MORTGAGE LOAN FLOW PURCHASE, SALE, AND SERVICING AGREEMENT

Exhibit 10.8

EXECUTION COPY

MORTGAGE LOAN FLOW PURCHASE, SALE, AND SERVICING AGREEMENT
Dated and effective as of January 1, 2006

RWT HOLDINGS, INC.
                                          (Purchaser)

GREENPOINT MORTGAGE FUNDING, INC.
                                    (Seller)

and

REDWOOD TRUST, INC.
                                         (Guarantor)

Adjustable Rate Conventional Mortgage Loans

     This is a Mortgage Loan Flow Purchase, Sale and Servicing Agreement, dated and effective as of January 1, 2006, and is executed between RWT Holdings, Inc., a Delaware corporation, as purchaser (hereinafter, the “Purchaser”), GreenPoint Mortgage Funding, Inc., a New York corporation, as seller and servicer (the “Seller”), and Redwood Trust, Inc., a Maryland corporation (the “Guarantor”).

     The Purchaser and the Seller desire to establish a flow program whereby the Seller will make Mortgage Loans which meet the applicable provisions of this Agreement, and the Purchaser will, on a regular basis, purchase such Mortgage Loans from the Seller, as applicable, provided the parties agree on the price, date and other conditions or considerations as set forth in this Agreement.

     All of the Mortgage Loans will be secured by first mortgages or deeds of trust on residential dwellings situated within the state(s) indicated on the Mortgage Loan Schedule.

     The Purchaser and Seller wish to prescribe the manner of purchase by the Purchaser and the management, servicing and control of the Mortgage Loans.

     In consideration of the premises and the mutual agreements hereinafter set forth, the Purchaser and the Seller agree as follows:

ARTICLE I

DEFINITIONS

     Whenever used herein, the following words and phrases, unless the context otherwise requires, shall have the following meanings:

     “Agreement”: This Mortgage Loan Flow Purchase, Sale and Servicing Agreement, including all exhibits hereto, and all amendments hereof and supplements hereto.

     “ALTA”: The American Land Title Association.

     “Annual Mortgage Interest Rate Cap”: The maximum amount, as provided in the Mortgage Note, that a Mortgage Interest Rate can change on any Interest Rate Change Date.

     “Appraised Value”: The amount set forth in an appraisal in connection with the origination of each Mortgage Loan as the value of the Mortgaged Property.

     “Assessment of Compliance” The statement as defined in Section 6.05 hereto.

     “Assignment of Mortgage”: An assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form (but not recorded) that, when properly completed and recorded, is sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect of record the sale of the Mortgage Loan to the Purchaser.

     “Assumed Principal Balance”: As to each Mortgage Loan as of any date of determination, (i) the principal balance of the Mortgage Loan outstanding as of the Cut-off Date after application of payments due on or before the Cut-off Date, whether or not received, minus ((ii) all amounts previously distributed to the Purchaser with respect to the Mortgage Loan pursuant to Section 5.01 and representing (a) payments or other recoveries of principal or (b) advances of scheduled principal payments made pursuant to Section 5.03.

     “Attestation Report”: The report as defined in Section 6.05 hereto.

     “Back-Up SOX Certificate”: The certification as defined in Section 12.02 hereto.

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

     “Compliance Statement” The statement as defined in Section 6.04 hereto.

     “Condemnation Proceeds”: All awards or settlements in respect of a taking of an entire Mortgaged Property by exercise of the power of eminent domain or condemnation.

     “Custodial Account”: The separate account or accounts created and maintained pursuant to Section 4.04.

     “Custodial Agreement”: The agreement for the retention of each Mortgage Note, Mortgage, Assignment of Mortgage and other documents, which agreement is in the form annexed hereto as Exhibit D.

     “Custodian”: The custodian under the Custodial Agreement, or its successor.

     “Current Index”: The index, as provided in each Mortgage Note, used to adjust the Mortgage Interest Rate on each Interest Change Date.

     “Curtailment”: Any Principal Prepayment made by a Mortgagor that is not a Full Principal Prepayment.

     “Customary Servicing Procedures”: Procedures (including collection procedures) using the same care that the Seller customarily employs and exercises in servicing and administering mortgage loans for its own account and those of third-party investors giving due consideration to accepted mortgage servicing practices.

     “Cut-off Date”: The first day of the month in which the respective Funding Date occurs.

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

     “Depositor”: With respect to any Pass-Through Transfer, the “depositor, if any, specified by the Purchaser and identified in related transaction documents.

     “Determination Date”: The 16th day (or if such 16th day is not a Business Day, the Business Day immediately preceding such 16th day) of the month of the related Remittance Date.

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

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

     “Eligible Depository Institution”: An account or accounts maintained with a depository institution which is acceptable to Fannie Mae or Freddie Mac for establishment of custodial accounts.

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

     (i) obligations of or guaranteed as to principal and interest by the (a) United States, the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the Federal National Mortgage Association (“Fannie Mae”) or any agency or instrumentality of the United States when such obligations are backed by the full faith and credit of the United States; provided, that such obligations of Freddie Mac or Fannie Mae shall be limited to senior debt obligations and mortgage participation certificates except that investments in mortgage-backed or mortgage participation securities with yields evidencing extreme sensitivity to the rate of principal payments on the underlying mortgages shall not constitute Eligible Investments hereunder;

     (ii) repurchase agreements (which must be fully collateralized) on obligations specified in clause (i) maturing not more than one month from the date of acquisition thereof;

     (iii) federal funds, certificates of deposit, demand deposits, time deposits and bankers’ acceptances (which 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 or a remaining maturity of more than 30 days) denominated in United States dollars of any U.S. depository institution or trust company incorporated under the laws of the United States or any state thereof or of any domestic branch of a foreign depository institution or trust company;

     (iv) commercial paper (having original maturities of not more than 365 days) of any corporation incorporated under the laws of the United States or any state thereof which are rated at least A-1 or P-1 by S & P Corporation (“S & P”) and Moody’s Investor Services, Inc. (“Moody’s”), respectively;

     (v) obligations of major foreign commercial banks, limited to Eurodollar deposits, time deposits, certificate of deposits, bankers acceptances, Yankee Bankers acceptances and Yankee certificate of deposits;

     (vi) obligations of major foreign corporations limited to commercial paper, auction rate preferred stock, medium term notes, master notes and loan participations;

     (vii) money market funds comprised of securities described in the aforementioned clauses (i-iv) and having a stated policy of maintaining a set net asset value per share (a “Money Market Fund”). All Money Market Funds will conform to Rule 2a-7 of the Investment Seller Act of 1940;

provided, however, that no instrument shall be an Eligible Investment if it represents, either (1) the right to receive only interest payments with respect to the underlying debt instrument or (2) the right to receive both principal and interest payments derived from obligations underlying such instrument and the principal and interest with respect to such instrument provide a yield to maturity greater than 120% of the yield to maturity at par of such underlying obligations.

     “Escrow Account”: The separate account or accounts created and maintained pursuant to Section 4.06.

     “Escrow Payments”: The amounts constituting taxes, assessments, mortgage insurance premiums, fire and hazard insurance premiums and other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to any Mortgage Loan.

     “Event of Default”: Any one of the conditions or circumstances enumerated in Section 9.01.

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

     “Fannie Mae”: The Federal National Mortgage Association or any successor organization.

     “Fidelity Bond”: A fidelity bond required to be maintained by the Seller pursuant to Section 4.13.

     “FDIC”: The Federal Deposit Insurance Corporation or any successor organization.

     “Freddie Mac”: The Federal Home Loan Mortgage Corporation or any successor organization.

     “Full Principal Prepayment”: A Principal Prepayment made by a Mortgagor of the entire principal balance of a Mortgage Loan.

     “Funding Date”: Each date that the Purchaser purchases Mortgage Loans from the Seller hereunder.

     “Guarantor”: Redwood Trust, Inc., a Maryland corporation.

     “HUD”: The Department of Housing and Urban Development or any successor organization.

     “Insurance Proceeds”: Proceeds of any Primary Insurance Policy, title policy, hazard policy or other insurance policy covering a Mortgage Loan, if any, to the extent such proceeds are not to be applied to the restoration of the related Mortgaged Property or released to the Mortgagor in accordance with Customary Servicing Procedures or in accordance with the terms of the related Mortgage Loan or applicable law.

     “Interest Rate Change Date”: The date on which the Mortgage Interest Rate is subject to change as provided in the related Mortgage Note.

     “Lifetime Mortgage Interest Rate Cap”: The maximum amount, as provided in the Mortgage Note, that a Mortgage Interest Rate can change over the life of the Mortgage Loan.

     “Liquidation Proceeds”: Cash, other than Insurance Proceeds, Condemnation Proceeds or REO Disposition Proceeds, received in connection with the liquidation of a defaulted Mortgage Loan, whether through the sale or assignment of the Mortgage Loan, trustee’s sale, foreclosure sale or otherwise.

     “Loan-to-Value Ratio” or “LTV”: With respect to any Mortgage Loan, the original principal balance of such Mortgage Loan divided by the Appraised Value of the related Mortgaged Property.

     “Margin”: The amount that is added to the Current Index value to determine the Mortgage Interest Rate on each Interest Rate Change Date.

     “Master Servicer”: With respect to a Pass-Through Transfer, the “master servicer”, if any, identified by the Purchaser and identified in related transaction documents.

     “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.

     “Monthly Payment”: The scheduled monthly payment of principal and interest on a Mortgage Loan which is payable by a Mortgagor under the related Mortgage Note.

     “Mortgage”: The mortgage, deed of trust or other instrument creating a first lien on or first priority ownership interest in an estate in fee simple, or a leasehold estate, in real property securing a Mortgage Note, including any rider incorporated by reference therein.

     “Mortgage File”: The documents, records and other items referred to in Exhibit A annexed hereto pertaining to a particular Mortgage Loan.

     “Mortgage Interest Rate”: The annual rate at which interest accrues at the time of determination on any Mortgage Loan in accordance with the provisions of the related Mortgage Note.

     “Mortgage Loan”: An individual mortgage loan that is the subject of this Agreement, each mortgage loan originally sold and subject to this Agreement being identified on the Mortgage Loan Schedule.

     “Mortgage Loan Remittance Rate”: As to each Mortgage Loan, the annual rate of interest required to be remitted hereunder to the Purchaser, which shall be equal to the related Mortgage Interest Rate minus the related Servicing Fee Rate.

     “Mortgage Loan Schedule”: The schedule of Mortgage attached hereto as Exhibit E, such schedule setting forth the following information as to each Mortgage Loan, as applicable: (a) the Mortgage Loan identifying number, (b) state and zip code of the Mortgaged Property, (c) the Mortgage Interest Rate, (d) the original principal balance of the Mortgage Loan, (e) principal balance of the Mortgage Loan as of the Cut-off Date after deduction of payments of principal due on or before the Cut-off Date, whether or not collected, (f) the first payment date, (g) a code indicating whether the Mortgaged Property is occupied by the owner (and, if so, whether it is occupied as a primary, secondary or vacation residence), and (h) the purpose of the Mortgage Loan.

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

     “Mortgaged Property”: The real property and improvements subject to a Mortgage, constituting security for repayment of the debt evidenced by the related Mortgage Note.

     “Mortgagor”: The obligor on a Mortgage Note.

     “Nonrecoverable Advance”: Any advance previously made by the Seller pursuant to Section 5.03 or Section 5.04 or any expenses incurred pursuant to Section 4.08 which, in the good faith judgement of the Seller, may not be ultimately recoverable by the Seller from Liquidation Proceeds. The determination by the Seller that is has made a Nonrecoverable Advance, shall be evidenced by an Officer’s Certificate of the Seller delivered to the Purchaser and detailing the reasons for such determination.

     “Officers’ Certificate”: A certificate signed by the President, a Senior Vice President or a Vice President and by the Treasurer or the Secretary or one of the Assistant Secretaries of the Seller, or by other duly authorized officers or agents of the Seller, and delivered to the Purchaser as required by this Agreement.

     “Opinion of Counsel”: A written opinion of counsel, who may be salaried counsel employed by the Seller.

     “P&I Advance”: As to any Mortgage Loan, any advance made by the Seller pursuant to Section 5.03.

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

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

     “Prepayment Interest Shortfall”: As to any Remittance Date and any Mortgage Loan, (a) if such Mortgage Loan was the subject of a Full Principal Prepayment during the related Principal Prepayment Period, the excess of one month’s interest (adjusted to the Mortgage Loan Remittance Rate) on the Assumed Principal Balance of such Mortgage Loan outstanding immediately prior to such prepayment, over the amount of interest (adjusted to the Mortgage Loan Remittance Rate) actually paid by the Mortgagor in respect of such Principal Prepayment Period, and (b) if such Mortgage Loan was the subject of a Curtailment during the related Principal Prepayment Period, an amount equal to one month’s interest at the Mortgage Loan Remittance Rate on the amount of such Curtailment.

     “Primary Insurance Policy”: With respect to each Mortgage Loan, the primary policy of mortgage insurance in effect, or any replacement policy therefor obtained by the Seller pursuant to Section 4.08.

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

     “Principal Prepayment Period”: As to any Remittance Date, the calendar month preceding the calendar month in which such Remittance Date occurs.

     “Purchase Price”: As to each Mortgage Loan to be sold hereunder, the price set forth in the Mortgage Loan Schedule and the related Purchase Price and Terms Letter.

     “Purchase Price and Terms Letter”: With respect to any pool of Mortgage Loans purchased and sold on any Funding Date, the letter agreement between the Purchaser and the Seller (including any exhibits, schedules and attachments thereto), setting forth the terms and conditions of such transaction and describing the Mortgage Loans to be purchased by the Purchaser on such Funding Date. A Purchase Price and Terms Letter may relate to more than one pool of Mortgage Loans to be purchased on one or more Funding Dates hereunder.

     “Purchase Price Percentage”: As to each Mortgage Loan to be sold hereunder, the percentage of the principal balance thereof being paid as part of the Purchase Price, as set forth in the Mortgage Loan Schedule and the related Purchase Price and Terms Letter.

     “Purchaser”: RWT Holdings, Inc., a Delaware corporation.

     “Qualified Substitute Mortgage Loan”: A mortgage loan substituted by the Seller for a Deleted Mortgage Loan which must, on the date of such substitution, (i) have a principal balance at the time of substitution not in excess of the principal balance of the Deleted Mortgage Loan (the amount of any difference being deemed to be a principal payment to be credited to or deposited by the Seller in the Custodial Account), (ii) have a Mortgage Interest Rate not less than and not more

than 1% greater than that of the Deleted Mortgage Loan, (iii) have a remaining maturity not later than and not more than one year less than the remaining maturity of the Deleted Mortgage Loan, (iv) have a Lifetime Mortgage Interest Rate Cap not less than that of the Deleted Mortgage Loan and not more than two (2) percentage points above that of the Deleted Mortgage Loan, (v) have a Margin not less than that of the Deleted Mortgage Loan, (vi) have a Loan-to-Value Ratio at the time of substitution equal to or less than the Loan-to-Value Ratio of the Deleted Mortgage Loan at the time of substitution, (vii) Mortgage Loan, (viii) have the same Current Index as the Deleted Mortgage Loan, (ix) comply as of the date of substitution with each representation and warranty set forth in Section 3.02, (x) be in the same credit grade category as the Deleted Mortgage Loan, (xi) have the same prepayment penalty term, if any, and (xii) be, in the reasonable determination of the Seller, of the same type, quality and character as the Deleted Mortgage Loan as if the breach had not occurred.

     “Reconstitution Agreement”: The agreement or agreements entered into by the Seller and the Purchaser and certain third parties on the Reconstitution Date or Dates with respect to any or all of the Mortgage Loans serviced hereunder, in connection with a Whole Loan Transfer or a Pass-Through Transfer as provided in Section 12.01.

     “Reconstitution Date”: The date or dates on which any or all of the Mortgage Loans serviced under this Agreement shall be removed from this Agreement and reconstituted as part of a Whole Loan Transfer or Pass-Through Transfer pursuant to Section 12.01 hereof. On such date, the Mortgage Loans transferred shall cease to be covered by this Agreement and the Seller shall cease to service such Mortgage Loans under this Agreement.

     “Record Date”: The close of business of the last Business Day of the month preceding the month of the related Remittance Date.

     “Refinanced Mortgage Loan”: A Mortgage Loan that was made to a Mortgagor who owned the Mortgaged Property prior to the origination of such Mortgage Loan.

     “Regulation AB”: Subpart 229.1100—Asset-Backed Securities (Regulation AB), 17 C.F.R. Sections 229.1100-1123, 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. 22-8518, 70 Fed. Reg. 1,506, 1,531 (Jan.7, 2005) or by the staff of the SEC. or as may be provided by the SCE or its staff from time to time.

     “Remittance Date”: The 18th day of any month, or if such 18th day is not a Business Day, the first Business Day immediately prior thereto.

     “REO Disposition”: The final sale by the Seller of a Mortgaged Property acquired by the Seller in foreclosure or by deed in lieu of foreclosure.

     “REO Disposition Proceeds”: All amounts received with respect to an REO Disposition pursuant to Section 4.14.

     “REO Property”: A Mortgaged Property acquired by the Seller through foreclosure or deed in lieu of foreclosure, as described in Section 4.14.

     “Repurchase Price”: With respect to any Mortgage Loan to be repurchased by the Seller pursuant to Section 3.03, an amount equal to the Assumed Principal Balance of such Mortgage Loan as of the date of such repurchase, plus interest on such Assumed Principal Balance at the Mortgage Loan Remittance Rate from the date to which interest has last been paid to the day prior to the day of the repurchase.

     “SEC”: The United States Securities and Exchange Commission.

     “Seller”: GreenPoint Mortgage Funding, Inc., a New York corporation, or its successor in interest or any successor to the Seller under this Agreement appointed as herein provided.

     “Servicing Advances”: All customary, reasonable and necessary “out of pocket” costs and expenses incurred in the performance by the Seller of its servicing obligations, including, but not limited to, the cost of (a) the preservation, restoration and protection of the Mortgaged Property, (b) any enforcement or judicial proceedings, including foreclosures, (c) the management and liquidation of REO Property pursuant to Section 4.14 and (d) compliance with the Seller’s obligations described in Section 4.08.

     “Servicing Fee”: The amount of the annual fee the Purchaser shall pay to the Seller, equal to 0. 250% of the outstanding principal amount of each Mortgage Loan with respect to the period of time prior to the initial Interest Rate Change Date and, thereafter, 0.375% of the outstanding principal amount for that Mortgage Loan. Such fee shall be payable monthly and shall be computed on the basis of the same principal amount and for the period respecting which any related interest payment on a Mortgage Loan is computed.

     “Servicing Officer”: Any officer of the Seller involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name appears on a list of servicing officers furnished by the Seller to the Purchaser upon request, as such list may from time to time be amended.

     “Trust”: With respect to a Pass-Through Transfer, the “trust”, if any, specified by the Purchaser and identified in the related transaction documents.

     “Whole Loan Transfer”: Any sale or transfer of all of the Mortgage Loans by the Purchaser to a third party.

ARTICLE II

CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES;
BOOKS AND RECORDS; CUSTODIAL AGREEMENT;
DELIVERY OF MORTGAGE LOAN DOCUMENTS

     Section 2.01 Conveyance of Mortgage Loans; Possession of Mortgage Files .

     The Seller agrees to sell and the Purchaser agrees to purchase, from time to time, those certain Mortgage Loans identified in a Mortgage Loan Schedule, at the price and on the terms set

forth herein and in the related Purchase Price and Terms Letter. The Purchaser, on any Funding Date, shall be obligated to purchase only such Mortgage Loans set forth in the applicable Mortgage Loan Schedule, subject to the terms and conditions of this Agreement and the related Purchase Price and Terms Letter.

     The Purchaser will purchase Mortgage Loan(s) from the Seller, on such Funding Dates as may be agreed upon by the Purchaser and the Seller. Each closing shall, at the Purchaser’s option be either: by telephone, confirmed by letter or wire as the parties shall agree; or conducted in person at such place, as the parties shall agree. On the Funding Date and subject to the terms and conditions of this Agreement, the Seller will sell, transfer, assign, set over and convey to the Purchaser, without recourse except as set forth in this Agreement, and the Purchaser will purchase, all of the right, title and interest of the Seller in and to the Mortgage Loans being conveyed by it hereunder, as identified on the Mortgage Loan Schedule.

     On the Funding Date and in accordance with the terms herein, the Purchaser will pay to the Seller, by wire transfer of immediately available funds, the Purchase Price, according to the instructions to be provided by the Seller. The Seller, simultaneously with the payment of the Purchase Price, shall execute and deliver to the Purchaser a Warranty Bill of Sale with respect to the Mortgage Loans in the form annexed hereto as Exhibit H.

     The Purchaser shall be entitled to all scheduled principal due after the Cut-off Date, all other recoveries of principal collected after the Cut-off Date and all payments of interest on the Mortgage Loans (minus that portion of any such payment which is allocable to the period prior to the Cut-off Date). The principal balance of each Mortgage Loan as of the Cut-off Date is determined after application of payments of principal due on or before the Cut-off Date whether or not collected. Therefore, payments of scheduled principal and interest prepaid for a due date beyond the Cut-off Date shall not be applied to the principal balance as of the Cut-off Date. Such prepaid amounts shall be the property of the Purchaser. The Seller shall hold any such prepaid amounts for the benefit of the Purchaser for subsequent remittance by the Seller to the Purchaser. All scheduled payments of principal due on or before the Cut-off Date and collected by the Seller after the Cut-off Date shall belong to the Seller.

     Pursuant to Section 2.03 hereof, the Seller shall have delivered a portion of each Mortgage File to the Custodian prior to the Funding Date. The contents of each Mortgage File not delivered to the Custodian are and shall be held in trust by the Seller for the benefit of the Purchaser as the owner thereof and the Seller’s possession of the portion of each Mortgage File so retained is at the will of the Purchaser for the sole purpose of servicing the related Mortgage Loan, and such retention and possession by the Seller is in a custodial capacity only. On the Funding Date, the ownership of each Mortgage Note, Mortgage and each related Mortgage File is vested in the Purchaser and the ownership of all records and documents with respect to each related Mortgage Loan prepared by or which come into the possession of the Seller shall immediately vest in the Purchaser and shall be retained and maintained, in trust, by the Seller at the will of the Purchaser in such custodial capacity only. The Mortgage File may be retained in microfilm, microfiche, optical storage or magnetic media in lieu of hard copy. The Seller shall maintain records (i) confirming the sale of the related Mortgage Loan to the Purchaser and (ii) confirming the Purchaser’s ownership interest in the Mortgage File. The Seller shall release from its custody the contents of any Mortgage File only in accordance with written instructions from the Purchaser, unless such release is required as incidental

to the Seller’s servicing of the Mortgage Loans or is in connection with a repurchase of any Mortgage Loan or the removal of any Mortgage Loan or related REO Property from the terms of this Agreement pursuant to Section 3.03, in which cases such written instructions shall not be required.

     Section 2.02 Books and Records .

     Notwithstanding the sale of the Mortgage Loans to the Purchaser, record title to each Mortgage and the related Mortgage Note shall continue in the name of the Seller and be retained by the Seller in trust for the Purchaser for the sole purpose of facilitating the servicing and the supervision of the servicing of the Mortgage Loans. All rights arising out of the Mortgage Loans including, but not limited to, all funds received on or in connection with a Mortgage Loan shall be held by the Seller in trust for the benefit of the Purchaser as the owner of the Mortgage Loans, subject to subsequent deduction of amounts to which the Seller is entitled pursuant to the terms of this Agreement.

     The sale of each Mortgage Loan shall be reflected on the Seller’s balance sheet and other financial statements as a sale of assets by the Seller. The Seller shall be responsible for maintaining, and shall maintain, a complete set of books and records for each Mortgage Loan which shall be clearly marked to reflect the ownership of each Mortgage Loan by the Purchaser.

     Section 2.03 Custodial Agreement; Delivery of Mortgage Loan Documents .

     Pursuant to the Custodial Agreement, on or prior to each Funding Date, the Seller shall deliver to the Custodian each of the following documents for each Mortgage Loan:

     (a) The original Mortgage Note endorsed, “Pay to the order of                                          , without recourse” and signed in the name of the Seller by an authorized officer. Such signature may be an original signature or a facsimile signature of such officer. If the Mortgage Loan was acquired by the Seller in a merger, the endorsement must be by “GreenPoint Mortgage Funding, Inc., successor by merger to [name of predecessor]”; and if the Mortgage Loan was acquired or originated by the Seller while doing business under another name, the endorsement must be by “GreenPoint Mortgage Funding, Inc., formerly known as [previous name]”. The Mortgage Note shall include all intervening endorsements showing a complete chain of title from the originator to the Seller.

     (b) The original Mortgage, or a copy of the Mortgage with evidence of recording thereon certified by the appropriate recording office to be a true copy of the recorded Mortgage, or, if the original Mortgage has not yet been returned from the recording office, a copy of the original Mortgage together with a certificate of a duly authorized representative of the Seller (which certificate may consist of stamped text appearing on such copy of the Mortgage), the closing attorney or an officer of the title insurer which issued the related title insurance policy, certifying that the copy is a true copy of the original of the Mortgage which has been transmitted for recording in the appropriate recording office of the jurisdiction in which the Mortgaged Property is located.

     (c) Unless the Mortgage Loan is registered on the MERS System, the original Assignment of Mortgage, assigned to                                          , but otherwise in form and substance acceptable for recording and sent for recording; provided, however, that certain recording information will not be available if, as of the Funding Date, the Seller has not received the related Mortgage from the appropriate recording office. If the Mortgage Loan was acquired by the Seller in a merger, the assignment must be by “GreenPoint Mortgage Funding, Inc., successor by merger to [name of predecessor]”; and if the Mortgage Loan was acquired or originated by the Seller while doing business under another name, the assignment must be by “GreenPoint Mortgage Funding, Inc., formerly known as [previous name]”.

     (d) Originals or certified true copies from the appropriate recording offices of all assumption and modification agreements, if any or if the original has not yet been returned from the recording office, a copy of such original certified by the Seller.

     (e) Originals, or certified true copies from the appropriate recording offices, of any intervening assignments of the Mortgage with evidence of recording thereon, or, if the original intervening assignment has not yet been returned from the recording office, a certified copy of such assignment.

     The Custodian has certified its receipt of each such document as evidenced by its Initial Certification in the form annexed to the Custodial Agreement.

     Section 2.04 Conditions Precedent to Closing .

     Each purchase of Mortgage Loans hereunder shall be subject to each of the following conditions:

     (a) All of the representations and warranties of the Seller and of the Purchaser under this Agreement shall be true and correct as of the Funding Date, and no event shall have occurred which, with notice or the passage of time, would constitute an Event of Default under this Agreement;

     (b) The Purchaser shall have received, or the Purchaser’s attorneys shall have received in escrow, all documents as specified herein, in such forms as are agreed upon and acceptable to the Purchaser, duly executed by all signatories other than the Purchaser as required pursuant to the respective terms thereof;

     (c) All other terms and conditions of this Agreement shall have been complied with.

     Subject to the foregoing conditions, the Purchaser shall pay to the Seller on each Funding Date the applicable Purchase Price as provided herein.

     Section 2.05 First Payment Default; Early Full Principal Prepayment .

     In the event any Mortgage Loan purchased hereunder goes into default because the first Monthly Payment due thereon becomes delinquent and remains delinquent for a period of 30 days, the Seller will repurchase such Mortgage Loan at the Purchase Price or substitute in its place a Qualified Substitute Mortgage Loan or Loans pursuant to the provisions of Section 3.03.

     In the event any Mortgage Loan purchased hereunder becomes the subject of a Full Principal Prepayment within 90 days after the related Funding Date, the Seller will remit to the Purchaser no later than the last Business Day of the month following the month in which such Full Principal Prepayment occurred, an amount equal to (a) the difference between the Purchase Price Percentage for such Mortgage Loan and 100%, times (b) the principal balance of such Mortgage Loan on the date of the Full Principal Prepayment.

     In the event that a mortgage loan, acquired by the Purchaser for a Purchase Price greater than 101.00%, pays off within the first 12 months from the Funding Date, the Seller shall reimburse the Purchaser the full premium paid for the loan.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER;
REPURCHASE AND SUBSTITUTION;
REVIEW OF MORTGAGE LOANS

     Section 3.01 Representations and Warranties of the Seller .

     The Seller represents, warrants and covenants to the Purchaser, as of the Funding Date or as of such other date specified below, that:

     (i) The Seller is a validly existing corporation in good standing under the laws of the State of New York and is qualified to transact business in, is in good standing under the laws of, and possesses all licenses necessary for the conduct of its business in, each state in which any Mortgaged Property is located or is otherwise exempt or not required under applicable law to effect such qualification or license and no demand for such qualification or license has been made upon the Seller by any such state, and in any event the Seller is in compliance with the laws of each such State to the extent necessary to ensure the enforceability of each Mortgage Loan;

     (ii) The Seller has full power and authority to hold each Mortgage Loan, to sell each Mortgage Loan pursuant to this Agreement and to execute, deliver and perform, and to enter into and consummate all transactions contemplated by this Agreement and to conduct its business as presently conducted, has duly authorized the execution, delivery and performance of this Agreement, has duly executed and delivered this Agreement and each Assignment of Mortgage to the Purchaser constitutes a legal, valid and binding obligation of the Seller, enforceable against it in accordance with its terms subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance;

     (iii) None of the execution and delivery of this Agreement, the origination of the Mortgage Loans by the Seller, the sale of the Mortgage Loans to the Purchaser, the consummation

of the transactions contemplated hereby, or the fulfillment of or compliance with the terms and conditions of this Agreement will conflict with any of the terms, conditions or provisions of the Seller’s articles of incorporation or by-laws or materially conflict with or result in a material breach of any of the terms, conditions or provisions of any legal restriction or any agreement or instrument to which the Seller is now a party or by which it is bound, or constitute a default or result in an acceleration under any of the foregoing, or result in the material violation of any law, rule, regulation, order, judgment or decree to which the Seller or its property is subject;

     (iv) There is no litigation pending or to the best of Seller’s knowledge threatened with respect to the Seller which is reasonably likely to have a material adverse effect on the sale of the related Mortgage Loans, the execution, delivery or enforceability of this Agreement, or which is reasonably likely to have a material adverse effect on the financial condition of the Seller;

     (v) No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Seller of or compliance by the Seller with this Agreement, the sale of the Mortgage Loans or the consummation of the transactions contemplated by this Agreement except for consents, approvals, authorizations and orders which have been obtained;

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

     (vii) Neither this Agreement nor any statement, report or other agreement, document or instrument furnished or to be furnished by the Seller pursuant to this Agreement contains or will contain any materially untrue statement of facts or omits or will omit to state a fact necessary to make the statements contained therein not misleading; and

     Section 3.02 Representations and Warranties as to Individual Mortgage Loans .

     The Seller hereby represents and warrants to the Purchaser, as to each Mortgage Loan as of the Funding Date or such other date as may be specified below, that:

     (i) The information set forth in the Mortgage Loan Schedule is true, complete and correct in all material respects as of the Cut-Off Date;

     (ii) The Mortgage creates a first lien on or a first priority ownership interest in real property securing the related Mortgage Note, free and clear of all adverse claims, liens and encumbrances having priority over the first lien of the Mortgage subject only to (1) the lien of non-delinquent current real property taxes and assessments not yet due and payable, (2) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording which are acceptable to mortgage lending institutions generally and, with respect to any Mortgage Loan for which an appraisal was made prior to the Cut-Off Date, either (A) which are referred to or otherwise considered in the appraisal made for the originator of the Mortgage Loan, or (B) which do not adversely affect the appraised value of the Mortgaged Property as set forth in such appraisal, and (C) other matters to which like properties are commonly subject which

do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property. If the Mortgaged Property includes a leasehold estate, the lease is valid, in full force and affect, and conforms to the Fannie Mae requirements for leasehold estates. Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting and enforceable first lien and first priority security interest on the property described therein;

     (iii) The Mortgage Loan has not been delinquent thirty (30) days or more at any time during the twelve (12) month period prior to the Cut-off Date for such Mortgage Loan. There are no defaults under the terms of the Mortgage Loan; and the Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds from a party other than the owner of the Mortgaged Property subject to the Mortgage, directly or indirectly, for the payment of any amount required by the Mortgage Loan;

     (iv) There are no delinquent taxes which are due and payable, ground rents, assessments or other outstanding charges affecting the related Mortgaged Property;

     (v) The terms of the Mortgage Note of the related Mortgagor and the Mortgage have not been impaired, waived, altered or modified in any respect, except by written instruments which have been recorded to the extent any such recordation is required by applicable law or is necessary to protect the interests of the Purchaser, and which have been approved by the title insurer and the primary mortgage insurer, as applicable, and copies of which written instruments are included in the Mortgage File. No other instrument of waiver, alteration or modification has been executed, and no Mortgagor has been released, in whole or in part, from the terms thereof except in connection with an assumption agreement, which assumption agreement is part of the Mortgage File and the terms of which are reflected on the Mortgage Loan Schedule;

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

     (vii) All buildings upon the Mortgaged Property are insured by a generally acceptable insurer pursuant to standard hazard policies conforming to the requirements of Fannie Mae and Freddie Mac. All such standard hazard policies are in effect and on the date of origination contained a standard mortgagee clause naming the Seller and its successors in interest as loss payee and such clause is still in effect and all premiums due thereon have been paid. If the Mortgaged Property is located in an area identified by the Federal Emergency Management Agency as having special flood hazards under the Flood Disaster Protection Act of 1973, as amended, such Mortgaged Property is covered by flood insurance by a generally acceptable insurer in an amount not less than the requirements of Fannie Mae and Freddie Mac. The Mortgage obligates the Mortgagor thereunder to maintain all such insurance at the Mortgagor’s cost and expense, and on the Mortgagor’s failure to do so, authorizes the holder of the Mortgage to maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement therefor from the Mortgagor;

     (viii) Any and all requirements of any federal, state or local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan have been complied with in all material respects;

     (ix) The Mortgage has not been satisfied, canceled or subordinated, in whole or in part, or rescinded, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part nor has any instrument been executed that would effect any such satisfaction, release, cancellation, subordination or rescission;

     (x) The Mortgage Note and the related Mortgage are original and genuine and each is the legal, valid and binding obligation of the maker thereof, enforceable in all respects in accordance with its terms subject to bankruptcy, insolvency and other laws of general application affecting the rights of creditors, and the Seller has taken all action necessary to transfer such rights of enforceability to the Purchaser. All parties to the Mortgage Note and the Mortgage had the legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage. The Mortgage Note and the Mortgage have been duly and properly executed by such parties. The proceeds of the Mortgage Note have been fully disbursed and there is no requirement for future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvements and as to disbursements of any escrow funds therefor have been complied with;

     (xi) Immediately prior to the transfer and assignment to the Purchaser, the Mortgage Note and the Mortgage were not subject to an assignment or pledge, and the Seller had good and marketable title to and was the sole owner thereof and had full right to transfer and sell the Mortgage Loan to the Purchaser free and clear of any encumbrance, equity, lien, pledge, charge, claim or security interest;

     (xii) The Mortgage Loan is covered by an ALTA lender’s title insurance policy or other generally acceptable form of policy of insurance, with all necessary endorsements, issued by a title insurer qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring (subject to the exceptions contained in clause (b) (1), (2) and (3) above) the Seller, its successors and assigns, as to the first priority lien of the Mortgage in the original principal amount of the Mortgage Loan. Such title insurance policy affirmatively insures ingress and egress and against encroachments by or upon the Mortgaged Property or any interest therein. The Seller is the sole insured of such lender’s title insurance policy, such title insurance policy has been duly and validly endorsed to the Purchaser or the assignment to the Purchaser of the Seller’s interest therein does not require the consent of or notification to the insurer and such lender’s title insurance policy is in full force and effect and will be in full force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lender’s title insurance policy, and no prior holder of the related Mortgage has done, by act or omission, anything which would impair the coverage of such lender’s title insurance policy;

     (xiii) There is no default, breach, violation or event of acceleration existing under the Mortgage or the related Mortgage Note and, to the Seller’s knowledge, no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a

default, breach, violation or event permitting acceleration; and neither the Seller nor any prior mortgagee has waived any default, breach, violation or event permitting acceleration;

     (xiv) To the best of the Seller’s knowledge, 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 to or equal to the lien of the related Mortgage;

     (xv) All improvements subject to the Mortgage lie wholly within the boundaries and building restriction lines of the Mortgaged Property (and wholly within the project with respect to a condominium unit) and no improvements on adjoining properties encroach upon the Mortgaged Property except those which are insured against by the title insurance policy referred to in clause (xii) above and all improvements on the property comply with all applicable zoning and subdivision laws and ordinances;

     (xvi) The Mortgage Loan was originated by the Seller or by an eligible correspondent of the Seller. The Mortgage Loan complies in all material respects with all the terms, conditions and requirements of the Seller’s underwriting standards attached here as Exhibit G. The Mortgage Notes and Mortgages are on forms acceptable to Fannie Mae or Freddie Mac;

     (xvii) The Mortgage Loan contains the usual and enforceable provisions of the originator at the time of origination for the acceleration of the payment of the unpaid principal amount if the related Mortgaged Property is sold without the prior consent of the mortgagee thereunder. The Mortgage Loan has an original term to maturity of not more than 40 years, with interest payable in arrears on the first day of each month. Except as otherwise set forth on the Mortgage Loan Schedule, the Mortgage Loan does not contain terms or provisions which would result in negative amortization nor contain “graduated payment” features;

     (xviii) The Mortgaged Property at origination of the Mortgage Loan was and, to the Seller’s knowledge, currently is free of damage and waste and at origination of the Mortgage Loan there was, and, to the Seller’s knowledge, there currently is, no proceeding pending for the total or partial condemnation thereof;

     (xix) The related Mortgage contains enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (1) in the case of a Mortgage designated as a deed of trust, by trustee’s sale, and (2) otherwise by judicial foreclosure;

     (xx) If the Mortgage constitutes a deed of trust, a trustee, duly qualified if required under applicable law to act as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by the Purchaser to the trustee under the deed of trust, except in connection with a trustees sale or attempted sale after default by the Mortgagor;

     (xxi) If required by the applicable processing style, the Mortgage File contains an appraisal of the related Mortgaged Property made and signed prior to the final approval of the mortgage loan application by a qualified appraiser satisfying the requirements of Title XI of The Financial Institutions Reform, and Enforcement Act of 1989, as amended, and the regulations

promulgated thereunder, that is acceptable to Fannie Mae or Freddie Mac and approved by the Seller. The appraisal, if applicable, is in a form generally acceptable to Fannie Mae or Freddie Mac;

     (xxii) All parties which have had any interest in the Mortgage, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (A) in substantial compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (B) (1) organized under the laws of such state, or (2) qualified to do business in such state, or (3) federal savings and loan associations, national banks, a Federal Home Loan Bank or the Federal Reserve Bank, or (4) not doing business in such state;

     (xxiii) To the best of the Seller’s knowledge, there does not exist any circumstances or conditions with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor’s credit standing that could reasonably be expected to cause private institutional investors to regard the Mortgage Loan as an unacceptable investment, to cause the Mortgage Loan to become delinquent, or to materially adversely affect the value or marketability of the Mortgage Loan;

     (xxiv) Each of the Mortgaged Properties consists of a single parcel of real property with a detached single-family residence erected thereon, or a two- to four-family dwelling, or a townhouse, or an individual condominium unit in a condominium project or an individual unit in a planned unit development. Any condominium unit or planned unit development either conforms with applicable Fannie Mae or Freddie Mac requirements regarding such dwellings or is covered by a waiver confirming that such condominium unit or planned unit development is acceptable to Fannie Mae or Freddie Mac or is otherwise “warrantable” with respect thereto. No such residence is a mobile home or manufactured dwelling.

     (xxv) The ratio of the original outstanding principal amount of the Mortgage Loan to the lesser of the appraised value (or stated value if an appraisal was not a requirement of the applicable processing style) of the Mortgaged Property at origination or the purchase price of the Mortgaged Property securing each Mortgage Loan (the “Loan-to-Value Ratio”) is not in excess of 95.00%. The original Loan-to-Value Ratio of each Mortgage Loan either was not more than 95.00% or the excess over 80.00% is insured as to payment defaults by a Primary Mortgage Insurance Policy issued by a primary mortgage insurer acceptable to Fannie Mae or Freddie Mac;

     (xxvi) The Seller is either, and each Mortgage Loan was originated by, a savings and loan association, savings bank, commercial bank, credit union, insurance company or similar institution which is supervised and examined by a federal or State authority, or by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Section 203 and 211 of the National Housing Act;

     (xxvii) The origination, collection and servicing practices with respect to each Mortgage Note and Mortgage have been legal in all material respects. With respect to escrow deposits and payments that the Seller collects, all such payments are in the possession of, or under the control of, the Seller, and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. No escrow deposits or other charges or

payments due under the Mortgage Note have been capitalized under any Mortgage or the related Mortgage Note; and

     (xxviii) No fraud or misrepresentation of a material fact with respect to the origination of a Mortgage Loan has taken place on the part of the Seller.

     (xxix) No Mortgage Loan contains a provision whereby the related Mortgagor can convert the related Mortgage Loan to a fixed rate instrument.

     Section 3.03 Repurchase and Substitution .

     The representations and warranties set forth in Sections 3.01 and 3.02 shall survive the sale of the Mortgage Loans and shall inure to the benefit of the Purchaser, notwithstanding any restrictive or qualified endorsement on any Mortgage Note or Assignment of Mortgage or the examination of any Mortgage File. Upon discovery by either the Seller or an Purchaser of a breach of any of the representations and warranties set forth in Sections 3.01 and 3.02 (notwithstanding the Seller’s lack of knowledge of such representation and warranty), which breach materially and adversely affects the value of the Mortgage Loans or the interest of the Purchaser (or which materially and adversely affects the interest of the Purchaser in the related Mortgage Loan in the case of a representation and warranty relating to a particular Mortgage Loan), the party discovering such breach shall give prompt written notice to the other. Within 90 days of the earlier of either discovery by or notice to the Seller of any such breach, the Seller shall use its best efforts to promptly cure such breach in all material respects and, if such breach cannot be cured during such 90 day period, the Seller shall, at the Purchaser’s option, repurchase such Mortgage Loan at the Repurchase Price. If any such breach shall involve any representation or warranty set forth in Section 3.01, and such breach cannot be cured within 90 days of the earlier of either discovery by or notice to the Seller of such breach, all the Mortgage Loans shall, at the Purchaser’s option, be repurchased by the Seller at the Repurchase Price; provided, however, that in the event of a breach of representation and warranty set forth in Section 3.01 that relates to less than all of the Mortgage Loans, the Seller shall repurchase only the Mortgage Loans to which such breach relates. However, the Seller may, at its option, replace a Mortgage Loan as to which a breach of representation of warranty has occurred as described in the foregoing sentences of this Section 3.03 and substitute in its place with a Qualified Substitute Mortgage Loan or Loans, provided, however, that any such substitution shall be effected not later than 120 days after the Funding Date. Any repurchase of a Mortgage Loan or Loans pursuant to the foregoing provisions of this Section 3.03 shall be accomplished by deposit in the Custodial Account of the amount of the Repurchase Price (after deducting therefrom any amounts received in respect of such repurchased Mortgage Loan or Loans and being held in the Custodial Account for future distribution).

     The Seller shall effect any substitution of a Qualified Substitute Mortgage Loan by delivering to the Custodian the documents as are required to be delivered by Section 2.03, with the Mortgage Note endorsed as required by Section 2.03. No substitution will be made in any calendar month after the Determination Date occurring in such month. The Seller shall deposit in the Custodial Account the Monthly Payment less the Servicing Fee due on such Qualified Substitute Mortgage Loan or Loans in the month following the date of such substitution. Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the month of substitution will be retained by the Seller. For the month of substitution, distributions to the Purchaser will include the

Monthly Payment due on such Deleted Mortgage Loan in the month of substitution, and the Seller shall thereafter be entitled to retain all amounts subsequently received by the Seller in respect of such Deleted Mortgage Loan. The Seller shall give written notice to the Purchaser that such substitution has taken place and shall amend the Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from the terms of this Agreement and the substitution of the Qualified Substitute Mortgage Loan. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement in all respects, and the Seller shall be deemed to have made with respect to such Qualified Substitute Mortgage Loan or Loans, as of the date of substitution, the covenants, representations and warranties set forth in Sections 3.01 and 3.02, except to the extent a representation contained in Section 3.02 relates to an expressly specified percentage of the Mortgage Loans.

     For any month in which the Seller substitutes one or more Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Seller will determine the amount (if any) by which the aggregate principal balance of all such Qualified Substitute Mortgage Loans as of the date of substitution is less than the aggregate Assumed Principal Balance of all such Deleted Mortgage Loans (after application of scheduled principal payments due in the month of substitution). The amount of such shortfall shall be distributed by the Seller in the month of substitution pursuant to Section 5.01. Accordingly, on the date of such substitution, the Seller will deposit from its own funds into the Custodial Account an amount equal to the amount of such shortfall.

      Indemnification . In addition to its repurchase and substitution obligations, Seller shall indemnify Purchaser and hold it harmless against any losses, damages, penalties, fines, forfeitutes, reasonable and necessary legal fees and related costs, judgments, and other costs and expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or resulting from a breach of Seller’s representations and warranties contained in Sections 3.01 and 3.02 that materially and adversely affects the value of one or more of the Mortgage Loans. The obligations of Seller set forth in this Section 3.03 to cure, substitute for or repurchase a defective Mortgage Loan and to indemnify Purchaser as provided in this Section 3.03 constitute the sole remedies of Purchaser with respect to a breach of the foregoing representations and warranties.

ARTICLE IV

ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

     Section 4.01 Seller to Act as Servicer .

     The Seller, as independent contract servicer, shall service and administer the Mortgage Loans for the benefit of the Purchaser in accordance with the terms of this Agreement and in conformity with Customary Servicing Procedures. In performing its obligations hereunder, the Seller shall exercise no less than the same care that it customarily employs and exercises in servicing and administering mortgage loans for its own account, but shall perform such obligations without regard to the Seller’s obligation to make Servicing Advances or P&I Advances, or to the Seller’s right to receive compensation for its services hereunder.

     Subject to the above-described servicing standards, the specific requirements and prohibitions of this Agreement and the respective Mortgage Loans, and the provisions of any

Primary Insurance Policy and applicable law, the Seller shall have full power and authority, acting alone, to do any and all things in connection with such servicing and administration which the Seller may deem necessary or desirable. Without limiting the generality of the foregoing, the Seller shall, and is hereby authorized and empowered to (i) execute and deliver on behalf of itself and the Purchaser, any and all instruments of satisfaction or cancellation, or of partial or full release, discharge and all other comparable instruments, with respect to the Mortgage Loan and with respect to the Mortgaged Property and (ii) waive, modify or vary any term of any Mortgage Loan or consent to the postponement of strict compliance with any such term or in any manner grant indulgence to the related Mortgagor if in the Seller’s reasonable and prudent determination such waiver, modification, postponement or indulgence is not materially adverse to the interests of the Purchaser and is not prohibited by a Primary Insurance Policy; provided, however, that the Seller may not, unless it has obtained the consent of the Purchaser, (a) permit any modification with respect to any Mortgage Loan that would vary the Mortgage Interest Rate, defer or forgive the payment of interest or of any principal, reduce the outstanding principal amount (other than as a result of its actual receipt of payment of principal on) or extend the final maturity date of such Mortgage Loan, (b) with respect to any Mortgage Loan for which any payment due remains delinquent for a period of 90 days or more, make any other modifications, or (c) accept substitute or additional collateral, or release any collateral, for a Mortgage Loan. If, with the consent of the Purchaser, the Seller permits the deferral of interest or principal payments on any Mortgage Loan, the Seller shall include in each remittance for any month in which any such principal or interest payment has been deferred an amount equal to the amount that the Seller would have been required to advance pursuant to Section 5.03 if such deferred amounts had been delinquent, and shall be entitled to reimbursement for such advances only to the same extent as for P&I Advances made pursuant to Section 5.03. If reasonably required by the Seller, the Purchaser shall furnish the Seller with any powers of attorney and other documents necessary or appropriate to enable the Seller to carry out its servicing and administrative duties under this Agreement.

     Section 4.02 Liquidation of Mortgage Loans; Servicing Advances and Foreclosure .

     If any payment due under any Mortgage Loan and not postponed pursuant to Section 4.01 is not paid when the same becomes due and payable, or if the Mortgagor fails to perform any other covenant or obligation under the Mortgage Loan and such failure continues beyond any applicable grace period, the Seller shall take such action as it shall deem to be in the best interests of the Purchaser. If any payment due under any Mortgage Loan and not postponed pursuant to Section 4.01 remains delinquent for a period of 90 days or more, the Seller shall (a) act in the best interests of the Purchaser, and such action may include the commencement of foreclosure proceedings or the sale of such Mortgage Loan, (b) if the Seller commences foreclosure proceedings, notify the Purchaser thereof on the monthly remittance report delivered pursuant to Section 5.02 on the first Remittance Date following such commencement and (c) respond to reasonable inquiries of the Purchaser with respect to the Mortgage Loan or related REO Property. Notwithstanding the foregoing, the Seller may not sell a delinquent Mortgage Loan unless it has obtained the consent of the Purchaser. The Purchaser may instruct the Seller to commence foreclosure proceedings on any Mortgage Loan for which any payment remains delinquent for a period of 120 days or more. If the Seller has commenced foreclosure proceedings, it shall promptly notify the Purchaser and thereafter periodically advise the Purchaser of the status of the foreclosure proceedings and follow the Purchaser’s instructions in connection therewith.

     Whether in connection with the foreclosure of a Mortgage Loan or otherwise, the Seller shall from its own funds make all necessary and proper Servicing Advances; provided, however, that the Seller is not required to make a Servicing Advance unless the Seller determines in the exercise of its good faith reasonable judgment that such Servicing Advance would ultimately be recoverable from REO Dispositions, Insurance Proceeds or Condemnation Proceeds (with respect to each of which the Seller shall have the priority described in Section 4.05 for purposes of withdrawals from the Custodial Account). In the event that any Servicing Advance or any commitment to pay Servicing Advances in connection with any Mortgage Loan exceeds $5,000 in the aggregate, the Seller shall secure the written approval of the Purchaser.

     Section 4.03 Collection of Mortgage Loan Payments .

     Continuously from the date hereof until the principal and interest on all Mortgage Loans are paid in full, the Seller will proceed diligently, in accordance with this Agreement, to collect all payments due under each of the Mortgage Loans when the same shall become due and payable, and will take special care in ascertaining and estimating annual taxes, assessments, fire and hazard insurance premiums, mortgage insurance premiums, and all other charges that, as provided in any Mortgage, will become due and payable in order that the installments payable by the Mortgagors will be sufficient to pay such charges as and when they become due and payable.

     Section 4.04 Establishment of Custodial Account; Deposits in Custodial Account .

     The Seller shall segregate and hold all funds collected and received pursuant to each Mortgage Loan and REO Property separate and apart from any of its own funds and general assets and shall establish and maintain one or more Custodial Accounts (collectively, the “Custodial Account”), in the form of non-interest bearing time deposit or demand accounts. The Custodial Account shall be established with an Eligible Depository Institution. The creation of any Custodial Account shall be evidenced by a letter agreement substantially in the form of Exhibit B hereto. A copy of such certification or letter agreement shall be furnished to any Purchaser upon request.

     The Seller shall deposit in a mortgage clearing account on a daily basis and in the Custodial Account no later than the second Business Day thereafter and retain therein:

     (i) all scheduled payments due after the Cutoff Date on account of principal, including Principal Prepayments collected after the Cutoff Date, on the Mortgage Loans;

     (ii) all payments on account of interest on the Mortgage Loans (minus the portion of any such payment which is allocable to the period prior to the Cutoff Date) adjusted to the Mortgage Loan Remittance Rate;

     (iii) all Liquidation Proceeds;

     (iv) all Insurance Proceeds, including amounts required to be deposited pursuant to Section 4.10 and Section 4.11, other than proceeds to be held in the Escrow Account and applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor in accordance with Customary Servicing Procedures, the Mortgage Loan documents or applicable law;

     (v) all Condemnation Proceeds with respect to any Mortgaged Property which are not released to the Mortgagor in accordance with Customary Servicing Procedures, the Mortgage Loan documents or applicable law;

     (vi) any amounts payable in connection with the repurchase of any Mortgage Loan pursuant to Section 3.03 and all amounts required to be deposited by the Seller in connection with shortfalls in principal amount of Qualified Substitute Mortgage Loans pursuant to Section 3.03 or;

     (vii) any amount required to be deposited in the Custodial Account pursuant to Section 5.04; and

     (viii) any amount required to be deposited in the Custodial Account pursuant to Sections 4.01, 4.14, 5.01, 5.03 and 6.02.

     The foregoing requirements for deposit in the Custodial Account shall be exclusive. Without limiting the generality of the foregoing, payments in the nature of late payment charges, fees for special services provided to a Mortgagor and assumption fees need not be deposited by the Seller in the Custodial Account.

     The Seller may invest the funds in the Custodial Account in Eligible Investments designated in the name of the Seller for the benefit of the Purchaser, which shall mature not later than the Business Day next preceding the Remittance Date next following the date of such investment (except that (i) any investment in the institution with which the Custodial Account is maintained may mature on such Remittance Date and (ii) any other investment may mature on such Remittance Date if the Seller shall advance funds on such Remittance Date, pending receipt thereof to the extent necessary to make distributions to the Purchaser) and shall not be sold or disposed of prior to maturity. Notwithstanding anything to the contrary herein and above, all income and gain realized from any such investment shall be for the benefit of the Seller and shall be subject to its withdrawal or order from time to time. The amount of any losses incurred in respect of any such investments shall be deposited in the Custodial Account by the Seller out of its own funds immediately as realized.

     Section 4.05 Withdrawals From the Custodial Account .

     The Seller shall, from time to time, withdraw funds from the Custodial Account for the following purposes:

     (i) to make payments to the Purchaser in the amounts and in the manner provided for in Section 5.01;

     (ii) to reimburse itself for P&I Advances, the Seller’s right to reimburse itself pursuant to this subclause (ii) being limited to amounts received on the related Mortgage

Loan that represent payments of principal and/or interest respecting which any such P&I Advance was made;

     (iii) to reimburse itself first for unreimbursed Servicing Advances, second for unreimbursed P&I Advances, and third for any unpaid Servicing Fees, the Seller’s right to reimburse itself pursuant to this subclause (iii) with respect to any Mortgage Loan being limited to related Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition Proceeds and such other amounts as may be collected by the Seller from the Mortgagor or otherwise relating to the Mortgage Loan, it being understood that, in the case of any such reimbursement, the Seller’s right thereto shall be prior to the rights of the Purchaser unless the Seller is required to repurchase a Mortgage Loan pursuant to Section 3.03, in which case the Seller’s right to such reimbursement shall be subsequent to the payment to the Purchaser of the Repurchase Price pursuant to Section 3.03 and all other amounts required to be paid to the Purchaser with respect to such Mortgage Loan;

     (iv) to reimburse itself for unreimbursed Servicing Advances and advances of Seller funds made pursuant to Section 5.03 to the extent that such amounts are nonrecoverable by the Seller pursuant to subclause (iii) above, provided that the Mortgage Loan for which such advances were made is not required to be repurchased by the Seller pursuant to Section 3.03, in which case the Seller’s right to such reimbursement shall be subsequent to the payment to the Purchaser of the Repurchase Price pursuant to Section 3.03 and all other amounts required to be paid to the Purchaser with respect to such Mortgage Loan, and to reimburse itself for such amounts to the extent that such amounts are nonrecoverable from the disposition of REO Property pursuant to Section 4.14 hereof;

     (v) to reimburse itself for expenses incurred by and reimbursable to it pursuant to Section 8.01;

     (vi) to pay itself with respect to each Mortgage Loan repurchased pursuant to Section 3.03 all amounts collected in respect of such Mortgage Loan and remaining on deposit in the Custodial Account as of the date on which the related Repurchase Price is deposited into the Custodial Account (other than the amount of such Repurchase Price);

     (vii) to pay itself with respect to each Mortgage Loan servicing compensation pursuant to Section 6.03;

     (viii) to reimburse itself for any Nonrecoverable Advance or Advances; and

     (ix) to clear and terminate the Custodial Account upon the termination of this Agreement.

     On each Remittance Date, the Seller shall withdraw all funds from the Custodial Account except for those amounts which, pursuant to Section 5.01(a)(iv) and (v), the Seller is not obligated to remit on such Remittance Date. The Seller may use such withdrawn funds only for the purposes described in this Section 4.05.

     Section 4.06 Establishment of Escrow Account; Deposits in Escrow Account .

     The Seller shall segregate and hold all funds collected and received pursuant to each Mortgage Loan which constitute Escrow Payments separate and apart from any of its own funds and general assets and shall establish and maintain one or more Escrow Accounts (collectively, the “Escrow Account”), in the form of non-interest bearing time deposit or demand accounts. The Escrow Account shall be established with an Eligible Depository Institution. The creation of any Escrow Account shall be evidenced by a letter agreement substantially in the form of Exhibit C hereto. Upon request, the Seller shall provide the Purchaser with a copy of a letter agreement evidencing the establishment of each Escrow Account. Notwithstanding the foregoing, the Seller may deposit in the Escrow Account amounts constituting escrow payments relating to mortgage loans not subject to this Agreement, provided, however, that all Escrow Payments in the Escrow Account are insured in a manner which shall provide the maximum available insurance by the FDIC thereon.

     The Seller shall deposit in a mortgage clearing account on a daily basis and no later than the second Business Day thereafter in the Escrow Account and retain therein: (i) all Escrow Payments held or collected on account of the Mortgage Loans, for the purpose of effecting timely payment of any such items as required under the terms of this Agreement, (ii) all Insurance Proceeds that are to be applied to the restoration or repair of any Mortgaged Property and (iii) all revenues received with respect to the management, conservation, protection and operation of the REO Properties pursuant to Section 4.14. The Seller shall make withdrawals therefrom only to effect such payments as are required under this Agreement, and for such other purposes as shall be set forth in or in accordance with Section 4.07. The Seller shall pay to the Mortgagor interest on escrowed funds to the extent required by law notwithstanding that the Escrow Account is non-interest bearing.

     Section 4.07 Withdrawals From Escrow Account .

     Withdrawals from the Escrow Account may be made by the Seller only (a) to effect timely payments of taxes, assessments, Primary Insurance Policy premiums, fire and hazard insurance premiums or other items constituting Escrow Payments for the related Mortgage, (b) to reimburse the Seller for any Servicing Advance made by Seller pursuant to Section 4.08 hereof with respect to a related Mortgage Loan, but only from amounts received on the related Mortgage Loan which represent late payments or collections of Escrow Payments thereunder, (c) to refund to any Mortgagor any funds found to be in excess of the amounts required under the terms of the related Mortgage Loan, (d) upon default of a Mortgagor or in accordance with the terms of the related Mortgage Loan and if permitted by applicable law, for transfer to the Custodial Account of such amounts as are to be applied to the indebtedness of a Mortgage Loan in accordance with the terms thereof, (e) for application to restoration or repair of the Mortgaged Property, (f) to deposit into the Custodial Account the funds required to be deposited therein pursuant to Section 4.14, (g) to pay to itself amounts to which it is entitled pursuant to Section 4.14, (h) to withdraw any Escrow Payments related to a Mortgage Loan repurchased by the Seller pursuant to Section 3.03, or (i) to clear and terminate the Escrow Account upon the termination of this Agreement.

     Section 4.08 Payment of Taxes, Insurance and Other Charges .

     With respect to each Mortgage Loan, the Seller shall maintain accurate records reflecting the status of taxes, assessments, and other charges for which an escrow is maintained and the status of

Primary Insurance Policy premiums and fire and hazard insurance coverage and shall obtain, from time to time, all bills for the payment of such charges (including renewal premiums) and shall effect payment thereof employing for such purpose deposits of the Mortgagor in the Escrow Account which shall have been estimated and accumulated by the Seller in amounts sufficient for such purposes, as allowed under the terms of the Mortgage or applicable law. To the extent that a Mortgage does not provide for Escrow Payments, or the Seller has waived the escrow of Escrow Payments or the Seller is prohibited by applicable state law from requiring the escrow of Escrow Payments, the Seller shall determine that any such payments are made by the Mortgagor. The Seller assumes full responsibility for the timely payment of all such bills and shall effect timely payments of all such bills irrespective of each Mortgagor’s faithful performance in the payment of same or the making of the Escrow Payments and shall make advances from its own funds to effect such payments.

     Section 4.09 Transfer of Accounts .

     The Seller may from time to time transfer the Custodial Account and the Escrow Account to any other Eligible Depository Institution. The Seller shall notify the Purchaser within 14 days of any such transfer under this Section 4.09.

     Section 4.10 Maintenance of Hazard Insurance .

     The Seller shall cause to be maintained for each Mortgage Loan, fire and hazard insurance with extended coverage customary in the area where the Mortgaged Property is located, in an amount which is, subject to applicable law, at least equal to the lesser of (i) the maximum insurable value of the improvements securing the related Mortgage Loan and (ii) the greater of (a) the outstanding principal balance of the Mortgage Loan and (b) the minimum amount necessary to prevent the Mortgagor and/or the mortgagee from becoming a co-insurer. If the Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) the Seller will cause to be maintained a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (i) the outstanding principal balance of the Mortgage Loan, (ii) the full insurable value of the Mortgaged Property, or (iii) the maximum amount of insurance available under the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, each as amended. The Seller shall also maintain on any REO Property, fire and hazard insurance with extended coverage in an amount which is at least equal to the maximum insurable value of the improvements which are a part of such property, liability insurance and, to the extent required and available under the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, each as amended, flood insurance in an amount required above. Any amounts collected by the Seller under any such policies (other than amounts to be deposited in the Escrow Account and applied to the restoration or repair of the related Mortgaged Property, REO Property, or released to the Mortgagor in accordance with Customary Servicing Procedures or in accordance with the terms of the Mortgage Loan or applicable law) shall be deposited in the Custodial Account, subject to withdrawal pursuant to Section 4.05. It is understood and agreed that no earthquake or other additional insurance need be required by the Seller of any Mortgagor or maintained on property acquired in respect of a Mortgage 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. All policies required hereunder shall be endorsed with standard mortgagee clauses with loss payable to the Seller, its successors and its assigns, or, upon request of the Purchaser, to the Purchaser, and shall provide for at least 30 days prior written notice to the Seller of any cancellation thereof. The Seller shall not accept or obtain any such insurance policy from an insurance company that does not at that time maintain a General Policy Rating of B-III or better in Best’s Key Rating Guide, or that is not licensed to do business in the State wherein the related Mortgaged Property is located.

     Section 4.11 Maintenance of Blanket Insurance Policy .

     If the Seller shall obtain and maintain a blanket insurance policy that is issued by an insurer generally acceptable to Fannie Mae and Freddie Mac and that insures against hazard losses on all of the Mortgage Loans, then, to the extent such policy provides coverage in an amount equal to the coverage required pursuant to Section 4.10 and otherwise complies with all other requirements of Section 4.10, the Seller shall be deemed to have satisfied its obligations as set forth in Section 4.10. Such policy may contain a clause providing for a reasonable deductible, in which case the Seller shall, if there shall not have been maintained on the related Mortgaged Property a policy complying with Section 4.10, and if there shall have been a loss that would have been covered by such policy, deposit in the Custodial Account the amount not otherwise payable under the blanket policy because of such deductible clause.

     Section 4.12 Maintenance of Mortgage Impairment Insurance Policy .

     The Seller may satisfy its obligations under Section 4.10 and 4.11 pertaining to physical storage of insurance policies and general policy rating requirements by maintaining a mortgage impairment or other form of blanket policy that will protect the Seller and/or investor in the event of uninsured loss, insolvency of an insurance carrier or any other loss normally to be covered by a mortgage impairment policy. It is agreed that any expense incurred by the Seller in maintaining any such insurance shall be borne by the Seller. This shall be deemed to include any loss or any expense as a result of a deductible clause in such a policy.

     Section 4.13 Fidelity Bond; Errors and Omissions Insurance .

     The Seller at its own expense shall maintain with responsible companies throughout the term of this Agreement a blanket fidelity bond and an errors and omissions insurance policy, with broad coverage on all officers, employees and other individuals acting on behalf of the Seller in connection with its activities under this Agreement. The amount of coverage shall be at least equal to the coverage that would be required of the Seller by Fannie Mae or Freddie Mac, if the Seller were servicing the Mortgage Loans for Fannie Mae or Freddie Mac, and such policy shall be issued by a company that is acceptable to Fannie Mae or Freddie Mac. The Fidelity Bond and errors and omissions insurance shall be in the form of the Mortgage Banker’s Blanket Bond and shall protect and insure the Seller against losses caused by such individuals, including losses from forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such individuals. Such Fidelity Bond shall also protect and insure the Seller against losses in connection with the failure to maintain any insurance policies required pursuant to this Agreement and the release or satisfaction of a Mortgage Loan without having obtained payment in full of the indebtedness secured thereby. No

provision of this Section 4.13 requiring such fidelity bond and errors and omissions insurance shall diminish or relieve the Seller from its duties and obligations as set forth in this Agreement.

     Section 4.14 Title, Management and Disposition of REO Property .

     If title to a Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale shall be taken in the name of the Seller or its nominee, in either case as nominee, for the benefit of the Purchaser on the date of acquisition of title (the “REO Purchaser”). In the event the Seller is not authorized or permitted to hold title to real property in the state in which the REO Property is located, or would be adversely affected under the “doing business” or tax laws of such state by so holding title, the deed or certificate of sale shall be taken in the name of such Person or Persons as shall be consistent with an opinion of counsel obtained by the Seller, at expense of the REO Purchaser, from an attorney duly licensed to practice law in the state where the REO Property is located. The Person or Persons holding such title other than the REO Purchaser shall acknowledge in writing that such title is being held as nominee for the REO Purchaser.

     The Seller, either itself or through an agent selected by the Seller, shall manage, conserve, protect and operate each REO Property for the REO Purchaser solely for the purpose of its prompt disposition and sale, and in same manner that it would be required to manage, conserve, protect and operate foreclosed property for its own account (subject to the condition described in the second paragraph of Section 4.02). The Seller shall attempt to sell the same (and may temporarily rent the same) on such terms and conditions as the Seller deems to be in the best interest of the REO Purchaser.

     The Seller shall cause to be deposited in the Escrow Account, on a daily basis upon receipt thereof, all revenues received with respect to the conservation and disposition of the related REO Property and shall withdraw therefrom funds necessary for the proper operation, management and maintenance of the related REO Property, including the cost of maintaining any hazard insurance pursuant to Section 4.10 hereof and the fees of any managing agent acting on behalf of the Seller. Any disbursement in excess of $5,000 shall be made only with the written approval of the REO Purchaser. For purposes of the preceding sentence, any approval given by the Purchaser shall constitute approval by the REO Purchaser. On or before each Determination Date, the Seller shall withdraw from the Escrow Account and deposit into the Custodial Account the net income from the REO Property on deposit in the Escrow Account less any reserves required to be maintained in the Escrow Account from time to time to satisfy reasonably anticipated expenses. The Seller shall furnish to the Purchaser on each Remittance Date, an operating statement for each REO Property covering the operation of each REO Property for the previous month and the Seller’s efforts in connection with the sale of that REO Property. Such statement shall be accompanied by such other information as the Purchaser shall reasonably request.

     Subject to Section 4.02, each REO Disposition shall be carried out by the Seller at such price, and upon such terms and conditions, as the Seller deems to be in the best interests of the REO Purchaser. If upon the acquisition of title to the Mortgaged Property by foreclosure sale or deed in lieu of foreclosure or otherwise, there remain outstanding unreimbursed P&I Advances pursuant to Section 5.03 with respect to the Mortgage Loan or if, upon liquidation as provided in this Section 4.14, there remain outstanding any unreimbursed Servicing Advances with respect to the Mortgaged Property or the Mortgage Loan, the Seller shall be entitled to reimbursement from the proceeds

received in connection with the disposition of the Mortgaged Property, and from the Custodial Account if such proceeds are insufficient, for any related unreimbursed Servicing Advances or related unreimbursed P&I Advances pursuant to Section 5.03. On the Remittance Date immediately following the Principal Prepayment Period in which REO Disposition Proceeds are received, the net cash proceeds of such REO Disposition shall be distributed to the REO Purchaser. In the event that the Seller is billed for expenses related to an REO Property subsequent to the date on which the net cash proceeds of such REO Disposition are distributed to the REO Purchaser, the Seller shall pay such expenses and shall thereupon be entitled to reimburse itself therefor by withdrawing the amount of such expenses from the Custodial Account.

     Section 4.15 Adjustments to Mortgage Interest Rate and Monthly Payment .

     On each applicable Interest Rate Change Date, the Mortgage Interest Rate shall be adjusted, in compliance with the requirements of the related Mortgage and Mortgage Note, to equal the sum of the Current Index plus the Margin (rounded in accordance with the related Mortgage Note) subject to the applicable Annual Mortgage Interest Rate Cap and Lifetime Mortgage Interest Rate Cap, if any, as set forth in the Mortgage Note. The Seller shall execute and deliver the notices required by each Mortgage and Mortgage Note, Customary Servicing Procedures, applicable laws and regulations regarding interest rate adjustments.

ARTICLE V

PAYMENTS TO THE PURCHASER

     Section 5.01 Distributions .

     (a) On each Remittance Date, the Seller shall remit to the Purchaser of record on the preceding Record Date (i) all amounts credited to the Custodial Account as of the close of business on the preceding Determination Date (net of charges against or withdrawals from the Custodial Account pursuant