Exhibit 10.7

 

EXECUTION VERSION

 

SECOND AMENDED AND RESTATED MASTER SPREAD ACQUISITION AND MSR SERVICING
AGREEMENT

 

PREAMBLE

 

This Second Amended and Restated Master Spread Acquisition and MSR Servicing
Agreement (the “Agreement”) is entered into by and between PennyMac Loan
Services, LLC, a Delaware limited liability company (the “Seller”), on the one
hand, and PennyMac Holdings, LLC, a Delaware limited liability company (“PMH” or
the “Purchaser”), as of December 19, 2016.

 

RECITALS

 

WHEREAS, the Seller and the Purchaser previously entered into the Amended and
Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of
April 20, 2015, as amended by the Amendment No. 1 to Amended and Restated Master
Spread Acquisition and MSR Servicing Agreement, dated as of August 26, 2015 and
the Amendment No. 2 to Amended and Restated Master Spread Acquisition and MSR
Servicing Agreement, dated as of November 10, 2015 (the “Existing Agreement”);

 

WHEREAS, the Seller may from time to time originate, or acquire from third
parties, mortgage servicing rights;

 

WHEREAS, the Purchaser may from time to time desire to acquire the right to
excess servicing spread arising from such mortgage servicing rights;

 

WHEREAS, the Seller and the Purchaser desire that the Seller service the
mortgage loans to which such servicing rights relate and provide additional
administrative services;

 

WHEREAS, the Seller desires to retain the right to refinance the residential
mortgage loans in the pool and the Seller will obtain a competitive benefit from
serving as the servicer of such mortgage loans and the Purchaser consents to
such right, as long as the Servicing Rights and a portion of the servicing
spread with respect to the newly-originated residential mortgage loans and/or
similar residential mortgage loans are retained by the Seller and the excess
servicing spread with respect to such mortgage loans is assigned by the Seller
to the Purchaser as described herein;

 

WHEREAS, the Seller desires to create a Participation Certificate (as defined
herein) to evidence the Purchased MSR Excess Spread;

 

WHEREAS, the Purchaser desires to finance the Participation Certificate with the
Seller pursuant to the Master Repurchase Agreement, dated as of the date hereof,
by and between the Purchaser, as seller thereunder, and Seller, as buyer
thereunder (as amended, modified or supplemented from time to time hereafter,
the “PMH Repurchase Agreement”), and the Seller has required certain changes in
order to facilitate the same;

 

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

 

WHEREAS, the Seller desires to acquire financing to fund its advances under the
PMH Repurchase Agreement pursuant to the Master Repurchase Agreement, dated as
of the date hereof, between the Seller, as seller thereunder, and the Issuer, as
buyer thereunder (as amended, modified or supplemented from time to time
hereafter, the “PC Repurchase Agreement”);

 

WHEREAS, the Purchaser has agreed to return each Participation Certificate
issued under the Existing Agreement to the Seller for cancellation, in exchange
for the Participation Certificate to be issued on the date hereof and any cash
necessary to reflect any difference in the aggregate value of each Participation
Certificate issued under the Existing Agreement and the value of the
Participation Certificate issued on the date hereof; and

 

WHEREAS, the parties hereto have requested that the Existing Agreement be
amended and restated, in its entirety, on the terms and subject to the
conditions set forth herein.

 

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

 

ARTICLE 1

 

DEFINITIONS

 

Section 1.01                             Definitions. For purposes of this
Agreement (which, for the avoidance of doubt, shall include the Preamble and
Recitals hereto), the following capitalized terms, unless the context otherwise
requires, shall have the respective meanings set forth below:

 

“Accepted Servicing Practices” means, with respect to any Mortgage Loan,
(i) those mortgage servicing practices of prudent mortgage lending institutions
which service mortgage loans of the same type as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located, and (ii) those
practices required by Ginnie Mae.

 

“Acknowledgement Agreement” means the Acknowledgement Agreement, dated as of
December 19, 2016, among the Issuer, Citibank, N.A., as indenture trustee and
Ginnie Mae, as amended, restated, supplemented or otherwise modified from time
to time.

 

“Additional Mortgage Loan” means a Mortgage Loan with respect to which the
Seller, (i) in order to eliminate the Shortfall Amount in whole or in part,
assigns to the Purchaser the applicable Transaction Excess Spread Percentage of
the Secondary Portfolio Excess Spread on such Additional Mortgage Loan, or
(ii) in lieu of including any Modified Loan(s) in the Primary Portfolio or
Secondary Portfolio, assigns to the Purchaser the applicable Purchased MSR
Excess Spread on such Additional Mortgage Loan.

 

2

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

 

“Affiliate” means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, “control” when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by management contract or otherwise and the terms “controlling” and
“controlled” have meanings correlative to the foregoing; provided, however, that
Affiliates of the Purchaser shall include only PennyMac Mortgage Investment
Trust and its wholly-owned subsidiaries, and Affiliates of the Seller shall
include only Private National Mortgage Acceptance Company, LLC and its
wholly-owned subsidiaries.

 

“Agreement” has the meaning set forth in the recitals hereto.

 

“Allowed Retention Percentage” has the meaning set forth in Section 4.01(a).

 

“Alternative Mortgage Loan” has the meaning set forth in Section 4.01(b).

 

“Ancillary Income” means all income derived from a Mortgage Loan (other than
payments or other collections in respect of principal, interest, escrow payments
and prepayment penalties attributable to such Mortgage Loan) and to which the
Seller, as the servicer of the Mortgage Loan, is entitled in accordance with the
Ginnie Mae Contract.

 

“Approved Valuation Firm” means any valuation firm that has been approved by a
majority of both the independent directors of PennyMac Financial Services, Inc.,
in the case of the Seller, and the independent trustees of PennyMac Mortgage
Investment Trust, in the case of the Purchaser.

 

“Assignment” means an assignment substantially in the form of Exhibit C.

 

“Assignment Date” means, with respect to any Mortgage Loan Identification Date,
the date that is ten (10) Business Days following such Mortgage Loan
Identification Date or such other date as may be set forth in the applicable
Confirmation.

 

“Base Indenture” means the Base Indenture, dated as of December 19, 2016, among,
the Issuer, as issuer, Citibank, N.A., as indenture trustee, as calculation
agent, as paying agent and as securities intermediary, Seller, as administrator
and as servicer, Credit Suisse First Boston Mortgage Capital LLC, as
administrative agent, and Pentalpha Surveillance LLC, as the credit manager, as
amended, restated, supplemented or otherwise modified from time to time,
including the schedules and exhibits thereto.

 

“Base Servicing Fee” means, with respect to each Mortgage Loan included in the
Portfolio, an amount equal to one-twelfth (1/12) of the Base Servicing Fee Rate
multiplied by the unpaid principal balance of such Mortgage Loan as of the first
day of the Collection Period due to the Seller as servicer; provided, however,
that (1) if the initial Collection Period is less than a full month, such fee
for each such Mortgage Loan shall be an amount equal to the product of the fee
otherwise described above and a fraction, the numerator of which is the number
of days in such initial Collection Period for such Mortgage Loan and the
denominator of which is 30; (2) if any Mortgage Loan ceases to be part of the
Portfolio during such Collection Period as a result of a termination of the
Seller’s duties as servicer under the Servicing Contract, the portion of such

 

3

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

 

amount that is attributable to such Mortgage Loan shall be adjusted to an amount
equal to the product of such portion and a fraction, the numerator of which is
the number of days in such Collection Period during which such Mortgage Loan was
included in the Portfolio and denominator of which is 30; and (3) if the Primary
Portfolio Collections for such Primary Portfolio and such Collection Period or
the Secondary Portfolio Collections for such Secondary Portfolio and such
Collection Period were used to cover prepayment interest shortfalls on the
related Primary Portfolio Mortgage Loans or the related Secondary Portfolio
Mortgage Loans, as the case may be, the fee otherwise described above shall be
reduced by the amount of such reduction.

 

“Base Servicing Fee Rate” means 0.10%.

 

“Business Day” means any day other than (i) a Saturday or Sunday, or (ii) any
other day on which national banking associations or state banking institutions
in New York, New York, the State of California, the State of Texas or the
Federal Reserve Bank of New York, are authorized or obligated by law, executive
order or governmental decree to be closed.

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Collection Period” means, with respect to each Transaction Remittance Date, the
calendar month preceding the month in which such Transaction Remittance Date
occurs.

 

“Confirmation” means (i) with respect to any Purchased MSR Excess Spread
existing as of the date hereof, the applicable letter agreement between the
Seller and the Purchaser, and (ii) with respect to Purchased MSR Excess Spread
related to any Transaction Portfolio acquired after the date hereof, a letter
agreement between the Seller and the Purchaser substantially in the form
attached hereto as Exhibit A that includes a mortgage loan schedule and sets
forth each of a “transaction settlement date”, a “transaction purchase price
percentage”, a “transaction asset purchase agreement,” “a transaction threshold
percentage” and an “allowed retention percentage”.

 

“Confirmation Date” means the date of a Confirmation.

 

“Creation Date” means with respect to Primary Portfolio Excess Spread and the
related Secondary Portfolio Excess Spread previously acquired, the date hereof,
and with respect to Primary Portfolio Excess Spread and the related Secondary
Portfolio Excess Spread acquired after the date hereof, the Transaction
Settlement Date.

 

“Cut-off Date” means, with respect to each Primary Portfolio, the date set forth
in the related Confirmation.

 

“Dedicated Account” means (i) during the term of the PMH Repurchase Agreement,
the “Dedicated Account” as such term is defined in the PMH Repurchase Agreement,
and (ii) after the termination of the PMH Repurchase Agreement and payment of
all related obligations under the PC Repurchase Agreement, the PMH Custodial
Account.

 

4

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

 

“Eligible Account” means any of (i) an account or accounts maintained with an
insured depository institution that meets the rating requirements adopted by
Ginnie Mae and set forth in the Ginnie Mae Guide, and that is (w) a federal
savings and loan association duly organized, validly existing and in good
standing under the federal banking laws of the United States, (x) a banking or
savings and loan association duly organized, validly existing and in good
standing under the applicable laws of any state, (y) a national banking
association duly organized, validly existing and in good standing under the
federal banking laws of the United States, or (z) a principal subsidiary of a
bank holding company; or (ii) a segregated trust account maintained in the trust
department of a federal or state chartered depository institution or trust
company in the United States, having capital and surplus of not less than
$50,000,000, and that meets the rating requirements adopted by Ginnie Mae and
set forth in the Ginnie Mae Guide, acting in its fiduciary capacity.

 

“Event of Default” means, an “Event of Default” as such term is defined in the
PC Repurchase Agreement.

 

“Excess Refinancing Percentage” has the meaning set forth in Section 4.01(a).

 

“Excess Spread Rate” means, as to any Mortgage Loan, (i) with respect to any
Purchased MSR Excess Spread existing as of the date hereof, the excess of the
Gross Servicing Fee Rate for such Mortgage Loan (and any related Additional
Mortgage Loan, New Mortgage Loan or Modified Loan) over the Transaction Base
Servicing Fee Rate for such Mortgage Loan, and (ii) with respect to any
Purchased MSR Excess Spread related to any Transaction Portfolio acquired after
the date hereof, the excess of the Gross Servicing Fee Rate for such Mortgage
Loan over the Base Servicing Fee Rate.

 

“Expense Amount” has the meaning set forth in Section 9.21.

 

“Expense Amount Accountant’s Letter” has the meaning set forth in Section 9.21.

 

“Expense Amount Tax Opinion” has the meaning set forth in Section 9.21.

 

“Expense Escrow Account” has the meaning set forth in Section 9.21.

 

“Ginnie Mae” means the Government National Mortgage Association, or any
successor thereto.

 

“Ginnie Mae Contract” means (a) 12 U.S.C. § 1721(g) and the implementing
regulations governing the Ginnie Mae MBS Program, 24 C.F.R. Part 300,
(b) applicable guaranty agreements and contractual agreements between Ginnie Mae
and the Seller, and (c) the Ginnie Mae Guide, and other applicable guides and
all amendments and additions thereto.

 

“Ginnie Mae Guide” means the Ginnie Mae Mortgage-Backed Securities Guide,
Handbook 5500.3, Rev. 1, as amended from time to time, and any related
announcements, directives and correspondence issued by Ginnie Mae.

 

“Ginnie Mae Mortgage Loan” means a Mortgage Loan underwritten in accordance with
the guidelines of Ginnie Mae described in the Servicing Contract and the Ginnie
Mae Guide.

 

5

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

 

“Gross Servicing Fee Rate” means, as to any Mortgage Loan, the annual rate at
which the servicing fee is calculated for such Mortgage Loan, determined as
provided in the related Servicing Contract. For the avoidance of doubt, “Gross
Servicing Fee Rate” shall not include the Guaranty Fee.

 

“Guaranty” means the Guaranty dated as of December 19, 2016, made by PennyMac
Mortgage Investment Trust in favor of Purchaser, as the same may be amended,
restated, supplemented or otherwise modified from time to time.

 

“Guaranty Fee” means, the monthly guarantee fee required to be paid by the
Seller to Ginnie Mae pursuant to the Servicing Contract and the Ginnie Mae
Guide.

 

“Issuer” means PNMAC GMSR ISSUER TRUST, together with its successors and
assigns.

 

“HUD” means the United States Department of Housing and Urban Development, or
any successor thereto.

 

“Lien” means, with respect to any property or asset of any Person (a) any
mortgage, lien, pledge, charge or other security interest or encumbrance of any
kind in respect of such property or asset or (b) the interest of a vendor or
lessor arising out of the acquisition of or agreement to acquire such property
or asset under any conditional sale agreement, lease purchase agreement or other
title retention agreement.

 

“MBS” means a mortgage backed security guaranteed by Ginnie Mae pursuant to the
Ginnie Mae Guide.

 

“Modified Loan” means a Mortgage Loan that is removed from a Mortgage Pool and
the terms of which have been modified in accordance with the requirements of the
Ginnie Mae Guide and which Mortgage Loan, as so modified, is eligible to be
resold or re-securitized by Seller to Ginnie Mae.

 

“Mortgage Loan” means a one-to-four family residential loan that is secured by a
mortgage, deed of trust or other similar security instrument and is a Ginnie Mae
Mortgage Loan. A Mortgage Loan includes the Mortgage Loan Documents, the
mortgage file, the monthly payments, any principal payments or prepayments, any
related escrow accounts, and all other rights, benefits, proceeds and
obligations arising from or in connection with such Mortgage Loan but excludes
the Servicing Rights that are the subject of this Agreement. A Mortgage Loan
also includes any Modified Loan.

 

“Mortgage Loan Documents” means the mortgages, notes, assignments and an
electronic record or copy of a mortgage loan application.

 

“Mortgage Loan Identification Date” means, with respect to a calendar month, the
20th day of the immediately succeeding calendar month.

 

“Mortgage Pool” means a pool or loan package securing an MBS for which the
Seller is the issuer.

 

6

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

 

“Mortgaged Property” means the real property (including all improvements,
buildings, fixtures and building equipment thereon and all additions,
alterations and replacements made at any time with respect to the foregoing) and
all other collateral securing repayment of the related Mortgage Loan.

 

“New Mortgage Loan” has the meaning set forth in Section 4.01(a).

 

“Nonqualifying Income” means any amount that is treated as gross income for
purposes of Section 856 of the Code and which is not Qualifying Income.

 

“Participation Certificate” means the participation certificate in the form of
Exhibit B attached hereto, which evidences the related Participation Interest.

 

“Participation Certificate Register” has the meaning assigned to such term in
Section 9.20.

 

“Participation Certificate Registrar” has the meaning assigned to such term in
Section 9.20.

 

“Participation Interest” means each participating beneficial ownership interest
(of the type and nature contemplated by 11 U.S.C. § 541(d) of the United States
Bankruptcy Code) in Purchased MSR Excess Spread with respect to each Portfolio,
and proceeds thereof together with the other rights and privileges specified in
this Agreement as evidenced by the issuance of a Participation Certificate.

 

“Payoff” means, with respect to a Mortgage Loan, any payment in full of the
unpaid principal balance of such Mortgage Loan that is received in advance of
the last scheduled due date for such Mortgage Loan and accompanied by the
accrued and unpaid interest to the date of such payment in full.

 

“PC Repurchase Agreement” has the meaning set forth in the recitals hereto.

 

“Person” means an individual, partnership, corporation (including a business
trust), limited liability company, joint stock company, trust, unincorporated
association, joint venture or other entity, or a government or any political
subdivision or agency thereof.

 

“PMH Custodial Account” means the demand deposit account “PennyMac Loan
Services, LLC — Purchased MSR Dedicated Account”, which account shall be
established by PMH in an advance of any termination of the PMH Repurchase
Agreement for the purpose of holding cash proceeds of the Excess Spread for the
benefit of Buyer.

 

“PMH Repurchase Agreement” has the meaning set forth in the recitals hereto.

 

“PMH Subordination Agreement” means the Subordination, Acknowledgment and Pledge
Agreement, dated as of December 19, 2016, among PMH and Issuer, as amended,
restated, supplemented or otherwise modified from time to time.

 

“Portfolio” refers to all Transaction Portfolios hereunder.

 

7

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

 

“Portfolio Mortgage Loan” means, a Mortgage Loan that is included in the
Portfolio.

 

“Portfolio Spread Custodial Account” means, with respect to each Primary
Portfolio and each Secondary Portfolio, the account established under
Section 5.01, which shall be entitled “PennyMac Loan Services, LLC — Purchased
MSR Dedicated Account”, and into which account all Primary Portfolio Collections
and Primary Portfolio Termination Payments in respect of such Primary Portfolio
and all Secondary Portfolio Collections and Secondary Portfolio Termination
Payments in respect of such Secondary Portfolio shall be deposited.

 

“Primary Portfolio” means the residential mortgage loans identified and listed
on a schedule to the Participation Certificate.

 

“Primary Portfolio Collections” means, with respect to each Primary Portfolio,
the funds collected on the related Primary Portfolio Mortgage Loans and
allocated as the servicing compensation payable to the Seller as servicer of
such Primary Portfolio Mortgage Loans pursuant to the Servicing Contract and the
Ginnie Mae Guide, other than Ancillary Income, the Guaranty Fee and, for the
avoidance of doubt, other than reimbursements received by the Seller from a loan
owner for advances and other out-of-pocket expenditures pursuant to the
Servicing Contract and the Ginnie Mae Guide.

 

“Primary Portfolio Excess Spread” means, with respect to each Primary Portfolio,
the rights of the Seller, severable from any and all other rights and
obligations under the Servicing Contract and the Ginnie Mae Guide, to the
Transaction Excess Spread Percentage of the Primary Portfolio Total Spread on
such Primary Portfolio.

 

“Primary Portfolio Mortgage Loan” means, a Mortgage Loan that is included in a
Primary Portfolio.

 

“Primary Portfolio Retained Spread” means, with respect to each Primary
Portfolio, the rights of the Seller to the Transaction Retained Spread
Percentage of the Primary Portfolio Total Spread on such Primary Portfolio.

 

“Primary Portfolio Termination Payment” means, with respect to each Primary
Portfolio, any payment that Ginnie Mae may elect to make in connection with the
termination of the servicer of any Primary Portfolio Mortgage Loan; provided,
however, that, if such a payment is made with respect to a group of mortgage
loans and fewer than all such mortgage loans are Primary Portfolio Mortgage
Loans, then the “Primary Portfolio Termination Payment” shall mean the portion
of such termination payment that is reasonably attributable to the Primary
Portfolio Mortgage Loans in such group based upon the methodology set forth in
the Servicing Contract for the calculation of termination payments thereunder.

 

“Primary Portfolio Total Spread” means, with respect to each Primary Portfolio,
for each Collection Period on or after the related Transaction Settlement Date,
the sum of the following: (a) the Primary Portfolio Collections received during
such Collection Period, net of the Base Servicing Fee; and (b) all other amounts
payable by a loan owner or master servicer to the Seller with respect to the
Servicing Rights for the Primary Portfolio Mortgage Loans, including any Primary
Portfolio Termination Payments.

 

8

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

 

“Protected REIT” means any entity that (i) has elected to be taxed as a real
estate investment trust pursuant to Section 856 et seq. of the Code, (ii) owns a
direct or indirect equity interest in Purchaser, and (iii) is treated for
purposes of Section 856 of the Code as owning all or a portion of the assets of
the Purchaser or as receiving all or a portion of the Purchaser’s income.

 

“Purchased MSR Excess Spread” means, any and all Primary Portfolio Excess Spread
or Secondary Portfolio Excess Spread.

 

“Qualifying Income” means gross income that is described in Section 856(c)(2) or
856(c)(3) of the Code.

 

“Refinanced Mortgage Loan” means a Portfolio Mortgage Loan that is refinanced
during the term of this Agreement.

 

“Refinancing Date” means the date on which a Refinanced Mortgage Loan is prepaid
by the related New Mortgage Loan.

 

“REIT Requirements” means the requirements imposed on real estate investment
trusts pursuant to Sections 856 through and including 860 of the Code.

 

“Replacement Mortgage Loans” has the meaning set forth in Section 4.01(a).

 

“Replacement Portfolio” has the meaning set forth in Section 4.01(a).

 

“Retained Servicing Fee” means with respect to each Mortgage Loan included in
the Portfolio, an amount equal to one-twelfth (1/12) of the Retained Spread Rate
multiplied by the unpaid principal balance of such Mortgage Loan as of the first
day of the Collection Period.

 

“Retained Mortgage Loans” has the meaning set forth in Section 4.01(a).

 

“Retained Spread Rate” means (i) with respect to any Mortgage Loan with related
Purchased MSR Excess Spread existing as of the date hereof, the Transaction Base
Servicing Fee Rate set forth in the related Confirmation less the Base Servicing
Fee Rate, and (ii) with respect to any Mortgage Loan with Purchased MSR Excess
Spread related to any Transaction Portfolio acquired after the date hereof, the
applicable rate set forth in the Confirmation.

 

“Secondary Portfolio” has the meaning set forth in Section 4.01(h).

 

“Secondary Portfolio Collections” means, with respect to each Secondary
Portfolio, the funds collected on the related Secondary Portfolio Mortgage Loans
and allocated as the servicing compensation payable to the Seller as servicer of
such Secondary Portfolio Mortgage Loans pursuant to the Servicing Contract and
the Ginnie Mae Guide, other than Ancillary Income, the Guaranty Fee and, for the
avoidance of doubt, other than reimbursements received by the Seller from a loan
owner for advances and other out-of-pocket expenditures pursuant to the
Servicing Contract and the Ginnie Mae Guide.

 

“Secondary Portfolio Excess Spread” means, with respect to each Secondary
Portfolio related to each Primary Portfolio, the rights of the Seller, severable
from any and all other rights under the Servicing Contract and the Ginnie Mae
Guide, to the Transaction Excess Spread Percentage of the related Secondary
Portfolio Total Spread on such Secondary Portfolio.

 

9

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

 

“Secondary Portfolio Mortgage Loan” means, a Mortgage Loan that is included in a
Secondary Portfolio.

 

“Secondary Portfolio Retained Spread” means, with respect to each Secondary
Portfolio, the rights of the Seller to the Transaction Retained Spread
Percentage of the Secondary Portfolio Total Spread on such Secondary Portfolio.

 

“Secondary Portfolio Termination Payment” means, with respect to each Secondary
Portfolio, any payment the Ginnie Mae may elect to make in connection with the
termination of the Servicer as the servicer of any Secondary Portfolio Mortgage
Loan; provided, however, that, if such a payment is made with respect to a group
of mortgage loans and fewer than all such mortgage loans are Secondary Portfolio
Mortgage Loans, then the “Secondary Portfolio Termination Payment” shall mean
the portion of such termination payment that is reasonably attributable to the
Secondary Portfolio Mortgage Loans in such group based upon the methodology set
forth in the Servicing Contract for the calculation of termination payments
thereunder.

 

“Secondary Portfolio Total Spread” means, with respect to each Secondary
Portfolio, for each Collection Period on or after the initial Assignment Date
when Secondary Portfolio Mortgage Loans became part of such Secondary Portfolio,
the sum of the following: (a) the Secondary Portfolio Collections received
during such Collection Period net of the Base Servicing Fee; and (b) all other
amounts payable by a loan owner or master servicer to the Seller with respect to
the Servicing Rights for Secondary Portfolio Mortgage Loans, including any
Secondary Portfolio Termination Payments, but for the avoidance of doubt, in
each case, excluding all Ancillary Income, the Guaranty Fee and reimbursements
for advances and other out-of-pocket expenditures received by the Seller from a
loan owner or master servicer in accordance with the Servicing Contract and the
Ginnie Mae Guide.

 

“Servicing Contract” means, with respect to each Mortgage Loan, Seller’s
“contract” with Ginnie Mae (as defined in the Acknowledgment Agreement) and,
without duplication, the Ginnie Mae Guide, as amended from time to time, and any
waivers, consent letters, acknowledgments and other agreements under which such
Mortgage Loan is serviced and administered.

 

“Servicing Rights” means with respect to the Mortgage Loans, the mortgage
servicing rights, including any and all of the following:  (a) any and all
rights to service the Mortgage Loans; (b) any payments to or monies received by
the servicer for servicing the Mortgage Loans; (c) any late fees, penalties or
similar payments with respect to the Mortgage Loans; (d) all agreements or
documents creating, defining or evidencing any such servicing rights to the
extent they relate to such servicing rights and all rights of the servicer
thereunder; (e) escrow or other similar payments with respect to the Mortgage
Loans and any amounts actually collected by the Seller as servicer with respect
thereto; (f) all accounts and other rights to payment related to any of the
property described in this paragraph; and (g) any and all documents, files,
records, servicing files, servicing documents, servicing records, data tapes,
computer records, or other information pertaining to the Mortgage Loans or
pertaining to the past, present or prospective servicing of the Mortgage Loans.

 

10

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

 

“Shortfall Amount” means, for any calendar month, an amount equal to the sum of
the following:

 

(a)                                 for each Mortgage Loan that became a
Refinanced Mortgage Loan during such calendar month, the product of (x) the
applicable Transaction Excess Spread Percentage for such Refinanced Mortgage
Loan, (y) 100% minus the Allowed Retention Percentage, and (z) the excess, if
any, of (i) 90% of the product of the Excess Spread Rate of such Refinanced
Mortgage Loan and the unpaid principal balance of such Refinanced Mortgage Loan
as of its Refinancing Date, over (ii) the product of the Excess Spread Rate of
the related New Mortgage Loan and the original principal balance of such New
Mortgage Loan; plus

 

(b)                                 for each Modified Loan that became a
Refinanced Mortgage Loan during such calendar month, the product of (x) the
applicable Transaction Excess Spread Percentage for such Refinanced Mortgage
Loan, and (y) the excess, if any, of (i) 90% of the product of the Excess Spread
Rate of such Refinanced Mortgage Loan and the unpaid principal balance of such
Refinanced Mortgage Loan as of its Refinancing Date, over (ii) the product of
the Excess Spread Rate of the related New Mortgage Loan and the original
principal balance of such New Mortgage Loan.

 

“Transaction” means the collective transactions scheduled to be consummated or
that are consummated (as the context may require) with respect to the Primary
Portfolio and the related Secondary Portfolio on a Transaction Settlement Date
or Assignment Date, as applicable.

 

“Transaction Asset Purchase Agreement” means, with respect to each Transaction,
the agreement pursuant to which the Seller is required to purchase or otherwise
acquire the Servicing Rights relating to the related Portfolio Mortgage Loans,
as in effect from time to time.

 

“Transaction Excess Spread Percentage” means, (i) with respect to any Purchased
MSR Excess Spread existing as of the date hereof, the percentage denominated as
such and set forth in the related Confirmation, and (ii)  with respect to any
Purchased MSR Excess Spread related to any Transaction Portfolio acquired after
the date hereof, 100% minus the Transaction Retained Spread Percentage.

 

“Transaction Portfolio” means, with respect to each Transaction, the residential
mortgage loans identified and listed on the schedule to the related Confirmation
and any Assignment related to such Transaction.

 

“Transaction Purchase Price” means, with respect to each Transaction, the
product of (i) the aggregate outstanding principal balance of the Primary
Mortgage Loans in the related Transaction Portfolio as of the Cut-off Date,
(ii) the Transaction Purchase Price Percentage and (iii) the Transaction Excess
Spread Percentage.

 

11

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

 

“Transaction Purchase Price Percentage” means, with respect to each Transaction
Portfolio, the percentage denominated as such and set forth in the related
Confirmation.

 

“Transaction Remittance Date” means with respect to each Transaction Portfolio,
the 10th day of each calendar month, or if such day is not a Business Day, the
prior Business Day, beginning in the month following the Transaction Settlement
Date.

 

“Transaction Retained Spread Percentage” means, with respect to each Primary
Portfolio and its related Secondary Portfolio, (A) the Retained Spread Rate
divided by (B) Gross Servicing Fee Rate minus the Base Servicing Fee Rate.

 

“Transaction Settlement Date” means, with respect to each Transaction Portfolio,
the date denominated as such and set forth in the related Confirmation.

 

“Transaction Threshold Percentage” means, with respect to each Transaction
Portfolio, the percentage denominated as such and set forth in the related
Participation Certificate.

 

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in
effect on the date hereof in the State of New York or the Uniform Commercial
Code as in effect in the applicable jurisdiction.

 

Section 1.02                             General Interpretive Principles. For
purposes of this Agreement, except as otherwise expressly provided or unless the
context otherwise requires:

 

(a)                                 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;

 

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

 

(c)                                  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;

 

(d)                                 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;

 

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

 

(f)                                   The term “include” or “including” shall
mean without limitation by reason of enumeration.

 

12

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

 

ARTICLE 2

 

REPRESENTATIONS AND WARRANTIES

 

Section 2.01                             Representations, Warranties and
Agreements of the Seller. The Seller hereby makes to the Purchaser, as of the
date hereof and as of each Transaction Settlement Date and each Assignment Date,
the representations and warranties set forth on Exhibit D.

 

Section 2.02                             Representations, Warranties and
Agreements of the Purchaser. The Purchaser hereby makes to the Seller, as of the
date hereof and as of each Transaction Settlement Date and each Assignment Date,
the representations and warranties set forth on Exhibit E.

 

ARTICLE 3

 

PURCHASES; PARTICIPATION INTERESTS

 

Section 3.01                             Purchases.

 

(a)                                 Transaction Agreement. The execution and
delivery of each Confirmation between the Seller and the Purchaser shall be an
agreement between such parties to the effect that, with respect to the
Transaction Portfolio described therein, and subject to the terms hereof and
thereof, (i) the Seller shall sell, and the Purchaser shall purchase, on the
Transaction Settlement Date all of the Seller’s right, title and interest in and
to the Primary Portfolio Excess Spread and all proceeds thereof and the
Secondary Portfolio Excess Spread and all proceeds thereof, all in exchange for
the payment of the Transaction Purchase Price, and (ii) each party shall perform
its duties under this Agreement as supplemented and amended by such
Confirmation.

 

(b)                                 Closing Conditions. The duties of the Seller
and the Purchaser to consummate each Transaction shall be subject to the
satisfaction of various conditions as set forth below:

 

(i)                                     The duty of each party to consummate
such Transaction shall be subject to the satisfaction of the following
conditions:

 

(A)                               the Seller shall have acquired the Servicing
Rights with respect to the related Transaction Portfolio;

 

(B)                               the representations and warranties made by the
other party in this Agreement and each other Transaction document to which such
party is a party to be made on or prior to the Transaction Settlement Date shall
be true and correct in all material respects; and

 

(C)                               the other party shall have performed or caused
the performance of each covenant or obligation required to be performed by such
party on or before the Transaction Settlement Date (including the delivery of
documents required to be delivered by such other party under Section 3.01 (c));

 

13

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

 

(ii)                                  The duty of the Seller to consummate such
Transaction shall be further subject to the satisfaction of the additional
condition that no change in the Purchaser’s financial conditions shall have
occurred following the Confirmation Date which would be reasonably likely to
materially and adversely affect the Purchaser’s ability to consummate the
Transaction on the Transaction Settlement Date;

 

(iii)                               The duty of the Purchaser to consummate such
Transaction shall be further subject to the satisfaction of the following
additional conditions:

 

(A)                               no change in the Seller’s financial or
operating condition, the Seller’s good standing with and authority from Ginnie
Mae and (if applicable) master servicers, the Servicing Rights, the Primary
Portfolio Mortgage Loans included in the related Transaction Portfolio or the
escrow accounts related to the Transaction Portfolio shall have occurred
following the Confirmation Date that, individually or in the aggregate, would be
reasonably likely to materially and adversely affect one or more of (x) the
Seller’s ability to consummate such Transaction on the Transaction Settlement
Date, or (y) the practical or other ability of an owner of the Servicing Rights
to realize the benefits thereof;

 

(B)                               the Seller shall have obtained or caused to
have been obtained all consents, approvals or other requirements of third
parties required for the consummation of the transactions contemplated by this
Agreement, including (if applicable) all requisite approvals from Ginnie Mae;

 

(C)                               the Seller shall have been appointed as the
servicer for the Transaction Portfolio; and

 

(D)                               the information set forth in the data tape
delivered to Purchaser on the Transaction Settlement Date is true and correct in
all material respects as of the date specified.

 

(c)                                  Closing Documents. The closing documents
for each Transaction shall consist of the documents set forth below, which the
Seller shall deliver or cause to be delivered to Purchaser on or before the
Transaction Settlement Date:

 

(i)                                     an Assignment executed by the Seller in
which the Seller assigns to the Purchaser all of the Seller’s right, title and
interest in, to and under the Purchased MSR Excess Spread;

 

(ii)                                  a copy of the executed Transaction Asset
Purchase Agreement;

 

(iii)                               a copy of the executed instrument evidencing
the Seller’s acquisition of the Servicing Rights with respect to the Transaction
Portfolio;

 

(iv)                              a copy of the executed Acknowledgment
Agreement with Ginnie Mae, if applicable, in form and substance satisfactory to
the Seller and Purchaser;

 

14

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

 

(v)                                 all consents, approvals or other
requirements of third parties required for the consummation of the transactions
contemplated by this Agreement, including (if applicable) the approval of Ginnie
Mae; and

 

(vi)                              such officers’ certificates, opinions of
counsel, instruments and documents as the Purchaser may reasonably request.

 

(d)                                 Closing. On the Transaction Settlement Date
for each Transaction, the Purchaser shall pay the Transaction Purchase Price to
the Seller, the Seller shall convey the related Primary Portfolio Excess Spread
on the Transaction Portfolio to the Purchaser and the Seller shall commence
servicing the Portfolio Mortgage Loans in the related Transaction Portfolio in
accordance with the Servicing Contract and the Ginnie Mae Guide if such
servicing has not already commenced. The Transaction Purchase Price shall be
paid by wire transfer of immediately available funds.

 

(e)                                  Additional Representations and Warranties.
Upon the consummation of the transactions scheduled to occur on the Transaction
Settlement Date for each Transaction Portfolio:

 

(i)                                     the Seller hereby represents and
warrants to the Purchaser as of the applicable Transaction Settlement Date (and
such representations and warranties shall survive the Transaction Settlement
Date) that:

 

(A)                               with respect to each Primary Portfolio
Mortgage Loan included in the related Transaction Portfolio, the Seller has been
duly and validly appointed as the servicer thereof under the Servicing Contract
or Ginnie Mae Guide and, for the purposes of such capacity, the Servicing
Contract and the Ginnie Mae Guide is in full force and effect;

 

(B)                               the Seller is not in material breach of or in
default of its duties under the Servicing Contract or Ginnie Mae Guide;

 

(C)                               no event has occurred that, with or without
notice or the passage of time, would entitle any Person to terminate the Seller
as servicer of any Primary Portfolio Mortgage Loan included in the related
Transaction Portfolio under the Servicing Contract or Ginnie Mae Guide, and the
Seller has no notice or knowledge of the intention of any Person to terminate or
cause the termination of the Seller’s rights and duties as servicer under the
Servicing Contract or Ginnie Mae Guide;

 

(D)                               the information set forth in the data tape
delivered to Purchaser on the Transaction Settlement Date is true and correct in
all material respects as of the date specified;

 

(E)                                the Seller is the sole owner of the Servicing
Rights related to each Mortgage Loan in such Primary Portfolio (subject to the
terms of the Servicing Contract or Ginnie Mae Guide), free and clear of any
Lien, claim, encumbrance or ownership interest in favor or any Person other than
the interests of the Purchaser contemplated hereby; and

 

15

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

 

(F)                                 the Seller has serviced the applicable
Mortgage Loans in accordance with the terms of the Servicing Contract and
Accepted Servicing Practices.

 

(ii)                                  the Purchaser hereby represents and
warrants to the Seller as of the applicable Transaction Settlement Date (and
such representations and warranties shall survive the Transaction Settlement
Date) that the Purchaser is a sophisticated investor and its decision to enter
into such Transaction is based upon the Purchaser’s independent experience,
knowledge and due diligence and evaluation of such Transaction without reliance
on any oral or written information provided by Seller other than the
representations and warranties made by Seller pursuant to the terms hereof.

 

Section 3.02                             Intent of Parties.

 

(a)                                 The Seller and the Purchaser intend that
each Transaction constitute a valid sale of the Primary Portfolio Excess Spread
and all proceeds thereof with respect to the related Primary Portfolio by the
Seller to the Purchaser. If the conveyance of the Primary Portfolio Excess
Spread is characterized by a court or governmental authority as security for a
loan rather than an absolute transfer or sale, the Seller will be deemed to have
granted, and hereby grants, to Purchaser, a security interest in all of its
right, title and interest in, to and under, whether now existing or in the
future arising or acquired, (i) all Primary Portfolio Excess Spread and all
rights under this Agreement with respect to any Primary Portfolio Excess Spread;
(ii) the Portfolio Spread Custodial Account; (iii) all rights to payment of
amounts due under this Agreement on account of or related to the Primary
Portfolio Excess Spread; (iv) all rights to reimbursement of Primary Portfolio
Excess Spreads and/or amounts due in respect thereof under the Servicing
Contract and the Ginnie Mae Guide; (v) all records, instruments or other
documentation evidencing any of the foregoing; (vi) all “general intangibles”,
“accounts”, “chattel paper”, “securities accounts”, “investment property”,
“deposit accounts” and “money” as defined in the Uniform Commercial Code
relating to or constituting any and all of the foregoing (including, without
limitation, all of Seller’s rights, title and interest in and under the Primary
Portfolio Excess Spreads); and (vii) any and all replacements, substitutions,
distributions on or proceeds of any and all of the foregoing, as security for a
loan in an amount equal to the Transaction Purchase Price.

 

(b)                                 The Seller hereby authorizes the filing of
any financing statements or continuation statements, and amendments to financing
statements, in any jurisdictions and with any filing offices as the Purchaser
may determine, in its sole discretion, are necessary or advisable to perfect the
sale of the assets conveyed and security interests granted to Purchaser and
agrees to execute financing statements in form reasonably acceptable to the
Purchaser and the Seller at the request of the Purchaser in order to reflect the
Purchaser’s interests in the assets conveyed to or subjected to a security
interest in favor of the Purchaser pursuant hereto and in the Portfolio Spread
Custodial Account.

 

16

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

 

(c)                                  In connection with each Transaction, the
Seller and the Purchaser further agree and acknowledge with respect the related
Primary Portfolio Mortgage Loans as follows:

 

(i)                                     the Seller is entitled to the Base
Servicing Fee, and Retained Servicing Fee and the Seller and the Purchaser, as
applicable, are entitled to the Primary Portfolio Excess Spread only so long as
the Seller maintains its status as an approved Ginnie Mae issuer and servicer;

 

(ii)                                  upon the Seller’s loss of its status as an
approved Ginnie Mae issuer and servicer, the Purchaser’s rights to any Primary
Portfolio Excess Spread also terminate;

 

(iii)                               the pledge of the Seller’s rights to the
Primary Portfolio Excess Spread conveys no right (such as a right to become a
substitute issuer or servicer) that is not specifically provided for in the
Ginnie Mae Guide; and

 

(iv)                              to the extent the Seller has pledged or in the
future pledges as collateral to a third party lender the Servicing Rights
relating to any Primary Portfolio Excess Spread, the pledged collateral will
include such Primary Portfolio Excess Spread and the Purchaser will enter into
any such agreements and/or file any financing statements as reasonably required
by such third party lender to give effect thereto.

 

Section 3.03                             Participation Interests.

 

(a) On the initial Creation Date, Seller will issue in the name of the
Purchaser, the related Participation Certificate.  Notwithstanding the creation
of separate Primary Portfolios and Secondary Portfolios for each Transaction,
the Participation Certificate shall evidence a 100% beneficial ownership
interest in the Primary Portfolio Excess Spread for each Primary Portfolio and
the Secondary Excess Spread for each Secondary Portfolio.  Thereafter, Purchaser
shall be deemed the owner of the Participation Interest described therein. 
There shall only be one Participation Certificate issued hereunder unless
otherwise consented to in writing by the holder of the Participation
Certificate.

 

(b)                                 Administration of the Purchased MSR Excess
Spread shall be governed by the terms of this Agreement and the Servicing
Contract, and the servicing and administration of the underlying mortgage loans
and/or real estate owned properties that support the Purchased MSR Excess Spread
shall be subject in all respects to the provisions of this Agreement and the
Servicing Contract. Seller shall retain record legal title to any payments,
distributions and other collections on the Purchased MSR Excess Spread, in its
capacity as the nominal owner of the Servicing Rights, but subject to the
Participation Interests, and Purchaser shall only be deemed to be in privity
with Seller and in no event whatsoever shall Purchaser be construed to be in
privity with any underlying investor or owner of the Mortgage Loans.

 

17

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

 

ARTICLE 4

 

RECAPTURE

 

Section 4.01                             Recapture.

 

(a)  With respect to each Primary Portfolio, if, during any calendar month, the
Seller or its Affiliates originate new residential mortgage loans the proceeds
of which are used to refinance a Mortgage Loan in such Primary Portfolio (such a
new mortgage loan, a “New Mortgage Loan”), the Seller shall transfer and convey
to the Purchaser on the related Assignment Date the Secondary Portfolio Excess
Spread and all proceeds thereof with respect to one or more of such New Mortgage
Loans (subject to Section 4.01(b)) that together have an aggregate unpaid
principal balance that is not less than the sum of the following amounts:

 

(i)                                     the product of (i) the aggregate amount
of Payoffs (whether or not resulting from refinancings) received during such
calendar month on all loans that were Primary Portfolio Mortgage Loans included
in the related Transaction Portfolio at the beginning of the month and (ii) the
Transaction Threshold Percentage;

 

(ii)                                  the product of (i) the dollar amount of
New Mortgage Loans that were originated during the calendar month, net of the
amount described in clause (i) above, and (ii) 100% minus the Allowed Retention
Percentage; and

 

(iii)                               either:

 

(A)                               a positive amount (and in no event less than
zero) equal to the excess, if any, of (i) the cumulative unpaid principal
balance of loans for which transfers were actually made under this Article 4 in
all such prior months, over (ii) the cumulative unpaid principal balance of
loans for which transfers were required to be made under this Article 4 in all
prior months (whether or not they were actually made); or

 

(B)                               a negative amount (and in no event more than
zero) equal to the excess of (i) the cumulative unpaid principal balance of
loans for which transfers were required to be made under this Article 4 in all
prior months (whether or not they were actually made), over (ii) the cumulative
unpaid principal balance of loans for which transfers were actually made under
this Article 4 in all such prior months.

 

For purposes of this subsection, the “Allowed Retention Percentage” means, with
respect to each Transaction Portfolio and any month, the percentage set forth
opposite the Excess Refinancing Percentage on the related Confirmation; and the
“Excess Refinancing Percentage” means, with respect to each Primary Portfolio
and any month, the excess, if any, of (a) a fraction, expressed as a percentage,
the numerator of which is equal to the aggregate principal balance of New
Mortgage Loans that were originated during such month, and the denominator of
which is the aggregate amount of Payoffs (whether or not resulting from
refinancings) received during such calendar month on all loans that were Primary
Portfolio Mortgage Loans included in the related Transaction Portfolio at the
beginning of the month, over (b) the Transaction Threshold Percentage.

 

The New Mortgage Loans and Alternative Mortgage Loans where the Servicing Rights
are so transferred and conveyed shall constitute “Replacement Mortgage Loans”;
the entire group of such Replacement Mortgage Loans shall constitute the
“Replacement Portfolio”;

 

18

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

 

the New Mortgage Loans where the related Servicing Rights are not so transferred
and conveyed shall constitute “Retained Mortgage Loans”; and the entire group of
such Retained Mortgage Loans shall constitute the “Retained Portfolio”. For
purposes of these definitions, if any Alternative Mortgage Loan is included in
the Replacement Portfolio in lieu of a New Mortgage Loan, then such New Mortgage
Loan shall be neither part of the Replacement Portfolio nor part of the Retained
Portfolio (including for the purposes of the provisions set forth in
Section 4.01(c)).

 

Notwithstanding anything in this Section 4.01(a) to the contrary, in lieu of
transferring and conveying to the Purchaser on the related Assignment Date the
related Secondary Portfolio Excess Spread as described herein, the Seller may,
at its option, but only to the extent that the fair market value of the
aggregate Secondary Portfolio Excess Spread to be transferred is less than
$200,000, and shall, if the related Secondary Portfolio Excess Spread otherwise
required to be transferred is prohibited by Ginnie Mae, wire to the Purchaser
cash in an amount equal to the fair market value of the related Secondary
Portfolio Excess Spread.

 

(b)                                 Each New Mortgage Loan included in the
Replacement Portfolio shall satisfy the following criteria: (1) such New
Mortgage Loan shall be the subject of the Servicing Contract; and (2) all
consents, if any, required by Ginnie Mae to assign all or a portion of the
Servicing Rights with respect to such New Mortgage Loan shall have been
obtained. Notwithstanding the preceding sentence, if insufficient New Mortgage
Loans are available that would allow satisfaction of the criteria set forth in
the preceding sentence, then the Seller shall use its best efforts to include in
the Replacement Portfolio another mortgage loan (an “Alternative Mortgage
Loan”), in lieu of each New Mortgage Loan that, but for such conditions in the
preceding sentence, would have been included in the Replacement Portfolio, and
that satisfies the following criteria:

 

(i)                                     The servicing fee rate for the
Alternative Mortgage Loan is substantially similar to the servicing fee rate of
the New Mortgage Loan;

 

(ii)                                  The interest accrual rate per annum on the
Alternative Mortgage Loan is substantially equal to the interest accrual rate
per annum on the New Mortgage Loan;

 

(iii)                               The final maturity date of the Alternative
Mortgage Loan is within six months of the final maturity date of the New
Mortgage Loan;

 

(iv)                              The principal balance of the Alternative
Mortgage Loan is substantially equal to the principal balance of the Refinanced
Mortgage Loan;

 

(v)                                 The remaining credit characteristics of the
Alternative Mortgage Loan (other than as specified in clauses (i), (ii),
(iii) and (iv) above) are substantially the same as the credit characteristics
of the New Mortgage Loan;

 

(vi)                              The Alternative Mortgage Loan is current as of
the applicable Assignment Date; and

 

19

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

 

(vii)                           The Alternative Mortgage Loan is not subject to
any foreclosure or similar proceeding as of the applicable Assignment Date; is
not in process of any modification, workout or other loss mitigation process;
and is not involved in litigation.

 

(c)                                  The Replacement Portfolio, on the one hand,
and the Retained Portfolio, on the other, shall have the following
characteristics:

 

(i)                                     The weighted average servicing fee rate
for the Mortgage Loans in the Retained Portfolio shall be substantially equal to
the weighted average servicing fee rate for the Mortgage Loans in the
Replacement Portfolio;

 

(ii)                                  The weighted average gross mortgage
interest rate per annum of the New Mortgage Loans in the Retained Portfolio is
substantially equal to the weighted average gross mortgage interest rate per
annum of the Mortgage Loans in the Replacement Portfolio;

 

(iii)                               The weighted average final maturity date of
the Mortgage Loans in the Retained Portfolio shall be within six months of the
weighted average final maturity date of the Mortgage Loans in the Replacement
Portfolio; and

 

(iv)                              The remaining credit characteristics of the
pool of Mortgage Loans in the Retained Portfolio (other than the characteristics
specified in clauses (i) and (ii) above) shall be substantially the same as the
credit characteristics of the pool of Mortgage Loans in the Replacement
Portfolio.

 

(d)                                 Not later than the Mortgage Loan
Identification Date related to each month in which the Seller or an Affiliate
thereof has originated New Mortgage Loans with respect to a Primary Portfolio,
the Seller shall (i) notify the Purchaser of the identity of each such New
Mortgage Loan and the Primary Portfolio Mortgage Loan included in the related
Transaction Portfolio that was refinanced using proceeds of such New Mortgage
Loan and (ii) provide a schedule setting forth the New Mortgage Loans (or
Alternative Mortgage Loans) proposed to compose the Replacement Portfolio, the
New Mortgage Loans proposed to compose the Retained Portfolio and the Seller’s
calculations of the weighted average gross mortgage interest rate and weighted
average final maturity date of each of the proposed Replacement Portfolio and
the proposed Retained Portfolio. The Seller and the Purchaser shall cooperate in
good faith to resolve any objections made by the Purchaser to the proposed
compositions of the Replacement Portfolio and Retained Portfolio.

 

(e)                                  Not later than the Mortgage Loan
Identification Date related to each month in which a Modified Loan was
re-securitized, the Seller shall identify all such Modified Loans, each of
which, for the avoidance of doubt, shall not be deemed to be a New Mortgage Loan
but rather shall either (i) continue to remain in its Primary Portfolio or
Secondary Portfolio, as applicable, or (ii) be returned to its Primary Portfolio
or Secondary Portfolio, as applicable, pursuant to an Assignment on the next
Assignment Date following the redelivery of the modified Mortgage Loan into a
new mortgage backed security guaranteed by Ginnie Mae. Notwithstanding the
foregoing, the Seller and the Purchaser may mutually agree that, in lieu of
including any Modified Loan(s) in the Primary Portfolio or Secondary Portfolio,
as applicable, the Seller may designate Additional Mortgage Loans or pay the
Purchaser in cash, in either case in an amount equal to the fair market value of
the Primary Portfolio Excess Spread or Secondary Portfolio Excess Spread
relating to such Modified Loan(s).

 

20

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

 

(f)                                   The Seller shall be required to designate
Additional Mortgage Loans as follows:

 

(i)                                     On or before the Mortgage Loan
Identification Date, the Seller shall calculate the Shortfall Amount, if any,
with respect to such calendar month and shall furnish the same to the Purchaser
along with commercially reasonable documentation supporting such calculation.
The Purchaser shall have five (5) days to notify the Seller that the Purchaser
accepts or objects to such calculation. If the Purchaser objects to such
calculation, it shall furnish the Seller with commercially reasonable supporting
documentation of its objection, and the parties shall cooperate in good faith to
resolve the objection. If the parties cannot resolve the disagreement, they
shall proceed in accordance with subsection (iii) below. If the Purchaser
accepts the calculation, or the disagreement is otherwise resolved as provided
in this Section 4.01(f), Seller shall designate Additional Mortgage Loans as
provided in Section 4.01(h) below as necessary to eliminate the Shortfall Amount
(calculated as though such Additional Mortgage Loans were New Mortgage Loans).

 

(ii)                                  In lieu of designating Additional Mortgage
Loans to eliminate some or all of the Shortfall Amount, the Seller may pay the
Purchaser, on the Assignment Date, an amount in cash equal to the fair market
value of the Secondary Portfolio Excess Spread relating to such Additional
Mortgage Loans that would otherwise be required to eliminate the Shortfall
Amount.

 

(iii)                               If the parties cannot resolve a disagreement
under this Section 4.01(f), they shall select an Approved Valuation Firm to
calculate the amount in dispute, and the decision of such Approved Valuation
Firm shall be final and binding on the parties. Each party agrees to cooperate
in good faith with the requests for information by such Approved Valuation Firm,
and each party shall pay 50% of the fees and expenses of such firm. Within two
(2) Business Days after the decision of the Approved Valuation Firm, the Seller
shall designate Additional Mortgage Loans or pay the cash fair market value, as
applicable, in order to eliminate the Shortfall Amount.

 

(g)                                  As of the applicable Assignment Date,
unless otherwise agreed upon by the Seller and the Purchaser, the Additional
Mortgage Loans shall satisfy the following criteria:

 

(i)                                     Reserved;

 

(ii)                                  The weighted average of the mortgage rates
on the Additional Mortgage Loans is substantially equal to the weighted average
of the mortgage rates on the New Mortgage Loans originated during the applicable
calendar month;

 

(iii)                               The weighted average remaining term to
maturity of the Additional Mortgage Loans is within six months of the weighted
average remaining term to maturity of the New Mortgage Loans originated during
the applicable calendar month;

 

21

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

 

(iv)                              The weighted average seasoning of the
Additional Mortgage Loans is less than or equal to that of the New Mortgage
Loans originated during the applicable calendar month;

 

(v)                                 The average unpaid principal balance of the
Additional Mortgage Loans is substantially similar to the average unpaid
principal balance of the New Mortgage Loans that were originated during the
applicable calendar month;

 

(vi)                              The remaining material credit characteristics
of the Additional Mortgage Loan (other than as specified in clauses
(i)-(v) above) are substantially similar to the credit characteristics of the
New Mortgage Loans originated during the applicable calendar month;

 

(vii)                           Each Additional Mortgage Loan is current as of
the applicable Assignment Date; and

 

(viii)                        Each Additional Mortgage Loan is not subject to
any foreclosure or similar proceeding, is not in, and has not gone through, the
process of modification, workout or any other loss mitigation process and is not
involved in litigation.

 

(h)                                 On the Assignment Date related to each month
in which the Seller has originated New Mortgage Loans, the Seller shall transfer
and convey to the Purchaser the Secondary Portfolio Excess Spread with respect
to the Replacement Portfolio and any Additional Mortgage Loans which shall
become subject to the Participation Certificate. Such transfer and conveyance
shall be effected by an instrument of assignment substantially in the form
attached hereto as Exhibit C.  The Seller shall be entitled to retain the
related Secondary Portfolio Retained Excess Spread.

 

The New Mortgage Loans, Alternative Mortgage Loans or Additional Mortgage Loans
for which the Seller transfers and conveys to the Purchaser the related
Secondary Portfolio Excess Spread on each Assignment Date and the New Mortgage
Loans, Alternative Mortgage Loans or Additional Mortgage Loans for which the
Seller transferred and conveyed to the Purchaser the related Secondary Portfolio
Excess Spread on all prior Assignment Dates shall together constitute the
“Secondary Portfolio”.

 

(i)                                     If insufficient New Mortgage Loans and
Alternative Mortgage Loans are available in circumstances that require a
transfer by the Seller under the foregoing subsections, or if counsel or
independent accountants for the Purchaser or any of its Affiliates determines
that there exists a material risk that such transfer would result in a violation
of the REIT Requirements by such Person, then the Seller shall consult with the
Purchaser and the parties shall negotiate in good faith for the transfer of one
or more investments in transactions that would not, in the judgment of counsel
or independent accountants for the Seller or the Purchaser or any of their
respective Affiliates, present such a risk and that would result in net economic
benefits to the Purchaser that are no less favorable than the economic benefit
to the Purchaser that would have resulted from a transfer under foregoing
subsections.

 

22

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

 

Section 4.02                             Intent of Parties.  (a) The parties
intend that each transfer made by the Seller under Section 4.01 constitute a
valid absolute transfer or sale of the related Secondary Portfolio Excess Spread
and all proceeds thereof for the related Replacement Portfolio by the Seller to
the Purchaser. If the conveyance of such Secondary Portfolio Excess Spread is
characterized by a court or governmental authority as security for a loan rather
than an absolute transfer or sale, the Seller will be deemed to have granted,
and hereby grants, to the Purchaser, a security interest in all of its right,
title and interest in, to and under, whether now existing or in the future
arising or acquired, (i) all Secondary Portfolio Excess Spread and all rights
under this Agreement with respect to any Secondary Portfolio Excess Spread;
(ii) the Portfolio Spread Custodial Account; (iii) all rights to payment of
amounts due under this Agreement on account of or related to the Secondary
Portfolio Excess Spread; (iv) all rights to reimbursement of Secondary Portfolio
Excess Spreads and/or amounts due in respect thereof under the Servicing
Contract and the Ginnie Mae Guide; (v) all records, instruments or other
documentation evidencing any of the foregoing; (vi) all “general intangibles”,
“accounts”, “chattel paper”, “securities accounts”, “investment property”,
“deposit accounts” and “money” as defined in the Uniform Commercial Code
relating to or constituting any and all of the foregoing (including, without
limitation, all of Seller’s rights, title and interest in and under the
Secondary Portfolio Excess Spreads); and (vii) any and all replacements,
substitutions, distributions on or proceeds of any and all of the foregoing, as
security for a loan in an amount equal to the value of such Secondary Portfolio
Excess Spread.

 

(b)                                 The Seller hereby authorizes the filing of
any financing statements or continuation statements, and amendments to financing
statements, in any jurisdictions and with any filing offices as the Purchaser
may determine, in its sole discretion, are necessary or advisable to perfect the
sale of the assets conveyed and security interests granted to Purchaser and
agrees to execute financing statements in form reasonably acceptable to the
Purchaser and the Seller at the request of the Purchaser in order to reflect the
Purchaser’s interests in the assets conveyed to or subjected to a security
interest in favor of the Purchaser pursuant hereto and in the Portfolio Spread
Custodial Account.

 

(c)                                  In connection with each Mortgage Loan in a
Secondary Portfolio, the Seller and the Purchaser further agree and acknowledge
as follows:

 

(i)                                     the Seller is entitled to the Base
Servicing Fee and the Seller and the Purchaser, as applicable, are entitled to
the related Secondary Portfolio Excess Spread only so long as the Seller
maintains its status as an approved Ginnie Mae issuer and servicer;

 

(ii)                                  upon the Seller’s loss of its status as an
approved Ginnie Mae issuer and servicer, the Purchaser’s rights to such
Secondary Portfolio Excess Spread also terminate;

 

(iii)                               the sale of the Seller’s rights to such
Secondary Portfolio Excess Spread conveys no right (such as a right to become a
substitute issuer or servicer) that is not specifically provided for in the
Ginnie Mae Guide; and

 

(iv)                              to the extent the Seller has pledged or in the
future pledges as collateral to a third party lender the Servicing Rights
relating to any Secondary Portfolio Excess Spread, the pledged collateral will
include such Secondary Portfolio Excess Spread and the Purchaser will enter into
any such agreements and/or file any financing statements as reasonably required
by such third party lender to give effect thereto.

 

23

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

 

Section 4.03                             Additional Representations and
Warranties.  On the Assignment Date with respect to each Replacement Portfolio,
the provisions set forth in Section 3.01(b) and Section 3.01(c) shall apply, as
applicable, to each Replacement Mortgage Loan and the Replacement Portfolio, and
Seller shall be deemed to have represented and warranted to the Purchaser with
respect to each Replacement Mortgage Loan and the Replacement Portfolio, as
applicable, the matters set forth in Section 3.01(e).

 

ARTICLE 5

 

PRIMARY PORTFOLIO COLLECTIONS, SECONDARY PORTFOLIO COLLECTIONS AND REMITTANCES

 

Section 5.01                             Portfolio Spread Custodial Account. 
With respect to each Primary Portfolio and each Secondary Portfolio, the Seller
shall establish the Portfolio Spread Custodial Account, which shall be an
Eligible Account, not later than the Transaction Settlement Date. The Seller
shall deliver to the Purchaser reasonable evidence of the establishment of such
account upon request. The Seller shall not pledge, obtain financing for or
otherwise permit any Lien of any creditor of the Seller to exist on, any portion
of the Primary Portfolio Collections, the Secondary Portfolio Collections or the
Seller’s interest in the Portfolio Spread Custodial Account other than, so long
as the PC Repurchase Agreement is in effect, pursuant to transactions relating
to the PC Repurchase Agreement and the PMH Subordination Agreement.

 

Section 5.02                             Deposits.  With respect to each Primary
Portfolio and each Secondary Portfolio, the Seller shall deposit into the
Dedicated Account from time to time any and all Primary Portfolio Collections
and Secondary Portfolio Collections received on or after the Transaction
Settlement Date, in each case within two (2) Business Days following receipt
thereof.

 

Section 5.03                             Withdrawals and Remittances.

 

(a) On each Transaction Remittance Date (so long as an Event of Default has not
occurred), the Seller shall withdraw from the Portfolio Spread Custodial Account
the cash on deposit therein with respect to the Primary Portfolio Collections
and pay such cash in the following amounts and order of priority, in each case
subject to funds remaining available after giving effect to each payment having
a higher priority:

 

(i)                                     first, any accrued and unpaid Base
Servicing Fee in respect of the Primary Portfolio Mortgage Loans to the Seller;

 

(ii)                                  second, from amounts in the Portfolio
Spread Custodial Account attributable to Primary Portfolio Termination Payments,
pro rata, (A) the Transaction Excess Spread Percentage of such Primary Portfolio
Termination Payments to the holder of the Participation Certificate, and (B) the
Transaction Retained Excess Spread Percentage of such Primary Portfolio
Termination Payments to the Seller;

 

24

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

 

(iii)                               third, pro rata, (A) to the holder of the
Participation Certificate, any Primary Portfolio Excess Spread for the prior
Collection Period (other than the portion thereof consisting of Primary
Portfolio Termination Payments paid pursuant to clause (i) above); and (B) to
the Seller, any Primary Portfolio Retained Spread for the prior Collection
Period (other than the portion thereof consisting of Primary Portfolio
Termination Payments paid pursuant to clause (i) above); provided, however, that
prior to the distribution to the Seller of any Primary Portfolio Retained Spread
pursuant to clause (B), the Primary Portfolio Retained Spread shall be applied
to the payment of any indemnity payments then due and payable by the Seller to
the Purchaser or its related indemnified persons under Section 8.03; and

 

(iv)                              fourth, to the Seller, any other amounts
remaining on deposit in the Portfolio Spread Custodial Account with respect to
the Primary Portfolio Collections.

 

(b)                                 On each Transaction Remittance Date (so long
as an Event of Default has not occurred), the Seller shall withdraw from the
Portfolio Spread Custodial Account the cash on deposit therein with respect to
the Secondary Portfolio Collections and pay such cash in the following amounts
and order of priority, in each case subject to funds remaining available after
giving effect to each payment having a higher priority:

 

(i)                                     first, any accrued and unpaid Base
Servicing Fee in respect of the Secondary Portfolio Mortgage Loans to the
Seller;

 

(ii)                                  second, from amounts in the Portfolio
Spread Custodial Account attributable to Secondary Portfolio Termination
Payments, pro rata, (A) the Transaction Excess Spread Percentage of such
Secondary Portfolio Termination Payments to the holder of the Participation
Certificate, and (B) the Transaction Retained Excess Spread Percentage of such
Secondary Portfolio Termination Payments to the Seller;

 

(iii)                               third, pro rata, (A) to the holder of the
Participation Certificate, any Secondary Portfolio Excess Spread for the prior
Collection Period (other than the portion thereof consisting of Secondary
Portfolio Termination Payments paid pursuant clause (i) above); and (B) to the
Seller, any Secondary Portfolio Retained Spread for the prior Collection Period
(other than the portion thereof consisting of Secondary Portfolio Termination
Payments paid pursuant to clause (i) above); provided, however, that prior to
the distribution to the Seller of any Primary Portfolio Retained Spread pursuant
to clause (B), the Primary Portfolio Retained Spread shall be applied to the
payment of any indemnity payments then due and payable by the Seller to the
Purchaser or its related indemnified persons under Section 8.03;

 

(iv)                              fourth, to the Seller, any other amounts
remaining on deposit in the Portfolio Spread Custodial Account.

 

(c)                                  After the termination of the PMH Repurchase
Agreement and payment of all related obligations under the PC Repurchase
Agreement, all payments to the holder of the Participation Certificate shall be
deposited into the PMH Custodial Account and made by wire transfer of
immediately available funds to an account designated by the holder of the
Participation Certificate.

 

25

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

 

ARTICLE 6

 

[RESERVED.]

 

ARTICLE 7

 

SERVICING AND OTHER MATTERS

 

Section 7.01                             Seller’s Duties with Respect to
Servicing.

 

(a)  Effective on the Transaction Settlement Date for each Transaction
Portfolio, the Seller agrees for the benefit of the Purchaser to service the
related Transaction Portfolio Mortgage Loans at all times in all material
respects with the Servicing Contract.  In connection with the Portfolio Mortgage
Loans related to each Transaction, the Seller shall not, without the express
written consent of Purchaser (which consent may be withheld in its absolute
discretion), (a) terminate or amend any Servicing Rights, or (b) enter into any
termination, modification, waiver or amendment of the Servicing Contract or its
rights and duties thereunder.

 

(b)                                 Under no circumstances shall the Purchaser
be responsible for the servicing acts and omissions of the Seller or any other
servicer or any originator of the Mortgage Loans, or for any servicing related
obligations or liabilities of any servicer under the Servicing Contract or the
Ginnie Mae Guide or any Person under the Mortgage Loan Documents, or for any
other obligations or liabilities of the Seller.

 

(c)                                  Upon the termination of the Seller as
servicer under the Servicing Contract or Ginnie Mae Guide, the Seller shall
remain liable to the Purchaser and Ginnie Mae for all liabilities and
obligations incurred by the Seller while the Seller was acting as the servicer
thereunder.

 

Section 7.02                             Base Servicing Fees.  The Seller agrees
that, notwithstanding the provisions of the Servicing Contract and Ginnie Mae
Guide, as between the parties hereto, the Seller shall be entitled to servicing
fees on the Primary Portfolio and any Secondary Portfolio only to the extent of
the applicable Base Servicing Fee and only to the extent that funds available
for the payment of such Base Servicing Fee are available in the Portfolio Spread
Custodial Account. Under no circumstances shall the Purchaser be liable to the
Seller for the payment of any Base Servicing Fee. The portion of the Base
Servicing Fee relating to a Secondary Portfolio Mortgage Loan shall begin to
accrue as of the commencement of the Collection Period in which the related
Assignment Date occurs but in no event shall such portion accrue on any day on
which the portion of the Base Servicing Fee relating to the Primary Portfolio
Mortgage Loan in respect of which such Secondary Portfolio Mortgage Loan became
a Secondary Portfolio Mortgage Loan also accrue.

 

Section 7.03                             Reporting.  In connection with each
Transaction, the Seller shall deliver to the Purchaser monthly reports, and
afford the Purchaser access to information, at such times and in such form and
substance as are set forth in the related Confirmation or as may reasonably be
agreed between the Seller and the Purchaser.

 

26

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

 

Section 7.04                             Certain Awards.  If an award of damages
is received by the Seller or the Purchaser as a result of a judgment, settlement
or arbitration (including payment pursuant to a guaranty of an obligor) pursuant
to a breach by the seller under the Transaction Asset Purchase Agreement for any
Transaction, then (i) if such breach had an adverse effect on the value of the
Primary Portfolio Total Spread or the Secondary Portfolio Total Spread, then the
portion of such award attributable to the Primary Portfolio Retained Excess
Spread or the Secondary Portfolio Retained Excess Spread, as applicable, shall
be distributed to the Purchaser or its designee promptly and the remainder of
such award shall be retained by the Seller and (ii) if such breach did not have
an adverse effect on the value of the Primary Portfolio Total Spread or the
Secondary Portfolio Total Spread, the Seller shall be entitled to the entirety
of such award.

 

ARTICLE 8

 

LIABILITIES OF THE SELLER; INDEMNIFICATION

 

Section 8.01                             Liability of the Seller.  The Seller
shall be liable in accordance herewith only to the extent of the obligations
specifically and respectively imposed upon and undertaken by the Seller herein.

 

Section 8.02                             Merger or Consolidation of the Seller.

 

(a)  The Seller shall keep in full effect its existence, rights and franchises
as an entity and maintain its qualification to service mortgage loans for HUD
and comply with the laws of each State in which any Mortgaged Property is
located to the extent necessary to protect the validity and enforceability of
this Agreement, and to perform its duties under this Agreement. The Seller shall
keep in full effect its existence, rights and franchises as an entity.

 

(b)                                 Any Person into which the Seller may be
merged, converted, or consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Seller shall be a party, or any Person
succeeding to the business of the Seller, shall be the successor of the Seller
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 such successor shall have expressly
assumed the duties of the Seller hereunder.

 

Section 8.03                             Indemnification by Seller.  The Seller
shall indemnify the Purchaser and its directors, officers, employees and agents
(the “Indemnified Parties”) and hold them harmless against any and all claims,
losses, damages, penalties, fines, forfeitures, reasonable and necessary legal
fees and related costs, judgments, and any other costs, fees and expenses that
any of them may sustain by reason of (A) the Seller’s willful misfeasance, bad
faith or negligence in the performance of its duties under this Agreement, the
Servicing Contract or the Ginnie Mae Guide, (B) the Seller’s reckless disregard
of its obligations or duties under this Agreement, the Servicing Contract or the
Ginnie Mae Guide, (C) the Seller’s breach of its representations, warranties or
covenants under this Agreement, the Servicing Contract or the

 

27

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

 

Ginnie Mae Guide, (D) Seller’s breach of a representation, warranty or covenant
under, or Seller’s failure to comply with any obligation under, any agreement or
obligation secured by a Purchaser’s right, title or interest in the Purchased
MSR Excess Spread or any other rights or interests of the Purchaser under this
Agreement, or (E) the Transactions being characterized by a court or
governmental authority as anything other than an absolute transfer or sale. The
Seller hereby grants the Purchaser a security interest in all of its right,
title and interest in, to and under, whether now existing or in the future
arising or acquired, (i) all Purchased MSR Excess Spread and all rights under
this Agreement with respect to any Purchased MSR Excess Spread; (ii) the
Portfolio Spread Custodial Account; (iii) all rights to payment of amounts due
under this Agreement on account of or related to the Purchased MSR Excess
Spread; (iv) all rights to reimbursement of Purchased MSR Excess Spreads and/or
amounts due in respect thereof under the Servicing Contract and the Ginnie Mae
Guide; (v) all records, instruments or other documentation evidencing any of the
foregoing; (vi) all “general intangibles”, “accounts”, “chattel paper”,
“securities accounts”, “investment property”, “deposit accounts” and “money” as
defined in the Uniform Commercial Code relating to or constituting any and all
of the foregoing (including, without limitation, all of Seller’s rights, title
and interest in and under the Purchased MSR Excess Spreads); and (vii) any and
all replacements, substitutions, distributions on or proceeds of any and all of
the foregoing, as security for the obligations of the Seller under this
Section 8.03.

 

Section 8.04                             Indemnification by Purchaser.  The
Purchaser shall indemnify the Seller and its directors, officers, employees and
agents and hold them harmless against any and all claims, losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and any other costs, fees and expenses that any of them may
sustain by reason of (A) the Purchaser’s willful misfeasance, bad faith or
negligence in the performance of its duties under this Agreement (B) the
Purchaser’s reckless disregard of its obligations or duties under this
Agreement, (C) the Purchaser’s breach of its representations, warranties or
covenants under this Agreement, or (D) the Transactions being characterized by a
court or governmental authority as a sale of any portion of the Servicing Rights
greater than Purchased MSR Excess Spread.

 

ARTICLE 9

 

MISCELLANEOUS

 

Section 9.01                             Notices.  All notices, requests,
demands and other communications which are required or permitted to be given
under this Agreement shall be in writing and shall be deemed to have been duly
given upon the delivery or mailing thereof, as the case may be, sent by
registered or certified mail, return receipt requested:

 

(i)                                     if to the Seller:

 

PennyMac Loan Services, LLC
Attn: Director, Servicing Operations
3043 Townsgate Road
Westlake Village, CA 91361

 

28

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

 

With a copy to:

 

PennyMac Loan Services, LLC
Attn: General Counsel
3043 Townsgate Road
Westlake Village, CA 91361

 

(ii)                                  if to the Purchaser:

 

PennyMac Holdings, LLC
Attn: Treasurer
3043 Townsgate Road
Westlake Village, CA 91361

 

With a copy to:

 

PennyMac Holdings, LLC
Attn: General Counsel
3043 Townsgate Road
Westlake Village, CA 91361

 

or such other address as may hereafter be furnished to the other parties by like
notice.

 

Section 9.02                             Amendment.  Neither this Agreement, nor
any terms hereof, may be amended, supplemented or modified except in an
instrument in writing executed by the parties hereto.

 

Section 9.03                             Entire Agreement.  This Agreement
contains the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions, express
or implied, oral or written, of any nature whatsoever with respect to the
subject matter hereof. The express terms hereof control and supersede any course
of performance and/or usage of the trade inconsistent with any of the terms
hereof.

 

Section 9.04                             Binding Effect; Beneficiaries.  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns. No
provision of this Agreement is intended or shall be construed to give to any
Person, other than the parties hereto, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.

 

Section 9.05                             Headings.  The section and subsection
headings in this Agreement are for convenience of reference only and shall not
be deemed to alter or affect the interpretation of any provisions hereof.

 

29

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

 

Section 9.06                             Further Assurances.  The Seller agrees
to execute and deliver such instruments and take such further actions as the
Purchaser may, from time to time, reasonably request in order to effectuate the
purposes and to carry out the terms of this Agreement.

 

Section 9.07                             Governing Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.
The parties hereto intend that the provisions of Section 5-1401 of the New York
General Obligations Law shall apply to this Agreement.

 

Section 9.08                             Relationship of Parties.  Nothing
herein contained shall be deemed or construed to create a partnership or joint
venture between the parties. Without limiting the generality of the preceding
statement, the servicing duties and responsibilities of the Seller shall be
rendered by it as an independent contractor and not as an agent of the
Purchaser. The Seller shall have full control of all of its acts, doings,
proceedings, relating to or requisite in connection with the discharge of its
duties and responsibilities under this Agreement.

 

Section 9.09                             Severability of Provisions.  If any one
or more of the covenants, agreements, provisions or terms of this Agreement
shall be held invalid for any reason whatsoever, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Agreement.

 

Section 9.10                             No Waiver; Cumulative Remedies.  No
failure to exercise and no delay in exercising, on the part of a party hereto,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

 

Section 9.11                             Exhibits.  The exhibits to this
Agreement are hereby incorporated and made a part hereof and form integral parts
of this Agreement.

 

Section 9.12                             Counterparts.  This Agreement may be
executed by the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.

 

Section 9.13                             WAIVER OF TRIAL BY JURY.

 

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

 

30

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

 

Section 9.14                             LIMITATION OF DAMAGES.

 

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

 

Section 9.15                             SUBMISSION TO JURISDICTION; WAIVERS.

 

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

 

Section 9.16                             Independent Analysis of Purchaser. 
Purchaser acknowledges that it has, independently and without reliance upon
Seller and based on such documents and information as Purchaser has deemed
appropriate, made the Purchaser’s own credit analysis and decision to purchase
the applicable Participation Interest. Purchaser hereby acknowledges that
(except as set forth hereinabove) Seller has made no representations or
warranties with respect to the Purchased MSR Excess Spread or the Participation
Interest, and that the Purchaser assumes all risk of loss in connection with its
Participation Interest.

 

Section 9.17                             No Creation of a Partnership.  Nothing
contained in this Agreement, and no action taken pursuant hereto shall be deemed
to constitute Seller with Purchaser, a partnership, association, joint venture
or other entity.

 

Section 9.18                             Article 8 Opt-In.  The Seller hereby
irrevocably elects that each Participation Certificate shall constitute and
shall remain a “security” for purposes of Article 8 of the Uniform Commercial
Code.

 

Section 9.19                             Reserved.

 

Section 9.20                             Participation Certificate Register. The
ownership of each Participation Interest shall be registered on a record of
ownership (the “Participation Certificate Register”) maintained by Issuer,
during the term of the PMH Repurchase Agreement (so long as the PC Repurchase
Agreement remains in effect), and, thereafter, by Seller (the “Participation

 

31

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

 

Certificate Registrar”). Notwithstanding anything else in this Agreement to the
contrary, the right to receive payments with respect to a Participation Interest
hereunder may be transferred only if the Transfer is registered on such record
of ownership and the transferee is identified as the owner of an interest in the
obligation. The Seller shall be entitled to treat the registered holder of each
Participation Interest (as recorded on such record of ownership) as the owner in
fact thereof for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in a Participation Interest or hereunder on the
part of any other person or entity.

 

Section 9.21                             Expense Reserve.

 

Notwithstanding anything in Section 8.03, in the event that counsel or
independent accountants for a Protected REIT determine that there exists a
material risk that any amounts due to the Purchaser under Section 8.03 hereof
would be treated as Nonqualifying Income for such Protected REIT upon the
payment of such amounts to the Purchaser, the amount paid to the Purchaser,
pursuant to this Agreement in any tax year shall not exceed the maximum amount
that can be paid to the Purchaser in such year without causing such Protected
REIT to fail to meet the REIT Requirements for such year, determined as if the
payment of such amount were Nonqualifying Income as determined by such counsel
or independent accountants to such Protected REIT. If the amount payable for any
tax year under the preceding sentence is less than the amount which the Person
obligated to make payment under Section 8.03 would otherwise be obligated to pay
to the Seller or the Purchaser, as the case may be, pursuant to such
Section 8.03 of this Agreement (the “Expense Amount”), then: (1) such obligated
Person shall place the Expense Amount into an escrow account (the “Expense
Escrow Account”) using an escrow agent and agreement reasonably acceptable to
the Purchaser and shall not release any portion thereof to the Purchaser, and
the Purchaser, shall not be entitled to any such amount, unless and until the
Purchaser, delivers to such obligated Person, at the sole option of such
Protected REIT, (i) an opinion (an “Expense Amount Tax Opinion”) of such
Protected REIT’s tax counsel to the effect that such amount, if and to the
extent paid, would not constitute Nonqualifying Income, (ii) a letter (an
“Expense Amount Accountant’s Letter”) from such Protected REIT’s independent
accountants indicating the maximum amount that can be paid at that time to the
Purchaser, without causing such Protected REIT to fail to meet the REIT
Requirements for any relevant taxable year, or (iii) a private letter ruling
issued by the IRS to such Protected REIT indicating that the receipt of any
Expense Amount hereunder will not cause such Protected REIT to fail to satisfy
the REIT Requirements (a “REIT Qualification Ruling” and, collectively with an
Expense Amount Tax Opinion and an Expense Amount Accountant’s Letter, a “Release
Document”); and (2) pending the delivery of a Release Document by the Purchaser,
to such obligated Person, the Purchaser, shall have the right, but not the
obligation, to borrow the Expense Amount from the Escrow Account pursuant to a
loan agreement (an “Indemnity Loan Agreement”) reasonably acceptable to the
Purchaser, that (i) requires such obligated Person to lend the Purchaser,
immediately available cash proceeds in an amount equal to the Expense Amount (an
“Indemnity Loan”), and (ii) provides for (A) a commercially reasonable interest
rate and commercially reasonable covenants, taking into account the credit
standing and profile of the Purchaser, as the case may be, or any guarantor of
the Purchaser, as the case may be, including such Protected REIT, at the time of
such Indemnity Loan, and (B) a 15 year maturity with no periodic amortization.

 

32

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

 

Section 9.22                             Survival.  This Agreement and the
Transactions, and all covenants, agreements, representations and warranties
herein and therein and in the certificates delivered pursuant hereto, shall
survive the date hereof and each Transaction Settlement Date.

 

Section 9.23                             Amendment and Restatement.  The terms
and provisions of the Existing Agreement shall be amended and restated in their
entirety by the terms and provisions of this Agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

33

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

 

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

 

 

PENNYMAC LOAN SERVICES, LLC (Seller)

 

 

 

 

 

By:

/s/ Pamela Marsh

 

 

Name: Pamela Marsh

 

 

Title: Managing Director, Treasurer

 

Signature Page — Second Amended and Restated Master Spread Acquisition and MSR
Servicing Agreement

 

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

 

 

PENNYMAC HOLDINGS, LLC (Purchaser)

 

 

 

 

 

 

 

By:

/s/ Pamela Marsh

 

 

Name: Pamela Marsh

 

 

Title: Managing Director, Treasurer

 

Signature Page — Second Amended and Restated Master Spread Acquisition and MSR
Servicing Agreement

 

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

 

EXHIBIT A

 

(Form of Confirmation)

 

CONFIRMATION

 

OF SPREAD ACQUISITION TRANSACTION UNDER
MASTER SPREAD ACQUISITION AND MSR SERVICING AGREEMENT

 

PARTIES:                                       PennyMac Loan Services, LLC
(Seller)

 

PennyMac Holdings, LLC (Purchaser)

 

DATE:                                                         
                     ,

 

RE:                                                                          
Spread Acquisition — Pool No. [   ]

 

 

The purpose of this letter agreement is to confirm the terms and conditions of
the Transaction entered into between PennyMac Loan Services, LLC and PennyMac
Holdings, LLC on the Transaction Settlement Date specified below. This letter
agreement is a “Confirmation” as described in the Master Agreement (as defined
below) .

 

The definitions and provisions contained in the Master Agreement are
incorporated into this Confirmation. In the event of any inconsistency between
the Master Agreement and this Confirmation, this Confirmation will govern.
Capitalized terms used herein and not otherwise defined have the meanings set
forth in the Master Agreement.

 

This Confirmation supplements, forms part of and is subject to the Second
Amended and Restated Master Spread Acquisition and MSR Servicing Agreement dated
as of December 19, 2016, between PennyMac Loan Services, LLC, as seller, and
PennyMac Holdings, LLC, as purchaser, as amended and supplemented from time to
time (the “Master Agreement”). All provisions contained in the Master Agreement
govern this Confirmation except as expressly modified below.

 

A-1

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

 

The terms of the Transaction to which this Confirmation relates are as follows:

 

Transaction Portfolio:

As set forth in Schedule I hereto.

 

 

Transaction Settlement Date:

          , 20    .

 

 

Transaction Purchase Price Percentage:

      %

 

 

Transaction Asset Purchase Agreement:

 

 

 

Transaction Threshold Percentage:

[   %]

 

 

Retained Spread Rate:

[   %]

 

 

Cut-off Date:

         , 20  .

 

 

Other:

In the event Seller, whether voluntarily or involuntarily, transfers the
Servicing Rights related to the Mortgage Loans in any Primary Portfolio or any
Secondary Portfolio and receives any termination fee or other compensation or
proceeds in connection with such transfer (the “Transfer Proceeds”) or recovers
under any purchase agreement governing the acquisition of Servicing Rights
related to such Purchased MSR Excess Spread any indemnity or reimbursement
proceeds or other amounts relating to the purchase price of such Servicing
Rights, including, without limitation, any amounts recovered with respect to
early payoffs or early payment defaults (the “Recovery Proceeds” and, together
with the Transfer Proceeds, the “Servicing Rights Proceeds”), Seller shall remit
to Purchaser an amount equal to the product of (a) such Servicing Rights
Proceeds, multiplied by (b) a fraction, the numerator of which is the
Transaction Purchase Price allocable to the Primary Portfolio Excess Spread
relating to such Servicing Rights and the denominator of which is the actual
purchase price paid by the Seller for such Servicing Rights.

 

A-2

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

 

Accepted and confirmed as of the date first written above:

 

SELLER:

PENNYMAC LOAN SERVICES, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

 

PURCHASER:

PENNYMAC HOLDINGS, LLC

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

A-3

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

 

SCHEDULE I

 

TO CONFIRMATION DATED           , 20   
UNDER THE SECOND AMENDED AND RESTATED MASTER

SPREAD ACQUISITION AND MSR SERVICING AGREEMENT

DATED AS OF DECEMBER 19, 2016

 

A-4

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

 

EXHIBIT B

 

FORM OF PARTICIPATION CERTIFICATE

 

This is a participation interest certificate (“Participation Certificate”)
evidencing a participation interest granted to CITIBANK, N.A. (“Indenture
Trustee”), not in its individual capacity, and for the benefit and security of
the Noteholders (as such term is defined in the Base Indenture, dated as of
December 19, 2016, among PNMAC GMSR ISSUER TRUST, as the issuer, the Indenture
Trustee, as indenture trustee, as calculation agent, as paying agent and as
securities intermediary, Company, as administrator and servicer, Credit Suisse
First Boston Mortgage Capital LLC, as the administrative agent and Pentalpha
Surveillance LLC, as the credit manager, as amended, restated, supplemented or
otherwise modified from time to time) and the Indenture Trustee (the
“Participant”) in the in the Primary Portfolio Excess Spread, the Secondary
Portfolio Excess Spread, the Primary Portfolio Collections, the Secondary
Portfolio Collections, the Primary Portfolio Termination Payments and the
Secondary Portfolio Termination Payments, in each case, related to the Portfolio
Mortgage Loans identified on Schedule I attached hereto, and as more
particularly described in the Second Amended and Restated Master Spread
Acquisition and MSR Servicing Agreement, dated as of December 19, 2016 (as
amended, restated, supplement or otherwise modified from time to time, the
“Participation Agreement”), by and among PENNYMAC LOAN SERVICES, LLC (“Seller”)
and PENNYMAC HOLDINGS, LLC (“Purchaser”). Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed to them in the Participation
Agreement.

 

Pursuant to the terms of the Participation Agreement, Seller hereby grants a
Participation Interest in the Primary Portfolio Excess Spread, the Secondary
Portfolio Excess Spread, the Primary Portfolio Collections, the Secondary
Portfolio Collections, the Primary Portfolio Termination Payments and the
Secondary Portfolio Termination Payments, in each case, related to the Portfolio
Mortgage Loans identified on Schedule I attached hereto initially to Purchaser
and thereafter to Participant:

 

Certificate No. 2

Percentage Interest: 100%

 

THIS PARTICIPATION CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES
LAWS OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS
PARTICIPATION CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE
ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION
AND IN ACCORDANCE WITH THE PROVISIONS OF SECTION 11 OF THE PARTICIPATION
AGREEMENT (AS DEFINED HEREIN).

 

The Seller hereby irrevocably elects that this Participation Certificate shall
constitute and shall remain a “security” for purposes of Article 8 of the
Uniform Commercial Code.

 

B-1

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

 

This Participation Certificate is subject to the terms, provisions and
conditions of the Participation Agreement, as to each of which the holder of
this Participation Certificate, by virtue of the acceptance hereof, assents and
by which such holder is bound.

 

This Participation Certificate shall be construed in accordance with the
internal laws of the State of New York applicable to agreements made and to be
performed in said State, without regard to conflicts of law principles (other
than Section 5-1401 of the New York General Obligations Law, which shall
govern), and the obligations, rights and remedies of the holder hereof shall be
determined in accordance with such laws.

 

[SIGNATURE FOLLOWS]

 

B-2

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

 

IN WITNESS WHEREOF, the Seller has caused this Participation Certificate to be
duly executed.

 

 

PENNYMAC LOAN SERVICES, LLC

 

 

 

 

 

By:

 

 

 

Name: Pamela Marsh

 

 

Title: Managing Director, Treasurer

 

 

 

 

 

Address for Notices:

 

 

 

PENNYMAC LOAN SERVICES, LLC

 

3043 Townsgate Road

 

Westlake Village, CA 91361

 

Attention: Treasurer

 

Phone Number: 805 330-6059; 818 746-2877

 

E-mail:

pamela.marsh@pnmac.com;

 

 

kevin.chamberlain@pnmac.com

 

 

 

 

 

With a copy to:

 

 

 

PENNYMAC LOAN SERVICES, LLC

 

3043 Townsgate Road

 

Westlake Village, CA 91361

 

Attention: General Counsel

 

B-3

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

 

ASSIGNMENT AND ASSUMPTION

 

FOR VALUE RECEIVED, the undersigned Assignor hereby sell(s), assign(s) and
transfer(s) unto           

 

 

(please print or typewrite name and address including postal zip code of
Assignee)

 

the Participation Interest evidenced by the within Participation Certificate and
hereby authorize(s) the registration of transfer of such Participation Interest
to the above named assignee on the participation register of the Seller. The
Participation Certificate is subject to the terms, provisions and conditions of
the Participation Agreement.

 

I (we) further direct the issuance of a new certificate of a like percentage
interest and class to the above named assignee and delivery of such certificate
to the following address:

 

 

 

Dated:

 

 

 

 

 

 

 

Signature by or on behalf of Assignor

 

ACCEPTANCE:

 

The undersigned Assignee hereby accepts and assumes all of the rights, interests
and obligations of the Participation Interest holder under the Participation
Agreement pursuant to which the participation interest transferred hereby was
created. The undersigned Assignee hereby makes the representations and
warranties contained in Section 5 of the Participation Agreement to Seller and
to the Assignor.

 

Dated:

 

 

 

 

 

 

 

Signature by or on behalf of Assignee

 

B-4

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

 

DISTRIBUTION INSTRUCTIONS

 

Assignee should include the following for purposes of distribution of any
proceeds of a Participation Interest:

 

Distributions shall, if permitted, be made by wire transfer or otherwise, in
immediately available funds, to
                                                                                                           for
the account
of                                                                               .

 

Distributions made by check (such check to be made payable
to                                       and all applicable statements and
notices should be mailed to
                                                                                                                                                                              .

 

This information is provided by                          , the assignee named
above, or                                      , as its agent.

 

B-5

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

 

SCHEDULE I
TO PARTICIPATION CERTIFICATE

 

Schedule to be updated from time to time and identify the related Portfolio
Mortgage Loans.

 

B-6

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

 

EXHIBIT C

 

(Form of Assignment)

 

PennyMac Loan Services, LLC (the “Transferor”), hereby assigns, conveys and
otherwise transfers to PennyMac Holdings, LLC (the “Transferee”) all of the
Transferor’s right, title and interest in, to and under the [Primary][Secondary]
Portfolio Excess Spread for the residential mortgage loans set forth in Annex A
attached hereto which shall be deemed to be a supplement to the Participation
Certificate issued pursuant to the Participation Agreement (as defined below).
Capitalized terms used and not defined in this instrument have the meanings
assigned to them in the Second Amended and Restated Master Spread Acquisition
and MSR Servicing Agreement dated as of December 19, 2016, between the
Transferor and the Transferee, as supplemented and amended by the Confirmation
dated      , between such parties (the “Participation Agreement”).

 

If the conveyance of such [Primary][Secondary] Portfolio Excess Spread is
characterized by a court or governmental authority as security for a loan rather
than an absolute transfer or sale, the Transferor will be deemed to have granted
to the Transferee, and the Transferor hereby grants to the Transferee, a
security interest in all of its right, title and interest in, to and under
whether now existing or in the future arising or acquired, all Primary Portfolio
Collections, Secondary Portfolio Collections, and the Portfolio Spread Custodial
Account and all proceeds thereof as security for a loan in an amount equal to
the value of such [Primary][Secondary] Portfolio Excess Spread.

 

 

PENNYMAC LOAN SERVICES, LLC

 

(Transferor)

 

 

 

 

 

By:

 

 

 

Name:

 

 

Title:

 

C-1

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

 

EXHIBIT D

 

(Representations and Warranties of the Seller)

 

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

 

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

 

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

 

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

 

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

 

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

 

D-1

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

 

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

 

D-2

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

 

EXHIBIT E

 

(Representations and Warranties of the Purchaser)

 

(a)                                 Due Organization and Good Standing. The
Purchaser is duly organized, validly existing and in good standing under the
laws of the state of its organization and has the power and authority to own its
assets and to transact the business in which it is currently engaged.

 

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

 

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

 

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

 

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

 

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

 

E-1

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

 

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

 

E-2

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