Exhibit 10.4




 





 


 


FLOW SERVICING AGREEMENT


 


between


 


PENNYMAC OPERATING PARTNERSHIP, L.P.,


as Owner


 


and


 


PENNYMAC LOAN SERVICES, LLC,


as Servicer


 


Dated as of August 4, 2009


 


FIXED- AND ADJUSTABLE-RATE RESIDENTIAL MORTGAGE
LOANS


 




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01

  	
   

  	
  Definitions

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  II

  	
  SERVICING

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01

  	
   

  	
  Servicer to Act as Servicer

  	
   

  	
  18

  
	
  Section 2.02

  	
   

  	
  Liquidation of Mortgage Loans

  	
   

  	
  20

  
	
  Section 2.03

  	
   

  	
  Collection of Mortgage Loan Payments; Payment
  Clearing Account

  	
   

  	
  20

  
	
  Section 2.04

  	
   

  	
  Establishment of and Deposits to Custodial Account

  	
   

  	
  21

  
	
  Section 2.05

  	
   

  	
  Permitted Withdrawals From Custodial Account

  	
   

  	
  22

  
	
  Section 2.06

  	
   

  	
  Establishment of and Deposits to Escrow Account

  	
   

  	
  23

  
	
  Section 2.07

  	
   

  	
  Permitted Withdrawals From Escrow Account

  	
   

  	
  24

  
	
  Section 2.08

  	
   

  	
  Payment of Taxes, Insurance and Other Charges

  	
   

  	
  25

  
	
  Section 2.09

  	
   

  	
  Protection of Accounts

  	
   

  	
  25

  
	
  Section 2.10

  	
   

  	
  Maintenance of Hazard Insurance

  	
   

  	
  26

  
	
  Section 2.11

  	
   

  	
  Maintenance of Mortgage Impairment Insurance Policy

  	
   

  	
  27

  
	
  Section 2.12

  	
   

  	
  Maintenance of Fidelity Bond and Errors and
  Omissions Insurance

  	
   

  	
  28

  
	
  Section 2.13

  	
   

  	
  Inspections

  	
   

  	
  28

  
	
  Section 2.14

  	
   

  	
  Restoration of Mortgaged Property

  	
   

  	
  29

  
	
  Section 2.15

  	
   

  	
  Title, Management and Disposition of REO Property

  	
   

  	
  29

  
	
  Section 2.16

  	
   

  	
  Costs and Expenses

  	
   

  	
  30

  
	
  Section 2.17

  	
   

  	
  Liquidity and Litigation Reserves

  	
   

  	
  31

  
	
  Section 2.18

  	
   

  	
  [Reserved]

  	
   

  	
  32

  
	
  Section 2.19

  	
   

  	
  [Reserved]

  	
   

  	
  32

  
	
  Section 2.20

  	
   

  	
  Notification of Adjustments

  	
   

  	
  32

  
	
  Section 2.21

  	
   

  	
  Recordation of Assignments of Mortgage

  	
   

  	
  32

  
	
  Section 2.22

  	
   

  	
  [Reserved]

  	
   

  	
  32

  
	
  Section 2.23

  	
   

  	
  Credit Reporting

  	
   

  	
  32

  
	
  Section 2.24

  	
   

  	
  Superior Liens

  	
   

  	
  32

  
	
  Section 2.25

  	
   

  	
  Prepayments in Full

  	
   

  	
  33

  
	
  Section 2.26

  	
   

  	
  Tax and Flood Service Contracts

  	
   

  	
  33

  
	
  Section 2.27

  	
   

  	
  Maintenance of PMI Policies and LPMI Policies;
  Collections Thereunder

  	
   

  	
  34

  
	
  Section 2.28

  	
   

  	
  Obligations of the Owner and the Servicer Related to
  Servicing Transfers

  	
   

  	
  34

  
	
  Section 2.29

  	
   

  	
  Reliability of Information/Exceptional Expenses

  	
   

  	
  36

  
	
  Section 2.30

  	
   

  	
  Escrow Obligations

  	
   

  	
  36

  
	
  Section 2.31

  	
   

  	
  [Reserved]

  	
   

  	
  37

  
	
  Section 2.32

  	
   

  	
  Additional Activities of the Servicer

  	
   

  	
  37

  
	
  Section 2.33

  	
   

  	
  No Obligation to Advance Delinquent Payments

  	
   

  	
  37

  



 


i

















 


	
  ARTICLE III

  	
  PAYMENTS; REPORTS

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01

  	
   

  	
  Remittances

  	
   

  	
  38

  
	
  Section 3.02

  	
   

  	
  Monthly Reports to the Owner

  	
   

  	
  38

  
	
  Section 3.03

  	
   

  	
  [Reserved]

  	
   

  	
  39

  
	
  Section 3.04

  	
   

  	
  Cost of Funds

  	
   

  	
  39

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  GENERAL SERVICING PROCEDURES

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01

  	
   

  	
  Transfers of Mortgaged Property

  	
   

  	
  40

  
	
  Section 4.02

  	
   

  	
  Satisfaction of Mortgages and Release of Mortgage
  Files

  	
   

  	
  41

  
	
  Section 4.03

  	
   

  	
  Servicing Compensation

  	
   

  	
  42

  
	
  Section 4.04

  	
   

  	
  Annual Statement as to Compliance

  	
   

  	
  43

  
	
  Section 4.05

  	
   

  	
  Annual Independent Public Accountants’ Servicing
  Report

  	
   

  	
  43

  
	
  Section 4.06

  	
   

  	
  [Reserved]

  	
   

  	
  44

  
	
  Section 4.07

  	
   

  	
  Right to Examine Servicer Records

  	
   

  	
  44

  
	
  Section 4.08

  	
   

  	
  Compliance with Gramm-Leach-Bliley Act of 1999

  	
   

  	
  44

  
	
  Section 4.09

  	
   

  	
  On-Line Access

  	
   

  	
  44

  
	
  Section 4.10

  	
   

  	
  [Reserved]

  	
   

  	
  45

  
	
  Section 4.11

  	
   

  	
  Use of Subservicers

  	
   

  	
  45

  
	
  Section 4.12

  	
   

  	
  Mortgage Loans Held by Wholly Owned Subsidiaries of
  Owner

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  SERVICER TO COOPERATE

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01

  	
   

  	
  Provision of Information

  	
   

  	
  46

  
	
  Section 5.02

  	
   

  	
  Financial Statements; Servicing Facilities

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  TERMINATION

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01

  	
   

  	
  Termination

  	
   

  	
  47

  
	
  Section 6.02

  	
   

  	
  Transfer of Servicing

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  BOOKS AND RECORDS

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01

  	
   

  	
  Possession of Servicing Files Prior to the Related
  Servicing Transfer Date

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  INDEMNIFICATION AND ASSIGNMENT

  	
   

  	
  52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01

  	
   

  	
  Indemnification; Remedies

  	
   

  	
  52

  
	
  Section 8.02

  	
   

  	
  Limitation on Liability of Servicer and Others

  	
   

  	
  53

  
	
  Section 8.03

  	
   

  	
  Limitation on Resignation and Assignment by Servicer

  	
   

  	
  54

  
	
  Section 8.04

  	
   

  	
  Assignment by Owner

  	
   

  	
  55

  
	
  Section 8.05

  	
   

  	
  Merger or Consolidation of the Servicer

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  REPRESENTATIONS, WARRANTIES AND COVENANTS OF OWNER

  	
   

  	
  56

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.01

  	
   

  	
  Organization
  and Good Standing; Licensing

  	
   

  	
  56

  
	
  Section 9.02

  	
   

  	
  Authorization;
  Binding Obligations

  	
   

  	
  56

  
	
  Section 9.03

  	
   

  	
  No
  Consent Required

  	
   

  	
  56

  
	
  Section 9.04

  	
   

  	
  No
  Violations

  	
   

  	
  56

  
	
  Section 9.05

  	
   

  	
  Litigation

  	
   

  	
  56

  



 


ii

















 


	
  ARTICLE X

  	
  REPRESENTATIONS AND WARRANTIES OF SERVICER

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.01

  	
   

  	
  Due Organization and Authority

  	
   

  	
  58

  
	
  Section 10.02

  	
   

  	
  Ordinary Course of Business

  	
   

  	
  58

  
	
  Section 10.03

  	
   

  	
  No Conflicts

  	
   

  	
  58

  
	
  Section 10.04

  	
   

  	
  Ability to Service

  	
   

  	
  58

  
	
  Section 10.05

  	
   

  	
  Ability to Perform

  	
   

  	
  59

  
	
  Section 10.06

  	
   

  	
  No Litigation Pending

  	
   

  	
  59

  
	
  Section 10.07

  	
   

  	
  No Consent Required

  	
   

  	
  59

  
	
  Section 10.08

  	
   

  	
  No Untrue Information

  	
   

  	
  59

  
	
  Section 10.09

  	
   

  	
  [Reserved]

  	
   

  	
  59

  
	
  Section 10.10

  	
   

  	
  MERS

  	
   

  	
  59

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XI

  	
  DEFAULT

  	
   

  	
  61

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.01

  	
   

  	
  Events of Default

  	
   

  	
  61

  
	
  Section 11.02

  	
   

  	
  Waiver of Defaults

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XII

  	
  CLOSING

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 12.01

  	
   

  	
  Closing Documents

  	
   

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE
  XIII

  	
  MISCELLANEOUS PROVISIONS

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 13.01

  	
   

  	
  Notices

  	
   

  	
  65

  
	
  Section 13.02

  	
   

  	
  Waivers

  	
   

  	
  65

  
	
  Section 13.03

  	
   

  	
  Entire Agreement; Amendment

  	
   

  	
  66

  
	
  Section 13.04

  	
   

  	
  Execution; Binding Effect

  	
   

  	
  66

  
	
  Section 13.05

  	
   

  	
  Headings

  	
   

  	
  66

  
	
  Section 13.06

  	
   

  	
  Applicable Law

  	
   

  	
  66

  
	
  Section 13.07

  	
   

  	
  Relationship of Parties

  	
   

  	
  66

  
	
  Section 13.08

  	
   

  	
  Severability of Provisions

  	
   

  	
  67

  
	
  Section 13.09

  	
   

  	
  Recordation of Assignments of Mortgage

  	
   

  	
  67

  
	
  Section 13.10

  	
   

  	
  Exhibits

  	
   

  	
  67

  
	
  Section 13.11

  	
   

  	
  Counterparts

  	
   

  	
  67

  
	
  Section 13.12

  	
   

  	
  Cooperation of Servicer with a Reconstitution

  	
   

  	
  67

  
	
  Section 13.13

  	
   

  	
  Trademarks

  	
   

  	
  69

  
	
  Section 13.14

  	
   

  	
  Confidentiality of Information

  	
   

  	
  70

  
	
  Section 13.15

  	
   

  	
  [Reserved]

  	
   

  	
  70

  
	
  Section 13.16

  	
   

  	
  WAIVER OF TRIAL BY JURY

  	
   

  	
  70

  
	
  Section 13.17

  	
   

  	
  LIMITATION OF DAMAGES

  	
   

  	
  70

  
	
  Section 13.18

  	
   

  	
  SUBMISSION TO JURISDICTION; WAIVERS

  	
   

  	
  70

  



 


iii

















 


	
  EXHIBITS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT 1

  	
   

  	
  LIST OF MONTHLY AND DAILY REPORTS

  
	
  EXHIBIT 2

  	
   

  	
  FORM OF CUSTODIAL ACCOUNT CERTIFICATION

  
	
  EXHIBIT 3

  	
   

  	
  FORM OF CUSTODIAL ACCOUNT LETTER AGREEMENT

  
	
  EXHIBIT 4

  	
   

  	
  FORM OF ESCROW ACCOUNT CERTIFICATION

  
	
  EXHIBIT 5

  	
   

  	
  FORM OF ESCROW ACCOUNT LETTER AGREEMENT

  
	
  EXHIBIT 6

  	
   

  	
  FORM OF OFFICER’S CERTIFICATE

  
	
  EXHIBIT 7

  	
   

  	
  MORTGAGE LOAN DOCUMENTS

  
	
  EXHIBIT 8

  	
   

  	
  FORM OF LIMITED POWER OF ATTORNEY

  
	
  EXHIBIT 9

  	
   

  	
  TERM SHEET

  
	
  EXHIBIT 10

  	
   

  	
  DELEGATION OF AUTHORITY MATRIX

  



 


iv














 


FLOW SERVICING AGREEMENT


 


This Flow Servicing
Agreement (this “Servicing Agreement”) is entered into as of August 4,
2009, by and between PennyMac Loan Services, LLC, a Delaware limited liability
company (the “Servicer”), and PennyMac Operating Partnership, L.P., a
Delaware limited partnership (the “Owner”).


 


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


 


WHEREAS, the Owner may from
time to time desire that some or all of the Mortgage Loans be serviced pursuant
to the terms of this Agreement, and the Servicer has agreed to service and
administer the Mortgage Loans that become subject to this Agreement, and the
parties desire to provide the terms and conditions of such servicing by the Servicer.


 


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


 

















 


ARTICLE I


 


DEFINITIONS


 


Section 1.01                                                    Definitions.


 


The
following terms are defined as follows:


 


Accepted Servicing Practices:  With respect to any Mortgage Loan (including
any related REO Property), each of those mortgage servicing practices
(including collection procedures) of prudent mortgage lending institutions
which service mortgage loans of the same type as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located, which servicing
practices (i) are in compliance with all federal, state and local laws and
regulations, (ii) shall be in accordance with the Servicer’s policies and
procedures as amended from time to time for mortgage loans of the same type, (iii)
are in accordance with the terms of the related Mortgage and Mortgage Note and (iv)
are at a minimum based on the requirements set forth from time to time by
Fannie Mae.


 


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


 


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


 


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


 


Ancillary Income:  All income derived from the Mortgage Loans
(other than payments or other collections in respect of principal, interest,
Escrow Payments and Prepayment Penalties attributable to the Mortgage Loans)
including, but not limited to, the Servicer’s share of all late charges, all
interest received on funds deposited in the Custodial Account or any Escrow
Account (subject to applicable law), assumption fees, reconveyance fees,
subordination fees, speedpay fees, mortgage pay on the web fees, automatic
clearing house fees, demand statement fees, modification fees, if any, fees
received with respect to checks on bank drafts returned by the related bank for
insufficient funds, assumption fees and other similar types of fees arising
from or in connection with any Mortgage Loan to the extent not otherwise
payable to the Mortgagor under applicable law or pursuant to the terms of the
related Mortgage Note.  In no event shall
the Servicer be entitled to any Prepayment Penalties.


 


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


 


2

















 


the
case of a Refinanced Mortgage Loan, such value of the Mortgaged Property is
based solely upon the value determined by an appraisal made for the originator
of such Refinanced Mortgage Loan at the time of origination of such Refinanced
Mortgage Loan.


 


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


 


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


 


Base Servicing Fee
Percentage:  The Base
Servicing Fee Percentage set forth in Exhibit 9 hereto.


 


BPO:  A broker price opinion.


 


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


 


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


 


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


 


Competitors: Any entity
whose business includes, as a primary strategy, acquiring and modifying
distressed mortgage loans.


 


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


 


Cost of Funds:  The amount payable by the Owner to the
Servicer pursuant to Section 3.04, which amount shall be equal to
one-twelfth of the product of (x) the
average daily balance of Servicing Advances and (y) the sum
of (i) the Cost of Funds Index plus 0 basis
points.


 


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


 


3

















 


Custodial Account:  The separate trust account or accounts
created and maintained pursuant to Section 2.04 at a Qualified
Depository.


 


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


 


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


 


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


 


Delinquent Mortgage Loan:  As defined in Section 6.01(c).


 


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


 


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


 


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


 


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


 


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


 


(iii)          repurchase obligations with
a term not to exceed 30 days with respect to any security described in clause (i)
above and entered into with a depository institution or trust company (acting
as principal) rated A-1+ or higher by S&P, and A2 or higher by Moody’s,
provided, however, that collateral transferred pursuant to such repurchase
obligation must be of the type described 


 


4

















 


in
clause (i) above and must (A) be valued daily at current market prices plus
accrued interest, (B) pursuant to such valuation, be equal, at all times, to
105% of the cash transferred by a party in exchange for such collateral and (C)
be delivered to such party or, if such party is supplying the collateral, an
agent for such party, in such a manner as to accomplish perfection of a
security interest in the collateral by possession of certificated securities;


 


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


 


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


 


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


 


(vii)         any other demand, money
market, common trust fund or time deposit or obligation, or interest bearing or
other security or investment rated in the highest rating category by each
Rating Agency;


 


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


 


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


 


Errors and Omissions
Insurance Policy:  An errors
and omissions insurance policy to be maintained by the Servicer pursuant to Section
2.12.


 


5

















 


Escrow Account:  The separate trust account or accounts
created and maintained pursuant to Section 2.06 at a Qualified
Depository.


 


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


 


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


 


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


 


Fannie Mae Guides:  The Fannie Mae Sellers’ Guide and the Fannie
Mae Servicers’ Guide and all amendments or additions thereto.


 


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


 


Fidelity Bond:  A fidelity bond to be maintained by the
Servicer pursuant to Section 2.12.


 


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


 


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


 


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


 


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


 


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


 


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


 


Gross Margin:  With respect to each Adjustable-Rate Mortgage
Loan, the fixed percentage amount set forth in the related Mortgage Note which
amount is added to the Index in accordance with the terms of such Mortgage Note
to determine on each Interest Rate Adjustment Date the Mortgage Interest Rate
for such Mortgage Loan.


 


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


 


6

















 


federal
or local law (or a similarly classified loan using different terminology under
a law imposing heightened regulatory scrutiny or additional legal liability for
residential mortgage loans having high interest rates, points and/or fees).


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Lifetime Rate Cap:  With respect to each Adjustable-Rate Mortgage
Loan, the provision of the related Mortgage Note that provides for an absolute
maximum Mortgage Interest Rate thereunder. 
The Mortgage Interest Rate during the terms of each Adjustable-Rate
Mortgage Loan shall not at any time exceed the Mortgage Interest Rate at the
time of origination of such Adjustable-Rate Mortgage Loan by more than the
amount per annum set forth on the Mortgage Loan Schedule.


 


Liquidation Proceeds:  Amounts, other than Condemnation Proceeds and
Insurance Proceeds, received in connection with the liquidation of a defaulted
Mortgage Loan, whether through the sale or assignment of such Mortgage Loan,
trustee’s sale, foreclosure sale or otherwise, or the sale of the related
Mortgaged Property if the Mortgaged Property is acquired in satisfaction of the
Mortgage Loan, other than amounts received following the acquisition of an REO
Property pursuant to Section 2.15 and prior to such liquidation.


 


Liquidity Reserve:  As defined in Section 2.17.


 


Liquidity Reserve Account:  The separate trust account or accounts to be
created and maintained under the circumstances described in Section 2.17.


 


Litigation Reserve:  As defined in Section 2.17.


 


7

















 


Litigation Reserve Account:  The separate trust account or accounts to be
created and maintained under the circumstances described in Section 2.17.


 


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


 


Management Agreement:  The Management Agreement dated as of August 4,
2009 by and among PennyMac Mortgage Investment Trust, PennyMac Operating
Partnership, L.P. and PNMAC Capital Management, LLC, as such agreement may be
amended from time to time.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Mortgage Impairment
Insurance Policy:  A mortgage
impairment or blanket hazard insurance policy as described in Section 2.11.


 


8

















 


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


 


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


 


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


 


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


 


Mortgage
Loan Schedule:  The
schedule of Mortgage Loans in the form attached as a schedule to the Notice of
Transfer of Mortgage Loans, to be delivered from time to time by the Owner to
the Servicer, which schedule shall include, but not be limited to, the
following information with respect to each Mortgage Loan:


 


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


 


(2)                                the Mortgagor’s
name;


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(11)                          the stated
maturity date;


 


9

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(26)                          whether the
Mortgage Loan provides for a Prepayment Penalty;


 


(27)                          the Prepayment
Penalty period of the Mortgage Loan, if applicable;


 


(28)                          a description
of the Prepayment Penalty, if applicable;


 


(29)                          the Mortgage
Interest Rate as of origination;


 


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


 


(31)                          the date of
origination;


 


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


 


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


 


10

















 


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


 


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


 


(36)                          a code
indicating whether the Mortgage Loan is assumable;


 


(37)                          a code
indicating whether the Mortgage Loan has been modified;


 


(38)                          the one year
payment history;


 


(39)                          the Due Date
for the first Monthly Payment;


 


(40)                          the original
Monthly Payment due;


 


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


 


(42)                          the Appraised
Value of the Mortgaged Property;


 


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


 


(44)                          the MERS
identification number;


 


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


 


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


 


(47)                          a code
indicating whether the Mortgage Loan is a HOEPA Loan;


 


(48)                          a code
indicating whether the Mortgage Loan is a High Cost Loan;


 


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


 


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


 


(51)                          whether the
Mortgage Loan is subject to a repurchase agreement;


 


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


 


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


 


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


 


(a)                                the number of Mortgage Loans;


 


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


 


(c)                                the weighted average Mortgage Interest Rate of the Mortgage Loans; and


 


(d)                               the weighted average maturity of the Mortgage Loans.


 


11














 


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


 


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


 


Mortgagor:  The obligor on a Mortgage Note.


 


Nonrecoverable Advance:  Any Servicing Advance previously made or
proposed to be made in respect of a Mortgage Loan or REO Property which, in the
good faith judgment of the Servicer, will not or, in the case of a proposed
advance, would not, be ultimately recoverable from related Insurance Proceeds,
Liquidation Proceeds or otherwise from such Mortgage Loan or REO Property.  The determination by the Servicer that it has
made a Nonrecoverable Advance or that any proposed Servicing Advance or advance
of principal and interest, if made, would constitute a Nonrecoverable Advance
shall be evidenced by an Officer’s Certificate delivered to the Owner.


 


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


 


Notice Date: As defined in
Section 11.01(b).


 


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


 


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


 


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


 


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


 


Outstanding Owner Servicing
Advances:  As defined
in Section 2.28(f).


 


Parent:  As defined in Section 13.14.


 


12

















 


Payment Clearing Account:  The account established and maintained
pursuant to the second paragraph of Section 2.03.


 


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


 


PennyMac REIT:  PennyMac Mortgage Investment Trust, a
Maryland real estate investment trust.


 


PennyMac REIT Manager:  PNMAC Capital Management, LLC, a Delaware
limited liability company.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


Private Securitization
Transaction:  Any
transaction involving either (1) a sale of some or all of the Mortgage Loans directly
or indirectly to an entity that issues privately offered, rated mortgage-backed
securities or (2) an entity that issues privately offered, rated securities, 


 


13

















 


the
payments of which are determined primarily by reference to one or more
portfolios of mortgage loans consisting, in whole or in part, of some or all of
the Mortgage Loans.


 


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


 


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


 


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


 


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


 


Rating Agency:  Any of Fitch, Moody’s or S&P, or their
respective successors, designated by the Owner.


 


Reconstitution:  A Whole Loan Transfer, a Private
Securitization Transaction or a Public Securitization Transaction, as the case
may be.


 


Reconstitution Date:  As defined in Section 13.12.


 


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


 


Remittance Date:  With respect to each Mortgage Loan, not later
than the 20th day of the month following the month in which payments in respect
of such Mortgage Loan are received and credited.


 


REO Marketing Fee:  With respect to each REO Property being
managed by the Servicer, that fee set forth in Exhibit 9.


 


REO Property:  A Mortgaged Property acquired by the Servicer
on behalf of the Owner through foreclosure or by deed in lieu of foreclosure,
as described in Section 2.15.


 


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


 


14

















 


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


 


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


 


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


 


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


 


Servicer: PennyMac Loan
Services, LLC or its successor in interest or any permitted assignee or
designee of under this Servicing Agreement as herein provided and as provided
in Section 6.02.  Unless the
context requires otherwise, all references to “Servicer” in this Servicing
Agreement shall be deemed to include such Servicer’s successors in interest or
permitted assignees or designees.


 


Servicer Employees:  As defined in Section 2.12.


 


Servicer Information:  As defined in Section 13.12(b)(ii)(A).


 


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


 


Servicing Fee:  With respect to each Mortgage Loan, the
product of (i) the Base Servicing Fee Percentage and (ii) the unpaid principal
balance of such Mortgage Loan as of the first day of each month for which the
Mortgage Loan is serviced.  With respect
to each newly boarded Mortgage Loan, boarded on or before the 15th day of
month, the Servicer shall be entitled to receive the full monthly Servicing Fee
for each newly boarded Mortgage Loan. 
With respect to each newly boarded Mortgage Loan boarded after the 15th
day of the month, the Servicer shall be entitled to one-half of the monthly
Servicing Fee for each newly boarded 


 


15

















 


Mortgage
Loan.  With respect to each Mortgage Loan
released from servicing, Servicer shall be entitled to receive the full monthly
Servicing Fee irrespective of the applicable release date.


 


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


 


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


 


Servicing Rights:  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 Ancillary Income 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) any and all
rights to and in the Escrow Payments or other similar payments with respect to
the Mortgage Loans and any amounts actually collected by the 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.


 


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


 


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


 


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


 


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


 


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


 


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


 


16

















 


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


 


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17

















 


ARTICLE II


 


SERVICING


 


Section 2.01                                                    Servicer to Act
as Servicer.


 


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


 


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


 


18

















 


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


 


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


 


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


 


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


 


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


 


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


 


Section 2.02                                                    Liquidation of
Mortgage Loans.


 


In the event that any
payment due under any Mortgage Loan and not postponed pursuant to Section 2.01
is not paid when the same becomes due and payable, or in the event the
Mortgagor fails to perform any other covenant or obligation under the Mortgage
Loan and such failure continues beyond any applicable grace period, the
Servicer shall take such action as the Servicer shall determine reasonably to
be in the best interest of the Owner in accordance with Accepted Servicing
Practices.  In the event that any payment
due under any Mortgage Loan is not postponed pursuant to Section 2.01
and remains delinquent for a period of ninety (90) days or any other default
continues for a period of ninety (90) days beyond the expiration of any grace
or cure period (or such other period as is required by law in the jurisdiction
where the related Mortgaged Property is located) or earlier as determined by
the Servicer, the Servicer is granted authority to effect Foreclosure
Commencement in accordance with and subject to Exhibit 10 hereto and
Accepted Servicing Practices.  In such
connection, the Servicer shall, acting in accordance with Accepted Servicing
Practices, advance on behalf of the Owner such funds as are necessary and
proper in connection with any foreclosure or towards the restoration or
preservation of any Mortgaged Property. Notwithstanding anything herein to the
contrary, no Servicing Advance shall be required to be made hereunder if such
Servicing Advance would, if made, constitute a Nonrecoverable Advance.  The determination by the Servicer that it has
made a Nonrecoverable Advance or that any proposed Servicing Advance would
constitute a Nonrecoverable Advance shall be evidenced by an Officers’
Certificate of the Servicer, delivered to the Owner, which details the reasons
for such determination.


 


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


 


Section 2.03                                                    Collection of
Mortgage Loan Payments; Payment Clearing Account.


 


Continuously from the
related Servicing Transfer Date until the principal and interest on all
Mortgage Loans are paid in full (unless otherwise provided herein), the
Servicer shall proceed diligently to collect all payments due under each of the
Mortgage Loans when the same shall become due and payable and shall take
special care in ascertaining and estimating Escrow Payments, to the extent
applicable, and all other charges that will become due and payable with respect
to the Mortgage Loans and each related Mortgaged Property, to the end that 


 


20

















 


the
installments payable by the Mortgagors will be sufficient to pay such charges
as and when they become due and payable. 
Notwithstanding anything herein to the contrary, the Servicer shall not
be required to institute or join in litigation with respect to collection of
any payment (whether under a Mortgage, Mortgage Note, PMI Policy or otherwise
or against any public or governmental authority with respect to a taking or
condemnation) if in its reasonable judgment it believes that it will be unable
to enforce the provision of the Mortgage or other instrument pursuant to which
payment is required.  Further, the
Servicer shall take special care in ascertaining and estimating annual ground
rents, taxes, assessments, water rates, flood insurance premiums, fire and
hazard insurance premiums, mortgage insurance premiums, and all other charges
that, as provided in the Mortgage, will become due and payable to the end that
the installments payable by the Mortgagors will be sufficient to pay such
charges as and when they become due and payable.


 


The Servicer shall establish
and maintain a Payment Clearing Account into which it shall deposit on a daily
basis all payments received in respect of mortgage loans serviced by the
Servicer (whether or not serviced pursuant to this Servicing Agreement).  Not later than the second Business Day
following the receipt of a payment in respect of a Mortgage Loan subject to
this Servicing Agreement, the Servicer shall withdraw the amount such payment
form the Payment Clearing Account and shall immediately deposit (1) in the
Custodial Account, the portion of such payment required to be deposited therein
pursuant to Section 2.04, and (2) in the Escrow Account, the portion of
such payment required to be deposited therein pursuant to Section 2.06.


 


Section 2.04                                                    Establishment
of and Deposits to Custodial Account.


 


The Servicer shall establish
one or more Custodial Accounts, in the form of time deposit or demand accounts,
titled “PNMAC Loan Svc LLC ITF PennyMac Operating
Partnership, L.P. ttee and/or bailee for PNMAC LLC - and/or pmnts of var mtgrs
and/or other owners of int in loans- P&I”  The Custodial Account shall be established
with a Qualified Depository acceptable to the Owner as a Special Deposit
Account.  Any funds deposited in the
Custodial Account shall at all times be fully insured to the full extent
permitted by the FDIC and any amounts therein may be invested in Eligible
Investments.  The creation of any
Custodial Account shall be evidenced by a certification in the form of Exhibit
2 hereto, in the case of an account established with the Servicer (provided
the Servicer qualifies as a Qualified Depository), or by a letter agreement in
the form of Exhibit 3 hereto, in the case of an account held by a
depository other than the Servicer.  A
copy of such certification or letter agreement shall be furnished to the Owner
on or prior to the execution of this Servicing Agreement.  The Servicer shall segregate and hold all
funds in the Custodial Account separate and apart from the Servicer’s own funds
and general assets.


 


The
Servicer shall deposit in the Custodial Account and retain therein the
following collections received by the Servicer, together with any payments made
by the Servicer subsequent to the Servicing Transfer Date pursuant to this
Servicing Agreement:


 


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


 


21














 


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


 


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


 


(iv)                              all Insurance
Proceeds including amounts required to be deposited pursuant to Section 2.10
(other than proceeds to be held in the Escrow Account and applied to the
restoration or repair of the Mortgaged Property or released to the Mortgagor in
accordance with Section 2.14), and Section 2.11;


 


(v)                                 all
Condemnation Proceeds affecting any Mortgaged Property that are not applied to
the restoration or repair of the Mortgaged Property or released to the
Mortgagor in accordance with Section 2.14;


 


(vi)                              any amount
required to be deposited in the Custodial Account pursuant to Section 2.15
or 4.02;


 


(vii)                           [reserved];


 


(viii)                        [reserved];


 


(ix)                              any Prepayment
Penalties received with respect to any Mortgage Loan; and


 


(x)                                 any amounts
required to be deposited by the Servicer pursuant to Section 2.11
in connection with the deductible clause in any blanket hazard insurance
policy.  Such deposit shall be made from
Servicer’s own funds, without reimbursement therefor.


 


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


 


Section 2.05                                                     Permitted
Withdrawals From Custodial Account.


 


Subject to Section 3.01, the
Servicer shall be entitled to withdraw funds from the Custodial Account for the
following purposes:


 


(i)                                     to make
payments to the Owner (or as otherwise directed by the Owner in writing) in the
amounts and in the manner provided in Section 3.01;


 


(ii)                                  to fund any
Liquidity Reserve Account or any Litigation Reserve Account as and to the
extent required by Section 2.17;


 


22

















 


(iii)                               [reserved];


 


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


 


(v)                                 [reserved];


 


(vi)                              [reserved];


 


(vii)                           to invest funds
in Eligible Investments in accordance with Section 2.09;


 


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


 


(ix)                              to pay to
itself any interest earned on funds deposited in the Custodial Account (all
such interest to be withdrawn monthly not later than each Remittance Date);


 


(x)                                 [reserved];


 


(xi)                              [reserved]; and


 


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


 


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


 


Section 2.06                                                     Establishment
of and Deposits to Escrow Account.


 


The Servicer shall establish and maintain one
or more Escrow Accounts, in the form of time deposit or demand accounts, titled
“PNMAC Loan Svc LLC ttee and/or bailee for PNMAC
LLC and/or pmts of  var mtgrs and/or
other owners of int in loans- T&I”.  The Escrow Account shall be established with
a Qualified Depository as a Special Deposit Account.  Funds deposited in the Escrow Accounts may be
drawn on by the Servicer in accordance with Section 2.07.  The creation of any Escrow Account shall be
evidenced by a certification in the form of Exhibit 4 hereto, in
the case of an account established with the Servicer (provided the Servicer
qualifies as a Qualified Depository), or by a letter agreement in the form of Exhibit 5
hereto, in the case of an account held by a depository other than the
Servicer.  A copy of such certification
shall be furnished to the Owner on or prior to the execution of this Servicing
Agreement.  The Servicer shall segregate
and hold all funds in any Escrow Account separate and apart from the Servicer’s
own funds and general assets.


 


The Servicer shall deposit in the Escrow
Account or Accounts and retain therein the following collections received by
the Servicer:


 


23

















 


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


 


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


 


The Servicer shall make withdrawals from the
Escrow Account only to effect such payments as are required under this
Servicing Agreement, as set forth in Section 2.07.  Any interest paid on funds deposited in the
Escrow Account by the depository institution shall accrue to the benefit of the
Servicer, other than interest on escrowed funds required by law to be paid to
the Mortgagor.  To the extent required by
law, the Servicer shall be responsible to pay from its own funds interest on escrowed
funds to the Mortgagor notwithstanding that the Escrow Account may be non
interest bearing or that interest paid thereon is insufficient for such
purposes.


 


Section 2.07                                                     Permitted
Withdrawals From Escrow Account.


 


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


 


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


 


(ii)                                  to reimburse
the Servicer for any Servicing Advance made by the Servicer pursuant to Section 2.08
with respect to a Mortgage Loan, but only from amounts received on the related
Mortgage Loan which represent late payments or collections of Escrow Payments
thereunder;


 


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


 


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


 


(v)                                 for application
to restoration or repair of the Mortgaged Property in accordance with the procedures
outlined in Section 2.14;


 


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


 


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


 


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


 


24

















 


Section 2.08                                                     Payment of
Taxes, Insurance and Other Charges.


 


With respect to each First Lien Mortgage Loan
that provides for Escrow Payments to be made, the Servicer shall maintain
accurate records reflecting the status of ground rents, taxes, assessments,
water rates and other charges which are or may become a lien upon the Mortgaged
Property and the status of PMI Policy premiums, flood insurance, and fire and
hazard insurance coverage and shall obtain, from time to time, all bills for
the payment of such charges (including renewal premiums) and shall effect
payment thereof prior to the applicable penalty or termination date and at a
time appropriate for securing maximum discounts allowable, employing for such
purpose deposits of the Mortgagor in the Escrow Account which shall have been
estimated and accumulated by the Servicer in amounts sufficient for such
purposes, as allowed under the terms of the related Mortgage.


 


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


 


Section 2.09                                                     Protection of
Accounts.


 


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


 


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


 


25

















 


Account, any Liquidity
Reserve Account or any Litigation Reserve Account, by the Servicer out of its
own funds immediately as realized with no right to reimbursement.


 


Section 2.10                                                     Maintenance of
Hazard Insurance.


 


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


 


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


 


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


 


26

















 


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


 


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


 


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


 


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


 


Pursuant to Section 2.04, any
amounts collected by the Servicer under any such policies (other than amounts
to be deposited in the Escrow Account and applied to the restoration or repair
of the related Mortgaged Property, or property acquired in liquidation of the
Mortgage Loan, or to be released to the Mortgagor, in accordance with the
Servicer’s normal servicing procedures as specified in Section 2.14)
shall be deposited in the Custodial Account subject to withdrawal pursuant to Section 2.05.


 


Section 2.11                                                     Maintenance of
Mortgage Impairment Insurance Policy.


 


In the event that the Servicer shall obtain
and maintain a blanket policy insuring against losses arising from flood, fire
and hazards covered under extended coverage on all of the Mortgage Loans, then,
to the extent such policy provides coverage in an amount equal to the amount
required pursuant to Section 2.10 and otherwise complies with all
other requirements of Section 2.10, it shall conclusively be deemed
to have satisfied its obligations as set forth in Section 2.10.  Any amounts collected by the Servicer under
any such policy relating to a 


 


27

















 


Mortgage Loan shall be
deposited in the Custodial Account subject to withdrawal pursuant to Section 2.05.  Such policy may contain a deductible clause,
in which case, in the event that there shall not have been maintained on the
related Mortgaged Property a policy complying with Section 2.10,
and there shall have been a loss which would have been covered by such policy,
the Servicer shall deposit in the Custodial Account at the time of such loss
the amount not otherwise payable under the blanket policy because of such
deductible clause, such amount to be deposited from the Servicer’s funds,
without reimbursement therefor.  The
Servicer may seek reimbursement from the Owner for the costs and premiums
associated with obtaining and maintaining any such blanket policy.


 


Section 2.12                                                     Maintenance of
Fidelity Bond and Errors and Omissions Insurance.


 


The Servicer shall maintain with responsible
companies that would meet the requirements of Fannie Mae, at its own expense, a
blanket Fidelity Bond and an Errors and Omissions Insurance Policy, with broad
coverage on all officers, employees or other persons acting in any capacity
requiring such persons to handle funds, money, documents or papers relating to
the Mortgage Loans (“Servicer Employees”).  Any such Fidelity Bond and Errors and
Omissions Insurance Policy shall be in the form of the Mortgage Banker’s
Blanket Bond and shall protect and insure the Servicer against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such Servicer Employees. 
Such Fidelity Bond and Errors and Omissions Insurance Policy also shall
protect and insure the Servicer against losses in connection with the failure
to maintain any insurance policies required pursuant to this agreement and the
release or satisfaction of a Mortgage Loan without having obtained payment in
full of the indebtedness secured thereby. 
No provision of this Section 2.12 requiring such Fidelity
Bond and Errors and Omissions Insurance Policy shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Servicing
Agreement.  Any such Fidelity Bond and
Errors and Omissions Insurance Policy shall be comply with the applicable
requirements from time to time of Fannie Mae. Upon request, the Servicer shall
cause to be delivered to the Owner a certified true copy of such Fidelity Bond
and Errors and Omissions Insurance Policy and shall obtain a statement from the
surety and insurer that such Fidelity Bond and Errors and Omissions Insurance
Policy shall in no event be terminated or materially modified without thirty
(30) days’ prior written notice to the Owner.


 


Section 2.13                                                     Inspections.


 


The Servicer shall order an inspection of the
Mortgaged Property when the related Mortgage Loan becomes 45 days delinquent
and every 30 days thereafter so long as such Mortgage Loan remains delinquent
to assure itself that the value of the Mortgaged Property is being preserved, provided that the Servicer shall be
required to take such action only if it determines that the proceeds to the
Owner (after giving effect to the recovery of the Servicer’s out-of-pocket
expenses) from payment on, or disposition of, the related Mortgage Loan or
REO Property would be increased as a result of the taking of such
action.  The Servicer shall document on
its servicing system each such inspection. 
The costs of such inspections shall be treated as Servicing Advances for
which the Servicer shall be entitled to full reimbursement for in accordance
with Section 2.05(iv).


 


28

















 


Section 2.14                                                     Restoration of
Mortgaged Property.


 


The Servicer need not obtain the approval of
the Owner prior to releasing any Insurance Proceeds or Condemnation Proceeds to
the Mortgagor to be applied to the restoration or repair of the Mortgaged
Property if such release is in accordance with Accepted Servicing Practices and
the terms of this Servicing Agreement. 
At a minimum, the Servicer shall comply with the following conditions in
connection with any such release of Insurance Proceeds or Condemnation
Proceeds:


 


(i)                                     the Servicer
shall receive satisfactory independent verification of completion in all
material respects of repairs and issuance of any required approvals with
respect thereto;


 


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


 


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


 


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


 


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


 


Section 2.15                                                     Title,
Management and Disposition of REO Property.


 


In the event that title to any Mortgaged
Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed
or certificate of sale shall be taken in the name of the Servicer on behalf of
the Owner and without reference to the Owner except as otherwise required by
law, or in the event the Servicer is not authorized or permitted to hold title
to real property in the state where the REO Property is located, or would be
adversely affected under the “doing business” or tax laws of such state by so
holding title, the deed or certificate of sale shall be taken in the name of
such Person(s) as shall be consistent with an Opinion of Counsel obtained
by Servicer from an attorney duly licensed to practice law in the state where
the REO Property is located.  The Person
or Persons holding such title other than the Owner shall acknowledge in writing
that such title is being held as nominee for the Owner.


 


Upon approval by Owner, the Servicer shall
manage, conserve, protect and operate each REO Property for the Owner solely
for the purpose of its prompt disposition and sale.  In consideration therefor, the Owner shall
pay the Servicer the REO Marketing Fee per month as set forth in Exhibit 9.  The Servicer, either itself or through an
agent selected by the Servicer, shall manage, conserve, protect and operate the
REO Property in accordance with Accepted Servicing Practices and in the same
manner that similar property in the same locality as the REO Property is
managed.  The Servicer shall attempt to
sell the same (and may temporarily rent the same, except as otherwise provided
below) on such terms and conditions as the Servicer deems to be in the best
interest of the Owner in accordance with Accepted Servicing 


 


29

















 


Practices.  The Servicer shall provide the Owner on a
monthly basis with a report on the status of each REO Property.


 


In consideration therefor, the Owner shall
pay the Servicer the REO Marketing Fee per month as set forth in Exhibit 9.


 


The Servicer shall also maintain on each REO
Property fire and hazard insurance with extended coverage in an amount which is
at least equal to the maximum insurable value of the improvements which are a
part of such property, liability insurance and, to the extent required and
available under the National Flood Insurance Act of 1968 or Flood Disaster
Prevention Act of 1973, as amended, flood insurance in the amount required in Section 2.10
hereof, provided that the
Servicer shall be required to maintain such insurance only if it determines
that the proceeds to the Owner (after giving effect to the recovery of the
Servicer’s out-of-pocket expenses) from payment on, or disposition of, the
related REO Property would be increased as a result of the maintenance of
such insurance.  Such costs to maintain
appropriate insurance coverage shall be treated as Servicing Advances for which
the Servicer shall be entitled to full reimbursement in accordance with Section 2.05(iv).


 


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


 


With respect to each REO Property, the
Servicer shall segregate and hold all funds collected and received in
connection with the operation of the REO Property in the Custodial
Account.  The Servicer shall cause to be
deposited on  a daily basis in each
Custodial Account all revenues received by Servicer (such revenues being those
received by Servicer within two Business Days prior to actual deposit into the
Escrow Account) with respect to the conservation and disposition of the related
REO Property.  Any advances made to
maintain appropriate insurance coverage shall be treated as Servicing Advances
for which the Servicer shall be entitled to full reimbursement in accordance
with Section 2.05(iv).


 


The Servicer shall furnish to the Owner on a
monthly basis the Servicer’s standard REO report on REO Property then serviced
by the Servicer.


 


Section 2.16                                                     Costs and
Expenses.


 


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


 


30

















 


Section 2.17                                                     Liquidity and
Litigation Reserves.


 


(a)                                 Liquidity
Reserve.  The Servicer, in its
discretion, may establish a liquidity reserve (the “Liquidity Reserve”)
from which to fund Servicing Advances (other than litigation costs and expenses
(including attorneys’ fees), which may be funded through the use of a
Litigation Reserve pursuant to Section 2.17(b)).  If the Servicer elects to establish a
Liquidity Reserve it shall establish a Liquidity Reserve Account at a Qualified
Depository.  The Liquidity Reserve
Account shall be held in trust for the benefit of the Owner and shall be
established and maintained for the sole purpose of holding and distributing the
Liquidity Reserve funds.  The Servicer
may fund the Liquidity Reserve with such portion of distributions on the
Mortgage Loans as it deems appropriate, in the exercise of its reasonable
discretion.  At the termination of this
Servicing Agreement, all remaining funds held in the Liquidity Reserve shall be
distributed to the Owner.  Amounts on
deposit in the Liquidity Reserve Account shall be invested in Eligible
Investments, shall not be used to pay costs or expenses other than Servicing
Advances (excluding litigation costs and expenses), and shall be used to pay
Servicing Advances (other than litigation costs and expenses) only in any month
in which the distributions on the Mortgage Loans received during that month are
insufficient to provide sufficient cash to pay all Servicing Advances due and
payable (without prepayment) during that month. 
No funds from any other source (other than interest or earnings on the
funds held in the Liquidity Reserve Account) shall be commingled in the
Liquidity Reserve Account.  Amounts on
deposit in the Liquidity Reserve Account (including interest and earnings
thereon) shall be used and may be withdrawn and disbursed only in accordance
with the provisions of this paragraph. 
The Servicer shall be authorized and directed to withdraw funds from the
Liquidity Reserve Account only to make disbursements in accordance with this
Servicing Agreement and not for any other purpose.


 


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


 


31














 


Section 2.18                                                     [Reserved].


 


Section 2.19                                                     [Reserved].


 


Section 2.20                                                     Notification of
Adjustments.


 


With respect to each Adjustable-Rate Mortgage
Loan, the Servicer shall adjust the Mortgage Interest Rate on the related
Interest Rate Adjustment Date in compliance with the requirements of applicable
law and the related Mortgage and Mortgage Note. If, pursuant to the terms of
the Mortgage Note, another Index is selected for determining the Mortgage
Interest Rate because the original Index is no longer available, the same Index
will be used with respect to each Mortgage Note which requires a new Index to
be selected provided that such selection does not conflict with the terms of
the related Mortgage Note.  The Servicer
shall execute and deliver any and all necessary notices required under
applicable law and the terms of the related Mortgage Note and Mortgage
regarding the Mortgage Interest Rate and the Monthly Payment adjustments.  The Servicer shall promptly deliver to the Owner
such notifications and any additional applicable data regarding such
adjustments and the methods used to calculate and implement such
adjustments.  Upon the discovery by the
Servicer or the Owner that the Servicer has failed to adjust a Mortgage Interest
Rate or a Monthly Payment pursuant to the terms of the related Mortgage Note
and Mortgage, the Servicer shall immediately deposit in the Custodial Account
from its own funds the amount of any interest loss caused the Owner thereby
without reimbursement therefor.


 


Section 2.21                                                     Recordation of Assignments
of Mortgage.


 


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


 


Section 2.22                                                     [Reserved].


 


Section 2.23                                                     Credit
Reporting.


 


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


 


Section 2.24                                                     Superior Liens.


 


If the Servicer is notified that any superior
lienholder has accelerated or intends to accelerate the obligations secured by
the superior lien, or has declared or intends to declare a 


 


32

















 


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


 


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


 


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


 


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


 


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


 


Section 2.25                                                     Prepayments in
Full.


 


With respect to each Mortgage Loan, the
Servicer agrees to deliver on or prior to the fifth (5th) Business Day of each
month to the Owner, a report setting forth information with respect to any
prepayments in full with respect to such Mortgage Loan.


 


Section 2.26                                                     Tax and Flood
Service Contracts.


 


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


 


33

















 


Section 2.27                                                     Maintenance of
PMI Policies and LPMI Policies; Collections Thereunder.


 


The Servicer shall maintain in full force and
effect, a PMI Policy, issued by a Qualified Insurer, with respect to each
Mortgage Loan for which such coverage is required, provided that the Servicer’s obligations to pay premiums in
respect of any such Policy shall terminate if the Servicer determines that the
related insurer is unwilling or unable to make all payments due under such
policy.  Such coverage shall be
maintained until the LTV Ratio or CLTV, as applicable, of the related Mortgage
Loan is reduced to that amount for which Fannie Mae no longer requires such
insurance to be maintained. The Servicer will not cancel or refuse to renew any
PMI Policy in effect on the related Servicing Transfer Date that is required to
be kept in force under this Servicing Agreement unless a replacement PMI Policy
or LPMI Policy for such cancelled or non-renewed policy is obtained from and
maintained with a Qualified Insurer.  The
Servicer shall not take any action which would result in non-coverage under any
applicable PMI Policy or LPMI Policy of any loss which, but for the actions of
the Servicer, would have been covered thereunder.  In connection with any assumption or
substitution agreement entered into or to be entered into pursuant to Section 4.01,
the Servicer shall promptly notify the insurer under the related PMI Policy or
LPMI Policy, if any, of such assumption or substitution of liability in
accordance with the terms of such policy and shall take all actions which may
be required by such insurer as a condition to the continuation of coverage
under the PMI Policy or LPMI Policy. If such PMI Policy is terminated as a
result of such assumption or substitution of liability, the Servicer shall
obtain a replacement PMI Policy as provided above.


 


In connection with its activities as
servicer, the Servicer agrees to prepare and present, on behalf of itself, and
the Owner, claims to the insurer under any PMI Policy or LPMI Policy in a
timely fashion in accordance with the terms of such policies and, in this
regard, to take such action as shall be necessary to permit recovery under any
PMI Policy or LPMI Policy respecting a defaulted Mortgage Loan.  Pursuant to Section 2.04, any
amounts collected by the Servicer under any PMI Policy or LPMI Policy shall be
deposited in the related Custodial Account, subject to withdrawal pursuant to Section 2.05.


 


Section 2.28                                                     Obligations of
the Owner and the Servicer Related to Servicing Transfers.


 


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


 


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


 


34

















 


parties.  Not later than one (1) Business
Day following the Servicing Transfer Date, the Owner shall provide the Servicer
with computer or like records (final data) reflecting the status of payments,
balances and other pertinent information as set forth above and necessary to
service the Mortgage Loans as of the Servicing Transfer Date.


 


(b)                                 Delivery of
Notification Letter. With respect to each pool of Mortgage Loans to be
serviced under this Servicing Agreement, the Owner shall use its best efforts
to deliver or cause to be delivered to the Servicer a Notice of Transfer of
Mortgage Loans for such Mortgage Loans not less than forty-five (45) days prior
to the related Servicing Transfer Date, the Servicer shall provide its written
approval or denial within five (5) Business Days of receipt of such
Notice, which approval shall not be unreasonably withheld.


 


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


 


(d)                                 Notice to
Mortgagors.  The Owner
shall cause to be provided to each Mortgagor a “Notice of assignment, sale or
transfer of servicing” to the Servicer. 
Upon boarding of each Mortgage Loan originated by a third-party
originator, the Servicer shall deliver to each related Mortgagor a “Welcome
Letter” in accordance with RESPA and Accepted Servicing Practices.


 


(e)                                  Transfer of
Escrow Funds and Other Proceeds.  The Owner shall use its best efforts to  transfer or cause to be transferred to the
Servicer, within one (1) Business Day and not later than three (3) Business
Days following the Servicing Transfer Date by wire transfer to the account
designated by the Servicer, an amount equal to the sum of (i) Escrow
Payments collected from each Mortgagor; and if applicable (ii) all
undistributed insurance loss draft funds; (iii) all unapplied funds
received by the Owner or any prior servicer; (iv) all unapplied interest
on escrow balances accrued through the related Servicing Transfer Date; (v) all
buydown funds held by the Owner or any prior servicer as of the related
Servicing Transfer Date; and (vi) all other related amounts held by the
respective owner of the Mortgage Loan or any prior servicer of such Mortgage
Loan as of the related Servicing Transfer Date that the Owner or any prior
servicer is not entitled to retain.  The
Owner shall be responsible for any interest on escrow amounts held by the Owner
prior to the related Servicing Transfer Date. 
The Servicer shall be entitled to deduct from Servicer’s monthly
remittance to the Owner any shortfalls in Escrow Payments that result from
Owner’s failure to deliver any Escrow Payment in full to the Servicer.  To the extent the Custodial Account has
insufficient funds to fully fund such shortfalls in the Escrow Payments plus
all other amounts due to the Servicer as set forth in Section 4.03
herein, the Owner shall wire such shortfall amount to the Servicer promptly
upon receipt of notice of such shortfalls from the Servicer.


 


35

















 


(f)                                   Outstanding
Servicing Advances. Not later than ten (10) Business Days
following the Servicing Transfer Date, the Owner shall deliver to the Servicer
a schedule, certified by an authorized officer of the Owner as being true and
correct and setting forth, in all material respects, those Servicing Advances
made by the Owner with respect to the Mortgage Loans as of the related
Servicing Transfer Date for which the Owner has not been reimbursed (the “Outstanding
Owner Servicing Advances”).  The
Servicer agrees to reimburse the prior servicer within thirty (30) days
following the Servicing Transfer Date for all Outstanding Owner Servicing
Advances with which the prior servicer or the Owner has provided the Servicer
with reasonably detailed documentation evidencing such advances.  The Servicer shall have no obligation to
board Outstanding Owner Servicing Advances or reimburse the prior servicer
unless the Servicer has received reasonably detailed documentation allowing the
Servicer to collect such advances from the Mortgagor.


 


Section 2.29                                                     Reliability of
Information/Exceptional Expenses.


 


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


 


Section 2.30                                                     Escrow
Obligations.


 


In connection with impounded Mortgage Loans,
the Owner shall (i) cause all taxes and assessments with respect to which
the related tax bill is due within thirty (30) days following the related
Servicing Transfer Date to be paid prior to such Servicing Transfer Date, and (b) cause
all hazard, flood, earthquake, PMI Policy and other insurance premiums that are
due on or prior to the thirtieth (30th) day following such Servicing Transfer
Date to be paid on or prior to such Servicing Transfer Date.  The Owner shall be responsible for any losses
including but not limited to tax penalties (including any loss of discount for
which any Mortgagor or any third party for the benefit of the Mortgagor has a
legal claim) for the current tax due period or for any tax period that ends no
more than twelve (12) months earlier than the date of the last paid 


 


36

















 


installment of the Mortgage
Loan, as well as for its advances to pay the delinquent taxes themselves in
connection with any Mortgage Loan for which the Owner failed to pay taxes as
required by this Section 2.30 as the result of an action or
inaction of a previous servicer.


 


Section 2.31                                                     [Reserved].


 


Section 2.32                                                     Additional
Activities of the Servicer.


 


Subject to the following
paragraph, nothing herein shall prevent the Servicer or any of its Affiliates
from engaging in other businesses of any kind, including the issuance of mortgage-backed
securities, or from rendering services of any kind to any other person or
entity, including the performance of monitoring, administering or servicing
activities for others investing in any type of real estate investment.


 


The Servicer shall not (i) act
as servicer or subservicer for distressed residential mortgage loans held by
Competitors, and (ii) act as the servicer or subservicer on a portfolio of
distressed mortgage loans acquired in a competitive bidding process where the
Servicer or another entity managed by the PennyMac REIT Manager or an Affiliate
thereof does not have an interest in any part of the portfolio.  Notwithstanding the foregoing, the Servicer
may act as servicer or subservicer where a majority of the independent members
of the board of trustees of PennyMac REIT determines that (i) the Servicer
has sufficient capacity to service the loans without negatively affecting the
quality of the services provided by the Servicer hereunder, and (ii) by
acting in such capacity the Servicer will not competitively disadvantage the
Owner or PennyMac REIT.  The Servicer may
act as servicer or subservicer of residential mortgage loans for
government-sponsored entities and other government-related entities and in
other circumstances not prohibited by the limitations set forth in this
paragraph.


 


Section 2.33                                                     No Obligation
to Advance Delinquent Payments.


 


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


 


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REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


 


37

















 


ARTICLE III


 


PAYMENTS; REPORTS


 


Section 3.01                                                     Remittances.


 


On each Remittance Date the Servicer shall
remit by wire transfer of immediately available funds to the Owner (or as
otherwise directed in writing by the Owner) all amounts deposited in the
Custodial Account related to the Due Period (net of charges against or
withdrawals from the Custodial Account pursuant to Section 2.05).  The Servicer shall remit to the Owner (or as
otherwise directed in writing by the Owner) all Principal Prepayments, in full
or in part, on the Remittance Date pursuant to Section 2.05.


 


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


 


All distributions made to the Owner pursuant
to this Section 3.01 in accordance with the following wire transfer
instructions:


 


	
  BANK:

  	
  Bank
  of America

  
	
  ABA:

  	
  026009593

  
	
  ACCT
  #:

  	
  1257205359

  
	
  ACCT
  NAME:

  	
  PennyMac Operating Partnership LP

  
	
   

  	
  Operating Account

  



 


Section 3.02                                                     Monthly Reports
to the Owner.


 


Not later than the twentieth (20th) calendar
day of each month or, if the 10th day is not a Business Day, the next
succeeding Business Day, the Servicer shall furnish to the Owner standard
monthly reports as set forth on Exhibit 1 attached hereto or in a
format mutually agreed upon (which shall be provided in Excel format and be
accessible by the Owner via the Servicer’s secured website).  For all purposes of this Servicing Agreement,
delinquency status shall be determined in accordance with standard MBA
methodology, as is appropriate, as determined by the Owner for the applicable
Mortgage Loan type.  At the time when a
Mortgage Loan becomes subject to this Servicing Agreement, the Owner will
include in the related Notice of Transfer of Mortgage Loans a statement of the
related delinquency methodology to be used for such Mortgage Loan.


 


In addition, on or before March 15th of
each calendar year, the Servicer shall furnish to each Person who was an Owner
(or subsequent owner of a Mortgage Loans subject to 


 


38

















 


this Servicing Agreement) at
any time during such calendar year an annual statement in accordance with the
requirements of applicable federal income tax law as to the aggregate of
remittances for the applicable portion of such year.


 


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


 


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


 


Section 3.03                                                     [Reserved]


 


Section 3.04                                                     Cost of Funds.


 


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


 


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39














 


ARTICLE IV


 


GENERAL SERVICING PROCEDURES


 


Section 4.01                                                     Transfers of
Mortgaged Property.


 


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


 


If the Servicer reasonably believes it is
unable under applicable law to enforce such “due-on-sale” clause, the Servicer,
shall, to the extent permitted by applicable law, enter into (i) an
assumption and modification agreement with the Person to whom such property has
been conveyed, pursuant to which such Person becomes liable under the Mortgage
Note and the original Mortgagor remains liable thereon or (ii) in the
event the Servicer is unable under applicable law to require that the original
Mortgagor remain liable under the Mortgage Note and the Servicer has the prior
consent of the primary mortgage guarantee insurer, a substitution of liability
agreement with the purchaser of the Mortgaged Property pursuant to which the
original Mortgagor is released from liability and the purchaser of the
Mortgaged Property is substituted as Mortgagor and becomes liable under the
Mortgage Note.  If an assumption fee is
collected by the Servicer for entering into an assumption agreement, such fee
will be retained by the Servicer as additional servicing compensation.  In connection with any such assumption,
neither the Mortgage Interest Rate borne by the related Mortgage Note, the term
of the Mortgage Loan nor the outstanding principal amount of the Mortgage Loan
shall be changed. Where an assumption is allowed pursuant to this Section 4.01,
the Servicer, with the prior written consent of the insurer under the PMI
Policy or LPMI Policy, if any, is authorized to enter into a substitution of
liability agreement with the Person to whom the Mortgaged Property has been
conveyed or is proposed to be conveyed pursuant to which the original Mortgagor
is released from liability and such Person is substituted as Mortgagor and
becomes liable under the related Mortgage Note. Any such substitution of
liability agreement shall be in lieu of an assumption agreement.  The Servicer shall notify the Owner that any
such substitution of liability or assumption agreement has been completed by
forwarding to the Owner, or its designee, the original of any such substitution
of liability or assumption agreement, which document shall be added to the
related Mortgage File and shall, for all purposes, be considered a part of such
Mortgage File to the same extent as all other documents and instruments
constituting a part thereof.


 


To the extent that any Mortgage Loan is
assumable, the Servicer shall inquire diligently into the creditworthiness of
the proposed transferee, and shall follow Accepted Servicing Practices and the
underwriting practices and procedures of prudent mortgage lenders in  the respective states where the Mortgaged
Properties are located including but not limited to Servicer conducting a
review of the credit and financial capacity of the individual receiving the
property, and may approve the assumption if it believes the recipient is
capable of assuming the 


 


40

















 


mortgage obligations.  If the credit of the proposed transferee does
not satisfy the relevant underwriting criteria and the transfer of ownership
actually occurs, the Servicer diligently shall, to the extent permitted by the
Mortgage or the Mortgage Note and by applicable law, accelerate the maturity of
the Mortgage Loan.


 


The Servicer shall be required to take any
action otherwise required by this Section 4.01 only if it
determines that the proceeds to the Owner (after giving effect to the recovery
of the Servicer’s out-of-pocket expenses) from payment on, or disposition of
the related Mortgage Loan or REO Property would be increased as a result
of the taking of such action.


 


Section 4.02                                                     Satisfaction of
Mortgages and Release of Mortgage Files.


 


Upon the payment in full of any Mortgage
Loan, or the receipt by the Servicer of a notification that payment in full will
be escrowed in a manner customary for such purposes, the Servicer shall notify
the Owner in the Monthly Remittance Advice as provided in Section 3.02,
and may request the release of any Mortgage Loan Documents from the Owner in
accordance with this Section 4.02. 
The Servicer shall obtain discharge of the related Mortgage Loan as of
record within any related time limit required by applicable law  (unless prevented from complying as a result
of the failure of the local recording office to comply with its obligations on
a timely basis).


 


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


 


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


 


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


 


The Servicer shall maintain the Fidelity Bond
and Errors and Omissions Insurance Policy as provided for in Section 2.12
insuring the Servicer against any loss it may 


 


41

















 


sustain with respect to any
Mortgage Loan not satisfied in accordance with the procedures set forth herein.


 


Section 4.03                                                     Servicing
Compensation.


 


As consideration for servicing the Mortgage
Loans, the Owner shall pay the Servicer the applicable Servicing Fee and Other
Fees the Servicer is entitled to each month. 
The obligation of the Owner to pay the Servicing Fee and Other Fees with
regard to the Mortgage Loans shall be irrespective of Monthly Payments
collected by the Servicer on the Mortgage Loans.  The Servicer shall deliver to the Owner on
the tenth (10th) calendar day of each month or, if the 10th day is not a
Business Day, the next succeeding Business Day, an invoice setting forth the
Servicing Fees and Other Fees, including accrued and unpaid Servicing Fees and
Other Fees, with respect to the Mortgage Loans serviced by the Servicer during
the preceding calendar month, and the Owner shall pay such invoice via wire
transfer (in accordance with written instructions to be provided by the
Servicer) no later than the related Distribution Date.  With respect to amounts due to the Servicer
that remain unpaid after the Distribution Date pursuant to this section,
interest shall be due on such late payment at an annual rate equal to the Prime
Rate, adjusted as of the date of each change, plus one percentage point, but in
no event greater than the maximum amount permitted by applicable law.  Such interest shall be paid on the date such
late payment is made and shall cover the period commencing with the day
following the Business Day on which such payment was due and ending with the
Business Day on which such payment is made, both inclusive.  The Servicer shall be entitled to deduct such
unpaid amounts due to Servicer on the Remittance Date following the
Distribution Date that such amounts were due if Owner has not already made payment.


 


Additional servicing compensation in the form
of Ancillary Income shall be retained by the Servicer to the extent not
required to be deposited in the Custodial Account.  The Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder
and shall not be entitled to reimbursement thereof except as specifically
provided for herein.


 


Notwithstanding anything set forth in this
section related to Ancillary Income, the Servicer shall not collect from the
Mortgagor, pass through as an advance or as a liquidation expense any charges
other than bona fide fees, which fees must be in compliance with local
law.  Servicer can not add on a
processing, or review fee or any additional fee, mark up or otherwise directly
make a profit on or from services or activities rendered by a third party or
affiliate (examples include but not limited to: 
letters and notices, force placed insurance, BPOs, appraisals,
inspections, property preservation costs). 
Servicer may collect any third party fees which are charged in
accordance with Accepted Servicing Practices. 
In no event shall Servicer retain the Prepayment Penalties.


 


In the event of a dispute arising from any
act or omission by the Servicer or the Owner hereunder during the course of
this Servicing Agreement, the Servicer and the Owner shall use best efforts to
work together in good faith to resolve such dispute within a time period that
is reasonable in the context of the cause of the dispute.  Except in the case of a monetary error, the
Owner and the Servicer shall both work together in good faith to resolve the
dispute within thirty (30) days of a formal notice from either party.  In the case of a monetary error, the 


 


42

















 


party holding the amounts
due the other party shall use reasonable efforts to submit the amount in error
within ten (10) Business Days from the date the error was uncovered.  With respect to amounts due a party after the
tenth (10th) Business Day after the date the error was uncovered, interest
shall be due on such late payment at an annual rate equal to the federal funds
rate as is publicly announced from time to time, plus three hundred basis
points (3.00%) but in no event greater than the maximum amount permitted by
applicable law.  Such interest shall be
paid on the date such late payment is made and shall cover the period
commencing with the day following the Business Day on which such payment was
due and ending with the Business Day on which such payment is made, both
inclusive.


 


Section 4.04                                                     Annual
Statement as to Compliance.


 


(a)                                 So long as any
Mortgage Loans are being serviced hereunder, or were serviced hereunder during
the prior calendar year, the Servicer shall, at its own expense, deliver to the
Owner, on or before March 28th of each year beginning March 28, 2010
(but in no event later than the next to the last Business Day of such month), a
statement of compliance addressed to the Owner and signed by a Servicing
Officer, to the effect that (i) a review of the Servicer’s servicing
activities during the immediately preceding calendar year (or applicable
portion thereof) and of its performance under the servicing provisions of this
Servicing Agreement during such period has been made under such officer’s
supervision, and (ii) to the best of such officer’s knowledge, based on
such review, the Servicer has fulfilled all of its servicing obligations under
this Servicing Agreement in all material respects throughout such calendar year
(or applicable portion thereof) or, if there has been a failure to fulfill any
such obligation in any material respect, specifically identifying each such
failure known to such officer, the nature and the status thereof.


 


Section 4.05                                                     Annual
Independent Public Accountants’ Servicing Report.


 


(a)                                 So long as any
Mortgage Loans are being serviced hereunder, or were serviced hereunder during
the prior calendar year, the Servicer shall, at its own expense, deliver to the
Owner, on or before March 28th of each year beginning March 28, 2010
(but in no event later than the next to the last Business Day of such month), a
report of a registered public accounting firm stating that (i) it has
obtained a letter of representation regarding certain matters from the
management of the Servicer which includes an assertion that the Servicer has
complied with certain minimum residential mortgage loan servicing standards,
identified in the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm
in accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate.  In rendering its report
such firm may rely, as to matters relating to the direct servicing of
residential mortgage loans by Subservicers, upon comparable reports of firms of
independent certified public accountants rendered on the basis of examinations
conducted in accordance with the same standards (rendered within one year of
such report) with respect to those Subservicers.


 


43

















 


Section 4.06                                                     [Reserved].


 


Section 4.07                                                     Right to
Examine Servicer Records.


 


The Owner shall have the right during the
term of this Servicing Agreement to examine and audit any and all of the books,
records, or other information of the Servicer, whether held by the Servicer or
by another on its behalf, with respect to or concerning this Servicing
Agreement or the Mortgage Loans, during normal business hours, upon reasonable
advance notice and at the sole cost and expense of the Owner; provided, however, that unless otherwise required by law,
the Servicer shall not be required to provide access to such information if the
provision thereof would violate any law or legal obligation of the Servicer, or
would compromise the Servicer’s information disclosure and security policies,
including the legal right to privacy of any Mortgagor.


 


Section 4.08                                                     Compliance with
Gramm-Leach-Bliley Act of 1999.


 


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


 


Section 4.09                                                     On-Line Access.


 


Servicer shall provide to the Owner internet
access (via a secure portfolio management website) to certain computer screens
in the Servicer’s loan administration computer system or view Mortgage Loan
information.  In addition the Servicer
shall update such Mortgage Loan information on a “real time” basis.  The Servicer shall provide to the Owner
internet access (via secure report and data transmission website) to the
Servicer’s loan administration computer system to transmit and receive Mortgage
Loan information relating to new loan boardings, service releases and to
download portfolio management reports. 
With respect to access to Servicer’s portfolio management website, the
Servicer shall provide the Owner with the tools to create and administer log-in
identifications and passwords for each of its authorized users.  In accessing Servicer’s websites, the Owner
agrees that it will: (i) only log-in with the identification assigned by
the Servicer; (ii) correctly and completely log off the system immediately
upon completion of each session of service; (iii) not allow any
unauthorized employee or agent of the Owner, to use the assigned log in
identification or improperly access the Servicer’s computer system; (iv) keep
the assigned log in identification and all other information enabling such
access strictly confidential; (v) not access, or attempt to access any
Servicer systems or data other than that which is specifically authorized; (vi) not
intentionally spread viruses or other malicious computer codes to the Servicer’s
computer systems; (vii) not copy or infringe upon any content contained on
the Servicer’s loan administration computer system; (vii) designate in
writing an administrator who shall maintain on a quarterly basis a current list
of employees or agents of the Owner who have been authorized to access the
Servicer’s loan administration computer system and assigned log in
identifications and passwords pursuant to this Section 4.09 (each
an “Authorized User”); (viii) conduct a quarterly review to ensure
that each Authorized User is currently an employee or agent of the Owner and
whose employment or function as agent of the Owner requires the Authorized User
to have continued access to the Servicer’s loan administration computer system;
(ix) immediately remove from the list of authorized users, and deny access
to, any individual who is not currently an employee or agent of the Owner or
whose employment or function as agent no longer requires such employee or agent
of the Owner to 


 


44

















 


remain an Authorized User
and to have access to the Servicer’s loan administration computer system; and (x) deliver
to the Servicer on or before the end of the month following each anniversary of
the date of execution of this Servicing Agreement, beginning on the first such
anniversary following the execution of this Servicing Agreement, an officer’s
certification stating that the Owner has fully complied and satisfied the
obligations as set forth above in clauses (i) through (ix).


 


Access to the Servicer’s administration
system shall be available 24 hours a day and seven days a week.  Notwithstanding the foregoing, the Servicer
shall have no liability to the Owner in the event that access to the Servicer’s
loan administration system becomes limited or otherwise unavailable during
periods of heavy use, upgrades, maintenance to address security concerns or
otherwise.  The Owner acknowledges that
Mortgage Loan information may only be accessible for viewing during such time
the Mortgage Loan is being serviced under this Servicing Agreement.  The Servicer shall purge all reports and
files from websites that are aged more than sixty (60) days and the Servicer
shall not be responsible to store, maintain, or archive such reports and files
unless otherwise agreed upon in writing by both parties.


 


Section 4.10                                                     [Reserved].


 


Section 4.11                                                     Use of
Subservicers.


 


It shall not be necessary for the Servicer to
seek the consent of the Owner to the utilization of any Subservicer or
Affiliate.  The Servicer shall be
responsible for obtaining from each Subservicer and delivering to the Owner any
servicer compliance statement required to be delivered by such Subservicer
under Section 4.04 and any assessment of compliance and attestation
required to be delivered by such Subservicer under Section 4.05.


 


Section 4.12                                                     Mortgage Loans
Held by Wholly Owned Subsidiaries of Owner.


 


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


 


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45

















 


ARTICLE V


 


SERVICER TO COOPERATE


 


Section 5.01                                                     Provision of
Information.


 


During the term of this Servicing Agreement,
the Servicer shall furnish to the Owner all reports required hereunder, and
such other periodic, special, or other reports or information, whether or not
provided for herein, as shall be necessary, reasonable, or appropriate with
respect to the Owner or the purposes of this Servicing Agreement to the extent
such reports or information are readily accessible to the Servicer without
undue expense.  All such reports or
information shall be provided by and in accordance with all reasonable
instructions and directions which the Owner may give and to the extent the
Servicer incurs any material cost or expense related to this Section 5.01
not otherwise required to be incurred pursuant to this Servicing Agreement,
such expense shall be at the sole cost and expense of the Owner.


 


The Servicer shall execute and deliver all
such instruments and take all such action as the Owner may reasonably request
from time to time to the extent such action is in accordance with Accepted
Servicing Practices, in order to effectuate the purposes and to carry out the
terms of this Servicing Agreement.


 


Section 5.02                                                     Financial
Statements; Servicing Facilities.


 


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


 


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


 


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46

















 


ARTICLE VI


 


TERMINATION


 


Section 6.01                                                     Termination.


 


(a)                                 This Servicing
Agreement shall continue in full force and effect until terminated in
accordance with the provisions of this paragraph.  This Servicing Agreement shall terminate,
without the payment of any termination fee, upon the earlier of:  (i) the termination of the Servicer
pursuant to this Section 6.01, 8.03 or 11.01 and (ii) the
termination of the Management Agreement.


 


(b)                                 Notwithstanding
and in addition to the foregoing, the Servicer shall have the right to
terminate this Servicing Agreement for cause, after thirty (30) days’ written
notice thereof by Servicer, if (i) Owner fails to remit any compensation
due to the Servicer within the time periods specified pursuant to the terms of
this Servicing Agreement, (ii) the Owner fails to perform any material
obligations hereunder or (iii) the Owner has not transferred any Mortgage
Loan to the Servicer upon the expiration of ninety (90) days after the
execution of this Servicing Agreement.


 


(c)                                  Notwithstanding
and in addition to the foregoing, in the event that (i) a Mortgage Loan
becomes delinquent for a period of one hundred and twenty (120) days or more (a
“Delinquent Mortgage Loan”) or (ii) a Mortgage Loan becomes an REO
Property, the Owner may at its election terminate this Servicing Agreement with
respect to such Delinquent Mortgage Loan or REO Property upon thirty (30) days’
written notice to the Servicer, provided, however,
upon such transfer and assignment which shall be in accordance with all
applicable laws, the Owner shall reimburse the Servicer for its Servicing Fee,
any outstanding and unreimbursed Servicing Advances, and any other outstanding,
unreimbursed fees and costs of the Servicer with respect to such Delinquent
Mortgage Loan or REO Property.


 


(d)                                 In the event
that the Servicer’s duties, responsibilities and liabilities under this
Servicing Agreement should be terminated pursuant to the aforementioned
sections, the Servicer shall discharge such duties and responsibilities during
the period from the date it acquires knowledge of such termination until the
Transfer Date with the same degree of diligence and prudence which it is
obligated to exercise under this Servicing Agreement, and shall take no action
whatsoever that might impair or prejudice the rights or financial condition of
its successor.  Following any such
termination, the Owner shall act diligently to appoint a successor servicer.  The resignation or removal of the Servicer pursuant
to the aforementioned sections shall not become effective until a successor
shall be appointed by the Owner. 
Notwithstanding anything to the contrary contained herein, in no event
shall a termination of this Servicing Agreement or the Servicer hereunder
terminate any indemnification obligations of the Servicer, which obligations
shall survive any such termination.


 


Section 6.02                                                     Transfer of
Servicing.


 


On the Transfer Date or upon any termination
of the Servicer as Servicer pursuant to Section 6.01, the Owner or
a successor servicer appointed by the Owner, shall assume all 


 


47

















 


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


 


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


 


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


 


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


 


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


 


Anything to the contrary in
this Section 6.02(c) notwithstanding, in the event that
Servicer is terminated for cause as a result of the occurrence of an Event of
Default under this Servicing Agreement, the payments required in this Section 6.02(c) shall
be made in the amounts and at the times otherwise provided in this Servicing
Agreement.


 


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


 


48

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(iii)                               If a misapplied
payment which occurred prior to the related Transfer Date cannot be identified
and said misapplied payment has resulted in a shortage in a Custodial Account
or Escrow Account, and such misapplied 


 


49

















 


payment
was the direct result of the Servicer’s error, the Servicer shall be liable for
the amount of such shortage.  In such
case, the Servicer shall reimburse the Owner for the amount of such shortage
within thirty (30) days after receipt of written demand therefor from the
Owner;


 


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


 


(v)                                 Any check
issued under the provisions of this Section 6.02(j) shall be
accompanied by a statement indicating the Owner Mortgage Loan identification
number and an explanation of the allocation of any such payments.


 


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


 


On the related Transfer Date, the Servicer
shall comply with all of the provisions of this Servicing Agreement to effect a
complete transfer of the servicing with respect to the related Mortgage
Loans.  Except as otherwise provided in
this Servicing Agreement, on the related Transfer Date for each related
Mortgage Loan, this Servicing Agreement, except for Articles VI, VIII,
IX, and X, and Sections 13.04, 13.06, 13.07,
13.08, 13.12, 13.13, 13.14, 13.16, 13.17
and 13.18 which shall survive the related Transfer Date, shall terminate
with respect to such Mortgage Loan.


 


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ARTICLE
VII


 


BOOKS
AND RECORDS


 


Section 7.01                                                        Possession of
Servicing Files Prior to the Related Servicing Transfer Date.


 


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


 


The Servicer shall be
responsible for maintaining, and shall maintain, a complete set of books and
records for each Mortgage Loan which shall be marked clearly to reflect the
ownership of each Mortgage Loan by the Owner. 
In particular, the Servicer shall maintain in its possession, available
for inspection by the Owner, and shall deliver to the Owner if so directed by
the Owner, upon written demand, evidence of compliance with all federal, state
and local laws, rules and regulations, and requirements of Fannie Mae,
including but not limited to documentation as to the method used in determining
the applicability of the provisions of the National Flood Insurance Act of 1968
or Flood Disaster Prevention Act of 1973, as amended, to the Mortgaged
Property, documentation evidencing insurance coverage and eligibility of any
condominium project for approval by Fannie Mae and periodic inspection reports
as required by Section 2.13, as applicable.


 


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


 


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ARTICLE
VIII


 


INDEMNIFICATION
AND ASSIGNMENT


 


Section 8.01                                                        Indemnification;
Remedies.


 


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


 


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


 


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


 


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


 


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


 


(c)           (i)            Any failure by the Servicer or any
Subservicer to deliver any information, report, certification, accountants’
letter or other material when and as required under Sections 4.04, 4.05,
or 5.02, which continues unremedied for three Business Days after
receipt by the Servicer and the applicable Subservicer or subcontractor, of
written notice of such failure from the Owner, shall, except as provided in
clause (ii) of this paragraph, constitute an Event of Default with respect
to the Servicer under this Servicing Agreement, and shall entitle the Owner in
its sole discretion to terminate the rights and obligations of the Servicer as
servicer under this Servicing Agreement without payment (notwithstanding
anything in this Agreement


 


52

















 


related
thereto to the contrary) of any compensation to the Servicer; provided,
however, it is understood that the Servicer shall remain entitled to receive
reimbursement for all unreimbursed Servicing Advances made by the Servicer
under this Servicing Agreement. 
Notwithstanding anything to the contrary set forth herein, to the extent
that any provision of this Servicing Agreement expressly provides for the
survival of certain rights or obligations following termination of the Servicer
as servicer, such provision shall be given effect.


 


(ii)           Any
failure by the Servicer or any Subservicer to deliver any information, report,
certification or accountants’ letter or other material when and as required
under this Servicing Agreement, which continues unremedied for three (3) Business
Days after receipt by the applicable Subservicer of written notice of such
failure from the Owner shall constitute an Event of Default with respect to the
Servicer under this Servicing Agreement, and shall entitle the Owner in its
sole discretion to terminate the rights and obligations of the Servicer as
servicer under this Servicing Agreement without payment (notwithstanding
anything in this Agreement to the contrary) of any compensation to the
Servicer; provided, however, it is understood that the Servicer shall remain
entitled to receive reimbursement for all unreimbursed Servicing Advances made
by the Servicer under this Servicing Agreement. 
Notwithstanding anything to the contrary set forth herein, to the extent
that any provision of this Servicing Agreement expressly provides for the
survival of certain rights or obligations following termination of the Servicer
as servicer, such provision shall be given effect.


 


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


 


(e)           The foregoing
indemnifications provided for in this Section are not intended by the parties
to encompass “normal” litigation relating to servicing operations conducted in
accordance with Standard Servicing Practices including, without limitation,
foreclosure litigation.


 


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


 


Section 8.02                                                        Limitation on
Liability of Servicer and Others.


 


Neither the Servicer nor any
of the directors, officers, employees or agents of the Servicer shall be under
any liability to the Owner for any action taken or for refraining from the
taking of any action in good faith pursuant to this Servicing Agreement, or for
errors in judgment, provided, however,
that this provision shall not protect the Servicer or any such person against
any breach of warranties or representations made herein, its own grossly
negligent actions, or failure to perform its obligations in compliance with any
standard of care set forth in this Servicing Agreement, or any liability which
would otherwise be imposed by reason of any


 


53

















 


breach of the terms and conditions of this
Servicing Agreement.  The Servicer and
any director, officer, employee or agent of the Servicer may rely in good faith
on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder.  The Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action which is not
incidental to its duties to service the Mortgage Loans in accordance with this
Servicing Agreement and which in its opinion may involve it in any expense or
liability, provided, however, that
the Servicer may undertake any such action which it may deem necessary or
desirable in respect to this Servicing Agreement and the rights and duties of
the parties hereto.  In such event, the
Servicer shall be entitled to reimbursement from the Owner of the reasonable
legal expenses and costs of such action.


 


Section 8.03                                                        Limitation on
Resignation and Assignment by Servicer.


 


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


 


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


 


The Servicer shall not
resign from the obligations and duties hereby imposed on it except by mutual
consent of the Servicer and the Owner or upon the determination that its duties
hereunder are no longer permissible under applicable law and such incapacity
cannot be cured by the Servicer.  Any
such determination permitting the resignation of the Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Owner which
Opinion of Counsel shall be in form and substance acceptable to the Owner.  No such resignation shall become effective
until a successor shall have assumed the Servicer’s responsibilities and
obligations hereunder in the manner provided in Section 6.02.


 


Without in any way limiting
the generality of this Section 8.03, in the event that the Servicer
either shall assign this Servicing Agreement or the servicing responsibilities
hereunder or delegate its duties hereunder or any portion thereof or sell or
otherwise dispose of all or substantially all of its property or assets without
the prior written consent of the Owner, then the Owner shall have the right to
terminate this Servicing Agreement upon notice given as set forth in Section 6.01(a),
11.01(g) and 13.01, without any payment of any penalty or
damages and without any liability whatsoever to the Servicer or any third
party.


 


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Section 8.04                                                        Assignment by
Owner.


 


Subject to the limitations
and requirements set forth in the third paragraph of Section 2.01,
the Owner shall have the right, to assign, in whole or in part, its interest
under this Agreement with respect to some or all of the Mortgage Loans, and
designate any Person to exercise any rights of the Owner hereunder.


 


Section 8.05                                                        Merger or
Consolidation of the Servicer.


 


The Servicer will keep in
full effect its existence, rights and franchises as a limited partnership under
the laws of the state of its filing except as permitted herein, and will obtain
and preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect
the validity and enforceability of this Servicing Agreement, or any of the
Mortgage Loans and to perform its duties under this Servicing Agreement.  Any Person into which the Servicer may be
merged or consolidated, or any corporation resulting from any merger,
conversion or consolidation (including by means of the sale of all or
substantially all of the Servicer’s assets to such Person) to which the
Servicer shall be a party, or any Person succeeding to the business of the
Servicer (whether or not related to loan servicing), shall be the successor of
the Servicer hereunder, without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding


 


The Servicer shall give
ninety (90) days’ prior written notice to the Owner to the extent permitted by
applicable law of any such merger, conversion, consolidation, sale or other
disposition to which the Servicer proposes to be a party.  In the event that any successor entity to the
Servicer fails to meet the requirements set forth in this Section 8.05
and the Owner does not consent to such successor becoming the servicer
hereunder, then the Servicer shall have the right to terminate this Servicing
Agreement with respect to the Servicer and any such successor upon notice given
as set forth in Section 6.01, without any payment of any termination
penalty or termination damages and without any additional liability whatsoever
to the Servicer or any third party, except for liabilities accrued under this
Servicing Agreement prior to the date of termination and for liabilities
resulting from Owner’s obligations hereunder, including the payment of the
Servicing Fee pursuant to Section 4.03.


 


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ARTICLE
IX


 


REPRESENTATIONS,
WARRANTIES AND COVENANTS OF OWNER


 


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


 


Section 9.01                                                        Organization and
Good Standing; Licensing.


 


The Owner is a Delaware
limited partnership, duly organized, validly existing and has the power and
authority to own its assets and to transact the business in which it is
currently engaged.


 


Section 9.02                                                        Authorization;
Binding Obligations.


 


The Owner has the power and
authority to make, execute, deliver and perform this Servicing Agreement, and
perform all of the transactions contemplated to be performed by it under this
Servicing Agreement, and has taken all necessary action to authorize the
execution, delivery and performance of this Servicing Agreement.  When executed and delivered, this Servicing
Agreement will constitute the legal, valid and binding obligation of the Owner
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally and by the availability of equitable remedies.


 


Section 9.03                                                        No Consent
Required.


 


The Owner is not required to
obtain the consent of any other party or any consent, license, approval or
authorization from, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Servicing Agreement, except
such as have been obtained or made or as to which the failure to obtain or make
will not materially adversely affect the ability of the Owner to perform all
obligations hereunder.


 


Section 9.04                                                        No Violations.


 


The execution, delivery and
performance of this Servicing Agreement by the Owner will not violate any
provision of any existing law or regulation or any order or decree of any court
applicable to the Owner, except for violations that will not adversely affect
the Owner’s ability to perform its obligations under this Servicing Agreement
or the certificate of incorporation of the Owner, or constitute a material
breach of any mortgage, indenture, contract or other agreement to which the
Owner is a party or by which the Owner may be bound.


 


Section 9.05                                                        Litigation.


 


No litigation or
administrative proceeding of or before any court, tribunal or governmental body
is currently pending or to the knowledge of the Owner threatened, against the


 


56

















 


Owner or with respect to this Servicing
Agreement, which if adversely determined would have a material adverse effect
on the transactions contemplated by this Servicing Agreement.


 


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ARTICLE
X


 


REPRESENTATIONS
AND WARRANTIES OF SERVICER


 


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


 


Section 10.01                                                  Due
Organization and Authority.


 


The Servicer is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware as now being conducted and is licensed,
qualified and in good standing in each state where a Mortgaged Property is
located if the laws of such state require licensing or qualification in order
to conduct business of the type conducted by the Servicer, and in any event the
Servicer is in compliance with the laws of any such state to the extent
necessary to ensure the enforceability of the related Mortgage Loan in
accordance with the terms of this Servicing Agreement; the Servicer has the
full power and authority to execute and deliver this Servicing Agreement and to
perform in accordance herewith; the execution, delivery and performance of this
Servicing Agreement (including all instruments or transfer to be delivered
pursuant to this Servicing Agreement) by the Servicer and the consummation of
the transactions contemplated hereby have been duly and validly authorized;
this Servicing Agreement evidences the valid, binding and enforceable
obligation of the Servicer; and all requisite action has been taken by the
Servicer to make this Servicing Agreement valid and binding upon the Servicer
in accordance with its terms.


 


Section 10.02                                                  Ordinary Course
of Business.


 


The consummation of the
transactions contemplated by this Servicing Agreement are in the ordinary
course of business of the Servicer.


 


Section 10.03                                                  No Conflicts.


 


Neither the execution and
delivery of this Servicing Agreement, nor the fulfillment of or compliance with
the terms and conditions of this Servicing Agreement, will conflict with or
result in a breach of any of the terms, conditions or provisions of the
Servicer’s organizational documents or any legal restriction or any agreement
or instrument to which the Servicer is now a party or by which it is bound, or
constitute a default or result in an acceleration under any of the foregoing,
or result in the violation of any law, rule, regulation, order, judgment or
decree to which the Servicer or its property is subject, or impair the ability
of the Owner to realize on the Mortgage Loans, or impair the value of the Mortgage
Loans.


 


Section 10.04                                                  Ability to
Service.


 


The Servicer has the
facilities, procedures, and experienced personnel necessary for the sound
servicing of mortgage loans of the same type as the Mortgage Loans.  The Servicer is in good standing to enforce
and service mortgage loans in the jurisdiction wherein the Mortgaged Properties
are located.


 


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Section 10.05                                                  Ability to
Perform.


 


The Servicer does not
believe, nor does it have any reason or cause to believe, that it cannot
perform each and every covenant contained in this Servicing Agreement.


 


Section 10.06                                                  No Litigation
Pending.


 


There is no action, suit,
proceeding or investigation pending or to the best of Servicer’s knowledge
threatened against the Servicer, before any court, administrative agency or
other tribunal asserting the invalidity of this Servicing Agreement, seeking to
prevent the consummation of any of the transactions contemplated by this
Servicing Agreement or which, either in any one instance or in the aggregate,
may result in any material adverse change in the business, operations,
financial condition, properties or assets of the Servicer, or in any material
impairment of the right or ability of the Servicer to carry on its business substantially
as now conducted, or in any material liability on the part of the Servicer, or
which would draw into question the validity of this Servicing Agreement, or the
Mortgage Loans or of any action taken or to be taken in connection with the
obligations of the Servicer contemplated herein, or which would be likely to
impair materially the ability of the Servicer to perform under the terms of
this Servicing Agreement.


 


Section 10.07                                                  No Consent
Required.


 


No consent, approval,
authorization or order of any court or governmental agency or body is required
for the execution, delivery and performance by the Servicer of or compliance by
the Servicer with this Servicing Agreement, or the servicing of the Mortgage
Loans as evidenced by the consummation of the transactions contemplated by this
Servicing Agreement, or if required, such approval has been obtained prior to
the date hereof.


 


Section 10.08                                                  No Untrue
Information.


 


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


 


Section 10.09                                                  [Reserved].


 


Section 10.10                                                  MERS.


 


The Servicer is a member of
MERS in good standing, and will comply in all material respects with the rules and
procedures of MERS in connection with the servicing of the MERS Mortgage Loans
for as long as such Mortgage Loans are registered with MERS.


 


To the extent the Owner
requests the Servicer to register or transfer a Mortgage Loan with Mortgage
Electronic Registration System, Inc., the Owner shall transfer or cause to
be transferred to Servicer the required mortgage loan information within five (5) Business
Days of the Servicing Transfer Date.  For
such services, the Owner agrees to pay the Servicer the fee set


 


59

















 


forth on Exhibit 9 upon the
boarding or release of such Mortgage Loan on the Servicer’s mortgage loan
administration system.


 


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ARTICLE XI


 


DEFAULT


 


Section 11.01                                                  Events of
Default.


 


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


 


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


 


(b)           the failure by the
Servicer duly to observe or perform in any material respect any other of the
covenants or agreements on the part of the Servicer set forth in this Servicing
Agreement which continues unremedied for a period of thirty (30) days (except
that such number of days shall be fifteen (15) in the case of a failure to pay
any premium for any insurance policy under this Servicing Agreement) after the
date on which notice of such failure, requiring the same to be remedied, shall
have been given to the Servicer by the Owner (the date of delivery of such
notice, the “Notice Date”); provided, however,
that in the case of a failure that cannot be cured within thirty (30) days
after the Notice Date, the cure period may be extended if the Servicer can
demonstrate to the reasonable satisfaction of the Owner that the failure can be
cured and the Servicer is diligently pursuing remedial action; or


 


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


 


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


 


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


 


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


 


61

















 


satisfy
the licensing requirements for the jurisdiction where such Mortgaged Properties
are located;


 


(g)           the Servicer
attempts to assign its right to servicing compensation hereunder or the
Servicer attempts, without the consent of the Owner, to sell or otherwise
dispose of all or substantially all of its property or assets or to assign this
Servicing Agreement or the servicing responsibilities hereunder or to delegate
its duties hereunder or any portion thereof in a manner not permitted under
this Servicing Agreement; or


 


(h)           any of those
failures specified in Section 8.01(c)(i) or (ii) as
constituting an Event of Default under this Servicing Agreement.


 


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


 


In
case one or more Events of Default by Servicer occur and shall not have been
remedied, the Owner, by notice in writing to Servicer may, in addition to
whatever rights the Owner may have at law or equity to damages, including
injunctive relieve and specific performance, terminate all the rights and
obligations of Servicer under this Servicing Agreement and in and to the
Mortgage Loans and the proceeds thereof. 
The Servicer shall not be entitled to any Service Release Fees upon such
termination; provided, however, that  the Servicer shall be entitled to any accrued and unpaid
Servicing Fees, Servicing Advances, Other Fees and Ancillary Income to the date
of such termination.  Upon receipt by the
Servicer of such written notice, all authority and power of the Servicer under
this Servicing Agreement, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the successor appointed pursuant to Section 6.02.  Upon written request from the Owner, the
Servicer shall prepare, execute and deliver any and all documents and other
instruments, place in such successor’s possession all Mortgage Files to the
extent initially provided to the Servicer, and do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement or assignment of
the Mortgage Loans and related documents, or otherwise, at the Servicer’s sole
expense or as otherwise provided under Accepted Servicing Practices.  The Servicer agrees to cooperate with the
Owner and such successor in effecting the termination of the Servicer’s
responsibilities and rights hereunder, including, without limitation, the
transfer to such successor for administration by it of all cash amounts which
shall at the time be credited by the Servicer to the Custodial Account or
Escrow Account or thereafter received with respect to the Mortgage Loans.


 


Section 11.02                                                  Waiver of Defaults.


 


The
Owner may waive any default by the Servicer in the performance of its
obligations hereunder and its consequences. 
Upon any such waiver of a past default, such default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
remedied for every purpose of this Servicing Agreement.  No such waiver shall extend to


 


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any subsequent or other default or impair any right consequent thereon
except to the extent expressly so waived.


 


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ARTICLE XII


 


CLOSING


 


Section 12.01                                                  Closing
Documents.


 


The
Closing Documents shall consist of fully executed originals of the following
documents:


 


1.                                       this Servicing
Agreement;


 


2.                                       a Custodial
Account Certification or a Custodial Account Letter Agreement, as applicable,
as required hereunder, in the form of either Exhibit 2 or Exhibit 3;


 


3.                                       an Escrow
Account Certification or an Escrow Account Letter Agreement, as applicable, as
required hereunder, in the form of either Exhibit 4 or Exhibit 5;


 


4.                                       an Officer’s
Certificate, in the form of Exhibit 6, with respect to the
Servicer, including all attachments thereto.


 


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64

















 


ARTICLE XIII


 


MISCELLANEOUS PROVISIONS


 


Section 13.01                                                  Notices.


 


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


 


(a)           If to the Owner to:


 


PennyMac Operating Partnership,
L.P.


Attn: Chief Operating
Officer


27001 Agoura Road


Calabasas, CA 91301


 


With a copy to:


 


PennyMac Operating
Partnership, L.P.


Attn:  General Counsel


27001 Agoura Road


Calabasas, CA  91301


 


(b)           If to the Servicer:


 


PennyMac Loan Services, LLC


Attn: Director, Servicing
Operations


27001 Agoura Road


Calabasas, CA 91301


 


With a copy to:


 


PennyMac Loan Services, LLC


Attn: General Counsel


27001 Agoura Road


Calabasas, CA 91301


 


Section 13.02                                                  Waivers.


 


Any
of the Servicer or the Owner may upon consent of all parties, by written notice
to the others:


 


(a)           Waive compliance
with any of the terms, conditions or covenants required to be complied with by
the others hereunder; and


 


65

















 


(b)           Waive or modify
performance of any of the obligations of the others hereunder.


 


The
waiver by any party hereto of a breach of any provision of this Servicing
Agreement shall not operate or be construed as a waiver of any other subsequent
breach.


 


Section 13.03                                                  Entire
Agreement; Amendment.


 


This
Servicing Agreement, including all documents and exhibits incorporated by
reference herein, constitutes the entire agreement between the parties with
respect to servicing of the Mortgage Loans. 
This Servicing Agreement may be amended and any provision hereof waived,
but, only in writing signed by the party against whom such enforcement is
sought.


 


Section 13.04                                                  Execution;
Binding Effect.


 


This
Servicing Agreement may be executed in one or more counterparts and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same agreement. 
Subject to Sections 8.02 and 8.03, this Servicing
Agreement shall inure to the benefit of and be binding upon the Servicer and
the Owner and their respective permitted successors and assigns.


 


Section 13.05                                                  Headings.


 


Headings
of the Articles and Sections in this Servicing Agreement are for reference
purposes only and shall not be deemed to have any substantive effect.


 


Section 13.06                                                  Applicable Law.


 


THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE
NEW YORK GENERAL OBLIGATIONS LAW), EXCEPT TO THE EXTENT PREEMPTED BY FEDERAL
LAW.


 


Section 13.07                                                  Relationship of
Parties.


 


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


 


66

















 


Section 13.08                                                  Severability of
Provisions.


 


If
any one or more of the covenants, agreements, provisions or terms of this
Servicing 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 Servicing
Agreement and shall in no way affect the validity or enforceability of the
other provisions of this Servicing Agreement.


 


Section 13.09                                                  Recordation of
Assignments of Mortgage.


 


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


 


Section 13.10                                                  Exhibits.


 


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


 


Section 13.11                                                  Counterparts.


 


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


 


Section 13.12                                                  Cooperation of
Servicer with a Reconstitution.


 


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


 


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


 


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


 


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


 


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


 


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


 


67

















 


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


 


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


 


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


 


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


 


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


 


(iv)          if
the Servicer will continue servicing the Mortgage Loans included in the
Reconstitution, (1) cooperate fully with the Owner, any prospective
purchaser, any Rating Agency or any party to any agreement to be executed in
connection with such Whole Loan Transfer, Private Securitization Transaction or
Public Securitization Transaction, with respect to all reasonable 


 


68

















 


requests and due diligence procedures, including participating in
meetings with Rating Agencies, bond insurers and such other parties as the
Owner shall designate and participating in meetings with prospective purchasers
of the Mortgage Loans or interests therein and providing information reasonably
requested by such purchasers; (2) to execute, deliver and perform all
reconstitution agreements required by the Owner, and to use its best
reasonable, good faith efforts to facilitate such Whole Loan Transfer, Private
Securitization Transaction or Public Securitization Transaction, as the case
may be; (3) (a) to restate the representations and warranties set
forth in this Servicing Agreement as of the Reconstitution Date which shall not
be materially more onerous than those required under this Servicing Agreement
or (b) make the representations and warranties with respect to the
servicing of the Mortgage Loans set forth in the related selling/servicing
guide of the master servicer or issuer, as the case may be, or such
representations and warranties with respect to the servicing of the Mortgage
Loans as may be required by any Rating Agency or prospective purchaser of the
related securities or such Mortgage Loans, in connection with such
Reconstitution; provided, however, that such
representations and warranties shall not be materially more onerous than those
required under this Servicing Agreement. 
The Servicer shall use its reasonable best efforts to provide to such
master servicer or issuer, as the case may be, and any other participants in
such Reconstitution:  (i) any and
all information and appropriate verification of information which may be
reasonably available to the Servicer or its affiliates, whether through letters
of its auditors and counsel or otherwise, as the Owner or any such other
participant shall reasonably request and (ii) subject to the provisions of
this Section 13.12(b), to execute, deliver and satisfy all
conditions set forth in any indemnity agreement required by the Owner or any
such participant; provided that the Servicer is given an opportunity to review
and reasonably negotiate in good faith provisions of such indemnity.


 


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


 


Section 13.13                                                  Trademarks.


 


The
Owner and the Servicer agree that they and their employees, subcontractors and
agents, shall not, without the prior written consent of the other party in each
instance, (i) use in advertising, publicity or otherwise the name of each
and every other party to this Servicing Agreement or their Affiliates or any of
their managing directors, partners or employees, nor any 


 


69

















 


trade name, trademark, trade device, service mark, symbol or any
abbreviation, contraction or simulation thereof owned by the other party or
their Affiliates, or (ii) represent, directly or indirectly, any product
or any service provided by the Owner and the Servicer as approved or endorsed
by the other parties to this Servicing Agreement or their Affiliates.


 


Section 13.14                                                  Confidentiality
of Information.


 


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


 


Section 13.15                                                  [Reserved]


 


Section 13.16                                                  WAIVER OF TRIAL
BY JURY.


 


THE
SERVICER AND THE OWNER EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.


 


Section 13.17                                                  LIMITATION OF
DAMAGES.


 


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


 


Section 13.18                                                  SUBMISSION TO
JURISDICTION; WAIVERS.


 


The
Servicer and the Owner hereby irrevocably and unconditionally:


 


(a)           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
NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA,
THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE CENTRAL DISTRICT OF
CALIFORNIA AND APPELLATE COURTS FROM ANY THEREOF;


 


(b)           CONSENTS THAT ANY
SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT
PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF 


 


70

















 


ANY
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING
WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;


 


(c)           AGREES THAT NOTHING
HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.


 


[SIGNATURES APPEAR ON NEXT
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71














 


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


 


	
   

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

  
	
   

  	
  (Owner)

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  PENNYMAC GP OP, INC.,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeff Grogin

  
	
   

  	
   

  	
  Name: Jeff Grogin

  
	
   

  	
   

  	
  Title: Executive Vice President and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PENNYMAC LOAN SERVICES, LLC, a Delaware limited liability company

  
	
   

  	
  (Servicer)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeff Grogin

  
	
   

  	
   

  	
  Name: Jeff Grogin

  
	
   

  	
   

  	
  Title: Secretary and Chief
  Legal Officer

  



 


72

















 


EXHIBIT 1


 


MONTHLY REPORTS


 


Remittance

Delinquency

Inventory Flow

Post Boarding Exception


 


 


DAILY REPORTS


 


Boarding Notification

Payoff

Transaction Detail


 


1-1

















 


EXHIBIT 2


 


CUSTODIAL ACCOUNT CERTIFICATION


 


                       ,
2009


 


As Servicer under the Flow
Servicing Agreement, Fixed- and Adjustable-Rate Mortgage Loans, dated as of August 4,
2009 (the “Servicing  Agreement”), we hereby certify that the
Servicer has established the account described below as a Custodial Account (as
such term is defined in the Servicing Agreement) pursuant to Section 2.04.  The Custodial Account shall be a Special
Deposit Account as such term is defined in the Servicing Agreement.


 


	
  Title of Account:

  	
  [            ],
  in trust for
  [                              ]

  
	
   

  	
   

  
	
  Account Number:

  	
                                                             

  
	
   

  	
   

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

  	
                                                                                                         

  
	
   

  	
                                                                                                         

  
	
   

  	
                                                                                                         

  
	
   

  	
                                                                                                         

  
	
   

  	
   

  
	
   

  	
  PennyMac Loan Services, LLC,

  as Servicer

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  



 


2-1

















 


EXHIBIT 3


 


CUSTODIAL ACCOUNT LETTER AGREEMENT


 


                    ,
2009


 


	
  To:

  	
                                                   

  	
   

  
	
   

  	
                                                   

  	
   

  
	
   

  	
                                                   

  	
   

  
	
   

  	
  (the “Depository”)

  	
   

  



 


As Servicer under the Flow
Servicing Agreement, Fixed- and Adjustable-Rate Mortgage Loans, dated as of August 4,
2009 (the “Servicing  Agreement”), we hereby authorize and request
you to establish an account, as a Custodial Account (as such term is defined in
the Servicing Agreement) pursuant to Section 2.04 of the Agreement,
to be designated “[            ],
as servicer, in trust for
[                      ]”
All deposits in the account shall be subject to withdrawal therefrom by order
signed by the Servicer.  You may refuse
any deposit which would result in violation of the requirement that the account
be fully insured as described below. 
This letter is submitted to you in duplicate.  Please execute and return one original to us.


 


	
   

  	
  PennyMac Loan Services, LLC,

  
	
   

  	
  as Servicer

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  



 


3-1

















 


The undersigned, as
Depository, hereby certifies that the above described account has been
established under Account Number
                    ,
at the office of the Depository indicated above, and agrees to honor
withdrawals on such account as provided above. 
The Custodial Account shall be a Special Deposit Account (as such term
is defined in the Servicing Agreement). 
The full amount deposited at any time in the account will be insured by
the Federal Deposit Insurance Corporation.


 


	
   

  	
   

  
	
   

  	
  Depository

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  



 


3-2

















 


EXHIBIT 4


 


ESCROW ACCOUNT CERTIFICATION


 


                             ,
2009


 


As Servicer under the Flow
Servicing Agreement, Fixed- and Adjustable-Rate Mortgage Loans, dated as of August 4,
2009 (the “Servicing Agreement”), we hereby certify that the Servicer
has established the account described below as an Escrow Account pursuant to Section 2.06
of the Agreement.  The Escrow Account
shall be a Special Deposit Account as such term is defined in the Servicing
Agreement.


 


	
  Title of Account:

  	
  [            ],
  in trust for
  [                              ]

  
	
   

  	
   

  
	
  Account Number:

  	
                                                             

  
	
   

  	
   

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

  	
                                                                                                         

  
	
   

  	
                                                                                                         

  
	
   

  	
                                                                                                         

  
	
   

  	
                                                                                                         

  
	
   

  	
   

  
	
   

  	
  PennyMac Loan Services, LLC, 

  as Servicer

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  



 


4-1

















 


EXHIBIT 5


 


ESCROW ACCOUNT LETTER AGREEMENT


 


                 ,
2009


 


	
  To:

  	
                                                   

  	
   

  
	
   

  	
                                                   

  	
   

  
	
   

  	
                                                   

  	
   

  
	
   

  	
  (the “Depository”)

  	
   

  



 


As Servicer under the Flow
Servicing Agreement, Fixed- and Adjustable-Rate Mortgage Loans, dated as of August 4,
2009 (the “Servicing Agreement”), we hereby authorize and request you to
establish an account as an Escrow Account (as such term is defined in the
Servicing Agreement) pursuant to Section 2.06 of the Agreement, to
be designated as “[            ],
in trust for
[                      ],
and various Mortgagors.”  All deposits in
the account shall be subject to withdrawal therefrom by order signed by the
Servicer.  You may refuse any deposit
which would result in violation of the requirement that the account be fully
insured as described below.  This letter
is submitted to you in duplicate.  Please
execute and return one original to us.


 


	
   

  	
  PennyMac Loan Services, LLC,

  
	
   

  	
  as Servicer

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  



 


5-1

















 


The undersigned, as
Depository, hereby certifies that the above described account has been
established under Account Number
            , at
the office of the Depository indicated above, and agrees to honor withdrawals
on such account as provided above.  The
Escrow Account shall be a Special Deposit Account (as such term is defined in
the Servicing Agreement).  The full
amount deposited at any time in the account will be insured by the Federal
Deposit Insurance Corporation.


 


	
   

  	
   

  
	
   

  	
  Depository

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Date:

  	
   

  



 


5-2

















 


EXHIBIT 6


 


FORM OF OFFICER’S CERTIFICATE


 


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


 


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


 


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


 


3.                                       Attached hereto
as Exhibit 3 is a true, correct and complete copy of the
resolutions of the
[            ] of
the Company authorizing the Company to execute and deliver the Flow Servicing
Agreement, dated as of August 4, 2009 (the “Flow Servicing Agreement”),
between the Company and PennyMac Operating Partnership, L.P. (the “Owner”),
and such resolutions are in effect on the date hereof.


 


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


 


6-1

















 


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


 


	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  PennyMac Loan Services, LLC

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  



 


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


 


IN WITNESS WHEREOF, I have
hereunto signed my name.


 


	
  Date:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  PennyMac Loan Services, LLC

  
	
  [Seal]

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  



 


6-2














 


EXHIBIT 4 to

Company’s Officer’s Certificate


 


	
  NAME

  	
   

  	
  TITLE

  	
   

  	
  SIGNATURE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  



 


6-3

















 


EXHIBIT 7


 


MORTGAGE LOAN DOCUMENTS


 


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


 


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


 


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


 


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


 


7-1

















 


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


 


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


 


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


 


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


 


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


 


7-2

















 


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


 


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


 


(b)           Residential loan application.


 


(c)           Mortgage Loan closing statement.


 


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


 


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


 


(f)            Credit report on the Mortgagor.


 


(g)           Residential appraisal report, if available.


 


(h)           Photograph of the Mortgaged Property.


 


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


 


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


 


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


 


(m)          Sales contract, if applicable.


 


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


 


(o)           Amortization schedule, if applicable.


 


7-3

















 


EXHIBIT 8


 


FORM OF LIMITED POWER
OF ATTORNEY


 


PennyMac Operating
Partnership, L.P., a limited partnership, organized under the laws of Delaware
and having its principal place of business at 27001 Agoura Road, Third Floor,
Calabasas, CA 91301, as Owner (hereinafter called “Owner”) hereby
appoints PennyMac Loan Services, LLC. (hereinafter called the “Servicer”),
as its true and lawful attorney in fact to act in the name, place and stead of
Owner solely for the purposes set forth below.


 


The said attorney in fact is
hereby authorized and empowered, solely with respect to the Mortgage Loans and
REO Properties, as defined in, and subject to the terms of, that certain Flow
Servicing Agreement, between the Servicer and Owner, dated as of August 4,
2009 (the “Servicing Agreement”), as follows:


 


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


 


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


 


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


 


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


 


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


 


8-1

















 


This Limited Power of
Attorney shall expire on
          
    , 20    .


 


[NAME]


 


	
  Dated:

  	
                                                                              ,
  20   

  



 


	
  Witness:

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  



 


8-2

















 


EXHIBIT 9


 


TERM SHEET


 


BASE SERVICING FEE
PERCENTAGE

(per loan)


 


With
respect to each Mortgage Loan, the Base Servicing Fee Percentage for that
Mortgage Loan set forth in the Servicer’s servicing records.  The Base Servicing Fee Percentage for a
Mortgage Loan shall be determined in accordance with the written protocol
approved by (i) a majority of the independent members of the board of
Trustees of PennyMac REIT, (ii) the Owner and (iii) the
Servicer.  The following factors shall be
taken into account in formulating the written protocol:  The Base Servicing Fee Percentages shall (i) be
based on the risk characteristics of the mortgage loans in a particular pool,
including the market value of the underlying properties, creditworthiness of
the borrowers, seasoning of the mortgage loans, degree of current and expected
mortgage loan defaults, current loan-to-value ratios, borrowers’ payment history
and debt-to-income levels, (ii) be consistent with the assumptions used by
the PennyMac REIT Manager in determining the bid for the related portfolio of
mortgage loans, (iii) be competitive with those charged by specialty
mortgage loan servicers providing comparable services for comparable mortgage
loans, and (iv) range from 30 to 100 basis points per annum on the unpaid
principal balance of the related mortgage loans.


 


OTHER KEY PARAMETERS


 


	
  Remittance Types

  	
  Actual/Actual Basis during Interim Servicing Period

  
	
   

  	
   

  
	
  Remittance Date

  	
  See definition of Remittance Date

  
	
   

  	
   

  
	
  Servicing Advances

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

  
	
   

  	
   

  
	
  Cost of Funds on Servicing Advances

  	
  Refer to Section 3.04

  
	
   

  	
   

  
	
  Prepayment Penalties

  	
  Owner will retain 100% of the prepayment penalties.

  
	
   

  	
   

  
	
  Late Charges Collected

  	
  Servicer will retain 100% of late charges collected by Servicer

  
	
   

  	
   

  
	
  Ancillary Income

  	
  Servicer will retain 100% of all Ancillary Income

  
	
   

  	
   

  
	
  Delegated Authority

  	
  Refer to Exhibit 10

  



 


9-1

















 


	
  Contract Term

  	
  Refer to Section 6.01

  
	
   

  	
   

  
	
  Eligible Mortgage Loan

  	
  See definition of Eligible Mortgage Loan

  



 


MISCELLANEOUS ONE-TIME AND
OTHER FEES


 


Service
Release Fee:  $500 if released within one
year of boarding; $250 if released within two years of boarding; $150 if
released thereafter


 


REO
Marketing Fee:  75 basis points of the
gross proceeds received in connection with the disposition of an REO Property


 


Tax
Service Contract:  Servicer’s cost


 


Flood
Zone Service Contract:  Servicer’s cost


 


Backfill
Fee:  $15 per Mortgage File


 


MERS
Fee:  Servicer’s cost


 


Modification
Fee:  $1,000 for modifications classified
by the Servicer as full modifications (to include interest rate reductions);
$295 for modifications classified by the Servicer as simple modifications (to
include capitalization of delinquent payments)


 


To the extent the Servicer
participation in the U.S. Treasury’s Home Affordable Modification Program (or
other similar mortgage loan modification programs), the Servicer shall be
entitled to retain any incentive payments payable to mortgage loan servicers
under the program.


 


In the event the Servicer
effects a refinancing of a Mortgage Loan on behalf of the Owner and not through
a third party lender and the resulting Mortgage Loan is readily saleable, the
Servicer shall be entitled to retain a market-based origination fee (set, as of
the date of this Servicing Agreement, at one percent (1%) of the principal
balance of the Refinanced Mortgage Loan plus a $750 underwriting fee).  Should the Servicer originate a Mortgage Loan
to facilitate the disposition of REO Property, the Servicer shall be entitled
to retain a market-based origination fee (set, as of the date of this Servicing
Agreement, at one percent (1%) of the principal balance of the Refinanced
Mortgage Loan plus a $750 underwriting fee). 
The amount of the origination fee shall be subject to review by the
Owner and the Servicer from time to time to reflect market rates.  The Owner shall reimburse the Servicer for
any out of pocket expenses that the Servicer incurs in connection with any such
origination, including title fees, legal fees and closing costs.


 


In addition to the Ancillary
Income that the Servicer is entitled to retain pursuant to Section 4.03,
the Servicer shall be entitled to customary market-based fees and charges for
the boarding, deboarding and disposition of Mortgage Loans.


 


9-2














 


EXHIBIT 10


 


DELEGATION OF AUTHORITY MATRIX


 


	
  FUNCTION

  	
   

  	
  DELEGATION

  
	
   

  	
   

  	
   

  
	
  Delinquent Taxes on Non-escrowed Loans

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Advances on Escrowed Loans

  	
   

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

  
	
   

  	
   

  	
   

  
	
  New Escrow Accounts

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Escrow Shortage Pro-ration

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Escrow Cushion Requirement

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Escrow Account Waiver

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Loss Drafts

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Private Mortgage Insurance Waiver

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Transfer of Ownership — Exempt Transactions

  	
   

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

  



 


10-1

















 


	
  Prepayment Penalties

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Waiver of Fees

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Subordination Requests

  	
   

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

   

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

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

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

   

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

   

  1.)                                   The first
  lien amount increases and the first lien LTV increases; or

  2.)                                   Any senior
  lien is a private party; or

  3.)                                   The new
  senior lien has the potential for negative amortization.

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Partial Release, Acquisitions, Easement

  	
   

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

  



 


10-2

















 


	
  Lien Releases

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Assumptions

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Foreclosure Approval

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Impact Analysis

  	
   

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

  
	
   

  	
   

  	
   

  
	
  REO Marketing

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Property Preservation

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Bidding Instruction

  	
   

  	
  Owner approval is required on bidding instructions.

  
	
   

  	
   

  	
   

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

  	
   

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

  



 


10-3

















 


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

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Discounted Payoff

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

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

  
	
   

  	
   

  	
   

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

  	
   

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

  



 


10-4

















 


	
  Bankruptcy Actions

  	
   

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

   

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

  
	
   

  	
   

  	
   

  
	
  Review and Approval of Walk Analysis

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Charge-off of Loans

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Post Charge-off Transfer

  	
   

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

  
	
   

  	
   

  	
   

  
	
  Payoff Processing

  	
   

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

  



 


10-5