POOLING AND SERVICING AGREEMENT

EXHIBIT 10.3

EXECUTION

HMB ACCEPTANCE CORP., as Depositor

WELLS FARGO BANK, N.A.,

as Securities Administrator and Master Servicer

HOMEBANC MORTGAGE CORPORATION, as Seller and Servicer

WILMINGTON TRUST COMPANY, as Delaware Trustee

and

U.S. BANK NATIONAL ASSOCIATION, as Trustee

POOLING AND SERVICING AGREEMENT

Dated as of March 1, 2007

HOMEBANC MORTGAGE TRUST 2007-1

MORTGAGE PASS-THROUGH CERTIFICATES

TABLE OF CONTENTS

 

 

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This POOLING AND SERVICING AGREEMENT, dated as of March 1, 2007 (this “Agreement” or this “Pooling and Servicing Agreement”), is by and among HMB ACCEPTANCE CORP., a Delaware corporation, as depositor (the “Depositor”), U.S. BANK NATIONAL ASSOCIATION, as trustee (the “Trustee”), WELLS FARGO BANK, N.A., as securities administrator (in such capacity, the “Securities Administrator”) and master servicer (in such capacity, the “Master Servicer”), HOMEBANC MORTGAGE CORPORATION, a Georgia corporation, as seller (in such capacity, the “Seller”) and as servicer (in such capacity, the “Servicer”) and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Delaware trustee (the “Delaware Trustee”).

PRELIMINARY STATEMENT

The Depositor has acquired the Mortgage Loans from the Seller, and at the Closing Date is the owner of the Mortgage Loans and the other property being conveyed by it to the Trustee hereunder for inclusion in the Trust Estate. On the Closing Date, the Depositor will acquire the Certificates from the Trust, as consideration for its transfer to the Trust of the Mortgage Loans and the other property constituting the Trust Estate. The Depositor has duly authorized the execution and delivery of this Agreement to provide for the conveyance to the Trustee of the Mortgage Loans and the other property constituting the Trust Estate. All covenants and agreements made by the Seller in the Mortgage Loan Purchase Agreement and by the Depositor, the Master Servicer, the Servicer, the Securities Administrator and the Trustee herein with respect to the Mortgage Loans and the other property constituting the Trust Estate are for the benefit of the Holders from time to time of the Certificates. The Depositor, the Trustee, the Master Servicer, the Servicer and the Securities Administrator are entering into this Agreement, and the Trustee is accepting the Trust Estate, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged.

As provided herein, an election shall be made that portions of the Trust Fund be treated for federal income tax purposes as comprising four real estate mortgage investment conduits under Section 860D of the Code (each a “REMIC” or, in the alternative, Lower-Tier REMIC I, Lower-Tier REMIC II, REMIC 2 and REMIC 3 (REMIC 3 also being referred to as the “Upper Tier REMIC”)). Any inconsistencies or ambiguities in this Agreement or in the administration of this Agreement shall be resolved in a manner that preserves the validity of such REMIC elections.

Each Certificate, other than the Class R Certificates, represents ownership of a regular interest in the Upper Tier REMIC for purposes of the REMIC Provisions. The Class R Certificate represents ownership of the sole Class of residual interest in each REMIC for purposes of the REMIC Provisions.

The Upper Tier REMIC shall hold as its assets the several uncertificated interests in REMIC 2, other than the LT2-R Interest, and each such interest is hereby designated as a regular interest in REMIC 2 for purposes of the REMIC Provisions. REMIC 2 shall hold as its assets the several Classes of uncertificated interests in Lower-Tier REMIC I and Lower-Tier REMIC II, other than the LT-RI and LTR-II Interests, and each such interest is hereby designated as a regular interest in Lower-Tier REMIC I or Lower-Tier REMIC II, as applicable, for purposes of the REMIC Provisions. Lower-Tier REMIC I shall hold as its assets the Pool I Mortgage Loans and any related assets and Lower Tier REMIC II shall hold as assets the Pool II Mortgage Loans and related assets.

 

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The startup day for each REMIC created hereby for purposes of the REMIC Provisions is the Closing Date. In addition, for purposes of the REMIC Provisions, the latest possible maturity date for each regular interest in each REMIC created hereby is the Latest Possible Maturity Date.

Lower-Tier REMIC I

The following table sets forth (or describes) the designation, interest rate, and initial principal balance for each interest in Lower-Tier REMIC I, each of which, other than the LT-RI Interest, is hereby designated as a regular interest (each, a “REMIC LT-I Regular Interest).

 

(1)

The interest rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of these REMIC LT-I Regular Interests is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-1 as of the first day of the related Collection Period.

 

(2)

The interest rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of these REMIC LT-I Regular Interests is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-2 as of the first day of the related Collection Period.

 

(3)

The interest rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of these REMIC LT-I Interests is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-3 as of the first day of the related Collection Period.

 

(4)	The Class LT-RI Interest is the sole residual interest in Lower-Tier REMIC I. It does not have an interest rate or a principal balance.

On each Distribution Date, the Paying Agent shall first pay or charge as an expense of Lower-Tier REMIC I all expenses of the Trust associated with Pool I for such Distribution Date.

On each Distribution Date, the Paying Agent shall distribute the remaining Available Funds with respect to the Mortgage Loans in Loan Group I-1, Loan Group I-2, and Loan Group I-3 in the following order or priority:

(i) First, to the LTI-1-Sub, LTI-2-Sub, and LTI-3-Sub Interests as follows:

 

1.

To the LTI-Sub-1 Interest until its principal balance equals one percent of the Subordinate Component for Loan Group I-1 for the immediately succeeding Distribution Date;

 

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2.

To the LTI-Sub-2 Interest until its principal balance equals one percent of the Subordinate Component for Loan Group I-2 for the immediately succeeding Distribution Date

 

3.

To the LTI-Sub-3 Interest until its principal balance equals one percent of the Subordinate Component for Loan Group I-3 for the immediately succeeding Distribution Date;

 

4.

To the LTI-1 Sub, LTI-2-Sub, and LTI-3-Sub Interests the amount necessary to cause the ratio of the principal balance of each such REMIC LT-I Regular Interest to each of the other REMIC LT-I Regular Interests having “Sub” in its designation to equal the ratio of the Subordinate Component for the related Loan Group for the immediately succeeding Distribution Date to the aggregate of the Subordinate Components of the other Loan Groups for the immediately succeeding Distribution Date;

(ii) Second, concurrently to the LTI-1 Senior, LTI-2 Senior, and LTI-3 Senior Interests until the principal balance of each such REMIC LT-I Regular Interest equals the excess of the Loan Group Balance for the related Loan Group on the last day of the related Collection Period after taking into account all payments received during such Collection Period over the principal balance of the LTI-1 Sub Interest, in the case of the LTI-1 Senior Interest, the LTI-2 Sub Interest, in the case of the LTI-2 Senior Interest, and the LTI-3 Sub Interest, in the case of the LTI-3 Senior Interest, after taking into account distributions made pursuant to priority (i) above on such Distribution Date;

(iii) Third, as interest at the rates described above on each of the REMIC LT-I Regular Interests

(iv) Fourth, any remaining amounts, to the LT-RI Interest.

All Realized Losses on the Pool I Mortgage Loans shall be allocated among the REMIC LT-I Regular Interests in the same manner that principal distributions are allocated.

Lower-Tier REMIC II

The following table sets forth (or describes) the designation, interest rate, and initial principal balance for each interest in Lower-Tier REMIC I, each of which, other than the LT-RII Interest, is hereby designated as a regular interest (each, a “REMIC LT-II Regular Interest).

 

 

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(1)

The interest rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of these REMIC LT-II Regular Interests is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Pool II Mortgage Loans as of the first day of the related Collection Period.

 

(2)	The LT-RII is the sole residual interest in Lower-Tier REMIC II. It does not have an interest rate or a principal balance.

On each Distribution Date, the Paying Agent shall first pay or charge as an expense of Lower-Tier REMIC II all expenses of the Trust associated with Pool II for such Distribution Date.

On each Distribution Date, the Paying Agent shall distribute the Group II Interest Funds among the REMIC LT-II Regular Interests as interest at the rates described above, provided, however, that interest that accrues on the LTII-Q Interest shall be deferred on any Distribution Date in an amount equal to one-half of the increase in the Group II Overcollateralization Amount on such Distribution Date and interest so deferred shall be distributed as principal according to priority 1 below.

On each Distribution Date, the Paying Agent shall distribute the Group II Principal Distribution Amount in the following order or priority:

 

1.

First, to each of the LTII-A, LTII-M-1, LTII-M-2, and LTII-B Interests until the principal balance of each such REMIC LT-II Regular Interest equals one-half the Class Principal Amount of the Corresponding Class of Certificates immediately after such Distribution Date;

 

2.

Second, to the LT-II Q Interest any remaining amounts.

All Realized Losses on the Pool II Mortgage Loans shall be allocated among the REMIC LT-I Regular Interests in the same manner that principal distributions are allocated.

REMIC 2

The following table sets forth (or describes) the designation, interest rate, and initial principal balance for each interest in REMIC 2, each of which, other than the LT-R2 Interest, is hereby designated as a regular interest (each, a “REMIC 2 Regular Interest).

 

 

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(1)

The interest rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of these REMIC 2 Regular Interests is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-1 as of the first day of the related Collection Period.

 

(2)

The interest rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of these REMIC 2 Regular Interests is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-2 as of the first day of the related Collection Period.

 

(3)

The interest rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of these REMIC 2 Regular Interests is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-3 as of the first day of the related Collection Period.

 

(4)

The interest rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of these REMIC 2 Regular Interests is a per annum rate equal to the weighted average of the interest rates on the LTI-1-Sub, LTI-2-Sub, and LTI-3-Sub Interests for such Distribution Date, weighted based on their relative principal balances before taking into account any distributions on such Distribution Date.

 

(5)	The interest rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of these REMIC 2 Regular Interests is a per annum rate equal to the Group II Certificate Interest Rate on the Corresponding Class of Certificates for such Distribution Date.

 

(6)

The LTII-X Interest comprises two components, one of which has an initial principal balance of $3,178,796 on which no interest will accrue. The second component is a notional component having a notional balance on any Distribution Date equal to the sum of the principal balances of the REMIC LT-II Regular Interests. The LTII-X Interest shall accrue interest for each Interest Accrual Period at a per annum rate equal to the excess, if any, of (i) the weighted average of the interest rates on the REMIC LT-II Regular Interests for such Distribution Date (the weighted average of the Net Mortgage Rates on the Pool II Mortgage Loans as of the first day of the related Collection Period) over (ii) the Adjusted REMIC II WAC. Interest accrued on the LTII-X Interest for any Interest Accrual Period will be deferred to the extent of any increase in the Group II Overcollateralization Amount on the related Distribution Date. Any interest so deferred shall not itself accrue interest.

 

(7)	The Class LT-R2 Interest is the sole residual interest in REMIC 2. It does not have an interest rate or a principal balance.

On each Distribution Date, all amounts distributed with respect to the REMIC LT-I Regular Interests and the REMIC LT-II Regular Interests shall first be distributed on the REMIC 2 Regular Interests as interest at the interest rates described above, provided that, any interest

 

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accrued on the Class LTII-X Interest shall be deferred to the extent of any increase in the Group II Overcollateralization Amount on such Distribution Date. Any remaining amounts shall be distributed first as principal on each REMIC 2 Regular Interest other than the LTII-X Interest until its principal balance equals the Class Principal Amount of the Corresponding Class of Certificates immediately after such Distribution Date, and any remaining amounts shall be distributed in respect of the LTII-X Interest.

All Realized Losses on the Mortgage Loans shall be allocated among the REMIC 2 Regular Interests in the same manner that principal distributions are allocated.

REMIC 3

The following table sets forth (or describes) the Class designation, Group I Certificate Interest Rate or the Group II Certificate Interest Rate, initial Class Principal Amount or Notional Amount and minimum denomination for each Class of Certificates comprising interests in the Trust Fund created hereunder. Each Certificate, other than the Class R Certificates represents ownership of regular interests in the Upper Tier REMIC.

 

(1)	On or prior to the Distribution Date in February 2012, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of the Class I-1A-1 and Class I-1A-2

 

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Certificates is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-1, weighted on the basis of the Scheduled Principal Balances of such Mortgage Loans as of the first day of the related Collection Period, minus approximately 0.543%. After the Distribution Date in February 2012, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of the Class I-1A-1 and Class I-1A-2 Certificates is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-1, weighted on the basis of the Scheduled Principal Balances of such Mortgage Loans as of the first day of the related Collection Period.

 

(2)

On or prior to the Distribution Date in February 2012, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class I-1X Certificates is a per annum rate equal to approximately 0.543% per annum. After the Distribution Date in February 2012, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class I-1X Certificates shall be 0.00%.

 

(3)	The Class I-1X, Class I-2X and Class I-3X Certificates will be issued in minimum Percentage Interests of 10%.

 

(4)

On or prior to the Distribution Date in January 2014, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of the Class I-2A-1 and Class I-2A-2 Certificates is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-2, weighted on the basis of the Scheduled Principal Balances of such Mortgage Loans as of the first day of the related Collection Period, minus approximately 0.644%. After the Distribution Date in January 2014, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of the Class I-2A-1 and Class I-2A-2 Certificates is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-2, weighted on the basis of the Scheduled Principal Balances of such Mortgage Loans as of the first day of the related Collection Period.

 

(5)

On or prior to the Distribution Date in January 2014, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class I-2X Certificates is a per annum rate equal to approximately 0.644% per annum. After the Distribution Date in January 2014, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class I-2X Certificates shall be 0.00%.

 

(6)

On or prior to the Distribution Date in February 2017, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of the Class I-3A-1 and Class I-3A-2 Certificates is a per annum rate equal to the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-3, weighted on the basis of the Scheduled Principal Balances of such Mortgage Loans as of the first day of the related Collection Period, minus approximately 0.072%. After the Distribution Date in February 2017, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for each of the Class I-3A-1 and Class I-3A-2 Certificates is a per annum rate equal to the weighted average Net Mortgage Rate of the Mortgage Loans in Loan Group I-3, weighted on the basis of the Scheduled Principal Balances of such Mortgage Loans as of the first Day of the related Collection Period.

 

(7)

On or prior to the Distribution Date in February 2017, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class I-3X Certificates is a per annum rate equal to approximately 0.072% per annum. After the Distribution Date in February 2017, the Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class I-3X Certificates shall be 0.00%.

 

(8)

The Group II Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class II-A Certificates is a per annum rate equal to the least of (i) LIBOR + approximately 0.300%, (ii) 11.000% per annum and (iii) the Group II Net WAC Cap Rate; provided , that if

 

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the Pool II Mortgage Loans and related property are not purchased pursuant to Section 10.02 on the Group II Initial Purchase Date, then with respect to each subsequent Distribution Date the per annum rate calculated pursuant to clause (i) above with respect to the Class II-A Certificates will be LIBOR plus approximately 0.600%.

 

(9)

The Group I Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for each the Group I Subordinate Certificates is a per annum rate equal to the weighted average of the weighted average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I-1, Loan Group I-2 and Loan Group I-3, weighted in proportion to Subordinate Component for each Loan Group.

 

(10)

The Group II Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class II-M-1 Certificates is a per annum rate equal to the least of (i) LIBOR + approximately 0.900%, (ii) 11.000% per annum and (iii) the Group II Net WAC Cap Rate; provided , that if the Pool II Mortgage Loans and related property are not purchased pursuant to Section 10.02 on the Group II Initial Purchase Date, then with respect to each subsequent Distribution Date the per annum rate calculated pursuant to clause (i) above with respect to the Class II-M-1 Certificates will be LIBOR plus approximately 1.350%.

 

(11)

The Group II Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class II-M-2 Certificates is a per annum rate equal to the least of (i) LIBOR + approximately 2.000%, (ii) 11.000% per annum and (iii) the Group II Net WAC Cap Rate; provided , that if the Pool II Mortgage Loans and related property are not purchased pursuant to Section 10.02 on the Group II Initial Purchase Date, then with respect to each subsequent Distribution Date the per annum rate calculated pursuant to clause (i) above with respect to the Class II-M-2 Certificates will be LIBOR plus approximately 3.000%.

 

(12)

The Group II Certificate Interest Rate with respect to any Distribution Date (and the related Interest Accrual Period) for the Class II-B Certificates is a per annum rate equal to the least of (i) LIBOR + approximately 2.000%, (ii) 11.000% per annum and (iii) the Group II Net WAC Cap Rate; provided , that if the Pool II Mortgage Loans and related property are not purchased pursuant to Section 10.02 on the Group II Initial Purchase Date, then with respect to each subsequent Distribution Date the per annum rate calculated pursuant to clause (i) above with respect to the Class II-B Certificates will be LIBOR plus approximately 3.000%.

 

(13)

For any Distribution Date, the Class II-X Certificate shall be entitled to all amounts distributable in respect of the LTII-X Interest in REMIC 2 and shall at all time have economic entitlements identical to those described for the LTII-X Interest in footnote (6) in the table describing REMIC 2 in this Preliminary Statement.

 

(14)

The Class R Certificate will be issued without a Certificate Principal Amount and will not bear interest at a stated rate. The Class R Certificate represents ownership of the residual interest in the Upper Tier REMIC, as well as ownership of the LT-RI, the LT-RII, and Class LT2-R Interests. The Class R Certificate will be issued as a single Certificate evidencing the entire Percentage Interest in such Class.

As of the Cut-off Date, the Mortgage Loans had an aggregate Scheduled Principal Balance of $300,008,828.

As of the Cut-off Date, the Pool I Mortgage Loans had an aggregate Scheduled Principal Balance of $245,220,032.

As of the Cut-off Date, the Pool II Mortgage Loans had an aggregate Scheduled Principal Balance of $54,788,796.

 

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In consideration of the mutual agreements herein contained, the Depositor, the Seller, the Master Servicer, the Trustee, the Securities Administrator, the Servicer and the Delaware Trustee hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions . The following words and phrases, unless the context otherwise requires, shall have the following meanings:

Accepted Servicing Practices : With respect to any Mortgage Loan, those mortgage loan servicing practices (including collection procedures) of prudent mortgage banking institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, and which are in accordance with Fannie Mae servicing practices and procedures, for MBS pool mortgages, as defined in the Fannie Mae Guides including future updates.

Accountant : A Person engaged in the practice of accounting who (except when this Agreement provides that an Accountant must be Independent) may be employed by or affiliated with the Depositor or an Affiliate of the Depositor.

Accounts : Any or all of the Custodial Accounts, the Escrow Accounts, the Collection Account, the Certificate Account and any other accounts created or maintained by the Master Servicer, the Securities Administrator or the Servicer pursuant to this Agreement.

Additional Disclosure Notification : As defined in Section 8.04(a).

Additional Form 10-D Disclosure : As defined in Section 8.04(a).

Additional Form 10-K Disclosure : As defined in Section 8.04(b).

Additional Servicer : Each affiliate of a Servicer that Services any of the Mortgage Loans and each Person that is not an affiliate of any Servicer that Services 10% or more of the Mortgage Loans.

Adjusted REMIC II WAC : For any Distribution Date (and the related Interest Accrual Period) a per annum rate equal to the product of (i) two multiplied by (ii) the weighted average of the interest rates on the LTI-A, LTII-M-1, LTII-M-2, LTII-B, and LTII-Q Interests in Lower-Tier REMIC II weighted in proportion to their principal balances as of the first day of the related Interest Accrual Period, and computed by subjecting the interest rate on the LTII-Q Interest to a cap of 0.00% and subjecting the interest rate on each of the LTI-A, LTII-M-1, LTII-M-2, and LTII-B Interests to a cap equal to the product of (a) Group II Certificate Interest Rate for the Corresponding Class of Certificates multiplied by (b) the quotient of the actual number of days in the Interest Accrual Period Divided by 30.

 

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Adjustment Date : With respect to any Mortgage Loan, the date on which an adjustment is made to the Monthly Payment to correspond to an adjustment in the related Mortgage Note.

Adverse REMIC Event : Either (i) loss of status as a REMIC, within the meaning of Section 860D of the Code, for any group of assets identified as a REMIC in the Preliminary Statement to this Agreement, or (ii) imposition of any tax, including the tax imposed under Section 860F(a)(1) on prohibited transactions, and the tax imposed under Section 860G(d) on certain contributions to a REMIC, on any REMIC created hereunder to the extent such tax would be payable from assets held as part of the Trust Estate.

Affiliate : With respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

Aggregate Pool Balance : With respect to Pool I, as of any date of determination, an amount equal to the aggregate of the Loan Group Balances of the Mortgage Loans in Loan Group I-1, Loan Group I-2 and Loan Group I-3 on such date, and with respect to Pool II, as of any date of determination, an amount equal to the Pool Balance of Pool II on such date.

Agreement : This Pooling and Servicing Agreement and all amendments and supplements hereto.

Ancillary Income : All income derived from the Mortgage Loans, excluding Servicing Fees attributable to the Mortgage Loans and other amounts treated as payment proceeds of the Mortgage Loans, including but not limited to, late charges, fees received with respect to checks or bank drafts returned by the related bank for non-sufficient funds, assumption fees, optional insurance administrative fees and all other incidental fees and charges.

Appraised Value : With respect to any Mortgaged Property, the value thereof as determined by an appraisal made for the originator of the Mortgage Loan at the time of origination of the Mortgage Loan by an appraiser who met the requirements of the Servicer and Fannie Mae, or as determined by use of an automated valuation model.

Assignment of Mortgage : An assignment of Mortgage, notice of transfer or equivalent instrument, in recordable form, which is sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect of record the sale of the Mortgage, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering Mortgages secured by Mortgaged Properties located in the same county, if permitted by law.

Authorized Officer : Any Person who may execute an Officer’s Certificate on behalf of the Trust.

Back-up Certification : As defined in Section 8.03.

 

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Bankruptcy : As to any Person, the making of an assignment for the benefit of creditors, the filing of a voluntary petition in bankruptcy, adjudication as a bankrupt or insolvent, the entry of an order for relief in a bankruptcy or insolvency proceeding, the seeking of reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief, or seeking, consenting to or acquiescing in the appointment of a trustee, receiver or liquidator, dissolution, or termination, as the case may be, of such Person pursuant to the provisions of either the Bankruptcy Code, or any other similar state laws.

Bankruptcy Code : The United States Bankruptcy Code of 1986, as amended.

Bankruptcy Loss : Any loss resulting from a bankruptcy court, in connection with a personal bankruptcy of a borrower, (1) establishing the value of a Mortgaged Property at an amount less than the Outstanding Principal Balance of the Mortgage Loan secured by such Mortgaged Property or (2) reducing the amount of the Monthly Payment on the related Mortgage Loan, in each case, as reported by the Servicer to the Master Servicer.

Book-Entry Certificates : Beneficial interests in Certificates designated as “Book-Entry Certificates” in this Agreement, ownership and transfers of which shall be evidenced or made through book entries by a Clearing Agency as described in Section 6.02; provided , that after the occurrence of a condition whereupon Definitive Certificates are to be issued to Certificate Owners, such Book-Entry Certificates shall no longer be “Book-Entry Certificates.” In no event shall the Residual Certificates be designated as Book-Entry Certificates.

Business Day : Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in New York, New York or, if other than New York, the city in which the Corporate Trust Office of the Trustee is located, or the States of Delaware, Georgia, Maryland, Massachusetts, Minnesota or Texas are authorized or obligated by law or executive order to be closed.

Certificate : Any one of the certificates signed and countersigned by the Securities Administrator in substantially the forms attached hereto as Exhibit A.

Certificate Account : The account maintained by the Securities Administrator in accordance with the provisions of Section 6.07.

Certificate Group : The Group I-1 Senior Certificates, the Group I-2 Senior Certificates, the Group 1-3 Senior Certificates and the Group II Senior Certificates, as applicable.

Certificate of Trust : The certificate of trust filed with the Delaware Secretary of State in respect of the Trust pursuant to Section 3810 of the DSTS.

Certificate Owner : With respect to a Book-Entry Certificate, the Person who is the owner of such Book-Entry Certificate, as reflected on the books of the Clearing Agency, or on the books of a Person maintaining an account with such Clearing Agency (directly or as an indirect participant, in accordance with the rules of such Clearing Agency).

 

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Certificate Principal Amount : With respect to any Group II Senior Certificate or Group II Subordinate Certificate as of any Distribution Date, the initial Certificate Principal Amount thereof on the Closing Date, less the amount of all principal distributions previously distributed with respect to such Certificate and any Group I Applied Loss Amount previously allocated to such Certificate; provided, however, that on each Distribution Date on which a Subsequent Recovery is distributed, the Certificate Principal Amount of any Certificate whose Certificate Principal Amount has previously been reduced by application of Group I Applied Loss Amounts will be increased, in order of seniority, by an amount (to be applied pro rata to all Certificates of such class) equal to the lesser of (1) any Group II Deferred Amount for each such class immediately prior to such Distribution Date and (2) the total amount of any Subsequent Recovery distributed on such Distribution Date to Certificateholders, after application (for this purpose) to any more senior classes of Certificates. The Class II-X and Class II-R Certificates will be issued without Certificate Principal Amounts. With respect to any Group I Certificate as of any Distribution Date, the initial Certificate Principal Amount thereof on the Closing Date, as reduced by (1) all amounts allocable to principal previously distributed with respect to such Certificate, (2) the principal portion of all Realized Losses previously allocated to such Certificate (taking into account the applicable Group I Loss Allocation Limitation), and (3) solely in the case of a Group I Subordinate Certificate, such Certificate’s pro rata share, if any, of the Group I Subordinate Certificate Writedown Amount for previous Distribution Dates; provided that, the Certificate Principal Amount of any class of Group I Subordinate Certificates with the highest payment priority to which Realized Losses have been allocated shall be increased by the amount of any Subsequent Recoveries on the Pool I Mortgage Loans not previously allocated, but not by more than the amount of Realized Losses previously allocated to reduce the Certificate Principal Amount of that Certificate. The Class I-1X, Class I-2X, Class I-3X and Class R Certificates are issued without Certificate Principal Amounts.

Certificate Register and Certificate Registrar : The register maintained and the registrar appointed pursuant to Section 6.02.

Certificateholder : The meaning provided in the definition of “Holder.”

Certification Parties : As defined in Section 8.03.

Certifying Person : As defined in Section 8.03.

Civil Relief Act : The Servicemembers Civil Relief Act, as such may be amended from time to time, and any similar state or local laws.

Class : All Certificates and, in the case of REMIC 1 and REMIC 2, all Lower Tier Interests, bearing the same class designation.

Class II-A Principal Distribution Amount : With respect to any applicable Distribution Date on or after the Group II Stepdown Date, as long as a Group II Trigger Event has not occurred with respect to such Distribution Date, an amount equal to the excess of (x) the aggregate Class Principal Amount of the Group II Senior Certificates immediately prior to such Distribution Date over (y) the Class II-A Target Amount.

 

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Class II-A Target Amount : The lesser of (a) the product of (i) approximately 57.90% and (ii) the aggregate Scheduled Principal Balance of the Mortgage Loans in Pool II as of the last day of the related Collection Period, and (b) the aggregate Scheduled Principal Balance of the Pool II Mortgage Loans as of the last day of the related Collection Period minus the Group II Overcollateralization Floor.

Class II-B Principal Distribution Amount : With respect to any applicable Distribution Date on or after the Group II Stepdown Date, as long as a Group II Trigger Event has not occurred with respect to such Distribution Date, an amount equal to the lesser of (x) the remaining Group II Principal Distribution Amount for that Distribution Date after payment of the Class II-A Principal Distribution Amount, the Class II-M-1 Principal Distribution Amount and the Class II-M-2 Principal Distribution Amount, and (y) the excess, if any, of (A) the sum of (1) the aggregate Class Principal Amount of the Group II Senior Certificates (after taking into account the payment of the Class II-A Principal Distribution Amount for such Distribution Date), (2) the Class Principal Amount of the Class II-M-1 Certificates (after taking into account the payment of the Class II-M-1 Principal Distribution Amount for such Distribution Date), (3) the Class Principal Amount of the Class II-M-2 Certificates (after taking into account the payment of the Class II-M-2 Principal Distribution Amount for such Distribution Date) and (4) the Class Principal Amount of the Class II-B Certificates immediately prior to such Distribution Date, over (B) the Class II-B Target Amount.

Class II-B Target Amount : The lesser of (a) the product of (i) approximately 85.80% and (ii) the aggregate Scheduled Principal Balance of the Pool II Mortgage Loans as of the last day of the related Collection Period, and (b) the aggregate Scheduled Principal Balance of the Pool II Mortgage Loans as of the last day of the related Collection Period minus the Group II Overcollateralization Floor.

Class II-M-1 Principal Distribution Amount : With respect to any applicable Distribution Date on or after the Group II Stepdown Date, as long as a Group II Trigger Event has not occurred with respect to such Distribution Date, an amount equal to the lesser of (x) the remaining Group II Principal Distribution Amount for that Distribution Date after payment of the Class II-A Principal Distribution Amount and (y) the excess, if any, of (A) the sum of (1) the aggregate Class Principal Amount of the Group II Senior Certificates (after taking into account the payment of the Class II-A Principal Distribution Amount for such Distribution Date) and (2) the Class Principal Amount of the Class II-M-1 Certificates immediately prior to such Distribution Date, over (B) the Class II-M-1 Target Amount.

Class II-M-1 Target Amount : The lesser of (a) the product of (i) approximately 70.00% and (ii) the aggregate Scheduled Principal Balance of the Pool II Mortgage Loans as of the last day of the related Collection Period, and (b) the aggregate Scheduled Principal Balance of the Pool II Mortgage Loans as of the last day of the related Collection Period minus the Group II Overcollateralization Floor.

Class II-M-2 Principal Distribution Amount : With respect to any applicable Distribution Date on or after the Group II Stepdown Date, as long as a Group II Trigger Event has not occurred with respect to such Distribution Date, an amount equal to the lesser of (x) the

 

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remaining Group II Principal Distribution Amount for that Distribution Date after payment of the Class II-A Principal Distribution Amount and the Class II-M-1 Principal Distribution Amount and (y) the excess, if any, of (A) the sum of (1) the aggregate Class Principal Amount of the Group II Senior Certificates (after taking into account the payment of the Class II-A Principal Distribution Amount for such Distribution Date), (2) the Class Principal Amount of the Class II-M-1 Certificates (after taking into account the payment of the Class II-M-1 Principal Distribution Amount for such Distribution Date) and (3) the Class Principal Amount of the Class II-M-2 Certificates immediately prior to such Distribution Date, over (B) the Class II-M-2 Target Amount.

Class II-M-2 Target Amount : The lesser of (a) the product of (i) approximately 78.20% and (ii) the aggregate Scheduled Principal Balance of the Pool II Mortgage Loans as of the last day of the related Collection Period, and (b) the aggregate Scheduled Principal Balance of the Pool II Mortgage Loans as of the last day of the related Collection Period minus the Group II Overcollateralization Floor.

Class II-X Distributable Amount : With respect to any Distribution Date, the amount of interest that has accrued on the Class II-X Notional Amount, as described in the Preliminary Statement, but that has not been distributed prior to such date. In addition, such amount shall include the initial Group II Overcollateralization Amount of $3,178,796 to the extent such amount has not been distributed on an earlier Distribution Date as part of the Group II Overcollateralization Release Amount.

Class Principal Amount : With respect to each class of Certificates, the aggregate Certificate Principal Amount of all certificates of that class.

Class Principal Amount : With respect to each Class of Certificates (other than the Class I-1X, Class I-2X, Class I-3X and Class R Certificates), the aggregate Certificate Principal Amount of all Certificates of that Class. With respect to the Class I-1X, Class I-2X, Class I-3X and Class R Certificates, zero. With respect to any Lower Tier Interest, the initial Class Principal Amount as shown or described in the table set forth in the Preliminary Statement to this Agreement for the issuing REMIC, as reduced by principal distributed with respect to such Lower Tier Interest and Realized Losses allocated to such Lower Tier Interest.

Class R Certificate : Each Class R Certificate executed by the Securities Administrator, and authenticated and delivered by the Certificate Registrar, substantially in the form annexed hereto as Exhibit A and evidencing the ownership of the Class LT1-R Interest, the Class LT2-R Interest and the residual interest in the Upper Tier REMIC.

Clearing Agency : An organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act, as amended. As of the Closing Date, the Clearing Agency shall be The Depository Trust Company.

Closing Date : March 30, 2007.

Code : The Internal Revenue Code of 1986, as amended.

 

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Collection Account : A separate account maintained by the Master Servicer established in the name of the Trustee and for the benefit of the Certificateholders pursuant to Section 5.06.

Collection Period : With respect to any Distribution Date, the one-month period commencing on the second day of the calendar month immediately preceding the month in which such Distribution Date occurs and ending on the first day of the month in which such Distribution Date occurs.

Commission : The United States Securities and Exchange Commission.

Compensating Interest Payment : With respect to any Distribution Date, payments made by the Servicer or the Master Servicer in an amount equal to the lesser of (x) the aggregate Prepayment Interest Shortfall Amount with respect to such Distribution Date and (y) the aggregate Servicing Fee payable to the Servicer or the aggregate master servicing compensation payable to the Master Servicer, as applicable, in respect of such Distribution Date.

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

Control : The meaning specified in Section 8-106 of the Delaware UCC.

Corporate Trust Office : With respect to (i) the Securities Administrator and the Certificate Registrar, the principal corporate trust office of the Securities Administrator which, for purposes of presentment of Certificates for transfer and exchange and final payment, is located at Wells Fargo Bank, N.A., Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, and for all other purposes is located at P.O. Box 98, Columbia, Maryland 21046 (or for overnight deliveries, at 9062 Old Annapolis Road, Columbia, Maryland 21045), Attention: Client Manager (HomeBanc 2007-1); and (iii) the Trustee, the principal office of the Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of execution of this Agreement is located at One Federal Street, 3 ^rd Floor, Boston, Massachusetts 02110, Attention: Corporate Trust Office Trust Services/HomeBanc 2007-1, or at such other address as the Trustee may designate from time to time by notice to the Certificateholders, or the principal corporate trust office of any successor Trustee at the address designated by such successor Trustee by notice to the Certificateholders.

Corresponding Class : The Class of Certificates that corresponds to a class of interests in REMIC 2 as provided in the Preliminary Statement.

Custodial Account : The separate custodial account (other than an Escrow Account) established and maintained by the Servicer pursuant to Section 4.02(d) of this Agreement.

Custodial Agreement : The custodial agreement dated as of March 1, 2007, relating to the custody of certain of the Mortgage Loans, among the Custodian, the Master Servicer, the Depositor and the Trustee.

 

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Custodian : The custodian appointed pursuant to the Custodial Agreement, and any successor thereto. The initial Custodian is U.S. Bank National Association.

Custodian Fee : The certification, safekeeping and release fee payable by the Master Servicer on behalf of the Trust to the Custodian from income on funds held in the Collection Account as provided in Section 5.07 and pursuant to the terms of the separate fee letter agreement for HomeBanc Mortgage Trust 2007-1 Mortgage Pass-Through Certificates.

Cut-off Date : March 1, 2007.

Cut-off Date Balance : The Pool I Cut-off Date Balance and the Pool II Cut-off Date Balance, as applicable.

Deficient Valuation : With respect to any Mortgage Loan, a valuation of the Mortgaged Property by a court of competent jurisdiction in an amount less than the unpaid principal balance of the Mortgage Loan secured by such Mortgaged Property.

Definitive Certificate : A Certificate of any Class issued in definitive, fully registered, certificated form.

Delaware Trustee : Wilmington Trust Company, not in its individual capacity but solely as trustee, and its successors and assigns.

Delaware Trustee Fee : The annual ongoing fee payable by the Master Servicer on behalf of the Trust to the Delaware Trustee from income on funds held in the Collection Account.

Delaware UCC : The Uniform Commercial Code as in effect in the State of Delaware.

Deleted Mortgage Loan : A Mortgage Loan that is repurchased from the Trust Estate pursuant to the terms hereof or as to which one or more Qualifying Substitute Mortgage Loans are substituted therefor.

Delinquent : For reporting purposes, in accordance with the MBA method, a Mortgage Loan is “delinquent” when any payment contractually due thereon has not been made by the close of business on the Due Date therefor. Such Mortgage Loan is “30 days Delinquent” if such payment has not been received by the close of business on the corresponding day of the month immediately succeeding the month in which such payment was first due, or, if there is no such corresponding day ( e.g. , as when a 30-day month follows a 31-day month in which a payment was due on the 31st day of such month), then on the last day of such immediately succeeding month. Similarly for “60 days Delinquent” and the second immediately succeeding month and “90 days Delinquent” and the third immediately succeeding month.

Depositor : HMB Acceptance Corp., a Delaware corporation.

Depository : The initial Depository shall be The Depository Trust Company, the nominee of which is Cede & Co., as the registered Holder of the Book-Entry Certificates. The Depository shall at all times be a “clearing corporation” as defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State of New York.

 

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Depository Agreement : The agreement dated March 30, 2007, between the Trust and The Depository Trust Company, as the initial Clearing Agency, relating to the Book-Entry Certificates.

Depository Participant : A broker, dealer, bank or other financial institution or other Person for whom from time to time a Depository effects book-entry transfers and pledges of securities deposited with the Depository.

Determination Date : With respect to each Distribution Date, the 15th day of the related calendar month, or, if such day is not a Business Day, the immediately preceding Business Day.

Disqualified Non - U.S. Person : With respect to a Class R Certificate, any Non-U.S. Person or agent thereof other than (i) a Non-U.S. Person that holds the Class R Certificate in connection with the conduct of a trade or business within the United States and has furnished the transferor and the Securities Administrator with an effective IRS Form W-8ECI or (ii) a Non-U.S. Person that has delivered to both the transferor and the Securities Administrator an opinion of a nationally recognized tax counsel to the effect that the transfer of the Class R Certificate to it is in accordance with the requirements of the Code and the regulations promulgated thereunder and that such transfer of the Class R Certificate will not be disregarded for federal income tax purposes.

Disqualified Organization : A “disqualified organization” as defined in Section 860E(e)(5) of the Code.

Distribution Date : The 25th day of each month or, if such 25th day is not a Business Day, the next succeeding Business Day, commencing in April 2007.

Due Date : With respect to each Mortgage Loan, the date in each month on which the related Monthly Payment is due, exclusive of any days of grace, if such due date is the first day of a month; otherwise, the first day of the following month or such other date as is specified in this Agreement.

Eligible Account : Either (i) an account or accounts maintained with a federal or state chartered depository institution or trust company that complies with the definition of Eligible Institution or (ii) an account or accounts the deposits in which are insured by the FDIC to the limits established by such corporation, provided that any such deposits not so insured shall be maintained in an account at a depository institution or trust company whose commercial paper or other short term debt obligations (or, in the case of a depository institution or trust company which is the principal subsidiary of a holding company, the commercial paper or other short term debt or deposit obligations of such holding company or depository institution, as the case may be) have been rated by each Rating Agency in its highest short-term rating category, or (iii) a segregated trust account or accounts (which shall be a “special deposit account”) maintained with the Securities Administrator or any other federal or state chartered depository institution or trust company, acting in its fiduciary capacity, in a manner acceptable to the Rating Agencies. Eligible Accounts may bear interest.

 

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Eligible Institution : Any of the following:

(i) An institution whose:

(A) commercial paper, short-term debt obligations, or other short-term deposits are rated at least “A-1+” and “P-1” or long-term unsecured debt obligations are rated at least “AA-” or “Aa3” by S&P and Moody’s, respectively (or assigned comparable ratings by the other Rating Agencies), if the amounts on deposit are to be held in the account for no more than 365 days; or

(B) commercial paper, short-term debt obligations, demand deposits, or other short-term deposits are rated at least “A-2” and “P-1” by S&P and Moody’s, respectively (or assigned comparable ratings by the other Rating Agencies), if the amounts on deposit are to be held in the account for no more than 30 days and are not intended to be used as credit enhancement. Upon the loss of the required rating set forth in this clause (ii), the accounts shall be transferred immediately to accounts which have the required rating. Furthermore, commingling by the Servicer is acceptable at the A-2 and P-1 rating level if the Servicer is a bank, thrift or depository and provided the Servicer has the capability to immediately segregate funds and commence remittance to an Eligible Account upon a downgrade; or

(ii) the corporate trust department of a federal depositor institution or state-chartered depositor institution subject to regulations regarding fiduciary funds on deposit similar to Title 12 of the U.S. Code of Federal Regulation Section 9.10(b), which, in either case, has corporate trust powers and is acting in its fiduciary capacity.

Eligible Investments : Any one or more of the following obligations or securities:

(i) direct obligations of, and obligations fully guaranteed as to timely payment of principal and interest by, the United States of America or 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 (“Direct Obligations”);

(ii) federal funds, or demand and time deposits in, certificates of deposits of, or bankers’ acceptances issued by, any depository institution or trust company (including U.S. subsidiaries of foreign depositories and the Trustee or the Securities Administrator or any agent of the Trustee or the Securities Administrator, acting in its respective commercial capacity) incorporated or organized under the laws of the United States of America or any state thereof and subject to supervision and examination by federal or state banking authorities, so long as at the time of investment or the contractual commitment providing for such investment the commercial paper or other short-term debt obligations of such depository institution or trust company (or, in the case of a depository institution or trust company which is the principal subsidiary of a holding company, the commercial paper or other short-term debt or deposit obligations of such holding company or deposit institution, as the case may be) have been rated by each Rating Agency in its highest short-term rating category or one of its two highest long-term rating categories;

 

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(iii) repurchase agreements collateralized by Direct Obligations or securities guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac with any registered broker/dealer subject to Securities Investors’ Protection Corporation jurisdiction or any commercial bank insured by the FDIC, if such broker/dealer or bank has an uninsured, unsecured and unguaranteed obligation rated by each Rating Agency in its highest short-term rating category, provided that both parties to the transaction treat it as a secured borrowing under FAS 140.

(iv) securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States of America or any state thereof which have a credit rating from each Rating Agency, at the time of investment or the contractual commitment providing for such investment, at least equal to one of the two highest long-term credit rating categories of each Rating Agency; provided, however, that securities issued by any particular corporation will not be Eligible Investments to the extent that investment therein will cause the then outstanding principal amount of securities issued by such corporation and held as part of the Trust Estate to exceed 20% of the sum of the Pool Balance and the aggregate principal amount of all Eligible Investments in the Collection Account; provided, further , that such securities will not be Eligible Investments if they are published as being under review with negative implications from any Rating Agency;

(v) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than 180 days after the date of issuance thereof) rated by each Rating Agency in its highest short-term rating category;

(vi) a Qualified GIC;

(vii) certificates or receipts representing direct ownership interests in future interest or principal payments on obligations of the United States of America or its agencies or instrumentalities (which obligations are backed by the full faith and credit of the United States of America) held by a custodian in safekeeping on behalf of the holders of such receipts; and

(viii) any other demand, money market, common trust fund or time deposit or obligation, or interest-bearing or other security or investment (including those managed or advised by the Trustee, the Master Servicer, the Securities Administrator, or any Affiliate thereof), provided that the security or investment is with the limitations of paragraph 35.c(6) of FAS 140 and (A) rated in the highest rating category by each Rating Agency or (B) that would not adversely affect the then current rating assigned by each Rating Agency of any of the Certificates. Such investments in this subsection (viii) may include money market mutual funds or common trust fund, including any fund for which Wells Fargo Bank, N.A. (the “Bank”) in its capacity other than as the Master Servicer, the Securities Administrator or an affiliate thereof serves as an investment advisor, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (x) the Bank, the Trustee, the Master Servicer or any affiliate thereof charges and collects fees and expenses from such funds for services rendered, (y) the Bank, the Trustee, the Securities Administrator, the Master Servicer or any affiliate thereof

 

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charges and collects fees and expenses for services rendered pursuant to this Agreement, and (z) services performed for such funds and pursuant to this Agreement may converge at any time. The Bank or an affiliate thereof is specifically authorized to charge and collect from the Trust Estate such fees as are collected from all investors in such funds for services rendered to such funds (but not to exceed investment earnings thereon);

provided, however , that no such instrument shall be an Eligible Investment if such instrument evidences either (i) a right to receive only interest payments with respect to the obligations underlying such instrument, or (ii) both principal and interest payments derived from obligations underlying such instrument and the principal and interest payments with respect to such instrument provide a yield to maturity of greater than 120% of the yield to maturity at par of such underlying obligations, provided that any such investment will be a “permitted investment” within the meaning of Section 860G(a)(5) of the Code.

Entitlement Holder : The meaning specified in Section 8-102(a)(7) of the Delaware UCC.

Entitlement Order : The meaning specified in Section 8-102(a)(8) of the Delaware UCC ( i.e., generally, orders directing the transfer or redemption of any Financial Asset).

ERISA : The Employee Retirement Income Security Act of 1974, as amended.

ERISA-Qualifying Underwriting : A best efforts or firm commitment underwriting or private placement that meets the requirements of an Underwriter’s Exemption.

ERISA-Restricted Certificates : Each of the Class I-1X, I-2A-2, Class I-2X, Class I-3A-2, Class I-3X, Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5, Class I-B-6, Class II-M-1, Class II-M-2, Class II-B, Class II-X and Class R Certificates and any Certificate that is not rated at least either “BBB-” or “Ba3” at the time of its acquisition.

Errors and Omissions Insurance : Errors and Omissions Insurance to be maintained by the Servicer in accordance with Section 4.02.

Escrow Account : The separate escrow account (other than a Custodial Account) established and maintained by the Servicer pursuant to Section 4.02(f) of this Agreement.

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

Event of Default : Any Master Servicer Event of Default or Servicer Event of Default.

Exchange Act : The Securities Exchange Act of 1934, as amended.

 

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Fannie Mae : Fannie Mae, a federally chartered and privately owned corporation organized and existing under the Federal National Mortgage Association Charter Act, or any successor thereto.

Fannie Mae Guide(s) : The Fannie Mae Selling Guide and the Fannie Mae Servicing Guide and all amendments or additions thereto.

FAS 140 : Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities .

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

FHA Regulations : Regulations promulgated by HUD under the National Housing Act, codified in 24 Code of Federal Regulations, and other HUD issuances relating to FHA loans, including the related handbooks, circulars, notices and mortgagee letters.

Final Scheduled Distribution Date : With respect to each Class of the Group I Certificates, the Distribution Date occurring in April, 2047. With respect to each Class of the Group II Certificates, the Distribution Date occurring in May, 2037.

Financial Asset : The meaning specified in Section 8-102(a) of the Delaware UCC.

FHA : United States Federal Housing Administration.

Final Certification : As defined in Section 2.02(c).

Fitch : Fitch, Inc., or any successor in interest.

Form 8-K Disclosure Information : As defined in Section 8.04(c).

Freddie Mac : The Federal Home Loan Mortgage Corporation, a corporate instrumentality of the United States created and existing under Title III of the Emergency Home Finance Act of 1970, as amended, or any successor thereto.

Ginnie Mae : The Government National Mortgage Association, a wholly owned corporate instrumentality of the United States within HUD.

Gross Margin : With respect to a Mortgage Loan, a fixed percentage amount specified in the related mortgage note that is added to an index to determine the related Mortgage Rate.

Group I Accrued Interest : With respect to the Group I Certificates of any Class on any Distribution Date, is equal to the amount of interest accrued during the related Interest Accrual Period at the applicable Group I Certificate Interest Rate on the Class Principal Amount, or in the case of the Interest Only Certificates, the Notional Amount, of such Group I Certificate immediately prior to such Distribution Date, less (1) in the case of a Group I Senior Certificate, such Certificate’s share of (a) Prepayment Interest Shortfalls on the Mortgage Loans in the related Loan Group, to the extent not covered by Compensating Interest Payments paid by the Servicer or the Master Servicer, (b) interest shortfalls on the Mortgage Loans in the related Loan

 

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Group resulting from the application of the Relief Act or similar state law and (c) after the Group I Cross-Over Date, the interest portion of any Realized Losses on the Mortgage Loans in the related Loan Group and (2) in the case of a Group I Subordinate Certificate, such Certificate’s share of (a) Prepayment Interest Shortfalls on the Mortgage Loans in the related Loan Group, to the extent not covered by Compensating Interest Payments paid by the Servicer or the Master Servicer, (b) interest shortfalls on the Mortgage Loans in the related Loan Group resulting from the application of the Relief Act or similar state law and (c) the interest portion of any Realized Losses on the Mortgage Loans in the related Loan Group. Prepayment Interest Shortfalls and interest shortfalls resulting from the application of the Relief Act will be allocated among the Group I Certificates in proportion to the amount of Group I Accrued Interest that would have been allocated thereto in the absence of such shortfalls. Group I Accrued Interest is calculated on the basis of a 360-day year consisting of twelve 30-day months. No Group I Accrued Interest will be payable with respect to any class of Group I Certificates or Interest Only Certificates after the Distribution Date on which the outstanding Class Principal Amount or Notional Amount of such Group I Certificate or Interest Only Certificate, as applicable, has been reduced to zero.

Group I Allocable Share : With respect to any Class of Group I Subordinate Certificates on any Distribution Date will generally equal such Class’s pro rata share (based on the Class Principal Amount of each Class entitled thereto) of the sum of each of the components of the definition of Group I Subordinate Optimal Principal Amount; provided , that except as described in the succeeding sentence, no Class of Group I Subordinate Certificates (other than the Class of Group I Subordinate Certificates outstanding with the lowest numerical designation) shall be entitled on any Distribution Date to receive distributions pursuant to clauses (2), (3) and (5) of the definition of Group I Subordinate Optimal Principal Amount unless the Group I Class Prepayment Distribution Trigger for the related Class is satisfied for such Distribution Date. If on any Distribution Date the Class Principal Amount of any Class of Group I Subordinate Certificates for which the related Group I Class Prepayment Distribution Trigger was satisfied on such Distribution Date is reduced to zero, any amounts distributable to such Class pursuant to clauses (2), (3) and (5) of the definition of Group I Subordinate Optimal Principal Amount, to the extent of such Class’s remaining Group I Allocable Share, shall be distributed to the remaining Classes of Group I Subordinate Certificates in reduction of their respective Class Principal Amounts, sequentially, in the order of their numerical class designations.

Group I Applied Loss Amount : With respect to any Distribution Date, the amount, if any, by which (x) the aggregate Certificate Principal Amount of the Group I Certificates after giving effect to all distributions on such Distribution Date, but before giving effect to any application of the Group I Applied Loss Amount with respect to such date, exceeds (y) the Aggregate Pool Balance for Loan Group I for such Distribution Date.

Group I Available Funds : For any Distribution Date and each of Loan Group I-1, Loan Group I-2 and Loan Group I-3, an amount which generally includes, (1) all previously undistributed payments on account of principal (including the principal portion of Monthly Payments, Principal Prepayments and the principal amount of Net Liquidation Proceeds, Subsequent Recoveries and the proceeds of any purchase of Pool I Mortgage Loans by the Seller or the Servicer) and all previously undistributed payments on account of interest received after the Cut-off Date and on or prior to the related Determination Date, in each case, from the

 

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Mortgage Loans in the related Loan Group, (2) any Monthly Advances made by a Servicer or Master Servicer and Compensating Interest Payments made by the Servicer or the Master Servicer for such Distribution Date in respect of the mortgage loans in the related Loan Group and (3) any amounts reimbursed by the Master Servicer in connection with losses on certain eligible investments, net fees payable to, and amounts reimbursable to, the Master Servicer, the Servicer, the Trustee, the Delaware Trustee, the Securities Administrator and the Custodian as provided in the Pooling and Servicing Agreement and investment earnings on amounts on deposit in the Certificate Account to the extent allocable to such Loan Group. Additionally, the Depositor shall deposit $100 into the Certificate Account which shall be paid to the holders of the Class R Certificates on the first Distribution Date.

Group I Certificate Interest Rate : With respect to each Class of Group I Certificates and any Distribution Date, the applicable per annum rate set forth or described under the heading “REMIC 3” in the Preliminary Statement hereto.

Group I Certificates : The Group I Senior Certificates and the Group I Subordinate Certificates.

Group I Cross-Over Date : The distribution date on which the Class Principal Amounts of the Group I Subordinate Certificates are reduced to zero.

Group I Initial Purchase Date : The first Distribution Date following the month in which the Pool Balance for Pool I is less than 10% of the Pool I Cut-off Date Balance.

Group I Interest Shortfalls : With respect to any Distribution Date and each Pool I Mortgage Loan that during the related Prepayment Period was the subject of a Principal Prepayment or constitutes a Relief Act Mortgage Loan, an amount determined as follows:

(1) Partial principal prepayments received during the relevant Prepayment Period: The difference between (i) one month’s interest at the applicable Net Mortgage Rate on the amount of such prepayment and (ii) the amount of interest of such prepayment (adjusted to the applicable Net Mortgage Rate) received at the time of such prepayment;

(2) Principal prepayments in full received during the relevant Prepayment Period: The difference between (i) one month’s interest at the applicable Net Mortgage Rate on the Scheduled Principal Balance of such Mortgage Loan immediately prior to such prepayment and (ii) the amount of interest of such prepayment (adjusted to the applicable Net Mortgage Rate) received at the time of such prepayment; and

(3) Relief Act Mortgage Loans: As to any Relief Act Mortgage Loan, the excess of (i) 30 days’ interest (or, in the case of a principal prepayment in full, interest to the date of prepayment) on the Scheduled Principal Balance thereof (or, in the case of a principal prepayment in part, on the amount so prepaid) at the related Net Mortgage Rate over (ii) 30 days’ interest (or, in the case of a principal prepayment in full, interest to the date of prepayment) on such Scheduled Principal Balance (or, in the case of a Principal Prepayment in part, on the amount so prepaid) at the Net Mortgage Rate required to be paid by the Mortgagor as limited by application of the Relief Act.

 

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Group I Loss Allocation Limitation : As defined in Section 6.09(d).

Group I Net Interest Shortfall : With respect to any Distribution Date, the Group I Interest Shortfall, if any, for such Distribution Date net of Compensating Interest Payments made with respect to such Distribution Date.

Group I Original Subordinate Principal Balance : The aggregate Class Principal Amount of the Group I Subordinate Certificates as of the Closing Date.

Group I Senior Certificates : The Group I-1 Senior Certificates, the Group I-2 Senior Certificates and the Group I-3 Senior Certificates.

Group I Senior Optimal Principal Amount : With respect to each of the Group I -1, Group I-2 and Group I-3 Senior Certificates, other than the Interest Only Certificates, and each Distribution Date, will be an amount equal to the sum of the following (but in no event greater than the aggregate Class Principal Amounts of each of the Group I-1, Group I-2 and Group I-3 Senior Certificates as applicable, immediately prior to such Distribution Date):

(A) the applicable Group I Senior Percentage of the principal portion of all Monthly Payments due on the Mortgage Loans in the related Loan Group on the related Due Date, as specified in the amortization schedule at the time applicable thereto (after adjustment for previous principal prepayments but before any adjustment to such amortization schedule by reason of any bankruptcy or similar proceeding or any moratorium or similar waiver or grace period);

(B) the applicable Group I Senior Prepayment Percentage of the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group which was the subject of a prepayment in full received by the Servicer during the applicable Prepayment Period;

(C) the applicable Group I Senior Prepayment Percentage of all partial prepayments allocated to principal received during the applicable Prepayment Period;

(D) the lesser of (a) the applicable Group I Senior Prepayment Percentage of the sum of (i) all Net Liquidation Proceeds allocable to principal received in respect of each Mortgage Loan in the related Loan Group which became a Liquidated Mortgage Loan during the related Prepayment Period (other than Mortgage Loans described in the immediately following clause (ii)) and all Subsequent Recoveries received in respect of each Liquidated Mortgage Loan in the related Loan Group during the related Collection Period and (ii) the Scheduled Principal Balance of each such Mortgage Loan in the related Loan Group purchased by an insurer from the Trustee during the related Prepayment Period pursuant to the related primary mortgage insurance policy, if any, or otherwise; and (b) the applicable Group I Senior Percentage of the sum of (i) the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group which

 

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became a Liquidated Mortgage Loan during the related Prepayment Period (other than the mortgage loans described in the immediately following clause (ii)) and all Subsequent Recoveries received during the related Collection Period and (ii) the Scheduled Principal Balance of each such Mortgage Loan in the related Loan Group that was purchased by an insurer from the Trustee during the related Prepayment Period pursuant to the related primary mortgage insurance policy, if any or otherwise; and

(E) the applicable Group I Senior Prepayment Percentage of the sum of (a) the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group which was repurchased by the Sponsor in connection with such Distribution Date and (b) the excess, if any, of the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group that has been replaced by the Sponsor with a Qualified Substitute Mortgage Loan pursuant to the Mortgage Loan Purchase Agreement in connection with such Distribution Date over the Scheduled Principal Balance of each such Qualified Substitute Mortgage Loan.

Group I Senior Percentage : With respect to each Loan Group, the lesser of (a) 100% and (b) the percentage (carried to six places rounded up) obtained by dividing the aggregate Class Principal Amount of the Group I Senior Certificates related to such Loan Group, other than the Interest Only Certificates, immediately prior to such Distribution Date, by the aggregate Scheduled Principal Balance of the Mortgage Loans in such Loan Group as of the beginning of the related Collection Period. The initial Group I Senior Percentage for each Loan Group will be equal to approximately 92.60%.

Group I Senior Prepayment Percentage : The Group I Senior Prepayment Percentage for the Group I-1, Group I-2 and Group I-3 Senior Certificates, other than the Interest Only Certificates, on any Distribution Date occurring during the periods set forth below will be as follows:

 

 

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Any scheduled reduction to the Group I-1, Group I-2 and Group I-3 Senior Prepayment Percentage for the Group I Senior Certificates shall not be made as of any Distribution Date unless, as of the last day of the month preceding such Distribution Date (1) the aggregate Scheduled Principal Balance of the Mortgage Loans delinquent 60 days or more (including for this purpose any such Mortgage Loans in foreclosure and bankruptcy and such Mortgage Loans with respect to which the related Mortgaged Property has been acquired by the Trust) averaged over the last six months, as a percentage of the aggregate Class Principal Amount of the Group I Subordinate Certificates does not exceed 50% and (2) cumulative Realized Losses on the Mortgage Loans do not exceed (a) 30% of the aggregate Class Principal Amount of the Group I Original Subordinate Principal Balance if such Distribution Date occurs between and including April 2014 and March 2015, (b) 35% of the Group I Original Subordinate Principal Balance if such Distribution Date occurs between and including April 2015 and March 2016, (c) 40% of the Group I Original Subordinate Principal Balance if such Distribution Date occurs between and including April 2016 and March 2017, (d) 45% of the Group I Original Subordinate Principal Balance if such Distribution Date occurs between and including April 2017 and March 2018, and (e) 50% of the Group I Original Subordinate Principal Balance if such Distribution Date occurs during or after April 2018.

In addition, if on any Distribution Date the current weighted average of the Group I Subordinate Percentages is equal to or greater than two times the initial weighted average of the Group I Subordinate Percentages, and (a) the aggregate Scheduled Principal Balance of the Mortgage Loans delinquent 60 days or more (including for this purpose any such Mortgage Loans in foreclosure and bankruptcy and such Mortgage Loans with respect to which the related Mortgaged Property has been acquired by the Trust), averaged over the last six months, as a percentage of the aggregate Class Principal Amount of the Group I Subordinate Certificates does not exceed 50% and (b)(i) on or prior to the Distribution Date occurring in March 2010, cumulative Realized Losses on the Mortgage Loans as of the end of the related Prepayment Period do not exceed 20% of the Group I Original Subordinate Principal Balance and (ii) after the Distribution Date occurring in March 2010, cumulative Realized Losses on the Mortgage Loans as of the end of the related Prepayment Period do not exceed 30% of the Group I Original Subordinate Principal Balance, then, in each case, the Group I Senior Prepayment Percentages for the Group I-1, Group I-2 and Group I-3 Senior Certificates for such Distribution Date will equal the Group I Senior Percentage for the Group I-1, Group I-2 and Group I-3 Senior Certificates, respectively; provided, however, if on such Distribution Date the current weighted average of the Group I Subordinate Percentages is equal to or greater than two times the initial weighted average of the Group; I Subordinate Percentages on or prior to the Distribution Date occurring in March 2010 and the above delinquency and loss tests are met, then the Group I Senior Prepayment Percentages for the Group I-1, Group I-2 and Group I-3 Senior Certificates for such Distribution Date will equal the Group I Senior Percentage for the Group I-1, Group I-2 and Group I-3 Senior Certificates, respectively, plus 50% of the related Group I Subordinate Percentage on such Distribution Date.

Notwithstanding the foregoing, if, on any Distribution Date, the percentage, the numerator of which is the aggregate Class Principal Amount of the Group I Senior Certificates immediately preceding such Distribution Date, and the denominator of which is the Scheduled Principal Balance of the Mortgage Loans as of the beginning of the related Collection Period, exceeds such percentage as of the Cut-off Date, then the Group I Senior Prepayment Percentage with respect to the Group I Senior Certificates for such Distribution Date will equal 100%.

 

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Group I Subordinate Certificate Writedown Amount : With respect to the Group I Subordinate Certificates, the amount by which (x) the sum of the Class Principal Amounts of the Group I Certificates (after giving effect to the distribution of principal and the allocation of Realized Losses in reduction of the Class Principal Amounts of the Group I Certificates on such Distribution Date) exceeds (y) the Scheduled Principal Balances of the Pool I Mortgage Loans on the Due Date related to such Distribution Date.

Group I Subordinate Certificates : The Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5 and Class I-B-6 Certificates.

Group I Subordinate Optimal Principal Amount : With respect to the Group I Subordinate Certificates and each Distribution Date will be an amount equal to the sum of the following from each Loan Group (but in no event greater than the aggregate Class Principal Amounts of the Group I Subordinate Certificates immediately prior to such Distribution Date):

(1) the applicable Group I Subordinate Percentage of the principal portion of all Monthly Payments due on each Mortgage Loan in the related Loan Group on the related Due Date, as specified in the amortization schedule at the time applicable thereto (after adjustment for previous principal prepayments but before any adjustment to such amortization schedule by reason of any bankruptcy or similar proceeding or any moratorium or similar waiver or grace period);

(2) the applicable Group I Subordinate Prepayment Percentage of the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group which was the subject of a prepayment in full received by the Servicer during the applicable Prepayment Period;

(3) the applicable Group I Subordinate Prepayment Percentage of all partial prepayments of principal received during the applicable Prepayment Period for each Mortgage Loan in the related Loan Group;

(4) the excess, if any, of (a) the Net Liquidation Proceeds allocable to principal received during the related Prepayment Period in respect of each Liquidated Mortgage Loan in the related Loan Group and all Subsequent Recoveries received in respect of each Liquidated Mortgage Loan in the related Loan Group during the related Prepayment Period over (b) the sum of the amounts distributable to the holders of the related Group I Senior Certificates pursuant to clause (4) of the definition of “Group I Senior Optimal Principal Amount” on such distribution date;

(5) the applicable Group I Subordinate Prepayment Percentage of the sum of (a) the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group which was repurchased by the Sponsor in connection with such Distribution Date and (b) the difference, if any, between the Scheduled Principal Balance of each Mortgage Loan in the related Loan Group that has been replaced by the Sponsor with a substitute

 

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mortgage loan pursuant to the Mortgage Loan Purchase Agreement in connection with such Distribution Date and the Scheduled Principal Balance of each such substitute mortgage loan; and

(6) on the Distribution Date on which the Class Principal Amounts of the related Group I Senior Certificates have all been reduced to zero, 100% of any applicable Group I Senior Optimal Principal Amount.

Group I Subordinate Percentage : As of any Distribution Date and with respect to any Loan Group, 100% minus the related Group I Senior Percentage for the Group I Senior Certificates related to such Loan Group. The initial Group I Subordinate Percentage for each Loan Group will be equal to approximately 7.40%.

Group I Subordinate Prepayment Percentage : As of any Distribution Date and with respect to any Loan Group, 100% minus the related Group I Senior Prepayment Percentage for such Loan Group, except that on any Distribution Date after the Class Principal Amount of each Class of Group I Senior Certificates of the related Group I Certificate Group have each been reduced to zero, if (A) the weighted average of the Group I Subordinate Percentages on such Distribution Date equals or exceeds two times the initial weighted average of the Group I Subordinate Percentages and (B) the aggregate Scheduled Principal Balance of the Pool I Mortgage Loans delinquent 60 days or more (including for this purpose any such Mortgage Loans in foreclosure and bankruptcy and Pool I Mortgage Loans with respect to which the related Mortgaged Property has been acquired by the Trust), averaged over the last six months, as a percentage of the sum of the aggregate Class Principal Amount of the Group I Subordinate Certificates does not exceed 50%, the Group I Subordinate Prepayment Percentage for the Group I Subordinate Certificates with respect to such Loan Group will equal 100%. If the above test is not satisfied on any Distribution Date after the Class Principal Amount of each Class of Group I Senior Certificates of the related Group I Certificate Group have each been reduced to zero and any Group I Senior Certificates are still outstanding, then the Group I Subordinate Prepayment Percentage with respect to such Loan Group shall equal zero for such Distribution Date.

Group I-1 Senior Certificates : The Class I-1A-1 and Class I-1A-2 Certificates.

Group I-2 Senior Certificates : The Class I-2A-1 and Class I-2A-2 Certificates.

Group I-3 Senior Certificates : The Class I-3A-1 and Class I-3A-2 Certificates.

Group II Applied Loss Amount : With respect to any Distribution Date, the amount, if any, by which (x) the aggregate Certificate Principal Amount of the Group II Certificates after giving effect to all distributions on such Distribution Date, but before giving effect to any application of the Group II Applied Loss Amount with respect to such date, exceeds (y) the Aggregate Pool Balance for Loan Group II for such Distribution Date.

Group II Basis Risk Carryover Amounts : For any Distribution Date, the sum of (i) if the Group II Certificate Interest Rate for a Class of Group II Certificates is calculated based on the Group II Net WAC Cap Rate, the excess, if any, of (a) the amount of Accrued Interest calculated using the lesser of (x) One-month LIBOR plus the related margin and (y) 11.000% over (b) the

 

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amount of Accrued Interest calculated using a Group II Certificate Interest Rate equal to the related Group II Net WAC Cap Rate for such Distribution Date and (ii) the Group II Basis Risk Carryforward Amount for all previous Distribution Dates not previously paid plus interest thereon at the related Group II Certificate Interest Rate.

Group II Carryforward Interest : With respect to any Distribution Date and each class of Group II Senior or Group II Subordinate Certificates, the sum of (i) the amount, if any, by which (x) the sum of (A) Group II Current Interest for such class for the immediately preceding Distribution Date and (B) any unpaid Group II Carryforward Interest for such class from previous Distribution Dates exceeds (y) the amount distributed in respect of interest on such class on such immediately preceding Distribution Date, and (ii) interest on such amount for the related Interest Accrual Period at the applicable Group II Certificate Interest Rate.

Group II Certificate Interest Rate : With respect to each Class of Group II Certificates and any Distribution Date, the applicable per annum rate set forth or described under the heading “REMIC 3” in the Preliminary Statement hereto.

Group II Certificates : The Group II Senior Certificates and the Group II Subordinate Certificates.

Group II Cumulative Loss Trigger Event : A Group II Cumulative Loss Trigger Event shall have occurred with respect to any Distribution Date beginning in April 2009 if the fraction, expressed as a percentage, obtained by dividing (x) the aggregate amount of Realized Losses incurred on the Pool II Mortgage Loans from the Cut-off Date through the last day of the related Collection Period by (y) the Cut-off Date Balance, exceeds the applicable percentage described below with respect to such Distribution Date:

 

Group II Current Interest : With respect to each Class of Group II Certificates and any Distribution Date, the aggregate amount of interest accrued at the applicable Group II Certificate Interest Rate during the related Interest Accrual Period on the Class Principal Amount of such Class immediately prior to such Distribution Date.

Group II Deferred Amount : With respect to any Distribution Date and each Class of the Group II Certificates, the amount by which (x) the aggregate of Group II Applied Loss Amounts previously applied in reduction of the Class Principal Amount thereof pursuant to Section 6.09 hereof exceeds (y) the sum of (1) the aggregate of amounts previously reimbursed in respect thereof and (2) the amount by which the Class Principal Amount of such Certificate has been increased due to any Subsequent Recovery.

 

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Group II Delinquency Event : A Group II Delinquency Event shall have occurred with respect to any Distribution Date if the Group II Rolling Three Month Delinquency Rate as of the last day of the immediately preceding calendar month equals or exceeds 19.00% of the Group II Senior Enhancement Percentage for the prior Distribution Date.

Group II Delinquency Rate : With respect to any calendar month, the fraction, expressed as a percentage, the numerator of which is the aggregate Scheduled Principal Balance of all Pool II Mortgage Loans 60 days Delinquent or more (including all foreclosures, bankruptcies and REO Properties) as of the close of business on the last day of such month and as reported by the Servicer to the Master Servicer, and the denominator of which is the Pool Balance of Pool II as of the close of business on the last day of such month.

Group II Extra Principal Distribution Amount : For any Distribution Date, is the lesser of (x) the Group II Monthly Excess Cashflow for such Distribution Date and (y) the Group II Overcollateralization Deficiency for such Distribution Date.

Group II Initial Purchase Date : The first Distribution Date following the month in which the Pool Balance for Pool II is less than 10% of the Pool II Cut-off Date Balance.

Group II Interest Funds : With respect to any Distribution Date and Pool II, the sum of (1) all interest received or advanced by the Servicer or the Master Servicer for the related Collection Period and available in the Certificate Account on that Distribution Date with respect to the Pool II Mortgage Loans, (2) all Compensating Interest Payments paid with respect to the Pool II Mortgage Loans that were prepaid during the related Prepayment Period, (3) the portion of any purchase price or other amount paid with respect to the Pool II Mortgage Loans allocable to interest; net of any fees or other amounts reimbursable to the Master Servicer, the Servicer, the Securities Administrator, the Trustee, the Custodian and the Delaware Trustee as provided in the Agreements to the extent allocable to Pool II and (4) with respect to the Distribution Date in April 2007, the Initial Group II Interest Deposit.

Group II Monthly Excess Cashflow : With respect to any Distribution Date, the sum of (1) the Group II Overcollateralization Release Amount, (2) Group II Monthly Excess Interest and (3) the Group II Monthly Excess Principal.

Group II Monthly Excess Interest : With respect to any Distribution Date, the amount of Group II Interest Funds remaining after application pursuant to clauses (1) and (2) of Section 6.08(g).

Group II Monthly Excess Principal : With respect to any Distribution Date, the Group II Principal Distribution Amount remaining after application pursuant to any of clauses (1) and (2) under Section 6.08(h)(i) and Clauses (1) through (4) under Section 6.08(h)(ii).

Group II Net WAC Cap Rate : With respect to any Distribution Date and the Group II Certificates, a per annum rate equal to the product of (1) the quotient of (a) 30 divided by (b) the actual number of days in the Interest Accrual Period, multiplied by (2) the weighted average of the Net Mortgage Rates of the Pool II Mortgage Loans as of the first day of the related Collection Period, weighted on the basis of their stated principal balances as of such first day of the related Collection Period.

 

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Group II Overcollateralization Amount : For any Distribution Date, the amount, if any, by which (1) the aggregate Scheduled Principal Balance of the Pool II Mortgage Loans exceeds (2) the aggregate Class Principal Amount of the Group II Senior and Group II Subordinate Certificates as of such Distribution Date after giving effect to the reduction on such Distribution Date of the Class Principal Amounts of the Group II Senior and Group II Subordinate Certificates resulting from the distribution of Group II Principal Funds for Pool II on such Distribution Date.

Group II Overcollateralization Deficiency : With respect to any Distribution Date, the amount, if any, by which (1) the Group II Overcollateralization Target Amount for such Distribution Date exceeds (2) the Group II Overcollateralization Amount for such Distribution Date, calculated for this purpose after giving effect to the reduction on such Distribution Date of the Class Principal Amounts of the Group II Senior Certificates and Group II Subordinate Certificates resulting from the distribution of Group II Principal Funds for Pool II on such Distribution Date.

Group II Overcollateralization Floor : Approximately 0.50% of the Pool II Cut-off Date Balance.

Group II Overcollateralization Release Amount : With respect to any Distribution Date and Pool II, the lesser of (x) the Group II Principal Funds for such Distribution Date and (y) the excess, if any, of (1) the Group II Overcollateralization Amount for such Distribution Date (assuming that 100% of such Group II Principal Funds is applied as a principal distribution on such Distribution Date) over (2) the Group II Overcollateralization Target Amount for such Distribution Date (with the amount determined pursuant to this clause (y) deemed to be $0 if the Group II Overcollateralization Amount is less than or equal to the Group II Overcollateralization Target Amount on that Distribution Date).

Group II Overcollateralization Target Amount : With respect to any Distribution Date and Pool II, (a) prior to the Group II Stepdown Date, approximately 7.10% of the aggregate Scheduled Principal Balance of the Pool II Mortgage Loans as of the Cut-off Date, (b) on or after the Group II Stepdown Date and if a Group II Trigger Event is not in effect, the greater of (i) approximately 14.20% of the then current aggregate Scheduled Principal Balance of the Pool II Mortgage Loans as of the last day of the related Collection Period and (ii) the Group II Overcollateralization Floor and (c) on or after the Group II Stepdown Date and if a Group II Trigger Event is in effect, the Group II Overcollateralization Target Amount for the immediately preceding Distribution Date.

Group II Principal Distribution Amount : With respect to any Distribution Date and Pool II, the Group II Principal Funds for Pool II for such Distribution Date minus (b) the portion of the Overcollateralization Release Amount attributable to Pool II (based on the related Pool Balance).

 

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Group II Principal Funds : With respect to any Distribution Date and Pool II, the sum of (1) the principal portion of all scheduled monthly payments on the Pool II Mortgage Loans due on the related Due Date, to the extent received or advanced, (2) the principal portion of all proceeds of the repurchase of a Mortgage Loan from Pool II (or, in the case of a substitution, certain amounts representing a principal adjustment) as required by the Mortgage Loan Purchase Agreement during the preceding calendar month, (3) the principal portion of all other unscheduled collections received during the preceding calendar month in respect of the Pool II Mortgage Loans, including full and partial prepayments, the proceeds of any purchase of Pool II Mortgage Loans by the Seller or the Servicer, Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds and Subsequent Recoveries; net of any fees payable to, and other amounts reimbursable to, the Master Servicer, the Servicer, the Securities Administrator, the Trustee, the Custodian and the Delaware Trustee as provided in the Agreements (to the extent not reimbursed from Group II Interest Funds) to the extent allocable to Pool II, and (4) with respect to the Distribution Date in April 2007, the Initial Group II Principal Deposit.

Group II Rolling Three Month Delinquency Rate : With respect to any Distribution Date, the average of the Group II Delinquency Rates for each of the three (or one and two, in the case of the first and second Distribution Dates, respectively) immediately preceding months.

Group II Senior Certificates : The Class II-A Certificates.

Group II Senior Enhancement Percentage : With respect to any Distribution Date, the fraction, expressed as a percentage, the numerator of which is the sum of the aggregate Class Principal Amount of the Group II Subordinate Certificates and the Group II Overcollateralization Amount (which, for purposes of this definition only, will not be less than zero) after giving effect to distributions on such Distribution Date, and the denominator of which is the Pool Balance for Pool II for such Distribution Date.

Group II Stepdown Date : The earlier to occur of (i) the first Distribution Date following the Distribution Date on which the aggregate Class Principal Amount of the Senior Certificates has been reduced to zero and (ii) the later to occur of (a) the Distribution Date occurring in April 2010 and (b) the first Distribution Date on which the Senior Enhancement Percentage (calculated for this purpose after giving effect to payments or other recoveries in respect of the Mortgage Loans during the related Collection Period but before giving effect to distributions on the Certificates on such Distribution Date) is greater than or equal to approximately 42.10%.

Group II Step-up Date : The first Distribution Date after the Pool II Initial Purchase Date.

Group II Subordinate Certificates : The Class II-M-1, Class II-M-2 and Class II-B Certificates.

Group II Trigger Event : A Group II Trigger Event will have occurred with respect to any Distribution Date if (a) a Group II Delinquency Event has occurred for such Distribution Date or (b) a Group II Cumulative Loss Trigger Event has occurred for such Distribution Date.

Guidelines : As defined in Section 4.02(p).

 

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Holder or Certificateholder : The registered owner of any Certificate as recorded on the books of the Certificate Registrar except that, solely for the purposes of taking any action or giving any consent pursuant to this Agreement, any Certificate registered in the name of the Depositor, the Trustee, the Securities Administrator, the Master Servicer, the Servicer, any Subservicer retained by the Servicer, or any Affiliate thereof shall be deemed not to be outstanding in determining whether the requisite percentage necessary to effect any such consent has been obtained, except that, in determining whether the Trustee and the Securities Administrator shall be protected in relying upon any such consent, only Certificates which a Responsible Officer of the Trustee knows to be so owned shall be disregarded. The Trustee may request and conclusively rely on certifications by the Depositor, the Securities Administrator, the Master Servicer or the Servicer in determining whether any Certificates are registered to an Affiliate of the Depositor, the Securities Administrator, the Master Servicer or the Servicer.

HUD : The United States Department of Housing and Urban Development, or any successor thereto and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA Regulations.

Independent : When used with respect to any Accountants, a Person who is “independent” within the meaning of Rule 2-01(b) of the Securities and Exchange Commission’s Regulation S-X. When used with respect to any other Person, a Person who (a) is in fact independent of another specified Person and any Affiliate of such other Person, (b) does not have any material direct financial interest in such other Person or any Affiliate of such other Person, and (c) is not connected with such other Person or any Affiliate of such other Person as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions.

Index : Either the Six-Month LIBOR Index or the One-Year LIBOR Index.

Initial Certification : As defined in Section 2.02(a).

Initial Group II Interest Deposit : $923.54.

Initial Group II Principal Deposit : $84,750.00.

Insurance Policy : Any primary mortgage insurance policy, standard hazard insurance policy, flood insurance policy, earthquake insurance policy or title insurance policy relating to the Mortgage Loans or the Mortgaged Properties, to be in effect as of the Closing Date or thereafter during the term of this Agreement.

Insurance Proceeds : Any amounts paid by an insurer under a primary mortgage insurance policy, any standard hazard insurance policy, flood insurance policy, title insurance policy or any other insurance policy relating to the Mortgage Loans or related mortgaged properties other than amounts to cover expenses incurred by the Servicer in connection with procuring such proceeds, applied to the restoration and repair of the related Mortgaged Property or to be paid to the borrower pursuant to the related Mortgage Note or state law.

 

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Interest Accrual Period : With respect to any Distribution Date and any class of Group I Senior Certificates or Group I Subordinate Certificates or any of the REMIC LT-I Regular Interests, REMIC LT-II Regular Interests, or REMIC 2 Regular Interests, the calendar month immediately preceding the month in which such Distribution Date occurs. With respect to any Distribution Date and any class of Group II Senior Certificates or Group II Subordinate Certificates, the period beginning on the immediately preceding Distribution Date (or on the Closing Date, in the case of the first Interest Accrual Period) and ending on the day immediately preceding the related Distribution Date.

Interim Certification : As defined in Section 2.02(b).

Item 1122 Responsible Party : As defined in Section 8.07.

Latest Possible Maturity Date : The Distribution Date occurring in April 2042.

Lender Paid Mortgage Insurance Rate : The Lender Paid Mortgage Insurance Rate shall be a rate per annum equal to the percentage shown on the Mortgage Loan Schedule.

Lender Primary Mortgage Insurance Policy or LPMI Policy : Any Primary Mortgage Insurance Policy for which premiums are paid by the Servicer.

LIBOR Business Day : Any day on which banks in London, England and The City of New York are open and conducting transactions in foreign currency and exchange.

LIBOR Determination Date : The second LIBOR Business Day immediately preceding the commencement of each Interest Accrual Period for any Group II Certificates.

Liquidated Mortgage Loan : Any defaulted Mortgage Loan as to which the Servicer has determined that all amounts that it expects to recover from or on account of such Mortgage Loan have been recovered, as reported by the Servicer to the Master Servicer, and any Second Lien Mortgage Loan that is 180 or more days delinquent in payment.

Liquidation Expenses : Expenses that are incurred by the Master Servicer or the Servicer, as applicable, in connection with the liquidation of any defaulted Mortgage Loan and are not recoverable under the applicable primary mortgage insurance policy, if any, including, without limitation, foreclosure and rehabilitation expenses, legal expenses and unreimbursed amounts, if any, expended pursuant to Sections 4.02(c), 4.02(j) or 4.02(o).

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

Loan Group : Loan Group I-1, Loan Group I-2 or Loan Group I-3, as the context requires.

 

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Loan Group I-1 : The loan group consisting of conventional first lien, hybrid Mortgage Loans with interest rates that have an initial fixed rate period of five years and thereafter adjust on a semi-annual or annual basis.

Loan Group I-2 : The loan group consisting of conventional first lien, hybrid mortgage loans with interest rates that have an initial fixed rate period of seven years and thereafter adjust on a semi-annual or annual basis.

Loan Group I-3 : The loan group consisting of conventional first lien, hybrid mortgage loans with interest rates that have an initial fixed rate period of ten years and thereafter adjust on a semi-annual or annual basis.

Loan Group Balance : With respect to each of Loan Group I-1, Loan Group I-2 and Loan Group I-3 and any date of determination, the aggregate Scheduled Principal Balance of the Mortgage Loans in that Loan Group as of such date.

Loan-to-Value Ratio : With respect to a Mortgage Loan, at any time, the ratio, expressed as a percentage, of the principal balance of such Mortgage Loan as of the applicable date of determination, to (a) in the case of a purchase, the lesser of the sale price of the Mortgaged Property and its appraised value at the time of sale or (b) in the case of a refinancing or modification, the appraised value of the Mortgaged Property at the time of the refinancing or modification.

Lower-Tier REMIC I : As described in the Preliminary Statement.

Lower-Tier REMIC II : As described in the Preliminary Statement.

Majority Certificateholders : Until such time as the sum of the Class Principal Amounts of all Classes of Certificates (other than the Class R, Class I-1X, Class I-2X, Class I-3X and Class II-X Certificates) has been reduced to zero, the holder or holders of in excess of 50% of the aggregate Class Principal Amount of all Classes of Certificates; and thereafter, the holder of the Class R Certificate.

Margin : With respect to each adjustable rate Mortgage Loan, the fixed percentage amount set forth in each related Mortgage Note which is added to the Index in order to determine the related Mortgage Rate, as set forth in the Mortgage Loan Schedule.

Master Servicer : Wells Fargo Bank, N.A., or any successor in interest, or if any successor master servicer shall be appointed as herein provided, then such successor master servicer.

Master Servicer Errors and Omission Insurance Policy : Any errors and omission insurance policy required to be obtained by the Master Servicer satisfying the requirements of Section 5.02.

Master Servicer Event of Default : Any one of the conditions or circumstances enumerated in Section 9.01(a).

 

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Master Servicer Fidelity Bond : Any fidelity bond to be maintained by the Servicer in accordance with Section 5.02.

Master Servicer Remittance Date : With respect to each Distribution Date, the Business Day immediately preceding such Distribution Date.

Material Defect : With respect to any Mortgage Loan, as defined in Section 2.02(c) hereof.

Maximum Mortgage Rate : The maximum level to which a Mortgage Rate can adjust in accordance with its terms, regardless of changes in the Index.

MERS : Mortgage Electronic Registration Systems, Inc., a Delaware corporation, or any successor in interest thereto.

MERS Mortgage Loan : Any Mortgage Loan as to which the related Mortgage, or an Assignment of Mortgage, has been or will be recorded in the name of MERS, as nominee for the holder from time to time of the Mortgage Note.

MIN : The Mortgage Identification Number for Mortgage Loans registered with MERS on the MERS ^® System.

Minimum Lifetime Mortgage Rate : The minimum level to which a Mortgage Rate can adjust in accordance with its terms, regardless of changes in the Index.

Monthly Advance: An advance made by the Servicer pursuant to Section 4.03(c) or the Master Servicer pursuant to Section 6.11, as applicable, with respect to delinquent payments of principal and interest on the Mortgage Loans, adjusted to the related Net Mortgage Rate.

Monthly Payment : With respect to any Mortgage Loan and any month, the scheduled payment or payments of principal and interest due during such month on such Mortgage Loan, which either is payable by a mortgagor in such month under the related mortgage note, or in the case of any Mortgaged Property acquired through foreclosure or deed-in-lieu of foreclosure, would otherwise have been payable under the related Mortgage Note, in each case, as reduced by any Bankruptcy Loss.

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

Mortgage : A mortgage, deed of trust or other instrument encumbering a fee simple interest in real property securing a Mortgage Note.

Mortgage Bankers’ Blanket Bond : The fidelity bond developed by the Mortgage Bankers Association of America and its members used to protect a mortgage lender/servicer against errors and omissions, mortgage impairment and losses arising from the dishonest, fraudulent and criminal acts of its management and employees.

 

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Mortgage File : The mortgage documents listed in Section 2.01(b) pertaining to a particular Mortgage Loan required to be delivered to the Trustee (or the Custodian) pursuant to this Agreement.

Mortgage Loan : The conventional, adjustable rate, first lien residential mortgage loans sold by the Seller to the Depositor pursuant to the Mortgage Loan Purchase Agreement and subsequently transferred by the Depositor to the Trust Estate pursuant to this Agreement.

Mortgage Loan Documents : As defined in Section 2.01(b).

Mortgage Loan Purchase Agreement : The mortgage loan purchase agreement dated as of March 1, 2007, between the Seller and the Depositor.

Mortgage Loan Schedule : The schedule attached hereto as Schedule A, which shall identify each Mortgage Loan, as such schedule may be amended from time to time to reflect the addition of Mortgage Loans to, or the deletion of Mortgage Loans from, the Trust. The Depositor shall be responsible for providing the Master Servicer and the Custodian on behalf of the Trustee with all amendments to the Mortgage Loan Schedule.

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

Mortgage Pool : A pool of Mortgage Loans in the Trust Estate, including Pool I and Pool II, as the context requires.

Mortgage Rate : With respect to any Mortgage Loan, its applicable interest rate determined as provided in the related mortgage note, as reduced by any Relief Act Reduction.

Mortgaged Property : With respect to any Mortgage Loan, the underlying real property securing such Mortgage Loan.

Mortgagor : The obligor on a Mortgage Note.

Net Liquidation Proceeds : All amounts, net of (1) unreimbursed expenses and (2) unreimbursed Monthly Advances and Servicing Advances, received and retained in connection with the liquidation of defaulted Mortgage Loans, through Insurance Proceeds or Condemnation Proceeds, by foreclosure or otherwise, together with any net proceeds received on a monthly basis with respect to any Mortgaged Properties acquired by foreclosure or deed in lieu of foreclosure.

Net Mortgage Rate : With respect to any Mortgage Loan at any time, the Mortgage Rate thereof reduced by the Servicing Fee Rate for such Mortgage Loan.

Non-MERS Mortgage Loan : Any Mortgage Loan other than a MERS Mortgage Loan.

Non-Permitted Transferee : A Person other than a Permitted Transferee.

 

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Nonrecoverable Advance : Any advance previously made by the Servicer pursuant to Section 4.03(c) or by the Master Servicer pursuant to Section 6.11 or any Servicing Advance which, in the good faith judgment of the Servicer or the Master Servicer, as applicable, may not be ultimately recoverable by the Servicer or the Master Servicer from Liquidation Proceeds, Insurance Proceeds, Condemnation Proceeds or otherwise. The determination by the Servicer or the Master Servicer, as applicable, that it has made a Nonrecoverable Advance, shall be evidenced by an Officer’s Certificate of the Servicer or the Master Servicer, as applicable, delivered to the Trustee and the Master Servicer (in the case of the Servicer) and detailing the reasons for such determination

Notional Amount : With respect to the Class I-1X Certificates, as of any date of determination, is equal to the aggregate Class Principal Amount of the Class I-1A-1 Certificates and Class I-1A-2 Certificates. With respect to the Class I-2X Certificates, as of any date of determination, is equal to the aggregate Class Principal Amount of the Class I-2A-1 Certificates and Class I-2A-2 Certificates. With respect to the Class I-3X Certificates, as of any date of determination, is equal to the aggregate Class Principal Amount of the Class I-3A-1 Certificates and Class I-3A-2 Certificates. Reference to the Notional Amount of the Interest Only Certificates is solely for convenience in calculations and does not represent the right to receive any distributions allocable to principal.

Offering Document : The Prospectus.

Officer’s Certificate : A certificate signed by the Chairman of the Board, any Vice Chairman, the President, any Executive Vice President, any Senior Vice President, any Vice President or any Assistant Vice President of a Person.

One-Month LIBOR or One-Month LIBOR Index : The Interest Settlement Rate for U.S. dollar deposits of one-month maturity set by the BBA as of 11:00 a.m. (London time) on the LIBOR Determination Date.

One-Year LIBOR Index : The interbank offered rates for twelve-month United States dollar deposits in the London market, calculated as provided in the related mortgage note.

Operative Agreements : This Agreement, the Mortgage Loan Purchase Agreement, the Custodial Agreement, the Depository Agreement and each other document contemplated by any of the foregoing to which the Depositor, the Seller, the Master Servicer, the Servicer, the Securities Administrator, the Delaware Trustee, the Trustee or the Custodian is a party.

Opinion of Counsel : A written opinion of counsel, reasonably acceptable in form and substance to the Seller, the Securities Administrator, the Trustee and/or the Master Servicer, as applicable, and who may be in-house or outside counsel to the Seller, the Servicer, the Depositor, the Master Servicer, the Securities Administrator or the Trustee but which must be Independent outside counsel with respect to any such opinion of counsel concerning federal income tax or ERISA matters.

Original Trust Agreement : The trust agreement, dated as of March 29, 2007, among the Depositor, the Trustee and the Delaware Trustee.

 

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Outstanding Principal Balance : With respect to a Mortgage Loan, the principal balance of such Mortgage Loan remaining to be paid by the borrower or, in the case of an REO Property, the principal balance of the related Mortgage Loan remaining to be paid by the borrower at the time such property was acquired by or on behalf of the Trust.

Ownership Interest : As to any Residual Certificate, any ownership interest in such Certificate including any interest in such Certificate as the Holder thereof and any other interest therein, whether direct or indirect, legal or beneficial.

Payahead : Any Monthly Payment intended by the related borrower to be applied in a Collection Period subsequent to the Collection Period in which such payment was received.

Paying Agent : Initially, the Securities Administrator, in its capacity as paying agent under this Agreement, or any successor to the Securities Administrator in such capacity.

PCAOB means the Public Company Accounting Oversight Board.

Percentage Interest : With respect to any Certificate, its percentage interest in the undivided beneficial ownership interest in the assets of the Trust evidenced by all Certificates of the same Class as such Certificate. With respect to any Certificate other than the Class II-X or Class R Certificates, the Percentage Interest evidenced thereby shall equal the initial Certificate Principal Amount (or Notional Amount) thereof divided by the initial Class Principal Amount (or Notional Amount) of all Certificates of the same Class. With respect to the Class II-X and Class R Certificates, the Percentage Interest evidenced thereby shall be as specified on the face thereof, or otherwise be equal to 100%.

Periodic Cap : With respect to each Mortgage Loan, the maximum adjustment that can be made to the Mortgage Rate on each Adjustment Date in accordance with its terms, regardless of changes in the Index.

Permitted Transferee : Any Person other than (i) the United States, any State or political subdivision thereof, or any agency or instrumentality of any of the foregoing, (ii) a foreign government, international organization or any agency or instrumentality of either of the foregoing, (iii) an organization (except certain farmers’ cooperatives described in Section 521 of the Code) which is exempt from tax imposed by Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on unrelated business taxable income) on any excess inclusions (as defined in Section 860E(c)(1) of the Code) with respect to any Residual Certificate, (iv) rural electric and telephone cooperatives described in Section 1381(a)(2)(C) of the Code, (v) a Person that is a Disqualified Non-U.S. Person or a U.S. Person with respect to whom income from a Residual Certificate is attributable to a foreign permanent establishment or fixed base, within the meaning of an applicable income tax treaty, of such Person or any other U.S. Person, (vi) an “electing large partnership” within the meaning of Section 775 of the Code and (vii) any other Person so designated by the Depositor based upon an Opinion of Counsel that the Transfer of an Ownership Interest in a Residual Certificate to such Person may cause any REMIC to fail to qualify as a REMIC at any time that the Certificates are outstanding. The terms “United States”, “State” and “international organization” shall have the meanings set forth in Section 7701 of the Code or successor provisions. A corporation will not be treated as an

 

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instrumentality of the United States or of any State or political subdivision thereof for these purposes if all of its activities are subject to tax and, with the exception of Freddie Mac, a majority of its board of directors is not selected by such government unit.

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

Pool : Pool I or Pool II, as the context requires.

Pool I : The mortgage pool consisting of Loan Group I-1, Loan Group I-2 and Loan Group I-3.

Pool I Cut-off Date Balance : With respect to the Pool I Mortgage Loans, approximately $245,220,032.

Pool I Mortgage Loans : The conventional, adjustable rate, first lien residential mortgage loans in Pool I sold by the Seller to the Depositor pursuant to the Mortgage Loan Purchase Agreement and subsequently transferred by the Depositor to the Trust pursuant to the Pooling and Servicing Agreement.

Pool I Termination Price : The sum, as calculated by the Servicer, of (a) 100% of the aggregate Outstanding Principal Balance of the Pool I Mortgage Loans, plus Group I Accrued Interest thereon at the applicable Mortgage Rate, (b) the fair market value of the REO Property and all other property being purchased, (c) any unreimbursed Servicing Advances relating to Pool I, (d) any costs and damages incurred by the Trust as a result of violation of any applicable federal, state or local predatory or abusive lending law in connection with the origination of any Pool Mortgage Loan and (e) all other amounts to be paid or reimbursed to the Master Servicer, the Securities Administrator, the Delaware Trustee, the Trustee and the Custodian under the Operative Agreements allocable to Pool I.

Pool II : The mortgage pool consisting of conventional second lien, fixed and adjustable rate Mortgage Loans.

Pool II Cut-off Date Balance : With respect to the Pool II Mortgage Loans, approximately $54,788,796.

Pool II Mortgage Loans : The conventional, fixed and adjustable rate, second lien residential mortgage loans in Pool II sold by the Seller to the Depositor pursuant to the Mortgage Loan Purchase Agreement and subsequently transferred by the Depositor to the Trust pursuant to the Pooling and Servicing Agreement.

Pool II Termination Price : The sum, as calculated by the Servicer, of (a) 100% of the aggregate Outstanding Principal Balance of the Pool II Mortgage Loans, plus Group II Accrued Interest thereon at the applicable Mortgage Rate, (b) the fair market value of the REO Property and all other property being purchased, (c) any unreimbursed Servicing Advances relating to Pool II, (d) any costs and damages incurred by the Trust as a result of violation of any applicable

 

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federal, state or local predatory or abusive lending law in connection with the origination of any Pool II Mortgage Loan and (e) all other amounts to be paid or reimbursed to the Master Servicer, the Securities Administrator, the Delaware Trustee, the Trustee and the Custodian under the Operative Agreements allocable to Pool II.

Pool Balance : With respect to each Mortgage Pool and any date of determination, the aggregate Scheduled Principal Balance of the Mortgage Loans in that Mortgage Pool as of such date.

Pool Percentage : With respect to each Mortgage Pool and any Distribution Date, the fraction, expressed as a percentage, the numerator of which is the Pool Balance for such Mortgage Pool for such date and the denominator of which is the Aggregate Pool Balance for such date.

Prepayment Interest Shortfall : The amount by which one month’s interest at the Mortgage Rate (as reduced by the Servicing Fee Rate) on a Mortgage Loan as to which a voluntary prepayment has been made exceeds the amount of interest actually received in connection with such prepayment.

Prepayment Period : With respect to any Distribution Date, the immediately preceding calendar month.

Primary Mortgage Insurance Policy : Any primary mortgage guaranty insurance policy issued in connection with a Mortgage Loan which provides compensation to a Mortgage Note holder in the event of default by the obligor under such Mortgage Note or the related Mortgage, or any replacement policy therefor through the related Interest Accrual Period for such Class relating to a Distribution Date.

Prime Rate : The prime rate of the United States money center commercial banks as published in The Wall Street Journal , Northeast Edition.

Principal Prepayment : Any payment or other recovery of principal on a Mortgage Loan which is received in advance of its scheduled Due Date to the extent that it is not accompanied by an amount as to interest representing scheduled interest due on any date or dates in any month or months subsequent to the month of prepayment, including Insurance Proceeds and Repurchase Proceeds, but excluding the principal portion of Net Liquidation Proceeds received at the time a mortgage loan becomes a Liquidated Mortgage Loan.

Proceeding : Any suit in equity, action at law or other judicial or administrative proceeding.

Prospectus : The prospectus supplement dated March 29, 2007, together with the accompanying prospectus dated March 28, 2007, relating to the Class I-1A-1, Class I-1A-2, Class I-2A-1, Class I-2A-2, Class I-3A-1, Class I-3A-2, Class I-1X, Class I-2X, Class I-3X, Class II-A, Class I-B-1, Class I-B-2, Class I-B-3, Class II-M-1, Class II-M-2 and Class II-B Certificates.

 

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Purchase Price : With respect to the purchase of a Mortgage Loan or related REO Property pursuant to this Agreement, an amount equal to the sum of (a) 100% of the unpaid principal balance of such Mortgage Loan, (b) accrued interest thereon at the applicable Mortgage Rate, from the date as to which interest was last paid to (but not including) the Due Date in the Collection Period immediately preceding the related Distribution Date, (c) the amount of any costs and damages incurred by the Trust in connection with any violation of any applicable federal, state or local predatory or abusive lending law in connection with the origination of such Mortgage Loan and (d) the fair market value of all other property being purchased. The Servicer and the Master Servicer shall be reimbursed from the Purchase Price for any Mortgage Loan or related REO Property for any Monthly Advances and Servicing Advances made or other amounts advanced with respect to such Mortgage Loan that are reimbursable to the Servicer or the Master Servicer under this Agreement, together with any accrued and unpaid compensation due to the Servicer or the Master Servicer hereunder.

Qualified GIC : A guaranteed investment contract or surety bond providing for the investment of funds in the Collection Account and insuring a minimum, fixed or floating rate of return on investments of such funds, which contract or surety bond shall:

(i) be an obligation of an insurance company or other corporation whose long-term debt is rated by each Rating Agency in one of its two highest rating categories or, if such insurance company has no long-term debt, whose claims paying ability is rated by each Rating Agency in one of its two highest rating categories, and whose short-term debt is rated by each Rating Agency in its highest rating category;

(ii) provide that the Master Servicer on behalf of the Trustee may exercise all of the rights under such contract or surety bond without the necessity of taking any action by any other Person;

(iii) provide that if at any time the then current credit standing of the obligor under such guaranteed investment contract is such that continued investment pursuant to such contract of funds would result in a downgrading of any rating of the Certificates, the Securities Administrator shall terminate such contract without penalty and be entitled to the return of all funds previously invested thereunder, together with Group I Accrued Interest thereon at the interest rate provided under such contract to the date of delivery of such funds to the Securities Administrator;

(iv) provide that the Trustee’s interest therein shall be transferable to any successor trustee hereunder; and

(v) provide that the funds reinvested thereunder and Group I Accrued Interest thereon be returnable to the Collection Account not later than the Business Day prior to any Distribution Date.

Qualified Insurer : An insurance company duly qualified as such under the laws of the states in which the related Mortgaged Properties are located, duly authorized and licensed in such states to transact the applicable insurance business and to write the insurance provided and whose claims paying ability is rated by each Rating Agency in its highest rating category or whose selection as an insurer will not adversely affect the rating of the Certificates.

 

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Qualifying Substitute Mortgage Loan : A mortgage loan (i) which has an Outstanding Principal Balance not greater nor materially less than the Mortgage Loan for which it is to be substituted; (ii) which has a Mortgage Rate and Net Mortgage Rate not less than, and not materially greater than, such Mortgage Loan; (iii) which has a maturity date not materially earlier or later than such Mortgage Loan and not later than the latest maturity date of any Mortgage Loan; (iv) which is of the same property type and occupancy type as such Mortgage Loan; (v) with respect to a Mortgage Loan, which has a Loan-to-Value Ratio not greater than the Loan-to-Value Ratio of such Mortgage Loan; (vi) which is current in payment of principal and interest as of the date of substitution; (vii) as to which the payment terms do not vary in any material respect from the payment terms of the Mortgage Loan for which it is to be substituted and (viii) which has a Gross Margin and Maximum Mortgage Rate no less than those of such Mortgage Loan, has the same Index and interval between Adjustment Dates as such Mortgage Loan, and a Minimum Lifetime Mortgage Rate no lower than that of such Mortgage Loan.

Rating Agency : Each of Moody’s and S&P.

Realized Loss : With respect to a Mortgage Loan, (1) a Bankruptcy Loss or (2) as to any Liquidated Mortgage Loan, the unpaid principal balance thereof plus accrued and unpaid interest thereon at the mortgage rate through the last day of the month of liquidation less the Net Liquidation Proceeds with respect to such Mortgage Loan and the related Mortgaged Property. In addition, to the extent the Servicer received with respect to any Mortgage Loan, the amount of the Realized Loss with respect to that Mortgage Loan will be reduced to the extent such Subsequent Recoveries are applied to reduce the Class Principal Amount, in the case of the Group I Certificates (other than the Class I-1X, Class I-2X and Class I-3X Certificates), or the Certificate Principal Amount, in the case of the Group II Certificates, as applicable.

Record Date : For each class of Certificates other than the Group II Senior Certificates and the Group II Subordinate Certificates, and each Distribution Date, will be the close of business on the last Business Day of the calendar month preceding such Distribution Date. For each class of Group II Senior Certificates and the Group II Subordinate Certificates and each Distribution Date, will be the close of business on the Business Day immediately preceding such Distribution Date; provided, however, that if any such Certificates is no longer a Book-Entry Certificate, the “Record Date” for such class of Certificates shall be the close of business on the last Business Day of the calendar month preceding such Distribution Date.

Regulation AB : Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such may be amended from time to time, and subject to such clarifications and interpretations as have been provided by the Commission in the adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the Commission, or as may be provided by the Commission or its staff from time to time.

 

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Relevant Servicing Criteria : The Servicing Criteria applicable to each party, as set forth on Exhibit F attached hereto. Multiple parties can have responsibility for the same Relevant Servicing Criteria. With respect to a Servicing Function Participant engaged by the Master Servicer, the Securities Administrator, the Custodian or the Servicer, the term “Relevant Servicing Criteria” may refer to a portion of the Relevant Servicing Criteria applicable to such parties.

Relevant UCC : The Uniform Commercial Code as in effect in the applicable jurisdiction.

Relief Act : The Servicemembers Civil Relief Act, or similar state or local law.

Relief Act Mortgage Loan : Any Mortgage Loan as to which the Scheduled Payment thereof has been reduced due to the application of the Relief Act.

Relief Act Reduction : With respect to a Mortgage Loan, a reduction of the applicable Mortgage Rate by application of the Relief Act.

REMIC : Each pool of assets in the Trust Estate designated as a REMIC pursuant to the Preliminary Statement.

REMIC 2 : As described in the Preliminary Statement.

REMIC 3 : As described in the Preliminary Statement.

REMIC Provisions : The provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at sections 860A through 860G of Subchapter M of Chapter 1 of the Code, and related provisions, and regulations, including proposed regulations and rulings, and administrative pronouncements promulgated thereunder, as the foregoing may be in effect from time to time.

REO Property : A Mortgaged Property acquired by the Servicer through foreclosure or deed-in-lieu of foreclosure in connection with a defaulted Mortgage Loan or otherwise treated as having been acquired pursuant to the REMIC Provisions.

Reportable Event : As defined in Section 8.04(c).

Reporting Servicer : As defined in Section 8.04(b).

Repurchase Proceeds : The purchase price proceeds in connection with any repurchase of a Mortgage Loan by the Seller and any cash deposit in connection with the substitution of a Mortgage Loan.

Request for Release : A request for release in the form attached as Exhibit Seven to the Custodial Agreement.

Residual Certificate : The Class R Certificate.

 

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Residual Equity Interest of the Trust : The Class II-X Distributable Amount together with the amounts distributable to the Class R Certificate under Section 6.08.

Responsible Officer : Any vice president, any assistant vice president, any assistant secretary, any associate, any assistant treasurer, or any other officer of the Trustee or the Securities Administrator, as applicable, customarily performing functions similar to those performed by any of the above-designated officers and, in each case, having direct responsibility for the administration of the Operative Agreements and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

Restricted Certificates : Each of the Class M-2, Class B-1, Class X and Class R Certificates.

Rule 144A : Rule 144A of the Securities Act.

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

Sarbanes-Oxley Act : The Sarbanes-Oxley Act of 2002 and the rules and regulations of the Commission promulgated thereunder (including any interpretations thereof by the Commission’s staff).

Sarbanes-Oxley Certification : A written certification covering the activities of all Servicing Function Participants and signed by an officer of the Master Servicer that complies with (i) the Sarbanes-Oxley Act of 2002, as amended from time to time, and (ii) Exchange Act Rules 13a-14(d) and 15d-14(d), as in effect from time to time; provided that if, after the Closing Date (a) the Sarbanes-Oxley Act of 2002 is amended, (b) the rules referred to in clause (ii) are modified or superseded by any subsequent statement, rule or regulation of the Commission or any statement of a division thereof, or (c) any future releases, rules and regulations are published by the Securities and Exchange Commission from time to time pursuant to the Sarbanes-Oxley Act of 2002, which in any such case affects the form or substance of the required certification and results in the required certification being, in the reasonable judgment of the Master Servicer, materially more onerous than the form of the required certification as of the Closing Date, the Sarbanes-Oxley Certification shall be as agreed to by the Master Servicer, the Depositor and the Seller following a negotiation in good faith to determine how to comply with any such new requirements.

Scheduled Principal Balance : With respect to any Mortgage Loan and any Distribution Date (1) the unpaid principal balance of such mortgage loan as of the close of business on the related Due Date (giving effect to the principal payment to be made on such Due Date and irrespective of any delinquency in its payment), as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization schedule by reason of any bankruptcy or similar proceeding occurring after the Cut-off Date (other than a Deficient Valuation) or any moratorium or similar waiver or grace period) less (2) any Principal Prepayments and the principal portion of any Net Liquidation Proceeds received during or prior to the immediately preceding Prepayment Period; provided that the Scheduled Principal Balance of any Liquidated Mortgage Loan is zero.

 

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Second Lien Mortgage Loans : Mortgage Loans secured by mortgages or deeds of trust or similar security instruments creating a second lien on the related Mortgaged Property.

Securities Act : The Securities Act of 1933, as amended.

Securities Administrator: Wells Fargo Bank, N.A., not in its individual capacity but solely as securities administrator, or any successor in interest.

Securities Intermediary : The Person acting as Securities Intermediary under this Agreement (which is the Securities Administrator), its successor in interest, and any successor Securities Intermediary appointed pursuant to Section 6.10.

Security Entitlement : The meaning specified in Section 8-102(a)(17) of the New York UCC.

Seller : HomeBanc Mortgage Corporation.

Senior Certificates : The Group I Senior Certificates and the Group II Senior Certificates.

Servicer : HomeBanc Mortgage Corporation, or its successor in interest or assigns or any successor to the Servicer under this Agreement as herein provided.

Servicer Errors and Omission Insurance Policy : Any errors and omission insurance policy required to be obtained by the Servicer satisfying the requirements of Section 4.02(l).

Servicer Event of Default : Any one of the conditions or circumstances enumerated in Section 4.07 with respect to the Servicer.

Servicer Fidelity Bond : Any fidelity bond to be maintained by the Servicer in accordance with Section 4.02(l).

Servicer Remittance Date : The 18th day of any month, or if such 18th day is not a Business Day, the first Business Day immediately preceding such 18th day.

Service(s)(ing) : In accordance with Regulation AB, the act of servicing and administering the Mortgage Loans or any other assets of the Trust Estate by an entity that meets the definition of “servicer” set forth in Item 1101 of Regulation AB and is subject to the disclosure requirements set forth in 1108 of Regulation AB. Any uncapitalized occurrence of this term shall have the meaning commonly understood by participants in the residential mortgage-backed securitization market.

Servicing Account : The custodial account maintained by the Servicer on behalf of the Trust for collection of principal and interest on the Mortgage Loans.