Exhibit 10.2

 

Execution Version

 

 

THIRD AMENDED AND RESTATED FLOW SERVICING AGREEMENT

between

PENNYMAC OPERATING PARTNERSHIP, L.P.,
as Owner

and

PENNYMAC LOAN SERVICES, LLC,
as Servicer

Dated as of September 12, 2016

 

 

 

 

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

 

Page

 

 

ARTICLE I DEFINITIONS

2

 

 

 

 

Section 1.01 

Definitions.

2

 

 

ARTICLE II CONTINUATION OF EXISTING SERVICING; SERVICING OF ADDITIONAL MORTGAGE
LOANS

20

 

 

 

Section 2.01 

Servicing to Continue.

20

Section 2.02 

Addition of Mortgage Loans.

20

Section 2.03 

Closing Documents.

21

 

 

ARTICLE III SERVICING OF AGENCY MORTGAGE LOANS

23

 

 

 

 

Section 3.01 

Servicer to Act as Servicer of Agency Mortgage Loans.

23

Section 3.02 

Guides Control.

23

 

 

ARTICLE IV SERVICING OF NON-AGENCY MORTGAGE LOANS

26

 

 

 

 

Section 4.01 

Servicer to Act as Servicer of Non-Agency Mortgage Loans.

26

Section 4.02 

Liquidation of Mortgage Loans.

28

Section 4.03 

Collection of Mortgage Loan Payments; Payment Clearing Account.

29

Section 4.04 

Establishment of and Deposits to Custodial Account.

29

Section 4.05 

Permitted Withdrawals From Custodial Account.

30

Section 4.06 

Establishment of and Deposits to Escrow Account.

31

Section 4.07 

Permitted Withdrawals From Escrow Account.

32

Section 4.08 

Payment of Taxes, Insurance and Other Charges.

33

Section 4.09 

Protection of Accounts.

33

Section 4.10 

Maintenance of Hazard Insurance.

34

Section 4.11 

Maintenance of Mortgage Impairment Insurance Policy.

36

Section 4.12 

Maintenance of Fidelity Bond and Errors and Omissions Insurance.

36

Section 4.13 

Inspections.

36

Section 4.14 

Restoration of Mortgaged Property.

37

Section 4.15 

Title, Management and Disposition of REO Property.

37

Section 4.16 

Costs and Expenses.

39

Section 4.17 

Liquidity and Litigation Reserves.

39

Section 4.18 

Transfers of Mortgaged Properties.

40

Section 4.19 

Satisfaction of Mortgages and Release of Mortgage Files.

41

Section 4.20 

Notification of Adjustments.

42

Section 4.21 

Recordation of Assignments of Mortgage.

43

Section 4.22 

[Reserved].

43

Section 4.23 

Credit Reporting.

43

Section 4.24 

Superior Liens.

43

Section 4.25 

Prepayments in Full.

44

i

--------------------------------------------------------------------------------

 

Section 4.26 

Tax and Flood Service Contracts.

44

Section 4.27 

Maintenance of PMI Policies and LPMI Policies; Collections Thereunder.

44

Section 4.28 

Reliability of Information/Exceptional Expenses.

45

Section 4.29 

Escrow Obligations.

45

Section 4.30 

No Obligation to Advance Delinquent Payments.

46

Section 4.31 

MERS Transfers.

46

 

 

ARTICLE V PAYMENTS; REPORTS

47

 

 

 

 

Section 5.01 

Remittances.

47

Section 5.02 

Reports to the Owner.

47

Section 5.03 

Tax Reporting.

48

Section 5.04 

Cost of Funds.

48

 

 

ARTICLE VI RECORDS, INFORMATION AND COMPLIANCE DOCUMENTS

49

 

 

 

 

Section 6.01 

Possession of Servicing Files.

49

Section 6.02 

Annual Statement as to Compliance.

49

Section 6.03 

Annual Independent Public Accountants’ Servicing Report.

50

Section 6.04 

Provision of Information.

50

Section 6.05 

Right to Examine Servicer Records.

50

Section 6.06 

Compliance with Gramm-Leach-Bliley Act of 1999.

51

Section 6.07 

Reserved.

51

Section 6.08 

Financial Statements; Servicing Facilities.

51

Section 6.09 

Use of Subservicers.

51

Section 6.10 

Mortgage Loans Held by Wholly Owned Subsidiaries of Owner.

52

 

 

ARTICLE VII SERVICING COMPENSATION

53

 

 

 

 

Section 7.01 

Servicing Compensation.

53

 

 

ARTICLE VIII TERMINATION

56

 

 

 

 

Section 8.01 

Termination.

56

Section 8.02 

Outbound Transfer of Servicing.

57

 

 

ARTICLE IX INDEMNIFICATION AND ASSIGNMENT AND OTHER MATTERS RELATED TO SERVICER

61

 

 

 

Section 9.01 

Indemnification.

61

Section 9.02 

Limitation on Liability of Servicer and Others.

62

Section 9.03 

Limitation on Resignation and Assignment by Servicer.

62

Section 9.04 

Assignment by Owner.

63

Section 9.05 

Merger or Consolidation of the Servicer.

63

Section 9.06 

Additional Activities of the Servicer.

63

 

 

ARTICLE X REPRESENTATIONS AND WARRANTIES

64

 

 

 

 

Section 10.01 

Representations and Warranties of the Owner.

64

Section 10.02 

Representations and Warranties of the Servicer.

65

ii

--------------------------------------------------------------------------------

 

 

 

 

 

ARTICLE XI DEFAULT

68

 

 

 

 

Section 11.01

Events of Default.

68

Section 11.02

Waiver of Defaults.

70

 

 

 

 

ARTICLE XII RECONSTITUTIONS

71

 

 

 

 

Section 12.01

Cooperation of Servicer with a Reconstitution.

71

 

 

ARTICLE XIII MISCELLANEOUS PROVISIONS

74

 

 

 

 

Section 13.01

Notices.

74

Section 13.02

Amendment.

75

Section 13.03

Entire Agreement.

75

Section 13.04

Binding Effect; Beneficiaries.

75

Section 13.05

Headings.

75

Section 13.06

Further Assurances.

75

Section 13.07

Governing Law.

75

Section 13.08

Relationship of Parties.

75

Section 13.09

Severability of Provisions.

76

Section 13.10

No Waiver; Cumulative Remedies.

76

Section 13.11

Recordation of Assignments of Mortgage.

76

Section 13.12

Exhibits.

76

Section 13.13

Counterparts.

76

Section 13.14

Trademarks.

76

Section 13.15

Confidentiality of Information.

77

Section 13.16

WAIVER OF TRIAL BY JURY.

77

Section 13.17

LIMITATION OF DAMAGES.

77

Section 13.18

SUBMISSION TO JURISDICTION; WAIVERS.

77

 

 

iii

--------------------------------------------------------------------------------

 

EXHIBITS

 

EXHIBIT 1

LIST OF MONTHLY AND DAILY REPORTS

EXHIBIT 2

FORM OF CUSTODIAL ACCOUNT CERTIFICATION

EXHIBIT 3

RESERVED

EXHIBIT 4

FORM OF ESCROW ACCOUNT CERTIFICATION

EXHIBIT 5

RESERVED

EXHIBIT 6

FORM OF OFFICER’S CERTIFICATE

EXHIBIT 7

MORTGAGE LOAN DOCUMENTS

EXHIBIT 8

FORM OF LIMITED POWER OF ATTORNEY

EXHIBIT 9

TERM SHEET

EXHIBIT 10

DELEGATION OF AUTHORITY MATRIX

EXHIBIT 11

SERVICING CRITERIA TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE

EXHIBIT 12

PROPERTY MANAGEMENT SERVICES

 

 

iv

--------------------------------------------------------------------------------

 

THIRD AMENDED AND RESTATED FLOW SERVICING AGREEMENT

This Third Amended and Restated Flow Servicing Agreement (this “Agreement”) is
entered into as of September 12, 2016, by and between PennyMac Loan Services,
LLC, a Delaware limited liability company (the “Servicer”), and PennyMac
Operating Partnership, L.P., a Delaware limited partnership (the “Owner”).

RECITALS

WHEREAS, the Servicer is in the business of servicing residential mortgage loans
similar to the Mortgage Loans;

WHEREAS, the Owner desires that the Servicer service some or all of the Mortgage
Loans, and the Servicer is willing to perform such servicing;

WHEREAS, the Owner and the Servicer previously entered into that certain Second
Amended and Restated Flow Servicing Agreement, dated as of March 1, 2013, as
amended by Amendment No. 1 thereto dated as of November 14, 2013, Amendment No.
2 thereto dated as of June 1, 2014, Amendment No. 3 thereto dated as of December
11, 2014, Amendment No. 4 thereto dated as of March 31, 2015, Amendment No. 5
thereto dated as of September 1, 2015, and Amendment No. 6 thereto dated as of
June 1, 2016 (collectively, the “Original Agreement”);

WHEREAS, the Owner and the Servicer desire to amend and restate the Original
Agreement;

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

 

 

--------------------------------------------------------------------------------

ARTICLE I

DEFINITIONS

 

Section 1.01

Definitions.

The following terms are defined as follows:

AAA: As defined in Section 7.01.

Accepted Servicing Practices:  With respect to any Mortgage Loan (including any
related REO Property), each of those mortgage servicing practices (including
collection procedures) of prudent mortgage lending institutions which service
mortgage loans of the same type as such Mortgage Loan in the jurisdiction where
the related Mortgaged Property is located, which servicing practices (i) are in
compliance with all applicable federal, state and local laws, regulations and
guidance, including without limitation Regulation X, 12 C.F.R. § 1024, and
Regulation Z, 12 C.F.R. § 1026, (ii) shall be in accordance with the Servicer’s
policies and procedures as amended from time to time for mortgage loans of the
same type, (iii) are in accordance with the terms of the related Mortgage and
Mortgage Note and (iv) with respect to any Agency Mortgage Loan, are at a
minimum based on the requirements set forth from time to time in the applicable
Guide.

Actual/Actual Basis:  Remittance to the Owner or its designee which requires the
Servicer to remit to the Owner or such designee the actual interest and actual
principal collected from each Mortgagor.

Additional Servicing Fee:  With respect to each Third Party Loan, the Additional
Servicing Fee set forth in or established pursuant to Exhibit 9 hereto.

Adjustable-Rate Mortgage Loan:  A Mortgage Loan which provides for the
adjustment of the Mortgage Interest Rate payable in respect thereto.

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

Agency:  With respect to an Agency Mortgage Loan, Fannie Mae, Freddie Mac or
Ginnie Mae, as applicable.

Agency Mortgage Loan:  A Mortgage Loan that is a Fannie Mae Mortgage Loan, a
Freddie Mac Mortgage Loan or a Ginnie Mae Mortgage Loan.

Ancillary Income:  All income derived from the Mortgage Loans (other than
payments or other collections in respect of principal, interest, Escrow Payments
and Prepayment Penalties attributable to the Mortgage Loans) including, but not
limited to, assumption fees,

2

--------------------------------------------------------------------------------

reconveyance fees, subordination fees, speedpay fees, mortgage pay on the web
fees, automatic clearing house fees, demand statement fees, modification fees,
if any, fees received with respect to checks on bank drafts returned by the
related bank for insufficient funds, the Servicer’s share of all late charges,
and other similar types of fees arising from or in connection with any Mortgage
Loan to the extent not otherwise payable to the Mortgagor under applicable law
or pursuant to the terms of the related Mortgage Note.  In no event shall the
Servicer be entitled to any Prepayment Penalties.

Appraised Value:  With respect to any Mortgaged Property, the lesser of (i) the
value thereof as determined by an appraisal made for the originator of the
Mortgage Loan at the time of origination of the Mortgage Loan and (ii) the
purchase price for the related Mortgaged Property paid by the Mortgagor with the
proceeds of the Mortgage Loan; provided, however, in the case of a Refinanced
Mortgage Loan, such value of the Mortgaged Property is based solely upon the
value determined by an appraisal made for the originator of such Refinanced
Mortgage Loan at the time of origination of such Refinanced Mortgage Loan.

Arbitrator: As defined in Section 7.01.

Asset Balance:  On any day for any Mortgage Loan, other than a liquidated
Mortgage Loan, the total unpaid outstanding principal balance of such Mortgage
Loan on such date.

Assignment of Mortgage:  An assignment of the Mortgage, notice of transfer or
equivalent instrument in recordable form, sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect the
sale of the Mortgage to the Owner.

Base Servicing Fee:  The Base Servicing Fee set forth in or established pursuant
to Exhibit 9 hereto.

BPO:  A broker price opinion.

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

Code:  The Internal Revenue Code of 1986, as amended.

Combined Loan-to-Value Ratio or CLTV:  With respect to any Second Lien Mortgage
Loan, the ratio (expressed as a percentage) of the sum of the outstanding
principal amount of such Second Lien Mortgage Loan plus the outstanding
principal amount of the related First Lien Mortgage Loan to the lesser of (a)
the Appraised Value of the Mortgaged Property at origination or (b) if such
Second Lien Mortgage Loan was made to finance part of the acquisition of the
related Mortgaged Property, the purchase price of the Mortgaged Property.

Commission: The Securities and Exchange Commission and any successor thereto.

3

--------------------------------------------------------------------------------

Condemnation Proceeds:  All awards or settlements in respect of a Mortgaged
Property, whether permanent or temporary, partial or entire, by exercise of the
power of eminent domain or condemnation, to the extent not required to be
released to a Mortgagor in accordance with the terms of the related Mortgage
Loan Documents.

Correspondent Loan:  A newly originated Mortgage Loan acquired by Owner or one
of its wholly owned subsidiaries from a third party originator under the
correspondent lending program established by Owner or such subsidiary.

Cost of Funds:  The amount payable by the Owner to the Servicer pursuant to
Section 5.04, which amount shall be equal to one-twelfth of the product of (x)
the average daily balance of Servicing Advances and (y) the sum of (i) the Cost
of Funds Index plus 0 basis points.

Cost of Funds Index:  A per annum rate equal to the London interbank offered
rate for one-month United States dollar deposits as such rate appears, in The
Wall Street Journal (West Coast edition), as of the first Business Day of such
calendar month.  If the rate above is unavailable, the Servicer shall select a
comparable source mutually agreeable to the Servicer and the Owner from which to
determine such rate.

Custodial Account:  The separate trust account or accounts created and
maintained pursuant to Section 4.04 at a Qualified Depository.

Custodial Agreement:  The agreement governing the retention of the originals of
each Mortgage Note, Mortgage, Assignment of Mortgage and other Mortgage Loan
Documents.

Custodian:  The custodian of the Mortgage Loan Documents as specified under the
related Custodial Agreement.

Cut-off Date:  The date set forth in the related Purchase Agreement, if
applicable.

Deed in Lieu Fee:  With respect to each Mortgaged Property, the title to which
is acquired by deed in lieu of foreclosure, the Deed in Lieu Fee as set forth in
Exhibit 9.

Delinquent Mortgage Loan:  As defined in Section 8.01(c).

Dispute:  As defined in Section 7.01.

Distressed Whole Loan:  Any Mortgage Loan classified by the PennyMac REIT
Manager as troubled or distressed and acquired by Owner as part of a pool of
mortgage loans that are or are expected to be re-performing and/or
under-performing mortgage loans.

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

Due Period:  With respect to amounts collected by the Servicer and required to
be remitted to the Owner (or as otherwise directed in writing by the Owner) on
each Remittance Date, the period commencing on the first day of the month and
ending on the last day of the month preceding the month of the Remittance Date.

4

--------------------------------------------------------------------------------

Eligible Investments:  Any one or more of the obligations or securities listed
below, acquired at a purchase price of not greater than par which investment
provides for a date of maturity not later than one day prior to the Remittance
Date in each month (or such other date as permitted under this Agreement):

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

(ii)(A) federal funds, demand and time deposits in, certificates of deposits of,
or bankers’ acceptances issued by, any depository institution or trust company
(including U.S. subsidiaries of foreign depositories) incorporated or organized
under the laws of the United States of America or any state thereof and subject
to supervision and examination by federal and/or state authorities, so long as
at the time of such investment or the contractual commitment providing for such
investment, such depository institution or trust company has a short-term
uninsured debt rating in the highest available rating category of Moody’s and
S&P  and provided that each such investment has an original maturity of no more
than 365 days; and (B) any other demand or time deposit or deposit which is
fully insured by the FDIC;

(iii)repurchase obligations with a term not to exceed 30 days with respect to
any security described in clause (i) above and entered into with a depository
institution or trust company (acting as principal) that has obligations with an
investment-grade rating from a Rating Agency, provided, however, that collateral
transferred pursuant to such repurchase obligation must be of the type described
in clause (i) above and must (A) be valued daily at current market prices plus
accrued interest, (B) pursuant to such valuation, be equal, at all times, to
105% of the cash transferred by a party in exchange for such collateral and (C)
be delivered to such party or, if such party is supplying the collateral, an
agent for such party, in such a manner as to accomplish perfection of a security
interest in the collateral by possession of certificated securities;

(iv)securities bearing interest or sold at a discount issued by any corporation
incorporated under the laws of the United States of America or any state thereof
which have a credit rating from a Rating Agency that rates such securities in
its highest long-term unsecured rating categories at the time of investment or
the contractual commitment providing for such investment;

(v)commercial paper (including both non-interest bearing discount obligations
and interest bearing obligations payable on demand or on a specified date not
more than thirty (30) days after the date of issuance thereof) that is rated by
a Rating Agency that rates such securities in its highest short term rating
category available at the time of such investment;

5

--------------------------------------------------------------------------------

(vi)certificates or receipts representing direct ownership interests in future
interest or principal payments on obligations of the United States of America or
its agencies or instrumentalities (which obligations are backed by the full
faith and credit of the United States of America) held by a custodian in
safekeeping on behalf of the holders of such receipts; and

(vii)any other demand, money market, common trust fund or time deposit or
obligation, or interest bearing or other security or investment rated investment
grade level by a Rating Agency;

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

Eligible Mortgage Loan:  A mortgage loan that is a fixed-rate or Adjustable-Rate
Mortgage Loan that is secured by either a 1st lien or 2nd lien Mortgage on a
single family (i.e., one- to four-unit) residential Mortgaged Property located
in any of the 50 states of the United States or in the District of Columbia;
provided, however, that such mortgage loan shall not be a High Cost Loan or a
HOEPA Loan.  Notwithstanding the foregoing, an Eligible Mortgage Loan shall be
one of the types of mortgage loans that the Servicer currently services on its
servicing platform.

Errors and Omissions Insurance Policy:  An errors and omissions insurance policy
to be maintained by the Servicer pursuant to Section 4.12.

Escrow Account:  The separate trust account or accounts created and maintained
pursuant to Section 4.06 at a Qualified Depository.

Escrow Payment:  With respect to any Mortgage Loan, the amounts constituting
ground rents, taxes, assessments, water rates, sewer rents, municipal charges,
mortgage insurance premiums, flood insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the related Mortgage or any other
document.

Event of Default:  Any one of the conditions or circumstances enumerated in
Section 11.01.

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

Fannie Mae Guide:  Collectively, the Fannie Mae Selling Guide and Servicing
Guide, as such Guides may be amended from time to time hereafter.

Fannie Mae Mortgage Loan:  A Mortgage Loan underwritten in accordance with the
guidelines of Fannie Mae described in the Fannie Mae Guide.

6

--------------------------------------------------------------------------------

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

Fee Amendment: As defined in Section 7.01.

Fee Negotiation Request: As defined in Section 7.01.

Fidelity Bond:  A fidelity bond to be maintained by the Servicer pursuant to
Section 4.12.

First Lien Mortgage Loan:  A Mortgage Loan secured by a Mortgage in first lien
position on the related Mortgaged Property.

Fitch:  Fitch, Inc., or any successor thereto.

Fixed-Rate Mortgage Loan:  A fixed-rate mortgage loan serviced pursuant to this
Agreement.

Flood Zone Service Contract:  A transferable contract maintained for a Mortgaged
Property with a nationally recognized flood zone service provider for the
purpose of obtaining the current flood zone status relating to such Mortgaged
Property.

Foreclosure Commencement:  With respect to any Mortgage Loan, the delivery of
the applicable file to the Servicer’s foreclosure counsel for initiation of
foreclosure proceedings.

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

Freddie Mac Guide:  The Freddie Mac Single-Family Seller/Servicer Guide, as such
Guide may be amended from time to time hereafter.

Freddie Mac Mortgage Loan:  A Mortgage Loan underwritten in accordance with the
guidelines of Freddie Mac described in the Freddie Mac Guide.

Ginnie Mae:  The Government National Mortgage Association, or any successor
thereto.

Ginnie Mae Mortgage Loan:  A Mortgage Loan underwritten in accordance with the
guidelines of Ginnie Mae described in the Ginnie Mae Guide.

Ginnie Mae Guide:  The Ginnie Mae Mortgage-Backed Securities Guide, as such
Guide may hereafter from time to time be amended.

Guide:  With respect to any Fannie Mae Mortgage Loan, the Fannie Mae Guide; with
respect to any Freddie Mac Mortgage Loan, the Freddie Mac Guide; and with
respect to any Ginnie Mae Mortgage Loan, the Ginnie Mae Guide.

Gross Margin:  With respect to each Adjustable-Rate Mortgage Loan, the fixed
percentage amount set forth in the related Mortgage Note which amount is added
to the Index in

7

--------------------------------------------------------------------------------

accordance with the terms of such Mortgage Note to determine on each Interest
Rate Adjustment Date the Mortgage Interest Rate for such Mortgage Loan.

High Cost Loan:  A Mortgage Loan (a) covered by HOEPA or (b) classified as a
“high cost,” “threshold,” “covered,” “predatory” or similar loan under any other
applicable state, federal or local law (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).

HOEPA:  The Federal Home Ownership and Equity Protection Act of 1994, as
amended.

HOEPA Loan:  A Mortgage Loan which (a) is subject to HOEPA or (b) which the
Servicer discovers is subject to HOEPA.

Inbound Transfer Date:  The date on which the Servicer begins servicing the
related Mortgage Loan pursuant to this Agreement.

Index:  With respect to each Adjustable-Rate Mortgage Loan, the index set forth
in the related Mortgage Note.

Insurance Proceeds:  With respect to each Mortgage Loan, proceeds of insurance
policies insuring such Mortgage Loan or the related Mortgaged Property.

Interest Rate Adjustment Date:  With respect to each Adjustable-Rate Mortgage
Loan, the date specified in the related Mortgage Note on which the Mortgage
Interest Rate is adjusted.

Interest Shortfall:  The amount of interest due a third party owner of a
Mortgage Loan following a payoff or Principal Prepayment where the interest
accrued and due from the underlying Mortgagor is insufficient to pay the
interest due to such third party owner pursuant to the terms of the applicable
Guide or the terms of any Whole Loan Transfer, Private Securitization
Transaction or Public Securitization Transaction.  Such Interest Shortfall shall
be the sole responsibility of the Owner.

Interim Servicing Period:  With respect to any Mortgage Loan, the period
commencing on the related Inbound Transfer Date and ending on the Reconstitution
Date.

Lender Paid Mortgage Insurance Policy or LPMI Policy:  A policy of mortgage
guaranty insurance issued by an insurer which meets the requirements of Fannie
Mae and Freddie Mac in which the owner or servicer of the Mortgage Loan is
responsible for the premiums associated with such mortgage insurance policy.

Lifetime Rate Cap:  With respect to each Adjustable-Rate Mortgage Loan, the
provision of the related Mortgage Note that provides for an absolute maximum
Mortgage Interest Rate thereunder.  The Mortgage Interest Rate during the terms
of each Adjustable-Rate Mortgage Loan shall not at any time exceed the Mortgage
Interest Rate at the time of origination of such

8

--------------------------------------------------------------------------------

Adjustable-Rate Mortgage Loan by more than the amount per annum set forth on the
Mortgage Loan Schedule.

Liquidation Fee:  With respect to each sale of an REO Property or a Mortgaged
Property through a foreclosure sale, or each full or discounted payoff accepted
by the Servicer in satisfaction of a defaulted Mortgage Loan, the Liquidation
Fee as set forth in Exhibit 9.

Liquidation Proceeds:  Amounts, other than Condemnation Proceeds and Insurance
Proceeds, received in connection with the liquidation of a defaulted Mortgage
Loan, whether through the sale or assignment of such Mortgage Loan, trustee’s
sale, foreclosure sale or otherwise, or the sale of the related Mortgaged
Property if the Mortgaged Property is acquired in satisfaction of the Mortgage
Loan, other than amounts received following the acquisition of an REO Property
pursuant to Section 4.15 and prior to such liquidation.

Liquidity Reserve:  As defined in Section 4.17.

Liquidity Reserve Account:  The separate trust account or accounts to be created
and maintained under the circumstances described in Section 4.17.

Litigation Reserve:  As defined in Section 4.17.

Litigation Reserve Account:  The separate trust account or accounts to be
created and maintained under the circumstances described in Section 4.17.

Loan-to-Value Ratio or LTV:  With respect to any First Lien Mortgage Loan, the
ratio (expressed as a percentage) of the outstanding principal amount of such
First Lien Mortgage Loan to the lesser of (a) the Appraised Value of the related
Mortgaged Property at origination or (b) if such First Lien Mortgage Loan was
made to finance the acquisition of the related Mortgaged Property, the purchase
price of such Mortgaged Property.

Management Agreement:  The Second Amended and Restated Management Agreement
dated as of September 12, 2016 by and among PennyMac Mortgage Investment Trust,
PennyMac Operating Partnership, L.P. and PNMAC Capital Management, LLC, as such
agreement may be amended from time to time.

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

MERS Mortgage Loan:  Any Mortgage Loan as to which the related Mortgage or
Assignment of Mortgage has been recorded in the name of MERS, as agent for the
holder from time to time of the Mortgage Note and which is identified as a MERS
Mortgage Loan on the related Mortgage Loan Schedule.

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

9

--------------------------------------------------------------------------------

MOM Loan:  Any Mortgage Loan as to which MERS acts as the mortgagee of record of
such Mortgage Loan, solely as nominee for the originator of such Mortgage Loan
and its successors and assigns, at the origination thereof.

Monthly Payment:  The scheduled monthly payment of principal and interest on a
Mortgage Loan.

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

Mortgage:  The mortgage, deed of trust or other instrument securing a Mortgage
Note, which creates a first or second lien, as applicable, on an unsubordinated
estate in fee simple in real property securing such Mortgage Note; except that
with respect to real property located in jurisdictions in which the use of
leasehold estates for residential properties is a widely accepted practice, the
mortgage, deed of trust or other instrument securing the Mortgage Note may
secure and create a first or second lien, as applicable, upon a leasehold estate
of the Mortgagor.

Mortgage File:  The items pertaining to a particular Mortgage Loan referred to
as the Mortgage File in Exhibit 7 annexed hereto, and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.

Mortgage Impairment Insurance Policy:  A mortgage impairment or blanket hazard
insurance policy as described in Section 4.11.

Mortgage Interest Rate:  With respect to each Mortgage Loan, the annual rate of
interest borne on the related Mortgage Note.

Mortgage Loan:  An individual mortgage loan to be serviced pursuant to this
Agreement, as identified on the Mortgage Loan Schedule, which mortgage loan
shall be an Eligible Mortgage Loan and includes without limitation the Mortgage
File, the Monthly Payments, Principal Prepayments, Liquidation Proceeds,
Condemnation Proceeds, Insurance Proceeds, Servicing Rights and all other
rights, benefits, proceeds and obligations arising from or in connection with
such mortgage loan, excluding replaced or repurchased mortgage loans.

Mortgage Loan Documents:  The documents listed on Exhibit 7 attached hereto
pertaining to any Mortgage Loan.

Mortgage Loan Remittance Rate:  With respect to each Mortgage Loan, the annual
rate of interest remitted to the Owner (or as otherwise directed in writing by
the Owner), which shall be equal to the related Mortgage Interest Rate.

Mortgage Loan Schedule:  The schedule of Mortgage Loans in the form attached as
a schedule to the Notice of Inbound Transfer, to be delivered from time to time
by the Owner to the Servicer, which schedule shall include, but not be limited
to, the following information with respect to each Mortgage Loan (or such lesser
information as the Service Provider may determine in its reasonable discretion):

 

(1)

the name of the Seller and the Seller’s Mortgage Loan identifying number;

10

--------------------------------------------------------------------------------

 

(2)

the Mortgagor’s name;

 

(3)

the street address of the Mortgaged Property including the city, state and ZIP
code;

 

(4)

a code indicating whether the Mortgaged Property is owner-occupied, a second
home or investment property;

 

(5)

the number and type of residential units constituting the Mortgaged Property
(i.e., a one-family residence, a two- to four-family residence, a unit in a
condominium project or a unit in a planned unit development);

 

(6)

the original months to maturity or the remaining months to maturity from the
related Cut-off Date, in any case based on the original amortization schedule
and, if different, the maturity expressed in the same manner but based on the
actual amortization schedule;

 

(7)

the LTV at origination in the case of a First Lien Mortgage Loan;

 

(8)

the CLTV at origination in the case of a Second Lien Mortgage Loan;

 

(9)

the Mortgage Interest Rate as of the related Cut-off Date;

 

(10)

the date on which the Monthly Payment was due on the Mortgage Loan and, if such
date is not consistent with the Due Date currently in effect, such Due Date;

 

(11)

the stated maturity date;

 

(12)

the amount of the Monthly Payment as of the related Cut-off Date;

 

(13)

the last payment date on which a Monthly Payment was actually applied to pay
interest and the outstanding principal balance;

 

(14)

the original principal amount of the Mortgage Loan;

 

(15)

the principal balance of the Mortgage Loan as of the close of business on the
related Cut-off Date, after deduction of payments of principal due and collected
on or before the related Cut-off Date;

 

(16)

in the case of an Adjustable-Rate Mortgage Loan, the next Interest Rate
Adjustment Date;

 

(17)

in the case of an Adjustable-Rate Mortgage Loan, the Gross Margin;

 

(18)

in the case of an Adjustable-Rate Mortgage Loan, the Lifetime Rate Cap under the
terms of the Mortgage Note;

 

(19)

in the case of an Adjustable-Rate Mortgage Loan, a code indicating the type of
Index;

 

(20)

in the case of an Adjustable-Rate Mortgage Loan, the Periodic Rate Cap under the
terms of the Mortgage Note;

 

(21)

in the case of an Adjustable-Rate Mortgage Loan, the Periodic Rate Floor under
the terms of the Mortgage Note;

11

--------------------------------------------------------------------------------

 

(22)

the type of Mortgage Loan (i.e., Fixed-Rate, Adjustable-Rate, First Lien, Second
Lien);

 

(23)

a code indicating the purpose of the loan (i.e., purchase, rate and term
refinance, equity take-out refinance);

 

(24)

a code indicating the related documentation program (i.e. full, alternative or
reduced);

 

(25)

the loan credit classification (as described in the related Underwriting
Guidelines);

 

(26)

whether the Mortgage Loan provides for a Prepayment Penalty;

 

(27)

the Prepayment Penalty period of the Mortgage Loan, if applicable;

 

(28)

a description of the Prepayment Penalty, if applicable;

 

(29)

the Mortgage Interest Rate as of origination;

 

(30)

the credit risk score (FICO score) of the related Mortgagor at origination;

 

(31)

the date of origination;

 

(32)

in the case of an Adjustable-Rate Mortgage Loan, the Mortgage Interest Rate
adjustment period;

 

(33)

in the case of an Adjustable-Rate Mortgage Loan, the Mortgage Interest Rate
adjustment percentage;

 

(34)

in the case of an Adjustable-Rate Mortgage Loan, the Mortgage Interest Rate
floor;

 

(35)

the Mortgage Interest Rate calculation method (i.e., 30/360, simple interest,
other);

 

(36)

a code indicating whether the Mortgage Loan is assumable;

 

(37)

a code indicating whether the Mortgage Loan has been modified;

 

(38)

the one year payment history;

 

(39)

the Due Date for the first Monthly Payment;

 

(40)

the original Monthly Payment due;

 

(41)

with respect to the related Mortgagor, the debt-to-income ratio;

 

(42)

the Appraised Value of the Mortgaged Property;

 

(43)

the sales price of the Mortgaged Property if the Mortgage Loan was originated in
connection with the purchase of the Mortgaged Property;

 

(44)

the MERS identification number;

 

(45)

a code indicating whether the Mortgage Loan has borrower paid, lender paid or
deep primary mortgage insurance coverage and, if so, (i) the insurer’s name,
(ii) the policy or certification number, (iii) the premium rate and (iv) the
coverage percentage;

12

--------------------------------------------------------------------------------

 

(46)

in the case of a Second Lien Mortgage Loan, the outstanding principal balance of
the superior lien;

 

(47)

a code indicating whether the Mortgage Loan is a HOEPA Loan;

 

(48)

a code indicating whether the Mortgage Loan is a High Cost Loan;

 

(49)

a code indicating whether the Mortgage Loan is a subject to a buydown;

 

(50)

flood zone and flood insurance coverage information with respect to the Mortgage
Loan (to the extent known by the Owner);

 

(51)

whether the Mortgage Loan is subject to a repurchase agreement;

 

(52)

if the Mortgage Loan is subject to a repurchase agreement, the name of the
counterparty; and

 

(53)

in the case of a negative amortization Mortgage Loan, the next payment
adjustment date and the maximum negative amortization.

With respect to the Mortgage Loans in the aggregate, the Mortgage Loan Schedule
shall set forth the following information, as of the related Cut-off Date:

 

(a)

the number of Mortgage Loans;

 

(b)

the current aggregate outstanding principal balance of the Mortgage Loans;

 

(c)

the weighted average Mortgage Interest Rate of the Mortgage Loans; and

 

(d)

the weighted average maturity of the Mortgage Loans.  

Mortgage Note:  The note or other evidence of the indebtedness of a Mortgagor
under a Mortgage Loan secured by a Mortgage.

Mortgaged Property:  The real property (or leasehold estate, if applicable)
securing repayment of the debt evidenced by a Mortgage Note.

Mortgagor:  The obligor on a Mortgage Note.

MSR Recapture Agreement:  The Amended and Restated MSR Recapture Agreement,
dated as of September 12. 2016, by and between the Servicer and PennyMac Corp.

Non-Agency Mortgage Loan:  A Mortgage Loan that is not an Agency Mortgage Loan.

Nonrecoverable Advance:  Any Servicing Advance previously made or proposed to be
made in respect of a Mortgage Loan or REO Property which, in the good faith
judgment of the Servicer, will not or, in the case of a proposed advance, would
not, be ultimately recoverable from related Insurance Proceeds, Liquidation
Proceeds or otherwise from such Mortgage Loan or REO Property.

Notice of Inbound Transfer:  A notice in the form mutually agreed upon by the
Owner and the Servicer prior to a pending transfer whereby the Owner notifies
the Servicer of the addition of the Mortgage Loans specified therein to the
coverage of this Agreement.

13

--------------------------------------------------------------------------------

Officer’s Certificate:  A certificate signed by the Chairman of the Board or the
Vice Chairman of the Board or a President or Vice President or the Treasurer or
the Secretary or one of the Assistant Treasurers or Assistant Secretaries of the
Servicer, and delivered to the Owner.

Opinion of Counsel:  A written opinion of counsel, who may be counsel for the
Servicer, reasonably acceptable to the Owner; provided, however, that any
Opinion of Counsel relating to the qualification of any account required to be
maintained pursuant to this Agreement at a Qualified Depository must be (unless
otherwise stated in such Opinion of Counsel) an opinion of counsel who (i) is in
fact independent of the Servicer, (ii) does not have any material direct or
indirect financial interest in the related Servicer or is an Affiliate of either
of them and (iii) is not connected with the Servicer as an officer, employee,
director or person performing similar functions.  

Originator:  With respect to a Mortgage Loan, the originator of such Mortgage
Loan.

Other Fees:  With respect to each Mortgage Loan, those fees set forth in Exhibit
9 for the specific services described therein.

Outbound Transfer Date:  With respect to a Mortgage Loan, the date on which the
physical servicing of such Mortgage Loan is transferred from the Servicer
pursuant to this Agreement to a successor servicer.

Outstanding Owner Servicing Advances:  As defined in Section 4.28(f).

P&I Advance:  Payments of principal and interest advanced by Servicer to a third
party owner of a Mortgage Loan, including those Mortgage Loans in any pool
created pursuant to the terms of the applicable Guide or the terms of any Whole
Loan Transfer, Private Securitization Transaction or Public Securitization
Transaction, and any amounts required to be advanced due to negative
amortization or Interest Shortfall due such owner upon the payoff or Principal
Prepayment of a Mortgage Loan.  Such P&I Advance shall be the sole
responsibility of the Owner.

Parent:  As defined in Section 13.14.

Payment Clearing Account:  The account established and maintained pursuant to
the second paragraph of Section 4.03.

PennyMac Property Preservation Program:  The proprietary property preservation
programs designed by PNMAC Capital Management, LLC to modify and enhance the
value of Mortgage Loans or mitigate losses to Mortgage Loans, as amended from
time to time, and presented to the Servicer by the program technology and other
documentation administered and provided by the PennyMac REIT Manager.

PennyMac REIT:  PennyMac Mortgage Investment Trust, a Maryland real estate
investment trust, or any successor thereto.

14

--------------------------------------------------------------------------------

PennyMac REIT Manager:  PNMAC Capital Management, LLC, a Delaware limited
liability company, or any successor thereto.

Periodic Rate Cap:  With respect to each Adjustable-Rate Mortgage Loan, the
provision of the Mortgage Note which provides for an absolute maximum amount by
which the Mortgage Interest Rate specified therein may increase on an Interest
Rate Adjustment Date above the Mortgage Interest Rate previously in effect.

Periodic Rate Floor:  With respect to each Adjustable-Rate Mortgage Loan, the
provision of the related Mortgage Note which provides for an absolute maximum
amount by which the related Mortgage Interest Rate may decrease on an Interest
Rate Adjustment Date below the Mortgage Interest Rate previously in effect.

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

PMI Policy:  A policy of primary mortgage guaranty insurance issued by a
Qualified Insurer.

Prepayment Penalty:  Any prepayment premium, penalty or charge collected by the
Servicer with respect to a Mortgage Loan from a Mortgagor in connection with any
Principal Prepayment pursuant to the terms of such Mortgage Loan.

Prime Rate:  The prime rate in effect from time to time as published as the
average rate in The Wall Street Journal (West Coast edition).

Principal Prepayment:  Any payment or other recovery of principal on a Mortgage
Loan which is received in advance of its scheduled Due Date, including any
Prepayment Penalty thereon, 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.

Private Securitization Transaction:  Any transaction involving either (1) a sale
of some or all of the Mortgage Loans directly or indirectly to an entity that
issues privately offered, rated mortgage-backed securities or (2) an entity that
issues privately offered, rated securities, the payments of which are determined
primarily by reference to one or more portfolios of mortgage loans consisting,
in whole or in part, of some or all of the Mortgage Loans.

Public Securitization Transaction:  Any transaction subject to Regulation AB
involving either (1) a sale or other transfer of some or all of the Mortgage
Loans directly or indirectly to an issuing entity in connection with an issuance
of publicly offered, rated mortgage-backed securities or (2) an issuance of
publicly offered, rated securities, the payments on which are determined
primarily by reference to one or more portfolios of residential mortgage loans
consisting, in whole or in part, of some or all of the Mortgage Loans.

Purchase Agreement:  The agreement pursuant to which the Owner purchased
Mortgage Loans from the related Seller, if applicable.

15

--------------------------------------------------------------------------------

Qualified Depository:  Either (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the short-term unsecured debt obligations of such holding company of
which) are rated A-2 by S&P or Prime-2 by Moody’s (or a comparable rating if
another Rating Agency is specified by the Owner by written notice to the
Servicer) at the time any amounts are held on deposit therein, (ii) an account
or accounts the deposits in which are fully insured by the FDIC or (iii) a trust
account or accounts maintained with a federal or state chartered depository
institution or trust company acting in its fiduciary capacity.

Qualified Insurer:  Any insurer which meets the requirements of Fannie Mae and
Freddie Mac.

Rating Agency:  Any credit rating agency that is a “nationally recognized
statistical rating organization” within the meaning of Section 3(a)(62) of the
Securities Exchange Act of 1934, as amended, in the residential mortgage asset
class and is designated by the Owner, or any successor to such organization.

Reconstitution:  As defined in Section 12.01.

Reconstitution Date:  As defined in Section 12.01.

Refinanced Mortgage Loan:  A Mortgage Loan the proceeds of which were not used
to purchase the related Mortgaged Property.

Regulation AB:  Subpart 22.1100-Asset Backed Securities (Regulation AB), 17
C.F.R. §§ 229.1100-22.1123, as amended, and subject to such clarification and
interpretation as have been provided by the Commission in the adopting release
(Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg.
1,506, 1,631 (Jan. 7, 2005)) or by the staff of the Commission, or as may be
provided by the Commission or its staff from time to time as of an applicable
date of determination.

Remittance Date:  With respect to each Mortgage Loan, not later than the last
Business Day of the month following the month in which payments in respect of
such Mortgage Loan are received and credited.

REO Property:  A Mortgaged Property acquired by the Servicer on behalf of the
Owner through foreclosure or by deed in lieu of foreclosure, as described in
Section 4.15.

REO Property Management Fee: With respect to any REO Property rented by Servicer
for the benefit of Owner as part of Servicer’s management thereof, the REO
Property Management Fee as set forth in Exhibit 9.

REO Property Rental Fee: With respect to any REO Property rented by Servicer for
the benefit of Owner as part of Servicer’s management thereof, the REO Property
Rental Fee as set forth in Exhibit 9.

RESPA:  Real Estate Settlement Procedures Act, as amended from time to time.

16

--------------------------------------------------------------------------------

S&P:  Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and any successor thereto.

Second Lien Mortgage Loan:  A Mortgage Loan secured by a Mortgage in second lien
position on the related Mortgaged Property.

Seller:  With respect to each Mortgage Loan, the Seller set forth in the related
Mortgage Loan Schedule, if applicable.

Service Release Fee:  With respect to each Mortgage Loan, the fee set forth in
Exhibit 9 hereto payable by the Owner to the Servicer upon the release of such
Mortgage Loan from the Servicer’s loan administration system; provided, however,
that no such fee shall be payable by the Owner if the Mortgage Loan or the
servicing thereof is transferred (i) to the Servicer or an Affiliate of the
Servicer or (ii) pursuant to an Event of Default.

Servicer: PennyMac Loan Services, LLC or its successor in interest or any
permitted assignee or designee of under this Agreement as herein provided and as
provided in Section 8.02.  Unless the context requires otherwise, all references
to “Servicer” in this Agreement shall be deemed to include such Servicer’s
successors in interest or permitted assignees or designees. Further, it is
expressly understood by Owner and Servicer that, with respect to any Agency
Mortgage Loan serviced hereunder, (i) the Servicer is acting solely in the
capacity of a subservicer and has no right or interest in or to the related
Servicing Rights, and (ii) any references to the Inbound Transfer Date or the
Outbound Transfer Date, or any “transfer” of servicing in connection therewith,
relates only to the date on which the Servicer commences or terminates its
subservicing of such Agency Mortgage Loan and does not reflect, suggest or
entail any actual transfer of the related Servicing Rights or servicing
responsibilities (as opposed to the physical servicing activities).

Servicer Employees:  As defined in Section 4.12.

Servicer Information:  As defined in Section 12.01(b)(ii)(A).

Servicing Advances:  All customary, reasonable and necessary “out‑of‑pocket”
costs and expenses (including reasonable attorneys’ fees and disbursements)
incurred (regardless if any such advance is not, in the reasonable determination
of the Servicer, a Nonrecoverable Advance when made but, thereafter, becomes a
Nonrecoverable Advance) 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 or REO Property, (b) any
fees relating to any enforcement or judicial proceedings, excluding
foreclosures, (c) amounts advanced to correct defaults on any mortgage loan
which is senior to the Mortgage Loan and amounts advanced to keep current or pay
off a mortgage loan that is senior to the Mortgage Loan, (d) any appraisals,
valuations, broker price opinions, inspections, or environmental assessments,
(e) the management and liquidation of the Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of the Mortgage, (f) taxes, assessments,
water rates, sewer rents, mortgage insurance premiums, fire and hazard insurance
premiums, flood insurance premiums and other charges which are or may become a
lien upon the Mortgaged Property, and (g) executing and recording instruments of
satisfaction, deeds of reconveyance.

17

--------------------------------------------------------------------------------

Servicing Criteria – The “servicing criteria” set forth in Item 1122(d) of
Regulation AB, as set forth on Exhibit 11 hereto.

Servicing Fee:  With respect to each Mortgage Loan, the monthly sum of (a) the
applicable Base Servicing Fee, (b) if such Mortgage Loan is a Third Party Loan,
the applicable Additional Servicing Fee and (c) if such Mortgage Loan is a
Distressed Whole Loan, the applicable Supplemental Servicing Fee.  With respect
to each newly boarded Mortgage Loan, boarded on or before the 15th day of month,
the Servicer shall be entitled to receive the full monthly Servicing Fee for
each newly boarded Mortgage Loan.  With respect to each newly boarded Mortgage
Loan boarded after the 15th day of the month, the Servicer shall be entitled to
one-half of the monthly Servicing Fee for each newly boarded Mortgage
Loan.  With respect to each Mortgage Loan released from servicing, Servicer
shall be entitled to receive the full monthly Servicing Fee irrespective of the
applicable release date.

Servicing File:  With respect to each Mortgage Loan, the file retained by the
Servicer consisting of originals, if provided, or copies of all documents in the
related Mortgage File which are not delivered to the Owner, its designee or the
Custodian and copies of the related Mortgage Loan Documents.

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 that is required to be furnished by the Servicer to
the Owner, as such list may from time to time be amended.

Servicing Rights:  With respect to a Mortgage Loan, the right and obligation
(and, with respect to any Agency Mortgage Loan, the indivisible, conditional and
non-delegable right and obligation) to do any and all of the following:  (a)
service and administer such Mortgage Loan; (b) collect any payments or monies
payable or received for servicing such Mortgage Loan; (c) collect any late fees,
assumption fees, penalties or similar payments with respect to such Mortgage
Loan; (d) enforce the provisions of all agreements or documents creating,
defining or evidencing any such servicing rights and all rights of the servicer
thereunder, including, but not limited to, any clean-up calls and termination
options; (e) collect and apply any escrow payments or other similar payments
with respect to such Mortgage Loan; (f) control and maintain all accounts and
other rights to payments related to any of the property described in the other
clauses of this definition; (g) possess and use any and all documents, files,
records, servicing files, servicing documents, servicing records, data tapes,
computer records, or other information pertaining to such Mortgage Loan or
pertaining to the past, present or prospective servicing of such Mortgage Loan;
and (h) enforce any and all rights, powers and privileges incident to any of the
foregoing, all in accordance with Accepted Servicing Practices.

Special Deposit Account:  An account which the Owner and the Servicer agree
shall be a special deposit account for the benefit of the Owner under applicable
law.

Subservicer:  Any Person that services Mortgage Loans on behalf of the Servicer
or any Subservicer and is responsible for the performance (whether directly or
through Subservicers) of a substantial portion of the material servicing
functions required to be performed by the Servicer under this Agreement.

18

--------------------------------------------------------------------------------

Supplemental Servicing Fee:  With respect to each Distressed Whole Loan, the
Supplemental Servicing Fee set forth in or established pursuant to Exhibit 9
hereto.

Tax Service Contract:  A life of loan tax service contract maintained for a
Mortgaged Property with a tax service provider for the purpose of obtaining
current information from local taxing authorities relating to such Mortgaged
Property.

Third Party Loan:  A Mortgage Loan (including any Correspondent Loan) owned by a
third party investor and with respect to which Owner owns or has otherwise
acquired the Servicing Rights relating thereto, and any Correspondent Loan held
by Owner as a whole loan.

Underwriting Guidelines:  The underwriting guidelines of the applicable
Originator, as identified or specified in the related Purchase Agreement, if
applicable.

Whole Loan Transfer:  The sale or transfer by Owner of some or all of the
Mortgage Loans in a whole loan or participation format other than a Private
Securitization Transaction or a Public Securitization Transaction.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

19

--------------------------------------------------------------------------------

ARTICLE II

CONTINUATION OF EXISTING SERVICING;
SERVICING OF ADDITIONAL MORTGAGE LOANS

 

Section 2.01

Servicing to Continue.

All mortgage loans that were being serviced by the Servicer under the Original
Agreement immediately prior to the execution and delivery of this Agreement
shall constitute Mortgage Loans serviced under this Agreement upon its execution
and delivery.

 

Section 2.02

Addition of Mortgage Loans.

The Owner and the Servicer shall take the following actions with respect to each
Mortgage Loan that the Owner desires to have serviced by the Servicer hereunder
in order to effect the transfer of servicing to the Servicer on the related
Inbound Transfer Date:

(a)Delivery of Mortgage Loan Data.  With respect to each pool of Mortgage Loans
to be serviced under this Agreement, no later than thirty (30) calendar days
prior to the Inbound Transfer Date (or as otherwise mutually agreed between the
Owner and the Servicer), the Owner shall furnish or cause to be furnished to the
Servicer complete and accurate Mortgage Loan data reflecting the status of
payments, balances and other pertinent information necessary to service such
Mortgage Loans including but not limited to: (i) master file; (ii)
Adjustable-Rate Mortgage Loan master file; (iii) escrow file; (iv) tax and
insurance payee file; (v) Adjustable-Rate Mortgage Loan history file; (vi)
servicing activities; and (vii) any other pertinent information reasonably
required by the Servicer.  Such information shall be provided to the Servicer in
such electronic format as is mutually agreed upon by both parties.

(b)Delivery of Notification Letter. With respect to each pool of Mortgage Loans
to be serviced under this Agreement, the Owner shall use its best efforts to
deliver or cause to be delivered to the Servicer a Notice of Inbound Transfer
for such Mortgage Loans not less than thirty (30) days prior to the related
Inbound Transfer Date (or as otherwise mutually agreed between the Owner and the
Servicer).  The Notice of Inbound Transfer shall include a statement of the
related delinquency methodology to be used for the related Mortgage Loans as
determined by the Owner.

(c)Delivery of Servicing and Other Files.  The Owner shall use its reasonable
best efforts to provide Servicer with hard copies (or imaged copies if
available) of the Servicing File with respect to each Mortgage Loan transferred
to Servicer within fifteen (15) Business Days prior to the applicable Inbound
Transfer Date (or as otherwise mutually agreed between the Owner and the
Servicer).  The Owner shall use its reasonable best efforts to provide Servicer
with hard copies (or imaged copies if available) of any default file with
respect to each Mortgage Loan transferred to Servicer within five (5) Business
Days of the applicable Inbound Transfer Date (or as otherwise mutually agreed
between the Owner and the Servicer).  Any costs and expenses to deliver the
aforementioned files shall be borne by the Owner.

(d)Notice to Mortgagors.  The Owner shall cause to be provided to each Mortgagor
a “Notice of assignment, sale or transfer of servicing” to the Servicer.  Upon
boarding

20

--------------------------------------------------------------------------------

of each Mortgage Loan originated by a third-party originator, the Servicer shall
deliver to each related Mortgagor a “Welcome Letter” in accordance with RESPA
and Accepted Servicing Practices.

(e)Transfer of Escrow Funds and Other Proceeds.  The Servicer shall use its best
efforts to  transfer or cause to be transferred to a designated account, within
one (1) Business Day and not later than three (3) Business Days following the
Inbound Transfer Date by wire transfer, an amount equal to the sum of (i) Escrow
Payments collected from each Mortgagor; and if applicable (ii) all undistributed
insurance loss draft funds; (iii) all unapplied funds received by the Owner or
any prior servicer; (iv) all unapplied interest on escrow balances accrued
through the related Inbound Transfer Date; (v) all buydown funds held by the
Owner or any prior servicer as of the related Inbound Transfer Date; and (vi)
all other related amounts held by the respective owner of the Mortgage Loan or
any prior servicer of such Mortgage Loan as of the related Inbound Transfer Date
that the Owner or any prior servicer is not entitled to retain.  The Owner shall
be responsible for any interest on escrow amounts held by the Owner prior to the
related Inbound Transfer Date.  The Servicer shall be entitled to deduct from
Servicer’s monthly remittance to the Owner any shortfalls in Escrow Payments
that result from Owner’s failure to deliver any Escrow Payment in full to the
Servicer.  To the extent the Custodial Account has insufficient funds to fully
fund such shortfalls in the Escrow Payments plus all other amounts due to the
Servicer as set forth in Section 5.01 herein, the Owner shall wire such
shortfall amount to the Servicer promptly upon receipt of notice of such
shortfalls from the Servicer.

(f)Outstanding Servicing Advances. The Servicer agrees to reimburse the prior
servicer or the Owner, as applicable, within thirty (30) days following the
related Inbound Transfer Date for all unreimbursed Servicing Advances made by
the prior servicer or the Owner with respect to the Mortgage Loans as of such
Inbound Transfer Date (the “Outstanding Owner Servicing Advances”) and for which
the prior servicer or the Owner has provided to the Servicer reasonably detailed
documentation evidencing such advances.  The Servicer shall have no obligation
to board Outstanding Owner Servicing Advances or reimburse the prior servicer
unless the Servicer has received reasonably detailed documentation allowing the
Servicer to collect such advances from the Mortgagor.

 

Section 2.03

Closing Documents.

Simultaneously with the execution and delivery of this Agreement, the Servicer
shall deliver to the Owner an Officer’s Certificate, in the form of Exhibit 6,
with respect to the Servicer, including all attachments thereto.  If requested
by the Owner in connection with any Notice of Inbound Transfer, the Servicer
shall deliver the following documents to or at the direction of the Owner:

 

1.

a copy of this Agreement;

 

2.

a Custodial Account Certification in the form of Exhibit 2, as required under
Article IV, or a copy of any similar certification previously delivered under
the Original Agreement or this Agreement; and

21

--------------------------------------------------------------------------------

 

3.

an Escrow Account Certification in the form of Exhibit 4, as required under
Article IV, or a copy of any similar certification previously delivered under
the Original Agreement or this Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

22

--------------------------------------------------------------------------------

ARTICLE III

SERVICING OF AGENCY MORTGAGE LOANS

 

Section 3.01

Servicer to Act as Servicer of Agency Mortgage Loans.

The Servicer shall service and administer each Agency Mortgage Loan in
accordance and shall otherwise comply in all respects with the related Guide,
including the requirements of such Guide relating to the maintenance of
custodial and escrow accounts, it being understood that any interest paid by the
depository institution on funds deposited in any related custodial account or
escrow account shall accrue to the benefit of the Owner. To the extent required
by law, the Owner shall be responsible for interest on escrowed funds to the
Mortgagor notwithstanding that such escrow account may be non interest bearing
or that interest paid thereon is insufficient for such purposes.  

 

Section 3.02

Guides Control.

In the event of any conflict between the other provisions of this Agreement,
insofar as they may relate to any Agency Mortgage Loan, and the terms of the
related Guide, the terms of such Guide shall control.

 

Section 3.03

Agency Rights.

The Servicer’s rights with respect to the Agency Mortgage Loans are subject and
subordinate in all respects to all rights, powers and prerogatives of the
applicable Agency under the Applicable Guide, at law and in equity, including
without limitation an Agency’s right to suspend or terminate the Owner’s
Servicing Rights (in whole or in part, and with or without cause) and to suspend
or terminate the Owner as an approved seller/servicer or servicer (whether with
or without cause) without recourse to an Agency whatsoever, such that the
Servicer’s rights with respect to the Agency Mortgage Loans pursuant to this
Agreement are subject to extinguishment at any time.

 

Section 3.04

Additional Agency Rights.

Owner’s execution and delivery of this Agreement constitutes Owner’s express
written consent to permit any Agency, consistent with the applicable Guide, to
have access to, or to have disclosed to it, or to receive copies of (i) any and
all mortgage records pertaining to any Agency Mortgage Loans serviced by Owner
for the applicable Agency and subserviced by Servicer; (ii) this Agreement; and
(iii) any and all other records, documents, files, information and data
maintained or held by Owner (or by others on Owner’s behalf), which an Agency
considers necessary or desirable to determine or assess the correctness and
completeness of the mortgage records pertaining to any Agency Mortgage Loans
serviced by the Owner for the applicable Agency and subserviced by Servicer, to
assure that Owner and Servicer are complying with the requirements of the
applicable Guide.

23

--------------------------------------------------------------------------------

 

Section 3.05

Limits on Subservicer’s Rights.

This Agreement does not include or convey to Servicer (i) the right to assume
the role of Owner as an approved servicer of any Agency; (ii) the right to
suspend or terminate Owner’s master servicing contracts with any Agency (in
whole or in part, and with or without cause) or the right to suspend or
terminate Owner as an approved Seller/Servicer or servicer of any Agency
(whether with or without cause); (iii) the right to transfer the Servicing
Rights relating to any Agency Mortgage Loan; or (iv) status as a third party
beneficiary of any of the agreements between Owner and any Agency.

 

Section 3.06

Prevailing Party Rights.

In any legal action or proceeding to defend or enforce an Agency’s rights with
respect to the Servicing Rights or such Agency’s rights as a third party
beneficiary to this Agreement, the prevailing party shall be entitled to recover
attorneys’ fees and costs.

 

Section 3.07

Investor Reports.

Owner and Servicer shall each provide to each Agency, at such address as such
Agency may from time to time designate, on or before the twentieth (20th) day
(or if such day is not a Business Day, as defined in the applicable Guide, then
the next succeeding Business Day) of each calendar month, a written report
containing (i) any notice of default or event of default under this Agreement,
received or sent by Owner or Servicer, respectively, (ii) any notice of an act,
event or circumstance indicating that with the passage of time, without cure of
such act, event or circumstance, there would be an event of default, received or
sent by Owner or Servicer, respectively, and (iii) such other information or
documents that an Agency may request with respect to this Agreement or the
related Agency Mortgage Loans, all in form and substance acceptable to such
Agency, to the extent that such other information or documents may be requested
of other servicers and subservicers. An Agency’s determinations with respect to
this Section 3.07 shall be made in its sole and absolute discretion.

 

Section 3.08

Limitation of Claims.

Servicer may only make any claims against an Agency, arising out of or relating
to this Agreement or the Agency Mortgage Loans, through Owner.

 

Section 3.09

No Interest in Servicing Rights.

Servicer acknowledges and agrees that it has no interest in the Servicing Rights
or in any agreements between Owner and an Agency.

 

Section 3.10

Joint and Several Liability.

Owner and Servicer shall jointly and severally indemnify, defend and hold
harmless each Agency from and against any losses, damages or expenses arising
out of or relating to Servicer’s fraud, willful misconduct or negligent acts or
omissions in connection with its subservicing of the related Agency Mortgage
Loans pursuant to this Agreement; provided, however, that it is expressly
understood and agreed that Servicer shall not be liable to any

24

--------------------------------------------------------------------------------

Agency for any such losses, damages or expenses in connection with either (i)
the origination of any related Agency Mortgage Loan, or (ii) the servicing of
any Agency Mortgage Loan other than during the period Servicer is or was
obligated to service such Agency Mortgage Loan pursuant to this Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

25

--------------------------------------------------------------------------------

ARTICLE IV

SERVICING OF NON-AGENCY MORTGAGE LOANS

 

Section 4.01

Servicer to Act as Servicer of Non-Agency Mortgage Loans.

The Servicer shall service the Non-Agency Mortgage Loans in accordance with the
provisions of this Agreement and its obligations in respect of the Mortgage
Loans shall be limited to those set forth in this Agreement.  To the extent set
forth in and subject to the terms of the Delegation of Authority Matrix attached
as Exhibit 10 hereto, the Owner hereby delegates authority to the Servicer to
carry out the Servicer’s servicing and administration duties with respect to the
Non-Agency Mortgage Loans without obtaining the Owner’s prior written approval.

Consistent with the terms of this Agreement, the PennyMac Property Preservation
Program, and Accepted Servicing Practices, the Servicer may, with respect to a
Non-Agency Mortgage Loan, (i) waive any late payment charge or, if applicable,
any penalty interest, or (ii) extend the due dates for the Monthly Payments due
on a Mortgage Note, or waive, in whole or in part, a Prepayment Penalty.  Unless
in compliance with the PennyMac Property Preservation Program, the terms of any
Non-Agency Mortgage Loan may only be modified, varied or forgiven with the prior
written consent of the Owner while the Non-Agency Mortgage Loan remains
outstanding.  The Servicer’s analysis supporting any forbearance and the
conclusion that any forbearance meets the standards of this section shall be
reflected in writing or electronically in the Servicing File.  The Servicer is
hereby authorized and empowered to execute and deliver on behalf of itself and
the Owner, all instruments of satisfaction or cancellation, or of partial or
full release, discharge and all other comparable instruments, with respect to
the Non-Agency Mortgage Loans and with respect to the Mortgaged Properties.  If
reasonably required by the Servicer, the Owner shall furnish the Servicer with a
fully executed Power of Attorney and other documents necessary or appropriate to
enable the Servicer to carry out its servicing and administrative duties under
this Agreement with respect to the Non-Agency Mortgage Loans.  With respect to
the Non-Agency Mortgage Loans, the Servicer may request the consent of the Owner
in writing by certified mail, overnight courier or such other means as may be
agreed to by the parties to a course of action that the Servicer proposes to
take under this Agreement.  Unless the Owner shall give written notice to the
Servicer that it objects to any such recommended course of action within ten
(10) Business Days immediately following the day on which the Owner received the
Servicer’s written consent request (together with its recommended course of
action and relevant supporting documentation), the Owner shall be deemed to have
consented to such recommended course of action, and Servicer may take the action
recommended to the Owner, unless the Servicer determines, in its reasonable
discretion, that such action is no longer prudent or applicable and the Servicer
notifies the Owner of such decision not to act.  In the event that the Owner
shall object to the Servicer’s recommended course of action, Servicer shall take
such action as is required by the Owner, and the Servicer shall have no
liability therefor if it is not negligent in performing such action.  Further,
to the extent the Servicer has provided the Owner with reasonably timely notice,
the Owner shall indemnify and hold harmless the Servicer from and against any
penalty, fine or damages that may result from the Owner’s decision to wait for
any period of time up to ten (10) Business Days before providing Servicer with
direction as to the course of action to be taken as permitted in the second
immediately preceding sentence.  In

26

--------------------------------------------------------------------------------

addition, except in accordance with the PennyMac Property Preservation Program,
notwithstanding the foregoing, the Servicer may not waive any Prepayment Penalty
or portion thereof required by the terms of the related Mortgage Note unless (i)
the Servicer determines that such waiver would maximize recovery of Liquidation
Proceeds for such Non-Agency Mortgage Loan, taking into account the value of
such Prepayment Penalty and such Non-Agency Mortgage Loan, and the waiver of
such Prepayment Penalty is standard and customary in servicing similar
Non-Agency Mortgage Loans (including the waiver of a Prepayment Penalty in
connection with a refinancing of the Mortgage Loan related to a default or a
reasonably foreseeable default) or (ii) the enforceability thereof is limited
(1) by bankruptcy, insolvency, moratorium, receivership or other similar laws
relating to creditor’s rights or (2) due to acceleration in connection with a
foreclosure or other involuntary payment, or (iii) in the Servicer’s reasonable
judgment, (1) the waiver of such prepayment penalty relates to a default or a
reasonably foreseeable default, (2) such waiver would maximize recovery of total
proceeds taking into account the value of such Prepayment Penalty and such
Mortgage Loan and (3) such waiver is standard and customary in servicing similar
mortgage loans similar to such Non-Agency Mortgage Loan (including any waiver of
a prepayment penalty in connection with a refinancing of a Non-Agency Mortgage
Loan that is related to a default or a reasonably foreseeable default). In no
event will the Servicer waive a Prepayment Penalty in connection with a
refinancing of a Non-Agency Mortgage Loan that is not related to a default or a
reasonably foreseeable default.  In servicing and administering the Non-Agency
Mortgage Loans, the Servicer shall employ procedures (including collection
procedures) and exercise the same care that it customarily employs and exercises
in servicing and administering mortgage loans for its own account, where such
procedures do not conflict with the requirements of this Agreement, and the
Owner’s reliance on the Servicer.  In addition, the Servicer shall retain
adequate personnel to effect such servicing and administration of the Non-Agency
Mortgage Loans.  Servicer shall have no obligation to collect a Prepayment
Penalty with respect to a Non-Agency Mortgage Loan unless the Servicer is
provided with such information electronically; provided, however, that the
Servicer shall compare the Notice of Inbound Transfer provided by the Owner and
any electronic data regarding the Non-Agency Mortgage Loans provided by the
previous servicer of such Non-Agency Mortgage Loans and provide the Owner with
prompt written notice of any discrepancies with respect to information regarding
Prepayment Penalties.

The Owner may sell and transfer, in whole or in part, some or all of the
Non-Agency Mortgage Loans at any time and from time to time (including, without
limitation, in connection with a Private Securitization Transaction or a Public
Securitization Transaction). Upon such execution, the Servicer shall mark its
books and records to reflect the ownership of the Non-Agency Mortgage Loans by
such transferee.

The Servicer shall notify MERS of the ownership interest of Owner in each MOM
Loan.  At any time during the term of this Agreement, Owner may direct the
Servicer to cause any MOM Loan to be deactivated from the MERS System.

The Servicing File maintained by the Servicer pursuant to this Agreement shall
be appropriately marked and identified in the Servicer’s computer system to
clearly reflect the ownership of the related Non-Agency Mortgage Loan by the
Owner.  The Servicer shall release from its custody the contents of any
Servicing File maintained by it only in accordance with this Agreement.

27

--------------------------------------------------------------------------------

The Servicer shall be responsible for the actions of any vendors which the
Servicer utilizes to carry out its obligations hereunder.  The Owner shall
promptly reimburse the Servicer for any fees paid to such vendors by the
Servicer.

The Servicer shall maintain adequate capacity to service the Non-Agency Mortgage
Loans, as well as other mortgage loans that it may service (including mortgage
loans held by other entities managed by the PennyMac REIT Manager or any of its
Affiliates).

 

Section 4.02

Liquidation of Mortgage Loans.

In the event that any payment due under any Non-Agency Mortgage Loan and not
postponed pursuant to Section 4.01 is not paid when the same becomes due and
payable, or in the event the Mortgagor fails to perform any other covenant or
obligation under the Non-Agency Mortgage Loan and such failure continues beyond
any applicable grace period, the Servicer shall take such action as the Servicer
shall determine reasonably to be in the best interest of the Owner in accordance
with Accepted Servicing Practices.  In the event that any payment due under any
Non-Agency Mortgage Loan is not postponed pursuant to Section 4.01 and remains
delinquent for a period of ninety (90) days or any other default continues for a
period of ninety (90) days beyond the expiration of any grace or cure period (or
such other period as is required by law in the jurisdiction where the related
Mortgaged Property is located) or earlier as determined by the Servicer, the
Servicer is granted authority to effect Foreclosure Commencement in accordance
with and subject to Exhibit 10 hereto and Accepted Servicing Practices.  In such
connection, the Servicer shall, acting in accordance with Accepted Servicing
Practices, advance on behalf of the Owner such funds as are necessary and proper
in connection with any foreclosure or towards the restoration or preservation of
any Mortgaged Property securing a Non-Agency Mortgage Loan. Notwithstanding
anything herein to the contrary, no Servicing Advance shall be required to be
made hereunder with respect to a Non-Agency Mortgage Loan if such Servicing
Advance would, if made, constitute a Nonrecoverable Advance.  The determination
by the Servicer that it has made a Nonrecoverable Advance with respect to a
Non-Agency Mortgage Loan or that any proposed Servicing Advance with respect to
a Non-Agency Mortgage Loan would constitute a Nonrecoverable Advance shall be
evidenced by an Officers’ Certificate of the Servicer, delivered to the Owner,
which details the reasons for such determination.

The Servicer acknowledges and agrees that it shall take and initiate any legal
actions with respect to any with respect to a Non-Agency Mortgage Loans and
related REO Properties, including, without limitation, any foreclosure actions,
acceptance of deeds in lieu of foreclosure, and any collection actions with
respect to such Non-Agency Mortgage Loans or related REO Properties on behalf of
the Owner, but only in the name of the Servicer or its nominee and without
reference to the Owner.  Except as otherwise required by law or with the consent
of the Owner, under no circumstances shall any such action be taken in the name
of, or with any reference to, the Owner.  The Servicer shall provide prior
written notice to the Owner, if the Servicer is required by applicable law to
take any legal actions with respect to the Non-Agency Mortgage Loans or related
REO Properties in the name of, or with reference to, the Owner.

28

--------------------------------------------------------------------------------

 

Section 4.03

Collection of Mortgage Loan Payments; Payment Clearing Account.

Continuously from the related Inbound Transfer Date until the principal and
interest on all Mortgage Loans are paid in full (unless otherwise provided
herein), the Servicer shall proceed diligently to collect all payments due under
each of the Non-Agency Mortgage Loans when the same shall become due and payable
and shall take special care in ascertaining and estimating Escrow Payments, to
the extent applicable, and all other charges that will become due and payable
with respect to the Non-Agency Mortgage Loans and each related Mortgaged
Property, to the end that the installments payable by the Mortgagors will be
sufficient to pay such charges as and when they become due and
payable.  Notwithstanding anything herein to the contrary, with respect to the
Non-Agency Mortgage Loans, the Servicer shall not be required to institute or
join in litigation with respect to collection of any payment (whether under a
Mortgage, Mortgage Note, PMI Policy or otherwise or against any public or
governmental authority with respect to a taking or condemnation) if in its
reasonable judgment it believes that it will be unable to enforce the provision
of the Mortgage or other instrument pursuant to which payment is
required.  Further, the Servicer shall take special care in ascertaining and
estimating annual ground rents, taxes, assessments, water rates, flood insurance
premiums, fire and hazard insurance premiums, mortgage insurance premiums, and
all other charges that, as provided in the Mortgage, will become due and payable
to the end that the installments payable by the Mortgagors will be sufficient to
pay such charges as and when they become due and payable.

The Servicer shall establish and maintain a Payment Clearing Account into which
it shall deposit on a daily basis all payments received in respect of mortgage
loans serviced by the Servicer (whether or not serviced pursuant to this
Agreement).  Not later than the second Business Day following the receipt of a
payment in respect of a Non-Agency Mortgage Loan subject to this Agreement, the
Servicer shall withdraw the amount of such payment from the Payment Clearing
Account and shall immediately deposit (1) in the Custodial Account, the portion
of such payment required to be deposited therein pursuant to Section 4.04, and
(2) in the Escrow Account, the portion of such payment required to be deposited
therein pursuant to Section 4.06.

 

Section 4.04

Establishment of and Deposits to Custodial Account.

The Servicer shall establish one or more Custodial Accounts, in the form of time
deposit or demand accounts titled in the name of “PNMAC Loan Svc LLC ITF
[description of applicable owners or investors]” or titled in another reasonable
manner indicating that such account is held in a custodial capacity.  Each
Custodial Account shall be established with a Qualified Depository acceptable to
the Owner as a Special Deposit Account.  Any funds deposited in the Custodial
Account shall at all times be fully insured to the full extent permitted by the
FDIC and any amounts therein may be invested in Eligible Investments.  The
creation of any Custodial Account shall be evidenced by a certification in the
form of Exhibit 2 hereto, in the case of an account established with the
Servicer (provided the Servicer qualifies as a Qualified Depository).  A copy of
such certification or letter agreement shall be furnished to the Owner upon
request.  The Servicer shall segregate and hold all funds in the Custodial
Account separate and apart from the Servicer’s own funds and general assets.

29

--------------------------------------------------------------------------------

With respect to the Non-Agency Mortgage Loans, the Servicer shall deposit in the
Custodial Account and retain therein the following collections received by the
Servicer, together with any payments made by the Servicer subsequent to the
Inbound Transfer Date pursuant to this Agreement:

(i)all payments on account of principal on such Mortgage Loans, including all
Principal Prepayments;

(ii)all payments on account of interest on the related Mortgage adjusted to the
Mortgage Loan Remittance Rate;

(iii)all related Liquidation Proceeds and any amount received with respect to
the related REO Property;

(iv)all related Insurance Proceeds including amounts required to be deposited
pursuant to Section 4.10 (other than proceeds to be held in the Escrow Account
and applied to the restoration or repair of the related Mortgaged Property or
released to the related Mortgagor in accordance with Section 4.14), and Section
4.11;

(v)all Condemnation Proceeds affecting any related Mortgaged Property that are
not applied to the restoration or repair of the related Mortgaged Property or
released to the related Mortgagor in accordance with Section 4.14;

(vi)any amount required to be deposited in the Custodial Account pursuant to
Section 4.15 or 4.19;

(vii)any Prepayment Penalties received with respect to any Non-Agency Mortgage
Loan; and

(viii)any amounts required to be deposited by the Servicer pursuant to
Section 4.11 in connection with the deductible clause in any blanket hazard
insurance policy.  Such deposit shall be made from Servicer’s own funds, without
reimbursement therefor.

The foregoing requirements for deposit into the Custodial Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, Ancillary Income and Prepayment Penalties need not be
deposited by the Servicer into the Custodial Account.  Any interest paid by the
depository institution on funds deposited in the Custodial Account and relating
to any Distressed Whole Loan shall accrue to the benefit of the Servicer and the
Servicer may retain any such interest.

 

Section 4.05

Permitted Withdrawals From Custodial Account.

Subject to Section 5.01, the Servicer shall be entitled to withdraw funds from
the Custodial Account for the following purposes:

(i)to make payments to the Owner (or as otherwise directed by the Owner in
writing) in the amounts and in the manner provided in Section 5.01;

30

--------------------------------------------------------------------------------

(ii)to fund any Liquidity Reserve Account or any Litigation Reserve Account as
and to the extent required by Section 4.17;

(iii)following the liquidation of a Non-Agency Mortgage Loan, to reimburse
itself for (a) any unpaid Servicing Advances to the extent recoverable from
Liquidation Proceeds, Insurance Proceeds or other amounts received with respect
to the related Non-Agency Mortgage Loan plus (b) related unreimbursed
Nonrecoverable Advances made by the Servicer in accordance with this Agreement;

(iv)to invest funds in Eligible Investments in accordance with Section 4.09;

(v)to withdraw funds deposited in the Custodial Account in error;

(vi)to pay to itself any interest earned on funds deposited in the Custodial
Account and relating to any Distressed Whole Loan (all such interest to be
withdrawn monthly not later than each Remittance Date); and

(vii)to clear and terminate the Custodial Account upon the termination of the
Servicing Agreement.

The Servicer shall keep and maintain separate accounting, on a Mortgage Loan by
Mortgage Loan basis, for the purpose of justifying any withdrawal from the
Custodial Account pursuant to subclause (iii) above.

 

Section 4.06

Establishment of and Deposits to Escrow Account.

The Servicer shall establish and maintain one or more Escrow Accounts, in the
form of time deposit or demand accounts titled in the name of “PNMAC Loan Svc
LLC ttee and/or bailee for [description of applicable owners or investors]” or
titled in another reasonable manner indicating that such account is held in a
custodial capacity.  Each Escrow Account shall be established with a Qualified
Depository as a Special Deposit Account.  Funds deposited in the Escrow Accounts
may be drawn on by the Servicer in accordance with Section 4.07.  The creation
of any Escrow Account shall be evidenced by a certification in the form of
Exhibit 4 hereto, in the case of an account established with the Servicer
(provided the Servicer qualifies as a Qualified Depository).  A copy of such
certification shall be furnished to the Owner on or prior to the execution of
this Agreement.  The Servicer shall segregate and hold all funds in any Escrow
Account separate and apart from the Servicer’s own funds and general assets.

With respect to the Non-Agency Mortgage Loans, the Servicer shall deposit in the
Escrow Account or Accounts and retain therein the following collections received
by the Servicer:

(i)all related Escrow Payments collected on account of the Non-Agency Mortgage
Loans, for the purpose of effecting timely payment of any such items as required
under the terms of this Agreement;  and

31

--------------------------------------------------------------------------------

(ii)all amounts representing related Insurance Proceeds or Condemnation Proceeds
which are to be applied to the restoration or repair of any related Mortgaged
Property.

The Servicer shall make withdrawals from the Escrow Account only to effect such
payments as are required under this Agreement, as set forth in Section
4.07.  Any interest paid on funds deposited in the Escrow Account by the
depository institution and relating to any Distressed Whole Loan shall accrue to
the benefit of the Servicer.  To the extent required by law, the Servicer shall
be responsible to pay from its own funds interest on escrowed funds to the
Mortgagor notwithstanding that the Escrow Account may be non interest bearing or
that interest paid thereon is insufficient for such purposes.

 

Section 4.07

Permitted Withdrawals From Escrow Account.

With respect to the Non-Agency Mortgage Loans, withdrawals from the Escrow
Account or Accounts may be made by the Servicer only:

(i)to effect timely payments of ground rents, taxes, assessments, water rates,
mortgage insurance premiums, condominium charges, flood insurance, fire and
hazard insurance, premiums or other items constituting related Escrow Payments
for the related Mortgage;

(ii)to reimburse the Servicer for any Servicing Advance made by the Servicer
pursuant to Section 4.08 with respect to a Non-Agency Mortgage Loan, but only
from amounts received on the related Mortgage Loan which represent late payments
or collections of Escrow Payments thereunder;

(iii)to refund to any related Mortgagor any funds found to be in excess of the
amounts required under the terms of the related Mortgage Loan or applicable
federal or state law or judicial or administrative ruling;

(iv)for transfer to the Custodial Account in accordance with the terms of the
related Mortgage and Mortgage Note or this Agreement;

(v)for application to restoration or repair of the related Mortgaged Property in
accordance with the procedures outlined in Section 4.14;

(vi)to pay the Servicer, or any Mortgagors to the extent required by law, any
interest due on the funds deposited in the Escrow Account and relating to any
Distressed Whole Loan or to pay the Owner, or any Mortgagors to the extent
required by law, any interest paid on the funds deposited in the Escrow Account
and relating to any Mortgage Loan other than a Distressed Whole Loan;

(vii)to reimburse itself for any amounts deposited in the Escrow Account in
error; and

(viii)to clear and terminate the Escrow Account on the termination of this
Agreement.

32

--------------------------------------------------------------------------------

 

Section 4.08

Payment of Taxes, Insurance and Other Charges.

With respect to each Non-Agency Mortgage Loan that is a First Lien Mortgage Loan
requiring Escrow Payments to be made by the related Mortgagor, the Servicer
shall maintain accurate records reflecting the status of ground rents, taxes,
assessments, water rates and other charges which are or may become a lien upon
the Mortgaged Property and the status of PMI Policy premiums, flood insurance,
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 prior to the applicable penalty or termination date and
at a time appropriate for securing maximum discounts allowable, employing for
such purpose deposits of the related 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 related Mortgage.  

To the extent that any Non-Agency Mortgage Loan is a First Lien Mortgage Loan
that does not provide for Escrow Payments, the Servicer shall determine that any
such payments are made by the related Mortgagor when due.  With respect to each
Non-Agency Mortgage Loan that is a First Lien Mortgage Loan requiring Escrow
Payments to be made by the related Mortgagor, subject to Accepted Servicing
Practices, the Servicer assumes full responsibility for the payment of all such
bills and shall effect payments of all such bills irrespective of the
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 within the time period required to avoid penalties and interest
and  avoid the loss of the related Mortgaged Property by foreclosure from a tax
or other lien. Notwithstanding the foregoing, if Servicer reasonably determines
that such Servicing Advance would be a Nonrecoverable Advance, Servicer shall
have no obligation to make such Servicing Advance.  Solely with respect to
Non-Agency Mortgage Loans that require Escrow Payments, if Servicer fails to
make a Servicing Advance with respect to any payment prior to the date on which
late payment penalties or costs related to protecting the lien accrue, the
Servicer shall pay any such penalties or costs which accrued.

 

Section 4.09

Protection of Accounts.

The Servicer may transfer the Custodial Account, the Escrow Account, any
Liquidity Reserve Account or any Litigation Reserve Account to a different
Qualified Depository from time to time.  Such transfer shall be made only upon
obtaining consent of the Owner, which shall not be unreasonably withheld.  The
Servicer shall notify the Owner in writing of any such transfer fifteen (15)
Business Days prior to such transfer.

Amounts on deposit in the Custodial Account, the Escrow Account, any Liquidity
Reserve Account or any Litigation Reserve Account may at the option of the
Servicer be invested in Eligible Investments.  Any such Eligible Investment
shall mature no later than one day prior to the Remittance Date in each month;
provided, however, that if such Eligible Investment is an obligation of a
Qualified Depository (other than the Servicer) that maintains the Custodial
Account, the Escrow Account, any Liquidity Reserve Account or any Litigation
Reserve Account, then such Eligible Investment may mature on the related
Remittance Date.  Any such Eligible Investment shall be made in the name of the
Servicer in trust for the benefit of

33

--------------------------------------------------------------------------------

the Owner.  All income on or gain realized from any such Eligible Investment
shall be for the benefit of the Servicer and may be withdrawn at any time by the
Servicer.  Any losses incurred in respect of any such investment shall be
deposited in the Custodial Account, the Escrow Account, any Liquidity Reserve
Account or any Litigation Reserve Account, by the Servicer out of its own funds
immediately as realized with no right to reimbursement.

 

Section 4.10

Maintenance of Hazard Insurance.

The Servicer shall cause to be maintained for each Non-Agency Mortgage Loan that
is a First Lien Mortgage Loan, hazard insurance (with extended coverage as is
customary in the area where the Mortgaged Property is located) such that all
buildings upon the related Mortgaged Property are insured by a generally
acceptable insurer acceptable under the Fannie Mae Guides against loss by fire,
hazards of extended coverage and such other hazards as are required to be
insured pursuant to the Fannie Mae Guides, in an amount which is at least equal
to the lesser of (i) the maximum insurable value of the improvements securing
such Mortgage Loan and (ii) the greater of (a) the outstanding principal balance
of such Mortgage Loan or (b) an amount such that the proceeds thereof shall be
sufficient to prevent the related Mortgagor or the loss payee from becoming a
co-insurer (or, in the case of any related REO Property, the fair market value
of such REO Property).

With respect to the Non-Agency Mortgage Loans, if required by the National Flood
Insurance Act of 1968 or Flood Disaster Prevention Act of 1973, as amended, each
such Mortgage Loan is, and shall continue to be, covered by a flood insurance
policy meeting the requirements of the current guidelines of the Federal
Insurance Administration with a generally acceptable insurance carrier
acceptable under the Fannie Mae Guides in an amount representing coverage not
less than the least of (i) the aggregate unpaid principal balance of such
Mortgage Loan (or, in the case of a related REO Property, the fair market value
of such REO Property), (ii) maximum amount of insurance which is available under
the National Flood Insurance Act of 1968 or Flood Disaster Prevention Act of
1973, as amended (regardless of whether the area in which such Mortgaged
Property is located is participating in such program), or (iii) the full
replacement value of the improvements which are part of such Mortgaged
Property.  If a related Mortgaged Property is located in a special flood hazard
area and is not covered by flood insurance or is covered in an amount less than
the amount required by the National Flood Insurance Act of 1968 or Flood
Disaster Prevention Act of 1973, as amended, the Servicer shall notify the
related Mortgagor that the Mortgagor must obtain such flood insurance coverage,
and if such Mortgagor fails to obtain the required flood insurance coverage
within forty-five (45) days after such notification, the Servicer shall
immediately force place the required flood insurance on such Mortgagor’s
behalf.  Notwithstanding the foregoing, Servicer shall have no liability to
Owner or any third party for any penalties or fines imposed based on Servicer’s
failure to timely notify the Director of FEMA and the flood insurance provider
related to a servicing transfer if Servicer is not provided with flood insurance
information; provided that, the Servicer shall have promptly provided Owner with
notice of such missing flood insurance information.  Notwithstanding the
foregoing, the Servicer shall maintain a blanket insurance policy in sufficient
amounts to cover any uninsured loss due to any gap in Mortgagor-provided
coverage.

34

--------------------------------------------------------------------------------

If a Non-Agency Mortgage Loan that is a First Lien Mortgage Loan is secured by a
unit in a condominium project, the Servicer shall verify that the coverage
required of the homeowners’ association, including hazard, flood, liability, and
fidelity coverage, is being maintained in accordance with then current Fannie
Mae requirements, and secure from the homeowners’ association its agreement to
notify the Servicer promptly of any change in the insurance coverage or of any
condemnation or casualty loss that may have a material effect on the value of
the related Mortgaged Property as security.

The Servicer shall cause to be maintained on each Mortgaged Property securing a
Non-Agency Mortgage Loan such other or additional insurance as may be required
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance, or pursuant to the
requirements of any private mortgage guaranty insurer, or as may be required to
conform with Accepted Servicing Practices.

In the event that the Owner or the Servicer shall determine that the Mortgaged
Property securing a Non-Agency Mortgage Loan should be insured against loss or
damage by hazards and risks not covered by the insurance required to be
maintained by the Mortgagor pursuant to the terms of the Mortgage, the Servicer
shall in accordance with the Fannie Mae Guides make commercially reasonable
efforts to communicate and consult with the Mortgagor with respect to the need
for such insurance and bring to the Mortgagor’s attention the desirability of
protection of the Mortgaged Property.

All policies required hereunder shall name the Servicer and its successors and
assigns as a mortgagee and loss payee and shall be endorsed with non
contributory standard or New York mortgagee clauses which shall provide for at
least thirty (30) days prior written notice of any cancellation, reduction in
amount or material change in coverage.

In all such cases, the Servicer shall not interfere with the Mortgagor’s freedom
of choice in selecting either his insurance carrier or agent, provided, however,
that the Servicer shall not accept any such insurance policies from insurance
companies unless such companies currently reflect a General Policy Rating of
A:VI or better under Best’s Key Rating Guides, are acceptable under the Fannie
Mae Guides and are licensed to do business in the jurisdiction in which the
Mortgaged Property is located.  The Servicer shall determine that such policies
provide sufficient risk coverage and amounts as required pursuant to the Fannie
Mae Guides, that they insure the property owner, and that they properly describe
the property address.  The Servicer shall furnish to the Mortgagor a formal
notice of expiration of any such insurance in sufficient time for the Mortgagor
to arrange for renewal coverage by the expiration date; provided, however, that
in the event that no such notice is furnished by the Servicer, the Servicer
shall ensure that replacement insurance policies are in place in the required
coverages and the Servicer shall be solely liable for any losses in the event
coverage is not provided.

Pursuant to Section 4.04, 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, or property
acquired in liquidation of the Mortgage Loan, or to be released to the
Mortgagor, in accordance with the Servicer’s normal servicing procedures as
specified in Section 4.14) shall be deposited in the Custodial Account subject
to withdrawal pursuant to Section 4.05.

35

--------------------------------------------------------------------------------

 

Section 4.11

Maintenance of Mortgage Impairment Insurance Policy.

In the event that the Servicer shall obtain and maintain a blanket policy
insuring against losses arising from flood, fire and hazards covered under
extended coverage on all of the Non-Agency Mortgage Loans, then, to the extent
such policy provides coverage in an amount equal to the amount required pursuant
to Section 4.10 and otherwise complies with all other requirements of Section
4.10, it shall conclusively be deemed to have satisfied its obligations as set
forth in Section 4.10.  Any amounts collected by the Servicer under any such
policy relating to a Non-Agency Mortgage Loan shall be deposited in the
Custodial Account subject to withdrawal pursuant to Section 4.05.  Such policy
may contain a deductible clause, in which case, in the event that there shall
not have been maintained on the related Mortgaged Property a policy complying
with Section 4.10, and there shall have been a loss which would have been
covered by such policy, the Servicer shall deposit in the Custodial Account at
the time of such loss the amount not otherwise payable under the blanket policy
because of such deductible clause, such amount to be deposited from the
Servicer’s funds, without reimbursement therefor.  The Servicer may seek
reimbursement from the Owner for the costs and premiums associated with
obtaining and maintaining any such blanket policy.

 

Section 4.12

Maintenance of Fidelity Bond and Errors and Omissions Insurance.

The Servicer shall maintain with responsible companies that would meet the
requirements of Fannie Mae, at its own expense, a blanket Fidelity Bond and an
Errors and Omissions Insurance Policy, with broad coverage on all officers,
employees or other persons acting in any capacity requiring such persons to
handle funds, money, documents or papers relating to the Mortgage Loans
(“Servicer Employees”).  Any such Fidelity Bond and Errors and Omissions
Insurance Policy shall be in the form of the Mortgage Banker’s Blanket Bond and
shall protect and insure the Servicer against losses, including forgery, theft,
embezzlement, fraud, errors and omissions and negligent acts of such Servicer
Employees.  Such Fidelity Bond and Errors and Omissions Insurance Policy also
shall 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 4.12 requiring such Fidelity Bond and Errors and Omissions Insurance
Policy shall diminish or relieve the Servicer from its duties and obligations as
set forth in this Agreement.  Any such Fidelity Bond and Errors and Omissions
Insurance Policy shall comply with the applicable requirements from time to time
of Fannie Mae. Upon request, the Servicer shall cause to be delivered to the
Owner a certified true copy of such Fidelity Bond and Errors and Omissions
Insurance Policy and shall obtain a statement from the surety and insurer that
such Fidelity Bond and Errors and Omissions Insurance Policy shall in no event
be terminated or materially modified without thirty (30) days’ prior written
notice to the Owner.

 

Section 4.13

Inspections.

The Servicer shall order an inspection of the Mortgaged Property securing a
Non-Agency Mortgage Loan when such Mortgage Loan becomes 45 days delinquent and
every 30 days thereafter so long as such Mortgage Loan remains delinquent to
assure itself that the value

36

--------------------------------------------------------------------------------

of the Mortgaged Property is being preserved, provided that the Servicer shall
be required to take such action only if it determines that the proceeds to the
Owner (after giving effect to the recovery of the Servicer’s out‑of‑pocket
expenses) from payment on, or disposition of, the related Mortgage Loan or
REO Property would be increased as a result of the taking of such action.  The
Servicer shall document on its servicing system each such inspection.  The costs
of such inspections shall be treated as Servicing Advances for which the
Servicer shall be entitled to full reimbursement for in accordance with Section
4.05(iv).

 

Section 4.14

Restoration of Mortgaged Property.

With respect to the Non-Agency Mortgage Loans, 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 Accepted Servicing
Practices and the terms of this Agreement.  At a minimum, the Servicer shall
comply with the following conditions in connection with any such release of such
Insurance Proceeds or Condemnation Proceeds:

(i)the Servicer shall receive satisfactory independent verification of
completion in all material respects 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 4.15

Title, Management and Disposition of REO Property.

In the event that title to any Mortgaged Property securing a Non-Agency Mortgage
Loan 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 Owner or its designee,
which may include Servicer on behalf of the Owner, or in the event the Servicer
is not authorized or permitted to hold title to real property in the state where
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(s) as shall be consistent with
an Opinion of Counsel obtained by Servicer 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 Owner shall acknowledge in writing
that such title is being held as nominee for the Owner.  Where title is acquired
by the acceptance of a deed in lieu of foreclosure, the Owner shall pay to the
Servicer a Deed in Lieu Fee.

37

--------------------------------------------------------------------------------

Upon approval by Owner, the Servicer shall manage, conserve, protect and operate
each REO Property related to a Non-Agency Mortgage Loan for the Owner either for
the purpose of its prompt disposition and sale or its rental.  The Servicer,
either itself or through an agent selected by the Servicer, shall manage,
conserve, protect and operate such REO Property in accordance with Accepted
Servicing Practices and in the same manner that similar property in the same
locality as such REO Property is managed.  The Servicer shall attempt to sell or
rent the same on such terms and conditions as the Servicer deems to be in the
best interest of the Owner in accordance with Accepted Servicing Practices.  The
Servicer shall provide the Owner on a monthly basis with a report on the status
of each REO Property related to a Non-Agency Mortgage Loan.  

The Servicer shall also maintain on each REO Property related to a Non-Agency
Mortgage Loan 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 or Flood Disaster
Prevention Act of 1973, as amended, flood insurance in the amount required in
Section 4.10 hereof, provided that the Servicer shall be required to maintain
such insurance only if it determines that the proceeds to the Owner (after
giving effect to the recovery of the Servicer’s out‑of‑pocket expenses) from
payment on, or disposition of, the related REO Property would be increased as a
result of the maintenance of such insurance.  Such costs to maintain appropriate
insurance coverage shall be treated as Servicing Advances for which the Servicer
shall be entitled to full reimbursement in accordance with Section 4.05(iv).  In
addition, for the sale of each REO Property related to a Non-Agency Mortgage
Loan, Owner shall pay to Servicer the Liquidation Fee.

The disposition of each REO Property related to a Non-Agency Mortgage Loan shall
be carried out by the Servicer at such price, and upon such terms and
conditions, as the Servicer deems to be in the best interests of the Owner in
accordance with Accepted Servicing Practices.  The proceeds of sale of such REO
Property shall be promptly deposited in the Custodial Account pursuant to the
terms of this Agreement but not later than the second Business Day following
receipt thereof.  As soon as practical thereafter, the expenses of such sale
shall be paid and the Servicer shall reimburse itself for any related
unreimbursed Servicing Advances and unpaid Servicing Fees made pursuant to this
Section.

With respect to each REO Property related to a Non-Agency Mortgage Loan, the
Servicer shall segregate and hold all funds collected and received in connection
with the operation of the REO Property in the Custodial Account.  The Servicer
shall cause to be deposited on a daily basis in each Custodial Account all
revenues received by Servicer (such revenues being those received by Servicer
within two Business Days prior to actual deposit into the Escrow Account) with
respect to the conservation and disposition of the related REO Property.  Any
advances made to maintain appropriate insurance coverage shall be treated as
Servicing Advances for which the Servicer shall be entitled to full
reimbursement in accordance with Section 4.05(iv).

With respect to all REO Properties managed by the Servicer that are subject to
rental agreements, the Servicer shall be entitled to collect on a monthly basis
any applicable REO Property Rental Fees, REO Property Management Fees and
related fees as set forth on Exhibit 9,

38

--------------------------------------------------------------------------------

net of Owner’s monthly cost to directly employ and compensate any personnel that
help facilitate the Servicer’s management of such REO Properties.

The Servicer shall furnish to the Owner on a monthly basis the Servicer’s
standard REO report on REO Property then managed by the Servicer with respect to
the Non-Agency Mortgage Loans.

 

Section 4.16

Costs and Expenses.

With respect to the Non-Agency Mortgage Loans, Owner will be responsible for all
losses including but not limited to unrecoverable interest, “out-of-pocket”
costs and expenses from either the Mortgagor or Owner that are normal and
customary that occur as the result of normal business activity associated with
owning the loans.

 

Section 4.17

Liquidity and Litigation Reserves.

(a)Liquidity Reserve.  The Servicer, in its discretion, may establish a
liquidity reserve (the “Liquidity Reserve”) from which to fund Servicing
Advances (including litigation costs and expenses (including attorneys’ fees)),
P&I Advances and Interest Shortfall with respect to the Mortgage Loans.  If the
Servicer elects to establish a Liquidity Reserve it shall establish a Liquidity
Reserve Account at a Qualified Depository.  The Liquidity Reserve Account shall
be held in trust for the benefit of the Owner and shall be established and
maintained for the sole purpose of holding and distributing the Liquidity
Reserve funds.  The Servicer may fund the Liquidity Reserve with such portion of
distributions on the Mortgage Loans (but such portion shall nonetheless be
deemed to have been distributed to Owner) as it deems appropriate, in the
exercise of its reasonable discretion, or otherwise request Owner to fund such
Liquidity Reserve, in which case Owner shall fund such Liquidity Reserve as so
requested.  At the termination of this Agreement, all remaining funds held in
the Liquidity Reserve shall be distributed to the Owner.  Amounts on deposit in
the Liquidity Reserve Account shall be invested in Eligible Investments, shall
not be used to pay costs or expenses other than Servicing Advances (including
litigation costs and expenses (including attorneys’ fees)), P&I Advances and
Interest Shortfall, and shall be used to pay such amounts only in any month in
which the distributions on the Mortgage Loans received during that month are
insufficient to provide sufficient cash to pay all such amounts due and payable
during that month.  No funds from any other source (other than interest or
earnings on the funds held in the Liquidity Reserve Account) shall be commingled
in the Liquidity Reserve Account.  Amounts on deposit in the Liquidity Reserve
Account (including interest and earnings thereon) shall be used and may be
withdrawn and disbursed only in accordance with the provisions of this
paragraph.  The Servicer shall be authorized and directed to withdraw funds from
the Liquidity Reserve Account only to make disbursements in accordance with this
Agreement and not for any other purpose.  Notwithstanding anything in this
Section 4.17(a) to the contrary, it is expressly understood that the Servicer’s
failure to establish or require the Owner to establish or fund a Liquidity
Reserve shall not preclude the Servicer from seeking reimbursement from the
Owner for Servicing Advances (including litigation costs and expenses (including
attorneys’ fees)), P&I Advances and Interest Shortfall, all of which remain the
obligations of the Owner.

39

--------------------------------------------------------------------------------

(b)Litigation Reserve.  Without prejudice to its rights under Section 4.17(a),
the Servicer, in its discretion, may establish a litigation reserve (the
“Litigation Reserve”) from which to fund litigation costs and expenses
(including attorneys’ fees) that constitute Servicing Advances with respect to
the Mortgage Loans.  If the Servicer elects to establish a Litigation Reserve it
shall establish a Litigation Reserve Account at a Qualified Depository.  The
Litigation Reserve Account shall be held in trust for the benefit of the Owner
and shall be established and maintained for the sole purpose of holding and
distributing the Litigation Reserve funds.  The Servicer may fund the Litigation
Reserve with such portion of distributions on the Mortgage Loans (but such
portion shall nonetheless be deemed to have been distributed to Owner) as it
deems appropriate, in the exercise of its reasonable discretion, or otherwise
request Owner to fund such Litigation Reserve, in which case Owner shall fund
such Liquidity Reserve as so requested.  At the termination of this Agreement,
all remaining funds held in the Litigation Reserve shall be distributed to the
Owner.  Amounts on deposit in the Litigation Reserve Account shall be invested
in Eligible Investments, shall not be used to pay costs or expenses other than
litigation costs and expenses that constitute Servicing Advances, and shall be
used to pay such litigation costs and expenses only in any month in which
distributions on the Mortgage Loans received during that month are insufficient
to provide sufficient cash to pay all Servicing Advances due and payable
(without prepayment) during that month with respect to the Mortgage Loans.  No
funds from any other source (other than interest or earnings on the funds held
in the Litigation Reserve Account) shall be commingled in the Litigation Reserve
Account.  Amounts on deposit in the Litigation Reserve Account (including
interest and earnings thereon) shall be used and may be withdrawn and disbursed
only in accordance with the provisions of this paragraph.  The Servicer shall be
authorized and directed to withdraw funds from the Litigation Reserve Account
only to make disbursements in accordance with this Agreement and not for any
other purpose.

(c)For the avoidance of doubt, references under this Section 4.17 to “Mortgage
Loans” shall be deemed to include both Agency Mortgage Loans and Non-Agency
Mortgage Loans; provided, however, that to the extent there is any conflict
between the actions permitted to be taken by the Servicer under this Section
4.17 and the actions permitted to be taken by the Servicer pursuant to the
requirements of the applicable Guide, the requirements of the applicable Guide
shall control.

 

Section 4.18

Transfers of Mortgaged Properties.

The Servicer shall enforce any “due-on-sale” provision contained in any Mortgage
or Mortgage Note under any Non-Agency Mortgage Loan and deny assumption by the
Person to whom the related Mortgaged Property has been or is about to be sold
whether by absolute conveyance or by contract of sale, and whether or not the
related Mortgagor remains liable on such Mortgage and Mortgage Note.  When the
related Mortgaged Property has been conveyed by the Mortgagor, the Servicer
shall, to the extent it has knowledge of such conveyance, exercise its rights to
accelerate the maturity of such Mortgage Loan under the “due-on-sale” clause
applicable thereto; provided, however, that the Servicer shall not exercise such
rights if prohibited by law from doing so.

If the Servicer reasonably believes it is unable under applicable law to enforce
such “due-on-sale” clause, the Servicer, shall, to the extent permitted by
applicable law, enter

40

--------------------------------------------------------------------------------

into (i) an assumption and modification agreement with the Person to whom such
property has been conveyed, pursuant to which such Person becomes liable under
the related Mortgage Note and the original Mortgagor remains liable thereon or
(ii) in the event the Servicer is unable under applicable law to require that
the original Mortgagor remain liable under the Mortgage Note and the Servicer
has the prior consent of the primary mortgage guarantee insurer, a substitution
of liability agreement with the purchaser of the Mortgaged Property pursuant to
which the original Mortgagor is released from liability and the purchaser of the
Mortgaged Property is substituted as Mortgagor and becomes liable under the
Mortgage Note.  If an assumption fee is collected by the Servicer for entering
into an assumption agreement, such fee will be retained by the Servicer as
additional servicing compensation.  In connection with any such assumption,
neither the Mortgage Interest Rate borne by the related Mortgage Note, the term
of the Mortgage Loan nor the outstanding principal amount of the Mortgage Loan
shall be changed. Where an assumption is allowed pursuant to this Section 4.18,
the Servicer, with the prior written consent of the insurer under the PMI Policy
or LPMI Policy, if any, is authorized to enter into a substitution of liability
agreement with the Person to whom the Mortgaged Property has been conveyed or is
proposed to be conveyed pursuant to which the original Mortgagor is released
from liability and such Person is substituted as Mortgagor and becomes liable
under the related Mortgage Note. Any such substitution of liability agreement
shall be in lieu of an assumption agreement.  The Servicer shall notify the
Owner that any such substitution of liability or assumption agreement has been
completed by forwarding to the Owner, or its designee, the original of any such
substitution of liability or assumption agreement, which document shall be added
to the related Mortgage File and shall, for all purposes, be considered a part
of such Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.

To the extent that any Non-Agency Mortgage Loan is assumable, the Servicer shall
inquire diligently into the creditworthiness of the proposed transferee, and
shall follow Accepted Servicing Practices and the underwriting practices and
procedures of prudent mortgage lenders in the respective states where the
related Mortgaged Properties are located including but not limited to Servicer
conducting a review of the credit and financial capacity of the individual
receiving the property, and may approve the assumption if it believes the
recipient is capable of assuming the mortgage obligations.  If the credit of the
proposed transferee does not satisfy the relevant underwriting criteria and the
transfer of ownership actually occurs, the Servicer diligently shall, to the
extent permitted by the Mortgage or the Mortgage Note and by applicable law,
accelerate the maturity of the Non-Agency Mortgage Loan.

The Servicer shall be required to take any action otherwise required by this
Section 4.18 only if it determines that the proceeds to the Owner (after giving
effect to the recovery of the Servicer’s out‑of‑pocket expenses) from payment
on, or disposition of the related Mortgage Loan or REO Property would be
increased as a result of the taking of such action.

 

Section 4.19

Satisfaction of Mortgages and Release of Mortgage Files.

Upon the payment in full of any Non-Agency Mortgage Loan, or the receipt by the
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Servicer shall notify the Owner in the Monthly
Remittance Advice as provided in Section 5.02, and may request the release of
any Mortgage Loan Documents from the Owner in accordance with this Section
4.19.  The Servicer shall obtain discharge of the

41

--------------------------------------------------------------------------------

related Mortgage Loan as of record within any related time limit required by
applicable law (unless prevented from complying as a result of the failure of
the local recording office to comply with its obligations on a timely basis).

In connection with any instrument of satisfaction or deed of reconveyance with
respect to a Non-Agency Mortgage Loan, the Servicer shall be entitled to a
reconveyance fee.  Such reconveyance fee shall only be reimbursable to the
Servicer by the Owner to the extent the reconveyance fee is uncollectible from
the related Mortgagor based on the terms of the security instrument or in the
Servicer’s reasonable opinion that such fee is not allowable by statute.

Upon receipt of such request, the Owner or its designee shall within five (5)
Business Days release or cause to be released the related Mortgage Loan
Documents to Servicer and Servicer shall prepare and process any satisfaction or
release.  If the Owner or its designee or the Custodian does not release the
related Mortgage Loan Documents to Servicer within five (5) Business Days of
receipt of request to do so, Servicer may retain a third party to complete the
reconveyance and charge the Owner the actual cost of services provided by such
third party.  Except as set forth in this paragraph, Servicer shall have no
liability for third party delays that may result in assessed penalties.

If the Servicer satisfies or releases a Mortgage securing a Non-Agency Mortgage
Loan without first having obtained payment in full of the indebtedness secured
by the Mortgage (or such lesser amount in connection with a discounted payoff
accepted by the Servicer with respect to a defaulted Mortgage Loan) or should
the Servicer otherwise prejudice any rights the Owner may have under the
mortgage instruments, the Servicer shall deposit the shortfall amount of the
paid indebtedness in the Custodial Account (unless such shortfall is $500 or
less, in which case no deposit shall be required) within five (5) Business Days
of receipt of such demand by the Owner.

The Servicer shall cause the Fidelity Bond and Errors and Omissions Insurance
Policy required under Section 4.12 to insure the Servicer against any loss it
may sustain with respect to any Non-Agency Mortgage Loan not satisfied in
accordance with the procedures set forth herein.

 

Section 4.20

Notification of Adjustments.

With respect to each Non-Agency Mortgage Loan that is an Adjustable-Rate
Mortgage Loan, the Servicer shall adjust the Mortgage Interest Rate on the
related Interest Rate Adjustment Date in compliance with the requirements of
applicable law and the related Mortgage and Mortgage Note. If, pursuant to the
terms of the related Mortgage Note, another Index is selected for determining
the Mortgage Interest Rate because the original Index is no longer available,
the same Index will be used with respect to each Mortgage Note which requires a
new Index to be selected provided that such selection does not conflict with the
terms of the related Mortgage Note.  The Servicer shall execute and deliver any
and all necessary notices required under applicable law and the terms of the
related Mortgage Note and Mortgage regarding the Mortgage Interest Rate and the
Monthly Payment adjustments.  The Servicer shall promptly deliver to the Owner
such notifications and any additional applicable data regarding such adjustments
and the methods used to calculate and implement such adjustments.  Upon the

42

--------------------------------------------------------------------------------

discovery by the Servicer or the Owner that the Servicer has failed to adjust a
Mortgage Interest Rate or a Monthly Payment pursuant to the terms of the related
Mortgage Note and Mortgage related to a Non-Agency Mortgage Loan, the Servicer
shall immediately deposit in the Custodial Account from its own funds the amount
of any interest loss caused the Owner thereby without reimbursement therefor.

 

Section 4.21

Recordation of Assignments of Mortgage.

Except in connection with Accepted Servicing Practices for defaulted Mortgage
Loans, the Servicer shall not be responsible for the preparation or recording of
the Assignments of Mortgage relating to the Non-Agency Mortgage Loans to the
Owner, or any other party; provided, however, that in the event the Servicer
agrees (which agreement shall be in Servicer’s sole discretion) to record any
mortgage assignment, any expense, including the fees of third party service
providers, incurred by the Servicer in connection with the preparation and
recordation of Assignments of Mortgage shall be reimbursable by the Owner, or,
if not reimbursed by the Owner, advanced or paid as a Servicing Advance.  

 

Section 4.22

[Reserved].

 

Section 4.23

Credit Reporting.

With respect to the Non-Agency Mortgage Loans, the Servicer shall fully furnish,
in accordance with the Fair Credit Reporting Act and its implementing
regulations, accurate and complete information (e.g. favorable and unfavorable)
on the Mortgagor credit files to Equifax, Experian and Trans Union Credit
Information Company (or their respective successors) on a monthly basis and in
accordance with applicable federal, state and local laws.

 

Section 4.24

Superior Liens.

With respect to the Non-Agency Mortgage Loans, if the Servicer is notified that
any superior lienholder has accelerated or intends to accelerate the obligations
secured by the superior lien, or has declared or intends to declare a default
under the superior mortgage or the promissory note secured thereby, or has filed
or intends to file an election to have the related Mortgaged Property sold or
foreclosed, the Servicer shall take whatever actions are necessary to protect
the interests of the Owner, and/or to preserve the security of the related
Mortgage Loan, subject to any requirements applicable to real estate mortgage
investment conduits pursuant to the Code.  The Servicer shall make a Servicing
Advance of the funds necessary to cure such default or reinstate such superior
lien if the Servicer determines that such Servicing Advance is in the best
interests of the Owner and would be in accordance with Accepted Servicing
Practices.  The Servicer shall not make such a Servicing Advance except to the
extent that it determines that such advance would not be a Nonrecoverable
Advance from Liquidation Proceeds on the related Mortgage Loan.  The Servicer
shall thereafter take such action as is necessary to recover the amount so
advanced.

43

--------------------------------------------------------------------------------

If a Non-Agency Mortgage Loan is identified on the Notice of Inbound Transfer as
a Second Lien Mortgage Loan, then the Servicer may consent to the refinancing of
the prior senior lien on the related Mortgaged Property, provided that the
following requirements are met:

1.the resulting CLTV of such Second Lien is no higher than its CLTV prior to
such refinancing; and

2.the interest rate, or, in the case of an adjustable-rate existing senior lien,
the maximum interest rate, for the loan evidencing the refinanced senior lien is
no more than 2.0% (or such higher rate that the Servicer determines to be in the
Owner’s best interest) higher than the interest rate or the maximum interest
rate, as the case may be, on the loan evidencing the existing senior lien
immediately prior to the date of such refinancing; and

3.the loan evidencing the refinanced senior lien is not subject to the
possibility of negative amortization.

 

Section 4.25

Reserved.

 

Section 4.26

Tax and Flood Service Contracts.

The Servicer, at the Owner’s expense, shall cause each Non-Agency Mortgage Loan
that is a First Lien Mortgage Loan and is transferred to the Servicer for
servicing to be covered (to the extent not already covered) by a Tax Service
Contract and/or Flood Service Contract, by (a) a Tax Service Contract and/or (b)
a Flood Zone Service Contract.  If any Non-Agency Mortgage Loan is missing a
required Tax Service Contract or if any Non-Agency Mortgage Loan is missing a
required Flood Zone Service Contract at the time of the Inbound Transfer Date,
Servicer shall place such Tax Service Contract or Flood Zone Service Contract,
as applicable, and shall be entitled to the fee associated with acquiring such
contracts as set forth in Exhibit 9.

 

Section 4.27

Maintenance of PMI Policies and LPMI Policies; Collections Thereunder.

The Servicer shall maintain in full force and effect, a PMI Policy, issued by a
Qualified Insurer, with respect to each Non-Agency Mortgage Loan for which such
coverage is required, provided that the Servicer’s obligations to pay premiums
in respect of any such Policy shall terminate if the Servicer determines that
the related insurer is unwilling or unable to make all payments due under such
policy.  Such coverage shall be maintained until the LTV Ratio or CLTV, as
applicable, of the related Non-Agency Mortgage Loan is reduced to that amount
for which Fannie Mae would no longer require such insurance. The Servicer will
not cancel or refuse to renew any PMI Policy in effect on the related Inbound
Transfer Date that is required to be kept in force under this Agreement with
respect to a Non-Agency Mortgage Loan unless a replacement PMI Policy or LPMI
Policy for such cancelled or non-renewed policy is obtained from and maintained
with a Qualified Insurer.  The Servicer shall not take any action which would
result in non-coverage under any applicable PMI Policy or LPMI 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

44

--------------------------------------------------------------------------------

Section 4.18 with respect to a Non-Agency Mortgage Loan, the Servicer shall
promptly notify the insurer under the related PMI Policy or LPMI Policy, if any,
of such assumption or substitution of liability in accordance with the terms of
such policy and shall take all actions which may be required by such insurer as
a condition to the continuation of coverage under the PMI Policy or LPMI Policy.
If such PMI Policy is terminated as a result of such assumption or substitution
of liability, the Servicer shall obtain a replacement PMI Policy as provided
above.

In connection with its activities as servicer with respect to the Non-Agency
Mortgage Loans, the Servicer agrees to prepare and present, on behalf of itself,
and the Owner, claims to the insurer under any PMI Policy or LPMI Policy in a
timely fashion in accordance with the terms of such policies and, in this
regard, to take such action as shall be necessary to permit recovery under any
PMI Policy or LPMI Policy respecting a defaulted Non-Agency Mortgage
Loan.  Pursuant to Section 4.04, any amounts collected by the Servicer under any
PMI Policy or LPMI Policy shall be deposited in the related Custodial Account,
subject to withdrawal pursuant to Section 4.05.

 

Section 4.28

Reliability of Information/Exceptional Expenses.

The Servicer may rely on all data and materials relating to the Non-Agency
Mortgage Loans supplied to it by the Owner or the Owner’s designee(s) and the
authenticity and accuracy of such data and materials, including any signatures
contained therein.  The Servicer shall not be obligated to conduct an
independent investigation of any data materials or audit of any data, materials
or Mortgage File, and may rely on the authenticity and accuracy of such data and
materials as provided, including any signatures contained therein and shall not
be held accountable for data integrity, missing information or missing documents
that prevent the boarding of a Non-Agency Mortgage Loan to the Servicer’s
mortgage loan administration system.  The Servicer shall deliver notification to
the Owner of any material data deficiencies discovered by the Servicer. If such
error was identified prior to the Inbound Transfer Date, the Owner shall have
the ability to correct such errors or provide missing data at no additional cost
to Servicer. Should the Owner decline to provide such data corrections or
provide such missing data, Servicer shall be entitled to charge the Owner a
manual data backfill fee as set forth on Exhibit 9.  If such error was
identified after the Inbound Transfer Date and such error was not the result of
Servicer’s negligence, the Servicer shall provide the Owner with a written cost
estimate to correct such errors, and upon the Owner’s approval, which approval
should not be unreasonably withheld, the Owner shall reimburse the Servicer for
all documented costs and expenses incurred by the Servicer, including but not
limited to, costs and expenses resulting from the Owner’s actions, instructions
or any failure by the Owner to provide the Servicer complete, accurate and
timely Mortgage Loan information.

 

Section 4.29

Escrow Obligations.  

In connection with impounded Non-Agency Mortgage Loans, the Owner shall (i)
cause all taxes and assessments with respect to which the related tax bill is
due within thirty (30) days following the related Inbound Transfer Date to be
paid prior to such Inbound Transfer Date, and (b) cause all hazard, flood,
earthquake, PMI Policy and other insurance premiums that are due on or prior to
the thirtieth (30th) day following such Inbound Transfer Date to be paid on or
prior to such Inbound Transfer Date.  The Owner shall be responsible for any
losses including

45

--------------------------------------------------------------------------------

but not limited to tax penalties (including any loss of discount for which any
related Mortgagor or any third party for the benefit of the related Mortgagor
has a legal claim) for the current tax due period or for any tax period that
ends no more than twelve (12) months earlier than the date of the last paid
installment of the Non-Agency Mortgage Loan, as well as for its advances to pay
the delinquent taxes themselves in connection with any Non-Agency Mortgage Loan
for which the Owner failed to pay taxes as required by this Section 4.29 as the
result of an action or inaction of a previous servicer.

 

Section 4.30

No Obligation to Advance Delinquent Payments.

The Servicer shall have no obligation to advance amounts constituting delinquent
principal and interest payments on any Non-Agency Mortgage Loan.

 

Section 4.31

MERS Transfers.

The Servicer shall comply in all material respects with the rules and procedures
of MERS in connection with the servicing of the Non-Agency Mortgage Loans that
are MERS Mortgage Loans for as long as such Non-Agency Mortgage Loans are
registered with MERS.

To the extent the Owner requests the Servicer to register or transfer a
Non-Agency Mortgage Loan with Mortgage Electronic Registration System, Inc., the
Owner shall promptly transfer or cause to be transferred to Servicer the
required mortgage loan information.  For such services, the Owner agrees to pay
the Servicer the fee set forth on Exhibit 9 upon the boarding or release of such
Non-Agency Mortgage Loan on the Servicer’s mortgage loan administration system.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

46

--------------------------------------------------------------------------------

ARTICLE V

PAYMENTS; REPORTS

 

Section 5.01

Remittances.

On each Remittance Date, the Servicer shall remit by wire transfer of
immediately available funds to the Owner (or as otherwise directed in writing by
the Owner) (i) with respect to the Agency Mortgage Loans, subject to the
requirements of the applicable Guide, all amounts on deposit in the custodial
accounts maintained with respect to the Agency Mortgage Loans (net of amounts
required to remain on deposit therein or paid to or for the benefit of the
related Agency pursuant to the applicable Guide) and (ii) with respect to the
Non-Agency Mortgage Loans, all amounts on deposit in the Custodial Account
related to the Due Period (net of charges against or withdrawals from the
Custodial Account pursuant to Section 4.05).  The Servicer shall remit to the
Owner (or as otherwise directed in writing by the Owner) all Principal
Prepayments with respect to the Non-Agency Mortgage Loans, in full or in part,
on the Remittance Date pursuant to Section 4.05.

With respect to any remittance received by the Owner after the day on which such
payment was due, the Servicer shall pay to the Owner interest on any such late
payment at an annual rate equal to the Prime Rate, adjusted as of the date of
each change, plus one percentage point, but in no event greater than the maximum
amount permitted by applicable law.  Such interest shall be remitted to the
Owner by the Servicer on the date such late payment is made and shall cover the
period commencing with the day such payment was due and ending with the Business
Day on which such payment is made, both inclusive.  The payment by the Servicer
of any such interest shall not be deemed an extension of time for payment or a
waiver of any Event of Default.

All remittances made to the Owner pursuant to this Section 5.01 are to be made
in accordance with the wire transfer instructions provided by Owner.

 

Section 5.02

Reports to the Owner.

Not later than the twentieth (20th) calendar day of each month or, if the 20th
day is not a Business Day, the next succeeding Business Day, the Servicer shall
furnish to the Owner standard monthly reports as set forth on Exhibit 1 attached
hereto or in a format mutually agreed upon (which shall be provided in Excel
format).  For all purposes of this Agreement, delinquency status shall be
determined in accordance with standard MBA methodology, as is appropriate, as
determined by the Owner for the applicable Mortgage Loan type and set forth in
the related Notice of Inbound Transfer.

Not less frequently than quarterly, commencing in the second calendar quarter
following the calendar quarter in which this Agreement is executed and
delivered, the Servicer shall deliver to the Owner a reasonably detailed report
regarding the Servicer’s financial results.  Not less frequently than annually,
commencing in the calendar year following the year in which this Agreement is
executed and delivered, the Servicer shall deliver to the Owner relevant market
data on management and servicing fees.

47

--------------------------------------------------------------------------------

 

Section 5.03

Tax Reporting.

In addition, on or before March 15th of each calendar year, the Servicer shall
furnish to each Person who was an Owner (or subsequent owner of a Mortgage Loans
subject to this Agreement) at any time during such calendar year an annual
statement in accordance with the requirements of applicable federal income tax
law as to the aggregate of remittances for the applicable portion of such year.

Such obligation of the Servicer shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the
Servicer pursuant to any requirements of the Code as from time to time are in
force.

The Servicer shall prepare and file any and all tax returns, information
statements or other filings required to be delivered to any governmental taxing
authority or to the Owner pursuant to any applicable law with respect to the
Mortgage Loans and the transactions contemplated hereby.  In addition, the
Servicer shall provide the Owner with such information concerning the Mortgage
Loans as is necessary for the Owner to prepare its federal income tax return as
the Owner may reasonably request from time to time and which is reasonably
available to the Servicer.

 

Section 5.04

Cost of Funds.

With respect to any Servicing Advances made by Servicer from its own funds under
the terms of this Agreement, the Servicer shall be entitled to collect from the
Owner monthly for the Cost of Funds on such Servicing Advances.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

48

--------------------------------------------------------------------------------

ARTICLE VI

RECORDS, INFORMATION AND COMPLIANCE DOCUMENTS

 

Section 6.01

Possession of Servicing Files.

The contents of each Servicing File related to a Non-Agency Mortgage Loan are
and shall be held in trust by the Servicer for the benefit of the Owner as the
owner thereof.  The Servicer shall maintain in the Servicing File a hard or
electronic copy, if available, of each Mortgage Loan Document received by the
Owner or its designee and the originals or copies of documents not delivered to
the Owner in the Servicer’s possession received during the term of this
Agreement.  The possession of the Servicing File by the Servicer is at the will
of the Owner for the sole purpose of servicing the related Non-Agency Mortgage
Loan, pursuant to this Agreement, and such retention and possession by the
Servicer is in its capacity as Servicer only and at the election of the
Owner.  The Servicer shall release its custody of the contents of any 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 Non-Agency
Mortgage Loans pursuant to this Agreement.

The Servicer shall be responsible for maintaining, and shall maintain, a
complete set of books and records for each Non-Agency Mortgage Loan which shall
be marked clearly to reflect the ownership of each Non-Agency Mortgage Loan by
the Owner.  In particular, the Servicer shall maintain in its possession,
available for inspection by the Owner, and shall deliver to the Owner if so
directed by the Owner, upon written demand, evidence of compliance with all
federal, state and local laws, rules and regulations, and requirements of Fannie
Mae, including but not limited to documentation as to the method used in
determining the applicability of the provisions of the National Flood Insurance
Act of 1968 or Flood Disaster Prevention Act of 1973, as amended, to the related
Mortgaged Property, documentation evidencing insurance coverage and eligibility
of any condominium project for approval by Fannie Mae and periodic inspection
reports as required by Section 4.13, as applicable.

The Servicer shall keep at its servicing office books and records in which,
subject to such reasonable regulations as it may prescribe, the Servicer shall
note transfers of Mortgage Loans.  

 

Section 6.02

Annual Statement as to Compliance.

(a)So long as any Mortgage Loans are being serviced hereunder, or were serviced
hereunder during the prior calendar year, the Servicer shall, at its own
expense, deliver to the Owner, on or before March 28th of each year (but in no
event later than the next to the last Business Day of such month), a statement
of compliance addressed to the Owner and signed by a Servicing Officer, to the
effect that (i) a review of the Servicer’s servicing activities during the
immediately preceding calendar year (or applicable portion thereof) and of its
performance under the servicing provisions of this Agreement during such period
has been made under such officer’s supervision, and (ii) to the best of such
officer’s knowledge, based on such review, the Servicer has fulfilled all of its
servicing obligations under this Agreement in all material respects throughout
such calendar year (or applicable portion thereof) or, if there has been a
failure to

49

--------------------------------------------------------------------------------

fulfill any such obligation in any material respect, specifically identifying
each such failure known to such officer, the nature and the status thereof.

 

Section 6.03

Annual Independent Public Accountants’ Servicing Report.

(a)So long as any Mortgage Loans are being serviced hereunder, or were serviced
hereunder during the prior calendar year, the Servicer shall, at its own
expense, deliver to the Owner, on or before March 28th of each year (but in no
event later than the next to the last Business Day of such month), either (A) a
report of a registered public accounting firm stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Servicer which includes an assertion that the Servicer has complied with certain
minimum residential mortgage loan servicing standards, identified in the Uniform
Single Attestation Program for Mortgage Bankers established by the Mortgage
Bankers Association of America, with respect to the servicing of residential
mortgage loans during the most recently completed fiscal year and (ii) on the
basis of an examination conducted by such firm in accordance with standards
established by the American Institute of Certified Public Accountants, such
representation is fairly stated in all material respects, subject to such
exceptions and other qualifications that may be appropriate, or (B) both (i) an
assessment of compliance by the Servicer with the applicable Servicing Criteria
during the immediately preceding calendar year (in lieu of the annual statement
of compliance in Section 6.02 which shall not be required if Servicer provides
the assessment of compliance as set forth in this Section 6.03(B), and (ii) a
report by a registered public accounting firm that attests to and reports on the
assessment of compliance provided in the clause (B)(i) above, which attestation
shall be in accordance with Rule 1-02(a)(3) and Rule 2-02(g) of Regulation S-X
under the Securities Act and the Securities Exchange Act.  In rendering any
report to be provided hereunder such firm may rely, as to matters relating to
the direct servicing of residential mortgage loans by Subservicers, upon
comparable reports of firms of independent certified public accountants rendered
on the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Subservicers.

 

Section 6.04

Provision of Information.

The Servicer shall furnish to the Owner all reports required hereunder, and such
other periodic, special, or other reports or information, whether or not
provided for herein, as shall be necessary, reasonable, or appropriate with
respect to the Owner or the purposes of this Agreement to the extent such
reports or information are readily accessible to the Servicer without undue
expense.  All such reports or information shall be provided by and in accordance
with all reasonable instructions and directions which the Owner may give and to
the extent the Servicer incurs any material cost or expense related to this
Section 6.04 not otherwise required to be incurred pursuant to this Agreement,
such expense shall be at the sole cost and expense of the Owner.

 

Section 6.05

Right to Examine Servicer Records.

The Owner shall have the right during the term of this Agreement to examine and
audit any and all of the books, records, or other information of the Servicer,
whether held by the Servicer or by another on its behalf, with respect to or
concerning this Agreement or the

50

--------------------------------------------------------------------------------

Mortgage Loans, during normal business hours, upon reasonable advance notice and
at the sole cost and expense of the Owner; provided, however, that unless
otherwise required by law, the Servicer shall not be required to provide access
to such information if the provision thereof would violate any law or legal
obligation of the Servicer, or would compromise the Servicer’s information
disclosure and security policies, including the legal right to privacy of any
Mortgagor.

 

Section 6.06

Compliance with Gramm-Leach-Bliley Act of 1999.

With respect to each Mortgage Loan and the related Mortgagor, each party shall
comply with Title V of the Gramm-Leach-Bliley Act of 1999 and all applicable
regulations and guidelines promulgated thereunder, and shall provide all notices
required of the party thereunder.

 

Section 6.07

Reserved.

 

Section 6.08

Financial Statements; Servicing Facilities.

In connection with marketing the Mortgage Loans or a proposed Reconstitution,
the Owner shall make available to a prospective purchaser audited financial
statements of the consolidated group that includes the Servicer for the most
recently completed three fiscal years for which such statements are available,
as well as a “Consolidated Statement of Condition” at the end of the last two
fiscal years for which such statements are available covered by any
“Consolidated Statement of Operations.”  The Servicer also shall make available
any comparable interim statements to the extent any such statements have been
prepared by or on behalf of the corporate group that includes the Servicer (and
are available upon request to the public at large).  The Servicer shall furnish
to the Owner or a prospective purchaser copies of the statements specified
above.

The Servicer shall make available to the Owner or any prospective purchaser a
knowledgeable representative for the purpose of answering questions respecting
recent developments affecting the Servicer or the financial statements of the
corporate group that includes the Servicer, and to permit any prospective
purchaser (upon reasonable notice) to inspect the Servicer’s servicing
facilities (no more than 6 times per year unless mutually agreed to between the
parties) for the purpose of satisfying such prospective purchaser that the
Servicer has the ability to service the Mortgage Loans as provided in this
Agreement provided that such access is necessary, reasonable, or appropriate
with respect to the Owner or the purposes of this Agreement to the extent such
access or information are readily accessible to the Servicer without undue
expense.

 

Section 6.09

Use of Subservicers.

It shall not be necessary for the Servicer to seek the consent of the Owner to
the utilization of any Subservicer, including an Affiliate acting as a
Subservicer; provided, however, that the Servicer delivers any notices or
obtains any consents or approvals otherwise required by the applicable
Guide.  The Servicer shall be responsible for obtaining from each Subservicer
and delivering to the Owner any servicer compliance statement required to be
delivered by such Subservicer under Section 6.02 and any assessment of
compliance and attestation required to be delivered by such Subservicer under
Section 6.03.

51

--------------------------------------------------------------------------------

 

Section 6.10

Mortgage Loans Held by Wholly Owned Subsidiaries of Owner.

The Servicer acknowledges that certain Mortgage Loans may be held by the Owner
through one or more of its wholly owned subsidiaries.  The Servicer shall
service such Mortgage Loans in accordance with the provisions of this Agreement
in the same manner as it services Mortgage Loans held directly by the
Owner.  The Servicing Fee and Other Fees in respect of Mortgage Loans held
through wholly owned subsidiaries of the Owner may, at the option of the Owner,
be paid directly by the Owner or by the subsidiary holding the related Mortgage
Loan.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

52

--------------------------------------------------------------------------------

ARTICLE VII

SERVICING COMPENSATION

 

Section 7.01

Servicing Compensation.

As consideration for servicing the Mortgage Loans, the Owner shall pay the
Servicer the applicable Servicing Fee and Other Fees the Servicer is entitled to
each month.  The obligation of the Owner to pay the Servicing Fee and Other Fees
with regard to the Mortgage Loans shall be irrespective of Monthly Payments
collected by the Servicer on the Mortgage Loans (but this shall not be construed
to limit the effect of any provision hereof, including Exhibit 9, for the
calculation of any fee by reference to one or more specified amounts collected
on or in respect of the Mortgage Loans).  Notwithstanding anything in this
Agreement to the contrary, the Servicer shall not be entitled to collect more
than one of any of the following Other Fees within any eighteen (18) month
period:  Liquidation Fee, Reperformance Fee and Modification Fee; provided,
however, that in the event the Servicer would otherwise be entitled to collect
more than one of such Other Fees during any eighteen (18) month period, the
Servicer shall be entitled to collect the highest of such Other Fees, net of any
other such Other Fees paid during the applicable eighteen (18) month period.

The Servicer shall deliver to the Owner on the tenth (10th) calendar day of each
month or, if the 10th day is not a Business Day, the next succeeding Business
Day, an invoice setting forth the Servicing Fees and Other Fees, including
accrued and unpaid Servicing Fees and Other Fees, with respect to the Mortgage
Loans serviced by the Servicer during the preceding calendar month, and the
Owner shall pay such invoice via wire transfer (in accordance with written
instructions to be provided by the Servicer) no later than the last day of the
calendar month in which such invoice was delivered.  With respect to amounts due
to the Servicer that remain unpaid after the Remittance Date pursuant to this
Section, interest shall accrue at an annual rate equal to the Prime Rate,
adjusted as of the date of each change, plus one percentage point, but in no
event greater than the maximum amount permitted by applicable law.  Such
interest shall accrue from and including the day following the Business Day on
which such payment was due to and including the Business Day when such payment
is made and shall be payable on the date when such payment is so made.  The
Servicer shall be entitled to deduct such unpaid amounts due to Servicer on the
Remittance Date following the Remittance Date that such amounts were due if
Owner has not already made payment.

Additional servicing compensation in the form of Ancillary Income shall be
retained by the Servicer.  

The Servicer shall be required to pay all expenses incurred by it in connection
with its servicing activities hereunder and shall not be entitled to
reimbursement thereof except as specifically provided for herein.

Notwithstanding anything set forth in this section related to Ancillary Income,
the Servicer shall not collect from the Mortgagor, pass through as an advance or
as a liquidation expense any charges other than bona fide fees, which fees must
be in compliance with local law.  Servicer cannot add on a processing, or review
fee or any additional fee, mark up or otherwise

53

--------------------------------------------------------------------------------

directly make a profit on or from services or activities rendered by a third
party or affiliate (examples include but not limited to:  letters and notices,
force placed insurance, BPOs, appraisals, inspections, property preservation
costs).  The Servicer may collect any third party fees which are charged in
accordance with Accepted Servicing Practices.  In no event shall Servicer retain
the Prepayment Penalties.

In the event of a dispute arising from any act or omission by the Servicer or
the Owner hereunder during the course of this Agreement, the Servicer and the
Owner shall use reasonable efforts to cooperate with each other in good faith to
resolve such dispute within a time period that is reasonable under the
circumstances surrounding the dispute.  Except in the case of a monetary error,
the Owner and the Servicer shall use reasonable efforts to cooperate with each
other in good faith to resolve the dispute within thirty (30) days of a formal
notice from either party.  In the case of a monetary error, the party holding
the amounts due the other party shall use reasonable efforts to submit the
amount in error within ten (10) Business Days following the discovery of the
error.  With respect to amounts due a party after the tenth (10th) Business Day
following the discovery of the error, interest shall be accrue on such late
payment at an annual rate equal to the federal funds rate as is publicly
announced from time to time, plus three hundred basis points (3.00%), but in no
event greater than the maximum amount permitted by applicable law.  Such
interest shall accrue from and including the day following the Business Day on
which such payment was due to and including the Business Day when such late
payment is made and shall be payable on the date when such late payment is so
made.  

Notwithstanding anything to the contrary contained herein, upon the written
request (a “Fee Negotiation Request”) of the Owner or the Servicer following a
determination by the Owner or the Servicer that the rates of compensation
payable to the Servicer hereunder differ materially from market rates of
compensation for services comparable to those provided hereunder, which request
includes a proposal for revised rates of compensation hereunder, the parties
hereto shall negotiate in good faith to amend the provisions of this Agreement
relating to the compensation of the Servicer in order to cause such compensation
to be materially consistent with market rates of compensation for services
comparable to those provided hereunder (a “Fee Amendment”); provided, however,
that no such request shall be made until the second anniversary of the effective
date of this Agreement, after which time each party may make such request (i)
once with respect to fees to be paid during the remainder of the Initial Term,
which request shall be made prior to the expiration of the Initial Term, and
(ii) once with respect to fees to be paid during any Automatic Renewal Term,
which request shall be made at least 210 days prior to the start of such
Automatic Renewal Term.  If the parties are unable to reach agreement on the
terms of a Fee Amendment within thirty (30) days of the date of delivery of the
relevant Fee Negotiation Request, then the terms of such Fee Amendment shall be
determined by final and binding arbitration as described below.

All disputes, differences and controversies of the Owner or the Servicer
relating to a Fee Amendment (individually, a “Dispute” and, collectively,
“Disputes”) shall be resolved by final and binding arbitration administered by
the American Arbitration Association (“AAA”) under its Commercial Arbitration
Rules, subject to the following provisions:

(a)Following the delivery of a written demand for arbitration by either the
Owner or the Servicer, each party shall choose one (1) arbitrator within ten
(10) Business Days

54

--------------------------------------------------------------------------------

after the date of such written demand and the two chosen arbitrators shall
mutually, within ten (10) Business Days after selection select a third (3rd)
arbitrator (each, an “Arbitrator” and together, the “Arbitrators”), each of whom
shall be a retired judge selected from a roster of arbitrators provided by the
AAA. If the third (3rd) Arbitrator is not selected within fifteen (15) Business
Days after delivery of the written demand for arbitration (or such other time
period as the Owner and the Servicer may agree), the Owner and the Servicer
shall promptly request that the commercial panel of the AAA select an
independent Arbitrator meeting such criteria.

(b)The rules of arbitration shall be the Commercial Rules of the American
Arbitration Association; provided, however, that notwithstanding any provisions
of the Commercial Arbitration Rules to the contrary, unless otherwise mutually
agreed to by the Owner and the Servicer, the sole discovery available to each
party shall be its right to conduct up to two (2) non-expert depositions of no
more than three (3) hours of testimony each.

(c)The Arbitrators shall render a decision by majority decision within three (3)
months after the date of appointment, unless the Owner and the Servicer agree to
extend such time. The decision shall be final and binding upon the Owner and the
Servicer; provided, however, that such decision shall not restrict either the
Owner or the Servicer from terminating this Agreement pursuant to the terms
hereof.

(d)Each party shall pay its own expenses in connection with the resolution of
Disputes, including attorneys’ fees, unless determined otherwise by the
Arbitrator.

(e)The Owner and the Servicer agree that the existence, conduct and content of
any arbitration pursuant to this Section 7.01 shall be kept confidential and
neither the Owner nor the Servicer shall disclose to any Person any information
about such arbitration, except in connection with such arbitration or as may be
required by law or by any regulatory authority (or any exchange on which such
party’s securities are listed) or for financial reporting purposes in such
party’s financial statements.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

55

--------------------------------------------------------------------------------

ARTICLE VIII

TERMINATION

 

Section 8.01

Termination.

(a)This Agreement shall continue in full force and effect until terminated in
accordance with the provisions of this paragraph. This Agreement shall have an
initial term of four years from the date hereof (the “Initial Term”).  After the
Initial Term, this Agreement shall be deemed renewed automatically every 18
months for an additional 18 month period (an “Automatic Renewal Term”) unless
the Owner or the Servicer terminates this Agreement upon the expiration of the
Initial Term or any Automatic Renewal Term and upon at least 180 days’ prior
written notice to the Owner or the Servicer, as applicable. If (i) either of the
Amended and Restated Mortgage Banking Services Agreement, between the Servicer
and PennyMac Corp., dated as of September 12. 2016 (the “MBS Agreement”), or the
MSR Recapture Agreement is terminated by PennyMac Corp. without cause as
provided in each such agreement or (ii) the Management Agreement is terminated
by PennyMac REIT without cause as provided in such agreement, the Servicer shall
have the right to terminate this Agreement without cause upon notice to the
Owner.  If (i) either of the MBS Agreement or the MSR Recapture Agreement is
terminated by PennyMac Loan Services without cause or (ii) the Management
Agreement is terminated by PennyMac REIT Manager as provided in such agreement,
the Owner shall have the right to terminate this Agreement without cause upon
notice to the Servicer.   This Agreement shall also terminate:

(i)in whole with respect to all of the Mortgage Loans and REO Properties,
without the payment of any Service Release Fee or other termination fee, upon
the earlier of (A) the termination of the Servicer at the election of the Owner
following an Event of Default pursuant to Section 11.01 or (B) the termination
of the Management Agreement;

(ii)in whole with respect to all of the Mortgage Loans and REO Properties, at
the election of the Servicer, if, after thirty (30) days’ written notice thereof
by Servicer, (A) the Owner fails to remit any compensation due to the Servicer
within the time periods set forth in this Agreement or (B) the Owner fails to
perform any material obligations  of the Owner hereunder;

(iii)in part with respect to one or more individual Mortgage Loans, at the
election of the Owner, in connection with a Reconstitution involving such
Mortgage Loans, subject to the payment of the applicable Service Release Fees;

(iv)in part with respect to an individual Mortgage Loan at the election of the
Owner, and subject to the payment of the applicable Service Release Fee, if (a)
such Mortgage Loan becomes delinquent for a period of one hundred and twenty
(120) days or more (a “Delinquent Mortgage Loan”) or (B) the Mortgaged Property
securing such Mortgage Loan becomes an REO Property; provided, however, upon
such termination, the Owner shall pay to the Servicer any related unpaid
Servicing Fee, any related outstanding and unreimbursed Servicing

56

--------------------------------------------------------------------------------

Advances and any other outstanding and unreimbursed fees and costs of the
Servicer relating to such Delinquent Mortgage Loan or REO Property for which the
Servicer would be entitled to reimbursement from the Owner;

(v)in whole, at the election of the Owner, if the Servicer in its capacity as
“Servicer” under the MSR Recapture Agreement fails to duly observe or perform in
any material respect any covenant or agreement on the part of the Servicer set
forth in the MSR Recapture Agreement that continues unremedied for a period of
thirty (30) days after the date on which notice of such failure, requiring the
same to be remedied, is given to the Servicer by the “MSR Owner” under the MSR
Recapture Agreement; provided, however, that, with respect to any such failure
that is susceptible to cure but not curable within such 30-day period, the
Servicer shall have an additional cure period of thirty (30) days to effect such
cure so long as the Servicer has commenced to cure such failure within the
initial 30-day period, the Servicer is diligently pursuing a full cure and the
Servicer has provided evidence of such curability and such diligent pursuit that
is reasonably satisfactory to the Owner; and

(vi)in whole, at the election of the Servicer, if the “MSR Owner” under the MSR
Recapture Agreement fails to duly observe or perform in any material respect any
covenant or agreement on the part of such “MSR Owner”  set forth in the MSR
Recapture Agreement that continues unremedied for a period of thirty (30) days
after the date on which notice of such failure, requiring the same to be
remedied, is given to such “MSR Owner” by the Servicer in its capacity as
“Servicer” under the MSR Recapture Agreement; provided, however, that, with
respect to any such failure that is susceptible to cure but not curable within
such 30-day period, such “MSR Owner” shall have an additional cure period of
thirty (30) days to effect such cure so long as such “MSR Owner” has commenced
to cure such failure within the initial 30-day period, such “MSR Owner” is
diligently pursuing a full cure and such “MSR Owner” has provided evidence of
such curability and such diligent pursuit that is reasonably satisfactory to the
Servicer.

(b)In the event that the Servicer’s duties, responsibilities and liabilities
under this Agreement are terminated pursuant to Section 8.01(a), the Servicer
shall discharge such duties and responsibilities during the period from the date
it acquires notice or knowledge of such termination until the Outbound Transfer
Date, with the same degree of diligence and prudence which it is obligated to
exercise under this Agreement, and shall take no action whatsoever that might
impair or prejudice the rights or financial condition of its
successor.  Following any such termination, the Owner shall act diligently to
appoint a successor servicer.  No termination pursuant to Section 8.01(a) shall
become effective until a successor servicer is appointed by the Owner.  No
termination pursuant to Section 8.01(a) shall limit any indemnification
obligations of the Servicer, which obligations shall survive such termination.

 

Section 8.02

Outbound Transfer of Servicing.

On each Outbound Transfer Date or upon any termination of the Servicer as
Servicer pursuant to Section 8.01 or resignation of the Servicer permitted under
Section 9.03, the

57

--------------------------------------------------------------------------------

Owner or a successor servicer appointed by the Owner, shall assume all servicing
responsibilities related to, and the Servicer shall cease all servicing
responsibilities related to the Mortgage Loans.  Any successor servicer shall
have the right to negotiate a new Servicing Fee with the Owner.

Owner shall provide the Servicer not less than twenty (20) days’ prior written
notice of the Outbound Transfer Date.  Any Mortgage Loan service released by the
Servicer shall be released on actual balances as of the Outbound Transfer
Date.  Upon receipt of such notification from Owner the Servicer shall, at its
sole cost and expense, take such steps as may be necessary or appropriate to
effectuate and evidence the transfer of the servicing of the related Mortgage
Loans to the successor servicer, including but not limited to the following:

(a)Notice to Mortgagors.  The Servicer shall mail to the Mortgagor of each
related Mortgage Loan a letter advising such Mortgagor of the transfer of the
servicing of the related Mortgage Loan to the Owner, or its designee, in
accordance with RESPA; provided, however, such letters shall be in the form
mutually agreed upon by the Owner and the Servicer prior to a pending transfer.

(b)Mortgage Loans in Foreclosure.  The servicing with respect to Mortgage Loans
in foreclosure on or before the related Outbound Transfer Date shall not be
transferred from the Servicer to the Owner or the successor servicer, as the
case may be, and such Mortgage Loans shall continue to be serviced by the
Servicer pursuant to the terms of this Agreement.  However, if the Owner so
elects, the Owner may waive the provisions of this paragraph (a) and accept
transfer of servicing of such Mortgage Loans and all amounts received by the
Servicer thereunder.

(c)Servicing Advances.  Subject to the limitations set forth in the definition
of “Nonrecoverable Advances”, the Servicer shall be entitled to be reimbursed
for all unreimbursed Servicing Advances and any other advances made by the
Servicer pursuant to this Agreement with respect to any Mortgage Loan on the
related Outbound Transfer Date, but only if the successor servicer after the
related Outbound Transfer Date is not the Servicer or an Affiliate.  In
addition, the Owner shall cause the Servicer to be reimbursed for any accrued
and unpaid Servicing Fees, unpaid Ancillary Income, Other Fees and for any
trailing expenses representing Servicing Advances for which invoices are
received by the Servicer after the Outbound Transfer Date.  The Owner shall
cause the Servicer to be reimbursed for such trailing expenses within five (5)
Business Days of receipt of such invoice.

Anything to the contrary in this Section 8.02(c) notwithstanding, in the event
that Servicer is terminated for cause as a result of the occurrence of an Event
of Default under this Agreement, the payments required in this Section 8.02(c)
shall be made in the amounts and at the times otherwise provided in this
Agreement.

(d)Notice to Taxing Authorities and Insurance Companies.  The Servicer shall
transmit to the applicable taxing authorities and insurance companies (including
primary mortgage insurance policy insurers, if applicable) and/or agents,
notification of the transfer of the servicing to the Owner, or its designee, and
instructions to deliver all notices, tax bills and

58

--------------------------------------------------------------------------------

insurance statements, as the case may be, to the Owner from and after the
related Outbound Transfer Date.

(e)Delivery of Servicing Records.  The Servicer shall forward to the Owner, or
its designee, all servicing records and the Servicing File in the Servicer’s
possession relating to each related Mortgage Loan.

(f)Escrow Payments.  The Servicer shall provide the Owner, or its designee, with
immediately available funds by wire transfer in the amount of the net Escrow
Payments and suspense balances and all loss draft balances associated with the
related Mortgage Loans.  The Servicer shall also provide the Owner with an
accounting statement of Escrow Payments and suspense balances and loss draft
balances sufficient to enable the Owner to reconcile the amount of such payment
with the accounts of the Mortgage Loans.  Additionally, the Servicer shall wire
transfer to the Owner the amount of any agency, trustee or prepaid Mortgage Loan
payments and all other similar amounts held by the Servicer.

(g)Payoffs and Assumptions.  The Servicer shall provide to the Owner, or its
designee, copies of all assumption and payoff statements generated by the
Servicer on the related Mortgage Loans from the related Cut-off Date to the
related Outbound Transfer Date.

(h)Mortgage Payments Received Prior to the Related Outbound Transfer
Date.  Prior to the related Outbound Transfer Date all payments received by the
Servicer on each related Mortgage Loan shall be properly applied to the account
of the particular Mortgagor.

(i)Mortgage Payments Received After Outbound Transfer Date.  The amount of any
related Monthly Payments received by the Servicer after the related Outbound
Transfer Date shall be forwarded to the Owner or its designee within two (2)
Business Days after the date of receipt.  The Servicer shall notify the Owner or
its designee of the particulars of the payment, which notification requirement
shall be satisfied if the Servicer forwards with its payment sufficient
information to permit appropriate processing of the payment by the Owner or its
designee.  The Servicer shall assume full responsibility for the necessary and
appropriate legal application of such Monthly Payments received by the Servicer
after the related Outbound Transfer Date with respect to related Mortgage Loans
then in foreclosure or bankruptcy; provided, however, that for purposes of this
Agreement, necessary and appropriate legal application of such Monthly Payments
shall include, but not be limited to, endorsement of a Monthly Payment to the
Owner with the particulars of the payment such as the account number, dollar
amount, date received and any special Mortgagor application instructions and the
Servicer shall comply with the foregoing requirements with respect to all
Monthly Payments received by it.

(j)Misapplied Payments.  Misapplied payments shall be processed as follows:

(i)All parties shall cooperate in correcting misapplication errors;

(ii)The party receiving notice of a misapplied payment occurring prior to the
related Outbound Transfer Date and discovered after the related Outbound
Transfer Date shall immediately notify the other party;

59

--------------------------------------------------------------------------------

(iii)If a misapplied payment which occurred prior to the related Outbound
Transfer Date cannot be identified and said misapplied payment has resulted in a
shortage in a Custodial Account or Escrow Account, and such misapplied payment
was the direct result of the Servicer’s error, the Servicer shall be liable for
the amount of such shortage.  In such case, the Servicer shall reimburse the
Owner for the amount of such shortage within thirty (30) days after receipt of
written demand therefor from the Owner;

(iv)If a misapplied payment which occurred prior to the related Outbound
Transfer Date has created an improper Purchase Price as the result of an
inaccurate outstanding principal balance and such misapplied payment was the
direct result of the Servicer’s error, a check shall be issued to the party
shorted by the improper payment application within thirty (30) days after notice
thereof by the other party; and

(v)Any check issued under the provisions of this Section 8.02(j) shall be
accompanied by a statement indicating the Owner Mortgage Loan identification
number and an explanation of the allocation of any such payments.

(k)Books and Records.  The Servicer shall cause the books, records and accounts
with respect to the related Mortgage Loans to be in accordance with all Accepted
Servicing Practices on the related Outbound Transfer Date.

Without limiting the foregoing, the Servicer shall comply with all of the
provisions of this Agreement to effect a complete transfer of the servicing with
respect to the related Mortgage Loans on the related Outbound Transfer
Date.  This Agreement shall terminate with respect to the related Mortgage Loans
on the related Outbound Transfer Date, except that Articles VI, VIII, IX, and
XII, and Sections 13.14, 13.15, 13.16, 13.17 and 13.18 shall survive such
termination.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

60

--------------------------------------------------------------------------------

ARTICLE IX

INDEMNIFICATION AND ASSIGNMENT AND
OTHER MATTERS RELATED TO SERVICER

 

Section 9.01

Indemnification.

(a)The Servicer agrees to indemnify and hold the Owner and any successor
servicer harmless from any liability, claim, loss or damage (including, without
limitation, any reasonable legal fees, judgments or expenses relating to such
liability, claim, loss or damage) to the Owner directly or indirectly resulting
from the Servicer’s failure:

(i)to observe and perform any or all of the Servicer’s duties, obligations,
covenants, agreements, warranties or representations contained in this
Agreement; or

(ii)to comply with all applicable requirements with respect to the servicing of
the Mortgage Loans as set forth herein.

The Servicer immediately shall notify the Owner if a claim is made by a third
party with respect to this Agreement.  For purposes of this Section 8.01(a),
“Owner” shall mean the Person then acting as the Owner under this Agreement and
any and all Persons who previously were “Owners” under this Agreement.

(b)The Owner agrees to indemnify and hold the Servicer harmless from any
liability, claim, loss or damage (including without limitation, any reasonable
legal fees, judgments or expenses relating to such liability, claim, loss or
damage) to the Servicer (a) directly or indirectly resulting from the Owner’s
failure to observe and perform any or all of the Owner’s duties, obligations,
covenants, agreements, warranties or representations contained in this Agreement
or (b) directly resulting from the Servicer taking any legal actions with
respect to any Mortgage Loans and/or REO Properties in the name of the Servicer
and without reference to the Owner, or (c) any act or omission on the part of
any prior servicer or (d) directly resulting from any third party act or
omission which occurred in connection with the origination, processing, funding
or servicing of a mortgage loan (unless such third party was hired by Servicer);
but, in each case set forth in clauses (a) - (d) above, only to the extent such
loss does not result from the Servicer’s own gross negligence, bad faith or
willful misconduct or failure of the Servicer (i) to observe and perform any or
all of Servicer’s duties, obligations, covenants, agreements, warranties or
representations contained in this Agreement; or (ii) to comply with all
applicable requirements with respect to the servicing of the Mortgage Loans as
set forth herein.

(c)If the indemnification provided for herein is unavailable or insufficient to
hold harmless the indemnified party, then the indemnifying party agrees that it
shall contribute to the amount paid or payable by such indemnified party as a
result of any claims, losses, damages or liabilities uncured by such indemnified
party in such proportion as is appropriate to reflect the relative fault of such
indemnified party on the one hand and the indemnifying party on the other.

(d)The indemnifications provided for in this Section shall survive the
termination of Servicing Agreement or the termination of any party to this
Agreement.

61

--------------------------------------------------------------------------------

 

Section 9.02

Limitation on Liability of Servicer and Others.

Neither the Servicer nor any of the directors, officers, employees or agents of
the Servicer shall be under any liability to the Owner for any action taken or
for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment, provided, however, that this provision
shall not protect the Servicer or any such person against any breach of
warranties or representations made herein, its own grossly negligent actions, or
failure to perform its obligations in compliance with any standard of care set
forth in this Agreement, or any liability which would otherwise be imposed by
reason of any breach of the terms and conditions of this Agreement.  The
Servicer and any director, officer, employee or agent of the Servicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder.  The Servicer
shall not be under any obligation to appear in, prosecute or defend any legal
action which is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement and which in its opinion may involve it in any
expense or liability; provided, however, that the Servicer may undertake any
such action which it may deem necessary or desirable in respect to this
Agreement and the rights and duties of the parties hereto.  In such event, the
Servicer shall be entitled to reimbursement from the Owner of the reasonable
legal expenses and costs of such action.

 

Section 9.03

Limitation on Resignation and Assignment by Servicer.

The Owner has entered into this Agreement with the Servicer and subsequent
purchasers will purchase the Mortgage Loans in reliance upon the independent
status of the Servicer, and the representations as to the adequacy of its
servicing facilities, plant, personnel, records and procedures, its integrity,
reputation and financial standing, and the continuance thereof.  The Servicer
shall not assign this Agreement or the servicing hereunder or delegate its
rights or duties hereunder or any portion hereof (except as provided in the next
succeeding paragraph or Section 6.09) or sell or otherwise dispose of all or
substantially all of its property or assets without the prior written consent of
the Owner, which consent shall be granted or withheld in the reasonable
discretion of the Owner.

The Servicer may, without the consent of the Owner, retain third party
contractors to perform certain servicing and loan administration functions,
including without limitation, hazard insurance administration, tax payment and
administration, flood certification and administration, collection services and
similar functions; provided, however, that the retention of such contractors by
Servicer shall not limit the obligation of the Servicer to service the Mortgage
Loans pursuant to the terms and conditions of this Agreement.

The Servicer shall not resign from the obligations and duties hereby imposed on
it except by mutual consent of the Servicer and the Owner or upon the
determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot be cured by the Servicer.  Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered to the Owner which Opinion of
Counsel shall be in form and substance acceptable to the Owner.  No such
resignation shall become effective until a successor shall have assumed the
Servicer’s responsibilities and obligations hereunder in the manner provided in
Section 8.02.

62

--------------------------------------------------------------------------------

 

Section 9.04

Assignment by Owner.

The Owner shall have the right, to assign, in whole or in part, its interest
under this Agreement with respect to some or all of the Mortgage Loans, and
designate any Person to exercise all or any of the rights of the Owner
hereunder.

 

Section 9.05

Merger or Consolidation of the Servicer.

The Servicer will keep in full effect its existence, rights and franchises as a
limited partnership under the laws of the state of its filing except as
permitted herein, and will obtain and preserve its qualification to do business
as a foreign corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this Agreement,
or any of the Mortgage Loans and to perform its duties under this
Agreement.  Any Person into which the Servicer may be merged or consolidated, or
any corporation resulting from any merger, conversion or consolidation
(including by means of the sale of all or substantially all of the Servicer’s
assets to such Person) to which the Servicer shall be a party, or any Person
succeeding to the substantially all of the servicing business (whether alone or
together with one or more other businesses of the Servicer), shall be the
successor of the Servicer hereunder, without the execution or filing of any
paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding.

 

Section 9.06

Additional Activities of the Servicer.

Subject to the restrictions set forth in the MBS Agreement, the Servicer and its
Affiliates shall be entitled to engage in any business or transaction of any
kind or nature, including the issuance of mortgage-backed securities and
performing monitoring, administrative or servicing activities of any kind for
the benefit of any other Person, including (i) acting as servicer or subservicer
of residential mortgage loans for government-sponsored entities and other
government-related entities under arrangements not governed by this Agreement
and (ii) acting as a servicer or subservicer for distressed residential mortgage
loans, and otherwise conducting special servicing activities relating to
residential mortgage loans or real estate acquired in respect thereof, for
itself or other Persons.  The preceding statement shall not be construed to
limit the effect of any express restriction or limitation that may be set forth
in the another provision of this Agreement.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

63

--------------------------------------------------------------------------------

ARTICLE X

REPRESENTATIONS AND WARRANTIES

 

Section 10.01

Representations and Warranties of the Owner.

(a)As of the date hereof and on each date on which a Mortgage Loan becomes
subject to the terms of this Agreement, the Owner represents and warrants to,
and covenants and agrees with, the Servicer as follows:

(i)Due Organization and Good Standing.  The Owner is duly organized, validly
existing and in good standing as a limited partnership under the laws of the
State of Delaware and has the power and authority to own its assets and to
transact the business in which it is currently engaged.

(ii)No Violation of Organizational Documents or Agreements.  The execution and
delivery of this Agreement by the Owner, and the performance and compliance with
the terms of this Agreement by the Owner, will not violate the Owner’s
organizational documents or constitute a default (or an event which, with notice
or lapse of time, or both, would constitute a default) under, or result in the
breach of, any material agreement or other instrument to which the Owner is a
party or which is applicable to it or any of its assets.

(iii)Full Power and Authority.  The Owner has the full power and authority to
enter into and consummate all transactions contemplated by this Agreement, has
duly authorized the execution, delivery and performance of this Agreement, and
has duly executed and delivered this Agreement.

(iv)Binding Obligation.  This Agreement, assuming due authorization, execution
and delivery by the other parties hereto, constitutes a valid, legal and binding
obligation of the Owner, enforceable against the Owner in accordance with the
terms hereof, subject to (A) applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of creditors’ rights
generally, and (B) general principles of equity, regardless of whether such
enforcement is considered in a proceeding in equity or at law.

(v)No Violation of Law, Regulation or Order.  The Owner is not in violation of,
and its execution and delivery of this Agreement and its performance and
compliance with the terms of this Agreement will not constitute a violation of,
any law, any order or decree of any court or arbiter, or, to the Owner’s
knowledge, any order, regulation or demand of any federal, state or local
governmental or regulatory authority, which violation, in the Owner’s good faith
and reasonable judgment, is likely to affect materially and adversely either the
ability of the Owner to perform its obligations under this Agreement or the
financial condition of the Owner.

(vi)No Material Litigation.  No litigation is pending or, to the best of the
Owner’s knowledge, threatened against the Owner that, if determined

64

--------------------------------------------------------------------------------

adversely to the Owner, would prohibit the Owner from entering into this
Agreement or that, in the Owner’s good faith and reasonable judgment, is likely
to materially and adversely affect either the ability of the Owner to perform
its obligations under this Agreement or the financial condition of the Owner.

(vii)No Consent Required.  Any consent, approval, authorization or order of any
court or governmental agency or body required under federal or state law for the
execution, delivery and performance by the Owner of or compliance by the Owner
with this Agreement or the consummation of the transactions contemplated by this
Agreement has been obtained and is effective except where the lack of consent,
approval, authorization or order would not have a material adverse effect on the
performance by the Owner under this Agreement.

(b)The representations and warranties of the Owner set forth in Section 9.02(a)
shall survive the execution and delivery of this Agreement and each date on
which a Mortgage Loan becomes subject to the terms of this Agreement.  Upon
discovery by the Owner of any breach of any of the foregoing representations and
warranties, the Owner shall give prompt written notice thereof to the Servicer.

 

Section 10.02

Representations and Warranties of the Servicer.

(a)As of the date hereof, on each date on which a Mortgage Loan becomes subject
to the terms of this Agreement and at all times while Mortgage Loans are
serviced by Servicer hereunder, the Servicer represents and warrants to, and
covenants and agrees with, the Owner as follows:

(i)Due Organization and Good Standing.  The Servicer is duly organized, validly
existing and in good standing a limited liability company under the laws of the
State of Delaware and has the power and authority to own its assets and to
transact the business in which it is currently engaged, and the Servicer is in
compliance with the laws of each state or other jurisdiction in which any
Mortgaged Property is located to the extent necessary to perform its obligations
under this Agreement.

(ii)No Violation of Organizational Documents or Agreements.  The execution and
delivery of this Agreement by the Servicer, and the performance and compliance
with the terms of this Agreement by the Servicer, will not violate the
Servicer’s organizational documents or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
result in the breach of, any material agreement or other instrument to which the
Servicer is a party or which is applicable to it or any of its assets.

(iii)Full Power and Authority.  The Servicer has the full power and authority to
enter into and consummate all transactions contemplated by this Agreement, has
duly authorized the execution, delivery and performance of this Agreement, and
has duly executed and delivered this Agreement.

65

--------------------------------------------------------------------------------

(iv)Binding Obligation.  This Agreement, assuming due authorization, execution
and delivery by the other parties hereto, constitutes a valid, legal and binding
obligation of the Servicer, enforceable against the Servicer in accordance with
the terms hereof, subject to (A) applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting the enforcement of
creditors’ rights generally, and (B) general principles of equity, regardless of
whether such enforcement is considered in a proceeding in equity or at law.

(v)No Violation of Law, Regulation or Order.  The Servicer is not in violation
of, and its execution and delivery of this Agreement and its performance and
compliance with the terms of this Agreement will not constitute a violation of,
any law, any order or decree of any court or arbiter, or, to the Servicer’s
knowledge, any order, regulation or demand of any federal, state or local
governmental or regulatory authority, which violation, in the Servicer’s good
faith and reasonable judgment, is likely to affect materially and adversely
either the ability of the Servicer to perform its obligations under this
Agreement or the financial condition of the Servicer.

(vi)No Material Litigation.  No litigation is pending or, to the best of the
Servicer’s knowledge, threatened against the Servicer that, if determined
adversely to the Servicer, would prohibit the Servicer from entering into this
Agreement or that, individually or in the aggregate, in the Servicer’s good
faith and reasonable judgment, is likely to materially and adversely affect
either the ability of the Servicer to perform its obligations under this
Agreement or the financial condition of the Servicer.

(vii)No Consent Required.  Any consent, approval, authorization or order of any
court or governmental agency or body required under federal or state law for the
execution, delivery and performance by the Servicer of or compliance by the
Servicer with this Agreement or the consummation of the transactions
contemplated by this Agreement has been obtained and is effective except where
the lack of consent, approval, authorization or order would not have a material
adverse effect on the performance by the Servicer under this Agreement.

(viii)Ordinary Course of Business.  The consummation of the transactions
contemplated by this Agreement are in the ordinary course of business of the
Servicer.

(ix)Able to Perform.  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.

(x)Fidelity Bond and Errors and Omissions Coverage.  The Fidelity Bond and an
Errors and Omissions Insurance Policy required pursuant to Section 4.12 of this
Agreement are in effect.

66

--------------------------------------------------------------------------------

(xi)No Untrue or Misleading Information.  No statement, report or other document
relating to the Servicer furnished or to be furnished by the Servicer pursuant
to this Agreement or in connection with the transactions contemplated hereby
contains any untrue statement of material fact or omits to state a material fact
necessary to make the statements contained therein not misleading.

(xii)MERS Membership.  The Servicer is a member of MERS in good standing.

(b)The representations and warranties of the Servicer set forth in Section
9.02(a) shall survive the execution and delivery of this Agreement and each date
on which a Mortgage Loan becomes subject to the terms of this Agreement.  Upon
discovery by the Servicer of any breach of any of the foregoing representations
and warranties, the Servicer shall give prompt written notice thereof to the
Owner.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

67

--------------------------------------------------------------------------------

ARTICLE XI

DEFAULT

 

Section 11.01

Events of Default.

(a)The following shall constitute an Event of Default under this Agreement on
the part of the Servicer:

(i)any failure by the Servicer to remit to the Owner (or as otherwise directed
by the Owner) any payment required to be made under the terms of this Agreement
which continues unremedied for a period of five (5) Business Days after the date
upon which notice of such failure is given to the Servicer, requiring the same
to be remedied, shall have been given to the Servicer by the Owner; or

(ii)the failure by the Servicer duly to observe or perform in any material
respect any other covenant or agreement on the part of the Servicer set forth in
this Agreement that continues unremedied for a period of thirty (30) days
(except that such number of days shall be fifteen (15) in the case of a failure
to pay any premium for any insurance policy under this Agreement) after the date
on which notice of such failure, requiring the same to be remedied, is given to
the Servicer by the Owner; provided, however, that, with respect to any such
failure that is susceptible to cure but not curable within such 30-day or 15-day
period, the Servicer shall have an additional cure period of thirty (30) days to
effect such cure so long as the Servicer has commenced to cure such failure
within the initial 30-day period, the Servicer is diligently pursuing a full
cure and the Servicer has provided evidence of such curability and such diligent
pursuit that is reasonably satisfactory to the Owner; or

(iii)any breach of any representation or warranty on the part of the Servicer
set forth in this Agreement that continues unremedied for a period of thirty
(30) days after the date on which notice of such breach, requiring the same to
be remedied, is given to the Servicer by the Owner; provided, however, that,
with respect to any such breach that is susceptible to cure but not curable
within such 30-day period, the Servicer shall have an additional cure period of
thirty (30) days to effect such cure so long as the Servicer has commenced to
cure such failure within the initial 30-day period, the Servicer is diligently
pursuing a full cure and the Servicer has provided evidence of such curability
and such diligent pursuit that is reasonably satisfactory to the Owner; or

(iv)a decree or order of a court or agency or supervisory authority having
jurisdiction for the appointment of a conservator or receiver or liquidator in
any insolvency, bankruptcy, readjustment of debt, marshaling of assets and
liabilities or similar proceedings, or for the winding up or liquidation of its
affairs, shall have been entered against the Servicer and such decree or order
shall have remained in force undischarged or unstayed for a period of 60 days;
or

68

--------------------------------------------------------------------------------

(v)the Servicer shall consent to the appointment of a conservator or receiver or
liquidator in any insolvency, bankruptcy, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the Servicer or
of or relating to all or substantially all of its property; or

(vi)the Servicer shall admit in writing its inability to pay its debts generally
as they become due, file a petition to take advantage of any applicable
insolvency or reorganization statute, make an assignment for the benefit of its
creditors, or voluntarily suspend payment of its obligations; or

(vii)the Servicer fails to maintain its license to do business or service
residential mortgage loans in any jurisdiction where the Mortgaged Properties
are located for more than ninety (90) days after receiving notice from any
Person thereof, provided that such failure shall not constitute an Event of
Default if, prior to the expiration of such ninety (90) day period, that
Servicer transfers the affected Mortgaged Properties to one or more Subservicers
that satisfy the licensing requirements for the jurisdiction where such
Mortgaged Properties are located;

(viii)without the prior consent of the Owner or as expressly permitted or
required by the other provisions of this Agreement, the Servicer attempts to
assign this Agreement or its right to servicing compensation hereunder, or to
delegate its duties hereunder, in each case whether in whole or in part, or the
Servicer sells or otherwise disposes of all or substantially all of its property
or assets; or

(ix)the Servicer or any Subservicer fails to deliver any information, report,
certification, accountants’ letter or other material when and as required under
Section 4.02, Section 4.03 or Section 4.06 and such failure continues unremedied
for three Business Days after receipt by the Servicer and (if applicable) such
Subservicer of written notice of such failure from the Owner.

In each and every such case, so long as an Event of Default shall not have been
remedied, in addition to whatsoever rights the Owner may have at law or equity
to damages, including injunctive relief and specific performance, the Owner, by
notice in writing to the Servicer, may terminate without compensation all the
rights and obligations of the Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof.

(b)In case one or more Events of Default by Servicer occur and shall not have
been remedied, the Owner, by notice in writing to Servicer shall be entitled, in
addition to whatever rights the Owner may have at law or equity to damages,
including injunctive relieve and specific performance, to terminate all the
rights and obligations of Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, by notice in writing to the Servicer
and without payment of any Service Release Fees or other compensation; provided,
however, that the Servicer shall continue to be obligated to pay and entitled to
receive all amounts accrued or owing by or to it under this Agreement on or
prior to the date of such termination, whether in respect of Servicing Fees,
Servicing Advances or otherwise and such amounts shall be due and payable at the
times and in the manner as if the Servicer were not

69

--------------------------------------------------------------------------------

terminated.  Upon receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Agreement, whether with respect to the
Mortgage Loans or otherwise, shall pass to and be vested in the successor
appointed pursuant to Section 8.02.  Upon written request from the Owner, the
Servicer shall prepare, execute and deliver any and all documents and other
instruments, place in such successor’s possession all Mortgage Files to the
extent initially provided to the Servicer, and do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise, at the Servicer’s sole
expense or as otherwise provided under Accepted Servicing Practices.  The
Servicer agrees to cooperate with the Owner and such successor in effecting the
termination of the Servicer’s responsibilities and rights hereunder, including,
without limitation, the transfer to such successor for administration by it of
all cash amounts which shall at the time be credited by the Servicer to the
Custodial Account or Escrow Account or thereafter received with respect to the
Mortgage Loans.

 

Section 11.02

Waiver of Defaults.

The Owner may waive any default by the Servicer in the performance of its
obligations hereunder and its consequences.  Upon any such waiver of a default,
such default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been remedied for every purpose of this Agreement.  No
such waiver shall extend to any subsequent or other Event of Default or impair
any right consequent thereon except to the extent expressly so waived.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

70

--------------------------------------------------------------------------------

ARTICLE XII

RECONSTITUTIONS

 

Section 12.01

Cooperation of Servicer with a Reconstitution.

(a)The Servicer and the Owner agree that with respect to some or all of the
Mortgage Loans, on one or more dates (each a “Reconstitution Date”), at the
Owner’s sole option, the Owner may effect a sale (each, a “Reconstitution”) of
some or all of the Mortgage Loans then subject to this Agreement, without
recourse, to:

(i)Fannie Mae or Freddie Mac in one or more Whole Loan Transfers;

(ii)one or more other third-party purchasers in one or more Whole Loan
Transfers;

(iii)one or more trusts or other entities to be formed as part of one or more
Private Securitization Transactions; or

(iv)one or more trusts or other entities to be formed as part of one or more
Public Securitization Transactions.

(b)With respect to each Whole Loan Transfer, Private Securitization Transaction
or Public Securitization Transaction, as the case may be, entered into by the
Owner, the Servicer shall:

(i)upon request of the Owner, service the Mortgage Loans included in such
Reconstitution pursuant to a security servicing agreement or other agreement;

(ii)if the Servicer will continue servicing the Mortgage Loans included in the
Reconstitution, provide as applicable:

(A)information pertaining to the Servicer of the type and scope customarily
included in offering documents for residential mortgage-backed securities
transactions involving single or multiple loan originators including information
regarding financial condition and mortgage loan delinquency, foreclosure and
loss experience or other information as is otherwise reasonably requested by the
Owner, and to deliver to the Owner any non-public, unaudited financial
information, in which case the Owner shall bear the cost of having such
information audited by certified public accountants if the Owner desires such an
audit, or as is otherwise reasonably requested by the Owner and which the
Servicer is capable of providing without unreasonable effort or expense
(collectively “Servicer Information”), and to indemnify the Owner and its
affiliates for material misstatements or omissions contained in the Servicer
Information; provided, however, Owner shall indemnify and hold harmless Servicer
and its affiliates for material misstatements or omissions contained in all
other

71

--------------------------------------------------------------------------------

information in any offering document, other than Servicer Information; and

(B)such opinions of counsel, letters from auditors, and certificates of public
officials or officers of Servicer as are reasonably believed necessary by the
trustee, any Rating Agency or the Owner, as the case may be, in connection with
such Private Securitization Transaction or Public Securitization
Transaction.  The Owner shall pay all third party costs associated with the
preparation of the information described in clause (ii)(A) above and the
delivery of any opinions (other than opinions by in-house counsel), letters or
certificates described in this clause (ii)(B).

(iii)if the Servicer will continue servicing the Mortgage Loans included in the
Reconstitution, to negotiate and execute one or more custodial agreements among
the Owner, the Servicer and a third party custodian/trustee which is generally
considered to be a prudent custodian/trustee in the secondary mortgage market
designated by the Owner in its sole discretion after consultation with the
Servicer, in either case for the purpose of pooling the Mortgage Loans with
other Mortgage Loans for resale or securitization; and

(iv) if the Servicer will continue servicing the Mortgage Loans included in the
Reconstitution, (1) cooperate fully with the Owner, any prospective purchaser,
any Rating Agency or any party to any agreement to be executed in connection
with such Whole Loan Transfer, Private Securitization Transaction or Public
Securitization Transaction, with respect to all reasonable requests and due
diligence procedures, including participating in meetings with Rating Agencies,
bond insurers and such other parties as the Owner shall designate and
participating in meetings with prospective purchasers of the Mortgage Loans or
interests therein and providing information reasonably requested by such
purchasers; (2) to execute, deliver and perform all reconstitution agreements
required by the Owner, and to use its best reasonable, good faith efforts to
facilitate such Whole Loan Transfer, Private Securitization Transaction or
Public Securitization Transaction, as the case may be; (3) (a) to restate the
representations and warranties set forth in this Agreement as of the
Reconstitution Date which shall not be materially more onerous than those
required under this Agreement or (b) make the representations and warranties
with respect to the servicing of the Mortgage Loans set forth in the related
selling/servicing guide of the master servicer or issuer, as the case may be, or
such representations and warranties with respect to the servicing of the
Mortgage Loans as may be required by any Rating Agency or prospective purchaser
of the related securities or such Mortgage Loans, in connection with such
Reconstitution; provided, however, that such representations and warranties
shall not be materially more onerous than those required under this
Agreement.  The Servicer shall use its reasonable best efforts to provide to
such master servicer or issuer, as the case may be, and any other participants
in such Reconstitution:  (i) any and all information and appropriate
verification of information which may be reasonably available to the Servicer or
its affiliates, whether through letters of its

72

--------------------------------------------------------------------------------

auditors and counsel or otherwise, as the Owner or any such other participant
shall reasonably request and (ii) subject to the provisions of this Section
12.01(b), to execute, deliver and satisfy all conditions set forth in any
indemnity agreement required by the Owner or any such participant; provided that
the Servicer is given an opportunity to review and reasonably negotiate in good
faith provisions of such indemnity.

(c)Any execution of a security servicing agreement or reconstitution agreement
by the Servicer shall be conditioned on the Servicer receiving the Servicing Fee
or such other servicing fee acceptable to Servicer.  All Mortgage Loans not sold
or transferred pursuant to a Whole Loan Transfer, Private Securitization
Transaction or Public Securitization Transaction shall be subject to this
Agreement and shall continue to be serviced in accordance with the terms of this
Agreement and with respect thereto this Agreement shall remain in full force and
effect.  Notwithstanding any provision to the contrary in this Agreement, in the
event that the Servicer is the servicer with respect to a Reconstitution, the
Owner agrees that in such Reconstitution any servicing performance termination
triggers shall be substantially similar to those contained in this Agreement or
otherwise subject to approval by the Servicer in its reasonable discretion.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

73

--------------------------------------------------------------------------------

ARTICLE XIII

MISCELLANEOUS PROVISIONS

 

Section 13.01

Notices.

All notices, requests, demands and other communications which are required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given upon the delivery or mailing thereof, as the case
may be, sent by registered or certified mail, return receipt requested:

 

(a)

If to the Owner to:

PennyMac Operating Partnership, L.P.

Attn: Chief Operating Officer

3043 Townsgate Road

Westlake Village, CA 91361

 

With copies to:

PennyMac Operating Partnership, L.P.

Attn:  General Counsel

3043 Townsgate Road

Westlake Village, CA 91361

 

and

 

Stoner Fox Law Group, LLP

Attn: John E. Stoner

120 Vantis, Suite 300

Aliso Viejo, California 92656

 

 

(b)

If to the Servicer:

PennyMac Loan Services, LLC

Attn: Director, Servicing Operations

3043 Townsgate Road

Westlake Village, CA 91361

 

With a copy to:

PennyMac Loan Services, LLC

Attn: General Counsel

3043 Townsgate Road

Westlake Village, CA 91361

 

74

--------------------------------------------------------------------------------

 

Section 13.02

Amendment.

Neither this Agreement, nor any terms hereof, may be amended, supplemented or
modified except in an instrument in writing executed by the parties hereto.  

 

Section 13.03

Entire Agreement.

This Agreement contains the entire agreement and understanding among the parties
hereto with respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions, express
or implied, oral or written, of any nature whatsoever with respect to the
subject matter hereof.  The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof.  

 

Section 13.04

Binding Effect; Beneficiaries.

The provisions of this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective permitted successors and
assigns.  Except as set forth in Section 9.04, no provision of this Agreement is
intended or shall be construed to give to any Person, other than the parties
hereto, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein. Notwithstanding the foregoing,
each Agency is expressly made a third party beneficiary of this Agreement.

 

Section 13.05

Headings.

The section and subsection headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the interpretation of
any provisions hereof.

 

Section 13.06

Further Assurances.

The Servicer agrees to execute and deliver such instruments and take such
further actions as the Owner may, from time to time, reasonably request in order
to effectuate the purposes and to carry out the terms of this Agreement.

 

Section 13.07

Governing Law.

This Agreement shall be construed in accordance with the substantive laws of the
State of New York applicable to agreements made and to be performed entirely in
such State, and the obligations, rights and remedies of the parties hereunder
shall be determined in accordance with such laws.  The parties hereto intend
that the provisions of Section 5-1401 of the New York General Obligations Law
shall apply to this Agreement.

 

Section 13.08

Relationship of Parties.

Nothing herein contained shall be deemed or construed to create a partnership or
joint venture between the parties.  The duties and responsibilities of the
Servicer shall be rendered by it as an independent contractor and not as an
agent of the Owner.  The Servicer shall

75

--------------------------------------------------------------------------------

have full control of all of its acts, doings, proceedings, relating to or
requisite in connection with the discharge of its duties and responsibilities
under this Agreement.

 

Section 13.09

Severability of Provisions.

If any one or more of the covenants, agreements, provisions or terms of this
Agreement shall be held invalid for any reason whatsoever, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Agreement.

 

Section 13.10

No Waiver; Cumulative Remedies.

No failure to exercise and no delay in exercising, on the part of a party
hereto, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.  The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.  

 

Section 13.11

Recordation of Assignments of Mortgage.

To the extent permitted by applicable law, each of the Assignments of Mortgage
is subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the Mortgaged Properties are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Owner or the Owner’s designee.

 

Section 13.12

Exhibits.

The exhibits to this Agreement are hereby incorporated and made a part hereof
and form integral parts of this Agreement.

 

Section 13.13

Counterparts.

This Agreement may be executed by the parties to this Agreement on any number of
separate counterparts (including by telecopy), and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.

 

Section 13.14

Trademarks.

The Owner and the Servicer agree that they and their employees, subcontractors
and agents, shall not, without the prior written consent of the other party in
each instance, (i) use in advertising, publicity or otherwise the name of each
and every other party to this Agreement or their Affiliates or any of their
managing directors, partners or employees, nor any trade name, trademark, trade
device, service mark, symbol or any abbreviation, contraction or simulation
thereof owned by the other party or their Affiliates, or (ii) represent,
directly or indirectly, any

76

--------------------------------------------------------------------------------

product or any service provided by the Owner and the Servicer as approved or
endorsed by the other parties to this Agreement or their Affiliates.

 

Section 13.15

Confidentiality of Information.

If, during the term of this Agreement, the Owner requests that the Servicer
provide to the Owner non-public, confidential information related to the
Servicer and other affiliates of the Servicer (collectively, “Parent”), and if
Parent, in its sole discretion agrees to provide this information, the parties
agree that they shall enter into a confidentiality agreement in form and
substance mutually agreeable to the parties prior to the release of such
information (which obligation shall not be assigned by the Owner).

 

Section 13.16

WAIVER OF TRIAL BY JURY.

EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND,
THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.

 

Section 13.17

LIMITATION OF DAMAGES.

NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, THE PARTIES AGREE
THAT NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL, CONSEQUENTIAL
OR PUNITIVE DAMAGES WHATSOEVER, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE
AND STRICT LIABILITY), OR ANY OTHER LEGAL OR EQUITABLE PRINCIPLE, PROVIDED,
HOWEVER, THAT SUCH LIMITATION SHALL NOT BE APPLICABLE WITH RESPECT TO THIRD
PARTY CLAIM MADE AGAINST A PARTY.

 

Section 13.18

SUBMISSION TO JURISDICTION; WAIVERS.

EACH OF THE OWNER AND THE SERVICER HEREBY IRREVOCABLY (I) SUBMITS, FOR ITSELF IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, OR FOR RECOGNITION
AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE JURISDICTION OF ANY
NEW YORK STATE AND FEDERAL COURTS SITTING IN THE BOROUGH OF MANHATTAN IN NEW
YORK CITY WITH RESPECT TO MATTERS ARISING OUT OF OR RELATING TO THIS AGREEMENT;
(II) AGREES THAT ALL CLAIMS WITH RESPECT TO ANY ACTION OR PROCEEDING REGARDING
SUCH MATTERS MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL
COURTS; (III) WAIVES, TO THE FULLEST POSSIBLE EXTENT, WITH RESPECT TO SUCH
COURTS, THE DEFENSE OF AN INCONVENIENT FORUM; (IV) AGREES THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED

77

--------------------------------------------------------------------------------

IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED
BY LAW; AND (V) WAIVES TO THE EXTENT PERMITTED BY APPLICABLE LAW ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, CLAIM, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) RELATING TO OR ARISING OUT OF THIS
AGREEMENT.

[SIGNATURES APPEAR ON NEXT PAGE]

 

78

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by
their respective officers thereunto duly authorized as of the date first above
written.

 

 

 

PENNYMAC OPERATING PARTNERSHIP, L.P., a Delaware limited partnership

(Owner)

 

 

 

 

 

 

By:

PENNYMAC GP OP, INC.,

its General Partner

 

 

 

 

 

 

By:

/s/ Andrew S. Chang

 

 

 

Name:

Andrew S. Chang

 

 

 

Title:

Senior Managing Director and

 

 

 

 

Chief Business Development Officer

 

 

 

 

PENNYMAC LOAN SERVICES, LLC, a Delaware limited liability company

(Servicer)

 

 

 

 

 

 

By:

/s/ Anne D. McCallion

 

 

 

Name:

Anne D. McCallion

 

 

 

Title:

Senior Managing Director and

 

 

 

 

Chief Financial Officer

 

  

79

--------------------------------------------------------------------------------

EXHIBIT 1

MONTHLY REPORTS

Remittance
Delinquency
Inventory Flow

 

 

 

 

 

 

 

 

 

 

 

Exh. 1-1

--------------------------------------------------------------------------------

 

EXHIBIT 2

CUSTODIAL ACCOUNT CERTIFICATION

_______ __, 20__

As Servicer under the Third Amended and Restated Flow Servicing Agreement, dated
as of September 12. 2016 (the “Servicing Agreement”), we hereby certify that the
Servicer has established the account described below as a Custodial Account (as
such term is defined in the Servicing Agreement) pursuant to Section 4.04 of the
Servicing Agreement.  The Custodial Account shall be a Special Deposit Account
as such term is defined in the Servicing Agreement.

 

Title of Account:

 

[______], in trust for [_______________]

 

 

 

Account Number:

 

 

 

 

 

 

Address of office or branch of the Servicer at which Account is maintained:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PennyMac Loan Services, LLC,

as Servicer

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

Date:

 

 

 

Exh. 2-1

--------------------------------------------------------------------------------

 

EXHIBIT 3

RESERVED

 

 

Exh. 3-1

--------------------------------------------------------------------------------

 

EXHIBIT 4

ESCROW ACCOUNT CERTIFICATION

_________ ___, 20__

As Servicer under the Third Amended and Restated Flow Servicing Agreement, dated
as of September 12. 2016 (the “Servicing Agreement”), we hereby certify that the
Servicer has established the account described below as an Escrow Account
pursuant to Section 4.06 of the Agreement.  The Escrow Account shall be a
Special Deposit Account as such term is defined in the Servicing Agreement.

 

Title of Account:

 

[______], in trust for [_______________]

 

 

 

Account Number:

 

 

 

 

 

 

Address of office or branch of the Servicer at which Account is maintained:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PennyMac Loan Services, LLC,

as Servicer

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

 

Date:

 

 

 

 

Exh. 4-1

--------------------------------------------------------------------------------

 

EXHIBIT 5

RESERVED

 

 

Exh. 5-1

--------------------------------------------------------------------------------

 

EXHIBIT 6

FORM OF OFFICER’S CERTIFICATE

I, ____________________, hereby certify that I am the duly elected
[______________],of PennyMac Loan Services, LLC, a Delaware limited liability
company  (the “Company”) and further as follows:

1.Attached hereto as Exhibit 1 is a true, correct and complete copy of the
Certificate of Formation of the Company which is in full force and effect on the
date hereof and which has been in effect without amendment, waiver, rescission
or modification.

2.Attached hereto as Exhibit 2 is an original certificate of good standing of
the Company issued within ten days of the date hereof, and no event has occurred
since the date thereof which would impair such standing.

3.Attached hereto as Exhibit 3 is a true, correct and complete copy of the
resolutions of the [______] of the Company authorizing the Company to execute
and deliver the Third Amended and Restated Flow Servicing Agreement, dated as of
September 12. 2016 (the “Servicing Agreement”), between the Company and PennyMac
Operating Partnership, L.P. (the “Owner”), and such resolutions are in effect on
the date hereof.

4.Each person listed on Exhibit 4 attached hereto who, as an officer or
representative of the Company, signed (a) the Servicing Agreement, and (b) any
other document delivered or on the date hereof in connection with any purchase
described in the agreements set forth above was, at the respective times of such
signing and delivery, and is now, a duly elected or appointed, qualified and
acting officer or representative of the Company, who holds the office set forth
opposite his or her name on Exhibit 4, and the signatures of such persons
appearing on such documents are their genuine signatures.

Exh. 6-1

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of the
Company.

 

Date:

 

 

 

 

 

 

 

 

By:

PennyMac Loan Services, LLC

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

I, ________________________, an [Assistant] Secretary of the Company, hereby
certify that ____________ is the duly elected, qualified and acting [Vice]
President of the Company and that the signature appearing above is [her] [his]
genuine signature.

IN WITNESS WHEREOF, I have hereunto signed my name.

 

Date:

 

 

 

 

 

 

 

 

By:

PennyMac Loan Services, LLC

[Seal]

 

 

Name:

 

 

 

 

 

Title:

 

 

Exh. 6-2

--------------------------------------------------------------------------------

 

EXHIBIT 4 to
Company’s Officer’s Certificate

 

NAME

 

TITLE

 

SIGNATURE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exh. 6-3

--------------------------------------------------------------------------------

 

EXHIBIT 7

MORTGAGE LOAN DOCUMENTS

The following documents shall constitute the Mortgage Loan Documents with
respect to each Mortgage Loan:

(a)the original Mortgage Note bearing all intervening endorsements, endorsed
“Pay to the order of _________, without recourse” and signed in the name of the
last endorsee (the “Last Endorsee”) by an authorized officer.  To the extent
that there is no room on the face of the Mortgage Notes for endorsements, the
endorsement may be contained on an allonge, if state law so allows and the
Custodian is so advised by the Owner that state law so allows.  If the Mortgage
Loan was acquired by the Seller in a merger, the endorsement must be by “[Last
Endorsee], successor by merger to [name of predecessor]”.  If the Mortgage Loan
was acquired or originated by the Last Endorsee while doing business under
another name, the endorsement must be by “[Last Endorsee], formerly known as
[previous name]”; the original of any guarantee executed in connection with the
Mortgage Note;

(b)the original Mortgage with evidence of recording thereon.  If in connection
with any Mortgage Loan, the Owner cannot deliver or cause to be delivered the
original Mortgage with evidence of recording thereon because of a delay caused
by the public recording office where such Mortgage has been delivered for
recordation or because such Mortgage has been lost or because such public
recording office retains the original recorded Mortgage, the Seller shall
deliver or cause to be delivered to the Custodian, a photocopy of such Mortgage,
together with (i) in the case of a delay caused by the public recording office,
an Officer’s Certificate of the Seller (or certified by the title company,
escrow agent, or closing attorney) stating that such Mortgage has been
dispatched to the appropriate public recording office for recordation and that
the original recorded Mortgage or a copy of such Mortgage certified by such
public recording office to be a true and complete copy of the original recorded
Mortgage will be promptly delivered to the Custodian upon receipt thereof by the
Seller; or (ii) in the case of a Mortgage where a public recording office
retains the original recorded Mortgage or in the case where a Mortgage is lost
after recordation in a public recording office, a copy of such Mortgage
certified by such public recording office to be a true and complete copy of the
original recorded Mortgage; the originals of all assumption, modification,
consolidation or extension agreements, if any, with evidence of recording
thereon;

(c)the original Assignment of Mortgage for each Mortgage Loan, in form and
substance acceptable for recording.  The Assignment of Mortgage must be duly
recorded only if recordation is either necessary under applicable law or
commonly required by private institutional mortgage investors in the area where
the Mortgaged Property is located or on direction of the Owner as provided in
this Agreement.  If the Assignment of Mortgage is to be recorded, the Mortgage
shall be assigned to the Owner or as directed by the Owner.  If the Assignment
of Mortgage is not to be recorded, the Assignment of Mortgage shall be delivered
in blank.  If the Mortgage Loan was acquired by the Seller in a merger, the
Assignment of Mortgage must be made by “[Seller], successor by merger to

Exh. 7-1

--------------------------------------------------------------------------------

 

[name of predecessor]”.  If the Mortgage Loan was acquired or originated by the
Seller while doing business under another name, the Assignment of Mortgage must
be by “[Seller], formerly known as [previous name]”; 

(d)the originals of all intervening assignments of mortgage (if any) evidencing
a complete chain of assignment from the Originator to the Last Endorsee with
evidence of recording thereon, or if any such intervening assignment has not
been returned from the applicable recording office or has been lost or if such
public recording office retains the original recorded assignments of mortgage,
the Seller shall deliver or cause to be delivered to the Custodian, a photocopy
of such intervening assignment, together with (i) in the case of a delay caused
by the public recording office, an Officers Certificate of the Seller (or
certified by the title company, escrow agent, or closing attorney) stating that
such intervening assignment of mortgage has been dispatched to the appropriate
public recording office for recordation and that such original recorded
intervening assignment of mortgage or a copy of such intervening assignment of
mortgage certified by the appropriate public recording office to be a true and
complete copy of the original recorded intervening assignment of mortgage will
be promptly delivered to the Custodian upon receipt thereof by the Seller; or
(ii) in the case of an intervening assignment where a public recording office
retains the original recorded intervening assignment or in the case where an
intervening assignment is lost after recordation in a public recording office, a
copy of such intervening assignment certified by such public recording office to
be a true and complete copy of the original recorded intervening assignment;

(e)The original mortgagee policy of title insurance or, in the event such
original title policy is unavailable, a certified true copy of the related
policy binder or commitment for title certified to be true and complete by the
title insurance company (provided, that the original mortgagee policy of title
insurance shall be added when available);

(f)original powers of attorney, if applicable, or, if in connection with any
Mortgage Loan, the Seller cannot deliver or cause to be delivered the original
power of attorney with evidence of recording thereon, if applicable, because of
a delay caused by the public recording office, the Seller shall deliver or cause
to be delivered to the Custodian, a photocopy of such power of attorney,
together with an Officer’s Certificate of the Seller (or certified by the title
company, escrow agent, or closing attorney) stating that such power of attorney
has been dispatched to the appropriate public recording office for recordation
and that the original recorded power of attorney or a copy of such power of
attorney certified by such public recording office to be a true and complete
copy of the original recorded power of attorney will be promptly delivered to
the Custodian upon receipt thereof by the Seller; and

(g)security agreement, chattel mortgage or equivalent document executed in
connection with the Mortgage.

Exh. 7-2

--------------------------------------------------------------------------------

 

The following documents, together with the Mortgage Loan Documents, shall
constitute the Mortgage File with respect to each Mortgage Loan:

(a)The original hazard insurance policy and, if required by law, flood insurance
policy.

(b)Residential loan application.

(c)Mortgage Loan closing statement.

(d)Verification of employment and income except for Mortgage Loans originated
under a Limited Documentation Program.

(e)Verification of acceptable evidence of source and amount of downpayment.

(f)Credit report on the Mortgagor.

(g)Residential appraisal report, if available.

(h)Photograph of the Mortgaged Property.

(i)Survey of the Mortgaged Property, if any.

(j)Copy of each instrument necessary to complete identification of any exception
set forth in the exception schedule in the title policy, i.e., map or plat,
restrictions, easements, sewer agreements, home association declarations,
etc.  All required disclosure statements.

(l)If available, termite report, structural engineer’s report, water potability
and septic certification.

(m)Sales contract, if applicable.

(n)Tax receipts, insurance premium receipts, ledger sheets, payment history from
date of origination, insurance claim files, correspondence, current and
historical computerized data files, and all other processing, underwriting and
closing papers and records which are customarily contained in a mortgage loan
file and which are required to document the Mortgage Loan or to service the
Mortgage Loan.

(o)Amortization schedule, if applicable.

 

Exh. 7-3

--------------------------------------------------------------------------------

 

EXHIBIT 8

FORM OF LIMITED POWER OF ATTORNEY

PennyMac Operating Partnership, L.P., a limited partnership, organized under the
laws of Delaware and having its principal place of business at 3043 Townsgate
Road, Westlake Village, CA 91361, as Owner (hereinafter called “Owner”) hereby
appoints PennyMac Loan Services, LLC. (hereinafter called the “Servicer”), as
its true and lawful attorney in fact to act in the name, place and stead of
Owner solely for the purposes set forth below.

The said attorney in fact is hereby authorized and empowered, solely with
respect to the Mortgage Loans and REO Properties, as defined in, and subject to
the terms of, that certain Third Amended and Restated Flow Servicing Agreement,
between the Servicer and Owner, dated as of September 12, 2016 (the “Servicing
Agreement”), as follows:

1.To execute, acknowledge, seal and deliver deed of trust/mortgage note
endorsements, lost note affidavits, assignments of deed of trust/mortgage and
other recorded documents, satisfactions/releases/reconveyances of deed of
trust/mortgage, subordinations and modifications, tax authority notifications
and declarations, deeds, bills of sale, and other instruments of sale,
conveyance, and transfer, appropriately completed, with all ordinary or
necessary endorsements, acknowledgments, affidavits, and supporting documents as
may be necessary or appropriate to effect its execution, delivery, conveyance,
recordation or filing.

2.To execute and deliver insurance filings and claims, affidavits of debt,
substitutions of trustee, substitutions of counsel, non military affidavits,
notices of rescission, foreclosure deeds, transfer tax affidavits, affidavits of
merit, verifications of complaints, notices to quit, bankruptcy declarations for
the purpose of filing motions to lift stays, and other documents or notice
filings on behalf of Owner in connection with insurance, foreclosure, bankruptcy
and eviction actions.

3.To endorse any checks or other instruments received by the Servicer and made
payable to Owner.

4.To pursue any deficiency, debt or other obligation, secured or unsecured,
including but not limited to those arising from foreclosure or other sale,
promissory note or check.  This power also authorizes the Servicer to collect,
negotiate or otherwise settle any deficiency claim, including interest and
attorney’s fees.

5.To do any other act or complete any other document that arises in the normal
course of servicing of all Mortgage Loans and REO Properties, as defined in, and
subject to the terms of the Servicing Agreement.

Exh. 8-1

--------------------------------------------------------------------------------

 

This Limited Power of Attorney shall expire on _____ __, 20__.

[NAME]

 

Date:

 

20__

 

 

 

 

 

 

 

 

 

Witness:

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

Exh. 8-2

--------------------------------------------------------------------------------

 

EXHIBIT 9

TERM SHEET

 

THIRD PARTY LOANS

BASE SERVICING FEES
(per loan)

With respect to each Mortgage Loan that is a Third Party Loan and not a
Distressed Whole Loan, the Base Servicing Fee shall be:

(i)if such Mortgage Loan is a Fixed-Rate Mortgage Loan, $7.50; or

(ii)if such Mortgage Loan is an Adjustable-Rate Mortgage Loan, $8.50.

 

ADDITIONAL SERVICING FEES

(per loan)

With respect to each Mortgage Loan that is a Third Party Loan, the Additional
Servicing Fee shall be one of the following:

(i)if, as of the first day of the relevant month, such Mortgage Loan is not
delinquent, or is delinquent by less than 30 days, and no bankruptcy proceeding
is pending by or against the Mortgagor, 0;

(ii)if, as of the first day of the relevant month, such Mortgage Loan is
delinquent by 30 days or more and less than 60 days, and no bankruptcy
proceeding is pending by or against the Mortgagor and no foreclosure proceeding
has been initiated, $10.00;

(iii)if, as of the first day of the relevant month, such Mortgage Loan is
delinquent by 60 days or more and less than 90 days, and no bankruptcy
proceeding is pending by or against the Mortgagor and no foreclosure proceeding
has been initiated, $20.00;

(iv)if, as of the first day of the relevant month, such Mortgage Loan is
delinquent by 90 days or more, and no bankruptcy proceeding is pending by or
against the Mortgagor and no foreclosure proceeding has been initiated, $50.00;

(v)if, as of the first day of the relevant month, a bankruptcy proceeding is
pending by or against the Mortgagor, $45.00;

Exh. 9-1

--------------------------------------------------------------------------------

 

(vi)if, as of the first day of the relevant month, foreclosure proceedings have
been commenced and the Mortgaged Property has not become an REO Property,
$55.00; or  

(vii)if, as of the first day of the relevant month, the Mortgaged Property has
become an REO Property, $75.00.  

 

Exh. 9-2

--------------------------------------------------------------------------------

 

DISTRESSED WHOLE LOANS

BASE SERVICING FEES
(per loan)

With respect to each Mortgage Loan that is a Distressed Whole Loan, the Base
Servicing Fee shall be one of the following:

(i)if, as of the first day of the relevant month, such Mortgage Loan is not
delinquent, or is delinquent by less than 30 days, and no bankruptcy proceeding
is pending by or against the Mortgagor, $30.00;

(ii)if, as of the first day of the relevant month, such Mortgage Loan is
delinquent by 30 days or more and less than 90 days, and no bankruptcy
proceeding is pending by or against the Mortgagor and no foreclosure proceeding
has been initiated, $60.00;

(iii)if, as of the first day of the relevant month, such Mortgage Loan is
delinquent by 90 days or more, and no bankruptcy proceeding is pending by or
against the Mortgagor and no foreclosure proceeding has been initiated, $90.00;

(iv)if, as of the first day of the relevant month, such Mortgage Loan is not
delinquent, or is delinquent by less than 30 days, and a bankruptcy proceeding
is pending by or against the Mortgagor, $100.00;

(v)if, as of the first day of the relevant month, such Mortgage Loan is
delinquent by 30 days or more, and a bankruptcy proceeding is pending by or
against the Mortgagor, $100.00;

(vi)if, as of the first day of the relevant month, foreclosure proceedings have
been commenced and the Mortgaged Property has not become an REO Property,
$95.00; or

(vii)if, as of the first day of the relevant month, the Mortgaged Property has
become an REO Property, $75.00.  

 

SUPPLEMENTAL SERVICING FEES

With respect to each Mortgage Loan that is a Distressed Whole Loan, the
Supplemental Servicing Fee shall be $25.00.

 

Exh. 9-3

--------------------------------------------------------------------------------

 

THIRD PARTY LOANS AND DISTRESSED WHOLE LOANS

OTHER KEY PARAMETERS

 

 

Remittance Types

Actual/Actual Basis during Interim Servicing Period

Remittance Date

See definition of Remittance Date

Servicing Advances

Servicer to be reimbursed monthly for all unpaid Servicing Advances incurred by
Servicer in the prior month including Cost of Funds.

Cost of Funds on Servicing Advances

Refer to Section 5.04

Prepayment Penalties

Owner will retain 100% of the prepayment penalties.

Late Charges Collected

Servicer will retain 75% of late charges collected by Servicer

Ancillary Income

Servicer will retain 100% of all Ancillary Income

Delegated Authority

Refer to Exhibit 10

Contract Term

Refer to Section 8.01

Eligible Mortgage Loan

See definition of Eligible Mortgage Loan

 

 

ANCILLARY INCOME AND OTHER FEES

The Servicer shall be entitled to all Ancillary Income and the following Other
Fees in addition to the Servicing Fee:

Setup Fee:  With respect to each Mortgage Loan, other than a Distressed Whole
Loan, $10.00 if information is provided to Servicer in a format that enables
electronic boarding or $25.00 if information is provided to Servicer in format
that necessitates manual boarding.  With respect to each Distressed Whole Loan,
$15.00 if information is provided to Servicer in format that enables electronic
boarding or $25.00 if information is provided to Servicer in format that
necessitates manual boarding.  

Service Release Fee:  With respect to each Mortgage Loan, other than a
Distressed Whole Loan, $25.00 if released on or prior to the first anniversary
of boarding, $23.00 if released after the first anniversary of boarding and on
or prior to the second anniversary of boarding, and $18.00 if released
thereafter. With respect to each Distressed Whole Loan, $40.00.

Deed in Lieu Fee:  $500, unless the deed in lieu is completed under the U.S.
Treasury’s Home Affordable Foreclosure Alternatives initiative, in which case no
Deed in Lieu Fee shall apply.

Exh. 9-4

--------------------------------------------------------------------------------

 

Liquidation Fee:  150 basis points of the gross proceeds received in connection
with the disposition of a Mortgage Loan (including the sale of the related
Mortgage Note), 125 basis points in connection with either the disposition of an
REO Property or a Mortgaged Property through a foreclosure sale, or 75 basis
points in connection with either a full or discounted payoff accepted by the
Servicer with respect to a Mortgage Loan, including a full or discounted payoff
accepted in connection with the sale of the Mortgaged Property to a third party.

REO Property Lease Renewal Fee: $100 per lease renewed.

 

REO Property Rental Fee: $30 per month per REO Property.

 

REO Property Management Fee: Servicer's cost if property management services
and/or any related software costs are outsourced to a third party property
management firm or 9% of gross rental income if Servicer provides directly those
property management services identified on Exhibit 12 to the Agreement.

  

REO Property Tenant Paid Fees: Servicer may retain any tenant paid application
fee or late rent fee.

 

REO Property Third-Party Vendor Fees: In the event Servicer provides property
management services directly, Servicer may charge Owner the Servicer's cost for
support services provided by any third-party vendor that arise out of Servicer’s
property management services.  Such fees may include, but are not limited to,
related software, real estate broker marketing, eviction and inspection
services, as well as leasing fees to the real estate broker.

Tax Service Contract:  $75.00 per Mortgage Loan.

Flood Zone Service Contract:  Servicer’s cost.

MERS Fee:  Servicer’s cost.

Reperformance Fee:  150 basis points of the unpaid principal balance of the
Mortgage Loan (as then in effect) if the Mortgage Loan is brought current (after
having been delinquent for a period of 90 days or more) without any modification
and remains current for a consecutive period of 12 months or is sold prior to
the expiration of such 12 months.

Modification Fee:  (a) 150 basis points of the unpaid principal balance of the
Mortgage Loan (as in effect immediately after the consummation of the
modification) if the modification includes an interest rate reduction or is
classified by the Servicer (acting in accordance with Accepted Servicing
Practices) as a full modification, or (b) 50 basis points of the unpaid
principal balance of the Mortgage Loan (as in effect immediately after the
consummation of the modification) if the modification is classified by the
Servicer (acting in accordance with Accepted Servicing Practices) as a
streamlined modification; or, if the Servicer participates in the U.S.
Treasury’s Home Affordable Modification program (or other similar mortgage loan
modification programs) and enters into a transaction involving the Mortgage Loan
that results in the payment or retention of any incentive payment to the
Servicer or Owner and the Servicer is not otherwise entitled to a

Exh. 9-5

--------------------------------------------------------------------------------

 

Modification Fee as set forth above, 150 basis points of the unpaid principal
balance of the Mortgage Loan (as in effect immediately after the consummation of
the transaction).

If the Servicer enters into a transaction involving the Mortgage Loan under the
U.S. Treasury Department’s Home Affordable Modification program (or other
similar mortgage loan modification programs) that results in any incentive
payment to the Servicer or Owner and the Servicer has already collected a
Modification Fee, the Servicer shall reimburse the Owner the amount of such
incentive payments.

In the event the Servicer effects a refinancing of a Distressed Whole Loan on
behalf of the Owner and not through a third party lender and the resulting
Mortgage Loan is readily saleable, or the Servicer originates a Mortgage Loan to
facilitate the disposition of REO Property, the Servicer shall be entitled to
fees and other compensation in connection with such originations based on
market-based pricing and terms that are consistent with the pricing and terms
offered by the Servicer to unaffiliated third parties on a retail basis.  The
amount of the compensation and the pricing and terms offered by the Servicer
shall be subject to review by the Owner and the Servicer from time to time to
reflect market rates.  The Owner shall reimburse the Servicer for any out of
pocket expenses that the Servicer incurs in connection with any such
origination, including title fees, legal fees and closing costs.

 

Exh. 9-6

--------------------------------------------------------------------------------

 

EXHIBIT 10

 

DELEGATION OF AUTHORITY MATRIX

 

FUNCTION

DELEGATION

Delinquent Taxes on Non-escrowed Loans

Authority is granted to Servicer to make payment of delinquent taxes on
non-escrowed loans.

Advances on Escrowed Loans

Authority is granted to Servicer to advance corporate funds in payment of
escrowed items.

New Escrow Accounts

Authority is granted to Servicer to establish escrow accounts upon borrower
request.

Escrow Shortage Pro-ration

Authority is granted to Servicer to negotiate extended escrow shortage repayment
periods as the situation warrants.

Escrow Cushion Requirement

Authority is granted to Servicer to negotiate down or remove any escrow cushion
requirement used for escrow analysis.

Escrow Account Waiver

Authority is granted to Servicer to waive an escrow account following Fannie Mae
Servicing Guidelines Part III, Chapter 103.01.

Loss Drafts

Authority is granted to Servicer to process insurance losses as described in the
Fannie Mae Servicing Guide Part II, Chapter 5.

Private Mortgage Insurance Waiver

Authority is granted to Servicer to waive Private Mortgage Insurance requirement
as described in the Fannie Mae Servicing Guide Part II, Chapters 102.03, 102.04
and 102.05.

Transfer of Ownership – Exempt Transactions

Authority is granted to Servicer to follow guidelines as stated in the Fannie
Mae Servicing Guide Part III, 408.02.  In addition to Fannie Mae servicing
guidelines, there must be evidence of insurance with Owner named in mortgagee
clause; mortgage payments must be current; and if required, approval of the
private mortgage insurance company, FHA or VA must be obtained.

 

Exh. 10-1

--------------------------------------------------------------------------------

 

Prepayment Penalties

No authority is granted to Servicer to negotiate reduction of prepayment
penalties without Owner approval unless the mortgage loan is accelerated in
which case Servicer may waive in accordance with the Fannie Mae Servicing Guide
Part I, Chapter 203.05.  This clause excludes the waiving of pre-payment
penalties/early closure fees extending more than 36 months from Mortgage Loan
origination date.

Waiver of Fees

Authority is granted to Servicer to waive any fee that it is entitled to receive
as Ancillary Income without Owner’s consent.  Servicer shall be entitled to
waive late charges based on Servicer’s policies and procedures.

Subordination Requests

Servicer may approve a request to subordinate a second mortgage in favor of a
refinanced loan if:

1.)

The new loan to value of the refinanced loan is equal to or less than the
original LTV of the first mortgage (no cash-out refinancing allowed unless
substantiated through a new appraisal to reflect increased value), and

2.)

The loan has had no delinquencies in past 12 months, and

3.)

The new senior lien is not a HELOC, Land Contract, Recapture Lien, Texas A6, Cal
Vet, Bond with recapture Taxes, All Inclusive Trust Deed, Option ARM, Flex 100,
or Reverse Mortgage.

Without Owner’s approval, Servicer MAY NOT approve a subordination request if
any of the following conditions exist:

1.)

The first lien amount increases and the first lien LTV increases; or

2.)

Any senior lien is a private party; or

3.)

The new senior lien has the potential for negative amortization.

Owner shall review the subordination request prior to final approval if the
request has any of the MAY NOT conditions listed above.  

Partial Release, Acquisitions, Easement

Authority is granted to Servicer to approve requests for Partial Release,
Acquisitions, and Easements in accordance with the standards specified in the
Fannie Mae Servicing Guide.

Exh. 10-2

--------------------------------------------------------------------------------

 

Lien Releases

Authority is granted to Servicer to approve full lien releases upon full payoff
of the loan without the prior approval of Owner.  Full lien releases to be
completed in compliance with applicable law, and penalties for non-compliance
accrue to Servicer.  Servicer shall not be responsible for penalties as a result
of third party delays if Servicer has timely processed a lien release pursuant
to applicable law.

Assumptions

Authority is granted to Servicer to negotiate Simple Assumptions according to
the Fannie Mae Servicing Guide Part III, Chapter 4. Qualified Assumption
requests will be referred to Owner for approval.

Foreclosure Approval

Authority is granted to Servicer to proceed with foreclosure using prudent
servicing guidelines.

Property Evaluations (BPO’s)/Drive-By Appraisal

Authority is granted to Servicer to order a brokers price opinion (BPO) or
drive-by appraisal using prudent servicing guidelines.  The cost of the BPO or
drive-by appraisal shall be passed on to the borrower if the BPO or drive-by
appraisal is related to a borrower requested forbearance plan as reasonably
determined by Servicer.

Impact Analysis

Authority is granted to Servicer to complete an impact analysis using prudent
servicing guidelines.

REO Marketing

Authority is granted to Servicer to follow Servicer’s current guidelines to make
REO marketing decisions.

Property Preservation

Authority is granted to Servicer to use Fannie Mae Property Preservation
guidelines as outlined in the Fannie Mae Servicing Guide for loans owned by
Owner and following internal state guidelines.

Bidding Instruction

Owner approval is required on bidding instructions.

Short Term Forbearance – Written agreement to reduce or suspend payments not to
exceed 6 months

Authority is granted to Servicer to permit forbearance or allow for suspension
of monthly payments up to 90 days, if the mortgagor is in default or Servicer
determines that default is imminent and granting such forbearance is in the best
interest of Owner.  Mortgagor must be current as to all fees and costs prior to
any forbearance plan.  Owner approval is required to permit forbearance or allow
for suspension of monthly payments of 91 days or more.

 

Exh. 10-3

--------------------------------------------------------------------------------

 

Long Term Forbearance – Written agreement to reduce or suspend payments up to 12
months

Unless pursuant to the PennyMac Property Preservation Program, Owner approval is
required.  Servicer to provide approval package including financials, credit
report, valuation, hardship description and recommendation.

Repayment Plan – Written agreement where the mortgagor must immediately make
payments in addition to regular monthly payments to cure the delinquency

Authority is granted pursuant to the PennyMac Property Preservation Program, and
to Servicer to negotiate Repayment Plans where borrower must cure through full
reinstatement within 6 months, including fees and costs.  Any Repayment Plan
over 6 months requires Owner approval.

Modifications – Formal agreement to change payment amount based upon one or more
terms of the original loan (i.e. interest rate reduction, extended term,
capitalized arrearage)

Authority is granted pursuant to the PennyMac Property Preservation Program, and
all modification requests to capitalize arrearages are to be processed in
accordance with the Fannie Mae Servicing Guide Part VII, Chapter 502 and will
require Owner approval.  Servicer will obtain pre-qualification information as
prescribed by Owner (credit report, financial statements and cash flow
information from all obligors).

Pre-foreclosure Sale – Borrower allowed to sell or refinance property to avoid
foreclosure

Authority is granted pursuant to the PennyMac Property Preservation Program, and
authority is granted to Servicer to negotiate Pre-foreclosure Sales according to
the Fannie Mae Servicing Guide Part VII, Chapter 504. Authority is granted to
Servicer to accept pre-foreclosure sale offers as long as the loss from the
pre-foreclosure sale is equal to or less than the loss anticipated and the
negotiated price is at least 95% of the Asset Balance.  For all other
pre-foreclosure sales, Owner approval to accept the sale is required.

Discounted Payoff

Authority is granted pursuant to the PennyMac Property Preservation Program. For
all discounted payoffs with the exception of those covered by mortgage
insurance, Owner approval to accept the payoff is required.  Authority is
granted to Servicer to negotiate a discounted payoff where the loss amount is
fully covered by the applicable mortgage insurance policy.

Deed-in-Lieu – Borrower voluntarily deeds property to lender, avoiding
foreclosure

Authority is granted pursuant to the PennyMac Property Preservation Program,
otherwise, Owner must approve deed-in-lieu requests on all transactions.

 

Exh. 10-4

--------------------------------------------------------------------------------

 

Partial Claims – PMI remits funds to bring account current.  If mortgage is
subsequently foreclosed, prepaid claim amounts are deducted from final claim

Authority is granted pursuant to the PennyMac Property Preservation Program, and
authority is granted to Servicer to negotiate and accept Partial Claims subject
to account being brought current; no associated pre-foreclosure sale,
modification or repayment plan.

Bankruptcy Actions

1st Liens – Authority is granted to Servicer to process bankruptcy filing
following Fannie Mae Servicing Guidelines and refer to the delegations listed in
this Exhibit (impact analysis, charge-off, foreclosure) for final disposition in
Bankruptcy.

Junior Liens – Authority is granted to Servicer to process bankruptcy filing in
accordance with Servicer’s guidelines for owned assets and refer to the above
delegations for final disposition in Bankruptcy.  Decisions on how to proceed
with charge-off/foreclosure revert to Owner at impact analysis stage.

Review and Approval of Walk Analysis

Servicer will review collection activities and complete an “Impact Analysis”
which begins the pre-foreclosure review process.  The analysis assists in
determining the economic impact of foreclosure (equity position/loss severity).
Servicer will provide the analysis to Owner with a recommendation of future loss
mitigation actions.  Servicer takes no responsibility for these recommendations,
and will contact Owner for final approval and direction as to what those actions
will be.

Charge-off of Loans

Authority is granted to Servicer to charge off loans that are 180 days
contractually delinquent, with the approval by Owner of an impact analysis
form.  Authority is granted to Servicer to charge off loans that are 120 days
contractually delinquent, with Owner’s approval of an impact analysis, for loans
that are in Chapter 7 bankruptcy and have no equity, per Owner’s approval of an
impact analysis form.

Post Charge-off Transfer

Authority is granted to Servicer to initiate service transfer for loans that
have been fully charged-off, or have been sold from REO, with a resulting loss.

Payoff Processing

Authority is granted to Servicer to accept as payment in full a payment amount
within $100 of the total indebtedness.  Owner shall reimburse Servicer for any
shortfall that is $100 or less of the indebtedness.

 

Exh. 10-5

--------------------------------------------------------------------------------

 

EXHIBIT 11

SERVICING CRITERIA TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE

The assessment of compliance to be delivered under the Agreement shall address,
at a minimum, the criteria identified as below as “Applicable Servicing
Criteria,” as identified by a mark in the column titled “Applicable Servicing
Criteria.”

Servicing Criteria

Applicable
Servicing Criteria

Reference

Criteria

 

 

General Servicing Considerations

 

1122(d)(1)(i)

Policies and procedures are instituted to monitor any performance or other
triggers and events of default in accordance with the transaction agreements.

X

1122(d)(1)(ii)

If any material servicing activities are outsourced to third parties, policies
and procedures are instituted to monitor the third party’s performance and
compliance with such servicing activities.

X

1122(d)(1)(iii)

Any requirements in the transaction agreements to maintain a back-up servicer
for the mortgage loans are maintained.

 

1122(d)(1)(iv)

A fidelity bond and errors and omissions policy is in effect on the party
participating in the servicing function throughout the reporting period in the
amount of coverage required by and otherwise in accordance with the terms of the
transaction agreements.

X

 

Cash Collection and Administration

 

1122(d)(2)(i)

Payments on mortgage loans are deposited into the appropriate custodial bank
accounts and related bank clearing accounts no more than two business days
following receipt, or such other number of days specified in the transaction
agreements.

X

1122(d)(2)(ii)

Disbursements made via wire transfer on behalf of an obligor or to an investor
are made only by authorized personnel.

X

1122(d)(2)(iii)

Advances of funds or guarantees regarding collections, cash flows or
distributions, and any interest or other fees charged for such advances, are
made, reviewed and approved as specified in the transaction agreements.

X

1122(d)(2)(iv)

The related accounts for the transaction, such as cash reserve accounts or
accounts established as a form of overcollateralization, are separately
maintained (e.g., with respect to commingling of cash) as set forth in the
transaction agreements.

X

1122(d)(2)(v)

Each custodial account is maintained at a federally insured depository
institution as set forth in the transaction agreements.  For purposes of this
criterion, “federally insured depository institution” with respect to a foreign
financial institution means a foreign financial institution that meets the
requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.

X

1122(d)(2)(vi)

Unissued checks are safeguarded so as to prevent unauthorized access.

X

1122(d)(2)(vii)

Reconciliations are prepared on a monthly basis for all asset-backed securities
related bank accounts, including custodial accounts and related bank clearing
accounts.  These reconciliations are (A) mathematically accurate; (B) prepared
within 30 calendar days after the bank statement cutoff date, or such other
number of days specified in the transaction agreements; (C) reviewed and
approved by someone other than the person who prepared the reconciliation; and
(D) contain explanations for reconciling items.  These reconciling items are
resolved within 90 calendar days of their original identification, or such other
number of days specified in the transaction agreements.

X

 

Investor Remittances and Reporting

 

1122(d)(3)(i)

Reports to investors, including those to be filed with the Commission, are
maintained in accordance with the transaction agreements and applicable
Commission requirements.  Specifically, such reports (A) are prepared in
accordance with timeframes and other terms set forth in the transaction
agreements; (B) provide information calculated in accordance with the terms
specified in the transaction agreements; (C) are filed with the Commission as
required by its rules and regulations; and (D) agree with investors’ or the
trustee’s records as to the total unpaid principal balance and number of
mortgage loans serviced by the Regulation AB Servicer.

X

Exh. 11-1

--------------------------------------------------------------------------------

 

Servicing Criteria

Applicable
Servicing Criteria

Reference

Criteria

 

1122(d)(3)(ii)

Amounts due to investors are allocated and remitted in accordance with
timeframes, distribution priority and other terms set forth in the transaction
agreements.

X

1122(d)(3)(iii)

Disbursements made to an investor are posted within two business days to the
Regulation AB Servicer’s investor records, or such other number of days
specified in the transaction agreements.

X

1122(d)(3)(iv)

Amounts remitted to investors per the investor reports agree with cancelled
checks, or other form of payment, or custodial bank statements.

X

 

Pool Asset Administration

 

1122(d)(4)(i)

Collateral or security on mortgage loans is maintained as required by the
transaction agreements or related mortgage loan documents.

X

1122(d)(4)(ii)

Mortgage loan and related documents are safeguarded as required by the
transaction agreements

X

1122(d)(4)(iii)

Any additions, removals or substitutions to the asset pool are made, reviewed
and approved in accordance with any conditions or requirements in the
transaction agreements.

X

1122(d)(4)(iv)

Payments on mortgage loans, including any payoffs, made in accordance with the
related mortgage loan documents are posted to the Regulation AB Servicer’s
obligor records maintained no more than two business days after receipt, or such
other number of days specified in the transaction agreements, and allocated to
principal, interest or other items (e.g., escrow) in accordance with the related
mortgage loan documents.

X

1122(d)(4)(v)

The Regulation AB Servicer’s records regarding the mortgage loans agree with the
Regulation AB Servicer’s records with respect to an obligor’s unpaid principal
balance.

X

1122(d)(4)(vi)

Changes with respect to the terms or status of an obligor’s mortgage loans
(e.g., loan modifications or re-agings) are made, reviewed and approved by
authorized personnel in accordance with the transaction agreements and related
pool asset documents.

X

1122(d)(4)(vii)

Loss mitigation or recovery actions (e.g., forbearance plans, modifications and
deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are
initiated, conducted and concluded in accordance with the timeframes or other
requirements established by the transaction agreements.

X

1122(d)(4)(viii)

Records documenting collection efforts are maintained during the period a
mortgage loan is delinquent in accordance with the transaction agreements.  Such
records are maintained on at least a monthly basis, or such other period
specified in the transaction agreements, and describe the entity’s activities in
monitoring delinquent mortgage loans including, for example, phone calls,
letters and payment rescheduling plans in cases where delinquency is deemed
temporary (e.g., illness or unemployment).

X

1122(d)(4)(ix)

Adjustments to interest rates or rates of return for mortgage loans with
variable rates are computed based on the related mortgage loan documents.

X

1122(d)(4)(x)

Regarding any funds held in trust for an obligor (such as escrow accounts):  (A)
such funds are analyzed, in accordance with the obligor’s mortgage loan
documents, on at least an annual basis, or such other period specified in the
transaction agreements; (B) interest on such funds is paid, or credited, to
obligors in accordance with applicable mortgage loan documents and state laws;
and (C) such funds are returned to the obligor within 30 calendar days of full
repayment of the related mortgage loans, or such other number of days specified
in the transaction agreements.

X

1122(d)(4)(xi)

Payments made on behalf of an obligor (such as tax or insurance payments) are
made on or before the related penalty or expiration dates, as indicated on the
appropriate bills or notices for such payments, provided that such support has
been received by the servicer at least 30 calendar days prior to these dates, or
such other number of days specified in the transaction agreements.

X

1122(d)(4)(xii)

Any late payment penalties in connection with any payment to be made on behalf
of an obligor are paid from the servicer’s funds and not charged to the obligor,
unless the late payment was due to the obligor’s error or omission.

X

1122(d)(4)(xiii)

Disbursements made on behalf of an obligor are posted within two business days
to the obligor’s records maintained by the servicer, or such other number of
days specified in the transaction agreements.

X

1122(d)(4)(xiv)

Delinquencies, charge-offs and uncollectible accounts are recognized and
recorded in accordance with the transaction agreements.

X

1122(d)(4)(xv)

Any external enhancement or other support, identified in Item 1114(a)(1) through
(3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction
agreements.

 

 

Exh. 11-2

--------------------------------------------------------------------------------

 

EXHIBIT 12

 

PROPERTY MANAGEMENT SERVICES

 

For purposes of this Servicing Agreement, REO Property Management Services may
include:

 

1.

LEASING SERVICES.  

 

a.

Market Rental Property;  

 

b.

Show Rental Property;  

 

c.

Qualify Tenant;

 

d.

Lease Property;

 

e.

Coordinate Move-In;  

 

f.

Manage Security Deposit; and

 

g.

Perform Move-Out Inspection.  

 

2.

PROPERTY MANAGEMENT SERVICES.

 

a.

Collect Rent;  

 

b.

Manage Evictions;  

 

c.

Respond to Tenant Inquiries;  

 

d.

Maintain Property;  

 

e.

Perform Routine Maintenance; and

 

f.

Manage Unit Turnover.  

 

3.

ASSET MANAGEMENT SERVICES

 

a.

Initial and On-Going Property Preservation Services;

 

b.

Remediation Services;

 

c.

Utilities and Home Owner Association Management;

 

d.

Code Violations Management and Mitigation;

 

e.

Property Tax Management Services;

 

f.

Legal Eviction Program Management;

Exh. 12-1

--------------------------------------------------------------------------------

 

 

g.

Provision of Cash-For-Relocation Program Management;  

 

h.

Valuation Services;

 

i.

Authorization of Repairs and Improvements; and

 

j.

Property and Casualty Insurance Services.

 

4.

RENOVATION SERVICES

 

a.

Provision of Renovation Services;

 

b.

Initial Property Screening Assessment;

 

c.

Renovation Estimate Assessment;

 

d.

Property Onboarding Assessment;

 

e.

Scope of Work;

 

f.

Final Scope of Work;

 

g.

Management of Change Orders; and

 

h.

Inspection for Turnover to Leasing.

 

5.

PROPERTY PRESERVATION AND INSPECTION SERVICES

 

a.

Provision of Property Preservation and Inspection Services;

 

b.

Communications to  Owner of Property Conditions, Preservation Activities and
Repairs at Properties;

 

c.

Document Retention;

 

d.

Property Occupancy Inspection;

 

e.

Other Inspections As Needed and As Determined By Servicer;

 

f.

Lawn Maintenance;

 

g.

Pool Maintenance;

 

h.

Debris and Hazard Removal;

 

i.

Discoloration Remediation;

 

j.

Health and Life Safety Issue Remediation; Miscellaneous Preservation Activities;

 

k.

Code Violation Management and Mitigation;

 

l.

Management of Utilities and Home Owner Association;

Exh. 12-2

--------------------------------------------------------------------------------

 

 

m.

Marketing Signs. 

 

6.

INSURANCE SERVICES

 

a.

Standard Property and Casualty Insurance Services; and

 

b.

Claims Management and Loss Mitigation Services.

Exh. 12-3