SURETY BOND

 

 

 

Financial Guaranty Insurance Company

125 Park Avenue

New York, New York 10017

(212) 312-3000 (800) 352-0001

 

 

SURETY BOND

 

 

Issuer: Home Equity Loan Trust 2005-HS1              Policy Number:  05030098

                                                     Control Number:  0010001

 

 

Insured Obligations:

$303,750,000 in principal amount of Home Equity  Loan-Backed Term Notes,  Series

2005-HS1,  Class A-II and Variable Funding Notes with a Maximum Variable Funding

Balance of $35,441,794 (collectively, the "Class II Notes")

 

Indenture Trustee:  JPMorgan Chase Bank, N.A.

 

Financial Guaranty Insurance Company  ("Financial  Guaranty"),  a New York stock

insurance  company,  in  consideration  of the right of  Financial  Guaranty  to

receive  monthly  premiums as provided in the  Insurance  Agreement  (as defined

below), and subject to the terms of this Surety Bond, hereby unconditionally and

irrevocably  agrees to pay each  Group II Credit  Enhancement  Draw  Amount  (as

defined  below),  to the  Indenture  Trustee,  to the  extent  set  forth in the

Indenture (as defined below).  Capitalized  terms used and not otherwise defined

herein  shall have the  meanings  assigned  to such  terms in  Appendix A to the

Indenture as in effect and executed on the date hereof.

 

The following terms used herein shall have the meanings assigned to them below:

 

"Group II Credit Enhancement Draw Amount" shall mean an amount, if any, equal to

on any Payment  Date for the Class II Notes,  the sum of (a) the amount by which

the  Interest  Distribution  Amount for the Class II Notes on such  Payment Date

exceeds  the amount on deposit in the Payment  Account  available  for  interest

payments on the Class II Notes on such Payment Date,  (b) any  Liquidation  Loss

Amount  (other than any Excess Loss  Amount)  with respect to the Group II Loans

for such Payment Date to the extent not  distributed as part of the  Liquidation

Loss Distribution Amount for the Class II Notes or covered by a reduction of the

Group II Overcollateralization  Amount on such Payment Date, (c) any Excess Loss

Amount with respect to the Group II Loans, (d) the Guaranteed Payment Amount, if

applicable, and (e) any Preference Amount (as defined in this Surety Bond).

 

"Guaranteed  Payment  Amount"  means  with  respect  to the Class II Notes,  the

aggregate outstanding Security Balance on the Class II Notes on the Payment Date

in October 2035, after giving effect to all other  distributions of principal on

the Class II Notes on such Payment Date.

 

 

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"Deficiency  Amount" for any Payment Date means the sum of the amounts set forth

in  clauses  (a),  (b),  (c) and  (d) of the  definition  of  "Group  II  Credit

Enhancement Draw Amount."

 

Financial  Guaranty  will pay a Group II Credit  Enhancement  Draw  Amount  with

respect to the Class II Notes by 12:00 noon (New York City time) in  immediately

available funds to the Indenture Trustee on the later of (i) the second Business

Day following the day on which  Financial  Guaranty  shall have received  Notice

that a  Deficiency  Amount is due in  respect of the Class II Notes and (ii) the

Payment Date on which the related Deficiency Amount is payable to the Holders of

the Class II Notes pursuant to the Indenture, for disbursement to the Holders of

the Class II Notes in the same  manner as other  payments  with  respect  to the

Class II Notes are required to be made.

 

Upon such payment, Financial Guaranty shall be fully subrogated to the rights of

the  Holders  of the Class II Notes to  receive  the  amount so paid.  Financial

Guaranty's obligations with respect to the Class II Notes hereunder with respect

to each Payment Date shall be discharged  to the extent funds  consisting of the

related Deficiency Amount are received by the Indenture Trustee on behalf of the

Holders of the Class II Notes for  payment to such  Holders,  as provided in the

Indenture  and  herein,  whether or not such funds are  properly  applied by the

Indenture Trustee.

 

If any  portion  or all of  any  amount  that  is  insured  hereunder  that  was

previously  distributed  to a  Holder  of Class  II  Notes  is  recoverable  and

recovered  from such Holder as a voidable  preference by a trustee in bankruptcy

pursuant to the U.S. Bankruptcy Code, pursuant to a final  non-appealable  order

of a court  exercising  proper  jurisdiction  (a "Final Order") (such  recovered

amount,  a "Preference  Amount"),  Financial  Guaranty will pay on the guarantee

described in the first paragraph hereof, an amount equal to each such Preference

Amount by 12:00 noon on the next  Payment  Date after the  second  Business  Day

following  Receipt by  Financial  Guaranty of (w) a certified  copy of the Final

Order,  (x) an opinion of counsel  satisfactory to Financial  Guaranty that such

order is final and not subject to appeal, (y) an assignment,  in form reasonably

satisfactory to Financial Guaranty,  irrevocably assigning to Financial Guaranty

all rights and claims of the  Indenture  Trustee  and/or such Holder of Class II

Notes  relating  to or arising  under  such  Preference  Amount  and  appointing

Financial  Guaranty as the agent of the Indenture  Trustee and/or such Holder in

respect of such Preference Amount, and (z) a Notice appropriately  completed and

executed  by the  Indenture  Trustee or such  Holder,  as the case may be.  Such

payment  shall be made to the  receiver,  conservator,  debtor-in-possession  or

trustee in bankruptcy named in the Final Order and not to the Indenture  Trustee

or Holder of Class II Notes directly (unless the Holder has previously paid such

amount to such receiver,  conservator,  debtor-in-possession or trustee named in

such Final Order in which case payment  shall be made to the  Indenture  Trustee

for   distribution  to  the  Holder  upon  proof  of  such  payment   reasonably

satisfactory to Financial Guaranty).  Notwithstanding the foregoing, in no event

shall  Financial  Guaranty be (i) required to make any payment under this Surety

Bond in respect of any Preference Amount to the extent such Preference Amount is

comprised of amounts  previously paid by Financial Guaranty  hereunder,  or (ii)

obligated to make any payment in respect of any Preference Amount, which payment

represents a payment of the principal amount of any Class II Notes, prior to the

time Financial  Guaranty otherwise would have been required to make a payment in

respect  of such  principal,  in which  case  Financial  Guaranty  shall pay the

balance of the  Preference  Amount  when such amount  otherwise  would have been

required.

 

 

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All payments  made by  Financial  Guaranty  hereunder  in respect of  Preference

Amounts will be made with Financial Guaranty's own funds.

 

This Surety Bond is non-cancelable for any reason,  including  nonpayment of any

premium.  The  premium on this  Surety  Bond is not  refundable