SALE AND SERVICING AGREEMENT

EXECUTION VERSION

SALE AND SERVICING AGREEMENT
Dated as of June 19, 2006

among

INDYMAC BANK, F.S.B.
(Seller and Servicer)

INDYMAC MBS, INC.
(Depositor)

INDYMAC HOME EQUITY MORTGAGE LOAN ASSET-BACKED TRUST, SERIES 2006-H2
(Trust)

and

DEUTSCHE BANK NATIONAL TRUST COMPANY
(Indenture Trustee)

ARTICLE I.
DEFINITIONS

i

 

ii

ARTICLE VII.
SERVICER TERMINATION

iii

 

iv

          This Sale and Servicing Agreement (the “ Agreement ”) is entered into effective as of June 19, 2006, among INDYMAC BANK, F.S.B., a federal savings bank, as seller (in such capacity, the “ Seller ”), and as servicer (in such capacity, the “ Servicer ”), INDYMAC MBS, INC., a Delaware corporation, as the depositor (the “ Depositor ”), INDYMAC HOME EQUITY MORTGAGE LOAN ASSET-BACKED TRUST, SERIES 2006-H2, a Delaware statutory trust (the “ Trust ”), and DEUTSCHE BANK NATIONAL TRUST COMPANY, a national banking association, as Indenture Trustee on behalf of the Class A Noteholders (in such capacity, the “ Indenture Trustee ”).

PRELIMINARY STATEMENT

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

          The following table sets forth the Class Designation, Note Rate, Initial Note Principal Amount and minimum denomination for the Notes of each Class issued pursuant to the Indenture.

1

ARTICLE I.

DEFINITIONS

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

           Accelerated Principal Payment : With respect to any Payment Date a payment received as a payment of principal by the Noteholders of any Class of Notes, for the purpose of increasing the Overcollateralization Amount, and to be paid from the Excess Cashflow for such Class, and equal to for any Payment Date the lesser of (x) the amount of the Excess Cashflow for such Class and (y) the Overcollateralization Deficiency Amount for such Payment Date (after giving effect to any Class of Notes senior to such Class).

           Accepted Servicing Practices : The Servicer’s normal servicing practices in servicing and administering revolving home equity line of credit mortgage loans for its own account, which in general will conform to the mortgage servicing practices of prudent mortgage lending institutions which service for their own account, mortgage loans of the same type as the Mortgage Loans in the jurisdictions in which the related Mortgaged Properties are located.

           Accountant’s Opinion : A written opinion of the Servicer’s internal accountants, delivered and acceptable to the Indenture Trustee.

           Accrual Period : With respect to each Mortgage Loan and Due Date, the period from and including the preceding Due Date to but not including such Due Date.

           Additional Balance : As to any Mortgage Loan and day, the aggregate amount of all Draws conveyed to the Trust pursuant to Section 2.01(a).

           Additional Balance Advance Amount : As to any Payment Date during the Managed Amortization Period, the excess, if any, of (i) the aggregate principal amount of all Additional Balances created during the Collection Period relating to such Payment Date over (ii) the Principal Collections in respect of the Mortgage Loans received during the Collection Period relating to such Payment Date.

           Administration Agreement : The Administration Agreement dated as of June 19, 2006 among the Issuer, the Administrator, the Owner Trustee and the Depositor, as may be amended or supplemented from time to time.

           Advance Notice : A notice to the Class L Certificateholder substantially in the form of Exhibit D.

2

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

           Aggregate Draw Amount – As of any day during the Managed Amortization Period, the sum of (x) the Floating Allocation Percentage of the aggregate principal balance of all Draws on such day and (y) the amount of any Daily Draw Deficits remaining from the preceding day of the related Collection Period (if such preceding day is not within the related Collection Period, the Daily Draw Deficit from the preceding day shall be zero).

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

           Anniversary Year : Means the one-year period beginning on the Closing Date and ending on the first anniversary thereof, and each subsequent one-year period beginning on the day after the end of the preceding Anniversary Year and ending on the next succeeding anniversary of the Closing Date.

           Appraised Value : The appraised value of a Mortgaged Property based upon the appraisal made by or for the originator, in compliance with the Servicer’s underwriting criteria (which criteria may permit an electronic appraisal or other abbreviated appraisal process), in each case at the time of the origination of the related Mortgage Loan or, if new appraisals are obtained, the appraised value based upon the most recent appraisal.

           Assessment of Compliance : As defined in Section 3.11.

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

           Available Funds : With respect to any Payment Date, the sum of (i) the Principal Collections for the related Collection Period, (ii) the Interest Collections for the related Collection Period, (iii) Early Termination Fees recovered from any Mortgagor during the related Collection Period and (iv) any other amounts remitted by the Servicer with respect to that Payment Date on the Servicer Remittance Date pursuant to Section 3.03(ii).

           Book-Entry Note : Any Class A Note registered in the name of the Depository or its nominee, ownership of a security entitlement with respect to which is reflected on the books of

3

the Depository or on the books of a Person maintaining an account with such Depository (directly or as an indirect participant in accordance with the rules of such Depository).

           Business Day : Any day other than (i) a Saturday or Sunday, or (ii) a day on which banking institutions in the States of New York or California or the city in which the Corporate Trust Office or the office of the Insurer is located are required or authorized by law to be closed.

           Certificate Account : The account maintained by the Administrator pursuant to Section 5.07

           Certificate Principal Balance : The Class Principal Balance of the Class B Certificates, the Class Principal Balance of the Class P Certificates, the Class Principal Balance of the Class L Certificates or the Class Principal Balance of the Class R Certificates, as applicable.

           Certificate Register and Certificate Registrar : The register which provides for the registration of the Certificates and the registration of transfers of Certificates, which shall be maintained by the Indenture Trustee, as Certificate Registrar.

           Certificateholders : The holders of the Class B Certificates, the Class P Certificates, the Class L Certificates or the Class R Certificates.

           Certificates : The Class B Certificates, the Class P Certificates, Class L Certificates and Class R Certificates.

           Charge-Off Amount : With respect to any Charged-Off HELOC under clause (i) of the definition thereof, the amount of the Principal Balance that has been written down (including, for any Mortgage Loan that became a Liquidated Mortgage Loan during the related Collection Period, any unrecovered portion of its Principal Balance that is written down during that Collection Period after giving effect to the Net Liquidation Proceeds applied in reduction of the Principal Balance of such Mortgage Loan) and with respect to any Charged-Off HELOC that became a Charged-Off HELOC during the related Collection Period under clause (ii) of the definition thereof, the entire Principal Balance of such Mortgage Loan minus the Appraised Value of the related Mortgaged Property.

           Charged-Off HELOC : Means (i) a Mortgage Loan with a Principal Balance that has been written down on the Servicer’s servicing system in accordance with its policies and procedures (including, any Mortgage Loan that became a Liquidated Mortgage Loan during the related Collection Period, and had an unrecovered portion of its related Principal Balance written down during that Collection Period) and (ii) any Mortgage Loan that is more than 180 days past due.

           Class : All Notes and Certificates bearing the same class designation.

4

           Class A Note : Any Note designated as a “Class A Asset-Backed Note” on the face thereof, substantially in the form of Exhibit A-1 to the Indenture.

           Class A Noteholder : The owner of the Class A Notes, as shown on the Note Register.

           Class A Principal Payment Amount : With respect to each Payment Date, (a) prior to the Stepdown Date or if a Rapid Amortization Event or Trigger Event has occurred, the Principal Payment Amount for such Payment Date and (b) on or after the Stepdown Date unless a Rapid Amortization Event or a Trigger Event has occurred, the lesser of (A) the excess of (i) the Note Principal Amount of the Class A Notes immediately prior to the applicable Payment Date over (ii) the Class A Target Amount for such Payment Date and (B) the Principal Payment Amount for such Payment Date.

           Class A Target Amount : For each Payment Date, the lesser of (a) the product of (i) 93.70% and (ii) the Invested Amount at the end of the related Collection Period and (b) the excess if any of (i) the Invested Amount at the end of the related Collection Period over (ii) 0.50% of the Cut-off Date Pool Balance.

           Class B Certificate : A Certificate, substantially in the form of Exhibit A-1 to the Trust Agreement.

           Class L Certificate : A Certificate, substantially in the form of Exhibit A-2 to the Trust Agreement.

           Class L Interest : The beneficial ownership interest in the assets of the Trust not represented by the Class B Certificate, the Class P Certificate and the Class R Certificate and is evidenced by the Class L Certificate.

           Class L Interest Collections : With respect to any Payment Date and the Class L Certificate, an amount equal to the Interest Collections allocable to such Payment Date times the Class L Percentage.

           Class L Percentage : For any Payment Date, 100% minus the Floating Allocation Percentage for such Payment Date.

           Class P Certificate : A Certificate, substantially in the form of Exhibit A-3 to the Trust Agreement

           Class R Certificate : A Residual Certificate, substantially in the form of Exhibit A-4 to the Trust Agreement.

           Class M1 Note : Any Note designated as a “Class M1 Asset-Backed Note” on the face thereof, substantially in the form of Exhibit A-2 to the Indenture.

5

           Class M1 Principal Payment Amount : With respect to any Payment Date, (a) prior to the Stepdown Date or if a Rapid Amortization or Trigger Event has occurred, the Principal Payment Amount for such Payment Date remaining after the Note Principal Amount of the Class A Notes has been reduced to zero and (b) on or after the Stepdown Date unless a Rapid Amortization Event or Trigger Event has occurred, the lesser of (i) the excess of (A) the aggregate of the Note Principal Amount of the Class A Notes (after giving effect to payments of principal on such Payment Date) and the Note Principal Amount of the Class M1 Notes immediately prior to such Payment Date over (B) the Class M1 Target Amount for such Payment Date and (ii) the Principal Payment Amount for such Payment Date after giving effect to payments of principal to the Holders of the Class A Notes therefrom.

           Class M1 Target Amount : With respect to each Payment Date, the lesser of (a) the product of (i) 95.90% and (ii) the Invested Amount at the end of the related Collection Period and (b) the excess if any of (i) the Invested Amount at the end of the related Collection Period over (ii) 0.50% of the Cut-off Date Pool Balance.

           Class M2 Note : Any Note designated as a “Class M2 Asset-Backed Note” on the face thereof, substantially in the form of Exhibit A-3 to the Indenture.

           Class M2 Principal Payment Amount : With respect to any Payment Date, (a) prior to the Stepdown Date or if a Rapid Amortization or Trigger Event has occurred, the Principal Payment Amount for such Payment Date remaining after the Note Principal Amount of the Class A Notes and the Class M1 Notes has been reduced to zero and (b) on or after the Stepdown Date unless a Rapid Amortization Event or Trigger Event has occurred, the lesser of (i) excess of (A) the aggregate of the Note Principal Amount of the Class A Notes (after giving effect to payments of principal on such Payment Date), the Note Principal Amount of the Class M1 Notes (after giving effect to payments of principal on such Payment Date) and the Note Principal Amount of the Class M2 Notes immediately prior to such Payment Date over (B) the Class M2 Target Amount for such Payment Date and (ii) the Principal Payment Amount for such Payment Date after giving effect to payments of principal to the Holders of the Class A Notes and the Class M1 Notes therefrom.

           Class M2 Target Amount : With respect to each Payment Date, the lesser of (a) the product of (i) 99.00% and (ii) the Invested Amount at the end of the related Collection Period and (b) the excess if any of (i) the Invested Amount at the end of the related Collection Period over (ii) 0.50% of the Cut-off Date Pool Balance.

           Class Principal Balance : With respect to the Class L Certificates and any Payment Date during the Managed Amortization Period, the sum of the Additional Balance Advance Amount for such Payment Date and any prior Payment Date, less (x) the sum of the amount, calculated for such Payment Date and any prior Payment Date, equal to all Charge-off Amounts for such Payment Date multiplied by the Class L Percentage for such Payment Date, and (y) distributions to such Class pursuant to Section 3.11 of the Trust Agreement representing principal payments on the Mortgage Loans for such Payment Date and any prior Payment Date. With respect to the Class L Certificates and any Payment Date during the Rapid Amortization Period, the sum of (a)

6

the Class Principal Balance of the Class L Certificates on the last Payment Date prior to the commencement of the Rapid Amortization Period (after giving effect to the payment of all distributions, and the allocation of Charge-Off Amounts on such Payment Date) plus (b) the aggregate amount of Draws conveyed to the Issuer during the Rapid Amortization Period, less (x) the sum of the amount, calculated for such Payment Date and any prior Payment Date during the Rapid Amortization Period, equal to all Charge-off Amounts for such Payment Dates multiplied by the Class L Percentage and (y) distributions to such Class pursuant to Section 3.11 of the Trust Agreement representing principal payments on the Mortgage Loans during the Rapid Amortization Period.

          With respect to the Class B Certificates and any Payment Date, an amount equal to the excess of the Invested Amount on the last day of the related Collection Period (after taking into account all Interest Collections and Principal Collections for such Payment Date) over the sum of the aggregate Note Principal Amount of the Notes immediately prior to such Payment Date.

          With respect to the Class P Certificates and any Payment Date, the maximum dollar amount of principal to which the Holder of the Class P Certificate is then entitled, such amount being equal to the Class P Certificate’s denomination minus all distributions of principal previously made with respect thereto.

          With respect to the Class R Certificates and any Payment Date, zero.

           Close of Business : With respect to any Business Day, 5:00 p.m. (New York time).

           Closing Date : June 27, 2006.

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

           Collection Account : The custodial account or accounts created and maintained for the benefit of the Noteholders, the Certificateholders and the Insurer pursuant to Section 3.02(b).

           Collection Period : With respect to any Payment Date and Mortgage Loan, the 19 ^th day of the calendar month immediately preceding such Payment Date to the 18 ^th day of the calendar month of such Payment Date.

           Combined Loan-to-Value Ratio or CLTV : With respect to any Mortgage Loan the sum of the Credit Limit of such Mortgage Loan at the time such Mortgage Loan was originated or at the time such Mortgage Loan is modified pursuant to Section 3.01(h) and the outstanding principal balance of any Senior Liens as of the date of origination of the Mortgage Loan, divided by the Appraised Value.

           Commission : The Securities and Exchange Commission.

7

           Controlling Class Notes : The Class A Notes, so long as any Class A Notes are Outstanding, then the Class M1 Notes, so long as any Class M1 Notes are Outstanding, and finally the Class M2 Notes.

           Controlling Party : The Insurer, so long as the Class A Notes are Outstanding or any Reimbursement Amounts remain due and owing to the Insurer and no Insurer Default shall have occurred and be continuing, and the Majority Securityholders, after the Class A Notes are no longer Outstanding and no Reimbursement Amounts are due and owing to the Insurer or for so long as an Insurer Default shall have occurred and is continuing.

           Conveyed Assets : As defined in Section 2.01(a).

           Corporate Trust Office : The principal office of the Indenture Trustee at which at any particular time its corporate business shall be administered, which office on the Closing Date is located at 1761 East Saint Andrew Place, Santa Ana, California 92705-4934, Attention: IN06H2.

           Credit Enhancement Percentage : With respect to the Class A Notes and any Payment Date, a percentage equal to (x) the sum of (i) the Note Principal Amount of the Class M1 Notes and the Class M2 Notes (after taking into account any payments of principal on such Payment Date) and (ii) the Overcollateralization Amount for such Payment Date, divided by (y) the Invested Amount for such Payment Date.

           Credit Limit : As to any Mortgage Loan, the maximum principal balance permitted under the terms of the related Mortgage Note.

           Credit Line Agreement : The Mortgage Note.

           Cut-off Date : As to any Mortgage Loan, the close of business on June 19, 2006.

           Cut-off Date Pool Balance : $499,902,120.

           Cut-off Date Principal Balance : With respect to any Mortgage Loan, the unpaid principal balance thereof as of the Cut-off Date (or as of the applicable date of substitution with respect to an Eligible Substitute Mortgage Loan pursuant to Section 2.02 or 2.05).

           Daily Draw Deficit : As of any day during any Collection Period preceding the commencement of the Rapid Amortization Period, the excess, if any, of the Aggregate Draw Amount on such day over the Floating Allocation Percentage of Principal Collections in respect of the Mortgage Loans received during such Collection Period and remaining on deposit in the Collection Account.

8

           Defective Mortgage Loan : Any Mortgage Loan subject to repurchase or substitution by the Seller pursuant to Section 2.02 or 2.05.

           Deferred Interest : With respect to the Notes of each Class and any Payment Date, the excess, if any, of interest due at the applicable Formula Note Rate over interest due at the applicable Note Rate.

           Definitive Notes : As defined in the Indenture.

           Delinquent Mortgage Loan and Delinquent : A Mortgage Loan is a Delinquent Mortgage Loan if the Monthly Payment due thereon is not received by the close of business on the Due Date in accordance with the related Mortgage Note and until such delinquency is subsequently cured.

           Depositor : IndyMac MBS Inc., a Delaware corporation.

           Depositor Certification : As defined in Section 3.14(e).

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

           Depository Agreement : The agreement dated as of June 27, 2006, among the Indenture Trustee, acting on behalf of the Trust, and The Depository Trust Company, as the initial Depository, relating to the Book-Entry Notes.

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

           Determination Date : With respect to any Payment Date, the date which is five (5) Business Days prior to such Payment Date.

           Distribution Report : As defined in Section 3.14.

           Draw : With respect to any Mortgage Loan, an additional borrowing by the related Mortgagor subsequent to the Cut-off Date in accordance with the related Mortgage Note.

           Draw Period : With respect to any Mortgage Loan, the period during which the related Mortgagor is permitted to make Draws.

           Due Date : With respect to any Mortgage Loan and any Monthly Payment, the date on which such Monthly Payment is due from the related Mortgagor.

9

           Early Termination Fee: As to a Mortgage Loan, any charge owed by a Mortgagor in connection with the termination of the related Credit Line Agreement within a specified period following the origination of such Mortgage Loan.

           Eligible Account : An account maintained at an Eligible Institution.

           Eligible Institution : Shall mean (1) any depository institution (which may be the Indenture Trustee) organized under the laws of the United States or any one of the States thereof, including the District of Columbia (or any domestic branch of a foreign bank) which at all times (a) has a short-term unsecured debt rating of “P-1” by Moody’s, (b) has a short-term unsecured debt rating of “A-1” by Standard & Poor’s and (c) has its accounts fully insured by the FDIC or maintains trust accounts in a fiduciary capacity, or (2) any other institution that is acceptable to each Rating Agency; provided, however, that if such other institution does not satisfy the rating criteria set forth in clause (1), such other institution shall also be acceptable to the Insurer. If so qualified, the Indenture Trustee or the Servicer may be considered an Eligible Institution for the purposes of this definition.

           Eligible Investments : One or more of the following:

                    (i) obligations of or guaranteed as to principal and interest by the United States or any agency or instrumentality thereof when such obligations are backed by the full faith and credit of the United States;

                    (ii) repurchase agreements on obligations specified in clause (i) maturing not more than one month from the date of acquisition thereof, provided that the unsecured obligations of the party agreeing to repurchase such obligations are at the time rated by each Rating Agency in its highest short-term rating available;

                    (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; provided that the debt obligations of such depository institution or trust company (or, if the only Rating Agency is Standard & Poor’s, in the case of the principal depository institution in a depository institution holding company, debt obligations of the depository institution holding company) at the date of acquisition thereof have been rated by each Rating Agency in its highest short-term rating available; and provided further that, if the only Rating Agency is Standard & Poor’s and if the depository or trust company is a principal subsidiary of a bank holding company and the debt obligations of such subsidiary are not separately rated, the applicable rating shall be that of the bank holding company; and, provided further that, if the original maturity of such short-term obligations of a domestic branch of a foreign depository institution or trust company shall exceed 30 days, the short-term rating of such institution shall be A-1+ in the case of Standard & Poor’s if Standard & Poor’s is the Rating Agency;

10

                    (iv) commercial paper and demand notes (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 on the date of acquisition has been rated by each Rating Agency in its highest short-term rating available; provided that such commercial paper shall have a remaining maturity of not more than 30 days;

                    (v) a money market fund or a qualified investment fund rated by each Rating Agency in its highest long-term rating available; and

                    (vi) other obligations or securities that are acceptable to each Rating Agency and the Insurer as an Eligible Investment hereunder and will not reduce the rating assigned to any Class of Notes by such Rating Agency below the lower of the then-current rating or the rating assigned to such Notes as of the Closing Date by such Rating Agency, as evidenced in writing;

                     provided , however , 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 payments with respect to such instrument provide a yield to maturity greater than 120% of the yield to maturity at par of such underlying obligations. References herein to the highest rating available on unsecured long-term debt shall mean AAA in the case of Standard & Poor’s and Fitch and Aaa in the case of Moody’s, and references herein to the highest rating available on unsecured commercial paper and short-term debt obligations shall mean A-1 in the case of Standard & Poor’s, P-1 in the case of Moody’s and either A-1 by Standard & Poor’s, P-1 by Moody’s or F-1 by Fitch in the case of Fitch; provided, however, that any Eligible Investment that is a short-term debt obligation rated A-1 by Standard & Poor’s must satisfy the following additional conditions: (i) the total amount of debt from A-1 issuers must be limited to the investment of monthly principal and interest payments (assuming fully amortizing collateral); (ii) the total amount of A-1 investments must not represent more than 20% of the aggregate outstanding Note Principal Amount of the Notes and each investment must not mature beyond 30 days; and (iii) if the investments may be liquidated prior to their maturity or are being relied on to meet a certain yield, interest must be tied to a single interest rate index plus a single fixed spread (if any) and must move proportionately with that index.

           Eligible Substitute Mortgage Loan : With respect to Mortgage Loans, a Mortgage Loan substituted by the Seller for a Mortgage Loan that constitutes a Defective Mortgage Loan which must, on the date of such substitution, (i) have an outstanding Principal Balance that is approximately equal to the Principal Balance of such Defective Mortgage Loan; (ii) have a Loan Rate not less than the Loan Rate of the Defective Mortgage Loan and not more than 1% in excess of the Loan Rate of such Defective Mortgage Loan; (iii) have a Loan Rate Cap based on the Index, determined in accordance with then current underwriting standards; (iv) have a Margin that is not less than the Margin of the Defective Mortgage Loan and not more than 1% in excess of the Margin for the Defective Mortgage Loan; (v) have a Mortgage of the same or higher level of priority as the Mortgage relating to the Defective Mortgage Loan at the time such

11

Mortgage was transferred to the Trust; (vi) have a maturity not later than the Final Scheduled Payment Date; (vii) comply with each representation and warranty set forth in Section 2.04 (deemed to be made as of the date of substitution); and (viii) have an original Combined Loan-to-Value Ratio not greater than that of the Defective Mortgage Loan.

          More than one Eligible Substitute Mortgage Loan may be substituted for a Defective Mortgage Loan if such Eligible Substitute Mortgage Loans meet the foregoing attributes in the aggregate.

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

           Errors and Omissions Insurance Policy : As defined in Section 3.06.

           Event of Servicer Termination : As defined in Section 7.01.

           Excess Cashflow : With respect to any Payment Date and each Class of Notes, the Floating Allocation Percentage of Available Funds for such Payment Date which remain on deposit in the Payment Account after taking into account the payments on such Payment Date listed in (x) in the case of the Class A Notes, clauses (i) through (vii) of Section 5.01(a), (y) in the case of the Class M1 Notes, clauses (i) through (viii) of Section 5.01(a) and the Class M1 Principal Payment Amount paid to the Holders of the Class M1 Notes pursuant to clause (I) of Section 5.01(a) and (z) in the case of the Class M2 Notes, clauses (i) through (ix) of Section 5.01(a) and the Class M2 Principal Payment Amount paid to the Holders of the Class M2 Notes pursuant to clause (x) of Section 5.01(a).

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

           Expense Fee Rate : Is an amount equal to the sum of (i) the Servicing Fee Rate, (ii) the fees of the Owner Trustee, (iii) a per annum rate equal to a fraction, the numerator of which is the product of (a) 12 and the sum of (b)(1) current interest shortfalls resulting from the application of the Servicemembers Civil Relief Act, or any similar state law, (2) any interest shortfalls resulting from prepayments of the Mortgage Loans and (3) payments to the Indenture Trustee in respect of the Indenture Trustee Expense Amount and the denominator of which is the Pool Balance at the beginning of the related Collection Period and (iv) the product of (a) the rate at which the Insurer Premium is calculated and (b) a fraction, the numerator of which is the Note Principal Amount of the Class A Notes immediately before the Payment Date and the denominator of which is the Pool Balance at the beginning of the related Collection Period.

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

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

12

           Fidelity Bond : As defined in Section 3.06.

           Final Recovery Determination : With respect to any defaulted Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property purchased by the Seller or the Servicer pursuant to or as contemplated by Sections 2.02, 2.04, 2.05, 3.07 or 8.01), a determination made by the Servicer that all Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which the Servicer, in its reasonable good faith judgment, expects to be finally recoverable in respect thereof have been so recovered. The Servicer shall maintain records, prepared by a Servicing Officer, of each Final Recovery Determination made thereby.

           Final Scheduled Payment Date : The Payment Date in June 2036,whereby the Holders of each Class of Notes shall be entitled to receive a payment of principal in an amount equal to the Note Principal Amount of such Class of Notes and any accrued and unpaid interest thereon.

           Floating Allocation Percentage : With respect to any Payment Date, the percentage equivalent of a fraction the numerator of which is the Invested Amount at the end of the related Collection Period giving effect to Principal Collections that are allocated to the Notes on such Payment Date and the denominator of which is the Pool Balance at the end of the related Collection Period (or in the case of the first Payment Date, the Cut-off Date Pool Balance), provided such percentage shall not be greater than 100%.

           Foreclosure Profit : With respect to a Liquidated Mortgage Loan, the amount, if any, by which (i) the related aggregate Net Recoveries exceed (ii) the related Principal Balance (without giving effect to any reduction thereto in respect of any prior Charge-Off Amounts) immediately prior to receipt of the final Recoveries plus accrued and unpaid interest thereon at the applicable Loan Rate from the date interest was last paid through the date of receipt of the final Recoveries.

           Formula Note Rate : (i) with respect to the Class A Notes and any Interest Accrual Period, the per annum rate equal to LIBOR plus 0.15%; (ii) with respect to the Class M1 Notes and any Interest Accrual Period, the per annum rate equal to LIBOR plus 2.75%; and (iii) with respect to the Class M2 Notes and any Interest Accrual Period, the per annum rate equal to LIBOR plus 2.75%.

           Holders : The holders of the Class A Notes, the Class M Notes, the Class B Certificates, the Class P Certificates, the Class L Certificates or the Class R Certificates.

           Indenture : The Indenture dated as of June 19, 2006, between the Issuer and the Indenture Trustee, as such may be amended, modified or supplemented from time to time.

           Indenture Trustee : Deutsche Bank National Trust Company, a national banking association, as Indenture Trustee under this Agreement, or any successor Indenture Trustee appointed in accordance with this agreement.

13

           Indenture Trustee Expense Amount : Means, any costs, expenses or liabilities reimbursable to the Indenture Trustee to the extent provided in the Indenture; provided, however, such reimbursable amounts may not exceed $20,000 on any Payment Date or $150,000 during any Anniversary Year (excluding, for this purpose, costs and expenses of the indenture trustee incurred in connection with any transfer of servicing following a default by the Servicer). In the event that the Indenture Trustee incurs reimbursable amounts in excess of $150,000, it may seek reimbursement for such amounts in subsequent Anniversary Years, but (subject to the immediately preceding sentence) in no event shall more than $150,000 be reimbursed to the Indenture Trustee per Anniversary Year.

           Indenture Trustee Fee : An amount as agreed upon between the Indenture Trustee and the Seller and Servicer, pursuant to a side letter dated as of June 27, 2006.

           Index : Means the Prime Rate.

           Initial Invested Amount : $499,902,120.

           Initial LIBOR Rate : 5.485%.

           Initial Note Principal Amount : (i) with respect to the Class A Notes, $486,654,000, (ii) with respect to the Class M1 Notes, $4,749,000, and (iii) with respect to the Class M2 Notes, $8,498,000.

           Insurance and Indemnity Agreement : The Insurance and Indemnity Agreement dated as of June 27, 2006 among the Indenture Trustee, the Insurer and the other parties thereto, including any amendments and supplements thereto in accordance with the terms thereof.

           Insurance Agreement Event of Default : For purposes of Section 7.01 hereunder, and notwithstanding the definition of the same set forth in the Insurance and Indemnity Agreement, the occurrence of one or more of the following events:

          (a) Any representation or warranty (other than a representation or warranty in respect of the Mortgage Loans contained in Section 3.01 of the Mortgage Loan Purchase Agreement or Section 2.04 of the Sale and Servicing Agreement, so long as the party breaching such representation or warranty shall have performed its obligations with respect thereto in accordance with the Mortgage Loan Purchase Agreement or the Sale and Servicing Agreement, as the case may be) made by the Sponsor, the Seller, the Servicer, the Depositor or the Trust under the Insurance and Indemnity Agreement or under any other Transaction Document, or in any certificate furnished under the Insurance and Indemnity Agreement or under any other Transaction Document, shall prove to be untrue or incomplete in any material respect; provided, however, that if the Sponsor, the Seller, the Servicer, the Depositor or the Trust effectively cures any such defects in any representation or warranty under any Transaction Document or certificate or report furnished under any Transaction Document, within the time period specified

14

in the related document as the cure period therefor, such defect shall not in and of itself constitute an Insurance Agreement Event of Default;

          (b) (i) The Sponsor, the Seller, the Servicer, the Depositor or the Trust shall fail to pay when due any amount payable by the Sponsor, the Seller, the Servicer, the Depositor or the Trust unless such amounts are paid in full within the cure period therefor, respectively, under the Insurance and Indemnity Agreement or (ii) a legislative body has enacted any law that declares or a court of competent jurisdiction shall find or rule that the Insurance Agreement or any other Transaction Document are not valid and binding on the Sponsor, the Seller, the Servicer, the Depositor or the Trust;

          (c) Any failure on the part of the Sponsor, the Seller, the Servicer, the Depositor or the Trust duly to observe or perform in any material respect any other of the covenants or agreements on the part of the Sponsor, the Seller, the Servicer, the Depositor or the Trust contained in the Insurance and Indemnity Agreement or in any other Transaction Document which continues unremedied beyond any cure period provided therein, or, in the case of the Insurance and Indemnity Agreement, for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Sponsor, the Seller, the Servicer, the Depositor or the Trust by the Insurer (with a copy to the Indenture Trustee) or by the Indenture Trustee (with a copy to the Insurer). Such failure shall not constitute an Insurance Agreement Event of Default hereunder, if within such 60-day period the Sponsor, the Seller, the Servicer, the Depositor or the Trust, as the case may be, shall have given notice to the Insurer of corrective action it proposes to take, which corrective action is agreed, in writing by the Insurer to be satisfactory and the Sponsor, the Seller, the Servicer, the Depositor or the Trust shall thereafter pursue such corrective action diligently until such default is cured;

          (d) A decree or order of a court or agency or supervisory authority having jurisdiction in the premises in an involuntary case under any present or future federal or state insolvency or similar law or the appointment of a conservator or receiver or liquidator or other similar official in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Sponsor, the Seller or the Servicer and such decree or order shall have remained in force undischarged or unstayed for a period of 90 consecutive days;

          (e) The Sponsor, the Seller or the Servicer shall consent to the appointment of a conservator or receiver or liquidator or other similar official in any involuntary insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Sponsor, the Seller or the Servicer or of or relating to all or substantially all of its property and if the Sponsor, the Seller or the Servicer, shall fail to take appropriate action resulting in the withdrawal or dismissal of such proceeding within 60 Business Days; or

          (f) The Sponsor, the Seller or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of or otherwise voluntarily commence a case or proceeding under any applicable insolvency, reorganization or

15

other similar statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations.

           Insurance Proceeds : Proceeds of any title policy or other insurance policy covering a Mortgage Loan, 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 the procedures that the Servicer would follow in servicing mortgage loans held for its own account, subject to the terms and conditions of the related Mortgage Note and Mortgage.

           Insured Amount : As defined in the Policy with respect to the Class A Notes and each Payment Date.

           Insurer : Ambac Assurance Corporation, a Wisconsin stock insurance corporation, or any successor thereto.

           Insurer Default : The failure by the Insurer to make a payment required under the Policy in accordance with the terms thereof.

           Interest Accrual Period : with respect to each Payment Date will be the period from and including the preceding Payment Date (or, in the case of the first Payment Date, from the Closing Date) to, but excluding the current Payment Date.

           Interest Collections : with respect to any Payment Date, is equal to the sum of (a) all payments by or on behalf of mortgagors and any other amounts constituting interest, including the portion of Net Liquidation Proceeds and Insurance Proceeds allocated to interest pursuant to the terms of the related Mortgage Note (excluding the fees or late charges or similar administrative fees paid by Mortgagors) collected during the related Collection Period and all Recoveries, less the Servicing Fee for the related Collection Period and (b) the interest portion of (i) the purchase price paid for a Mortgage Loan repurchased by the seller or the originator during the related Collection Period, (ii) any Substitution Amounts in respect of a qualifying substitute Mortgage Loan which is substituted by the seller or the originator during the related Collection Period for a removed Mortgage Loan, and (iii) the Optional Redemption Price in connection with any Optional Redemption of the Notes during the related Collection Period. The terms of the related Mortgage Note shall determine the portion of each payment in respect of such Mortgage Loan that constitutes principal or interest.

           Interest Payment Amount : With respect to the Notes of each Class and any Payment Date, (x) the Note Rate applicable to such Class and Payment Date multiplied by (y) the Note Principal Amount of such Class immediately prior to such Payment Date multiplied by (z) a fraction, the numerator of which is the actual number of days in the related Interest Accrual Period and the denominator of which is 360.

           Invested Amount : On any Payment Date, is the Initial Invested Amount reduced by (i) the aggregate amount of principal collected on the Mortgage Loans and allocated to the Notes

16

from the Cut-off Date through and including such Payment Date and (ii) the aggregate Investor Charge-Off Amounts since the Cut-off Date, including the Investor Charge-Off Amount for such Payment Date.

           Investor Charge-Off Amount : For any Payment Date, the Charge-Off Amounts incurred during the related Collection Period multiplied by the Floating Allocation Percentage for such Payment Date.

           Late Payment Rate : For any Payment Date, the lesser of (a) the greater of (i) the rate of interest, as it is publicly announced by Citibank, N.A. at its principal office in New York, New York, as its prime rate (any change in such prime rate of interest to be effective on the date such change is announced by Citibank, N.A.), plus 2% per annum and (ii) the then applicable highest rate of interest on the Notes and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days.

           LIBOR : With respect to the first Interest Accrual Period, the Initial LIBOR Rate. With respect to each subsequent Interest Accrual Period, a per annum rate determined on the LIBOR Determination Date in the following manner by the Indenture Trustee on the basis of the “Interest Settlement Rate” set by the British Bankers’ Association (the “BBA”) for one-month United States dollar deposits, as such rates appear on the Telerate Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date.

          (a) If on such a LIBOR Determination Date, the BBA’s Interest Settlement Rate does not appear on the Telerate Page 3750 as of 11:00 a.m. (London time), or if the Telerate Page 3750 is not available on such date, the Indenture Trustee will obtain such rate from Reuters’ “page LIBOR 01” or Bloomberg’s page “BBAM”. If such rate is not published for such LIBOR Determination Date, LIBOR for such date will be the most recently published Interest Settlement Rate. In the event that the BBA no longer sets an Interest Settlement Rate, the Indenture Trustee will designate an alternative index (which, so long as the Class A Notes are Outstanding, is acceptable to the Insurer) that has performed, or that the Indenture Trustee expects to perform, in a manner substantially similar to the BBA’s Interest Settlement Rate.

          (b) The establishment of LIBOR by the Indenture Trustee and the Indenture Trustee’s subsequent calculation of the Note Rate for the relevant Interest Accrual Period, in the absence of manifest error, will be final and binding.

           LIBOR Business Day : Any day other than (i) a Saturday or a Sunday and (ii) a day on which banking institutions in the State of New York or in the city of London, England are required or authorized by law to be closed.

           LIBOR Determination Date : With respect to any Interest Period, the second LIBOR Business Day preceding the first day of such Interest Period.

17

           Lien : Any lien, charge, mortgage, claim, participation interest, equity, pledge or security interest of any nature, encumbrances or right of others.

           Liquidation Expenses : Expenses that are incurred by the Servicer in connection with the liquidation of any defaulted Mortgage Loan and are not recoverable under the applicable primary mortgage insurance policy, if any, including, without limitation, foreclosure and rehabilitation expenses, legal expenses and unreimbursed amounts, if any, expended pursuant to Sections 3.07 or 3.08.

           Liquidated Mortgage Loan : Any Mortgage Loan as to which the Servicer has made a Final Recovery Determination.

           Liquidation Event : With respect to any Mortgage Loan, any of the following events: (i) such Mortgage Loan is paid in full; (ii) a Final Recovery Determination is made as to such Mortgage Loan or (iii) such Mortgage Loan is removed from the Trust Fund by reason of its being purchased, sold or replaced pursuant to or as contemplated by Sections 2.02, 2.04, 2.05 3.07 or 8.01. With respect to any REO Property, either of the following events: (i) a Final Recovery Determination is made as to such REO Property or (ii) such REO Property is removed from the Trust Fund by reason of its being sold or purchased pursuant to Sections 3.07(a) or 8.01.

           Liquidation Proceeds : The amount (other than amounts received in respect of the rental of any REO Property prior to REO Disposition) received by the Servicer in connection with (i) the taking of all or a part of a Mortgaged Property by exercise of the power of eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage Loan by means of a trustee’s foreclosure sale or otherwise or (iii) the repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant to or as contemplated by Sections 2.02, 2.04, 2.05, 3.07 or 8.01.

           Loan Rate : With respect to any Mortgage Loan as of any day, the variable interest rate applicable under the related Mortgage Note.

           Loan Rate Cap : With respect to any Mortgage Loan, the lesser of (i) the maximum Loan Rate permitted by the related Mortgage Note over the life of the Mortgage Loan, and (ii) the applicable state usury ceiling.

           Lost Note Affidavit : An affidavit in the form of Exhibit H.

           Majority Securityholders : During the period that any Notes are outstanding, the holder or holders of in excess of 50% of the Note Principal Amount of the Controlling Class Notes; and thereafter, the holders of the Certificates (voting collectively as a single class).

           Managed Amortization Period : With respect to the Notes, the period commencing on the first Payment Date and ending on the earlier to occur of (x) the 120 ^th Payment Date and (y) the Payment Date which immediately follows a Rapid Amortization Event.

18

           Margin : With respect to each Mortgage Loan, the fixed percentage amount set forth in the related Credit Line Agreement which amount is added to the Prime Rate in accordance with the terms of such Credit Line Agreement to determine the Loan Rate for such Mortgage Loan, subject to the Loan Rate Cap.

           Material Adverse Change : As defined in the Insurance and Indemnity Agreement.

           Maximum Principal Payment : With respect the Notes, (i) during the Managed Amortization Period, the Net Principal Collections with respect to such Payment Date, and (ii) during the Rapid Amortization Period, the Floating Allocation Percentage of Principal Collections for such Payment Date.

           Maximum Rate : With respect to the Notes on any Payment Date, the product of (x) the weighted average of the Loan Rates of the Mortgage Loans, based on the Stated Principal Balance of each Mortgage Loan, as of the beginning of the Collection Period, net of (i) the Servicing Fee Rate, (ii) the fees of the Owner Trustee (expressed as a per annum rate), (iii) the Indenture Trustee Fee (expressed as a per annum rate), (iv) a per annum rate equal to a fraction, the numerator of which is the product of (a) 12 and (b) the sum of (1) any interest shortfalls resulting from application of the Relief Act, (2) any interest shortfalls resulting from prepayments on the Mortgage Loans, and (3) any payments to the Indenture Trustee in respect of the Indenture Trustee Expense Amount and the denominator of which is the Pool Balance at the beginning of the related Collection Period, and (v) the product of (1) the premiums payable to the Insurer (expressed as a per annum rate) and (2) a fraction, the numerator of which is the Note Principal Amount of the Class A Notes immediately before the Payment Date and the denominator of which is the Pool Balance at the beginning of the related Collection Period, and (y) a fraction, the numerator of which is 30 and the denominator of which is the number of days in the related Interest Accrual Period.

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

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

           Monthly Payment : With respect to a Mortgage Loan, the scheduled monthly payment of principal and/or interest required to be made by a Mortgagor on such Mortgage Loan.

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

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

19

           Mortgage File : The mortgage documents listed in Section 2.01(e)(i) and (ii), pertaining to a particular Mortgage Loan and any additional documents required to be added to the Mortgage File pursuant to this Agreement.

           Mortgage Loan : Each of the home equity line of credit mortgage loans that is transferred and assigned to the Trust pursuant to Sections 2.01, 2.05 and 2.09, together with the Related Documents, exclusive of home equity line of credit mortgage loans that are transferred to the Seller, from time to time pursuant to Sections 2.02 and 2.05.

           Mortgage Loan Purchase Agreement : The mortgage loan purchase agreement, dated as of  June 19, 2006, between the Seller and the Depositor, relating to the sale of the Mortgage Loans from the Seller to the Depositor.

           Mortgage Loan Schedule : With respect to the Cut-off Date, the schedule of Mortgage Loans constituting assets of the Trust and thereafter as amended or supplemented pursuant to the terms hereof. The Mortgage Loan Schedule is the schedule set forth herein as Exhibit A, which schedule sets forth as to each Mortgage Loan: (i) the Cut-off Date Principal Balance, (ii) the loan number, (iii) the Credit Limit, (iv) the CLTV as of the date of the origination of the related Mortgage Loan, (v) occupancy and loan purpose, (vi) the Loan Rate as of the Cut-off Date, (vii) the Margin, (viii) the type of property, (ix) the debt-to-income ratio, (x) the credit score, (xi) the Originator, (xii) the Loan Rate Cap, (xiii) documentation type, (xiv) zip code, (xv) term of the draw period, (xvi) lien position, (xvii) maximum rate, (xviii) original term , (xix) remaining term, and (xx) any related Early Termination Fee.

           Mortgage Note : With respect to a Mortgage Loan, the related credit line account agreement executed by the related Mortgager and any amendment or modification thereof.

           Mortgaged Property : With respect to each Mortgage Loan, the underlying real property, including improvements thereon.

           Mortgagee : With respect to any Mortgage Loan as of any date of determination, the holder of the related Mortgage Note and any related Mortgage as of such date.

           Mortgagor : With respect to any Mortgage Loan, the obligor or obligors under the related Mortgage Note.

           Net Available Funds : With respect to each Payment Date, the excess of (A) the Available Funds for that Payment Date, over (B) the sum of (i) the payment of the Indenture Trustee Expense Amount, (ii) the payment to the Owner Trustee of its fee for services rendered pursuant to the Trust Agreement, (iii) all Early Termination Fees (which are distributable only to the Class P Certificates), and (iv) during the Managed Amortization Period, the amount of Principal Collections for that Payment Date applied to purchase additional draws under the Mortgage Loans.

20

           Net Charge-Off Amount : With respect to any Mortgage Loan, the Charge-Off Amount, less any Net Recoveries with respect to such Mortgage Loan.

           Net Liquidation Proceeds : With respect to any Liquidated Mortgage Loan or any other disposition of related Mortgaged Property (including REO Property), the related Liquidation Proceeds net of Servicing Advances, Servicing Fees and any other accrued and unpaid servicing fees received and retained in connection with the liquidation of such Mortgage Loan or Mortgaged Property.

           Net Loan Rate : With respect to any Mortgage Loan on any day, the Loan Rate less the Expense Fee Rate.

           Net Principal Collections : With respect to the Mortgage Loans and any Payment Date, an amount equal the positive difference between (x) the Floating Allocation Percentage of Principal Collections with respect to such Payment Date and (y) the Floating Allocation Percentage of the aggregate principal amount of all Additional Balances arising during the related Collection Period; provided, however , that in no event will Net Principal Collections be less than zero with respect to any Payment Date.

           Net Recoveries : With respect to any Charged-Off HELOC, Recoveries net of unreimbursed Servicing Fees with respect thereto.

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

           Nonrecoverable Advance : Any Advance previously made or proposed to be made by the Servicer in respect of a Mortgage Loan which, in the good faith judgment of the Servicer, will not, or, in the case of a proposed Advance, would not, be ultimately recoverable by the Servicer from related late collections, Insurance Proceeds, Liquidation Proceeds or proceeds from the disposition of any REO Property. To the extent that any Mortgagor is not obligated under the related Mortgage documents to pay or reimburse any portion of any Servicing Advances that are outstanding with respect to the related Mortgage Loan as a result of a modification of such Mortgage Loan by the Servicer, which forgives amounts which the Servicer or Subservicer had previously advanced, and the Servicer determines that no other source of payment or reimbursement for such advances is available to it, such Servicing Advances shall be deemed to be Nonrecoverable Advances. The determination by the Master Servicer that it has made a Nonrecoverable Advance or that any proposed Advance would constitute a Nonrecoverable Advance, shall be evidenced by an Officer’s Certificate delivered to the Company, the Indenture Trustee and the Insurer.

           Note Principal Amount : With respect to any Class of Notes and any date, the Initial Note Principal Amount, less the amount of all principal distributions previously distributed with respect to such Note and, in the case of the Class M1 and Class M2 Notes, any Investor Charge-Off Amounts allocated to such Class pursuant to Section 3.19(b).

21

           Note Rate : With respect to each Class of Notes and any Payment Date, the lesser of the applicable Formula Note Rate and the Maximum Rate for such Payment Date.

           Note Register and Note Registrar : The register which provides for the registration of the Class A Notes and the registration of transfers of the Class A Notes, which shall be maintained by the Indenture Trustee, as Note Registrar.

           Noteholder: Any owner of the Notes, as shown on the Note Register.

           Notes : The Class A Notes, the Class M1 Notes and the Class M2 Notes, collectively.

           Officer’s Certificate : A certificate signed by the President, an Executive Vice President, a Senior Vice President, a Vice President, an Assistant Vice President, the Treasurer, Assistant Treasurer, Cashier, Assistant Cashier, Controller or Assistant Controller of the Servicer, Seller or the Depositor, as the case may be, and delivered to the Indenture Trustee and the Insurer.

           Opinion of Counsel : A written opinion of counsel, who may be in-house counsel for the Servicer (or its affiliate), the Depositor (or its affiliate), the Seller (or its affiliate) or the Depositor (or its affiliate) (except that any opinion pursuant to Section 2.01 or 6.04 or relating to taxation or otherwise as required by the Insurer must be an opinion of independent outside counsel) and who, in the case of opinions delivered to the Insurer, the Indenture Trustee and the Rating Agency, is reasonably acceptable to each of them.

           Optional Redemption Date : As defined in Section 8.01(b) of this Agreement.

           Optional Redemption Holder : The Servicer.

           Optional Redemption Price : An amount equal to the greater of: (a) the sum of (i) the aggregate outstanding Principal Balance of each Mortgage Loan, plus accrued interest at the applicable Loan Rate, (ii) any costs and damages incurred by the Trust in connection with a violation of any federal, state or local predatory or abusive lending law, (iii) the fair market value of all other property being purchased and (iv) any unreimbursed Servicing Advances, unreimbursed expenses and any unpaid fees due to the Servicer, the Insurer, the Indenture Trustee and the Owner Trustee, and (v) any Reimbursement Amounts and (b) the sum of (i) the Note Principal Amount of the Class A Notes, the Class M1 Notes and the Class M2 Notes with interest due thereon (including Deferred Interest), (ii) any costs and damages incurred by the Trust in connection with a violation of any federal, state or local predatory or abusive lending laws, (iii) any unreimbursed Servicing Advances, unreimbursed expenses and any unpaid fees due to the Servicers, the Insurer, the Indenture Trustee, and the Owner Trustee and (iv) any Reimbursement Amounts.

           Originator : With respect to each Mortgage Loan sold by the Seller, the originator of such Mortgage Loan as specified in the Mortgage Loan Schedule.

22

           Outstanding : The meaning specified in the Indenture.

           Overcollateralization Amount : With respect to the Notes and any Payment Date, the excess, if any, of (x) the Invested Amount as of the end of the related Collection Period over (y) the sum of the Note Principal Amount of the Notes as of such Payment Date (after taking into account any reductions to such Note Principal Amount resulting from payments made pursuant to clauses (iii), (iv), (viii), (ix) and (x) of Section 5.01(a) of this Agreement on such Payment Date).

           Overcollateralization Deficiency Amount : With respect to the Notes and any Payment Date, the excess, if any, of (i) the Specified Overcollateralization Amount for such Payment Date over (ii) the Overcollateralization Amount for such Payment Date.

           Overcollateralization Deficit : With respect to the Class A Notes and any Payment Date, the amount, if any, by which (a) the Note Principal Amount of the Class A Notes, after taking into account the payment to the Holders of the Class A Notes of all principal from all sources other than the Policy on such Payment Date, exceeds (b) the Invested Amount as of as of the end of the related Collection Period plus any Principal Collections due in the immediately preceding Collection Period but received in the subsequent Collection Period before the related Servicer Remittance Date.

           Owner Trustee : Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity but solely as owner trustee under the Trust Agreement, and any successor owner trustee under the Trust Agreement appointed in accordance with the terms thereof.

           Payment Account : The segregated non-interest bearing trust account established by the Indenture Trustee pursuant to Section 5.05.

           Payment Date : The 28 ^th day of each month or, if such day is not a Business Day, then the next Business Day, beginning in July 2006.

           Permitted Activities : The activities allowed under Paragraph 35 of SFAS 140.

           Percentage Interest : With respect to the Notes of any Class, the percentage obtained by dividing the principal denomination of such Note by the aggregate of the principal denominations of all Notes of such Class. With respect to a Certificate, the percentage set forth on the face of such Certificate.

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

23

           Plan : An employee benefit plan or other retirement arrangement which is subject to Section 406 of ERISA and/or Section 4975 of the Code or any entity whose underlying assets include such plan’s or arrangement’s assets by reason of their investment in the entity.

           Policy : The financial guaranty insurance policy (No.AB1006BE) with respect to the Class A Notes and all endorsements thereto, if any, dated the Closing Date, issued by the Insurer for the benefit of the Holders of the Class A Notes, a copy of which is attached hereto as Exhibit G.

           Pool Balance : With respect to any date, the aggregate of the Principal Balances of all of the Mortgage Loans as of such date.

           Preference Amount : As defined in the Policy.

           Premium Amount : The premium payable to the Insurer for the Policy pursuant to the Insurance and Indemnity Agreement.

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

           Principal Balance : As of any date of determination and any Mortgage Loan, an amount equal to the Cut-off Date Principal Balance of the Mortgage Loan, plus (i) any Additional Balances transferred to the trust in respect of the Mortgage Loan, minus (ii) all collections credited against the principal balance of the Mortgage Loan in accordance with the related Credit Line Agreement prior to that day, and minus (iii) all prior related Charge-Off Amounts. For purposes of this definition, a Liquidated Mortgage Loan will have a Principal Balance equal to the Principal Balance of that Mortgage Loan prior to the final recovery of liquidation proceeds and a Principal Balance of zero thereafter.

           Principal Collections : with respect to any Payment Date, is equal to the sum of amounts allocated to principal collected during the related Collection Period, the portion of Net Liquidation Proceeds and Insurance Proceeds allocated to principal pursuant to the terms of the Credit Line Agreements, any amounts allocable to principal with respect to any Mortgage Loans that are repurchased out of the trust, the principal portion of any Substitution Amount and the principal portion of any Optional Redemption Price.

           Principal Payment Amount : With respect to the Notes on any Payment Date, the Maximum Principal Payment with respect to such Payment Date.

           Principal Prepayment : Any payment of principal made by the Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due Date and which is not accompanied by an amount of interest representing the full amount of scheduled interest due on any Due Date in any month or months subsequent to the month of prepayment.

24

           Purchase Price : An amount equal to the principal balance of the Mortgage Loan at the time of any transfer Pursuant to Sections 2.03 or 2.04 plus (a) the greater of (i) accrued and unpaid interest at the applicable mortgage loan rate net of the servicing fee to the date of repurchase and (ii) 30 days’ interest, computed at the applicable mortgage loan rate and (b) any expenses incurred by the trust as a result of the defect, including any costs and damages actually incurred and paid by or on behalf of the trust in connection with any violation of such mortgage loan of any predatory or abusive lending laws..

           Purchaser : The Depositor, as purchasers of the Mortgage Loans under the Mortgage Loan Purchase Agreement.

           Qualifying SPE : As set forth in SFAS 140.

           Rapid Amortization Event : As defined in Section 5.08.

           Rapid Amortization Period : The period commencing on the day immediately following the end of the Managed Amortization Period and continuing until the termination of the Trust pursuant to Section 8.01.

           Rating Agency : Any statistical credit rating agency, or its successor, that rated the Class A Notes at the request of the Depositor at the time of the initial issuance of the Class A Notes. If such agency or a successor is no longer in existence, “Rating Agency” shall be such statistical credit rating agency, or other comparable Person, designated by the Servicer and the Insurer, notice of which designation shall be given to the Indenture Trustee. References herein to the highest short term unsecured rating category of a Rating Agency shall mean “A-1+” or better in the case of Standard & Poor’s and “P-1” or better in the case of Moody’s and in the case of any other Rating Agency shall mean the ratings such other Rating Agency deems equivalent to the foregoing ratings. References herein to the highest long-term rating category of a Rating Agency shall mean “AAA” in the case of Standard & Poor’s and “Aaa” in the case of Moody’s and in the case of any other Rating Agency, the rating such other Rating Agency deems equivalent to the foregoing ratings.

           Ratings : The ratings initially assigned to the Notes and the Certificates by the Rating Agencies, as evidenced by letters from the Rating Agencies.

           Record Date : With respect to the Class A Notes for so long as the Class A Notes are held in book-entry form, the Business Day immediately preceding the related Payment Date following the date on which Definitive Notes are issued for the Class A Notes, and with respect to any other Class of Notes or Certificates, the last Business Day of the calendar month preceding the month in which the related Payment Date occurs

           Recordation Event : Any of (i) the long-term senior unsecured debt rating of the Seller (or any successor in interest thereto) is no longer being rated at least “BBB-” by Standard & Poor’s, (ii) the occurrence of an Event of Servicer Termination, or (iii) the occurrence of a

25

bankruptcy, insolvency or foreclosure relating to the Servicer; provided , that any Recordation Event may be waived by the Insurer (so long as the Class A Notes are Outstanding or any Reimbursement Amounts remain due and owing to the Insurer and no Insurer Default has occurred and is continuing) by its providing written notice of such waiver to the Servicer and the Indenture Trustee; and (iv) at the written request of the Insurer (so long as the Class A Notes are Outstanding or any Reimbursement Amounts remain due and owing to the Insurer and no Insurer Default has occurred and is continuing) to the Indenture Trustee to cause the Custodian to record Assignments of Mortgages because the Insurer has determined, in the exercise of its reasonable judgment, that such recordation is necessary to protect the Insurer’s interest with respect to such Mortgage Loans because (a) a Material Adverse Change with respect to the Seller or the Servicer has occurred, (b) the Insurer has been so advised by counsel as a result of a change that occurred after the Closing Date in applicable law or the interpretation thereof or (c) with respect to a particular Mortgage Loan, the insolvency of the related Mortgagor.

           Recoveries : With respect to a Charged-Off HELOC, the proceeds (including Released Mortgaged Property Proceeds but not including amounts drawn under the Policy) received by the Servicer in connection with such Charged-Off HELOC minus related Servicing Advances and any amount due the holder of any Senior Lien that has not been previously paid.

           Reference Banks : Three major banks that are engaged in the London interbank market, selected by the Servicer and identified in writing to the Indenture Trustee.

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

           Reimbursement Amount : As of any Payment Date with respect to the Class A Notes, the sum of (x)(i) all Insured Payments paid by the Insurer, but for which the Insurer has not been reimbursed prior to such Payment Date pursuant to Section 5.01(a)(v) of this Agreement, plus (ii) interest accrued on such Insured Payments not previously repaid calculated at the Late Payment Rate from the date the Indenture Trustee received the related Insured Payments and (y), without duplication, (i) any other amounts then due and owing to the Insurer under the Insurance Agreement as certified to the Indenture Trustee by the Insurer, plus (ii) interest on such amounts at the Late Payment Rate.

           Related Documents : With respect to each Mortgage Loan, the documents listed in Section 2.01(e)(ii)(B) through (D).

           Released Mortgaged Property Proceeds : As to any Mortgage Loan, proceeds received by the Servicer in connection with (a) a taking of an entire Mortgaged Property by exercise of the power of eminent domain or condemnation or (b) any release of part of the Mortgaged Property from the lien of the related Mortgage, whether by partial condemnation, sale or otherwise, which

26

are not released to the Mortgagor in accordance with (i) applicable law, (ii) mortgage servicing standards employed by the Servicer in servicing home equity line of credit mortgage loans for its own account and (iii) this Agreement.

           Relief Act : The Servicemembers Civil Relief Act, as amended.

           Relief Act Interest Shortfall : With respect to any Payment Date, for any Mortgage Loan with respect to which there has been a reduction in the amount of interest collectible thereon for the most recently ended Collection Period or (without duplication) any earlier Collection Period as a result of the application of the Relief Act, the amount by which (i) interest collectible on such Mortgage Loan during each such Collection Period is less than (ii) one month’s interest on the Stated Principal Balance of such Mortgage Loan at the Loan Rate for such Mortgage Loan before giving effect to the application of the Relief Act.

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

           REO Account : The account or accounts maintained by the Servicer in respect of an REO Property pursuant to Section 3.07.

           REO Disposition : The sale or other disposition of an REO Property on behalf of the Trust.

           REO Imputed Interest : As to any REO Property, for any calendar month during which such REO Property was at any time part of the Trust Fund, one month’s interest at the applicable Net Loan Rate on the Stated Principal Balance of such REO Property (or, in the case of the first such calendar month, of the related Mortgage Loan if appropriate) as of the close of business on the Payment Date in such calendar month.

           REO Principal Amortization : With respect to any REO Property, for any calendar month, the excess, if any, of (a) the aggregate of all amounts received in respect of such REO Property during such calendar month, whether in the form of rental income, sale proceeds (including, without limitation, that portion of the Optional Redemption Price paid in connection with a purchase of all of the Mortgage Loans and REO Properties pursuant to Section 8.01 that is allocable to such REO Property) or otherwise, net of any portion of such amounts (i) payable pursuant to Section 3.07 in respect of the proper operation, management and maintenance of such REO Property or (ii) payable or reimbursable to the Servicer pursuant to Section 3.07 for unpaid Servicing Fees in respect of the related Mortgage Loan and unreimbursed Servicing Advances, over (b) the REO Imputed Interest in respect of such REO Property for such calendar month.

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

27

           Reserve Account : The account designated as the “Reserve Account” and established pursuant to Section 5.06 hereof.

           Residual Certificate : The Class L or Class R Certificate, as applicable.

           Residual Certificateholder : Any holder of a Residual Certificate.

           Responsible Officer : With respect to the Indenture Trustee, any Managing Director, any Director, any Vice President, any Assistant Vice President, any Associate, any Assistant Secretary, any Trust Officer, or any other officer of the Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers who at such time shall be officers to whom with respect to a particular matter, the matter is referred because of such officer’s knowledge of and familiarity with the particular subject and who has direct responsibility for administration of this Agreement. When used with respect to a Seller, the Depositor or the Servicer, the Chief Executive Officer or any Vice President, Assistant Vice President, Treasurer, Assistant Treasurer, Cashier, Assistant Cashier or any Secretary or Assistant Secretary.

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

           Securityholders : The Noteholders and the Certificateholders.

           Seller : IndyMac Bank, F.S.B., a federal savings bank, as seller under the Mortgage Loan Purchase Agreement.

           Senior Lien : With respect to any Mortgage Loan that is not a first priority lien, the mortgage loan or mortgage loans relating to the corresponding Mortgaged Property having priority senior to that of such Mortgage Loan.

           Servicer : IndyMac Bank, F.S.B., a federal savings bank, as Servicer, or any successor hereunder appointed in accordance with the terms hereof.

           Servicer Employees : As defined in Section 3.06.

           Servicer Remittance Date : With respect to any Payment Date, the Business Day prior to such Payment Date.

           Servicing Advances : All reasonable and customary unanticipated “out of pocket” costs and expenses incurred in the performance by the Servicer of its servicing obligations, including, but not limited to, the cost of (i) the preservation, restoration and protection of the Mortgaged Property, (ii) any enforcement or judicial proceedings, including foreclosures, (iii) the management and liquidation of the REO Property, including reasonable fees paid to any independent contractor in connection therewith, and (iv) compliance with the obligations under

28

Sections 3.04, 3.07 or 3.17 hereunder; provided however, that such obligation with respect to any related Mortgage Loan shall cease if the Servicer determines, in its sole discretion, that Servicing Advances with respect to such Mortgage Loan are or would be Nonrecoverable Advances.

           Servicing Certificate : As defined in Section 5.03(a).

           Servicing Fee : With respect to any Payment Date and Mortgage Loans, the product of (i) the Servicing Fee Rate and (ii) the aggregate Principal Balance of Mortgage Loans as of the opening of business on the first day of the related Collection Period (or at the Cut-off Date with respect to the first Payment Date), a portion of such Servicing Fee may be retained by a Sub-Servicer as its servicing compensation..

           Servicing Fee Rate : 0.50% per annum, with respect to Mortgage Loans.

           Servicing Officer : Any officer of the Servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name and specimen signature appear on a list of servicing officers furnished to the Indenture Trustee (with a copy to the Insurer) by the Servicer on the Closing Date, as such list may be amended from time to time, initially set forth in Exhibit B.

           SFAS 140 : Statement of Financial Accounting Standards No. 140 of the Financial Accounting Standards Board, as in effect on the date hereof.

           Six Month Rolling Delinquency Rate : With respect to any Payment Date on and after the sixth Payment Date, the average of the Principal Balances of 60+ Day Delinquent Mortgage Loans for the related Collection Period and the five preceding Collection Periods divided by the Pool Balance, in each case on the last day of those Collection Periods, respectively.

           60+ Day Delinquent Mortgage Loan : For any Collection Period, any Mortgage Loan that is (i) more than 60 days delinquent, (ii) for which the related Mortgagor has filed for bankruptcy protection, (iii) that is in foreclosure, or (iv) with respect to which the related Mortgaged Property is characterized as REO Property as of the end of such Collection Period.

           Specified Overcollateralization Amount : on any Payment Date, is an amount equal to 0.50% of the Initial Invested Amount.

           Sponsor : IndyMac Bank, F.S.B., a federal savings bank.

           Stated Principal Balance : With respect to any Mortgage Loan: (a) as of any date of determination up to but not including the Payment Date on which the proceeds, if any, of a Liquidation Event with respect to such Mortgage Loan would be distributed, the outstanding Stated Principal Balance of such Mortgage Loan as of the Cut-off Date, as shown in the Mortgage Loan Schedule, plus any Additional Balances transferred to the trust in respect of the

29

Mortgage Loan, minus the sum of (i) the principal portion of each Monthly Payment due on a Due Date subsequent to the Cut-off Date, (ii) the portion of all Principal Prepayments received after the Cut-off Date, to the extent paid pursuant to Section 5.01 on or before such date of determination, (iii) all Liquidation Proceeds and Insurance Proceeds allocable to Principal to the extent paid pursuant to Section 5.01 on or before such date of determination, and (iv) any Charge-off Amount incurred with respect thereto during or prior to the Collection Period for the most recent Payment Date coinciding with or preceding such date of determination; and (b) as of any date of determination coinciding with or subsequent to the Payment Date on which the proceeds, if any, of a Liquidation Event with respect to such Mortgage Loan would be paid, zero. With respect to any REO Property: (a) as of any date of determination up to but not including the Payment Date on which the proceeds, if any, of a Liquidation Event with respect to such REO Property would be paid, an amount (not less than zero) equal to the Stated Principal Balance of the related Mortgage Loan as of the date on which such REO Property was acquired on behalf of the Trust Fund, minus the aggregate amount of REO Principal Amortization in respect of such REO Property for all previously ended calendar months, to the extent paid pursuant to Section 5.01 on or before such date of determination; and (b) as of any date of determination coinciding with or subsequent to the Payment on which the proceeds, if any, of a Liquidation Event with respect to such REO Property would be paid, zero.

           Statement to Noteholders : As defined in Section 5.03(b).

           Stepdown Date : With respect to the Notes, the later to occur of (a) the 31 ^st Payment Date and (b) the Payment Date following the Payment Date on which the Credit Enhancement Percentage is approximately 6.30%.

           Subsequent Recoveries : As of any Payment Date, amounts received by the Servicer (net of any related expenses permitted to be reimbursed to the Servicer) specifically related to a Charged-Off HELOC.

           Subservicer : Any Person with whom the Servicer has entered into a Subservicing Agreement and who satisfies the requirements set forth in Section 3.01(a) in respect of the qualification of a Subservicer.

           Subservicing Agreement : Any agreement between the Servicer and any Subservicer relating to subservicing and/or administration of certain Mortgage Loans as provided in Section 3.01, a copy of which shall be delivered, along with any modifications thereto, to the Indenture Trustee and the Insurer.

           Substitution Adjustment : As to any date on which a substitution occurs pursuant to Section 2.05, the sum of (a) the excess of (i) the aggregate Principal Balances of all Defective Mortgage Loans to be replaced by Eligible Substitute Mortgage Loans (after application of principal payments received on or before the date of substitution of any Eligible Substitute Mortgage Loans as of the date of substitution) over (ii) the Principal Balance of such Eligible Substitute Mortgage Loans and (b) the greater of (x) accrued and unpaid interest (accruing at the Loan Rate for such Defective Mortgage Loan) on such excess through the Collection Period

30

relating to the Payment Date for which such Substitution Adjustment will be included as part of Available Funds and (y) 30 days’ interest on such excess calculated on a 360-day year in each case at the Loan Rate (or Loan Rate net of the Servicing Fee Rate if the related Seller is the Servicer) and (c) if the Servicer is not the related Seller the amount of any unreimbursed Servicing Advances made by the Servicer with respect to such Defective Mortgage Loan and (d) the amounts referred to in clauses (iii)(y) and (iv) of the definition of Purchase Price in respect of such Defective Mortgage Loan.

           Substitution Date : As defined in Section 2.05(b).

           Supplemental Mortgage Loan Schedule : As defined in Section 2.05(b).

           Telerate Page 3750 : The display designated as page 3750 on the Moneyline Telerate Service (or such other page as may replace page 3750 on that service for the purpose of displaying London interbank offered rates of major banks).

           Transaction Documents : This Agreement, the Mortgage Loan Purchase Agreement, the Indenture, the Insurance and Indemnity Agreement, the Trust Agreement, the Administration Agreement and the Premium Letter.

           Trigger Event : With respect to any Payment Date, will be in effect if:

          (a) the sum of the amount, for each Collection Period prior to such Payment Date, equal to the aggregate of the Investor Charge-Off Amounts for all prior Collection Periods, expressed as a percentage of the Initial Invested Amount, is greater than

          (b) the Six Month Rolling Delinquency Rate for such Payment Date is greater than 3.50%.

           Trust, Trust Estate or Trust Fund : IndyMac Home Equity Mortgage Loan Asset-Backed Trust, Series 2006-H2, a Delaware statutory trust, established pursuant to the Trust Agreement, the corpus of which consists of the Mortgage Loans and Mortgage Files, such other assets as

31

shall from time to time be identified as deposited in the Trust Accounts in accordance with this Agreement, property that secured a Mortgage Loan and that has become REO Property, the interest of the Seller in certain hazard insurance policies maintained by the Mortgagors or the Servicer in respect of the Mortgage Loans, the Depositor’s rights under the Mortgage Loan Purchase Agreement and all proceeds of the foregoing.

           Trust Accounts : The Collection Account, the Certificate Account, the Payment Account and the Reserve Account.

           Trust Agreement : The Trust Agreement, dated as of June 13, 2006, among the Seller, the Depositor and the Owner Trustee, as amended and restated as of June 27, 2006, among the Seller, the Depositor and the Owner Trustee.

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

           Uninsured Cause : Any cause of damage to a Mortgaged Property such that the complete restoration of such property is not fully reimbursable by the insurance policies required to be maintained pursuant to Section 3.04 hereof.

           Utilization Rate : As of any date, the percentage of the line of credit relating to a Mortgage Loan that has been drawn upon.

          Section 1.02 Other Definitional Provisions .

          (a) Capitalized terms used herein and not otherwise defined herein have the meanings assigned to them in the Indenture and the Trust Agreement, as applicable.

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

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

32

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

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

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

          Section 1.03 Interest Calculations .

          All calculations of interest that are made in respect of the Principal Balance of a Mortgage Loan shall be made on a daily basis using a 365-day year and the actual number of days elapsed. All calculations of interest that are made in respect of the Notes and the Certificates, shall be calculated on the basis of a 360 day year and the actual number of days elapsed in the related Interest Accrual Period. The calculation of the Premium Amount, the Servicing Fee and the Indenture Trustee Fee shall be made on the basis of the actual number of days in each Collection Period divided by 360. All dollar amounts calculated hereunder shall be rounded to the nearest penny with one-half of one penny being rounded up.

ARTICLE II.

CONVEYANCE OF THE MORTGAGE LOANS

          Section 2.01 Conveyance of the Mortgage Loans .

          (a) The Depositor, concurrently with the execution and delivery of this Agreement, does hereby transfer, assign, set over and otherwise convey to the Trust, without recourse (subject to Sections 2.02 and 2.04) all of its right, title and interest in and to (i) each Mortgage Loan listed on the Mortgage Loan Schedule on the Closing Date and the related Mortgage File (including the related Mortgage Note and Mortgage), including its Cut-off Date Principal Balance (including all rights of the Depositor pursuant to the Mortgage Loan Purchase Agreement to purchase Additional Balances resulting from Draws made pursuant to the related Mortgage Note prior to the termination of this Agreement) and all related collections in respect of such Mortgage Loan received after the Cut-off Date (excluding scheduled interest payments due on or prior to the Cut-off Date); (ii) related property that secured a Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) its rights under any related insurance policies

33

maintained in respect of the Mortgage Loans (including any Insurance Proceeds) provided , however , that neither the Indenture Trustee nor the Trust assumes any obligation under any Mortgage Note for the funding of future Draws to the Mortgagor thereunder, and neither the Indenture Trustee nor the Trust will be obligated or permitted to fund any such future Draws; and (vi) any and all proceeds of the foregoing (collectively, the “ Conveyed Assets ”). Additional Balances shall be included in the related Principal Balance transferred to the Trust pursuant to this Section 2.01 and therefore will be part of the corpus of the Trust.

          The Seller, the Depositor and the Trust agree to take or cause to be taken such actions (including without limitation the filing of the UCC-1 financing statements in the States of California, in the case of the Seller, and the State of Delaware, in the case of the Depositor (which shall have been filed on or before the Closing Date) describing the Cut-off Date Principal Balances and Additional Balances related to the Mortgage Loans, and naming the Seller as debtor and the Depositor as secured party, in the case of the Seller, and naming the Depositor as debtor and the Trust as secured party, in the case of the Depositor, and any amendments to such UCC-1 financing statements required to reflect a change in the name or corporate structure of the Seller, the Depositor, or the Trust, as the case may be, or the filing of any additional financing statement due to the change in the jurisdiction of formation of the Seller, the Depositor or the Trust, as the case may be, within 30 days of any event necessitating such filing) as are necessary to perfect and protect the Depositor’s interest in the case of the Seller and the Trust and the Insurer’s interest in the case of the Depositor, in each case describing Cut-off Date Principal Balance and the Additional Balances related to the Mortgage Loans, the remainder of the trust estate and the proceeds thereof. In addition, the Servicer agrees to file continuation statements with respect to such UCC-1 financing statements as required and as long as this Agreement remains outstanding with such authorization and information as may be necessary to make such filing to be provided by the applicable parties.

          In the event any loss is suffered by the Insurer or the Indenture Trustee, on behalf of the Trust, in respect of any Mortgage Loan, as a result of a failure by the Seller or the Depositor to file the UCC-1 financing statements when required to perfect or maintain the perfection of the Indenture Trustee’s security interest hereunder and afford it first priority, the Seller shall, on the Business Day next preceding the Payment Date in the month following the Collection Period during which such loss occurred, purchase such Mortgage Loan. Such purchase shall be accomplished in the same manner as set forth in Section 2.02.

          In addition, on or prior to the Closing Date, the Depositor shall cause the Insurer to deliver the Policy to the Indenture Trustee, for the benefit of the Class A Noteholders.

          (b) In exchange for the transfer of the Mortgage Loans on the Closing Date, the Class B, Class P, Class L and Class R Certificates and the Class M1 and Class M2 Notes shall be issued to or at the direction of the Depositor.

          (c) In consideration of the sale of any Additional Balance from the Depositor to the Trust on any day, the Trust shall pay or cause to be paid to the Depositor or its designee an amount equal to the aggregate principal balances of the related Draws on such day. The Trust shall fund

34

the amount specified in the preceding sentence in one of the following ways, as applicable: (i) with respect to any Collection Period preceding the commencement of the Rapid Amortization Period, (a) on each day during such Collection Period, a cash payment, to the extent then available from the Floating Allocation Percentage of Principal Collections on the Mortgage Loans received during such Collection Period and remaining on deposit in the Collection Account, in an amount equal to the Aggregate Draw Amount on such day, and (b) on the last day of such Collection Period, to the extent there exists an Additional Balance Advance Amount for such Collection Period, an increase in the Class Principal Balance of the Class L Certificate, equal to such Additional Balance Advance Amount, and (ii) for any day on and after the first day of the Collection Period in which the commencement of the Rapid Amortization Period occurs, and any Collection Period thereafter, an increase in the Class Principal Balance of the Class L Certificate in an amount equal to the aggregate principal balance of Additional Balances on such day.

          (d) Prior to the last day of each Collection Period preceding the commencement of the Rapid Amortization Period, the Holder of the Class L Certificate shall purchase the Additional Balance Advance Amount for the related Payment Date, if any, and the Seller shall deliver to the Indenture Trustee and the Holder of the Class L Certificates two Business Days prior to the following Servicer Remittance Date an Advance Notice including the aggregate amount of the expected Additional Balance Advance Amount for that date. Upon receipt of such notice and in any event no later than two Business Days prior to the following Payment Date, the Holder of the Class L Certificate shall make an advance to the Trust in the amount specified in such Advance Notice by depositing such amount into the Reserve Account. The Indenture Trustee shall cause such amount to be remitted to the Seller on such following Payment Date. In addition, on and after the first day of the Collection Period in which the commencement of the Rapid Amortization Period occurs, the Holder of the Class L Certificate shall purchase Additional Balances that are transferred to the Trust (as such Additional Balances are conveyed and in the amounts specified by the Servicer) by depositing into the Reserve Account the amount of the Draws relating to such Additional Balances, which amount shall be disbursed by the Indenture Trustee to the Seller. The Class Principal Balance of the Class L Certificates will be increased by the amount of any such purchased Additional Balance Advance Amounts or Additional Balances, as applicable, as described in Section 2.01(c) above.

          (e) (i) In connection with such transfer, assignment, sale and conveyance by the Depositor will deliver or have delivered to, and deposit with, the Indenture Trustee (or its designee), on or before the Closing Date, the Mortgage Loan Schedule in computer readable format.

35

 

          provided, however , that as to any Mortgage Loan, if as evidenced by an Opinion of Counsel delivered to and in form and substance satisfactory to the Indenture Trustee, the Insurer, and the Rating Agencies (x) an optical image or other representation of the related document specified in clause (d)(ii)(C) above is enforceable in the relevant jurisdictions to the same extent as the original of such document and (y) such optical image or other representation does not impair the ability of an owner of such Mortgage Loan to transfer or perfect its interest in such Mortgage Loan, such optical image or other representation may be delivered as required in clause (d)(ii).

          The Seller and the Depositor each hereby confirms to the Indenture Trustee and the Insurer that it has made the appropriate entries in its general accounting records, to indicate that such Mortgage Loans have been sold to the Depositor by the Seller, and sold by the Depositor to the Trust. The Servicer hereby confirms to the Indenture Trustee and the Insurer that it has

36

clearly and unambiguously made appropriate entries in its general accounting records indicating that such Mortgage Loans constitute part of the Trust and are serviced by it on behalf of the Trust in accordance with the terms hereof.

          The Seller shall deliver to the Indenture Trustee, as initial custodian and bailee for the benefit of the Trust, the documents and instruments listed above in this clause (e).

          The Assignments of Mortgage will be held by the Indenture Trustee, subject to the conditions provided below in clause (f).

          (f) It is the express intent of the parties hereto that the conveyance of the Mortgage Loans and the other property described above by the Depositor to the Trust, as provided in this Agreement be, and be construed as, a sale of all of the Depositor’s right, title and interest in the Mortgage Loans and the other property described above by the Depositor to the Trust. It is, further, not the intention of the parties that such conveyance be deemed a pledge of the Mortgage Loans and the other property described above by the Depositor to the Trust to secure a debt or other obligation of the Depositor. However, in the event that, notwithstanding the intent of the parties, the Mortgage Loans and the other property described above are held to be property of the Depositor, or if for any reason this Agreement is held or deemed to create a security interest in the Mortgage Loans and the other property described above, then, (x) this Agreement shall also be deemed to be a security agreement within the meaning of Articles 8 and 9 of the UCC; and (y) the Depositor hereby grants to the Trust a security interest in and to all of the Depositor’s right, title, and interest, whether now owned or hereafter acquired, in and to the Conveyed Assets.

          The possession by the Indenture Trustee or its designee, of Mortgage Files, including the Mortgage Notes and the Mortgages and such other goods, letters of credit, advices of credit, instruments, money, documents, chattel paper (tangible and electronic) or certificated securities in accordance with the terms of this Agreement shall be deemed to be “possession by the secured party,” or possession by a purchaser or a person designated by him or her, for purposes of perfecting the security interest pursuant to the UCC (including, without limitation, Sections 9-313, 8-313 or 8-321 thereof); and notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed to be notifications to, or acknowledgments, receipts or confirmations from, securities intermediaries, bailees or agents of, or persons holding for, the Indenture Trustee or its designee, as applicable, for the purpose of perfecting such security interest under applicable law. The Seller, the Servicer and the Depositor shall, to the extent consistent with this Agreement, take such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans and the proceeds thereof, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of the Agreement. In connection herewith, the Trust shall have all of the rights and remedies of a secured party and creditor under the UCC. Notwithstanding the foregoing, in taking such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans and the proceeds

37

thereof, such security interest would be deemed to be a perfected security interest of first priority under applicable law, and maintaining such throughout the term of this Agreement.

          (g) Within 90 days after the Closing Date, the Indenture Trustee, will, for the benefit of Noteholders and the Insurer, review each Mortgage File to ascertain that all required documents set forth in Section 2.01 have been received and appear on their face to contain the requisite signatures by or on behalf of the respective parties thereto, and shall deliver to the Depositor, the Servicer, the Insurer and the Indenture Trustee an initial certification (the “ Initial Certification ”) in the form annexed hereto as Exhibit J to the effect that, as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan prepaid in full or any specifically identified in such certification as not covered by such certification), (i) all of the applicable documents specified in Section 2.01(e) are in its possession and (ii) such documents have been reviewed by it and appear to relate to such Mortgage Loan. The Indenture Trustee shall determine whether such documents are executed and endorsed, but shall be under no duty or obligation to inspect, review or examine any such documents, instruments, certificates or other papers to determine that the same are valid, binding, legally effective, properly endorsed, genuine, enforceable or appropriate for the represented purpose or that they have actually been recorded or are in recordable form or that they are other than what they purport to be on their face. The Indenture Trustee shall not have any responsibility for verifying the genuineness or the legal effectiveness of or authority for any signatures of or on behalf of any party or endorser.

          (h) If in the course of the review described in paragraph (e) above the Indenture Trustee discovers any document or documents constituting a part of a Mortgage File that is missing, does not appear regular on its face (i.e., is mutilated, damaged, defaced, torn or otherwise physically altered) or appears to be unrelated to the Mortgage Loans identified in the Mortgage Loan Schedule, as applicable (each, a “ Material Defect ”), the Indenture Trustee, upon discovering such Material Defect shall promptly identify the Mortgage Loan to which such Material Defect relates in the Interim Certification delivered to each of the Depositor and the Servicer and give notice thereof to the Seller.

          (i) Within 180 days following the Closing Date, the Indenture Trustee shall deliver to the Depositor, the Servicer and the Insurer a final certification (the “ Final Certification ”) substantially in the form attached as Exhibit K evidencing the completeness of the Mortgage Files in its possession or control, with any exceptions noted thereto.

          (j) Nothing in this Agreement shall be construed to constitute an assumption by the Trust Estate, the Indenture Trustee, the Administrator, any Custodian or the Noteholders of any unsatisfied duty, claim or other liability on any Mortgage Loan or to any Mortgagor. The Indenture Trustee shall have no responsibility for reviewing any Mortgage File except as expressly provided in this Section 2.01. In reviewing any Mortgage File pursuant to this Section, the Indenture Trustee shall have no responsibility for determining whether any document is valid and binding, whether the text of any assignment or endorsement is in proper or recordable form (except, if not assigned to the Indenture Trustee or endorsed in blank, to determine if the Indenture Trustee is the assignee or endorsee), whether any document has been recorded in accordance with the requirements of any applicable jurisdiction, or whether a blanket assignment

38

is permitted in any applicable jurisdiction, whether any Person executing any document is authorized to do so or whether any signature thereon is genuine, but shall only be required to determine whether a document has been executed, that it appears regular on its face and is related to such Mortgage Loan, and, upon the return of such document from the county recorder’s office in accordance with this section, that it purports to be recorded.

          (k) The Indenture Trustee shall have the right to appoint a custodian to act on its behalf with respect to its obligations under Section 2.01(g) through (i).

          (l) (i) Upon the occurrence of a Recordation Event, the Indenture Trustee shall within 90 days of such Recordation Event submit, at the expense of the Seller, to the appropriate recording offices Assignments of Mortgage to the Indenture Trustee on behalf of the Trust, which may be blanket assignments if permitted by applicable law, for the Mortgage Loans. In lieu of recording any such Assignments of Mortgage, the Servicer may provide to the Indenture Trustee and the Insurer an Opinion of Counsel in a form reasonably acceptable to the Owner Trustee, Indenture Trustee and the Insurer, to the effect that recordation of an Assignment of Mortgage in the state where the related Mortgaged Property is located is not necessary to protect the interests of the Owner Trustee, the Indenture Trustee or the Securityholders in the related Mortgage. In the event that any such Assignment of Mortgage is lost or returned unrecorded because of a defect therein, the Indenture Trustee shall promptly prepare, at the expense of the Seller, a substitute Assignment of Mortgage or cure such defect, as the case may be, and thereafter the Indenture Trustee shall, at the expense of the Seller, submit each such Assignment of Mortgage for recording.

          (ii ) With respect to each MERS Mortgage Loan, the Servicer shall, at the expense of the Depositor, take such actions as are necessary to cause the Indenture Trustee to be clearly identified as the owner of each such Mortgage Loan on the records of MERS for purposes of the system of recording transfers of beneficial ownership of mortgages maintained by MERS.

          Section 2.02 Acceptance by Indenture Trustee, Review of Documentation .

          (a) The Indenture Trustee hereby acknowledges the issuance of the Policy by the Insurer for the benefit of the Class A Noteholders and the sale and assignment of the Mortgage Loans, and, subject to the review provided for in Section 2.01, and declares that, when delivered to the Indenture Trustee in accordance with Section 2.01(e), the Indenture Trustee will hold the documents constituting the Mortgage Files and that all amounts received by it under the Indenture in trust, upon the terms herein set forth, for the use and benefit of all present and future Class A Noteholders and the Insurer.

          (b) If the Seller is given notice under Section 2.01(h) and if the Seller does not correct or cure the omission or defect within the 90-day period specified in Section 2.01(h), the Seller shall purchase the Mortgage Loan from the Trust or substitute an Eligible Substitute Mortgage Loan, as provided in Section 2.05, for such Mortgage Loan. Any such purchase by the Seller shall be at the Purchase Price and in each case shall be accomplished in the manner set forth in Section 2.04. It is understood and agreed that the obligation of the Seller to purchase any Mortgage Loan

39

or substitute an Eligible Substitute Mortgage Loan for such Mortgage Loan as to which a material defect in or omission of a constituent document exists shall constitute the sole remedy against the Seller respecting such defect or omission available to the Insurer, the Noteholders, the Indenture Trustee or the Certificateholders.

          The Servicer, promptly following the transfer of (i) a Mortgage Loan with a Material Defect or (ii) an Eligible Substitute Mortgage Loan to the Indenture Trustee pursuant to this Section and Section 2.05, as the case may be, shall amend the Mortgage Loan Schedule and make appropriate entries in its general account records to reflect such transfer and the addition of any Eligible Substitute Mortgage Loan, if applicable.

          Section 2.03 Representations and Warranties Regarding the Seller, the Depositor and the Servicer .

          (a) The Seller, the Depositor and the Servicer each represents and warrants as to itself to the parties hereto and the Insurer that, as of the Closing Date:

40

 

41

 

42

          (b) The representations and warranties set forth in Section 2.03(a) shall survive the sale and assignment of the Mortgage Loans to the Trust. Upon discovery of a breach of any representations and warranties which materially and adversely affect the interests of the Indenture Trustee, the Noteholders, the Certificateholders, the Depositor or the Insurer, the Person discovering such breach shall give prompt written notice to the other parties and to the Insurer. Within 60 days of its discovery or its receipt of notice of breach, or, with the prior written consent of the Insurer, such longer period specified in such consent, the Seller, the Depositor or the Servicer, as appropriate, shall cure such breach in all material respects.

          Section 2.04 Representations and Warranties of the Seller Regarding the Mortgage Loans .

          (a) The Seller hereby represents and warrants to the Depositor and the Insurer, and the Depositor hereby assigns its rights with respect to such representations and warranties to the Trust, the Indenture Trustee on behalf of the Noteholders and the Certificateholders and the Insurer as follows as of the Closing Date, and with respect to each Eligible Substitute Mortgage Loan, as of the date of such substitution (and to the extent expressly stated therein as of such other time):

43

 

44

 

45

 

46

 

47

 

48

 

          It is understood and agreed that each of the foregoing representations and warranties of the Seller may not be waived and shall survive the issuance of the Notes.

          (b) [Reserved.]

          (c) It is understood and agreed that the representations and warranties set forth in this Section shall survive the transfer of the Mortgage Loans to the Trust and the termination of the rights and obligations of the Servicer pursuant to Section 6.04 or 7.01 herein. Upon discovery by the Seller, the Depositor, the Servicer, the Owner Trustee, the Insurer or the Indenture Trustee (in the case of the Indenture Trustee, upon a Responsible Officer of the Indenture Trustee obtaining actual knowledge) of a breach of any of the foregoing representations and warranties, which materially and adversely affects the value of the related Mortgage Loan or the interests of the Trust, the Noteholders, the Certificateholders or the Insurer in the related Mortgage Loan, the party discovering such breach shall give prompt written notice to the other parties and the Insurer. Within 90 days of its discovery or its receipt of notice of breach, the Seller shall use all reasonable efforts to cure such breach in all material respects and if such breach is not cured by the end of such 90-day period, the Seller shall purchase such Mortgage Loan from the Trust or substitute an Eligible Substitute Mortgage Loan for such Mortgage Loan on the Determination Date in the month following the month in which such 90-day period expired at the Purchase Price of such Mortgage Loan or,