Equifirst or EQLS 2008-1 PSA

D 4 3 1 2 5 5 2
Client/Matter ID: 97366 / 081

Office: NY
GroupID:
Folder Number: BF-lOO-OOl
Subfolder Number: 8
Document Number: 11-00
Title: 11. Pooling and Servicing Agreement, dated as of January 1,2008 (the "Pooling and
Servicing Agreement"), among the Depositor, BBPLC, the Servicer, the Trustee, the
Custodian, the Guarantor and the Credit Risk Manager relating to the issuance of the
Offered Certificates and the Class P Certificates (collectively, the "Certificates") and the
servicing of the mortgage loans (the "Mortgage Loans").
USActive 11384001.15
EXECUTION COPY
SECURITIZED ASSET BACKED RECEIVABLES LLC,
Depositor
BARCLAYS BANK PLC,
Sponsor
BARCLAYS CAPITAL REAL ESTATE INC. D/B/A
HOMEQ SERVICING,
Servicer
DEUTSCHE BANK NATIONAL TRUST COMPANY,
Trustee
THE BANK OF NEW YORK TRUST COMPANY, N.A.,
Custodian
FEDERAL HOME LOAN MORTGAGE CORPORATION,
Guarantor
and
CLAYTON FIXED INCOME SERVICES INC.,
Credit Risk Manager
POOLING AND SERVICING AGREEMENT
Dated as of January 1,2008
$106,294,999
(Approximate)
EQUIFIRST LOAN SECURITIZATION TRUST 2008-1
MORTGAGE PASS-THROUGH CERTIFICATES,
SERIES 2008-1
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 2
Section 1.01
Section 1.02
Defined Terms 2
Accounting 25
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF
CERTIFICATES 26
Section 2.01
Section 2.02
Section 2.03
Section 2.04
Section 2.05
Section 2.06
Section 2.07
Conveyance of Mortgage Loans 26
Acceptance by Trustee; Review by Custodian 29
Repurchase or Substitution of Mortgage Loans by the Sponsor
and the Depositor. 30
Representations and Warranties of the Depositor. 34
Representations, Warranties and Covenants of the Servicer.. 36
Representations and Warranties of the Custodian 38
Issuance of Certificates 39
ARTICLE III ADMINISTRATION AND SERVICING OF THE ISSUING ENTITy 39
Section 3.01
Section 3.02
Section 3.03
Section 3.04
Section 3.05
Section 3.06
Section 3.07
Section 3.08
Section 3.09
Section 3.10
Section 3.11
Section 3.12
Section 3.13
Section 3.14
Section 3.15
Servicer to Act as Servicer. 39
Collection of Mortgage Loan Payments 42
Realization Upon Defaulted Mortgage Loans .42
Collection Account and Certificate Account. .43
Permitted Withdrawals from the Collection Account. .46
Establishment of Escrow Accounts; Deposits in Escrow
Accounts 48
Permitted Withdrawals from Escrow Account.. 48
Payment of Taxes, Insurance and Other Charges; Collections
Thereunder. 48
Transfer of Accounts 49
Maintenance of Hazard Insurance 49
Maintenance of Lender-Placed Insurance Policy 50
Fidelity Bond, Errors and Omissions Insurance 50
Title, Management and Disposition of REO Property 51
Due-on-Sa1e Clauses; Assumption and Substitution
Agreements 52
Custodian to Cooperate; Release of Files 53
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TABLE OF CONTENTS
(continued)
Page
Section 3.16
Section 3.17
Section 3.18
Section 3.19
Section 3.20
Section 3.21
Section 3.22
Section 3.23
Section 3.24
Section 3.25
Servicing Compensation 54
Annual Statement as to Compliance 55
Assessment of Servicing Compliance; Registered Public
Accounting Firm Attestation Reports 55
Access to Certain Documentation and Information Regarding
the Mortgage Loans 56
Obligations of the Servicer in Respect of Compensating
Interest. 56
Investment of Funds in the Collection Account and the
Certificate Account 57
Liability of Servicer; Limitation of Liability of the Depositor,
the Servicer and the Sponsor; Indemnification 58
Reports of Foreclosure and Abandonment of Mortgaged
Properties 59
Purchase by Freddie Mac of Delinquent Mortgage Loans 60
No Personal Solicitation 60
Section 3.26 Reports to be Delivered by the Servicer.. 60
Section 3.27 Servicing Matters Relating to the Relief Act. 61
Section 3.28 Duties of the Credit Risk Manager. 62
Section 3.29 Limitation of Liability of the Credit Risk Manager. 62
Section 3.30 Removal of the Credit Risk Manager. 63
Section 3.31 Notification of Adjustments 63
Section 3.32 Gramm-Leach-Bliley Act.. 63
ARTICLE IV FLOW OF FUNDS 64
Section 4.01
Section 4.02
Section 4.03
Section 4.04
Section 4.05
Section 4.06
Distributions 64
Method of Distribution 65
Statements 65
Remittance Reports; Advances 68
The Guarantee 69
Allocation of Realized Losses 70
ARTICLE V THE CERTIFICATES 70
Section 5.01
The Certificates 70
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TABLE OF CONTENTS
(continued)
Page
Section 5.02
Section 5.03
Section 5.04
Section 5.05
Registration of Transfer and Exchange of Certificates 70
Mutilated, Destroyed, Lost or Stolen Certificates 72
Persons Deemed Owners 72
Maintenance of Office or Agency 72
ARTICLE VI THE SERVICER AND THE DEPOSITOR 73
Section 6.01
Section 6.02
Section 6.03
Section 6.04
Liability of the Servicer and the Depositor. 73
Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer or the Depositor 73
[Reserved] 73
Servicer Not to Resign 73
ARTICLE VII DEFAULT 74
Section 7.01
Section 7.02
Section 7.03
Section 7.04
Section 7.05
Servicer Events of Termination :.. 74
Trustee to Act; Appointment of Successor. 76
Waiver of Defaults 77
Notification to Guarantor and Certificateholders 77
Survival of Servicer Liabilities 78
ARTICLE VIII CONCERNING THE TRUSTEE AND THE CUSTODIAN 78
Section 8.01
Section 8.02
Section 8.03
Section 8.04
Section 8.05
Section 8.06
Section 8.07
Section 8.08
Section 8.09
Section 8.10
Section 8.11
Section 8.12
Duties of Trustee 78
Certain Matters Affecting the Trustee and the Custodian 79
Trustee and Custodian Not Liable for Certificates or Mortgage
Loans 81
Trustee May Own Certificates 82
Trustee's and Custodian's Fees and Expenses 82
Eligibility Requirements for Trustee 83
Resignation or Removal of Trustee 84
Successor Trustee 84
Merger or Consolidation of Trustee 85
Appointment of Co-Trustee or Separate Trustee 85
Limitation of Liability 86
Trustee May Enforce Claims Without Possession of
Certificates 87
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TABLE OF CONTENTS
(continued)
Page
Section 8.13 Suits for Enforcement.. 87
Section 8.14 Waiver of Bond Requirement. 87
Section 8.15 Waiver of Inventory, Accounting and Appraisal Requirement.. 87
Section 8.16 Patriot Act. 88
Section 8.17 Trustee Errors and Omissions Policy 88
Section 8.18 Custodial Responsibilities 88
Section 8.19 Limitations on Custodial Responsibilities 89
ARTICLE IX GRANTOR TRUST ADMINISTRATION 91
Section 9.01 Books and Records; Grantor Trust.. 91
Section 9.02 Tax Matters 92
Section 9.03 Compliance with Withholding Requirements 93
ARTICLE X TERMINATION 93
Section 10.01
Section 10.02
Termination 93
Trust Irrevocable 95
ARTICLE XI MISCELLANEOUS PROVISIONS 95
Section 11.01
Section 11.02
Section 11.03
Section 11.04
Section 11.05
Section 11.06
Section 11.07
Section 11.08
Section 11.09
Section 11.10
Section 11.11
Section 11.12
Section 11.13
Section 11.14
Section 11.15
Amendment. 95
Recordation of Agreement; Counterparts 96
Limitation on Rights of Certificateholders 96
Governing Law; Jurisdiction 97
Notices 97
Severability of Provisions 98
Article and Section References 98
Further Assurances 98
Benefits of Agreement. 98
Acts of Certificateholders '" 98
Recharacterization 99
Inspection and Audit Rights 100
Certificates Nonassessable and Fully Paid 100
Rule of Construction 100
Waiver of Jury Trial. 100
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TABLE OF CONTENTS
(continued)
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Page
EXHIBITS:
Exhibit A-I
Exhibit A-2
Exhibit A-3
Exhibit A-4
Exhibit B
Exhibit C
Exhibit D
Exhibit E-l
Exhibit E-2
Exhibit F
Exhibit G
Exhibit H
Exhibit I
Exhibit J-l
Exhibit J-2
Exhibit K
Exhibit L-l
Exhibit L-2
Exhibit M
Exhibit N
Exhibit 0
Exhibit P
Exhibit Q
Exhibit R
Exhibit S
Exhibit T
Exhibit U
Form of Class l-A-l Certificate
Form of Class 2-A-l Certificate
Form of Class P Certificate
Addresses for Requesting Mortgage Loan Schedule
Form of Request for Release
Form of Custodian's Initial Certification
Form of Custodian's Final Certification
Form of Mortgage Loan Purchase Agreement
Form of Lost Note Affidavit
Form of ERISA Representation Letter
Form of Rule 144A Investment Letter
Form of Certificate Report
Form of Supplemental Certificate Report
Form of Servicer REO Monthly Tracking Report
Form of Remittance Report
Form of Supplemental Remittance Report
Form of Transferor Certificate
Contents of Each Mortgage File
Servicing Criteria to be Addressed in Servicer's Assessment of Compliance
Limited Power of Attorney
Form of Loan Modification Report
Guidelines for Servicing Mortgage Loans in Default - Servicing Standards
Mortgage Loan Schedule Information
Form of Credit Risk Management Agreement
Form 332
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This Pooling and Servicing Agreement is dated as of January 1, 2008 (this "Agreement"),
among SECURITIZED ASSET BACKED RECEIVABLES LLC, as depositor (the
"Depositor"), BARCLAYS BANK PLC, as sponsor (the "Sponsor"), BARCLAYS CAPITAL
REAL ESTATE INC. D/B/A HOMEQ SERVICING, as servicer (the "Servicer"), DEUTSCHE
BANK NATIONAL TRUST COMPANY, as trustee (the "Trustee"), THE BANK OF NEW
YORK TRUST COMPANY, N.A., as custodian (the "Custodian"), FEDERAL HOME LOAN
MORTGAGE CORPORATION, as guarantor (the "Guarantor") and CLAYTON FIXED
INCOME SERVICES INC., as credit risk manager (the "Credit Risk Manager").
PRELIMINARY STATEMENT
The Depositor is the owner of the Trust Fund that is hereby conveyed to the Trustee in
return for the Certificates. All covenants and agreements made by the Sponsor in the Mortgage
Loan Purchase Agreement and by the Depositor and the Trustee herein with respect to the
Mortgage Loans and the other property constituting the Trust Fund are for the benefit of the
Holders from time to time of the Certificates and the Guarantor.
The Certificates
The following table sets forth (or describes) the Class designation, Original Certificate
Principal Balance, Pass-Through Rate, principal and interest types, minimum denomination,
incremental denomination and Final Scheduled Distribution Date for each Class of Certificates
comprising interests in the Trust created hereunder.
Original
Certificate Pass- Minimum Final Scheduled
Principal Through Principal Denomination Incremental Distribution Date
Class Balance Rate (%) Type Interest Type ($) Denomination ($) (I)
Pass-
Class I-A-I $23,118,000 (2) Through Variable Rate $1,000,000 $1 February 25. 2038
Pass-
Class 2-A-l $36,032,396 (3) Through Variable Rate $1,000,000 $1 February 25, 2038
Pass-
Class 3-A-1 $25,045,402 (4) Through Variable Rate $1,000,000 $1 February 25. 2038
Pass-
Class 4-A-1 $22,099,201 (5) Through Variable Rate $1,000,000 $1 February 25, 2038
Class P (6) (6) N/A N/A N/A N/A N/A
( 1) The Final Scheduled Distribution Date represents the Distribution Date in the month
following the latest maturity date of any Mortgage Loan in the related Loan Group.
(2) The Class I-A-l Pass-Through Rate with respect to each Distribution Date will be a per
annum rate equal to the Net WAC Rate of the Mortgage Loans in Loan Group 1. For the
initial Distribution Date in February 2008, this rate is 9.248723% per annum.
(3) The Class 2-A-l Pass-Through Rate with respect to each Distribution Date will be a per
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(4) The Class 3-A-I Pass-Through Rate with respect to each Distribution Date will be a per
(5) The Class 4-A-I Pass-Through Rate with respect to each Distribution Date will be a per
initial Distribution Date in February 2008, this rate is 8.351691 % per annum.
(6) The Class P Certificate has no Certificate Principal Balance or Pass-Through Rate and is
entitled to distributions of Prepayment Penalties and certain other amounts not
constituting principal or interest on the Mortgage Loans, as specified herein.
In consideration of the mutual agreements herein contained, the Depositor, the Sponsor,
the Servicer, the Trustee, the Custodian, the Guarantor and the Credit Risk Manager hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms. Whenever used in this Agreement or in the "Preliminary
Statement," the following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article. Interest on the Class A Certificates will be calculated on
the basis of a 360-day year consisting of twelve 30-day months.
"1933 Act" The Securities Act of 1933, as amended.
"Account" Any of the Collection Account, the Certificate Account or any Escrow
Account.
"Accepted Servicing Practices" The Servicer's normal servicing practices, which will
conform to the mortgage servicing practices of prudent mortgage servicing institutions that
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. In the event of any conflict
between Accepted Servicing Practices and the Servicing Standards, the terms of the Servicing
Standards shall govern and be applicable.
"Accrued Certificate Interest" With respect to each Distribution Date and each Class of
Class A Certificates, an amount equal to one-twelfth of the product of (i) the Pass-Through Rate
for such Class of Certificates and (ii) the Certificate Principal Balance of such Class of
Certificates immediately prior to such Distribution Date.
"Adjustable Rate Mortgage Loan" A Mortgage Loan that has a rate at which interest
accrues that adjusts based on the value of the related Index plus a related Gross Margin, as set
forth and subject to the limitations in the related Mortgage Note.
"Adjustment Date" With respect to each Adjustable Rate Mortgage Loan, each
adjustment date on which the Mortgage Rate changes pursuant to the related Mortgage Note.
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The first Adjustment Date following the Cut-off Date as to each Adjustable Rate Mortgage Loan
is set forth in the Mortgage Loan Schedule.
"Advance" As to any Mortgage Loan, any advance made by the Servicer in respect of
any Distribution Date pursuant to Section 4.04 or if the Servicer fails to make any advance, any
advance made by the Trustee, as successor servicer, pursuant to Section 7.01.
"Affiliate" With respect to any Person, any other Person controlling, controlled by or
under common control with such Person. For purposes of this definition, "control" means the
power to direct the management and policies of a Person, directly or indirectly, whether through
ownership of voting securities, by contract or otherwise and "controlling" and "controlled" shall
have meanings correlative to the foregoing.
"Aggregate Annual Cap" As defined in Section 3.22 hereof.
"Agreement" This Pooling and Servicing Agreement and all amendments and
supplements hereto made in accordance with the terms herein.
"Applicable Regulations" As to any Mortgage Loan, all federal, state and local laws,
statutes, rules and regulations applicable thereto.
"Applicable Law" As defined in Section 8.16 hereof.
"Approved Freddie Mac Servicer" Any Person approved by Freddie Mac to service
mortgage loans of the type contained in the Trust Fund in accordance with Freddie Mac's
customary standards for granting such approval, whose approval has not been withdrawn.
"Assignment" An assignment of Mortgage, notice of transfer or equivalent instrument, in
recordable form, which is sufficient under the laws of the jurisdiction wherein the related
Mortgaged Property is located to reflect or record the sale of the Mortgage, 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.
"Available Funds" As to any Distribution Date and any Loan Group, with respect to the
Mortgage Loans in such Loan Group, an amount equal to the excess of (i) the sum of: (a) the
aggregate of the Scheduled Payments due during the related Due Period and received on or prior
to the related Determination Date by the Servicer, (b) Liquidation Proceeds, Insurance Proceeds,
Condemnation Proceeds, Principal Prepayments, Substitution Adjustment Amounts, any amount
due by the Servicer pursuant to Section 3.08(b) hereof, the Purchase Price for any repurchased
Mortgage Loan, the Termination Price with respect to the termination of the Trust pursuant to
Section 10.01 hereof and other unscheduled recoveries of principal and interest (excluding
Prepayment Penalties) in respect of the Mortgage Loans during the related Prepayment Period,
(c) the aggregate of any amounts received in respect of an REO Property deposited in the
Collection Account for such Distribution Date, (d) any Compensating Interest for such
Distribution Date, (e) the aggregate of any Advances made by the Servicer or the Trustee, as
successor servicer, for such Distribution Date and (f) any Reimbursement Amount or Subsequent
Recovery deposited into the Collection Account during the related Prepayment Period over (ii)
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the sum of (a) amounts reimbursable or payable to the Depositor, the Servicer or the Credit Risk
Manager pursuant to Sections 3.05, 3.22 or 3.29, (b) amounts reimbursable or payable to the
Trustee (including in its capacity as Certificate Registrar) pursuant to Section 3.05, Section 7.01
or Section 8.05, (c) Stayed Funds, (d) the Servicing Fee, (e) the Custodian Fee, (f) the Credit
Risk Management Fee and (g) amounts deposited in the Collection Account or the Certificate
Account, as the case may be, in error.
"Balloon Loan" A Mortgage Loan that provides for a Balloon Payment.
"Balloon Payment" A payment of the unamortized principal balance of a Mortgage Loan
in a single payment at the maturity of such Mortgage Loan that is substantially greater than the
preceding Scheduled Payment.
"Bankruptcy Code" Title 11 of the United States Code, as amended.
"Business Day" Any day other than (i) a Saturday or a Sunday, (ii) a legal holiday in the
State of New York, California, New Jersey, Delaware, Texas or lllinois or Commonwealth of
Pennsylvania or Virginia, (iii) a day on which the offices of the federal government in the
District of Columbia are closed or (iv) with respect to the Servicer only, a day on which the New
York Stock Exchange is closed.
"Capitalized Reimbursement Amount" With respect to any Mortgage Loan, the amount
of unreimbursed Advances and Servicing Advances on such Mortgage Loan added to the
principal balance of such Mortgage Loan in connection with a Servicer Modification.
"Certificate" Any of the Class I-A-l, Class 2-A-l, Class 3-A-I, Class 4-A-l or Class P
Certificates.
"Certificate Account" The segregated, non-interest bearing trust account or accounts
created and maintained by the Trustee pursuant to Section 3.04(b), which shall be entitled
"Deutsche Bank National Trust Company, as trustee, in trust for registered holders of EquiFirst
Loan Securitization Trust 2008-1 Mortgage Pass-Through Certificates, Series 2008-1 and the
Guarantor" and which must be an Eligible Account.
"Certificate Principal Balance" With respect to each Class of Class A Certificates and
any Distribution Date, the Original Certificate Principal Balance of such Class reduced by all
amounts actually distributed in respect of principal of such Class (including without duplication
any Guarantor Payments representing payments of principal) on all prior Distribution Dates
pursuant to Section 4.01(a) and any Realized Losses allocated to such Class pursuant to Section
4.06; provided, however, that the Certificate Principal Balance of a Class of Class A Certificates
shall not be reduced by any Guarantor Payments in respect of Realized Losses that have been
previously allocated to the Certificates pursuant to Section 4.06. The Class P Certificate does
not have a Certificate Principal Balance.
"Certificate Register" and "Certificate Registrar" The register maintained and registrar
appointed pursuant to Section 5.02 hereof.
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"Certificate Report" A report prepared by the Trustee pursuant to Sections 4.03(a) and
4.03(c), which shall be in the form of Exhibit J-I attached hereto.
"Certificateholder" or "Holder" The Person in whose name a Certificate is registered in
the Certificate Register.
"Class" Collectively, Certificates which have the same priority of payment and bear the
same class designation and the form of which is identical except for variation in the Percentage
Interest evidenced thereby.
"Class A Certificate" Any of the Class I-A-I, Class 2-A-I, Class 3-A-I and Class 4-A-I
Certificates.
"Class A Certificateholders" Collectively, the Holders of the Class A Certificates.
"Class I-A-I Certificates" Any Certificate designated as a "Class I-A-I Certificate" on
the face thereof, executed by the Trustee on behalf of the Trust and authenticated by the
Certificate Registrar in substantially the form set forth as Exhibit A-I hereto, representing the
right to distributions as set forth herein.
"Class I-A-I Final Scheduled Distribution Date" As to the Class I-A-I Certificates, the
earlier of (i) February 25, 2038 and (ii) the Distribution Date on which the Termination Price is
paid pursuant to Section 1O.01(a) hereof.
"Class I-A-I Pass-Through Rate" For each Distribution Date and the Class I-A-I
Certificates, a per annum rate equal to the Net WAC Rate on the Group I Mortgage Loans (as of
the beginning of the related Due Period).
"Class 2-A-I Certificates" Any Certificate designated as a "Class 2-A-I Certificate" on
Certificate Registrar in substantially the form set forth as Exhibit A-2 hereto, representing the
"Class 2-A-I Final Scheduled Distribution Date" As to the Class 2-A-I Certificates, the
paid pursuant to Section 1O.01(a) hereof.
"Class 2-A-I Pass-Through Rate" For each Distribution Date and the Class 2-A-I
Certificates, a per annum rate equal to the Net WAC Rate on the Group 2 Mortgage Loans (as of
"Class 3-A-I Certificates" Any Certificate designated as a "Class 3-A-I Certificate" on
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"Class 3-A-1 Final Scheduled Distribution Date" As to the Class 3-A-1 Certificates, the
paid pursuant to Section 10.01(a) hereof.
"Class 3-A-1 Pass-Through Rate" For each Distribution Date and the Class 3-A-1
"Class 4-A-1 Certificates" Any Certificate designated as a "Class 4-A-1 Certificate" on
"Class 4-A-1 Final Scheduled Distribution Date" As to the Class 4-A-1 Certificates, the
paid pursuant to Section 10.01(a) hereof.
"Class 4-A-1 Pass-Through Rate" For each Distribution Date and the Class 4-A-1
"Class P Certificate" Any Certificate designated as a "Class P Certificate" on the face
thereof substantially in the form annexed hereto as Exhibit B, executed by the Trustee on behalf
of the Trust, and authenticated by the Certificate Registrar, representing the right to distributions
as set forth herein and therein.
"Class P Certificateholder" The Holder of the Class P Certificate.
"Closing Date" January 24,2008.
"Code" The Internal Revenue Code of 1986, as it may be amended from time to time.
"Collection Account" The segregated account or accounts created and maintained by the
Servicer pursuant to Section 3.04(a), which shall be entitled "Barclays Capital Real Estate Inc.
DIB/A Homeq Servicing, as servicer for Deutsche Bank National Trust Company, as trustee, in
trust for registered holders of EquiFirst Loan Securitization Trust 2008-1 Mortgage
Pass-Through Certificates, Series 2008-1 and the Guarantor", and which must be an Eligible
Account.
"Commission" The United States Securities and Exchange Commission.
"Compensating Interest" As defined in Section 3.20 hereof.
"Condemnation Proceeds" All awards or settlements in respect of a taking of a
Mortgaged Property by exercise of the power of eminent domain or condemnation.
"Corporate Trust Office" The designated office of the Trustee at which at any particular
time its corporate trust business with respect to this Agreement is administered, which office at
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the date of the execution of this Agreement is located at 1761 East St. Andrew Place, Santa Ana,
California 92705-4934, Attn: Trust Administration - BC08El, facsimile number (714) 247-
6478 and which is the address to which notices to and correspondence with the Trustee should be
directed.
"Credit Risk Management Agreement" The agreement between the Credit Risk Manager
and the Servicer, regarding the loss mitigation and advisory services to be provided by the Credit
Risk Manager, a form of which is attached hereto as Exhibit T.
"Credit Risk Management Fee" The amount payable to the Credit Risk Manager on each
Distribution Date as compensation for all services rendered by it in the exercise and performance
of any and all powers and duties of the Credit Risk Manager under the Credit Risk Management
Agreement, which amount shall be equal to the product of (i) one-twelfth of the Credit Risk
Management Fee Rate multiplied by (ii) the aggregate of the Stated Principal Balance of each
Mortgage Loan and any related REO Properties as of the preceding Distribution Date.
"Credit Risk Management Fee Rate" With respect to each Distribution Date, a per annum
rate of 0.014%.
"Credit Risk Manager" Clayton Fixed Income Services Inc., and its successors and
assigns.
"Credit Risk Manager Aggregate Annual Cap" As defined in Section 3.29(c) hereof.
"Current Loan-to-Value Ratio" For any Mortgage Loan on any date of determination, a
ratio expressed as a percentage, and calculated by dividing (i) the current Stated Principal
Balance by (ii) the lesser of (a) the appraised value of the related Mortgaged Property at the time
of origination of such Mortgage Loan or (b) if the Mortgage is originated in connection with a
purchase of the Mortgaged Property, the purchase price for such Mortgaged Property. -
"Custodial Mortgage Loan Schedule" As of any date with respect to the Mortgage Loans,
the lists of such Mortgage Loans included in the Trust on such date, delivered electronically to
the Custodian in an acceptable format. The Custodial Mortgage Loan Schedule shall set forth
the following information with respect to each Mortgage Loan:
(1) the Seller identifying number;
(2) the Mortgagor name;
(3) the co-Mortgagor name;
(4) the first Due Date;
(5) the date of the Mortgage Note;
(6) the original principal balance;
(7) the Mortgage Rate;
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(8) the Scheduled Payment;
(9) the scheduled maturity date;
(10) the Mortgage Identification Number, if applicable;
(11) the street address of the Mortgaged Property;
(12) the city, state and zip code of the Mortgaged Property;
(13) for any Mortgage Loan that was a construction-to-permanent mortgage loan, the
date that such Mortgage Loan was converted;
(14) for any interest-only Mortgage Loan, the date of the first Scheduled Payment
containing principal and interest;
(15) with respect to an Adjustable Rate Mortgage Loan,
A. the Index;
B. the date that the Index value is determined for each Adjustment Date;
C. the first Adjustment Date;
D. the Gross Margin;
E. the Periodic Rate Cap;
F. the percentage to which the Mortgage Rate will be rounded on each
Adjustment Date;
G. the Maximum Mortgage Rate;
H. the Minimum Mortgage Rate on the first Adjustment Date;
I. the Maximum Mortgage Rate on the first Adjustment Date; and
J. a code indicating whether a Mortgage Loan originally had a Gross Margin
in excess of 4.50% per annum and notice was sent by the Sponsor to the
Mortgagor stating that the Gross Margin was reduced to or capped at
4.50% per annum.
"Custodian" The Bank of New York Trust Company, N.A., a national banking
association, and its successors in interest and, if any successor custodian is appointed hereunder,
such successor.
"Custodian Aggregate Annual Cap": As defined in Section 8.05 hereof.
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"Custodian Fee" As to any Distribution Date, an amount equal to the product of
one-twelfth of the Custodian Fee Rate and the aggregate Stated Principal Balance of the
Mortgage Loans as of the first day of the related Due Period.
"Custodian Fee Rate" With respect to each Distribution Date, the greater of (a) 0.0075% per
annum or (b) a per annum rate equal to $500 divided by the applicable Stated Principal Balance
of the Mortgage Loans multiplied by 12.
"Cut-off Date" January 1, 2008.
"Cut-off Date Principal Balance" With respect to any Mortgage Loan, the unpaid
principal balance thereof as of the close of business on the day immediately preceding the Cut-
off Date after giving effect to any Scheduled Payment due on the Cut-off Date and to the
application of funds received or advanced on or before and related to such date (or as of the
applicable date of substitution with respect to an Eligible Substitute Mortgage Loan).
"Debt Service Reduction" With respect to any Mortgage Loan, a reduction in the
Scheduled Payment for such Mortgage Loan by a court of competent jurisdiction in a proceeding
under the Bankruptcy Code, except such a reduction resulting from a Deficient Valuation.
"Defective Mortgage Loan" A Mortgage Loan removed from the Trust Fund that mayor
may not be replaced by one or more Eligible Substitute Mortgage Loans pursuant to Section 2.03
hereof.
"Deficiency Amount" With respect to any Distribution Date and any Class of Class A
Certificates, the sum of: (i) the amount, if any, by which the Accrued Certificate Interest on such
Class of Class A Certificates exceeds the amount on deposit in the Certificate Account available
to be distributed therefor on such Distribution Date; (ii) the amount, if any, by which the
Certificate Principal Balance of such Class of Class A Certificates (after giving effect to all
amounts distributable and allocable to principal to such Class of Class A Certificates on such
Distribution Date) exceeds the Loan Group Balance of the related Loan Group as of the
immediately preceding Due Date; and (iii) on the Final Scheduled Distribution Date, the
Certificate Principal Balance of such Class of Class A Certificates on such Final Scheduled
Distribution Date (after giving effect to all amounts distributable and allocable to principal on
such Class of Class A Certificates but prior to giving effect to any Guarantor Payment for such
Class of Class A Certificates on such Final Scheduled Distribution Date).
"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, or any reduction in the amount of principal to be paid in
connection with any Scheduled Payment that results in a permanent forgiveness of principal,
which forgiveness of principal results from a proceeding initiated under the Bankruptcy Code.
"Delinquent" Any Mortgage Loan with respect to which the Scheduled Payment due on a
Due Date is not made by the close of business on the day immediately preceding the next
scheduled Due Date for such Mortgage Loan.
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"Delivery Event" As defined in Section 3.26(b) hereof.
"Depositor" Securitized Asset Backed Receivables LLC, or any successor in interest.
"Determination Date" With respect to any Distribution Date, the 15th calendar day of
each calendar month of such Distribution Date or, if such 15th day is not a Business Day, the
immediately preceding Business Day.
"Distribution Date" The 25th calendar day of each calendar month after the initial
issuance of the Certificates, or if such 25th day is not a Business Day, the next succeeding
Business Day, commencing in February 2008.
"Due Date" With respect to each Mortgage Loan, the day of the calendar month on which
the Scheduled Payment for such Mortgage Loan is due in accordance with the terms of the
related Mortgage Note, exclusive of any grace period.
"Due Period" With respect to any Distribution Date, the period from the second day of
the calendar 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" Any of (i) an account or accounts maintained with a federal or state
chartered depository institution or trust company the short-term unsecured debt obligations (or,
in the case of a depository institution or trust company that is the principal subsidiary of a
holding company, the short-term unsecured debt obligations of such holding company) of which
are rated "A-I+" by S&P or "P-l" by Moody's (or a comparable rating if another rating agency
is specified by written notice to the Servicer) at the time any amounts are held on deposit therein,
(ii) a trust account or accounts maintained with the trust department of a federal or state
chartered depository institution, national banking association or trust company acting in its
fiduciary capacity or (iii) any other account acceptable to the Guarantor. If an account ceases to
be an Eligible Account under clauses (i), (ii) or (iii) above, the account shall be moved within
five (5) Business Days to a depository which does satisfy one of the clauses above.
"Eligible Investments" Anyone or more of the following obligations or securities
acquired at a purchase price of not greater than par, regardless of whether issued or managed by
the Depositor, the Servicer, the Trustee or any of their respective Affiliates or for which an
Affiliate of the Trustee serves as an advisor:
(i) unsecured debt obligations of Freddie Mac;
(ii) direct obligations of, or obligations fully guaranteed as to timely payment
of 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;
(iii) (A) demand and time deposits in, certificates of deposit of, bankers'
acceptances issued by or federal funds sold by any depository institution or trust company
(including the Trustee or its agents acting in their respective commercial capacities) 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 authorities, so long as, at the time of such investment or
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contractual commitment providing for such investment, such depository institution or trust
company or its ultimate parent has a short term uninsured debt rating in one of the two highest
available rating categories of each Rating Agency and provided that each such investment has an
original maturity of no more than 365 days and (B) any other demand or time deposit or deposit
which is fully insured by the FDIC;
(iv) repurchase obligations with a term not to exceed 30 days with respect to
any security described in clause (i) above and entered into with a depository institution or trust
company (acting as principal) rated "A" or "A2" (or the equivalent) or higher by a Rating
Agency, provided, however, that collateral transferred pursuant to such repurchase obligation
must be of the type described in clause (i) above and must (A) be valued daily at current market
prices plus accrued interest or (B) pursuant to such valuation, be equal, at all times, to 105% of
the cash transferred by the Trustee in exchange for such collateral and (C) be delivered to the
Trustee or if the Trustee is supplying the collateral, an agent for the Trustee, as the case may be,
in such a manner as to accomplish perfection of a security interest in the collateral by possession
of certificated securities;
(v) at the time of such investments, securities bearing interest or sold at a
discount that are issued by any corporation incorporated under the laws of the United States of
America or any State thereof and that are rated by each Rating Agency in its highest long-term
unsecured rating categories at the time of such investment or contractual commitment providing
for such investment;
(vi) at the time of such investments, commercial paper (including both non-
interest-bearing discount obligations and interest-bearing obligations payable on demand or on a
specified date not more than 30 days after the date of acquisition thereof) that is rated by each
Rating Agency in its highest short-term unsecured debt rating available at the time of such
investment; and
(vii) units of money market funds registered under the Investment Company
Act of 1940 (including funds managed or advised by the Trustee or affiliates thereof) that, if
rated by each Rating Agency, are rated in its highest rating category (if so rated by such Rating
Agency);
provided, that no instrument described hereunder shall evidence either the right to receive (a)
only interest with respect to the obligations underlying such instrument or (b) both principal and
interest payments derived from obligations underlying such instrument and the interest and
principal payments with respect to such instrument provide a yield to maturity at par greater than
120% of the yield to maturity at par of the underlying obligations.
"Eligible Substitute Mortgage Loan" A mortgage loan substituted for a Defective
Mortgage Loan pursuant to the terms of this Agreement which must, on the date of such
substitution, (i) have an outstanding principal balance, after application of all scheduled
payments of principal and interest due during or prior to the month of substitution, not in excess
of, the Stated Principal Balance of the Defective Mortgage Loan as of the Due Date in the
calendar month during which the substitution occurs, (ii) have a Mortgage Rate, with respect to a
Fixed Rate Mortgage Loan, not less than the Mortgage Rate of the Defective Mortgage Loan and
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not more than 1% in excess of the Mortgage Rate of such Defective Mortgage Loan, (iii) be of
the same product type as the Defective Mortgage Loan (e.g., substitution of a Balloon Loan for a
Balloon Loan, an interest-only loan for an interest-only loan, etc.), (iv) if an Adjustable Rate
Mortgage Loan, have a Maximum Mortgage Rate not less than the Maximum Mortgage Rate of
the Defective Mortgage Loan, (v) if an Adjustable Rate Mortgage Loan, have a Minimum
Mortgage Rate not less than the Minimum Mortgage Rate of the Defective Mortgage Loan, (vi)
if an Adjustable Rate Mortgage Loan, have a Gross Margin equal to or greater than the Gross
Margin of the Defective Mortgage Loan, (vii) if an Adjustable Rate Mortgage Loan, have the
same Index and frequency of adjustment as the Defective Mortgage Loan, (viii) if an Adjustable
Rate Mortgage Loan, have a next Adjustment Date not more than three months later than the
next Adjustment Date on the Defective Mortgage Loan, (ix) have an original term to maturity not
greater than (and not more than one year less than) that of the Defective Mortgage Loan, (x) be
current as of the date of substitution, (xi) have a Current Loan-to-Value Ratio equal to or lower
than the Current Loan-to-Value Ratio of the Defective Mortgage Loan, (xii) have a risk grading
at least equal to the risk grading assigned to the Defective Mortgage Loan, (xiii) have the same
lien priority as the Defective Mortgage Loan, (xiv) have a Prepayment Penalty at least equal in
amount and duration of that of the Defective Mortgage Loan, (xv) have the same occupancy
status as the Defective Mortgage Loan, (xvi) have been underwritten in all material respects in
accordance with the underwriting guidelines set forth in the Underwriting Guidelines and (xvii)
conform to each representation and warranty set forth in Section 7.02 of the Mortgage Loan
Purchase Agreement. In the event that two or more mortgage loans are substituted for a
Defective Mortgage Loan, the amounts described in clause (i) hereof shall be determined on the
basis of aggregate principal balance, the Mortgage Rates described in clause (ii) hereof shall be
determined on the basis of weighted average Mortgage Rates, the risk gradings described in
clause (xi) hereof shall be satisfied as to each such mortgage loan, the terms described in clause
(viii) hereof shall be determined on the basis of weighted average remaining term to maturity, the
Current Loan-to-Value Ratios described in clause (x) hereof shall be satisfied as to each such
mortgage loan and, except to the extent otherwise provided in this sentence, the representations
and warranties referenced in clause (xvi) hereof must be satisfied as to each Eligible Substitute
Mortgage Loan. Each Eligible Substitute Mortgage Loan must be acceptable to the Guarantor.
"EPD Mortgage Loan" As defined in Section 2.01(f) hereof.
"ERISA" The Employee Retirement Income Security Act of 1974, as amended.
"Escrow Account" The account or accounts created and maintained pursuant to Section
3.06.
"Escrow Agreement" An agreement between a Mortgagor and the Servicer relating to
accounts constituting taxes and/or fire and hazard insurance premiums required to be escrowed.
"Escrow Payments" The amounts constituting taxes and/or fire and hazard insurance
premiums required to be escrowed pursuant to an Escrow Agreement.
"Estate in Real Property" A fee simple estate in a parcel of real property.
"Exchange Act" The Securities Exchange Act of 1934, as amended.
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"FDIC" Federal Deposit Insurance Corporation or any successor thereto.
"FEMA" The Federal Emergency Management Agency.
"Fidelity Bond" An insurance policy naming the Trustee, its successors and assigns as
loss payees relative to losses caused by improper or unlawful acts of the Servicer's personnel.
"Final Scheduled Distribution Date" Any of the Class l-A-l Final Scheduled Distribution
Date, the Class 2-A-l Final Scheduled Distribution Date, the Class 3-A-l Final Scheduled
Distribution Date and the Class 4-A-l Final Scheduled Distribution Date.
"Fitch" Fitch Ratings and its successors, and if such company shall for any reason no
longer perform the functions of a securities rating agency, "Fitch" shall be deemed to refer to any
other "nationally recognized statistical rating organization" as set forth on the most current list of
such organizations released by the Commission.
"Fixed Rate Mortgage Loan" A Mortgage Loan which has a constant annual rate at which
interest accrues in accordance with the provisions of the related Mortgage Note.
"Foreclosure Price" The amount reasonably expected to be received from the sale of the
related Mortgaged Property net of any expenses associated with foreclosure proceedings.
"Freddie Mac" Federal Home Loan Mortgage Corporation, a corporate instrumentality of
the United States created and existing under Title III of the Emergency Home Finance Act of
1970, as amended, or any successor thereto.
"Form 332" A form prepared by the Servicer for each applicable Mortgage Loan and
delivered to the Guarantor and the Credit Risk Manager pursuant to Section 3.26, which shall be
in the form of Exhibit U, attached hereto or such other form as mutually agreed to between the
Servicer and the Guarantor.
"Gross Margin" With respect to each Adjustable Rate Mortgage Loan, the fixed
percentage set forth in the related Mortgage Note that is added to the Index value on each
Adjustment Date in accordance with the terms of the related Mortgage Note, which is used to
determine the Mortgage Rate for such Mortgage Loan.
"Group 1 Mortgage Loan" Each Mortgage Loan listed on the Mortgage Loan Schedule as
a Mortgage Loan in Loan Group 1.
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"Guarantee" The obligations of the Guarantor pursuant to Section 4.05 hereof.
"Guarantor" Freddie Mac, in its capacity as guarantor of the Class A Certificates under
this Agreement, or its successor-in-interest.
"Guarantor Payment" Any payment made by the Guarantor pursuant to Section 4.05 in
respect of a Deficiency Amount.
"Guarantor Reimbursement Amount" With respect to any Distribution Date, the sum of
all amounts paid by the Guarantor in respect of Deficiency Amounts on all prior Distribution
Dates to the extent not previously reimbursed, with interest thereon at a per annum rate for each
day equal to the Prime Rate plus 2.00%.
"HUD" The United States Department of Housing and Urban Development.
"Independent" When used with respect to any specified Person, any such Person who (i)
is in fact independent of the Depositor, the Sponsor, the Trustee, the Custodian, the Servicer and
their respective Affiliates, (ii) does not have any direct financial interest in or any material
indirect financial interest in the Depositor, the Sponsor, the Trustee, the Custodian or the
Servicer, or any Affiliate thereof, and (iii) is not connected with the Depositor, the Sponsor, the
Trustee, the Custodian or the Servicer, or any Affiliate thereof, as an officer, employee,
promoter, underwriter, trustee, partner, director or Person performing similar functions;
provided, however, that a Person shall not fail to be Independent of the Depositor, the Sponsor,
the Trustee, the Custodian or the Servicer, or any Affiliate thereof, merely because such Person
is the beneficial owner of 1% or less of any class of securities issued by the Depositor, the
Sponsor, the Trustee, the Custodian or the Servicer, or any Affiliate thereof, as the case may be.
"Index" With respect to each Adjustable Rate Mortgage Loan and with respect to each
related Adjustment Date, the index as specified in the related Mortgage Note.
"Information Circular" The information circular, dated January 23, 2008 relating to the
Class A Certificates.
"Insurance Proceeds" Proceeds of any title policy, hazard policy or other insurance policy
covering a Mortgage Loan, to the extent such proceeds are not to be applied to the restoration of
the related Mortgaged Property or released to the Mortgagor in accordance with the procedures
that the Servicer would follow in servicing mortgage loans held for its own account, subject to
the terms and conditions of the related Mortgage Note and Mortgage.
"IRS" The Internal Revenue Service.
"Late Collections" With respect to any Mortgage Loan, all amounts received subsequent
to the Determination Date immediately following any related Due Period, whether as late
payments of Scheduled Payments or as Insurance Proceeds, Condemnation Proceeds,
Liquidation Proceeds or otherwise, which represent late payments or collections of principal
and/or interest due (without regard to any acceleration of payments under the related Mortgage
and Mortgage Note) but delinquent on a contractual basis for such Due Period and not previously
recovered.
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"Liquidated Loan" As to any Distribution Date, any Mortgage Loan or related REO
Property in respect of which the Servicer has determined, in accordance with the servicing
procedures specified herein, as of the end of the related Prepayment Period, that all Liquidation
Proceeds, Condemnation Proceeds and Insurance Proceeds which it expects to recover with
respect to the liquidation of the Mortgage Loan or disposition of the related REO Property have
been recovered.
"Liquidation Proceeds" The amount (other than amounts received in respect of the rental
of any REO Property prior to REO Disposition) received by the Servicer in connection with (i)
the taking of all or a part of a Mortgaged Property by exercise of the power of eminent domain or
condemnation or (ii) the liquidation of a defaulted Mortgage Loan by means of a trustee's sale,
foreclosure sale or otherwise.
"Loan Group" Any of Loan Group 1, Loan Group 2, Loan Group 3 or Loan Group 4.
"Loan Group 1" The Group 1 Mortgage Loans.
"Loan Group Balance" As of any date of determination and Loan Group, the aggregate
Stated Principal Balance of the Mortgage Loans of such Loan Group.
"Loan Modification Report" A report prepared by the Servicer and delivered to the
Guarantor and the Credit Risk Manager pursuant to Section 3.26, which shall be in the form of
Exhibit Qattached hereto or such other form as mutually agreed to between the Servicer and the
Guarantor.
"Lost Note Affidavit" With respect to any Mortgage Loan as to which the original
Mortgage Note has been lost, misplaced or destroyed and has not been replaced, an affidavit
from the Sponsor or Depositor certifying that the original Mortgage Note has been lost,
misplaced or destroyed (together with a complete copy of the related Mortgage Note and
indemnifying the Trust against any loss, cost or liability resulting from the failure to deliver the
original Mortgage Note) in the form of Exhibit G hereto.
"Majority Certificateholders" The Holders of Class A Certificates evidencing at least a
majority of the Voting Interests.
"Maximum Mortgage Rate" With respect to each Adjustable Rate Mortgage Loan, the
maximum rate of interest set forth as such in the related Mortgage Note and with respect to each
Fixed Rate Mortgage Loan, the rate of interest set forth in the related Mortgage Note.
"MERS" Mortgage Electronic Registration Systems, Inc., a Delaware corporation, or any
successor thereto.
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"MERS Mortgage Loan" Any MOM Mortgage Loan or any other Mortgage Loan as to
which MERS is (or becomes) the mortgagee of record and as to which a MIN has been assigned.
"MIN" A MERS Mortgage Identification Number assigned to a Mortgage Loan in
accordance with the MERS Procedure Manual.
"Minimum Mortgage Rate" With respect to each Adjustable Rate Mortgage Loan, the
percentage set forth in the related Mortgage Note as the minimum Mortgage Rate thereunder.
"MOM" A Mortgage Loan where the related Mortgage names MERS as the original
mortgagee thereof, as to which a MIN has been assigned, and which Mortgage has not been
assigned to any other person.
"Moody's" Moody's Investors Service, Inc., and its successors, and if such company
shall for any reason no longer perform the functions of a securities rating agency, "Moody's"
shall be deemed to refer to any other "nationally recognized statistical rating organization" as set
forth on the most current list of such organizations released by the Commission.
"Mortgage" The mortgage, deed of trust or other instrument creating a first lien on, or
first priority security interest in, a Mortgaged Property securing a Mortgage Note.
"Mortgage File" With respect to each Mortgage Loan, the Mortgage Loan Documents
and the items listed on Exhibit N hereto and any additional documents required to be added to
the Mortgage File pursuant to this Agreement.
"Mortgage Loan" Each mortgage loan transferred and assigned to the Trustee pursuant to
Section 2.01 or Section 2.03(e) as from time to time held as a part of the Trust Fund, the
Mortgage Loans so held being identified in the Mortgage Loan Schedule.
"Mortgage Loan Documents" The documents contained in each Mortgage File and
specified in Section 2.01 and any additional documents required to be added to the Mortgage File
pursuant to this Agreement.
"Mortgage Loan Purchase Agreement" The agreement between the Sponsor and the
Depositor, dated as of January 24, 2008, regarding the transfer of the Mortgage Loans by the
Sponsor to or at the direction of the Depositor, in the form of Exhibit F attached hereto.
"Mortgage Loan Schedule" As of any date with respect to the Mortgage Loans,
collectively the list or the lists of such Mortgage Loans included in the Trust Fund on such date,
separately identifying the Fixed Rate Mortgage Loans and the Adjustable Rate Mortgage Loans
in each Loan Group delivered by the Depositor to the Trustee, the Servicer, the Custodian and
the Guarantor. The Mortgage Loan Schedule shall set forth, with respect to each Mortgage
Loan, the information listed in Exhibit S attached hereto.
The Mortgage Loan Schedule shall set forth the following information, as of the Cut-off
Date, with respect to the Mortgage Loans in the aggregate, for Loan Group 1, Loan Group 2,
Loan Group 3 and Loan Group 4: (i) the number of Mortgage Loans; (ii) the Cut-off Date
Principal Balance of the Mortgage Loans; (iii) the weighted average Mortgage Rate of the
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Mortgage Loans; and (iv) the weighted average maturity of the Mortgage Loans. The Mortgage
Loan Schedule shall be amended from time to time in accordance with the provisions of this
Agreement. With respect to any Eligible Substitute Mortgage Loan, Cut-off Date shall refer to
the applicable date of substitution.
"Mortgage Note" The original executed note or other evidence of indebtedness
evidencing the indebtedness of a Mortgagor under a Mortgage Loan (including the notice sent to
the Mortgagor from the Sponsor whereby the Gross Margin was reduced and capped, at 4.50%
per annum for any Mortgage Loan that had a Gross Margin higher than 4.50% per annum.
"Mortgage Pool" The pool of Mortgage Loans, identified on the Mortgage Loan
Schedule from time to time, and any REO Properties acquired in respect thereof.
"Mortgage Rate" With respect to each Mortgage Loan, the annual rate at which interest
accrues on such Mortgage Loan from time to time in accordance with the provisions of the
related Mortgage Note, which rate (i) in the case of each Fixed Rate Mortgage Loan shall remain
constant at the rate set forth in the Mortgage Loan Schedule as the Mortgage Rate in effect
immediately following the Cut-off Date and (ii) in the case of each Adjustable Rate Mortgage
Loan (a) as of any date of determination until the first Adjustment Date following the Cut-off
Date shall be the rate set forth in the Mortgage Loan Schedule as the Mortgage Rate in effect
immediately following the Cut-off Date and (b) as of any date of determination thereafter shall
be the rate as adjusted on the most recent Adjustment Date, to equal the sum, rounded as
provided in the Mortgage Note, of the Index value, determined as set forth in the related
Mortgage Note, plus the related Gross Margin subject to the limitations set forth in the related
Mortgage Note. With respect to each Mortgage Loan that becomes an REO Property, as of any
date of determination, the annual rate determined in accordance with the immediately preceding
sentence as of the date such Mortgage Loan became an REO Property.
"Mortgaged Property" The underlying property securing a Mortgage Loan, including any
REO Property, consisting of an Estate in Real Property improved by a Residential Dwelling.
"Mortgagor" The obligor or obligors on a Mortgage Note.
"Net Liquidation Proceeds" With respect to any Liquidated Loan or any other disposition
of related Mortgaged Property (including REO Property) the related Liquidation Proceeds net of
unreimbursed Advances, unreimbursed Servicing Advances, unpaid Servicing Fees and any
other accrued and unpaid servicing fees received and retained in connection with the liquidation
of such Mortgage Loan or Mortgaged Property.
"Net Mortgage Rate" With respect to any Mortgage Loan and for each Distribution Date,
the Mortgage Rate borne by such Mortgage Loan minus the sum of (i) the Servicing Fee Rate,
(ii) the Custodian Fee Rate and (iii) the Credit Risk Management Fee Rate, for such Distribution
Date.
"Net WAC Rate" As to any Distribution Date and Loan Group, a per annum rate equal to
the weighted average of the Net Mortgage Rates of the Mortgage Loans of such Loan Group
(based on the Stated Principal Balances of the Mortgage Loans of such Loan Group in
accordance with their amortization schedules on the first day of the related Due Period).
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"Nonrecoverable Advance" Any Advance or Servicing Advance previously made or
proposed to be made in respect of a Mortgage Loan that, in the good faith business judgment of
the Servicer (or the Trustee, as successor servicer, in the case of any Advance made by the
Trustee pursuant to Section 7.01), will not or, in the case of a proposed Advance or Servicing
Advance, would not be ultimately recoverable from Late Collections on such Mortgage Loan as
provided herein.
"Officer's Certificate" A certificate signed by the Chairman of the Board, the Vice
Chairman of the Board, the President, a vice president (however denominated), and by the
Treasurer, the Secretary, or one of the assistant treasurers or assistant secretaries or any other
duly authorized officer of the Servicer, the Trustee, the Custodian, the Sponsor, the Guarantor or
the Depositor, as applicable, including in the case of the Servicer, a Servicing Officer.
"Opinion of Counsel" A written opinion of counsel, reasonably acceptable to the Trustee
or the Guarantor, as applicable, who may, without limitation, be a salaried counsel for the
Depositor, the Sponsor, the Trustee, the Custodian or the Servicer except that any opinion of
counsel relating to tax matters must be an opinion of Independent counsel.
"Original Certificate Principal Balance" With respect to the Class A Certificates, as
follows:
(i) Class l-A-l Certificates: $23,118,000;
(ii) Class 2-A-l Certificates: $36,032,396;
(iii) Class 3-A-l Certificates: $25;045,402; and
(iv) Class 4-A-l Certificates: $22,099,201
The Class P Certificate shall have no Original Certificate Principal Balance.
"Original Loan Seller" With respect to each Mortgage Loan, EquiFirst Corporation, a
North Carolina corporation.
"Original Loan-to-Value Ratio" For any Mortgage Loan, a ratio, expressed as a
percentage, and calculated by dividing (i) the original principal amount by (ii) the lesser of (a)
the appraised value of the related Mortgaged Property at the time of origination of such
Mortgage Loan or (b) if the Mortgage is originated in connection with a purchase of the
Mortgaged Property, the purchase price for such Mortgaged Property.
"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.
"Pass-Through Rate" With respect to (i) the Class l-A-l Certificates, the Class l-A-l
Pass-Through Rate, (ii) the Class 2-A-l Certificates, the Class 2-A-l Pass-Through Rate, (iii) the
Class 3-A-l Certificates, the Class 3-A-l Pass-Through Rate and (iv) the Class 4-A-l
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Certificates, the Class 4-A-I Pass-Through Rate. The Class P Certificate has no Pass-Through
Rate.
"Percentage Interest" With respect to any Certificate (other than the Class P Certificate),
a fraction, expressed as a percentage, the numerator of which is the initial Certificate Principal
Balance, as the case may be, represented by such Certificate and the denominator of which is the
Original Certificate Principal Balance of the related Class. With respect to the Class P
Certificate, 100%.
"Periodic Rate Cap" With respect to each Adjustable Rate Mortgage Loan, the applicable
limit on adjustment of the Mortgage Rate for each Adjustment Date specified in the applicable
Mortgage Note and designated as such in the Mortgage Loan Schedule.
"Person" Any individual, corporation, partnership, joint venture, association, joint stock
company, trust, limited liability company, unincorporated organization or government or any
agency or political subdivision thereof.
"Pool Balance" As of any date of determination, the aggregate Stated Principal Balance
of the Mortgage Loans and REO Properties.
"Prepayment Adjustment" As defined in the letter agreement, dated January 24, 2008,
between the Depositor and Freddie Mac.
"Prepayment Interest Shortfall" With respect to any Distribution Date, for each Mortgage
Loan that, during the related Prepayment Period, was the subject of a Principal Prepayment that
was applied by the Servicer to reduce the outstanding principal balance of such Mortgage Loan
on a date, preceding the related Due Date; an amount equal to interest at the applicable Mortgage
Rate less the Servicing Fee on the amount of such Principal Prepayment for the number of days
commencing on the date on which the Principal Prepayment is applied and ending on the last day
of the calendar month in which the Prepayment Penalty was applied.
"Prepayment Penalty" With respect to any Prepayment Period, any prepayment penalty,
premium or charge collected by the Servicer from a Mortgagor in connection with any voluntary
Principal Prepayment pursuant to the terms of the related Mortgage Note from time to time held
as a part of the Trust Fund, the Prepayment Penalties so held being determined in accordance
with the guidelines for Prepayment Penalty provisions set forth in the Underwriting Guidelines.
"Prepayment Period" With respect to any Distribution Date, the one month period ending
on the last day of the calendar month preceding the month in which such Distribution Date
occurs.
"Prime Rate" The prime rate announced to be in effect from time to time, as published as
the average rate in The Wall Street Journal (Northeast edition).
"Principal Prepayment" Any payment of principal made by the Mortgagor on a Mortgage
Loan that is received in advance of its scheduled Due Date and which is not accompanied by an
amount of interest representing the full amount of scheduled interest due on any Due Date in any
month or months subsequent to the month of prepayment.
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"Purchase Price" With respect to any Mortgage Loan or REO Property to be purchased
pursuant to or as contemplated by Section 2.01 or 2.03, an amount equal to the sum of (i) 100%
of the Stated Principal Balance thereof as of the date of purchase, (ii) accrued interest on such
Stated Principal Balance at the applicable Mortgage Rate in effect from time to time from the
Due Date as to which interest was last paid (by the Mortgagor or Advanced by the Servicer),
and, as of the date of purchase, been distributed pursuant to Section 4.01, through the end of the
calendar month in which the purchase is to be effected, (iii) any unreimbursed Servicing
Advances and any unpaid Servicing Fees allocable to such Mortgage Loan or REO Property, (iv)
any amounts previously withdrawn from the Collection Account in respect of such Mortgage
Loan or REO Property pursuant to Section 3.13 and (v) in the case of a Mortgage Loan or REO
Property required to be purchased pursuant to Section 2.03, expenses reasonably incurred or to
be incurred by the Servicer (under Sections 2.03(a) and 2.03(e) only), the Guarantor or the
Trustee in respect of the breach or defect giving rise to the purchase obligation.
"Rating Agency or Rating Agencies" Moody's, S&P and Fitch, or their respective
successors. If such agencies or their successors are no longer in existence, "Rating Agencies"
shall be such nationally recognized statistical rating organizations as set forth on the most current
list of such organizations released by the Commission and designated by the Depositor, notice of
which designation shall be given to the Trustee, the Guarantor and the Servicer.
"Realized Loss" With respect to (i) a Liquidated Loan, the amount by which the
remaining Stated Principal Balance of the Mortgage Loan, plus accrued and unpaid interest
thereon at the Mortgage Rate through the last day of the month in which such Mortgage Loan
was liquidated, exceeds the amount of Net Liquidation Proceeds and Insurance Proceeds applied
to the Stated Principal Balance of the related Mortgage Loan; and (ii) any Mortgage Loan, any
amount of principal that the Mortgagor is no longer legally required to pay (except for the
extinguishment of penalties, fees or other charges that results from the exercise of remedies due
to default by the Mortgagor), including a Deficient Valuation, a Debt Service Reduction or a
reduction of the Stated Principal Balance resulting from a modification of such Mortgage Loan
by the Servicer.
"Record Date" With respect to any Distribution Date and Certificate, the last Business
Day of the month preceding such Distribution Date.
"Regulation AB" Subpart 229.1100 - Asset Backed Securities (Regulation AB), 17
c.F.R. 229.1100-229.1123, as such may be amended from time to time, and subject to such
clarification and interpretation as have been publicly provided by the Commission in the
adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg.
1,506-1,631 (January 7, 2005)) or by the staff of the Commission, or as may be provided by the
Commission or its staff from time to time.
"Reimbursement Amount" With respect to any Mortgage Loan, any costs or damages
incurred by the Trust, the Trustee, or the Guarantor in connection with a breach of the Sponsor's
representations set forth in Section 7.02(a) of the Mortgage Loan Purchase Agreement. The
Reimbursement Amount will not include reimbursement for any Deficiency Amounts.
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"Related Documents" With respect to any Mortgage Loan, the related Mortgage Notes,
Mortgages and other related documents (such as assumption or modification agreements and
powers of attorney).
"Relevant Servicing Criteria" The Servicing Criteria applicable to the Servicer, as set
forth on Exhibit 0 attached hereto.
"Relief Act" The Servicemembers Civil Relief Act, as it may be amended from time to
time.
"Remittance Report" A report prepared by the Servicer and delivered to the Trustee
pursuant to Section 4.04(a), which shall be in the form of Exhibit L-1 attached hereto.
"REO Disposition" The sale or other disposition of an REO Property on behalf of the
Trust.
"REO Mortgage Loan" Any Mortgage Loan which is not a Liquidated 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 Property" A Mortgaged Property acquired by the Servicer on behalf of the Trust
through foreclosure or deed-in-lieu of foreclosure, as described in Section 3.13.
"Report Delivery Failure" The fourth (and any subsequent) failure of the Servicer (i) to
transmit the required reports to the Guarantor by the dates they are due or (ii) to transmit the
reports in a materially accurate and complete manner.
"Request for Release" A release signed by a Servicing Officer, in the form of Exhibit D
attached hereto.
"Residential Dwelling" Anyone of the following: (i) a detached one- or two-family
dwelling, (ii) a one-family dwelling unit in a condominium project, (iii) a townhouse or (iv) a
rowhouse, none of which is a co-operative, condotel, manufactured home or mobile home.
"Responsible Officer" When used with respect to the Trustee or the Custodian, any
officer of the Corporate Trust Office of the Trustee or the Custodian, as applicable, having direct
responsibility for the administration of this Agreement, including any managing director, any
vice president, any assistant vice president, any assistant secretary, any associate or trust officer,
or any other officer of the Trustee or the Custodian, as applicable, customarily performing
functions similar to those performed by any of the above-designated officers and in each case
having direct responsibility for the administration of this Agreement. When used with respect to
the Servicer, a Servicing Officer.
"S&P" Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and its
successors, and if such company shall for any reason no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other "nationally recognized
statistical rating organization" as set forth on the most current list of such organizations released
by the Commission.
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"Safesteps Offerings" The credit parameters of Freddie Mac with respect to subprime
offerings which are attached and referred to in the Mortgage Loan Purchase Agreement.
"Scheduled Payment" With respect to any Mortgage Loan, the monthly interest only
payment or the scheduled monthly payment of principal and interest on such Mortgage Loan
which is payable by the related Mortgagor from time to time under the related Mortgage Note,
determined: (i) after giving effect to (a) any Deficient Valuation and/or Debt Service Reduction
with respect to such Mortgage Loan, (b) any reduction in the amount of interest collectible from
the related Mortgagor pursuant to the Relief Act or similar state laws and (c) any Servicer
Modification and (ii) on the assumption that all other amounts, if any, due under such Mortgage
Loan are paid when due.
"Servicer" Barclays Capital Real Estate Inc. d/b/a Homeq Servicing, or its successor in
interest.
"Servicer Errors and Omissions Policy" An insurance policy covering losses caused by
errors or omissions of the Servicer and its personnel, including, but not limited to losses caused
by the failure to pay insurance premiums or taxes, to record or perfect liens, to effect valid
transfers of Mortgage Notes, or to properly service Mortgage Loans.
"Servicer Event of Termination" One or more of the events described in Section 7.01.
"Servicer Modification" A modification to the terms of a Mortgage Loan, in accordance
with the terms of Section 3.01.
"Servicer Remittance Date" With respect to any Distribution Date, the later of (i) the date
that is two (2) Business Days after the 15th day of the month in which such Distribution Date
occurs and (ii) the 18th day (or if such day is not a Business Day, the immediately succeeding
Business Day) of the month in which such Distribution Date occurs.
"Servicer REO Monthly Tracking Report" A report prepared by the Servicer and
delivered to the Guarantor pursuant to Section 3.26, which shall be in the form of Exhibit K
attached hereto.
"Servicing Advances" All customary, reasonable and necessary "out of pocket" costs and
expenses incurred by the Servicer (including reasonable attorneys' fees and disbursements) in the
performance of its servicing obligations, including, but not limited to, the cost of (i) the
preservation, inspection, restoration and protection of a Mortgaged Property, including without
limitation advances in respect of real estate taxes and assessments, (ii) any collection,
enforcement or judicial proceedings, including without limitation foreclosures, collections and
liquidations, (iii) the conservation, management, sale and liquidation of any REO Property, (iv)
executing and recording instruments of satisfaction, deeds of reconveyance, substitutions of
trustees on deeds of trust or Assignments of Mortgage to the extent not otherwise recovered from
the related Mortgagors or payable under this Agreement, (v) the amount of any deductible under
a lender-placed hazard insurance policy on any individual Mortgaged Property (vi) compliance
with the obligations under Sections 3.01 and 3.10 and (vii) any amounts mutually agreed to by
the Servicer and the Guarantor.
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"Servicing Criteria" The "servicing criteria" set forth in Item 1122(d) of Regulation AB,
as such may be amended from time to time.
"Servicing Fee" As to each Mortgage Loan and any Distribution Date, an amount equal
to the product of (i) one-twelfth of the Servicing Fee Rate and (ii) the Stated Principal Balance of
such Mortgage Loan as of the preceding Distribution Date or, in the event of any payment of
interest that accompanies a Principal Prepayment in full made by the Mortgagor, interest at the
Servicing Fee Rate on the Stated Principal Balance of such Mortgage Loan as of the preceding
Distribution Date for the period covered by such payment of interest.
"Servicing Fee Rate" With respect to each Mortgage Loan, 0.50% per annum.
"Servicing File" With respect to each Mortgage Loan, the file retained by the Servicer
consisting of originals or copies of all documents in the Mortgage File which are not delivered to
the Trustee or the Custodian, as applicable, and any records, documents or notes of the Servicer
related to the servicing of such Mortgage Loan.
"Servicing Officer" Any officer of the Servicer involved in, or responsible for, the
administration and servicing of Mortgage Loans, whose name and specimen signature appear on
a list of servicing officers furnished by the Servicer to the Trustee and the Depositor, as such list
may from time to time be amended.
"Servicing Standards" The servicing standards of Freddie Mac as attached hereto as
Exhibit R. In the event of any conflict between Accepted Servicing Practices and the Servicing
Standards, the terms of the Servicing Standards shall govern and be applicable.
"Similar Law" As defined in Section 5.02(b) hereof.
"Sponsor" Barclays Bank PLC, in its capacity as seller under the Mortgage Loan
Purchase Agreement.
"Stated Principal Balance" With respect to any Mortgage Loan or related REO Property
(i) as of the Cut-off Date, the Cut-off Date Principal Balance thereof, and (ii) as of any
Distribution Date, such Cut-off Date Principal Balance, minus the sum of (a) the principal
portion of the Scheduled Payments (I) due with respect to such Mortgage Loan during each Due
Period ending prior to such Distribution Date and (2) that were received by the Servicer as of the
close of business on the Determination Date related to such Distribution Date or with respect to
which Advances were made on the Servicer Remittance Date prior to such Distribution Date and
(b) all Principal Prepayments with respect to such Mortgage Loan received on or before the last
day of the related Prepayment Period, and all Liquidation Proceeds to the extent applied by the
Servicer as recoveries of principal in accordance with Section 3.03 with respect to such
Mortgage Loan or related REO Property, that were received by the Servicer on or before the last
day of the related Prepayment Period. Notwithstanding the foregoing, the Stated Principal
Balance of a Liquidated Loan shall be deemed to be zero.
"Stayed Funds" Any payment required to be made under the terms of the Certificates and
this Agreement but which is not remitted by the Servicer because the Servicer is the subject of a
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proceeding under the Bankruptcy Code and the making of such remittance is prohibited by
Section 362 of the Bankruptcy Code.
"Subsequent Recovery" Any amount (net of reimbursable expenses) received on a
Mortgage Loan subsequent to such Mortgage Loan being determined to be a Liquidated Loan
that resulted in a Realized Loss in a prior month.
"Subservicer" Any Person that services Mortgage Loans on behalf of the Servicer in
accordance with the provisions of Section 3.01 hereof and is responsible for the performance of a
substantial portion of the material servicing functions required to be performed by the Servicer
under this Agreement or any sub-servicing agreement.
"Substitution Adjustment Amount" As defined in Section 2.03(e) hereof.
"Supplemental Remittance Report" A report prepared by the Servicer and delivered to the
Guarantor pursuant to Section 3.26, which shall be in the form of Exhibit L-2 attached hereto, or
such other form that is mutually agreed upon by the Servicer and the Guarantor.
"Supplemental Certificate Report" A report prepared by the Trustee and delivered to the
Guarantor and the Credit Risk- Manager pursuant to Section 4.03(d), which shall be in the form
of Exhibit J-2 attached hereto.
"Tax Return" As defined in Section 9.01 hereof.
"Termination Price" As defined in Section 1O.01(a) hereof.
"Trust" EquiFirst Loan Securitization Trust 2008-1, a trust created under the laws of the
State of New York.
"Trust Fund" The segregated pool of assets subject hereto, constituting the primary trust
created hereby and to be administered hereunder, such entire Trust Fund consisting of: (i) such
Mortgage Loans as from time to time are subject to this Agreement, together with the Mortgage
Files relating thereto, and together with all collections thereon and proceeds thereof, (ii) any
REO Property, together with all collections thereon and proceeds thereof, (iii) the Trustee's
rights with respect to the Mortgage Loans under all insurance policies required to be maintained
pursuant to this Agreement and any proceeds thereof, (iv) the Trustee's rights with respect to the
Guarantee, (v) the Depositor's rights under the Mortgage Loan Purchase Agreement (including
any security interest created thereby), (vi) the right to receive any Prepayment Adjustment, and
(vii) the Collection Account, any Escrow Account and the Certificate Account and such assets
that are deposited therein from time to time and any investments thereof, together with any and
all income, proceeds and payments with respect thereto.
"Trustee" Deutsche Bank National Trust Company, a national banking association, not in
its individual capacity, but solely in its capacity as trustee for the benefit of the Certificateholders
under this Agreement, and any successor thereto, and any corporation or national banking
association resulting from or surviving any consolidation or merger to which it or its successors
may be a party and any successor trustee as may from time to time be serving as successor
trustee hereunder; it being understood that certain duties of the Trustee with respect to the
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possession and administration of the Mortgage Loan Documents generally will be carried out by
a custodian.
"Trustee Aggregate Annual Cap" As defined in Section 8.05 hereof.
"Trustee Errors and Omissions Policy" An insurance policy covering losses caused by
errors or omissions of the Trustee and its personnel.
"Underwriting Guidelines" The underwriting guidelines attached and referred to in the
Mortgage Loan Purchase Agreement.
"United States Person" or "U.S. Person" (i) A citizen or resident of the United States, (ii)
a corporation, partnership or other entity treated as a corporation or partnership for United States
federal income tax purposes organized in or under the laws of the United States or any state
thereof or the District of Columbia (unless, in the case of a partnership, Treasury Regulations
provide otherwise), (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 over the administration of the trust and one or more United
States persons have 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.
"Voting Interests" The portion of the voting rights of all of the Certificates which is
allocated to any Class A Certificate. The Voting Interests allocated among Holders of the Class
A Certificates shall be 100%. The Voting Interests allocated to the Class A Certificates shall be
allocated among all holders of the Class A Certificates in proportion to the outstanding
Certificate Principal Balance of such Certificates; provided, however, that any Certificate
registered in the name of the Servicer, the Sponsor, the Depositor or the Trustee or any of their
respective affiliates shall not be included in the calculation of Voting Interests; provided that
only such Certificates as are known by a Responsible Officer of the Trustee to be so registered
will be so excluded. The Class P Certificate shall have no Voting Interest.
"WHFIT" A "Widely Held Fixed Investment Trust" as that term is defined in Treasury
Regulations section 1.671-5(b)(22) or successor provisions.
"WHFIT Regulations" Treasury Regulations section 1.671-5, as amended.
"WHMT" A "Widely Held Mortgage Trust" as that term is defined In Treasury
Regulations section 1.671-5(b)(23) or successor provisions.
"Written Order to Authenticate" A written order of the Depositor directing the Trustee to
execute, authenticate and deliver the Certificates.
Section 1.02 Accounting. Unless otherwise specified herein, for the purpose of any
definition or calculation, whenever amounts are required to be netted, subtracted or added or any
distributions are taken into account such definition or calculation and any related definitions or
calculations shall be determined without duplication of such functions.
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ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 2.01 Conveyance of Mortgage Loans. (a) The Depositor, concurrently with the
execution and delivery hereof, does hereby sell, transfer, assign, set over and otherwise convey
to the Trustee, on behalf of the Trust, without recourse, for the benefit of the Certificateholders
all the right, title and interest of the Depositor, including any security interest therein for the
benefit of the Depositor, in and to the Trust Fund. Such assignment includes all interest and
principal received with respect to the Mortgage Loans after the Cut-off Date (other than
Scheduled Payments due on the Mortgage Loans on or before the Cut-off Date) and any
Principal Prepayment received on or after the Cut-off Date. The Trustee hereby accepts such
assignment, and shall be entitled to exercise all rights of the Depositor under the Mortgage Loan
Purchase Agreement as if, for such purpose, it were the Depositor.
In connection with such assignment, the Depositor shall, with respect to each Mortgage
Loan, deliver, or cause to be delivered, to the Custodian, on or before the Closing Date the
following documents or instruments which are included in the Mortgage File:
(i) the original Mortgage Note (except for the Mortgage Notes for which
there is a Lost Note Affidavit and a copy of the Mortgage Note attached thereto; provided,
however, that no more than 2% of the Mortgage Loans shall be secured by Mortgage Loans for
which a Lost Note Affidavit has been delivered in lieu of the original Mortgage Note, and in the
event of any default, loss or delay in enforcement that arises as a result of a lost Mortgage Note,
the Depositor shall indemnify, defend and hold harmless the Trust for any loss or expense
(including reasonable attorney's fees) that the Trust may sustain with respect to such lost
Mortgage Note and the Guarantor and the Trustee shall enforce the Depositor's obligation with
respect thereto), bearing all intervening endorsements showing a complete chain of endorsement
from the originator to the last endorsee, endorsed "Pay to the order of , without
recourse" and signed in the name of the last endorsee by an authorized officer. To the extent that
there is no room on the face of any Mortgage Note for an endorsement, the endorsement may be
contained on an allonge, only if state law so permits. If the Mortgage Loan was acquired by the
Original Loan Seller in a merger, the endorsement must be by "[last endorsee], successor by
merger to [name of predecessor]". If the Mortgage Loan was acquired or originated by the last
endorsee while doing business under another name, the endorsement must be by "[last endorsee],
formerly known as [previous name]";
(ii) the original Mortgage with evidence of recording thereon or a certified
true copy of such Mortgage submitted for recording. If, in connection with any Mortgage Loan,
the original Mortgage cannot be delivered with evidence of recording thereon on or prior to the
Closing Date because of a delay caused by the public recording office where such Mortgage has
been delivered for recordation or because such Mortgage has been lost or because such public
recording office retains the original recorded Mortgage, the Depositor shall deliver or cause to be
delivered to the Custodian a photocopy of such Mortgage, together with (A) in the case of a
delay caused by the public recording office, an Officer's Certificate of the Depositor (or certified
by the Original Loan Seller or the Depositor, title company, escrow agent, or closing attorney)
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stating that such Mortgage has been dispatched to the appropriate public recording office for
recordation and that the original recorded Mortgage or a copy of such Mortgage certified by such
public recording office to be a true and complete copy of the original recorded Mortgage will be
promptly delivered to the Custodian upon receipt thereof by the Depositor or the Original Loan
Seller; or (B) in the case of a Mortgage where a public recording office retains the original
recorded Mortgage or in the case where a Mortgage is lost after recordation in a public recording
office, a copy of such Mortgage certified by such public recording office to be a true and
complete copy of the original recorded Mortgage;
(iii) the original of each assumption agreement, recorded or unrecorded
modification, written assurance or substitution agreement pertaining to such Mortgage Note, if
any, including, if applicable, a copy of the notice from the Sponsor to the each Mortgagor with a
Mortgage Loan containing a Gross Margin in excess of 4.50% per annum pertaining to the Gross
Margin being reduced and capped at 4.50% per annum for each such Mortgage Loan;
(iv) the original Assignment of Mortgage for each Mortgage Loan endorsed in
blank (except with respect to MERS Loans);
(v) the originals of all intervening assignments of Mortgage (if any)
evidencing a complete chain of assignment from the originator to the last endorsee (or, in the
case of a MERS Loan, MERS) with evidence of recording thereon, or if any such intervening
assignment has not been returned from the applicable recording office or has been lost or if such
public recording office retains the original recorded assignments of Mortgage, the Depositor
shall deliver or cause to be delivered a photocopy of such intervening assignment, together with
(A) in the case of a delay caused by the public recording office, an Officer's Certificate of the
Depositor or the Original Loan Seller or a certificate from an escrow company, a title company
or a closing attorney stating that such intervening assignment of Mortgage has been dispatched to
the appropriate public recording office for recordation and that such original recorded
intervening assignment of Mortgage or a copy of such intervening assignment of Mortgage
certified by the appropriate public recording office to be a true and complete copy of the original
recorded intervening assignment of Mortgage will be promptly delivered to the Custodian upon
receipt thereof by the Depositor or the Original Loan Seller; or (B) in the case of an intervening
assignment where a public recording office retains the original recorded intervening assignment
or in the case where an intervening assignment is lost after recordation in a public recording
office, a copy of such intervening assignment certified by such public recording office to be a
true and complete copy of the original recorded intervening assignment;
(vi) the original mortgagee title insurance policy or, in the event such original
title policy is unavailable, a copy of the title policy, certified by the Original Loan Seller or the
Depositor, or certified true copy of the related policy binder or commitment for title certified to
be true and complete by the title insurance company;
(vii) the original or, if unavailable, a copy of any security agreement, chattel
mortgage or equivalent document executed in connection with the Mortgage (if provided); and
(viii) if any of the above documents has been executed by a person holding a
power of attorney, an original or, if such power of attorney was recorded with the related
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Mortgage Loan, a photocopy of such power of attorney certified by the Original Loan Seller or
the Depositor to be a true and correct copy of the original.
(b) If any assignment of a Mortgage to the Trust is in the process of being recorded
on the Closing Date, the Sponsor shall use its best efforts to cause each such original recorded
document or certified copy thereof to be delivered to the Custodian promptly following its
recordation, but in no event later than one (I) year following the Closing Date. If any Mortgage
has been recorded in the name of MERS or its designee, no assignment of Mortgage in favor of
the Trust will be required to be prepared or delivered and instead, the Servicer shall take all
actions as are necessary to cause the Trust to be shown as the owner of the related Mortgage
Loan on the records of MERS for the purpose of the system of recording transfers of beneficial
ownership of mortgages maintained by MERS. The Sponsor shall also cause to be delivered to
the Custodian any other original mortgage loan document included in the Mortgage Loan
Document if a copy thereof has been delivered. The Sponsor shall pay from its own funds,
without any right of reimbursement therefor, the amount of any costs, liabilities and expenses
incurred by the Trust by reason of the failure of the Sponsor to deliver or cause to be delivered to
the Custodian within one (l) year following the Closing Date any assignment of a Mortgage
(except with respect to any Mortgage recorded in the name of MERS) not delivered to the
Custodian on the Closing Date.
In lieu of recording an assignment of any Mortgage, the Sponsor may deliver or cause to
be delivered to the Custodian the assignment of the Mortgage Loan to the Trustee, on behalf of
the Trust, in a form suitable for recordation, if (i) with respect to a particular state the Trustee
and the Custodian have received an Opinion of Counsel acceptable to them that such recording is
not required to make the assignment effective against the parties to the Mortgage or subsequent
purchasers or encumbrances of the Mortgaged Property or (ii) the related Mortgage is located in
any state other than Florida or Maryland. In the event that the Custodian receives notice that
recording is required to protect the right, title and interest of the Trust in and to any such
Mortgage Loan for which recordation of an assignment has not previously been required, the
Custodian shall promptly notify the Trustee and the Custodian shall within five Business Days
(or such other reasonable period of time mutually agreed upon by the Custodian and the Trustee)
of its receipt of such notice deliver each previously unrecorded assignment to the Servicer for
recordation.
(c) Except for Mortgage Notes endorsed in blank, endorsements shall comply with
the following format:
WITHOUT RECOURSE
PAY TO THE ORDER OF:
DEUTSCHE BANK NATIONAL TRUST COMPANY, AS
TRUSTEE under the pooling and servicing agreement dated as of January 1,2008
and its successors and assigns,
[ ]
[Signature of Officer] [Officer's Name and Title]
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Except where assignments in blank are authorized or in the case of any Mortgage
registered in the name of MERS, assignments of any Mortgage shall comply with the following:
PAY TO THE ORDER OF:
DEUTSCHE BANK NATIONAL TRUST COMPANY,
AS TRUSTEE and its successors and assigns
(d) Concurrently with the execution and delivery of this Agreement, the Depositor
shall deliver the Mortgage Loan Schedule to the Trustee, the Guarantor, the Credit Risk
Manager, the Servicer and the Custodian.
(e) [Reserved].
(f) In the event a Mortgagor fails to make a Scheduled Payment that is due in January
2008 or February 2008 by February 29,2008, the Sponsor shall repurchase such Mortgage Loan
(any such Mortgage Loan, an HEPD Mortgage Loan") at the Purchase Price plus the Prepayment
Adjustment by no later than March 31, 2008. The Purchase Price and the Prepayment
Adjustment for the repurchased Mortgage Loan shall be deposited in the Collection Account, and
the Custodian, upon receipt of written notice from the Servicer of such deposit, shall release to
the Sponsor the Mortgage Loan Document of the Mortgage Loan being repurchased. The
Trustee shall execute and deliver such instruments of transfer or assignment (or, in the case of a
Mortgage Loan registered in the name of MERS or its designee, the Servicer shall reflect such
assignment on the records of MERS), in each case without recourse, as the Sponsor or the
Servicer shall furnish to it and as shall be necessary to vest in the Sponsor any Mortgage Loan
released pursuant hereto and the Custodian and the Trustee shall have no further responsibility
with regard to such Mortgage Loan Document.
(g) In the event of a voluntary Principal Prepayment in full of a Mortgage Loan
within the first three (3) months of the Closing Date, the Depositor agrees to remit (or to cause to
be remitted) an amount equal to the Prepayment Adjustment for such Mortgage Loan to the
Trustee. Such Prepayment Adjustment shall be remitted by the Depositor to the Trustee not less
than two (2) days prior to the Distribution Date immediately following the Principal Payment in
full. The Trustee shall deposit all such identifiable Prepayment Adjustments in the Distribution
Account within one (1) Business Day after receipt.
(h) No later than the 10th calendar day prior to each Distribution Date, the Servicer
and Depositor agree to provide to the Trustee and the Guarantor and the Credit Risk Manager
pursuant to Section 2.01(f) and 2.01(g) the Mortgage Loan number and any related Prepayment
Adjustment information in a mutually agreeable format.
Section 2.02 Acceptance by Trustee; Review by Custodian. The Custodian, on behalf
of the Trustee, acknowledges the receipt of, subject to the provisions of Section 2.01 and subject
to the review by the Custodian described below and any exceptions noted on the exception report
described in the next paragraph below, the documents referred to in Section 2.01 above and
declares that it holds and will hold such documents and the other documents delivered to the
Custodian, on behalf of the Trustee, constituting the Mortgage File. The Trustee acknowledges
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that it holds or will hold all such assets in trust for the exclusive use and benefit of all present and
future Certificateholders.
The Custodian, for the benefit of the Certificateholders, shall execute and deliver to the
Servicer, the Guarantor, the Credit Risk Manager, the Trustee and the Depositor on or prior to
the Closing Date an initial certification in the form attached hereto as Exhibit E-l to the effect
that, except as may be specified in a list of exceptions attached thereto, it has received a
Mortgage Loan Document containing the original Mortgage Notes (described in Section
2.01(a)(i)) relating to each Mortgage Loan listed in the Mortgage Loan Schedule based on a
comparison of all of the items listed on the Custodial Mortgage Loan Schedule (other than any
Mortgage Loan that has been paid in full, liquidated or otherwise released as of the date of such
certification, and subject to any exceptions specifically identified in the exception report annexed
to such certification).
The Custodian shall review each Mortgage Loan Document within 30 days after
execution of this Agreement. The Custodian will deliver no later than fifteen (15) days after
completion of such review to the Servicer, the Guarantor, the Trustee, the Credit Risk Manager
and the Depositor a final certification in the form of Exhibit E-2 hereto to the effect that, except
as may be specified in a list of exceptions attached thereto, all required documents set forth in
Section 2.01(a) have been executed andreceived and appear regular on their face, and that such
documents relate to the Mortgage Loans identified in the Mortgage Loan Schedule based on a
comparison of all of the items listed on the Custodial Mortgage Loan Schedule, in so doing, the
Custodian may rely on the purported due execution and genuineness of any such document and
on the purported genuineness of any signature thereon.
If, in the process of reviewing the Mortgage Loan Documents and making or preparing,
as the case may be, the certifications referred to above, the Custodian finds any document or
documents constituting a part of a Mortgage Loan Document to be missing or defective in any
respect, at the conclusion of its review, the Custodian shall so notify the Depositor, the Trustee,
the Guarantor, the Credit Risk Manager and the Servicer.
It is herein acknowledged that, in conducting such review, neither the Trustee nor the
Custodian shall be under any duty or obligation to inspect, review or examine any such
documents, instruments, certificates or other papers to determine that they are genuine,
enforceable or appropriate for the represented purpose, that they have actually been recorded or
that they are other than what they purport to be on their face.
Section 2.03 Repurchase or Substitution of Mortgage Loans by the Sponsor and the
Depositor. (a) In respect of any Mortgage Loan, upon receipt of written notice of (or if a
Responsible Officer of the Trustee or the Custodian, as applicable, obtains actual knowledge of)
any defective document in, or that a document is missing from, a Mortgage Loan Document or of
a breach of a representation of warranty of (i) the Depositor in Section 2.04 hereof or (ii) the
Sponsor in Section 7.02 of the Mortgage Loan Purchase Agreement, and such breach or
defective or missing document materially adversely affects the value of such Mortgage Loan or
Prepayment Penalty or the interest therein of the Certificateholders, the Trustee or the Custodian,
as applicable, shall promptly (and in no event more than fifteen (15) days after completion of the
review) notify the Depositor, the Sponsor, the Credit Risk Manager, the Guarantor and the
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Servicer of such defect, missing document or breach and the Trustee upon receipt of the written
determination set forth below shall request that the Sponsor cure such defect or breach or deliver
such missing document within 30 days from the date the Depositor or the Sponsor was notified
of such missing document, breach or defect. The Servicer shall forward to the Guarantor any
repurchase letter generated as a result of a breach or defect or missing document. Such
notification from the Custodian shall be in the form of an exception report. The Guarantor shall
consult with the Depositor to determine if any breach of a representation or warranty has a
material adverse effect and any Mortgage Loan in which the breach of the representation or
warranty is determined by both the Depositor and the Guarantor to be material shall be
repurchased. In the event the Depositor and the Guarantor fail to agree on the materiality of a
breach, the Credit Risk Manager shall be consulted and shall determine whether such breach has
a material adverse effect requiring the Mortgage Loan to be repurchased from the Trust. The
Trustee shall be entitled to conclusively rely upon any determination of the Guarantor, the
Depositor or the Credit Risk Manager under the immediately preceding sentence.
Without limiting the effect of the second preceding sentence, any breach of the
representations set forth in clauses (3) through (5), (47) through (59) and (66) through (69) of
Section 7.02 of the Mortgage Loan Purchase Agreement shall be deemed to materially adversely
affect the value of the Mortgage Loan or Prepayment Penalty or the interests therein of the
Certificateholders in the related Mortgage Loan. If the Sponsor does not deliver such missing
document or cure such defect or cure such breach in all material respects during such period, the
Sponsor shall repurchase such Mortgage Loan from the Trust at the Purchase Price on or prior to
the Determination Date following the expiration of such period (subject to Section 2.03(e) and
the last paragraph of this Section 2.03(a)). If the Depositor repurchases a Mortgage Loan
pursuant to this Section 2.03 prior to April 24, 2008, the Depositor shall remit the Prepayment
Adjustment for such Mortgage Loan. The Purchase Price and, if applicable, the Prepayment
Adjustment, for the repurchased Mortgage Loan shall be deposited in the Collection Account,
and the Custodian, upon receipt of a Request for Release from the Servicer of such deposit, shall
release to the Sponsor the Mortgage Loan Document of the Mortgage Loan being repurchased.
The Trustee shall execute and deliver such instruments of transfer or assignment (or, in the case
of a Mortgage Loan registered in the name of MERS or its designee, the Servicer shall reflect
such assignment on the records of MERS), in each case without recourse, as the Sponsor or the
Servicer shall furnish to it and as shall be necessary to vest in the Sponsor any Mortgage Loan
released pursuant hereto and the Custodian and the Trustee shall have no further responsibility
with regard to such Mortgage Loan Document. In lieu of repurchasing any such Mortgage Loan
as provided above, the Sponsor may cause such Mortgage Loan to be removed from the Trust
Fund (in which case it shall become a Defective Mortgage Loan) and may substitute one or more
Eligible Substitute Mortgage Loans in the manner and subject to the limitations set forth in
Section 2.03(e).
It is understood and agreed that the representations and warranties set forth in Section
7.02 of the Mortgage Loan Purchase Agreement shall inure to the benefit of the
Certificateholders and the Guarantor and shall survive delivery of the Mortgage Loan Documents
to the Custodian notwithstanding any restrictive or qualified endorsement or assignment. It is
understood and agreed that the obligations of the Sponsor set forth in this Section 2.03(a) to cure,
substitute for or repurchase a Mortgage Loan and, in Section 2.03(b), to pay the Reimbursement
Amount constitute the sole remedies available to the Guarantor, the Certificateholders and to the
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Trustee on their behalf respecting a breach of the representations and warranties in Section 2.04
hereof and Section 7.02 of the Mortgage Loan Purchase Agreement.
(b) In addition to the foregoing, in the case of a breach of the Sponsor's
representations set forth in Section 7.02 of the Mortgage Loan Purchase Agreement, the Sponsor
shall pay to the Trust the Reimbursement Amount. The Reimbursement Amount shall be
delivered to the Servicer for deposit into the Collection Account within ten (to) days from the
date the Sponsor and Depositor are notified in writing by the Trustee of the amount of such costs
and damages, which notice shall be accompanied by supporting documentation sufficiently
detailing the basis for payment of the Reimbursement Amount. Further, in the event that the
Guarantor has incurred any direct costs or damages as a result of the breach of the Sponsor's
representations set forth in Section 7.02 of the Mortgage Loan Purchase Agreement (other than
the payment of any Deficiency Amount), the Sponsor shall reimburse the Guarantor for such
amounts within ten (10) days following the date on which the Sponsor is notified in writing by
the Guarantor of the amount of such costs and damages, which notice shall be accompanied by
supporting documentation sufficiently detailing the nature and basis of payment thereof.
(c) If any (i) Reimbursement Amounts or (ii) costs or damages contemplated by
clause (v) of the definition of Purchase Price are incurred by the Trustee, the Trust or the
Guarantor subsequent to the purchase of the affected Mortgage Loan pursuant to this Section
2.03, then the Sponsor shall deliver to the Trustee for deposit into the Certificate Account the
amount of such costs and expenses upon ten (10) Business Days' prior written notice and receipt
of an Officer's Certificate of the Trustee or the Guarantor, as the case may be. In addition, if any
(x) Reimbursement Amounts or (y) costs or damages contemplated by clause (v) of the definition
of Purchase Price are incurred by the Guarantor subsequent to the termination of the Trust
pursuant to Section 10.01, then the Sponsor shall remit the amount of such costs and expenses to
the Guarantor upon ten (to) Business Days' prior written notice and receipt of an Officer's
Certificate of the Guarantor and in accordance with wiring instructions specified in such
Officer's Certificate.
(d) Within 90 days of the earlier of discovery by the Servicer or receipt of notice by
the Servicer of the breach of any representation, warranty or covenant of the Servicer set forth in
Section 2.05 which breach materially and adversely affects the interests of the Certificateholders
in any Mortgage Loan, the Servicer shall cure such breach in all material respects.
(e) Any substitution of Eligible Substitute Mortgage Loans for Defective Mortgage
Loans made pursuant to Section 2.03(a) must be effected prior to the last Business Day that is
within two years after the Closing Date. As to any Defective Mortgage Loan for which the
Depositor substitutes an Eligible Substitute Mortgage Loan or Loans, such substitution shall be
effected by the Depositor delivering to the Custodian, on the Trustee's behalf for such Eligible
Substitute Mortgage Loan or Loans, the documents required by Section 2.01, together with an
Officer's Certificate providing that each such Eligible Substitute Mortgage Loan satisfies the
definition thereof and specifying the Substitution Adjustment Amount, if any, in connection with
such substitution. The Custodian shall acknowledge receipt (such acknowledgement shall be in
the form of a certification) for such Eligible Substitute Mortgage Loan or Loans and, within ten
(to) Business Days thereafter, shall review such documents as specified in Section 2.02 and
deliver to the Servicer and the Trustee, with respect to such Eligible Substitute Mortgage Loan or
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Loans, a certification substantially in the form attached hereto as Exhibit E-l, with any
applicable exceptions noted thereon. Within 45 calendar days of the date of substitution, the
Custodian shall deliver to the Servicer, the Credit Risk Manager, the Guarantor and the Trustee a
certification substantially in the form of Exhibit E-2 hereto with respect to such Eligible
Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon. Scheduled
Payments due with respect to Eligible Substitute Mortgage Loans in the month of substitution are
not part of the Trust Fund and will be retained by the Depositor. For the month of substitution,
distributions to Certificateholders will reflect the collections and recoveries in respect of such
Defective Mortgage Loan in the Due Period or Prepayment Period, as applicable, preceding the
date of substitution and the Depositor shall thereafter be entitled to retain all amounts
subsequently received in respect of such Defective Mortgage Loan. The Depositor shall amend
the Mortgage Loan Schedule to reflect the removal of such Defective Mortgage Loan from the
terms of this Agreement and the substitution of the Eligible Substitute Mortgage Loan or Loans
and shall deliver a copy of such amended Mortgage Loan Schedule to the Trustee, the Servicer,
the Guarantor, the Credit Risk Manager and the Custodian. Upon such substitution, such
Eligible Substitute Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall
be subject in all respects to the terms of this Agreement, including all applicable representations
and warranties as of the date of substitution.
For any month in which the Sponsor substitutes one or more Eligible Substitute Mortgage
Loans for one or more Defective Mortgage Loans, the Servicer shall determine the amount (the
"Substitution Adjustment Amount"), if any, by which the aggregate unpaid principal balance of
all such Defective Mortgage Loans exceeds the aggregate principal balance of each such Eligible
Substitute Mortgage Loan as of the date of substitution, together with one month's interest on
such principal balance at the applicable Mortgage Rate. On the date of such substitution, the
Sponsor shall deliver or cause to be delivered to the Servicer for deposit in the Collection
Account an amount equal to the Substitution Adjustment Amount, if any, and the Custodian, on
behalf of the Trustee, upon receipt ofthe related Eligible Substitute Mortgage Loan or Loans and
notice by the Servicer of such deposit, shall release to the Sponsor the related Mortgage Loan
Document and the Trustee shall execute and deliver such instruments of transfer or assignment,
in each case without recourse, as the Sponsor or the Servicer shall deliver to it and as shall be
necessary to vest therein any Defective Mortgage Loan released pursuant hereto.
The Depositor and the Sponsor shall determine the Purchase Price of any Mortgage Loan
utilizing data provided by the Servicer or the eligibility of any Eligible Substitute Mortgage Loan
utilizing data provided by the Servicer about the related Defective Mortgage Loan, and the
Trustee shall be protected in relying on such determination.
(f) If the Trustee receives written notice from the Custodian or the Guarantor that the
defect was not cured by the Sponsor within 30 days after the Trustee's notice, the Trustee shall
demand that the Sponsor repurchase such Mortgage Loan or substitute for such Mortgage Loan
in accordance with the provisions of this Section 2.03 by providing notice to the Depositor of
such defect. If the Sponsor fails to cure such defect, or repurchase or substitute for such
Mortgage Loan in accordance with the provisions of this Section 2.03, the Trustee shall, at the
written direction of the Guarantor, take such action as the Guarantor may direct, to enforce the
Sponsor's obligations under this Section 2.03.
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Section 2.04 Representations and Warranties of the Depositor. (a) The Depositor
hereby represents and warrants to the Trustee, for the benefit of the Certificateholders, the
Guarantor and the Servicer that as of the Closing Date or as of such other date specifically
provided herein:
(i) The Depositor is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(ii) The Depositor has the power and authority to convey the Mortgage Loans
and to execute, deliver and perform, and to enter into and consummate the transactions
contemplated by, this Agreement;
(iii) This Agreement has been duly and validly authorized, executed and
delivered by the Depositor, all requisite company action having been taken, and, assuming the
due authorization, execution and delivery hereof by the other parties hereto, constitutes or will
constitute the legal, valid and binding agreement of the Depositor, enforceable against the
Depositor in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting
the rights of creditors generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law);
(iv) No litigation is pending, or, to the best of the Depositor's knowledge,
threatened, against the Depositor that would materially and adversely affect the execution,
delivery or enforceability of this Agreement and the Mortgage Loan Purchase Agreement or the
ability of the Depositor to perform its obligations under this Agreement or the Mortgage Loan
Purchase Agreement in accordance with the terms thereof.
(v) No consent, approval, authorization or order of, or registration or filing
with, or notice to, any governmental authority or court is required for the execution, delivery and
performance of or compliance by the Depositor with this Agreement and the Mortgage Loan
Purchase Agreement or the consummation by the Depositor of any of the transactions
contemplated hereby, except as have been received or obtained on or prior to the Closing Date;
(vi) None of the execution and delivery of this Agreement by the Depositor,
the consummation of the transactions contemplated hereby or thereby, or the fulfillment of or
compliance with the terms and conditions of this Agreement or the Mortgage Loan Purchase
Agreement, (i) conflicts or will conflict with or results or will result in a breach of, or constitutes
or will constitute a default or results or will result in an acceleration under (A) the certificate of
formation or limited liability company agreement of the Depositor, or (B) of any term, condition
or provision of any material indenture, deed of trust, contract or other agreement or instrument to
which the Depositor or any of its subsidiaries is a party or by which it or any of its subsidiaries is
bound; (ii) results or will result in a violation of any law, rule, regulation, order, judgment or
decree applicable to the Depositor of any court or governmental authority having jurisdiction
over the Depositor or its subsidiaries; or (iii) results in the creation or imposition of any lien,
charge or encumbrance which would have a material adverse effect upon the Mortgage Loans or
any documents or instruments evidencing or securing the Mortgage Loans;
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(vii) There are no actions, suits or proceedings before or against or
investigations of, the Depositor pending, or to the knowledge of the Depositor, threatened, before
any court, administrative agency or other tribunal, and no notice of any such action, which, in the
Depositor's reasonable judgment, might materially and adversely affect the performance by the
Depositor of its obligations under this Agreement or the Mortgage Loan Purchase Agreement, or
the validity or enforceability of this Agreement or the Mortgage Loan Purchase Agreement;
(viii) The Depositor 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
that would materially and adversely affect its performance hereunder; and
(ix) Immediately prior to the transfer and assignment by the Depositor to the
Trustee on the Closing Date, the Depositor had good title to the Mortgage Loans and the
Mortgage Notes were subject to no offsets, claims, liens, mortgage, pledge, charge, security
interest, defense or counterclaims, and the Depositor was the sole owner of each Mortgage Loan,
free of any interest of any other Person, and the Depositor has transferred all right, title and
interest in each Mortgage Loan to the Trustee on behalf of the Trust.
(x) Each of this Agreement and the Mortgage Loan Purchase Agreement
constitutes a legal, valid and binding obligation of the Depositor, enforceable against the
Depositor in accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and except as such enforceability
may be limited by general principles of equity (whether considered in a proceeding at law or in
equity).
(xi) As of the Closing Date, the Depositor has transferred all right, title and
interest in the Mortgage Loans to the Trustee on behalf of the Trust.
(xii) The Depositor has not transferred the Mortgage Loans to the Trustee on
behalf of the Trust with any intent to hinder, delay or defraud any of its creditors.
(b) The Depositor hereby restates the representations and warranties set forth in
Section 7.02 of the Mortgage Loan Purchase Agreement, and by this reference incorporates such
representations and warranties herein, to the Trustee and the Guarantor, as of the Closing Date.
The representations and warranties of the Sponsor with respect to the Mortgage Loans in the
Mortgage Loan Purchase Agreement, which are being assigned by the Depositor to the Trust
hereunder, were made as of the Closing Date as specified in the Mortgage Loan Purchase
Agreement. The Trustee acknowledges that the Depositor shall have no obligation or liability
with respect to any breach of any representation or warranty with respect to the Mortgage Loans
(except as set forth in Section 2.04(a)(viii) herein).
(c) Freddie Mac reserves the right to conduct a post-settlement quality control
underwriting review of any Mortgage Loan at any time. Freddie Mac will underwrite each
Mortgage selected for post-settlement quality control review to verify that it complies with the
representations and warranties described in the Mortgage Loan Purchase Agreement. Freddie
Mac will notify the Sponsor and/or Servicer in writing to submit the designated Mortgage Files
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to Freddie Mac. The Sponsor and/or Servicer will promptly provide Freddie Mac access to, or
electronic copies of the related Mortgage File and all underwriting documentation available to it
(and if requested by the Guarantor, originals of such documentation), and the Sponsor may be
required to repurchase any Mortgage Loan that does not comply with the representations and
warranties as described in the Mortgage Loan Purchase Agreement.
Section 2.05 Representations, Warranties and Covenants of the Servicer. (a) The
Servicer hereby represents, warrants and covenants to the Trustee, for the benefit of the Trustee
and the Certificateholders and to the Depositor and the Guarantor that as of the Closing Date or
as of such date specifically provided herein:
(i) The Servicer is duly organized and is validly existing as a corporation in
good standing under the laws of the State of Delaware and is duly authorized and qualified to
transact any and all business contemplated by this Agreement to be conducted by the Servicer in
any state in which a Mortgaged Property is located or is otherwise not required under applicable
law to effect such qualification and, in any event, is in compliance with the doing business laws
of any such state, to the extent necessary to ensure its ability to enforce each Mortgage Loan, to
service the Mortgage Loans in accordance with the terms of this Agreement and to perform any
of its other obligations under this Agreement and the Credit Risk Management Agreement in
accordance with the terms hereof;
(ii) The Servicer has the corporate power and authority to service each
Mortgage Loan, and to execute, deliver and perform, and to enter into and consummate the
transactions contemplated by this Agreement and the Credit Risk Management Agreement and
has duly authorized by all necessary corporate action on the part of the Servicer the execution,
delivery and performance of this Agreement and the Credit Risk Management Agreement; and
this Agreement and the Credit Risk Management Agreement, assuming the due authorization,
execution and delivery hereof by the other parties hereto, constitutes a legal, valid and binding
obligation of the Servicer, enforceable against the Servicer in accordance with its terms, except
that (A) the enforceability hereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally and (B) the remedy of
specific performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any proceeding therefor may
be brought;
(iii) The execution and delivery of this Agreement and the Credit Risk
Management Agreement by the Servicer, the servicing of the Mortgage Loans under this
Agreement, the consummation of any other of the transactions contemplated by this Agreement
and the Credit Risk Management Agreement, and the fulfillment of or compliance with the terms
hereof and therein are in the ordinary course of business of the Servicer and will not (A) result in
a material breach of any term or provision of the organizational documents of the Servicer or (B)
materially conflict with, result in a material breach, violation or acceleration of, or result in a
material default under, the terms of any other material agreement or instrument to which the
Servicer is a party or by which it may be bound, or (C) constitute a material violation of any
statute, order or regulation applicable to the Servicer of any court, regulatory body,
administrative agency or governmental body having jurisdiction over the Servicer; and the
Servicer is not in breach or violation of any material indenture or other material agreement or
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instrument, or in violation of any statute, order or regulation of any court, regulatory body,
administrative agency or governmental body having jurisdiction over it which breach or violation
may materially impair the Servicer's ability to perform or meet any of its obligations under this
Agreement and the Credit Risk Management Agreement;
(b) The Servicer is an approved servicer of conventional residential mortgage loans
for Freddie Mac, with the facilities, procedures, and experienced personnel necessary for the
sound servicing of mortgage loans of the same type as the Mortgage Loans. The Servicer is in
good standing to service mortgage loans for Freddie Mac, and no event has occurred, including
but not limited to a change in insurance coverage, which would make the Servicer unable to
comply with Freddie Mac eligibility requirements or which would require notification to Freddie
Mac;
(c) This Agreement and the Credit Risk Management Agreement, and all documents
and instruments contemplated hereby or thereby which are executed and delivered by the
Servicer, constitute and will constitute valid, legal and binding obligations of the Servicer,
enforceable in accordance with their respective terms, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally (whether considered in a proceeding at
law or in equity); .
(d) The Servicer does not believe, nor does it have any reason or cause to believe,
that it cannot perform each and every covenant contained in this Agreement and the Credit Risk
Management Agreement;
(e) There is no action, suit, proceeding or investigation pending or, to its knowledge,
threatened against the Servicer that, either individually 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 carryon its
business substantially as now conducted, or in any material liability on the part of the Servicer,
or that would draw into question the validity or enforceability of this Agreement and the Credit
Risk Management Agreement or of any action taken or to be taken in connection with the
obligations of the Servicer contemplated herein, or that would be likely to impair materially the
ability of the Servicer to perform under the terms of this Agreement and the Credit Risk
Management Agreement;
(f) No consent, approval 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 and the Credit Risk Management Agreement or the consummation
of the transactions contemplated by this Agreement, except for such consents, approvals,
authorizations and orders, if any, that have been obtained;
(g) No information in this Agreement provided by the Servicer nor any information,
certificate of an officer, statement furnished in writing or report delivered to the Trustee by the
Servicer in connection with the transactions contemplated hereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a material fact necessary in order
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to make the statements contained therein, in light of the circumstances under which they were
made, not misleading; and
(h) The Servicer has fully furnished, and shall continue to fully furnish for so long as
it is servicing the Mortgage Loans hereunder, in accordance with the Fair Credit Reporting Act
and its implementing regulations, accurate and complete information on the Mortgagor credit
files to Equifax, Experian and Trans Union Credit Information Company on a monthly basis.
Section 2.06 Representations and Warranties of the Custodian. The Custodian hereby
represents and warrants to the Trustee, for the benefit of each of the Trust and the
Certificateholders, the Servicer and to the Depositor and the Guarantor that as of the Closing
Date:
(a) The Custodian is duly organized and is validly existing and in good standing
under the laws of its jurisdiction of incorporation and is duly authorized and qualified to transact
any and all business contemplated by this Agreement to be conducted by the Custodian or is
otherwise not required under applicable law to effect such qualification and, in any event, is in
compliance with the doing business laws of any such state, to the extent necessary to perform
any of its obligations under this Agreement in accordance with the terms hereof.
(b) The Custodian has the full power and authority to execute, deliver and perform,
and to enter into and consummate the transactions contemplated by this Agreement and has duly
authorized, by all necessary action on the part of the Custodian, the execution, delivery and
performance of this Agreement; and this Agreement, assuming the due authorization, execution
and delivery hereof by the other parties hereto, constitutes a legal, valid and binding obligation
of the Custodian, enforceable against the Custodian in accordance with its terms, except that
(i) the enforceability hereof may be limited by bankruptcy, insolvency, moratorium, receivership
and other similar laws relating to creditors' rights generally and (ii) 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.
(c) The execution and delivery of this Agreement by the Custodian, the
consummation of any other of the transactions contemplated by this Agreement, and the
fulfillment of or compliance with the terms thereof are in the ordinary course of business of the
Custodian and will not result in a material breach of any term or provision of the articles of
association or bylaws of the Custodian.
It is understood and agreed that the representations, warranties and covenants set forth in
Sections 2.05 and 2.06 shall survive delivery of the Mortgage Loan Documents to the Custodian
and shall inure to the benefit of the Trustee, the Depositor, the Guarantor and the
Certificateholders. Upon discovery by any of the Depositor, the Guarantor, the Servicer or the
Trustee of a breach of any of the representations, warranties and covenants set forth in Sections
2.04, 2.05 and 2.06 which materially and adversely affects the value of any Mortgage Loan,
Prepayment Penalty or the interests therein of the Certificateholders or the Guarantor, the party
discovering such breach shall give prompt written notice (but in no event later than two (2)
Business Days following such discovery) to the other parties hereto.
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Upon discovery by any of the Depositor, the Servicer, the Guarantor or the Trustee of a
breach of any of the representations and warranties set forth in Sections 2.05 and 2.06, the party
discovering such breach shall give prompt written notice, which shall not exceed two (2)
Business days, to the other parties. The Guarantor shall consult with the Depositor to determine
if any such breach is material and any breach determined by the Depositor and the Guarantor to
be material shall, upon written notice by the Depositor or the Guarantor to the Trustee, be
included by the Trustee on the next Certificate Report prepared pursuant to Section 4.03. The
Trustee shall be entitled to conclusively rely upon any determination of the Guarantor or the
Depositor under the immediately preceding sentence.
Section 2.07 Issuance of Certificates. The Trustee acknowledges the assignment to it of
the Mortgage Loans and the delivery to the Custodian on its behalf of the Mortgage Loan
Documents, subject to the provisions of Sections 2.01 and 2.02, and the Trustee acknowledges
the assignment to it of all other assets included in the Trust Fund, receipt of which is hereby
acknowledged. Concurrently with such assignment and delivery and in exchange therefor, the
Trustee, pursuant to the Written Order to Authenticate executed by an officer of the Depositor,
has executed, and the Certificate Registrar has authenticated and delivered to or upon the order
of the Depositor, each Class of Certificates in the minimum dollar denominations and integral
dollar multiples in excess thereof or minimum Percentage Interests set forth in Section 5.01
hereof. The interests evidenced by the Certificates constitute the entire beneficial ownership
interest in the Trust.
ARTICLE III
ADMINISTRATION AND SERVICING
OF THE ISSUING ENTITY
Section 3.01 Servicer to Act as Servicer. (a) The Servicer, as an independent contract
servicer, shall service and administer the Mortgage Loans in accordance with this Agreement,
Accepted Servicing Practices and the Servicing Standards.
The Servicer may arrange for the sub-servicing of any Mortgage Loan by a Subservicer
pursuant to a sub-servicing agreement; provided, however, that (i) such Subservicer is an
Approved Freddie Mac Servicer which represents and warrants that it is in compliance with the
laws of each state necessary to enable it to perform its obligations under such sub-servicing
agreement, (ii) such sub-servicing arrangement and the terms of the related sub-servicing
agreement must provide for the servicing of such Mortgage Loans in a manner consistent with
the servicing arrangements contemplated hereunder and (iii) the Guarantor consents to the
appointment of such Subservicer. The Servicer shall give prior notice to the Guarantor of the
appointment of any Subservicer and shall furnish to the Guarantor a copy of such sub-servicing
agreement. Unless the context otherwise requires, 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 Subservicer on behalf of the Servicer. Notwithstanding the provisions of any sub-
servicing 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 liable to the Trust, the Trustee,
the Guarantor and the Certificateholders for the servicing and administration of the Mortgage
U8Active 11384001.15
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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 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. All
actions of each Subservicer performed pursuant to the related sub-servicing agreement shall be
performed as an agent of the Servicer with the same force and effect as if performed directly by
the Servicer.
Notwithstanding the foregoing, the Servicer shall have the right to engage, at its own
expense, third-party vendors or subcontractors to perform specific functions of the Servicer
under this Agreement in accordance with its normal servicing practices and the Servicing
Standards. The Servicer shall remain obligated and liable to the Trust, the Trustee, the Guarantor
and the Certificateholders for the servicing and administration of the Mortgage Loans in
accordance with the provisions of this Agreement without diminution of such obligation or
liability by virtue of such engagement of third-party vendors or subcontractors or by virtue of
indemnification from the third-party vendors or subcontractors and to the same extent and under
the same terms and conditions, including the Servicing Fee, as if the Servicer alone were
servicing and administering the Mortgage Loans and furthermore, such third-party vendors or
subcontractors shall not be reimbursed from the Trust Fund for any costs and expenses related to
their engagement, provided, however, that the Servicer shall be reimbursed for such costs and
expenses to the extent permitted hereunder.
(b) The Guarantor shall have the right to (i) direct the Servicer to terminate any
Subservicer that is not an Approved Freddie Mac Servicer and (ii) direct the Servicer to
terminate a Subservicer if the Guarantor in its reasonable judgment determines that such
Subservicer should not sub-service the Mortgage Loans, provided, however, that any termination
in connection with clauses (i) and (ii) shall be at the expense of the Servicer from its own funds
and without any right of reimbursement from the Trust. Notwithstanding any provision in this
Agreement or in any sub-servicing agreement to the contrary, in no event will any termination
fees and expenses payable to a subservicer upon the removal thereof be charged to (or paid from)
the Guarantor or the Trust.
(c) Consistent with the terms of this Agreement, Accepted Servicing Practices and the
Servicing Standards, the Servicer may waive, modify or vary any term of any Mortgage Loan or
consent to the postponement of strict compliance with any such term or in any manner grant
indulgence to any Mortgagor if in the Servicer's reasonable determination such waiver,
modification, postponement or indulgence is not materially adverse to the Certificateholders;
provided, however, that, unless the Mortgagor is in default with respect to the Mortgage Loan or
such default is, in the judgment of the Servicer, reasonably foreseeable, the Servicer shall not
permit any modification with respect to any Mortgage Loan that would (i) change the Mortgage
Rate, defer or forgive the payment thereof of any principal or interest payments, reduce or
increase the outstanding principal amount (except for actual payments of principal) or extend the
final maturity date with respect to such Mortgage Loan beyond the applicable Final Scheduled
Distribution Date of the Loan Group containing such Mortgage Loan or (ii) be inconsistent with
the terms of the hazard insurance policy or flood insurance policy. Notwithstanding the
foregoing, the Servicer shall not permit any modification with respect to any Mortgage Loan that
would constitute a sale or exchange of such Mortgage Loan within the meaning of Section 1001
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of the Code (including any proposed, temporary or final Treasury regulations promulgated
thereunder) (other than in connection with a proposed conveyance or assumption of such
Mortgage Loan that is treated as a Principal Prepayment in full or in a default situation). For the
avoidance of doubt, a waiver, modification, postponement or indulgence shall be deemed to not
materially adversely affect the Certificateholders if the Servicer determines that such waiver,
modification, postponement or indulgence is reasonably likely to increase the proceeds of the
related Mortgage Loan over the amount expected to be collected pursuant to foreclosure.
Without limiting the generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered to execute and deliver on behalf of itself and the Trustee, 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. The Servicer shall make all required Servicing Advances and shall service and
administer the Mortgage Loans in accordance with Applicable Regulations, and shall provide to
the Mortgagor any reports required to be provided to them thereby. By the execution of this
Agreement, the Trustee hereby grants to the Servicer a power of attorney, substantially in the
form attached hereto as Exhibit P, to enable the Servicer to carry out its servicing and
administrative duties hereunder; provided, however, that the Trustee shall not be held liable for
any misuse of any such power of attorney by the Servicer. Notwithstanding anything contained
herein to the contrary, Servicer shall not, without the Trustee's written consent: (x) initiate
any action, suit or proceeding solely under the Trustee's name without indicating the Servicer's
representative capacity; or (y) take any action with the intent to cause, and that actually causes,
the Trustee to be registered to do business in any state. The Trustee shall not be responsible for,
and the Servicer (from its own funds and without any right of reimbursement from the Trust)
shall indemnify the Trustee, for any action taken by the Servicer pursuant to the application of
any power of attorney to the extent indemnification by the Servicer is required by Section 3.22
and provided that the Servicer shall have no obligation to indemnify the Trustee for such action
to the extent such action was taken pursuant to and in accordance with specific written
instructions from the Trustee, which instructions are not based on Servicer's recommendations or
proposals.
(d) In servlcmg and administering the Mortgage Loans, the Servicer shall employ
procedures including collection procedures consistent with Accepted Servicing Practices and the
Servicing Standards.
(e) Notwithstanding anything in this Agreement to the contrary, in the event of a
voluntary Principal Prepayment of a Mortgage Loan, the Servicer may waive any Prepayment
Penalty or portion thereof required by the terms of the related Mortgage Note if (i) such waiver is
upon the death of a Mortgagor, (ii)(A) such waiver relates to a default or a reasonably
foreseeable default and (B) such waiver would, in the reasonable judgment of the Servicer,
maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking into account the
value of such Prepayment Penalty, (iii) the enforceability of the Prepayment Penalty is limited
(A) by bankruptcy, insolvency, moratorium, receivership, or other similar law relating to
creditors' rights generally, (B) due to acceleration in connection with a foreclosure or other
involuntary payment or (iv) the Prepayment Penalty would not be permitted under applicable
law; provided that the Servicer shall be responsible for any portion of a Prepayment Penalty not
paid due to a waiver of a Prepayment Penalty for any reason other than that which is provided in
this Section 3.02(e) and shall deposit such amount of the related Prepayment Penalty into the
Collection Account out of its own funds. If the Servicer waives a Prepayment Penalty, the
Servicer shall notify the Trustee in writing of such waiver.
Section 3.02 Collection of Mortgage Loan Payments. Continuously from the date
hereof until the principal and interest on all Mortgage Loans are paid in full or as long as the
Mortgage Loan or any related REO Property remains subject to this Agreement, the Servicer will
diligently collect all payments due under each Mortgage Loan when the same shall become due
and payable and shall, to the extent such procedures shall be consistent with Accepted Servicing
Practices, the Servicing Standards and Applicable Regulations, follow such collection procedures
as it follows with respect to mortgage loans comparable to the Mortgage Loans or any related
REO Property and held for its own account. Further, where applicable, the Servicer will take
special care in ascertaining and estimating annual Escrow Payments that, as provided in the
Escrow Agreement, will become due and payable, to the end that the installments payable by the
Mortgagors will be sufficient to pay such charges as and when they become due and payable.
Section 3.03 Realization Upon Defaulted Mortgage Loans. (a) In the event that any
payment due under any Mortgage Loan is not paid when the same becomes due and payable, or
in the event the Mortgagor fails to perform any other covenant or obligation under the Mortgage
Loan and such failure continues beyond any applicable grace period, the Servicer shall take such
action as it shall deem to be in the best interest of the Certificateholders.
In connection with a foreclosure or other conversion, the Servicer shall exercise such
rights and powers vested in it hereunder and use the same degree of care and skill in its exercise
as it would exercise or use under the circumstances in the conduct of its own affairs and
consistent with Accepted Servicing Practices, Applicable Regulations and the Servicing
Standards, including, without limitation, advancing funds for the payment of taxes and insurance
premiums with respect to the Mortgage Loans. In addition, in connection with a foreclosure, the
Servicer shall service such Mortgage Loan as set forth and in accordance with the procedures
relating to foreclosure set forth in the Guidelines for Servicing Mortgage Loans in Default-
Servicing Standards attached as Exhibit R hereto.
Notwithstanding the foregoing, the Servicer shall 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 (A) that such restoration and/or foreclosure will increase the proceeds of
liquidation of the Mortgage Loan after reimbursement to itself of such expenses and (B) that
such expenses will be recoverable to it through Liquidation Proceeds with respect to the
Mortgage Loan (respecting which it shall have priority for purposes of withdrawals from the
Collection Account). Any such expenditures shall constitute Servicing Advances for purposes of
this Agreement.
(b) Notwithstanding the foregoing provisions of this Section 3.03, with respect to any
Mortgage Loan as to which the Servicer has received actual notice of, or has actual knowledge
of, the presence of any toxic or hazardous substance on the related Mortgaged Property, the
Servicer shall not, on behalf of the Trust, either (i) obtain title to such Mortgaged Property as a
result of or in lieu of foreclosure or otherwise, or (ii) otherwise acquire possession of, or take any
other action with respect to, such Mortgaged Property if, as a result of any such action, the Trust
or the Guarantor would be considered to hold title to, to be a mortgagee-in-possession of, or to
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be an owner or operator of such Mortgaged Property within the meaning of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended from time to
time, or any comparable law, unless the Servicer (i) has obtained the Guarantor's consent (which
consent shall not be unreasonably withheld) to such action and (ii) has determined, based on its
reasonable judgment and a report prepared, with the consent of the Guarantor, by a Person who
regularly conducts environmental audits using customary industry standards, stating that:
(1) such Mortgaged Property is in material compliance with applicable environmental
laws or, if not, that it would be in the best economic interest of the
Certificateholders to take such actions as are necessary to bring the Mortgaged
Property into compliance therewith; and
(2) there are no circumstances present at such Mortgaged Property relating to the use,
management or disposal of any hazardous substances, hazardous materials,
hazardous wastes, or petroleum-based materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under any
federal, state or local law or regulation, or that if any such materials are present
for which such action could be required, that it would be in the best economic
interest of the Certificateholders to take such actions with respect to the affected
Mortgaged Property. .
Notwithstanding the foregoing, if such environmental audit reveals, or if the Servicer has
actual knowledge or notice, that such Mortgaged Property contains such wastes or substances,
the Servicer shall not foreclose or accept a deed in lieu of foreclosure.
(c) If the Servicer determines, as described above, that it is in the best economic interest
of the Certificateholders to take such actions as are necessary to bring any such Mortgaged
Property into compliance with applicable environmental laws, or to take such action with respect
to the containment, clean-up or remediation of hazardous substances, hazardous materials,
hazardous wastes, or petroleum-based materials affecting any such Mortgaged Property, then the
Servicer shall take such action as it deems to be in the best economic interest of the
Certificateholders; provided that the Servicer shall obtain the Guarantor's prior consent. The
cost of (i) any such compliance, containment, cleanup or remediation and (ii) the environmental
audit report contemplated by this Section 3.03 shall be advanced by the Servicer, subject to the
Servicer's right to be reimbursed therefor from the Collection Account as a Servicing Advance
as provided in Section 3.05(b).
Any consent required by the Guarantor pursuant to this Article III may be requested by
e-mail fromdistressed_properties@freddiemac.com (with a copy of such request delivered to the
Credit Risk Manager by uploading it at https://https://upload.murrayhillcompany.com/).
Section 3.04 Collection Account and Certificate Account. (a) The Servicer shall
segregate and hold all funds collected and received pursuant to each Mortgage Loan and any
related REO Property separate and apart from any of its own funds and general assets and shall
establish and maintain one or more accounts (such account or accounts, the "Collection
Account"). Each Collection Account shall be an Eligible Account.
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The Servicer shall deposit in the Collection Account within one (l) Business Day of
receipt, except to the extent those funds are not validated upon initial processing, within two (2)
Business Days of receipt, and retain therein, the following payments and collections received or
made by it after the Cut-off Date with respect to the Mortgage Loans, without duplication:
(i) all payments on account of principal, including Principal Prepayments, on
the Mortgage Loans other than principal due on the Mortgage Loans on or prior to the Cut-off
Date;
(ii) all payments on account of interest on the Mortgage Loans adjusted to the
Mortgage Rate less the Servicing Fee Rate other than interest due on the Mortgage Loans on or
prior to the Cut-off Date;
(iii) all Net Liquidation Proceeds and Subsequent Recoveries;
(iv) all Insurance Proceeds including amounts required to be deposited
pursuant to Section 3.10, other than proceeds to be held in the Escrow Account and applied to
the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance
with the Servicer's normal servicing procedures and the Servicing Standards, the loan documents
or applicable law;
(v) all Condemnation Proceeds affecting any Mortgaged Property which are
not released to the Mortgagor in accordance with the Servicer's normal servicing procedures and
the Servicing Standards, the loan documents or applicable law;
(vi) any amounts required to be deposited by the Servicer in connection with
any REO Property pursuant to Section 3.13;
(vii) all Prepayment Penalties collected by the Servicer in connection with the
voluntary Principal Prepayment in full of any of the Mortgage Loans then on deposit in the
Collection Account and all Prepayment Adjustments (other than Prepayment Adjustments
pursuant to Section 2.01(g)) paid by the Depositor; and
(viii) all amounts required to be deposited by the Servicer pursuant to Section
2.03.
Any interest paid on funds deposited in the Collection Account, subject to Section 3.21,
shall accrue to the benefit of the Servicer and the Servicer shall be entitled to retain and
withdraw such interest from the Collection Account pursuant to Section 3.05(e). In addition, the
Servicer shall deposit in the Collection Account any amounts required to be deposited pursuant
to Section 3.21(b) in connection with losses realized on Eligible Investments with respect to
funds held in the Collection Account. The foregoing requirements for deposit into the Collection
Account shall be exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of late payment charges, bad check fees, assumption
fees and other similar fees need not be deposited by the Servicer in the Collection Account.
Amounts deposited into the Collection Account in error may be withdrawn at any time.
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(b) On behalf of the Trust, the Trustee shall establish and maintain one or more
accounts (such account or accounts, the "Certificate Account") held in trust for the benefit of the
Certificateholders. On behalf of the Trust, the Servicer shall deliver to the Trustee in
immediately available funds for deposit in the Certificate Account on the Servicer Remittance
Date (i) that portion of the Available Funds (calculated without regard to the references in the
definition thereof to amounts that may be deposited to the Certificate Account from a different
source as provided herein) then on deposit in the Collection Account, (ii) the amount of all
Prepayment Penalties collected by the Servicer in connection with the voluntary Principal
Prepayment in full of any of the Mortgage Loans then on deposit in the Collection Account
(other than any such Prepayment Penalties received after the related Prepayment Period), (iii)
any Prepayment Adjustments that became due since the previous Servicer Remittance Date and
(iv) amounts reimbursable or payable to the Trustee pursuant to Section 7.01 and Section 8.05.
The Trustee may, from time to time, withdraw from the Certificate Account for the following
purposes:
(i) to pay to the Trustee (including in its capacity as Certificate Registrar) and
the Custodian any amounts owed to them pursuant to Sections 7.01 and 8.05;
(ii) to remit funds to the Certificateholders in the amounts and the manner
provided for herein;
(iii) [Reserved];
(iv) to pay to the Trustee earnings on or investment income with respect to
funds in or credited to the Certificate Account;
(v) to pay to the Credit Risk Manager as compensation the Credit Risk
Management Fee (including any unpaid Credit Risk Management Fee with respect to prior
Distribution Dates) and to reimburse the Credit Risk Manager for any amount due to the Credit
Risk Manager pursuant to Sections 3.28 and 3.29(b);
(vi) [Reserved]; and
(vii) to clear and terminate the Certificate Account upon the termination of this
Agreement.
The Trustee shall notify the Depositor and the Guarantor of the amount, purpose and
party paid pursuant to Section 3.04(b)(i).
(c) Funds in the Collection Account and the Certificate Account may be invested in
Eligible Investments in accordance with the provisions set forth in Section 3.21. The Servicer
shall give notice to the Trustee and the Guarantor of the location of the Collection Account
maintained by it when established upon request and prior to any change thereof. The Trustee
shall give notice to the Servicer, the Depositor and the Guarantor of the location of the
Certificate Account when established and prior to any change thereof.
(d) In the event the Servicer delivers to the Trustee for deposit in the Certificate
Account any amount not required to be deposited therein, it may at any time request in writing
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that the Trustee withdraw such amount from the Certificate Account and remit to the Servicer
any such amount, any provision herein to the contrary notwithstanding. In addition, the Servicer
shall deliver to the Trustee from time to time for deposit, and the Trustee shall so deposit, in the
Certificate Account:
(i) any Advances, as required pursuant to Section 4.04;
(ii) any Stayed Funds, as soon as permitted by the federal bankruptcy court
having jurisdiction in such matters;
(iii) any Prepayment Penalties or amounts in connection with the waiver of
such Prepayment Penalties, and any Prepayment Adjustment, in each case required to be
deposited pursuant to Section 2.01;
(iv) any amounts required to be deposited in the Certificate Account pursuant
to Sections 2.03, 3.04, 3.08(b), 3.20, 3.21 or 4.04; and
(v) any amounts required to be deposited by the Servicer pursuant to Section
3.11 in connection with the deductible clause in any lender-placed hazard insurance policy, such
-deposit being made from the Servicer's own funds, without reimbursement therefor.
(e) Promptly upon receipt of any Stayed Funds, whether from the Servicer, a trustee
in bankruptcy, or federal bankruptcy court or other source, the Trustee shall, unless such funds
have been received from the Servicer, notify the Servicer of such receipt and deposit such funds
in the Certificate Account, subject to withdrawal thereof as permitted hereunder. In addition, the
Trustee shall deposit in the Certificate Account any amounts required to be deposited pursuant to
Section 3.21(b) in connection with losses realized on Eligible Investments with respect to funds
held in the Certificate Account.
Section 3.05 Permitted Withdrawals from the Collection Account. The Servicer may,
from time to time, withdraw from the Collection Account for the following purposes:
(a) to remit to the Trustee for deposit in the Certificate Account the amounts required
to be so remitted pursuant to Section 3.04(b) or permitted to be so remitted pursuant to the first
sentence of Section 3.04(d);
(b) to reimburse itself for any unreimbursed Advances and Servicing Advances; the
Servicer's right to reimburse itself pursuant to this subclause (b) being limited to amounts
received on the related Mortgage Loan which represent payments of (i) principal and/or interest
respecting which any such Advance was made or (ii) Condemnation Proceeds, Insurance
Proceeds or Liquidation Proceeds respecting which any such Servicing Advance was made;
(c) to pay itself any Capitalized Reimbursement Amounts;
(d) to reimburse itself for any unreimbursed Servicing Advances, and for
unreimbursed Advances, in each case, to the extent that such amounts are deemed to be
Nonrecoverable Advances, and to reimburse itself for any unpaid Servicing Fees to the extent
reimbursable pursuant to clause (f) below and to reimburse itself for such amounts to the extent
USActive 11384001 .15
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that such amounts are nonrecoverable from the disposition of REO Property pursuant to Section
3.03 or Section 3.13 hereof;
(e) to reimburse itself for any amounts paid or expenses incurred pursuant to Section
3.03 (and not otherwise previously reimbursed);
(f) to pay to itself as servicing compensation (i) any interest earned on funds in the
Collection Account (all such interest to be withdrawn monthly not later than each Servicer
Remittance Date) and (ii) the Servicing Fee from that portion of any payment or recovery as to
interest on a particular Mortgage Loan to the extent not retained pursuant to Section 3.04(a)(ii);
(g) to reimburse itself for any amounts paid pursuant to Section 3.22 (and not
otherwise previously reimbursed);
(h) to the extent the Purchase Price amount is deposited into the Collection Account,
to reimburse the Servicer or the Trustee, as the case may be, for enforcement expenses
reasonably incurred in respect of the breach or defect giving rise to the purchase obligation under
Section 2.03 of this Agreement that were included in the Purchase Price of the Mortgage Loan,
including any expenses arising out of the enforcement of the purchase obligation;
(i) to reimburse itself and the Depositor or Sponsor for expenses and costs
reimbursable to them pursuant to Section 3.22(c) and subject to the Aggregate Annual Cap;
(j) to clear and terminate the Collection Account upon the termination of this
Agreement;
(k) to reimburse the Credit Risk Manager for expenses and costs reimbursable to
them pursuant to Section 3.29 and subject to the Credit Risk Manager Annual Cap; and
(1) to make Advances from funds held for future distribution, subject to
Section 4.04(b).
The foregoing requirements for withdrawal from the Collection Account shall be
exclusive. In the event the Servicer shall deposit 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. The Servicer shall notify the
Trustee of the amount, purpose and party of any payment or reimbursement of expenses made
pursuant to Sections 3.05(d), (f), (g), (h) and (j).
In addition, the Servicer will use commercially reasonable efforts to cause to be
withdrawn from the Collection Account no later than 1:00 p.m. Eastern Time, but in any case no
later than 4:00 p.m. Eastern Time on the Servicer Remittance Date, the amounts required to be
remitted under Section 3.04(b), to the extent on deposit, and such amount shall be deposited in
the Certificate Account; provided, however, if the Trustee does not receive such amounts on the
Servicer Remittance Date, the Servicer shall pay, out of its own funds, interest on such amount at
a rate equal to the Prime Rate for each date or part thereof.
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Section 3.06 Establishment of Escrow Accounts; Deposits in Escrow Accounts. The
Servicer shall segregate and hold all funds collected and received pursuant to each 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 time
deposit or demand accounts. A copy of such account certification agreement shall be furnished
to the Trustee upon request. Each Escrow Account shall be an Eligible Account.
The Servicer shall deposit in the Escrow Account or Accounts within one (I) Business
Day of receipt, except to the extent those funds are not validated upon initial processing, within
two (2) Business Days of receipt, and retain therein, (a) all Escrow Payments collected on
account of the Mortgage Loans, for the purpose of effecting timely payment of any such items as
required under the terms of this Agreement, and (b) all Insurance Proceeds 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 shall be set forth in, or in accordance with, Section 3.07. 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
Mortgagor.
Section 3.07 Permitted Withdrawals from Escrow Account. Withdrawals from the
Escrow Account may be made by the Servicer (a) to effect timely payments of Escrow
Payments, (b) to reimburse the Servicer for 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 Late Collections of Escrow Payments thereunder, (c) to
refund to the Mortgagor any funds as may be determined to be overages, (d) for transfer to the
Collection Account in accordance with the terms of this Agreement, (e) for application to
restoration or repair of the Mortgaged Property, (f) to pay to the Servicer, or to the Mortgagor to
the extent required by the related Mortgage Loan or Applicable RegUlations, any interest paid on
the funds deposited in the Escrow Account, (g) to clear and terminate the Escrow Account on the
termination of this Agreement or (h) to transfer to the Collection Account any Insurance
Proceeds. As part of its servicing duties, the Servicer shall pay to the Mortgagor interest on
funds in the Escrow Account, to the extent required by the related Mortgage Loan or Applicable
Regulations, and to the extent that interest earned on funds in the Escrow Account is insufficient,
shall pay such interest from its own funds, without any reimbursement therefor.
In the event the Servicer shall deposit in the Escrow Account any amount not required to
be deposited therein, it may at any time withdraw such amount from the Escrow Account, any
provision herein to the contrary notwithstanding.
Section 3.08 Payment of Taxes, Insurance and Other Charges; Collections Thereunder.
With respect to each Mortgage Loan subject to an Escrow Agreement, the Servicer shall
maintain accurate records reflecting the status of taxes, which are or may become a lien upon the
Mortgaged Property and the status of fire, flood (if applicable) and hazard 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 the Escrow Account which shall have been estimated and
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accumulated by the Servicer in amounts sufficient for such purposes, as allowed under the terms
of the Escrow Agreement, Accepted Servicing Practices, the Servicing Standards or Applicable
Regulations. To the extent that a Mortgage Loan is not subject to an Escrow Agreement, the
Servicer shall determine that any such payments are made by the Mortgagor. The Servicer
assumes full responsibility for the payment of all such bills and shall effect payments of all such
bills irrespective of the Mortgagor's faithful performance in the payment of same or the making
of the Escrow Payments and shall make Servicing Advances from its own funds to effect such
payments (unless determined to be a Nonrecoverable Advance). The Servicer shall not terminate
any Escrow Agreement which existed as of the Closing Date.
Section 3.09 Transfer of Accounts. The Servicer may transfer the Collection Account
or the Escrow Account to a different depository institution from time to time. Upon such
transfer, the Servicer shall deliver to the Trustee (and the Trustee shall provide to the Depositor
and the Guarantor), a certification or letter agreement, as the case may be, as required pursuant to
Sections 3.04(c) and 3.06.
Section 3.10 Maintenance of Hazard Insurance. (a) The Servicer shall cause to be
maintained for each Mortgage Loan fire and hazard insurance with extended coverage as is
customary in the area where the Mortgaged Property is located in an amount which is at least
equal to the lesser of (i) the estimated replacement value of the improvements that are part of
such Mortgaged Property which may be the last known coverage, or (ii) the greater of (A) the
Stated Principal Balance of the Mortgage Loan or (B) an amount such that the proceeds of such
policy shall be sufficient to prevent the related Mortgagor and/or mortgagee from becoming a co-
Insurer.
(b) If the Mortgaged Property is in an area identified by FEMA regulations as an area
having special flood hazards and flood insurance has been made available under the National
Flood Insurance Program, the Servicer shall 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 Stated Principal Balance of the Mortgage Loan, (ii) the minimum amount required
to compensate for damage or loss on a replacement cost basis or (iii) the maximum amount of
insurance which is available under the Flood Disaster Protection Act of 1973, as amended.
(c) The Servicer shall also maintain on the REO Property for the benefit of the
Certificateholders, (i) fire and hazard insurance with extended coverage in an amount which is at
least equal to the replacement cost of the improvements which are a part of such property and (ii)
to the extent required and available under the Flood Disaster Protection Act of 1973, as
amended, flood insurance in an amount as provided above.
(d) Any amounts collected by the Servicer under any such policies shall be applied in
the following order: (i) to the restoration or repair of the Mortgaged Property, (ii) to the
outstanding indebtedness and (iii) to be released to the Mortgagor in accordance with the loan
documents and applicable law. It is understood and agreed that no earthquake or other additional
insurance is required to be maintained by the Servicer or the Mortgagor or maintained on
property acquired in respect of the Mortgage Loan, other than pursuant to such Applicable
Regulations as shall at any time be in force and as shall require such additional insurance. All
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such policies shall be endorsed with standard mortgagee clauses with loss payable to the Servicer
and shall provide for at least 30 days prior written notice of any cancellation, reduction in the
amount of or material change in coverage to the Servicer. 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 currently reflect a general policy rating of B:VI or better in Best's Key
Rating Guide or are otherwise acceptable to the Guarantor and are licensed to do business in the
state wherein the property subject to the policy is located.
Section 3.11 Maintenance of Lender-Placed Insurance Policy. (a) The Servicer, upon
discovering that the Mortgagor has not maintained hazard insurance on the related Mortgaged
Property meeting the requirements of Section 3.10, the Servicer shall either (i) obtain evidence of
adequate insurance from the Mortgagor or (ii) procure an individual hazard insurance policy
meeting the requirements of Section 3.10 with respect to such Mortgage Loan.
(b) In the event that the Servicer shall obtain and maintain an individual lender-
placed policy permitted pursuant to (a) above, such policy shall be issued by an insurer that has a
general policy rating of B:VI or better in Best's Key Rating Guide or otherwise acceptable to the
Guarantor insuring against hazard losses on a Mortgage Loan. However, if the Servicer procures
an individual hazard insurance policy with respect to a Mortgage Loan, the Servicer shall
Advance the amount of any premiums under such policy; and such advances shall be deemed to
be Servicing Advances. In connection with its activities as servicer of the Mortgage Loans, the
Servicer agrees to prepare and present, on behalf of the Trustee, claims under any such lender-
placed policy in a timely fashion in accordance with the terms of such policy. Upon request of
the Trustee, the Servicer shall cause to be delivered to the Custodian and the Trustee a certified
true copy of such policy and a statement from the insurer thereunder that such policy shall in no
event be terminated or materially modified without thirty days prior written notice to the Trustee.
Section 3.12 Fidelity Bond, Errors and Omissions Insurance. (a) The Servicer shall
maintain, at all times and at its own expense, a Servicer Errors and Omissions Policy in an
amount and with an insurer acceptable under the Servicing Standards or otherwise reasonably
acceptable to Freddie Mac. The Servicer Errors and Omissions Policy shall insure the Servicer,
its successors and assigns, against any losses resulting from negligence, errors or omissions on
the part of officers, employees or other persons acting on behalf of the Servicer in the
performance of its duties as a Servicer pursuant to this Agreement. The Servicer shall maintain
in effect the Servicer Errors and Omissions Policy at all times and the Servicer Errors and
Omissions Policy may not be canceled, permitted to lapse or otherwise terminated without the
acquisition of comparable coverage by the Servicer. The terms of the Servicer Errors and
Omissions Policy shall provide for a deductible amount that is acceptable under the Servicing
Standards or otherwise reasonably acceptable to Freddie Mac with respect to its approved
mortgage loan servicers.
(b) The Servicer must maintain, at all times, at its own expense, a Fidelity Bond in an
amount and with an insurer acceptable under the Servicing Standards or otherwise reasonably
acceptable to Freddie Mac and having terms that are acceptable to Freddie Mac. The Servicer
must provide notice of change in insurer contemporaneously with its change in the policy of the
Fidelity Bond. The amount of Fidelity Bond coverage shall be an amount acceptable to the
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Servicing Standards or otherwise reasonably acceptable to Freddie Mac. The coverage of the
Fidelity Bond must explicitly insure the Servicer, its successors and assigns, against any losses
resulting from dishonest, fraudulent or criminal acts on the part of officers, employees or other
persons acting on behalf of the Servicer. The Servicer must maintain in effect the Fidelity Bond
at all times and the Fidelity Bond may not be canceled, permitted to lapse or otherwise
terminated without thirty Business Days' prior written notice by registered mail to the Trustee,
the Guarantor and the Depositor. Further, the Fidelity Bond must provide that, or the insurer
must state in writing to the Trustee, the Guarantor and the Depositor that, the Fidelity Bond shall
not be cancelable without the giving of notice as provided for in the prior sentence. The terms of
the Fidelity Bond must provide for a deductible amount that does not exceed Freddie Mac
requirements.
Section 3.13 Title, Management and Disposition of REO Property.
(a) In the event that title to a Mortgaged Property is acquired in foreclosure or by
deed in lieu of foreclosure, the deed or certificate of sale shall be taken in the name of the
Trustee, on behalf of the Certificateholders and the Guarantor, or in the event the Trustee is not
authorized or permitted to hold title to real property in the state where the REO Property is
located, or would be adversely affected under the "doing business" or tax laws of such state by
so holding title, the deed or certificate of sale shall be taken in the name of such Person or
Persons as shall be consistent with an Opinion of Counsel obtained by the Servicer from an
attorney duly licensed to practice law in the state where the REO Property is located. Any
Person or Persons holding such title other than the Trustee shall acknowledge in writing that
such title is being held as nominee for the benefit of the Trustee. Pursuant to the power of
attorney granted in Section 3.01, the Servicer is hereby authorized to acquire, transfer and
dispose of any REO Property taken in the name of the Trustee pursuant to this Section 3.13
without further documentation of its authority as attorney in fact for the Trustee on behalf of the
Trust.
(b) The Trust shall not acquire any REO Property (or personal property incident to
such real property) except in accordance with Accepted Servicing Practices and the Servicing
Standards and in connection with a default or imminent default of a Mortgage Loan. In the event
that the Trust acquires any REO Property (or personal property incident to such real property) in
connection with a default of a Mortgage Loan, such REO Property shall be disposed of by the
Servicer as expeditiously as possible (and in any event not later than the end of the third taxable
year following the year of acquisition unless an extension of such period is obtained from the
IRS) in a manner that, consistent with Servicing Standards, maximizes the net present value of
the recovery to the Trust.
With respect to each REO Property, the Servicer shall segregate and hold all funds
collected and received in connection with the operation of the REO Property separate and apart
from its own funds or general assets and shall deposit or cause to be deposited, on a daily basis,
within one (1) Business Day of receipt, into the Collection Account, all revenues received with
respect to the related REO Property and shall withdraw therefrom funds necessary for the proper
operation, management and maintenance of the REO Property, including the cost of maintaining
any hazard insurance pursuant to Section 3.10 hereof and the fees of any realtor acting on behalf
of the Servicer.
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The Servicer shall use its best efforts to dispose of the REO Property as promptly as is
practically consistent with protecting the Certificateholders' interests and consistent with the
Servicing Standards.
Each REO Disposition shall be carried out by the Servicer at such price and upon such
terms and conditions as the Servicer deems to be in the best interest of the Certificateholders and
in accordance with the Servicing Standards. If as of the date title to any REO Property was
acquired by the Servicer there were outstanding unreimbursed Servicing Advances with respect
to the REO Property, the Servicer, upon an REO Disposition of such REO Property, shall be
entitled to reimbursement for any related unreimbursed Servicing Advances from proceeds
received in connection with such REO Disposition. The proceeds from the REO Disposition, net
of any payments to the Servicer as provided above, shall be deposited in the Collection Account
and shall be distributed to the Trust in the month following receipt thereof in accordance with
Section 4.01.
Any REO Disposition shall be for cash only.
While the Servicer is initially responsible for the disposal of each REO Property, the
Guarantor shall have the right, (a) subject to the following sentence, to assume this responsibility
with respect to any REO Property or (b) upon fifteen (15) days prior written notice to the
Servicer, direct the Servicer's actions with respect to the disposition of any REO Property. If the
Guarantor wishes to exercise such right set forth in (a) above, the Guarantor shall provide 30
days prior written notification to the Servicer and work with the Servicer to develop a mutually
agreed upon process and timetable for implementing the transfer of such marketing
responsibilities. Nothing contained in this paragraph shall limit the Servicer's right to recover
any Servicing Advances made by it prior to the transition date in the manner contemplated by
Section 3.05.
Section 3.14 Due-on-Sale Clauses; Assumption and Substitution Agreements. When a
Mortgaged Property has been or is about to be conveyed by the Mortgagor, the Servicer shall, to
the extent it has knowledge of such conveyance or prospective conveyance, exercise its rights to
accelerate the maturity of the related Mortgage Loan under any "due-on-sale" clause contained
in the related Mortgage or Mortgage Note; provided, however, that the Servicer shall not
exercise any such right if the "due-on-sale" clause, in the reasonable belief of the Servicer, is not
enforceable under applicable law. In such event, the Servicer shall make reasonable efforts to
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 and, unless prohibited by applicable law or the Mortgage, the Mortgagor remains
liable thereon; provided, however, that, unless the Mortgage Loan is in default or default with
respect thereto is reasonably foreseeable, such assumption and modification does not result in a
"significant modification" of the Mortgage Loan within the meaning of Code Section 1001. If
the foregoing is not permitted under applicable law, the Servicer is authorized to enter into a
substitution of liability agreement with such Person, pursuant to which the original Mortgagor is
released from liability and such Person is substituted as Mortgagor and becomes liable under the
Note; provided, however, that such substitution does not result in a "significant modification" of
the Mortgage Loan within the meaning of Section 1001 of the Code. The Mortgage Loan, as
assumed, shall conform in all respects to the requirements, representations and warranties of this
USActive 11384001 .15
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Agreement and the Mortgage Loan Purchase Agreement. The Servicer shall notify the Trustee,
the Guarantor and the Credit Risk Manager that any such assumption or substitution agreement
has been completed by forwarding to the Trustee (or the Custodian, as the case may be) the
original assumption or substitution agreement (indicating the Mortgage File to which it relates)
which shall be added by the Trustee (or the Custodian, as the case may be) to the related
Mortgage File and which 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. The Servicer
shall be responsible for recording any such assumption or substitution agreements. Except as
otherwise provided in Section 3.01, in connection with any such assumption or substitution
agreement, the Scheduled Payment on the related Mortgage Loan shall not be changed but shall
remain as in effect immediately prior to the assumption or substitution, the stated maturity or
outstanding principal amount of such Mortgage Loan shall not be changed nor shall any required
monthly payments of principal or interest be deferred or forgiven. Any fee collected by the
Servicer for consenting to any such conveyance or entering into an assumption or substitution
agreement shall be retained by or paid to the Servicer as additional 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 assumption of a Mortgage Loan by operation of law or any
assumption which the Servicer may be restricted by law from preventing, for any reason
whatsoever.
Section 3.15 Custodian to Cooperate; Release of Files. (a) Upon the payment in full of
any Mortgage Loan (including any liquidation of any Mortgage Loan through foreclosure or
otherwise, 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 confirm to the Trustee that all amounts
required to be remitted to the Certificate Account in connection with such Mortgage Loan have
been so deposited, and the Servicer shall deliver two copies of such Request for Release to the
Custodian. The Custodian shall, at the Sponsor's expense, within three (3) Business Days of its
receipt of such a Request for Release, release the related Mortgage Loan Document to the
Servicer, as requested by the Servicer. The Servicer is authorized to cause the removal from the
registration on the MERS System of any such Mortgage, if applicable, and the Servicer, on
behalf of the Trustee, shall execute and deliver the request for reconveyance, deed of
reconveyance or release or satisfaction of mortgage or such instrument releasing the lien of the
Mortgage, together with the Mortgage Note with written evidence of cancellation thereon.
Expenses incurred in connection with any instrument of satisfaction or deed of reconveyance
may be chargeable to the Mortgagor.
From time to time and as appropriate for the servicing or foreclosure of any Mortgage
Loan, including but not limited to, collection under any insurance policies, or to effect a partial
release of any Mortgaged Property from the lien of the Mortgage, the Servicer shall deliver to the
Custodian two copies of a Request for Release. The Custodian shall, within three (3) Business
Days, release the related Mortgage Loan Document to the Servicer. Any such Request for
Release shall obligate the Servicer to return the Mortgage Loan Document to the Custodian by
the 60
th
day following the release thereof, unless (i) the Mortgage Loan has been liquidated and
the Liquidation Proceeds relating to the Mortgage Loan have been deposited in the Certificate
Account or (ii) the Mortgage Loan Document or any documents contained therein have been
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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. Upon receipt of two copies of a Request
for Release stating that such Mortgage Loan was liquidated and that all amounts received or to
be received in connection with such liquidation which are required to be deposited into the
Certificate Account have been so deposited, or that such Mortgage Loan has become an REO
Property, the Custodian shall amend its records.
Upon the occurrence of the event specified in clause (ii) of the preceding paragraph, the
Trustee shall execute and deliver to the Servicer, as directed by the Servicer, court pleadings,
requests for trustee's sale or other documents 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. Each such direction shall include a request that such pleadings or documents
be executed by the Trustee and a statement as to the reason such documents or pleadings are
required and a certification that the execution and delivery thereof by the Trustee will not
invalidate or otherwise affect the lien of the Mortgage, except for the termination of such a lien
upon completion of the foreclosure proceeding or trustee's sale.
(b) Subject to Section 3.01, the Servicer shall accept applications of Mortgagors for
consent to (i) partial releases of Mortgages, (ii) alterations, and (iii) removal, demolition or
division of properties subject to Mortgages. No application for approval shall be granted by the
Servicer unless: (x) the provisions of the related Mortgage Note and Mortgage have been
complied with; (y) the Current Loan-to-Value Ratio and debt-to-income ratio after any release
does not exceed the maximum Original Loan-to-Value Ratio and debt-to-income ratio
established in accordance with the Underwriting Guidelines of the Mortgage Loans; and (z) the
lien priority of the related Mortgage is not affected. Upon receipt by the Trustee of a Servicing
Officer's certificate setting forth the action proposed to be taken in respect of a particular
Mortgage Loan and certifying that the criteria set forth in the immediately preceding sentence
have been satisfied, the Trustee shall execute and deliver to the Servicer the consent or partial
release so requested by, and furnished to it by, the Servicer. A proposed form of consent or
partial release, as the case may be, shall accompany any Servicing Officer's certificate delivered
by the Servicer pursuant to this paragraph.
Section 3.16 Servicing Compensation. As compensation for its activities hereunder, the
Servicer shall be entitled to retain the amount of the Servicing Fee with respect to each Mortgage
Loan. The Servicer shall be entitled to retain additional servicing compensation in the form of
release fees, bad check charges, assumption fees, modification or extension fees, late payment
charges, or any other service-related fees, Insurance Proceeds and Liquidation Proceeds not
required to be deposited in the Collection Account and similar items, to the extent collected from
Mortgagors. Subject to Section 3.21(b), the Servicer shall also be entitled to all income and gain
net of any losses realized from Eligible Investments in the Collection Account, and any other
benefits arising from the Collection Account and the Escrow Account shall be retained by the
Servicer to the extent not required to be deposited in the Collection Account and the Escrow
Account.
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The Servicing Fee with respect to any Mortgage Loan shall be payable monthly, solely
from the interest portion (including recoveries with respect to interest from Liquidation
Proceeds, Insurance Proceeds, Condemnation Proceeds and proceeds received with respect to
REO Properties), to the extent permitted under Section 3.05 of such Scheduled Payment
collected by the Servicer, but in no event from Guarantor Payments.
Section 3.17 Annual Statement as to Compliance. (a) The Servicer shall deliver in
electronic form, or otherwise make available to the Trustee, Depositor and the Guarantor on or
before March 31 of each year or if such day is not a Business Day, the next Business Day,
commencing in March 2009, a copy of a certificate in the form required by Item 1123 of
Regulation AB, to the effect that (i) an authorized officer of the Servicer has reviewed (or a
review has been made under his or her supervision of) such party's activities under this
Agreement during the prior calendar year or portion thereof and (ii) to the best of such officer's
knowledge, based on such review, such party has fulfilled all of its obligations under this
Agreement in all material respects throughout the prior calendar year or portion thereof or, if
there has been a failure to fulfill any such obligation in any material respect, specifying each
such failure known to such officer and the nature and status thereof. The Depositor shall review
such certificate and, if applicable, consult with the Servicer as to the nature of any failure to
fulfill any obligation under this Agreement in any material respect.
(b) Delivery of such reports, information and documents to the Trustee and Guarantor
is for informational purposes only and the Trustee's, Guarantor's and Depositor's receipt of such
shall not constitute constructive notice of any information contained therein or determinable,
from information contained therein, including the Servicer's compliance with any of its
covenants hereunder (as to which the Trustee, Guarantor and the Depositor are entitled to rely
exclusively on Officer's Certificates).
Section 3.18 Assessment of Servicing Compliance; Registered Public Accounting Firm
Attestation Reports (a) The Servicer, at its own expense, shall furnish, or otherwise make
available to the Trustee, Depositor and Guarantor, not later than March 31 of each year, or if
such day is not a Business Day, the next Business Day, commencing in March 2009, a copy of a
report, signed by an authorized officer of the Servicer on assessment of compliance with, at a
minimum, the Relevant Servicing Criteria that contains:
(i) a statement by the Servicer of its responsibility for assessing compliance
with the Servicing Criteria applicable to it;
(ii) a statement that the Servicer used the Servicing Criteria applicable to it to
assess compliance with the Servicing Criteria;
(iii) the Servicer's assessment of compliance with the Servicing Criteria
applicable to it as of and for the preceding fiscal year, including, if there had been any material
instance of noncompliance with the Servicing Criteria applicable to it, identifying each such
failure and the nature and status thereof; and
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(iv) a statement that a registered public accounting firm has issued an
attestation report on the Servicer's assessment of compliance with the Servicing Criteria
applicable to it as of and for the preceding fiscal year.
Promptly after receipt of each such report on assessment of compliance, the Depositor
shall review each such report and, if applicable, consult with the Servicer as to the nature of any
material instance of noncompliance with the Relevant Servicing Criteria by the Servicer.
(b) The Servicer shall cause a registered public accounting firm which is a member of
the Institute of Certified Public Accountants to furnish to the Trustee, Depositor and Guarantor,
not later than March 31 of each year, or if such day is not a Business Day, the next Business
Day, commencing in March 2009, an electronic report to the effect that (i) it has obtained a
representation regarding certain matters from the management of the Servicer, which includes an
assertion that the Servicer has complied with the Relevant Servicing Criteria, and (ii) on the basis
of an examination conducted by such firm in accordance with standards for attestation
engagements issued or adopted by the Public Company Accounting Oversight Board, it is
expressing an opinion as to whether the Servicer's assessment of compliance with the Relevant
Servicing Criteria was fairly stated in all material respects, or it cannot express an overall
opinion regarding the Servicer's assessment of compliance with the Relevant Servicing Criteria.
In the event that an overall opinion cannot be expressed, such registered public accounting firm
shall state in such report why it was unable to express such an opinion. Such report must be
available for general use and not contain restricted use language.
(c) Upon written request, the Trustee shall make available any report from the
Servicer furnished pursuant to Section 3.17 and this Section 3.18 to any Certificateholder.
Section 3.19 Access to Certain Documentation and Information Regarding the
Mortgage Loans.
(a) The Servicer shall provide to the Trustee and the Guarantor access to the available
documentation regarding the Mortgage Loans, such access being afforded without charge but
only upon reasonable advance request and during normal business hours at the offices of the
Servicer designated by it. The servicing files will initially be held at 4837 Watt Avenue, North
Highlands, California 95660-5101. The Servicer shall provide notice to the Trustee and the
Guarantor of any change to such location.
(b) Upon reasonable prior written request, the Guarantor shall have the right, at no
expense to the Servicer other than its normal overhead expenses, to inspect and review the
Servicer's servicing practices with respect to the Mortgage Loans; provided, however, that such
inspection and review must occur during the normal business hours of the Servicer.
Section 3.20 Obligations of the Servicer in Respect of Compensating Interest. With
respect to each Distribution Date, not later than the close of business on the related Servicer
Remittance Date, the Servicer shall deliver to the Trustee for deposit in the Certificate Account
an amount ("Compensating Interest") equal to the lesser of (a) the aggregate of the Prepayment
Interest Shortfalls on the Mortgage Loans for such Distribution Date resulting from Principal
Prepayments on the Mortgage Loans during the related Prepayment Period and (b) its aggregate
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Servicing Fee received in the related Due Period. The Servicer shall apply Compensating
Interest to offset any Prepayment Interest Shortfalls attributable to Principal Prepayments on the
Mortgage Loans. The Servicer shall not have the right to reimbursement for any amounts
remitted to the Trustee in respect of Compensating Interest. Such amounts so remitted shall be
included in the Available Funds and distributed therewith on the next Distribution Date.
Section 3.21 Investment of Funds in the Collection Account and the Certificate
Account (a) The Servicer may direct in writing any depository institution maintaining the
Collection Account and the Trustee may direct in writing any depository institution maintaining
the Certificate Account (for purposes of this Section 3.21, each an "Investment Account"), to
invest the funds in such Investment Account in one or more Eligible Investments bearing interest
or sold at a discount, and maturing, unless payable on demand, (i) no later than the Business Day
immediately preceding the date on which such funds are required to be withdrawn from such
account pursuant to this Agreement, if a Person other than the Trustee is the obligor thereon, and
(ii) no later than the date on which such funds are required to be withdrawn from such account
pursuant to this Agreement, if the Trustee is the obligor thereon. All such Eligible Investments
shall be held to maturity, unless payable on demand. Any investment of funds in an Investment
Account shall be made in the name of the Trustee or the Servicer, as applicable (in its capacity as
such) or in the name of a nominee of the same. The Servicer or the Trustee, as applicable, shall
be entitled to sole possession over each such investment and the income thereon, and any
certificate or other instrument evidencing any such investment shall be delivered directly to the
Trustee or its agent, together with any document of transfer necessary to transfer title to such
investment to the Trustee or its nominee. In the event amounts on deposit in an Investment
Account are at any time invested in an Eligible Investment payable on demand, the Servicer or
the Trustee shall: (x) consistent with any notice required to be given thereunder, demand that
payment thereon be made on the last day such Eligible Investment may otherwise mature
hereunder in an amount equal to the lesser of (1) all amounts then payable thereunder and (2) the
amount required to be withdrawn on such date; and (y) demand payment of all amounts due
thereunder promptly upon determination by a Responsible Officer of the Trustee that such
Eligible Investment would not constitute an Eligible Investment in respect of funds thereafter on
deposit in the Investment Account.
(b) All income and gain realized from the investment of funds in the Collection
Account shall be for the benefit of the Servicer. The Servicer shall deposit in the Collection
Account the amount of any loss incurred in respect of any such Eligible Investment made with
funds in such account immediately upon realization of such loss from its own funds without any
right of reimbursement. All income and gain realized from the investment of funds in the
Certificate Account shall be for the benefit of the Trustee. The Trustee shall deposit in the
Certificate Account the amount of any loss incurred on Eligible Investments in the Certificate
Account from its own funds without any right of reimbursement.
(c) Except as otherwise expressly provided in this Agreement, if any default occurs in
the making of a payment due under any Eligible Investment, or if a default occurs in any other
performance required under any Eligible Investment, the Trustee may and, subject to Section
8.01 and Section 8.02(a)(v), upon the request of the Holders of Certificates representing a
majority of the Voting Interests allocated to the Class A Certificates, shall take such action as
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may be appropriate to enforce such payment or performance, including the institution and
prosecution of appropriate proceedings.
Section 3.22 Liability of Servicer; Limitation of Liability of the Depositor, the Servicer
and the Sponsor; Indemnification (a) Subject to clause (b) below, the Servicer (except the
Trustee if it is required to succeed the Servicer hereunder) indemnifies and holds the Trustee, the
Guarantor, the Custodian and the Depositor (and their respective officers, directors and
Affiliates) harmless against any and all claims, losses, penalties, fines, forfeitures, reasonable
legal fees and related costs, judgments, and any other costs, fees and expenses that the Trustee,
the Guarantor, the Custodian and the Depositor may sustain (including, in the case of the
Guarantor, any payments made by the Guarantor under its Guarantee), in any way related to the
failure of the Servicer to perform its duties hereunder and service the Mortgage Loans in
compliance with Accepted Servicing Practices and the Servicing Standards, including, but not
limited to the Servicer's obligation to deliver any information, report, certification, accountants'
letter or other material required pursuant to this Agreement. The Servicer shall immediately
notify the Trustee, the Guarantor, the Custodian, the Depositor and the Trust if a claim is made
that may result in such claims, losses, penalties, fines, forfeitures, legal fees or related costs,
judgments, or any other costs, fees and expenses, and the Servicer shall assume (with the consent
of such party or parties who are the subject of any such claim) the defense of any such claim and
pay all expenses in connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the Servicer, the
Trustee, the Guarantor, the Custodian, the Depositor and/or the Trust in respect of such claim.
The provisions of this Section 3.22 shall survive the termination of this Agreement and the
payment of the outstanding Certificates.
(b) None of the Depositor, the Servicer, the Sponsor or any of the directors, officers,
employees or agents of the Depositor, the Servicer or the Sponsor shall be under any liability to
the Trust or the Certificateholders for any action taken, or for refraining from the taking of any
action, in good faith pursuant to this Agreement, or for errors in judgment; provided, however,
that this provision shall not protect the Depositor, the Sponsor or the Servicer or any such Person
against any breach of warranties or representations made herein or the Mortgage Loan Purchase
Agreement, or against any specific liability imposed on the Servicer for a breach of Accepted
Servicing Practices or the Servicing Standards, or against any liability which would otherwise be
imposed by reason of its respective willful misfeasance, bad faith, fraud or negligence in the
performance of its duties or by reason of reckless disregard of its respective obligations or duties
hereunder.
(c) The Depositor, the Servicer, the Sponsor and any director, officer, employee or
agent of the Depositor, the Servicer or the Sponsor, may rely in good faith on any document of
any kind which, prima facie, is properly executed and submitted by any appropriate Person with
respect to any matters arising hereunder. The Guarantor, the Depositor, the Servicer, the
Sponsor and any director, officer, employee or agent of the Guarantor, the Depositor, the
Servicer or the Sponsor shall be indemnified and held harmless by the Trust 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 incurred in connection with any legal action
incurred by reason of its respective misfeasance, bad faith, fraud or negligence, a breach of a
representation or warranty hereunder or under the Mortgage Loan Purchase Agreement or (in the
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case of the Servicer) a breach of Accepted Servicing Practices or the Servicing Standards in the
performance of its respective duties or by reason of reckless disregard of its respective
obligations or duties hereunder or the Mortgage Loan Purchase Agreement. The Depositor, the
Sponsor or the Servicer shall not be under any obligation to appear in, prosecute or defend any
legal action unless such action is related to its respective duties under this Agreement and in its
opinion does not expose it to any expense or liability; provided, however, that each of the
Depositor, the Servicer and the Sponsor (in each case, with the consent of the Guarantor, which
consent shall not be unreasonably withheld) may, and the Guarantor may in its discretion,
undertake any action related to its obligations hereunder which it may deem necessary or
desirable with respect to this Agreement and the rights and duties of the parties hereto and the
interests of the Certificateholders hereunder. In such event, and subject to (d) below, in the case
of the Depositor, the Servicer and the Sponsor, the legal expenses and costs of such action and
any liability resulting therefrom (except any loss, liability or expense incurred by reason of
willful misfeasance, bad faith or negligence in the performance of duties hereunder or by reason
of reckless disregard of obligations and duties hereunder) shall be expenses, costs and liabilities
of the Trust, and the Depositor, the Servicer and the Sponsor shall be entitled to be reimbursed
therefor from the Collection Account as and to the extent provided in Section 3.05, any such
right of reimbursement being prior to the rights of the Certificateholders to receive any amount
in the Collection Account.
The Servicer's right to indemnity or reimbursement pursuant to this Section shall survive
any resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 with respect to
any losses, expenses, costs or liabilities arising prior to such resignation or termination (or
arising from events that occurred prior to such resignation or termination).
Notwithstanding anything herein to the contrary, in preparing or furnishing any reports or
certifications pursuant to this Agreement, the Servicer shall be entitled to rely conclusively on
the accuracy of the information or data provided to it by any other party to the Agreement and
shall have no liability for any errors therein.
(d) Notwithstanding anything to the contrary in this Agreement and the Mortgage
Loan Purchase Agreement, none of the Servicer, the Sponsor or the Depositor, will be entitled to
any amount of indemnification expenses from the Trust pursuant to this Section 3.22 or any other
Section of this Agreement or the Mortgage Loan Purchase Agreement to the extent that such
indemnification expenses exceed in the aggregate $200,000 per annum (with respect to such
parties in the aggregate, the "Aggregate Annual Cap"); provided, that any amounts in excess of
such Aggregate Annual Cap shall be paid, to the extent funds are available, in the subsequent
year or years (subject to the Aggregate Annual Cap for such subsequent year or years) until paid
in full.
Section 3.23 Reports of Foreclosure and Abandonment of Mortgaged Properties. On or
before the date required under the applicable provisions of the Code, the Servicer shall file (a)
the reports of mortgage interest received required by Section 6050H of the Code, (b) the reports
of foreclosure and abandonment of any Mortgaged Property required by Section 6050J of the
Code and (c) the reports relating to cancellation of indebtedness income required by Section
6050P of the Code with the Internal Revenue Service and provide an Officer's Certificate
certifying its compliance with this Section 3.23 to the Trustee. The reports from the Servicer
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shall be in form and substance sufficient to meet the reporting requirements imposed by such
Section 6050H, Section 60501 or Section 6050P.
Section 3.24 Purchase by Freddie Mac of Delinquent Mortgage Loans. Freddie Mac
shall have the right to purchase from the Trust for the Purchase Price any Mortgage Loan after
such Mortgage Loan becomes 120 days or more delinquent; provided, however, that prior to
initially exercising such right, Freddie Mac (a) shall provide the Servicer and the Trustee 30 days
written notice and (b) following such notice, shall cooperate with the Servicer to develop a
mutually agreed upon process and timetable for implementing such purchases. If Freddie Mac
exercises its right to purchase any Mortgage Loan that becomes 120 days or more Delinquent, (i)
the Servicer shall continue to service such Mortgage Loan in accordance with the terms of this
Agreement and shall be entitled to continue to receive the Servicing Fee for such Mortgage Loan
subject to Section 3.16 and (ii) the Guarantor and the Trustee shall cooperate to develop a
mutually agreed upon process and timetable for Requests for Release relating to such Mortgage
Loans.
Section 3.25 No Personal Solicitation. From and after the Closing Date, the Servicer
agrees that it will not take any action or permit or cause any action to be taken by any of its
agents and Affiliates, or by any independent contractors or independent mortgage brokerage
companies on the Servicer's behalf, to (a) intentionally target the performing or nonpeiforming
Mortgage Loans for refinancing purposes, (b) segregate the Mortgage Loans in the Servicer's
portfolio from the Mortgage Loans for different treatment for refinancing purposes and (c)
personally, by telephone, mail or electronic mail, solicit the Mortgagor under any Mortgage Loan
for the purpose of refinancing such Mortgage Loan; provided, that the Servicer may solicit any
Mortgagor that is in default or as to when default is reasonably foreseeable or for whom the
Servicer has received a request for verification of mortgage, a request for demand for payoff, a
mortgagor-initiated written or oral communication indicating a desire to prepay the related
Mortgage Loan, or the mortgagor initiates a title search; provided, further, it is understood and
agreed that promotions undertaken by the Servicer or any of its Affiliates which (i) concern
optional insurance products or other additional products or (ii) are directed to the general public
at large, including, without limitation, mass mailings based on commercially acquired mailing
lists, newspaper, radio and television advertisements shall not constitute solicitation under this
Section, nor is the Servicer prohibited from responding to unsolicited requests or inquiries made
by a Mortgagor or an agent of a Mortgagor. Furthermore, the Servicer shall be permitted to
include in its monthly statements to borrowers or otherwise, statements regarding the availability
of the Servicer's counseling services with respect to refinancing mortgage loans and any
refinancing and payment in full of a Mortgage Loan that results from such counseling services is
permitted hereunder.
Section 3.26 Reports to be Delivered by the Servicer. (a) No later than the 10
th
calendar day of each month, the Servicer shall deliver to the Guarantor bye-mail to
subprime@freddiemac.com and to the Credit Risk Manager by uploading to
https://upload.murrayhillcompany.com/ or such other form of delivery as the Servicer, the Credit
Risk Manager and the Guarantor shall mutually agree upon a Servicer REO Monthly Tracking
Report in electronic format, with respect to such Distribution Date and copies of all repurchase
letters issued pursuant to Section 2.03. No later than five Business Days prior to each
Distribution Date, the Servicer shall electronically deliver to the Guarantor in such medium as
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may be agreed between the Servicer and the Guarantor and to the Credit Risk Manager by
uploading to https://upload.murrayhillcompany.comJ (i) a Supplemental Remittance Report with
respect to such Distribution Date, (ii) a Loan Modification Report with respect to the Prepayment
Period relating to such Distribution Date; provided, however, that the Servicer shall not be
required to deliver a Loan Modification Report if there are no loan modifications during the
related Prepayment Period and (iii) Form 332 with respect to each applicable Mortgage Loan.
(b) If, with respect to any Distribution Date, (i) the Servicer does not deliver the
Supplemental Remittance Report to the Guarantor on or before the fifth Business Day preceding
such Distribution Date, or (ii) the information in the Supplemental Remittance Report delivered
by the Servicer with respect to such Distribution Date is not correct or complete in any material
respect, such failure shall constitute a "Delivery Event" with respect to such Distribution Date
and the Servicer shall be subject to the following penalties: (i) the Servicer shall pay Freddie
Mac an amount equal to $50,000 upon the occurrence of the third Delivery Event and (ii) as
provided for in Section 7.01 (a)(ix), the occurrence of a fourth Delivery Event shall result in an
Event of Default.
The foregoing penalty shall constitute the sole monetary remedy to the Guarantor in
connection with Delivery Events.
Section 3.27 Servicing Matters Relating to the Relief Act. The Servicer shall comply
with the Relief Act and similar state laws as they apply to "service members" within the meaning
of the Relief Act or a comparable term under a similar state law. The Servicer shall apply
interest rate caps under the Relief Act or similar state laws beginning with the first Due Date
after the effective date of the commencement of the service member's period of active duty, and
reinstate the contractual Mortgage Rate beginning with the second Due Date following the
termination of the service member's period of active duty. In accordance with the Relief Act or
any similar state law, the Servicer shall afford such relief only upon receipt of a copy (which
may be faxed) of the military orders. If a Mortgagor requests military relief other than interest
rate relief, the Servicer must notify Freddie Mac within ten (10) Business Days of receiving the
request, including all relevant information along with a recommendation. If the request for relief
is made after the effective date of active duty and the Servicer receives it within 180 days after
the date active duty terminates, the rate cap may be retroactive to the payment due on the first
Due Date after the effective date of active duty (provided, however, that the Trust shall not be
required to provide any credit for any relief prior to the Cut-off Date). At the Mortgagor's
option, the Servicer shall credit the resulting amount to the Mortgage Loan's outstanding
principal balance or reduce monthly escrow installments, or refund it to the Mortgagor.
In addition, with respect to any relief accorded to a Mortgagor under the Relief Act or
any similar state law, the Servicer must:
(a) waive all late charges resulting from payments deferred, restructured or rate-
capped under the Relief Act, or any similar state law, and waive any Prepayment Penalties that
would otherwise be payable;
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(b) report a Mortgagor who is receiving relief under the Relief Act or any similar
state law and who is otherwise current hereunder as "paying as agreed" to the credit repositories;
and
(c) notify Freddie Mac using the monthly Supplemental Remittance Report that the
Mortgagor is receiving relief under the Relief Act or any similar state law until it ends or until
the Mortgage Loan is fully reinstated, paid off, or a workout is completed or a foreclosure sale is
held or a deed-in lieu of foreclosure is executed or, if a Mortgagor's military relief interferes
with foreclosure, stating that such relief under the Relief Act or any similar state law is in effect
and the date it was granted.
The Servicing Fee Rate for Mortgage Loans whose interest rate has been reduced as
required by the Relief Act shall not be affected by the rate cap.
Section 3.28 Duties of the Credit Risk Manager. For and on behalf of the Trust and the
Guarantor, pursuant to the Credit Risk Management Agreement, the Credit Risk Manager will
provide reports to the Guarantor and make recommendations to the Servicer concerning certain
delinquent and defaulted Mortgage Loans, and as to the collection of any Prepayment Penalties
with respect to the Mortgage Loans. Such reports and recommendations will be based upon
information provided to the Credit Risk Manager pursuant to the Credit Risk Management
Agreement, and the Credit Risk Manager shall look to the Servicer for all information and data
(including loss and delinquency information and data) relating to the servicing of the related
Mortgage Loans. Upon any termination of the Credit Risk Manager or the appointment of a
successor Credit Risk Manager, the Guarantor shall give written notice thereof to the Servicer,
the Trustee, and the Depositor.
Section 3.29 Limitation of Liability of the Credit Risk Manager.
(a) Neither the Credit Risk Manager, nor any of its directors, officers, employees, or
agents shall be under any liability to the Trustee, the Certificateholders, the Guarantor, the
Sponsor or the Depositor for any action taken or for refraining from the taking of any action
made in good faith pursuant to this Agreement, in reliance upon information provided by the
Servicer under the Credit Risk Management Agreement, or for errors in judgment; provided,
however, that this provision shall not protect the Credit Risk Manager or any such person against
liability that would otherwise be imposed by reason of willful malfeasance, bad faith or
negligence in its performance of its duties or by reason of reckless disregard of its obligations
and duties under this Agreement or the Credit Risk Management Agreement. The Credit Risk
Manager and any director, officer, employee, or agent of the Credit Risk Manager 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, and may rely in good faith upon the accuracy of
information furnished by the Servicer pursuant to the Credit Risk Management Agreement in the
performance of its duties thereunder and hereunder.
(b) The Credit Risk Manager and any director or officer or employee or agent of the
Credit Risk Manager shall be indemnified by the Trust and held harmless against any loss,
liability or expense incurred in connection with the performance of its duties and obligations and
any legal action relating to this Agreement other than any loss, liability or expense incurred by
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reason of its willful misfeasance, bad faith or negligence in the performance of duties hereunder
or by reason of its reckless disregard of obligations and duties hereunder or under the Credit Risk
Management Agreement. Subject to (c) below, the Credit Risk Manager may (with the consent
of the Guarantor, which consent shall not be unreasonably withheld) undertake any such legal
action which it may deem necessary or desirable in respect of this Agreement and the Credit Risk
Management Agreement, and the rights and duties of the parties hereto and the interests of the
Certificateholders hereunder. In such event, the reasonable legal expenses and costs of such
action and any liability resulting therefrom shall be expenses, costs and liabilities of the Trust
and the Credit Risk Manager shall be entitled to be reimbursed therefor pursuant to Section 3.05.
(c) Notwithstanding anything to the contrary in this Agreement, the Credit Risk
Manager will not be entitled to any amount of indemnification expenses from the Trust pursuant
to this Section 3.29 or any other Section of this Agreement to the extent that such
indemnification expenses exceed in the aggregate $100,000 per annum (the "Credit Risk
Manager Annual Cap"); provided, that any amounts in excess of such Credit Risk Manager
Annual Cap shall be paid, to the extent funds are available, in the subsequent year or years
(subject to the Credit Risk Manager Annual Cap for such subsequent year or years) until paid in
full.
Section 3.30 Removal of the Credit Risk Manager. The Credit Risk Manager may be
removed as Credit Risk Manager upon the earliest of (a) at the option of the Guarantor, and upon
30 days written notice to the Credit Risk Manager, at any time following the Distribution Date
occurring in January 2012, (b) the termination of the Trust, or (c) with the prior written consent
of the Guarantor by Certificateholders evidencing, in aggregate, not less than 66 2/3% of the
aggregate Percentage Interests of all Classes of Certificates, in the exercise of its or their sole
discretion. Upon receipt of such notice in (c) above, the Trustee shall provide written notice to
the Credit Risk Manager of its removal, which shall be effective upon receipt of such notice by
the Credit Risk Manager.
Section 3.31 Notification of Adjustments. With respect to each Adjustable Rate
Mortgage Loan, the Servicer shall adjust the Mortgage Rate on the related Adjustment Date and
shall adjust the Scheduled Payment on the related Adjustment Date, if applicable, in compliance
with the requirements of applicable law, the related Mortgage and Mortgage Note and the
Servicing Standards. In the event that an Index becomes unavailable or otherwise unpublished,
the Servicer shall select a comparable alternative index over which it has no direct control and
which is readily verifiable. The Servicer shall execute and deliver any and all necessary notices
required under applicable law and the terms of the related Mortgage Note and Mortgage
regarding the Mortgage Rate and Scheduled Payment adjustments. The Servicer shall promptly,
upon written request therefor, deliver to the Trustee such notifications and any additional
applicable data regarding such adjustments and the methods used to calculate and implement
such adjustments. Upon the discovery by the Servicer or the receipt of notice from the Trustee
that the Servicer has failed to adjust a Mortgage Rate or Scheduled Payment in accordance with
the terms of the related Mortgage Note, the Servicer shall deposit in the Collection Account from
its own funds the amount of any loss of interest caused as such loss of interest occurs.
Section 3.32 Gramm-Leach-Bliley Act. The Servicer shall comply with Title V of the
Gramm-Leach-Bliley Act of 1999 and all applicable regulations promulgated thereunder,
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relating to the Mortgage Loans and the related Mortgagors and shall provide all required notices
thereunder.
ARTICLE IV
FLOW OF FUNDS
Section 4.01 Distributions. (a) On each Distribution Date, the Trustee shall withdraw,
from the Certificate Account, Available Funds with respect to each Loan Group and distribute
them as follows:
(i) first, concurrently, as follows:
(A) with respect to the Class l-A-l Certificates, to the extent of the
Available Funds for Loan Group 1:
first, to the Class l-A-l Certificates, Accrued Certificate Interest
thereon for such Distribution Date; and
second, to the Class l-A-l Certificates in reduction of the
Certificate Principal Balances thereof, any remaining Available
Funds for Loan Group 1 for such Distribution Date, until the
Certificate Principal Balance of the Class l-A-l Certificates is
reduced to zero;
(B) with respect to the Class 2-A-l Certificates, to the extent of the
first, to the Class 2-A-l Certificates, Accrued Certificate Interest
second, to the Class 2-A-l Certificates in reduction of the
Certificate Principal Balance of the Class 2-A-l Certificates is
reduced to zero;
(C) with respect to the Class 3-A-l Certificates, to the extent of the
reduced to zero; and
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(D) with respect to the Class 4-A-l Certificates, to the extent of the
reduced to zero; and
(ii) second, to the Guarantor, any Guarantor Reimbursement Amounts and any
other amounts owed to the Guarantor pursuant to this Agreement.
(b) On each Distribution Date, the Trustee shall withdraw from the Certificate
Account, any Prepayment Penalties and Prepayment Adjustments and pay such amounts to the
Class P Certificate.
Section 4.02 Method of Distribution. The Trustee shall make distributions in respect of
a Distribution Date, by 12:00 noon New York City time on- such Distribution Date, to each
Certificateholder of record on the related Record Date (other than as provided in Section 10.01
respecting the final distribution) (a) by wire transfer in immediately available funds to the
account of the Person entitled thereto if such Person shall have so notified the Certificate
Registrar in writing at least seven (7) Business Days prior to the Record Date immediately prior
to such Distribution Date and such Person is the registered owner of such Certificates or (b) by
check mailed by first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register, provided that the Certificate Registrar may
deduct a reasonable wire transfer fee from any payment (other than any payment made to
Freddie Mac) made by wire transfer. Distributions among Certificateholders shall be made in
proportion to the Percentage Interests evidenced by the Certificates held by such
Certificateholders. In addition, the Trustee shall make distributions to the Guarantor by wire
transfer in immediately available funds to the account previously provided by the Guarantor.
Section 4.03 Statements. (a) On each Distribution Date, based on the Mortgage Loan
information contained in the Remittance Report, the Trustee shall prepare and make available to
the Depositor (and its designees), the Certificateholders, the Servicer, the Guarantor and the
Credit Risk Manager on its website at https://tss.sfs.db.comlinvestpublic/, a statement (the
"Certificate Report") as to the distributions made on such Distribution Date (based on
information provided by the Servicer and the Guarantor pursuant to Sections 4.05(a) or 4.06
herein):
(i) the amount of the distribution made on such Distribution Date to the
Holders of each Class of Certificates allocable to principal;
(ii) the aggregate amount of servicing compensation received by the Servicer
during the related Due Period;
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(iii) the aggregate amount of Advances and Servicing Advances for the related
Due Period, cumulative unreimbursed Advances and Servicing Advances and cumulative
Nonrecoverable Advances;
(iv) the Pool Balance and each Loan Group Balance, at the close of business at
the end of the related Due Period;
(v) with respect to each Loan Group, the number, weighted average remaining
term to maturity and weighted average Mortgage Rate of the Mortgage Loans in such Loan
Group as of the related Due Date;
(vi) with respect to each Loan Group, the number and aggregate Stated
Principal Balances of the Mortgage Loans that are (A) Delinquent (exclusive of Mortgage Loans
in foreclosure or bankruptcy), grouping such Delinquent Mortgage Loans in 30 day increments,
up to 180 days Delinquent, (B) in foreclosure, as of the close of business on the last day of the
calendar month preceding the Distribution Date and (C) in bankruptcy as of the close of business
on the last day of the calendar month preceding the Distribution Date;
(vii) with respect to any Mortgage Loan that became an REO Property during
the preceding calendar month, the loan number of such Mortgage Loan and the Stated Principal .
Balance of the REO Property as of the close of business on the last Business Day of such
calendar month;
(viii) the aggregate amount of Principal Prepayments made during the related
Prepayment Period;
(ix) the aggregate amount of Realized Losses incurred during the related Due
Period and the cumulative amount of Realized Losses since the Cut-off Date;
(x) the Certificate Principal Balance of each Class of Class A Certificates,
after giving effect to the distributions;
(xi) the Accrued Certificate Interest in respect of each Class of Class A
Certificates for such Distribution Date, and the respective portions thereof, if any, remaining
unpaid following the distributions made in respect of such Certificates on such Distribution Date;
(xii) the aggregate amount of any Prepayment Interest Shortfalls and any
Compensating Interest for such Distribution Date, to the extent not covered by payments by the
Servicer pursuant to Section 3.20;
(xiii) the Available Funds with respect to each Loan Group;
(xiv) the Pass-Through Rate for each Class of Class A Certificates for such
Distribution Date;
(xv) the aggregate Stated Principal Balance of Mortgage Loans purchased by
the Sponsor, the Guarantor or the Servicer during the related Prepayment Period;
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(xvi) the amount of the Custodian Fee and the Credit Risk Management Fee;
(xvii) the Guarantor Reimbursement Amount and the Deficiency Amount for
such Distribution Date;
(xviii) the Mortgage Loan identifying number of each Mortgage Loan with a
Prepayment Penalty that was the subject of a Principal Prepayment during the related Collection
Period, the Prepayment Penalty collected and the aggregate amount paid to the Class P
Certificate for such Distribution Date;
(xix) the pool factors for such Distribution Date;
(xx) the amount of Subsequent Recoveries received during the related
Prepayment Period;
(xxi) any expenses or indemnification amounts paid by the Trust and the parties
to whom these payments are made; and
(xxii) the applicable Determination Date, the Record Date and the actual
Distribution Date for the distribution.
Notwithstanding anything herein to the contrary, in preparing or furnishing any reports or
certifications pursuant to this Agreement, the Trustee shall be entitled to rely conclusively on the
accuracy of the information or data provided to it by any other party to the Agreement and shall
have no liability for any errors therein.
Assistance in using the Trustee's website can be obtained by calling the Trustee at 1-800-
735-7777. The Trustee shall provide such information to parties that are unable to use the above
distribution option by mailing to them via first class mail a paper copy of the Certificate Report,
upon request of any such party made by calling the customer service desk and indicating such.
The Trustee shall have the right to change the way such reports are distributed in order to make
such distribution more convenient and/or more accessible to the parties, and the Trustee shall
provide timely and adequate notification to all parties regarding any such change.
The Trustee may fully rely upon and shall have no liability with respect to information
with respect to the Mortgage Loans provided by the Servicer and the Guarantor.
In the case of information furnished pursuant to subclauses (i), (xi) and (xii) above, the
amounts shall be expressed in a separate section of the report as a dollar amount for each Class
of Class A Certificates for each $1,000 original dollar amount as of the Closing Date.
(b) The Trustee shall provide each Certificateholder with the information required
pursuant to Section 9.01 and Section 9.02.
(c) No later than five (5) Business Days prior to each Distribution Date, the Trustee
shall provide the Guarantor and the Credit Risk Manager with (i) the Certificate Report and (ii)
the Supplemental Certificate Report, each in electronic format. In the event the Trustee does not
deliver the reports set forth in clauses (i) and (ii) by the close of business five Business Days
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prior to each Distribution Date, the Guarantor shall use its best efforts to determine the Guarantor
Payment required to be made on the applicable Distribution Date.
(d) No later than five (5) Business Days prior to any Distribution Date on which a
Guarantor Payment is due, the Trustee shall provide the Guarantor with a list of the Holders of
record (as set forth in the Certificate Register) of each Class of Class A Certificates, as of the
related Record Date; provided, however, that such list shall not be required to be delivered for
any Distribution Dates on which Freddie Mac or its nominee is the Holder of record of all
Classes of Class A Certificates.
(e) With respect to any Distribution Date, in the event the Trustee has used the funds
on deposit in the Certificate Account for a purpose that is not expressly provided for in this
Agreement and such actions resulted directly from the Trustee's breach of its obligations
hereunder, and as a result the Guarantor has made a payment with respect to the Guarantee in
excess of the Guarantor Payment, if any, owed, then the Trustee shall, not later than the fourth
day following such Distribution Date, reimburse the Guarantor, out of its own funds, for any
Guarantor Payments (plus interest thereon) made as a result of the actions described above. Such
interest shall be at a per annum rate for each day equal to the Prime Rate for such day plus 1.00%
per annum, calculated on the basis of the number of days between the Guarantor's receipt of
such reimbursement and the related Distribution Date.
Section 4.04 Remittance Reports; Advances. (a) On or prior to the tenth (loth) calendar
day or, if such day is not a Business Day, the next Business Day of each month, the Servicer
shall deliver to the Trustee bye-mail (or by such other means as such parties may agree from
time to time) the Remittance Report with respect to the related Distribution Date. On the same
date, the Servicer shall electronically forward to the Trustee (with a copy to the Credit Risk
Manager) in such medium as may be agreed between the Servicer and the Trustee the
information set forth in such Remittance Report with respect to the related Distribution Date and
such information reasonably available to the Servicer necessary in order for the Trustee to
perform the calculations necessary to make the distributions and allocations contemplated by
Section 4.01 and to prepare the Certificate Report. The Trustee shall not be responsible to
recompute, recalculate or verify any information provided to it by the Servicer.
(b) The amount of Advances to be made by the Servicer for any Distribution Date
shall equal, subject to Section 4.04(d), the sum of the aggregate amount of Scheduled Payments
(net of the related Servicing Fee), due during the related Due Period in respect of the Mortgage
Loans, which Scheduled Payments were delinquent on a contractual basis as of the close of
business on the related Determination Date. For purposes of the preceding sentence, the
Scheduled Payment on each Balloon Loan with a delinquent Balloon Payment is equal to the
assumed monthly payment that would have been due on the related Due Date based on the
original principal amortization schedule for such Balloon Loan.
On each Servicer Remittance Date, the Servicer shall remit in immediately available
funds to the Trustee for deposit in the Certificate Account an amount equal to the aggregate
amount of Advances, if any, to be made in respect of the Mortgage Loans or REO Properties for
the related Distribution Date either (i) from its own funds or (ii) from the Collection Account, to
the extent of funds held therein for future distribution (in which case it will cause to be made an
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appropriate entry in the records of the Collection Account that amounts held for future
distribution have been, as permitted by this Section 4.04, used by the Servicer in discharge of
any such Advance) or (iii) in the form of any combination of (i) and (ii) aggregating the total
amount of Advances to be made by the Servicer with respect to the Mortgage Loans. Any
amounts held for future distribution and so used shall be appropriately reflected in the Servicer's
records and replaced by the Servicer by deposit in the Collection Account on or before any future
Servicer Remittance Date to the extent that the Available Funds for the related Distribution Date
(determined without regard to Advances to be made on the Servicer Remittance Date) shall be
less than the sum of the total amount that would be distributed to the Certificateholders pursuant
to Section 4.01 on such Distribution Date.
The Guarantor, in its reasonable judgment, shall have the right to require the Servicer to
remit, from its own funds, to the Collection Account an amount equal to all Advances previously
made out of funds held in the Collection Account and not previously repaid from collections on
the Mortgage Loans, and in such event, the Servicer shall thereafter remit all Advances from its
own funds. In no event shall the preceding sentence be construed as limiting the Servicer's right
to (a) pass through late collections on the related Mortgage Loans in lieu of making advances or
(b) reimburse itself for such Advances from late collections on the related Mortgage Loans.
(c) The obligation of the Servicer to make such Advances is mandatory,
notwithstanding any other provision of this Agreement but subject to (d) below, and, with respect
to any Mortgage Loan, shall continue until the earliest of the time that (i) such Mortgage Loan is
paid in full by the Mortgagor or (ii) such Mortgage Loan or REO Property is disposed of by the
Trust.
(d) Notwithstanding anything herein to the contrary, no Advance or Servicing
Advance shall be required to be made hereunder by the Servicer if such Advance would, if made,
constitute a Nonrecoverable Advance. The determination by the Servicer that it has made a
Nonrecoverable Advance or that any proposed Advance, if made, would constitute a
Nonrecoverable Advance, shall be evidenced by an Officer's Certificate of the Servicer delivered
to the Trustee.
Section 4.05 The Guarantee. (a) On each Distribution Date following receipt from the
Trustee of a Certificate Report or Supplemental Certificate Report that indicates a Deficiency
Amount for any Class of Class A Certificates for such Distribution Date, the Guarantor shall
distribute the related Guarantor Payment in an aggregate amount equal to the Deficiency Amount
for such Class of Class A Certificates for such Distribution Date directly to the Holders of such
Class of Class A Certificates, without first depositing such amount in the Certificate Account.
The Guarantor shall make such payments to the Holders of record (as set forth in the Certificate
Register) as of the Record Date relating to such Distribution Date. On each Distribution Date on
which a Guarantor Payment is due with respect to any Class of Class A Certificates, the
Guarantor shall provide written notice to the Trustee that such Guarantor Payment has been
made in full (or if such Guarantor Payment was not paid in full, the amount that was unpaid).
(b) Any consent rights of the Guarantor under this Agreement or any rights of the
Guarantor to take action under this Agreement shall be suspended during any period in which the
Guarantor has failed to make a payment required pursuant to Section 4.05(a).
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Section 4.06 Allocation of Realized Losses. In the event that the Trustee receives
notice from the Guarantor that any amount of a Guarantor Payment with respect to any Class of
Class A Certificates remains unpaid on any Distribution Date, the Trustee shall allocate Realized
Losses with respect to the Mortgage Loans in the related Loan Group, to the extent of such
unpaid amount as of such Distribution Date, to such Class of Class A Certificates.
ARTICLE V
THE CERTIFICATES
Section 5.01 The Certificates. Each Class of Certificates shall be substantially in the
forms annexed hereto as exhibits, and shall, on original issue, be executed by the Trustee and
authenticated and delivered by the Certificate Registrar to or upon the receipt of a Written Order
to Authenticate from the Depositor concurrently with the sale and assignment to the Trustee of
the Trust Fund. Each Class of Class A Certificates shall be initially evidenced by one or more
Certificates representing a Percentage Interest with a minimum dollar denomination of
$1,000,000 and integral multiples of $1 in excess thereof. The Class P Certificate is issuable
only as a single certificate.
The Certificates shall be executed on behalf of the Trust by manual or facsimile signature
on behalf of the Trustee by a Responsible Officer. Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures were affixed, authorized to
sign on behalf of the Trustee shall bind the Trust, notwithstanding that such individuals or any of
them have ceased to be so authorized prior to the authentication and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate shall be entitled to any
benefit under this Agreement or be valid for any purpose, unless such Certificate shall have been
manually authenticated by the Certificate Registrar substantially in the form provided for herein,
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. The Certificates shall be issued in
fully registered, certificated form.
Section 5.02 Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall cause to be kept at the Corporate Trust Office of
the Trustee a Certificate Register in which, subject to such reasonable regulations as it may
prescribe, the Certificate Registrar shall provide for the registration of Certificates and of
transfers and exchanges of Certificates as herein provided. The Trustee shall initially serve as
Certificate Registrar for the purpose of authenticating and registering Certificates and transfers
and exchanges of Certificates as herein provided. The Trustee as Certificate Registrar shall be
subject to the same standards of care, limitations on liability and rights to indemnity as the
Trustee, and the provisions of Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.11, 8.14 and 8.15 shall
apply to the Certificate Registrar to the same extent as they apply to the Trustee. Any Certificate
Registrar appointed in accordance with this Section 5.02(a) may at any time resign by giving at
least 30 days' advance written notice of resignation to the Trustee, the Servicer and the
Depositor, such resignation to become effective upon appointment of a successor Certificate
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Registrar. Neither the Trustee nor the Certificate Registrar shall be responsible for receiving or
requiring any transfer documentation unless expressly provided for in this Article V.
Upon surrender for registration of transfer of any Certificate at any office or agency of
the Certificate Registrar maintained for such purpose pursuant to the foregoing paragraph and
upon satisfaction of the conditions set forth below, the Trustee on behalf of the Trust shall
execute and the Certificate Registrar shall authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Certificates of the same aggregate Percentage Interest.
At the option of the Certificateholders, Certificates may be exchanged for other
Certificates in authorized denominations and the same aggregate Percentage Interests, upon
surrender of the Certificates to be exchanged at any such office or agency. Whenever any
Certificates are so surrendered for exchange, the Trustee shall execute on behalf of the Trust and
the Certificate Registrar shall authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate presented or
surrendered for registration of transfer or exchange shall (if so required by the Trustee or the
Certificate Registrar) be duly endorsed by, or be accompanied by a written instrument of transfer
satisfactory to the Trustee and the Certificate Registrar duly executed by the Holder thereof or
his attorney duly authorized in writing.
(b) No transfer, sale, pledge or other disposition of the Class P Certificate shall be
made unless such disposition is exempt from the registration requirements of the 1933 Act, and
any applicable state securities laws or is made in accordance with the 1933 Act and such laws.
In the event of any such transfer, the Certificate Registrar shall require the transferor to execute a
transferor certificate (in substantially the form attached hereto as Exhibit M) and the transferee to
execute an investment letter in substantially in the form attached hereto as Exhibit I acceptable to
and in form and substance reasonably satisfactory to the Depositor and the Certificate Registrar
certifying to the Depositor and the Certificate Registrar the facts surrounding such transfer,
which investment letter shall not be an expense of the Certificate Registrar or the Depositor. The
transferor of a Certificate desiring to effect such transfer shall, and does hereby agree to,
indemnify the Certificate Registrar, the Trustee, the Guarantor and the Depositor against any
liability that may result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.
No transfer of the Class P Certificate shall be made unless the Certificate Registrar shall
have received a representation from the transferee of such Certificate substantially in the form of
Exhibit H to the effect that such transferee is not an employee benefit plan or arrangement
subject to Section 406 of ERISA, a plan subject to Section 4975 of the Code or a plan subject to
any Federal, state or local law ("Similar Law") materially similar to the foregoing provisions of
ERISA or the Code, nor a Person acting on behalf of any such plan or arrangement nor using the
assets of any such plan or arrangement (collectively, a "Plan") to effect such transfer.
Notwithstanding anything else to the contrary herein, any purported transfer of the Class P
Certificate to a transferee that does not make the representation above shall be void and of no
effect.
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The Class P Certificate may not be sold to any employee benefit plan subject to Title I of
ERISA, any plan subject to Section 4975 of the Code, or any plan subject to any Similar Law or
any Person investing on behalf of or with plan assets of such Plan.
To the extent permitted under applicable law (including, but not limited to, ERISA), the
Certificate Registrar shall be under no liability to any Person for any registration of transfer of
the Class P Certificate that is in fact not permitted by this Section 5.02(b) or for making any
payments due on such Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was registered by the
Certificate Registrar in accordance with the foregoing requirements.
(c) No service charge shall be made for any registration of transfer or exchange of
Certificates, but the Certificate Registrar may require payment of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer or exchange of
Certificates.
All Certificates surrendered for registration of transfer or exchange shall be cancelled by
the Certificate Registrar and disposed of pursuant to its standard procedures.
Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated
Certificate is surrendered to the Certificate Registrar or the Certificate Registrar receives
evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is
delivered to the Trustee, the Depositor and the Certificate Registrar such security or indemnity as
may be required by them to save each of them harmless, then, in the absence of notice to the
Trustee or the Certificate Registrar that such Certificate has been acquired by a bona fide
purchaser, the Trustee shall execute on behalf of the Trust, and the Certificate Registrar 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 Percentage Interest. Upon the issuance of
any new Certificate under this Section, the Trustee or the Certificate Registrar may require the
payment of a sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) in connection therewith. Any duplicate Certificate issued pursuant to this
Section, shall constitute complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any
time.
Section 5.04 Persons Deemed Owners. The Servicer, the Depositor, the Sponsor, the
Trustee, the Certificate Registrar, the Guarantor and any agent of the Servicer, the Depositor, the
Sponsor, the Trustee, the Certificate Registrar or the Guarantor may treat the Person, including a
depository company, in whose name any Certificate is registered as the owner of such Certificate
for the purpose of receiving distributions pursuant to Section 4.01 and for all other purposes
whatsoever, and none of the Servicer, the Trust, the Trustee, the Sponsor, the Guarantor nor any
agent of any of them shall be affected by notice to the contrary.
Section 5.05 Maintenance of Office or Agency. The Trustee will maintain or cause to
be maintained at its expense an office or offices or agency or agencies where Certificates may be
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surrendered for registration of transfer or exchange. The Trustee initially designates its offices
located at Deutsche Bank National Trust Company, c/o DB Services Tennessee, 648 Grassmere
Park Road, Nashville, Tennessee 37211-3658, Attention: Transfer Unit. The Trustee shall give
prompt written notice to the Certificateholders of any change in such location of any such office
or agency.
ARTICLE VI
THE SERVICER AND THE DEPOSITOR
Section 6.01 Liability of the Servicer and the Depositor. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically imposed upon and
undertaken by the Servicer herein. The Depositor shall be liable in accordance herewith only to
the extent of the obligations specifically imposed upon and undertaken by the Depositor.
Section 6.02 Merger or Consolidation of, or Assumption of the Obligations of, the
Servicer or the Depositor Any entity into which the Servicer or the Depositor may be merged or
consolidated, or any entity resulting from any merger, conversion or consolidation to which the
Servicer or the Depositor shall be a party, or any organization succeeding to the business of the
Servicer or the Depositor through the transfer of substantially all of its assets or all assets relating
to such business, or otherwise, shall be the successor of the Servicer or the Depositor, as the case
may be, hereunder, without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding; provided, however,
that (a) the successor servicer shall satisfy all the requirements of Section 7.02 with respect to the
qualifications of a successor servicer and (b) the Servicer and such successor or surviving Person
shall notify the Depositor, the Guarantor and the Trustee of any such merger, conversion or
consolidation at least two (2) Business Days prior to the effective date thereof (unless giving
such prior notice would be prohibited by applicable law or by a confidentiality agreement, in
which case notice shall be given by 12 noon eastern time one Business Day after such merger or
consolidation).
Section 6.03 [Reservedl.
Section 6.04 Servicer Not to Resign. Subject to the provisions of Section 7.01 and
Section 6.02, the Servicer shall not resign from the obligations and duties hereby imposed on it
except (a) upon detennination that the perfonnance of its obligations or duties hereunder are no
longer pennissible under applicable law or are in material conflict by reason of applicable law
with any other activities carried on by it or its subsidiaries or Affiliates, the other activities of the
Servicer so causing such a conflict being of a type and nature carried on by the Servicer or its
subsidiaries or Affiliates at the date of this Agreement or (b) upon satisfaction of the following
condition: the Servicer has proposed a successor servicer to the Trustee and the Guarantor in
writing and such proposed successor servicer is acceptable to the Guarantor and the proposed
successor executes and delivers to the Trustee and the Guarantor an agreement, in fonn and
substance reasonably satisfactory to the Trustee and the Guarantor, which contains an
assumption by such successor servicer of the due and punctual perfonnance and observance of
each covenant and condition to be perfonned or observed by the Servicer under this Agreement
from and after the date of such agreement; provided, however, that no such resignation by the
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Servicer shall become effective until such successor servicer or, in the case of (a) above, the
Trustee shall have assumed the Servicer's responsibilities and obligations hereunder or the
Trustee shall have designated a successor servicer in accordance with Section 7.02. Any such
resignation shall not relieve the Servicer of responsibility for any of the obligations specified in
Sections 7.01 and 7.02 as obligations that survive the resignation or termination of the Servicer.
Any such determination permitting the resignation of the Servicer pursuant to clause (a) above
shall be evidenced by an Opinion of Counsel to such effect delivered to the Trustee and the
Guarantor at the expense of the Servicer.
ARTICLE VII
DEFAULT
Section 7.01 Servicer Events of Termination. (a) If anyone of the following events
("Servicer Events of Termination") shall occur and be continuing:
(i) (A) the failure by the Servicer to make any Advance or to pay
Compensating Interest and such failure described in this clause (A) continues unremedied for
one Business Day following receipt of written notice (including by any notice sent via telecopier
or e-mail) of such failure; or
(B) any other failure by the Servicer to deposit in the Collection Account
or Certificate Account any deposit required to be made under the terms of this Agreement, which
failure described in this clause (B) continues unremedied for one Business Day after the first date
on which written notice (including by any notice sent via telecopier or e-mail) of such failure is
given to the Servicer;
(ii) the failure by the Servicer duly to observe or perform, in any material
respect, any other covenants, obligations or agreements of the Servicer as set forth in this
Agreement, which failure continues unremedied for a period of 30 days, after the date (A) on
which written notice of such failure, requiring the same to be remedied, shall have been given to
the Servicer by the Trustee or by any Holder of a Certificate (other than the Class P Certificate)
evidencing at least a majority of the Voting Interests, or to the Servicer and the Trustee by the
Guarantor, or (B) actual knowledge of such failure by a Servicing Officer of the Servicer;
provided, however, that if the Servicer is unable, with the exercise of reasonable diligence, to
remedy such failure within such 30-day period, such period shall be extended for an additional
30 days; or
(iii) the entry against the Servicer of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the appointment of a trustee,
conservator, receiver or liquidator in any insolvency, conservatorship, receivership, readjustment
of debt, marshalling of assets and liabilities or similar proceedings, or for the winding up or
liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect
for a period of 60 days; or
(iv) the Servicer shall voluntarily go into liquidation, consent to the
appointment of a conservator or receiver or liquidator or similar person in any insolvency,
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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 its property; or a decree or order of a
court or agency or supervisory authority having jurisdiction in the premises for the appointment
of a conservator, receiver, liquidator or similar person 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, unbonded or unstayed for a period of 60 days; or 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; or
(v) the Servicer shall admit in writing its inability generally to pay its debts as
they become due, file a petition to take advantage of any applicable insolvency or reorganization
statute, make an assignment for the benefit of its creditors, or voluntarily suspend payment of its
obligations; or
(vi) the Servicer ceases to be an Approved Freddie Mac Servicer; or
(vii) Fitch reduces its servicer rating of the Servicer to "RPS2-" or lower,
Moody's reduces its servicer rating of the Servicer to "SQ3" or lower, or Standard & Poor's
reduces its servicer rating of the Servicer to "Average" or lower; or
(viii) the Servicer fails to maintain an acceptable level of rating in a mutually
agreed upon performance measurement for certain loss mitigation and collection activities; or
(ix) the occurrence of the fourth Delivery Event.
(b) Then, and in each and every such case, so long as any such event shall not have
been remedied within the applicable grace period, (x) with respect solely to clause (i)(A) above,
if such Advance continues unremedied for one (1) Business Day following receipt of written
notice of such failure to make an Advance, with the consent of the Guarantor, the Trustee may,
or upon the written direction of the Guarantor, the Trustee shall, terminate all of the rights and
obligations of the Servicer under this Agreement and the Trustee shall assume upon such
termination, the duties of a successor servicer pursuant to Section 7.02 (including, but not limited
to, the duty to make Advances required pursuant to this Agreement) and (y) in the case of
(a)(i)(B), (ii), (iii), (iv), (v), (vi), (vii), (viii), and (ix) above, the Trustee shall, at the written
direction of the Guarantor or the Holders of the Class A Certificates evidencing Voting Interests
aggregating not less than a majority, by notice then given in writing to the Servicer (and to the
Trustee if given by Holders of Certificates), terminate all of the rights and obligations of the
Servicer as servicer under this Agreement. Any such notice to the Servicer shall also be given to
the Trustee and the Depositor. On or after the receipt by the Servicer (and by the Trustee if such
notice is given by the Holders) of such written notice, all authority and power of the Servicer
under this Agreement, whether with respect to the Certificates or the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee pursuant to and under this Section or
successor servicer appointed in connection with Section 7.02; and, without limitation, the
Trustee or successor servicer is hereby authorized and empowered to execute and deliver, on
behalf of the Servicer, as attorney-in-fact or otherwise, any and all documents and other
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instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and endorsement of
each Mortgage Loan and Related Documents or otherwise. The Servicer agrees to cooperate
with the Trustee (or the applicable successor servicer) in effecting the termination of the
responsibilities and rights of the Servicer hereunder, including, without limitation, the delivery to
the Trustee (or the applicable successor servicer) of all documents and records requested by it to
enable it to assume the Servicer's functions under this Agreement within twenty (20) Business
Days subsequent to such notice, the transfer within two (2) Business Days subsequent to such
notice to the Trustee (or the applicable successor servicer) for the administration by it of all cash
amounts that shall at the time be held by the Servicer and to be deposited by it in the Collection
Account, the Certificate Account or any Escrow Account or that have been deposited by the
Servicer in such accounts or thereafter received by the Servicer with respect to the Mortgage
Loans or any REO Property received by the Servicer. In the event that the Servicer is terminated
pursuant to this Section 7.01, the terminated Servicer shall be responsible for the servicing
transfer, providing notices to the Mortgagors, arranging for and transferring the Servicing Files
to a successor Servicer and pay all of its own out-of-pocket costs and expenses at its own
expense. All reasonable out-of-pocket costs and expenses (including attorneys' fees) incurred in
connection with transferring the servicing to the successor servicer and amending this Agreement
to reflect such succession as Servicer pursuant to this Section shall be paid by the predecessor
servicer (or if the predecessor servicer is the Trustee, the initial servicer) upon presentation of
reasonable documentation of such costs and expenses, and if such predecessor Servicer defaults
in its obligation to pay such costs, such costs shall be paid by the successor Servicer or the
Trustee (in which case the successor Servicer or the Trustee shall be entitled to reimbursement
therefor from funds in the Collection Account).
Notwithstanding any termination of the activities of a Servicer hereunder, the Servicer
shall be entitled to receive payment of all accrued and unpaid Servicing Fees and reimbursement
for all outstanding Advances and Servicing Advances properly made prior to the date of
termination.
Section 7.02 Trustee to Act; Appointment of Successor. (a) Within 90 days of the time
the Servicer (and the Trustee, if notice is sent by the Holders) receives a notice of termination
pursuant to Section 7.01 or 6.04, the Trustee (or such other successor servicer as is approved in
accordance with this Agreement) shall be the successor in all respects to the Servicer in its
capacity as servicer under this Agreement and the transactions set forth or provided for herein
and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof arising on and after its succession. As compensation
therefor, the Trustee (or such other successor servicer) shall be entitled to such compensation as
the Servicer would have been entitled to hereunder if no such notice of termination had been
given. Notwithstanding the above, (i) if the Trustee is unwilling to act as successor servicer or
(ii) if the Trustee is legally unable so to act, the Trustee shall appoint or petition a court of
competent jurisdiction to appoint, any established housing and home finance institution, bank or
other mortgage loan or home equity loan servicer who is, or who has an affiliate who is, (x)
acceptable to Freddie Mac, and (y) has a net worth of not less than $15,000,000 as the successor
to the Servicer hereunder in the assumption of all or any part of the responsibilities, duties or
liabilities of the Servicer hereunder. Pending appointment of a successor to the Servicer
hereunder, unless the Trustee is prohibited by law from so acting, the Trustee shall act in such
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capacity as hereinabove provided. In connection with such appointment and assumption, the
successor shall be entitled to receive compensation out of payments on Mortgage Loans in an
amount equal to the compensation which the Servicer would otherwise have received pursuant to
Section 3.16 (or such other compensation as the Trustee and such successor shall agree, not to
exceed the Servicing Fee). The appointment of a successor servicer shall not affect any liability
of the predecessor servicer which may have arisen under this Agreement prior to its termination
as Servicer to pay any deductible under an insurance policy pursuant to Section 3.11 or to
indemnify the parties indicated in Section 3.22 pursuant to the terms thereof, nor shall any
successor servicer be liable for any acts or omissions of the predecessor servicer or for any
breach by such servicer of any of its representations or warranties contained herein or in any
related document or agreement. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such succession.
Neither the Trustee nor any other successor to the Servicer shall be deemed to be in
default hereunder by reason of any failure to make, or any delay in making, any distribution
hereunder or any portion thereof or any failure to perform, or any delay in performing, any duties
or responsibilities hereunder, in either case caused by the failure of the Servicer to deliver or
provide, or any delay in delivering or providing, any cash, information, documents or records to
it.
The successor Servicer shall notify the Depositor, the Guarantor and Trustee of any such
appointment at least two (2) Business Days prior to the effective date thereof. Each successor
Servicer shall be acceptable to the Guarantor, as evidenced in writing to the Trustee.
(b) Any successor, including the Trustee, to the Servicer as servicer shall during the
term of its service as servicer continue to service and administer the Mortgage Loans for the
benefit of Certificateholders, and maintain in force a policy or policies of insurance covering
errors and omissions in the performance of its obligations as Servicer hereunder and a Fidelity
Bond in respect of its officers, employees and agents to the same extent as the Servicer is so
required pursuant to Section 3.12.
Section 7.03 Waiver of Defaults. The Holders of Certificates entitled to at least 66
2/3% of the Voting Interests allocated to the Classes of Certificates affected by a Servicer Event
of Termination may, on behalf of all Certificateholders, or the Guarantor may, waive any events
permitting removal of the Servicer as servicer pursuant to this Article VII, provided, however,
that such Holders 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 Servicer Event of Termination arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereto except to the
extent expressly so waived.
Section 7.04 Notification to Guarantor and Certificateholders. (a) The Trustee shall
give the Guarantor written notice of the occurrence of any event described in Section 7.0l(a)
(without regard to any cure periods therein) within one (1) Business Day of the date on which a
Responsible Officer of the Trustee shall have actual knowledge thereof.
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(b) On any termination or appointment of a successor to the Servicer pursuant to this
Article VII or Section 6.04, the Trustee shall give prompt written notice thereof to the
Certificateholders at their respective addresses appearing in the Certificate Register.
(c) No later than 30 days after the occurrence of a Servicer Event of Termination, the
Trustee shall transmit by mail to all Certificateholders notice of such Servicer Event of
Termination.
Section 7.05 Survival of Servicer Liabilities. Notwithstanding anything herein to the
contrary, upon termination of the Servicer hereunder, any liabilities of the Servicer which
accrued prior to such termination shall survive such termination.
ARTICLE VIII
CONCERNING THE TRUSTEE AND THE CUSTODIAN
Section 8.01 Duties of Trustee. The Trustee, prior to the occurrence of a Servicer
Event of Termination of which a Responsible Officer of the Trustee shall have actual knowledge
and after the curing of all Servicer Events of Termination which may have occurred undertakes
to perform such duties and only such duties as are specifically set forth in this Agreement as
duties of the Trustee. If a Servicer Event of Termination has occurred (which has not been
cured), of which a Responsible Officer of the Trustee has actual knowledge, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement, and use the same degree of
care and skill in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
Upon receipt of all resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement, the Trustee shall examine them to
determine whether they conform on their face to the requirements of this Agreement; provided,
however, that the Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument furnished by the
Servicer, the Sponsor or the Depositor hereunder. If any such instrument is found not to conform
on its face to the requirements of this Agreement, the Trustee shall notify the Certificateholders
and the Guarantor of such instrument in the event that the Trustee, after so requesting, does not
receive a satisfactorily corrected instrument.
Any good faith interpretation of the Trustee of any provisions of this Agreement relating
to the distributions to be made on or the allocation of any losses to the Certificates which the
Trustee concludes are ambiguous or unclear shall be binding on Certificateholders.
No provision of this Agreement shall be construed to relieve the Trustee from liability for
its own negligent action, its own negligent failure to act or its own willful misconduct; provided,
however, that:
(a) prior to the occurrence of a Servicer Event of Termination of which a Responsible
Officer of the Trustee has actual knowledge, and after the curing of all such Servicer Events of
Termination which may have occurred, the duties and obligations of the Trustee shall be
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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;
(b) the Trustee shall not be liable for an error of judgment made in good faith by a
Responsible Officer of the Trustee, unless it shall be proved that the Trustee was negligent in
ascertaining or investigating the pertinent facts related thereto;
(c) 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 the Majority Certificateholders
relating to the time, method and place of conducting any proceeding for any remedy available to
the Trustee or exercising or omitting to exercise any trust or power conferred upon the Trustee
under this Agreement;
(d) the Trustee shall not be charged with knowledge of any failure by the Servicer to
comply with the obligations of the Servicer referred to in clauses (i) and (ii) of Section 7.0l(a) or
any Servicer Event of Termination unless a Responsible Officer of the Trustee obtains actual
knowledge of such failure or the Trustee receives written notice of such failure from the Servicer
or the Majority Certificateholders;
(e) the Trustee shall not be required to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties under this Agreement, or in the
exercise of any of its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is not reasonably
assured to it; and
(f) none of the provisions contained in this Agreement shall in any event require the
Trustee to perform, or be responsible for the manner of performance of, any of the obligations of
the Servicer under this Agreement, except during such time, if any, as the Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement.
Section 8.02 Certain Matters Affecting the Trustee and the Custodian. (a) Except as
otherwise provided in Section 8.01:
(i) the Trustee and the Custodian may each request and conclusively rely
upon, and shall be protected in acting or refraining from acting upon, any resolution, Officer's
Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond or other paper or document reasonably believed
by it to be genuine and to have been signed or presented by the proper party or parties;
(ii) the Trustee and the Custodian may each consult with counsel and any
advice or Opinion of Counsel shall be full and complete authorization and protection in respect
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of any action taken or suffered or omitted by it hereunder in good faith and in accordance with
such advice or Opinion of Counsel;
(iii) neither the Trustee nor the Custodian shall be under any obligation to
exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at the request, order or direction of the
Certificateholders pursuant to the provisions of this Agreement, unless such Certificateholders
shall have offered to the Trustee and the Custodian, as applicable, security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities which may be incurred
therein or thereby;
(iv) neither the Trustee nor the Custodian shall be personally liable for any
action taken, suffered or omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Agreement;
(v) prior to the occurrence of a Servicer Event of Termination of which a
Responsible Officer of the Trustee has actual knowledge, and after the curing of all Servicer
Events of Termination 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 documents,
unless requested in writing to do so by the Majority Certificateholders or the Guarantor;
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 indemnity satisfactory to the Trustee against
such cost, expense or liability as a condition to such proceeding. The reasonable expense of
every such examination shall be paid by the Servicer or, if paid by the Trustee, shall be
reimbursed by the Servicer upon demand from the Servicer's own funds. Nothing in this clause
(v) shall derogate from the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Mortgagors;
(vi) the Trustee shall not be accountable, have any liability or make any
representation as to any acts or omissions hereunder of the Servicer until such time as the Trustee
may be required to act as Servicer pursuant to Section 7.02;
(vii) 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 or a custodian and the
Trustee shall not be responsible for any misconduct or negligence on the part of any such agent,
attorney or custodian appointed by it with due care;
(viii) the right of the Trustee to perform any discretionary act enumerated in this
Agreement shall not be construed as a duty, and the Trustee shall not be answerable for other
than its negligence or willful misconduct in the performance of such act;
(ix) the Trustee shall not be required to give any bond or surety in respect of
the execution of the Trust created hereby or the powers granted hereunder;
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(x) the Trustee shall be under no obligation to exercise any of the trusts, rights
or powers vested in it by this Agreement or to institute, conduct or defend any litigation under
this Agreement or in relation hereto at the request, order or direction of any of the
Certificateholders, pursuant to this Agreement, unless such Certificateholders shall have offered
to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs,
expenses and liabilities which may be incurred therein or thereby;
(xi) the Trustee shall not be deemed to have notice of any default, event of
default or any breach by the Depositor or the Sponsor of any representation, warranty or
covenant, unless a Responsible Officer of the Trustee has actual knowledge thereof or unless
written notice of any event which is in fact such a default, event of default or breach is received
by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the
Certificates and this Agreement;
(xii) 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 the Holders of Certificates evidencing not less than 25% of the Voting Rights allocated
to each Class of Certificates;
(xiii) the Trustee shall not be liable for the acts or omissions of the Custodian;
(xiv) the Trustee shall not be liable for any loss on any investment of funds
pursuant to this Agreement (other than respect to the investment of funds in the Certificate
Account, if any); and
(xv) the Trustee makes no representations and shall have no responsibilities to:
(i) the validity, legality, priority, perfection, recordability, enforceability, sufficiency, due
authorization or genuineness of any document in each Mortgage File or (ii) the collectibility,
insurability, effectiveness or suitability of any Mortgage Loan.
Section 8.03 Trustee and Custodian Not Liable for Certificates or Mortgage Loans.
The recitals contained herein and in the Certificates shall be taken as the statements of the
Depositor, and the Trustee assumes no responsibility for the correctness of the same. Neither the
Trustee nor the Custodian make any representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than (a) the signature and authentication of the Trustee on
the Certificates and (b) the authentication of the Trustee, acting as Certificate Registrar, on the
Certificates, or of any Mortgage Loan or Related Document. The Trustee shall not be
accountable for the use or application by the Servicer, or for the use or application of any funds
paid to the Servicer in respect of the Mortgage Loans or deposited in or withdrawn from the
Collection Account by the Servicer. The Trustee shall not at any time have any responsibility or
liability for or with respect to the legality, validity and enforceability of any Mortgage or any
Mortgage Loan, or the perfection and priority of any Mortgage or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Trust or its ability to
generate the payments to be distributed to Certificateholders under this Agreement, including,
without limitation: the existence, condition and ownership of any Mortgaged Property; the
existence and enforceability of any hazard insurance thereon (other than the Trustee's
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responsibility if the Trustee shall assume the duties of the Servicer pursuant to Section 7.02); the
validity of the assignment of any Mortgage Loan to the Trustee or of any intervening
assignment; the completeness of any Mortgage Loan; the performance or enforcement of any
Mortgage Loan (other than the Trustee's responsibility if the Trustee shall assume the duties of
the Servicer pursuant to Section 7.02); the compliance by the Depositor or the Servicer with any
warranty or representation made under this Agreement or the Mortgage Loan Purchase
Agreement or in any related document or the accuracy of any such warranty or representation
(except, in the case of the Trustee, after receipt of notice of any non-compliance therewith or any
breach thereof); any investment of monies by or at the direction of the Servicer or any loss
resulting therefrom, it being understood that the Trustee shall remain responsible for any Trust
property that it may hold in its individual capacity; the acts or omissions of any of the Servicer
(other than the Trustee's responsibility if the Trustee shall assume the duties of the Servicer
pursuant to Section 7.02), or any Mortgagor; any action of the Servicer (other than the Trustee's
responsibility if the Trustee shall assume the duties of the Servicer pursuant to Section 7.02),
taken in the name of the Trust; the failure of the Servicer to act or perform any duties required of
it as agent of the Trust hereunder (other than the Trustee's responsibility if the Trustee shall
assume the duties of the Servicer pursuant to Section 7.02); or any action by the Trustee taken at
the instruction of the Servicer (other than the Trustee's responsibility if the Trustee shall assume
the duties of the Servicer pursuant to Section 7.02); provided, however, that the foregoing shall
not relieve the Trustee of its obligation to perform its duties under this Agreement. The Trustee
shall have no responsibility for filing any financing or continuation statement in any public office
at any time or to otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder.
Section 8.04 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 (subject to the
proviso contained in the definition of Voting Interests) as it would have if it were not Trustee and
may transact any banking and trust business or otherwise deal with the Servicer, the Depositor,
the Sponsor or their Affiliates.
Section 8.05 Trustee's and Custodian's Fees and Expenses. (a) As compensation for its
services hereunder, the Trustee shall be entitled to the investment income on funds on deposit in
the Certificate Account as set forth in Section 3.21 and may withdraw from the Certificate
Account on each Distribution Date such amount in order to disburse the Custodian Fee for the
Distribution Date. The Trust shall reimburse (x) the Trustee for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with any of the
provisions of this Agreement (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 or which is the
responsibility of the Trustee hereunder and (y) the Custodian for all extraordinary expenses
incurred by the Custodian. In addition, the Trustee and the Custodian, and their respective
officers, directors, employees and agents shall be indemnified by the Trust from, and held
harmless against, any and all losses, liabilities, damages, claims or expenses incurred in
connection with any audit, controversy or judicial proceeding relating to a governmental
authority or legal action relating to this Agreement or the Certificates and the performance of
their duties hereunder and the costs and expenses of defending themselves against any claim in
connection with the exercise or performance of any of their powers or duties hereunder, other
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than any loss, liability or expense (a) that constitutes a specific liability of the Trustee or
Custodian under this Agreement or (b) incurred by reason of willful misfeasance, bad faith or
negligence of the Trustee or Custodian in the performance of their duties hereunder or by reason
of their reckless disregard of their obligations and their duties hereunder. Subject to (b) below,
the Trustee, the Custodian and their officers, directors, employees and agents shall be
indemnified by the Trust from, and held harmless against, any and all losses, liabilities, damages,
claims or expenses, including reasonable attorneys' fees, that may be imposed on, incurred by or
asserted against the Custodian in any way related to or arising out of this Agreement or any
action taken or not taken by the Custodian and which the Trustee had paid to the Custodian
pursuant to the terms of this Agreement, other than any loss, liability or expense (i) that
constitutes a specific liability of the Custodian under this Agreement or (ii) or incurred by reason
of willful misfeasance, bad faith or negligence of the Custodian in the performance of its duties
under this Agreement or by reason of the Custodian's reckless disregard of its obligations under
this Agreement. This Section shall survive termination of this Agreement or the resignation or
removal of any Trustee hereunder and payment of the Certificates.
(b) Notwithstanding anything to the contrary in this Agreement, neither the Trustee
nor the Custodian will be entitled to any amount of indemnification expenses and, with respect to
the Custodian, extraordinary expenses, from the Trust pursuant to this Section 8.05 or any other
Section of this Agreement to the extent that such indemnification expenses or extraordInary
expenses exceed in the aggregate $150,000 per annum for each of the Trustee and the Custodian
(with respect to each party in the aggregate "Trustee Aggregate Annual Cap" and "Custodian
Aggregate Annual Cap", respectively); provided, that any amounts in excess of such Trustee
Aggregate Annual Cap or Custodian Aggregate Annual Cap, as the case may be, shall be paid, to
the extent funds are available, in the subsequent year or years (subject to the Trustee Aggregate
Annual Cap or Custodian Aggregate Annual Cap, as the case may be, for such subsequent year
or years) until paid in full. Promptly after receipt by the Trustee of written notice of the
commencement of any action, the Trustee will notify the Guarantor in writing of the
commencement thereof and, at such time as the Trustee believes that the costs or expenses
arising from any such action will exceed the lesser of (i) $50,000 or (ii) the amount remaining of
the Trustee Aggregate Annual Cap, the Trustee will notify the Guarantor in writing.
(c) The Trustee shall have no obligation to incur additional expenses for which
reimbursement is limited pursuant to this section in excess of the aggregate limit set forth above
unless it has received reasonable security or indemnity for such additional expenses. The
Certificateholders shall hold the Trustee harmless from any consequences to such
Certificateholders resulting from any failure of the Trustee to incur any such additional fees and
expenses in excess of the aforementioned aggregate limit.
Section 8.06 Eligibility Requirements for Trustee. The Trustee shall at all times (a) be
an entity duly organized and validly existing under the laws of the United States of America or
any state thereof, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 or a member of a bank holding system, the
aggregate combined capital surplus of which is at least $50,000,000, provided that its separate
capital and surplus shall at all times be at least the amount specified in Section 31O(a)(2) of the
Trust Indenture Act of 1939, (b) be subject to supervision or examination by federal or state
authority, (c) have a minimum long-term debt rating of BBB by S&P and Baa3 by Moody's and
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a short-term debt rating of at least Al or better by Moody's, and subject to supervision or
examination by federal or state authority and (d) be acceptable to the Guarantor. The Trustee
shall not be the Depositor, the Sponsor or an affiliate of the Depositor, the Sponsor or the
Servicer. 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 8.06, the combined capital and surplus of such entity shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so published. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of this Section 8.06,
the Trustee shall resign immediately in the manner and with the effect specified in Section 8.07.
The Trustee agrees to indemnify the Trust, the Depositor and the Guarantor for any taxes and
costs including, without limitation, any reasonable attorneys' fees imposed on or incurred by the
Trust, the Depositor or the Guarantor, caused solely by any state, local or franchise taxes
imposed upon the Trust as a result of the location of the Trustee.
Section 8.07 Resignation or Removal of Trustee. The 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 the Guarantor. Upon receiving such notice of resignation, the
Depositor shall promptly appoint a successor Trustee, by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trustee and one copy to the
successor Trustee. If no successor Trustee shall have been so appointed and having 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 8.06 and shall fail to resign after written request therefor by the Guarantor or the
Depositor, or if at any time the Trustee shall be legally unable to act, 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 or Servicer, with the
consent of the Guarantor (which consent shall not be unreasonably withheld), may remove the
Trustee. If the Depositor or the Servicer removes the Trustee under the authority of the
immediately preceding sentence, the Depositor shall promptly 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 Majority Certificateholders or the Guarantor may at any time remove the Trustee and
the Custodian by written instrument or instruments delivered to the Servicer, the Depositor, the
Trustee and the Custodian; the Depositor shall thereupon use its best efforts to appoint a
successor Trustee and successor Custodian acceptable to the Guarantor, as the case may be in
accordance with this Article VIII.
Any resignation or removal of the Trustee and appointment of a successor Trustee
pursuant to any of the provisions of this Section 8.07 shall not become effective until acceptance
of appointment by the successor Trustee as provided in Section 8.08.
Section 8.08 Successor Trustee. Any successor Trustee appointed as provided in
Section 8.07 shall execute, acknowledge and deliver to the Depositor, the Guarantor, the Servicer
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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, without any further act, deed or conveyance, shall become fully vested with
all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if
originally named as Trustee. 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
fully and certainly vesting and confirming in the successor Trustee all such rights, powers, duties
and obligations.
If no successor Trustee shall have been appointed and an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of
such notice of retiring, the retiring trustee or any Holder of a Mortgage Note, on behalf of itself
and all others similarly situated, may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
No successor Trustee shall accept appointment as provided in this Section 8.08 unless at
the time of such acceptance such successor Trustee shall be eligible under the provisions of
Section 8.06.
Upon acceptance of appointment by a successor Trustee as provided in this Section 8.08,
the successor Trustee shall mail notice of the appointment of a successor Trustee hereunder to all
Holders of Certificates at their addresses as shown in the Certificate Register.
Section 8.09 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 entity (a) shall be eligible under the provisions of Section 8.06, 8.08 and 8.16,
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 and (b) shall notify the Depositor of any
such merger, conversion or consolidation at least two Business Days prior to the effective date
thereof (unless such notice is otherwise prohibited by law, in which case such notice shall be
provided on the effective date thereof).
Section 8.10 Appointment of Co-Trustee or Separate Trustee. Notwithstanding any
other provisions of this Agreement, at any time, for the purpose of meeting any legal
requirements of any jurisdiction in which any part of the Trust Fund or any Mortgaged Property
may at the time be located, the Depositor and the Trustee acting jointly shall have the power and
shall execute and deliver all instruments to appoint one or more Persons approved by the Trustee
to act as co-trustee or co-trustees, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of the Trust Fund, and to vest in such Person or Persons, in such capacity and
for the benefit of the Certificateholders, such title to the Trust Fund, or any part thereof, and,
subject to the other provisions of this Section 8.10, such powers, duties, obligations, rights and
trusts as the Servicer and the Trustee may consider necessary or desirable. Any such co-trustee
or separate trustee shall be subject to the written approval of the Servicer. If the Servicer shall
not have joined in such appointment within fifteen (15) days after the receipt by it of a request so
to do, or in the case a Servicer Event of Termination shall have occurred and be continuing, the
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Trustee alone shall have the power to make such appointment. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a successor Trustee under Section
8.06, and no notice to Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 8.08.
Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed
and act subject to the following provisions and conditions:
(a) all rights, powers, duties and obligations conferred or imposed upon the Trustee
shall be conferred or imposed upon and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts are to be performed, the
Trustee shall be incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee
or co-trustee, but solely at the direction of the Trustee;
(b) no trustee hereunder shall be held personally liable by reason of any act or
omission of any other trustee hereunder;
(c) the Trustee may at any time accept the resignation of or remove any separate
trustee or co-trustee; and
(d) the Trust Fund, and not the Trustee, shall be liable for the payment of reasonable
compensation, reimbursement and indemnification to any such separate trustee or co-trustee, if
the separate trustee or co-trustee is appointed for the purpose of meeting any legal requirements.
Any notice, request or other writing given to the Trustee shall be deemed to have been
given to each of the then separate trustees and co-trustees, as effectively as if given to each of
them. Every instrument appointing any separate trustee or co-trustee shall refer to this
Agreement and the conditions of this Article VIII. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property specified in its
instrument of appointment, either jointly with the Trustee or separately, as may be provided
therein, subject to all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the
Depositor and the Servicer.
Any separate trustee or co-trustee may, at any time, constitute the Trustee, its agent or
attorney-in-fact, with full power and authority, to the extent not prohibited by law, to do any
lawful act under or in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new or successor Trustee.
Section 8.11 Limitation of Liability. The Certificates are executed by the Trustee, not
in its individual capacity but solely as Trustee of the Trust, in the exercise of the powers and
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authority conferred and vested in it by this Agreement. Each of the undertakings and agreements
made on the part of the Trustee in the Certificates is made and intended not as a personal
undertaking or agreement by the Trustee but is made and intended for the purpose of binding
only the Trust.
Section 8.12 Trustee May Enforce Claims Without Possession of Certificates. (a) All
rights of action and claims under this Agreement, the Mortgage Loan Purchase Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the possession of any of the
Certificates or the production thereof in any proceeding relating thereto, and such proceeding
instituted by the Trustee shall be brought in its own name or in its capacity as Trustee for the
benefit of all Holders of such Certificates, subject to the provisions of this Agreement. Any
recovery of judgment shall, after provision for the payment of the reasonable compensation,
expenses, disbursement and advances of the Trustee or its agents and counsel, be for the ratable
benefit of the Certificateholders in respect of which such judgment has been recovered.
(b) The Trustee shall afford the Depositor, the Guarantor, the Servicer and each
Certificateholder upon at least 24 hours notice during normal business hours, access to all
records maintained by the Trustee in respect of its duties hereunder and access to officers of the
Trustee responsible for performing such duties. The Trustee shall cooperate fully with the
Servicer, the Depositor, the Guarantor and such Certificateholder and shall make available to the
Servicer, the Depositor, the Guarantor and such Certificateholder for review and copying at the
expense of the party requesting such copies, such books, documents or records as may be
requested with respect to the Trustee's duties hereunder. The Depositor, the Guarantor, the
Servicer and the Certificateholders shall not have any responsibility or liability for any action or
failure to act by the Trustee and are not obligated to supervise the performance of the Trustee
under this Agreement or otherwise.
Section 8.13 Suits for Enforcement. In case a Servicer Event of Termination or other
default by the Servicer hereunder shall occur and be continuing, the Trustee with the consent of
the Guarantor may proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by a suit, action or proceeding in equity or at law or
otherwise, whether for the specific performance of any covenant or agreement contained in this
Agreement, the Mortgage Loan Purchase Agreement or in aid of the execution of any power
granted in this Agreement or for the enforcement of any other legal, equitable or other remedy,
as the Trustee, being advised by counsel, and subject to the foregoing, shall deem most effectual
to protect and enforce any of the rights of the Trustee and the Certificateholders.
Section 8.14 Waiver of Bond Requirement. The Trustee shall be relieved of, and each
Certificateholder hereby waives, any requirement of any jurisdiction in which the Trust, or any
part thereof, may be located that the Trustee post a bond or other surety with any court, agency
or body whatsoever.
Section 8.15 Waiver of Inventory, Accounting and Appraisal Requirement. The
Trustee shall be relieved of, and each Certificateholder hereby waives, any requirement of any
jurisdiction in which the Trust Fund, or any part thereof, may be located that the Trustee file any
inventory, accounting or appraisal of the Trust Fund with any court, agency or body at any time
or in any manner whatsoever.
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Section 8.16 Patriot Act. In order to comply with the laws, rules, regulations and
executive orders in effect from time to time applicable to banking institutions, including those
relating to the funding of terrorist activities and money laundering ("Applicable Law"), the
Trustee is required to obtain, verify and record certain information relating to individuals and
entities which maintain a business relationship with the Trustee. Accordingly, each of the parties
agree to provide to the Trustee, upon its request from time to time such identifying information
and documentation as may be available for such party in order to enable the Trustee to comply
with Applicable Law.
Section 8.17 Trustee Errors and Omissions Policy. The Trustee shall maintain, at all
times and at its own expense, a Trustee Errors and Omissions Policy, which policy shall have
such terms and coverage amounts as are comparable to those of errors and omissions policies
maintained by trustees generally.
The Trustee Errors and Omissions Policy shall insure the Trustee, its successors and
assigns, against any losses resulting from negligence, errors or omissions on the part of officers,
employees or other persons acting on behalf of the Trustee in the performance of its duties as
Trustee pursuant to this Agreement.
The Trustee shall maintain in effect the Trustee Errors and Omissions Policy at all times.
Upon receipt of written notice by a Responsible Officer at the Corporate Trust Office that the
Trustee Errors and Omissions Policy is to be canceled or terminated, the Trustee shall, within
three (3) Business Days, send written notice by registered mail to the Depositor and the
Guarantor. The Trustee shall provide to the Guarantor on an annual basis, a certificate of the
Trustee describing the various coverage maintained by the Trustee then in effect.
Section 8.18 Custodial Responsibilities.
(a) The Custodian shall provide access to the Mortgage Loan Documents in
possession of the Custodian regarding the related Mortgage Loans and REO Property and the
servicing thereof to the Trustee, the Guarantor and the Certificateholders, the FDIC and the
supervisory agents and examiners of the FDIC, such access being afforded only upon two (2)
Business Days' prior written request and during normal business hours at the office of the
Custodian. The Custodian shall allow representatives of the above entities to photocopy any of
the records and documentation and shall provide equipment for that purpose at the expense of the
person requesting such access.
(b) The Custodian may resign from its obligations hereunder upon 60 days' prior
written notice to the Trustee, the Depositor, the Guarantor and the Servicer. Such resignation
shall take effect upon (i) the appointment of a successor Custodian reasonably acceptable to the
Depositor and the Guarantor within such 60 day period; and (ii) delivery of all Mortgage Loan
Documents to the successor Custodian. The Trustee shall have the right, but not the obligation,
to become the successor Custodian. If no successor Custodian is appointed within 60 days after
written notice of the Custodian's resignation is received by the Trustee, the Custodian may
petition a court of competent jurisdiction to appoint a successor Custodian. The Custodian shall
be acceptable to the Guarantor and have a combined capital and surplus of at least $10,000,000
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and shall be qualified to do business in the jurisdiction in which it holds any Mortgage Loan
Document and afforded the same protections hereunder as the Trustee.
(c) Upon such resignation or termination and appointment of successor Custodian,
the Custodian shall, at the Custodian's expense (if such resignation is without cause), promptly
transfer to the successor Custodian, as directed in writing by the Trustee, all applicable Mortgage
Loan Documents being maintained under this Agreement. Notwithstanding the foregoing, the
Trust, not the Custodian, shall bear the costs relating to the transfer of Mortgage Loan
Documents if the Custodian shall resign with cause (induding the Custodian's resignation due to
the failure of the Custodian to be paid all fees due to the Custodian hereunder).
(d) The Custodian may be terminated at any time, in the Guarantor's discretion,
without a payment of fees from the Guarantor or the Trust.
(e) In order to comply with laws, rules and regulations applicable to banking
institutions, induding those relating to the funding of terrorist activities and money laundering,
the Custodian is required to obtain, verify and record certain information relating to individuals
and entities which maintain a business relationship with the Custodian. Accordingly, each of the
parties agrees to provide to the Custodian upon its request from time to time such identifying
information and documentation as may be available for such party in order to enable the
Custodian to comply with Applicable Law, provided, that, the Guarantor shall not be required to
provide any materials it deems confidential.
Section 8.19 Limitations on Custodial Responsibilities.
(a) The Custodian shall be under no duty or obligation to inspect, review or examine
the Mortgage Loan Documents to determine that the contents thereof are appropriate for the
represented purpose or that they have been actually recorded or that they are other than what they
purport to be on their face.
(b) The Custodian shall not be responsible for preparing or filing any reports or
returns relating to federal, state or local income taxes with respect to this Agreement, other than
for the Custodian's compensation or for reimbursement of expenses.
(c) The Custodian shall not be responsible or liable for, and makes no representation
or warranty with respect to, the validity, adequacy, perfection or priority of any lien upon or
security interest in any Mortgage Loan Document.
(d) The duties and obligations of the Custodian shall only be such as are expressly set
forth in this Agreement or as set forth in a written amendment to this Agreement executed by the
parties hereto or their successors and assigns. In the event that any provision of this Agreement
implies or requires that action or forbearance be taken by a party, but is silent as to which party
has the duty to act or refrain from acting, the parties agree that the Custodian shall not be the
party required to take the action or refrain from acting. In no event shall the Custodian have any
responsibility to ascertain or take action except as expressly provided herein.
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(e) The Custodian makes no representations and shall have no responsibilities (except
as expressly set forth herein) as to the validity, sufficiency, value, genuineness, ownership or
transferability of any of the Mortgage Loans.
(f) The Custodian shall not be liable for any error of judgment, or for any act done or
step taken or omitted by it, in good faith, or for any mistake of fact or law, or for anything that it
may do or refrain from doing in connection therewith, except in the case of its negligent
performance or omission or its bad faith or willful misfeasance.
(g) The Custodian shall not be responsible to verify (i) the validity, legality,
enforceability, sufficiency, due authorization of any document in the Mortgage Loan Documents
or of any Mortgage Loans or (ii) the collectibility, insurability, effectiveness including the
authority or capacity of any Person to execute or issue any document in the Mortgage Loan
Documents, or suitability of any Mortgage Loans.
(h) The Custodian shall have no obligation to verify the receipt of any such
documents the existence of which was not made known to the Custodian by receipt of the
Mortgage Loan Documents.
(i) The Custodian shall have no obligation to determine whether the recordation of
any document is necessary.
(j) Except as set forth in Section 8.05, in no event shall the Custodian or its directors,
affiliates, officers, agents, and employees be held liable for any special, indirect or consequential
damages resulting from any action taken or omitted to be taken by it or them hereunder or in
connection herewith even if advised of the possibility of such damages.
(k) In order to comply with Applicable Law, the Custodian is required to obtain,
verify and record certain information relating to individuals and entities which maintain a
business relationship with the Custodian. Accordingly, each of the parties agrees to provide to
the Custodian upon its request from time to time such party's complete name, address, tax
identification number and such other identifying information together with copies of such party's
constituting documentation, securities disclosure documentation and such other identifying
documentation as may be available for such party.
(I) The Custodian shall not be responsible for delays or failures in performance
resulting from acts beyond its control. Such acts shall include, but not be limited to, acts of God,
strikes, lockouts, riots, acts of war or terrorism, epidemics, governmental or regulatory actions,
fire, communication line failures, computer viruses, power failures, or earthquakes (each, a
"Force Majeure Event"). The Custodian agrees that it will use commercially reasonable efforts
to mitigate the effects of the Force Majeure Event. The Custodian further agrees that it shall give
notice (including a reasonable description of such Force Majeure Event) to the other parties
hereto within a reasonable time of the Custodian having notice of such Force Majeure Event and
use its best efforts to resume performance as promptly as practicable under the circumstances.
(m) Nothing in this Agreement shall be deemed to impose on the Custodian any duty
to qualify to do business in any jurisdiction, other than (i) any jurisdiction where any Mortgage
Loan Document is or may be held by the Custodian from time to time hereunder, and (ii) any
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jurisdiction where its ownership of property or conduct of business requires such qualification
and where failure to qualify could have a material adverse effect on the Custodian or its property
or business or on the ability of the Custodian to perform its duties hereunder.
(n) The Custodian shall have no responsibility nor duty with respect to any Mortgage
Loan Document while such Mortgage Loan Document is not in its possession. If the Custodian
requests instructions from the Trustee with respect to any act, action or failure to act in
connection with this Agreement, the Custodian shall be entitled to refrain from taking such
action and continue to refrain from acting unless and until the Custodian shall have received
written instructions from the Trustee, the Servicer or the Depositor with respect to a Mortgage
Loan Document without incurring any liability therefore to the Trustee or any other person.
(0) Any Person into which the Custodian may be merged or consolidated, or any
Person resulting from any merger or consolidation to which the Custodian shall be a party, or
any person succeeding to the business of the Custodian, shall be the successor of the Custodian
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.
(p) the right of the Custodian to perform any discretionary act enumerated in this
Agreement shall not be construed as a duty, and the Custodian shall not be answerable for other
than its negligence or willful misconduct in the performance of such act.
ARTICLE IX
GRANTOR TRUST ADMINISTRATION
Section 9.01 Books and Records; Grantor Trust. The Trustee shall be responsible for
the keeping of all appropriate books and records relating to the receipt and disbursement of all
moneys that it may receive hereunder. The Trustee shall file an application with the IRS for a
taxpayer identification number with respect to the Trust and the Trustee shall prepare or cause to
be prepared and the Trustee shall sign and the Trustee shall file or cause to be filed a grantor
trust tax return in connection with the transactions contemplated hereby (the "Tax Return");
provided, however, that the Trustee shall send or cause to be sent a copy of the completed Tax
Return to the Servicer, the Guarantor and the Certificateholders within 30 days of their request.
The Servicer, the Guarantor and any Certificateholders shall each, upon request by the Trustee,
furnish the Trustee with all such information as may be reasonably required in order to facilitate
the Trustee's preparation of such Tax Return. The Trustee shall keep copies of the Tax Returns
delivered to or filed by it. Notwithstanding anything herein to the contrary, the Trustee shall
provide to any Certificateholder such tax reporting information as is necessary and appropriate
for such Certificateholder to prepare its tax return or as is required to be provided under state or
federal tax laws by the dates required by such laws. Such information shall be in a format as
required by applicable state or federal laws or as reasonably requested by such Certificateholder.
In addition, the Trustee shall prepare and file all other documents required to be filed under state
or federal tax laws by the dates required by such laws. Moreover, the Trustee shall make
reasonable efforts to provide to the Guarantor such tax reporting information as is necessary and
appropriate for the Guarantor to meet its tax reporting obligations and such other information, as
the Guarantor may reasonably request, with such information provided no later than (a) the 30th
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day after the close of the calendar year or (b) the date that is fourteen (14) days after receipt by
the Trustee of a request by the Guarantor.
Section 9.02 Tax Matters. (a) It is the intention of the parties hereto that, for income
and franchise tax purposes, the Trust shall be treated as a grantor trust under subpart E of part I
of subchapter J of chapter 1 of the Code and, consistent with such treatment, there shall be no
power under this Agreement to vary the investment of the Certificateholders within the meaning
of Treasury Regulations Section 301.7701-4(c)(l). The parties agree that, unless otherwise
required by appropriate tax authorities, the Trustee on behalf of the Trust will file or cause to be
filed annual or other necessary returns, reports and other forms consistent with the
characterization of the Trust, as described in the preceding sentence. The Trustee shall not have
the power to vary the investment of the Certificateholders to take advantage of changes in market
rates of interest to improve their rate of return.
(b) If the Trust has multiple holders of any Class of Certificates, net income of the
Trust for any month allocable to such Class of Certificates as determined for federal income tax
purposes (and each item of income, gain, loss, credit and deduction entering into the computation
thereof) shall be allocated, as applicable, to the Certificateholders of such Class and apportioned
among such Certificateholders pro rata based upon their respective Percentage Interests.
(c) All tax returns in respect of the Trust shall be signed by the Trustee, unless some
other party is required by law to sign such return (in which case such other party shall sign).
(d) The Trustee shall represent the Trust in any administrative or judicial proceedings
relating to an examination or audit by any governmental taxing authority and otherwise shall be
authorized to act on behalf of the Trust in relation to any tax matter involving the Trust, provided
that the Trustee agrees to consult with the Guarantor and accommodate the Guarantor's
reasonable requests. In addition, the Trustee shall provide underlying supporting information to
the Guarantor with respect to such additional information given to the Guarantor under
subsection (e) hereof in the event of an examination or audit by any governmental taxing
authority. The Trustee shall not be liable for any of the foregoing with respect to any additional
information provided to the Guarantor as required in subsection (e) hereof.
(e) The Trustee shall report the Trust to the IRS as a non-WHFIT on Form 1041
unless the beneficial owner of the Certificates (certifying that it is the beneficial owner) notifies
the Trustee in writing no later than January 31st of the applicable year that the Certificates are
held by a "middleman", as defined under the WHFIT Regulations. If the Trustee is so notified,
the Trustee shall report the Trust to the IRS as a WHMT under WHFIT Regulations on Form
1099 pursuant to the provisions herein, provided that the Trustee receives on a timely basis any
and all information (not otherwise in its possession). The Trustee shall not be responsible to
verify or confirm the beneficial owner's information and shall be indemnified by the beneficial
owner with respect thereto. The Trustee shall provide each Certificateholder the same
information it reports to the IRS within a reasonable time after such filing. In addition, in all
events, the Trustee shall provide to the Guarantor, for informational purposes only, all tax
information that would be required if the Trust were reported as a WHMT under the WHFIT
Regulations.
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(f) If required, the Trustee shall report required WHFIT information using the accrual
method, except to the extent the WHFIT Regulations specifically require a different method.
The Trustee is under no obligation to determine whether any Certificateholder or other beneficial
owner of a Certificate, to the extent the Trustee has actual knowledge of any other beneficial
owner of a Certificate, uses the cash or accrual method. The Trustee shall make available
information as required by the WHFIT Regulations to Certificateholders annually.
(g) The Trustee shall not be liable for failure to meet the reporting requirements of
the WHFIT Regulations nor for any penalties thereunder if such failure is due to: (i) the lack of
reasonably necessary information being provided to the Trustee or (ii) incomplete, inaccurate or
untimely information being provided to the Trustee; provided, however, that the Trustee provides
timely notice to the Certificateholders that it is unable to meet the reporting requirements due to
incomplete, inaccurate or untimely information. Absent receipt of information regarding any
sale of securities, including the price, amount of proceeds and date of sale from the beneficial
owner thereof or the Depositor, the Trustee will assume there is no secondary market trading of
WHFIT interests.
Section 9.03 Compliance with Withholding Requirements. Notwithstanding any other
provision of this Agreement, the Trustee shall comply with all federal withholding requirements
with respect to payments to Certificateholders (except for those Certificateholders that are
exempt from withholding and on the Closing Date have provided an executed Form W-9 to the
Trustee) of interest or original issue discount that are applicable under the Code. The consent of
Certificateholders shall not be required for any such withholding. Without limiting the
foregoing, the Trustee agrees that it will not withhold with respect to payments to a person who
is not a United States person, within the meaning of Section 7701(a)(30) of the Code, of interest
or original issue discount that qualify as "portfolio interest" within the meaning of Section
871(h) or Section 881(c) of the Code, as applicable, in the case of a Certificateholder that has
furnished or caused to be furnished an effective applicable IRS Form W-8BEN or IRS Form W-
8IMY (including all applicable attachments) or an acceptable substitute form or a successor
form. In the event the Trustee withholds any amount from interest or original issue discount
payments or advances thereof to any Certificateholder pursuant to federal withholding
requirements, the Trustee shall indicate the amount withheld to such Certificateholder. The
parties hereto understand and agree that the Trustee shall not be required to gross up any such
payments for the amount of such withholding (or any other amounts).
ARTICLE X
TERMINATION
Section 10.01 Termination. (a) The respective obligations and responsibilities of the
Servicer, the Depositor, the Sponsor, the Credit Risk Manager, the Trustee, the Custodian, the
Guarantor and the Certificate Registrar created hereby (other than the obligation of the Guarantor
to make any Guarantor Payment due but not paid, the obligation of the Trustee to make certain
payments to Certificateholders after the final Distribution Date and the obligation of the Trustee
to send certain notices as hereinafter set forth) shall terminate upon notice to the Trustee upon
the earliest of (i) the Distribution Date on which the Certificate Principal Balance of each Class
of Class A Certificates has been reduced to zero and the Guarantor has received all Guarantor
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Reimbursement Amounts, (ii) the final payment or other liquidation of the last Mortgage Loan
and REO Properties in the Trust, and (iii) the optional purchase by the Servicer of the Mortgage
Loans and REO Properties as described below. Notwithstanding the foregoing, 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.
The Servicer at its option, may terminate the Trust and retire the Certificates on or after
the first Distribution Date following the Distribution Date on which the Pool Balance is reduced
to less than or equal to 10% of the Pool Balance as of the Cut-off Date by purchasing all of the
outstanding Mortgage Loans (and REO Properties) in the Trust at a price equal to the sum of (i)
the sum of the Stated Principal Balance of the Mortgage Loans and accrued and unpaid interest
thereon at the weighted average of the Mortgage Rates through the end of the Due Period
preceding the final Distribution Date plus unreimbursed Servicing Advances and any unpaid
Servicing Fees allocable to such Mortgage Loans, (ii) the fair market value of the REO
Properties as determined in good faith by the Servicer and approved by the Guarantor (the
"Termination Price"). Notwithstanding the foregoing, no party may exercise this optional
purchase right unless any Reimbursement Amount owed to the Trust and any amounts owed to
the Guarantor pursuant to Section 2.03 hereof has been paid.
Any such purchase shall be accomplished by delivery by the party exercising the optional
purchase right on the Determination Date before such Distribution Date of the Termination Price
to the Trustee for deposit into the Certificate Account as part of Available Funds.
(b) Notice of any termination, specifying the Distribution Date (which shall be a date
that would otherwise be a Distribution Date) upon which the Certificateholders may surrender
their Certificates to the Trustee for payment of the final distribution and cancellation, shall be
given promptly by the Trustee (upon the Trustee receiving notice of such date from the Servicer),
by letter to the Certificateholders and the Depositor mailed as soon as practicable prior to the
final Distribution Date specifying (i) the Distribution Date upon which final distribution of the
Certificates will be made upon presentation and surrender of such Certificates at the office of the
Trustee therein designated, (ii) the amount of any such final distribution and (iii) that the Record
Date otherwise applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office of the Trustee therein
specified. Not less than five (5) Business Days prior to such Determination Date relating to such
Distribution Date, the Trustee shall notify the Depositor and the Guarantor of the amount of any
unpaid Reimbursement Amount owed to the Trust, to the extent a Responsible Officer of the
Trustee has actual knowledge of such amount. Upon such exercise of its purchase option, the
Servicer shall also notify the Guarantor 35 days prior to the final Distribution Date by calling
Freddie Mac's dealer line at (866) 903-2767 and confirming via fax at (571) 382-3817 and (571)
382-4385 and e-mail at subprime@freddiemac.com on the same day.
(c) Upon presentation and surrender of the Certificates, the Trustee shall cause to be
distributed to the Holders of the Certificates on the Distribution Date for such final distribution,
in proportion to the Percentage Interests of their respective Class and to the extent that funds are
available for such purpose, an amount equal to the amount required to be distributed to such
Holders in accordance with the provisions of Sections 4.01 for such Distribution Date.
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(d) In the event that all Certificateholders shall not surrender their Certificates for
final payment and cancellation on or before such final Distribution Date, the Trustee shall
promptly following such date cause all funds in the Certificate Account not distributed in final
distribution to Certificateholders to be withdrawn therefrom and credited to the remaining
Certificateholders by depositing such funds in a separate escrow account for the benefit of such
Certificateholders, and 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 nine months after the second notice all the Certificates
shall not have been surrendered for cancellation, the Trustee may take appropriate steps to
contact the remaining Certificateholders concerning the surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets which remain in the Trust.
Section 10.02 Trust Irrevocable. Except as expressly provided herein, the Trust created
hereby is irrevocable.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Amendment. (a) This Agreement may be amended from time to time by
the Depositor, the Servicer, the Sponsor, the Custodian (as to the custodial provisions only), the
Credit Risk Manager, the Trustee and the Guarantor without the consent of the Certificateholders
(i) to cure any ambiguity or mistake, (ii) to correct, modify or supplement any provision herein
which may be inconsistent with any other provision herein or in the Information Circular, (iii) to
make any other provisions with respect to matters or questions arising under this Agreement,
which are not materially inconsistent with the provisions of this Agreement or (iv) to comply
with any requirements imposed by the Code; provided, however, that any such action listed in
clause (iii) above shall not adversely affect in any material respect the interests of any
Certificateholder, as evidenced by an Opinion of Counsel delivered to the Guarantor, the
Servicer, and the Trustee.
(b) In addition, this Agreement may be amended from time to time by the Depositor, the
Servicer, the Sponsor, the Custodian (as to the custodial provisions only), the Credit Risk
Manager, the Trustee and the Guarantor, with the consent of the Majority Certificateholders for
the purpose of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the Holders of
Certificates; provided, however, that no such amendment or waiver shall (i) reduce in any
manner the amount of, or delay the timing of, payments on the Certificates which are required to
be made 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 either 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 aggregating at least 66 2/3% of the Voting Interests evidenced by such
Class, or (iii) reduce the percentage of Voting Interests required by clause (ii) above without the
consent of the Holders of all Certificates of such Class then outstanding. Prior to the execution
of any amendment to this Agreement and the Trustee will not consent to any amendment of the
applicable Agreement unless it shall first have received an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement and shall specify the
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section of this Agreement pursuant to which such amendment is being made. Each of the
Guarantor and the Trustee may, but shall not be obligated to, enter into any such amendment
which affects the Trustee's or the Guarantor's own rights, duties or immunities under this
Agreement.
(c) Notwithstanding any provision of this Agreement to the contrary, the Trustee shall not
consent to any amendment to this Agreement unless it shall have first received an Opinion of
Counsel, delivered by (and at the expense of) the Person seeking such Amendment, to the effect
that such amendment will not cause the Trust to fail to qualify as a grantor trust at any time that
any Certificates are outstanding and that the amendment is being made in accordance with the
terms hereof.
Promptly after the execution of any such amendment the Trustee shall furnish, at the
expense of the Person that requested the amendment if such Person is the Servicer, or otherwise
at the expense of the Trust (but in no event at the expense of the Trustee), a copy of such
amendment and the Opinion of Counsel referred to in the immediately preceding paragraph to
the Servicer, the Guarantor and the Credit Risk Manager.
It shall not be necessary for the consent of Certificateholders under this Section 11.01 to
approve the particular form of any proposed amendment; instead 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 Certificateho1ders shall be subject to
such reasonable regulations as the Trustee may prescribe.
Section 11.02 Recordation of Agreement; Counterparts. To the extent permitted by
applicable law, this Agreement is subject to recordation in all appropriate public offices for real
property records in all the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate public recording
office or elsewhere, such recordation to be effected by the Servicer at the expense of the Trust,
but only upon direction of Certificateholders evidencing at least a majority of the Voting
Interests, accompanied by an Opinion of Counsel to the effect that such recordation materially
and beneficially affects the interests of the Certificateholders.
For the purpose of facilitating the recordation of this Agreement as herein provided and
for other purposes, this Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and such counterparts
shall together constitute but one and the same instrument.
Section 11.03 Limitation on Rights of Certificateholders. The death or incapacity of any
Certificateholder shall not (a) operate to terminate this Agreement or the Trust, (b) 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, or (c) otherwise affect the
rights, obligations and liabilities of the parties hereto or any of them.
Except as expressly provided for herein, no Certificateholder shall have any right to vote
or in any manner otherwise control the operation and management of the Trust, or the obligations
of the parties hereto, nor shall anything herein set forth or contained in the terms of the
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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 herein provided, and unless also the Holders of
Certificates entitled to at least 25% of the Voting Interests shall have made written request upon
the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and
shall have offered to the Trustee such reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and the Trustee for 60 days after its
receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute
any such action, suit or proceeding. It is understood and intended, and expressly covenanted by
each Certificateholder with every other Certificateholder and the Trustee, that no one or more
Holders of Certificates 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, or to obtain or seek to obtain priority over or preference to any other such Holder,
which priority or preference is not otherwise provided for herein, or to enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable and common
benefit of all Certificateholders. For the protection and enforcement of the provisions of this
Section 11.03 each and every Certificateholder and the Trustee shall be entitled to such relief as
can be given either at law or in equity.
Section 11.04 Governing Law; Jurisdiction. 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. With respect to any
claim arising out of this Agreement, each party irrevocably submits to the exclusive jurisdiction
of the courts of the State of New York and the United States District Court located in the
Borough of Manhattan in The City of New York, and each party irrevocably waives any
objection which it may have at any time to the laying of venue of any suit, action or proceeding
arising out of or relating hereto brought in any such courts, irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought in any
inconvenient forum and further irrevocably waives the right to object, with respect to such claim,
suit, action or proceeding brought in any such court, that such court does not have jurisdiction
over such party, provided that service of process has been made by any lawful means.
Section 11.05 Notices. All directions, demands, consents and notices hereunder shall be
in writing and shall be deemed to have been duly given when delivered to: (i) in the case of the
Depositor, Securitized Asset Backed Receivables LLC, 200 Park Avenue, New York, New York
10166, Attention: General Counsel, Facsimile Number: (212) 412-7519; (ii) in the case of the
Servicer to HomEq Servicing, 4837 Watt Avenue, North Highlands, California 95660-5101,
Attention: Portfolio Management, Facsimile Number. (916) 339-6995; (iii) in the case of the
Trustee to Deutsche Bank National Trust Company, 1761 East St. Andrew Place, Santa Ana,
California 92705-4934, Attn: Trust Administration - BC08El, Facsimile Number: (714) 247-
6478; (iv) in the case of the Custodian, to The Bank of New York Trust Company, N.A., 2220
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Chemsearch Boulevard, Suite 150, Irving, Texas 75062, Attention: Custody Manager; (v) in the
case of the Guarantor, 1551 Park Run Drive, Mail Stop D5N, McLean, Virginia 22102, Fax No:
(571) 382-4405, Attention: Director: Security Operations-Re: T-078; and (vi) in the case of the
Credit Risk Manager, Clayton Fixed Income Services Inc., 1700 Lincoln Street, Suite 1600,
Denver, Colorado, 80203, Fax No: (720) 947-6598, Attention: General Counsel, or such other
address and fax number as may hereafter be furnished in writing by the Credit Risk Manager, or
by email atjandriola@clayton.com. and in the case of any of the foregoing Persons, such other
address or Facsimile number as may be hereafter furnished by any such Person in writing.
Notices to Certificateholders shall be deemed given when mailed, first class postage prepaid, to
their respective addresses appearing in the Certificate Register.
Any notice required or permitted to be mailed to a Certificateholder shall be given by
first class mail, postage prepaid, at the address of such Holder as shown in the Certificate
Register. Except as provided in Section 7.01(a)(i)(A), notice of any Servicer Event of
Termination shall be given bye-mail and by certified mail. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have duly been given when
mailed, whether or not the Certificateholder receives such notice. A copy of any notice required
to be e-mailed or telecopied hereunder shall also be mailed to the appropriate party in the manner
set forth above.
Section 11.06 Severability of Provisions. If anyone or more of the covenants,
agreements, provisions or terms of this Agreement shall for any reason whatsoever be held
invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
Section 11.07 Article and Section References. All article and section references used in
this Agreement, unless otherwise provided, are to articles and sections in this Agreement.
Section 11.08 Further Assurances. Notwithstanding any other provision of this
Agreement, neither the Class A Certificateholders nor the Trustee shall have any obligation to
consent to any amendment or modification of this Agreement unless they have been provided
reasonable security or indemnity by the person requesting such amendment or modification
against their out-of-pocket expenses (including reasonable attorneys' fees) to be incurred in
connection therewith.
Section 11.09 Benefits of Agreement. Nothing in this Agreement or in the Certificates,
expressed or implied, shall give to any Person, other than the Certificateholders and the parties
hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
Section 11.10 Acts of Certificateholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Agreement to be given or taken
by the Certificateholders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Certificateholders in person or by agent duly appointed
in writing; and such action shall become effective when such instrument or instruments are
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delivered to the Trustee and the Servicer. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the "act" of the
Certificateholders signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee and the Trust, if made in the manner provided
in this Section 11.10.
(b) The fact and date of the execution by any Person of any such instrument or
writing may be proved by the affidavit of a witness of such execution or by the certificate of a
notary public or other officer authorized by law to take acknowledgments of deeds, certifying
that the individual signing such instrument or writing acknowledged to him the execution
thereof. Whenever such execution is by a signer acting in a capacity other than his or her
individual capacity, such certificate or affidavit shall also constitute sufficient proof of his
authority.
(c) Any request, demand, authorization, direction, notice, consent, waiver or other
action by any Certificateholder shall bind every future Holder of such Certificate and the Holder
of every Certificate issued upon the registration of transfer thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the
Trust in reliance thereon, whether or not notation of such action is made upon such Certificate.
Section 11.11 Recharacterization. Concurrently with the execution and delivery hereof,
the Depositor does hereby irrevocably sell, transfer, assign, set over and otherwise convey to the
Trust, without recourse, all the Depositor's right, title and interest in and to the Trust Fund (such
transfer and assignment by the Company to be referred to herein as the "Conveyance").
It is the express intent of the parties hereto that the transfer of the Trust Fund to the Trust
by the Depositor, as provided in this Section 11.11 be, and be construed as, an absolute sale of
the Trust Fund, including for accounting purposes (that is, when considered in conjunction with
the concurrent transfer of Certificates to third parties for cash consideration). It is, further, not the
intention of the parties that such Conveyance be deemed the grant of a security interest in the
Trust Fund by the Depositor to the Trust to secure a debt or other obligation of the Depositor.
However, in the event that, notwithstanding the intent of the parties, the Trust Fund is held to be
the property of the Depositor, or if for any other reason this Agreement is held or deemed to
create a security interest in the Trust Fund, then:
(a) this Agreement shall constitute a security agreement; and
(b) the conveyance provided for in this Section 11.11 shall be deemed to be a
grant by the Depositor to the Trust of, and the Depositor hereby grants to
the Trust to secure all of the Depositor's obligations hereunder, a security
interest in all of the Depositor's right, title, and interest, whether now
owned or hereafter acquired, in and to:
(I) the Trust Fund;
(II) all accounts, chattel paper, deposit accounts, documents, general
intangibles, goods, instruments, investment property, letter-of-
credit rights, letters of credit, money, and oil, gas, and other
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minerals, consisting of, arising from, or relating to, any of the
foregoing; and
(III) all proceeds of the foregoing.
The Sponsor and the Depositor shall, to the extent consistent with the Mortgage Loan
Purchase Agreement and this Agreement, take such actions as may be reasonably necessary,
including but not limited to, filing any Uniform Commercial Code continuation statements to
ensure that, if the Mortgage Loan Purchase Agreement or this Agreement were deemed to create
a security interest in the Mortgage Loans or Trust Fund, such security interest would be deemed
to be a perfected security interest of first priority under applicable law and will be maintained as
such throughout the term of this Agreement.
Section 11.12 Inspection and Audit Rights. The Servicer agrees that, on reasonable prior
notice, it will permit any representative of the Depositor, the Guarantor or the Trustee during the
Servicer's normal business hours, to examine all the books of account, records, reports and other
papers of the Servicer relating to the Mortgage Loans, to make copies and extracts therefrom, to
cause such books to be audited by independent certified public accountants selected by the
Depositor or the Trustee and to discuss its affairs, finances and accounts relating to the Mortgage
Loans with its officers, employees and independent public accountants (and by this provision the
Servicer hereby authorizes said accountants to discuss with such representative such affairs,
finances and accounts), all at such reasonable times and as often as may be reasonably requested.
Any out-of-pocket expense of the Servicer incident to the exercise by the Depositor or the
Trustee of any right under this Section 11.13 shall be borne by the Servicer.
Section 11.13 Certificates Nonassessable and Fully Paid. It is the intention of the
Depositor that Certificateholders shall not be personally liable for obligations of the Trust Fund,
that the interests in the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by the Trustee
pursuant to this Agreement, are and shall be deemed fully paid.
Section 11.14 Rule of Construction. Article and section headings are for the
convenience of the reader and shall not be considered in interpreting this Agreement or the intent
of the parties hereto.
Section 11.15 Waiver of Jury Trial. EACH PARTY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY, WAIVES (TO THE EXTENT PERMITTED BY
APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT
ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A
JURY.
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Title:
IN WITNESS WHEREOF, the Depositor, the Trustee, the Custodian, the
Sponsor, the Servicer, the Credit Risk Manager and the Guarantor-have caused their names to be
signed hereto by their respective officers thereunto duly authorized as of the day and year first
above written.
SECURITIZED ASSET BACKED
RECEIVABLES LLC

Managing Director
DEUTSCHE BANK NATIONAL TRUST
COMPANY,
solely as Trustee and not in its individual
capacity
By: _
Name:
Title:
By: _
Name:
Title:
THE BANK OF NEW YORK TRUST
COMPANY,N.A.
By: _
Name:
Title:
BARCLAYS CAPITAL REAL ESTATE INC.
D/B/A HOMEQ SERVICING
By:. _
Name:
Title:
[EQLS 2008-1-(1.08)-PSA]
IN WITNESS WHEREOF, the Depositor, the Trustee, the Custodian, the
Sponsor, the Servicer, the Credit Risk Manager and the Guarantor have caused their names to be
above written.
RECEIVABLES LLC
By:. _
Name:
Title:
COMPANY,
capacity
. . Amy Stoddard
Title. Authorized Signer

Name: Barbara Campben
Title: Va President
THE BANK OF NEW YORK TRUST
COMPANY, N.A.
By: _
Name:
Title:
By: _
Name:
Title:
[EQLS 2008-1-(1.08)-PSA]
INWITNESS WHEREOF, the Depositor, the Trustee, the Custodian, the
above written.
SECURITIZEDASSET BACKED
RECEIVABLES LLC
By: _
Name:
Title:
DEUTSCHE BANKNATIONAL mUST
COMPANY,
capacity
By: _
Name:
Title:
By: _
Name:
Title:
THE BANKOF NEW YORKTRUST
COMPANY, N.A.
By:
Name:
Title:
By: _
Name:
Title:
[EQlS 2008-1-(1.08}-pSA]
IN WITNES; WHEREOF, the Depositor,the Trustee, the Custodian, the
signed hereto by their respe :tive officers thereunto duly authorized as of the day and year first
above written.
RECEIVABLES LLC
By: _
Name:
Title:
COMPANY,
capacity
By: _
Name:
Title:
By: _
Name:
Title:
THE BANK OF NEW YORKTRUST
COMPANY, N.A.
By:
-----------------
Name:
Title:
By: f'"6--_
Name: c.:;::r-
Title:
[EQLS 200S-1-(1.0S}-PSA]
FEDERAL HOME LOAN MORTGAGE
CORPORATION,
_
Name:
Title:
CLAYTON FIXED INCOME SERVICES INC.,
as Credit Risk Manager
By: _
Name:
Title:
[EQLS 20081-(1.08)-PSA]
FEDERAL HOME LOAN MORTGAGE
CORPORATION,
as Guarantor
By: _
Name:
Title:
EVIN J. KANOUF
PRESIDENTAND GENERAl COUNSEL
[EQLS 2008-1-(1.08)-PSA]

Equifirst or EQLS 2008-1 PSA

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