SURETY BOND

 

 

Financial Guaranty Insurance Company

125 Park Avenue

New York, New York 10017

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

 

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-HS2                Policy Number:  05030146

                                                       Control Number:  0010001

 

Insured Obligations:

$227,812,500 in principal amount of Home Equity  Loan-Backed Term Notes,  Series

2005-HS2,  Class A-II and Variable Funding Notes with a Maximum Variable Funding

Balance of $27,982,718 (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 for the Class II Notes (1)

an amount,  if any,  equal to on any  Payment  Date 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 and (d) the Guaranteed Payment Amount,

if applicable, and (2) 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 December 2035, after giving effect to all other distributions of principal on

the Class II Notes on such Payment Date.

 

"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 sought

to be  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  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,  in form satisfactory to

Financial  Guaranty,  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.

 

If any  notice  received  by  Financial  Guaranty  is not in  proper  form or is

otherwise insufficient for the purpose of making a claim under this Surety Bond,

it will be deemed not to have been received by Financial Guaranty, and Financial

Guaranty  will  promptly  so advise the  Indenture  Trustee,  and the  Indenture

Trustee may submit an amended notice.

 

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