SALE AND SERVICING AGREEMENT,

Exhibit 10.1

 

EXECUTION COPY

 

SALE AND SERVICING AGREEMENT

 

dated as of November 1, 2005

 

by and among

 

ACCREDITED MORTGAGE LOAN REIT TRUST,

as Depositor,

 

ACCREDITED HOME LENDERS, INC.,

as Sponsor and Servicer,

 

ACCREDITED MORTGAGE LOAN TRUST 2005-4,

as Issuer,

 

and

 

DEUTSCHE BANK NATIONAL TRUST COMPANY,

as Indenture Trustee

TABLE OF CONTENTS

 

 

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SALE AND SERVICING AGREEMENT, dated as of November 1, 2005 (this “ Agreement ”), by and among ACCREDITED MORTGAGE LOAN REIT TRUST, a Maryland real estate investment trust, as depositor (the “ Depositor ”), ACCREDITED HOME LENDERS, INC., a California corporation, as sponsor (the “ Sponsor ”), ACCREDITED MORTGAGE LOAN TRUST 2005-4, a Delaware statutory trust, as issuer (the “ Issuer ”), ACCREDITED HOME LENDERS, INC., a California corporation, as servicer (the “ Servicer ”), and DEUTSCHE BANK NATIONAL TRUST COMPANY, a national banking association, as indenture trustee (the “ Indenture Trustee ”).

 

W I T N E S S E T H

 

WHEREAS, the Sponsor has contributed the mortgage loans (the “ Mortgage Loans ”) listed on Schedule I to this Agreement to the Depositor, pursuant to the Contribution Agreement and Assignment, dated November 9, 2005, between the Sponsor and the Depositor, (the “ Contribution Agreement ”);

 

WHEREAS, the Depositor desires to sell to the Issuer, and the Issuer desires to purchase from the Depositor, the Mortgage Loans;

 

WHEREAS, immediately after such purchase, the Issuer will pledge such Mortgage Loans to the Indenture Trustee pursuant to the terms of an Indenture, dated as of November 1, 2005 (the “ Indenture ”), between the Issuer and the Indenture Trustee, and issue the Accredited Mortgage Loan Trust 2005-4, Asset-Backed Notes (the “ Notes ”);

 

WHEREAS, the Servicer has agreed to service the Mortgage Loans, which constitute the principal assets of the Trust;

 

WHEREAS, the Indenture Trustee will hold the Mortgage Loans and certain other assets pledged to the Indenture Trustee pursuant to the Indenture;

 

WHEREAS, the Issuer will enter into an interest rate swap agreement with the Swap Provider where the Issuer agrees to pay certain fixed-rate amounts to the Swap Provider and the Swap Provider agrees to pay certain floating-rate amounts to the Trust; and

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the Depositor, the Sponsor, the Issuer, the Servicer and the Indenture Trustee hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01. Certain Defined Terms . Capitalized terms used herein but not defined herein shall have the meanings ascribed to such terms in Appendix I attached hereto.

 

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Section 1.02. Provisions of General Application .

 

(a) The terms defined herein and in Appendix I to the Indenture include the plural as well as the singular.

 

(b) The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole. Unless otherwise noted, all references to Articles and Sections shall be deemed to refer to Articles and Sections of this Agreement.

 

(c) Any reference to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute to which reference is made and all regulations promulgated pursuant to such statutes.

 

(d) All calculations of interest with respect to the LIBOR Notes provided for herein shall be on the basis of a 360-day year and the actual number of days elapsed in the related Interest Accrual Period. All calculations of interest with respect to any Mortgage Loan provided for herein shall be made in accordance with the terms of the related Mortgage Note and Mortgage or, if such documents do not specify the basis upon which interest accrues thereon, on the basis of a 360 day year consisting of twelve 30-day months, to the extent permitted by applicable law.

 

(e) Any Mortgage Loan payment is deemed to be received on the date such payment is actually received by the Servicer; provided , however , that, for purposes of calculating payments on the Notes, prepayments with respect to any Mortgage Loan are deemed to be received on the date they are applied in accordance with Accepted Servicing Practices consistent with the terms of the related Mortgage Note and Mortgage to reduce the outstanding Principal Balance of such Mortgage Loan on which interest accrues.

 

ARTICLE II

 

SALE AND CONVEYANCE OF THE MORTGAGE LOANS

 

Section 2.01. Purchase and Sale of Mortgage Loans; Deposit of Derivatives .

 

(a) The Sponsor hereby directs the Depositor to sell, transfer, assign, set over and convey, and the Depositor does hereby sell, transfer, assign, set over and convey to the Issuer, in each case without recourse, but subject to the terms and provisions of this Agreement, all of the right, title and interest of the Depositor in and to the Mortgage Loans, including the Cut-Off Date Principal Balance of, and interest due on, such Mortgage Loans listed on Schedule I attached hereto, and all other assets included or to be included in the Trust Estate (other than the Swap Agreement, which is being entered into directly by the Issuer).

 

(b) The Depositor may cause the deposit of derivatives at any time into the Accredited Mortgage Loan Trust 2005-4 and any such deposited derivatives shall become part of the Trust Estate.

 

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(c) The parties hereto understand and agree that it is not intended that any Mortgage Loan be included in the Issuer that is a “High-Cost Home Loan” as defined by HOEPA or any other applicable predatory or abusive lending laws.

 

Section 2.02. Reserved .

 

Section 2.03. Purchase Price . On the Closing Date, as full consideration for the Depositor’s sale of the Mortgage Loans to the Issuer, the Underwriters, on behalf of the Issuer, will deliver to, or at the direction of, the Depositor an amount in cash equal to $1,183,184,625.00. Additionally, the Depositor will receive the Certificates issued by the Issuer pursuant to the Trust Agreement.

 

Section 2.04. Possession of Mortgage Files; Access to Mortgage Files .

 

(a) Upon the receipt by the Depositor, or its designee, of the purchase price for the Mortgage Loans set forth in Section 2.03 hereof, the ownership of each Mortgage Note, each Mortgage and the contents of the Mortgage File related to each Mortgage Loan will be vested in the Issuer, and will be pledged to the Indenture Trustee, for the benefit of the Noteholders.

 

(b) Pursuant to Section 2.05 hereof, the Depositor has delivered, or caused to be delivered the Indenture Trustee’s Mortgage File related to each Mortgage Loan to the Indenture Trustee.

 

(c) The Indenture Trustee will hold the Indenture Trustee’s Mortgage Files in trust pursuant to the terms of the Indenture for the benefit of all present and future Noteholders and the Swap Provider.

 

(d) Consistent with the terms of the Indenture, the Indenture Trustee shall afford the Depositor, the Sponsor, the Issuer and the Servicer reasonable access to all records and documentation regarding the Mortgage Loans relating to this Agreement, such access being afforded at customary charges, upon reasonable prior written request and during normal business hours at the offices of the Indenture Trustee.

 

(e) No later than the fifth Business Day of each fourth month, commencing in April 2006, the Indenture Trustee shall deliver to the Servicer a report dated as of the first day of such month, identifying those Mortgage Loans for which it has not yet received (i) an original recorded Mortgage or a copy thereof certified to be true and correct by the public recording office in possession of such Mortgage or (ii) in the event that Assignments of Mortgage are required to be recorded in accordance with the provisions of Section 2.05, an original recorded Assignment of Mortgage to the Indenture Trustee and any required intervening Assignments of Mortgage or a copy thereof certified to be a true and correct copy by the public recording office in possession of such Assignment of Mortgage.

 

Section 2.05. Delivery of Mortgage Loan Documents . (a) In connection with the transfer and assignment of the Mortgage Loans, the Depositor shall, on or before the Closing Date, deliver, or cause to be delivered, to the Indenture Trustee (as pledgee of the Issuer pursuant to the Indenture), the following documents or instruments constituting the Indenture Trustee’s Mortgage File with respect to each Mortgage Loan so transferred or assigned:

 

(i) the original Mortgage Note, endorsed without recourse in blank or to “Deutsche Bank National Trust Company, as Indenture Trustee under the Indenture dated as of November 1, 2005, Accredited Mortgage Loan Trust 2005-4” by the Sponsor, including all intervening endorsements showing a complete chain of endorsement;

 

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(ii) the related original Mortgage with evidence of recording indicated thereon or a copy thereof certified by the applicable recording office and if the Mortgage Loan is registered on the MERS System, such Mortgage or an assignment of the mortgage shall reflect MERS as the mortgagee of record and shall include the MIN for such Mortgage Loan;

 

(iii) each intervening mortgage assignment, with evidence of recording indicated thereon or if the original is not available, a copy thereof certified by the applicable recording office, if any, showing a complete chain of assignment from the originator of the related Mortgage Loan to the Sponsor (or to MERS, if the Mortgage Loan is registered on the MERS System), and noting the presence of a MIN (if the Mortgage Loan is registered on the MERS System), which assignment may, at the Sponsor’s option, be combined with the assignment referred to in subpart (iv) hereof, in which case it must be in recordable form, but need not have been previously recorded);

 

(iv) unless the Mortgage Loan is registered on the MERS System, a mortgage assignment in recordable form (which, if acceptable for recording in the relevant jurisdiction as evidenced by an Opinion of Counsel addressed to the Indenture Trustee, may be included in a blanket assignment or assignments) of each Mortgage from the Sponsor to the Indenture Trustee;

 

(v) originals of all assumption, modification and substitution agreements in those instances where the terms or provisions of a Mortgage or Mortgage Note have been modified or such Mortgage or Mortgage Note has been assumed (if any); and

 

(vi) an original title insurance policy or title opinion (or (A) a copy of the title insurance policy or title opinion, or (B) the related binder, commitment or preliminary report, or copy thereof in which case the Sponsor hereby certifies that the original Mortgage has been delivered to the title insurance company that issued such binder, commitment or preliminary report).

 

In instances where the original recorded Mortgage or any intervening mortgage assignment or a completed assignment of the Mortgage in recordable form cannot be delivered by the Sponsor to the Indenture Trustee prior to or concurrently with the execution and delivery of this Agreement due to a delay in connection with recording, the Sponsor may:

 

(x) in lieu of delivering such original recorded Mortgage or intervening mortgage assignment, deliver to the Indenture Trustee, a copy thereof and the Sponsor hereby certifies that the original Mortgage has been delivered to a title insurance company for recordation after receipt of its policy of title insurance or the related binder, commitment or preliminary report therefor; and

 

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(y) with respect to clause (iv) above, in lieu of delivering the completed assignment in recordable form, deliver to the Indenture Trustee, the assignment in recordable form, otherwise complete except for recording information.

 

The Indenture Trustee is hereby authorized and directed, upon an Event of Default and subject to subsection (b) below, with respect to each assignment described in Section 2.05(a)(iv) hereof, to endorse such assignment as follows: “Deutsche Bank National Trust Company, as Indenture Trustee under the Indenture dated as of November 1, 2005, Accredited Mortgage Loan Trust 2005-4.”

 

(b) As promptly as practicable, but in any event within thirty (30) days from the Closing Date, the Sponsor shall promptly submit, or cause to be submitted for recording in the appropriate public office for real property records, each assignment referred to in Section 2.05(a)(iv); provided, that the Sponsor need not cause to be recorded any assignment which (i) is registered on the MERS System, or (ii) relates to a Mortgage Loan in any jurisdiction under the laws of which, as evidenced by an Opinion of Counsel delivered by the Sponsor (at the Sponsor’s expense) to the Indenture Trustee, acceptable to the Rating Agencies, the recordation of such assignment is not necessary to protect the Indenture Trustee’s, the Noteholders’, the Swap Provider’s and the Certificates’ interest in the related Mortgage Loan. The Indenture Trustee, shall retain a copy of each assignment submitted for recording. In the event that any such assignment is lost or returned unrecorded because of a defect therein, the Sponsor shall promptly prepare a substitute assignment or cure such defect, as the case may be, and thereafter the Sponsor shall submit each such assignment for recording. The costs relating to the delivery and recordation of the documents in connection with the Mortgage Loans as specified in this Article II shall be borne by the Sponsor. With respect to Mortgage Loans (i) not registered on the MERS System, or (ii) not covered by an Opinion of Counsel described in this section 2.05(b) to the extent that assignments of mortgage have not been recorded within one year after the Closing Date, the Depositor shall, and if the Depositor fails to, then the Sponsor shall be obligated to repurchase such Mortgage Loans in accordance with the provisions of Section 4.02.

 

In connection with the assignment of any Mortgage Loan registered on the MERS System, promptly after the Closing Date, the Sponsor will cause, at its own expense, the MERS System to indicate that such Mortgage Loan has been assigned to the Indenture Trustee for the benefit of the Noteholders by entering (a) the Indenture Trustee’s Org ID in the “Investor” field which identifies the Indenture Trustee and (b) in the “Pool” field a code which identifies the securitization serial number of the Notes issued in connection with such Mortgage Loans. The Sponsor and the Servicer will not alter the entries referenced in this paragraph with respect to any such Mortgage Loan during the term of this Agreement unless and until such Mortgage Loan is repurchased or otherwise in accordance with the terms of this Agreement.

 

(c) The Sponsor shall, within five (5) Business Days after the receipt thereof, deliver, or cause to be delivered, to the Indenture Trustee: (i) the original recorded Mortgage and related power of attorney, if any, in those instances where a copy thereof certified by the Sponsor was delivered to the Indenture Trustee; (ii) the original recorded assignment of Mortgage from

 

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the last endorsee to the Indenture Trustee, which, together with any intervening assignments of Mortgage, evidences a complete chain of assignment from the originator of the Mortgage Loan to the Indenture Trustee, in those instances where copies of such assignments certified by the Sponsor were delivered to the Indenture Trustee; and (iii) the title insurance policy or title opinion required in Section 2.05(a)(vi).

 

Notwithstanding anything to the contrary contained in this Section 2.05, in those instances where the public recording office retains the original Mortgage, power of attorney, if any, assignment or assignment of Mortgage after it has been recorded or such original has been lost, the Sponsor shall be deemed to have satisfied its obligations hereunder upon delivery to the Indenture Trustee, of a copy of such Mortgage, power of attorney, if any, assignment or assignment of Mortgage certified by the public recording office to be a true copy of the recorded original thereof.

 

From time to time the Sponsor may forward, or cause to be forwarded, to the Indenture Trustee, additional original documents evidencing any assumption or modification of a Mortgage Loan.

 

(d) All original documents relating to the Mortgage Loans that are not required to be delivered to the Indenture Trustee, pursuant to Section 2.05(a) hereof are, and shall be, held by the Servicer, the Sponsor or the Depositor, as the case may be, in trust for the benefit of the Indenture Trustee, on behalf of the Noteholders and the Swap Provider. In the event that any such original document is required pursuant to the terms of this Section 2.05 to be a part of an Indenture Trustee’s Mortgage File, such document shall be delivered promptly to the Indenture Trustee. From and after the sale of the Mortgage Loans to the Issuer pursuant hereto, to the extent that the last assignee thereof retains title of record to any Mortgage Loans prior to the vesting of legal title in the Issuer, such title shall be retained in trust for the Issuer as the owner of the Mortgage Loans, and the Indenture Trustee, as the pledgee of the Issuer under the Indenture. In acting as custodian of any original document which is part of the Indenture Trustee’s Mortgage Files, the Servicer agrees further that it does not and will not have or assert any beneficial ownership interest in the related Mortgage Loans or the Mortgage Files. Promptly upon the Servicer’s receipt of any such original document, the Servicer, on behalf of the Issuer, shall mark conspicuously each such original document, and its master data processing records with a legend evidencing that the Issuer has purchased the related Mortgage Loan and all right and title thereto and interest therein, and pledged such Mortgage Loan and all right and title thereto and interest therein to the Indenture Trustee, on behalf of the Noteholders and the Swap Provider.

 

Section 2.06. Acceptance of the Trust Estate; Certain Substitutions; Certification by the Indenture Trustee. (a) The Indenture Trustee is authorized and directed to, and agrees to, do the following:

 

(i) execute and deliver to the Depositor, the Sponsor and the Servicer, on or prior to the Closing Date with respect to each Mortgage Loan transferred on such date, an acknowledgement of receipt, in the form attached as Exhibit C hereto, of the original Mortgage Note as required to be included in the Indenture Trustee’s Mortgage File (with any exceptions noted) and declares that it will hold such documents and any

 

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amendments, replacements or supplements thereto, as well as any other assets included in the definition of Trust Estate and delivered to the Indenture Trustee, subject to the conditions set forth in the Indenture, for the benefit of the Noteholders.

 

(ii) to review (or cause to be reviewed) each Indenture Trustee’s Mortgage File within sixty (60) days after the Closing Date (or, with respect to any Qualified Substitute Mortgage Loans, within sixty (60) days after receipt thereof), and to deliver to the Servicer, the Depositor and the Sponsor a certification, in the form attached hereto as Exhibit D , to the effect that, except as otherwise noted, as to each Mortgage Loan listed in the related Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan specifically identified in such certification as not covered by such certification), (i) all documents specified in Section 2.05(a)(i)-(iv) and (vi) are in its possession, (ii) each such document has been reviewed by it and appears, on its face, not to have been mutilated, damaged, torn or otherwise physically altered (handwritten additions, changes or corrections shall not constitute physical alteration if they reasonably appear to have been initialed), appears regular on its face and relates to such Mortgage Loan, and (iii) based on its examination and only as to the foregoing documents, the information set forth on the Mortgage Loan Schedule with respect to items (i), (ii) (with respect to property address only, excluding zip code), (iii) and (vi) of the definition of “Mortgage Loan Schedule” accurately reflects the information set forth in the Indenture Trustee’s Mortgage File delivered on such date; provided however , no certification of the Indenture Trustee shall constitute a determination by the Indenture Trustee of the proper form, adequacy or enforceability of any document included in the Indenture Trustee’s Mortgage File.

 

(iii) to review (or cause to be reviewed) each Indenture Trustee’s Mortgage File within one hundred eighty (180) days after the Closing Date (or, with respect to any Qualified Substitute Mortgage Loans, within one hundred eighty (180) days after receipt thereof), and to deliver to the Servicer and the Sponsor a certification in the form attached hereto as Exhibit E to the effect that, except as otherwise noted, as to each Mortgage Loan listed in the related Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan specifically identified in such certification as not covered by such certification), (i) all documents specified in Section 2.05(a)(i)-(iv) and (vi) are in its possession, (ii) each such document has been reviewed by it and has not been mutilated, damaged, torn or otherwise physically altered (handwritten additions, changes or corrections shall not constitute physical alteration if they reasonably appear to be initialed by the Mortgagor), appears regular on its face and relates to such Mortgage Loan, and (iii) based on its examination and only as to the foregoing documents, the information set forth in items (i), (ii) (with respect to property address only, excluding zip code), (iii) and (vi) of the definition of “Mortgage Loan Schedule” accurately reflects the information set forth in the Indenture Trustee’s Mortgage File delivered on such date.

 

In performing any such review, the Indenture Trustee may conclusively rely on the Sponsor as to the purported genuineness of any such document and any signature thereon. It is understood that the scope of the Indenture Trustee’s review of the Indenture Trustee’s Mortgage Files is limited solely to confirming that the documents listed in Section 2.05 have been executed

 

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and received and relate to the Indenture Trustee’s Mortgage Files identified in the related Mortgage Loan Schedule. The Indenture Trustee shall be under no duty or obligation to inspect, review or examine any such documents, instruments, certificates or other papers to determine that they are genuine, enforceable, or appropriate for the represented purpose or that they are other than what they purport to be on their face.

 

(b) If the Indenture Trustee during the process of reviewing the Indenture Trustee’s Mortgage Files finds any document constituting a part of a Indenture Trustee’s Mortgage File which is not executed, has not been received, is unrelated to the Mortgage Loan identified in the related Mortgage Loan Schedule, or does not conform to the requirements of Section 2.05 or the description thereof as set forth in the related Mortgage Loan Schedule, the Indenture Trustee shall promptly so notify the Servicer and the Sponsor. Upon receipt of such notice respecting such defect, the Depositor and the Sponsor shall have a sixty (60) day period after such notice within which to correct or cure any such defect, or if the Servicer determines that the defect materially and adversely affects the value of the related Mortgage Loan or the interest of the Noteholders in the related Mortgage Loan, to either (i) substitute in lieu of such Mortgage Loan a Qualified Substitute Mortgage Loan in the manner and subject to the conditions set forth in this Section 2.06 or (ii) purchase such Mortgage Loan at a purchase price equal to the Loan Repurchase Price. Upon receipt by the Indenture Trustee of two copies of a certification, in the form attached hereto as Exhibit F , of a Servicing Officer of such substitution or purchase and, in the case of a substitution, upon receipt by the Indenture Trustee, of the related Indenture Trustee’s Mortgage File, and the deposit of the Loan Repurchase Price, in the case of a purchase, or the Substitution Adjustment, if any, in connection with a substitution, in the Collection Account, the Indenture Trustee shall release to the Servicer for release to the Depositor or the Sponsor, as applicable, the related Indenture Trustee’s Mortgage File and the Indenture Trustee shall execute, without recourse, and deliver such instruments of transfer furnished by the Depositor or the Sponsor as may be necessary to transfer such Mortgage Loan to the Depositor or the Sponsor, as applicable.

 

Section 2.07. Grant of Security Interest . (a) It is intended that the conveyance of the Mortgage Loans and other property by the Depositor to the Issuer as provided in this Article II be, and be construed for all purposes other than tax and accounting purposes as, a sale of the Mortgage Loans and such other property by the Depositor to the Issuer. It is, for all purposes other than tax and accounting purposes further, not intended that such conveyance be deemed a pledge of the Mortgage Loans or such other property by the Depositor to the Issuer to secure a debt or other obligation of the Depositor. However, in the event that the Mortgage Loans or any of such other property 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 or any of such other property, then it is intended that: (i) this Agreement shall also be deemed to be a security agreement within the meaning of the Uniform Commercial Code; (ii) the conveyance provided for in this Article II shall be deemed to be a grant by the Depositor to the Issuer of a security interest in all of the Depositor’s right, title and interest in and to the Mortgage Loans and such other property and all amounts payable to the holders of the Mortgage Loans in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including, without limitation, all amounts from time to time held or invested in the Accounts whether in the form of cash, instruments, securities or other property; (iii) the possession by the Indenture Trustee, of the Mortgage Notes

 

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and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be “possession by the secured party” for purposes of perfecting the security interest pursuant to the Uniform Commercial Code; and (iv) notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from financial intermediaries, bailees or agents, as applicable, of the Indenture Trustee for the purpose of perfecting such security interest under applicable law. The Depositor, the Sponsor, the Servicer, on behalf of the Issuer and the Indenture Trustee, shall, to the extent consistent with this Agreement, take such actions as may be reasonably necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans or any of such other property, 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 this Agreement.

 

(b) The Depositor, the Sponsor and the Servicer shall take no action inconsistent with the Trust’s ownership of the Trust Estate and each shall indicate or shall cause to be indicated in its records and records held on its behalf that ownership of each Mortgage Loan and the other assets in the Trust Estate is vested in the Issuer, as owner, and is pledged to the Indenture Trustee, for the benefit of the Noteholders and the Swap Provider pursuant to the terms of the Indenture. The Indenture Trustee is authorized to act, pursuant to the terms of this Agreement for the benefit of the Noteholders and shall be authorized to act at the direction of such parties. In addition, the Depositor, the Sponsor and the Servicer shall respond to any inquiries from third parties with respect to ownership of a Mortgage Loan or any other asset in the Trust Estate by stating that it is not the owner of such asset and that the Issuer is the owner of such Mortgage Loan or other asset in the Trust Estate, which is pledged to the Indenture Trustee, for the benefit of the Noteholders and the Swap Provider.

 

Section 2.08. Further Action Evidencing Assignments . (a) The Servicer agrees that, from time to time, at its expense, it shall cause the Sponsor or Depositor, as the case may be, to, and each of the Sponsor and Depositor agree that it shall, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or appropriate, or that the Servicer or the Indenture Trustee may reasonably request, in order to perfect, protect or more fully evidence the transfer of ownership of the Mortgage Loans and other assets in the Trust Estate or to enable the Indenture Trustee, to exercise or enforce any of its rights hereunder. Without limiting the generality of the foregoing, the Servicer, the Sponsor and the Depositor shall, upon the request of the Servicer or the Indenture Trustee execute and file (or cause to be executed and filed) such real estate filings, financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate.

 

(b) Each of the Sponsor and the Depositor hereby grants to the Servicer and the Indenture Trustee powers of attorney to execute all documents on its behalf under this Agreement as may be necessary or desirable to effectuate the foregoing.

 

Section 2.09. Assignment of Agreement . The Sponsor, the Depositor and the Servicer hereby acknowledge and agree that the Issuer may assign its interest under this Agreement to the Indenture Trustee, for the benefit of the Noteholders and the Swap Provider, as may be required

 

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to effect the purposes of the Indenture, without further notice to, or consent of, the Sponsor or the Servicer, and the Indenture Trustee shall succeed to such of the rights of the Issuer hereunder as shall be so assigned. The Issuer shall, pursuant to the Indenture, assign all of its right, title and interest in and to the Mortgage Loans and its right to exercise the remedies created by Section 4.02 of this Agreement for breaches of the representations, warranties, agreements and covenants of the Sponsor contained in Sections 3.02 and 4.01 of this Agreement, assign such right, title and interest to the Indenture Trustee, for the benefit of the Noteholders and the Swap Provider. The Sponsor agrees that, upon such assignment to the Indenture Trustee, such representations, warranties, agreements and covenants will run to and be for the benefit of the Indenture Trustee and the Indenture Trustee may enforce, without joinder of the Sponsor or the Issuer, the repurchase obligations of the Sponsor set forth herein with respect to breaches of such representations, warranties, agreements and covenants.

 

ARTICLE III

 

REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Section 3.01. Representations, Warranties and Covenants of the Servicer . The Servicer hereby represents, warrants and covenants to the Indenture Trustee, the Depositor, the Sponsor, the Issuer, the Swap Provider and the Noteholders as of the Closing Date and during the term of this Agreement that:

 

(a) The Servicer is duly organized, validly existing and in good standing under the laws of its state of incorporation and has the power to own its assets and to transact the business in which it is currently engaged. The Servicer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it or the performance of its obligations hereunder requires such qualification and in which the failure so to qualify could reasonably be expected to have a material adverse effect on the business, properties, assets, or condition (financial or other) of the Servicer or the performance of its obligations hereunder.

 

(b) The Servicer has the power and authority to make, execute, deliver and perform this Agreement and all of the transactions contemplated under this Agreement, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement, and assuming the due authorization, execution and delivery hereof by the other parties hereto constitutes, or will constitute, the legal, valid and binding obligation of the Servicer, enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally, and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law).

 

(c) The Servicer is not required to obtain the consent of any other party or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency which consent already has not been obtained in connection with the execution, delivery, performance, validity or enforceability of this Agreement, except such as have been obtained prior to the Closing Date.

 

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(d) The execution, delivery and performance of this Agreement by the Servicer will not violate any provision of any existing law or regulation or any order or decree of any court or the charter or bylaws of the Servicer, or constitute a breach of any mortgage, indenture, contract or other Agreement to which the Servicer is a party or by which it may be bound.

 

(e) Except as set forth in the Prospectus Supplement under the heading “ Risk Factors ,” there is no action, suit, proceeding or investigation pending or to Servicer’s knowledge threatened against the Servicer which, either in any one instance or in the aggregate, is, in the Servicer’s judgment, likely to result in any material adverse change in the business, operations, financial condition, properties, or assets of the Servicer, or in any material impairment of the right or ability of the Servicer to carry on its business substantially as now conducted, or in any material liability on the part of the Servicer, or which would draw into question the validity of this Agreement, the Notes, or the Mortgage Loans or of any action taken or to be taken in connection with the obligations of the Servicer contemplated herein or therein, or which would be likely to impair materially the ability of the Servicer to perform its obligations hereunder.

 

(f) Neither this Agreement nor any statement, report, or other document furnished by the Servicer pursuant to this Agreement or in connection with the transactions contemplated hereby, including, without limitation, the sale or placement of the Notes, contains any untrue material statement of fact provided by or on behalf of the Servicer or omits to state a material fact necessary to make the statements provided by or on behalf of the Servicer contained herein or therein not misleading.

 

(g) The Servicer does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Agreement.

 

(h) The Servicer is not an “investment company” or a company “controlled by an investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 

(i) The Servicer shall take all necessary steps to maintain the Indenture Trustee’s perfection and priority in the Mortgage Loans.

 

(j) The Servicer will fully furnish, in accordance with the Fair Credit Reporting Act and its implementing regulations, accurate and complete information (i.e., favorable and unfavorable) on its borrower credit files to Equifax, Experian, and Trans Union Credit Information Company (three of the credit repositories), on a monthly basis.

 

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

 

It is understood and agreed that the representations, warranties and covenants set forth in this Section 3.01 shall survive the delivery of the respective Indenture Trustee’s Mortgage Files to the Indenture Trustee and inure to the benefit of the Indenture Trustee.

 

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Section 3.02. Representations, Warranties and Covenants of the Sponsor . The Sponsor hereby represents, warrants and covenants to the Indenture Trustee, the Depositor, the Issuer, the Swap Provider and the Servicer that as of the date of this Agreement or as of such date specifically provided herein:

 

(a) The Sponsor is a corporation duly organized, validly existing and in good standing under the laws of the State of California.

 

(b) The Sponsor has the corporate power and authority to execute, deliver and perform, and to enter into and consummate the transactions contemplated by this Agreement.

 

(c) This Agreement has been duly and validly authorized, executed and delivered by the Sponsor, all requisite corporate action having been taken, and, assuming the due authorization, execution and delivery hereof by the other parties hereto, constitutes or will constitute the legal, valid and binding agreement of the Sponsor, enforceable against the Sponsor in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally, and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law).

 

(d) No consent, approval, authorization or order of or registration or filing with, or notice to, any governmental authority or court is required for the execution, delivery and performance of or compliance by the Sponsor with this Agreement or the consummation by the Sponsor of any of the transactions contemplated hereby, except as have been made on or prior to the Closing Date.

 

(e) None of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby or thereby, or the fulfillment of or compliance with the terms and conditions of this Agreement, (i) conflicts or will conflict with or results or will result in a breach of, or constitutes or will constitute a default or results or will result in an acceleration under (A) the articles of incorporation or bylaws of the Sponsor, or (B) of any term, condition or provision of any material indenture, deed of trust, contract or other agreement or instrument to which the Sponsor or any of its subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii) results or will result in a violation of any law, rule, regulation, order, judgment or decree applicable to the Sponsor of any court or governmental authority having jurisdiction over the Sponsor or its subsidiaries; or (iii) results in the creation or imposition of any lien, charge or encumbrance which would have a material adverse effect upon the Mortgage Loans or any documents or instruments evidencing or securing the Mortgage Loans.

 

(f) Except as set forth in the Prospectus Supplement under the heading “ Risk Factors ,” there are no actions, suits or proceedings before or against or investigations of, the Sponsor pending, or to the knowledge of the Sponsor, threatened, before any court, administrative agency or other tribunal, and no notice of any such action, which, in the Sponsor’s reasonable judgment, might materially and adversely affect the performance by the Sponsor of its obligations under this Agreement, or the validity or enforceability of this Agreement.

 

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(g) The Sponsor is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency that may materially and adversely affect its performance hereunder.

 

It is understood and agreed that the representations, warranties and covenants set forth in this Section 3.02 may not be waived and shall survive delivery of the respective Indenture Trustee’s Mortgage Files to the Indenture Trustee and shall inure to the benefit of the Indenture Trustee.

 

Section 3.03. [Reserved.]

 

Section 3.04. Representations, Warranties and Covenants of the Indenture Trustee . The Indenture Trustee hereby represents, warrants and covenants to the Issuer, the Swap Provider, the Servicer, the Depositor and the Sponsor that as of the date of this Agreement or as of such date specifically provided herein:

 

(a) The Indenture Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America;

 

(b) The Indenture Trustee has the requisite power and authority to execute, deliver and perform, and to enter into and consummate transactions contemplated by this Agreement;

 

(c) This Agreement has been duly and validly authorized, executed and delivered by the Indenture Trustee, all requisite action having been taken, and, assuming the due authorization, execution and delivery hereof by the other parties hereto, constitutes or will constitute the legal, valid and binding agreement of the Indenture Trustee, enforceable against the Indenture Trustee in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally, and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law);

 

(d) No consent, approval, authorization or order of or registration or filing with, or notice to, any governmental authority or court is required for the execution, delivery and performance of or compliance by the Indenture Trustee with this Agreement or the consummation by the Indenture Trustee of any of the transactions contemplated hereby, except as have been made on or prior to the Closing Date;

 

(e) None of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby or thereby, or the fulfillment of or compliance with the terms and conditions of this Agreement, (i) conflicts or will conflict with or results or will result in a breach of, or constitutes or will constitute a default or results or will result in an acceleration under (A) the articles of association or bylaws of the Indenture Trustee, or (B) to the best of its knowledge, of any term, condition or provision of any material indenture, deed of trust, contract or other agreement or instrument to which the Indenture Trustee is a party or by which it is bound; or (ii) results or will result in a violation of any statute, rule, regulation, order, judgment or decree applicable to the Indenture Trustee of any court or governmental authority having jurisdiction over the Indenture Trustee or its subsidiaries which violation would materially and adversely affect the Indenture Trustee’s performance of its duties hereunder; and

 

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(f) There are no actions, suits or proceedings before or against or investigations of, the Indenture Trustee, pending or to the knowledge of the Indenture Trustee threatened, before any court, administrative agency or other tribunal, and no notice of any such action, which, in the Indenture Trustee’s reasonable judgment, would materially and adversely affect the performance by the Indenture Trustee of its obligations under this Agreement, or the validity or enforceability of this Agreement.

 

It is understood and agreed that the representations, warranties and covenants set forth in this Section 3.04 shall survive delivery of the respective Indenture Trustee’s Mortgage Files to the Indenture Trustee.

 

Section 3.05. Covenants and Representations of the Sponsor and Servicer Regarding Prepayment Charges .

 

(a) The Servicer covenants that it will not waive any Prepayment Charge or part of a Prepayment Charge unless in connection with a Mortgage Loan that is in default or for which a default is reasonably foreseeable.

 

(b) The Sponsor hereby represents and warrants that the information set forth in the Prepayment Charge Schedule is complete, true and correct in all material respects at the date or dates respecting which such information is furnished and each Prepayment Charge is permissible and enforceable in accordance with its terms (except to the extent that the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, receivership and other similar laws relating to creditors’ rights generally) under applicable law.

 

(c) Upon discovery by the Sponsor or the Indenture Trustee of a breach of the foregoing, the party discovering such breach shall give prompt written notice to the other parties. Within 60 days of the earlier of discovery by the Servicer or receipt of notice by the Servicer of breach, the Servicer shall cure such breach in all material respects. If the covenant made by the Servicer in clause (a) above is breached the Servicer must pay into the Collection Account the amount of the waived Prepayment Charge. If the representation made by the Sponsor in clause (b) above is breached, the Sponsor must pay into the Collection Account the amount of the scheduled Prepayment Charge, less any amount previously collected and paid by the Servicer into the Collection Account. The foregoing obligations of the Servicer and the Sponsor shall be the sole and exclusive remedies for a breach of this Section 3.05(a) or (b).

 

Section 3.06. Representations, Warranties and Covenants of the Depositor . The Depositor hereby represents, warrants and covenants to the Indenture Trustee, the Issuer, the Swap Provider, the Sponsor and the Servicer that as of the date of this Agreement or as of such date specifically provided herein:

 

(a) The Depositor is a Maryland real estate investment trust duly organized, validly existing and in good standing under the laws of the State of Maryland.

 

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(b) The Depositor has the trust power and authority to convey the Mortgage Loans and to execute, deliver and perform, and to enter into and consummate the transactions contemplated by this Agreement.

 

(c) This Agreement has been duly and validly authorized, executed and delivered by the Depositor, all requisite corporate action having been taken, and, assuming the due authorization, execution and delivery hereof by the other parties hereto, constitutes or will constitute the legal, valid and binding agreement of the Depositor, enforceable against the Depositor in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the rights of creditors generally, and by general equity principles (regardless of whether such enforcement is considered in a proceeding in equity or at law).

 

(d) No consent, approval, authorization or order of or registration or filing with, or notice to, any governmental authority or court is required for the execution, delivery and performance of or compliance by the Depositor with this Agreement or the consummation by the Depositor of any of the transactions contemplated hereby, except as have been made on or prior to the Closing Date.

 

(e) None of the execution and delivery of this Agreement, the consummation of the transactions contemplated hereby or thereby, or the fulfillment of or compliance with the terms and conditions of this Agreement, (i) conflicts or will conflict with or results or will result in a breach of, or constitutes or will constitute a default or results or will result in an acceleration under (A) the certificate of trust or bylaws of the Depositor, or (B) of any term, condition or provision of any material indenture, deed of trust, contract or other agreement or instrument to which the Depositor or any of its subsidiaries is a party or by which it or any of its subsidiaries is bound; (ii) results or will result in a violation of any law, rule, regulation, order, judgment or decree applicable to the Depositor of any court or governmental authority having jurisdiction over the Depositor or its subsidiaries; or (iii) results in the creation or imposition of any lien, charge or encumbrance which would have a material adverse effect upon the Mortgage Loans or any documents or instruments evidencing or securing the Mortgage Loans.

 

(f) Except as set forth in the Prospectus Supplement under the heading “ Risk Factors ,” there are no actions, suits or proceedings before or against or investigations of, the Depositor pending, or to the knowledge of the Depositor, threatened, before any court, administrative agency or other tribunal, and no notice of any such action, which, in the Depositor’s reasonable judgment, might materially and adversely affect the performance by the Depositor of its obligations under this Agreement, or the validity or enforceability of this Agreement.

 

(g) The Depositor is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency that may materially and adversely affect its performance hereunder.

 

(h) The Depositor hereby covenants that it has filed a federal income tax return for its taxable year ending December 31, 2004 on Internal Revenue Service Form 1120 REIT on which the Depositor elected to be taxed as a REIT. The Depositor hereby represents

 

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that it has been organized in conformity with the requirements for qualification for taxation as a REIT and hereby covenants that it at all times the Depositor owns Trust Certificates, either directly, or indirectly through one or more Qualified REIT Subsidiaries, will conduct its operations so as to qualify as a REIT. If, at any time the Depositor owns Trust Certificates, either directly, or indirectly through one or more Qualified REIT Subsidiaries, the Depositor determines that is has failed to qualify as a REIT, the Depositor shall, within 30 days of such discovery, notify the Indenture Trustee of such failure.

 

It is understood and agreed that the representations, warranties and covenants set forth in this Section 3.06 shall survive delivery of the respective Indenture Trustee’s Mortgage Files to the Indenture Trustee and shall inure to the benefit of the Indenture Trustee.

 

ARTICLE IV

 

THE MORTGAGE LOANS

 

Section 4.01. Representations and Warranties Concerning the Mortgage Loans . The Sponsor makes the following representations and warranties to the Depositor, the Servicer, the Indenture Trustee, the Swap Provider and the Issuer as to the Mortgage Loans on which the Issuer relies in accepting the Mortgage Loans in trust and executing the Notes. All uses and variations of the word “enforceable” in this Section 4.01, shall be deemed to be qualified as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether considered in a proceeding or action in equity or at law). With respect to the representations and warranties stated in Sections 4.01(i), (r), (ddd), (eee) and (fff), the Sponsor makes such representations and warranties on behalf of itself and the Depositor. Such representations, warranties and covenants are made or deemed to be made as of the Closing Date.

 

(a) The information with respect to each Mortgage Loan set forth in the Mortgage Loan Schedule is true and correct as of the Cut-Off Date, based on Cut-Off Date Principal Balances.

 

(b) Each Mortgage Loan is being serviced either (i) through the Servicer or (ii) a Person controlling, controlled by or under common control with the Servicer and qualified to service mortgage loans.

 

(c) Each Mortgage Loan was underwritten or reunderwritten pursuant to the Underwriting Guidelines which conform in all material respects to the description thereof set forth in the Prospectus Supplement.

 

(d) All of the original or certified documentation required to be delivered to the Indenture Trustee pursuant to this Agreement (including all material documents related thereto) with respect to each Mortgage Loan has been or will be delivered to the Indenture Trustee in accordance with the terms of this Agreement. Each of the documents and instruments specified to be included therein has been duly executed and in due and proper form, and each such document or instrument is in a form generally acceptable to prudent mortgage lenders that regularly originate or purchase mortgage loans comparable to the Mortgage Loans for sale to prudent investors in the secondary market that invest in mortgage loans such as the Mortgage Loans.

 

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(e) [Reserved.]

 

(f) Each Mortgaged Property is improved by a single (one to four) family residential dwelling, which may include condominiums, individual units in a planned unit development and townhouses but shall not include cooperatives.

 

(g) No Mortgage Loan had an LTV at origination in excess of 100%.

 

(h) Each Mortgage Loan is a valid, subsisting enforceable and perfected first lien as identified on the Mortgage Loan Schedule on the Mortgaged Property and subject in all cases to the exceptions to title set forth in the title insurance policy, with respect to the related Mortgage Loan, which exceptions are generally acceptable to banking institutions in connection with their regular mortgage lending activities, and such other exceptions to which similar properties are commonly subject and which do not individually, or in the aggregate, materially and adversely affect the benefits of the security intended to be provided by such Mortgage. At the time each Mortgage Loan was originated, the originator was a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act or a savings and loan association, a savings bank, a commercial bank or similar banking institution which was supervised and examined by a federal or state authority or a mortgage banker or broker licensed or authorized to do business in the jurisdiction in which the related Mortgaged Property is located, applying the same standards and procedures used by the Sponsor in originating Mortgage Loans directly.

 

(i) Immediately prior to the transfer and assignment of the Mortgage Loans to the Depositor pursuant to the Contribution Agreement, the Sponsor held good and marketable title to, and was the sole owner of each Mortgage Loan, subject to no liens, charges, mortgages or encumbrances or rights of others, except liens of third party warehouse lenders that will be released simultaneously with the transfer and assignment contemplated herein; and immediately prior to the transfer and assignment herein contemplated, the Depositor held good and marketable title to, and was the sole owner of, each Mortgage Loan subject to no liens, charges, mortgages, encumbrances or rights of others except liens which will be released simultaneously with such transfer and assignment; and immediately upon the transfer and assignment herein contemplated, the Indenture Trustee will hold good and marketable title to, and be the sole owner of, each Mortgage Loan subject to no liens, charges, mortgages, encumbrances or rights of others except liens which will be released simultaneously with such transfer and assignment.

 

(j) There is no delinquent tax or assessment lien on any Mortgaged Property, and each Mortgaged Property is free of substantial damage and is in good repair.

 

(k) There is no valid and enforceable right of rescission, set-off, defense or counterclaim to any Mortgage Note or Mortgage, including the obligation of the related Mortgagor to pay the unpaid principal of or interest on such Mortgage Note or the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the

 

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exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto.

 

(l) There is no mechanics’ lien or claim for work, labor or material affecting any Mortgaged Property which is or may be a lien prior to, or equal with and no rights are outstanding that under the law gives rise to such liens, the lien of the related Mortgage except those which are insured against by any title insurance policy referred to in paragraph (n) below.

 

(m) Each Mortgage Loan at the time it was made complied with, and each Mortgage Loan at all times was serviced in compliance with, in each case, in all material respects, applicable local, state and federal laws and regulations, including, without limitation, the federal Truth-in-Lending Act and other consumer protection laws, the Home Ownership and Equity Protection Act of 1994, real estate settlement procedure, usury, equal credit opportunity, disclosure and recording laws and all applicable predatory and abusive lending laws.

 

(n) With respect to each Mortgage Loan, a lender’s title insurance policy, issued in standard California Land Title Association form or American Land Title Association form, or other form acceptable in a particular jurisdiction by a title insurance company authorized to transact business in the state in which the related Mortgaged Property is situated, in an amount at least equal to the original Principal Balance of such Mortgage Loan insuring the mortgagee’s interest under the related Mortgage Loan as the holder of a valid first mortgage lien of record on the real property described in the related Mortgage, as the case may be, subject only to exceptions of the character referred to in paragraph (h) above, was effective on the date of the origination of such Mortgage Loan, and, as of the Closing Date such policy will be valid and inure to the benefit of the Indenture Trustee on behalf of the Noteholders.

 

(o) The improvements upon each Mortgaged Property are covered by a valid and existing hazard insurance policy (which may be a blanket policy of the type described in this Agreement) with a generally acceptable carrier that provides for fire and extended coverage representing coverage not less than the least of (i) the outstanding Principal Balance of the related Mortgage Loan, (ii) the minimum amount required to compensate for damage or loss on a replacement cost basis or (iii) the full insurable value of the Mortgaged Property.

 

(p) If any Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, a flood insurance policy (which may be a blanket policy of the type described in this Agreement) in a form meeting the requirements of the current guidelines of the Federal Insurance Administration is in effect with respect to such Mortgaged Property with a generally acceptable carrier in an amount representing coverage not less than the least of (i) the outstanding Principal Balance of the related Mortgage Loan, (ii) the minimum amount required to compensate for damage or loss on a replacement cost basis or (iii) the maximum amount of insurance that is available under the Flood Disaster Protection Act of 1973.

 

(q) Each Mortgage and Mortgage Note is the legal, valid and binding obligation of the maker thereof and is enforceable in accordance with its terms, except only as

 

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such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether considered in a proceeding or action in equity or at law), and all parties to each Mortgage Loan had full legal capacity to execute all documents relating to such Mortgage Loan and convey the estate therein purported to be conveyed.

 

(r) The Sponsor has directed and the Depositor has caused to be performed any and all acts required to be performed to preserve the rights and remedies of the Indenture Trustee in any Insurance Policies applicable to any Mortgage Loan delivered by the Sponsor or the Depositor including, to the extent such Mortgage Loan is not covered by a blanket policy described in this Agreement, any necessary notifications of insurers, assignments of policies or interests therein, and establishments of coinsured, joint loss payee and mortgagee rights in favor of the Indenture Trustee.

 

(s) The Sponsor has caused or will have caused, within ten days, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest in the original Mortgage Note and all subsequent assignments of the original Mortgage, granted to the Indenture Trustee hereunder, subject to the provisions of Section 2.05(b) of this Agreement.

 

(t) The terms of each Mortgage Note and each Mortgage have not been impaired, altered, waived or modified in any respect, except by a written instrument which has been recorded, if necessary, to protect the interest of the Noteholders and which has been delivered to the Indenture Trustee.

 

(u) The proceeds of each Mortgage Loan have been fully disbursed, and there is no obligation on the part of the mortgagee to make future advances thereunder. All costs, fees and expenses incurred in making or closing or recording such Mortgage Loans were paid.

 

(v) Except as otherwise required by law or pursuant to the statute under which the related Mortgage Loan was made, the related Mortgage Note is not and has not been secured by any collateral, pledged account or other security except the lien of the corresponding Mortgage.

 

(w) No Mortgage Loan was originated under a buydown plan.

 

(x) No Mortgage Loan provides for negative amortization, has a shared appreciation feature, or other contingent interest feature.

 

(y) Each Mortgaged Property is located in the state identified in the Mortgage Loan Schedule and consists of one or more parcels of real property with a residential dwelling erected thereon and that no residence or dwelling is a mobile home.

 

(z) Each Mortgage securing a Mortgage Note contains a provision for the acceleration of the payment of the unpaid Principal Balance of the related Mortgage Loan in the event the related Mortgaged Property is sold without the prior consent of the mortgagee thereunder.

 

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(aa) Any advances made after the date of origination of a Mortgage Loan but prior to the Cut-Off Date, have been consolidated with the outstanding principal amount secured by the related Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term reflected on the Mortgage Loan Schedule. The consolidated principal amount does not exceed the original principal amount of the related Mortgage Loan. No Mortgage Note permits or obligates the Depositor, the Servicer, the Sponsor or any other Person to make future advances to the related Mortgagor at the option of the Mortgagor.

 

(bb) There is no proceeding pending or threatened for the total or partial condemnation of any Mortgaged Property, nor is such a proceeding currently occurring, and each Mortgaged Property is undamaged by waste, fire, earthquake or earth movement, flood, tornado or other casualty, so as to affect adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended.

 

(cc) All of the improvements which were included for the purposes of determining the Appraised Value of any Mortgaged Property lie wholly within the boundaries and building restriction lines of such Mortgaged Property, and no improvements on adjoining properties encroach upon such Mortgaged Property, except as stated in the related title insurance policy and affirmatively insured.

 

(dd) No improvement located on or being part of any Mortgaged Property is in violation of any applicable zoning law or regulation. As of the related date of origination, all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of each Mortgaged Property and, with respect to the use and occupancy of the same, including, but not limited to, certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities and such Mortgaged Property is lawfully occupied under the applicable law.

 

(ee) With respect to each Mortgage constituting a deed of trust, a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in such Mortgage, and no fees or expenses are or will become payable by the Sponsor, the Depositor, or the Issuer to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the related Mortgagor.

 

(ff) [Reserved.]

 

(gg) [Reserved.]

 

(hh) Each Mortgage contains customary and enforceable provisions which render the rights and remedies of the holder thereof adequate for the realization against the related Mortgaged Property of the benefits of the security, including (i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale and (ii) otherwise by judicial foreclosure. There is no homestead or other exemption available which materially interferes with the right to sell the related Mortgaged Property at a trustee’s sale or the right to foreclose the related Mortgage.

 

(ii) There is no default, breach, violation or event of acceleration existing under any Mortgage or the related Mortgage Note and no event which, with the passage of time

 

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or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration; and the Depositor has not waived any default, breach, violation or event of acceleration.

 

(jj) No instrument of release or waiver has been executed in connection with any Mortgage Loan, and no Mortgagor has been released, in whole or in part.

 

(kk) [Reserved.]

 

(ll) The Sponsor has no actual knowledge that there exists on any Mortgaged Property any hazardous substances, hazardous wastes or solid wastes, as such terms are defined in the CERCLA, the Resource Conservation and Recovery Act of 1976, or other federal, state or local environmental legislation.

 

(mm) No action, error, omission, misrepresentation, negligence, fraud or similar occurrence with respect to the origination of a Mortgage Loan has taken place on the part of any person, including, without limitation, the Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination of the Mortgage Loan or in the application of any insurance in relation to such Mortgage Loan.

 

(nn) The Sponsor has not solicited the Mortgagor in connection with any refinancing.

 

(oo) If the Mortgage Loan is an adjustable rate Mortgage Loan, all of the adjustments to the Mortgage Interest Rate, to the amount of the monthly payment, and to the principal balance have been made in accordance with the terms of the related Mortgage Note.

 

(pp) The origination and collection practices used with respect to the Mortgage Loan have been in all respects legal, proper, prudent and customary in the mortgage origination and servicing business.

 

(qq) An appraisal of the related Mortgaged Property was made and signed, prior to the approval of the Mortgage Loan application, by a qualified appraiser who met the requirements of the Sponsor’s appraisal policy and procedures and who had no interest, direct or indirect in the Mortgaged Property or in any loan made on the security thereof, whose compensation was not affected by the approval or disapproval of the Mortgage Loan.

 

(rr) The Mortgagor has received all disclosure materials required by applicable law with respect to the making of adjustable rate mortgage loans; and if the Mortgage Loan is a refinanced Mortgage Loan, the Mortgagor has received all disclosure and rescission materials required by applicable law with respect to the making of a refinanced Mortgage Loan, and evidence of such receipt is and will remain in the Servicer’s file.

 

(ss) If the residential dwelling on the Mortgaged Property is a condominium unit or a unit in a planned unit development (other than a de minimis planned unit development), such condominium or planned unit development project meets the Sponsor’s eligibility requirements.

 

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(tt) None of the Mortgage Loans was more than one payment past due or had been dishonored. None of the Mortgage Loans have been thirty or more days delinquent more than one time in the twelve months preceding the Cut-Off Date.

 

(uu) The Sponsor has not advanced funds, or induced, solicited or knowingly received any advance of funds by a person other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage Loan, except for interest prepaid upon the closing of the Mortgage Loan. No Mortgage Loan contains any provision pursuant to which Monthly Payments are: (i) paid or partially paid with funds deposited in any separate account established by the Sponsor, the Mortgagor, or anyone on behalf of the Mortgagor or (ii) paid by any source other than the Mortgagor. The Mortgage Loan is not deemed a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature.

 

(vv) No foreclosure proceedings are pending against the Mortgaged Property and the Mortgage Loan is not subject to any pending bankruptcy or insolvency proceeding, and to the Sponsor’s best knowledge, no material litigation or material lawsuit relating to the Mortgage Loan is pending.

 

(ww) Principal payments on the Mortgage Loan commenced or will commence within sixty days after the proceeds of the Mortgage Loan were disbursed.

 

(xx) With respect to escrow deposits, if any, all such payments are in the possession of, or under the control of, the Servicer and there exists no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made or could be made. No escrow deposits or escrow advances or other charges or payments due the Servicer have been capitalized under any Mortgage or the related Mortgage Note.

 

(yy) With respect to the conveyance of the Mortgage Loans by the Sponsor to the Depositor, the Sponsor used no selection procedures that identified the Mortgage Loans as being less desirable or valuable than other comparable mortgage loans originated or acquired by the Sponsor. The Mortgage Loans are representative of the Sponsor’s portfolio of fixed-rate or adjustable-rate mortgage loans, as applicable. With respect to the conveyance of the Mortgage Loans pursuant to this Agreement, the Depositor used no selection procedures that identified the Mortgage Loans as being less desirable or valuable than other comparable mortgage loans originated or acquired by the Depositor. The Mortgage Loans are representative of the Depositor’s portfolio of fixed-rate or adjustable-rate mortgage loans, as applicable.

 

(zz) Each Mortgage Loan conforms, and all such Mortgage Loans in the aggregate conform in all material respects to the description thereof set forth in the Prospectus Supplement.

 

(aaa) All requirements for the valid transfer of each Insurance Policy, including any assignments or notices required in each Insurance Policy, have been satisfied.

 

(bbb) This Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Mortgage Loans in favor of the Indenture Trustee, which security interest is prior to all other liens, and is enforceable as such as against creditors of and purchasers from the Depositor.

 

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(ccc) The Mortgage Loans constitute “instruments” within the meaning of the applicable UCC.

 

(ddd) The Sponsor received all consents and approvals required by the terms of the Mortgage Loans to the contribution of the Mortgage Loans pursuant to the Contribution Agreement to the Depositor and the Depositor has received all consents and approvals required by the terms of the Mortgage Loans to the sale of the Mortgage Loans hereunder to the Owner Trustee and the subsequent pledge to the Indenture Trustee.

 

(eee) Other than the security interest granted to the Indenture Trustee pursuant to the Indenture, neither the Sponsor nor the Depositor has pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Mortgage Loans. Neither the Sponsor nor the Depositor has authorized the filing of nor is aware of any financing statements against the Sponsor or the Depositor that include a description of collateral covering the Mortgage Loans other than any financing statement relating to the security interest granted to the Indenture Trustee hereunder or that has been terminated. Neither the Sponsor nor the Depositor is aware of any judgment or tax lien filings affecting the Mortgage Loans against either the Depositor or the Sponsor.

 

(fff) All financing statements filed or to be filed against the Sponsor or the Depositor in favor of the Indenture Trustee in connection herewith describing the Mortgage Loans contain a statement to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Indenture Trustee.”

 

(ggg) None of the Mortgage Loans are classified as (a) “high cost” loans under the Home Ownership and Equity Protection Act of 1994 or (b) “high cost,” “threshold,” “covered”, “predatory” or “abusive” loans under any other applicable state, federal or local law (including without limitation any regulation or ordinance) (or a similarly classified loan using different terminology under a law imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees).

 

(hhh) No proceeds from any Mortgage Loan were used to finance single-premium credit insurance policies. With respect to each Mortgage Loan, no borrower obtained a prepaid single-premium credit-life, credit-disability, credit unemployment or credit property insurance policy in connection with the origination of the mortgage loan.

 

(iii) No Mortgage Loan is a “High Cost Home Loan” or “Covered Loan,” as applicable, (as such terms are defined in the then current Standard & Poor’s LEVELS Glossary which is now Version 5.6c Revised, Appendix E) and no Mortgage Loan originated on or after October 1, 2002 through March 6, 2003 is governed by the Georgia Fair Lending Act. No Mortgage Loan that was originated on or after October 1, 2002 and before March 7, 2003 is secured by property located in the State of Georgia. There is no Mortgage Loan that was originated on or after March 7, 2003 which is a “high cost home loan” as defined under the Georgia Fair Lending Act.

 

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(jjj) No Mortgage Loan is secured by a leasehold interest, unless such leasehold interest extends 60 months beyond the stated maturity of the Mortgage Note.

 

(kkk) There is no pending action or proceeding directly involving the Mortgaged Property in which compliance with any environmental law, rule or regulation is an issue. Based upon customary and prudent residential mortgage industry underwriting standards, there is no violation of any environmental law, rule or regulation with respect to the Mortgaged Property, and nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation constituting a prerequisite to use and enjoyment of said property.

 

(lll) The Mortgagor has not notified Accredited, and Accredited has no knowledge of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act or any similar state statute.

 

(mmm) No Mortgage Loan was made in connection with the construction (other than a “construct to perm” loan) or rehabilitation of a Mortgaged Property or facilitating the trade in or exchange of a Mortgaged Property.

 

(nnn) Accredited has complied with all applicable anti money laundering laws and regulations, including without limitation the USA Patriot Act of 2001 (collectively, the “Anti-Money Laundering Laws”).

 

(ooo) No Mortgage Loan imposes a Prepayment Charge for a term in excess of five years.

 

(ppp) No Mortgage Loan is a “High-Cost Home Loan” as defined in the New Jersey Home Ownership Act, effective as of November 27, 2003, or the Home Loan Protection Act of New Mexico, effective as of January 1, 2004.

 

(qqq) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Massachusetts Predatory Home Loan Practice Act effective November 7, 2004 (MA House Bill 4880).

 

(rrr) With respect to the Mortgage Loans in Group I, (i) no Mortgage Loan imposes a Prepayment Charge for a term in excess of three years, (ii) the servicer for each Mortgage Loan has fully furnished (and, on a going forward basis, will fully furnish), in accordance with the Fair Credit Reporting Act and its implementing regulations, accurate and complete information (i.e., favorable and unfavorable) on its borrower credit files to Equifax, Experian, and Trans Union Credit Information Company (three of the credit repositories), on a monthly basis, (iii) with respect to any Mortgage Loan originated on or after August 1, 2004, neither the related mortgage nor the related mortgage note requires the borrower to submit to arbitration to resolve any dispute arising out of or relating in any way to the mortgage loan transaction, (iv) no Mortgage Loan is covered by the Home Ownership and Equity Protection Act of 1994 (“HOEPA”), (v) no Mortgage Loan is a “high cost home,” “covered” (excluding home loans defined as “covered home loans” in the New Jersey Home Ownership Security Act of 2002 that were originated between November 26, 2003 and July 7, 2004), “high risk home” or “predatory” loan under any applicable state, federal or local law (or a similarly classified loan using different terminology under a law imposing heightened regulatory scrutiny or additional

 

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legal liability for residential mortgage loans having high interest rates, points and/or fees), (vi) each Mortgage Loan is a “qualified mortgage” under Section 860G(a)(3) of the Code, and (vii) the original Principal Balance of each Mortgage Loan was within Freddie Mac’s dollar amount limits for conforming one- to four-family mortgage loans, as follows:

 

 

(sss) A breach of any one of the representations set forth in paragraphs (ggg), (hhh), (iii) and (qqq) above, will be deemed to materially and adversely affect the interests of the Noteholders and shall require a repurchase of the affected Mortgage Loan pursuant to Section 4.02.

 

It is understood and agreed that the representations, warranties and covenants set forth in this Section 4.01 shall survive delivery of the respective Indenture Trustee’s Mortgage Files to the Indenture Trustee and shall inure to the benefit of the Indenture Trustee on behalf of the Noteholders.

 

Section 4.02. Purchase and Substitution . (a) It is understood and agreed that the representations and warranties set forth in Section 4.01 shall survive the transfer of the Mortgage Loans by the Depositor to the Issuer, the subsequent pledge thereof by the Issuer to the Indenture Trustee, for the benefit of the Noteholders, and the delivery of the Notes to the Noteholders, and shall continue in full force and effect, notwithstanding any restrictive or qualified endorsement on the Mortgage Notes and notwithstanding subsequent termination of this Agreement.

 

(b) Upon discovery by the Depositor, the Sponsor, the Servicer, the Indenture Trustee or a Noteholder of a breach of any of the representations and warranties in Section 4.01 which materially and adversely affects the value of any Mortgage Loan, or which materially and adversely affects the interests of the Noteholders in the related Mortgage Loan, the party discovering such breach or failure shall promptly (and in any event within five (5) days of the discovery) give written notice thereof to the others. Within sixty (60) days of the earlier of its discovery or its receipt of notice of any breach of a representation or warranty, the Depositor shall, and if the Depositor fails to, then the Sponsor shall (a) promptly cure such breach in all material respects, (b) purchase such Mortgage Loan on a Servicer Remittance Date, in the manner and at the price specified in Section 2.06(b) and this Section 4.02, or (c) remove such Mortgage Loan from the Trust Estate (in which case it shall become a Deleted Mortgage Loan) and substitute one or more Qualified Substitute Mortgage Loans in the manner specified in Section 2.06 and this Section 4.02. The Indenture Trustee shall deliver prompt written notice to the Rating Agencies of any repurchase or substitution made pursuant to this Section 4.02 or Section 2.06(b).

 

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(c) As to any Deleted Mortgage Loan for which the Depositor or the Sponsor substitutes a Qualified Substitute Mortgage Loan or Loans, the Servicer shall cause the Depositor or Sponsor to effect such substitution by delivering to the Indenture Trustee a certification, in the form attached hereto as Exhibit F , executed by a Servicing Officer, and the documents described in Sections 2.05(a)(i)-(vi) for such Qualified Substitute Mortgage Loan or Loans.

 

(d) The Servicer shall deposit in the Collection Account all payments received in connection with such Qualified Substitute Mortgage Loan or Loans after the date of such substitution. Monthly Payments due with respect to Qualified Substitute Mortgage Loans in or before the Due Period in which the substitution occurs shall not be part of the Trust Estate and will be retained by the Sponsor on the next succeeding Payment Date. For the Due Period in which the substitution occurs, distributions to Noteholders will include the Monthly Payment due on any Deleted Mortgage Loan for such Due Period and thereafter the Sponsor shall be entitled to retain all amounts received in respect of such Deleted Mortgage Loan. The Servicer shall give written notice to the Indenture Trustee that such substitution has taken place and shall amend the Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from the terms of this Agreement and the substitution of the Qualified Substitute Mortgage Loan or Loans. Upon such substitution, such Qualified Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement in all respects.

 

(e) With respect to any Mortgage Loan