Exhibit 10.16

GUARANTEE OF

ALESCO FINANCIAL INC.

THIS GUARANTEE (the “Guarantee”), dated as of June 29, 2007, is made and entered
into upon the terms hereinafter set forth, by ALESCO FINANCIAL INC., a Maryland
corporation (the “Guarantor”), for the benefit of Citibank, N.A. as indenture
trustee (on behalf of the Noteholders) (the “Indenture Trustee”) pursuant to
that certain Sale and Servicing Agreement, dated as of July 29, 2007, among
Structured Asset Mortgage Investments II. Inc., as depositor, Bear Stearns ARM
Trust 2007-2, as issuing entity, Wells Fargo Bank, N.A., as master servicer and
securities administrator, and Alesco Loan Holdings Trust, as mortgage loan
seller.

RECITALS:

1.     Pursuant to the Mortgage Loan Purchase Agreement, dated as of June 29,
2007, by and between Structured Asset Mortgage Investments II Inc., as depositor
(the “Depositor”) and Alesco Loan Holdings Trust, as mortgage loan seller (the
“Mortgage Loan Seller”) (the “MLPA”), the Mortgage Loan Seller has sold certain
mortgage loans (the “Mortgage Loans”) and related assets to the Depositor, which
has in turn sold them to the Issuing Entity.

In addition, the Mortgage Loan Seller has made certain representations and
warranties with respect to the Mortgage Loans, and has agreed to cure,
repurchase or substitute each Mortgage Loan that is determined to have breached
a representation or warranty made by it with respect thereto in accordance with
Section 7 of the MLPA. Pursuant to Section 13 of the MLPA, the Mortgage Loan
Seller has agreed to indemnify and hold harmless the Depositor and its
directors, officers and controlling persons from and against any loss, claim,
damage or liability or action arises out of, or is based upon any untrue
statement of a material fact contained in the Mortgage Loan Seller’s Information
(as defined therein). Pursuant to Section 7.02 of the Amended and Restated Trust
Agreement, dated as of June 29, 2007, among the Depositor, the Owner Trustee and
the Securities Administrator (the “Trust Agreement”), the Mortgage Loan Seller
has agreed to indemnify the Indemnified Parties (as defined therein) for
Expenses (as defined therein) for which the Depositor is required to indemnify
the Indemnified Parties (as defined therein) pursuant to Section 7.02 of the
Amended and Restated Trust Agreement, other than (1) any Expenses required to be
covered by the Master Servicer pursuant to Section 5.03 of the Sale and
Servicing Agreement or (2) and any Expenses actually paid by the Depositor in
accordance with Section 7.02 of the Amended and Restated Trust Agreement, (each
of the obligations in this paragraph, collectively, the “Guaranteed
Obligations”).

2.     The Guarantor is the indirect parent company of the Mortgage Loan Seller
and desires to guarantee the Guaranteed Obligations as provided herein.

NOW, THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which hereby are acknowledged by
the Guarantor, the Guarantor hereby agrees as follows:

 

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AGREEMENT

1.    Guaranty. Guarantor hereby absolutely, unconditionally and irrevocably
guarantees to the Indenture Trustee and the Owner Trustee the prompt, faithful
and full payment of the Guaranteed Obligations. This Guarantee is a present and
continuing guaranty of payment of the Guaranteed Obligations and not of
collectability and is in no way conditioned upon any attempt of Indenture
Trustee or the Owner Trustee, as the case may be, to enforce any action against
or to collect any of the Guaranteed Obligations from the Mortgage Loan Seller.

2.    Continuing Guaranty. This Guarantee is intended to be and shall be
construed to be a continuing, absolute and unconditional guaranty. Guarantor
guarantees that the Guaranteed Obligations will be paid promptly and strictly in
accordance with the terms of this Guarantee. Without limiting the generality of
the foregoing, Guarantor agrees that its obligations hereunder shall not be
released, diminished or impaired by, and waives any rights which it might
otherwise have which relate to any of the following (whether or not Guarantor
has consented thereto or received any notice thereof):

(a) any extension, settlement, modification, amendment, compromise, waiver or
release in respect of any Guaranteed Obligations;

(b) any lack of enforceability of the Guaranteed Obligations or any other
agreement or instrument relating thereto;

(c) any change in the corporate existence, structure or ownership of the
Mortgage Loan Seller or Guarantor or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting the Mortgage Loan Seller, Guarantor or
Indenture Trustee;

(d) the existence of any claim, defense, set-off or other rights or remedies
which Guarantor at any time may have against the Mortgage Loan Seller whether in
connection with this Guarantee, the transactions contemplated hereby or any
other transaction;

(e) any grant of any security or support for the Guaranteed Obligations whenever
occurring, including any pledge of collateral for the Guaranteed Obligations or
any person guaranteeing or otherwise becoming liable for the payment or
performance of the Guaranteed Obligations; or

(f) any impairment of any security or support for the Guaranteed Obligations,
including any full or partial release, failure to perfect, exchange,
subordination, or waste of any collateral for the Guaranteed Obligations or any
full or partial release of the Mortgage Loan Seller, any guarantor, or any other
person liable for the payment of the Guaranteed Obligations.

This Guarantee shall continue to be effective or be reinstated, as the case may
be, if any payment on the Guaranteed Obligations must be refunded for any
reason, including any bankruptcy proceeding. In the event that the Securities
Administrator must refund any payment received on or against the Guaranteed
Obligations, any prior release of or from this Guarantee shall be without
effect, and this Guarantee shall be reinstated in full force and effect. It is
the intention of Guarantor that the Guarantor’s obligations hereunder shall not
be discharged until all payment of the Guaranteed Obligations have been finally
and irrevocably paid or performed in full and are no longer subject to being set
aside or returned under any law, rule or regulation.

 

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3.     Payment. Whenever any of the Guaranteed Obligations shall be payable or
shall with the passage of time, become payable and at all times then and
thereafter that any such amounts remain unpaid (for any duration), Guarantor
shall, upon receiving written demand (without the necessity or obligation to
make or have made a similar demand on, or collection or other enforcement steps
against, the Mortgage Loan Seller), pay the amount due thereunder to the
Securities Administrator on behalf of the Indenture Trustee on the later of
(i) the date such amount is required to be paid by the seller and (ii) within
five (5) Business Days after receiving such written demand without set off,
counterclaim or defense against the Indenture Trustee in immediately available
funds and lawful currency of the United States of America. The obligations of
Guarantor hereunder shall rank pari passu with its senior unsecured debt
obligations.

4.     Waiver. Guarantor hereby unconditionally waives (a) promptness,
diligence, notice of acceptance with respect to the Guaranteed Obligations,
(b) any right to require the Indenture Trustee to enforce its rights or remedies
against the Mortgage Loan Seller or any other person, firm or corporation before
proceeding against Guarantor and (c) filing of claims with a court in the event
of insolvency or bankruptcy of the Mortgage Loan Seller. Guarantor acknowledges
and agrees that its obligations to the Indenture Trustee under this Guarantee
are separate and distinct from the Mortgage Loan Seller’s obligations under the
Sale and Servicing Agreement, the MLPA and the Trust Agreement and that a
separate action or actions for the enforcement of this Guarantee may be brought
and prosecuted against Guarantor whether or not the Mortgage Loan Seller is
joined therein.

5.     Representations and Warranties. Guarantor hereby represents and warrants
to Indenture Trustee the following:

(a) Guarantor is a corporation duly formed, validly existing and in good
standing under the laws of the state of Maryland. Guarantor has all necessary
corporate power and authority to (i) conduct its business and own its
properties, and (ii) execute and deliver this Guarantee and to perform all of
its obligations hereunder. The execution, delivery and performance of this
Guarantee by Guarantor have been duly and validly authorized by all requisite
limited liability company action on the part of Guarantor.

(b) This Guarantee has been duly executed and delivered on behalf of Guarantor,
and this Guarantee constitutes the legal, valid and binding obligation of
Guarantor, enforceable against it in accordance with its terms; subject,
however, to bankruptcy, insolvency, reorganization and other laws affecting
creditors’ rights generally and, with regard to any equitable remedies, to the
discretion of the court before which proceedings to obtain such remedies may be
pending.

 

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(c) The making and performance by Guarantor of this Guarantee does not
(i) violate any provision of law or any rule, regulation, order, writ, judgment,
decree or determination currently in effect having applicability to Guarantor or
Guarantor’s formation, organization or other governing documents, or (ii) result
in a breach of or constitute a default under any agreement to which Guarantor is
a party or by which Guarantor is currently bound or affected; and all consents
or approvals under such agreements and instruments necessary to permit the valid
execution, delivery and performance by Guarantor of this Guarantee have been
obtained.

6.    No Waiver; Remedies. No failure on the part of the Indenture Trustee to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

7.    Acknowledgment. The Guarantor acknowledges that this Guarantee shall be
for the benefit of the Indenture Trustee, acting on behalf of the Noteholders.

8.    Notices. All notices, requests, demands, consents and other communications
and deliveries under this Guarantee shall be in writing and (i) delivered in
person or by courier, (ii) sent by facsimile transmission, or (iii) mailed
certified first class mail, postage prepaid, return receipt requested, to the
appropriate party at the following address:

 

If to Indenture Trustee:

   Citibank, N.A.    388 Greenwich Street, 14th Floor    New York, New York
10013   

Telephone:   (212) 816-5773

Facsimile:    (212) 816-5527

If to Guarantor:

   Alesco Financial Inc.    2929 Arch Street, Suite 1703    Philadelphia,
Pennsylvania 19104    Attn: John Longino    With a copy to: Daniel Munley, Esq.,
Corporate Counsel    Telephone:   (215) 701-9555    Facsimile:    (215) 701-8282

If to Securities

   Wells Fargo Bank, N.A.

Administrator:

   9062 Old Annapolis Road    Columbia, Maryland 21045   
Attention: Client Services Manager: BSARM 2007-2    Telephone:   (410) 884-2000
   Facsimile:    (410) 715-2380

or to such other address as a party hereto may designate to the other party by
notice given as provided herein. Such notices shall be effective (a) if
delivered in person or by courier, upon actual receipt by the intended
recipient, (b) if sent by facsimile transmission, when the sender receives
confirmation that such notice was received at the facsimile number of the
addressee, or (c) if mailed, upon the date of delivery as shown by the return
receipt therefor.

 

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9.    Amendments. No release or waiver of any provision of this Guarantee nor
consent to any departure therefrom shall in any event be effective unless the
same shall be in writing and signed by the party against whom such waiver,
release or consent is to be enforced. This Guarantee may not be amended except
by written agreement signed by Guarantor and the Indenture Trustee and
Securities Administrator and the Indenture Trustee and Securities Administrator
shall be entitled to receive an opinion stating that such amendment shall not
have a material adverse effect on the Noteholders (such opinion of counsel not
to be at the expense of the Indenture Trustee).

10.     Binding Nature. This Guarantee shall be binding upon the successors and
permitted assigns of Guarantor and inure to the benefit of the Indenture Trustee
and its successors and assigns, and each and every reference herein to the
Indenture Trustee shall also include and refer to each and every successor and
assign of the Indenture Trustee. Notwithstanding anything to the contrary
provided herein, Guarantor shall not assign this Guarantor or delegate any of
its duties hereunder.

11.    Governing Law. This Guarantee shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to the
conflict of laws principles thereof, other than Section 5-1401 of the New York
General Obligations Law which shall apply hereto).

12.    Entire Agreement. This writing is the complete and exclusive statement of
the terms of this Guarantee and supersedes all prior oral or written
representations, understandings, and agreements between the Indenture Trustee
and Guarantor with respect to the subject matter hereof. The Indenture Trustee
and Guarantor agree that there are no conditions to the full effectiveness of
this Guarantee.

13.    Unenforceable Provisions. Any provision contained in this Guarantee which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. The parties
hereby agree that they shall negotiate in good faith to replace any invalid or
unenforceable provision with a new provision whose meaning and character will
correspond as nearly as possible to the original purpose and intent of this
Guarantee, in accordance with applicable law.

14.    Waiver of Jury Trial. GUARANTOR AGREES THAT ANY SUIT, ACTION, OR
PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM, BROUGHT OR INSTITUTED BY GUARANTOR,
BY THE INDENTURE TRUSTEE OR BY ANY SUCCESSOR OR ASSIGN OF THE INDENTURE TRUSTEE
ON OR WITH RESPECT TO THIS GUARANTEE OR WHICH IN ANY WAY RELATES, DIRECTLY OR
INDIRECTLY, TO THE TRANSACTIONS, GUARANTEED OBLIGATIONS OR ANY EVENT,
TRANSACTION, OR OCCURRENCE ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE
GUARANTEED OBLIGATIONS, OR THE DEALINGS OF THE PARTIES WITH RESPECT THERETO,
SHALL BE TRIED ONLY BY A COURT AND NOT BY A JURY.

 

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15.    Counterparts. The parties hereto may execute this Guarantee in
counterparts, which shall, in the aggregate, when signed by both parties hereto
constitute one and the same instrument, and, thereafter, each counterpart shall
be deemed an original instrument as against any party who has signed it. A
facsimile transmission of this Guarantee bearing a signature on behalf of a
party will be legal and binding on such party.

16.    Defined Terms. Capitalized terms used and not otherwise defined herein
shall have the respective meanings assigned to such terms in Appendix A to the
Indenture.

[SIGNATURES ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF, the undersigned has caused this Guarantee to be executed by
its duly authorized officer as of the date first above written.

 

ALESCO FINANCIAL INC.

By:

 

/s/ John Longino

   

Name: John Longino

Title: Chief Financial Officer and Treasurer

 

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