POOLING AND SERVICING AGREEMENT

Exhibit 4.3

HSBC HOME EQUITY LOAN CORPORATION II,

as Depositor,

HSBC FINANCE CORPORATION,

as Servicer,

HSBC BANK USA, NATIONAL ASSOCIATION,

as Administrator,

and

U.S. BANK NATIONAL ASSOCIATION,

as Trustee

POOLING AND SERVICING AGREEMENT

Dated as of December 14, 2006

HSBC Home Equity Loan Trust (USA) 2006-4

Closed-End Home Equity Loan Asset-Backed Certificates, Series 2006-4

TABLE OF CONTENTS

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This Pooling and Servicing Agreement, dated as of December 14, 2006, among HSBC HOME EQUITY LOAN CORPORATION II, as Depositor, HSBC FINANCE CORPORATION, as Servicer, HSBC BANK USA, NATIONAL ASSOCIATION, as Administrator, and U.S. BANK NATIONAL ASSOCIATION, as Trustee,

WITNESSETH THAT :

In consideration of the mutual agreements herein contained, the parties hereto agree as follows:

PRELIMINARY STATEMENT

The Depositor is the owner of the Trust Fund that is hereby conveyed to the Trustee in return for the Certificates. For federal income tax purposes, the Trust Fund (other than the Carryover Reserve Fund and the Derivative Contract Reserve Fund) will constitute a single REMIC. Each Certificate, other than the Class R Certificate, will represent ownership of one or more regular interests in the REMIC for purposes of the REMIC Provisions. The Class R Certificate will represent ownership of the sole class of residual interest in the REMIC. The REMIC will hold as assets all property of the Trust Fund (other than the assets held in the Carryover Reserve Fund and the Derivative Contract Reserve Fund). The latest possible maturity date of all REMIC regular interests described in this Agreement shall be the Latest Possible Maturity Date.

The following table sets forth characteristics of the REMIC Certificates, together with the minimum denominations and integral multiples in excess thereof in which such Classes shall be issuable:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions . Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the meanings specified in this Article.

Administrator : HSBC Bank USA, National Association, a national banking association, as Administrator (including its role as Certificate Registrar and Paying Agent) under this Agreement and the other Transaction Documents to which it is a party, or any successor administrator appointed in accordance with this Agreement that has accepted such appointment in accordance with this Agreement.

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

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

Applied Realized Loss Amount : With respect to any Distribution Date and each Class of Class M Certificates, the amount by which the Certificate Principal Balance of such Class was reduced on such Distribution Date pursuant to Section 4.03.

Appraised Value : With respect to any Home Equity Loan, the appraised value of the related Mortgaged Property based upon the appraisal used by the applicable Seller at the time of origination of such Home Equity Loan (or any mortgage loan made by the Seller on the Mortgaged Property that the Home Equity Loan replaced); provided that if the Home Equity Loan was originated simultaneously with or not more than 12 months after another mortgage was placed on the related Mortgaged Property, the lesser of the Appraised Value at origination of the other mortgage and the sales price, if any, of the related Mortgaged Property.

Assignment of Mortgage : With respect to any Mortgage, an assignment, notice of transfer or equivalent instrument, in recordable form, sufficient under the laws of the jurisdiction in which the related Mortgaged Property is located to reflect the sale of the Mortgage to the Trustee, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering the Home Equity Loans secured by Mortgaged Properties located in the same jurisdiction.

Available Distribution Amount : With respect to any Distribution Date, the sum, without duplication, of all amounts described in clauses (i) through (iii), inclusive, of Section 3.02(b)

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received by the Servicer with respect to the related Collection Period and deposited in the Collection Account.

BIF : The Bank Insurance Fund, as from time to time constituted, created under the Financial Institutions Reform, Recovery and Enhancement Act of 1989 or, if at any time after the execution of this instrument the Bank Insurance Fund is not existing and performing duties now assigned to it, the body performing such duties on such date.

Book-Entry Certificate : Any Offered Certificate registered in the name of the Depository or its nominee, ownership of which is reflected on the books of the Depository or on the books of a Person maintaining an account with such Depository (directly or as an indirect participant in accordance with the rules of such Depository).

Business Day : Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions or trust companies in the State of New York or Illinois are required or authorized by law to be closed.

Carryover Reserve Fund : The custodial account or accounts created and maintained for the benefit of the Certificateholders pursuant to Section 4.04(a). The Carryover Reserve Fund shall be an Eligible Account.

Certificate : A Class A Certificate, Class M Certificate or Class R Certificate.

Certificate Owner : The Person who is the beneficial owner of an interest in a Book-Entry Certificate.

Certificate Principal Balance : With respect to any Class of Offered Certificates as of any date of determination, the Original Class Certificate Principal Balance thereof reduced by all amounts previously distributed to the holders of such Class and allocable to principal and, in the case of any Class M Certificates, reduced by any Applied Realized Loss Amounts allocated to such Class of Certificates pursuant to Section 4.03. With respect to any Offered Certificate as of any date of determination, the product of (i) the Certificate Principal Balance of the Class of Offered Certificate to which such Offered Certificate belongs, times (ii) a fraction, the numerator of which is the initial Certificate Principal Balance of such Offered Certificate as stated on the face thereof, and the denominator of which is equal to the Original Class Certificate Principal Balance of such Class of Offered Certificates. The Class R Certificate has no Certificate Principal Balance.

Certificate Register and Certificate Registrar : The register maintained and the registrar appointed pursuant to Section 5.02.

Certificateholder or Holder : The Person in whose name a Certificate is registered in the Certificate Register, except that, solely for the purpose of giving any consent, direction, waiver or request pursuant to this Agreement, (i) any Certificate registered in the name of the Depositor (unless to the knowledge of a Responsible Officer of the Trustee the Depositor is acting as trustee or nominee for a Person who is not an Affiliate of the Depositor and who makes the voting decision with respect to such Certificate) or the Servicer or any Person known to a Responsible Officer of the Trustee to be an Affiliate of either the Depositor or the Servicer and

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(ii) any Certificate for which the Depositor (unless to the knowledge of a Responsible Officer of the Trustee (A) the Depositor is acting as trustee or nominee for a Person who is not an Affiliate of the Depositor and who makes the voting decision with respect to such Certificate or (B) the Depositor is the owner of all the Certificates) or the Servicer or any Person known to a Responsible Officer of the Trustee to be an Affiliate (other than an Affiliate that has purchased any Certificate on the Closing Date) of either the Depositor or the Servicer is the Certificate Owner shall be deemed not to be outstanding and the Percentage Interest evidenced thereby shall not be taken into account in determining whether the requisite amount of Percentage Interests necessary to effect any such consent, direction, waiver or request has been obtained.

Charge Off Amount : With respect to any Charged Off Home Equity Loan and Collection Period, an amount equal to the amount of the Principal Balance that the Servicer has charged off on its servicing records during such Collection Period.

Charged Off Home Equity Loan : A defaulted Home Equity Loan that is not a Liquidated Home Equity Loan and as to which (i) collection procedures are ongoing and (ii) the Servicer has charged off all or a portion of the related Principal Balance.

Class : Any of the Class A Certificates, Class M Certificates or Class R Certificate.

Class A Certificate : A Class A-1 Certificate, Class A-2 Certificate, Class A-3 Certificate or Class A-4 Certificate.

Class A Certificateholder : A Holder of a Class A Certificate.

Class A-1 Certificate : A Class A-1F Certificate or Class A-1V Certificate.

Class A-1 Certificateholder : A Holder of a Class A-1 Certificate.

Class A-1F Certificate : Any Certificate designated as a Class A-1F Certificate on the face thereof, substantially in the form of Exhibit A hereto.

Class A-1V Certificate : Any Certificate designated as a Class A-1V Certificate on the face thereof, substantially in the form of Exhibit A hereto.

Class A-2 Certificate : A Class A-2F Certificate or Class A-2V Certificate.

Class A-2 Certificateholder : A Holder of a Class A-2 Certificate.

Class A-2F Certificate : Any Certificate designated as a Class A-2F Certificate on the face thereof, substantially in the form of Exhibit A hereto.

Class A-2V Certificate : Any Certificate designated as a Class A-2V Certificate on the face thereof, substantially in the form of Exhibit A hereto.

Class A-3 Certificate : A Class A-3F Certificate or Class A-3V Certificate.

Class A-3 Certificateholder : A Holder of a Class A-3 Certificate.

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Class A-3F Certificate : Any Certificate designated as a Class A-3F Certificate on the face thereof, substantially in the form of Exhibit A hereto.

Class A-3V Certificate : Any Certificate designated as a Class A-3V Certificate on the face thereof, substantially in the form of Exhibit A hereto.

Class A-4 Certificate : Any Certificate designated as a Class A-4 Certificate on the face thereof, substantially in the form of Exhibit A hereto.

Class A Principal Distribution Amount : With respect to any Distribution Date, the excess of (A) the aggregate Certificate Principal Balance of the Class A Certificates immediately prior to such Distribution Date over (B) the lesser of (1) the product of (x) 49.30% and (y) the Pool Balance as of the last day of the related Collection Period and (2) the excess, if any, of the Pool Balance as of the last day of the related Collection Period over 1.00% of the Cut-Off Date Pool Balance.

Class M Certificate : A Class M-1 Certificate or Class M-2 Certificate.

Class M Certificateholder : A Holder of a Class M Certificate.

Class M-1 Certificate : Any Certificate designated as a Class M-1 Certificate on the face thereof, substantially in the form of Exhibit A hereto.

Class M-1 Certificateholder : A Holder of a Class M-1 Certificate.

Class M-1 Principal Distribution Amount : With respect to any Distribution Date, the excess, if any, of (i) the sum of (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the distribution of the Class A Principal Distribution Amount on such Distribution Date) and (B) the Certificate Principal Balance of the Class M-1 Certificates immediately prior to such Distribution Date over (ii) the lesser of (A) the product of (1) 58.50% and (2) the Pool Balance as of the last day of the related Collection Period and (B) the excess, if any, of the Pool Balance as of the last day of the related Collection Period over 1.00% of the Cut-Off Date Pool Balance.

Class M-2 Certificate : Any Certificate designated as a Class M-2 Certificate on the face thereof, substantially in the form of Exhibit A hereto.

Class M-2 Certificateholder : A Holder of a Class M-2 Certificate.

Class M-2 Principal Distribution Amount : With respect to any Distribution Date, the excess, if any, of (i) the sum of (A) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the distribution of the Class A Principal Distribution Amount on such Distribution Date), (B) the aggregate Certificate Principal Balance of the Class M-1 Certificates (after taking into account the distribution of the Class M-1 Principal Distribution Amount on such Distribution Date), and (C) the Certificate Principal Balance of the Class M-2 Certificates immediately prior to such Distribution Date over (ii) the lesser of (A) the product of (1) 66.20% and (2) the Pool Balance as of the last day of the related Collection Period

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and (B) the excess, if any, of the Pool Balance as of the last day of the related Collection Period over 1.00% of the Cut-Off Date Pool Balance.

Class R Certificate : Any Certificate designated as a Class R Certificate on the face thereof, in the form of Exhibit B hereto.

Class R Certificateholder : A Holder of a Class R Certificate.

Closing Date : December 14, 2006.

Code : The Internal Revenue Code of 1986, as amended from time to time, and any Treasury regulations promulgated thereunder.

Collection Account : The custodial account or accounts created and maintained for the benefit of the Certificateholders pursuant to Section 3.02(b). The Collection Account shall be an Eligible Account.

Collection Period : With respect to any Distribution Date and Home Equity Loan, the calendar month immediately preceding the month in which such Distribution Date occurs, except that with respect to the initial Distribution Date, the Collection Period is the period beginning on the day immediately following the Cut-Off Date and ending on December 31, 2006.

Combined Exposure : As defined in Section 3.04.

Combined Loan-to-Value Ratio or CLTV : With respect to each Home Equity Loan, a ratio, expressed as a percentage, the numerator of which is the sum of (a) the original Principal Balance of the Home Equity Loan and (b) the aggregate unpaid principal balance, at the time of origination of the Home Equity Loan, of all other mortgage loans, if any, secured by liens senior to that Home Equity Loan on the related Mortgaged Property, and the denominator of which is the Appraised Value of the Mortgaged Property.

Compensating Interest : With respect to any Collection Period, an amount equal to the lesser of (i) the Prepayment Interest Shortfall for such Collection Period and (ii) the Servicing Fee for the related Collection Period without regard to any reduction due to Compensating Interest.

Corporate Trust Office : With respect to the Trustee, the designated office of the Trustee at which at any particular time its corporate trust business shall be administered, which office on the Closing Date is located at the address therefor set forth in Section 10.05; and with respect to the Administrator, the principal office of the Administrator at which at any particular time its corporate trust business shall be administered, which office on the Closing Date is located at the address thereabove set forth in Section 10.05.

Cumulative Loss Percentage : With respect to any Distribution Date on or after the Stepdown Date, the fraction (expressed as a percentage) obtained by dividing (i) the Cumulative Realized Losses through the end of the related Collection Period, by (ii) the Cut-Off Date Pool Balance.

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Cumulative Loss Percentage Trigger : With respect to any Distribution Date on or after the Stepdown Date, means (i) for the January 2010 Distribution Date through the December 2010 Distribution Date, 6.10%; (ii) for the January 2011 Distribution Date through the December 2011 Distribution Date, 10.40%; (iii) for the January 2012 Distribution Date through the December 2012 Distribution Date, 13.80%; and (iv) for the January 2013 Distribution Date and each Distribution Date thereafter, 15.75%.

Cumulative Realized Losses : With respect to the Home Equity Loans and any Collection Period, an amount equal to the excess, if any, of (a) the sum of the aggregate Realized Losses on the Home Equity Loans from the Cut-Off Date through the last day of such Collection Period over (b) the sum of any Recovered Charge Off Amounts on the Home Equity Loans from the Cut-Off Date through the last day of such Collection Period.

Current Interest : With respect to the initial Distribution Date and each Class of Offered Certificates an amount equal to interest accrued during the two Interest Accrual Periods for the first Distribution Date on the Certificate Principal Balance of such Class of Offered Certificates immediately prior to such Distribution Date at the Pass-Through Rates for such Class and Interest Accrual Periods. With respect to each subsequent Distribution Date and each Class of Offered Certificates, an amount equal to interest accrued during the related Interest Accrual Period on the Certificate Principal Balance of such Class of Offered Certificates immediately prior to such Distribution Date at the Pass-Through Rate for such Class and Interest Accrual Period.

Cut-Off Date : With respect to each Home Equity Loan, the close of business on November 15, 2006.

Cut-Off Date Pool Balance : The aggregate of the Cut-Off Date Principal Balances of the Home Equity Loans.

Cut-Off Date Principal Balance : With respect to any Home Equity Loan, the unpaid principal balance thereof as of the Cut-Off Date or, with respect to any Eligible Substitute Home Equity Loan, as of the date of substitution of such Eligible Substitute Home Equity Loan.

Defective Home Equity Loan : A Home Equity Loan subject to repurchase or substitution pursuant to Section 2.02 or 2.04.

Definitive Certificates : As defined in Section 5.02(f).

Deposit Account Control Agreement : The Deposit Account Control Agreement dated as of December 14, 2006 among the Trustee and the Administrator.

Deposit Date : With respect to any Distribution Date, the Business Day immediately preceding such Distribution Date.

Deposit Event : The lowering of the Servicer’s short-term debt rating below "P-1" by Moody’s, "A-1" by Standard & Poor’s or "F1" by Fitch or any time in which HSBC Finance shall cease to be the Servicer.

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Depositor : HSBC Home Equity Loan Corporation II, a Delaware corporation, and its successors in interest.

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

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

Derivative Contract : Any ISDA Master Agreement, together with the related Schedule and Confirmation, entered into by the Administrator, on behalf of the Trust for the benefit of the Holder of the Class R Certificate, and a Derivative Counterparty in accordance with Section 3.13.

Derivative Contract Reserve Fund : As defined in Section 3.13.

Derivative Counterparty : Any counterparty to a Derivative Contract as provided in Section 3.13 which counterparty shall not be an Affiliate of the Servicer.

Determination Date : With respect to any Distribution Date, the second Business Day prior to such Distribution Date.

Distribution Date : The 20th day of each month (or if such 20th day is not a Business Day, then the next succeeding Business Day), commencing January 22, 2007.

EDGAR : The SEC’s Electronic Data Gathering, Analysis and Retrieval System.

Electronic Ledger : The electronic master record of home equity loans (including the Home Equity Loans) maintained by the Servicer.

Eligible Account : An account that is either (i) maintained with a depository institution whose short-term debt obligations at the time of any deposit therein are rated in the highest short-term debt rating category by the Rating Agencies, (ii) an account or accounts maintained with a depository institution with a long-term unsecured debt rating by each Rating Agency that is at least investment grade, provided that the deposits in such account or accounts are fully insured by either the BIF or the SAIF, (iii) a segregated trust account maintained in the corporate trust department with the Trustee in its fiduciary capacity or the Administrator in its capacity as administrator, or (iv) an account otherwise acceptable to each Rating Agency, as evidenced by a letter to such effect from each such Rating Agency to the Trustee and the Administrator, without reduction or withdrawal of the then-current ratings of any Class of Offered Certificates.

Eligible Substitute Home Equity Loan : A Home Equity Loan substituted by the Depositor or the Servicer for a Defective Home Equity Loan pursuant to Section 2.02(a) or 2.04, which on the date of such substitution must

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• • (i) have a Principal Balance not substantially greater or less than the Principal Balance of such Defective Home Equity Loan or such elected substituted Home Equity Loan;

    (ii) have a current Loan Rate of not less than the Loan Rate of the Defective Home Equity Loan or elected substituted Home Equity Loan and not more than 500 basis points in excess thereof;

    (iii) have a (A) remaining term to maturity not more than six months earlier or later than the remaining term to maturity of the Defective Home Equity Loan or elected substituted Home Equity Loan and (B) maturity date not later than the last day of the Collection Period immediately preceding the month in which the Final Scheduled Distribution Date occurs;

    (iv) comply with the representations and warranties set forth in Section 2.04(b), to the extent such representations and warranties do not pertain exclusively to the Home Equity Loans transferred on the Closing Date;

    (v) have a Combined Loan-to-Value Ratio that is not greater than the Combined Loan-to-Value Ratio of the Defective Home Equity Loan or elected substituted Home Equity Loan as of the date of origination of such Defective Home Equity Loan or elected substituted Home Equity Loan;

    (vi) have a lien position at least equal to the lien position of the Mortgage relating to the Defective Home Equity Loan or elected substituted Home Equity Loan; and

    (vii) be the obligation of a Mortgagor whose credit profile is substantially similar to that of the Mortgagor under the Defective Home Equity Loan or elected substituted Home Equity Loan,

provided , however , that with respect to (i) through (vii) above, a home equity loan may qualify as an Eligible Substitute Home Equity Loan if each of the Rating Agencies consents to such substitution.

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

ERISA-Restricted Certificate : The Class M and Class R Certificates and any Certificate with a rating which falls below the lowest applicable permitted rating under the Underwriter Exemption.

Exchange Act : The Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

Exchange Act Filing Obligation : The obligations of the Servicer (x) under Section 3.10, (y) under Section 6.02 and Section 6.04 with respect to notice and information to be provided to the Depositor or (z) under Article XI.

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Extra Principal Distribution Amount : With respect to any Distribution Date, the lesser of (x) the Monthly Excess Cashflow for such Distribution Date and (y) the Interim Overcollateralization Deficiency for such Distribution Date.

Fannie Mae : Fannie Mae, formerly known as The Federal National Mortgage Association, or any successor thereto.

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

Final Scheduled Distribution Date : With respect to the Offered Certificates, the Distribution Date occurring in March 2036.

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

Fixed Rate Certificates : The Class A-1F, Class A-2F and Class A-3F Certificates.

Floating Rate Certificates : The Class A-1V, Class A-2V, Class A-3V, Class A-4, Class M-1 and Class M-2 Certificates.

Foreclosure Profit : With respect to any Liquidated Home Equity Loan, the amount, if any, by which Net Liquidation Proceeds exceeds the sum of (i) the Principal Balance thereof immediately prior to the final recovery of its Liquidation Proceeds, (ii) accrued and unpaid interest (including imputed interest on REO) at the applicable Loan Rate from the date interest was last paid through the date of receipt of the final Liquidation Proceeds and (iii) the sum of all related Charge Off Amounts.

Form 8-K : A current report pursuant to Section 13 or 15(d) of the Exchange Act.

Formula Rate : With respect to each Class of Floating Rate Certificates and any Interest Accrual Period, a per annum rate equal to the sum of One-Month LIBOR for such Interest Accrual Period and (b) the applicable Pass-Through Margin for such Class and Interest Accrual Period.

With respect to each Class of Fixed Rate Certificates and any Interest Accrual Period, a per annum rate equal specified for such class and Interest Accrual Period in the following table:

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Freddie Mac : Freddie Mac, formerly known as The Federal Home Loan Mortgage Corporation, or any successor thereto.

Home Equity Loan : Such of the home equity loans (together with the related Mortgage Notes and Mortgages) transferred and assigned to the Trustee pursuant to Section 2.01 and pursuant to the Transfer Agreement together with the Related Documents, as from time to time are held as a part of the Trust, the home equity loans originally so held being identified in the Home Equity Loan Schedule delivered on the Closing Date. As applicable, the term Home Equity Loan shall be deemed to refer to the Mortgaged Property that has been converted to ownership by the Servicer prior to the final recovery of related Liquidation Proceeds.

Home Equity Loan Purchase Agreement : The home equity loan purchase agreement dated as of December 14, 2006, between the Depositor and the Sellers pursuant to which the Sellers convey to the Depositor all of their right, title and interest in and to the unpaid Principal Balances of the Home Equity Loans, including all interest and principal payments in respect thereof received on or after the Cut-Off Date, and certain other rights with respect to the collateral supporting the Home Equity Loans.

Home Equity Loan Schedule : With respect to any date, the schedule of Home Equity Loans, including any Eligible Substitute Home Equity Loans, included in the Trust on such date. The initial Home Equity Loan Schedule is the schedule delivered by the Depositor to the Trustee on the Closing Date and delivered as Exhibit C hereto, which schedule may be in the form of a computer file or an electronic or magnetic tape and sets forth as to each Home Equity Loan (i) the account number, (ii) the Cut-Off Date Principal Balance, (iii) the Loan Rate, (iv) the lien position of the related Mortgage and (v) the CLTV. The Home Equity Loan Schedule shall be amended from time to time to reflect the removal of Home Equity Loans and the addition of any Eligible Substitute Home Equity Loans to the Trust, and when so amended shall include the information set forth above with respect to each Eligible Substitute Home Equity Loan as of its related date of substitution.

HSBC Finance : HSBC Finance Corporation, a Delaware corporation, and its successors.

Insurance Proceeds : Proceeds paid by any insurer pursuant to any insurance policy covering a Home Equity Loan, or by the Servicer pursuant to the last sentence of Section 3.04, net of any component thereof covering any expenses incurred by or on behalf of the Servicer in connection with obtaining such Insurance Proceeds and exclusive of any portion thereof that is applied to the restoration or repair of the related Mortgaged Property, released to the Mortgagor in accordance with the Servicer’s normal servicing procedures or required to be paid to any holder of a mortgage senior to such Home Equity Loan.

Initial Home Equity Loan : Each Home Equity Loan transferred and assigned to the Trustee, on behalf of the Trust, on the Closing Date.

Interest Accrual Period : With respect to each Class of Floating Rate Certificates and (i) each Distribution Date after the initial Distribution Date, the period from and including the Distribution Date in the month immediately preceding the month in which the Distribution Date occurs and ending on and including the day immediately preceding the current Distribution Date

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and (ii) the initial Distribution Date, the following two periods: (a) the period beginning on the Closing Date and ending on December 19, 2006, and (b) the period beginning on December 20, 2006 and ending on the day immediately preceding the initial Distribution Date. With respect to each Class of Fixed Rate Certificates and (i) each Distribution Date after the initial Distribution Date, the calendar month preceding such Distribution Date and (ii) the initial Distribution Date, the following two periods: (a) the period beginning on November 16, 2006 and ending on November 30, 2006, and (b) the calendar month of December 2006.

Interest Carry Forward Amount : With respect to each Class of Offered Certificates and any Distribution Date, the sum of (i) an amount equal to the excess, if any, of (A) the sum of the Current Interest and the Interest Carry Forward Amount for such Class of Certificates as of the immediately preceding Distribution Date over (B) the amount of the actual distributions with respect to such amounts made to such Class of Certificates on such immediately preceding Distribution Date plus (ii) interest on such amount calculated for the related Interest Accrual Period at the related Pass-Through Rate.

Interest Collections : With respect to any Distribution Date, the sum, without duplication, of:

• • (i) the portion allocable to interest of all scheduled monthly payments on the Home Equity Loans received during the related Collection Period;

    (ii) all Net Liquidation Proceeds actually collected by the Servicer during the related Collection Period (to the extent such Net Liquidation Proceeds relate to interest);

    (iii) the interest portion of the Purchase Price for any Home Equity Loan repurchased from the Trust pursuant to the terms of this Agreement during the related Collection Period;

    (iv) the interest portion of all Substitution Adjustment Amounts with respect to the related Collection Period;

    (v) the interest portion of all other unscheduled collections on the Home Equity Loans received by the Servicer during the related Collection Period, to the extent not previously distributed; and

    (vi) the interest portion of all Insurance Proceeds on any Home Equity Loan collected by the Servicer during the related Collection Period.

Interim Overcollateralization Amount : With respect to any Distribution Date, the excess, if any, of (i) the Pool Balance as of the last day of the related Collection Period over (ii) the aggregate Certificate Principal Balance of the Offered Certificates (after giving effect to the anticipated distribution of Principal Collections on such Distribution Date).

Interim Overcollateralization Deficiency : With respect to any Distribution Date, the excess, if any, of (x) the Targeted Overcollateralization Amount for such Distribution Date over (y) the Interim Overcollateralization Amount for such Distribution Date.

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Issuing Entity : HSBC Home Equity Loan Trust (USA) 2006-4.

LIBOR Business Day : Any day on which dealings in United States dollars are transacted in the London interbank market.

LIBOR Determination Date : With respect to any Distribution Date, the second LIBOR Business Day before the first day of the related Interest Accrual Period.

Latest Possible Maturity Date : The Distribution Date following the third anniversary of the scheduled maturity date of the Mortgage Loan having the latest scheduled maturity date as of the Cut-Off Date.

Lien : Any mortgage, deed of trust, pledge, conveyance, hypothecation, assignment, participation, deposit arrangement, encumbrance, lien (statutory or other), preference, priority right or interest or other security agreement or preferential arrangement of any kind or nature whatsoever, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing or the filing of any financing statement under the UCC (other than any such financing statement filed for informational purposes only) or comparable law of any jurisdiction to evidence any of the foregoing.

Liquidated Home Equity Loan : With respect to any Distribution Date, any Home Equity Loan in respect of which the Servicer has determined as of the end of the related Collection Period that all Liquidation Proceeds that it expects to recover on such Home Equity Loan have been recovered (exclusive of any possibility of a deficiency judgment but including any recoveries of Charge Off Amounts or accrued or imputed interest including, but not limited to, recoveries related to walks (i.e., instances where the Mortgagor has voluntarily vacated the Mortgaged Property) or short sales)).

Liquidation Expenses : Out-of-pocket expenses (exclusive of overhead) that are incurred by the Servicer in connection with the liquidation of any Home Equity Loan and not recovered under any insurance policy, such expenses including, without limitation, reasonable legal fees and expenses, any unreimbursed amount expended pursuant to Section 3.06 (including, without limitation, amounts advanced to correct defaults on any mortgage loan that is senior to such Home Equity Loan and amounts advanced to keep current or pay off a mortgage loan that is senior to such Home Equity Loan) with respect to the related Home Equity Loan and any related and unreimbursed expenditures for real estate property taxes, mechanic’s liens, title perfection, property management or for property restoration, preservation or insurance against loss or damage.

Liquidation Proceeds : Proceeds (including Insurance Proceeds) received in connection with the liquidation of any Home Equity Loan, whether through trustee’s sale, foreclosure sale or otherwise, including, but not limited to, walks (i.e., instances where the Mortgagor has voluntarily vacated the Mortgaged Property) and short sales.

Loan Rate : With respect to any Home Equity Loan and day, the per annum rate of interest applicable under the related Mortgage Note to the calculation of interest for such day on

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the Principal Balance (adjusted as required by the Relief Act and/or any other federal, state or local legislation or regulation).

Majority Certificateholder : The Holder or Holders of Offered Certificates evidencing not less than 51% of the Voting Rights.

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

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

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

Monthly Excess Cashflow : With respect to any Distribution Date, the excess, if any, of (i) the Available Distribution Amount for such Distribution Date over (ii) the sum of (A) the amount of interest distributions on all Classes of Offered Certificates pursuant to clauses (i) through (iii) of Section 4.01(a) and (B) the Principal Collections for the related Collection Period.

Monthly Distribution Statement : The monthly statement to Certificateholders described in Section 4.02 hereof.

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

Mortgage : The mortgage, deed of trust or other instrument creating a first, second or third lien on an estate in fee simple interest in real property securing a Home Equity Loan.

Mortgage File : The mortgage documents (including without limitation the related Mortgage Note) listed in Section 2.01 pertaining to a particular Home Equity Loan and any additional documents required to be added to the Mortgage File pursuant to this Agreement, which documents may be physical documents or, pursuant to the terms of Section 2.01, may be optical images or other representations thereof.

Mortgage Note : With respect to a Home Equity Loan, the mortgage note or other evidence of indebtedness under which the related Mortgagor agrees to pay the indebtedness evidenced thereby and secured by the related Mortgage.

Mortgaged Property : The underlying property securing a Home Equity Loan.

Mortgagor : The obligor or obligors under a Mortgage.

Net Interest Collections : With respect to any Distribution Date:

• • (i) Interest Collections received during the related Collection Period; less

    (ii) the Servicing Fee for the related Collection Period; plus

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• • (iii) Recovered Charge Off Amounts actually collected by the Servicer during the related Collection Period.

Net Liquidation Proceeds : With respect to any Liquidated Home Equity Loan, the excess, if any, of (x) Liquidation Proceeds over (y) Liquidation Expenses.

Net Loan Rate : With respect to any Home Equity Loan, the Loan Rate less the Servicing Fee Rate.

Net Rate Cap : With respect to the first Distribution Date, a per annum rate equal to 7.95% and, with respect to each subsequent Distribution Date, a per annum rate equal to the weighted average of the Net Loan Rates of each Home Equity Loan, in each case outstanding as of the first day of the related Collection Period, multiplied in the case of the Floating Rate Certificates only by a fraction, the numerator of which is 30 and the denominator of which is the number of days in the related Interest Accrual Period.

Net Rate Carryover Amount : With respect to each Class of Offered Certificates and any Distribution Date, the sum of (i) the excess, if any, of (A) interest accrued on such Class of Certificates at the applicable Formula Rate for such Class for the related Interest Accrual Period over (B) interest accrued on such Class of Certificates at the applicable Pass-Through Rate for the related Interest Accrual Period, (ii) any Net Rate Carryover Amount for such Class remaining unpaid from prior Distribution Dates and (iii) interest on the amount in clause (ii) at the applicable Formula Rate for such Class and such Distribution Date.

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

Offered Certificates : The Class A Certificates and the Class M Certificates.

Officer’s Certificate : A certificate signed by the President, an Executive Vice President, a Senior Vice President, a Vice President, an Assistant Vice President, the Treasurer, Assistant Treasurer, Controller or Assistant Controller of the Depositor or the Servicer, as the case may be.

One-Month LIBOR : The per annum rate established by the Administrator in accordance with Section 4.02.

One Payment Delinquency Percentage : With respect to any Collection Period, a fraction, expressed as a percentage, the numerator of which is equal to the aggregate of the Principal Balances of all Home Equity Loans that are one (1) payment contractually delinquent as of the end of such Collection Period, and the denominator of which is the Pool Balance as of the end of such Collection Period.

Opinion of Counsel : A written opinion of counsel reasonably acceptable to the Trustee or the Administrator, as the case may be, who may be in-house counsel for the Servicer or the Depositor; provided, however, that with respect to the interpretation or application of the REMIC Provisions, such counsel must (i) in fact be independent of the Seller, the Depositor and the Servicer, (ii) not have any direct financial interest in the Seller, the Depositor or the Servicer or in any affiliate thereof, and (iii) not be connected with the Seller, the Depositor or the Servicer as

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an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions.

Optional Termination Date : The Distribution Date immediately following the Distribution Date on which the aggregate Certificate Principal Balance of the Offered Certificates, after giving effect to distributions on such Distribution Date, falls below 15 percent of the aggregate Original Class Certificate Principal Balance of the Offered Certificates.

Original Class Certificate Principal Balance : With respect to each Class of Offered Certificates, the amount set forth below:

Overcollateralization Amount : With respect to any Distribution Date, the excess, if any, of (x) the Pool Balance as of the last day of the related Collection Period over (y) the aggregate Certificate Principal Balance of the Offered Certificates calculated after taking into account all distributions in respect of principal on such Distribution Date.

Overcollateralization Release Amount : With respect to any Distribution Date, the amount (but not in excess of the Principal Collections received during the related Collection Period) equal to the excess, if any, of (i) the Interim Overcollateralization Amount for such Distribution Date over (ii) the Targeted Overcollateralization Amount for such Distribution Date.

Ownership Interest : With respect to any Certificate, any ownership or security 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, as owner or as pledgee.

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Pass-Through Margin : With respect to each Class of Floating Rate Certificates and any Interest Accrual Period, the percentage specified for such Class and Interest Accrual Period in the following table:

Pass-Through Rate : With respect to any Class of Certificates and any Interest Accrual Period, the lesser of (i) the applicable Formula Rate for such Class and Interest Accrual Period and (ii) the Net Rate Cap for the related Distribution Date.

Paying Agent : Any Person appointed as paying agent pursuant to Section 5.05.

Percentage Interest : For purposes of making distributions among Certificates of the Class A Certificates or Class M Certificates, the percentage obtained by dividing the principal denomination, as applicable, of such Certificate by the aggregate of the principal denominations, as applicable, of all Certificates of such Class. In the case of any Class R Certificate, the percentage interest set forth on the face of such Certificate.

Perfection Representations : The representations, warranties and covenants set forth in Schedule 1 attached hereto.

Permitted Investments : One or more of the following (excluding any callable investments purchased at a premium):

• • (i) direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality thereof, provided that such obligations are backed by the full faith and credit of the United States;

    (ii) repurchase agreements on obligations specified in clause (i) maturing not more than three months from the date of acquisition thereof, provided that the short-term unsecured debt obligations of the party agreeing to repurchase such obligations are at the date of acquisition rated by each Rating Agency in its highest short-term rating category (which is "F1+" for Fitch, "A-1+" for Standard & Poor’s and "P-1" for Moody’s);

    (iii) certificates of deposit, time deposits and bankers’ acceptances (which, if Moody’s is a Rating Agency, shall each have an original maturity of not more than 90 days and, in the case of bankers’ acceptances, shall in no event have an original maturity of more than 365 days) of any U.S. depository institution or trust company incorporated

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• • under the laws of the United States or any state thereof and subject to supervision and examination by federal and/or state banking authorities, provided that the unsecured short-term debt obligations of such depository institution or trust company at the date of acquisition thereof have been rated by each of Moody’s, Standard & Poor’s and Fitch in its highest unsecured short-term debt rating category;

    (iv) commercial paper (having original maturities of not more than 270 days) of any corporation incorporated under the laws of the United States or any state thereof which on the date of acquisition has been rated by Fitch, Standard & Poor’s and Moody’s in their highest short-term rating categories;

    (v) short term investment funds sponsored by any bank, trust company or national banking association incorporated under the laws of the United States or any state thereof which on the date of acquisition has been rated by Fitch, Standard & Poor’s and Moody’s in their respective highest rating category for long-term unsecured debt, or any other short-term investment fund the funds in which are invested in securities rated in the highest rating category by Fitch, Standard & Poor’s and Moody’s and which mature on demand or prior to the next Distribution Date;

    (vi) interests in any money market fund or mutual fund which at the date of acquisition has a rating of "Aaa" by Moody’s, "AAA" by Fitch, if rated by Fitch, and "AAA" (or "AAAm" or "AAAm-G" with respect to money market funds) by and Standard & Poor’s or such lower rating as will not result in the qualification, downgrading or withdrawal of the then current ratings assigned to the Offered Certificates by each Rating Agency; and

    (vii) other obligations or securities that are indebtedness in registered form for U.S. federal income tax purposes and that are reasonably acceptable to each Rating Agency as a Permitted Investment hereunder and will not result in a reduction in the then-current ratings of any Class of Offered Certificates, as evidenced by a confirmation or letter to such effect from such Rating Agency;

provided that no instrument described hereunder shall evidence either the right to receive (a) only interest with respect to the obligations underlying such instrument or (b) both principal and interest payments derived from obligations underlying such instrument if such interest and principal payments provide a yield to maturity at par greater than 120% of the yield to maturity at par of the underlying obligations; and provided , further , that no instrument described hereunder may be purchased at a price greater than par if such instrument may be prepaid or called at a price less than its purchase price prior to its stated maturity.

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

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Certificate, (iv) rural electric and telephone cooperatives described in Section 1381(a)(2)(C) of the Code, (v) an "electing large partnership" as defined in Section 775 of the Code, (vi) a Person that is not a citizen or resident of the United States, a corporation, partnership, or other entity created or organized in or under the laws of the United States, any state thereof or the District of Columbia, or an estate or trust whose income from sources without the United States is includible in gross income for United States federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States Persons have the authority to control all substantial decisions of the trust unless such Person has furnished the transferor and the Administrator with a duly completed Internal Revenue Service Form W-8ECI or any applicable successor form, 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 created under this Agreement 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 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, limited liability company, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other entity.

Pool Balance : As of any date of determination, the aggregate of the outstanding Principal Balances of all Home Equity Loans as of such date.

Preferred Stock : As defined in Section 10.13.

Prepayment Assumption : The "Prepayment Assumption" as defined in the Prospectus Supplement.

Prepayment Interest Shortfall : With respect to any Collection Period and any Home Equity Loans that were prepaid in full during such Collection Period, an aggregate amount equal to the excess, if any, of (i) thirty days’ interest on the aggregate Principal Balance of such Home Equity Loans at their respective Net Loan Rates, over (ii) the aggregate amount of interest actually remitted by the related Mortgagors in connection with such principal prepayments.

Principal Balance : With respect to any Home Equity Loan (other than a Liquidated Home Equity Loan) and date, the related Cut-Off Date Principal Balance, minus the sum of (x) all collections credited against the principal balance of such Home Equity Loan in accordance with the terms of the related Mortgage Note and (y) any related Charge Off Amounts credited against the principal balance of such Home Equity Loan prior to such date. For purposes of this definition, a Liquidated Home Equity Loan shall be deemed to have a Principal Balance equal to the Principal Balance of the related Home Equity Loan immediately prior to the final recovery of related Liquidation Proceeds and a Principal Balance of zero thereafter.

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Principal Collections : With respect to any Distribution Date, the sum, without duplication, of:

• • (i) the principal portion of all scheduled monthly payments on the Home Equity Loans received by the Servicer during the related Collection Period;

    (ii) the principal portion of the Purchase Price for any Home Equity Loan repurchased from the Trust pursuant to the terms of this Agreement during the related Collection Period;

    (iii) the principal portion of all Substitution Adjustment Amounts with respect to the related Collection Period;

    (iv) all Net Liquidation Proceeds allocable to principal (excluding Foreclosure Profits and Recovered Charge Off Amounts) actually received by the Servicer during the related Collection Period;

    (v) the principal portion of all other unscheduled collections on the Home Equity Loans received by the Servicer during the related Collection Period (including, without limitation, full and partial prepayments of principal made by the Mortgagors), to the extent not previously distributed; and

    (vi) the principal portion of all Insurance Proceeds on any Home Equity Loan collected by the Servicer during the related Collection Period.

Principal Distribution Amount : With respect to any Distribution Date, (i) the Principal Collections received on the Home Equity Loans during the related Collection Period plus (ii) the Extra Principal Distribution Amount for such Distribution Date, if any, minus (iii) for Distribution Dates occurring on and after the Stepdown Date and with respect to which a Trigger Event is not in effect, the Overcollateralization Release Amount, if any.

Prospectus Supplement : The Prospectus Supplement, dated December 7, 2006, relating to the Offered Certificates.

Purchase Price : With respect to any Home Equity Loan purchased from the Trust on any date pursuant to Section 2.02, 2.04 or 3.01, an amount equal to the sum of (i) the Principal Balance thereof plus any related Charge Off Amount as of the end of the related Collection Period preceding the date of repurchase, (ii) accrued and unpaid interest as of the end of such Collection Period and (iii) any costs and damages incurred by the Trust with respect to such Home Equity Loan in connection with any violation by such Home Equity Loan of any "predatory" or "abusive" lending laws.

Rating Agencies : Moody’s, Standard & Poor’s and Fitch. If such agency or a successor is no longer in existence, "Rating Agency" shall be such nationally recognized statistical credit rating agency, or other comparable Person, designated by the Depositor, notice of which designation shall be given to the Trustee and the Administrator. References herein to the highest short term unsecured rating category of a Rating Agency shall mean "P-1" or better in the case of Moody’s, "A-1+" or better in the case of Standard & Poor’s and "F1+" in the case of Fitch and

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in the case of any other Rating Agency shall mean such equivalent ratings. References herein to the highest long-term rating category of a Rating Agency shall mean "AAA" in the case of Fitch and Standard & Poor’s and "Aaa" in the case of Moody’s and in the case of any other Rating Agency, such equivalent rating.

Realized Loss : With respect to any (i) Charged Off Home Equity Loan and any Collection Period (other than the Collection Period in which all or a portion of such Charged Off Home Equity Loan becomes a Liquidated Home Equity Loan), the related Charge Off Amount and (ii) Liquidated Home Equity Loan, the excess of the related Principal Balance at the end of the related Collection Period in which such Home Equity Loan became a Liquidated Home Equity Loan over the related Net Liquidation Proceeds.

Record Date : With respect to any Distribution Date and the Floating Rate Certificates, the Business Day immediately preceding such Distribution Date, or if any such Class of Certificates are no longer Book-Entry Certificates, the last Business Day of the month immediately preceding the month in which such Distribution Date occurs. With respect to any Distribution Date and the Fixed Rate Certificates and the Class R Certificate, the last Business Day of the month immediately preceding the month in which such Distribution Date occurs.

Recovered Charge Off Amount : With respect to any Home Equity Loan that became a Liquidated Home Equity Loan during a Collection Period, the amount, if any, by which (i) the related Net Liquidation Proceeds exceed (ii) its Principal Balance immediately prior to foreclosure plus unpaid interest thereon, up to an amount equal to the related Charge Off Amounts, to the extent not previously recovered. With respect to any Charged Off Home Equity Loan and any Collection Period (other than the Collection Period in which all or a portion of such Charged Off Home Equity Loan becomes a Liquidated Home Equity Loan), an amount equal to the recovery of any prior Charge Off Amount, to the extent collected by the Servicer, or deposited by the Servicer or Depositor pursuant to Section 2.02 or 2.04, during any Collection Period, to the extent not previously recovered.

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 clarification and interpretation as have been provided by the SEC 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 SEC, or as may be provided by the SEC or its staff from time to time.

Related Documents : As such term is defined in Section 2.01.

REMIC Provisions : Provisions of the federal income tax law relating to real estate mortgage investment conduits, which appear at Sections 860A through 860G of the Code, and related provisions and proposed, temporary and final regulations and published rulings, notices and announcements promulgated thereunder, as the foregoing may be in effect from time to time, as well as provisions of applicable state laws.

Remittance Report : As such term is defined in Section 3.11(b).

REO : A Mortgaged Property that is acquired by the Trust in a foreclosure or by grant of deed in lieu of foreclosure.

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Residual Certificate : The Class R Certificate.

Responsible Officer : With respect to the Trustee or the Administrator, any officer assigned to the corporate trust group (or any successor thereto), including any vice president, assistant vice president, trust officer, assistant secretary or any other officer of the Trustee or the Administrator, as the case may be, customarily performing functions similar to those performed by any of the above designated officers, in each case having direct responsibility for the administration of this Agreement. When used with respect to any Seller or the Servicer, the President or any Vice President, Assistant Vice President, Treasurer, Assistant Treasurer or any Secretary or Assistant Secretary.

SAIF : The Savings Association Insurance Fund, as from time to time constituted, created under the Financial Institutions Reform, Recovery and Enhancement Act of 1989, or if at any time after the execution of this instrument the Savings Association Insurance Fund is not existing and performing duties now assigned to it, the body performing such duties on such date.

SEC : The U.S. Securities and Exchange Commission.

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

Sellers : The sellers set forth in Schedule 2 attached hereto.

Servicer : HSBC Finance, or its successor in interest, or any successor servicer appointed as herein provided.

Servicer Termination Events : As defined in Section 7.01.

Servicing Certificate : A certificate completed by and executed on behalf of the Servicer in accordance with Section 3.10.

Servicing Criteria : The "servicing criteria" set forth in Item 1122(d) of Regulation AB, as the same may be from time to time amended.

Servicing Fee : The fee payable to the Servicer pursuant to Section 3.09, which with respect to any Collection Period shall be equal to the excess of (i) 1/12th (or, in the case of the first Collection Period, a fraction the numerator of which is the number of days from the Cut-Off Date to the last day of such Collection Period and the denominator of which is 360) of the Servicing Fee Rate for each Home Equity Loan in the Home Equity Loan Schedule multiplied by the outstanding Principal Balance of such Home Equity Loan as of the first day of the related Collection Period, over (ii) the Compensating Interest for such Collection Period.

Servicing Fee Rate : A rate equal to 0.50% per annum.

Servicing Officer : Any officer of the Servicer or other individual designated by an officer of the Servicer involved in, or responsible for, the administration and servicing of the Home Equity Loans, whose name and specimen signature appear on a list of servicing officers furnished to the Trustee and the Administrator on the Closing Date by the Servicer, as such list may be amended from time to time.

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Settlement Agreement : The consent decrees entered into between Household International Inc. and participating States (and agencies of such States) in accordance with the agreement reached between Household International Inc. and a multi-state working group of state attorneys general and regulatory agencies, which became effective on January 19, 2003 and reflected in the Specified Filing.

Specified Filing : The filing by Household International Inc. with the SEC on Form 8-K dated October 11, 2002.

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

Stepdown Date : The earlier of (i) the first Distribution Date following the Distribution Date on which the aggregate Certificate Principal Balance of the Class A Certificates has been reduced to zero and (ii) the later of (A) the Distribution Date in January 2010 and (B) the first Distribution Date on which the aggregate Certificate Principal Balance of the Class A Certificates (calculated for this purpose after giving effect to anticipated distributions of principal for such Distribution Date) is less than or equal to 49.30% of the Pool Balance for such Distribution Date.

Subsequent Cut-Off Date : With respect to each Eligible Substitute Home Equity Loan, the close of business on the day designated as the "Subsequent Cut-Off Date" with respect to the Eligible Substitute Home Equity Loan.

Subservicer : With respect to each Home Equity Loan, the related Seller that sold such Home Equity Loan to the Depositor pursuant to the Home Equity Loan Purchase Agreement.

Substitution Adjustment Amount : With respect to any Defective Home Equity Loan or any Home Equity Loan for which the Servicer elects to substitute pursuant to Section 2.02 and the date on which a substitution thereof occurs pursuant to Section 2.02 or 2.04, the sum of:

• • (i) the excess, if any, of (a) the Principal Balance of such Defective Home Equity Loan or such elected Home Equity Loan plus any related Charge Off Amount as of the end of the related Collection Period preceding the date of substitution (after the application of any principal payments received on such Defective Home Equity Loan or such elected Home Equity Loan on or before the date of the substitution of the applicable Eligible Substitute Home Equity Loan or Loans) over (b) the aggregate Principal Balance of the applicable Eligible Substitute Home Equity Loan or Loans, plus

    (ii) accrued and unpaid interest to the end of such Collection Period computed on a daily basis at the Net Loan Rate on the Principal Balance of such Defective Home Equity Loan or such elected Home Equity Loan outstanding from time to time, plus

    (iii) any costs, expenses and damages incurred by the Trust resulting from any violation of any "predatory" or "abusive" lending laws" in connection with such Home Equity Loan.

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Targeted Overcollateralization Amount : With respect to any Distribution Date, (i) prior to the Stepdown Date, 16.90% of the Cut-Off Date Pool Balance, (ii) on or after the Stepdown Date and on which a Trigger Event is not in effect, the greater of (A) 33.80% of the Pool Balance as of the last day of the related Collection Period and (B) 1.00% of the Cut-Off Date Pool Balance, or (iii) on or after the Stepdown Date and on which a Trigger Event is in effect, the Targeted Overcollateralization Amount for the immediately preceding Distribution Date.

Termination Price : As defined in Section 9.01(a).

Three Payment Plus Delinquency Percentage : With respect to any Collection Period, a fraction, expressed as a percentage, the numerator of which is equal to the aggregate of the Principal Balances of all Home Equity Loans that are three (3) or more payments contractually delinquent, including those Home Equity Loans in bankruptcy, foreclosure and REO as of the end of such Collection Period, and the denominator of which is the Pool Balance as of the end of such Collection Period.

Transaction Documents : This Agreement, the Home Equity Loan Purchase Agreement, and any other document or agreement entered into in connection with the Trust, the Certificates or the Home Equity Loans.

Transfer : Any direct or indirect transfer, sale, pledge, hypothecation or other form of assignment of any Ownership Interest in a Certificate.

Transfer Agreement : The transfer agreement dated as of December 14, 2006 between the Trustee and each Seller pursuant to which the Sellers will assign to the Trustee, on behalf of the Trust, all of their right, title and interest in and on the Transferred Assets not otherwise transferred pursuant to the Home Equity Loan Purchase Agreement.

Transfer Date : With respect to any Home Equity Loan transferred to or retransferred from the Trust hereunder, the date on which such transfer or retransfer is made under the terms hereof, which date shall be (i) in the case of the Home Equity Loans originally listed on the Home Equity Loan Schedule, the Closing Date, and (ii) in the case of any Eligible Substitute Home Equity Loan, the date on which such Eligible Substitute Home Equity Loan is conveyed to the Trust under the terms hereof.

Transferred Assets : All aspects, rights, title or interests of, in, to or under the Home Equity Loans that are not otherwise conveyed hereunder pursuant to Section 2.01, including, without limitation, all agreements, instruments and other documents evidencing or governing the Mortgagor’s obligations under the Home Equity Loans or otherwise related thereto or establishing or setting forth the terms and conditions thereof, and any amendments or modifications thereto, and all property and collateral securing the borrowers obligations thereunder.

Trigger Event : Will be in effect on any Distribution Date on or after the Stepdown Date on which either (i) the Two Payment Plus Rolling Average for such Distribution Date equals or exceeds 11.50%, or (ii) the Cumulative Loss Percentage for such Distribution Date exceeds the Cumulative Loss Percentage Trigger for such Distribution Date.

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Trust : The trust created by this Agreement and designated "HSBC Home Equity Loan Trust (USA) 2006-4," the corpus of which consists of the Trust Fund.

Trust Fund : Consists of the Home Equity Loans, such assets as shall from time to time be identified as deposited in the Collection Account and the Carryover Reserve Fund (in each case exclusive of net earnings thereon), the Mortgage Notes and other Mortgage File documents for the Home Equity Loans, any property that secured a Home Equity Loan and that has become REO, the interest of the Depositor in certain hazard insurance policies maintained by the Mortgagors or the Servicer in respect of the Home Equity Loans, the Collection Account, the proceeds of each of the foregoing and one share of Preferred Stock of the Depositor.

Trustee : U.S. Bank National Association, or any successor Trustee appointed in accordance with this Agreement that has accepted such appointment in accordance with this Agreement.

Two Payment Delinquency Percentage : With respect to any Collection Period, a fraction, expressed as a percentage, the numerator of which is equal to the aggregate of the Principal Balances of all Home Equity Loans that are two (2) payments contractually delinquent as of the end of such Collection Period, and the denominator of which is the Pool Balance as of the end of such Collection Period.

Two Payment Plus Delinquency Percentage : With respect to any Collection Period, a fraction, expressed as a percentage, the numerator of which is equal to the aggregate of the Principal Balances of all Home Equity Loans that are two (2) or more payments contractually delinquent, including those Home Equity Loans in bankruptcy, foreclosure and REO as of the end of such Collection Period, and the denominator of which is the Pool Balance as of the end of such Collection Period.

Two Payment Plus Rolling Average : With respect to any Distribution Date, the average of the Two Payment Plus Delinquency Percentage for each of the three (3) immediately preceding Collection Periods.

UCC : The Uniform Commercial Code, as in effect from time to time in any specified jurisdiction.

Underwriter Exemption : Prohibited Transaction Exemption 2002-41, 67 Fed. Reg. 54487 (2002), as amended (or any successor thereto), or any substantially similar administrative exemption granted by the U.S. Department of Labor.

United States Person : As defined in Section 7701(a)(30) of the Code, (i) a citizen or resident of the United States, (ii) a domestic partnership, (iii) a domestic corporation, (iv) any estate (other than a foreign estate, within the meaning of Section 7701(a)(31) of the Code), and (v) any trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust, and (B) one or more United States Persons have the authority to control all substantial decisions of the trust.

Unpaid Realized Loss Amount : With respect to any Class of Class M Certificates and any Distribution Date, the excess, if any, of (i) the sum of all Applied Realized Loss Amounts

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with respect to such Class of Certificates on all previous Distribution Dates over (ii) the sum of all distributions in reduction of such Applied Realized Loss Amounts on all previous Distribution Dates. Amounts distributed to a Class of Class M Certificates in respect of any Unpaid Realized Loss Amount will not be applied to reduce the Certificate Principal Balance of such Class.

Voting Rights : 100% of the Voting Rights shall be allocated among the Offered Certificates (other than the Depositor or any of its Affiliates) in accordance with their respective Certificate Principal Balances. The Class R Certificate shall have no Voting Rights.

• • Section 1.02. Other Definitional Provisions .

(a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

(b) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control.

(c) The words "hereof", "herein", "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Article, Section, Schedule and Exhibit references contained in this Agreement are references to Articles, Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the terms "including" and "includes" shall mean "including without limitation."

(d) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine genders of such terms.

(e) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns.

Section 1.03. Interest Calculations . All calculations of interest hereunder that are made in respect of the Principal Balance of a Home Equity Loan shall be made based on the number of days elapsed between the date that interest was last paid on such Home Equity Loan and the date of receipt of the related Mortgagor’s most current payment. All calculations of interest on the Floating Rate Certificates, shall be made on the basis of a 360-day year and the actual number of days in the related Interest Accrual Period. All calculations of interest on the Fixed Rate Certificates shall be made on the basis of a 360-day year consisting of twelve 30-day months.

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ARTICLE II

CONVEYANCE OF HOME EQUITY LOANS;

ORIGINAL ISSUANCE OF CERTIFICATES; TAX TREATMENT

• • Section 2.01. Acknowledgment; Conveyance of Home Equity Loans; Custody of Mortgage Files .

(a) The Depositor, concurrently with the execution and delivery of this Agreement, does hereby irrevocably transfer, assign, sell, set over and otherwise convey to the Trustee, on behalf of the Trust, for the benefit of the Certificateholders without recourse (subject to Sections 2.02 and 2.04) (i) all of its right, title and interest in and to the unpaid principal balance of each Home Equity Loan and each Eligible Substitute Home Equity Loan, including all Interest Collections and Principal Collections in respect of any such Home Equity Loan received after the Cut-Off Date with respect to each Initial Home Equity Loan and after the Subsequent Cut-Off Date with respect to each Eligible Substitute Home Equity Loan pursuant to the Home Equity Loan Purchase Agreement; (ii) property which secured such Home Equity Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest in any insurance policies in respect of the Home Equity Loans (including any Insurance Proceeds); (iv) all proceeds of any of the foregoing; and (v) one share of the Depositor’s Preferred Stock. The parties hereto acknowledge and agree that it is the policy and intent of the Trust to only acquire Home Equity Loans consistent with the terms set forth in Section 2.04(b) of this Agreement.

(b) The Depositor agrees to take, or to cause to be taken, such actions and to execute such documents (including without limitation the filing of all necessary continuation statements for the UCC-1 financing statement filed in the State of Delaware (which shall have been filed as promptly as practicable, but in no event later than 10 days following the effective date of this Agreement), describing the Home Equity Loans and naming the Depositor as seller and the Trustee, on behalf of the Trust, as buyer, and any amendments or other filings to the UCC-1 financing statement required to reflect a change in the applicable UCC or a change of the name or corporate structure of the Depositor) as are necessary to perfect and protect the Certificateholders’ interests in the Trust created hereunder, including each Home Equity Loan and the proceeds thereof (other than delivering to the Trustee possession of the Mortgage Files, which possession will, subject to the terms hereof, be maintained by the Subservicers on behalf of the Servicer as custodian and bailee for the Trustee). The parties hereto intend that the transactions set forth herein constitute a sale and not a pledge by the Depositor to the Trustee, on behalf of the Trust, of all the Depositor’s right, title and interest in and to the Home Equity Loans and other Trust property as and to the extent described above. In the event the transactions set forth herein are characterized as a pledge and not a sale, the Depositor hereby grants to the Trustee, on behalf of the Trust, a security interest in all of the Depositor’s right, title and interest in, to and under the Home Equity Loans and such other Trust property, to secure all of the Depositor’s obligations hereunder, and this Agreement shall constitute a security agreement under applicable law. With respect to the Home Equity Loans sold by each Seller to the Depositor, the Servicer shall cause such Seller to file as promptly as practicable, but in no event later than ten days following the effective date of this Agreement, in the appropriate public filing office or offices UCC-1 financing statements and continuation statements describing such Home Equity Loans and naming such Seller as seller and the Depositor as buyer, to file appropriate

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continuation statements thereto, to file amendments thereto in the case of a change in the applicable UCC, name change or change in corporate structure and to file appropriate additional UCC-1 financing statements, if any, if such Seller changes its jurisdiction of incorporation.

(c) In connection with such transfer and assignment by the Depositor and the Servicer, acting through the Subservicers, the Trustee and the Servicer hereby acknowledge that the Subservicers are holding, with respect to the Home Equity Loans transferred on the Closing Date, and will hold, with respect to each Eligible Substitute Home Equity Loan, on and from the applicable Transfer Date, as custodian and bailee for the Trustee, the following documents or instruments with respect to each such Home Equity Loan (the " Related Documents "):

• • (i) the original Mortgage Note with all intervening endorsements showing a complete chain of title from the originator of such Home Equity Loan to the Seller or a copy of such original Mortgage Note with an accompanying lost note affidavit;

    (ii) the original Mortgage, with evidence of recording thereon, provided that if the original Mortgage has been delivered for recording to the appropriate public recording office of the jurisdiction in which the Mortgaged Property is located but has not yet been returned to the Seller by such recording office, the Seller may hold a copy of such original Mortgage;

    (iii) originals of any amendments to the Mortgage Note or Mortgage, any modification or assumption agreements and any previous assignments of such Home Equity Loan; and

    (iv) for each Mortgage Loan registered on the MERS® System, the original assignment into the name of MERS® including the related MIN of the Mortgage Loan;

provided , however , that as to any Home Equity Loan, if, as evidenced by an Opinion of Counsel delivered to and in form and substance reasonably satisfactory to the Trustee, (x) an optical image or other electronic representation of the related documents specified in clauses (i) through (iv) above are enforceable in the relevant jurisdictions to the same extent as the original of such document and (y) such optical image or other representation does not impair the ability of an owner of such Home Equity Loan to transfer its interest in such Home Equity Loan, such optical image or other representation may be held by the Servicer, acting through the Subservicers, as custodian and bailee for the Trustee, in lieu of the physical documents specified above.

(d) Except as hereinafter provided, the Servicer, acting through the Subservicers, shall be entitled to maintain possession of all of the foregoing documents and instruments, shall not be required to deliver any of them to the Trustee and shall not be required to record an assignment of Mortgage in favor of the Trustee, on behalf of the Trust, with respect to any Home Equity Loan. In the event, however, that possession of any of such documents or instruments is required by any Person (including the Trustee) acting as successor servicer pursuant to Section 6.04 or 7.02 in order to carry out the duties of Servicer hereunder, then such successor shall be entitled to request delivery, at the expense of the Servicer, of such documents or instruments by the Servicer and to retain such documents or instruments for servicing purposes; provided that

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the Trustee or such servicers shall maintain such documents at such offices as may be required by any regulatory body having jurisdiction over such Home Equity Loans.

(e) The Servicer’s right to maintain possession, directly or through each Subservicer, of the related Mortgage Files shall continue so long as (i) Moody’s, Standard & Poor’s and Fitch assign a long-term senior unsecured debt rating to HSBC Finance of at least "Baa3", in the case of Moody’s, "BBB", in the case of Fitch, and "BBB-", in the case of Standard & Poor’s, or such lower rating acceptable and assigned by Moody’s, Standard & Poor’s and Fitch) and (y) such Subservicer remains an Affiliate of HSBC Finance. At such time as either of the conditions specified in the preceding sentence is not satisfied, as promptly as practicable, but in no event more than 90 days thereafter in the case of clause (i) below, 60 days in the case of clause (ii) below and 60 days in the case of clause (iii) below, the Servicer shall cause each Subservicer, at such Subservicer’s expense or, to the extent the Subservicer fails to pay, the Servicer’s expense, to (i) either (x) record an assignment of Mortgage in favor of the Trustee, on behalf of the Trust (which may be a blanket assignment if permitted by applicable law), with respect to each of the Home Equity Loans being serviced by such Subservicer in the appropriate real property or other records or (y) deliver to the Trustee the assignment of such Mortgage in favor of the Trustee, on behalf of the Trust, in form for recordation, together with an Opinion of Counsel addressed to the Trustee to the effect that recording is not required to protect the Trustee’s right, title and interest in and to the related Home Equity Loan or to perfect a first priority security interest in favor of the Trustee, on behalf of the Trust, in the related Home Equity Loan, which Opinion of Counsel also shall be reasonably acceptable to each of the Rating Agencies and the Trustee, and (ii) unless an Opinion of Counsel, reasonably acceptable to the Trustee and the Rating Agencies (as evidenced in writing), is delivered to the Trustee to the effect that delivery of the Mortgage Files is not necessary to protect the Trustee’s right, title and interest in and to the related Home Equity Loans or to perfect a first priority security interest in favor of the Trustee, on behalf of the Trust, that will be prior to all other present and future claims in the related Home Equity Loans, deliver the related Mortgage Files to the Trustee or a custodian on its behalf to be held by the Trustee or such custodian on its behalf in trust, upon the terms herein set forth, for the use and benefit of all present and future Certificateholders, and the Trustee or such custodian on its behalf shall retain possession thereof except to the extent the Servicer or Subservicers require any Mortgage Files for normal servicing as contemplated by Section 3.08, and (iii) have a Responsible Officer of the applicable Seller endorse the original Mortgage Note with respect to each of the Home Equity Loans being serviced by the Subservicer to "Pay to the order of ____________ without recourse" with all intervening endorsements showing a complete chain of title from the originator of such Home Equity Loan to the applicable Seller. In the event that the Subservicers or the Servicer should fail to prepare, execute and record any assignments of Mortgages required under this Section 2.01 on a timely basis, the Servicer shall cause the Subservicers to appoint the Trustee as their attorney-in-fact to prepare, execute and record any assignments of Mortgages requested in writing by the Majority Certificateholder required under this Section 2.01. Such preparation, execution and recording shall be at the expense of the Subservicers, or to the extent not paid by the Subservicers, the Servicer; provided that if the Trustee is not reasonably assured of payment of such expenses from the Subservicer or the Servicer, the Trustee may require reasonable indemnity against such expense as a condition to taking any such action.

(f) Within 90 days following delivery, if any, of the Mortgage Files to the Trustee or a custodian on its behalf pursuant to the preceding subsection, the Trustee or a custodian on its

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behalf shall review each such Mortgage File to ascertain that all required documents set forth in this Section 2.01 have been executed and received and that such documents relate to the Home Equity Loans identified on the Home Equity Loan Schedule, and in so doing the Trustee or such custodian on its behalf may rely on the purported due execution and genuineness of any signature thereon. If within such 90-day period the Trustee or custodian finds any document constituting a part of a Mortgage File not to have been executed or received or to be unrelated to the Home Equity Loans identified in said Home Equity Loan Schedule or, if in the course of its review, the Trustee or custodian determines that such Mortgage File is otherwise defective in any material respect, the Trustee or custodian shall promptly upon the conclusion of its review notify the Depositor and the Servicer, and the Depositor and the Servicer shall have a period of 90 days after such notice within which to correct or cure any such defect; provided , however , that if such defect shall not have been corrected or cured within such 90-day period due to the failure of the related office of real property or other records to return any document constituting a part of a Mortgage File, the Depositor or the Servicer shall so notify the Trustee and the period during which such defect may be corrected or cured shall be extended for one additional 90-day period.

(g) The Trustee or a custodian on its behalf shall have no responsibility for reviewing any Mortgage File except as expressly provided in Section 2.01(f). In reviewing any Mortgage File pursuant to this Section 2.01, the Trustee or a custodian on its behalf shall have no responsibility for determining whether any document is valid and binding, whether the text of any assignment or endorsement is in proper or recordable form (except, if applicable, to determine if the Trustee is the assignee or endorsee), whether any document has been recorded in accordance with the requirements of any applicable jurisdiction, or whether a blanket assignment is permitted in any applicable jurisdiction, whether any Person executing any document is authorized to do so or whether any signature thereon is genuine, but shall only be required to determine whether a document has been executed, that it appears to be what it purports to be and, where applicable, that it purports to be recorded.

(h) The Servicer hereby confirms to the Trustee that on or prior to the Closing Date and on or prior to the applicable Transfer Date with respect to any Eligible Substitute Home Equity Loan, the portions of the Electronic Ledger relating to such Home Equity Loans have been or will have been clearly and unambiguously marked, and the appropriate entries have been or will have been made in its general accounting records, to indicate that such Home Equity Loans have been transferred to the Trustee, on behalf of the Trust, and constitute part of the Trust in accordance with the terms hereof.

(i) In connection with the assignment, pursuant to Section 2.01(e)(i), of any Home Equity Loan registered on the MERS® System, the Servicer shall cause each Subservicer, at such Subservicer’s expense or, to the extent the Subservicer fails to pay, the Servicer’s expense, at the time specified in the second sentence of Section 2.01(e)(i), to cause the MERS® System to indicate that such Home Equity Loans have been assigned to the Trust in accordance with this Agreement by including (or deleting, in the case of Home Equity Loans which are repurchased in accordance with this Agreement) in such computer files (a) the code "[IDENTIFY TRUST SPECIFIC CODE]" in the field "[IDENTIFY THE FIELD NAME FOR TRUST]" which identifies the Trust and (b) the code "[IDENTIFY SERIES SPECIFIC CODE NUMBER]" in the field "Pool Field" which identifies the series of the Certificates issued in connection with such Home Equity Loans. The Servicer agrees that it will not alter the codes referenced in this

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paragraph with respect to any Home Equity Loan during the term of this Agreement unless and until such Home Equity Loan is repurchased in accordance with the terms of this Agreement, and there is filed any financing statement or amendment thereof necessary to comply with the New York UCC or the UCC of any applicable jurisdiction.

Section 2.02. Acceptance by Trustee; Repurchase of Home Equity Loans; Conveyance of Eligible Substitute Home Equity Loans .

(a) The Trustee hereby acknowledges receipt on behalf of the Trust of all the right, title and interest of the Depositor in and to the assets described Section 2.01(a)(i) through (v), and all of the right, title and interest of the Sellers in and to the Transferred Assets pursuant to the Transfer Agreement, including but not limited to the transfer and assignment of the Mortgage Notes and the Mortgages, and declares, subject to Section 2.01(e), that it or a custodian on its behalf holds and will hold such documents and interests and all amounts received by it in trust, upon the terms herein set forth, for the use and benefit of all present and future Certificateholders. If the time to cure any defect of which the Trustee has notified the Depositor and the Servicer following a review of the Home Equity Loan Files pursuant to Section 2.01(f) has expired or if any loss is suffered by the Trust, on behalf of the Certificateholders, in respect of any Home Equity Loan as a result of (i) a defect in any document constituting a part of a Mortgage File or (ii) the related Seller’s retention of such Mortgage File or an assignment of Mortgage not having been recorded, the Depositor or, to the extent the Depositor fails to perform, the Servicer shall, in the case of a defect in such document, and the Servicer shall, in the case of a loss resulting from such Seller’s retention of a Mortgage File or assignment of Mortgage not having been recorded, on the Business Day next preceding the Distribution Date in the month following the end of the Collection Period in which the time to cure such defect expired or such loss occurred, either (i) repurchase the related Home Equity Loan (a " Defective Home Equity Loan ") (including any property acquired in respect thereof and any insurance policy or insurance proceeds with respect thereto) from the Trust at a price equal to the Purchase Price which shall be accomplished by deposit by the Depositor or the Servicer, as applicable, in the Collection Account pursuant to Section 3.02 on such next preceding Business Day, or (ii) if such next preceding Business Day occurs prior to the second anniversary of the Closing Date, remove such Defective Home Equity Loan from the Trust and substitute in its place an Eligible Substitute Home Equity Loan or Loans; provided , however , that any such substitution pursuant to clause (ii) above shall not be effected prior to the delivery to the Trustee of the Opinion of Counsel required by Section 2.06.

(b) [Reserved]

(c) With respect to any Eligible Substitute Home Equity Loan or Loans, the Servicer shall cause the related Seller to deliver to the Trustee with respect to such Eligible Substitute Home Equity Loan or Loans an acknowledgment that the related Seller is holding as custodian for the Trust such documents and agreements, if any, as are permitted to be held by the related Seller in accordance with Section 2.01. An assignment of the Mortgage in favor of the Trustee, on behalf of the Trust, with respect to such Eligible Substitute Home Equity Loan or Loans shall be required to be recorded in the appropriate real property or other records or delivered to the Trustee with the Opinion of Counsel referred to in Section 2.01 under the same circumstances that all other assignments of Mortgage are required to be recorded hereunder. For any Collection

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Period during which the Depositor or the Servicer substitutes one or more Eligible Substitute Home Equity Loans, the Servicer shall determine the Substitution Adjustment Amount. The Depositor or the Servicer, as applicable, shall deposit the Substitution Adjustment Amount in the Collection Account no later than the Business Day immediately preceding the Distribution Date in the month following the end of the Collection Period in which such substitution occurs. The Servicer shall amend the Home Equity Loan Schedule to reflect the removal of the Defective Home Equity Loan from the terms of this Agreement and the substitution of the Eligible Substitute Home Equity Loan or Loans. Upon such substitution, the Eligible Substitute Home Equity Loan or Loans shall be subject to the terms of this Agreement in all respects, and the Depositor shall be deemed to have made with respect to such Eligible Substitute Home Equity Loan or Loans, as of the date of substitution, the covenants, representations and warranties set forth in Section 2.04(b). The Trustee shall upon satisfaction of the conditions in this subsection immediately take any action requested by the Depositor, if any, to effect the reconveyance of such Defective Home Equity Loan or such Home Equity Loan for which the Servicer has made a substitution election so removed from the Trust to the Depositor or the Servicer, as applicable. The procedures applied by the Depositor or the Servicer in selecting each Eligible Substitute Home Equity Loan shall not be adverse to the interests of the Certificateholders and shall be comparable to the selection procedures applicable to the Home Equity Loans originally conveyed hereunder.

(d) Upon receipt by the Trustee of (i) in the case of a repurchase, a Servicing Certificate to the effect that the Purchase Price for any such Defective Home Equity Loan or such Home Equity Loan for which the Servicer has made a substitution election has been so deposited in the Collection Account or (ii) in the case of a substitution, (A) a Servicing Certificate to the effect that the Substitution Adjustment Amount, if any, has been so deposited in the Collection Account and (B) an Officer’s Certificate reciting the transfer and assignment of the Eligible Substitute Home Equity Loan(s) to the Trust and, if required at such time, that the related Mortgage File(s) for such Eligible Substitute Home Equity Loan(s) have been delivered to the Trustee and the assignment(s) of Mortgage have been recorded, the Trustee on behalf of the Trust shall execute and deliver such instrument of transfer or assignment presented to it by the Servicer, in each case without recourse, as shall be necessary to vest in the Depositor or the Servicer, as applicable, legal and beneficial ownership of such Defective Home Equity Loan or such Home Equity Loan for which the Servicer has made a substitution election (including any property acquired in respect thereof or proceeds of any insurance policy with respect thereto). It is understood and agreed that the obligation of the Depositor or the Servicer to repurchase or substitute for (to the extent permitted herein) any Defective Home Equity Loan shall constitute the sole and exclusive remedy respecting such defect available to Certificateholders or the Trustee against the Depositor or the Servicer, and such obligation on the part of the Servicer shall survive any resignation or termination of the Servicer hereunder.

Section 2.03. Representations, Warranties and Covenants of the Servicer . The Servicer represents, warrants and covenants that as of the Closing Date:

(a) The Servicer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power to own its assets and to transact the business in which it is currently engaged. The Servicer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the

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character of the business transacted by it or properties owned or leased by it require such qualification and in which the failure to so qualify would have a material adverse effect on the business, properties, assets, or condition (financial or other) of the Servicer;

(b) The Servicer has the power and authority to make, execute, deliver and perform its obligations under this Agreement and to perform its obligations with respect to all of the transactions contemplated under this Agreement, and has taken all necessary corporate action to authorize the execution, delivery and performance of its obligations under this Agreement. When executed and delivered, this Agreement will constitute the legal, valid and binding obligation of the Servicer enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies (whether in a proceeding at law or in equity);

(c) The Servicer is not required to obtain the consent of any other Person or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement, except for such consents, licenses, approvals or authorizations, or registrations or declarations, as shall have been obtained or filed, as the case may be;

(d) The execution and delivery of this Agreement and the performance of the transactions contemplated hereby by the Servicer will not violate any provision of any existing law or regulation or any order or decree of any court applicable to the Servicer or any provision of the Certificate of Incorporation or Bylaws of the Servicer, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Servicer is a party or by which the Servicer may be bound; and

(e) No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Servicer threatened, against the Servicer or any of its properties or with respect to this Agreement or the Certificates which in the opinion of the Servicer has a reasonable likelihood of resulting in a material adverse effect on the transactions contemplated by this Agreement.

(f) The Servicer is a member of MERS in good standing, and will comply in all material respects with the rules and procedures of MERS in connection with the servicing of the Home Equity Loans that are registered with MERS.

The representations and warranties set forth in this Section 2.03 shall survive the sale and assignment of the Home Equity Loans to the Trustee, on behalf of the Trust. Upon discovery of a breach of any representations and warranties which materially and adversely affects the interests of the Certificateholders, the Person discovering such breach shall give prompt written notice to the other parties. Within 60 days (or such longer period as permitted by prior written consent of a Responsible Officer of the Trustee) of its discovery or its receipt of notice of such breach, the Servicer shall cure such breach in all material respects.

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Section 2.04. Representations and Warranties of the Depositor Regarding this Agreement and the Home Equity Loans; Repurchases and Substitutions .

(a) The Depositor represents and warrants that as of the Closing Date:

• • (i) The Depositor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power to own its assets and to transact the business in which it is currently engaged. The Depositor is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it require such qualification and in which the failure to so qualify would have a material adverse effect on the business, properties, assets or condition (financial or other) of the Depositor;

    (ii) The Depositor has the power and authority to make, execute, deliver and perform its obligations under this Agreement and to perform its obligations with respect to all of the transactions contemplated under this Agreement, and has taken all necessary corporate action to authorize the execution, delivery and performance of its obligations under this Agreement. When executed and delivered, this Agreement will constitute the legal, valid and binding obligation of the Depositor enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies (whether in a proceeding at law or in equity);

    (iii) The Depositor is not required to obtain the consent of any other Person or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement, except for such consents, licenses, approvals or authorizations, or registrations or declarations, as shall have been obtained or filed, as the case may be;

    (iv) The execution and delivery of this Agreement and the performance of the transactions contemplated hereby by the Depositor will not violate any provision of any existing law or regulation or any order or decree of any court applicable to the Depositor or any provision of the Certificate of Incorporation or Bylaws of the Depositor, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Depositor is a party or by which the Depositor may be bound; and

    (v) No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Depositor threatened, against the Depositor or any of its properties or with respect to this Agreement which in the opinion of the Depositor has a reasonable likelihood of resulting in a material adverse effect on the transactions contemplated by this Agreement.

(b) The Depositor represents and warrants with respect to each Home Equity Loan that as of the Closing Date with respect to the Initial Home Equity Loans and the applicable

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Transfer Date with respect to any Eligible Substitute Home Equity Loans (or to the extent expressly stated herein as of such other time):

• • (i) This Agreement and the Transfer Agreement constitute a valid transfer and assignment to the Trustee, on behalf of the Trust, of all right, title and interest of the Depositor and the Sellers, respectively, in and to the Home Equity Loans, all monies due or to become due with respect thereto, all proceeds thereof, such funds as are from time to time deposited in the Collection Account (excluding any investment earnings thereon) and all other property specified in the definition of "Trust" as being part of the corpus of the Trust conveyed to the Trustee, on behalf of the Trust, by the Depositor;

    (ii) The information set forth in the Home Equity Loan Schedule with respect to such Home Equity Loan is true and correct in all material respects;

    (iii) Immediately prior to the transfer and assignment by the related Seller to the Depositor and the Trustee, on behalf of the Trust, pursuant to the Home Equity Loan Purchase Agreement and the Transfer Agreement, the Home Equity Loan has not been assigned or pledged, and the related Seller has good and marketable title thereto, and the related Seller is the sole owner and holder of such Home Equity Loan free and clear of any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of any nature, and has full right and authority, under all governmental and regulatory bodies having jurisdiction over the ownership of such Home Equity Loan, to transfer and assign the same pursuant to the Home Equity Loan Purchase Agreement and the Transfer Agreement;

    (iv) Immediately prior to the transfer and assignment by the Depositor to the Trustee, on behalf of the Trust, pursuant to this Agreement, the Home Equity Loan has not been assigned or pledged, and the Depositor has good and marketable title thereto, and the Depositor is the sole owner and holder of such Home Equity Loan free and clear of any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of any nature, and has full right and authority, under all governmental and regulatory bodies having jurisdiction over the ownership of such Home Equity Loan, to transfer and assign the same pursuant to this Agreement;

    (v) The related Mortgage is a valid and existing first or second lien (and, if such Mortgage is a second lien and HSBC Finance or any of its affiliates originated the related first lien mortgage loan, such Mortgage was not originated by HSBC Finance or any of its affiliates within 90 days of the related first lien mortgage loan), as set forth on the Home Equity Loan Schedule with respect to such Home Equity Loan, on the property therein described, and the related Mortgaged Property is free and clear of all encumbrances and liens having priority over the first or second lien, as applicable, of such Mortgage except for liens for (a) real estate taxes and special assessments not yet delinquent; (b) any first and, if applicable, second mortgage loan secured by such Mortgaged Property and specified on the Home Equity Loan Schedule; (c) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording that are acceptable to mortgage lending institutions generally; and (d) other matters to which like properties are commonly subject which do not

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• • materially interfere with the benefits of the security intended to be provided by such Mortgage;

    (vi) To the best knowledge of the Depositor, each Mortgage is not subject to any offset, defense or counterclaim of any obligor under the Mortgage;

    (vii) To the best knowledge of the Depositor, there is no delinquent recording or other tax or fee or assessment lien against the related Mortgaged Property;

    (viii) To the best knowledge of the Depositor, there is no proceeding pending or threatened for the total or partial condemnation of the related Mortgaged Property, and such property is free of material damage and is in good repair;

    (ix) There are no mechanics’ or similar liens or claims which have been filed for work, labor or material affecting the related Mortgaged Property which are, or may be, liens prior or equal to the lien of the related Mortgage, except (a) liens which are fully insured against by the title insurance policy referred to in clause (xiii) or (b) liens which do not materially interfere with the collection of the Home Equity Loan upon foreclosure or otherwise;

    (x) As of the Cut-Off Date for the Initial Home Equity Loans (or as of the applicable Transfer Date for any Eligible Substitute Home Equity Loan), no scheduled monthly payment is more than 30 days delinquent (measured on a contractual basis);

    (xi) The related Mortgage File contains each of the documents and instruments specified to be included therein (including, if applicable, an appraisal (which may be an appraisal prepared using a statistical data base));

    (xii) The related Mortgage Note and the related Mortgage at the time they were made complied in all material respects with applicable local, state and federal laws, including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection (including, without limitation, the Home Ownership and Equity Protection Act of 1994 and all other applicable anti-predatory lending laws), equal credit opportunity or disclosure laws applicable to the Home Equity Loan;

    (xiii) A lender’s title insurance policy or binder was issued within 60 days of the date of origination of each Home Equity Loan for home equity loans in excess of $50,000, if secured by a first lien, or $100,000, if secured by a second lien (in excess of $75,000, if secured by a first lien in Oklahoma or Texas, or $100,000, if secured by a first or second lien in Iowa), and each such policy is valid and remains in full force and effect, and a title search or other assurance of title customary in the relevant jurisdiction was obtained with respect to each Home Equity Loan as to which no title insurance policy or binder was issued;

    (xiv) The related Mortgaged Property is not a mobile home or a manufactured housing unit that is not permanently attached to its foundation;

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• • (xv) As of the Cut-Off Date, the Combined Loan-to-Value Ratio for each Initial Home Equity Loan was not in excess of 106%;

    (xvi) No selection procedure reasonably believed by the Depositor to be adverse to the interests of the Certificateholders was utilized in selecting the Home Equity Loan;

    (xvii) The Depositor has not transferred the Home Equity Loans to the Trustee, on behalf of the Trust, with any intent to hinder, delay or defraud any of its creditors;

    (xviii) The related Mortgage contains customary and enforceable provisions that render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security interest therein and each Home Equity Loan is an enforceable obligation of the related Mortgagor;

    (xix) The Depositor has not received a notice of default of any senior mortgage loan with respect to the related Mortgaged Property that has not been cured by a party other than the related Seller;

    (xx) The Initial Home Equity Loan does not have an original term to maturity in excess of 360 months; and the Principal Balance of which, when included in the Pool Balance (in each case for the Initial Home Equity Loans as of the Cut-Off Date), would not cause the weighted average remaining term to maturity of the Initial Home Equity Loans on a contractual basis to be greater than 290 months;

    (xxi) The related Mortgaged Property consists of a single parcel of real property with a one-to-four unit single family residence erected thereon, or an individual condominium unit, planned unit development unit or townhouse;

    (xxii) The Principal Balance of which, when included in the Pool Balance (in each case for the Initial Home Equity Loans as of the Cut-Off Date), would not cause the average Principal Balance of such Home Equity Loans to be greater than $115,000;

    (xxiii) The Principal Balance of which, when included in the Pool Balance (in each case for the Initial Home Equity Loans as of the Cut-Off Date), would not cause the weighted average percentage of the Initial Home Equity Loans secured by first liens to be less than 94%; and would not cause the weighted average percentage of the Initial Home Equity Loans secured by second liens to be greater than 6%;

    (xxiv) The Initial Home Equity Loans were originated in accordance with HSBC Finance’s underwriting guidelines and procedures including full and reduced documentation programs;

    (xxv) No Home Equity Loan is a High Cost Loan or Covered Loan as defined in the Standard & Poor’s LEVELS® Glossary in effect as of the Cut-Off Date and no Home Equity Loan originated on or after October 1, 2002 through March 6, 2003 is governed by the Georgia Lending Act;

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• • (xxvi) No Home Equity Loan originated on or after November 27, 2003 is a High-Cost Home Loan, as defined by New Jersey predatory and abusive lending law effected on November 27, 2003;

    (xxvii) No Home Equity Loan is a "high cost home," "high risk home" or "predatory" loan under any other applicable state, federal or local law (or similarly classified loan using different terminology under a law imposing additional legal liability for residential mortgage loans having high interest rates, points and/or fees);

    (xxviii) With respect to each Mortgage Note, one of the following has been obtained: an appraisal on Form 1004, an appraisal on Form 2055 with interior inspection, an appraisal on Form 2055 with exterior inspection, an appraisal on any other form of uniform residential appraisal report commonly known as a full appraisal or a valuation using an automated valuation model; and

    (xxix) Each Home Equity Loan is a "qualified mortgage" under Section 860G(a)(3) of the Code.

(c) It is understood and agreed that the representations and warranties set forth in this Section 2.04 shall survive the transfer and assignment of the Home Equity Loans to the Trustee, on behalf of the Trust. Upon discovery by the Depositor, the Servicer or the Trustee of a breach of any of the representations and warranties set forth in this Section 2.04, without regard to any limitation set forth in such representation or warranty concerning the knowledge of the Depositor as to the facts stated therein, which materially and adversely affects the interests of the Certificateholders in the related Home Equity Loan, the person discovering such breach shall give prompt written notice to the other parties and each Rating Agency. Within 60 days of its discovery or its receipt of notice of such breach, or, with the prior written consent of a Responsible Officer of the Trustee, such longer period not to exceed 90 days as specified in such consent, the Depositor or, as necessary, the Servicer shall cure such breach in all material respects. With regard to any such breach of the representations and warranties set forth in Section 2.04(b), unless, at the expiration of such 60 day or longer period, such breach has been cured in all material respects or otherwise does not exist or continue to exist, the Depositor or the Servicer shall, not later than the Business Day next preceding the Distribution Date in the month following the end of the Collection Period in which any such cure period expired, either (i) repurchase such Defective Home Equity Loan (including any property acquired in respect thereof and any insurance policy or insurance proceeds with respect thereto) or (ii) if such next preceding Business Day occurs prior to the second anniversary of the Closing Date, remove such Home Equity Loan from the Trust and substitute in its place an Eligible Substitute Home Equity Loan or Loans, in the same manner and subject to the same conditions as set forth in Section 2.02. Upon making any such repurchase or substitution and providing the Trustee with a written request and appropriate forms therefor, the Depositor or the Servicer, as applicable, shall be entitled to receive an instrument of assignment or transfer from the Trustee to the same extent as set forth in Section 2.02 with respect to the repurchase or replacement of Home Equity Loans under that Section. Subject to Section 2.04(d), it is understood and agreed that the obligation of the Depositor or the Servicer to purchase or substitute for any such Defective Home Equity Loan (or property acquired in respect thereof) shall constitute the sole and exclusive remedy against the Depositor or the Servicer respecting such breach of the foregoing representations or

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warranties available to Certificateholders or the Trustee against the Depositor or the Servicer, and such obligation on the part of the Servicer shall survive any resignation or termination of the Servicer hereunder.

(d) The Depositor and the Servicer, jointly and not severally, agree to indemnify and hold harmless the Trustee and the Trust against any and all out-of-pocket financial losses, claims, expenses, damages or liabilities to which the Trust may become subject, insofar as such out-of-pocket financial losses, claims, expenses, damages or liabilities (or actions in respect thereof) arise out of or are based upon any representation or warranty made by the Depositor in this Section 2.04 on which the Trustee has relied, being, or alleged to be, untrue or incorrect in any material respect. This indemnity will be in addition to any liability which the Depositor or the Servicer may otherwise have.

(e) Promptly after receipt by the Trustee of notice of the commencement of any action or proceeding in any way relating to or arising from this Agreement, the Trustee will notify the Depositor and the Servicer of the commencement thereof, but the omission so to notify the party from whom indemnification is sought (the " Indemnifying Party ") will not relieve the Indemnifying Party from any liability which it may have to the party seeking indemnification (the " Indemnified Party ") except to the extent that the Indemnifying Party is materially adversely affected by the lack of notice. In case any such action is brought against the Indemnified Party, and it notifies the Indemnifying Party of the commencement thereof, the Indemnifying Party will be entitled to participate in the defense (with the consent of the Indemnified Party which shall not be unreasonably withheld) of such action at the Indemnifying Party’s expense.

Section 2.05. Execution and Authentication of Certificates . The Trustee on behalf of the Trust shall execute, and the Administrator shall authenticate and deliver on the Closing Date to or upon the order of the Depositor, in exchange for the Home Equity Loans, concurrently with the assignment and conveyance to the Trustee of the Home Equity Loans, the Class A Certificates and Class M Certificates in authorized denominations and the Residual Certificate, together evidencing the ownership of the entire Trust.

Section 2.06. Delivery of Opinion of Counsel in Connection with Substitutions .

(a) Notwithstanding any contrary provision of this Agreement, no substitution pursuant to Section 2.02 or Section 2.04 shall be made more than 90 days after the Closing Date unless the Depositor or the Servicer, as the case may be, delivers to the Trustee an Opinion of Counsel, which Opinion of Counsel shall not be at the expense of the Trustee or the Trust Fund, addressed to the Trustee, to the effect that such substitution will not (i) result in the imposition of the tax on "prohibited transactions" on the Trust Fund or contributions after the Startup Date, as defined in Sections 860F(a)(2) and 860G(d) of the Code, respectively, or (ii) cause any REMIC created under this Agreement to fail to qualify as a REMIC at any time that any Certificates are outstanding.

(b) Upon discovery by the Depositor, the Servicer, or the Trustee that any Home Equity Loan does not constitute a "qualified mortgage" within the meaning of Section 860G(a)(3) of the Code, the party discovering such fact shall promptly (and in any event within five (5) Business Days of discovery) give written notice thereof to the other parties. In

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connection therewith, the Trustee shall require the Depositor or, as necessary, the Servicer, at its option, to either (i) substitute, if the conditions in Section 2.04(c) with respect to substitutions are satisfied, an Eligible Substitute Home Equity Loan for the affected Home Equity Loan, or (ii) repurchase the affected Home Equity Loan within 90 days of such discovery in the same manner as it would a Home Equity Loan for a breach of representation or warranty made pursuant to Section 2.04. Upon receipt from the Depositor or the Servicer, as the case may be, of a written request and appropriate forms therefor, the Trustee shall reconvey to the Depositor or the Servicer, as the case may be, the Home Equity Loan to be released pursuant to this Section in the same manner, and on the same terms and conditions, as it would a Home Equity Loan repurchased for breach of a representation or warranty contained in Section 2.04.

Section 2.07. REMIC Matters . The Preliminary Statement sets forth the designations and "latest possible maturity date" for federal income tax purposes of all interests created hereby. The "Startup Day" for purposes of the REMIC Provisions shall be the Closing Date. The REMIC’s fiscal year shall be the calendar year.

ARTICLE III

ADMINISTRATION AND SERVICING OF HOME EQUITY LOANS

Section 3.01. The Servicer .

(a) The Servicer shall, or shall cause the Subservicers to, service and administer the Home Equity Loans in a manner consistent with the terms of this Agreement and the Settlement Agreement (to the extent that no term or provision of the Settlement Agreement (excluding those terms identified in the Specified Filing) shall adversely affect in any material respect the interests of the Certificateholders) and with general industry practice and shall have full power and authority, acting alone or through the Subservicers, to do any and all things in connection with such servicing and administration which it may deem necessary or desirable, it being understood, however, that the Servicer shall at all times remain responsible to the Trustee and the Certificateholders for the performance of its duties and obligations hereunder in accordance with the terms hereof. Any amounts received by the related Subservicer in respect of a Home Equity Loan shall be deemed to have been received by the Servicer whether or not actually received by it. The Servicer shall represent and protect the interests of the Trust Fund in the same manner as it protects its own interests in mortgage loans in its own portfolio in any claim, proceeding or litigation regarding a Mortgage Loan, and shall not make or permit any modification, waiver or amendment of any Mortgage Loan which would cause any REMIC created under this Agreement to fail to qualify as a REMIC or result in the imposition of any tax under section 860F(a) or section 860G(d) of the Code.

Without limiting the generality of the foregoing, the Servicer shall continue, and is hereby authorized and empowered by the Trustee on behalf of the Trust, (i) in its own name or in the name of any Subservicer, when the Servicer or the Subservicer, as the case may be, believes it appropriate in its best judgment to register any Home Equity Loan on the MERS® System, or cause the removal from the registration of any Home Equity Loan on the MERS® System, to

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execute and deliver, on behalf of the Trust, any and all instruments of assignment and other comparable instruments with respect to such assignment or re-recording of a Mortgage in the name of MERS, solely as nominee for the Trust and its successors and assigns, and (ii) to execute and deliver, on behalf of itself, the Certificateholders and the Trust or any of them, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge and all other comparable instruments, with respect to the Home Equity Loans and with respect to the Mortgaged Properties. Upon the written request of the Servicer, the Depositor and the Trustee shall furnish the Servicer with any powers of attorney and other documents necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder. The Servicer in such capacity may also consent to the placing of a proposed lien senior to that of the Mortgage on the related Mortgaged Property, provided that such proposed lien is not secured by a note providing for negative amortization and:

• • (x) (i) the Mortgage relating to the Home Equity Loan was in a first lien position as of the Cut-Off Date and was in a first lien position immediately prior to the placement of the proposed senior lien, and (ii) the ratio of (a) the sum of the Principal Balance of the Home Equity Loan and the principal balance of the mortgage loan to be secured by the proposed senior lien to (b) the Appraised Value of the Mortgaged Property at the time the Home Equity Loan was originated is not greater than (1) with respect to Home Equity Loans with an original CLTV of 85% or less, 85%, (2) with respect to Home Equity Loans with an original CLTV in excess of 85% and not greater than 95%, 95% and (3) with respect to Home Equity Loans with an original CLTV in excess of 95% and not greater than 110%, 110%;

    (y) (i) the Mortgage relating to the Home Equity Loan was in a first or second lien position at the time the related Home Equity Loan was conveyed to the Trustee and, immediately following the placement of such proposed senior lien, such Mortgage will be in a second or, if such Mortgage was in a second lien position at the time the related Home Equity Loan was conveyed to the Trustee, a third lien position and (ii) the principal balance of the mortgage loan to be secured by the proposed senior lien and the rate at which interest accrues thereon are no greater than those of the related Home Equity Loan as of the date it was first conveyed to the Trustee; or

    (z) the Mortgage relating to the Home Equity Loan was in a second lien position as of the Cut-Off Date and the proposed senior lien secures a mortgage loan that refinances an existing first mortgage loan and the outstanding principal amount of such mortgage loan immediately following such refinancing and the rate at which interest accrues thereon are not greater than that of such existing first mortgage loan at the date the mortgage loan was originated.

(b) If (i) foreclosure proceedings are commenced with respect to any Home Equity Loan with respect to which the Servicer has consented to the placing of a subsequent senior lien pursuant to clause (x) in Section 3.01(a), or (ii) any loss is suffered by the Trust in respect of any Home Equity Loan as a result of (x) a failure to file on or within ten days following the effective date of this Agreement the UCC-l financing statements referred to in Section 2.01 or (y) a failure to publish on or prior to the Closing Date such notices reflecting the sale of the Home Equity Loans as are described in Section 3440.1(h) of the California Civil Code, then the Servicer shall

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repurchase or substitute for any adversely affected Home Equity Loan on the Business Day preceding the next Distribution Date following the end of the Collection Period during which such foreclosure proceedings were commenced or such losses were suffered. Such repurchase or substitution shall be accomplished in the same manner and subject to the same conditions as set forth in Section 2.02. Upon making any such repurchase or substitution and providing the Trustee with a written request and appropriate forms therefor, the Servicer shall be entitled to receive an instrument of assignment or transfer from the Trustee to the same extent as set forth in Section 2.02.

(c) Upon the request of a Mortgagor or at the Servicer’s own initiative, the Servicer (or the related Subservicer on behalf of the Servicer) may waive, modify or vary any term of any Home Equity Loan or consent to the postponement of strict compliance with any such term or in any manner grant indulgence to any Mortgagor if:

(i) in the Servicer’s (or such Subservicer’s) good faith determination such waiver, modification, postponement or indulgence will enhance recovery with respect to such Home Equity Loan; and

(ii) the Mortgagor is in default with respect to the Home Equity Loan, or such default is, in the judgment of the Servicer (or such Subservicer) imminent.

(d) The relationship of the Servicer (and of any successor to the Servicer as servicer under this Agreement) to the Trust under this Agreement is intended by the parties to be that of an independent contractor and not that of a joint venturer, partner or agent.

(e) In the event that the rights, duties and obligations of the Servicer are terminated hereunder, any successor to the Servicer in its sole discretion may, to the extent permitted by applicable law, terminate the existing subservicer arrangements with any Subservicer or assume the terminated Servicer’s rights under such subservicing arrangements, provided such termination or assumption will not violate the terms of such arrangements.

(f) Any expenses incurred in connection with the actions described in Section 3.01(a)(i) shall be borne by the Servicer in accordance with Section 3.09, with no right of reimbursement; provided that if, as a result of MERS discontinuing or becoming unable to continue operations in connection with the MERS System, it becomes necessary to remove any Home Equity Loan from registration on the MERS System and to arrange for the assignment of the related Mortgages to the Trustee, on behalf of the Trust, then any related expenses shall be reimbursable to the Servicer.

Section 3.02. Collection of Certain Home Equity Loan Payments .

(a) The Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Home Equity Loans, and shall, to the extent such procedures shall be consistent with this Agreement, follow such collection procedures as it follows with respect to home equity loans in its servicing portfolio comparable to the Home Equity Loans. Consistent with, and without limiting the generality of, the foregoing, the Servicer may in its discretion (i) waive any late payment charge or any assumption fees or other fees that may be collected in the ordinary course of servicing the Home Equity Loans, (ii) arrange with a

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Mortgagor a schedule for the payment of delinquent amounts, so long as such arrangement is consistent with the Servicer’s policies with respect to the home equity loans it owns or services, (iii) sell the Home Equity Loan at its fair market value to a third party for collection activity or (iv) reset the delinquency status of a contractually delinquent Home Equity Loan to current in accordance with the Servicer’s customary account management policies and practices.

(b) The Servicer shall establish and maintain with the Administrator a separate trust account (the "Collection Account") titled "HSBC Bank USA, National Association, as Administrator, on behalf of U.S. Bank National Association, as Trustee, in trust for the registered holders of HSBC Home Equity Loan Trust (USA) 2006-4, Closed-End Home Equity Loan Asset-Backed Certificates, Series 2006-4". In the event that a successor Administrator is appointed as provided in Section 8.19, a new Collection Account shall be promptly established at and maintained by such successor Administrator, and the title of the new Collection Account shall be "[Successor Administrator], as Administrator, on behalf of the Trustee, in trust for the registered holders of HSBC Home Equity Loan Trust (USA) 2006-4, Closed-End Home Equity Loan Asset-Backed Certificates, Series 2006-4", and any amounts in the old Collection Account shall be transferred to the new Collection Account. The Collection Account shall be an Eligible Account. No later than 12:00 noon Chicago time on each Deposit Date (or, if a Deposit Event has occurred and the Servicer has not provided credit enhancement acceptable to each of the Rating Agencies, within two (2) Business Days following receipt thereof by the Subservicers), the Servicer shall deposit or cause to be deposited into the Collection Account the following payments and collections received or made by it with respect to the Home Equity Loans (without duplication):

(i) Net Interest Collections on the Home Equity Loans;

(ii) Principal Collections on the Home Equity Loans; and

• • (iii) amounts required to be paid by the Servicer in connection with the termination of the Trust pursuant to Section 9.01;

provided , however , that, with respect to any Distribution Date, so long as a Deposit Event has not occurred, the Servicer shall, if so permitted in writing by the Class R Certificateholder, only be required to deposit payments and collections on the Home Equity Loans into the Collection Account up to the aggregate amount equal to the sum of all amounts payable on that Distribution Date pursuant to Section 4.01(a)(i)-(vii) hereof, and if at any time prior to that Distribution Date the amount of payments and collections on the Home Equity Loans deposited into the Collection Account with respect to the related Collection Period exceeds the amount required to be deposited into the Collection Account in order to make such payments on such Distribution Date, the Servicer shall be permitted to direct the Administrator in writing to withdraw any excess and pay the excess to the Servicer.

The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, fees (including annual fees) or late charge penalties payable by Mortgagors, prepayment penalties, or amounts received by the Servicer or a Subservicer for the accounts of Mortgagors for application towards the

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payment of taxes, insurance premiums, assessments and similar items for the account of the related Subservicer, if any, need not be deposited in the Collection Account.

(c) The Administrator shall hold amounts deposited in the Collection Account on behalf of the Trustee for the benefit of the Certificateholders. In addition, the Servicer shall notify the Administrator in writing on each Determination Date of the amount of payments and collections to be deposited in the Collection Account with respect to the related Distribution Date.

(d) The Servicer may cause the institution maintaining the Collection Account to invest any funds in the Collection Account in Permitted Investments (including obligations of the Servicer or of any of its Affiliates, if such obligations otherwise qualify as Permitted Investments), which shall mature or otherwise be available not later than the Business Day next preceding the Distribution Date or on the Distribution Date next following the date of such investment as long as such action does not result in a withdrawal or downgrading of the then current ratings on the Offered Certificates by the Rating Agencies (except that any investment in an obligation of the institution with which the Collection Account is maintained may mature on or before 12:00 noon, Chicago time, on such Distribution Date) and shall not be sold or disposed of prior to its maturity. In the event the Administrator is at any time maintaining the Collection Account, any request by the Servicer to invest funds on deposit in the Collection Account shall be in writing, shall be delivered to the Administrator at or before 10:30 A.M., Chicago time, if such investment is to be made on such day, and shall certify that the requested investment is a Permitted Investment that matures at or prior to the time required hereby. In the absence of such investment instructions, the amounts on deposit in the Collection Account shall remain uninvested. Any such investment shall be registered in the name of or controlled by the Administrator on behalf of the Trustee or in the name of its nominee and to the extent such investments are certificated they shall be maintained in the possession or control of the Administrator on behalf of the Trustee in the state of the Administrator’s Corporate Trust Office. Except as provided above, all income and gain realized from any such investment shall be for the benefit of the Servicer and shall be subject to its withdrawal or order from time to time. The amount of any losses incurred in respect of the principal amount of any such investments shall be deposited in the Collection Account by the Servicer out of its own funds immediately as realized.

(e) The Administrator is hereby authorized to execute purchases and sales of Permitted Investments as directed by the Servicer through the facilities of its own trading or capital markets operations. The Administrator shall send to the Servicer statements reflecting the monthly activity for each such purchase and sale made for the preceding month. Although the Servicer recognizes that it may obtain a broker confirmation or written monthly statement containing comparable information at no additional cost, the Servicer hereby agrees that confirmations of investments are not required to be issued by the Administrator for each month in which a monthly statement is rendered. No statement need be rendered pursuant to the provision of this subsection if no activity occurred in the account for such month.

Section 3.03. Withdrawals from the Collection Account .

(a) The Administrator shall withdraw or cause to be withdrawn funds from the Collection Account for the following purposes:

• • (i) On each Distribution Date, to make distributions and payments to Certificateholders pursuant to Section 4.01;

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• • (ii) From time to time, to make investments in Permitted Investments and to pay to the Servicer all income and gain earned in respect of Permitted Investments or on funds deposited in the Collection Account;

    (iii) To reimburse the Depositor or the Servicer to the extent permitted by Section 6.03;

    (iv) To withdraw any funds deposited in the Collection Account that were not required to be deposited therein or were deposited therein in error and to pay such funds to the appropriate Person;

    (v) To pay to the party legally entitled by a final order of a court of competent jurisdiction in an insolvency proceeding an amount equal to any preference claim made with respect to amounts paid with respect to the Home Equity Loans; provided that, if any such amount is later determined not to be a preference by such court of competent jurisdiction and is returned to the Servicer or any Subservicer, such amount shall be redeposited into the Collection Account by the Servicer; and

    (vi) to clear and terminate the Collection Account upon the termination of this Agreement and to pay any amounts remaining therein to the Class R Certificateholder.

(b) If the Servicer deposits in the Collection Account any amount not required to be deposited therein or credited thereto or any amount in respect of payments by Mortgagors made by checks subsequently returned for insufficient funds or other reason for non-payment, it may at any time withdraw such amount from the Collection Account pursuant to Section 3.03(a)(iv), and any such amounts shall not be included in Interest Collections and Principal Collections, any provision herein to the contrary notwithstanding. Any withdrawal or debit permitted by Section 3.03(a) shall be accomplished by delivering an Officer’s Certificate of the Servicer to the Administrator which describes the purpose of such withdrawal (including, without limitation, that any such amount was deposited in the Collection Account in error or, in the case of returned checks, that such amounts were properly debited, respectively). Upon receipt of any such Officer’s Certificate, the Administrator shall withdraw such amount for the account of the Servicer. All funds deposited by the Servicer in the Collection Account shall be held by the Administrator on behalf of the Trustee in trust for the Certificateholders, until disbursed in accordance with Section 4.01 or withdrawn or debited in accordance with this Section.

Section 3.04. Maintenance of Hazard Insurance; Property Protection Expenses . Each Home Equity Loan requires that the borrower thereunder maintain hazard insurance naming the Servicer or the related Subservicer as loss payee providing extended coverage in an amount which is at least equal to the lesser of (i) 100% of the insurable value of the Mortgaged Property or (ii) the combined principal balance owing on such Home Equity Loan and any mortgage loan senior to such Home Equity Loan from time to time. The Servicer represents and warrants that it or the applicable Seller verified the existence of such hazard insurance at the origination of the Home Equity Loan. The Servicer may cause to be maintained for each Home

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Equity Loan on which such insurance has lapsed hazard insurance with terms and limits similar to those described above. Any Insurance Proceeds received by the Servicer shall be deposited in the Collection Account on the Deposit Date in accordance with Section 3.02(b), subject to withdrawal pursuant to Section 3.03. Any cost incurred by the Servicer in maintaining any such insurance shall not, for the purposes of this Agreement, be added to the Principal Balance of the Home Equity Loan even if the terms of such Home Equity Loan so permit. The Servicer shall also maintain on property acquired upon foreclosure, or by grant of deed in lieu of foreclosure, hazard insurance with extended coverage in an amount which is at least equal to the lesser of (i) 100% of the insurable value of the Mortgaged Property or (ii) the combined unpaid principal balance owing on such Home Equity Loan and any mortgage loans senior to such Home Equity Loans at the time of such foreclosure or grant of deed in lieu of foreclosure plus accrued interest thereon. Amounts collected by the Servicer under any such policies shall be deposited in the Collection Account to the extent called for by Section 3.02. In cases in which any Mortgaged Property is located in a federally designated flood area, the hazard insurance to be maintained for the related Home Equity Loan shall include flood insurance. All such flood insurance shall be in such amounts as are required under applicable guidelines of Fannie Mae. The Servicer shall be under no obligation to require that any Mortgagor maintain earthquake or other additional insurance and shall be under no obligation itself to maintain any such additional insurance on property acquired in respect of a Home Equity Loan, other than pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance. With respect to Mortgaged Properties acquired by the Servicer as provided herein, the Servicer may satisfy its obligation set forth in the sixth sentence of this Section 3.04 by self insuring Mortgaged Properties for which the aggregate unpaid principal balance of the related Home Equity Loans plus the outstanding balance of any mortgage loans senior to such Home Equity Loans at the time title was acquired, plus accrued interest (the " Combined Exposure "), was less than $250,000 (or such other amount as the Servicer may in good faith determine from time to time) and by causing hazard policies to be maintained with respect to Mortgaged Properties for which the Combined Exposure equals or exceeds the self insurance threshold established from time to time by the Servicer by maintaining a blanket policy consistent with prudent industry standards insuring against hazard losses on the Mortgaged Properties. Such policy may contain a deductible clause, in which case the Servicer shall, in the event that there shall not have been maintained on the related Mortgaged Property a policy complying with the sixth sentence of this Section 3.04, and there shall have been a loss which would have been covered by such policy, deposit in the Collection Account the amount not otherwise payable under the blanket policy because of such deductible clause.

Section 3.05. Assumption and Modification Agreements . In any case in which a Mortgaged Property has been or is about to be conveyed by the Mortgagor, the Servicer shall exercise or refrain from exercising its right to accelerate the maturity of such Home Equity Loan consistent with the then-current practice of the Servicer and without regard to the inclusion of such Home Equity Loan in the Trust and not in the Servicer’s portfolio. If it elects not to enforce its right to accelerate or if it is prevented from doing so by applicable law, the Servicer (so long as such action conforms with the Servicer’s underwriting standards at the time for new originations) is authorized to take or enter into an assumption and modification agreement from or with the Person to whom such Mortgaged Property has been or is about to be conveyed, pursuant to which such Person becomes liable under the Mortgage Note and, to the extent permitted by applicable law, the Mortgagor remains liable thereon. The Servicer shall notify the

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Trustee that any assumption and modification agreement has been completed by delivering to the Trustee an Officer’s Certificate certifying that such agreement is in compliance with this Section and by forwarding to the applicable Subservicer on behalf of the Depositor or the Trustee, as applicable, the original copy of such assumption and modification agreement. Any such assumption and modification agreement shall, for all purposes, be considered a part of the related Mortgage File to the same extent as all other documents and instruments constituting a part thereof. No change in the terms of the related Mortgage Note may be made by the Servicer in connection with any such assumption to the extent that such change would not be permitted to be made in respect of the original Mortgage Note pursuant to Section 3.01 unless the conditions specified in Section 3.01 are satisfied. Any fee collected by the Servicer for entering into any such agreement will be retained by the Servicer as additional servicing compensation.

Section 3.06. Realization Upon Defaulted Home Equity Loans .

(a) The Servicer (or the Servicer together with the related Seller as called for by the Home Equity Loan Purchase Agreement) shall foreclose upon or otherwise comparably convert to ownership Mortgaged Properties securing such of the Home Equity Loans as come into and continue in default when, in the opinion of the Servicer based upon the practices and procedures referred to in the following sentence, no satisfactory arrangements can be made for collection of delinquent payments pursuant to Section 3.02; provided that i