EXHIBIT 10.16

 

EMC MORTGAGE CORPORATION

 

Purchaser,

 

HMB ACCEPTANCE CORP.

 

Company,

 

HOMEBANC CORP.

 

Servicer,

 

PURCHASE, WARRANTIES AND SERVICING AGREEMENT

Dated as of July 1, 2004

 

 

(Fixed and Adjustable Rate Mortgage Loans)

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TABLE OF CONTENTS

 

ARTICLE I

Section 1.01

   Defined Terms    2 ARTICLE II

Section 2.01

   Agreement to Purchase    15

Section 2.02

   Purchase Price    16

Section 2.03

   Servicing of Mortgage Loans    16

Section 2.04

   Record Title and Possession of Mortgage Files; Maintenance of Servicing Files
   17

Section 2.05

   Books and Records    17

Section 2.06

   Transfer of Mortgage Loans    18

Section 2.07

   Delivery of Mortgage Loan Documents    18

Section 2.08

   Quality Control Procedures    20

Section 2.09

   Near-term Principal Prepayments; Near Term Payment Defaults    20

Section 2.10

   Modification of Obligations    21

Section 2.11

   Guarantee of Company’s Obligations under this Agreement    21 ARTICLE III

Section 3.01

   Representations and Warranties of the Company and the Servicer    22

Section 3.02

   Representations and Warranties as to Individual Mortgage Loans    25

Section 3.03

   Repurchase; Substitution    36

Section 3.04

   Representations and Warranties of the Purchaser    38 ARTICLE IV

Section 4.01

   Servicer to Act as Servicer    39

Section 4.02

   Collection of Mortgage Loan Payments    42

Section 4.03

   Realization Upon Defaulted Mortgage Loans    43

Section 4.04

   Establishment of Custodial Accounts; Deposits in Custodial Accounts    44

Section 4.05

   Permitted Withdrawals from the Custodial Account    45

Section 4.06

   Establishment of Escrow Accounts; Deposits in Escrow Accounts    46

Section 4.07

   Permitted Withdrawals From Escrow Account    47

 

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Section 4.08

   Payment of Taxes, Insurance and Other Charges; Maintenance of Primary
Mortgage Insurance Policies; Collections Thereunder    48

Section 4.09

  

Transfer of Accounts

   49

Section 4.10

  

Maintenance of Hazard Insurance

   49

Section 4.11

  

Maintenance of Mortgage Impairment Insurance Policy

   50

Section 4.12

  

Fidelity Bond, Errors and Omissions Insurance

   51

Section 4.13

  

Title, Management and Disposition of REO Property

   51

Section 4.14

  

Notification of Maturity Date

   53

Section 4.15

  

Optional Purchase of Defaulted Mortgage Loans

   53 ARTICLE V

Section 5.01

  

Distributions

   53

Section 5.02

  

Statements to the Purchaser

   54

Section 5.03

  

Monthly Advances by the Servicer

   56

Section 5.04

  

Liquidation Reports

   56 ARTICLE VI

Section 6.01

  

Assumption Agreements

   57

Section 6.02

  

Satisfaction of Mortgages and Release of Mortgage Files

   58

Section 6.03

  

Servicing Compensation

   59

Section 6.04

  

Annual Statement as to Compliance

   59

Section 6.05

  

Annual Independent Certified Public Accountants’ Servicing Report

   59

Section 6.06

  

Purchaser’s Right to Examine Company and Servicer Records

   60

Section 6.07

  

Annual Certification

   60 ARTICLE VII

Section 7.01

  

Company and Servicer Shall Provide Information as Reasonably Required

   61 ARTICLE VIII

Section 8.01

  

Indemnification; Third Party Claims

   63

Section 8.02

  

Merger or Consolidation of the Company and Servicer

   63

Section 8.03

  

Limitation on Liability of the Company, Servicer and Others

   64

Section 8.04

  

Servicer Not to Assign or Resign

   64

 

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Section 8.05

   No Transfer of Servicing    65 ARTICLE IX

Section 9.01

   Events of Default    66

Section 9.02

   Waiver of Defaults    67 ARTICLE X

Section 10.01

   Termination    68 ARTICLE XI

Section 11.01

   Successor to the Servicer    68

Section 11.02

   Amendment    69

Section 11.03

   Recordation of Agreement    70

Section 11.04

   Governing Law    70

Section 11.05

   Notices    70

Section 11.06

   Severability of Provisions    71

Section 11.07

   Exhibits    72

Section 11.08

   General Interpretive Principles    72

Section 11.09

   Reproduction of Documents    73

Section 11.10

   Confidentiality of Information    73

Section 11.11

   Recordation of Assignment of Mortgage    73

Section 11.12

   Assignment by Purchaser    73

Section 11.13

   No Partnership    74

Section 11.14

   Execution: Successors and Assigns    74

Section 11.15

   Entire Agreement    74

Section 11.16

   No Solicitation    74

Section 11.17

   Closing    75

Section 11.18

   Cooperation of Company and Servicer with Reconstitution    75

EXHIBITS

         A    Contents of Mortgage File    79     B    Custodial Account Letter
Agreement    82     C    Escrow Account Letter Agreement    83     D    Form of
Assignment, Assumption and Recognition Agreement    84     E    Form of Trial
Balance    97     F    [reserved]          G    Request for Release of Documents
and Receipt    98     H    Company’s Underwriting Guidelines    100     I   
Form of Term Sheet    101

 

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This is a Purchase, Warranties and Servicing Agreement, dated as of July 1, 2004
and is executed among EMC MORTGAGE CORPORATION, as Purchaser, with offices
located at Mac Arthur Ridge II, 909 Hidden Ridge Drive, Suite 200, Irving, Texas
75038 (the “Purchaser”), HMB Acceptance Corp., with its executive offices
located at 2002 Summit Boulevard, Suite 100, Atlanta, GA 30319 (the “Company”)
and HomeBanc Corp., with its executive offices located at 2002 Summit Boulevard,
Suite 100, Atlanta, GA 30319 (the “Servicer”).

 

W I T N E S S E T H :

 

WHEREAS, the Purchaser has heretofore agreed to purchase from the Company and
the Company has heretofore agreed to sell to the Purchaser, from time to time,
certain Mortgage Loans on a servicing retained basis;

 

WHEREAS, the Servicer has heretofore agreed to service those loans sold by the
Company to the Purchaser on a servicing-retained basis and to guarantee the
obligations of the Company hereunder;

 

WHEREAS, each of the Mortgage Loans is secured by a mortgage, deed of trust or
other security instrument creating a first lien on a residential dwelling
located in the jurisdiction indicated on the Mortgage Loan Schedule, which is
annexed to the related Term Sheet; and

 

WHEREAS, the Purchaser, the Company and the Servicer wish to prescribe the
representations and warranties of the Company and the Servicer with respect to
themselves and the Mortgage Loans and the management, servicing and control of
the Mortgage Loans by the Servicer;

 

NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth,
and for other good and valuable consideration, the receipt and adequacy of which
is hereby acknowledged, the Purchaser, the Company and the Servicer agree as
follows:

 

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ARTICLE I

 

DEFINITIONS

 

Section 1.01 Defined Terms.

 

Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meaning specified in this
Article:

 

Accepted Servicing Practices: With respect to any Mortgage Loan, those mortgage
servicing practices (including collection procedures) of prudent mortgage
banking institutions which service mortgage loans of the same type as such
Mortgage Loan in the jurisdiction where the related Mortgaged Property is
located, and which are in accordance with Fannie Mae servicing practices and
procedures, for MBS pool mortgages, as defined in the Fannie Mae Guides
including future updates.

 

Adjustment Date: As to each adjustable rate Mortgage Loan, the date on which the
Mortgage Interest Rate is adjusted in accordance with the terms of the related
Mortgage Note.

 

Agreement: This Purchase, Warranties and Servicing Agreement including all
exhibits hereto, amendments hereof and supplements hereto.

 

Appraised Value: With respect to any Mortgaged Property, 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 by an appraiser who met the
requirements of the Servicer and Fannie Mae, or as determined by use of an AVM,
provided, however, that the use of an AVM shall be permitted only upon the
presentation by the Servicer to the Purchaser of an approval letter acceptable
to the Purchaser from each of the Rating Agencies, which letters shall state
that use of an AVM shall have no adverse effect in any material respect on the
interests of any certificateholder of the related securitization.

 

Assignment: An individual 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 of
record the sale or transfer of the Mortgage Loan.

 

BIF: The Bank Insurance Fund, or any successor thereto.

 

Business Day: Any day other than: (i) a Saturday or Sunday, or (ii) a legal
holiday in the States of Georgia, New York, Maryland or Minnesota, or (iii) a
day on which banks in the States of Georgia, New York, Maryland or Minnesota are
authorized or obligated by law or executive order to be closed.

 

Closing Date: With respect to any Mortgage Loan, the date stated on the related
Term Sheet.

 

Code: The Internal Revenue Code of 1986, or any successor statute thereto.

 

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Company: HMB Acceptance Corp., its successors in interest and assigns, as
permitted by this Agreement.

 

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.

 

Confirmation: The trade confirmation letter between the Purchaser and the
Company which relates to the Mortgage Loans.

 

Co-op Lease: With respect to a Co-op Loan, the lease with respect to a dwelling
unit occupied by the Mortgagor and relating to the stock allocated to the
related dwelling unit.

 

Co-op Loan: A Mortgage Loan secured by the pledge of stock allocated to a
dwelling unit in a residential cooperative housing corporation and a collateral
assignment of the related Co-op Lease.

 

Current Appraised Value: With respect to any Mortgaged Property, the value
thereof as determined by an appraisal made for the Servicer (by an appraiser who
met the requirements of the Servicer and Fannie Mae), or through the use of an
AVM, at the request of a Mortgagor for the purpose of canceling a Primary
Mortgage Insurance Policy in accordance with federal, state and local laws and
regulations or otherwise made at the request of the Servicer or Mortgagor.

 

Current LTV: The ratio of the Stated Principal Balance of a Mortgage Loan to the
Current Appraised Value of the Mortgaged Property.

 

Custodial Account: Each separate demand account or accounts created and
maintained pursuant to Section 4.04 which shall be entitled “HomeBanc Corp.
Custodial Account, in trust for the Purchaser, Owner of Adjustable Rate Mortgage
Loans” and shall be established in an Eligible Account, in the name of the
Person that is the “Purchaser” with respect to the related Mortgage Loans.

 

Custodian: With respect to any Mortgage Loan, the entity stated on the related
Term Sheet, and its successors and assigns, as custodian for the Purchaser.

 

Cut-off Date: With respect to any Mortgage Loan, the date stated on the related
Term Sheet.

 

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

 

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

 

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Due Period: With respect to any Remittance Date, the period commencing on the
second day of the month preceding the month of such Remittance Date and ending
on the first day of the month of the Remittance Date.

 

Eligible Account: An account established and maintained: (i) within FDIC insured
accounts created, maintained and monitored by the Servicer so that all funds
deposited therein are fully insured, or (ii) as a trust account with the
corporate trust department of a depository institution or trust company
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia which is not affiliated with the
Servicer (or any sub-servicer) or the Company or (iii) with an entity which is
an institution whose deposits are insured by the FDIC, the unsecured and
uncollateralized long-term debt obligations of which shall be rated “A2” or
higher by Standard & Poor’s and “A” or higher by Fitch, Inc. or one of the two
highest short-term ratings by any applicable Rating Agency, and which is either
(a) a federal savings association duly organized, validly existing and in good
standing under the federal banking laws, (b) an institution duly organized,
validly existing and in good standing under the applicable banking laws of any
state, (c) a national banking association under the federal banking laws, or (d)
a principal subsidiary of a bank holding company, or (iv) if ownership of the
Mortgage Loans is evidenced by mortgaged-backed securities, the equivalent
required ratings of each Rating Agency, and held such that the rights of the
Purchaser and the owner of the Mortgage Loans shall be fully protected against
the claims of any creditors of the Servicer (or any sub-servicer) or the Company
and of any creditors or depositors of the institution in which such account is
maintained or (v) in a separate non-trust account without FDIC or other
insurance in an Eligible Institution. In the event that a Custodial Account is
established pursuant to clause (iii), (iv) or (v) of the preceding sentence, the
Servicer shall provide the Purchaser with written notice on the Business Day
following the date on which the applicable institution fails to meet the
applicable ratings requirements.

 

Eligible Institution: An institution having (i) the highest short-term debt
rating, and one of the two highest long-term debt ratings of each Rating Agency;
or (ii) with respect to any Custodial Account, an unsecured long-term debt
rating of at least one of the two highest unsecured long-term debt ratings of
each Rating Agency.

 

Equity Take-Out Refinanced Mortgage Loan: A Refinanced Mortgage Loan the
proceeds of which were in excess of the outstanding principal balance of the
existing mortgage loan as defined in the Fannie Mae Guide(s).

 

Escrow Account: Each separate trust account or accounts created and maintained
pursuant to Section 4.06 which shall be entitled “HomeBanc Corp. Escrow Account,
in trust for the Purchaser, Owner of Adjustable Rate Mortgage Loans, and various
Mortgagors” and shall be established in an Eligible Account, in the name of the
Person that is the “Purchaser” with respect to the related Mortgage Loans.

 

Escrow Payments: With respect to any Mortgage Loan, the amounts constituting
ground rents, taxes, assessments, water rates, sewer rents, municipal charges,
mortgage 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 Mortgage or any other document.

 

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

 

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

 

Fannie Mae Guide(s): The Fannie Mae Selling Guide and the Fannie Mae Servicing
Guide and all amendments or additions thereto.

 

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

 

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

 

FHLMC Guide: The FHLMC Single Family Seller/Servicer Guide and all amendments or
additions thereto.

 

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

 

FIRREA: The Financial Institutions Reform, Recovery, and Enforcement Act of
1989.

 

GAAP: Generally accepted accounting principles, consistently applied.

 

HUD: The United States Department of Housing and Urban Development or any
successor thereto.

 

Index: With respect to any adjustable rate Mortgage Loan, the index identified
on the Mortgage Loan Schedule and set forth in the related Mortgage Note for the
purpose of calculating the interest rate thereon.

 

Initial Rate Cap: As to each adjustable rate Mortgage Loan, where applicable,
the maximum increase or decrease in the Mortgage Interest Rate on the first
Adjustment Date.

 

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

 

Interest Only Mortgage Loan: A Mortgage Loan for which an interest-only payment
feature is allowed during the period prior to the first Adjustment Date.

 

Lender Paid Mortgage Insurance Rate: The Lender Paid Mortgage Insurance Rate
shall be a rate per annum equal to the percentage shown on the Mortgage Loan
Schedule.

 

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Lender Primary Mortgage Insurance Policy: Any Primary Mortgage Insurance Policy
for which premiums are paid by the Servicer.

 

Lifetime Rate Cap: As to each adjustable rate Mortgage Loan, the maximum
Mortgage Interest Rate over the term of such Mortgage Loan.

 

Liquidation Proceeds: Cash 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.

 

Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan, the ratio of the
original outstanding principal amount of the Mortgage Loan, to (i) the Appraised
Value of the Mortgaged Property as of the Origination Date with respect to a
Refinanced Mortgage Loan, and (ii) the lesser of the Appraised Value of the
Mortgaged Property as of the Origination Date or the purchase price of the
Mortgaged Property with respect to all other Mortgage Loans.

 

Margin: With respect to each adjustable rate Mortgage Loan, the fixed percentage
amount set forth in each related Mortgage Note which is added to the Index in
order to determine the related Mortgage Interest Rate, as set forth in the
Mortgage Loan Schedule.

 

Master Servicer: Wells Fargo Bank, National Association, its successors in
interest and assigns, or any successor thereto designated by the Purchaser.

 

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 registered with MERS on the MERS® System.

 

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

 

MIN: The Mortgage Identification Number for any MERS Mortgage Loan.

 

MOM Loan: Any Mortgage Loan as to which MERS is acting as mortgagee, solely as
nominee for the originator of such Mortgage Loan and its successors and assigns.

 

Monthly Advance: The aggregate of the advances made by the Servicer on any
Remittance Date pursuant to Section 5.03.

 

Monthly Payment: The scheduled monthly payment of principal and interest on a
Mortgage Loan, or in the case of an Interest Only Mortgage Loan, payments of (i)
interest, or (ii) principal and interest, if applicable, on a Mortgage Loan
which is payable by a Mortgagor under the related Mortgage Note.

 

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Mortgage: The mortgage, deed of trust or other instrument securing a Mortgage
Note which creates a first lien on an unsubordinated estate in fee simple in
real property securing the Mortgage Note.

 

Mortgage File: The mortgage documents pertaining to a particular Mortgage Loan
which are specified in Exhibit A 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 required by Section 4.11.

 

Mortgage Interest Rate: The annual rate at which interest accrues on any
Mortgage Loan, which may be adjusted from time to time for an adjustable rate
Mortgage Loan, in accordance with the provisions of the related Mortgage Note.

 

Mortgage Loan: An individual mortgage loan which is the subject of this
Agreement, each Mortgage Loan originally sold and subject to this Agreement
being identified on the Mortgage Loan Schedule attached to the related Term
Sheet, which Mortgage Loan includes without limitation the Mortgage File, the
Monthly Payments, Principal Prepayments, Liquidation Proceeds, Condemnation
Proceeds, Insurance Proceeds, REO Disposition Proceeds, 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 in Exhibit A.

 

Mortgage Loan Remittance Rate: With respect to each Mortgage Loan, the annual
rate of interest remitted to the Purchaser, which shall be equal to the Mortgage
Interest Rate minus the Servicing Fee Rate minus the Lender Paid Mortgage
Insurance Rate.

 

Mortgage Loan Schedule: The schedule of Mortgage Loans annexed to the related
Term Sheet, such schedule setting forth the following information with respect
to each Mortgage Loan in the related Mortgage Loan Package:

 

(1) the Servicer’s Mortgage Loan identifying number;

 

(2) the Mortgagor’s first and last name;

 

(3) the street address of the Mortgaged Property including the city, state and
zip code;

 

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(4) a code indicating whether the Mortgaged Property is owner-occupied, a second
home or an investor property;

 

(5) the type of residential property constituting the Mortgaged Property;

 

(6) the original months to maturity of the Mortgage Loan;

 

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

 

(8) the Sales Price, if applicable, Appraised Value and Loan-to-Value Ratio, at
origination;

 

(9) the Mortgage Interest Rate as of origination and as of the related Cut-off
Date; with respect to each adjustable rate Mortgage Loan, the initial Adjustment
Date, the next Adjustment Date immediately following the related Cut-off Date,
the Index, the Margin, the Initial Rate Cap, if any, Periodic Rate Cap, if any,
minimum Mortgage Interest Rate under the terms of the Mortgage Note and the
Lifetime Rate Cap;

 

(10) the Origination Date of the Mortgage Loan;

 

(11) the stated maturity date;

 

(12) the amount of the Monthly Payment at origination;

 

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

 

(14) the original principal amount of the Mortgage Loan;

 

(15) the scheduled Stated 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 on or before the related Cut-off Date whether or not collected;

 

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

 

(17) a code indicating the documentation style (i.e. full, alternative, etc.);

 

(18) the number of times during the twelve (12) month period preceding the
related Closing Date that any Monthly Payment has been received after the month
of its scheduled due date;

 

(19) the date on which the first payment is or was due;

 

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(20) a code indicating whether or not the Mortgage Loan is the subject of a
Primary Mortgage Insurance Policy and the name of the related insurance carrier;

 

(21) a code indicating whether or not the Mortgage Loan is currently convertible
and the conversion spread;

 

(22) the last Due Date on which a Monthly Payment was actually applied to the
unpaid principal balance of the Mortgage Loan.

 

(23) product type (i.e. fixed, adjustable, 3/1, 5/1, etc.);

 

(24) credit score and/or mortgage score, if applicable;

 

(25) a code indicating whether or not the Mortgage Loan has a prepayment penalty
and if so, the amount and term thereof;

 

(26) the Current Appraised Value of the Mortgage Loan and Current LTV, if
applicable;

 

(27) a code indicating whether the Mortgage Loan is a MERS Mortgage Loan and the
MERS number, if applicable; and

 

(28) a code indicating whether or not the Mortgage Loan is the subject of a
Lender Primary Mortgage Insurance Policy and the name of the related insurance
carrier and the Lender Paid Mortgage Insurance Rate;

 

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

 

(1) the number of Mortgage Loans;

 

(2) the current aggregate outstanding principal balance of the Mortgage Loans;

 

(3) the weighted average Mortgage Interest Rate of the Mortgage Loans;

 

(4) the weighted average maturity of the Mortgage Loans; and

 

(5) the weighted average months to next Adjustment Date;

 

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

 

Mortgaged Property: The underlying real property securing repayment of a
Mortgage Note, consisting of a single parcel of real estate or contiguous
parcels of real estate bearing one legal

 

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description and tax assessment number and considered to be real estate under the
laws of the state in which such real property is located which may include
condominium units and planned unit developments, improved by a residential
dwelling; 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, a leasehold estate of the Mortgage, the term of which
is equal to or longer than the term of the Mortgage.

 

Mortgagor: The obligor on a Mortgage Note.

 

Net Liquidation Proceeds: As to any Mortgage Loan, Liquidation Proceeds net of
unreimbursed Servicing Advances, Servicing Fees and Monthly Advances and
expenses incurred by the Servicer in connection with the liquidation of the
Mortgage Loan and the related Mortgaged Property.

 

Nonrecoverable Advance: Any advance previously made by the Servicer pursuant to
Section 5.03 or any Servicing Advance which, in the good faith judgment of the
Servicer, may not be ultimately recoverable by the Servicer from Liquidation
Proceeds or otherwise. The determination by the Servicer that it has made a
Nonrecoverable Advance, shall be evidenced by an Officer’s Certificate of the
Servicer delivered to the Purchaser and the Master Servicer and detailing the
reasons for such determination.

 

OCC: Office of the Comptroller of the Currency, its successors and assigns.

 

Officers’ Certificate: A certificate signed by the Chairman of the Board, the
Vice Chairman of the Board, the President, a Senior Vice President or a Vice
President or by the Treasurer or the Secretary or one of the Assistant
Treasurers or Assistant Secretaries of the Company or Servicer, and delivered to
the Purchaser as required by this Agreement.

 

Opinion of Counsel: A written opinion of counsel, who may be an employee of the
party on behalf of whom the opinion is being given, reasonably acceptable to the
Purchaser.

 

Origination Date: The date on which a Mortgage Loan funded, which date shall
not, in connection with a Refinanced Mortgage Loan, be the date of the funding
of the debt being refinanced, but rather the closing of the debt currently
outstanding under the terms of the Mortgage Loan Documents.

 

OTS: Office of Thrift Supervision, its successors and assigns.

 

Periodic Rate Cap: As to each adjustable rate Mortgage Loan, the maximum
increase or decrease in the Mortgage Interest Rate on any Adjustment Date, as
set forth in the related Mortgage Note and the related Mortgage Loan Schedule.

 

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Permitted Investments: Any one or more of the following obligations or
securities:

 

(i) direct obligations of, and obligations fully guaranteed by the United States
of America or any agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the United
States of America;

 

(ii) (a) demand or time deposits, federal funds or bankers’ acceptances issued
by any depository institution or trust company incorporated under the laws of
the United States of America or any state thereof and subject to supervision and
examination by federal and/or state banking authorities, provided that the
commercial paper and/or the short-term deposit rating and/or the long-term
unsecured debt obligations or deposits of such depository institution or trust
company at the time of such investment or contractual commitment providing for
such investment are rated in one of the two highest rating categories by each
Rating Agency and (b) any other demand or time deposit or certificate of deposit
that is fully insured by the FDIC;

 

(iii) repurchase obligations with a term not to exceed thirty (30) days and with
respect to (a) any security described in clause (i) above and entered into with
a depository institution or trust company (acting as principal) described in
clause (ii)(a) above;

 

(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
that are rated in one of the two highest rating categories by each Rating Agency
at the time of such investment or contractual commitment providing for such
investment; provided, however, that securities issued by any particular
corporation will not be Permitted Investments to the extent that investments
therein will cause the then outstanding principal amount of securities issued by
such corporation and held as Permitted Investments to exceed 10% of the
aggregate outstanding principal balances of all of the Mortgage Loans and
Permitted Investments;

 

(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 one year after the date of issuance thereof) which are rated in one of
the two highest rating categories by each Rating Agency at the time of such
investment;

 

(vi) any other demand, money market or time deposit, obligation, security or
investment as may be acceptable to each Rating Agency as evidenced in writing by
each Rating Agency; and

 

(vii) any money market funds the collateral of which consists of obligations
fully guaranteed by the United States of America or any agency or
instrumentality of the United States of America the obligations of which are
backed by the full faith and

 

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credit of the United States of America (which may include repurchase obligations
secured by collateral described in clause (i)) and other securities and which
money market funds are rated in one of the two highest rating categories by each
Rating Agency.

 

provided, however, that no instrument or security shall be a Permitted
Investment if such instrument or security evidences a right to receive only
interest payments with respect to the obligations underlying such instrument or
if such security provides for payment of both principal and interest with a
yield to maturity in excess of 120% of the yield to maturity at par or if such
investment or security is purchased at a price greater than par.

 

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

 

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

 

Prepayment Period: With respect to any Remittance Date, the calendar month
preceding the month in which such Remittance Date occurs.

 

Primary Mortgage Insurance Policy: Each primary policy of mortgage insurance
represented to be in effect pursuant to Section 3.02(hh), or any replacement
policy therefor obtained by the Servicer pursuant to Section 4.08.

 

Prime Rate: The prime rate announced to be in effect from time to time as
published as the average rate in the Wall Street Journal (Northeast Edition).

 

Principal Prepayment: Any payment or other recovery of principal on a Mortgage
Loan full or partial which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium 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.

 

Purchase Price: As defined in Section 2.02.

 

Purchaser: EMC Mortgage Corporation, its successors in interest and assigns.

 

Qualified Appraiser: An appraiser, duly appointed by the Servicer, who had no
interest, direct or indirect in the Mortgaged Property or in any loan made on
the security thereof, and whose

 

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compensation is not affected by the approval or disapproval of the Mortgage
Loan, and such appraiser and the appraisal made by such appraiser both satisfy
the requirements of Title XI of FIRREA and the regulations promulgated
thereunder and the requirements of Fannie Mae, all as in effect on the date the
Mortgage Loan was originated.

 

Qualified Insurer: An insurance company duly qualified as such under the laws of
the states in which the Mortgaged Properties are located, duly authorized and
licensed in such states to transact the applicable insurance business and to
write the insurance provided, approved as an insurer by Fannie Mae or FHLMC.

 

Rating Agency: Standard & Poor’s, Fitch, Inc. or, in the event that some or all
of the ownership of the Mortgage Loans is evidenced by mortgage-backed
securities, the nationally recognized rating agencies issuing ratings with
respect to such securities, if any.

 

Refinanced Mortgage Loan: A Mortgage Loan which was made to a Mortgagor who
owned the Mortgaged Property prior to the origination of such Mortgage Loan and
the proceeds of which were used in whole or part to satisfy an existing
mortgage.

 

REMIC: A “real estate mortgage investment conduit,” as such term is defined in
Section 860D of the Code.

 

REMIC Provisions: The provisions of the federal income tax law relating to
REMICs, which appear at Sections 860A through 860G of the Code, and the related
provisions and regulations promulgated thereunder, as the foregoing may be in
effect from time to time.

 

Remittance Date: The 18th day of any month, beginning with the First Remittance
Date, or if such 18th day is not a Business Day, the first Business Day
immediately preceding such 18th day.

 

REO Disposition: The final sale by the Servicer of any REO Property.

 

REO Disposition Proceeds: Amounts received by the Servicer in connection with a
related REO Disposition.

 

REO Property: A Mortgaged Property acquired by the Servicer on behalf of the
Purchaser as described in Section 4.13.

 

Repurchase Price: With respect to any Mortgage Loan, a price equal to (i) the
product of the greater of 100% or the percentage of par as stated in the
Confirmation multiplied by the Stated Principal Balance of such Mortgage Loan on
the repurchase date, plus (ii) interest on such outstanding principal balance at
the Mortgage Loan Remittance Rate from the last date through which interest has
been paid and distributed to the Purchaser to the end of the month of
repurchase, plus, (iii) third party expenses incurred in connection with the
transfer of the Mortgage Loan being repurchased; less amounts received or
advanced in respect of such repurchased Mortgage Loan which are being held in
the Custodial Account for distribution in the month of repurchase.

 

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SAIF: The Savings Association Insurance Fund, or any successor thereto.

 

Servicer: HomeBanc Corp., its successors in interest and assigns, as permitted
by this Agreement.

 

Servicing Advances: All customary, reasonable and necessary “out of pocket”
costs and expenses (including reasonable attorneys’ fees and disbursements)
incurred in the performance by the Servicer of its servicing obligations,
including, but not limited to, the cost of (a) the preservation, restoration and
protection of the Mortgaged Property, (b) any enforcement, administrative or
judicial proceedings, or any legal work or advice specifically related to
servicing the Mortgage Loans, including but not limited to, foreclosures,
bankruptcies, condemnations, drug seizures, elections, foreclosures by
subordinate or superior lienholders, and other legal actions incidental to the
servicing of the Mortgage Loans (provided that such expenses are reasonable and
that the Servicer specifies the Mortgage Loan(s) to which such expenses relate
and, upon Purchaser’s request, provides documentation supporting such expense
(which documentation would be acceptable to Fannie Mae), and provided further
that any such enforcement, administrative or judicial proceeding does not arise
out of a breach of any representation, warranty or covenant of the Company or
Servicer hereunder), (c) the management and liquidation of the Mortgaged
Property if the Mortgaged Property is acquired in full or partial satisfaction
of the Mortgage, (d) taxes, assessments, water rates, sewer rates and other
charges which are or may become a lien upon the Mortgaged Property, and Primary
Mortgage Insurance Policy premiums and fire and hazard insurance coverage, (e)
any expenses reasonably sustained by the Servicer with respect to the
liquidation of the Mortgaged Property in accordance with the terms of this
Agreement and (f) compliance with the obligations under Section 4.08.

 

Servicing Fee: With respect to each Mortgage Loan, the amount of the annual fee
the Purchaser shall pay to the Servicer, which shall, for a period of one full
month, be equal to one-twelfth of the product of (a) the Servicing Fee Rate and
(b) the outstanding principal balance of such Mortgage Loan. Such fee shall be
payable monthly, computed on the basis of the same principal amount and period
respecting which any related interest payment on a Mortgage Loan is computed.
The obligation of the Purchaser to pay the Servicing Fee is limited to, and the
Servicing Fee is payable solely from, the interest portion of such Monthly
Payment collected by the Servicer, or as otherwise provided under Section 4.05
and in accordance with the Fannie Mae Guide(s).

 

Servicing Fee Rate: As set forth in the Term Sheet.

 

Servicing File: With respect to each Mortgage Loan, the file retained by the
Servicer, which may be in electronic media so long as original documents are not
required for purposes of realization of Liquidation Proceeds, REO Disposition
Proceeds, Condemnation Proceeds or Insurance Proceeds, consisting of all
documents in the Mortgage File which are not delivered to the Purchaser and the
Mortgage Loan Documents listed in Exhibit A, the originals of such Mortgage Loan
Documents which are delivered to the Purchaser or its designee pursuant to
Section 2.04.

 

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

 

Stated Principal Balance: As to each Mortgage Loan as of any date of
determination, (i) the principal balance of such Mortgage Loan at the Cut-off
Date after giving effect to payments of principal due on or before such date,
whether or not received, minus (ii) all amounts previously distributed to the
Purchaser with respect to the Mortgage Loan representing payments or recoveries
of principal or advances in lieu thereof.

 

Subservicer: Any subservicer which is subservicing the Mortgage Loans pursuant
to a Subservicing Agreement. Any subservicer shall meet the qualifications set
forth in Section 4.01.

 

Subservicing Agreement: An agreement between the Servicer and a Subservicer, if
any, for the servicing of the Mortgage Loans.

 

Term Sheet: A supplemental agreement in the form attached hereto as Exhibit I
which shall be executed and delivered by the Company, the Servicer and the
Purchaser to provide for the sale and servicing pursuant to the terms of this
Agreement of the Mortgage Loans listed on Schedule I attached thereto, which
supplemental agreement shall contain certain specific information relating to
such sale of such Mortgage Loans and may contain additional covenants relating
to such sale of such Mortgage Loans.

 

ARTICLE II

 

PURCHASE OF MORTGAGE LOANS; SERVICING OF MORTGAGE LOANS;

RECORD TITLE AND POSSESSION OF MORTGAGE FILES;

BOOKS AND RECORDS; CUSTODIAL AGREEMENT;

DELIVERY OF MORTGAGE LOAN DOCUMENTS

 

Section 2.01 Agreement to Purchase.

 

The Company agrees to sell and the Purchaser agrees to purchase the Mortgage
Loans having an aggregate Stated Principal Balance on the related Cut-off Date
set forth in the related Term Sheet in an amount as set forth in the
Confirmation, or in such other amount as agreed by the Purchaser and the Company
as evidenced by the actual aggregate Stated Principal Balance of the Mortgage
Loans accepted by the Purchaser on the related Closing Date, with servicing
retained by the Servicer. The Company shall deliver the related Mortgage Loan
Schedule attached to the related Term Sheet for the Mortgage Loans to be
purchased on the related Closing Date to the Purchaser at least two (2) Business
Days prior to the related Closing Date. The Mortgage Loans shall be sold
pursuant to this Agreement, and the related Term Sheet shall be executed and
delivered on the related Closing Date.

 

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Section 2.02 Purchase Price.

 

The Purchase Price for each Mortgage Loan shall be the percentage of par as
stated in the Confirmation (subject to adjustment as provided therein),
multiplied by the Stated Principal Balance, as of the related Cut-off Date, of
the Mortgage Loan listed on the related Mortgage Loan Schedule attached to the
related Term Sheet, after application of scheduled payments of principal due on
or before the related Cut-off Date whether or not collected.

 

In addition to the Purchase Price as described above, the Purchaser shall pay to
the Company, at closing, accrued interest on the Stated Principal Balance of
each Mortgage Loan as of the related Cut-off Date at the Mortgage Loan
Remittance Rate of each Mortgage Loan from the related Cut-off Date through the
day prior to the related Closing Date, inclusive.

 

The Purchase Price plus accrued interest as set forth in the preceding paragraph
shall be paid on the related Closing Date by wire transfer of immediately
available funds.

 

Purchaser shall be entitled to (1) all scheduled principal due after the related
Cut-off Date, (2) all other recoveries of principal collected on or after the
related Cut-off Date (provided, however, that all scheduled payments of
principal due on or before the related Cut-off Date and collected by the
Servicer or any successor servicer after the related Cut-off Date shall belong
to the Company), and (3) all payments of interest on the Mortgage Loans net of
applicable Servicing Fees (minus that portion of any such payment which is
allocable to the period prior to the related Cut-off Date). The outstanding
principal balance of each Mortgage Loan as of the related Cut-off Date is
determined after application of payments of principal due on or before the
related Cut-off Date whether or not collected, together with any unscheduled
principal prepayments collected prior to the related Cut-off Date; provided,
however, that payments of scheduled principal and interest prepaid for a Due
Date beyond the related Cut-off Date shall not be applied to the principal
balance as of the related Cut-off Date. Such prepaid amounts shall be the
property of the Purchaser. The Servicer shall deposit any such prepaid amounts
into the Custodial Account, which account is established for the benefit of the
Purchaser for subsequent remittance by the Servicer to the Purchaser.

 

Section 2.03 Servicing of Mortgage Loans.

 

Simultaneously with the execution and delivery of each Term Sheet, the Servicer
does hereby agree to directly service the Mortgage Loans listed on the related
Mortgage Loan Schedule attached to the related Term Sheet subject to the terms
of this Agreement and the related Term Sheet. The rights of the Purchaser to
receive payments with respect to the related Mortgage Loans shall be as set
forth in this Agreement.

 

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Section 2.04 Record Title and Possession of Mortgage Files; Maintenance of
Servicing Files.

 

As of the related Closing Date, the Company sold, transferred, assigned, set
over and conveyed to the Purchaser, without recourse, and the Company hereby
acknowledges that the Purchaser has, but subject to the terms of this Agreement
and the related Term Sheet, all the right, title and interest of the Company in
and to the Mortgage Loans. Company will deliver the Mortgage Files to the
Custodian designated by Purchaser, on or before the related Closing Date, at the
expense of the Company. The Servicer shall maintain a Servicing File, which
shall contain all documents necessary to service the Mortgage Loans. The
possession of each Servicing File by the Servicer is at the will of the
Purchaser, for the sole purpose of servicing the related Mortgage Loan, and such
retention and possession by the Servicer is in a custodial capacity only. From
the related Closing Date, the ownership of each Mortgage Loan, including the
Mortgage Note, the Mortgage, the contents of the related Mortgage File and all
rights, benefits, proceeds and obligations arising therefrom or in connection
therewith, has been vested in the Purchaser. All rights arising out of the
Mortgage Loans including, but not limited to, all funds received on or in
connection with the Mortgage Loans and all records or documents with respect to
the Mortgage Loans prepared by or which come into the possession of the Servicer
shall be received and held by the Servicer in trust for the benefit of the
Purchaser as the owner of the Mortgage Loans. Any portion of the Mortgage Files
retained by the Servicer shall be appropriately identified in the Servicer’s
computer system to clearly reflect the ownership of the Mortgage Loans by the
Purchaser. The Servicer shall release its custody of the contents of the
Mortgage Files only in accordance with written instructions of the Purchaser,
except when such release is required as incidental to the Servicer’s servicing
of the Mortgage Loans or is in connection with a repurchase of any Mortgage Loan
or Loans with respect thereto pursuant to this Agreement and the related Term
Sheet, such written instructions shall not be required.

 

Section 2.05 Books and Records.

 

The sale of each Mortgage Loan has been reflected on the Company’s balance sheet
and other financial statements as a financing of assets by the Company. The
Company shall be responsible for maintaining, and shall maintain, a complete set
of books and records for the Mortgage Loans that shall be appropriately
identified in the Company’s computer system to clearly reflect the ownership of
the Mortgage Loan by the Purchaser. In particular, the Company and/or the
Servicer shall maintain in its possession, available for inspection by the
Purchaser, or its designee and shall deliver to the Purchaser upon demand,
evidence of compliance with all federal, state and local laws, rules and
regulations, and requirements of Fannie Mae or FHLMC, as applicable, including
but not limited to documentation as to the method used in determining the
applicability of the provisions of the Flood Disaster Protection Act of 1973, as
amended, to the Mortgaged Property, documentation evidencing insurance coverage
of any condominium project as required by Fannie Mae or FHLMC, and periodic
inspection reports as required by Section 4.13. To the extent that original
documents are not required for purposes of realization of Liquidation Proceeds
or Insurance Proceeds, documents maintained by the Company and/or the Servicer
may be in the form of microfilm or microfiche.

 

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The Servicer shall maintain with respect to each Mortgage Loan and shall make
available for inspection by any Purchaser or its designee the related Servicing
File during the time the Purchaser retains ownership of a Mortgage Loan and
thereafter in accordance with applicable laws and regulations.

 

In addition to the foregoing, Company and/or the Servicer shall provide to any
supervisory agents or examiners that regulate Purchaser, including but not
limited to, the OTS, the FDIC and other similar entities, access, during normal
business hours, upon reasonable advance notice to Company and/or the Servicer
and without charge to Company and/or Servicer or such supervisory agents or
examiners, to any documentation regarding the Mortgage Loans that may be
required by any applicable regulator.

 

Section 2.06. Transfer of Mortgage Loans.

 

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. No transfer of a Mortgage Loan may be made
unless such transfer is in compliance with the terms hereof. For the purposes of
this Agreement, the Servicer shall be under no obligation to deal with any
person with respect to this Agreement or any Mortgage Loan unless a notice of
the transfer of such Mortgage Loan has been delivered to the Servicer in
accordance with this Section 2.06 and the books and records of the Servicer show
such person as the owner of the Mortgage Loan. The Purchaser may, subject to the
terms of this Agreement, sell and transfer one or more of the Mortgage Loans,
provided, however, that the transferee will not be deemed to be a Purchaser
hereunder binding upon the Servicer unless such transferee shall agree in
writing to be bound by the terms of this Agreement and an original counterpart
of the instrument of transfer in an Assignment and Assumption of this Agreement
substantially in the form of Exhibit D hereto executed by the transferee shall
have been delivered to the Servicer. The Purchaser also shall advise the
Servicer of the transfer. Upon receipt of notice of the transfer, the Servicer
shall mark its books and records to reflect the ownership of the Mortgage Loans
of such assignee, and the previous Purchaser shall be released from its
obligations hereunder with respect to the Mortgage Loans sold or transferred.

 

Section 2.07 Delivery of Mortgage Loan Documents.

 

The Company and/or the Servicer shall deliver and release to the Purchaser or
its designee the Mortgage Loan Documents in accordance with the terms of this
Agreement and the related Term Sheet. The documents enumerated as items (1),
(2), (3), (4), (5), (6), (7), (8), (9) and (16) in Exhibit A hereto shall be
delivered by the Company and/or the Servicer to the Purchaser or its designee no
later than three (3) Business Days prior to the related Closing Date pursuant to
a bailee letter agreement. All other documents in Exhibit A hereto, together
with all other documents executed in connection with the Mortgage Loan that the
Servicer may have in its possession, shall be retained by the Servicer in trust
for the Purchaser. If the Servicer cannot deliver the original recorded Mortgage
Loan Documents or the original policy of title insurance, including riders and
endorsements thereto, on the related Closing Date, the Servicer shall, promptly
upon receipt thereof and in any case not later

 

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than one hundred twenty (120) days from the related Closing Date, deliver such
original documents, including original recorded documents, to the Purchaser or
its designee (unless the Servicer is delayed in making such delivery by reason
of the fact that such documents shall not have been returned by the appropriate
recording office). If delivery is not completed within one hundred twenty (120)
days solely due to delays in making such delivery by reason of the fact that
such documents shall not have been returned by the appropriate recording office,
the Servicer shall deliver such document to Purchaser, or its designee, within
such time period as specified in a Servicer’s Officer’s Certificate. In the
event that documents have not been received by the date specified in the
Servicer’s Officer’s Certificate, a subsequent Servicer’s Officer’s Certificate
shall be delivered by such date specified in the prior Servicer’s Officer’s
Certificate, stating a revised date for receipt of documentation. The procedure
shall be repeated until the documents have been received and delivered. If
delivery is not completed within one hundred eighty (180) days solely due to
delays in making such delivery by reason of the fact that such documents shall
not have been returned by the appropriate recording office, the Servicer shall
continue to use its best efforts to effect delivery as soon as possible
thereafter, provided that if such documents are not delivered by the 270th day
from the date of the related Closing Date, the Company shall repurchase the
related Mortgage Loans at the Repurchase Price in accordance with Section 3.03
hereof.

 

For each Mortgage Loan that is not a MERS Mortgage Loan, the Company shall pay
all initial recording fees, if any, for the assignments of mortgage and any
other fees in connection with the transfer of all original documents to the
Purchaser or its designee. Company shall prepare, in recordable form, all
assignments of mortgage necessary to assign the Mortgage Loans to Purchaser, or
its designee. Company shall be responsible for recording the assignments of
mortgage.

 

In addition, in connection with the assignment of any MERS Mortgage Loan, the
Company agrees that it will cause, at its own expense, the MERS® System to
indicate that such Mortgage Loans have been assigned by the Company to the
Purchaser in accordance with this Agreement by including (or deleting, in the
case of Mortgage Loans which are repurchased in accordance with this Agreement)
in such computer files the information required by the MERS® System to identify
the Purchaser of such Mortgage Loans. The Company further agrees that it will
not alter the information referenced in this paragraph with respect to any
Mortgage Loan during the term of this Agreement unless and until such Mortgage
Loan is repurchased in accordance with the terms of this Agreement.

 

Servicer shall provide an original or duplicate original of the title insurance
policy to Purchaser or its designee no later than ninety (90) days of the
receipt of the recorded documents from the applicable recording office.

 

Any review by the Purchaser, or its designee, of the Mortgage Files shall in no
way alter or reduce the Company’s or the Servicer’s obligations hereunder.

 

If the Purchaser or its designee discovers any defect with respect to a Mortgage
File, the Purchaser shall, or shall cause its designee to, give written
specification of such defect to the Servicer and the Company which may be given
in the exception report or the certification delivered pursuant to this Section
2.07, or otherwise in writing and the Company shall cure or repurchase such
Mortgage Loan in accordance with Section 3.03.

 

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The Servicer shall forward to the Purchaser, or its designee, original documents
evidencing an assumption, modification, consolidation or extension of any
Mortgage Loan entered into in accordance with Section 4.01 or 6.01 within one
week of their execution; provided, however, that the Servicer shall provide the
Purchaser, or its designee, with a certified true copy of any such document
submitted for recordation within one week of its execution, and shall provide
the original of any document submitted for recordation or a copy of such
document certified to be a true and complete copy of the original within sixty
(60) days of its submission for recordation.

 

From time to time the Servicer may have a need for Mortgage Loan Documents to be
released from Purchaser, or its designee. Purchaser shall, or shall cause its
designee, upon the written request of the Servicer, within ten (10) Business
Days, deliver to the Servicer, any requested documentation previously delivered
to Purchaser as part of the Mortgage File, provided that such documentation is
promptly returned to Purchaser, or its designee, when the Servicer no longer
requires possession of the document, and provided that during the time that any
such documentation is held by the Servicer, such possession is in trust for the
benefit of Purchaser. Servicer shall indemnify Purchaser, and its designee, from
and against any and all losses, claims, damages, penalties, fines, forfeitures,
costs and expenses (including court costs and reasonable attorney’s fees)
resulting from or related to the loss, damage, or misplacement of any
documentation delivered to Servicer pursuant to this paragraph.

 

Section 2.08 Quality Control Procedures.

 

Each of the Company and the Servicer must have an internal quality control
program that verifies, on a regular basis, the existence and accuracy of the
legal documents, credit documents, property appraisals, and underwriting
decisions. The program must be capable of evaluating and monitoring the overall
quality of its loan production and servicing activities. The program is to
ensure that the Mortgage Loans are originated and serviced in accordance with
prudent mortgage banking practices and accounting principles; guard against
dishonest, fraudulent, or negligent acts; and guard against errors and omissions
by officers, employees, or other authorized persons.

 

Section 2.09 Near-term Principal Prepayments; Near Term Payment Defaults

 

In the event any Principal Prepayment in full is made by a Mortgagor on or prior
to three months after the related Closing Date, the Company shall remit to the
Purchaser an amount equal to the excess, if any, of the Purchase Price
Percentage over par multiplied by the amount of such Principal Prepayment. Such
remittance shall be made by the Company to Purchaser no later than the third
Business Day following receipt of such Principal Prepayment by the Company.

 

In the event either of the first three (3) scheduled Monthly Payments which are
due under any Mortgage Loan after the related Cut-off Date are not made during
the month in which such Monthly Payments are due, then not later than five (5)
Business Days after notice to the Company by Purchaser (and at Purchaser’s sole
option), the Company, shall repurchase such Mortgage Loan from the Purchaser
pursuant to the repurchase provisions contained in this Subsection 3.03.

 

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Section 2.10 Modification of Obligations. Purchaser may, without any notice to
Company or the Servicer, extend, compromise, renew, release, change, modify,
adjust or alter, by operation of law or otherwise, any of the obligations of the
Mortgagors or other persons obligated under a Mortgage Loan without releasing or
otherwise affecting the obligations of Company or the Servicer under this
Agreement, or with respect to such Mortgage Loan, except to the extent
Purchaser’s extension, compromise, release, change, modification, adjustment, or
alteration affects Company’s or Servicer’s ability to collect the Mortgage Loan
or realize on the security of the Mortgage, but then only to the extent such
action has such effect or reduces the Servicing Fee.

 

Section 2.11 Guarantee of Company’s Obligations under this Agreement.

 

The Servicer guarantees the performance by the Company of the Company’s
obligations under this Agreement, including without limitation, the repurchase
and substitution obligations of the Company pursuant to Section 3.03 and the
indemnification obligations of the Company pursuant to Section 8.01.

 

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ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF

THE COMPANY AND THE SERVICER; REPURCHASE; REVIEW OF MORTGAGE LOANS

 

Section 3.01 Representations and Warranties of the Company and Servicer.

 

The Company and the Servicer each represent, warrant and covenant to the
Purchaser that, as of the related Closing Date or as of such date specifically
provided herein:

 

(a) Each of the Company and the Servicer is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all licenses necessary to carry out its business as now being conducted,
and is licensed and qualified to transact business in and is in good standing
under the laws of each state in which any Mortgaged Property is located or is
otherwise exempt under applicable law from such licensing or qualification or is
otherwise not required under applicable law to effect such licensing or
qualification and no demand for such licensing or qualification has been made
upon such Company or Servicer by any such state, and in any event such Company
or Servicer is in compliance with the laws of any such state to the extent
necessary to ensure the enforceability of each Mortgage Loan and the servicing
of the Mortgage Loans in accordance with the terms of this Agreement;

 

(b) Each of the Company and the Servicer, as applicable, has the full power and
authority and legal right to hold, transfer and convey each Mortgage Loan, to
sell each Mortgage Loan and to execute, deliver and perform, and to enter into
and consummate all transactions contemplated by this Agreement and the related
Term Sheet and to conduct its business as presently conducted, has duly
authorized the execution, delivery and performance of this Agreement and the
related Term Sheet and any agreements contemplated hereby, has duly executed and
delivered this Agreement and the related Term Sheet, and any agreements
contemplated hereby, and this Agreement and the related Term Sheet and each
Assignment to the Purchaser and any agreements contemplated hereby, constitutes
a legal, valid and binding obligation of each of the Company and the Servicer,
enforceable against it in accordance with its terms, and all requisite corporate
action has been taken by each of the Company and the Servicer to make this
Agreement and the related Term Sheet and all agreements contemplated hereby
valid and binding upon each of the Company and the Servicer in accordance with
their terms;

 

(c) Neither the execution and delivery of this Agreement and the related Term
Sheet, nor the origination or purchase of the Mortgage Loans by the Company, the
sale of the Mortgage Loans to the Purchaser, the consummation of the
transactions contemplated hereby, or the fulfillment of or compliance with the
terms and conditions of this Agreement and the related Term Sheet will conflict

 

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with any of the terms, conditions or provisions of the Company’s or the
Servicer’s charter or by-laws or materially conflict with or result in a
material breach of any of the terms, conditions or provisions of any legal
restriction or any agreement or instrument to which the Company or the Servicer
is now a party or by which it is bound, or constitute a default or result in an
acceleration under any of the foregoing, or result in the material violation of
any law, rule, regulation, order, judgment or decree to which the Company or the
Servicer or their properties are subject, or impair the ability of the Purchaser
to realize on the Mortgage Loans.

 

(d) There is no litigation, suit, proceeding or investigation pending or, to the
best of Company’s and Servicer’s knowledge, threatened, or any order or decree
outstanding, with respect to the Company or the Servicer which, either in any
one instance or in the aggregate, is reasonably likely to have a material
adverse effect on the sale of the Mortgage Loans, the execution, delivery,
performance or enforceability of this Agreement and the related Term Sheet, or
which is reasonably likely to have a material adverse effect on the financial
condition of the Company or the Servicer.

 

(e) No consent, approval, authorization or order of any court or governmental
agency or body is required for the execution, delivery and performance by the
Company or the Servicer of or compliance by the Company or the Servicer with
this Agreement or the related Term Sheet, or the sale of the Mortgage Loans and
delivery of the Mortgage Files to the Purchaser or the consummation of the
transactions contemplated by this Agreement or the related Term Sheet, except
for consents, approvals, authorizations and orders which have been obtained;

 

(f) The consummation of the transactions contemplated by this Agreement or the
related Term Sheet is in the ordinary course of business of each of the Company
and the Servicer, and the transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Company pursuant to this Agreement or the related
Term Sheet are not subject to bulk transfer or any similar statutory provisions
in effect in any applicable jurisdiction;

 

(g) The origination and servicing practices used by the Company and the
Servicer, as applicable, and any prior originator or servicer with respect to
each Mortgage Note and Mortgage have been legal and in accordance with
applicable laws and regulations and the Mortgage Loan Documents, and in all
material respects proper and prudent in the mortgage origination and servicing
business. Each Mortgage Loan has been serviced in all material respects with
Accepted Servicing Practices. With respect to escrow deposits and payments that
the Servicer, on behalf of an investor, is entitled to collect, all such
payments are in the possession of, or under the control of, the Servicer, and
there exist no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. All escrow payments have
been collected in full compliance with state and federal law and the provisions
of the related Mortgage Note and Mortgage. As to any Mortgage Loan that is the
subject of an escrow, escrow of funds is not prohibited by applicable law and
has been established in an amount sufficient to pay for every escrowed item that
remains unpaid and has been assessed but is not yet due and payable. No escrow
deposits or other charges or payments due under the Mortgage Note have been
capitalized under any Mortgage or the related Mortgage Note;

 

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(h) Neither the Company nor the Servicer has knowledge of any circumstances or
condition with respect to the Mortgage, the Mortgaged Property, the Mortgagor or
the Mortgagor’s credit standing that could reasonably be expected to cause
investors to regard the Mortgage Loan as an unacceptable investment, cause such
Mortgage Loan to become delinquent or adversely affect the value or the
marketability of the Mortgage Loan. The Company did not select the Mortgage
Loans sold to Purchaser based on any adverse selection of mortgage loans in its
portfolio that met Purchaser’s purchase parameters for this transaction (as such
parameters are set forth in the Confirmation), including without limitation, the
location or condition of the Mortgaged Property, payment pattern of the borrower
or any other factor that may adversely affect the expected cost of foreclosing,
owning or holding the Mortgage Loans or related Mortgaged Property or collecting
the insurance or guarantee proceeds related thereto;

 

(i) The Company will treat the sale of the Mortgage Loans to the Purchaser as a
financing for accounting purposes and for federal income tax purposes;

 

(j) Servicer is an approved seller/servicer of residential mortgage loans for
Fannie Mae, FHLMC and HUD, with such facilities, procedures and personnel
necessary for the sound servicing of such mortgage loans. The Servicer is duly
qualified, licensed, registered and otherwise authorized under all applicable
federal, state and local laws, and regulations, if applicable, and is in good
standing to sell mortgage loans to and service mortgage loans for Fannie Mae and
FHLMC and no event has occurred which would make Servicer unable to comply with
eligibility requirements or which would require notification to either Fannie
Mae or FHLMC;

 

(k) Each of the Company and the Servicer does not believe, nor does it have any
cause or reason to believe, that it cannot perform each and every covenant
contained in this Agreement or the related Term Sheet. Each of the Company and
the Servicer is solvent and the sale of the Mortgage Loans will not cause the
Company or the Servicer to become insolvent. The sale of the Mortgage Loans is
not undertaken with the intent to hinder, delay or defraud any of the Company’s
or the Servicer’s creditors;

 

(l) No statement, tape, diskette, form, report or other document prepared by, or
on behalf of, Company or the Servicer pursuant to this Agreement or the related
Term Sheet or in connection with the transactions contemplated hereby, contains
or will, as of the date such documentation is delivered by the Company or the
Servicer, contain any statement that is or will be inaccurate or misleading in
any material respect;

 

(m) The Servicer acknowledges and agrees that the Servicing Fee represents
reasonable compensation for performing such services and that the entire
Servicing Fee shall be treated by the Servicer, for accounting and tax purposes,
as compensation for the servicing and administration of the Mortgage Loans
pursuant to this Agreement. In the opinion of Company, the consideration
received by Company upon the sale of the Mortgage Loans to Purchaser under this
Agreement and the related Term Sheet constitutes fair consideration for the
Mortgage Loans under current market conditions.

 

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(n) Each of the Company and the Servicer has delivered to the Purchaser
financial statements of its parent, for its last two complete fiscal years. All
such financial information fairly presents the pertinent results of operations
and financial position for the period identified and has been prepared in
accordance with GAAP consistently applied throughout the periods involved,
except as set forth in the notes thereto. There has been no change in the
business, operations, financial condition, properties or assets of the Company
or the Servicer since the date of the Company’s and Servicer’s financial
information that would have a material adverse effect on its ability to perform
its obligations under this Agreement;

 

(o) The Company has not dealt with any broker, investment banker, agent or other
person that may be entitled to any commission or compensation in connection with
the sale of the Mortgage Loans;

 

Section 3.02 Representations and Warranties as to Individual Mortgage Loans.

 

References in this Section to percentages of Mortgage Loans refer in each case
to the percentage of the aggregate Stated Principal Balance of the Mortgage
Loans as of the related Cut-off Date, based on the outstanding Stated Principal
Balances of the Mortgage Loans as of the related Cut-off Date, and giving effect
to scheduled Monthly Payments due on or prior to the related Cut-off Date,
whether or not received. References to percentages of Mortgaged Properties
refer, in each case, to the percentages of expected aggregate Stated Principal
Balances of the related Mortgage Loans (determined as described in the preceding
sentence). The Company hereby represents and warrants to the Purchaser, as to
each Mortgage Loan, as of the related Closing Date as follows:

 

(a) The information set forth in the Mortgage Loan Schedule attached to the
related Term Sheet is true, complete and correct in all material respects as of
the related Cut-Off Date;

 

(b) The Mortgage creates a valid, subsisting and enforceable first lien or a
first priority ownership interest in an estate in fee simple in real property
securing the related Mortgage Note subject to principles of equity, bankruptcy,
insolvency and other laws of general application affecting the rights of
creditors;

 

(c) All payments due prior to the related Cut-off Date for such Mortgage Loan
have been made as of the related Closing Date; the Mortgage Loan has not been
dishonored; there are no material defaults under the terms of the Mortgage Loan;
neither the Company, the Servicer nor any subservicer has advanced its own
funds, or induced, solicited or knowingly received any advance of funds from a
party other than the owner of the Mortgaged Property subject to the Mortgage,
directly or indirectly, for the payment of any amount required by the Mortgage
Loan. As of the related Closing Date, all of the Mortgage Loans will have an
actual Interest Paid to Date of their related Cut-off Date(or later) and will be
due for the scheduled monthly payment next succeeding the Cut-off Date (or
later), as evidenced by a posting to Servicer’s servicing collection system. No
payment under any Mortgage Loan is delinquent as of the related Closing Date nor
has any scheduled payment been delinquent at

 

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any time during the twelve (12) months prior to the month of the related Closing
Date. For purposes of this paragraph, a Mortgage Loan will be deemed delinquent
if any payment due thereunder was not paid by the Mortgagor in the month such
payment was due;

 

(d) The origination and collection practices used by the Company and the
Servicer with respect to each Mortgage Note and Mortgage have been in all
respects legal, proper, prudent and customary in the mortgage origination and
servicing industry. The Mortgage Loan has been serviced by the Servicer and any
predecessor servicer in accordance with the terms of the Mortgage Note. With
respect to escrow deposits and Escrow Payments, if any, all such payments are in
the possession of, or under the control of, the Servicer and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. No escrow deposits or Escrow Payments or
other charges or payments due the Servicer have been capitalized under any
Mortgage or the related Mortgage Note and no such escrow deposits or Escrow
Payments are being held by the Servicer for any work on a Mortgaged Property
which has not been completed;

 

(e) The terms of the Mortgage Note and the Mortgage have not been impaired,
waived, altered or modified in any respect, except by written instruments which
have been recorded to the extent any such recordation is required by law, or,
necessary to protect the interest of the Purchaser. No instrument of waiver,
alteration or modification has been executed except in connection with a
modification agreement and which modification agreement is part of the Mortgage
File and the terms of which are reflected in the related Mortgage Loan Schedule,
and no Mortgagor has been released, in whole or in part, from the terms thereof
except in connection with an assumption agreement and which assumption agreement
is part of the Mortgage File and the terms of which are reflected in the related
Mortgage Loan Schedule; the substance of any such waiver, alteration or
modification has been approved by the issuer of any related Primary Mortgage
Insurance Policy, Lender Primary Mortgage Insurance Policy and title insurance
policy, to the extent required by the related policies;

 

(f) The Mortgage Note and the Mortgage are not subject to any right of
rescission, set-off, counterclaim or defense, including, without limitation, the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render the
Mortgage Note or Mortgage unenforceable, in whole or in part, or subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set-off, counterclaim or defense has
been asserted with respect thereto; and as of the related Closing Date the
Mortgagor was not a debtor in any state or federal bankruptcy or insolvency
proceeding;

 

(g) All buildings or other customarily insured improvements upon the Mortgaged
Property are insured by an insurer acceptable under the Fannie Mae or FHLMC
Guides, against loss by fire, hazards of extended coverage and such other
hazards as are provided for in the Fannie Mae or FHLMC Guide, as well as all
additional requirements set forth in Section 4.10 of this Agreement. All such
standard hazard policies are in full force and effect and contain a standard
mortgagee clause naming the Servicer and its successors in interest and assigns
as loss payee and such clause is still in effect and all premiums due thereon
have been paid. If required by the Flood Disaster Protection Act of 1973, as
amended, the

 

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Mortgage Loan is covered by a flood insurance policy meeting the requirements of
the current guidelines of the Federal Insurance Administration which policy
conforms to Fannie Mae or FHLMC requirements and was issued by an insurer
acceptable to Fannie Mae or FHLMC, as well as all additional requirements set
forth in Section 4.10 of this Agreement. The Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at the Mortgagor’s cost and expense,
and on the Mortgagor’s failure to do so, authorizes the holder of the Mortgage
to maintain such insurance at the Mortgagor’s cost and expense and to seek
reimbursement therefor from the Mortgagor. Neither the Company, the Servicer
(nor any prior originator, servicer or subservicer of any of the Mortgage Loans)
nor any Mortgagor has engaged in any act or omission which has impaired or would
impair the coverage of any such policy, the benefits of the endorsement provided
for herein, or the validity and binding effect of either;

 

(h) Any and all requirements of any federal, state or local law including,
without limitation, usury, truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to the Mortgage Loan have been complied with in all material
respects; none of the Mortgage Loans are classified as a (a) a “high cost” loan
under the Home Ownership and Equity Protection Act of 1994 or (b) a “high cost”,
“threshold”, or “predatory” loan under any other applicable state, federal or
local law; each of the Company and the Servicer maintains, and shall maintain,
evidence of such compliance as required by applicable law or regulation and
shall make such evidence available for inspection at the Company’s and
Servicer’s office during normal business hours upon reasonable advance notice;

 

(i) The Mortgage has not been satisfied, canceled or subordinated, in whole or
in part, or rescinded, and the Mortgaged Property has not been released from the
lien of the Mortgage, in whole or in part nor has any instrument been executed
that would effect any such release, cancellation, subordination or rescission.
The Servicer has not waived the performance by the Mortgagor of any action, if
the Mortgagor’s failure to perform such action would cause the Mortgage Loan to
be in default, nor has the Servicer waived any default resulting from any action
or inaction by the Mortgagor;

 

(j) The Mortgage is a valid, subsisting, enforceable and perfected first lien on
the Mortgaged Property, including all buildings on the Mortgaged Property and
all installations and mechanical, electrical, plumbing, heating and air
conditioning systems affixed to such buildings, and all additions, alterations
and replacements made at any time with respect to the foregoing securing the
Mortgage Note’s original principal balance subject to principles of equity,
bankruptcy, insolvency and other laws of general application affecting the
rights of creditors. The Mortgage and the Mortgage Note do not contain any
evidence of any security interest or other interest or right thereto. Such lien
is free and clear of all adverse claims, liens and encumbrances having priority
over the first lien of the Mortgage subject only to (1) the lien of
non-delinquent current real property taxes and assessments not yet due and
payable, (2) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record as of the date of recording which are
acceptable to mortgage lending institutions generally and either (A) which are
referred to in the lender’s title insurance policy delivered to the originator
or otherwise considered in the appraisal made for the originator of the Mortgage
Loan, or (B) which do not adversely affect the residential use or Appraised
Value of the Mortgaged

 

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Property as set forth in such appraisal, and (3) other matters to which like
properties are commonly subject which do not individually or in the aggregate
materially interfere with the benefits of the security intended to be provided
by the Mortgage or the use, enjoyment, value or marketability of the related
Mortgaged Property. Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Mortgage Loan
establishes and creates a valid, subsisting, enforceable and perfected first
lien and first priority security interest on the property described therein, and
the Company has the full right to sell and assign the same to the Purchaser;

 

(k) The Mortgage Note and the related Mortgage are original and genuine and each
is the legal, valid and binding obligation of the maker thereof, enforceable in
all respects in accordance with its terms subject to principles of equity,
bankruptcy, insolvency and other laws of general application affecting the
rights of creditors, and the Company has taken all action necessary to transfer
such rights of enforceability to the Purchaser. All parties to the Mortgage Note
and the Mortgage had the legal capacity to enter into the Mortgage Loan and to
execute and deliver the Mortgage Note and the Mortgage. The Mortgage Loan
Documents are on forms acceptable to Fannie Mae and FHLMC. The Mortgage Note and
the Mortgage have been duly and properly executed by such parties. No fraud,
error, omission, misrepresentation, negligence or similar occurrence with
respect to a Mortgage Loan has taken place on the part of Company, the Servicer
or the Mortgagor, or, to the best of Company’s and the Servicer’s knowledge,
information and belief, and after due inquiry, on the part of any other party
involved in the origination or servicing of the Mortgage Loan. The proceeds of
the Mortgage Loan have been fully disbursed and there is no requirement for
future advances thereunder, and any and all requirements as to completion of any
on-site or off-site improvements and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred in
making or closing the Mortgage Loan and the recording of the Mortgage were paid,
and the Mortgagor is not entitled to any refund of any amounts paid or due under
the Mortgage Note or Mortgage;

 

(l) The Company is the sole owner and holder of the Mortgage Loan and the
indebtedness evidenced by the Mortgage Note. Upon the sale of the Mortgage Loan
to the Purchaser, the Servicer will retain the Mortgage File or any part thereof
with respect thereto not delivered to the Purchaser or the Purchaser’s designee
in trust only for the purpose of servicing and supervising the servicing of the
Mortgage Loan. Immediately prior to the transfer and assignment to the
Purchaser, the Mortgage Loan, including the Mortgage Note and the Mortgage, were
not subject to an assignment, sale or pledge to any person other than Purchaser,
and the Company had good and marketable title to and was the sole owner thereof
and had full right to transfer and sell the Mortgage Loan to the Purchaser free
and clear of any encumbrance, equity, lien, pledge, charge, claim or security
interest and has the full right and authority subject to no interest or
participation of, or agreement with, any other party, to sell and assign the
Mortgage Loan pursuant to this Agreement and following the sale of the Mortgage
Loan, the Purchaser will own such Mortgage Loan free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge, claim or
security interest. The Company intends to relinquish all rights to possess,
control and monitor the Mortgage Loan, except for the purposes of the Servicer
servicing the Mortgage Loan as set forth in this Agreement. After the related
Closing Date, neither the Company nor the Servicer will have any right to modify
or alter the terms of the sale of the

 

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Mortgage Loan and neither the Company nor the Servicer will have any obligation
or right to repurchase the Mortgage Loan or substitute another Mortgage Loan,
except as provided in this Agreement, or as otherwise agreed to by the Company
and/or the Servicer and the Purchaser;

 

(m) Each Mortgage Loan is covered by an ALTA lender’s title insurance policy or
other generally acceptable form of policy or insurance acceptable to Fannie Mae
or FHLMC (including adjustable rate endorsements), issued by a title insurer
acceptable to Fannie Mae or FHLMC and qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring (subject to the
exceptions contained in (j)(1), (2) and (3) above) the Servicer, its successors
and assigns, as to the first priority lien of the Mortgage in the original
principal amount of the Mortgage Loan and against any loss by reason of the
invalidity or unenforceability of the lien resulting from the provisions of the
Mortgage providing for adjustment in the Mortgage Interest Rate and Monthly
Payment. Where required by state law or regulation, the Mortgagor has been given
the opportunity to choose the carrier of the required mortgage title insurance.
The Servicer, its successors and assigns, is the sole insured of such lender’s
title insurance policy, such title insurance policy has been duly and validly
endorsed to the Purchaser or the assignment to the Purchaser of the Servicer’s
interest therein does not require the consent of or notification to the insurer
and such lender’s title insurance policy is in full force and effect and will be
in full force and effect upon the consummation of the transactions contemplated
by this Agreement. No claims have been made under such lender’s title insurance
policy, and no prior holder or servicer of the related Mortgage, including the
Company, the Servicer, nor any Mortgagor, has done, by act or omission, anything
which would impair the coverage of such lender’s title insurance policy;

 

(n) There is no default, breach, violation or event of acceleration existing
under the Mortgage or the related Mortgage Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure period,
and to the knowledge of the Company or the Servicer, would constitute a default,
breach, violation or event permitting acceleration; and neither the Company, the
Servicer, any subservicer, nor any prior mortgagee has waived any default,
breach, violation or event permitting acceleration;

 

(o) There are no mechanics’ or similar liens or claims which have been filed for
work, labor or material (and no rights are outstanding that under law could give
rise to such liens) affecting the related Mortgaged Property which are or may be
liens prior to or equal to the lien of the related Mortgage;

 

(p) All improvements subject to the Mortgage which were considered in
determining the Appraised Value of the Mortgaged Property lie wholly within the
boundaries and building restriction lines of the Mortgaged Property (and wholly
within the project with respect to a condominium unit) and no improvements on
adjoining properties encroach upon the Mortgaged Property except those which are
insured against by the title insurance policy referred to in clause (m) above
and all improvements on the property comply with all applicable zoning and
subdivision laws and ordinances;

 

(q) Each Mortgage Loan was originated by or for the Company pursuant to, and
conforms with, the Company’s underwriting guidelines attached as Exhibit H
hereto. The Mortgage Loan bears

 

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interest at an adjustable rate (if applicable) as set forth in the related
Mortgage Loan Schedule, and Monthly Payments under the Mortgage Note are due and
payable on the first day of each month. The Mortgage contains the usual and
enforceable provisions of the Company at the time of origination for the
acceleration of the payment of the unpaid principal amount of the Mortgage Loan
if the related Mortgaged Property is sold without the prior consent of the
mortgagee thereunder;

 

(r) The Mortgaged Property is not subject to any material damage. At origination
of the Mortgage Loan there was not, since origination of the Mortgage Loan there
has not been, and there currently is no proceeding pending for the total or
partial condemnation of the Mortgaged Property. Neither the Company nor the
Servicer has received notification that any such proceedings are scheduled to
commence at a future date;

 

(s) The related Mortgage contains customary and enforceable provisions such as
to render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
provided thereby, including, (1) in the case of a Mortgage designated as a deed
of trust, by trustee’s sale, and (2) otherwise by judicial foreclosure. There is
no homestead or other exemption available to the Mortgagor which would interfere
with the right to sell the Mortgaged Property at a trustee’s sale or the right
to foreclose the Mortgage;

 

(t) If the Mortgage constitutes a deed of trust, a trustee, authorized and duly
qualified if required under applicable law to act as such, has been properly
designated and currently so serves and is named in the Mortgage, and no fees or
expenses, except as may be required by local law, are or will become payable by
the Purchaser to the trustee under the deed of trust, except in connection with
a trustee’s sale or attempted sale after default by the Mortgagor;

 

(u) The Mortgage File contains an appraisal, if required, of the related
Mortgaged Property signed prior to the final approval of the mortgage loan
application by a Qualified Appraiser, approved by the Servicer, who had no
interest, direct or indirect, in the Mortgaged Property or in any loan made on
the security thereof, and whose compensation is not affected by the approval or
disapproval of the Mortgage Loan, and the appraisal and appraiser both satisfy
the requirements of Fannie Mae or FHLMC and Title XI of the Federal Institutions
Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Loan was originated. The
appraisal is in a form acceptable to Fannie Mae or FHLMC;

 

(v) All parties which have had any interest in the Mortgage, whether as
mortgagee, assignee, pledgee or otherwise, are (or, during the period in which
they held and disposed of such interest, were) (A) in compliance with any and
all applicable licensing requirements of the laws of the state wherein the
Mortgaged Property is located, and (B) (1) organized under the laws of such
state, or (2) qualified to do business in such state, or (3) federal savings and
loan associations or national banks or a Federal Home Loan Bank or savings bank
having principal offices in such state, or (4) not doing business in such state;

 

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(w) The related Mortgage Note is not and has not been secured by any collateral
except the lien of the corresponding Mortgage and the security interest of any
applicable security agreement or chattel mortgage referred to above and such
collateral does not serve as security for any other obligation;

 

(x) The Mortgagor has received and has executed, where applicable, all
disclosure materials required by applicable law with respect to the making of
such mortgage loans;

 

(y) The Mortgage Loan does not contain balloon or “graduated payment” features;
No Mortgage Loan is subject to a buydown agreement or contains any buydown
provision;

 

(z) The Mortgagor is not in bankruptcy and, the Mortgagor is not insolvent and
neither the Company nor the Servicer has knowledge of any circumstances or
conditions with respect to the Mortgage, the Mortgaged Property, the Mortgagor
or the Mortgagor’s credit standing that could reasonably be expected to cause
investors to regard the Mortgage Loan as an unacceptable investment, cause the
Mortgage Loan to become delinquent, or materially adversely affect the value or
marketability of the Mortgage Loan;

 

(aa) Each Mortgage Loan bears interest based upon a thirty (30) day month and a
three hundred and sixty (360) day year. The Mortgage Loans have an original term
to maturity of not more than thirty (30) years, with interest payable in arrears
on the first day of each month. As to each adjustable rate Mortgage Loan, on
each applicable Adjustment Date, the Mortgage Interest Rate will be adjusted to
equal the sum of the Index, plus the applicable Margin; provided, that the
Mortgage Interest Rate, on each applicable Adjustment Date, will not increase by
more than the Initial Rate Cap or Periodic Rate Cap, as applicable. Over the
term of each adjustable rate Mortgage Loan, the Mortgage Interest Rate will not
exceed such Mortgage Loan’s Lifetime Rate Cap. Each Mortgage Note requires a
monthly payment which is sufficient, during the period prior to the first
adjustment to the Mortgage Interest Rate, to fully amortize the outstanding
principal balance as of the first day of such period over the then remaining
term of such Mortgage Note and to pay interest at the related Mortgage Interest
Rate; provided however, with respect to any Interest Only Mortgage Loans, the
Mortgage Note allows a Monthly Payment of interest only during the first 10
years from origination, and after the first 10 years from origination, the
Mortgage Note requires a Monthly Payment of principal and interest, sufficient
to fully amortize the outstanding principal balance over the then remaining term
of such Mortgage Loan. As to each Mortgage Loan, if the related Mortgage
Interest Rate changes on an adjustment date, the then outstanding principal
balance will be reamortized over the remaining life of such Mortgage Loan. No
Mortgage Loan contains terms or provisions which would result in negative
amortization. None of the Mortgage Loans contain a conversion feature which
would cause the Mortgage Loan interest rate to convert to a fixed interest rate.
None of the Mortgage Loans are considered agricultural loans;

 

(bb) (INTENTIONALLY LEFT BLANK)

 

(cc) (INTENTIONALLY LEFT BLANK)

 

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(dd) (INTENTIONALLY LEFT BLANK)

 

(ee) (INTENTIONALLY LEFT BLANK)

 

(ff) (INTENTIONALLY LEFT BLANK)

 

(gg) (INTENTIONALLY LEFT BLANK)

 

(hh) In the event the Mortgage Loan had an LTV at origination greater than
80.00%, the excess of the principal balance of the Mortgage Loan over 75.0% of
the Appraised Value of the Mortgaged Property with respect to a Refinanced
Mortgage Loan, or the lesser of the Appraised Value or the purchase price of the
Mortgaged Property with respect to a purchase money Mortgage Loan was insured as
to payment defaults by a Primary Mortgage Insurance Policy issued by a Qualified
Insurer. No Mortgage Loan has an LTV over 95%. All provisions of such Primary
Mortgage Insurance Policy have been and are being complied with, such policy is
in full force and effect, and all premiums due thereunder have been paid. No
Mortgage Loan requires payment of such premiums, in whole or in part, by the
Purchaser. No action, inaction, or event has occurred and no state of facts
known to the Company or the Servicer exists that has, or will result in the
exclusion from, denial of, or defense to coverage. Any Mortgage Loan subject to
a Primary Mortgage Insurance Policy obligates the Mortgagor thereunder to
maintain the Primary Mortgage Insurance Policy, subject to state and federal
law, and to pay all premiums and charges in connection therewith. No action has
been taken or failed to be taken, on or prior to the Closing Date which has
resulted or will result in an exclusion from, denial of, or defense to coverage
under any Primary Mortgage Insurance Policy (including, without limitation, any
exclusions, denials or defenses which would limit or reduce the availability of
the timely payment of the full amount of the loss otherwise due thereunder to
the insured) whether arising out of actions, representations, errors, omissions,
negligence, or fraud of the Company, the Servicer or the Mortgagor, or for any
other reason under such coverage. The mortgage interest rate for the Mortgage
Loan as set forth on the related Mortgage Loan Schedule is net of any such
insurance premium. Any Mortgage Loan subject to a Lender Primary Mortgage
Insurance Policy obligates the Servicer to maintain the Lender Primary Insurance
Policy and to pay all premiums and charges in connection therewith;

 

(ii) The Assignment is in recordable form and is acceptable for recording under
the laws of the jurisdiction in which the Mortgaged Property is located;

 

(jj) Unless otherwise indicated on the Mortgage Loan Schedule, none of the
Mortgage Loans are secured by an interest in a leasehold estate. The Mortgaged
Property is located in the state identified in the related Mortgage Loan
Schedule and consists of a single parcel of real property or contiguous parcels
bearing one legal description and tax assessment number with a detached single
family residence erected thereon, or a townhouse, or a two-to-four family
dwelling, or an individual condominium unit in a condominium project, or an
individual unit in a planned unit development or a de minimis planned unit
development, provided, however, that no residence or dwelling is a single

 

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parcel of real property with a manufactured home not affixed to a permanent
foundation, or a mobile home. Any condominium unit or planned unit development
conforms with the Company’s underwriting guidelines. As of the date of
origination, no portion of any Mortgaged Property is used for commercial
purposes, and since the Origination Date to the best of the Company’s and the
Servicer’s knowledge, no portion of any Mortgaged Property has been, or
currently is, used for commercial purposes;

 

(kk) Monthly Payments on the Mortgage Loan commenced no more than sixty (60)
days after the funds were disbursed in connection with the Mortgage Loan. The
Mortgage Note is payable on the first day of each month in monthly installments
of principal, if applicable, and interest, which installments are subject to
change due to the adjustments to the Mortgage Interest Rate on each Adjustment
Date, with interest calculated and payable in arrears;

 

(ll) As of the Closing Date of the Mortgage Loan, the Mortgage Property was
lawfully occupied under applicable law, and all inspections, licenses and
certificates required to be made or issued with respect to all occupied portions
of the Mortgaged Property and, with respect to the use and occupancy of the
same, including but not limited to certificates of occupancy and fire
underwriting certificates, have been made or obtained from the appropriate
authorities;

 

(mm) There is no pending action or proceeding directly involving the Mortgaged
Property in which compliance with any environmental law, rule or regulation is
an issue; there is no violation of any environmental law, rule or regulation
with respect to the Mortgaged Property; and neither the Company nor the Servicer
has received any notice of any environmental hazard on the Mortgaged Property
and nothing further remains to be done to satisfy in full all requirements of
each such law, rule or regulation constituting a prerequisite to use and
enjoyment of said property;

 

(nn) The Mortgagor has not notified the Company or the Servicer, and neither the
Company nor the Servicer has knowledge of any relief requested or allowed to the
Mortgagor under the Servicemembers Civil Relief Act;

 

(oo) No Mortgage Loan is a construction or rehabilitation Mortgage Loan or was
made to facilitate the trade-in or exchange of a Mortgaged Property;

 

(pp) The Mortgagor for each Mortgage Loan is a natural person or an Illinois
land trust or an inter vivos revocable trust acceptable to Fannie Mae and/or
Freddie Mac;

 

(qq) None of the Mortgage Loans are Co-op Loans;

 

(rr) With respect to each Mortgage Loan that has a prepayment penalty feature,
each such prepayment penalty is enforceable and will be enforced by the Servicer
and each prepayment penalty is permitted pursuant to federal, state and local
law. No Mortgage Loan will impose a prepayment penalty for a term in excess of
five years from the date such Mortgage Loan was originated. Except as otherwise
set forth on the Mortgage Loan Schedule, with respect to each Mortgage Loan that
contains

 

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a prepayment penalty, such prepayment penalty is at least equal to the lesser of
(A) the maximum amount permitted under applicable law and (B) six months
interest at the related Mortgage Interest Rate on the amount prepaid in excess
of 20% of the original principal balance of such Mortgage Loan;

 

(ss) With respect to each Mortgage Loan either (i) the fair market value of the
Mortgaged Property securing such Mortgage Loan was at least equal to 80 percent
of the original principal balance of such Mortgage Loan at the time such
Mortgage Loan was originated or (ii) (a) the Mortgage Loan is only secured by
the Mortgage Property and (b) substantially all of the proceeds of such Mortgage
Loan were used to acquire or to improve or protect the Mortgage Property. For
the purposes of the preceding sentence, if the Mortgage Loan has been
significantly modified other than as a result of a default or a reasonable
foreseeable default, the modified Mortgage Loan will be viewed as having been
originated on the date of the modification;

 

(tt) The Mortgage Loan was originated by a mortgagee approved by the Secretary
of Housing and Urban Development pursuant to sections 203 and 211 of the
National Housing Act, a savings and loan association, a savings bank, a
commercial bank, credit union, insurance company or similar institution which is
supervised and examined by a federal or state authority;

 

(uu) None of the Mortgage Loans are simple interest Mortgage Loans and none of
the Mortgaged Properties are timeshares;

 

(vv) All of the terms of the Mortgage pertaining to interest rate adjustments,
payment adjustments and adjustments of the outstanding principal balance are
enforceable, all such adjustments have been properly made, including the mailing
of required notices, and such adjustments do not and will not affect the
priority of the Mortgage lien. With respect to each Mortgage Loan which has
passed its initial Adjustment Date, the Servicer has performed an audit of the
Mortgage Loan to determine whether all interest rate adjustments have been made
in accordance with the terms of the Mortgage Note and Mortgage;

 

(ww) Each Mortgage Note, each Mortgage, each Assignment and any other documents
required pursuant to this Agreement to be delivered to the Purchaser or its
designee, or its assignee for each Mortgage Loan, have been, on or before the
related Closing Date, delivered to the Purchaser or its designee, or its
assignee;

 

(xx) Each Mortgage Loan complies with, and each of the Company and the Servicer
and any subservicer has complied with, applicable local, state and federal laws,
regulations and other requirements including, without limitation, usury, equal
credit opportunity, real estate settlement procedures, the Federal
Truth-In-Lending Act, disclosure laws and all applicable predatory and abusive
lending laws and consummation of the transactions contemplated hereby, including
without limitation, the receipt of interest by the owner of such Mortgage Loan,
will not involve the violation of any such laws, rules or regulations. None of
the Mortgage Loans are (a) Mortgage Loans subject to 12 CFR Part 226.31, 12 CFR
Part 226.32 or 226.34 of Regulation Z, the regulation implementing TILA, which
implements the Home Ownership and Equity Protection Act of 1994, as amended, or
(b) except as

 

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may be provided in subparagraph (c) below, classified and/or defined, as a “high
cost”, “threshold”, “predatory” “high risk home loan” or “covered” loan (or a
similarly classified loan using different terminology under a law imposing
additional legal liability for mortgage loans having high interest rates, points
and or/fees) under any other applicable state, federal or local law including,
but not limited to, the States of Georgia, New York, North Carolina, Arkansas,
Kentucky or New Mexico or (c) Mortgage Loans subject to the New Jersey Home
Ownership Security Act of 2002 (the “Act”), unless such Mortgage Loan is a (1)
“Home Loan” as defined in the Act that is a first lien Mortgage Loan, which is
not a “High Cost Home Loan” as defined in the Act or (2) “Covered Home Loan” as
defined in the Act that is a first lien purchase money Mortgage Loan, which is
not a High Cost Home Loan under the Act. In addition to and notwithstanding
anything to the contrary herein, no Mortgage Loan for which the Mortgaged
Property is located in New Jersey is a Home Loan as defined in the Act that was
made, arranged, or assigned by a person selling either a manufactured home or
home improvements to the Mortgaged Property or was made by an originator to whom
the Mortgagor was referred by any such seller. Each Mortgage Loan is being (and
has been) serviced in accordance with Accepted Servicing Practices and
applicable state and federal laws, including, without limitation, the Federal
Truth-In-Lending Act and other consumer protection laws, real estate settlement
procedures, usury, equal credit opportunity and disclosure laws. Each of the
Company and the Servicer shall maintain in its possession, available for the
Purchaser’s inspection, as appropriate, and shall deliver to the Purchaser or
its designee upon demand, evidence of compliance with all such requirements;

 

(yy) There is no Mortgage Loan that was originated on or after October 1, 2002
and before March 7, 2003, which is secured by property located in the State of
Georgia;

 

(zz) No proceeds from any Mortgage Loan were used to finance single premium
credit insurance policies;

 

(aaa) Each Mortgage is in compliance with the anti-predatory lending eligibility
for purchase requirements of Fannie Mae’s Selling Guide;

 

(bbb) No borrower was encouraged or required to select a Mortgage Loan product
offered by the Mortgage Loan’s originator which is a higher cost product
designed for less creditworthy borrowers, unless at the time of the Mortgage
Loan’s origination, such borrower did not qualify taking into account credit
history and debt to income ratios for a lower cost credit product then offered
by the Mortgage Loan’s originator or any affiliate of the Mortgage Loan’s
originator. If, at the time of loan application, the borrower may have qualified
for a lower cost credit product then offered by any mortgage lending affiliate
of the Mortgage Loan’s originator, the Mortgage Loan’s originator referred the
borrower’s application to such affiliate for underwriting consideration;

 

(ccc) The methodology used in underwriting the extension of credit for each
Mortgage Loan employs objective mathematical principles which relate the
borrower’s income, assets and liabilities to the proposed payment and such
underwriting methodology does not rely on the extent of the borrower’s equity in
the collateral as the principal determining factor in approving such credit
extension. Such underwriting methodology confirmed that at the time of
origination (application/approval) the borrower had a reasonable ability to make
timely payments on the Mortgage Loan;

 

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(ddd) With respect to any Mortgage Loan that contains a provision permitting
imposition of a premium upon a prepayment prior to maturity: (i) prior to the
loan’s origination, the borrower agreed to such premium in exchange for a
monetary benefit, including but not limited to a rate or fee reduction, (ii)
prior to the loan’s origination, the borrower was offered the option of
obtaining a mortgage loan that did not require payment of such a premium, (iii)
the prepayment premium is disclosed to the borrower in the loan documents
pursuant to applicable state and federal law, and (iv) notwithstanding any state
or federal law to the contrary, the Servicer shall not impose such prepayment
premium in any instance when the mortgage debt is accelerated as the result of
the borrower’s default in making the loan payments; and

 

(eee) No borrower was required to purchase any credit life, disability, accident
or health insurance product as a condition of obtaining the extension of credit.
No borrower obtained a prepaid single premium credit life, disability, accident
or health insurance policy in connection with the origination of the Mortgage
Loan; No proceeds from any Mortgage Loan were used to purchase single premium
credit insurance policies as part of the origination of, or as a condition to
closing, such Mortgage Loan.

 

Section 3.03 Repurchase; Substitution.

 

It is understood and agreed that the representations and warranties set forth in
Sections 3.01 and 3.02 shall survive the sale of the Mortgage Loans and delivery
of the Mortgage Loan Documents to the Purchaser, or its designee, and shall
inure to the benefit of the Purchaser, notwithstanding any restrictive or
qualified endorsement on any Mortgage Note or Assignment or the examination, or
lack of examination, of any Mortgage File. Upon discovery by the Company, the
Servicer or the Purchaser of a breach of any of the foregoing representations
and warranties which materially and adversely affects the value of the Mortgage
Loans or the interest of the Purchaser in any Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other. The
Company shall have a period of sixty (60) days from the earlier of its discovery
or its receipt of notice of any such breach within which to correct or cure such
breach. The Company hereby covenants and agrees that if any such breach is not
corrected or cured within such sixty day period, the Company shall, at the
Purchaser’s option and not later than ninety (90) days of its discovery or its
receipt of notice of such breach, repurchase such Mortgage Loan at the
Repurchase Price or, with the Purchaser’s prior consent and at Purchaser’s sole
option, substitute a Mortgage Loan as provided below. In the event that any such
breach shall involve any representation or warranty set forth in Section 3.01,
and such breach is not cured within sixty (60) days of the earlier of either
discovery by or notice to the Company of such breach, all Mortgage Loans shall,
at the option of the Purchaser, be repurchased by the Company at the Repurchase
Price. Any such repurchase shall be accomplished by wire transfer of immediately
available funds to Purchaser in the amount of the Repurchase Price.

 

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If the Company is required to repurchase any Mortgage Loan pursuant to this
Section 3.03, the Company may, with the Purchaser’s prior consent and at
Purchaser’s sole option, within ninety (90) days from the related Closing Date,
remove such defective Mortgage Loan from the terms of this Agreement and
substitute another mortgage loan for such defective Mortgage Loan, in lieu of
repurchasing such defective Mortgage Loan. Any substitute Mortgage Loan is
subject to Purchaser acceptability. Any substituted Loans will comply with the
representations and warranties set forth in this Agreement as of the
substitution date

 

The Company and/or the Servicer shall amend the related Mortgage Loan Schedule
to reflect the withdrawal of the removed Mortgage Loan from this Agreement and
the substitution of such substitute Mortgage Loan therefor. Upon such amendment,
the Purchaser shall review the Mortgage File delivered to it relating to the
substitute Mortgage Loan. In the event of such a substitution, accrued interest
on the substitute Mortgage Loan for the month in which the substitution occurs
and any Principal Prepayments made thereon during such month shall be the
property of the Purchaser and accrued interest for such month on the Mortgage
Loan for which the substitution is made and any Principal Prepayments made
thereon during such month shall be the property of the Company. The principal
payment on a substitute Mortgage Loan due on the Due Date in the month of
substitution shall be the property of the Company and the principal payment on
the Mortgage Loan for which the substitution is made due on such date shall be
the property of the Purchaser.

 

It is understood and agreed that the obligation of the Company set forth in this
Section 3.03 to cure, repurchase or substitute for a defective Mortgage Loan,
and to indemnify Purchaser pursuant to Section 8.01, constitute the sole
remedies of the Purchaser respecting a breach of the foregoing representations
and warranties. If the Company fails to repurchase or substitute for a defective
Mortgage Loan in accordance with this Section 3.03, or fails to cure a defective
Mortgage Loan to Purchaser’s reasonable satisfaction in accordance with this
Section 3.03, or to indemnify Purchaser pursuant to Section 8.01, that failure
shall be an Event of Default and the Purchaser shall be entitled to pursue all
remedies available in this Agreement as a result thereof. No provision of this
paragraph shall affect the rights of the Purchaser to terminate this Agreement
for cause, as set forth in Sections 10.01 and 11.01.

 

Any cause of action against the Company relating to or arising out of the breach
of any representations and warranties made in Sections 3.01 and 3.02 shall
accrue as to any Mortgage Loan upon (i) the earlier of discovery of such breach
by the Company or the Servicer or notice thereof by the Purchaser to the Company
or the Servicer, (ii) failure by the Company to cure such breach or repurchase
such Mortgage Loan as specified above, and (iii) demand upon the Company by the
Purchaser for compliance with this Agreement.

 

In the event that any Mortgage Loan is held by a REMIC, notwithstanding any
contrary provision of this Agreement, with respect to any Mortgage Loan that is
not in default or as to which no default is imminent, no substitution pursuant
to Subsection 3.03 shall be made after the applicable REMIC’s “start up day” (as
defined in Section 860G(a) (9) of the Code), unless the Servicer has obtained an
Opinion of Counsel to the effect that such substitution will not (i) result in
the imposition

 

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of taxes on “prohibited transactions” of such REMIC (as defined in Section 860F
of the Code) or otherwise subject the REMIC to tax, or (ii) cause the REMIC to
fail to qualify as a REMIC at any time.

 

Section 3.04 Representations and Warranties of the Purchaser.

 

The Purchaser represents, warrants and convenants to the Company and the
Servicer that, as of the related Closing Date or as of such date specifically
provided herein:

 

(a) The Purchaser is a corporation, dully organized validly existing and in good
standing under the laws of the State of Delaware and is qualified to transact
business in, is in good standing under the laws of, and possesses all licenses
necessary for the conduct of its business in, each state in which any Mortgaged
Property is located or is otherwise except or not required under applicable law
to effect such qualification or license;

 

(b) The Purchaser has full power and authority to hold each Mortgage Loan, to
purchase each Mortgage Loan pursuant to this Agreement and the related Term
Sheet and to execute, deliver and perform, and to enter into and consummate all
transactions contemplated by this Agreement and the related Term Sheet and to
conduct its business as presently conducted, has duly authorized the execution,
delivery and performance of this Agreement and the related Term Sheet, has duly
executed and delivered this Agreement and the related Term Sheet;

 

(c) None of the execution and delivery of this Agreement and the related Term
Sheet, the purchase of the Mortgage Loans, the consummation of the transactions
contemplated hereby, or the fulfillment of or compliance with the terms and
conditions of this Agreement and the related Term Sheet will conflict with any
of the terms, conditions or provisions of the Purchaser’s charter or by-laws or
materially conflict with or result in a material breach of any of the terms,
conditions or provisions of any legal restriction or any agreement or instrument
to which the Purchaser is now a party or by which it is bound, or constitute a
default or result in an acceleration under any of the foregoing, or result in
the material violation of any law, rule, regulation, order, judgment or decree
to which the Purchaser or its property is subject;

 

(d) There is no litigation pending or to the best of the Purchaser’s knowledge,
threatened with respect to the Purchaser which is reasonably likely to have a
material adverse effect on the purchase of the related Mortgage Loans, the
execution, delivery or enforceability of this Agreement and the related Term
Sheet, or which is reasonably likely to have a material adverse effect on the
financial condition of the Purchaser;

 

(e) No consent, approval, authorization or order of any court or governmental
agency or body is required for the execution, delivery and performance by the
Purchaser of or compliance by the Purchaser with this Agreement and the related
Term Sheet, the purchase of the Mortgage Loans or the consummation of the
transactions contemplated by this Agreement and the related Term Sheet except
for consents, approvals, authorizations and orders which have been obtained;

 

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(f) The consummation of the transactions contemplated by this Agreement and the
related Term Sheet is in the ordinary course of business of the Purchaser;

 

(h) The Purchaser will treat the purchase of the Mortgage Loans from the Company
as a purchase for reporting, tax and accounting purposes; and

 

(i) The Purchaser does not believe, nor does it have any cause or reason to
believe, that it cannot perform each and every of its covenants contained in
this Agreement and the related Term Sheet.

 

The Purchaser shall indemnify each of the Company and the Servicer and hold it
harmless against any claims, proceedings, losses, damages, penalties, fines,
forfeitures, reasonable and necessary legal fees and related costs, judgments,
and other costs and expenses resulting from a breach by the Purchaser of the
representations and warranties contained in this Section 3.04. It is understood
and agreed that the obligations of the Purchaser set forth in this Section 3.04
to indemnify the Seller as provided herein constitute the sole remedies of the
Seller respecting a breach of the foregoing representations and warranties.

 

ARTICLE IV

 

ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

 

Section 4.01 Servicer to Act as Servicer.

 

The Servicer, as independent contract servicer, shall service and administer the
Mortgage Loans in accordance with this Agreement and with Accepted Servicing
Practices, and shall have full power and authority, acting alone, to do or cause
to be done any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement and with Accepted Servicing Practices and
exercise the same care that it customarily employs for its own account. Except
as set forth in this Agreement, the Servicer shall service the Mortgage Loans in
strict compliance with the servicing provisions of the Fannie Mae Guides
(special servicing option), which include, but are not limited to, provisions
regarding the liquidation of Mortgage Loans, the collection of Mortgage Loan
payments, the payment of taxes, insurance and other charges, the maintenance of
hazard insurance with a Qualified Insurer, the maintenance of mortgage
impairment insurance, the maintenance of fidelity bond and errors and omissions
insurance, inspections, the restoration of Mortgaged Property, the maintenance
of Primary Mortgage Insurance Policies and Lender Primary Mortgage Insurance
Policies, insurance claims, the title, management and disposition of REO
Property, permitted withdrawals with respect to REO Property, liquidation
reports, and reports of foreclosures and abandonments of Mortgaged Property, the
transfer of Mortgaged Property, the release of Mortgage Files, annual
statements, and examination of records and facilities. In the event of any
conflict, inconsistency or discrepancy between any of the

 

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servicing provisions of this Agreement and the related Term Sheet and any of the
servicing provisions of the Fannie Mae Guides, the provisions of this Agreement
shall control and be binding upon the Purchaser and the Servicer.

 

Consistent with the terms of this Agreement, the Servicer may waive, modify or
vary any term of any Mortgage Loan or consent to the postponement of any such
term or in any manner grant indulgence to any Mortgagor if in the Servicer’s
reasonable and prudent determination such waiver, modification, postponement or
indulgence is not materially adverse to the Purchaser, provided, however, that
unless the Servicer has obtained the prior written consent of the Purchaser, the
Servicer shall not permit any modification with respect to any Mortgage Loan
that would change the Mortgage Interest Rate, defer for more than ninety (90)
days or forgive any payment of principal or interest, reduce or increase the
outstanding principal balance (except for actual payments of principal) or
change the final maturity date on such Mortgage Loan. In the event of any such
modification which has been agreed to in writing by the Purchaser and which
permits the deferral of interest or principal payments on any Mortgage Loan, the
Servicer shall, on the Business Day immediately preceding the Remittance Date in
any month in which any such principal or interest payment has been deferred,
deposit in the Custodial Account from its own funds, in accordance with Section
4.04, the difference between (a) such month’s principal and one month’s interest
at the Mortgage Loan Remittance Rate on the unpaid principal balance of such
Mortgage Loan and (b) the amount paid by the Mortgagor. The Servicer shall be
entitled to reimbursement for such advances to the same extent as for all other
advances pursuant to Section 4.05. Without limiting the generality of the
foregoing, the Servicer shall continue, and is hereby authorized and empowered,
to prepare, execute and deliver, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Properties. Notwithstanding anything herein to the contrary, the
Servicer may not enter into a forbearance agreement or similar arrangement with
respect to any Mortgage Loan which runs more than one hundred eighty (180) days
after the first delinquent Due Date. Any such agreement shall be approved by
Purchaser and, if required, by the Primary Mortgage Insurance Policy insurer and
Lender Primary Mortgage Insurance Policy insurer, if required.

 

Notwithstanding anything in this Agreement to the contrary, if any Mortgage Loan
becomes subject to a Pass-Through Transfer, the Servicer (a) with respect to
such Mortgage Loan, shall not permit any modification with respect to such
Mortgage Loan that would change the Mortgage Interest Rate and (b) shall not
(unless the Mortgagor is in default with respect to such Mortgage Loan or such
default is, in the judgment of the Servicer, reasonably foreseeable) make or
permit any modification, waiver or amendment of any term of such Mortgage Loan
that would both (i) effect an exchange or reissuance of such Mortgage Loan under
Section 1001 of the Code (or Treasury regulations promulgated thereunder) or
(ii) cause any REMIC to fail to qualify as a REMIC under the Code or the
imposition of any tax on “prohibited transactions” or “contributions” after the
startup date under the REMIC Provisions.

 

Prior to taking any action with respect to the Mortgage Loans subject to a
Pass-Through Transfer, which is not contemplated under the terms of this
Agreement, the Servicer will obtain an

 

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Opinion of Counsel acceptable to the trustee in such Pass-Through Transfer with
respect to whether such action could result in the imposition of a tax upon any
REMIC (including but not limited to the tax on prohibited transactions as
defined in Section 860F(a)(2) of the Code and the tax on contributions to a
REMIC set forth in Section 860G(d) of the Code)(either such event, an “Adverse
REMIC Event”), and the Servicer shall not take any such actions as to which it
has been advised that an Adverse REMIC Event could occur.

 

The Servicer shall not permit the creation of any “interests” (within the
meaning of Section 860G of the Code) in any REMIC. The Servicer shall not enter
into any arrangement by which a REMIC will receive a fee or other compensation
for services nor permit a REMIC to receive any income from assets other than
“qualified mortgages” as defined in Section 860G(a)(3) of the Code or “permitted
investments” as defined in Section 860G(a)(5) of the Code.

 

In servicing and administering the Mortgage Loans, the Servicer shall employ
Accepted Servicing Practices, giving due consideration to the Purchaser’s
reliance on the Servicer. Unless a different time period is stated in this
Agreement or the related Term Sheet, Purchaser shall be deemed to have given
consent in connection with a particular matter if Purchaser does not
affirmatively grant or deny consent within five (5) Business Days from the date
Purchaser receives a second written request for consent for such matter from
Servicer as servicer.

 

The Mortgage Loans may be subserviced by a Subservicer on behalf of the Servicer
provided that the Subservicer is an entity that engages in the business of
servicing loans, and in either case shall be authorized to transact business,
and licensed to service mortgage loans, in the state or states where the related
Mortgaged Properties it is to service are situated, if and to the extent
required by applicable law to enable the Subservicer to perform its obligations
hereunder and under the Subservicing Agreement, and in either case shall be a
FHLMC or Fannie Mae approved mortgage servicer in good standing, and no event
has occurred, including but not limited to a change in insurance coverage, which
would make it unable to comply with the eligibility requirements for lenders
imposed by Fannie Mae or for seller/servicers imposed by Fannie Mae or FHLMC, or
which would require notification to Fannie Mae or FHLMC. In addition, each
Subservicer will obtain and preserve its qualifications to do business as a
foreign corporation and its licenses to service mortgage loans, in each
jurisdiction in which such qualifications and/or licenses are or shall be
necessary to protect the validity and enforceability of this Agreement, or any
of the Mortgage Loans and to perform or cause to be performed its duties under
the related Subservicing Agreement. The Servicer may perform any of its
servicing responsibilities hereunder or may cause the Subservicer to perform any
such servicing responsibilities on its behalf, but the use by the Servicer of
the Subservicer shall not release the Servicer from any of its obligations
hereunder and the Servicer shall remain responsible hereunder for all acts and
omissions of the Subservicer as fully as if such acts and omissions were those
of the Servicer. The Servicer shall pay all fees and expenses of the Subservicer
from its own funds, and the Subservicer’s fee shall not exceed the Servicing
Fee. Servicer shall notify Purchaser promptly in writing upon the appointment of
any Subservicer.

 

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At the cost and expense of the Servicer, without any right of reimbursement from
the Custodial Account, the Servicer shall be entitled to terminate the rights
and responsibilities of the Subservicer and arrange for any servicing
responsibilities to be performed by a successor subservicer meeting the
requirements in the preceding paragraph, provided, however, that nothing
contained herein shall be deemed to prevent or prohibit the Servicer, at the
Servicer’s option, from electing to service the related Mortgage Loans itself.
In the event that the Servicer’s responsibilities and duties under this
Agreement are terminated pursuant to Section 4.13, 8.04, 9.01 or 10.01 and if
requested to do so by the Purchaser, the Servicer shall at its own cost and
expense terminate the rights and responsibilities of the Subservicer effective
as of the date of termination of the Servicer. The Servicer shall pay all fees,
expenses or penalties necessary in order to terminate the rights and
responsibilities of the Subservicer from the Servicer’s own funds without
reimbursement from the Purchaser.

 

Notwithstanding any of the provisions of this Agreement relating to agreements
or arrangements between the Servicer and the Subservicer or any reference herein
to actions taken through the Subservicer or otherwise, the Servicer shall not be
relieved of its obligations to the Purchaser and shall be obligated to the same
extent and under the same terms and conditions as if it alone were servicing and
administering the Mortgage Loans. The Servicer shall be entitled to enter into
an agreement with the Subservicer for indemnification of the Servicer by the
Subservicer and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification. The Servicer will indemnify and hold Purchaser
harmless from any loss, liability or expense arising out of its use of a
Subservicer to perform any of its servicing duties, responsibilities and
obligations hereunder.

 

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

 

Section 4.02 Collection of Mortgage Loan Payments.

 

Continuously from the date hereof until the date each Mortgage Loan ceases to be
subject to this Agreement, the Servicer will proceed diligently to collect all
payments due under each Mortgage Loan when the same shall become due and payable
and shall, to the extent such procedures shall be consistent with this
Agreement, Accepted Servicing Practices, and the terms and provisions of any
related Primary Mortgage Insurance Policy and Lender Primary Mortgage Insurance
Policy, follow such collection procedures as it follows with respect to mortgage
loans comparable to the Mortgage Loans and held for its own account. Further,
the Servicer will take special care in ascertaining and estimating annual escrow
payments, and all other charges that, as provided in the Mortgage, will become
due and payable, so that the installments payable by the Mortgagors will be
sufficient to pay such charges as and when they become due and payable.

 

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In no event will the Servicer waive its right to any prepayment penalty or
premium without the prior written consent of Purchaser and Servicer will use
diligent efforts to collect same when due except as otherwise provided in the
prepayment penalty rider to the Mortgage.

 

Section 4.03 Realization Upon Defaulted Mortgage

 

The Servicer shall use its best efforts, consistent with the procedures that the
Servicer would use in servicing loans for its own account, consistent with
Accepted Servicing Practices, any Primary Mortgage Insurance Policies and Lender
Primary Mortgage Insurance Policies and the best interest of Purchaser, to
foreclose upon or otherwise comparably convert the ownership of properties
securing such of the Mortgage Loans as come into and continue in default and as
to which no satisfactory arrangements can be made for collection of delinquent
payments pursuant to Section 4.01. Foreclosure or comparable proceedings shall
be initiated within ninety (90) days of default for Mortgaged Properties for
which no satisfactory arrangements can be made for collection of delinquent
payments, subject to state and federal law and regulation. The Servicer shall
use its best efforts to realize upon defaulted Mortgage Loans in such manner as
will maximize the receipt of principal and interest by the Purchaser, taking
into account, among other things, the timing of foreclosure proceedings. The
Servicer, on behalf of the Purchaser, may also, in its discretion, as an
alternative to foreclosure, sell defaulted Mortgage Loans at fair market value
to third-parties, if the Servicer reasonably believes that such sale would
maximize proceeds to the Purchaser in the aggregate (on a present value basis)
with respect to those Mortgage Loans. The foregoing is subject to the provisions
that, in any case in which a Mortgaged Property shall have suffered damage, the
Servicer shall not be required to expend its own funds toward the restoration of
such property unless it shall determine in its discretion (i) that such
restoration will increase the proceeds of liquidation of the related Mortgage
Loan to the Purchaser after reimbursement to itself for such expenses, and (ii)
that such expenses will be recoverable by the Servicer through Insurance
Proceeds, Condemnation Proceeds, REO Disposition Proceeds or Liquidation
Proceeds from the related Mortgaged Property, as contemplated in Section 4.05.
Servicer shall obtain prior approval of Purchaser as to repair or restoration
expenses in excess of ten thousand dollars ($10,000). The Servicer shall notify
the Purchaser in writing of the commencement of foreclosure proceedings and not
less than five (5) days prior to the acceptance or rejection of any offer of
reinstatement. The Servicer shall be responsible for all costs and expenses
incurred by it in any such proceedings or functions; provided, however, that it
shall be entitled to reimbursement thereof from the related property, as
contemplated in Section 4.05. Notwithstanding anything to the contrary contained
herein, in connection with a foreclosure or acceptance of a deed in lieu of
foreclosure, in the event the Servicer has reasonable cause to believe that a
Mortgaged Property is contaminated by hazardous or toxic substances or wastes,
or if the Purchaser otherwise requests an environmental inspection or review of
such Mortgaged Property, such an inspection or review is to be conducted by a
qualified inspector at the Purchaser’s expense. Upon completion of the
inspection, the Servicer shall promptly provide the Purchaser with a written
report of the environmental inspection. After reviewing the environmental
inspection report, the Purchaser shall determine how the Servicer shall proceed
with respect to the Mortgaged Property.

 

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In the event that a Mortgage Loan becomes part of a REMIC, and becomes REO
Property, such property shall be disposed of by the Servicer, with the consent
of Purchaser as required pursuant to this Agreement, before the close of the
third taxable year following the taxable year in which the Mortgage Loan became
an REO Property, unless the Servicer provides to the trustee under such REMIC an
opinion of counsel to the effect that the holding of such REO Property
subsequent to the close of the third taxable year following the taxable year in
which the Mortgage Loan became an REO Property, will not result in the
imposition of taxes on “prohibited transactions” as defined in Section 860F of
the Code, or cause the transaction to fail to qualify as a REMIC at any time
that certificates are outstanding. Servicer shall manage, conserve, protect and
operate each such REO Property for the certificateholders solely for the purpose
of its prompt disposition and sale in a manner which does not cause such
property to fail to qualify as “foreclosure property” within the meaning of
Section 860F(a)(2)(E) of the Code, or any “net income from foreclosure property”
which is subject to taxation under the REMIC provisions of the Code. Pursuant to
its efforts to sell such property, the Servicer shall either itself or through
an agent selected by Servicer, protect and conserve such property in the same
manner and to such an extent as is customary in the locality where such property
is located. Additionally, Servicer shall perform the tax withholding and
reporting related to Sections 1445 and 6050J of the Code.

 

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

 

The Servicer shall segregate and hold all funds collected and received pursuant
to each Mortgage Loan separate and apart from any of its own funds and general
assets and shall establish and maintain one or more Custodial Accounts. The
Custodial Account shall be an Eligible Account. Funds, deposited in the
Custodial Account shall at all times be insured by the FDIC up to the FDIC
insurance limits, or must be invested in Permitted Investments for the benefit
of the Purchaser. Funds deposited in the Custodial Account may be drawn on by
the Servicer in accordance with Section 4.05. The creation of any Custodial
Account shall be evidenced by a letter agreement in the form shown in Exhibit B
hereto. The original of such letter agreement shall be furnished to the
Purchaser on the Closing Date, and upon the request of any subsequent Purchaser.

 

The Servicer shall deposit in a mortgage clearing account on a daily basis, and
in the Custodial Account or Accounts no later than 48 hours after receipt of
funds, and retain therein the following payments and collections received or
made by it subsequent to the Cut-off Date, or received by it prior to the
Cut-off Date but allocable to a period subsequent thereto, other than in respect
of principal and interest on the Mortgage Loans due on or before the Cut-off
Date:

 

(i) all payments on account of principal, including Principal Prepayments and
related penalties, on the Mortgage Loans;

 

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

 

(iii) all Net Liquidation Proceeds;

 

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(iv) any amounts required to be deposited by the Servicer in connection with any
REO Property pursuant to Section 4.13 and in connection therewith, the Servicer
shall provide the Purchaser with written detail itemizing all of such amounts;

 

(v) all Insurance Proceeds including amounts required to be deposited pursuant
to Sections 4.08, 4.10 and 4.11, other than proceeds to be held in the Escrow
Account and applied to the restoration or repair of the Mortgaged Property or
released to the Mortgagor in accordance with Accepted Servicing Practices, the
Mortgage Loan Documents or applicable law;

 

(vi) all Condemnation Proceeds affecting any Mortgaged Property which are not
released to the Mortgagor in accordance with Accepted Servicing Practices, the
loan documents or applicable law;

 

(vii) any Monthly Advances;

 

(viii) with respect to each full or partial Principal Prepayment, any Prepayment
Interest Shortfalls, to the extent of the Servicer’s aggregate Servicing Fee
received with respect to the related Prepayment Period;

 

(ix) any amounts required to be deposited by the Servicer pursuant to Section
4.10 in connection with the deductible clause in any blanket hazard insurance
policy, such deposit shall be made from the Servicer’s own funds, without
reimbursement therefor; and

 

(x) any amounts required to be deposited in the Custodial Account pursuant to
Section 4.01, 4.13 or 6.02.

 

The foregoing requirements for deposit in the Custodial Account shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of late payment charges and assumption
fees, to the extent permitted by Section 6.01, need not be deposited by the
Servicer in the Custodial Account. Any interest paid on funds deposited in the
Custodial Account by the depository institution shall accrue to the benefit of
the Servicer and the Servicer shall be entitled to retain and withdraw such
interest from the Custodial Account pursuant to Section 4.05 (iv). The Purchaser
shall not be responsible for any losses suffered with respect to investment of
funds in the Custodial Account.

 

Section 4.05 Permitted Withdrawals From the Custodial Account.

 

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

 

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

 

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(ii) to reimburse itself for Monthly Advances, the Servicer’s right to reimburse
itself pursuant to this subclause (ii) being limited to amounts received on the
related Mortgage Loan which represent late collections (net of the related
Servicing Fees) of principal and/or interest respecting which any such advance
was made, it being understood that, in the case of such reimbursement, the
Servicer’s right thereto shall be prior to the rights of the Purchaser, except
that, where the Servicer is required to repurchase a Mortgage Loan, pursuant to
Section 3.03, the Servicer’s right to such reimbursement shall be subsequent to
the payment to the Purchaser of the Repurchase Price pursuant to such Section
and all other amounts required to be paid to the Purchaser with respect to such
Mortgage Loan;

 

(iii) to reimburse itself for unreimbursed Servicing Advances and any unpaid
Servicing Fees(or REO administration fees described in Section 4.13), the
Servicer’s right to reimburse itself pursuant to this subclause (iii) with
respect to any Mortgage Loan being limited to related proceeds from Liquidation
Proceeds, Condemnation Proceeds and Insurance Proceeds in accordance with the
relevant provisions of the Fannie Mae Guides or as otherwise set forth in this
Agreement; any recovery shall be made upon liquidation of the REO Property;

 

(iv) to pay to itself as part of its servicing compensation (a) any interest
earned on funds in the Custodial Account (all such interest to be withdrawn
monthly not later than each Remittance Date), (b) the Servicing Fee from that
portion of any payment or recovery as to interest with respect to a particular
Mortgage Loan;

 

(v) to pay to itself with respect to each Mortgage Loan that has been
repurchased pursuant to Section 3.03 all amounts received thereon and not
distributed as of the date on which the related repurchase price is determined,

 

(vi) to transfer funds to another Eligible Account in accordance with Section
4.09 hereof;

 

(vii) to remove funds inadvertently placed in the Custodial Account by the
Servicer;

 

(vi) to clear and terminate the Custodial Account upon the termination of this
Agreement; and

 

(vii) to reimburse itself for any Nonrecoverable Advances.

 

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

 

The Servicer shall segregate and hold all funds collected and received pursuant
to each Mortgage Loan which constitute Escrow Payments separate and apart from
any of its own funds and general assets and shall establish and maintain one or
more Escrow Accounts. The Escrow Account

 

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shall be an Eligible Account. Funds deposited in each Escrow Account shall at
all times be insured in a manner to provide maximum insurance under the
insurance limitations of the FDIC, or must be invested in Permitted Investments.
Funds deposited in the Escrow Account may be drawn on by the Servicer in
accordance with Section 4.07. The creation of any Escrow Account shall be
evidenced by a letter agreement in the form shown in Exhibit C. The original of
such letter agreement shall be furnished to the Purchaser on the Closing Date,
and upon request to any subsequent purchaser.

 

The Servicer shall deposit in a mortgage clearing account on a daily basis, and
in the Escrow Account or Accounts no later than 48 hours after receipt of funds,
and retain therein:

 

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

 

(ii) all Insurance Proceeds which are to be applied to the restoration or repair
of any Mortgaged Property; and

 

(iii) all Servicing Advances for Mortgagors whose Escrow Payments are
insufficient to cover escrow disbursements.

 

The Servicer shall make withdrawals from the Escrow Account only to effect such
payments as are required under this Agreement, and for such other purposes as
shall be as set forth or in accordance with Section 4.07. The Servicer shall be
entitled to retain any interest paid on funds deposited in the Escrow Account by
the depository institution to the extent permitted by law and, to the extent
required by law, the Servicer shall pay interest on escrowed funds to the
Mortgagor in accordance with applicable law. The Purchaser shall not be
responsible for any losses suffered with respect to investment of funds in the
Escrow Account.

 

Section 4.07 Permitted Withdrawals From Escrow Account.

 

Withdrawals from the Escrow Account may be made by Servicer only:

 

(i) to effect timely payments of ground rents, taxes, assessments, water rates,
Primary Mortgage Insurance Policy premiums, if applicable, fire and hazard
insurance premiums, condominium assessments and comparable items;

 

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

 

(iii) to refund to the Mortgagor any funds as may be determined to be overages;

 

(iv) for transfer to the Custodial Account in accordance with the terms of this
Agreement;

 

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(v) for application to restoration or repair of the Mortgaged Property;

 

(vi) to pay to the Servicer, or to the Mortgagor to the extent required by law,
any interest paid on the funds deposited in the Escrow Account;

 

(vii) to clear and terminate the Escrow Account on the termination of this
Agreement. As part of its servicing duties, the Servicer shall pay to the
Mortgagors interest on funds in Escrow Account, to the extent required by law,
and to the extent that interest earned on funds in the Escrow Account is
insufficient, shall pay such interest from its own funds, without any
reimbursement therefor; and

 

(viii) to pay to the Mortgagors or other parties Insurance Proceeds deposited in
accordance with Section 4.06.

 

Section 4.08 Payment of Taxes, Insurance and Other Charges; Maintenance of
Primary Mortgage Insurance Policies; Collections Thereunder.

 

With respect to each Mortgage Loan, 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 primary mortgage insurance premiums and fire and hazard insurance
coverage and shall obtain, from time to time, all bills for the payment of such
charges, including renewal premiums and shall effect payment thereof 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
Mortgagor in the Escrow Account which shall have been estimated and accumulated
by the Servicer in amounts sufficient for such purposes, as allowed under the
terms of the Mortgage or applicable law. To the extent that the Mortgage does
not provide for Escrow Payments, the Servicer shall determine that any such
payments are made by the Mortgagor at the time they first become due. The
Servicer assumes full responsibility for the timely payment of all such bills
and shall effect timely 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 advances from its own funds to effect such
payments.

 

The Servicer will maintain in full force and effect Primary Mortgage Insurance
Policies or Lender Primary Mortgage Insurance Policies issued by a Qualified
Insurer with respect to each Mortgage Loan for which such coverage is herein
required. Such coverage will be terminated only with the approval of Purchaser,
or as required by applicable law or regulation. The Servicer will not cancel or
refuse to renew any Primary Mortgage Insurance Policy or Lender Primary Mortgage
Insurance Policy in effect on the Closing Date that is required to be kept in
force under this Agreement unless a replacement Primary Mortgage Insurance
Policy or Lender Primary Mortgage Insurance Policy for such canceled or
nonrenewed 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 Primary Mortgage Insurance Policy or Lender Primary Mortgage
Insurance Policy of any loss which, but for the actions of the Servicer would
have been covered thereunder. In connection with any assumption or substitution
agreement entered into or to be entered into pursuant to Section

 

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6.01, the Servicer shall promptly notify the insurer under the related Primary
Mortgage Insurance Policy or Lender Primary Mortgage Insurance 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 Primary Mortgage Insurance
Policy or Lender Primary Mortgage Insurance Policy. If such Primary Mortgage
Insurance Policy or Lender Primary Mortgage Insurance Policy is terminated as a
result of such assumption or substitution of liability, the Servicer shall
obtain a replacement Primary Mortgage Insurance Policy or Lender Primary
Mortgage Insurance Policy as provided above.

 

In connection with its activities as servicer, the Servicer agrees to prepare
and present, on behalf of itself and the Purchaser, claims to the insurer under
any Private Mortgage Insurance Policy in a timely fashion in accordance with the
terms of such Primary Mortgage Insurance Policy or Lender Primary Mortgage
Insurance Policy and, in this regard, to take such action as shall be necessary
to permit recovery under any Primary Mortgage Insurance Policy or Lender Primary
Mortgage Insurance Policy respecting a defaulted Mortgage Loan. Pursuant to
Section 4.04, any amounts collected by the Servicer under any Primary Mortgage
Insurance Policy or Lender Primary Mortgage Insurance Policy shall be deposited
in the Custodial Account, subject to withdrawal pursuant to Section 4.05.

 

Section 4.09 Transfer of Accounts.

 

The Servicer may transfer the Custodial Account or the Escrow Account to a
different Eligible Account from time to time. Such transfer shall be made only
upon obtaining the prior written consent of the Purchaser, which consent will
not be unreasonably withheld.

 

Section 4.10 Maintenance of Hazard Insurance.

 

The Servicer shall cause to be maintained for each Mortgage Loan fire and hazard
insurance with extended coverage as is acceptable to Fannie Mae or FHLMC and
customary in the area where the Mortgaged Property is located in an amount which
is equal to the lesser of (i) the maximum insurable value of the improvements
securing such Mortgage Loan or (ii) the greater of (a) the outstanding principal
balance of the Mortgage Loan, and (b) an amount such that the proceeds thereof
shall be sufficient to prevent the Mortgagor and/or the mortgagee from becoming
a co-insurer. If required by the Flood Disaster Protection Act of 1973, as
amended, each Mortgage Loan shall be covered by a flood insurance policy meeting
the requirements of the current guidelines of the Federal Insurance
Administration in effect with an insurance carrier acceptable to Fannie Mae or
FHLMC, in an amount representing coverage not less than the least of (i) the
outstanding principal balance of the Mortgage Loan, (ii) the maximum insurable
value of the improvements securing such Mortgage Loan or (iii) the maximum
amount of insurance which is available under the Flood Disaster Protection Act
of 1973, as amended. If at any time during the term of the Mortgage Loan, the
Servicer determines in accordance with applicable law and pursuant to the Fannie
Mae Guides that a 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 Flood Disaster Protection Act of 1973, as amended, the
Servicer shall notify the related Mortgagor that the Mortgagor must obtain such
flood insurance coverage, and

 

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if said 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 the Mortgagor’s behalf. The Servicer
shall also maintain on each REO Property, fire and hazard insurance with
extended coverage in an amount which is at least equal to the maximum insurable
value of the improvements which are a part of such property, and, to the extent
required and available under the Flood Disaster Protection Act of 1973, as
amended, flood insurance in an amount as provided above. Any amounts collected
by the Servicer under any such policies other than amounts to be deposited in
the Escrow Account and applied to the restoration or repair of the Mortgaged
Property or REO Property, or released to the Mortgagor in accordance with
Accepted Servicing Practices, shall be deposited in the Custodial Account,
subject to withdrawal pursuant to Section 4.05. It is understood and agreed that
no other additional insurance need be required by the Servicer of the Mortgagor
or maintained on property acquired in respect of the Mortgage Loan, other than
pursuant to this Agreement, the Fannie Mae Guides or such applicable state or
federal laws and regulations as shall at any time be in force and as shall
require such additional insurance. All such policies shall be endorsed with
standard mortgagee clauses with loss payable to the Servicer and its successors
and/or assigns and shall provide for at least thirty (30) days prior written
notice of any cancellation, reduction in the amount or material change in
coverage to the Servicer. 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 are Qualified Insurers.

 

Section 4.11 Maintenance of Mortgage Impairment Insurance Policy.

 

In the event that the Servicer shall obtain and maintain a blanket policy issued
by an insurer acceptable to Fannie Mae or FHLMC insuring against hazard losses
on all of the 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, it being
understood and agreed that such policy may contain a deductible clause, in which
case the Servicer shall, in the event that there shall not have been maintained
on the related Mortgaged Property or REO Property a policy complying with
Section 4.10, and there shall have been a loss which would have been covered by
such policy, deposit in the Custodial Account the amount not otherwise payable
under the blanket policy because of such deductible clause. In connection with
its activities as servicer of the Mortgage Loans, the Servicer agrees to prepare
and present, on behalf of the Purchaser, claims under any such blanket policy in
a timely fashion in accordance with the terms of such policy. Upon request of
the Purchaser, the Servicer shall cause to be delivered to the Purchaser a
certified true copy of such policy and shall use its best efforts to obtain a
statement from the insurer thereunder that such policy shall in no event be
terminated or materially modified without thirty (30) days’ prior written notice
to the Purchaser.

 

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Section 4.12 Fidelity Bond, Errors and Omissions Insurance.

 

The Servicer shall maintain, at its own expense, a blanket fidelity bond and an
errors and omissions insurance policy, with broad coverage with responsible
companies on all officers, employees or other persons acting in any capacity
with regard to the Mortgage Loan to handle funds, money, documents and papers
relating to the Mortgage Loan. The Fidelity Bond 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 and fraud of such persons. The
errors and omissions insurance shall protect and insure the Servicer against
losses arising out of errors and omissions and negligent acts of such persons.
Such errors and omissions insurance shall also protect and insure the Servicer
against losses in connection with the failure to maintain any insurance policies
required pursuant to this Agreement and the release or satisfaction of a
Mortgage Loan without having obtained payment in full of the indebtedness
secured thereby. No provision of this Section 4.12 requiring the Fidelity Bond
or errors and omissions insurance shall diminish or relieve the Servicer from
its duties and obligations as set forth in this Agreement. The minimum coverage
under any such bond and insurance policy shall be at least equal to the
corresponding amounts required by Fannie Mae in the Fannie Mae Guides. Upon
request by the Purchaser, the Servicer shall deliver to the Purchaser a
certificate from the surety and the insurer as to the existence of the Fidelity
Bond and errors and omissions insurance policy and shall obtain a statement from
the surety and the insurer that such Fidelity Bond or insurance policy shall in
no event be terminated or materially modified without thirty (30) days’ prior
written notice to the Purchaser. The Servicer shall notify the Purchaser within
five (5) business days of receipt of notice that such Fidelity Bond or insurance
policy will be, or has been, materially modified or terminated. The Purchaser
(or any party having the status of Purchaser hereunder) and any subsidiary
thereof and their successors or assigns as their interests may appear must be
named as loss payees on the Fidelity Bond and as additional insured on the
errors and omissions policy. Upon request by Purchaser, Servicer shall provide
Purchaser with an insurance certificate certifying coverage under this Section
4.12, and will provide an update to such certificate upon request, or upon
renewal or material modification of coverage.

 

Section 4.13 Title, Management and Disposition of REO Property.

 

In the event that title to the Mortgaged Property is acquired in foreclosure or
by deed in lieu of foreclosure, the deed or certificate of sale shall be taken
in the name of the Purchaser or its designee, or in the event the Purchaser or
its designee 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 or Persons
as shall be consistent with an opinion of counsel obtained by the Servicer from
an attorney duly licensed to practice law in the state where the REO Property is
located. Any Person or Persons holding such title other than the Purchaser shall
acknowledge in writing that such title is being held as nominee for the benefit
of the Purchaser.

 

The Servicer shall notify the Purchaser in accordance with the Fannie Mae Guides
of each acquisition of REO Property upon such acquisition (and, in any event,
shall provide notice of the

 

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consummation of any foreclosure sale within three (3) Business Days of the date
Servicer receives notice of such consummation), together with a copy of the
drive by appraisal or brokers price opinion of the Mortgaged Property obtained
in connection with such acquisition, and thereafter assume the responsibility
for marketing such REO property in accordance with Accepted Servicing Practices.
Thereafter, the Servicer shall continue to provide certain administrative
services to the Purchaser relating to such REO Property as set forth in this
Section 4.13. No Servicing Fee shall be assessed or otherwise accrue on any REO
Property from and after the date on which it becomes an REO Property.

 

The Servicer shall, either itself or through an agent selected by the Servicer,
and in accordance with the Fannie Mae Guides manage, conserve, protect and
operate each REO Property in the same manner that it manages, conserves,
protects and operates other foreclosed property for its own account, and in the
same manner that similar property in the same locality as the REO Property is
managed. The Servicer shall cause each REO Property to be inspected promptly
upon the acquisition of title thereto and shall cause each REO Property to be
inspected at least monthly thereafter or more frequently as required by the
circumstances. The Servicer shall make or cause to be made a written report of
each such inspection. Such reports shall be retained in the Mortgage File and
copies thereof shall be forwarded by the Servicer to the Purchaser.

 

The Servicer shall use its best efforts to dispose of the REO Property as soon
as possible and shall sell such REO Property in any event within one year after
title has been taken to such REO Property, unless the Servicer determines, and
gives an appropriate notice to the Purchaser to such effect, that a longer
period is necessary for the orderly liquidation of such REO Property. If a
longer period than one (1) year is permitted under the foregoing sentence and is
necessary to sell any REO Property, the Servicer shall report monthly to the
Purchaser as to the progress being made in selling such REO Property. No REO
Property shall be marketed for less than the Appraised Value, without the prior
consent of Purchaser. No REO Property shall be sold for less than ninety five
percent (95%) of its Appraised Value, without the prior consent of Purchaser.
All requests for reimbursement of Servicing Advances shall be in accordance with
the Fannie Mae Guides. The disposition of REO Property 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 Purchaser (subject to the above
conditions) only with the prior written consent of the Purchaser. Servicer shall
provide monthly reports to Purchaser in reference to the status of the marketing
of the REO Properties.

 

Notwithstanding anything to the contrary contained herein, the Purchaser may, at
the Purchaser’s sole option, terminate the Servicer as servicer of any such REO
Property without payment of any termination fee with respect thereto, provided
that the Servicer shall on the date said termination takes effect be reimbursed
for any unreimbursed advances of the Servicer ‘s funds made pursuant to Section
5.03 and any unreimbursed Servicing Advances and Servicing Fees in each case
relating to the Mortgage Loan underlying such REO Property notwithstanding
anything to the contrary set forth in Section 4.05. In the event of any such
termination, the provisions of Section 11.01 hereof shall apply to said
termination and the transfer of servicing responsibilities with respect to such
REO Property to the Purchaser or its designee. Within five (5) Business Days of
any such termination, the Servicer shall,

 

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if necessary convey such property to the Purchaser and shall further provide the
Purchaser with the following information regarding the subject REO Property: the
related drive by appraisal or brokers price opinion, and copies of any related
Mortgage Impairment Insurance Policy claims. In addition, within five (5)
Business Days, the Servicer shall provide the Purchaser with the following
information regarding the subject REO Property: the related trustee’s deed upon
sale and copies of any related hazard insurance claims, or repair bids.

 

Section 4.14 Notification of Maturity Date.

 

With respect to each Mortgage Loan, the Servicer shall execute and deliver to
the Mortgagor any and all necessary notices required under applicable law and
the terms of the related Mortgage Note and Mortgage regarding the maturity date
if required under applicable law.

 

Section 4.15 Optional Purchase of Defaulted Mortgage Loans.

 

With respect to any Mortgage Loan which as of the first day of a calendar
quarter is delinquent in payment by 90 days or more or is an REO Property, the
Servicer shall have the right to purchase such Mortgage Loan in accordance with
the terms and conditions of Section 3.21 of that certain Sale and Servicing
Agreement, dated as of July [29], 2004, among Structured Asset Mortgage
Investments II Inc., Homebanc Mortgage Trust 2004-1 as issuer, U.S. Bank
National Association, Wells Fargo Bank, National Association and the Purchaser;
provided however (i) that such Mortgage Loan is still 90 days or more delinquent
or is an REO Property as of the date of such purchase and (ii) this purchase
option, if not theretofore exercised, shall terminate on the date prior to the
last day of the related calendar quarter. This purchase option, if not
exercised, shall not be thereafter reinstated unless the delinquency is cured
and the Mortgage Loan thereafter again becomes 90 days or more delinquent or
becomes an REO Property, in which case the option shall again become exercisable
as of the first day of the related calendar quarter.

 

ARTICLE V

 

PAYMENTS TO THE PURCHASER

 

Section 5.01 Distributions.

 

On each Remittance Date, the Servicer shall distribute by wire transfer of
immediately available funds to the Purchaser (i) all amounts credited to the
Custodial Account as of the close of business on the preceding Determination
Date, net of charges against or withdrawals from the Custodial Account pursuant
to Section 4.05, plus (ii) all Monthly Advances, if any, which the Servicer is
obligated to distribute pursuant to Section 5.03, plus, (iii) interest at the
Mortgage Loan Remittance Rate on any Principal Prepayment from the date of such
Principal Prepayment through the end of the month for which disbursement is made
provided that the Servicer’s obligation as to payment of such interest shall be
limited to the Servicing Fee earned during the month of the distribution, minus
(iv) any amounts attributable to Monthly Payments collected but due on a Due
Date or Dates subsequent to the

 

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preceding Determination Date, which amounts shall be remitted on the Remittance
Date next succeeding the Due Period for such amounts. It is understood that, by
operation of Section 4.04, the remittance on the first Remittance Date with
respect to Mortgage Loans purchased pursuant to the related Term Sheet is to
include principal collected after the Cut-off Date through the preceding
Determination Date plus interest, adjusted to the Mortgage Loan Remittance Rate
collected through such Determination Date exclusive of any portion thereof
allocable to the period prior to the Cut-off Date, with the adjustments
specified in clauses (ii), (iii) and (iv) above.

 

With respect to any remittance received by the Purchaser after the Remittance
Date, the Servicer shall pay to the Purchaser interest on any such late payment
at an annual rate equal to the Prime Rate, adjusted as of the date of each
change plus two (2) percentage points, but in no event greater than the maximum
amount permitted by applicable law. Such interest shall cover the period
commencing with the day following the Business Day such payment was due and
ending with the Business Day on which such payment is made to the Purchaser,
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 by
the Servicer. On each Remittance Date, the Servicer shall provide a remittance
report detailing all amounts being remitted pursuant to this Section 5.01.

 

Section 5.02 Statements to the Purchaser.

 

The Servicer shall furnish to Purchaser an individual loan accounting report, as
of the last Business Day of each month, in the Servicer’s assigned loan number
order to document Mortgage Loan payment activity on an individual Mortgage Loan
basis. With respect to each month, the corresponding individual loan accounting
report shall be received by the Purchaser no later than the tenth calendar day
of the following month on a disk or tape or other computer-readable format in
such format as may be mutually agreed upon by both Purchaser and Servicer, and
no later than the fifth Business Day of the following month in hard copy, and
shall contain the following:

 

(i) With respect to each Monthly Payment, the amount of such remittance
allocable to principal (including a separate breakdown of any Principal
Prepayment, including the date of such prepayment, and any prepayment penalties
or premiums, along with a detailed report of interest on principal prepayment
amounts remitted in accordance with Section 4.04);

 

(ii) with respect to each Monthly Payment, the amount of such remittance
allocable to interest;

 

(iii) the amount of servicing compensation received by the Servicer during the
prior distribution period;

 

(iv) the aggregate Stated Principal Balance of the Mortgage Loans;

 

(v) the aggregate of any expenses reimbursed to the Servicer during the prior
distribution period pursuant to Section 4.05;

 

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(vi) The number and aggregate outstanding principal balances of Mortgage Loans
(a) delinquent (1) 30 to 59 days, (2) 60 to 89 days, (3) 90 days or more; (b) as
to which foreclosure has commenced; and (c) as to which REO Property has been
acquired; and

 

The Servicer shall also provide a trial balance, sorted in Purchaser’s assigned
loan number order, in the form of Exhibit E hereto, with each such Report.

 

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

 

In addition, not more than sixty (60) days after the end of each calendar year,
the Servicer shall furnish to each Person who was a Purchaser 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.

 

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Section 5.03 Monthly Advances by the Servicer.

 

Not later than the close of business on the Business Day preceding each
Remittance Date, the Servicer shall deposit in the Custodial Account an amount
equal to all payments not previously advanced by the Servicer, whether or not
deferred pursuant to Section 4.01, of principal (due after the Cut-off Date) and
interest not allocable to the period prior to the Cut-off Date, adjusted to the
Mortgage Loan Remittance Rate, which were due on a Mortgage Loan and delinquent
at the close of business on the related Determination Date; provided, however,
that the Servicer may use the Amount Held for Future Distribution (as defined
below) then on deposit in the Custodial Account to make such Monthly Advances.
The Servicer shall deposit any portion of the Amount Held for Future
Distribution used to pay Monthly Advances into the Custodial Account on any
future Remittance Date to the extent that the funds that are available in the
Custodial Account for remittance to the Purchaser on such Remittance Date are
less than the amount of payments required to be made to the Purchaser on such
Remittance Date.

 

The “Amount Held for Future Distribution” as to any Remittance Date shall be the
total of the amounts held in the Custodial Account at the close of business on
the preceding Determination Date which were received after the Cut-off Date on
account of (i) Liquidation Proceeds, Insurance Proceeds, and Principal
Prepayments received or made in the month of such Remittance Date, and (ii)
payments which represent early receipt of scheduled payments of principal and
interest due on a date or dates subsequent to the related Due Date.

 

The Servicer’s obligation to make such Monthly Advances as to any Mortgage Loan
will continue through the last Monthly Payment due prior to the payment in full
of the Mortgage Loan, or through the Remittance Date prior to the date on which
the Mortgaged Property liquidates (including Insurance Proceeds, proceeds from
the sale of REO Property or Condemnation Proceeds) with respect to the Mortgage
Loan unless the Servicer deems such advance to be nonrecoverable. In such event,
the Servicer shall deliver to the Purchaser an Officer’s Certificate of the
Servicer to the effect that an officer of the Servicer has reviewed the related
Mortgage File and has made the reasonable determination that any additional
advances are nonrecoverable.

 

Section 5.04 Liquidation Reports.

 

Upon the foreclosure sale of any Mortgaged Property or the acquisition thereof
by the Purchaser pursuant to a deed-in-lieu of foreclosure, the Servicer shall
submit to the Purchaser a liquidation report with respect to such Mortgaged
Property in a form mutually acceptable to Servicer and Purchaser. The Servicer
shall also provide reports on the status of REO Property containing such
information as Purchaser may reasonably require.

 

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ARTICLE VI

 

GENERAL SERVICING PROCEDURES

 

Section 6.01 Assumption Agreements.

 

The Servicer will, to the extent it has actual knowledge of any conveyance or
prospective conveyance by any Mortgagor of the Mortgaged Property (whether by
absolute conveyance or by contract of sale, and whether or not the Mortgagor
remains or is to remain liable under the Mortgage Note and/or the Mortgage),
exercise its rights to accelerate the maturity of such Mortgage Loan under any
“due-on-sale” clause to the extent permitted by law; provided, however, that the
Servicer shall not exercise any such rights if prohibited by law or the terms of
the Mortgage Note from doing so or if the exercise of such rights would impair
or threaten to impair any recovery under the related Primary Mortgage Insurance
Policy or Lender Primary Mortgage Insurance Policy, if any. If the Servicer
reasonably believes it is unable under applicable law to enforce such
“due-on-sale” clause, the Servicer will enter into an assumption agreement with
the person to whom the Mortgaged Property has been conveyed or is proposed to be
conveyed, pursuant to which such person becomes liable under the Mortgage Note
and, to the extent permitted by applicable state law, the Mortgagor remains
liable thereon. Where an assumption is allowed pursuant to this Section 6.01,
the Servicer, with the prior consent of the Purchaser and the primary mortgage
insurer, 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.

 

In connection with any such assumption or substitution of liability, the
Servicer shall follow the underwriting practices and procedures of the Servicer.
With respect to an assumption or substitution of liability, the Mortgage
Interest Rate borne by the related Mortgage Note, the amount of the Monthly
Payment and the maturity date may not be changed (except pursuant to the terms
of the Mortgage Note). If the credit of the proposed transferee does not meet
such underwriting criteria, the Servicer diligently shall, to the extent
permitted by the Mortgage or the Mortgage Note and by applicable law, accelerate
the maturity of the Mortgage Loan. The Servicer shall notify the Purchaser that
any such substitution of liability or assumption agreement has been completed by
forwarding to the Purchaser 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. All fees collected by the Servicer for entering into an assumption or
substitution of liability agreement shall belong to the Servicer.

 

Notwithstanding the foregoing paragraphs of this Section or any other provision
of this Agreement, the Servicer shall not be deemed to be in default, breach or
any other violation of its obligations hereunder by reason of any assumption of
a Mortgage Loan by operation of law or any assumption which the Servicer may be
restricted by law from preventing, for any reason whatsoever. For purposes of
this Section 6.01, the term “assumption” is deemed to also include a sale of the
Mortgaged Property subject to the Mortgage that is not accompanied by an
assumption or substitution of liability agreement.

 

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Section 6.02 Satisfaction of Mortgages and Release of Mortgage Files.

 

Upon the payment in full of any 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 will immediately notify the Purchaser by a
certification, which certification shall include a statement to the effect that
all amounts received or to be received in connection with such payment which are
required to be deposited in the Custodial Account pursuant to Section 4.04 have
been or will be so deposited, of a Servicing Officer and shall request delivery
to it of the portion of the Mortgage File held by the Purchaser. The Purchaser
shall no later than five (5) Business Days after receipt of such certification
and request, release or cause to be released to the Servicer, the related
Mortgage Loan Documents and, upon its receipt of such documents, the Servicer
shall promptly prepare and deliver to the Purchaser the requisite satisfaction
or release. No later than five (5) Business Days following its receipt of such
satisfaction or release, the Purchaser shall deliver, or cause to be delivered,
to the Servicer the release or satisfaction properly executed by the owner of
record of the applicable mortgage or its duly appointed attorney in fact. No
expense incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Custodial Account.

 

In the event the Servicer satisfies or releases a Mortgage without having
obtained payment in full of the indebtedness secured by the Mortgage or should
it otherwise prejudice any right the Purchaser may have under the mortgage
instruments, the Servicer, upon written demand, shall remit within two (2)
Business Days to the Purchaser the then outstanding principal balance of the
related Mortgage Loan by deposit thereof in the Custodial Account. The Servicer
shall maintain the Fidelity Bond and errors and omissions insurance insuring the
Servicer against any loss it may sustain with respect to any Mortgage Loan not
satisfied in accordance with the procedures set forth herein.

 

From time to time and as appropriate for the servicing or foreclosure of the
Mortgage Loan, including for the purpose of collection under any Primary
Mortgage Insurance Policy or Lender Primary Mortgage Insurance Policy, the
Purchaser shall, upon request of the Servicer and delivery to the Purchaser of a
servicing receipt signed by a Servicing Officer, release the portion of the
Mortgage File held by the Purchaser to the Servicer. Such servicing receipt
shall obligate the Servicer to return the related Mortgage documents to the
Purchaser when the need therefor by the Servicer no longer exists, unless the
Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Custodial Account or the Mortgage File
or such document has been delivered to an attorney, or to a public trustee or
other public official as required by law, for purposes of initiating or pursuing
legal action or other proceedings for the foreclosure of the Mortgaged Property
either judicially or non-judicially, and the Servicer has delivered to the
Purchaser a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated, the servicing
receipt shall be released by the Purchaser to the Servicer.

 

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Section 6.03 Servicing Compensation.

 

As compensation for its services hereunder, the Servicer shall be entitled to
withdraw from the Custodial Account (to the extent of interest payments
collected on the Mortgage Loans) or to retain from interest payments collected
on the Mortgage Loans, the amounts provided for as the Servicer’s Servicing Fee,
subject to payment of compensating interest on Principal Prepayments as capped
by the Servicing Fee pursuant to Section 5.01 (iii). Additional servicing
compensation in the form of assumption fees, as provided in Section 6.01, and
late payment charges or otherwise shall be retained by the Servicer to the
extent not required to be deposited in the Custodial Account. No Servicing Fee
shall be payable in connection with partial Monthly Payments. 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 therefor except
as specifically provided for.

 

Section 6.04 Annual Statement as to Compliance.

 

The Servicer will deliver to the Purchaser and the Master Servicer not later
February 28 of each year beginning in February 2005, an Officers’ Certificate in
a form acceptable for filing with the Securities and Exchange Commission as an
exhibit to a Form 10-K stating, as to each signatory thereof, that (i) a review
of the activities of the Servicer during the preceding calendar year and of
performance under this Agreement has been made under such officers’ supervision,
and (ii) to the best of such officers’ knowledge, based on such review, the
Servicer has fulfilled all of its obligations under this Agreement throughout
such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officers and the nature
and status of cure provisions thereof. Copies of such statement shall be
provided by the Servicer to the Purchaser upon request.

 

Section 6.05 Annual Independent Certified Public Accountants’ Servicing Report.

 

On or before February 28 of each year beginning February 28, 2005 the Servicer
at its expense shall cause a firm of independent public accountants which is a
member of the American Institute of Certified Public Accountants to furnish a
statement to the Purchaser in a form acceptable for filing with the Securities
and Exchange Commission as an exhibit to a Form 10-K to the effect that such
firm has examined certain documents and records relating to the Servicer’s
servicing of mortgage loans of the same type as the Mortgage Loans pursuant to
servicing agreements substantially similar to this Agreement, which agreements
may include this Agreement, and that, on the basis of such an examination,
conducted substantially in the uniform single audit program for mortgage
bankers, such firm is of the opinion that the Servicer’s servicing has been
conducted in compliance with the agreements examined pursuant to this Section
6.05, except for (i) such exceptions as such firm shall believe to be
immaterial, and (ii) such other exceptions as shall be set forth in such
statement. Copies of such statement shall be provided by the Servicer to the
Purchaser and the Master Servicer. In addition, on an annual basis, Servicer
shall provided Purchaser with copies of its audited financial statements.

 

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Section 6.06 Purchaser’s Right to Examine Company and Servicer Records.

 

The Purchaser shall have the right to examine and audit at its expense upon
reasonable notice to the Company and/or the Servicer, during business hours or
at such other times as might be reasonable under applicable circumstances, any
and all of the books, records, documentation or other information of the Company
and/or the Servicer, or held by another for the Company and the Servicer or on
its behalf or otherwise, which relates to the performance or observance by the
Company and/or the Servicer of the terms, covenants or conditions of this
Agreement.

 

The Company and/or the Servicer shall provide to the Purchaser and any
supervisory agents or examiners representing a state or federal governmental
agency having jurisdiction over the Purchaser, including but not limited to OTS,
FDIC and other similar entities, access to any documentation regarding the
Mortgage Loans in the possession of the Company and/or the Servicer which may be
required by any applicable regulations. Such access shall be afforded without
charge, upon reasonable request, during normal business hours and at the offices
of the Company and/or the Servicer, and in accordance with the federal
government, FDIC, OTS, or any other similar regulations.

 

Section 6.07 Annual Certification.

 

(a) For so long as the Mortgage Loans are being master serviced by the Master
Servicer, by February 28th of each year (or if not a Business Day, the
immediately preceding Business Day), or at any other time upon thirty (30) days
written request, an officer of the Servicer shall execute and deliver an
Officer’s Certificate to the Purchaser and the Master Servicer for the benefit
of the Purchaser and the Master Servicer and their officers, directors and
affiliates, certifying as to the following matters:

 

  (i) Based on my knowledge, the information in the Annual Statement of
Compliance, the Annual Independent Public Accountant’s Servicing Report and all
servicing reports, officer’s certificates and other information relating to the
servicing of the Mortgage Loans submitted to the Master Servicer taken as a
whole, does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading as of the
date of this certification;

 

  (ii) The servicing information required to be provided to the Master Servicer
by the Servicer under this Agreement has been provided to the Master Servicer;

 

  (iii) I am responsible for reviewing the activities performed by the Servicer
under the Agreement and based upon the review required by this Agreement, and
except as disclosed in the Annual Statement of Compliance or the Annual

 

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Independent Public Accountant’s Servicing Report submitted to the Master
Servicer, the Servicer has, as of the date of this certification fulfilled its
obligations under this Agreement; and

 

  (iv) I have disclosed to the Master Servicer all significant deficiencies
relating to the Servicer’s compliance with the minimum servicing standards in
accordance with a review conducted in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or similar standard as set forth in the
Agreement.

 

(b) The Servicer shall indemnify and hold harmless the Purchaser and Master
Servicer and their officers, directors, agents and affiliates from and against
any losses, damages, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments and other costs and expenses arising out of or based
upon a breach by the Servicer or any of its officers, directors, agents or
affiliates of its obligations under this Section 6.07 or the negligence, bad
faith or willful misconduct of the Servicer in connection therewith. If the
indemnification provided for herein is unavailable or insufficient to hold
harmless the Purchaser or Master Servicer, then the Servicer agrees that it
shall contribute to the amount paid or payable by the Purchaser or Master
Servicer as a result of the losses, claims, damages or liabilities of the
Purchaser or Master Servicer in such proportion as is appropriate to reflect the
relative fault of the Purchaser or Master Servicer on the one hand and the
Servicer on the other in connection with a breach of the Servicer’s obligations
under this Section 6.07 or the Servicer’s negligence, bad faith or willful
misconduct in connection therewith.

 

ARTICLE VII

 

REPORTS TO BE PREPARED BY SERVICER

 

Section 7.01 Company and Servicer Shall Provide Information as Reasonably
Required.

 

The Company and the Servicer shall furnish to the Purchaser during the term of
this Agreement, such periodic, special or other reports, information or
documentation, whether or not provided for herein, as shall be necessary,
reasonable or appropriate in respect to the Purchaser, or otherwise in respect
to the Mortgage Loans and the performance of the Company and the Servicer under
this Agreement, including any reports, information or documentation reasonably
required to comply with any regulations regarding any supervisory agents or
examiners of the Purchaser all such reports or information to be as provided by
and in accordance with such applicable instructions and directions as the
Purchaser may reasonably request in relation to this Agreement or the
performance of the Company and the Servicer under this Agreement. Each of the
Company and the Servicer agrees to execute and deliver all such instruments and
take all such action as the Purchaser, from time to time, may reasonably request
in order to effectuate the purpose and to carry out the terms of this Agreement.

 

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In connection with marketing the Mortgage Loans, the Purchaser may make
available to a prospective purchaser audited financial statements of the Company
and the Servicer for the most recently completed two (2) fiscal years for which
such statements are available, as well as a Consolidated Statement of Condition
at the end of the last two (2) fiscal years covered by any Consolidated
Statement of Operations. If it has not already done so, the Company and the
Servicer shall furnish promptly to the Purchaser or a prospective purchaser
copies of the statements specified above.

 

The Servicer shall make reasonably available to the Purchaser or any prospective
Purchaser a knowledgeable financial or accounting officer for the purpose of
answering questions and to permit any prospective purchaser to inspect the
Servicer’s servicing facilities for the purpose of satisfying such prospective
purchaser that the Servicer has the ability to service the Mortgage Loans as
provided in this Agreement.

 

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ARTICLE VIII

 

THE SERVICER

 

Section 8.01 Indemnification; Third Party Claims.

 

Each of the Company and the Servicer agrees to indemnify the Purchaser and hold
it harmless against any and all claims, losses, damages, penalties, fines,
forfeitures, legal fees and related costs, judgments, and any other costs, fees
and expenses that the Purchaser may sustain in any way related to the failure of
the Company or the Servicer to observe and perform its duties, obligations,
covenants, and agreements to service the Mortgage Loans in compliance with the
terms of this Agreement. Each of the Company and the Servicer agrees to
indemnify the Purchaser and hold it harmless against any and all claims, losses,
damages, penalties, fines, forfeitures, legal fees and related costs, judgments,
and any other costs, fees and expenses that the Purchaser may sustain in any way
related to the breach of a representation or warranty set forth in Sections 3.01
or 3.02 of this Agreement. Each of the Company and the Servicer shall
immediately notify the Purchaser if a claim is made by a third party against
Company or Servicer with respect to this Agreement or the Mortgage Loans, assume
(with the consent of the Purchaser) the defense of any such claim and pay all
expenses in connection therewith, including counsel fees, whether or not such
claim is settled prior to judgment, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against it or the Purchaser in respect
of such claim. The Company and the Servicer shall follow any written
instructions received from the Purchaser in connection with such claim. The
Purchaser shall promptly reimburse the Company and the Servicer for all amounts
advanced by it pursuant to the two preceding sentences except when the claim
relates to the failure of the Servicer to service and administer the Mortgages
in compliance with the terms of this Agreement, the breach of representation or
warranty set forth in Sections 3.01 or 3.02, or the gross negligence, bad faith
or willful misconduct of Company or the Servicer. The provisions of this Section
8.01 shall survive termination of this Agreement. Nothing herein shall be
construed to impose any liability on either of the Company or the Servicer in
the event it has, in good faith, complied with any instructions of Purchaser,
which instructions are contrary to the terms and provisions of this agreement.

 

Section 8.02 Merger or Consolidation of the Company and Servicer.

 

Each of the Company and the Servicer will keep in full effect its existence,
rights and franchises as a corporation under the laws of the state of its
incorporation 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 Company or the Servicer may be merged or consolidated,
or any corporation resulting from any merger, conversion or consolidation to
which the Company or the Servicer shall be a party, or any Person succeeding to
the business of the Company or the Servicer

 

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whether or not related to loan servicing, shall be the successor of the Company
or 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; provided, however, that the successor or surviving
Person, or the parent company of such successor or surviving Person, shall be an
institution (i) having a GAAP net worth not less than $25,000,000, (ii) which is
a HUD-approved mortgagee whose primary business is in origination and servicing
of first lien mortgage loans, and (iii) who is a Fannie Mae or FHLMC approved
seller/servicer in good standing; provided, however, that if such successor or
surviving Person does not have a GAAP net worth of at least $25,000,000, the
parent company of such successor or surviving Person shall act as guarantor with
respect to such successor’s obligations under this Agreement.

 

Section 8.03 Limitation on Liability of the Company, Servicer and Others.

 

Neither the Company, the Servicer nor any of the officers, employees or agents
of the Company or the Servicer shall be under any liability to the Purchaser 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 made in good faith;
provided, however, that this provision shall not protect the Company or the
Servicer or any such person against any breach of warranties or representations
made herein, 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 negligence, bad faith or willful misconduct,
or any breach of the terms and conditions of this Agreement. The Company, the
Servicer and any officer, employee or agent of the Company or the Servicer may
rely in good faith on any document of any kind prima facie properly executed and
submitted by the Purchaser respecting any matters arising hereunder. Neither the
Company nor the Servicer shall 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 reasonable
opinion may involve it in any expenses or liability; provided, however, that the
Company or the Servicer may, with the consent of the Purchaser, 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
reasonable legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities for which the Purchaser will
be liable, and the Company or the Servicer shall be entitled to be reimbursed
therefor from the Purchaser upon written demand.

 

Section 8.04 Servicer Not to Assign or Resign.

 

The Servicer shall not assign this Agreement or resign from the obligations and
duties hereby imposed on it except by mutual consent of the Servicer and the
Purchaser 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
Purchaser which Opinion of Counsel shall be in form and substance acceptable to
the Purchaser. 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 11.01.

 

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Section 8.05 No Transfer of Servicing.

 

With respect to the retention of the Servicer to service the Mortgage Loans
hereunder, the Servicer acknowledges that the Purchaser has acted in reliance
upon the Servicer’s independent status, the adequacy of its servicing
facilities, plan, personnel, records and procedures, its integrity, reputation
and financial standing and the continuance thereof. Without in any way limiting
the generality of this Section, the Servicer shall not either assign this
Agreement or the servicing hereunder or delegate its rights or duties hereunder
or any portion thereof, or sell or otherwise dispose of all or substantially all
of its property or assets, other than in the normal course of business, without
the prior written approval of the Purchaser, which consent shall not be
unreasonably withheld; provided that the Servicer may assign the Agreement and
the servicing hereunder without the consent of Purchaser to an affiliate of the
Servicer to which all servicing of the Servicer is assigned so long as (i) such
affiliate is a Fannie Mae and Freddie Mac approved servicer and (ii) if it is
intended that such affiliate be spun off to the shareholders of the Servicer,
such affiliate have a GAAP net worth of at least $25,000,000 and (iii) such
affiliate shall deliver to the Purchaser a certification pursuant to which such
affiliate shall agree to be bound by the terms and conditions of this Agreement
and shall certify that such affiliate is a Fannie Mae and Freddie Mac approved
servicer in good standing..

 

Without in any way limiting the generality of this Section 8.05, in the event
that either the Company or the Servicer shall assign this Agreement or the
servicing responsibilities hereunder or delegate its duties hereunder or any
portion thereof without (i) satisfying the requirements set forth herein or (ii)
the prior written consent of the Purchaser, then the Purchaser shall have the
right to terminate this Agreement, without any payment of any penalty or damages
and without any liability whatsoever to the Company or the Servicer (other than
with respect to accrued but unpaid Servicing Fees and Servicing Advances
remaining unpaid) or any third party.

 

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ARTICLE IX

 

DEFAULT

 

Section 9.01 Events of Default.

 

In case one or more of the following Events of Default by the Company or the
Servicer shall occur and be continuing, that is to say:

 

(i) any failure by the Servicer to remit to the Purchaser any payment required
to be made under the terms of this Agreement which continues unremedied for a
period of one (1) Business Day; or

 

(ii) failure on the part of the Company or the Servicer duly to observe or
perform in any material respect any other of the covenants or agreements on the
part of the Company or the Servicer set forth in this Agreement which continues
unremedied for a period of thirty (30) days after the date on which written
notice of such failure shall have been given to the Company or the Servicer by
the Purchaser, and the remedial period provided for herein has expired; or

 

(iii) 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, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or liquidation of its
affairs, shall have been entered against the Company or the Servicer and such
decree or order shall have remained in force undischarged or unstayed for a
period of sixty (60) days; or

 

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

 

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

 

(vi) Servicer ceases to be approved by either Fannie Mae or FHLMC as a mortgage
loan seller or servicer for more than thirty (30) days; or

 

(vii) the Company or the Servicer attempts to assign its right to servicing
compensation hereunder or the Company or the Servicer attempts, without the
consent of the Purchaser, to sell or otherwise dispose of all or substantially
all of its property or assets or to assign this Agreement or the servicing
responsibilities hereunder or to delegate its duties hereunder or any portion
thereof; or

 

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(viii) the Servicer ceases to be (a) licensed to service first lien residential
mortgage loans in any jurisdiction in which a Mortgaged Property is located and
such licensing is required, and (b) qualified to transact business in any
jurisdiction where it is currently so qualified, but only to the extent such
non-qualification materially and adversely affects the Servicer’s ability to
perform its obligations hereunder;

 

(ix) the Company or the Servicer fails to meet the eligibility criteria set
forth in the last sentence of Section 8.02;

 

(x) failure by the Servicer to duly perform, within the required time period,
its obligations under Section 6.04, 6.05 or 6.07, which failure continues
unremedied for a period of fifteen (15) days after the date on which written
notice of such failure, requiring the same to be remedied, shall have been given
to the Servicer by any party to this Agreement or by the Master Servicer; or

 

(xi) failure by the Servicer to duly perform its obligations under Section 2.11.

 

Then, and in each and every such case, so long as an Event of Default shall not
have been remedied, the Purchaser, by notice in writing to the Company and the
Servicer (except in the case of an Event of Default under clauses (iii), (iv) or
(v) above, in which case, automatically and without notice) Purchaser may, in
addition to whatever rights the Purchaser may have under Sections 3.03 and 8.01
and at law or equity or to damages, including injunctive relief and specific
performance, terminate all the rights and obligations of the Servicer under this
Agreement and in and to the Mortgage Loans and the proceeds thereof without
compensating the Servicer for the same. On or after the receipt by the Company
and the Servicer of such written notice (or, in the case of an Event of Default
under clauses (iii), (iv) or (v) above, in which case, automatically and without
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 11.01. Upon written request from the
Purchaser, the Servicer shall prepare, execute and deliver, any and all
documents and other instruments, place in such successor’s possession all
Mortgage Files, 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. The Servicer
agrees to cooperate with the Purchaser 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 or any REO Property.

 

Section 9.02 Waiver of Defaults.

 

The Purchaser may waive only by written notice any default by the Company or the
Servicer in the performance of its obligations hereunder and its consequences.
Upon any such waiver of a past 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 default or impair any right consequent thereon except to the extent
expressly so waived in writing.

 

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ARTICLE X

 

TERMINATION

 

Section 10.01 Termination.

 

The respective obligations and responsibilities of the Servicer shall terminate
upon: (i) the later of the final payment or other liquidation (or any advance
with respect thereto) of the last Mortgage Loan and the disposition of all
remaining REO Property and the remittance of all funds due hereunder; or (ii) by
mutual consent of the Servicer and the Purchaser in writing; or (iii)
termination with cause under the terms of this Agreement.

 

ARTICLE XI

 

MISCELLANEOUS PROVISIONS

 

Section 11.01 Successor to the Servicer.

 

Prior to termination of the Servicer’s responsibilities and duties under this
Agreement pursuant to Sections 4.13, 8.04, 9.01, 10.01 (ii) or (iii), the
Purchaser shall (i) succeed to and assume all of the Servicer’s
responsibilities, rights, duties and obligations under this Agreement, or (ii)
appoint a successor having the characteristics set forth in Section 8.02 hereof
and which shall succeed to all rights and assume all of the responsibilities,
duties and liabilities of the Servicer under this Agreement prior to the
termination of the Servicer’s responsibilities, duties and liabilities under
this Agreement. In connection with such appointment and assumption, the
Purchaser may make such arrangements for the compensation of such successor out
of payments on Mortgage Loans as the Purchaser and such successor shall agree.
In the event that the Servicer’s duties, responsibilities and liabilities under
this Agreement should be terminated pursuant to the aforementioned Sections, the
Servicer shall discharge such duties and responsibilities during the period from
the date it acquires knowledge of such termination until the effective date
thereof 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. The
resignation or removal of the Servicer pursuant to the aforementioned Sections
shall not become effective until a successor shall be appointed pursuant to this
Section and shall in no event relieve the Company and/or the Servicer of the
representations and warranties made pursuant to Sections 3.01, 3.02 and 3.03 and
the remedies available to the Purchaser thereunder and under Section 8.01, it
being understood and agreed that the provisions of such Sections 3.01, 3.02,
3.03 and 8.01 shall be applicable to the Company and/or the Servicer
notwithstanding any such resignation or termination of the Servicer, or the
termination of this Agreement.

 

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Any successor appointed as provided herein shall execute, acknowledge and
deliver to the Company, the Servicer and to the Purchaser an instrument
accepting such appointment, whereupon such successor shall become fully vested
with all the rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer, with like effect as if originally named as a party
to this Agreement. Any termination or resignation of the Servicer or this
Agreement pursuant to Section 4.13, 8.04, 9.01 or 10.01 shall not affect any
claims that the Purchaser may have against the Company and/or the Servicer
arising prior to any such termination or resignation.

 

The Servicer shall promptly deliver to the successor the funds in the Custodial
Account and the Escrow Account and the Mortgage Files and related documents and
statements held by it hereunder and the Servicer shall account for all funds.
The Servicer shall execute and deliver such instruments and do such other things
all as may reasonably be required to more fully and definitely vest and confirm
in the successor all such rights, powers, duties, responsibilities, obligations
and liabilities of the Servicer. Within ten (10) Business Days of the execution
and delivery of such instruments, the successor shall reimburse the Servicer for
unrecovered Servicing Advances which the successor retains hereunder and which
would otherwise have been recovered by the Servicer pursuant to this Agreement
but for the appointment of the successor servicer.

 

Upon a successor’s acceptance of appointment as such, the Servicer shall notify
by mail the Purchaser of such appointment.

 

Section 11.02 Amendment.

 

This Agreement may be amended from time to time by the Company, the Servicer and
the Purchaser by written agreement signed by the Company, the Servicer and the
Purchaser.

 

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Section 11.03 Recordation of Agreement.

 

To the extent permitted by applicable law, this Agreement is subject to
recordation in all appropriate public offices for real property records in all
the counties or other comparable jurisdictions in which any of the properties
subject to the Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Servicer
at the Servicer’s expense on direction of the Purchaser accompanied by an
opinion of counsel to the effect that such recordation materially and
beneficially affects the interest of the Purchaser or is necessary for the
administration or servicing of the Mortgage Loans.

 

Section 11.04 Governing Law.

 

This Agreement and the related Term Sheet shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
principles of conflicts of laws and except to the extent preempted by Federal
law. The obligations, rights and remedies of the parties hereunder shall be
determined in accordance with such laws.

 

Section 11.05 Notices.

 

Any demands, notices or other communications permitted or required hereunder
shall be in writing and shall be deemed conclusively to have been given if
personally delivered at or mailed by registered mail, postage prepaid, and
return receipt requested or certified mail, return receipt requested, or
transmitted by telex, telegraph or telecopier and confirmed by a similar mailed
writing, as follows:

 

  (i) if to the Company:

 

HMB Acceptance Corp.

2002 Summit Boulevard, Suite 100

Atlanta, GA 30319 Attention:

Debra F. Watkins, EVP Capital Markets & Treasury

Telecopier No.: (404) 705-2301

 

With a copy to:

 

HMB Acceptance Corp.

2002 Summit Boulevard, Suite 100

Atlanta, GA 30319

Attention: General Counsel

Telecopier No.: (404) 303-4069

 

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  (ii) if to the Servicer:

 

HomeBanc Corp.

2002 Summit Boulevard, Suite 100

Atlanta, GA 30319 Attention:

Debra F. Watkins, EVP Capital Markets & Treasury

Telecopier No.: (404) 705-2301

 

With a copy to:

 

HomeBanc Corp.

2002 Summit Boulevard, Suite 100

Atlanta, GA 30319

Attention: General Counsel

Telecopier No.: (404) 303-4069

 

(iii) if to the Purchaser:

 

EMC Mortgage Corporation

Mac Arthur Ridge II,

909 Hidden Ridge Drive, Suite 200

Irving, Texas 75038

Attention: Ms. Raylene Ruyle

Telecopier No.:

 

With a copy to:

 

Bear Stearns Mortgage Capital Corporation

383 Madison Avenue

New York, New York 10179

Attention: Michelle Sterling

 

or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).

 

Section 11.06 Severability of Provisions.

 

Any part, provision, representation or warranty of this Agreement and the
related Term Sheet which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part,
provision, representation or warranty of this Agreement which is prohibited or
unenforceable or is held to be void or unenforceable in any jurisdiction shall
be ineffective, as to such jurisdiction, to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any

 

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such prohibition or unenforceability in any jurisdiction as to any Mortgage Loan
shall not invalidate or render unenforceable such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties hereto
waive any provision of law that prohibits or renders void or unenforceable any
provision hereof. If the invalidity of any part, provision, representation or
warranty of this Agreement shall deprive any party of the economic benefit
intended to be conferred by this Agreement, the parties shall negotiate, in good
faith, to develop a structure the economic effect of which is nearly as possible
the same as the economic effect of this Agreement without regard to such
invalidity.

 

Section 11.07 Exhibits.

 

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

 

Section 11.08 General Interpretive Principles.

 

For purposes of this Agreement, except as otherwise expressly provided or unless
the context otherwise requires:

 

(i) the terms defined in this Agreement have the meanings assigned to them in
this Agreement and include the plural as well as the singular, and the use of
any gender herein shall be deemed to include the other gender;

 

(ii) accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with generally accepted accounting principles;

 

(iii) references herein to “Articles”, “Sections”, Subsections”, “Paragraphs”,
and other subdivisions without reference to a document are to designated
Articles, Sections, Subsections, Paragraphs and other subdivisions of this
Agreement;

 

(iv) a reference to a Subsection without further reference to a Section is a
reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to Paragraphs and other
subdivisions;

 

(v) the words “herein”, “hereof”, “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular provision;

 

(vi) the term “include” or “including” shall mean without limitation by reason
of enumeration; and

 

(vii) headings of the Articles and Sections in this Agreement are for reference
purposes only and shall not be deemed to have any substantive effect.

 

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Section 11.09 Reproduction of Documents.

 

This Agreement and all documents relating thereto, including, without
limitation, (i) consents, waivers and modifications which may hereafter be
executed, (ii) documents received by any party at the closing, and (iii)
financial statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm,
micro-card, miniature photographic or other similar process. The parties agree
that any such reproduction shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the original
is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.

 

Section 11.10 Confidentiality of Information.

 

Each party recognizes that, in connection with this Agreement, it may become
privy to non-public information regarding the financial condition, operations
and prospects of the other party. Each party agrees to keep all non-public
information regarding the other party strictly confidential, and to use all such
information solely in order to effectuate the purpose of the Agreement, provided
that each party may provide confidential information to its employees, agents
and affiliates who have a need to know such information in order to effectuate
the transaction, provided further that such information is identified as
confidential non-public information. In addition, confidential information may
be provided to a regulatory authority with supervisory power over Purchaser,
provided such information is identified as confidential non-public information.

 

Section 11.11 Recordation of Assignments of Mortgage.

 

For each Mortgage Loan that is not a MERS Mortgage Loan, to the extent permitted
by applicable law, each of the Assignments 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 and at the Servicer’s expense in the event
recordation is either necessary under applicable law or requested by the
Purchaser at its sole option.

 

Section 11.12 Assignment.

 

The Purchaser shall have the right, without the consent of the Company or the
Servicer, 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 any rights of the Purchaser hereunder, by executing an Assignment and
Assumption Agreement substantially in the form of Exhibit D hereto and the
assignee or designee shall accede to the rights and obligations hereunder of the
Purchaser with respect to such Mortgage Loans. In no event shall Purchaser sell
a partial interest in any Mortgage Loan without the written consent of Company
and the Servicer, which consent shall not be unreasonably denied. All references
to the Purchaser in this Agreement shall be deemed to include its assignee or
designee. The Company and the Servicer shall have the right, only with the
consent of the Purchaser or otherwise in accordance with this Agreement, to
assign, in whole or in part, its interest under this Agreement with respect to
some or all of the Mortgage Loans.

 

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Section 11.13 No Partnership.

 

Nothing herein contained shall be deemed or construed to create a co-partnership
or joint venture between the parties hereto and the services of the Company and
the Servicer shall be rendered as an independent contractor and not as agent for
Purchaser.

 

Section 11.14 Execution: Successors and Assigns.

 

This Agreement may be executed in one or more counterparts and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed to be an original; such counterparts, together, shall constitute one
and the same agreement. Subject to this Agreement shall inure to the benefit of
and be binding upon the Company, the Servicer and the Purchaser and their
respective successors and assigns.

 

Section 11.15 Entire Agreement.

 

Each of the Company and the Servicer acknowledges that no representations,
agreements or promises were made to the Company and the Servicer by the
Purchaser or any of its employees other than those representations, agreements
or promises specifically contained herein and in the Confirmation. The
Confirmation and this Agreement and the related Term Sheet sets forth the entire
understanding between the parties hereto; provided, however, only this Agreement
and the related Term Sheet shall be binding upon all successors of both parties.
In the event of any inconsistency between the Confirmation and this Agreement,
this Agreement and the related Term Sheet shall control.

 

Section 11.16. No Solicitation.

 

From and after the Closing Date, each of the Company and the Servicer agrees
that it will not take any action or permit or cause any action to be taken by
any of its agents or affiliates, to personally, by telephone or mail, solicit
the borrower or obligor under any Mortgage Loan to refinance the Mortgage Loan,
in whole or in part, without the prior written consent of the Purchaser.
Notwithstanding the foregoing, it is understood and agreed that (i) promotions
undertaken by the Company and/or the Servicer or any affiliate of the Company
and/or the Servicer which are directed to the general public at large, or
segments thereof, provided that no segment shall consist primarily of the
Mortgage Loans, including, without limitation, mass mailing based on
commercially acquired mailing lists, newspaper, radio and television
advertisements and (ii) responses to unsolicited requests or inquiries made by a
Mortgagor or an agent of a Mortgagor, shall not constitute solicitation under
this Section 11.16. This Section 11.16 shall not be deemed to preclude the
Company and/or the Servicer or any of its affiliates from soliciting any
Mortgagor for any other financial products or services. The Company and the
Servicer shall use its best efforts to prevent the sale of the name of any
Mortgagor to any Person who is not an affiliate of the Company or the Servicer
other than as permitted by law.

 

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Section 11.17. Closing.

 

The closing for the purchase and sale of the Mortgage Loans shall take place on
the related Closing Date. The closing shall be either: by telephone, confirmed
by letter or wire as the parties shall agree, or conducted in person, at such
place as the parties shall agree.

 

The closing for the Mortgage Loans to be purchased on the related Closing Date
shall be subject to each of the following conditions:

 

(a) at least one (1) Business Day prior to the related Closing Date, the Company
shall deliver to the Purchaser a magnetic diskette, or transmit by modem, a
listing on a loan-level basis of the information contained in the related
Mortgage Loan Schedule attached to the related Term Sheet;

 

(b) all of the representations and warranties of the Company and the Servicer
under this Agreement shall be materially true and correct as of the related
Closing Date and no event shall have occurred which, with notice or the passage
of time, would constitute a material default under this Agreement;

 

(c) the Purchaser shall have received, or the Purchaser’s attorneys shall have
received in escrow, all documents required pursuant to this Agreement, the
related Term Sheet, an opinion of counsel and an officer’s certificate, all in
such forms as are agreed upon and acceptable to the Purchaser, duly executed by
all signatories other than the Purchaser as required pursuant to the terms
hereof;

 

(d) the Company and the Servicer shall have delivered and released to the
Purchaser (or its designee) on or prior to the related Closing Date all
documents required pursuant to the terms of this Agreement and the related Term
Sheet; and

 

(e) all other terms and conditions of this Agreement, the related Term Sheet and
the Confirmation shall have been materially complied with.

 

Subject to the foregoing conditions, the Purchaser shall pay to the Company on
the related Closing Date the Purchase Price, plus accrued interest pursuant to
Section 2.02 of this Agreement, by wire transfer of immediately available funds
to the account designated by the Company.

 

Section 11.18. Cooperation of Company and Servicer with a Reconstitution.

 

The Company, the Servicer and the Purchaser agree that with respect to some or
all of the Mortgage Loans, on or after the related Closing Date, on one or more
dates (each a “Reconstitution

 

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Date”) at the Purchaser’s sole option, the Purchaser may effect a sale (each, a
“Reconstitution”) of some or all of the Mortgage Loans then subject to this
Agreement, without recourse, to:

 

(a) one or more third party purchasers in one or more in whole loan transfers
(each, a “Whole Loan Transfer”); or

 

(b) one or more trusts or other entities to be formed as part of one or more
pass-through transfers (each, a “Pass-Through Transfer”).

 

The Company and the Servicer agree to execute in connection with any agreements
among the Purchaser, the Company, the Servicer and any servicer in connection
with a Whole Loan Transfer, an Assignment, Assumption and Recognition Agreement
substantially in the form of Exhibit D hereto, or, at Purchaser’s request, a
seller’s warranties and servicing agreement or a participation and servicing
agreement or similar agreement in form and substance reasonably acceptable to
the parties, and in connection with a Pass-Through Transfer, a pooling and
servicing agreement in form and substance reasonably acceptable to the parties,
(collectively the agreements referred to herein are designated, the
“Reconstitution Agreements”). It is understood that any such Reconstitution
Agreements will not contain any greater obligations on the part of Company or
the Servicer than are contained in this Agreement.

 

With respect to each Whole Loan Transfer and each Pass-Through Transfer entered
into by the Purchaser, each of the Company and the Servicer agrees (1) to
cooperate fully with the Purchaser and any prospective purchaser with respect to
all reasonable requests and due diligence procedures; (2) to execute, deliver
and perform all Reconstitution Agreements required by the Purchaser; (3) to
restate the representations and warranties set forth in this Agreement as of the
settlement or closing date in connection with such Reconstitution (each, a
“Reconstitution Date”). In that connection, the Company and the Servicer shall
provide to such servicer or issuer, as the case may be, and any other
participants in such Reconstitution: (i) any and all information (including
servicing portfolio information) and appropriate verification of information
(including servicing portfolio information) which may be reasonably available to
the Servicer, whether through letters of its auditors and counsel or otherwise,
as the Purchaser or any such other participant shall request upon reasonable
demand; and (ii) such additional representations, warranties, covenants,
opinions of counsel, letters from auditors, and certificates of public officials
or officers of the Company and the Servicer as are reasonably agreed upon by the
Company, the Servicer and the Purchaser or any such other participant. In
connection with each Pass-Through Transfer, the each of the Company and the
Servicer agrees to provide reasonable and customary indemnification to the
Purchaser and its affilates for disclosure contained in any offering document
relating to the Company, the Servicer or its affilates, the Mortgage Loans and
the underwriting standards of the Mortgage Loans. The Purchaser shall be
responsible for the costs relating to the delivery of such information. All
reasonable and customary costs, fees and expenses incurred by Company and the
Servicer pursuant to this provision shall be reimbursed to it and be deemed a
condition precedent to its execution of any Reconstitution Agreement(s).

 

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All Mortgage Loans not sold or transferred pursuant to a Reconstitution shall
remain subject to, and serviced in accordance with the terms of, this Agreement
and the related Term Sheet, and with respect thereto this Agreement and the
related Term Sheet shall remain in full force and effect.

 

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IN WITNESS WHEREOF, the Company, the Servicer and the Purchaser have caused
their names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.

 

EMC MORTGAGE CORPORATION    

Purchaser

By:

 

/s/ Dana Dillard

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

Name:

 

Dana Dillard

Title:

 

Senior Vice President

HMB ACCEPTANCE CORP.    

Company

By:

 

/s/ Charles W. McGuire

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

Name:

 

Charles W. McGuire

Title:

 

Secretary

HOMEBANC CORP.    

Servicer

By:

 

/s/ Debra F. Watkins

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

Name:

 

Debra F. Watkins

Title:

 

Executive Vice President

 

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EXHIBIT A

CONTENTS OF MORTGAGE FILE

 

With respect to each Mortgage Loan, the Mortgage File shall include each of the
following items, which shall be available for inspection by the Purchaser, and
which shall be retained by the Servicer in the Servicing File or delivered to
the Purchaser or its designee pursuant to Sections 2.04 and 2.05 of the
Purchase, Warranties and Servicing Agreement.

 

1. The original Mortgage Note endorsed “Pay to the order of
                                        , without recourse,” and signed via
original signature in the name of the Servicer by an authorized officer, with
all intervening endorsements showing a complete chain of title from the
originator to the Servicer, together with any applicable riders. In no event may
an endorsement be a facsimile endorsement. If the Mortgage Loan was acquired by
the Servicer in a merger, the endorsement must be by “[Company], successor by
merger to the [name of predecessor]”. If the Mortgage Loan was acquired or
originated by the Servicer while doing business under another name, the
endorsement must be by “[ Servicer] formerly known as [previous name]”. Mortgage
Notes may be in the form of a lost note affidavit subject to Purchaser
acceptability.

 

2. Except as provided below and for each Mortgage Loan that is not a MERS
Mortgage Loan, the original Mortgage with evidence of recording thereon. If in
connection with any Mortgage Loan that is not a MERS Mortgage Loan, the Servicer
cannot deliver or cause to be delivered the original Mortgage with evidence of
recording thereon on or prior to the related Closing Date 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 Servicer shall
deliver or cause to be delivered to the Purchaser 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 title insurer insuring the Mortgage stating that
such Mortgage has been delivered 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 Purchaser upon
receipt thereof by the Servicer; 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 with the recording information thereon certified by such public
recording office to be a true and complete copy of the original recorded
Mortgage. With respect to each MERS Mortgage Loan, the original Mortgage, noting
the presence of the MIN of the Mortgage Loans and either language indicating
that the Mortgage Loan is a MOM Loan or if the Mortgage Loan was not a MOM Loan
at origination, the original Mortgage and the assignment thereof to MERS, with
evidence of recording indicated thereon, or a copy of the Mortgage certified by
the public recording office in which such Mortgage has been recorded;

 

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3. The original or certified copy, certified by the Servicer, of the Primary
Mortgage Insurance Policy, if required.

 

4. In the case of each Mortgage Loan that is not a MERS Mortgage Loan, the
original Assignment of Mortgage, from the Servicer to “Mortgage Electronic
Registration Systems, Inc., its successors and assigns, as nominee for EMC
Mortgage Corporation, its successors and assigns, P.O. Box 2026, Flint, Michigan
48501-2026,” or otherwise in accordance with Purchaser’s instructions, which
assignment of mortgage shall, but for any blanks requested by Purchaser, be in
form and substance acceptable for recording. If the Mortgage Loan was acquired
or originated by the Servicer while doing business under another name, the
Assignment must be by “[Servicer] formerly known as [previous name]”. If the
Mortgage Loan was acquired by the Servicer in a merger, the endorsement must be
by “[Servicer], successor by merger to the [name of predecessor]”. None of the
Assignments are blanket assignments of mortgage;

 

5. The original policy of title insurance, including riders and endorsements
thereto, or if the policy has not yet been issued, a written commitment or
interim binder or preliminary report of title issued by the title insurance or
escrow company.

 

6. In the case of each Mortgage Loan that is not a MERS Mortgage Loan, originals
of all recorded intervening Assignments, or copies thereof, certified by the
public recording office in which such Assignments have been recorded showing a
complete chain of title from the originator to the Servicer, with evidence of
recording thereon, or a copy thereof certified by the public recording office in
which such Assignment has been recorded or, if the original Assignment has not
been returned from the applicable public recording office, a true certified
copy, certified by the Servicer.

 

7. Originals, or copies thereof certified by the public recording office in
which such documents have been recorded, of each assumption, extension,
modification, written assurance or substitution agreements, if applicable, or if
the original of such document has not been returned from the applicable public
recording office, a true certified copy, certified by the Servicer.

 

8. If the Mortgage Note or Mortgage or any other material document or instrument
relating to the Mortgage Loan has been signed by a person on behalf of the
Mortgagor, the original or copy of power of attorney or other instrument that
authorized and empowered such person to sign bearing evidence that such
instrument has been recorded, if so required in the appropriate jurisdiction
where the Mortgaged Property is located, or a copy thereof certified by the
public recording office in which such instrument has been recorded or, if the
original instrument has not been returned from the applicable public recording
office, a true certified copy, certified by the Servicer.

 

9. reserved.

 

10. Mortgage Loan closing statement (Form HUD-1) and any other truth-in-lending
or real estate settlement procedure forms required by law.

 

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11. Residential loan application.

 

12. Uniform underwriter and transmittal summary (Fannie Mae Form 1008) or
reasonable equivalent.

 

13. Credit report on the mortgagor.

 

14. Business credit report, if applicable.

 

15. Residential appraisal report and attachments thereto.

 

16. The original of any guarantee executed in connection with the Mortgage Note.

 

17. Verification of employment and income except for Mortgage Loans originated
under a limited documentation program, all in accordance with Company’s
underwriting guidelines.

 

18. Verification of acceptable evidence of source and amount of down payment, in
accordance with Company’s underwriting guidelines.

 

19. Photograph of the Mortgaged Property (may be part of appraisal).

 

20. Survey of the Mortgaged Property, if any.

 

21. Sales contract, if applicable.

 

22. If available, termite report, structural engineer’s report, water
portability and septic certification.

 

23. Any original security agreement, chattel mortgage or equivalent executed in
connection with the Mortgage.

 

24. Name affidavit, if applicable.

 

Notwithstanding anything to the contrary herein, Servicer may provide one
certificate for all of the Mortgage Loans indicating that the documents were
delivered for recording.

 

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EXHIBIT B

 

CUSTODIAL ACCOUNT LETTER AGREEMENT

 

                    , 2004

 

To: [                                        ]

(the “Depository”)

 

As “ Servicer ” under the Purchase, Warranties and Servicing Agreement, dated as
of July 1, 2004 Adjustable Rate Mortgage Loans (the “Agreement”), we hereby
authorize and request you to establish an account, as a Custodial Account
pursuant to Section 4.04 of the Agreement, to be designated as
“[                                                             ], in trust for
the [Purchaser], Owner of Adjustable Rate Mortgage Loans”. All deposits in the
account shall be subject to withdrawal therefrom by order signed by the
Servicer. This letter is submitted to you in duplicate. Please execute and
return one original to us.

 

[                                         ]

By:

 

 

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

Name:

 

 

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

Title:

 

 

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

 

The undersigned, as “Depository”, hereby certifies that the above described
account has been established under Account Number [                ], at the
office of the depository indicated above, and agrees to honor withdrawals on
such account as provided above. The full amount deposited at any time in the
account will be insured up to applicable limits by the Federal Deposit Insurance
Corporation through the Bank Insurance Fund or the Savings Association Insurance
Fund or will be invested in Permitted Investments as defined in the Agreement.

 

[                                         ]

By:

 

 

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

Name:

 

 

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

Title:

 

 

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

 

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EXHIBIT C

 

ESCROW ACCOUNT LETTER AGREEMENT

 

                    , 2004

 

To: [                                        ]

(the “Depository”)

 

As “Servicer” under the Purchase Warranties and Servicing Agreement, dated as of
July 1, 2004 Adjustable Rate Mortgage Loans (the “Agreement”), we hereby
authorize and request you to establish an account, as an Escrow Account pursuant
to Section 4.06 of the Agreement, to be designated as
“[                                                             ], in trust for
the [Purchaser], Owner of Adjustable Rate Mortgage Loans, and various
Mortgagors.” All deposits in the account shall be subject to withdrawal
therefrom by order signed by the Servicer. This letter is submitted to you in
duplicate. Please execute and return one original to us.

 

[                                         ]

By:

 

 

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

Name:

 

 

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

Title:

 

 

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

 

The undersigned, as “Depository”, hereby certifies that the above described
account has been established under Account Number                 , at the
office of the depository indicated above, and agrees to honor withdrawals on
such account as provided above. The full amount deposited at any time in the
account will be insured up to applicable limits by the Federal Deposit Insurance
Corporation through the Bank Insurance Fund or the Savings Association Insurance
Fund or will be invested in Permitted Investments as defined in the Agreement.

 

[                                         ]

By:

 

 

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

Name:

 

 

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

Title:

 

 

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

 

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EXHIBIT D

 

FORM OF PURCHASE, ASSIGNMENT, ASSUMPTION AND RECOGNITION AGREEMENT

 

This is an Assignment, Assumption and Recognition Agreement (this “AAR
Agreement”) made as of July 29, 2004 (the “Closing Date”), among EMC Mortgage
Corporation, (the “Assignor”), HomeBanc Mortgage Trust 2004-1, as issuer (the
“Assignee”), HMB Acceptance Corp. (the “Company”), HomeBanc Corp. (the
“Servicer”) and Structured Asset Mortgage Investments II Inc. (“SAMI II”).

 

In consideration of the mutual promises contained herein the parties hereto
agree that the residential mortgage loans (the “Assigned Loans”) listed on
Attachment 1 annexed hereto (the “Assigned Loan Schedule”) purchased by Assignor
from Company pursuant to the Purchase, Warranties and Servicing Agreement, dated
as of July 1, 2004, among the Assignor, the Servicer and the Company (the
“Agreement”), and sub-serviced by HomeBanc Mortgage Corporation, shall be
subject to the terms of this AAR Agreement. Capitalized terms used herein but
not defined shall have the meanings ascribed to them in the Agreement.

 

Assignment and Assumption

 

1. Assignor hereby grants, transfers and assigns to Assignee all of the right,
title and interest of Assignor in the Assigned Loans and, as they relate to the
Assigned Loans, all of its right, title and interest in, to and under the
Agreement. Assignor specifically reserves and does not assign to Assignee any
right, title and interest in, to or under any Mortgage Loans subject to the
Agreement other than those set forth on Attachment l. Notwithstanding anything
to the contrary contained herein, the Assignor specifically reserves and does
not assign to the Assignee any right, title and interest in, to or under the
representations and warranties contained in Section 3.01 and Section 3.02 of the
Agreement and the Assignor is retaining the right to enforce the representations
and warranties set forth in those sections against the Company.

 

Representations; Warranties and Covenants

 

2. Assignor warrants and represents to Assignee, Company and Servicer as of the
date hereof:

 

a. Attached hereto as Attachment 2 is a true and accurate copy of the Agreement,
which agreement is in full force and effect as of the date hereof and the
provisions of which have not been waived, amended or modified in any respect,
nor has any notice of termination been given thereunder;

 

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b. Assignor was the lawful owner of the Assigned Loans with full right to
transfer the Assigned Loans and any and all of its interests, rights and
obligations under the Agreement as it relates to the Assigned Loans, free and
clear of any and all liens, claims and encumbrances; and upon the transfer of
the Assigned Loans to Assignee as contemplated herein, Assignee shall have good
title to each and every Assigned Loan, as well as any and all of Assignor’s
interests, rights and obligations under the Agreement as it relates to the
Assigned Loans, free and clear of any and all liens, claims and encumbrances;

 

c. Assignor has not received notice of, and has no knowledge of, any offsets,
counterclaims or other defenses available to Company or Servicer with respect to
the Assigned Loans or the Agreement;

 

d. Assignor has not waived or agreed to any waiver under, or agreed to any
amendment or other modifications of, the Agreement. Assignor has no knowledge
of, and has not received notice of, any waivers under or any amendments or other
modifications of, or assignment of rights or obligations under the Agreement;

 

e. Assignor is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation, and has all
requisite power and authority to acquire, own and sell the Assigned Loans;

 

f. Assignor has full power and authority to execute, deliver and perform its
obligations under this AAR Agreement, and to consummate the transactions set
forth herein. The consummation of the transactions contemplated by this AAR
Agreement is in the ordinary course of Assignor’s business and will not conflict
with, or result in a breach of, any of the terms, conditions or provisions of
Assignor’s charter or by-laws or any legal restriction, or any material
agreement or instrument to which Assignor is now a party or by which it is
bound, or result in the violation of any law, rule, regulation, order, judgment
or decree to which Assignor or its property is subject. The execution, delivery
and performance by Assignor of this AAR Agreement and the consummation by it of
the transactions contemplated hereby, have been duly authorized by all necessary
action on the part of Assignor. This AAR Agreement has been duly executed and
delivered by Assignor and, upon the due authorization, execution and delivery by
Assignee, Company and Servicer, will constitute the valid and legally binding
obligation of Assignor enforceable against Assignor in accordance with its terms
except as enforceability may be limited by bankruptcy, reorganization,
insolvency, moratorium or other similar laws now or hereafter in effect relating
to creditors’ rights generally, and by general principles of equity regardless
of whether enforceability is considered in a proceeding in equity or at law;

 

g. No consent, approval, order or authorization of, or declaration, filing or
registration with, any governmental entity is required to be obtained or made by
Assignor in connection with the execution, delivery or performance by Assignor
of this AAR Agreement, or the consummation by it of the transactions
contemplated hereby. Neither Assignor nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the Assigned Loans
or any interest in the Assigned Loans, or solicited any offer to buy or accept
transfer, pledge or other

 

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disposition of the Assigned Loans, or any interest in the Assigned Loans, or
otherwise approached or negotiated with respect to the Assigned Loans, or any
interest in the Assigned Loans, with any Person in any manner, or made any
general solicitation by means of general advertising or in any other manner, or
taken any other action which would constitute a distribution of the Assigned
Loans under the Securities Act of 1933, as amended (the “1993 Act”) or which
would render the disposition of the Assigned Loans a violation of Section 5 of
the 1933 Act or require registration pursuant thereto; and

 

h. Assignor has received from Company and Servicer, and has delivered to
Assignee, all documents required to be delivered to Assignor by Company and
Servicer prior to the date hereof pursuant to Section 2.07 of the Agreement with
respect to the Assigned Loans.

 

3. Assignee warrants and represents to, and covenants with, Assignor, Company
and Servicer as of the date hereof:

 

a. Assignee is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation and has all requisite power and
authority to hold the Assigned Loans on behalf of the holders of HomeBanc
Mortgage Trust 2004-1, Mortgage-Backed Notes, Series 2004-1;

 

b. Assignee has full power and authority to execute, deliver and perform its
obligations under this AAR Agreement, and to consummate the transactions set
forth herein. The consummation of the transactions contemplated by this AAR
Agreement is in the ordinary course of Assignee’s business and will not conflict
with, or result in a breach of, any of the terms, conditions or provisions of
Assignee’s charter or by-laws or any legal restriction, or any material
agreement or instrument to which Assignee is now a party or by which it is
bound, or result in the violation of any law, rule, regulation, order, judgment
or decree to which Assignee or its property is subject. The execution, delivery
and performance by Assignee of this AAR Agreement and the consummation by it of
the transactions contemplated hereby, have been duly authorized by all necessary
action on the part of Assignee. This AAR Agreement has been duly executed and
delivered by Assignee and, upon the due authorization, execution and delivery by
Assignor, Servicer and Company, will constitute the valid and legally binding
obligation of Assignee enforceable against Assignee in accordance with its terms
except as enforceability may be limited by bankruptcy, reorganization,
insolvency, moratorium or other similar laws now or hereafter in effect relating
to creditors’ rights generally, and by general principles of equity regardless
of whether enforceability is considered in a proceeding in equity or at law;

 

c. No consent, approval, order or authorization of, or declaration, filing or
registration with, any governmental entity is required to be obtained or made by
Assignee in connection with the execution, delivery or performance by Assignee
of this AAR Agreement, or the consummation by it of the transactions
contemplated hereby;

 

d. There is no action, suit, proceeding, investigation or litigation pending or,
to Assignee’s knowledge, threatened, which either in any instance or in the
aggregate, if determined adversely to Assignee, would adversely affect
Assignee’s execution or delivery of, or the enforceability of, this AAR
Agreement, or the Assignee’s ability to perform its obligations under this AAR
Agreement;

 

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e. The Assignee assumes for the benefit of each of the Assignor, Servicer and
the Company all of the Assignor’s rights as Purchaser under the Agreement but
solely with respect to the Assigned Loans.

 

4. Company warrants and represents to, and covenants with, Assignor and Assignee
as of the date hereof:

 

a. Attached hereto as Attachment 2 is a true and accurate copy of the Agreement,
which agreement is in full force and effect as of the date hereof and the
provisions of which have not been waived, amended or modified in any respect,
nor has any notice of termination been given thereunder;

 

b. Company is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all requisite power and
authority to perform its obligations under the Agreement;

 

c. Company has full corporate power and authority to execute, deliver and
perform its obligations under this AAR Agreement, and to consummate the
transactions set forth herein. The consummation of the transactions contemplated
by this AAR Agreement is in the ordinary course of Company’s business and will
not conflict with, or result in a breach of, any of the terms, conditions or
provisions of Company’s charter or by-laws or any legal restriction, or any
material agreement or instrument to which Company is now a party or by which it
is bound, or result in the violation of any law, rule, regulation, order,
judgment or decree which violation would have a material adverse effect on
Company or its property or the consummation of the transactions contemplated by
this AAR. The execution, delivery and performance by Company of this AAR
Agreement and the consummation by it of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of
Company. This AAR Agreement has been duly executed and delivered by Company,
and, upon the due authorization, execution and delivery by Assignor, Assignee
and Servicer, will constitute the valid and legally binding obligation of
Company, enforceable against Company in accordance with its terms except as
enforceability may be limited by bankruptcy, reorganization, insolvency,
moratorium or other similar laws now or hereafter in effect relating to
creditors’ rights generally, and by general principles of equity regardless of
whether enforceability is considered in a proceeding in equity or at law;

 

d. No consent, approval, order or authorization of, or declaration, filing or
registration with, any governmental entity is required to be obtained or made by
Company in connection with the execution, delivery or performance by Company of
this AAR Agreement, or the consummation by it of the transactions contemplated
hereby; and

 

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e. No event has occurred from the applicable Closing Date to the date hereof
which would render the representations and warranties as to the related Mortgage
Loans made by the Company in Section 3.01 and Section 3.02 of the Agreement to
be untrue in any material respect.

 

5. Servicer warrants and represents to, and covenants with, Assignor and
Assignee as of the date hereof:

 

a. Attached hereto as Attachment 2 is a true and accurate copy of the Agreement,
which agreement is in full force and effect as of the date hereof and the
provisions of which have not been waived, amended or modified in any respect,
nor has any notice of termination been given thereunder;

 

b. Servicer is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all requisite power and
authority to service the Assigned Loans and otherwise to perform its obligations
under the Agreement;

 

c. Servicer has full corporate power and authority to execute, deliver and
perform its obligations under this AAR Agreement, and to consummate the
transactions set forth herein. The consummation of the transactions contemplated
by this AAR Agreement is in the ordinary course of Servicer’s business and will
not conflict with, or result in a breach of, any of the terms, conditions or
provisions of Servicer’s charter or by-laws or any legal restriction, or any
material agreement or instrument to which Servicer is now a party or by which it
is bound, or result in the violation of any law, rule, regulation, order,
judgment or decree which violation would have a material adverse effect on
Servicer or its property or the consummation of the transactions contemplated by
this AAR. The execution, delivery and performance by Servicer of this AAR
Agreement and the consummation by it of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of
Servicer. This AAR Agreement has been duly executed and delivered by Servicer,
and, upon the due authorization, execution and delivery by Assignor, Assignee
and Company, will constitute the valid and legally binding obligation of
Servicer, enforceable against Servicer in accordance with its terms except as
enforceability may be limited by bankruptcy, reorganization, insolvency,
moratorium or other similar laws now or hereafter in effect relating to
creditors’ rights generally, and by general principles of equity regardless of
whether enforceability is considered in a proceeding in equity or at law;

 

d. No consent, approval, order or authorization of, or declaration, filing or
registration with, any governmental entity is required to be obtained or made by
Servicer in connection with the execution, delivery or performance by Servicer
of this AAR Agreement, or the consummation by it of the transactions
contemplated hereby; and

 

e. Servicer shall establish a Custodial Account and an Escrow Account under the
Agreement in favor of Assignee with respect to the Assigned Loans separate from
the Custodial Account and the Escrow Account previously established under the
Agreement in favor of Assignor.

 

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Recognition of Assignee

 

6. From and after the date hereof, Company and Servicer shall recognize Assignee
as owner of the Assigned Loans and Servicer will service, or cause to be
serviced, the Assigned Loans for Assignee as if Assignee and Servicer had
entered into a separate servicing agreement for the servicing of the Assigned
Loans in the form of the Agreement (as modified herein), the terms of which are
incorporated herein by reference. Each of the Company and the Servicer
acknowledges and consents to (i) the assignment by the Assignor to the Assignee
of all of the Assignor’s rights against the Company and the Servicer pursuant to
the Agreement and to the enforcement or exercise of any right or remedy against
the Company and the Servicer pursuant to the Agreement as assigned by the
Assignor and (ii) the assignment by the Assignee to U.S. Bank National
Association (the “Indenture Trustee”) of such rights and to the enforcement or
exercise of any right or remedy by the Indenture Trustee, or the Master Servicer
acting pursuant to the Sale and Servicing Agreement (as defined below), against
the Company and the Servicer pursuant to this AAR Agreement as assigned by the
Assignee. Such enforcement of a right or remedy by the Assignee, the Master
Servicer or the Indenture Trustee, as applicable, shall have the same force and
effect as if the right or remedy had been enforced or exercised by the Assignor
directly.

 

In addition, each of the Company and the Servicer hereby acknowledges that from
and after the date hereof, the Assigned Loans will be subject to the Sale and
Servicing Agreement (the “Sale and Servicing Agreement”), dated as of July 29,
2004, by and among the Assignor, the Assignee, the Indenture Trustee, SAMI II
and Wells Fargo Bank, National Association, as master servicer and securities
administrator (the “Master Servicer”). Pursuant to the Sale and Servicing
Agreement, the Master Servicer has the right to monitor the Servicer’s
performance of its servicing obligations under the Agreement. Such right will
include, without limitation, the right to terminate the Servicer under the
Agreement upon the occurrence of an event of default thereunder, the right to
receive all remittances required to be made by the Servicer under the Agreement,
the right to receive all monthly reports and other data required to be delivered
by the Servicer under the Agreement, the right to examine the books and records
of the Servicer, indemnification rights, and the right to exercise certain
rights of consent and approval relating to actions taken by the Servicer. In
connection therewith, the Servicer hereby agrees that all remittances required
to be made with respect to the Assigned Loans pursuant to the Agreement shall be
made in accordance with the following wire transfer instructions:

 

HBMT 2004-1 Master Servicer Collection Account

Bank: Wells Fargo Bank, National Association

ABA Routing Number: 121000248

Account Name: SAS Clearing

Account #3970771416

FFC to: HBMT 2004-1, Account                     

 

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and the Servicer shall deliver, or cause to be delivered, all reports required
to be delivered under the Agreement to the Assignee and to the Master Servicer
at:

 

Wells Fargo Bank, National Association

9062 Old Annapolis Road

Columbia, Maryland 21045

Attention: HBMT 2004-1

 

Each of the Company and the Servicer agrees to indemnify and hold harmless SAMI
II, each director of SAMI II, each officer of SAMI II who signed the
Registration Statement, the Underwriter and each person, if any, who controls
SAMI II or the Underwriter within the meaning of Section 15 of the 1933 Act
(collectively, the “Indemnified Party”) against any and all losses, claims,
expenses, damages or liabilities to which the Indemnified Party may become
subject, under the 1933 Act or otherwise, including, without limitation, with
respect to disputes between the parties, insofar as such losses, claims,
expenses, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Prospectus Supplement or the omission or the alleged
omission to state in the Prospectus Supplement a material fact necessary in
order to make the statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and in conformity with
information furnished in writing by the Company and the Servicer specifically
for use in the sections of the Prospectus Supplement entitled “Mortgage Loan
Origination” and “The Master Servicer and the Servicer - The Servicer.”

 

It is the intention of Assignor, Company, Servicer and Assignee that this AAR
Agreement shall be binding upon and for the benefit of the respective successors
and assigns of the parties hereto. None of Company, Servicer or Assignor shall
amend or agree to amend, modify, waive, or otherwise alter any of the terms or
provisions of the Agreement which amendment, modification, waiver or other
alteration would in any way affect the Assigned Loans without the prior written
consent of Assignee.

 

7. The Servicer guarantees the performance by the Company of the Company’s
obligations under this AAR Agreement and under the Agreement, including without
limitation, the repurchase and substitution obligations of the Company pursuant
to Section 3.03 of the Agreement and the indemnification obligations of the
Company pursuant to Section 8.01 of the Agreement.

 

Limitation of Liability

 

8. It is expressly understood and agreed by the parties hereto that (a) this AAR
Agreement is executed and delivered by Wilmington Trust Company, not
individually or personally but solely as owner trustee of HomeBanc Mortgage
Trust 2004-1 (the “Trust”), in the exercise of the powers and authority
conferred and vested in it under the Amended and Restated Trust Agreement, dated
as of July 29, 2004, by and among Wilmington Trust Company, SAMI II and the
Indenture Trustee (b) each of the representations, undertakings and agreements
herein made on the part of the Trust is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but is
made and intended for the purpose of binding only the Trust and (c) under no
circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable for the breach
or failure of any obligation, representation, warranty or covenant made or
undertaken by the Trust under this AAR Agreement.

 

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Miscellaneous

 

9. All demands, notices and communications related to the Assigned Loans, the
Agreement and this AAR Agreement shall be in writing and shall be deemed to have
been duly given if personally delivered or mailed by registered mail, postage
prepaid, as follows:

 

  a. In the case of Company,

 

  HMB Acceptance Corp.

  2002 Summit Boulevard, Suite 100

  Atlanta, Georgia 30319

  Attention: General Counsel

 

  b. In the case of Servicer,

 

  HomeBanc Corp.

  2002 Summit Boulevard, Suite 100

  Atlanta, Georgia 30319

  Attention: General Counsel

 

  c. In the case of Assignor,

 

  EMC Mortgage Corporation

  Mac Arthur Ridge II

  909 Hidden Ridge Drive, Suite 200

  Irving, Texas 75038

  Attention: Ralene Ruyle

  Telecopier No.: (972) 444-2810

 

  with a copy to:

 

  Bear Stearns Mortgage Capital Corporation

  383 Madison Avenue

  New York, New York 10179

  Attention: Ernie Calabrese

  Telecopier No.: (212) 272-9529

 

  d. In the case of Assignee,

 

  Wilmington Trust Company

 

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  Rodney Square North

  1100 North Market Street

  Wilmington, Delaware 19890-0001

  Attention:                     

 

10. This AAR Agreement shall be construed in accordance with the laws of the
State of New York, without regard to conflicts of law principles, and the
obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.

 

11. No term or provision of this AAR Agreement may be waived or modified unless
such waiver or modification is in writing and signed by the party against whom
such waiver or modification is sought to be enforced.

 

12. This AAR Agreement shall inure to the benefit of the successors and assigns
of the parties hereto. Any entity into which Assignor, Assignee, Servicer or
Company may be merged or consolidated shall without the requirement for any
further writing, be deemed Assignor, Assignee, Servicer or Company, respectively
hereunder. For purposes of this AAR Agreement, any Master Servicer shall be
considered a third party beneficiary to this AAR Agreement entitled to all the
rights and benefits accruing to any Master Servicer herein as if it were a
direct party to this AAR Agreement.

 

13. This AAR Agreement shall survive the conveyance of the Assigned Loans as
contemplated in this AAR Agreement.

 

14. This AAR Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original and all such
counterparts shall constitute one and the same instrument.

 

15. In the event that any provision of this AAR Agreement conflicts with any
provision of the Agreement with respect to the Assigned Loans, the terms of this
AAR Agreement shall control.

 

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IN WITNESS WHEREOF, the parties hereto have executed this AAR Agreement as of
the day and year first above written.

 

EMC MORTGAGE CORPORATION Assignor By: Name: Title: HOMEBANC MORTGAGE TRUST
2004-1 By: Wilmington Trust Company,
not in its individual capacity but solely as Owner Trustee Assignee By: Name:
Title: HMB ACCEPTANCE CORP. Company By: Name: Title: HOMEBANC CORP. Servicer By:
Name: Title:

 

 

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Acknowledged and Agreed: WELLS FARGO BANK, NATIONAL ASSOCIATION Master Servicer
By: Name: Title: STRUCTURED ASSET MORTGAGE INVESTMENTS II INC. By: Name: Title:
U.S. BANK NATIONAL ASSOCIATION as Indenture Trustee for the holders of HomeBanc
Mortgage Trust 2004-1, Mortgage-Backed Notes, Series 2004-1 By: Name: Title:

 

94

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ATTACHMENT l

 

ASSIGNED LOAN SCHEDULE

 

(Provided Upon Request)

 

95

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ATTACHMENT 2

 

PURCHASE, WARRANTIES AND SERVICING AGREEMENT

 

96

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EXHIBIT E

 

FORM OF TRIAL BALANCE

 

97

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EXHIBIT G

 

REQUEST FOR RELEASE OF DOCUMENTS AND RECEIPT

 

RE: Mortgage Loan #                                         
                                    

 

BORROWER:                                         
                                                             

 

PROPERTY:                                         
                                                             

 

Pursuant to a Purchase, Warranties and Servicing Agreement (the “Agreement”)
among the Company, the Servicer and the Purchaser, the undersigned hereby
certifies that he or she is an officer of the Servicer requesting release of the
documents for the reason specified below. The undersigned further certifies
that:

 

(Check one of the items below)

 

             On                                 , the above captioned mortgage
loan was paid in full or that the Servicer has been notified that payment in
full has been or will be escrowed. The Servicer hereby certifies that all
amounts with respect to this loan which are required under the Agreement have
been or will be deposited in the Custodial Account as required.

 

             The above captioned loan is being repurchased pursuant to the terms
of the Agreement. The Servicer hereby certifies that the repurchase price has
been credited to the Custodial Account as required under the Agreement.

 

             The above captioned loan is being placed in foreclosure and the
original documents are required to proceed with the foreclosure action. The
Servicer hereby certifies that the documents will be returned to the Purchaser
in the event of reinstatement.

 

             Other (explain)

 

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

 

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

 

All capitalized terms used herein and not defined shall have the meanings
assigned to them in the Agreement.

 

Based on this certification and the indemnities provided for in the Agreement,
please release to the Servicer all original mortgage documents in your
possession relating to this loan.

 

Dated:                                         

 

By:                                                              

 

98

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Signature

 

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

        Title

 

Send documents to:                                         
                                                             

 

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

 

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

 

Acknowledgement:

 

Purchaser hereby acknowledges that all original documents previously released on
the above captioned mortgage loan have been returned and received by the
Purchaser.

 

Dated:                                         

 

By:                                         

        Signature

 

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

        Title

 

99

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EXHIBIT H

 

COMPANY’S UNDERWRITING GUIDELINES

 

100

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EXHIBIT I

 

TERM SHEET

 

This TERM SHEET (the “Term Sheet”) dated                     , among HMB
Acceptance Corp., a Delaware corporation, located at 2002 Summit Boulevard,
Suite 100, Atlanta, GA 30319 (the “Company”), HomeBanc Corp., a Delaware
corporation, located at 2002 Summit Boulevard, Suite 100, Atlanta, GA 30319 (the
“Servicer”) and EMC Mortgage Corporation, a Delaware corporation, located at
                     (the “Purchaser”) is made pursuant to the terms and
conditions of that certain Purchase, Warranties and Servicing Agreement (the
“Agreement”) dated as of                     , among the Company, the Servicer
and the Purchaser, the provisions of which are incorporated herein as if set
forth in full herein, as such terms and conditions may be modified or
supplemented hereby. All initially capitalized terms used herein unless
otherwise defined shall have the meanings ascribed thereto in the Agreement.

 

The Purchaser hereby purchases from the Company and the Company hereby sells to
the Purchaser, all of the Company’s right, title and interest in and to the
Mortgage Loans described on the Mortgage Loan Schedule annexed hereto as
Schedule I, pursuant to and in accordance with the terms and conditions set
forth in the Agreement, as same may be supplemented or modified hereby.
Hereinafter, the Servicer shall service the Mortgage Loans for the benefit of
the Purchaser and all subsequent transferees of the Mortgage Loans pursuant to
and in accordance with the terms and conditions set forth in the Agreement.

 

1. Definitions

 

For purposes of the Mortgage Loans to be sold pursuant to this Term Sheet, the
following terms shall have the following meanings:

 

Aggregate Principal Balance

(as of the Cut-Off Date):

 

Closing Date:

 

Custodian:

 

Cut-off Date:

 

Initial Weighted Average

Mortgage Loan Remittance Rate:

 

Mortgage Loan:

 

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Purchase Price Percentage:

 

Servicing Fee Rate:

 

Additional Closing Conditions:

 

In addition to the conditions specified in the Agreement, the obligation of each
of the Company and the Purchaser is subject to the fulfillment, on or prior to
the applicable Closing Date, of the following additional conditions: [None].

 

Additional Loan Documents:

 

In addition to the contents of the Mortgage File specified in the Agreement, the
following documents shall be delivered with respect to the Mortgage Loans:
[None]

 

[Additional] [Modification] of Representations and Warranties:

 

[In addition to the representations and warranties set forth in the Agreement,
as of the date hereof, the Company makes the following additional
representations and warranties with respect to the Mortgage Loans: [None].
[Notwithstanding anything to the contrary set forth in the Agreement, with
respect to each Mortgage Loan to be sold on the Closing Date, the representation
and warranty set forth in Section              of the Agreement shall be
modified to read as follows:]

 

Except as modified herein, Section              of the Agreement shall remain in
full force and effect as of the date hereof.

 

102

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

 

HMB ACCEPTANCE CORP.

By:

 

 

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

Name:

 

 

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

Title:

 

 

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

HOMEBANC CORP.

By:

 

 

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

Name:

 

 

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

Title:

 

 

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

EMC MORTGAGE CORPORATION

By:

 

 

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

Name:

 

 

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

Title:

 

 

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103

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SCHEDULE I

 

MORTGAGE LOAN SCHEDULE

 

104