MASTER MORTGAGE LOAN PURCHASE AND INTERIM SERVICING AGREEMENT

Exhibit 99.1

 

 

MASTER MORTGAGE LOAN PURCHASE AND INTERIM SERVICING

AGREEMENT

 

FIRST NLC FINANCIAL SERVICES, LLC

as an Initial Purchaser

 

MHC I, INC.

as an Initial Purchaser

 

NLC FUNDING I, LLC

as an Initial Purchaser

 

NLC FINANCE I, LLC

as an Initial Purchaser

 

NLC FUNDING II, LLC

as an Initial Purchaser

 

NLC FINANCE II, LLC

as an Initial Purchaser

 

[ - ]

Seller and Interim Servicer

 

Dated as of ___________

 

Fixed and Adjustable Rate Mortgage Loans

 

TABLE OF CONTENTS

 

 

i

 

ii

EXHIBITS

 

 

iii

MASTER MORTGAGE LOAN PURCHASE AND INTERIM SERVICING AGREEMENT

 

This is a MASTER MORTGAGE LOAN PURCHASE AND INTERIM SERVICING AGREEMENT (the “Agreement”), dated as of ______________, by and among First NLC Financial Services, LLC (“First NLC”), MHC I, Inc. (“MHC I”), NLC Finance I, LLC (“NLC Finance I”), NLC Funding I, LLC (“NLC Funding I”), NLC Finance II, LLC (“NLC Finance II”) and NLC Funding II, LLC (“NLC Funding II”), each having an office at 1001 Nineteenth Street North, Arlington, Virginia 22209 (each of First NLC, MHC I, NLC Finance I, NLC Funding I NLC Finance II, NLC Funding II and any affiliate of First NLC, MHC I, NLC Finance I, NLC Funding I NLC Finance II or NLC Funding II designated as Initial Purchaser in the related Trade Confirmation and, in the case of any affiliate of First NLC, MHC I, NLC Finance I, NLC Funding I NLC Finance II or NLC Funding II, the related Letter Agreement (each, as defined herein), an “Initial Purchaser”, and the Initial Purchaser or the Person, if any, to which the Initial Purchaser has assigned its rights and obligations hereunder as Purchaser with respect to a Mortgage Loan, and each of their respective successors and assigns, the “Purchaser”) and [ - ], having an office at [ - ] (the “Seller”).

 

WITNESSETH:

 

WHEREAS, the Seller desires to sell, from time to time, to the Purchaser, and the Purchaser desires to purchase, from time to time, from the Seller, certain fixed and adjustable rate residential first and second lien mortgage loans (the “Mortgage Loans”) as described herein on a servicing-released basis, and which shall be delivered in groups of whole loans on various dates as provided in the related Trade Confirmation (each, a “Closing Date”);

 

WHEREAS, each Mortgage Loan is secured by a mortgage, deed of trust or other security instrument creating a first or second lien on a residential dwelling located in the jurisdiction indicated on the Final Mortgage Loan Schedule for the related Mortgage Loan Package, which is to be annexed to the related Warranty Bill of Sale on each Closing Date;

 

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

 

WHEREAS, following its purchase of the Mortgage Loans from the Seller, the Purchaser desires to sell some or all of the Mortgage Loans to one or more purchasers as a whole loan transfer in a whole loan or participation format or a public or private mortgage-backed securities transaction.

 

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 . For purposes of this Agreement the following capitalized terms shall have the respective meanings set forth below.

 

Adjustable Rate Mortgage Loan : A Mortgage Loan which provides for the adjustment of the Mortgage Interest Rate payable in respect thereto.

 

1

Adjustment Date : With respect to each Adjustable Rate Mortgage Loan, the date set forth in the related Mortgage Note on which the Mortgage Interest Rate on such Adjustable Rate Mortgage Loan is adjusted in accordance with the terms of the related Mortgage Note.

 

Agreement : This Master Mortgage Loan Purchase and Interim Servicing Agreement including all exhibits, schedules, amendments and supplements hereto.

 

Appraised Value : As defined in the Underwriting Guidelines delivered on each Closing Date.

 

Assignment and Recognition Agreements : The agreement or agreements entered into by the Seller and the Purchaser and/or certain third parties on the Reconstitution Date or Dates with respect to any or all of the Mortgage Loans serviced hereunder, in connection with a Whole Loan Transfer or a Pass-Through Transfer as provided in Section 12.

 

Assignment of Mortgage : An individual 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 give record notice of the sale of the Mortgage to the Purchaser.

 

Balloon Loan : A Mortgage Loan identified on the Mortgage Loan Schedule as a balloon mortgage loan.

 

Business Day : Any day other than a Saturday or Sunday, or a day on which banking and savings and loan institutions in the State of [ - ], the State of [ - ], [ - ] or the State of [ - ] are authorized or obligated by law or executive order to be closed.

 

Buydown Mortgage Loan : A Mortgage Loan that contains provisions pursuant to which Monthly Payments are (a) paid or partially paid with funds deposited in any separate account established by the Seller, the Mortgagor, or anyone on behalf of the Mortgagor, (b) paid by any source other than the Mortgagor or (c) contains any other similar provisions which may constitute a “buydown” provision.

 

Closing Date : The date or dates on which the Purchaser from time to time shall purchase and the Seller from time to time shall sell to the Purchaser, the Mortgage Loans listed on the related Final Mortgage Loan Schedule with respect to the related Mortgage Loan Package.

 

Closing Documents : With respect to any Closing Date, the documents required pursuant to Section 9.

 

Code : The Internal Revenue Code of 1986, as amended, or any successor statute thereto.

 

Combined Loan-to-Value Ratio or CLTV : With respect to any Mortgaged Property, the fraction, expressed as a percentage, the numerator of which is the sum of (a) the unpaid principal balance of the first lien mortgage loan secured by such Mortgaged Property, plus (b) the unpaid principal balance of any related second lien mortgage loan or loans secured by such Mortgaged Property, and the denominator of which is the Appraised Value of the related Mortgaged Property.

 

2

Condemnation Proceeds : All awards, compensation and settlements in respect of a taking of all or part of a Mortgaged Property by exercise of the power of condemnation or the right of eminent domain.

 

Convertible Mortgage Loan : A Mortgage Loan that by its terms and subject to certain conditions contained in the related Mortgage or Mortgage Note allows the Mortgagor to convert the adjustable Mortgage Interest Rate on such Mortgage Loan to a fixed Mortgage Interest Rate.

 

Co-op : A private, cooperative housing corporation, having only one class of stock outstanding, which owns or leases land and all or part of a building or buildings, including apartments, spaces used for commercial purposes and common areas therein and whose board of directors authorizes the sale of stock and the issuance of a Co-op Lease.

 

Co-op Lease : With respect to a Co-op Loan, the lease with respect to a dwelling unit occupied by the Mortgagor and relating to the stock allocated to the related dwelling unit.

 

Co-op Loan : A Mortgage Loan secured by the pledge of stock allocated to a dwelling unit in a Co-op and a collateral assignment of the related Co-op Lease.

 

Custodial Account : One or more accounts created and maintained pursuant to Exhibit 8, which accounts the parties hereto intend to be a “special deposit account” and shall be held in trust for the Purchaser by the depository institution maintaining such accounts in a fiduciary capacity, separate and apart from its funds or general assets and shall not be held in any capacity that would create a debtor-creditor relationship between the depository institution maintaining the accounts and the Seller or Purchaser.

 

Custodial Agreement : The custodial agreement between each Initial Purchaser and the Custodian, governing the retention of the originals of the Mortgage Loan Documents.

 

Custodian : The custodian designated by the Initial Purchaser under the Custodial Agreement, or its successor in interest or assigns, or any successor to the Custodian under the Custodial Agreement.

 

Cut-off Date : The first day of the month in which the related Closing Date occurs or as otherwise set forth in the related Trade Confirmation.

 

Deleted Mortgage Loan : A Mortgage Loan replaced or to be replaced with a Qualified Substitute Mortgage Loan in accordance with this Agreement.

 

Determination Date : With respect to each Remittance Date, the date which is three (3) Business Days prior to such Remittance Date.

 

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

 

Eligible Account : Either (a) a Custodial Account maintained with a depository institution whose deposits are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC, the unsecured and uncollateralized debt obligations of which shall be rated

 

3

“AA” or better by S&P and “Aa2” or better by Moody’s and in the highest short-term rating category by S&P and the highest short term rating category by Moody’s, or (b) a segregated trust account maintained with the corporate trust department of a depository institution, which has corporate trust powers acting in its fiduciary capacity, and shall be subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulations Section 9.10(b)), and, in either case, which is either (i) a federal savings and loan association duly organized, validly existing and in good standing under the federal banking laws, (ii) an institution duly organized, validly existing and in good standing under the applicable banking laws of any state; or (iii) a national banking association duly organized, validly existing and in good standing under the federal banking laws.

 

Eligible Investment : Any one or more of the obligations and securities listed below which investment provides for a date of maturity not later than the Remittance Date in each month:

 

(a) direct obligations of or obligations fully guaranteed by, (i) the United States of America, or (ii) any agency or instrumentality of the United States of America, the obligations of which are backed by the full faith and credit of the United States of America;

 

(b) federal funds, demand, money market, or time deposits in, certificates of deposits of, or banker’s acceptances issued by any depository institution or trust company incorporated or organized under the laws of the United States of America or any state thereof, subject to supervision and examination by federal and/or state banking authorities, and, at the time of such investment or contractual commitment providing for such investment, whose commercial paper or other short-term debt obligations (or, in the case of a depository institution or trust company that is a subsidiary of a holding company, the commercial paper or other short-term debt obligations of such holding company) is rated “P-1” by Moody’s and “A-1” by S&P and whose long-term debt obligations (or, in the case of a depository institution that is a subsidiary of a holding company, the long-term debt obligations of such holding company) are rated at least “Aa2” by Moody’s and “AA” by S&P (collectively, with all other rating categories set out in this paragraph, the “Investment Ratings”).

 

Notwithstanding the foregoing, Eligible Investments shall not include (i) “stripped securities,” (ii) any investments which contractually may return less than the unpaid principal balance therefor, or (iii) a direct purchase of commercial paper from the issuer.

 

Escrow Account : One or more accounts created and maintained pursuant to Exhibit 8.

 

Escrow Payments : The amounts constituting ground rents, taxes, assessments, water charges, sewer rents, premiums, fire and hazard insurance premiums and other payments required to be escrowed by the Mortgagor with the Mortgagee pursuant to the terms of any Mortgage Note or Mortgage.

 

Event of Default : Any one of the events enumerated in Subsection 14.01.

 

Fannie Mae : The Federal National Mortgage Association or any successor thereto.

 

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

 

4

Final Mortgage Loan Schedule : With respect to each Mortgage Loan Package, the schedule of Mortgage Loans to be annexed to the related Warranty Bill of Sale on each Closing Date for the Mortgage Loan Package delivered on such Closing Date in both hard copy and electronic file, such schedule setting forth such information as the Purchaser shall reasonably request.

 

Final Recovery Determination : With respect to any defaulted Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property purchased by the Seller pursuant to this Agreement), a determination made by the Seller that all Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which the Seller, in its reasonable good faith judgment, expects to be finally recoverable in respect thereof have been so recovered. The Seller shall maintain records, prepared by a servicing officer of the Seller, of each Final Recovery Determination.

 

First Lien : With respect to each Mortgaged Property, the lien of the mortgage, deed of trust or other instrument securing a Mortgage Note which creates a first lien on the Mortgaged Property.

 

Fixed Rate Mortgage Loan : A Mortgage Loan with respect to which the Mortgage Interest Rate set forth in the Mortgage Note is fixed for the term of such Mortgage Loan.

 

Flood Zone Service Contract : A transferable contract maintained for the Mortgaged Property with a nationally recognized flood zone service provider for the purpose of obtaining the current flood zone status relating to such Mortgaged Property.

 

Freddie Mac : The Federal Home Loan Mortgage Corporation or any successor thereto.

 

HUD : The United States Department of Housing and Urban Development or any successor thereto.

 

Index : With respect to any Adjustable Rate Mortgage Loan, the index identified on the Final Mortgage Loan Schedule and set forth in the related Mortgage Note for the purpose of calculating the interest rate thereon.

 

Ineligible Loan : Any Mortgage Loan that is ineligible for purchase as defined in the related Trade Confirmation.

 

Initial Closing Date : The Closing Date on which the Initial Purchaser purchases and the Seller sells the first Mortgage Loan Package hereunder.

 

Initial Purchaser : Each of First NLC, MHC I, NLC Funding I, NLC Finance I, NLC Funding II, NLC Finance II or any successor.

 

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

 

5

Interest-Only Adjustment Date : With respect to each Interest-Only Mortgage Loan, the date specified in the related Mortgage Note on which the Monthly Payment will be adjusted to include principal as well as interest.

 

Interest-Only Mortgage Loan : A Mortgage Loan which only requires payments of interest for a period of time specified in the related Mortgage Note.

 

Interim Servicing Period : With respect to any Mortgage Loan, the period commencing on the related Closing Date and ending on the related Servicing Transfer Date.

 

Liquidation Proceeds : Amounts, other than Insurance Proceeds and Condemnation Proceeds, received in connection with the liquidation of a defaulted Mortgage Loan through trustee’s sale, foreclosure sale or otherwise, other than amounts received following the acquisition of REO Property.

 

Loan-to-Value Ratio or LTV : With respect to (i) any first lien mortgage loan as of any date of determination, the ratio on such date of the outstanding principal amount of such mortgage loan to the Appraised Value of the Mortgaged Property and (ii) any second lien mortgage loan, the CLTV of such mortgage loan.

 

Maximum Mortgage Interest Rate : With respect to each Adjustable Rate Mortgage Loan, a rate that is set forth on the related Final Mortgage Loan Schedule and in the related Mortgage Note and is the maximum interest rate to which the Mortgage Interest Rate on such Mortgage Loan may be increased on any Adjustment Date.

 

MERS : Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.

 

MERS Loan : Any Mortgage Loan registered with MERS on the MERS System.

 

MERS System : The system of recording transfers of mortgages electronically maintained by MERS.

 

MIN : The Mortgage Identification Number for any MERS Loan.

 

Minimum Mortgage Interest Rate : With respect to each Adjustable Rate Mortgage Loan, to the extent applicable a rate that is set forth on the related Final Mortgage Loan Schedule and in the related Mortgage Note and is the minimum interest rate to which the Mortgage Interest Rate on such Mortgage Loan may be decreased on any Adjustment Date.

 

MOM Loan : Any Loan as to which MERS is acting as mortgagee, solely as nominee for the originator of such Loan and its successors and assigns.

 

Monthly Payment : With respect to any Mortgage Loan other than an Interest-Only Mortgage Loan, the scheduled combined payment of principal and interest payable by a Mortgagor under the related Mortgage Note on each Due Date; or, with respect to Interest-Only Mortgage Loans, the scheduled payment of principal and/or interest payable by a Mortgagor under the related Mortgage Note on each Due Date.

 

6

Moody’s : Moody’s Investors Service, Inc. or its successor in interest.

 

Mortgage : The mortgage, deed of trust or other instrument creating a first lien or second lien on Mortgaged Property securing the Mortgage Note.

 

Mortgagee : The mortgagee or beneficiary named in the Mortgage and the successors and assigns of such mortgagee or beneficiary.

 

Mortgage File: The items pertaining to a particular Mortgage Loan referred to in Exhibit 5 annexed hereto, and any additional documents required to be added to the Mortgage File pursuant to this Agreement or the related Trade Confirmation.

 

Mortgage Interest Rate : With respect to each Fixed Rate Mortgage Loan, the fixed annual rate of interest provided for in the related Mortgage Note and, with respect to each Adjustable Rate Mortgage Loan, the annual rate that interest accrues on such Adjustable Rate Mortgage Loan from time to time in accordance with the provisions of the related Mortgage Note.

 

Mortgage Loan : Each first or second lien, residential mortgage loan sold, assigned and transferred to the Purchaser pursuant to this Agreement and the related Trade Confirmation and identified on the Final Mortgage Loan Schedule annexed to the related Warranty Bill of Sale on the related Closing Date, which Mortgage Loan includes without limitation the Mortgage File, the Monthly Payments, Principal Prepayments, Prepayment Charges, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition proceeds, and all other rights, benefits, proceeds and obligations arising from or in connection with such Mortgage Loan.

 

Mortgage Loan Documents : The following documents:

 

(a) The original Mortgage Note endorsed, “Pay to the order of ____________, without recourse” and signed in the name of the Seller by an authorized officer of the Seller. If the Mortgage Loan was acquired by the Seller in a merger or other type of acquisition, the endorsement must be by “[Seller], successor [by merger to or in interest to, as applicable] [name of predecessor]”; and if the Mortgage Loan was acquired or originated by the Seller while doing business under another name, the endorsement must be by “[Seller], successor in interest to [previous name].” The Mortgage Note shall include all intervening endorsements showing a complete chain of title from the originator to the Seller;

 

(b) Except as provided below and for each Mortgage Loan that is not a MERS Loan, the original recorded Mortgage, with evidence of recording thereon, or, if the original Mortgage has not yet been returned from the recording office, a copy of the original Mortgage certified by the closing agent to be a true copy of the original of the Mortgage that has been delivered for recording in the appropriate recording office of the jurisdiction in which the Mortgaged Property is located and in the case of each MERS Loan, the original Mortgage, noting the presence of the MIN of the MERS Loan and either language indicating that the Mortgage Loan is a MOM Loan or if the Mortgage Loan was not a MOM Loan at origination, the original Mortgage and the assignment thereof to MERS, with evidence of recording indicated thereon, or a copy of the Mortgage certified by the public recording office in which such Mortgage has been recorded;

 

7

(c) In the case of each Mortgage Loan that is not a MERS Loan, the original Assignment of each Mortgage, executed in blank. If the Mortgage Loan was acquired by the Seller in a merger or other type of acquisition, the assignment must be by “[Seller], successor [by merger to or in interest to, as applicable] [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 “[Seller], successor in interest to [previous name]”;

 

(d) The original policy of title insurance (or a preliminary title report if the original title insurance policy has not been received from the title insurance company);

 

(e) Originals of any intervening assignments of the Mortgage, with evidence of recording thereon or, if the original intervening assignment has not yet been returned from the recording office, a copy of such assignment certified to be a true copy of the original of the assignment which has been sent for recording in the appropriate jurisdiction in which the Mortgaged Property is located; and

 

(f) Originals of all assumption and modification agreements, if any.

 

Mortgage Loan Package : The Mortgage Loans listed on a Final Mortgage Loan Schedule, delivered to the Custodian and the Purchaser as set forth in the Custodial Agreement.

 

Mortgage Note : The original executed note or other evidence of the Mortgage Loan indebtedness of a Mortgagor.

 

Mortgaged Property : The Mortgagor’s real property securing repayment of a related Mortgage Note, consisting of a fee simple interest or leasehold estate in a single parcel of real property improved by a Residential Dwelling.

 

Mortgagor : The obligor on a Mortgage Note, the owner of the Mortgaged Property and the grantor or Mortgagor named in the related Mortgage and such grantor’s or Mortgagor’s successor’s in title to the Mortgaged Property.

 

Nonrecoverable Servicing Advance : Any Servicing Advance previously made or proposed to be made in respect of a Mortgage Loan or REO Property which, in the good faith judgment of the Seller, as servicer, after taking into account other preexisting liens and claims against such proceeds, will not or, in the case of a proposed advance, would not be ultimately recoverable from related late payments, Insurance Proceeds, Condemnation Proceeds, or Liquidation Proceeds on such Mortgage Loan or REO Property as provided herein.

 

Officer’s Certificate : A certificate signed by the Chairman of the Board or the Vice Chairman of the Board or a President, a Vice President, or an Assistant Vice President and by the Treasurer or the Secretary or one of the Assistant Treasurers or Assistant Secretaries of the Person on behalf of whom such certificate is being delivered.

 

Opinion of Counsel : A written opinion of counsel, who may be salaried counsel for the Person on behalf of whom the opinion is being given, reasonably acceptable to each Person to whom such opinion is addressed.

 

8

Pass-Through Transfer : The sale or transfer of some or all of the Mortgage Loans by the Purchaser to a trust or other entity to be formed as part of a publicly issued or privately placed mortgage-backed securities transaction.

 

Permanent Servicer : With respect to any Mortgage Loans, the Person (which Person may include the Seller in the Purchaser’s sole discretion) appointed by the Purchaser as successor to the Seller as interim servicer pursuant to a Permanent Servicing Agreement.

 

Permanent Servicing Agreement : With respect to any Mortgage Loans, the pooling and servicing agreement, sale and servicing agreement, servicing agreement or any similar document or agreement pursuant to which the Purchaser designates a Permanent Servicer with respect to such Mortgage Loans and such Permanent Servicer accepts such appointment.

 

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

 

Preliminary Mortgage Loan Schedule : The schedule of Mortgage Loans delivered by the Seller pursuant to Section 3 hereof containing such information as the Purchaser shall reasonably request.

 

Prepayment Charge : With respect to any Mortgage Loan, the premiums, fees, or charges, if any, due in connection with a full or partial prepayment of such Mortgage Loan in accordance with the terms thereof.

 

Primary Mortgage Insurance Policy : A policy of primary mortgage guaranty insurance issued by a Qualified Insurer.

 

Principal Prepayment : Any payment or other recovery of principal on a Mortgage Loan which is received in advance of its scheduled Due Date, including any Prepayment Charge, which is not accompanied by an amount of interest representing scheduled interest due on any date or dates in any month or months subsequent to the month of prepayment.

 

Purchase Price : The price paid on the related Closing Date by the Purchaser to the Seller pursuant to the related Trade Confirmation in exchange for the Mortgage Loans purchased on such Closing Date as calculated as provided in Section 4.

 

Purchase Price Percentage : The percentage of par as stated in the related Trade Confirmation (subject to adjustment as provided therein).

 

Qualified Depository : Any institution offering an Eligible Account.

 

Qualified Insurer : Any insurer which meets the Underwriting Guidelines.

 

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, be approved by the Purchaser (such approval not to be unreasonably withheld) and (i) have an outstanding principal balance, after deduction of all scheduled payments due in the month of substitution (or

 

9

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 (the amount of any shortfall will be deposited in the Custodial Account by the Seller in the month of substitution); (ii) have a Mortgage Interest Rate not less than and not more than one percent (1%) 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 (1) year less than that of the Deleted Mortgage Loan (iv) be of the same type as the Deleted Mortgage Loan (i.e., fixed rate or adjustable rate with same Maximum Mortgage Interest Rate and Index); (v) comply as of the date of substitution with each representation and warranty set forth in Section 7.02 of this Agreement; (vi) be current in the payment of principal and interest; (vii) be secured by a Mortgaged Property of the same type and occupancy status as secured the Deleted Mortgage Loan; (viii) have payment terms that do not vary in any material respect from those of the Deleted Mortgage Loan; (ix) have the same or higher credit quality characteristics than that of the Deleted Mortgage Loan; and (x) have a Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan.

 

Reconstitution Date : The date or dates on which any or all of the Mortgage Loans serviced under this Agreement shall be removed from this Agreement and reconstituted as part of a Whole Loan Transfer or Pass-Through Transfer pursuant to Section 12 hereof.

 

Record Date : With respect to each Remittance Date, the last Business Day of the month immediately preceding the month in which such Remittance Date occurs.

 

Refinanced Mortgage Loan : A Mortgage Loan the proceeds of which were not used to purchase the related Mortgaged Property.

 

REMIC : A “real estate mortgage investment conduit” within the meaning of Section 860D of the Code.

 

REMIC Provisions : Provisions of the federal income tax law relating to REMICs, which appear in Sections 860A through 860G of the Code, and related provisions, and proposed, temporary and final regulations and published rulings, notices and announcements promulgated thereunder, as the foregoing may be in effect from time to time.

 

Remittance Date : The [ - ] Business Day of each month.

 

REO Account : The separate trust account or accounts created and maintained pursuant to this Agreement which shall be entitled “[Seller], in trust for ***, as of [date of acquisition of title], Fixed and Adjustable Rate Mortgage Loans”.

 

REO Disposition : The final sale by the Seller of any REO Property.

 

REO Property : A Mortgaged Property acquired as a result of the liquidation of a Mortgage Loan.

 

Repurchase Price : As set forth in the related Trade Confirmation.

 

10

Residential Dwelling : Any one of the following: (i) a detached one-family dwelling, (ii) a detached two- to four-family dwelling, (iii) a one-family dwelling unit in a condominium project in accordance with the Underwriting Guidelines, or (iv) a detached one-family dwelling in a planned unit development, none of which is a Co-op, mobile or manufactured home other than manufactured housing that is deemed real property under applicable state law.

 

Second Lien : With respect to each Mortgaged Property, the lien of the mortgage, deed of trust or other instrument securing a Mortgage Note which creates a second lien on the Mortgaged Property.

 

Second Lien Mortgage Loan : A Mortgage Loan secured by the lien on the Mortgaged Property, subject to one prior lien on such Mortgaged Property securing financing obtained by the related Mortgagor.

 

Servicing Addendum : The terms and conditions attached hereto as Exhibit 8 which will govern the servicing of the Mortgage Loans by Seller during the Interim Servicing Period.

 

Servicing Advances : All customary, reasonable and necessary “out-of-pocket” costs and expenses incurred by the Seller in the performance of its servicing obligations, including, but not limited to, the cost of (i) preservation, restoration and repair of a Mortgaged Property, (ii) any enforcement or judicial proceedings with respect to a Mortgage Loan, including foreclosure actions and (iii) the management and liquidation of REO Property.

 

Servicing Fee : With respect to each Mortgage Loan, the amount of the annual servicing fee the Purchaser shall pay to the Seller, which shall, for each month during the Interim Servicing Period, be equal to one-twelfth of the product of (a) the Servicing Fee Rate and (b) the unpaid principal balance of the Mortgage Loan as of the first day of each such month (or, in the case of the first month, as of the related Closing Date). Such fee shall be payable monthly, computed on the basis of the same principal amount and period respectively which any related interest payment on a Mortgage Loan is computed. The obligation of the Purchaser to pay the Servicing Fee is limited to, and payable solely from, the interest portion (including recoveries with respect to interest from Liquidation Proceeds and other proceeds, to the extent permitted by Section 11.06) of the related Monthly Payment collected by the Seller, or as otherwise provided under Section 11.06. If the Interim Servicing Period includes any partial month, the Servicing Fee for such month shall be pro rated at a per diem rate based upon the actual number of days elapsed. The Servicing Fee shall accrue and be payable only in respect of the Interim Servicing Period.

 

Servicing Fee Rate : The per annum rate set forth in the related Trade Confirmation at which the Servicing Fee accrues.

 

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 Custodian and copies of the Mortgage Loan Documents.

 

11

Servicing Transfer Date : With respect to any Mortgage Loan, the date specified on the related Trade Confirmation on which servicing of the Mortgage Loan is transferred from the Seller to a Permanent Servicer.

 

S&P : Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. or its successor in interest.

 

Stated Principal Balance : As to each Mortgage Loan as of any date of determination, (i) the principal balance of the Mortgage Loan as of the Cut-off Date after giving effect to payments of principal due before such date whether or not collected from the Mortgagor 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.

 

Tax Service Contract : A transferable contract maintained for the Mortgaged Property with a tax service provider for the purpose of obtaining current information from local taxing authorities relating to such Mortgaged Property.

 

Trade Confirmation : With respect to any Mortgage Loan Package purchased and sold on any Closing Date, the letter agreement between the Purchaser and the Seller, in the form annexed hereto as Exhibit 9 (including any exhibits, schedules and attachments thereto) or as shall be agreed upon by the parties from time to time, setting forth the terms and conditions of such transaction and describing the Mortgage Loans to be purchased by the Purchaser on such Closing Date. A Trade Confirmation may relate to more than one Mortgage Loan Package to be purchased on one or more Closing Dates hereunder.

 

Underwriting Guidelines : The underwriting guidelines of the Seller in effect on the Closing Date.

 

Warranty Bill of Sale : A Warranty Bill of Sale with respect to the Mortgage Loans purchased on a Closing Date in the form annexed hereto as Exhibit 4 .

 

Whole Loan Transfer : Any sale or transfer of some or all of the Mortgage Loans by the Purchaser to a third party, which sale or transfer is not a Pass-Through Transfer.

 

SECTION 2. Agreement to Purchase . The Seller agrees to sell, and the Purchaser agrees to purchase, from time-to-time, Mortgage Loans having an aggregate principal balance on the related Cut-off Date in an amount as set forth in the related Trade Confirmation, or in such other amount as agreed by the Purchaser and the Seller as evidenced by the actual aggregate principal balance of the Mortgage Loans accepted by the Purchaser on the related Closing Date. The obligation of the Purchaser to purchase any Mortgage Loan from the Seller on any particular Closing Date shall be subject to the satisfaction of the conditions precedent to the Purchaser’s obligation to purchase set forth in Section 8.

 

SECTION 3. Mortgage Loan Schedules . Prior to the date on which the Seller and the Purchaser execute a Trade Confirmation, the Seller shall provide the Purchaser with the Preliminary Mortgage Loan Schedule. The Seller shall deliver the Final Mortgage Loan Schedule for a Mortgage Loan Package to be purchased on a particular Closing Date to the

 

12

Purchaser at least five (5) Business Days prior to the related Closing Date, or as soon thereafter as the Purchaser has finalized the list of mortgage loans it intends to purchase on such Closing Date.

 

SECTION 4. Purchase Price . The Purchase Price for each Mortgage Loan listed on the related Final Mortgage Loan Schedule shall be the Purchase Price Percentage multiplied by its outstanding principal balance as of the related Cut-off Date. If so provided in the related Trade Confirmation, portions of the Mortgage Loans shall be priced separately.

 

In addition to the Purchase Price as described above, the Initial Purchaser shall pay to the Seller, at closing, accrued interest on the outstanding principal balance of each Mortgage Loan as of the related Cut-off Date at the Mortgage Interest Rate, from the related Cut-off Date through the day prior to the related Closing Date, both inclusive.

 

The Purchaser shall own and be entitled to receive with respect to each Mortgage Loan purchased, (1) all scheduled principal due on and after the related Cut-off Date, (2) all other recoveries of principal and any Prepayment Charges collected after the related Cut-off Date (provided, however, that all scheduled payments of principal due on or before the related Cut-off Date and collected by the Seller after the related Cut-off Date shall belong to the Seller), and (3) all payments of interest on the Mortgage Loans net of the Servicing Fee (minus that portion of any such interest payment that is allocable to the period prior to the related Cut-off Date).

 

SECTION 5. Examination of Mortgage Files . In addition to the rights granted to the Initial Purchaser under the related Trade Confirmation to underwrite the Mortgage Loans and review the Mortgage Files prior to the Closing Date, the Seller shall, prior to the related Closing Date, (a) deliver to the Custodian in escrow, for examination with respect to each Mortgage Loan to be purchased on such Closing Date, the related Mortgage File, including the Assignment of Mortgage for any Mortgage Loan not registered in the MERS System, pertaining to each Mortgage Loan, or (b) make the related Mortgage File available to the Initial Purchaser for examination at the Seller’s offices or such other location as shall otherwise be agreed upon by the Initial Purchaser and the Seller. Such examination may be made by the Initial Purchaser or its designee at any reasonable time before or after the related Closing Date. If the Initial Purchaser makes such examination prior to the related Closing Date and identifies any Mortgage Loans that do not conform to the terms of the related Trade Confirmation or the Underwriting Guidelines, such Mortgage Loans may, at the Initial Purchaser’s option, be rejected for purchase by the Initial Purchaser or the Initial Purchaser may elect to delete such Mortgage Loans from the related Mortgage Loan Schedule, and such Deleted Mortgage Loan (or Loans) may be replaced by a Qualified Substitute Mortgage Loan (or Loans); provided, that the Purchaser must consent to the substitution of any Qualified Substitute Mortgage Loan (such consent not to be unreasonably withheld). The Initial Purchaser may, at its option and without notice to the Seller, purchase all or part of any Mortgage Loan Package without conducting any partial or complete examination. The fact that the Initial Purchaser has conducted or has determined not to conduct any partial or complete examination of the Mortgage Files shall not affect the Initial Purchaser’s (or any of its successors’) rights to demand repurchase or other relief or remedy provided for in this Agreement.

 

13

SECTION 6. Conveyance from Seller to Initial Purchaser .

 

Subsection

6.01  Conveyance of Mortgage Loans; Possession of Servicing Files.

 

The Seller, simultaneously with the payment of the Purchase Price, shall execute and deliver to each Initial Purchaser a Warranty Bill of Sale with respect to the related Mortgage Loan Package in the form attached hereto as Exhibit 4 The Servicing File retained by the Seller with respect to each Mortgage Loan pursuant to this Agreement shall be appropriately identified in the Seller’s computer system to reflect clearly the sale of such related Mortgage Loan to the Purchaser. The Seller shall release from its custody the contents of any Servicing File retained by it only in accordance with this Agreement, except when such release is required in connection with a repurchase of any such Mortgage Loan pursuant to Subsection 7.03 or 7.04.

 

In addition, in connection with the assignment of any MERS Loan, the Seller agrees that on each Closing Date, once the payment of the Purchase Price has been made by the Purchaser to the Seller, it will give notice to cause, at its own expense, the MERS System to indicate that the related Mortgage Loans have been assigned by the Seller to the Purchaser in accordance with this Agreement by including in such computer files the information required by the MERS System to identify the Purchaser as owner of such Mortgage Loans.

 

Subsection

6.02 Books and Records.

 

Record title to each Mortgage as of the related Closing Date shall be in the name of the Seller or MERS as the nominee for the Seller. Notwithstanding the foregoing, upon payment of the related Purchase Price, beneficial ownership of each Mortgage and the related Mortgage Note shall be vested solely in the Purchaser or the appropriate designee of the Purchaser, as the case may be. All rights arising out of the Mortgage Loans including, but not limited to, all funds received by the Seller after the related Cut-off Date on or in connection with a Mortgage Loan as provided in Section 4 shall be vested in the Purchaser or one or more designees of the Purchaser; provided, however, that all such funds received on or in connection with a Mortgage Loan as provided in Section 4 shall be received and held by the Seller in trust for the benefit of the Purchaser or the assignee of the Purchaser, as the case may be, as the owner of the Mortgage Loans pursuant to the terms of this Agreement.

 

It is the express intention of the parties that the transactions contemplated by this Agreement be, and be construed as, a sale of the Mortgage Loans by the Seller and not a pledge of the Mortgage Loans by the Seller to the Purchaser to secure a debt or other obligation of the Seller. Consequently, the sale of each Mortgage Loan shall be reflected as a sale on the Seller’s business records, tax returns and financial statements.

 

Subsection

6.03 Delivery of Mortgage Loan Documents.

 

The Seller shall from time to time in connection with each Closing Date, at least five (5) Business Days prior to such Closing Date, deliver to the Custodian the Mortgage Loan Documents with respect to each Mortgage Loan to be purchased and sold on the related Closing Date and set forth on the related Final Mortgage Loan Schedule delivered with such Mortgage Loan Documents.

 

14

The Custodian shall certify its receipt of all such Mortgage Loan Documents for the related Closing Date, pursuant to an initial custody receipt and initial certification of the Custodian. The Purchaser shall be responsible for maintaining the Custodial Agreement during the Interim Servicing Period. The fees and expenses of the Custodian shall be paid by the Purchaser.

 

The Seller shall forward to the Custodian original documents evidencing an assumption, modification, consolidation or extension of any Mortgage Loan entered into in accordance with this Agreement within two weeks of their execution, provided, however, that the Seller shall provide the Custodian with a certified true copy of any such document submitted for recordation within two weeks 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 ten (10) days of receipt by the Seller.

 

SECTION 7. Representations, Warranties and Covenants of the Seller: Remedies for Breach .

 

Subsection

7.01 Representations and Warranties Respecting the Seller.

 

The Seller represents, warrants and covenants to the Initial Purchaser and to any Purchaser as of the date hereof, as of the date of each respective Trade Confirmation, and as of each respective Closing Date or as of such date specifically provided herein or in the applicable Warranty Bill of Sale:

 

(1) The Seller is duly organized, validly existing and in good standing under the laws of the state of [ - ] and has all licenses necessary to carry on its business as now being conducted. The Seller is licensed in, qualified to transact business in and is in good standing under the laws of the state in which any Mortgaged Property is located and is and will remain in compliance with the laws of each state in which any Mortgaged Property is located to the extent necessary to ensure the enforceability of each Mortgage Loan and the servicing of the Mortgage Loan in accordance with the terms of this Agreement. No licenses or approvals obtained by the Seller have been suspended or revoked by any court, administrative agency, arbitrator or governmental body and no proceedings are pending which might result in such suspension or revocation;

 

(2) The Seller has the full power and authority to hold each Mortgage Loan, to sell each Mortgage Loan, and to execute, deliver and perform, and to enter into and consummate, all transactions contemplated by this Agreement. The Seller has duly authorized the execution, delivery and performance of this Agreement, has duly executed and delivered this Agreement, and this Agreement, assuming due authorization, execution and delivery by the Purchaser, constitutes a legal, valid and binding obligation of the Seller, enforceable against it in accordance with its terms except as the enforceability thereof may be limited by bankruptcy, insolvency or reorganization;

 

15

(3) The execution and delivery of this Agreement by the Seller and the performance of and compliance with the terms of this Agreement will not violate the Seller’s articles of incorporation or by-laws or constitute a default under or result in a breach or acceleration of, any contract, agreement or other instrument to which the Seller is a party or which may be applicable to the Seller or its assets;

 

(4) The Seller is not in violation of, and the execution and delivery of this Agreement by the Seller and its performance and compliance with the terms of this Agreement will not constitute a violation with respect to, any order or decree of any court or any order or regulation of any federal, state, municipal or governmental agency having jurisdiction over the Seller or its assets, which violation might have consequences that would adversely affect the condition (financial or otherwise) or the operation of the Seller or its assets or could reasonably be expected to have consequences that would adversely affect the performance of its obligations and duties hereunder;

 

(5) The Seller is a HUD approved mortgagee pursuant to Section 203 of the National Housing Act. No event has occurred, including but not limited to a change in insurance coverage, which would make the Seller unable to comply with HUD eligibility requirements or which would require notification to HUD;

 

(6) 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;

 

(7) [Reserved];

 

(8) Immediately prior to the payment of the Purchase Price for each Mortgage Loan, the Seller or MERS as the nominee for the Seller, was the owner of record of the related Mortgage and the owner of the indebtedness evidenced by the related Mortgage Note and upon the payment of the Purchase Price by the Purchaser, in the event that the Seller retains record title to the Mortgage, the Seller shall retain such record title to each Mortgage, each related Mortgage Note and the related Mortgage Files with respect thereto in trust for the Purchaser as the owner thereof and only for the purpose of servicing and supervising the servicing of each Mortgage Loan;

 

(9) There are no actions or proceedings against, or investigations of, the Seller before any court, administrative agency or other tribunal (A) that could reasonably be expected to prohibit its entering into this Agreement, (B) seeking to prevent the sale of the Mortgage Loans or the consummation of the transactions contemplated by this Agreement or (C) that could reasonably be expected to prohibit or adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement;

 

(10) 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 consummation of the transactions contemplated by this Agreement, except for such consents, approvals, authorizations or orders, if any, that have been obtained and disclosed to the Purchaser;

 

16

(11) 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;

 

(12) [Reserved];

 

(13) Neither this Agreement nor any written statement, report or other document prepared and furnished or to be prepared and furnished by the Seller pursuant to this Agreement or in connection with the transactions contemplated hereby contains any untrue statement of material fact;

 

(14) The consideration received by the Seller upon the sale of the Mortgage Loans constitutes fair consideration and reasonably equivalent value for such Mortgage Loans;

 

(15) The Seller is solvent and will not be rendered insolvent by the consummation of the transactions contemplated hereby. The Seller is not transferring any Mortgage Loan with any intent to hinder, delay or defraud any of its creditors; and

 

(16) The Seller is in good standing, and will comply in all material respects with the rules and procedures of MERS in connection with the servicing of the MERS Loans for as long as such Mortgage Loans are being serviced by the Seller and are registered with MERS and is current in payment in all fees and assessments imposed by MERS.

 

Subsection

7.02 Representations and Warranties Regarding Individual Mortgage Loans.

 

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

 

(1) The information set forth in the related Final Mortgage Loan Schedule is complete, true and correct in all material respects;

 

(2) The Mortgage Loan is in compliance with all requirements set forth in the related Trade Confirmation, the Mortgage Loan is not an Ineligible Loan as set forth in the related Trade Confirmation and the characteristics of the related Mortgage Loan Package are as set forth in the related Trade Confirmation (unless otherwise agreed to in writing by the Purchaser);

 

(3) All payments required to be made up to the close of business on the Closing Date for such Mortgage Loan under the terms of the Mortgage Note have been made (excluding any Mortgage Loans which are 29 days or less delinquent); the Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds from a party other than the owner of the related Mortgaged Property, directly or

 

17

indirectly, for the payment of any amount required by the Mortgage Note or Mortgage; and, as of the Closing Date, there has been no delinquency greater than 29 days in any payment by the Mortgagor thereunder during the last twelve months;

 

(4) There are no defaults in complying with the terms of the Mortgage and there are no delinquent taxes, ground rents, water charges, sewer rents, assessments, insurance premiums, leasehold payments, including assessments payable in future installments or other outstanding charges affecting the related Mortgaged Property;

 

(5) The terms of the Mortgage Note and the Mortgage have not been impaired, waived, altered or modified in any respect, except by written instruments, recorded in the applicable public recording office if necessary to maintain the lien priority of the Mortgage, and which have been delivered to the Custodian; the substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent required by the related policy, and is reflected on the related Final Mortgage Loan Schedule. No Mortgagor has been released, in whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent required by the policy, and which assumption agreement has been delivered to the Custodian and the terms of which are reflected in the related Final Mortgage Loan Schedule;

 

(6) The Mortgage Note and the Mortgage are not subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, nor will the operation of any of the terms of the Mortgage Note and the Mortgage, or the exercise of any right thereunder, render the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto;

 

(7) All buildings upon the Mortgaged Property are insured by a nationally recognized insurer acceptable under the Underwriting Guidelines 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 the Servicing Addendum. All such insurance policies contain a standard mortgagee clause naming the Seller, its successors and assigns as mortgagee and all currently due premiums thereon have been paid. If the Mortgaged Property is in an area identified on a Flood Hazard Map or Flood Insurance Rate Map issued 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 Insurance Administration is in effect which policy conforms to the requirements of the Underwriting Guidelines. The Mortgage obligates the Mortgagor thereunder to maintain all such insurance at the Mortgagor’s cost and expense, and on the Mortgagor’s failure to do so, authorizes the holder of the Mortgage to maintain such insurance at Mortgagor’s cost and expense and to seek reimbursement therefor from the Mortgagor. No action, inaction or event has occurred and no state of facts exists or has existed on or prior to the Closing Date that would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity

 

18

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;

 

(8) Any and all requirements of any federal, state or local law including, without limitation, laws governing prepayment penalties, usury, truth in lending, real estate settlement procedures, consumer credit protection, equal credit opportunity, fair housing, predatory lending, abusive lending and disclosure laws applicable to the origination and servicing of mortgage loans of a type similar to the Mortgage Loans have been complied with and the consummation of the transactions contemplated hereby will not involve the violation of any such laws;

 

(9) The Mortgage has not been satisfied, cancelled, 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 satisfaction, cancellation, subordination, rescission or release. 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;

 

(10) The related Mortgage is properly recorded and is a valid, existing and enforceable (subject to bankruptcy laws and general principals of equity) (A) first lien and first priority security interest with respect to each Mortgage Loan which is indicated by the Seller to be a First Lien (as reflected on the Final Mortgage Loan Schedule), or (B) second lien and second priority security interest with respect to each Mortgage Loan which is indicated by the Seller to be a Second Lien (as reflected on the Final Mortgage Loan Schedule), in either case, on the Mortgaged Property, including all improvements on the Mortgaged Property subject only to (a) the lien of current real property taxes and assessments not yet due and payable, (b) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording being 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 which do not adversely affect the Appraised Value of the Mortgaged Property, (c) other matters to which like properties are commonly subject which do not 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 and (d) with respect to each Mortgage Loan which is indicated by the Seller to be a Second Lien Mortgage Loan (as reflected on the Final Mortgage Loan Schedule), a First Lien on the 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, existing and enforceable (subject to bankruptcy laws and general principals of equity) (A) first lien and first priority security interest with respect to each Mortgage Loan which is indicated by the Seller to be a First Lien (as reflected on the Final Mortgage Loan Schedule) or (B) second lien and second priority security interest with respect to each Mortgage Loan which is indicated by the Seller to be a Second Lien Mortgage Loan (as reflected on the Final Mortgage Loan Schedule), in either case, on the

 

19

property described therein and the Seller has full right to sell and assign the same to the Purchaser. With respect to First Lien Mortgage Loans, unless otherwise indicated on the final Mortgage Loan Schedule, 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. With respect to Second Lien Mortgage Loans, 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;

 

(11) With respect to each Second Lien Mortgage Loan, where required or customary in the jurisdiction in which the related Mortgaged Property is located, the original lender has filed for record a request for notice of any action by the senior lienholder under the related First Lien, and the original lender has notified any senior lienholder in writing of the existence of the Second Lien Mortgage Loan and requested notification of any action to be taken against the Mortgagor by the senior lienholder;

 

(12) With respect to each Second Lien Mortgage Loan, either (a) no consent for the Second Lien Mortgage Loan is required by the holder of the related first lien or (b) such consent has been obtained and is contained in the Mortgage File.

 

(13) The Mortgage Note and the related Mortgage are genuine and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms, subject to bankruptcy laws and general principles of equity;

 

(14) All parties to the Mortgage Note and the Mortgage had legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage, and the Mortgage Note and the Mortgage have been duly and properly executed by such parties. The Mortgagor is a natural person, the identity of such natural person was fully verified by the Seller and such Mortgagor is not in violation of any laws regarding identity theft;

 

(15) The proceeds of the Mortgage Loan have been fully disbursed to or for the account of the Mortgagor and there is no obligation for the Mortgagee to advance additional funds 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 have been paid, and the Mortgagor is not entitled to any refund of any amounts paid or due to the Mortgagee pursuant to the Mortgage Note or Mortgage;

 

(16) The Seller is the sole legal, beneficial and equitable owner of the Mortgage Note and the Mortgage. The Seller has full right and authority under all governmental and regulatory bodies having jurisdiction over such Seller, subject to no interest or participation of, or agreement with, any party, to transfer and sell the Mortgage Loan to the Purchaser pursuant to this Agreement free and clear of any encumbrance or right of others, equity, lien, pledge, charge, mortgage, claim, participation interest or

 

20

security interest of any nature (collectively, a “Lien”); and immediately upon the transfers and assignments herein contemplated, the Seller shall have transferred and sold all of its right, title and interest in and to each Mortgage Loan and the Purchaser will hold good, marketable and indefeasible title to, and be the owner of, each Mortgage Loan subject to no Lien, other than any Lien created by the Purchaser;

 

(17) All parties which have had any interest in the Mortgage Loan, whether as originator, mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were): (A) organized under the laws of such state, or (B) qualified to do business in such state, or (C) federal savings and loan associations or national banks having principal offices in such state, or (D) not doing business in such state so as to require qualification or licensing, or (E) not otherwise required to be licensed in such state. All parties which have had any interest in the Mortgage Loan were in compliance with any and all applicable “doing business” and licensing requirements of the laws of the state wherein the Mortgaged Property is located or were not required to be licensed in such state;

 

(18) The Mortgage Loan is covered by an ALTA lender’s title insurance policy (which, in the case of an Adjustable Rate Mortgage Loan has an adjustable rate mortgage endorsement in the form of ALTA 6.0 or 6.1 or equivalent) or other form of title insurance acceptable under the Underwriting Guidelines, issued by a nationally recognized title insurer or reinsurer or other issuer acceptable under the Underwriting Guidelines and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring (subject to the exceptions contained above in (10)(a), (b) and (c) and, with respect to each Mortgage Loan which is indicated by the Seller to be a Second Lien Mortgage Loan (as reflected on the Final Mortgage Loan Schedule) clause (d)) 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, with respect to any Adjustable Rate Mortgage Loan, 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. Additionally, such lender’s title insurance policy affirmatively insures ingress and egress to and from the Mortgaged Property, and against encroachments by or upon the Mortgaged Property or any interest therein. The Seller and its successors and assigns are the sole insureds of such lender’s title insurance policy, and such lender’s title insurance policy is in full force and effect and will be in full force and effect upon the consummation of the purchase transactions contemplated by this Agreement. No claims have been made under such lender’s title insurance policy, and no prior holder of the related 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;

 

(19) 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

 

21

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 the Seller has not waived any default, breach, violation or event of acceleration (other than a payment delinquency of 29 days or less). With respect to each Mortgage Loan which is indicated by the Seller to be a Second Lien Mortgage Loan (as reflected on the Final Mortgage Loan Schedule) (i) the First Lien is in full force and effect, (ii) there is no default, breach, violation or event of acceleration existing under such First Lien mortgage or the related mortgage note, (iii) 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 thereunder, and either (A) the First Lien mortgage contains a provision which allows or (B) applicable law requires, the mortgagee under the Second Lien Mortgage Loan to receive notice of, and affords such mortgagee an opportunity to cure any default by payment in full or otherwise under the First Lien mortgage;

 

(20) 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 law could give rise to such lien) affecting the related Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the related Mortgage;

 

(21) (i) All improvements which were considered in determining the Appraised Value of the related Mortgaged Property lay wholly within the boundaries and building restriction lines of the Mortgaged Property, and (ii) to the best of Seller’s knowledge, no improvements on adjoining properties encroach upon the Mortgaged Property;

 

(22) The Mortgage Loan was originated by the Seller or by 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, or by a mortgagee approved as such by the Secretary of HUD pursuant to Section 203 and 211 of the National Housing Act;

 

(23) Monthly Payments on the Mortgage Loan shall commence (with respect to any newly originated Mortgage Loans) or commenced no more than sixty (60) days after the proceeds of the Mortgage Loan were disbursed. The Mortgage Loan bears interest at the Mortgage Interest Rate. With respect to each Mortgage Loan other than Second Lien Mortgage Loans, the Mortgage Note is payable on the first day of each month in Monthly Payments, which Monthly Payments with respect to any Mortgage Loan (A) in the case of a Fixed Rate Mortgage Loan, are sufficient, subject to adjustment at the Interest-Only Adjustment Date in the case of an Interest-Only Mortgage Loan to fully amortize the original principal balance over the original term thereof and to bear interest at the related Mortgage Interest Rate, (B) in the case of an Adjustable Rate Mortgage Loan, are changed on each Adjustment Date, and in any case, are sufficient to fully amortize the original principal balance over the original term thereof and to pay interest at the related Mortgage Interest Rate and (C) in the case of a Balloon Loan, are based on a fifteen (15) or thirty (30) year amortization schedule, as set forth in the related Mortgage Note, and a final monthly payment substantially greater than the preceding monthly payment which is sufficient to amortize the remaining principal balance of the

 

22

Balloon Loan and to pay interest at the related Mortgage Interest Rate. The Index for each Adjustable Rate Mortgage Loan is as set forth in the Final Mortgage Loan Schedule. The Mortgage Note does not permit negative amortization. No Mortgage Loan is a simple interest loan. No Mortgage Loan is a Convertible Mortgage Loan;

 

(24) The origination and collection practices used by the Seller with respect to each Mortgage Note and Mortgage have been in all respects legal, proper, prudent and customary in the mortgage origination and servicing industry. The Mortgage Loan has been serviced by the Seller and any predecessor servicer in accordance with the terms of the Mortgage Note. With respect to any Mortgage Loan which provides for an adjustable interest rate, all rate adjustments have been performed in accordance with federal and state law and the terms of the related Mortgage Note or subsequent modifications, if any. With respect to escrow deposits and Escrow Payments (other than with respect to each Mortgage Loan which is indicated by the Seller to be a Second Lien Mortgage Loan and for which the mortgagee under the First Lien is collecting Escrow Payments), if any, all such payments are in the possession of, or under the control of, the Seller and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. No escrow deposits or Escrow Payments or other charges or payments due the Seller have been capitalized under any Mortgage or the related Mortgage Note and no such escrow deposits or Escrow Payments are being held by the Seller for any work on a Mortgaged Property which has not been completed;

 

(25) The Mortgaged Property is free of damage and waste and there is no proceeding pending or threatened for the total or partial condemnation thereof nor is such a proceeding currently occurring or threatened;

 

(26) The Mortgage and related Mortgage Note contain customary and enforceable (subject to bankruptcy laws and general principles of equity) 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, (a) in the case of a Mortgage designated as a deed of trust, by trustee’s sale, and (b) otherwise by judicial foreclosure. Subsequent to the origination of the related Mortgage Loan, the Mortgaged Property has not been subject to any bankruptcy proceeding or foreclosure proceeding, nor are any such proceedings pending and the Mortgagor has not filed for protection under applicable bankruptcy laws. 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. The Mortgagor has not notified the Seller and the Seller has no knowledge of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act of 1940;

 

(27) The Mortgage Loan was underwritten in accordance with the Underwriting Guidelines in effect at the time the Mortgage Loan was originated and the Mortgage Note and Mortgage are on forms acceptable to Fannie Mae and Freddie Mac or acceptable in the secondary mortgage market and to the rating agencies for publicly

 

23

offered mortgage backed securities and no representations have been made to a Mortgagor that are inconsistent with the mortgage instruments used;

 

(28) The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage on the Mortgaged Property and the security interest of any applicable security agreement or chattel mortgage referred to in (10) above;

 

(29) The Mortgage File contains an appraisal of the related Mortgaged Property which complies with the Underwriting Guidelines and was made and signed, prior to the approval of the Mortgage Loan application, by a qualified 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, whose compensation was not affected by the approval or disapproval of the Mortgage Loan and who met the minimum qualifications of the Underwriting Guidelines. Each appraisal of the Mortgage Loan was made in accordance with the relevant provisions of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989;

 

(30) 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;

 

(31) The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature;

 

(32) The Mortgagor has executed one or more statements to the effect that the Mortgagor has received all disclosure materials required by applicable law with respect to the making of fixed rate mortgage loans in the case of Fixed Rate Mortgage Loans, and adjustable rate mortgage loans in the case of Adjustable Rate Mortgage Loans and rescission materials with respect to Refinanced Mortgage Loans, and each such statement is and will remain in the Mortgage File;

 

(33) No Mortgage Loan was made (a) to finance the construction or rehabilitation of a Mortgaged Property or (b) to facilitate the trade-in or exchange of a Mortgaged Property;

 

(34) The Seller has no knowledge of any circumstances or condition with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor’s credit standing, other than the non-prime nature thereof, that can reasonably be expected to cause the Mortgage Loan to be an unacceptable investment, cause the Mortgage Loan to become delinquent, or adversely affect the value of the Mortgage Loan;

 

(35) No Mortgage Loan is subject to a Primary Mortgage Insurance Policy;

 

24

(36) 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. Unless otherwise specified on the related Mortgage Loan Schedule, the Mortgagor represented at the time of origination of the Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the Mortgagor’s primary residence. To the best of Seller’s knowledge, no improvement located on or being part of any Mortgaged Property is in violation of any applicable zoning law or regulation.

 

(37) No error, omission, misrepresentation, negligence, fraud or similar occurrence with respect to a Mortgage Loan has taken place on the part of any person, including without limitation the Mortgagor, any appraiser or any other party involved in the origination of the Mortgage Loan or in the application of any insurance in relation to such Mortgage Loan. If a mortgage insurer fails to pay a claim submitted with respect to the related Mortgage Loan as a result of the mortgage insurer successfully asserting a defense based on fraud, then such failure to pay shall (i) constitute a breach of this representation which materially and adversely affects the interests of the owner of the Mortgage Loan and (ii) allow the Purchaser to enforce the remedies set forth in Subsection 7.03;

 

(38) Other than with respect to the MERS Loans, each original Mortgage was recorded or is in the process of being recorded and all subsequent assignments of the original Mortgage (other than the assignment to the Purchaser) have been recorded, or are in the process of being recorded, in the appropriate jurisdictions wherein such recordation is necessary to perfect the lien thereof as against creditors of the Seller. The Assignment of Mortgage, if any, is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located;

 

(39) Any principal advances made to the Mortgagor prior to the Cut-off Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the Mortgage securing the consolidated principal amount is expressly insured as having (A) first lien priority with respect to each Mortgage Loan which is indicated by the Seller to be a First Lien Mortgage Loan (as reflected on the Final Mortgage Loan Schedule), or (B) second lien priority with respect to each Mortgage Loan which is indicated by the Seller to be a Second Lien Mortgage Loan (as reflected on the Final Mortgage Loan Schedule), in either case, by a title insurance policy, an endorsement to the policy insuring the mortgagee’s consolidated interest or by other title evidence acceptable under the Underwriting Guidelines. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan;

 

(40) If the Residential Dwelling on the Mortgaged Property is a condominium unit or a unit in a planned unit development (other than a de minimis

 

25

planned unit development) such condominium or planned unit development project conforms to the Underwriting Guidelines;

 

(41) The source of the down payment, if any, with respect to each Mortgage Loan has been fully verified by the Seller as and if required pursuant to the Underwriting Guidelines;

 

(42) Interest on each Mortgage Loan is calculated on the basis of a 360-day year consisting of twelve 30-day months;

 

(43) To the best of Seller’s knowledge, the Mortgaged Property is in compliance with all applicable environmental laws pertaining to environmental hazards including, without limitation, asbestos, and neither the Seller nor, to the best of the Seller’s knowledge, the related Mortgagor, has received any notice of any violation or potential violation of such law;

 

(44) The Seller shall, at its own expense, cause each Mortgage Loan to be covered by a “life of loan” Tax Service Contract which is assignable to the Purchaser or its designee at no cost to the Purchaser or its designee; provided however, that if the Seller fails to purchase such Tax Service Contract, the Seller shall be required to reimburse the Purchaser for all costs and expenses incurred by the Purchaser in connection with the purchase of any such Tax Service Contract;

 

(45) Each Mortgage Loan is covered by a “life of loan” Flood Zone Service Contract which is assignable to the Purchaser or its designee at no cost to the Purchaser or its designee or, for each Mortgage Loan not covered by such Flood Zone Service Contract, the Seller agrees to purchase such Flood Zone Service Contract;

 

(46) [Reserved];

 

(47) No selection procedures were used by the Seller that identified the Mortgage Loans as being less desirable or valuable than other comparable mortgage loans in the Seller’s portfolio;

 

(48) Each Mortgage Loan constitutes a “qualified mortgage” under Section 860G(a)(3)(A) of the Code and Treasury Regulation Section 1.860G-2(a)(1);

 

(49) [Reserved];

 

(50) With respect to each Mortgage Loan which is a Second Lien, the related first lien does not permit negative amortization;

 

(51) The Mortgage Loan Documents with respect to each Mortgage Loan subject to Prepayment Charges specifically authorizes such Prepayment Charges to be collected and such Prepayment Charges are permissible and enforceable in accordance with the terms of the related Mortgage Loan Documents and applicable law;

 

26

(52) No Mortgage Loan had an LTV or a CLTV in excess of 100% at origination;

 

(53) No Mortgage Loan has an original term to maturity of more than thirty (30) years;

 

(54) Each Mortgage contains a provision for the acceleration of the payment of the unpaid principal balance of the related Mortgage Loan in the event the related Mortgaged Property is sold without the prior consent of the mortgagee thereunder;

 

(55) Each Mortgage Note is comprised of one original promissory note;

 

(56) No predatory or deceptive lending practices, including but not limited to, the extension of credit to the Mortgagor without regard for the Mortgagor’s ability to repay the Mortgage Loan and the extension of credit to the Mortgagor which has no apparent benefit to the Mortgagor, were employed by the originator of the Mortgage Loan in connection with the origination of the Mortgage Loan;

 

(57) The Seller and its agents have at all times complied with all applicable federal, state and local anti-money laundering laws, orders and regulations to the extent applicable to Seller or its agent, including without limitation the USA PATRIOT Act of 2001 (collectively, the “Anti-Money Laundering Laws”), in respect of the origination and servicing of each Mortgage Loan; no Mortgage Loan is subject to nullification pursuant to Executive Order 13224 (the “Executive Order”) or the regulations promulgated by the Office of Foreign Assets Control of the United States Department of the Treasury (“OFAC Regulations”) or in violation of the Executive Order or the OFAC Regulations, and no Mortgagor is subject to the provisions of such Executive Order or the OFAC Regulations nor listed as a “blocked person” for purposes of the OFAC Regulations;

 

(58) [Reserved];

 

(59) With respect to each purchase money Mortgage Loan, the Mortgagor’s assets were verified pursuant to the Underwriting Guidelines as part of the origination process;

 

(60) With respect to each Mortgage Loan, a full appraisal (URAR Form 1004) was obtained which meets the requirements in the Underwriting Guidelines;

 

(61) An automated valuation model was not used in place of a full appraisal in the appraisal process of any Mortgage Loan;

 

(62) With respect to each Mortgage Loan, the FICO score provided is not a NextGen FICO score;

 

(63) No Mortgage Loan is a Buydown Mortgage Loan;

 

27

(64) With respect to any Mortgage Loan originated on or after August 1, 2004, neither the Mortgage Loan nor the related Mortgage Note requires the Mortgagor to submit to arbitration to resolve any dispute arising out of or relating in any way to the mortgage loan transaction. Any breach of this representation shall be deemed to materially and adversely affect the interests of the owner of the Mortgage Loan and shall require a repurchase of the affected Mortgage Loan;

 

(65) None of the Mortgage Loans are Co-op Loans;

 

(66) With respect to a Mortgage Loan that is not secured by an interest in a leasehold estate, the Mortgaged Property is a fee simple estate that consists of a single parcel of real property with a Residential Dwelling erected thereon. No portion of the Mortgaged Property is used for commercial purposes, and since the date of origination, no portion of the Mortgaged Property has been used for commercial purposes; provided, that Mortgaged Properties which contain a home office shall not be considered as being used for commercial purposes as long as the Mortgaged Property has not been altered for commercial purposes and is not storing any chemicals or raw materials other than those commonly used for homeowner repair, maintenance and/or household purposes;

 

(67) The Mortgage Note, the Mortgage, the Assignment of Mortgage and any other documents required to be delivered under this Agreement for each Mortgage Loan have been delivered to the Custodian. The Seller is in possession of a complete, true and accurate Mortgage File in compliance with Exhibit 5 attached hereto, except for such documents the originals of which have been delivered to the Custodian;

 

(68) With respect to each Adjustable Rate Mortgage Loan, the Mortgage Loan Documents provide that after the related first Interest Rate Adjustment Date, a related Mortgage Loan may only be assumed if the party assuming such Mortgage Loan meets certain credit requirements stated in the Mortgage Loan Documents;

 

(69) The Seller has caused or will cause to be performed any and all acts required to preserve the rights and remedies of the Purchaser in any insurance policies applicable to the Mortgage Loans including, without limitation, any necessary notifications of insurers, assignments of policies or interests therein, and establishments of coinsured, joint loss payee and mortgagee rights in favor of the Purchaser;

 

(70) If the Mortgage Loan is secured by a leasehold estate, (1) the ground lease is assignable or transferable; (2) the ground lease will not terminate earlier than five years after the maturity date of the Mortgage Loan; (3) the ground lease does not provide for termination of the lease in the event of lessee’s default without the mortgagee being entitled to receive written notice of, and a reasonable opportunity to cure the default; (4) the ground lease permits the mortgaging of the related Mortgaged Property; (5) the ground lease protects the mortgagee’s interests in the event of a property condemnation; (6) all ground lease rents, other payments, or assessments that have become due have been paid; and (7) the use of leasehold estates for residential properties

 

28

is a well established practice in the jurisdiction in which the Mortgaged Property is located;

 

(71) The Mortgagor has not filed a bankruptcy petition or has not become the subject of involuntary bankruptcy proceedings or has not consented to the filing of a bankruptcy proceeding against it or to a receiver being appointed in respect of the related Mortgaged Property

 

(72) The Mortgage Loan has not previously been rejected and repurchased after a sale (other than pursuant to a repurchase agreement used for financing) or securitization;

 

(73) Each Mortgage Loan has a non-zero FICO score;

 

(74) With respect to any broker fees collected and paid on any of the Mortgage Loans, all broker fees have been properly assessed to the Mortgagor and no claims will arise as to broker fees that are double charged and for which the Mortgagor would be entitled to reimbursement;

 

(75) All information supplied by, on behalf of, or concerning the Mortgagor is true, accurate and complete in any material respect;

 

(76) No Second Lien Mortgage Loan is a “home equity line of credit;”

 

(77) No Mortgagor was encouraged or required to select a Mortgage Loan product offered by the Mortgage Loan’s originator which is a higher cost product designed for less creditworthy Mortgagors, unless at the time of the Mortgage Loan’s origination, such Mortgagor did not qualify taking into account credit history and debt-to-income ratios for a lower-cost credit product then offered by the Mortgage Loan’s originator or any affiliate of the Mortgage Loan’s originator. If, at the time of loan application, the Mortgagor may have qualified for a lower-cost credit product than offered by any mortgage lending affiliate of the Mortgage Loan’s originator, the Mortgage Loan’s originator referred the Mortgagor’s application to such affiliate for underwriting consideration;

 

(78) The methodology used in underwriting the extension of credit for each Mortgage Loan employs, in part, objective mathematical principles which relate the Mortgagor’s income, assets and liabilities to the proposed payment and such underwriting methodology does not rely on the extent of the Mortgagor’s equity in the collateral as the principal determining factor in approving such credit extension. Such underwriting methodology confirmed that at the time of origination (application/approval) the Mortgagor had a reasonable ability to make timely payments on the Mortgage Loan, relying on the Mortgagor’s representation of the Mortgagor’s income in the case of loan programs which did not require verification of the Mortgagor’s income;

 

(79) With respect to any Mortgage Loan that contains a provision permitting imposition of a premium upon a prepayment prior to maturity: (i) a mortgage

 

29

loan without such a premium was available to the Mortgagor at an interest rate and/or fee structure higher than that of the Mortgage Loan, (ii) prior to the loan’s funding, the Mortgagor had the option of obtaining the Mortgage Loan without a requirement for payment of such a premium, and (iii) the prepayment premium is disclosed to the Mortgagor in the loan documents pursuant to applicable state and federal law;

 

(80) No Mortgagor was required to purchase any credit life, disability, accident or health insurance product as a condition of obtaining the extension of credit. No Mortgagor obtained a prepaid single-premium credit life, disability, accident or health insurance policy in connection with the origination of the Mortgage Loan. No proceeds from any Mortgage Loan were used to purchase single premium credit insurance policies as part of the origination of, or as a condition to closing, such Mortgage Loan. Any breach of this representation shall be deemed to materially and adversely affect the interests of the owner of the Mortgage Loan and shall require a repurchase of the affected Mortgage Loans;

 

(81) All points and fees related to each Mortgage Loan were disclosed in writing to the Mortgagor in accordance with applicable state and federal law and regulation. All points and fees at origination, described in the aggregate and with respect to each component thereof are true, complete and correct as set forth on the Final Mortgage Loan Schedule;

 

(82) All fees and charges (including finance charges) and whether or not financed, assessed, collected or to be collected in connection with the origination and servicing of each Mortgage Loan have been disclosed in writing to the Mortgagor in accordance with applicable state and federal law and regulation;

 

(83) No Mortgage Loan is classified as a high cost mortgage loan under HOEPA, and no Mortgage Loan is a “high cost home,” “covered,” “high risk home” or “predatory” loan under any other applicable state, federal or local law (or a similarly classified loan using different terminology under a law imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees). Any breach of this representation shall be deemed to materially and adversely affect the interests of the owner of the Mortgage Loan and shall require a repurchase of the affected Mortgage Loan;

 

(84) Unless otherwise indicated on the Final Mortgage Loan Schedule, no Mortgage Loan originated on or after October 1, 2002 imposes a prepayment premium for a term in excess of three years. Any Mortgage Loan originated prior to October 1, 2002 will not impose prepayment penalties in excess of five years. Any breach of this representation shall be deemed to materially and adversely affect the value of the Mortgage Loan and shall require a repurchase of the affected Mortgage Loan;

 

(85) As to each consumer report (as defined in the Fair Credit Reporting Act, Public Law 91-508) or other credit information furnished by the Seller to the Purchaser, that Seller has full right and authority and is not precluded by law or contract from furnishing such information to the Purchaser and the Purchaser is not

 

30

precluded from furnishing the same to any subsequent or prospective purchaser of such Mortgage. The Seller and any predecessor servicer has fully furnished, in accordance with the Fair Credit Reporting Act and its implementing regulations, accurate and complete information (e.g., favorable and unfavorable) on its Mortgagor credit files to Equifax, Experian and Trans Union Credit Information Company, on a monthly basis;

 

(86) [Reserved];

 

(87) [Reserved];

 

(88) No Mortgage Loan is a High Cost Loan or Covered Loan, as applicable, and with respect to the foregoing, the terms “High Cost Loan” and “Covered Loan” have the meaning assigned to them in the then current Standard & Poor’s LEVELS ^® Version 5.6 Glossary Revised, Appendix E or any revised version thereof (the “Glossary”) where (x) a “High Cost Loan” is each loan identified in the column “Category under applicable anti-predatory lending law” of the table entitled “Standard & Poor’s High Cost Loan Categorization” in the Glossary as each such loan is defined in the applicable anti-predatory lending law of the state or jurisdiction specified in such table and (y) a “Covered Loan” is each loan identified in the column “Category under applicable anti-predatory lending law” of the table entitled “Standard & Poor’s High Covered Loan Categorization” in the Glossary as each such loan is defined in the applicable anti-predatory lending law of the State or jurisdiction specified in such table;

 

(89) [Reserved];

 

(90) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Georgia Fair Lending Act, as amended (the “Georgia Act”). No Mortgage Loan subject to the Georgia Act and secured by owner occupied real property or an owner occupied manufactured home located in the State of Georgia was originated (or modified) on or after October 1, 2002 through and including March 6, 2003. Any breach of this representation shall be deemed to materially and adversely affect the interests of the owner of the Mortgage Loan and shall require a repurchase of the affected Mortgage Loan;

 

(91) No Mortgage Loan is a “High-Cost Home Loan” as defined in New York Banking Law 6-1;

 

(92) No Mortgage Loan is a “home loan” as defined by Nevada Revised Statute §598D.040;

 

(93) No Mortgage Loan is a “high-rate, high-fee mortgage” as defined by Maine Revised Statute, Title 9A, §8-103;

 

(94) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Arkansas Home Loan Protection Act effective July 16, 2003 (Act 1340 of 2003);

 

31

(95) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Kentucky high-cost home loan statute effective June 24, 2003 (Ky. Rev. Stat. Section 360.100);

 

(96) No Mortgage Loan is a “High-Cost Home Loan” as defined in the New Jersey Home Ownership Act effective November 27, 2003 (N.J.S.A. 46:10B-22 et seq .);

 

(97) No Mortgage Loan is a “High-Cost Home Loan” as defined in the New Mexico Home Loan Protection Act effective January 1, 2004 (N.M. Stat. Ann. §§ 58-21A-1 et seq .);

 

(98) No Mortgage Loan is a “High-Risk Home Loan” as defined in the Illinois High-Risk Home Loan Act effective January 1, 2004 (815 Ill. Comp. Stat. 137/1 et seq .); and

 

(99) Each additional representation and warranty contained in the Trade Confirmation is true and correct in all material respects.

 

Subsection

7.03 Remedies for Breach of Representations and Warranties .

 

It is understood and agreed that the representations and warranties set forth in Subsections 7.01 and 7.02 shall survive the sale of the Mortgage Loans to the Purchaser, any resale of such Mortgage Loans by the Purchaser and the termination of this Agreement and shall inure to the benefit of the Purchaser, notwithstanding any restrictive or qualified endorsement on any Mortgage Note or Assignment of Mortgage or the examination or lack of examination of any Mortgage File. Upon discovery by either the Seller or the Purchaser of a breach of any of the foregoing representations and warranties which materially and adversely affects the value of the Mortgage Loans or the interest of the Purchaser (or which materially and adversely affects the interests of the Purchaser in the related Mortgage Loan in the case of a representation and warranty relating to a particular Mortgage Loan), the party discovering such breach shall give prompt written notice to the other. With respect to the representations and warranties set forth in Subsections 7.01 and 7.02 that are made to the best of the Seller’s knowledge, if it is discovered by the Seller or the Purchaser that the substance of such representation and warranty is inaccurate and such inaccuracy materially and adversely affects the value of a Mortgage Loan or the Mortgage Loans, then notwithstanding the Seller’s lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy shall be deemed a breach of the applicable representation or warranty and the remedies described in this Subsection 7.03 shall apply to such breach; provided, however, that with respect to each of the representations and warranties that the Seller restates subject to the knowledge qualification permitted by Section 12(3), any inaccuracy resulting from the Seller’s lack of knowledge of any material modification to the terms of a Mortgage Loan by the Purchaser or any successor servicer shall not be a breach of the applicable representation or warranty.

 

Within ninety (90) days of the earlier of either discovery by or notice to the Seller of any breach of a representation or warranty which materially and adversely affects the value of a Mortgage Loan or the Mortgage Loans, the Seller shall use diligent efforts promptly to cure such

 

32

breach in all material respects and, if such breach cannot be cured, the Seller shall, at the Purchaser’s option, repurchase such Mortgage Loan at the Repurchase Price. In the event that a breach shall involve any representation or warranty set forth in Subsection 7.01 which materially and adversely affects the value of the Mortgage Loans or the interest of the Purchaser and such breach cannot be cured within ninety (90) days of the earlier of either discovery by or notice to the Seller of such breach, all of the Mortgage Loans shall, at the Purchaser’s option, be repurchased by the Seller at the Repurchase Price. However, the Seller may, subject to the consent of the Purchaser and assuming that Seller has a Qualified Substitute Mortgage Loan, rather than repurchase the Mortgage Loan as provided above, remove such Mortgage Loan and substitute in its place a Qualified Substitute Mortgage Loan or Qualified Substitute Mortgage Loans; provided, however , that any such substitution shall be effected not later than one-hundred-twenty (120) days after the related Closing Date. Any repurchase of a Mortgage Loan(s) pursuant to the foregoing provisions of this Subsection 7.03 shall occur on a date designated by the Purchaser and shall be accomplished (i) during the Interim Servicing Period by deposit in the Custodial Account of the amount of the Repurchase Price for distribution to the Purchaser on the next scheduled Remittance Date and (ii) following the Interim Servicing Period, by wire transfer of immediately available funds on the repurchase date to an account designated by the Purchaser.

 

Notwithstanding the foregoing and solely with respect to Mortgage Loans that are a part of a Pass-Through Transfer or net interest margin security related to such Pass-Though Transfer, within 90 days of the earlier of discovery by the Seller or receipt of notice by the Seller of the breach of the representation or covenant of the Seller set forth in Subsection 7.02 (84) which materially and adversely affects the interests of any holder of any right or security representing the right to receive the Prepayment Charges, the Seller shall remedy such breach as follows: if the representation made by the Seller in Subsection 7.02 (84) is breached and a Principal Prepayment has occurred in the applicable prepayment period, the Seller must pay the amount of the scheduled Prepayment Charge, in accordance with instructions provided by the Purchaser, net of any amount previously collected and paid for the benefit of the holder of any right or security representing the right to receive the Prepayment Charges, in respect of such Prepayment Charge.

 

At the time of repurchase of any deficient Mortgage Loan, the Purchaser and the Seller shall promptly arrange for the reassignment of the repurchased Mortgage Loan to the Seller, free and clear of any lien, charge or encumbrance suffered or incurred by the Purchaser, and the delivery to the Seller of any documents held by the Custodian relating to the repurchased Mortgage Loan. In the event the Repurchase Price is deposited in the Custodial Account, the Seller shall, simultaneously with such deposit, give written notice to the Purchaser that such deposit has taken place. Upon such repurchase the related Final Mortgage Loan Schedule shall be amended to reflect the withdrawal of the repurchased Mortgage Loan from this Agreement.

 

As to any Deleted Mortgage Loan for which the Seller substitutes one or more Qualified Substitute Mortgage Loans, the Seller shall effect such substitution by delivering to the Purchaser for each Qualified Substitute Mortgage Loan the Mortgage Note, the Mortgage, the Assignment of Mortgage and such other documents and agreements as are required by Subsection 6.03. The Seller shall deposit in the Custodial Account the Monthly Payment less the

 

33

Servicing Fee due on such Qualified Substitute Mortgage Loan or Loans in the month following the date of such substitution. Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the month of substitution will be retained by the Seller. For the month of substitution, distributions to the Purchaser will include the Monthly Payment due on such Deleted Mortgage Loan in the month of substitution, and the Seller shall thereafter be entitled to retain all amounts subsequently received by the Seller or any other party in respect of such Deleted Mortgage Loan. The Seller shall give written notice to the Purchaser that such substitution has taken place and shall amend the Final Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from the terms of this Agreement and the substitution of the Qualified Substitute Mortgage Loan. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement in all respects, and the Seller shall be deemed to have made with respect to such Qualified Substitute Mortgage Loan or Loans, as of the date of substitution, the covenants, representations and warranties set forth in Subsections 7.01 and 7.02.

 

For any month in which the Seller substitutes one or more Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Seller will determine the amount (if any) by which the aggregate principal balance of all such Qualified Substitute Mortgage Loans as of the date of substitution is less than the aggregate Stated Principal Balance of all such Deleted Mortgage Loans (after application of scheduled principal payments due in the month of substitution). An amount equal to the amount of such shortfall shall be distributed by the Seller in the month of substitution pursuant to the Servicing Addendum. Accordingly, on the date of such substitution, the Seller will deposit from its own funds into the Custodial Account an amount equal to such amount.

 

In addition to such cure and repurchase obligation, the Seller shall indemnify the Initial Purchaser and any subsequent Purchaser and hold them harmless against any losses, damages, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and other costs and expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or resulting from, a breach of the Seller’s representations and warranties contained in this Section 7. It is understood and agreed that the obligations of the Seller set forth in this Subsection 7.03 to cure, substitute or repurchase a defective Mortgage Loan and to indemnify the Purchaser as provided in this Subsection 7.03 constitute the sole remedies of the Purchaser respecting a breach of the foregoing representations and warranties.

 

Any cause of action against the Seller relating to or arising out of the breach of any representations and warranties made in Subsections 7.01 or 7.02 shall accrue as to any Mortgage Loan upon (i) discovery of such breach by the Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by the Seller to cure such breach or repurchase such Mortgage Loan as specified above, and (iii) demand upon the Seller by the Purchaser for compliance with the relevant provisions of this Agreement.

 

Subsection

7.04 Repurchase of Early Payment Default Mortgage Loans; Premium Recapture of Mortgage Loans Prepaid-in-Full .

 

In the event that the Mortgagor is delinquent on the first or second Monthly Payment due to the Purchaser following the related Closing Date, the Seller shall promptly repurchase the

 

34

affected Mortgage Loans at the Repurchase Price. A Mortgage Loan will be deemed to be delinquent if any payment due thereunder was not paid by the Mortgagor prior to the due date of the next scheduled Monthly Payment.

 

As of the related Closing Date, the Seller shall have not received actual or constructive notice that any of the Mortgage Loans will be prepaid in full. In the event that any Mortgage Loan is p