FLOW MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT

PURCHASER

SELLER

EXHIBITS

- ii -

This is a Flow Mortgage Loan Purchase and Warranties Agreement (the “ Agreement ”), dated as of July 1, 2000, by and between Lehman Brothers Bank, FSB, having an office at Eleven Madison Avenue, New York, New York 10010-3629 (the “ Purchaser ”) and Fieldstone Mortgage Company having an office at 11000 Broken Land Parkway, Suite 600, Columbia, MD 21044 (the “ Seller ”).

WHEREAS, the Seller desires, from time to time, to sell to the Purchaser, and the Purchaser desires, from time to time, to purchase from the Seller, certain conventional adjustable and fixed rate residential first mortgage loans (the “ Mortgage Loans ”) on a servicing released basis as described herein, and which shall be delivered as whole loans;

WHEREAS, each Mortgage Loan is secured by a mortgage, deed of trust or other security instrument creating a first lien on a residential dwelling located in the jurisdiction indicated on the applicable Mortgage Loan Schedule, which is annexed hereto as Exhibit A ; and

WHEREAS, the Purchaser and the Seller wish to prescribe the manner of the conveyance, servicing and control of the Mortgage Loans.

NOW, THEREFORE, in consideration of the premises and mutual agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Purchaser and the Seller agree as follows:

SECTION 1.   DEFINITIONS .  

The following terms are defined as follows (except as otherwise agreed in writing by the parties):

Accepted Servicing Practices : With respect to any Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located.

Agreement : This Flow Mortgage Loan Purchase and Warranties Agreement and all amendments hereof and supplements hereto.

ALTA : The American Land Title Association or any successor thereto.

Appraised Value : The value set forth in an appraisal made in connection with the origination of the related Mortgage Loan as the value of the Mortgaged Property.

Approved Tax Service Contract Provider : Any of the following providers: Trans America.

Assignment and Conveyance : The related Assignment and Conveyance, substantially in the form attached hereto as Exhibit L .

Assignment of Mortgage : An assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage to the Purchaser.

ARM : A Mortgage Loan, the Mortgage Interest Rate of which is adjusted from time to time.

BIF : The Bank Insurance Fund, or any successor thereto.

BPO : A broker’s price opinion obtained by the Purchaser.

Business Day : Any day other than (i) a Saturday or Sunday, or (ii) a day on which banking and savings and loan institutions in the State of New York are authorized or obligated by law or executive order to be closed.

Closing Date : The related closing date as set forth on the related Purchase Price and Terms Letter and reflected on the related Assignment and Conveyance Agreement.

Condemnation Proceeds : All awards or settlements in respect of a Mortgaged Property, whether permanent or temporary, partial or entire, by exercise of the power of eminent domain or condemnation, to the extent not required to be released to a Mortgagor in accordance with the terms of the related Mortgage Loan Documents.

Credit Grade : As defined in the Underwriting Guidelines.

Custodial Account : The separate trust account created and maintained pursuant to the Interim Servicing Agreement.

Custodial Agreement : That certain Custodial Agreement, dated as of September 1, 1999, by and between the Purchaser and U.S. Bank Trust National Association.

Custodian : The custodian under the Custodial Agreement, or its successor in interest or assigns, or any successor to the Custodian under the Custodial Agreement, as therein provided.

Cut-off Date : With respect to any Closing Date, the date as set forth on the related Purchase Price and Terms Letter and reflected on the related Assignment and Conveyance Agreement.

Deleted Mortgage Loan : A Mortgage Loan which is repurchased or substituted with a Qualified Substitute Mortgage Loan by the Seller in accordance with the terms of this Agreement.

Determination Date : The 15th day of the month (or if such day is not a Business Day, the first Business Day preceding such 15th day) in which the related Remittance Date occurs.

Due Date : The day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.

Due Period : With respect to each Remittance Date, the period commencing on the second day of the month preceding the month of the Remittance Date and ending on the first day of the month of the Remittance Date.

Escrow Account : The separate account created and maintained pursuant to the Interim Servicing Agreement.

Escrow Payments : With respect to any Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums, condominium charges, and any other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.

FDIC : The Federal Deposit Insurance Corporation, or any successor thereto.

FHLMC : The Federal Home Loan Mortgage Corporation, or any successor thereto.

FNMA : The Federal National Mortgage Association, or any successor thereto.

Gross Margin : With respect to each Mortgage Loan, the fixed percentage amount set forth in the related Mortgage Note.

Group of Mortgage Loans : The Mortgage Loans to be purchased by the Purchaser from the Seller on a particular Closing Date.

Index : The rate per annum equal to the average of interbank offered rates for six month U.S. dollar denominated deposits in the London Market (LIBOR) as published by The   Wall   Street   Journal .

Insurance Proceeds : With respect to each Mortgage Loan, proceeds of insurance policies insuring the Mortgage Loan or the related Mortgaged Property.

Interest Rate Adjustment Date : The date on which an adjustment to the Mortgage Interest Rate with respect to each Mortgage Loan becomes effective.

Interim Servicing Agreement : The agreement, attached as Exhibit C hereto providing for the Seller to service the Mortgage Loans for an interim period as specified by the Interim Servicing Agreement.

Lifetime Rate Cap : The provision of each Mortgage Note which provides for an absolute maximum Mortgage Interest Rate thereunder.

Liquidation Proceeds : Cash received in connection with the liquidation of a defaulted Mortgage Loan, whether through the sale or assignment of such Mortgage Loan, trustee’s sale, foreclosure sale or otherwise, or the sale of the related Mortgaged Property if the Mortgaged Property is acquired in satisfaction of the Mortgage Loan.

Loan-to-Value Ratio or LTV : With respect to any Mortgage Loan, the ratio of the outstanding principal amount of the Mortgage Loan as of the related Cut-off Date (unless otherwise indicated) to the lesser of (a) the Appraised Value of the Mortgaged Property and (b) if the Mortgage Loan was made to finance the acquisition of the related Mortgaged Property, the purchase price of the Mortgaged Property, expressed as a percentage.

Monthly Payment : The scheduled monthly payment of principal and interest on a Mortgage Loan.

Mortgage : The mortgage, deed of trust or other instrument securing a Mortgage Note, which creates a first lien on an unsubordinated estate in fee simple in real property securing the Mortgage Note.

Mortgage File : The items pertaining to a particular Mortgage Loan referred to in Exhibit B annexed hereto, and any additional documents required to be added to the Mortgage File pursuant to this Agreement.

Mortgage Interest Rate : The annual rate of interest borne on a Mortgage Note.

Mortgage Loan : An individual Mortgage Loan which is the subject of this Agreement, each Mortgage Loan originally sold and subject to this Agreement being identified on the Mortgage Loan Schedule, which Mortgage Loan includes without limitation the Mortgage File, the Monthly Payments, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition Proceeds, Prepayment Penalties, Servicing Rights and all other rights, benefits, proceeds and obligations arising from or in connection with such Mortgage Loan.

Mortgage Loan Documents : The documents contained in the Mortgage File pertaining to each Mortgage Loan.

Mortgage Loan Schedule : With respect to each Group of Mortgage Loans purchased, a schedule of Mortgage Loans annexed hereto as Exhibit A , which shall be delivered to the Purchaser at least three (3) Business Days prior to the related Closing Date, such schedule setting forth the following information with respect to each Mortgage Loan: (1) the Seller’s Mortgage Loan identifying number; (2) the Mortgagor’s name; (3) the street address of the Mortgaged Property including the city, state and zip code; (4) a code indicating whether the Mortgaged Property is a single family residence, a 2-4 family residence, a condominium unit or a unit in a planned unit development; (5) the original months to maturity or the remaining months to maturity from the related Cut-off Date, in any case based on the original amortization schedule, and if different, the maturity expressed in the same manner but based on the actual amortization schedule; (6) a code indicating whether the Mortgage Loan is an adjustable rate, fixed rate or balloon Mortgage Loan; (7) a code indicating whether the Mortgage Loan is a first lien Mortgage Loan; (8) the Loan-to-Value Ratio at origination; (9) the Mortgage Interest Rate as of the related Cut-off Date; (10) the first payment date; (11) the stated maturity date; (12) the amount of the Monthly Payment; (13) the next payment due date; (14) the original principal amount of the Mortgage Loan; (15) the principal balance of the Mortgage Loan as of the close of business on the related Cut-off Date, after deduction of payments of principal received on or before the related Cut-off Date; (16) a code indicating the purpose of the Mortgage Loan; (17) a code indicating the occupancy status of the Mortgaged Property at origination; (18) the Index; (19) the next Interest Rate Adjustment Date; (20) the next payment adjustment date; (21) the Gross Margin; (22) the Mortgagor’s and co-Mortgagor’s FICO score and social security numbers; (23) the maximum Mortgage Interest Rate under the terms of the Mortgage Note; (24) the loan documentation type; (25) the debt to income ratio; (26) the Mortgagor’s age; (27) the co-Mortgagor’s age; (28) the Mortgagor’s gender; (29) the co-Mortgagor’s gender; (30) the Mortgagor’s race; (31) the co-Mortgagor’s race; (32) first time home buyer (y/n); (33) combined monthly income; (34) combined housing expense; (35) year built and (36) Mortgagor marital status. With respect to the Group of Mortgage Loans in the aggregate, each Mortgage Loan Schedule shall set forth the following information, as of the related Cut-off Date: (1) the number of Mortgage Loans; (2) the current aggregate outstanding principal balance of the Mortgage Loans; (3) the weighted average Mortgage Interest Rate of the Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans.

Mortgage Note : The note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage.

Mortgaged Property : The real property securing repayment of the debt evidenced by a Mortgage Note.

Mortgagor : The obligor on a Mortgage Note.

Officer’s Certificate : A certificate signed by the Chairman of the Board or the Vice Chairman of the Board or the President or a Vice President and by the Treasurer or the Secretary or one of the Assistant Treasurers or Assistant Secretaries of the Seller, and delivered to the Purchaser as required by this Agreement.

Opinion of Counsel : A written opinion of counsel, who may be an employee of the Seller, reasonably acceptable to the Purchaser.

Periodic Rate Cap : The provision of each Mortgage Note which provides for an absolute maximum amount by which the Mortgage Interest Rate therein may increase on an Interest Rate Adjustment Date above the Mortgage Interest Rate previously in effect.

Person : Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof.

Pool 1 Mortgage Loan : A conventional one-to four family residential first lien ARM Mortgage Loan which is a 2/28 Mortgage Loan meaning that, after the initial two year period, the Mortgage Interest Rate payable by the Mortgagor is subject to adjustment semi-annually in accordance with the related Mortgage Note.

Pool 2 Mortgage Loan : A conventional one-to four family residential first lien ARM Mortgage Loan which is a 3/27 Mortgage Loan meaning that, after the initial three year period, the Mortgage Interest Rate payable by the Mortgagor is subject to adjustment semi-annually thereafter in accordance with the related Mortgage Note.

Pool 3 Mortgage Loan : Conventional one-to four family residential fixed rate, first lien Mortgage Loans with original terms of up to 30 years. For the Pool 3 Mortgage Loans, the Mortgage Interest Rate payable by the Mortgagor is fixed for the life of the Mortgage and is subject to what is set forth in the related Mortgage Note.

Prime Rate : The prime rate announced to be in effect from time to time, as published as the average rate under the “Money Rates” section of The   Wall   Street   Journal .

Purchase Price : The price paid on the related Closing Date by the Purchaser to the Seller in exchange for the Mortgage Loans as calculated in Section 3 of this Agreement.

Purchase Price and Terms Letter : With respect to each Group of Mortgage Loans purchased hereunder, that certain letter agreement setting forth the general terms and conditions of the transaction consummated herein and identifying the Mortgage Loans to be purchased hereunder.

Purchaser : Lehman Brothers Bank, FSB, or its successor in interest or assigns or any successor to the Purchaser under this Agreement as herein provided.

Qualified Appraiser : An appraiser, duly appointed by the Seller, who had no interest, direct or indirect, in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan, and such appraiser and the appraisal made by such appraiser both satisfy the requirements of Title XI of the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the regulations promulgated thereunder, all as in effect on the date the Mortgage Loan was originated.

Qualified Insurer : A mortgage guaranty insurance company duly authorized and licensed where required by law to transact mortgage guaranty insurance business and approved as an insurer by FNMA or FHLMC.

Qualified Substitute Mortgage Loan : A mortgage loan eligible to be substituted by the Seller for a Deleted Mortgage Loan which must, on the date of such substitution, (i) have an outstanding principal balance, after deduction of all scheduled payments due in the month of substitution (or in the case of a substitution of more than one mortgage loan for a Deleted Mortgage Loan, an aggregate principal balance), not in excess of the Stated Principal Balance of the Deleted Mortgage Loan; (ii) have a Mortgage Interest Rate not less than and not more than 2% greater than the Mortgage Interest Rate of the Deleted Mortgage Loan; (iii) have a remaining term to maturity not greater than and not more than one year less than that of the Deleted Mortgage Loan; (iv) have a Gross Margin not less than that of the Deleted Mortgage Loan; (v) have a maximum Mortgage Interest Rate Cap not less than that of the Deleted Mortgage Loan; (vi) have a maximum periodic mortgage Interest Rate Cap not less than that of the Deleted Mortgage Loan; (vii) have a Credit Grade equal to that of the Deleted Mortgage Loan and (viii) comply with each representation and warranty set forth in Section 6 and 7.

Remittance Date : The 15th day of each month (or if such day is not a Business Day, the Business Day immediately following such 15th day).

REO Disposition Proceeds : All amounts received with respect to an REO disposition.

Repurchase Price : With respect to any Mortgage Loan, a price equal to (i) the Stated Principal Balance of the Mortgage Loan plus (ii) interest on such Stated Principal Balance at the Mortgage Interest Rate from the date on which interest has last been paid and distributed to the Purchaser to the date of repurchase, less amounts received, if any, plus amounts advanced, if any, by any servicer, in respect of such repurchased Mortgage Loan.

Seller : Fieldstone Mortgage Company or its successor in interest or assigns or any successor to the Seller under this Agreement as herein provided.

Servicer : Seller or its successor in interest or assigns under the Interim Servicing Agreement.

Servicing File : With respect to each Mortgage Loan the file retained by the Seller consisting of originals of all documents in the Mortgage File, which are not delivered to the Purchaser or the Purchaser’s designee, and copies of the Mortgage Loan Documents listed on Exhibit B hereto

Servicing Rights : Any and all of the following: (a) any and all rights to service the Mortgage Loans; (b) any payments to or monies received by the Seller for servicing the Mortgage Loans; (c) any late fees, penalties or similar payments with respect to the Mortgage Loans; (d) all agreements or documents creating, defining or evidencing any such servicing rights to the extent they relate to such servicing rights and all rights of the Seller thereunder; (e) Escrow Payments or other similar payments with respect to the Mortgage Loans and any amounts actually collected by the Seller with respect thereto; (f) all accounts and other rights to payment related to any of the property described in this paragraph; and (g) any and all documents, files, records, servicing files, servicing documents, servicing records, data tapes, computer records, or other information pertaining to the Mortgage Loans or pertaining to the past, present or prospective servicing of the Mortgage Loans.

Stated Principal Balance : As to each Mortgage Loan, (i) the principal balance of the Mortgage Loan at the related Cut-off Date after giving effect to payments of principal received on or before such date, minus (ii) all amounts previously distributed to the Purchaser with respect to the related Mortgage Loan representing payments or recoveries of principal or advances in lieu thereof.

Transfer Date : The date on which the Purchaser, or its designee, shall receive the transfer of servicing responsibilities and begin to perform the servicing of the Mortgage Loans, and the Seller shall cease all servicing responsibilities. The Transfer Date shall occur on a date to be mutually agreed upon by the Seller and the Purchaser.

Underwriting Guidelines : The underwriting guidelines of the Seller, attached hereto as Exhibit J.

The parties intend hereby to set forth the terms and conditions upon which the proposed transactions will be effected, and, in consideration of the premises and the mutual agreements set forth herein, agree as follows:

SECTION 2.   CONVEYANCE FROM SELLER TO PURCHASER .  

(a)   Conveyance of Mortgage Loans; Possession of Mortgage Files .

On the related Closing Date with respect to each Group of Mortgage Loans, the Seller, simultaneously with the payment of the Purchase Price as defined in the Purchase Price and Terms Letter, does hereby sell, transfer, assign, set over and convey to the Purchaser, without recourse, but subject to the terms of this Agreement, all rights, title and interest of the Seller in and to the Mortgage Loans in such Group together with the Servicing Rights and Mortgage Files and all rights and obligations arising under the documents contained therein. Pursuant to Section 2(c) hereof, the Seller has delivered each Mortgage File to the Purchaser or its designee. The contents of each Servicing File required to be retained by the Seller or its designee to service the Mortgage Loans pursuant to the Interim Servicing Agreement and thus not delivered to the Purchaser are and shall be held in trust by the Seller or its designee for the benefit of Purchaser as the owner thereof. The Seller’s or its designee’s possession of any portion of the Servicing File is at the will of the Purchaser for the sole purpose of facilitating servicing of the related Mortgage Loan pursuant to the Interim Servicing Agreement, and such retention and possession by the Seller or its designee shall be in a custodial capacity only. The ownership of each Mortgage Note, Mortgage, and the contents of the Mortgage File and Servicing File is vested in the Purchaser and the ownership of all records and documents with respect to the related Mortgage Loan prepared by or which come into the possession of the Seller or its designee shall immediately vest in the Purchaser and shall be retained and maintained, in trust, by the Seller or its designee at the will of the Purchaser in such custodial capacity only. The Servicing File retained by the Seller or its designee pursuant to the Interim Servicing Agreement shall be segregated from the other books and records of the Seller or its designee and shall be appropriately marked to clearly reflect the sale of the related Mortgage Loan to the Purchaser. The Seller or its designee shall release from its custody the contents of any Servicing File retained by it only in accordance with the Interim Servicing Agreement, except when such release is required in connection with a repurchase of any such Mortgage Loan pursuant to Section 8.

(b)   Books and Records .

Record title to each Mortgage and the related Mortgage Note after recording shall be in the name of the Purchaser or as Purchaser shall designate. All rights arising out of the Mortgage Loans including, but not limited to, all funds received by the Seller or its designee after the related Cut-off Date on or in connection with a Mortgage Loan shall be vested in the Purchaser; provided, however, that all funds received on or in connection with a Mortgage Loan shall be received and held by the Seller or its designee in trust for the benefit of the Purchaser as the owner of the Mortgage Loans pursuant to the terms of the Interim Servicing Agreement.

The sale of each Mortgage Loan shall be reflected on the Seller’s balance sheet and other financial statements as a sale of assets by the Seller.

(c)   Delivery of Mortgage Loan Documents .

At least five (5) Business Days prior to the related Closing Date, the Seller shall deliver to the Purchaser, or Purchaser’s designee, each of the following documents for each Mortgage Loan:

(i)   The original Mortgage Note endorsed, “Pay to the order of ________________, without recourse” and signed in the name of the Seller by an authorized officer. In the event that the Mortgage Loan was acquired by the Seller in a merger, the endorsement must be by “Fieldstone Mortgage Company, successor by merger to [name of predecessor]”; and in the event that the Mortgage Loan was acquired or originated by the Seller while doing business under another name, the endorsement must be by “Fieldstone Mortgage Company, formerly known as [previous name]”;

(ii)   Original recorded Mortgage, with evidence of recording information thereon except for any Mortgage which has been forwarded to the appropriate recorder’s office for recordation and which has not been returned by such recording officer, in which case the Seller shall deliver and release to Purchaser a certified true copy of any such Mortgage so certified by the Seller with evidence of such Mortgage’s delivery to the appropriate recorder’s office. In addition, the Seller shall deliver and release to the Purchaser the original recorded Mortgage within 90 days after the related Closing Date. In the event that the Seller is unable to deliver the original recorded Mortgage within such time period due to a delay caused by the public recording office, an extension of the date specified above may be requested from the Purchaser, which consent shall not be unreasonably withheld;

(iii)   Original Assignment of Mortgage, in blank, which assignment shall be in form and substance acceptable for recording but not recorded. In the event that the Mortgage Loan was acquired by the Seller in a merger, the assignment must be by “Fieldstone Mortgage Company, successor by merger to [name of predecessor]”; and in the event that the Mortgage Loan was acquired or originated by the Seller while doing business under another name, the assignment must be by “Fieldstone Mortgage Company, formerly known as [previous name]”;

(iv)   Original policy of title insurance, if available, or the Seller shall have delivered and released to the Purchaser the related binders. In addition, the Seller shall deliver to the Purchaser the original policy of title insurance within 90 days after the related Closing Date. In the event that the Seller is unable to deliver the original policy of title insurance within such time period due to a delay caused by the title insurer, an extension of the date specified above may be requested from the Purchaser, which consent shall not be unreasonably withheld. The policy must be properly endorsed, any necessary notices of transfer must be forwarded and any other action required to be taken must be taken in order to fully protect, under the terms of the policy and applicable law, Purchaser’s interest as first mortgagee;

(v)   Original of all assumption, extensions and modification agreements;

(vi)   Original recorded intermediate assignments of the Mortgage, including warehousing assignments, if any; and

(vii)   The contents of the Mortgage File for each Mortgage Loan, not expressly stated herein, and as set forth in Exhibit B hereto, except such documents retained by the Seller pursuant to Section 2(a) herein.

Pursuant to the Custodial Agreement delivered to the Purchaser contemporaneously with the delivery of this Agreement, the Seller has delivered and released to the Custodian those Mortgage Loan Documents listed in (i) - (vii) of this subsection 2(c) and as required by the Custodial Agreement with respect to each Mortgage Loan a list of which is set forth in the Custodial Agreement.

The Custodian has certified its receipt of all such Mortgage Loan Documents required to be delivered pursuant to the Custodial Agreement, as evidenced by the initial certification of the Custodian in the form annexed to the Custodial Agreement. The Purchaser shall be responsible for maintaining the Custodial Agreement and shall pay all fees and expenses of the Custodian.

The Seller or its designee shall forward to the Custodian original documents evidencing an assumption, modification, consolidation or extension of any Mortgage Loan entered into in accordance with the Interim Servicing Agreement within one week of their execution, provided, however, that the Seller or its designee shall provide the Custodian with a certified true copy of any such document submitted for recordation within one week of its execution, and shall provide the original of any document submitted for recordation or a copy of such document certified by the appropriate public recording office to be a true and complete copy of the original within sixty days of its submission for recordation. In the event that the Seller is unable to deliver the original recorded document within such time period due to a delay caused by the public recording office, an extension of the date specified above may be requested from the Purchaser, which consent shall not be unreasonably withheld.

SECTION 3.   PURCHASE PRICE .

(a)   The Purchase Price for each Group of Mortgage Loans shall be the percentage of par as stated in the related Purchase Price and Terms Letter, multiplied by the aggregate principal balance, as of the related Cut-off Date, of the Mortgage Loans listed on the Mortgage Loan Schedule, after application of payments of principal received on or before the related Cut-off Date. The initial principal amount of the Mortgage Loans shall be the aggregate principal balance of the Mortgage Loans, so computed as of the related Cut-off Date.

In addition to the Purchase Price as described above, the Purchaser shall pay to the Seller, at closing, accrued interest on the initial principal amount of the Mortgage Loans at the weighted average Mortgage Interest Rate, from the date interest was last received on the Mortgage Loan through the day prior to the related Closing Date, inclusive.

(b)   The Purchase Price shall be paid on the related Closing Date by wire transfer of immediately available federal funds.

(c)   The Purchaser shall be entitled to (1) all principal received after the related Cut-off Date, (2) all other recoveries of late charges, assumption fees or other charges collected after the related Cut-off Date, and (3) all payments of interest on the Mortgage Loans at the Mortgage Interest Rate received after the related Cut-off Date. The principal balance of each Mortgage Loan as of the related Cut-off Date is determined after application of payments of principal received on or before the related Cut-off Date. All payments of principal and interest (minus interest at the servicing fee rate, pursuant to the Interim Servicing Agreement) due on the first day of the month after the related Cut-off Date shall belong to the Purchaser.

SECTION 4.   SERVICING OF THE MORTGAGE LOANS .  

The Mortgage Loans have been sold by the Seller to the Purchaser on a servicing released basis. Subject to, and upon the terms and conditions of this Agreement, the Seller hereby sells, transfers, assigns and delivers to the Purchaser the Servicing Rights.

The Purchaser shall retain the Seller or its designee as the contract servicer of the Mortgage Loans for an interim period pursuant to and in accordance with the terms and conditions contained in the Interim Servicing Agreement.

Pursuant to the Interim Servicing Agreement, the Seller or its designee shall begin servicing the Mortgage Loans on behalf of the Purchaser and shall be entitled to all servicing fees due the Seller or its designee as set forth in the Interim Servicing Agreement. The Seller or its designee shall conduct such servicing in accordance with the terms of the Interim Servicing Agreement.

The Seller or any designee of the Seller shall not waive any prepayment penalty with respect to any Mortgage Loan which contains a prepayment penalty which prepays during the term of the penalty. If the Seller or its designee fails to collect the prepayment penalty upon any prepayment of any Mortgage Loan which contains a prepayment penalty, the Seller shall pay the Purchaser an amount equal to the prepayment penalty which was not collected.

SECTION 5.   TRANSFER OF SERVICING .  

On each Transfer Date, the Purchaser, or its designee, shall assume all servicing responsibilities related to, and the Seller or its designee shall cease all servicing responsibilities related to, the related Mortgage Loans. The Transfer Date shall be the date set forth in the related Purchase Price and Terms Letter.

On or prior to the related Transfer Date the Seller or its designee shall, at Seller’s sole cost and expense take such steps as may be necessary or appropriate to effectuate and evidence the transfer of the servicing of the related Mortgage Loans to the Purchaser, or its designee, including but not limited to the following:

(a)   Notice to Mortgagors . The Seller or its designee shall mail to the Mortgagor of each Mortgage a letter advising the Mortgagor of the transfer of the servicing of the related Mortgage Loan to the Purchaser, or its designee; in accordance with the Cranston Gonzales National Affordable Housing Act of 1990 provided, however, the content and format of the letter shall have the prior approval of the Purchaser. The Seller or its designee shall provide the Purchaser with copies of all such notices no later than the related Transfer Date.

(b)   Notice to Taxing Authorities and Insurance Companies . The Seller or its designee shall transmit to the applicable applicable tax services, taxing authorities and insurance companies (including primary mortgage insurance policy insurers, if applicable) and/or agents, notification of the transfer of the servicing to the Purchaser, or its designee, and instructions to deliver all notices, tax bills and insurance statements, as the case may be, to the Purchaser from and after the Transfer Date. The Seller or its designee shall provide the Purchaser with copies of all such notices no later than the related Transfer Date.

(c)   Delivery of Servicing Records . The Seller or its designee shall forward to the Purchaser, or its designee, all servicing records and the Servicing File in the Seller’s or its designee’s possession relating to each Mortgage Loan including the information enumerated in the Interim Servicing Agreement.

(d)   Escrow Payments . The Seller or its designee shall provide the Purchaser, or its designee, with immediately available funds by wire transfer in the amount of the net Escrow Payments and suspense balances and all loss draft balances associated with the Mortgage Loans. The Seller or its designee shall provide the Purchaser with an accounting statement of Escrow Payments and suspense balances and loss draft balances sufficient to enable the Purchaser to reconcile the amount of such payment with the accounts of the Mortgage Loans. Additionally, the Seller or its designee shall wire transfer to the Purchaser the amount of any agency, trustee or prepaid Mortgage Loan payments and all other similar amounts held by the Seller or its designee.

(e)   Payoffs and Assumptions . The Seller or its designee shall provide to the Purchaser, or its designee, copies of all assumption and payoff statements generated by the Seller or its designee on the Mortgage Loans from the related Cut-off Date to the related Transfer Date.

(f)   Mortgage Payments Received Prior to Transfer Date . Prior to the related Transfer Date all payments received by the Seller or its designee on each Mortgage Loan shall be properly applied by the Seller or its designee to the account of the particular Mortgagor.

(g)   Mortgage Payments Received After Transfer Date . The amount of any Monthly Payments received by the Seller or its designee after the related Transfer Date shall be forwarded to the Purchaser or its designee by overnight mail on the date of receipt. The Seller or its designee shall notify the Purchaser or its designee of the particulars of the payment, which notification requirement shall be satisfied if the Seller or its designee forwards with its payment sufficient information to permit appropriate processing of the payment by the Purchaser or its designee. The Seller or its designee shall assume full responsibility for the necessary and appropriate legal application of Monthly Payments received by the Seller or its designee after the Transfer Date with respect to Mortgage Loans then in foreclosure or bankruptcy; provided, for purposes of this Agreement, necessary and appropriate legal application of such Monthly Payments shall include, but not be limited to, endorsement of a Monthly Payment to the Purchaser with the particulars of the payment such as the account number, dollar amount, date received and any special Mortgagor application instructions.

(h)   Misapplied Payments . Misapplied payments shall be processed as follows:

(i)   All parties shall cooperate in correcting misapplication errors;

(ii)   The party receiving notice of a misapplied payment occurring prior to the related Transfer Date and discovered after the related Transfer Date shall immediately notify the other party;

(iii)   If a misapplied payment which occurred prior to the related Transfer Date cannot be identified and said misapplied payment has resulted in a shortage in a Custodial Account or Escrow Account, the Seller shall be liable for the amount of such shortage. The Seller shall reimburse the Purchaser for the amount of such shortage within thirty (30) days after receipt of written demand therefor from the Purchaser;

(iv)   If a misapplied payment which occurred prior to the related Transfer Date has created an improper Purchase Price as the result of an inaccurate outstanding principal balance, a check shall be issued to the party shorted by the improper payment application within five (5) Business Days after notice thereof by the other party;

(v)   Any check issued under the provisions of this Section 5(h) shall be accompanied by a statement indicating the corresponding Seller and/or the Purchaser Mortgage Loan identification number and an explanation of the allocation of any such payments.

(i)   Books and Records . On the related Transfer Date, the books, records and accounts of the Seller with respect to the Mortgage Loans shall be in accordance with all applicable Purchaser requirements.

(j)   Reconciliation . The Seller or its designee shall, on or before the related Transfer Date, reconcile principal balances and make any monetary adjustments required by the Purchaser. Any such monetary adjustments will be transferred between the Seller or its designee and the Purchaser as appropriate.

(k)   IRS Forms . The Seller or its designee shall prepare and file all IRS forms 1098, 1099 and other applicable forms and reports which are required to be filed with respect to the period prior to the related Transfer Date in relation to the servicing and ownership of the Mortgage Loans. The Seller or its designee shall provide copies of such forms to the Purchaser upon request and shall reimburse the Purchaser for any costs or penalties incurred by the Purchaser due to the Seller’s or its designee’s failure to comply with this paragraph. The Purchaser or the Purchaser’s designee shall prepare and file all such reports with respect to any period commencing on or after the related Transfer Date.

(l)   Tax Service Contracts . With respect to each Mortgage Loan for which there is a tax service contract with an Approved Tax Service Contract Provider in effect on the related Transfer Date, the Seller shall assign such Tax Service Contract to the Purchaser or the Purchaser’s designee. In the event that the Seller is unable to assign the Tax Service Contract to the Purchaser or the Purchaser’s designee, the Seller shall purchase a Tax Service Contract and assign the same to the Purchaser or the Purchaser’s designee.

SECTION 6.   REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER .  

The Seller, as a condition to the consummation of the transactions contemplated hereby, hereby makes the following representations and warranties to the Purchaser as of the related Closing Date:

(a)   Due Organization and Authority . The Seller is a Maryland corporation duly organized, validly existing and in good standing under the laws of Maryland and has all licenses necessary to carry on its business as now being conducted and is licensed, qualified and in good standing in each state where a Mortgaged Property is located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by the Seller, and in any event the Seller is in compliance with the laws of any such state to the extent necessary to ensure the enforceability of the related Mortgage Loan in accordance with the terms of this Agreement; the Seller has the full corporate power and authority to execute and deliver this Agreement and to perform in accordance herewith; the execution, delivery and performance of this Agreement (including all instruments of transfer to be delivered pursuant to this Agreement) by the Seller and the consummation of the transactions contemplated hereby have been duly and validly authorized; this Agreement evidences the valid, binding and enforceable obligation of the Seller; and all requisite corporate action has been taken by the Seller to make this Agreement valid and binding upon the Seller in accordance with its terms;

(b)   Ordinary Course of Business . The consummation of the transactions contemplated by this Agreement are in the ordinary course of business of the Seller, and the transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by the Seller pursuant to this Agreement are not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction;

(c)   No Conflicts . Neither the execution and delivery of this Agreement, the acquisition of the Mortgage Loans by the Seller, the sale of the Mortgage Loans to the Purchaser or the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement, will conflict with or result in a breach of any of the terms, conditions or provisions of the Seller’s charter or by-laws or any legal restriction or any agreement or instrument to which the Seller is now a party or by which it is bound, or constitute a default or result in an acceleration under any of the foregoing, or result in the violation of any law, rule, regulation, order, judgment or decree to which the Seller or its property is subject, or impair the ability of the Purchaser to realize on the Mortgage Loans, or impair the value of the Mortgage Loans;

(d)   Ability to Perform . The Seller 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. The Seller is solvent and the sale of the Mortgage Loans will not cause the Seller to become insolvent. The sale of the Mortgage Loans is not undertaken with the intent to hinder, delay or defraud any of the Seller’s creditors;

(e)   No Litigation Pending . There is no action, suit, proceeding or investigation pending or threatened against the Seller which, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of the Seller, or in any material impairment of the right or ability of the Seller to carry on its business substantially as now conducted, or in any material liability on the part of the Seller, or which would draw into question the validity of this Agreement or the Mortgage Loans or of any action taken or to be taken in connection with the obligations of the Seller contemplated herein, or which would be likely to impair materially the ability of the Seller to perform under the terms of this Agreement;

(f)   No Consent Required . No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Seller of or compliance by the Seller with this Agreement or the Mortgage Loans, the delivery of a portion of the Mortgage Files to the Custodian or the sale of the Mortgage Loans to the Purchaser or the consummation of the transactions contemplated by this Agreement, or if required, such approval has been obtained prior to the related Closing Date;

(g)   Selection Process . The Mortgage Loans were not intentionally selected in a manner so as to affect adversely the interests of the Purchaser;

(h)   No Untrue Information . Neither this Agreement nor any statement, report or other document furnished or to be furnished pursuant to this Agreement or in connection with the transactions contemplated hereby contains any untrue statement of fact or omits to state a fact necessary to make the statements contained therein not misleading;

(i)   Sale Treatment . The Seller has determined that the disposition of the Mortgage Loans pursuant to this Agreement will be afforded sale treatment for accounting and tax purposes;

(j)   No Commissions to Third Parties . The Seller has not dealt with any broker or agent or anyone else who might be entitled to a fee or commission in connection with this transaction other than the Purchaser;

(k)   Pool Characteristics . The Seller represents and warrants that each of the representations and warranties contained in Exhibit 2 annexed to the related Assignment and Conveyance Agreement is true and correct.

(l)   Financial Statements . The Seller has delivered to the Purchaser (i) financial statements as to its last two complete fiscal years and any later quarter ended more than 60 days prior to the execution of this Agreement and (ii)such other financial statements as have been requested by Purchaser. All such financial statements fairly present the pertinent results of operations and changes in financial position at the end of each such period of the Seller and its subsidiaries and have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods involved, except as set forth in the notes thereto. In addition, the Seller has delivered information as to its loan gain and loss experience as requested by the Purchaser, in each case with respect to mortgage loans owned by it and such mortgage loans serviced for others during such period, and all such information so delivered is true and correct in all material respects. There has been no change in the business, operations, financial condition, properties or assets of the Seller since the date of the Seller’s financial statements that would have a material adverse effect on its ability to perform its obligations under this Agreement. The Seller has completed any forms requested by the Purchaser in a timely manner and in accordance with the provided instructions;

(m)   Fair Consideration . The consideration received by the Seller upon the sale of the Mortgage Loans under this Agreement constitutes fair consideration and reasonably equivalent value for the Mortgage Loans;

(n)   Net Worth . The Seller has a net worth not less than the minimum net worth required by FNMA and FHLMC for an entity to qualify as (i) an FNMA and FHLMC approved seller and (ii) an FNMA and FHLMC approved servicer.

SECTION 7.   REPRESENTATIONS AND WARRANTIES REGARDING INDIVIDUAL MORTGAGE LOANS .  

As to each Mortgage Loan, the Seller hereby represents and warrants to the Purchaser that as of the related Closing Date:

(a)   Mortgage Loans as Described . The information set forth in the Mortgage Loan Schedule is complete, true and correct;

(b)   Payments Current . All payments required to be made up to the related Closing Date for the Mortgage Loan under the terms of the Mortgage Note have been made and credited. No payment required under the Mortgage Loan is 30 days delinquent nor has any payment under the Mortgage Loan been delinquent for more than 30 days at any time. The first Monthly Payment due after the Cut-off Date shall be made with respect to the Mortgage Loan on its Due Date or within the grace period, all in accordance with the terms of the related Mortgage Note;

(c)   No Outstanding Charges . There are no defaults in complying with the terms of the Mortgage, and all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable. The Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage Loan proceeds, whichever is earlier, to the day which precedes by one month the Due Date of the first installment of principal and interest;

(d)   Original Terms Unmodified . The terms of the Mortgage Note and Mortgage have not been impaired, waived, altered or modified in any respect, except by a written instrument which has been recorded, if necessary to protect the interests of the Purchaser and which has been delivered to the Purchaser. The substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent required by the policy, and its terms are reflected on the Mortgage Loan Schedule. No Mortgagor has been released, in whole or in part, except in connection with an assumption agreement approved the title insurer, to the extent required by the policy, and which assumption agreement is part of the Mortgage Loan File delivered to the Purchaser and the terms of which are reflected in the Mortgage Loan Schedule;

(e)   No Defenses . The Mortgage Loan is not subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and no Mortgagor was a debtor in any state or federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was originated;

(f)   Hazard Insurance . Pursuant to the terms of the Mortgage, all buildings or other improvements upon the Mortgaged Property are insured by a generally acceptable insurer against loss by fire, hazards of extended coverage and such other hazards as are customary in the area where the Mortgaged Property is located pursuant to insurance policies conforming to the requirements of FNMA and FHLMC. If upon origination of the Mortgage Loan, the Mortgaged Property was in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) a flood insurance policy meeting the requirements of the current guidelines of the Federal Flood Insurance Administration is in effect which policy conforms to the requirements of FNMA and FHLMC. All individual insurance policies contain a standard mortgagee clause naming the Seller and its successors and assigns as mortgagee, and all premiums thereon have been paid. The Mortgage obligates the Mortgagor thereunder to maintain the hazard insurance policy at the Mortgagor’s cost and expense, and on the Mortgagor’s failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at such Mortgagor’s cost and expense, and to seek reimbursement therefor from the Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided the policy is not a “master” or “blanket” hazard insurance policy covering the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect and inure to the benefit of the Purchaser upon the consummation of the transactions contemplated by this Agreement. The Seller has not engaged in, and has no knowledge of the Mortgagor’s or any subservicer’s having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either, including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity, and no such unlawful items have been received, retained or realized by the Seller;

(g)   Compliance with Applicable Laws . Any and all requirements of any federal, state or local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan have been complied with, and the Seller shall maintain in its possession, available for the Purchaser’s inspection, and shall deliver to the Purchaser on the Transfer Date, evidence of compliance with all such requirements;

(h)   No Satisfaction of Mortgage . The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would effect any such release, cancellation, subordination or rescission. The Seller has not waived the performance by the Mortgagor of any action, if the Mortgagor’s failure to perform such action would cause the Mortgage Loan to be in default, nor has the Seller waived any default resulting from any action or inaction by the Mortgagor;

(i)   Location and Type of Mortgaged Property . The Mortgaged Property is a fee simple property located in the state identified in the Mortgage Loan Schedule and consists of a single parcel of real property with a detached single family residence erected thereon, or a two- to four-family dwelling, a townhouse, or an individual condominium unit in a condominium project, or an individual unit in a planned unit development, provided, however, that any condominium unit or planned unit development shall conform with the Underwriting Guidelines regarding such dwellings and that no residence or dwelling is a mobile home. Except as set forth in the related Purchase Price and Terms Letter, no Mortgage Loan is secured by real property with a manufactured dwelling thereon. No portion of the Mortgaged Property is used for commercial purposes;

(j)   Valid First Lien . The Mortgage is a valid, subsisting enforceable and perfected first lien and first priority security interest on the Mortgaged Property, including all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing. The lien of the Mortgage is subject only to:

(1)   the lien of current real property taxes and assessments not yet due and payable;

(2)   covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to mortgage lending institutions generally and specifically referred to in the lender’s title insurance policy delivered to the originator of the Mortgage Loan and (i) referred to or to otherwise considered in the appraisal made for the originator of the Mortgage Loan or (ii) which do not adversely affect the appraised value of the Mortgaged Property set forth in such appraisal; and

(3)   other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property.

Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting and enforceable first lien and first priority security interest on the property described therein and the Seller has full right to sell and assign the same to the Purchaser. The Mortgaged Property was not, as of the date of origination of the Mortgage Loan, subject to a mortgage, deed of trust, deed to secure debt or other security instrument creating a lien subordinate to the lien of the Mortgage;

(k)   Validity of Mortgage Documents . The Mortgage Note and the Mortgage are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms. All prepayment penalties with respect to the Mortgage Loans are legal, valid and enforceable. Each Mortgage Loan that contains a prepayment penalty provides that in the event such Mortgage Loan is in default, the amount of the prepayment penalty shall be included in the legal balance of the Mortgage Loan, and such provision is legal, valid and enforceable. All parties to the Mortgage Note and the Mortgage and any other related agreement had legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage and any other related agreement, and the Mortgage Note and the Mortgage and any other related agreement have been duly and properly executed by such parties. The documents, instruments and agreements submitted for loan underwriting were not falsified and contain no untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the information and statements therein not misleading. No fraud was committed in connection with the origination of the Mortgage Loan. The Seller has reviewed all of the documents constituting the Servicing File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein;

(l)   Full Disbursement of Proceeds . The Mortgage Loan has been closed and the proceeds of the Mortgage Loan have been fully disbursed and there is no requirement for future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage;

(m)   Ownership . The Seller is the sole owner of record and holder of the Mortgage Loan. The Mortgage Loan is not assigned or pledged, and the Seller has good and marketable title thereto, and has full right to transfer and sell the Mortgage Loan therein to the Purchaser free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority subject to no interest or participation of, or agreement with, any other party, to sell and assign each Mortgage Loan pursuant to this Agreement;

(n)   Doing Business . All parties which have had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (1) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (2) organized under the laws of such state, or (3) qualified to do business in such state, or (4) federal savings and loan associations or national banks having principal offices in such state, or (5) not doing business in such state;

(o)   LTV No Mortgage Loan had at origination a loan to value ratio in excess of 100%.

(p)   Title Insurance . The Mortgage Loan is covered by an ALTA lender’s title insurance policy or other generally acceptable form of policy of insurance acceptable to FNMA or FHLMC, issued by a title insurer acceptable to FNMA or FHLMC and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring the Seller, its successors and assigns, as to the first priority lien of the Mortgage in the original principal amount of the Mortgage Loan and against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment in the Mortgage Interest Rate and Monthly Payment, subject only to the exceptions contained in clauses (1), (2) and (3) of paragraph (j) of this Section 7. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such lender’s title insurance policy affirmatively insures ingress and egress, and against encroachments by or upon the Mortgaged Property or any interest therein. The Seller is the sole insured of such lender’s title insurance policy, and such lender’s title insurance policy is in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lender’s title insurance policy, and no prior holder of the Mortgage, including the Seller, has done, by act or omission, anything which would impair the coverage of such lender’s title insurance policy including without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity, and no such unlawful items have been received, retained or realized by the Seller;

(q)   No Defaults . There is no default, breach, violation or event of acceleration existing under the Mortgage or the Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither the Seller nor its predecessors have waived any default, breach, violation or event of acceleration;

(r)   No Mechanics’ Liens . There are no mechanics’ or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the related Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the related Mortgage;

(s)   Location of Improvements; No Encroachments . All improvements which were considered in determining the Appraised Value of the Mortgaged Property lay wholly within the boundaries and building restriction lines of the Mortgaged Property and no improvements on adjoining properties encroach upon the Mortgaged Property. No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning law or regulation;

(t)   Origination: Payment Terms . At the time the Mortgage Loan was originated, the originator was a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act or a savings and loan association, a savings bank, a commercial bank or similar banking institution which is supervised and examined by a Federal or State authority. With respect to Pool 3 Mortgage Loans, the Mortgage Interest Rate is the fixed interest rate set forth in the Mortgage Note. With respect to Pool 1 and Pool 2 Mortgage Loans, the Mortgage Interest Rate for each ARM Mortgage Loan is adjusted semi-annually (after the respective initial period) on each Interest Rate Adjustment Date to equal the Index plus the Gross Margin, rounded up or down to the nearest 0.125%, subject to the Periodic Rate Cap and the Lifetime Rate Cap. The Mortgage Note is payable in equal monthly installments of principal and interest sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty years from commencement of amortization;

(u)   Customary Provisions . The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise by judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustee’s sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and merchantable title to the Mortgaged Property. There is no homestead or other exemption available to the Mortgagor which would interfere with the right to sell the Mortgaged Property at a trustee’s sale or the right to foreclose the Mortgage subject to applicable federal and state laws and judicial precedent with respect to bankruptcy and right of redemption;

(v)   Conformance with Underwriting Guidelines . The Mortgage Loan was underwritten in accordance with the Underwriting Guidelines in effect at the time the Mortgage Loan was originated, a copy of which Underwriting Guidelines are attached as Exhibit J hereto. The Mortgage Note and Mortgage are on forms acceptable in the secondary market.

(w)   Occupancy of the Mortgaged Property . The Mortgaged Property is lawfully occupied under applicable law. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities;

(x)   No Additional Collateral . The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in (j) above;

(y)   Deeds of Trust . In the event the Mortgage constitutes a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by the Purchaser to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgagor;

(z)   Acceptable Investment . The Seller and the Purchaser acknowledge that the Mortgage Loans are subprime mortgage loans. The Seller has no knowledge of any additional circumstances or conditions with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor’s credit standing that can reasonably be expected to cause private institutional investors to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become delinquent, or adversely affect the value or marketability of the Mortgage Loan;

(aa)   Delivery of Mortgage