LOAN SERVICING AGREEMENT

THIS LOAN SERVICING AGREEMENT dated as of [_________ __, 20__] (the “Agreement”) by and between RWT Holdings, Inc. and/or its assigns (“Owner”), a Delaware corporation with its principal office located at One Belvedere Place, #310 Mill Valley, California, 94941, and [______________], a [_________]corporation with its principal office located at [______________________](“Servicer”).

A.          Owner desires to retain Servicer from time to time to service certain residential mortgage loans that Owner may make or acquire; and

B.           Owner and Servicer desire to establish the terms and conditions on which Servicer shall service mortgage loans on behalf of Owner.

NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Section 1.01   Definitions

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

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

“Ancillary Income”: All income derived from the Mortgage Loans other than servicing fees and prepayment fees, including without limitation late charges and other incidental fees and fees, commissions or expense reimbursements relating to the placement of insurance, and such other income defined as Ancillary Income in this Agreement.

“Applicable Requirements”:  As of the time of reference, with respect to the Mortgage Loans, REO Property and the servicing of the Mortgage Loans, all of the following: (i) all contractual obligations of Owner under the Mortgage Loan, for which Owner or, by virtue of this Agreement, Servicer is responsible for or at any time was or hereafter will be responsible; (ii) all applicable federal, state and local legal and regulatory requirements (including, without limitation, statutes, rules, regulations and ordinances and including the Privacy Requirements) binding upon Owner or Servicer; (iii) all other applicable requirements and guidelines of each governmental agency, board, commission, instrumentality and other governmental body or officer having jurisdiction; (iv) all other applicable judicial and administrative judgments, orders, stipulations, awards, writs and injunctions; (v), the applicable provisions of the Fannie Mae Servicing Guide for whole loan servicing that would apply if Fannie Mae were the Investor for such Mortgage Loans, to the extent not otherwise inconsistent with this Agreement; and (vi) Customary Servicing Procedures.

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

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

“Business Day”:  Any day other than (i) a Saturday or Sunday, (ii) a day on which banking or savings and loan institutions in the Commonwealth of Pennsylvania or the States of California, Iowa or Connecticut are authorized or obligated by law or executive order to be closed, or (iii) a day that is a company holiday at the location of the main offices of either Owner or Servicer.

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

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

“Custodial Agreement”:  The agreement governing the retention of the originals of each Mortgage Note, Mortgage, Assignment of Mortgage and other Mortgage Loan Documents, a form of which is annexed hereto as Exhibit K .

“Custodian”:  The custodian under the Custodial Agreement, or its successor in interest or assigns, or any successor to the Custodian under the Custodial Agreement as provided therein.

“Customer Information”:  Any personally identifiable information in any form (written electronic or otherwise) relating to a Mortgagor, including, but not limited to: a Mortgagor’s name, address, telephone number, Mortgage Loan number, Mortgage Loan payment history, delinquency status, insurance carrier or payment information, tax amount or payment information; the fact that the Mortgagor has a relationship with the servicer of such Mortgagor’s Mortgage Loan; and any other non-public personally identifiable information.

“Customary Servicing Procedures”:  Those mortgage servicing practices of mortgage lending institutions that service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgage Property is located, exercising the same care in performing those practices that the Servicer customarily employs and exercises in servicing and administering mortgage loans for its own account (including compliance with all applicable federal, state and local laws).

“Cutoff Date”:  The last Business Day of the month.

“Determination Date”:  The 15 ^th day (or if such last day is not a Business Day, the Business Day immediately preceding such 15th day) of the month immediately preceding the related Remittance Date.

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

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

“Effective Date”:  The date that Servicer physically assumes in accordance with the Transfer Instructions.

“Eligibility Criteria”:  The eligibility criteria for residential mortgage loans to be delivered by Owner after the initial Effective Date to be serviced by Servicer under this Agreement, as specified in Exhibit A hereto, as the same may be amended from time to time with the mutual consent of both parties.

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

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

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

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

(iii)          federal funds, certificates of deposit, demand deposits, time deposits and bankers’ acceptances (which shall each have an original maturity of not more than 90 days and, in the case of bankers’ acceptances, shall in no event have an original maturity of more than 365 days or a remaining maturity of more than 30 days) denominated in United States dollars of any U.S. depository institution or trust company incorporated under the laws of the United States or any state thereof or of any domestic branch of a foreign depository institution or trust company;

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

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

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

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

(viii)        [_______]Variable Denomination Demand Note Program which constitutes unsecured, senior debt obligations of _____________as outlined in the Prospectus dated __________ __, 20__ (the “Demand Note Program”). Investments in the Demand Note Program are subject to:

(a)           ______’s short term unsecured debt must be rated (i) at least A-1 by S & P and at least P-2 by Moody’s or (ii) at least A-2 by S & P and at least P-1 by Moody’s; and

(b)           ______’s long term unsecured debt must be rated (i) not less than A- by S & P and (ii) not less than A3 by Moody’s;

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

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

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

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

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

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

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

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

“High Cost Loan”:  A residential mortgage loan that is subject to the anti-predatory prohibitions of state or local laws and regulations by virtue of the loan’s high interest rate or total points and fees.

“HOEPA”:  The Home Ownership Equity Protection Act.

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

“Index”:  With respect to any Adjustable Rate Mortgage Loan, the index set forth in the applicable Mortgage Note which is added to the gross margin to determine the Mortgage Interest Rate on each interest adjustment date.

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

“Investor”:  An assign (including any trustee) of RWT Holdings, Inc.’s legal interest in a Mortgage Loan.

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

“Loss Mitigation Activity”:  To the extent not ordinary to the servicing function, an initiative taken by the Servicer (sometimes on cooperation with the Mortgagor), with the prior written consent of Owner if the Servicer reasonably expects the impact to the Owner to be greater than $5,000 (which consent shall be deemed to have been provided if no response from Owner is provided within ten (10) Business Days after written notice to Owner of Servicer’s intent to undertake such initiative), that might result in a less costly alternative to the Owner than foreclosure.  Loss Mitigation Activity can include temporary forbearance, pre-sales, loan modifications, loan repayments, accepting a deed-in-lieu and deficiency judgments.

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

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

“Mortgage File”:  The items pertaining to a particular Mortgage Loan referred to in Exhibit C annexed hereto, which are delivered to the Custodian and not otherwise contained in the Mortgage Loan Servicing File, and any additional documents required to be added to the Mortgage File pursuant to this agreement.

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

“Mortgage Loan”:  An individual mortgage loan that is the subject of this Agreement, and those that are made subject to this Agreement after the initial Effective Date pursuant to the provisions specified herein.

“Mortgage Loan Documents”:  With respect to a Mortgage Loan, the original related Mortgage Note with applicable addenda, riders allonges or modifications, the original related Mortgage and the originals of any required addenda, riders allonges or modifications, the original related Assignment and any original intervening related Assignments, the original related title insurance policy, related PMI policy, if any, and the related appraisal report.

“Mortgage Loan Remittance Rate”:  With respect to each Mortgage Loan, the annual rate of interest remitted to the Owner, which shall be equal to the related Mortgage Interest Rate minus the Servicing Fee.

“Mortgage Loan Servicing File”: With respect to each Mortgage Loan, the file retained by the Servicer consisting of originals of all documents in the Mortgage File which are not delivered to the Custodian and copies of the Mortgage Loan Documents listed in the Custodial Agreement the originals of which are delivered to the Custodian pursuant to Section 2.04 as more fully set forth in Exhibit C .

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

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

“Mortgagor”:  The obligor on a Mortgage Note.

“New Loan Data File”: With respect to each Mortgage Loan delivered after the initial Effective Date by Owner to be serviced by Servicer under this Agreement, the data file produced by Owner pursuant to the Transfer Instructions that is used to enable Servicer to set up each Mortgage Loan on its servicing system.

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

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

“Owner”:  RWT Holdings, Inc. and/or its assigns.

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

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

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

“Prepayment Interest Shortfall”:  With respect to any Remittance Date, for each Mortgage Loan that was the subject of a Principal Prepayment during the related Principal Prepayment Period, an amount equal to the excess of one month’s interest at the applicable Mortgage Loan Remittance Rate on the amount of such Principal Prepayment over the amount of interest (adjusted to the Mortgage Loan Remittance Rate) actually paid by the related Mortgagor with respect to such Principal Prepayment Period.

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

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

“Principal Prepayment Period”:  The calendar month preceding the month of the applicable Remittance Date.

“Privacy Requirements”: Means the obligations imposed by (i) Title V of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq.; (ii) the applicable federal regulations implementing such act and codified at 12 CFR Parts 40, 216, 332,  573, and/or 16 CFR Part 313; (iii) Interagency Guidelines Establishing Standards For Safeguarding Borrower Information published in final form on February 1, 2001 (such final guidelines and/or rules the “Interagency Guidelines”) to establish and maintain an information Security Program; and (iv) other applicable federal, state and local laws, rules, regulations, and orders relating to the privacy and security of Customer Information, including the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and similar state laws.

“Qualified Insurer”:  A mortgage guaranty insurance Insurer duly authorized and licensed where required by law to transact mortgage guaranty insurance business and approved as an insurer by Fannie Mae or Freddie Mac.

“Rating Agencies” or “Rating Agencies” means any nationally recognized statistical credit agency that at the time of any determination thereof has outstanding a rating on one or more classes of mortgage-backed securities or asset-backed securities at the request of any issuer of mortgage-backed securities or asset-backed securities.

“Reconstitution”:  Either a Whole Loan Transfer or a Pass-Through Transfer.

“Reconstitution Date”:  The date on which any or all of the Mortgage Loans serviced under this Agreement shall be removed from this Agreement and reconstituted as part of a Whole Loan Transfer or Pass Through Transfer pursuant to Section 10.03 hereof.  The Reconstitution Date shall be such date designated by the Owner with thirty (30) days prior notice to Servicer.

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

“REMIC”: A real estate mortgage investment conduit, as such term is defined by the Internal Revenue Code of 1986, as amended.

“Remittance Date”:  The 18 ^th day of any month, beginning on the 18 ^th day of the month after the month of the applicable Transfer Date, or if such 18 ^th day is not a Business Day, the first Business Day immediately preceding.

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

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

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

“Servicer”:  [________________], a Pennsylvania corporation, or its successor in interest or any successor to the Servicer under this Agreement appointed as herein provided.

“Servicing Advances”:  All customary, reasonable and necessary “out of pocket” costs and expenses incurred in the performance by the Servicer of its servicing obligations, including, but not limited to, the cost of (a) the preservation, restoration and protection of the Mortgaged Property, (b) any enforcement or judicial proceedings, including foreclosures, (c) the management and liquidation of REO Property pursuant to Section 4.14, and (d) compliance with the Servicer’s obligations described in Sections 4.08 and 4.10.

“Servicing Compensation “:  The amount of fees payable to the Servicer for the services provided in this Agreement.

“Servicing Fee”: With respect to each Mortgage Loan, the amount the Owner shall pay to the Servicer, which shall, for a period of one full month, be equal to one-twelfth of the product of (a) the Servicing Fee Rate and (b) the Assumed Principal Balance as of the first day of the related Due Period.  The obligation of the Owner to pay the Servicing Fee is limited to, and the Servicing Fee is payable solely from, the interest portion (including recoveries with respect to interest from Liquidation Proceeds, to the extent permitted hereunder) of Monthly Payments collected by the Servicer, or as otherwise provided hereunder.

“Servicing Fee Rate”: The Servicing Fee Rate shall be 0.375%.

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

“Servicing Rights”:  With respect to each Mortgage Loan, any and all of the following:  (a) all rights to service the Mortgage Loan; (b) all rights to receive servicing fees, additional servicing compensation (including without limitation any late fees, assumption fees, penalties or similar payments with respect to the Mortgage Loan, and income on escrow accounts or other receipts on or with respect to the Mortgage Loan, but excluding all prepayment penalties), reimbursements or indemnification for servicing the Mortgage Loan, and any payments received in respect of the foregoing and proceeds thereof; (c) the right to collect, hold and disburse escrow payments or other similar payments with respect to the Mortgage Loans and any amounts actually collected with respect thereto and to receive interest income on such amounts to the extent permitted by applicable law; (d) all accounts and other rights to payment related to any of the property described in this paragraph; (e) possession and use of any and all Mortgage Loan Servicing Files pertaining to the Mortgage Loans or pertaining to the past, present or prospective servicing of the Mortgage Loans; (f) all rights and benefits relating to the direct solicitation of the related Mortgagors for products and services or modification of the Mortgage Loans and attendant right, title and interest in and to the list of such Mortgagors and data relating to their respective Mortgage Loans; (g) all rights, powers and privileges incident to any of the foregoing; and (h) all agreements or documents creating, defining or evidencing any of the foregoing rights to the extent they relate to such rights.

“Transfer Instructions”:  The instructions set forth on Exhibit D , detailing the procedures pursuant to which Servicer and Owner shall effect the assumption of the servicing obligations by Servicer, as the same may be amended or supplemented from time to time with respect to Mortgage Loans delivered on or after the initial Effective Date to be serviced by Servicer under this Agreement.

“WILMA File”:  A schedule annexed to each New Loan Data File as specified in the Transfer Instructions.

“Whole Loan Transfer”:  Any sale or transfer of some or all of the Mortgage Loans by the Owner to a third party, which transfer is not a Pass Through Transfer.

Section 2.01    Servicing of Mortgage Loans .

From and after each related Effective Date, the Servicer does hereby agree to service the Mortgage Loans on behalf of the Owner pursuant to the terms of this Agreement.  The rights of the Owner to receive payments with respect to the Mortgage Loans shall be as set forth in this Agreement.  Servicer shall be deemed to be the owner of the Servicing Rights.

The Owner shall deliver the Mortgage Loan Servicing Files to the Servicer in accordance with the Transfer Instructions. The contents of each Mortgage Loan Servicing File are and shall be held in trust by the Servicer for the benefit of the Owner as the owner thereof and the Servicer’s possession of each Mortgage Loan Servicing File so retained is at the will of the Owner for the sole purpose of servicing the related Mortgage Loan, and such retention and possession by the Servicer is in a custodial capacity only. The Mortgage Loan Servicing File may be retained in microfilm, microfiche, optical storage or magnetic media in lieu of hard copy.  The Servicer shall maintain records confirming the Owner’s ownership interest in the Mortgage Loan Servicing File.  The Servicer shall release from its custody the contents of any Mortgage Loan Servicing File only in accordance with written instructions from the Owner, unless such release is required as incidental to the Servicer’s servicing of the Mortgage Loans.  Owner may request the release of the contents of any Mortgage Loan Servicing File at any time; Servicer shall deliver the requested contents within five (5) business days of its receipt of Owner’s written request, and Owner shall reimburse Servicer for Servicer’s reasonable out of pocket expenses in connection with such delivery.

Section 2.03    Books and Records .

Record title to each Mortgage and the related Mortgage Note shall continue in the name of the Owner, provided, however, that, subject to Customary Servicing Procedures, Servicer shall have no responsibility or liability under this Agreement for acts, errors or omissions resulting from Servicer’s lack of record title in each Mortgage and the related Mortgage Notes.  All rights arising out of the Mortgage Loans including, but not limited to, all funds received on or in connection with a Mortgage Loan shall be held by the Servicer in trust for the benefit of the Owner as the owner of the Mortgage Loans, subject to subsequent deduction of amounts to which the Servicer is entitled pursuant to the terms of this Agreement.

Section 2.04     Custodial Agreement: Delivery of Documents .

The Owner shall deliver to the Custodian those Mortgage Loan Documents as required by Exhibit C to this Agreement with respect to each Mortgage Loan.  The Custodian will certify its receipt of all such Mortgage Loan Documents required to be delivered pursuant to the Custodial Agreement, as evidenced by the Initial Certification of the Custodian in the form annexed to the Custodial Agreement.  The Owner will be responsible for the fees and expenses of the Custodian.

The Servicer shall forward to the Custodian original documents evidencing an assumption, modification, consolidation or extension of any Mortgage Loan entered into in accordance with Section 4.01 within one (1) week of their execution, provided, however, that the Servicer shall provide the Custodian with a certified true copy of any such document submitted for recordation within ten (10) days of its execution, and shall provide the original of any document submitted for recordation or a copy of such document certified by the appropriate public recording office to be a true and complete copy of the original within sixty days of its submission for recordation.

Section 2.05    Tax Service/Flood Service .

The Servicer shall obtain, at Owner’s cost and expense, a valid fully paid, freely transferable, life of loan, tax service contract and flood service contract for each Mortgage Loan with a vendor selected by the Servicer as specified in the Transfer Instructions.  If Owner delivers, or causes to be delivered, existing tax service contracts or flood service contracts for any Mortgage Loan, the Servicer may convert such contracts, at Owner’s cost and expense, to one issued by the vendor selected by Servicer.

Each of the Servicer and Owner hereby represents and warrants to the other that, as of the initial and each Effective Date:

(a)            Due Organization and Authority .  With respect to Servicer, it is a corporation duly organized, validly existing and in good standing under the laws of the state of incorporation and has all licenses necessary to carry on its business as now being conducted and is licensed, qualified and in good standing in each state where a Mortgaged Property is located if the laws of such state require licensing or qualification in order to conduct business of the type conducted by it, and in any event it is in compliance with the laws of any such state to the extent necessary to ensure the enforceability of the related Mortgage Loan and the servicing of such Mortgage Loan in accordance with the terms of this Agreement.  With respect to Owner, it is a corporation, organized, existing and in good standing under the laws of the State of Delaware.  With respect to each, it has the full corporate power and authority to execute and deliver this Agreement and to perform in accordance herewith; the execution, delivery and performance of this Agreement by it and the consummation of the transactions contemplated hereby have been duly and validly authorized; With respect to each, this Agreement evidences the valid, binding and enforceable obligation of it; and all requisite corporate action has been taken by it to make this Agreement valid and binding upon it in accordance with its terms;

(b)            No Conflicts .  Neither the execution and delivery of this Agreement, or the transactions contemplated hereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement will conflict with or result in a breach of any of its terms, articles of incorporation or by-laws or any legal restriction or any agreement or instrument to which it is now a party or by which it is bound, or constitute a default or result in the violation of any law, rule, regulation, order, judgment or decree to which it or its property is subject;

(c)            Ability to Service .  With respect to the Servicer only, the Servicer is an approved seller/servicer of conventional residential mortgage loans for Fannie Mae or Freddie Mac, with the facilities, procedures, and experienced personnel necessary for the sound servicing of mortgage loans of the same type as the Mortgage Loans.  The Servicer is in good standing to service mortgage loans for Fannie Mae or Freddie Mac and no event has occurred with respect to the Servicer which would make the Servicer unable to comply with eligibility requirements or which would require notification to either Fannie Mae or Freddie Mac;

(d)            No Litigation Pending .  There is no action, suit, proceeding or investigation pending or threatened against it which, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of it, or in any material impairment of the right or ability of it to carry on its business substantially as now conducted, or in any material liability on the part of it, or which would draw into question the validity of this Agreement or the Mortgage Loans or of any action taken or to be contemplated herein, or which would be likely to impair materially the ability of it to perform under the terms of this Agreement; and

(e)            No Consent Required .  No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by it of or compliance by it with this Agreement, or if required, such approval has been obtained prior to the applicable Effective Date.

Section 3.02    Representations, Warranties and Covenants of Owner .

The Owner hereby represents and warrants as of the applicable Effective Date with respect to each Mortgage loan, and covenants to the Servicer that:

(a)            Mortgage Loans as Described .  The information set forth in WILMA File attached to each New Loan Data File is true and correct in all material respects.

(b)            Delivery of Books and Records .  Owner will, on or before the applicable Effective Date, deliver, or cause to be delivered, to the Servicer or any custodian, as applicable, all of the books, records, data, files and Mortgage Loan Servicing Files, including records on microfiche or its equivalent, reasonably required by the Servicer to document and service each Mortgage Loan; such books, records, data, files and documents shall contain all of the items (including but not limited to hazard insurance policies, flood insurance policies and private mortgage insurance policies) which are required by applicable law and Customary Servicing Procedures to service the Mortgage Loans, are true, accurate and complete in all material respects.

(c)            Flood Insurance .  If any of the Mortgage Loans are secured by Mortgaged Properties located in Federal Emergency Management Agency designated flood areas, then (to the extent required by Applicable Requirements) flood insurance policies are or will be in full force and effect in the amounts required by Owner under Applicable Requirements.

(d)            Hazard Insurance .  All Mortgaged Properties are insured against fire and have extended coverage insurance in the amounts required by [Fannie Mae]; all insurance premiums on such insurance policies have been or will have been paid in a timely manner; and there have been no fire losses on the Mortgaged Properties where Owner’s estimate of loss is materially greater than the net recovery from the fire insurance carrier.  To Owner’s knowledge, there have been no fire losses on the Mortgaged Properties as to which there is a pending coinsurance claim.

(e)            High Cost Loans .  No Mortgage Loan is a High Cost Loan or subject to HOEPA.

(f)            Tax Contracts .  All Mortgage Loans have a fully paid, freely transferable tax service contract.  If a tax service contract is not provided, Owner shall reimburse Servicer for its cost to obtain such a contract.  Owner shall reimburse Servicer for any expenses incurred for transferring existing tax contracts.

Section 3.03    Survival .

The representations and warranties of the Owner and the Servicer in this Article III shall survive the applicable Effective Date.

Section 4.01    Standards of Servicer .

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

From and after the initial Effective Date, the Servicer shall assume responsibility under this Agreement to service and administer additional Mortgage Loans upon the delivery, in accordance with the Transfer Instructions, of the related New Loan Data File and all related Mortgage Loan documentation by the Owner, provided that any new Mortgage Loans that the Owner desires to make subject to this Agreement meet the Eligibility Criteria then in effect.  The Owner shall provide the New Loan Data File for each Mortgage Loan to the Servicer promptly upon purchase or origination of the Mortgage Loan by the Owner, as specified in the Transfer Instructions.  The Owner shall notify the Servicer of any changes in the information contained in the New Loan Data File as specified in the Transfer Instructions.  The Owner agrees to provide the Servicer, within two (2) Business Days after the Servicer’s request, copies of the Mortgage Note, the Mortgage or any other documents the Owner has with respect to a Mortgage Loan that the Servicer deems reasonably necessary in connection with its performance of the servicing of said Mortgage Loan.  The Servicer shall cooperate with the Owner in connection with any transfer of the Servicing Rights with respect to the Mortgage Loans.

Subject to the above-described servicing standards, the specific requirements and prohibitions of this Agreement and the respective Mortgage Loans, and the provisions of any Primary Insurance Policy and applicable law, the Servicer shall have full power and authority, acting alone, to do any and all things in connection with such servicing and administration which the Servicer may deem necessary or desirable. Without limiting the generality of the foregoing, the Servicer shall, and is hereby authorized and empowered to (i) execute and deliver on behalf of itself and the Owner, any and all instruments of satisfaction or cancellation, or of partial or full release, discharge and all other comparable instruments, with respect to the Mortgage Loan and with respect to the Mortgaged Property and (ii) waive, modify or vary any term of any Mortgage Loan or consent to the postponement of strict compliance with any such term or in any manner grant indulgence to the related Mortgagor if in the Servicer’s reasonable and prudent determination such waiver, modification, postponement or indulgence is in the interests of the Owner and is not prohibited by a Primary Insurance Policy; provided, however, that the Servicer may not, unless it has obtained the consent of the Owner, permit any modification with respect to any Mortgage Loan that would vary the Mortgage Interest Rate, defer or forgive the payment of interest or of any principal, reduce the outstanding principal amount (other than as a result of its actual receipt of payment of principal on), extend the final maturity date of such Mortgage Loan, or accept substitute or additional collateral or release any collateral for a Mortgage Loan.  Notwithstanding anything to the contrary in the this Agreement, in the event of a Pass-Through Transfer for which Servicer continues to service any Mortgage Loan, the Servicer shall not make or permit any modification, waiver or amendment of any term of a Mortgage Loan that could cause any REMIC holding such Mortgage Loan to fail to qualify as a REMIC or result in the imposition of any tax under Section 860F(a) or 860G(d) of the Code on any REMIC holding such Mortgage Loan.  The Owner shall furnish the Servicer with a corporate resolution executed by the Board of Directors of Owner and appointing certain employees of Servicer to be officers of Owner for the limited purpose of executing certain documents in connection with Servicer’s performance of its obligations under this Agreement, in the form of Exhibit E hereto, no later than the initial Effective Date and if reasonably required by the Servicer, such other documents necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties under this Agreement.

The Servicer shall perform all of its servicing responsibilities hereunder and may cause a subservicer to perform any of its responsibilities on its behalf, but the use by the Servicer of a subservicer shall not release the Servicer from any of its obligations hereunder and the Servicer shall remain responsible hereunder for all acts and omissions of each subservicer as fully as if such acts and omissions were those of the Servicer.  The Servicer shall pay all fees and expenses of each subservicer from its own funds.

At the cost and expense of the Servicer, without any right of reimbursement from the Custodial Account, the Servicer shall be entitled to terminate the rights and responsibilities of a subservicer and arrange for any servicing responsibilities to be performed by a successor subservicer, provided, however, that nothing contained herein shall be deemed to prevent or prohibit the Servicer, at the Servicer’s option, from electing to service the related Mortgage Loans itself.  In the event that the Servicer’s responsibilities and duties as servicer under this Agreement are terminated pursuant to Section 8.03, 9.01 or 10.01, and if requested to do so by the Owner, the Servicer shall at its own cost and expense terminate the rights and responsibilities of each subservicer effective as of the date of termination of the Servicer.  The Servicer shall pay all fees, expenses or penalties necessary in order to terminate the rights and responsibilities of each subservicer from the Servicer’s own funds without reimbursement from the Owner.

Notwithstanding any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a subservicer or any reference herein to actions taken through a subservicer or otherwise, the Servicer shall not be relieved of its obligations to the Owner and shall be obligated to the same extent and under the same terms and conditions as if it alone were servicing and administering the Mortgage Loans.  The Servicer shall be entitled to enter into an agreement with a subservicer for indemnification of the Servicer by the subservicer and nothing contained in this Agreement shall be deemed to limit or modify such indemnification.

Any subservicing agreement, and any other transactions or services relating to the Mortgage Loans involving a subservicer shall be deemed to be between such subservicer and Servicer alone, and the Owner shall have no obligations, duties or liabilities with respect to such subservicer including no obligation, duty or liability of Owner to pay such subservicer’s fees and expenses.  For purposes of distributions and advances by the Servicer pursuant to this Agreement, the Servicer shall be deemed to have received a payment on a Mortgage Loan when a subservicer has received such payment.

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

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

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

Notwithstanding anything to the contrary contained herein, in connection with a foreclosure or acceptance of a deed in lieu of foreclosure, the Servicer shall have no obligation to commence foreclosure proceedings or obtain title to Mortgage Property securing a Mortgage Loan as a result of or in lieu of foreclosure or otherwise if (i) such Mortgage Loan is subject to the HOEPA or any regulations related thereto, (ii) such Mortgage Loan qualifies as a High Cost Loan under a state anti-predatory lending law or regulation, or (iii) a Mortgaged Property is contaminated by hazardous or toxic substances or wastes. If the Owner requests an environmental inspection or review of such Mortgaged Property, such an inspection or review is to be conducted by a qualified inspector at the Owner’s expense.  Upon completion of the inspection, the Servicer shall promptly provide the Owner with a written report of the environmental inspection.  In the event (a) the environmental inspection report indicates that the Mortgaged Property is contaminated by hazardous or toxic substances or wastes and (b) the Owner directs the Servicer to proceed with foreclosure or acceptance of a deed in lieu of foreclosure, the Servicer shall be reimbursed for all reasonable costs associated with such foreclosure or acceptance of a deed in lieu of foreclosure and any related environmental clean up costs, as applicable, from the related Liquidation Proceeds, or if the Liquidation Proceeds are insufficient to fully reimburse the Servicer, the Servicer shall be entitled to be reimbursed from amounts in the Custodial Account pursuant to Section 4.05 hereof.  In the event the Owner directs the Servicer not to proceed with foreclosure or acceptance of a deed in lieu of foreclosure, the Servicer shall be reimbursed for all Servicing Advances made with respect to the related Mortgaged Property from the Custodial Account pursuant to Section 4.05 hereof.

Section 4.03    Collection of Mortgage Loan Payments .

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

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

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

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

(i)           all scheduled payments due and collected under the Mortgage Note after the Effective Date on account of principal, including Principal Prepayments collected after the Effective Date (and with respect to each full or partial Principal Prepayment, any Prepayment Interest Shortfall to the extent of the Servicer’s aggregate Servicing Fee received with respect to the related Prepayment Period), on the Mortgage Loans;

(ii)           all payments collected on account of interest on the Mortgage Loans;

(iii)          all Liquidation Proceeds;

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

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

(vi)          any P&I Advances; and

(vii)         any amount required to be deposited in the Custodial Account pursuant to Sections 4.01, 4.11, 4.14, 4.17, 5.01 and 6.02.

The foregoing requirements for deposit in the Custodial Account shall be exclusive.    Any interest paid and investment income on funds deposited in the Custodial Account by the Eligible Depository Institution shall accrue to the benefit of the Servicer and shall be considered Ancillary Income (excluding prepayment penalties) payable in accordance with the terms of this Agreement.  Payments in the nature of late payment charges, fees for special services provided to a Mortgagor, assumption fees and all other Ancillary Income may be retained by the Servicer and do not need to be deposited in the Custodial Account..

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

Section 4.05    Withdrawals From the Custodial Account .

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

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

(ii)           to reimburse itself for P&I Advances, the Servicer’s right to reimburse itself pursuant to this subclause (ii) being limited to amounts received on the related Mortgage Loan that represent payments of principal and/or interest respecting which any such P&I Advance was made;

(iii)           to reimburse itself first for unreimbursed Servicing Advances and second for unreimbursed P&I Advances, the Servicer’s right to reimburse itself pursuant to this subclause (iii) with respect to any Mortgage Loan being limited to related Liquidation Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition Proceeds and such other amounts as may be collected by the Servicer from the Mortgagor or otherwise relating to the Mortgage Loan, it being understood that, in the case of any such reimbursement, the Servicer’s right thereto shall be prior to the rights of the Owner;

(iv)           to reimburse itself for unreimbursed Servicing Advances and advances of Servicer funds made pursuant to Section 5.03 of this Agreement to the extent that such amounts are nonrecoverable by the Servicer pursuant to subclause (iii) above

(v)           to reimburse itself for all expenses necessary for the proper operation, management and maintenance of each REO Property, including the cost of maintaining any hazard insurance pursuant to Section 4.10 and the fees of any managing agent of the Servicer or a subservicer, it being understood that, in the case of any such expenditure or withdrawal related to a particular REO Property, the amount of such expenditure or withdrawal from the Custodial Account shall be limited to amounts on deposit in the Custodial Account with respect to the related REO Property;

(vi)          to pay itself with respect to each Mortgage Loan the Servicing Compensation pursuant to Section 6.03;

(vii)         to transfer funds to another Eligible Depository Institution in accordance with Section 4.09 hereof;

(viii)        to remove funds inadvertently placed in the Custodial Account in error by the Servicer; and

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

On each Remittance Date, the Servicer shall withdraw all funds from the Custodial Account.  The Servicer may use such withdrawn funds only for the purposes described in this Section 4.05.

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

The Servicer shall segregate and hold all funds collected and received pursuant to each Mortgage Loan which constitute Escrow Payments separate and apart from any of its own funds and general assets and shall establish and maintain one or more Escrow Accounts (collectively, the “Escrow Account”), in the form of time deposit or demand accounts.  The Escrow Account shall be established with an Eligible Depository Institution.  The creation of any Escrow Account shall be evidenced by a letter agreement in the form of Exhibit G hereto.  Upon request, the Servicer shall provide the Owner with a copy of a letter agreement evidencing the establishment of each Escrow Account.

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

Section 4.07   Withdrawals From Escrow Account .

Withdrawals from the Escrow Account may be made by the Servicer only (a) to effect timely payments of taxes, assessments, Primary Insurance Policy premiums, fire and hazard insurance premiums or other items constituting Escrow Payments for the related Mortgage, (b) to reimburse the Servicer for any Servicing Advance made by Servicer pursuant to Sections 4.08 and 4.10 hereof with respect to a related Mortgage Loan, but only from amounts received on the related Mortgage Loan which represent late payments or collections of Escrow Payments thereunder, (c) to refund to any Mortgagor any funds found to be in excess of the amounts required under the terms of the related Mortgage Loan, (d) upon default of a Mortgagor or in accordance with the terms of the related Mortgage Loan and if permitted by applicable law, for transfer to the Custodial Account of such amounts as are to be applied to the indebtedness of a Mortgage Loan in accordance with the terms thereof, (e) for application to restoration or repair of the Mortgaged Property, (f) to pay to the Owner in accordance with the terms of this Agreement , or to the Mortgagor to the extent required by law, any interest paid on the funds deposited in the Escrow Account, (g) to deposit into the Custodial Account the funds required to be deposited therein pursuant to Section 4.14, (h) to pay to itself amounts to which it is entitled pursuant to Section 4.14, (i) to remove funds inadvertently placed in an Escrow Account in error by the Servicer, (j) to transfer funds to another Eligible Depository Institution in accordance with Section 4.09 hereof or (k) to clear and terminate the Escrow Account upon the termination of this Agreement.

Section 4.08    Payment of Taxes, Insurance and Other Charges .

With respect to each Mortgage Loan, the Servicer shall maintain accurate records reflecting the status of taxes, assessments, and other charges for which an escrow is maintained and the status of Primary Insurance Policy premiums and fire and hazard insurance coverage and shall obtain, from time to time, all bills for the payment of such charges (including renewal premiums) and shall effect payment thereof employing for such purpose deposits of the Mortgagor in the Escrow Account which shall have been estimated and accumulated by the Servicer in amounts sufficient for such purposes, as allowed under the terms of the Mortgage or applicable law.  To the extent that a Mortgage does not provide for Escrow Payments, or the Servicer has waived the escrow of Escrow Payments or the Servicer is prohibited by applicable state law from requiring the escrow of Escrow Payments, the Servicer shall use commercially reasonable efforts to seek to determine that any such payments are made by the Mortgagor.  The Servicer assumes full responsibility for the timely payment of all such bills and shall effect timely payments of all such bills irrespective of each Mortgagor’s faithful performance in the payment of same or the making of the Escrow Payments and shall make Servicing Advances from its own funds to effect such payments, subject to reimbursement pursuant to Section 4.07 hereof.

Section 4.09    Transfer of Accounts .

The Servicer may from time to time transfer the Custodial Account and the Escrow Account to an Eligible Depository Institution, provided that the Servicer provides written notice of such transfer within 14 Business Days thereafter.

Section 4.10    Maintenance of Hazard Insurance .

The Servicer shall cause to be maintained for each Mortgage Loan, fire and hazard insurance with extended coverage customary in the area where the Mortgaged Property is located, in an amount which is, subject to applicable law, at least equal to the lesser of (i) the maximum insurable value of the improvements securing the related Mortgage Loan and (ii) the greater of (a) the outstanding principal balance of the Mortgage Loan and (b) the minimum amount necessary to prevent the Mortgagor and/or the mortgagee from becoming a co-insurer.  If the Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, and that has federally-mandated flood insurance requirements (and such flood insurance has been made available) the Servicer will cause to be maintained a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (i) the outstanding principal balance of the Mortgage Loan, (ii) the full insurable value of the Mortgaged Property, or (iii) the maximum amount of insurance available under the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, each as amended.  The Servicer shall also maintain on any REO Property, fire and hazard insurance with extended coverage in an amount which is at least equal to the maximum insurable value of the improvements which are a part of such property, liability insurance and, to the extent required and available under the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, each as amended, flood insurance in an amount required above.  Any amounts collected by the Servicer under any such policies (other than amounts to be deposited in the Escrow Account and applied to the restoration or repair of the related Mortgaged Property, REO Property, or released to the Mortgagor in accordance with Customary Servicing Procedures or in accordance with the terms of the Mortgage Loan or applicable law) shall be deposited in the Custodial Account, subject to withdrawal pursuant to Section 4.05.  It is understood and agreed that no earthquake or other additional insurance need be required by the Servicer of any Mortgagor or maintained on property acquired in respect of a Mortgage Loan, other than pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance.  All policies required hereunder shall be endorsed with standard mortgagee clauses with loss payable to the Servicer, its successors and its assigns, or, upon request of the Owner, to the Owner, and shall provide for at least 30 days prior written notice to the Servicer of any cancellation thereof.  The Servicer shall not accept or obtain any such insurance policy from an insurance company that does not at that time maintain a General Policy Rating of B-III or better in Best’s Key Rating Guide.  Servicing Advances made under this Section 4.10 shall be eligible for reimbursement pursuant to Section 4.10 hereof.

Section 4.11    Maintenance of Blanket Insurance Policy .

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

Section 4.12    Maintenance of Mortgage Impairment Insurance Policy .

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

Section 4.13    Fidelity Bond; Errors and Omissions Insurance .

The Servicer at its own expense shall maintain with responsible companies throughout the term of this Agreement a blanket fidelity bond and an errors and omissions insurance policy, with broad coverage on all officers, employees and other individuals acting on behalf of the Servicer in connection with its activities under this Agreement.  The amount of coverage shall be at least equal to the coverage that would be required of the Servicer by Fannie Mae or Freddie Mac, if the Servicer were servicing the Mortgage Loans for Fannie Mae or Freddie Mac, and such policy shall be issued by a company that is acceptable to Fannie Mae or Freddie Mac.  The Fidelity Bond and errors and omissions insurance shall be in the form of the Mortgage Banker’s Blanket Bond and shall protect and insure the Servicer against losses caused by such individuals, including losses from forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such individuals.  Such Fidelity Bond shall also protect and insure the Servicer against losses in connection with the failure to maintain any insurance policies required pursuant to this Agreement and the release or satisfaction of a Mortgage Loan without having obtained payment in full of the indebtedness secured thereby.  No provision of this Section 4.13 requiring such fidelity bond and errors and omissions insurance shall diminish or relieve the Servicer from its duties and obligations as set forth in this Agreement.

Section 4.14    Title, Management and Disposition of REO Property .

Subject to Section 4.02, if title to a Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale shall be taken in the name of the Servicer or its nominee, in either case as nominee, for the benefit of the Owner on the date of acquisition of title (the “REO Owner”); provided, however, that the Servicer shall not be required to take title in its own name if it reasonably determines that such record ownership could harm the interests of the Owner or the Servicer.  In the event the Servicer is not authorized or permitted or elects not to hold title to real property in the state in which the REO Property is located, or would be adversely affected under the “doing business” or tax laws of such state by so holding title, the deed or certificate of sale shall be taken in the name of such Person or Persons as shall be consistent with an opinion of counsel obtained by the Servicer, at expense of the REO Owner, from an attorney duly licensed to practice law in the state where the REO Property is located.  The Person or Persons holding such title other than the REO Owner shall acknowledge in writing that such title is being held as nominee for the REO Owner.

In the event of a Pass-Through Transfer for which Servicer continues to service any Mortgage Loan, the REO Property must be sold within three years following the end of the calendar year of the date of acquisition if a REMIC election has been made with respect to the arrangement under which the Mortgage Loans and REO Property are held, unless (i) the Purchaser shall have been supplied with an Opinion of Counsel (at the Owner’s expense) to the effect that the holding by the related trust of such Mortgaged Property subsequent to such three-year period (and specifying the period beyond such three-year period for which the Mortgaged Property may be held) will not result in the imposition of taxes on “prohibited transactions” of the related trust as defined in Section 860F of the Code, or cause the related REMIC to fail to qualify as a REMIC, in which case the related trust may continue to hold such Mortgaged Property (subject to any conditions contained in such Opinion of Counsel), or (ii) the Purchaser (at the Owner’s expense) or the Servicer shall have applied for, prior to the expiration of such three-year period, an extension of such three-year period in the manner contemplated by Section 856(e)(3) of the Code, in which case the three-year period shall be extended by the applicable period.  If a period longer than three years is permitted under the foregoing sentence and is necessary to sell any REO Property, the Servicer shall report monthly to the Purchaser as to progress being made in selling such REO Property.

Notwithstanding any other provision of this Agreement, if a REMIC election has been made, no Mortgaged Property held by a REMIC shall be rented (or allowed to continue to be rented) or otherwise used for the production of income by or on behalf of the related trust or sold in such a manner or pursuant to any terms that would (i) cause such Mortgaged Property to fail to qualify at any time as “foreclosure property” within a meaning of Section 860G(a)(8) of the Code, (ii) subject to the related trust to the imposition of any federal or state income taxes on “net income from foreclosure property” with respect to such Mortgaged Property within the meaning of Section 860G(c) of the Code, or (iii) cause the sale of such Mortgaged Property to result in the receipt by the related trust or any income from non-permitted assets as described in Section 860F(a) (2)(B) of the Code, unless the Servicer has agreed to indemnify and hold harmless the related trust with respect to the imposition of any such taxes.

The Servicer, either itself or through an agent selected by the Servicer, shall manage, conserve, protect and operate each REO Property for the REO Owner solely for the purpose of its prompt disposition and sale, and in same manner that it would be required to manage, conserve, protect and operate foreclosed property for its own account (subject to the condition described in the second paragraph of Section 4.02); provided, however, that the Servicer’s obligations with respect to such REO Property shall in no way limit the right of the REO Owner to assume responsibility for the maintenance and sale of properties obtained through foreclosure proceedings or through other means in lieu of foreclosure proceedings. The Servicer shall attempt to sell the same (and may temporarily rent the same) on such terms and conditions as the Servicer deems to be in the reasonable interest of the REO Owner in accordance with Customary Servicing Procedures.  If Owner has notified the Servicer in writing that an REO Property is held as part of a REMIC, the Servicer will make reasonable efforts to sell such REO Property within the time necessary to preserve such REMIC status as advised by Owner in the notice thereof.

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

Each REO Disposition shall be carried out by the Servicer at such price, and upon such terms and conditions, as the Servicer deems to be in the reasonable interests of the REO Owner consistent with Customary Servicing Procedures; provided, however, that the Servicer, prior to any such disposition, shall notify the REO Owner in writing of such price, terms and conditions and shall proceed with such disposition only if the Servicer is not otherwise directed by the REO Owner in a writing delivered to the Servicer not later than the tenth Business Day following the Servicer’s delivery of such notice to the REO Owner.  For purposes of the preceding sentence, any direction given by the Owner shall constitute a direction by the REO Owner.  If upon the acquisition of title to the Mortgaged Property by foreclosure sale or deed in lieu of foreclosure or otherwise, there remain outstanding unreimbursed P&I Advances pursuant to Section 5.03 with respect to the Mortgage Loan or if, upon liquidation as provided in this Section 4.14, there remain outstanding any unreimbursed Servicing Advances with respect to the Mortgaged Property or the Mortgage Loan, the Servicer shall be entitled to reimbursement from the proceeds received in connection with the disposition of the Mortgaged Property, and from the Owner if such proceeds are insufficient, for any related unreimbursed Servicing Advances or related unreimbursed P&I Advances pursuant to Section 5.03.  On the Remittance Date immediately following the Principal Prepayment Period in which REO Disposition Proceeds are received, the net cash proceeds of such REO Disposition shall be distributed to the REO Owner.  In the event that the Servicer is billed for expenses related to an REO Property subsequent to the date on which the net cash proceeds of such REO Disposition are distributed to the REO Owner, the Servicer shall pay such expenses and shall thereupon be entitled to reimburse itself therefore by withdrawing the amount of such expenses from the Custodial Account.

Section 4.15    Transfer Notices .

(a)           Within fifteen (15) days before the applicable Effective Date with respect to the Mortgage Loans, the Owner shall cause any required notices (“Goodbye Letters”) to the Mortgagors of the transfer of the servicing function contemplated herein to be delivered to the Mortgagors. Such Goodbye Letters shall be prepared and delivered by or on behalf of the Owner in accordance with applicable law and the Transfer Instructions.  Within fifteen (15) days before the applicable Effective Date with respect to the Mortgage Loans, the Servicer shall cause any required notices (“Hello Letters”) to the Mortgagors of the Servicer’s assumption of the servicing function contemplated herein to be delivered to the Mortgagors.  Such Hello Letters shall be prepared and delivered by the Servicer in accordance with applicable law and the Transfer Instructions.  The parties shall cooperate to accomplish such notification in a timely and efficient manner as will best facilitate the assumption by the Servicer of the servicing responsibilities.  The form of the Goodbye Letters and Hello Letters to be sent to Mortgagors shall be approved by the Owner and the Servicer before mailing.

(b)           The Owner shall notify, or cause to be notified, all Insurers, by overnight or registered mail, that all insurance premium billings for the Mortgage Loans must be sent to the Servicer.  Additionally, the Owner shall, prior to the applicable Effective Date, obtain the written consent of any Insurers that have the contractual right to approve the assumption of the servicing responsibilities by the Servicer.

(c)           The Owner, with the reasonable assistance of the Servicer, shall notify the applicable taxing authorities (except as such is handled through the tax service company on any tax service contracts procured by the Servicer) of the assumption of the servicing responsibilities by the Servicer and include instructions to deliver all notices and tax bills to the Servicer or the applicable tax service provider, as the case may be, from and after the Effective Date.

(d)           The Owner shall notify all attorneys who, on the Effective Date, are providing legal services to or on behalf of the Owner in connection with pending foreclosure or litigation involving one or more of the Mortgage Loans, of the transfer of the servicing function with respect to the Mortgage Loans to the Servicer.

(e)           The costs and expenses related to the notices required to be provided under Subsections (b), (c) and (d) above shall be paid by the Owner.  Each of Owner and Servicer shall be responsible for their respective costs incurred in connection with subsection (a) above.

Section 4.16    Restoration of Mortgaged Property .

The Servicer need not obtain the approval of the Owner prior to releasing any Insurance Proceeds or Condemnation Proceeds to the Mortgagor to be applied to the restoration or repair of the Mortgaged Property if such release is in accordance with Customary Servicing Procedures.  For claims greater than $15,000, at a minimum the Servicer shall comply with the following conditions in connection with any such release of Insurance Proceeds or Condemnation Proceeds:

(i)            The Servicer shall receive satisfactory independent verification of completion of repairs and issuance of any required approvals with respect thereto;

(ii)           the Servicer shall take all steps necessary to preserve the priority of the lien of the Mortgage, including, but not limited to requiring waivers with respect to mechanics’ and materialmen’s liens;

(iii)           the Servicer shall verify that the Mortgage Loan is not in default; and

(iv)           pending repairs or restoration, the Servicer shall place the Insurance Proceeds or Condemnation Proceeds in the Escrow Account.

If the Owner is named as an additional loss payee, the Servicer is hereby empowered to endorse any loss draft issued in respect of such a claim in the name of the Owner.

Section 4.17    Maintenance of PMI Policy; Claims .

With respect to each Mortgage Loan with an LTV in excess of 80%, the Servicer shall maintain or cause the Mortgagor to maintain in full force and effect a PMI Policy insuring the portion over 78% until terminated pursuant to the Homeowners Protection Act of 1998, 12 UCS §4901, et seq.  In the event that such PMI Policy shall be terminated other than as required by law, the Servicer shall obtain from another Qualified Insurer a comparable replacement policy, with a total coverage equal to the remaining coverage of such terminated PMI Policy.  If the insurer shall cease to be a Qualified Insurer, the Servicer shall determine whether recoveries under the PMI Policy are jeopardized for reasons related to the financial condition of such insurer, it being understood that the Servicer shall in no event have any responsibility or liability for any failure to recover under the PMI Policy for such reason.  If the Servicer determines that recoveries are so jeopardized, it shall notify the Owner and the Mortgagor, if required, and obtain from another Qualified Insurer a replacement insurance policy.  The Servicer shall not take any action which would result in noncoverage under any applicable PMI Policy of any loss which, but for the actions of the Servicer would have been covered thereunder.  In connection with any assumption or substitution agreement entered into or to be entered into pursuant to Section 6.01, the Servicer shall promptly notify the insurer under the related PMI Policy, if any, of such assumption or substitution of liability in accordance with the terms of such PMI Policy and shall take all actions which may be required by such insurer as a condition to the continuation of coverage