AGENCY AGREEMENT

*Notional Amount

September 26, 2006

Ladies and Gentlemen:

PHH Mortgage Capital LLC, a Delaware limited liability company (the “Depositor”), proposes to engage you (also referred to herein as the “Agent”) as placement agent, on a best efforts basis only pursuant to this Agency Agreement (the “Agreement”), for all of the PHHMC Mortgage Pass-Through Certificates, Series 2006-3, Class A-1, Class A-2, Class A-3, Class A-4 and Class A-5 Certificates (collectively, the “Certificates”), having the aggregate principal or notional amounts and Pass-Through Rates set forth above. The Certificates, together with the Class A-6, Class A-7, Class A-8, Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates (collectively, the “Private Certificates”) and the Class R-I Certificates and Class R-II Certificates (together, the “Class R Certificates”) of the same series, will evidence the entire beneficial interest in the Trust Fund (as defined in the Pooling and Servicing Agreement referred to below) consisting primarily of a pool (the “Pool”) of conventional, fixed-rate one- to four- family residential mortgage loans (the “Mortgage Loans”) as described in the Prospectus Supplement (as hereinafter defined) to be sold by the Depositor. The Mortgage Loans will be purchased by the Depositor from PHH Mortgage (as defined herein) and Bishop’s Gate Residential Mortgage Trust (“Bishop’s Gate” and together with PHH Mortgage, the “Sellers”) pursuant to a mortgage loan purchase agreement (the “Mortgage Loan Purchase Agreement”) to be dated as of September 1, 2006 (the “Cut-off Date”).

The Certificates will be issued pursuant to a pooling and servicing agreement (the “Pooling and Servicing Agreement”) to be dated as of the Cut-off Date among the Depositor, as depositor, PHH Mortgage Corporation, as master servicer (“PHH Mortgage” or the “Master Servicer”) and Citibank, N.A., as trustee (the “Trustee”). The Certificates are described more fully in the Base Prospectus and the Prospectus Supplement (each as hereinafter defined) which the Depositor has furnished to you.

1.    Representations, Warranties and Covenants.

1.1    The Depositor represents and warrants to, and agrees with you that as of the date hereof (or as of such other date as may be specified in the representation and warranty):

(a)    The Depositor has filed with the Securities and Exchange Commission (the “Commission”) a registration statement (No. 333-131214) on Form S-3 for the registration under the Securities Act of 1933, as amended (the “Act”), of Mortgage Pass-Through Certificates and Mortgage-Backed Notes (issuable in series), including the Certificates, which registration statement has become effective, and a copy of which, as amended to the date hereof, has heretofore been delivered to you. The Depositor proposes to file with the Commission pursuant to Rule 424(b) under the rules and regulations of the Commission under the Act (the “1933 Act Regulations”) a supplement dated September 26, 2006 (the “Prospectus Supplement”), to the prospectus dated June 26, 2006 (the “Base Prospectus”), relating to the Certificates and the method of distribution thereof. Such registration statement (No. 333-131214) including exhibits thereto and any information incorporated therein by reference, as amended at the date hereof, is hereinafter called the “Registration Statement”; and the Base Prospectus and the Prospectus Supplement and any information incorporated therein by reference, together with any amendment thereof or supplement thereto authorized by the Depositor on or prior to the Closing Date for use in connection with the offering of the Certificates, are hereinafter called the “Prospectus”. The Depositor further proposes to prepare, after the final terms of all classes of the Certificates have been established, a Term Sheet and Term Sheet Supplement (such Term Sheet and Term Sheet Supplement, together with the Basic Prospectus, the “Definitive Free Writing Prospectus”). The Definitive Free Writing Prospectus must be provided to each investor prior to the time of Contract of Sale (as defined herein).

(b)    The Registration Statement has become effective, and the Registration Statement as of the effective date (the “Effective Date”) and as of the Closing Date, and the Prospectus, as of the date of the Prospectus Supplement and as of the Closing Date, complied in all material respects with the applicable requirements of the Act and the 1933 Act Regulations; and the Registration Statement, as of the Effective Date and as of the date of any amendment thereto, did not contain any untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and the Prospectus, as of the date of the Prospectus Supplement, did not, and as of the Closing Date will not, contain an untrue statement of a material fact and did not and will not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that neither the Depositor nor PHH Mortgage makes any representations or warranties as to (i) any information contained in or omitted from the portions of the Prospectus set forth under the caption “Method of Distribution” relating to the Certificates and the stabilization legend required by Item 502(d)(1) under Regulation S-K of the Act (the “Agent Information”) as set forth in Exhibit C hereto or (ii) any decrement or yield tables set forth in the section titled “Yield on the Certificates” in the Prospectus Supplement (the “Decrement/Yield Tables”). In addition, the Definitive Free Writing Prospectus, as of the date thereof and as of the Closing Date, did not and will not contain an untrue statement of a material fact and did not and will not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The effective date shall mean the earlier of the date by which the Prospectus Supplement is first used and the time of the first Contract of Sale to which such Prospectus Supplement relates.

(c)    The Depositor has been duly formed and is validly existing as a limited liability company in good standing under the laws of the State of Delaware and has the requisite organizational power to own its properties and to conduct its business as presently conducted by it; and the Depositor is duly qualified to do business as a foreign limited liability company in good standing in all other jurisdictions in which its ownership of property or the conduct of its business as presently conducted by it requires such qualification.

(d)    This Agreement has been duly authorized, executed and delivered by the Depositor.

(e)    As of the Closing Date, the Certificates and the Private Certificates will conform in all material respects to the description thereof contained in the Prospectus and the representations and warranties of the Depositor in the Pooling and Servicing Agreement will be true and correct in all material respects.

(f)    As of the Closing Date, the Certificates will be “mortgage related securities” as such term is defined in Section 3(a)(41) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

(g)    Each of the Certificates and the Private Certificates, when validly authenticated, issued and delivered in accordance with the Pooling and Servicing Agreement, will be duly and validly issued and outstanding and entitled to the benefits of the Pooling and Servicing Agreement, and immediately prior to the delivery of the Certificates to the Agent, the Depositor will own the Certificates, and upon such delivery the Agent will acquire title thereto, free and clear of any lien, pledge, encumbrance or other security interest other than one created or granted by the Agent.

(h)    As of the Closing Date, the Pooling and Servicing Agreement will have been duly authorized, executed and delivered by the Depositor and will conform in all material respects to the description thereof contained in the Prospectus and, assuming the valid execution thereof by the Trustee and the Master Servicer, the Pooling and Servicing Agreement will constitute a valid and binding agreement of the Depositor enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting the enforcement of creditors’ rights and by general equity principles.

(i)    As of the Closing Date, the Mortgage Loan Purchase Agreement will have been duly authorized, executed and delivered by the Depositor and the Sellers and will conform in all material respects to the description thereof contained in the Prospectus and will constitute a valid and binding agreement of the Depositor and the Sellers enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting the enforcement of creditors’ rights and by general equity principles.

(j)    Neither the issuance or delivery of the Certificates and the Private Certificates, nor the consummation of any other of the transactions contemplated herein or in the Pooling and Servicing Agreement or the Mortgage Loan Purchase Agreement, nor compliance with the provisions of the Pooling and Servicing Agreement, the Mortgage Loan Purchase Agreement or this Agreement, will conflict with or result in the breach of any material term or provision of the certificate of formation or bylaws of the Depositor, and the Depositor is not in breach or violation of or in default (nor has an event occurred which with notice or lapse of time or both would constitute a default) under the terms of (i) any indenture, contract, lease, mortgage, deed of trust, note agreement or other evidence of indebtedness or other agreement, obligation or instrument to which the Depositor is a party or by which it or its properties are bound, or (ii) any law, decree, order, rule or regulation applicable to the Depositor of any court or supervisory, regulatory, administrative or governmental agency, body or authority, or arbitrator having jurisdiction over the Depositor, or its properties, the default in or the breach or violation of which would have a material adverse effect on the Depositor or the ability of the Depositor to perform its obligations under the Pooling and Servicing Agreement or the Mortgage Loan Purchase Agreement; and neither the delivery of the Certificates, nor the consummation of any other of the transactions contemplated herein or in the Pooling and Servicing Agreement or the Mortgage Loan Purchase Agreement, nor the compliance with the provisions of the Pooling and Servicing Agreement, the Mortgage Loan Purchase Agreement or this Agreement will result in such a breach, violation or default which would have such a material adverse effect.

(k)    No filing or registration with, notice to, or consent, approval, authorization or order or other action of, any court or governmental authority or agency is required for the consummation by the Depositor of the transactions contemplated by this Agreement, the Pooling and Servicing Agreement or the Mortgage Loan Purchase Agreement (other than as required under state securities laws or Blue Sky laws, as to which no representations and warranties are made by the Depositor), except such as have been, or will have been prior to the Closing Date, obtained under the Act, and such recordations of the assignment of the Mortgage Loans to the Trustee or, if applicable, to Mortgage Electronic Registration Systems, Inc. (“MERS”) on behalf of the Trustee, pursuant to the Pooling and Servicing Agreement that have not yet been completed.

(l)    There is no action, suit or proceeding before or by any court, administrative or governmental agency, or other tribunal, domestic or foreign, now pending to which the Depositor is a party, or to the best of the Depositor’s knowledge threatened against the Depositor, which could reasonably result individually or in the aggregate in any material adverse change in the condition (financial or otherwise), earnings, affairs, regulatory situation or business prospects of the Depositor or could reasonably interfere with or materially and adversely affect the consummation of the transactions contemplated herein or in the Pooling and Servicing Agreement or the Mortgage Loan Purchase Agreement.

(m)    At the time of execution and delivery of the Pooling and Servicing Agreement, the Depositor will own the mortgage notes (the “Mortgage Notes”) being transferred to the Trust Fund (as defined in the Pooling and Servicing Agreement) pursuant to the Pooling and Servicing Agreement, free and clear of any lien, mortgage, pledge, charge, encumbrance, adverse claim or other security interest (collectively, “Liens”), except to the extent permitted in the Pooling and Servicing Agreement, and will not have assigned to any person other than the Trust Fund any of its right, title or interest in the Mortgage Notes. The Depositor will have the power and authority to transfer the Mortgage Notes to the Trust Fund and to transfer the Certificates to the Agent, and, upon execution and delivery to the Trustee of the Pooling and Servicing Agreement, payment by the Agent for the Certificates, and delivery to the Agent of the Certificates, the Trust Fund will own the Mortgage Notes and the Agent will acquire title to the Certificates, in each case free of Liens except to the extent permitted by the Pooling and Servicing Agreement.

(n)    Any taxes, fees and other governmental charges in connection with the execution, delivery and issuance of this Agreement, the Pooling and Servicing Agreement, the Mortgage Loan Purchase Agreement, the Certificates and the Private Certificates have been or will be paid by the Depositor or prior to the Closing Date, except for fees for recording assignments of Mortgage Loans to the Trustee or, if applicable, to MERS on behalf of the Trustee, pursuant to the Pooling and Servicing Agreement that have not yet been completed, which fees will be paid by the Depositor in accordance with the Pooling and Servicing Agreement.

(o)    The transfer of the Mortgage Loans and the related assets to the Trust Estate at the Closing Date will be treated by the Depositor for financial accounting and reporting purposes as a sale of assets and not as a pledge of assets to secure debt.

(p)    The Depositor is not, and, after giving effect to the transactions contemplated by the Pooling and Servicing Agreement and the Mortgage Loan Purchase Agreement and the offering and sale of the Certificates, neither the Depositor nor Trust Fund will be, an “investment company” as defined in the Investment Company Act of 1940, as amended.

(q)    The Depositor is not, as of the date upon which it delivers the Definitive Free Writing Prospectus, an Ineligible Issuer, as such term is defined in Rule 405 of the 1933 Act Regulations.

1.2    PHH Mortgage represents and warrants to, and agrees with you that as of the date hereof (or as of such other date as may be specified in the representation and warranty):

(a)    As of the Closing Date the representations and warranties of PHH Mortgage herein and in the Pooling and Servicing Agreement will be true and correct in all material respects.

(b)    PHH Mortgage has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of New Jersey and has the requisite corporate power to own its properties and to conduct its business as presently conducted by it; and PHH Mortgage is duly qualified to do business in good standing in all other jurisdictions in which its ownership of property or the conduct of its business as presently conducted by it requires such qualification.

(c)    This Agreement has been duly authorized, executed and delivered by PHH Mortgage.

(d)    As of the Closing Date, the Pooling and Servicing Agreement will have been duly authorized, executed and delivered by the Master Servicer and, assuming the valid execution thereof by the Trustee and the Depositor, the Pooling and Servicing Agreement will constitute a valid and binding agreement of the Master Servicer enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting the enforcement of creditors’ rights and by general equity principles.

(e)    As of the Closing Date, the Mortgage Loan Purchase Agreement will have been duly authorized, executed and delivered by PHH Mortgage and will constitute a valid and binding agreement of PHH Mortgage enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization or other laws relating to or affecting the enforcement of creditors’ rights and by general equity principles.

2.    Placement of Certificates.

2.1    Subject to the terms and conditions set forth in this Agreement, the Depositor and PHH Mortgage hereby appoint the Agent as their agent to solicit and receive offers to purchase the Certificates for settlement on September 28, 2006 (the “Closing Date”), and the Agent hereby accepts such appointment and agrees to use reasonable efforts, as your agent and not as principal, to so solicit and receive offers to purchase the Certificates. The Agent further agrees to use reasonable efforts to assist you in connection with the sale of the Certificates to the purchasers thereof. Notwithstanding the foregoing, the Depositor, in it sole discretion, may accept an offer to purchase any of the Certificates on a date after the Closing Date, in which case any such Certificates will be held by PHH Mortgage pending such settlement date.

2.2    You are not required to place any specific dollar amount of Certificates, but will use your best efforts to place the Certificates. The termination of the offering is the earlier to occur of one year from the date of this Agreement and the date on which all of the Certificates have been sold. The Depositor reserves the right to terminate your offering of the Certificates pursuant to this Agreement, as to any Certificates for which an offer to purchase that is acceptable to the Depositor in its sole discretion is not obtained by you. In connection with the foregoing, and in accordance with Section 4 hereof and applicable law you will: (a) offer the Certificates to prospective investors; (b) solicit indications of interest to purchase the Certificates; (c) submit pricing and settlement information for each proposed sale to the Depositor, which in each case shall be subject to the Depositor’s approval in its sole discretion; (d) prepare and deliver a confirmation for each sale in your capacity as agent; (e) refrain from using any Written Communications except as permitted by Section 4(d)(1) hereof; and (f) instruct all investors that they must deposit with Citibank, N.A. the amount of their purchase price by wire transfer of immediately available funds, which must be received by Citibank, N.A. no later than 10:00 a.m. New York City time on the Closing Date (or, if applicable, on any subsequent settlement date), and that any investor who fails to do so will be subject to fail costs. All settlements for the sale of the Certificates will be made through Citibank, N.A. Each confirmed sale of any of the Certificates by the Depositor to an investor will not be contingent on any other sale. As used herein, the terms “offer” and “sale” have the meanings specified in Section 2(3) of the Act.

The Agent represents and warrants that it has not offered and will not offer any Certificates in any of the EU Member States or in Iceland, Liechenstein or Norway.

The Agent may separately engage, at its own expense and with the prior written approval of the Depositor and PHH Mortgage, such sub-agents as it may deem necessary or appropriate.

2.3    The Depositor shall have the sole right to accept offers to purchase Certificates from it and may reject any such offer in whole or in part. The Agent also shall have the right, in its discretion reasonably exercised and without notice to the Depositor or PHH Mortgage, to reject in whole or in part any offer to purchase Certificates received by it.

2.4    The Agent may at any time agree to purchase, as principal, any portion of the Certificates, but has no obligation whatsoever to do so. The Depositor or PHH Mortgage may at any time agree to sell to the Agent, as principal, any portion of the Certificates, but have no obligation whatsoever to do so.

3.    Delivery and Payment . Delivery of and payment for the Certificates shall be made at the office of Thacher Proffitt & Wood llp at 10:00 a.m. New York City time, on September 28, 2006 or such later date as you shall designate, which date and time may be postponed by agreement between you and the Depositor (such date and time of delivery and payment for the Certificates being herein called the “Closing Date”). Delivery of the Certificates shall be made to the purchasers thereof through the Depository Trust Company (“DTC”) against payment by the purchaser thereof of the purchase price therefor to or upon the order of the Depositor by wire transfer in immediately available funds.

4.    Offering by Agent . It is understood that you propose to offer the Certificates for sale to the public as agent on behalf of the Depositor and PHH Mortgage as set forth in the Prospectus.

(a)    It is understood that the Agent proposes to solicit offers for the Certificates for sale to the public as set forth in the Prospectus and the Agent agrees that all such solicitations by it shall be made in compliance with all applicable laws and regulations. Prior to the date hereof, you have not offered, pledged, sold, disposed of or otherwise transferred any Certificate or any security backed by the Mortgage Loans, any interest in any Certificate or such security or any Mortgage Loan.

(b)    It is understood that the Agent will solicit offers to purchase the Certificates as follows:

   (1) Prior to the time you have received the Definitive Free Writing Prospectus you may, in compliance with the provisions of this Agreement, solicit offers to purchase Certificates; provided, that you shall not accept any such offer to purchase a Certificate or any interest in any Certificate or Mortgage Loan or otherwise enter into any Contract of Sale for any Certificate, any interest in any Certificate or any Mortgage Loan prior to the investor’s receipt of the Definitive Free Writing Prospectus.

   (2) Any Free Writing Prospectus (other than the Definitive Free Writing Prospectus) relating to the Certificates used by the Agent in compliance with the terms of this Agreement prior to the time the Depositor has entered into a Contract of Sale for Certificates shall prominently set forth substantially the following statement:

The information in this free writing prospectus is preliminary, and will be superseded by the Definitive Free Writing Prospectus. This free writing prospectus is being delivered to you solely to provide you with information about the offering of the Certificates referred to in this free writing prospectus and to solicit an offer to purchase the Certificates, when, as and if issued. Any such offer to purchase made by you will not be accepted and will not constitute a contractual commitment by you to purchase any of the Certificates until your offer to purchase Certificates has been accepted. Any offer by you to purchase Certificates will not be accepted, and you will not have any contractual commitment to purchase any of the Certificates until after you have received the Definitive Free Writing Prospectus. You may withdraw your offer to purchase Certificates at any time prior to the acceptance of your offer.

“Written Communication” has the same meaning as that term is defined in Rule 405 of the 1933 Act Regulations.

   (3) Any Free Writing Prospectus relating to Certificates and used by the Agent in connection with marketing the Certificates, including the Definitive Free Writing Prospectus, shall prominently set forth substantially the following statement:

The Certificates referred to in these materials are being sold when, as and if issued. You are advised that Certificates may not be issued that have the characteristics described in these materials. The issuing entity’s obligation to sell such Certificates to you is conditioned on the mortgage loans and certificates having the characteristics described in these materials. If for any reason such Certificates are not delivered, we will notify you, and neither the issuing entity nor any agent or underwriter will have any obligation to you to deliver all or any portion of the Certificates which you have committed to purchase, and none of the issuing entity nor any agent or underwriter will be liable for any costs or damages whatsoever arising from or related to such non-delivery.

(c)    It is understood that no investor will enter into a Contract of Sale until the Definitive Free Writing Prospectus has been conveyed to the investor. For purposes of this Agreement, Contract of Sale has the same meaning as in Rule 159 of the 1933 Act Regulations and all Commission guidance relating to Rule 159. The Definitive Free Writing Prospectus shall prominently set forth substantially the following statement:

This Definitive Free Writing Prospectus supersedes the information in any free writing prospectus previously delivered in connection with this offering, to the extent that this Definitive Free Writing Prospectus is inconsistent with any information in any free writing prospectus delivered in connection with this offering.

(d)    It is understood that the Agent may prepare and provide to prospective investors certain Free Writing Prospectuses (as defined below), subject to the following conditions:

   (1) Unless preceded or accompanied by a prospectus satisfying the requirements of Section 10(a) of the Act, the Agent shall not convey or deliver any Written Communication to any person in connection with the initial offering of the Certificates, unless such Written Communication either (i) is made in reliance on Rule 134 under the Act, (ii) constitutes a prospectus satisfying the requirements of Rule 430B under the Act, (iii) is the Definitive Free Writing Prospectus, or (iv) both (1) constitutes a Free Writing Prospectus (as defined below) used in reliance on Rule 164 and (2) includes only information that is within the definition of ABS Informational and Computational Materials as defined in Item 1100 of Regulation AB, or Permitted Additional Materials.

   (2) The Agent shall comply with all applicable laws and regulations in connection with the use of Free Writing Prospectuses, including but not limited to Rules 164 and 433 of the 1933 Act Regulations and all Commission guidance relating to Free Writing Prospectuses, including but not limited to Commission Release No. 33-8591.

   (3) For purposes hereof, “Free Writing Prospectus” shall have the meaning given such term in Rules 405 and 433 of the 1933 Act Regulations. “Issuer Information” shall mean information included in a Free Writing Prospectus that both (i) is within the types of information specified in clauses (1) to (5) of footnote 271 of Commission Release No