EX-10.66




Exhibit 10.66





CONFIDENTIAL TREATMENT REQUESTED



INFORMATION FOR WHICH CONFIDENTIAL TREATMENT HAS BEEN REQUESTED IS OMITTED AND IS IDENTIFIED BY
THREE ASTERISKS, AS FOLLOWS “* * *”, AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.





LOAN SERVICING AGREEMENT




by and between




BOSCO CREDIT LLC




as the Owner,




and




FRANKLIN CREDIT MANAGEMENT CORPORATION




as the Servicer




dated as of May 28, 2008




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE I DEFINITIONS; CERTAIN MATTERS OF CONSTRUCTION
	 	 	1	 
	 
	ARTICLE II ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
	 	 	9	 
	 
	2.1. The Servicer to Act as the Servicer
	 	 	9	 
	 
	2.2. Liquidation of Mortgage Loans
	 	 	10	 
	 
	2.3. Collection of Mortgage Loan Payments
	 	 	11	 
	 
	2.4. Reserved
	 	 	11	 
	 
	2.5. Reserved
	 	 	11	 
	 
	2.6. Reserved
	 	 	11	 
	 
	2.7. Payment of Taxes, Insurance and Other Charges
	 	 	11	 
	 
	2.8. Reserved
	 	 	11	 
	 
	2.9. Maintenance of Hazard Insurance
	 	 	11	 
	 
	2.10. Maintenance of Mortgage Impairment Insurance
	 	 	13	 
	 
	2.11. Maintenance of Fidelity Bond and Errors and Omissions Insurance
	 	 	13	 
	 
	2.12. Inspections
	 	 	13	 
	 
	2.13. Restoration of Mortgaged Property
	 	 	13	 
	 
	2.14. Maintenance of PMI Policy; Claims
	 	 	14	 
	 
	2.15. Title, Management and Disposition of REO Property
	 	 	15	 
	 
	2.16. REO Reports
	 	 	15	 
	 
	2.17. Liquidation Reports
	 	 	15	 
	 
	2.18. Reports of Foreclosures and Abandonments of Mortgaged Property
	 	 	15	 
	 
	2.19. Reserved
	 	 	16	 
	 
	2.20. Notification of Adjustments
	 	 	16	 
	 
	2.21. Transfer Notices
	 	 	16	 
	 
	2.22. Privacy
	 	 	16	 






 










 






	 	 	 	 	 
	2.23. Losses and Expenses
	 	 	17	 
	 
	ARTICLE III PAYMENTS TO OWNER
	 	 	19	 
	 
	3.1. Remittances
	 	 	19	 
	 
	3.2. Reserved
	 	 	19	 
	 
	3.3. Monthly Advances by the Servicer
	 	 	19	 
	 
	ARTICLE IV GENERAL SERVICING PROCEDURES
	 	 	19	 
	 
	4.1. Transfers of Mortgaged Property
	 	 	19	 
	 
	4.2. Satisfaction of Mortgages and Release of Mortgage Files
	 	 	20	 
	 
	4.3. Servicing Compensation
	 	 	20	 
	 
	4.4. Annual Independent Public Accountants’ Servicing Report
	 	 	20	 
	 
	4.5. Right to Examine Servicer Records
	 	 	20	 
	 
	4.6. Compliance with REMIC Provisions
	 	 	21	 
	 
	ARTICLE V POSSESSION OF MORTGAGE FILES; BOOKS AND RECORDS; CUSTODIAL AGREEMENT;
DELIVERY OF DOCUMENTS;
SERVICER TO COOPERATE
	 	 	21	 
	 
	5.1. Provision of Information
	 	 	21	 
	 
	5.2. Financial Statements; Servicing Facility
	 	 	21	 
	 
	5.3. Possession of Mortgage Files; Maintenance of Servicing Files
	 	 	21	 
	 
	5.4. Books and Records; Transfers of Mortgage Loans
	 	 	21	 
	 
	5.5. Custodial Agreement; Delivery of Documents
	 	 	22	 
	 
	ARTICLE VI REPRESENTATIONS AND WARRANTIES
	 	 	23	 
	 
	6.1. General Representations and Warranties
	 	 	23	 
	 
	6.2. Representations, Warranties and Covenants of the Owner Regarding
Individual Mortgage Loans
	 	 	24	 
	 
	ARTICLE VII THE SERVICER
	 	 	26	 
	 
	7.1. Indemnification; Third Party Claims.
	 	 	26	 






 









 






	 	 	 	 	 
	7.2. Merger or Consolidation of the Servicer
	 	 	27	 
	 
	7.3. Limitation on Liability of the Servicer and Others
	 	 	28	 
	 
	7.4. Limitation on Assignment by the Servicer
	 	 	28	 
	 
	ARTICLE VIII RESERVED
	 	 	28	 
	 
	ARTICLE IX DEFAULT
	 	 	28	 
	 
	9.1. Events of Default
	 	 	28	 
	 
	9.2. Waiver of Defaults
	 	 	29	 
	 
	ARTICLE X TERMINATION
	 	 	30	 
	 
	10.1. Termination
	 	 	30	 
	 
	10.2. Termination With Cause
	 	 	30	 
	 
	ARTICLE XI MISCELLANEOUS PROVISIONS
	 	 	30	 
	 
	11.1. Successor to the Servicer
	 	 	30	 
	 
	11.2. Other Activity
	 	 	31	 
	 
	11.3. Amendment; Extension Not a Waiver
	 	 	31	 
	 
	11.4. Governing Law; Venue
	 	 	32	 
	 
	11.5. Duration of Agreement
	 	 	32	 
	 
	11.6. Notices
	 	 	32	 
	 
	11.7. Severability of Provisions
	 	 	33	 
	 
	11.8. Relationship of Parties
	 	 	33	 
	 
	11.9. Execution; Successors and Assigns
	 	 	33	 
	 
	11.10. Assignment by the Owner
	 	 	33	 
	 
	11.11. Time of Payment
	 	 	33	 
	 
	11.12. Force Majeure
	 	 	33	 






 









 






	 	 	 	 	 
	EXHIBITS
	 	 	 	 
	 
	 	 	 	 
	Exhibit A            Mortgage Loan Schedule
	 	 	 	 
	Exhibit B            Contents of Each Mortgage Loan File
	 	 	 	 
	Exhibit C            Eligibility Criteria
	 	 	 	 
	Exhibit D            Servicing Fee Schedule
	 	 	 	 
	Exhibit E            Reports
	 	 	 	 
	Exhibit F            Approval Matrix
	 	 	 	 







 









 








LOAN SERVICING AGREEMENT




     This Loan Servicing Agreement (the “Agreement”), dated and effective as of [May 30],
2008, is by and between Bosco Credit LLC, as owner, and Franklin Credit Management Corporation, as
servicer.



     WHEREAS, the Mortgage Loans identified on the Mortgage Loan Schedule annexed hereto as
Exhibit A have been purchased by the Owner (as defined below); and



     WHEREAS, the Servicer (as defined below) has agreed to service each Mortgage Loan on behalf of
the Owner commencing on the Effective Date (as defined herein), and the parties hereto desire to
provide the mechanics of such servicing by the Servicer;



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



ARTICLE I




DEFINITIONS; CERTAIN MATTERS OF CONSTRUCTION




     Whenever used herein, the following words and phrases, unless the content otherwise requires,
shall have the following meanings:



     “Accepted Servicing Practices” means, with respect to any Mortgage Loan, those
mortgage servicing practices of prudent mortgage lending institutions that service mortgage loans
of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is
located, subject to, and modified by, the specified delegation of authority set forth in the
Approval Matrix.



     “Adjustment Date” means, as to each adjustable rate Mortgage Loan, the date on which
the Mortgage Interest Rate is adjusted in accordance with the terms of the related Mortgage Note
and Mortgage.



     “Agreement” has the meaning assigned to it in the preamble.



     “Ancillary Income” means all income derived from the Mortgage Loans other than
payments of principal and interest on the Mortgage Loans, insufficient fund fees, conversion fees,
satisfaction fees, optional insurance administrative fees, assumption fees, reinstatement fees,
customary real estate referral fees, modification fees, release fees, foreclosure fees, late
payment fees, insufficient fund fees, prepayment penalty fees and all other incidental fees and
charges received by the Servicer, but excluding Servicing Fees.



     “Applicable Requirements” means as of the time of reference, with respect to the
Mortgage Loans, REO Property and the servicing of the Mortgage Loans, all of the following: (i) all
contractual obligations of the Servicer set forth in this Agreement; (ii) the requirements set
forth in the related Mortgage Note and the related Mortgage; (iii) all applicable federal, state
and



 









 







local legal and regulatory requirements (including statutes, rules, regulations and ordinances
and including the Privacy Requirements); (iv) all other applicable requirements and guidelines of
each governmental agency, board, commission, instrumentality and other governmental body or officer
having jurisdiction; (v) all other applicable judicial and administrative judgments, orders,
stipulations, awards, writs and injunctions; and (vi) Accepted Servicing Practices.



     “Appraised Value” means with respect to any Mortgage Loan, the lesser of (i) the value
set forth on the appraisal made in connection with the origination of the related Mortgage Loan as
the value of the related Mortgaged Property, or (ii) the purchase price paid for the Mortgaged
Property, provided, however, that in the case of a refinanced Mortgage Loan, such value shall be
based solely on the appraisal made in connection with the refinancing of such Mortgage Loan.



     “Approval Matrix” means the specified delegation of authority for servicing the
Mortgage Loans set forth on Exhibit F to this Agreement



     “Assignment of Mortgage” means 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.



     “Business Day” means any day other than (i) a Saturday or Sunday, or (ii) a day on
which banking institutions located in New York or New Jersey are authorized or obligated by law or
executive order to be closed.



     “Buydown Agreement” means an agreement between the Originator and a Mortgagor, or an
agreement among the Servicer, a Mortgagor and a seller of a Mortgaged Property or a third party
with respect to a Mortgage Loan which provides for the application of Buydown Funds.



     “Buydown Funds” means, in respect of any Buydown Mortgage Loan, any amount held by the
Servicer, which was contributed by the seller of a Mortgaged Property subject to a Buydown Mortgage
Loan, the buyer of such property, the Originator or any other source, plus interest earned thereon,
in order to enable the Mortgagor to reduce the payments required to be made from the mortgagor’s
funds in the early years of a Mortgage Loan.



     “Buydown Mortgage Loan” means any Mortgage Loan in respect of which, pursuant to a
Buydown Agreement, (i) the Mortgagor pays less than the full monthly payments specified in the
Mortgage Note for a specified period, and (ii) the difference between the payments required under
such Buydown Agreement and the Mortgage Note is provided from Buydown Funds.



     “Buydown Period” means the period of time when a Buydown Agreement is in effect with
respect to a related Buydown Mortgage Loan.



     “Code” means the Internal Revenue Code of 1986, as it may be amended from time to time
or any successor statute thereto, and applicable U.S. Department of the Treasury regulations issued
pursuant thereto.



     “Condemnation Proceeds” means all awards or settlements in respect of a Mortgaged
Property, whether permanent or temporary, partial or entire, by exercise of the power of eminent



2









 







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.



     “Covered Loan” means a Mortgage Loan categorized as “Covered” pursuant to the Standard
& Poor’s Glossary for File Format for LEVELS®, Appendix E, as revised from time to time.



     “CPI” means the Consumer Price Index for All Urban Consumers, All Items (New
York-Northern New Jersey-Long Island, NY-NJ-CT-PA) as reported by the United States Department of
Labor, Bureau of Labor Statistics.



     “CPI Adjustment” means the percentage increase on an annual basis to the applicable
dollar figure equal to any percentage increase in the CPI in [September] of the prior year over
[September] of the immediately preceding year; provided, that such dollar figure shall
remain at its then-effective level in the event that the CPI decreases or remains unchanged in any
given year.



     “Custodial Agreement” means the agreement governing the retention of the originals of
each Mortgage Note, Mortgage, Assignment of Mortgage and other Mortgage Loan Documents.



     “Custodian” means the custodian under the Custodial Agreement, or its successor in
interest or assigns, or any successor to the Custodian under the Custodial Agreement as provided
therein.



     “Customer Information” means any personally identifiable information in any form
(written electronic or otherwise) relating to a Mortgagor, including, but not limited to: a
Mortgagor’s name, address, telephone number, Mortgage Loan number, Mortgage Loan payment history,
delinquency status, insurance carrier or payment information, tax amount or payment information;
the fact that the Mortgagor has a relationship with the servicer of such Mortgagor’s Mortgage Loan;
and any other non-public personally identifiable information.



     “Cut-off Date” means May 30, 2008, or with respect to Mortgage Loans and servicing
rights and obligations with respect to such Mortgage Loans made subject to this Agreement after the
first Effective Date hereunder, the date agreed to by the Servicer and the Owner.



     “Damages” means any and all assessments, judgments, claims, liabilities, losses,
costs, damages or expenses (including interest, penalties and reasonable attorneys’ fees, expenses
and disbursements in connection with any action, suit or proceeding and including any such
reasonable attorneys’ fees, expenses and disbursements incurred in enforcing any right of
indemnification against any indemnitor).



     “Delinquent” means a Mortgage Loan is “Delinquent” when any payment contractually due
thereon has not been made by the close of business on the Due Date therefor. Such Mortgage Loan is
“30 days Delinquent” if such contractual payment has not been received by the close of business on
the numerically corresponding day of the month immediately succeeding the month in which such
contractual payment was due, or, if there is no such numerically corresponding day (e.g., when a
30-day month follows a 31-day month in which a payment was due on the 31st day of such month) then
on the last day of such immediately succeeding month.



3









 




Similarly for “60 days Delinquent” the second immediately succeeding month, and for “90 days
Delinquent” the third immediately succeeding month.




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



     “Effective Date” means May 30, 2008, or with respect to Mortgage Loans and servicing
rights and obligations with respect to such Mortgage Loans made subject to this Agreement after
such date, on the date that the Servicer obtains possession of the Mortgage Loan Documents.



     “Eligibility Criteria” means the eligibility criteria for residential mortgage loans
to be delivered by the Owner after the initial Effective Date to be serviced by the Servicer under
this Agreement, as specified in Exhibit C to this Agreement, as the same may be amended
from time to time with the mutual consent of both parties.



     “Errors and Omissions Insurance Policy” means an errors and omissions insurance policy
to be maintained by the Servicer pursuant to Section 2.12.



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



     “Event of Default” means any one of the conditions or circumstances enumerated in
Section 9.1.



     “Expenses” has the meaning assigned to it in Section 2.24.2.



     “FDIC” means the Federal Deposit Insurance Corporation, or any successor thereto.



     “FHA” means the Federal Housing Administration, or any successor thereto.



     “Fidelity Bond” means a fidelity bond to be maintained by the Servicer pursuant to
Section 2.12.



     “Gross Margin” means with respect to each Mortgage Loan, the fixed percentage amount
set forth in the related Mortgage Note which is added to the Index in order to determine the
related Mortgage Interest Rate, as set forth in the Mortgage Loan Schedule.



     “High Cost Loan” means a Mortgage Loan classified as (a) a “high cost” loan under
HOEPA, (b) a “high cost home,” “threshold,” “covered,” “high risk home,” “predatory” or similar
loan under any other applicable state, federal or local law or (c) a Mortgage Loan categorized as
“High Cost” pursuant to the Standard & Poor’s Glossary for File Format for LEVELS®, Appendix E, as
revised from time to time.



     “HOEPA” means the Home Ownership Equity Protection Act of 1994, as amended.



4









 





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



     “Insurer” means any entity that insures or guarantees all or part of the risk of loss
of a Mortgage Loan, including FHA, VA or any provider of a PMI Policy, and the providers of any
hazard insurance policy, flood insurance policy or title insurance policy.



     “Insurance Proceeds” means with respect to each Mortgage Loan, proceeds of insurance
policies insuring the Mortgage Loan or the related Mortgaged Property.



     “Litigation: means any litigation, arbitration or other proceeding before any
governmental, administrative or arbitral court or tribunal, or any government investigation or
administrative enforcement action.



     “Liquidation Proceeds” means cash received in connection with the liquidation of a
defaulted Mortgage Loan, whether through the sale or assignment of such Mortgage Loan, trustee’s
sale, foreclosure sale or otherwise, or the sale of the related Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of the Mortgage Loan.



     “Loan-to-Value Ratio or LTV” means with respect to any Mortgage Loan, the ratio of the
original loan amount of the Mortgage Loan at its origination (unless otherwise indicated) to the
Appraised Value of the Mortgaged Property.



     “Monthly Payment” means the scheduled monthly payment of principal and interest on a
Mortgage Loan.



     “Mortgage” means the mortgage, deed of trust or other instrument securing a Mortgage
Note, which creates a lien on Mortgaged Property securing the Mortgage Note.



     “Mortgage File” means the items pertaining to a particular Mortgage Loan referred to
in Exhibit B to this Agreement, and any additional documents required to be added to the
Mortgage File pursuant to this Agreement.



     “Mortgage Interest Rate” means the annual rate of interest borne on a Mortgage Note in
accordance with the provisions of the Mortgage Note.



     “Mortgage Loan” means each Mortgage Loan subject to this Agreement and which is
identified on the Mortgage Loan Schedule, which Mortgage Loan includes the Mortgage File, the
Monthly Payments, Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance
Proceeds, REO Disposition Proceeds and all other rights, benefits, proceeds and obligations arising
from or in connection with such Mortgage Loan. To the extent the context shall permit or require,
each such reference to Mortgage Loan shall include REO Property.



     “Mortgage Loan Documents” means with respect to a Mortgage Loan, the original related
Mortgage Note with applicable addenda and riders, the original related Mortgage and the originals
of any required addenda and riders, the original related Assignment of Mortgage and



5









 







any original intervening related assignments, the original related title insurance policy,
related PMI Policy, if any, and the related appraisal report.



     “Mortgage Loan Schedule” means a schedule of Mortgage Loans annexed hereto as
Exhibit A, or as the same may be supplemented from time to time by mutual agreement of the
Owner and the Servicer, such schedule setting forth the following information with respect to each
Mortgage Loan: (1) the Servicer’s Mortgage Loan number; (2) the city state and zip code of the
Mortgaged Property; (3) a code indicating whether the Mortgaged Property is a single family
residence, two-family residence, three-family residence, four-family residence, PUD, mixed-use
property, or Condominium; (4) the current Mortgage Interest Rate; (5) Reserved; (6) the current
Monthly Payment; (7) the Gross Margin; (8) the original term to maturity; (9) the scheduled
maturity date; (10) the principal balance of the Mortgage Loan as of the Cut-off Date; (11) the
Loan-to-Value Ratio; (12) the next Adjustment Date; (13) the lifetime Mortgage Interest Rate cap;
(14) whether the Mortgage Loan is convertible or not; (15) a code indicating the PMI Policy
Insurer; and (16) whether the Mortgage Loan Documents contain a prepayment fee, and, if so, the
terms thereof.



     “Mortgage Note” means the note or other evidence of the indebtedness of a Mortgagor
secured by a Mortgage.



     “Mortgaged Property” means the real property securing repayment of the debt evidenced
by a Mortgage Note or, where the context permits or requires (including in Section 6.2), an REO
Property.



     “Mortgagor” means the obligor on a Mortgage Note.



     “New Loan Data File” means with respect to each Mortgage Loan delivered after the
initial Effective Date by the Owner to be serviced by the Servicer under this Agreement, the data
file produced by the Owner that is used to enable the Servicer to set up each Mortgage Loan on its
servicing system.



     “Opinion of Counsel” means a written opinion of counsel, who may be an employee of the
Servicer, reasonably acceptable to the Owner.



     “Originator” means, with respect to any Mortgage Loan, the entity or entities that (a)
took the relevant Mortgagor’s loan application; (b) processed the relevant Mortgagor’s loan
application: and/or (c) closed and/or funded such Mortgage Loan.



     “Owner” means Bosco Credit LLC, or its successor in interest or any successor to the
Owner under this Agreement as herein provided.



     “Owner Indemnitees” has the meaning assigned to it in Section 7.1.1.



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



6









 





     “PMI Policy” means a policy of primary mortgage guaranty insurance issued by an
Insurer.



     “Principal Prepayment” means 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 or
premium thereon and which is not accompanied by an amount of interest representing scheduled
interest due on any date or dates in any month or months subsequent to the month of prepayment.



     “Prior Servicer” means all servicers and subservicers, collectively and individually,
other than the Owner, which, at any time prior to the applicable Effective Date, pooled, sold,
serviced or subserviced any of the Mortgage Loans.



     “Privacy Requirements” means the obligations imposed by (i) Title V of the
Gramm-Leach-Bliley Act, 15 U.S.C. § 6801 et seq.; (ii) the applicable federal regulations
implementing such act and codified at 12 CFR Parts 40, 216, 332, 573, and/or 16 CFR Part 313;
(iii) Interagency Guidelines Establishing Standards For Safeguarding Borrower Information published
in final form on February 1, 2001 (such final guidelines and/or rules the “Interagency Guidelines”)
to establish and maintain an Information Security Program (as such term is defined in the
Interagency Guidelines); and (iv) other applicable federal, state and local laws, rules,
regulations, and orders relating to the privacy and security of Customer Information, including the
federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and similar state laws.



     “Qualified Insurer” means a mortgage guaranty insurance Insurer duly authorized and
licensed where required by law to transact mortgage guaranty insurance business and generally
acceptable as an Insurer under Accepted Servicing Practices.



     “REMIC” means a “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code.



     “REMIC Provisions” means provisions of the federal income tax law relating to a REMIC,
which appear at Section 860A through 860G of Subchapter M of Chapter 1, Subtitle A of the Code, and
related provisions, and regulations, rulings or pronouncements promulgated thereunder, as the
foregoing may be in effect from time to time.



     “Remittance Date” means the 25th day (or if such 25th day is not a Business Day, the
first Business Day immediately following) of any month, beginning with the First Remittance Date.



     “REO Disposition” means the final sale by the Servicer of any REO Property.



     “REO Disposition Proceeds” means all amounts received with respect to an REO
Disposition pursuant to Section 2.16.



     “REO Property” means a Mortgaged Property acquired through foreclosure, by deed in
lieu of foreclosure or otherwise, as described in Section 2.16.



7









 





     “Servicer” means Franklin Credit Management Corporation, or its successor in interest
or assigns, or any successor to the Servicer under this Agreement appointed as herein provided.



     “Servicer Employees” means Servicer Employees has the meaning set forth in Section
2.12.



     “Servicer Indemnitees” has the meaning assigned to it in Section 7.1.2.



     “Servicing Advances” means all customary, reasonable and necessary “out of pocket”
costs and expenses (including reasonable attorney’s fees and disbursements) incurred in the
performance by the Servicer of its servicing obligations, including, but not limited to, the cost
of (a) the preservation, restoration and protection of the Mortgaged Property, (b) any enforcement
or judicial proceedings, including foreclosures and bankruptcy proceedings, (c) the management and
liquidation of any REO Property, including, but not limited to, the cost of environmental
inspection or review of such property, (d) compliance with the obligations under Sections 2.8,
2.10, 2.11, 2.14 and 2.15, and (e) other Expenses that are the responsibility of the Owner under
Section 2.24.



     “Servicing Fee” means with respect to each Mortgage Loan, the fees the Owner shall pay
to the Servicer, as set forth on Exhibit D to this Agreement.



     “Servicing Fee Rate” means with respect to each Mortgage Loan, the percentage set
forth on Exhibit D to this Agreement.



     “Servicing File” means with respect to each Mortgage Loan, the file retained by the
Servicer consisting of originals of all documents in the Mortgage File which are not delivered to
the Custodian and copies of the Mortgage Loan Documents listed in the Custodial Agreement, the
originals of which are delivered to the Custodian pursuant to Section 5.5.



     “Servicing Rights” means the rights of the Servicer to service the Mortgage Loans
under this Agreement together with the right to receive reimbursement for Servicing Advances,
Servicing Fees, and any Ancillary Income arising from or connected to the Mortgage Loans.



     “VA: means the United States Department of Veterans Affairs, or any successor
thereto.



     Construction of this Agreement and Certain Terms and Phrases.



          (a) Unless the context of this Agreement clearly indicates otherwise, (i) words of any gender
include each other gender; (ii) words denoting the singular shall include the plural and vice
versa; (iii) the terms “hereof”, “herein”, “hereby” and derivate or similar words refer to this
entire Agreement and not to any particular provision of this Agreement; and (iv) the terms
“Article”, “Section”, and “Exhibit” without any reference to a specified document refer to the
specified Article, Section and Exhibit, respectively, of this Agreement.



          (b) The words “including”, “include” and “includes” are not exclusive and shall be deemed to
be followed by the words “without limitation”.



8









 





          (c) The word “or” shall be construed to mean “and/or” unless the context clearly prohibits
that construction.



          (d) Whenever this Agreement refers to a number of days, such number shall refer to calendar
days unless Business Days are specified.



          (e) Any reference to any federal, state, local or foreign statute or law, including any one or
more sections thereof, shall be deemed also to refer to, unless the context requires otherwise, all
rules and regulations promulgated thereunder.



          (f) The headings contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.



ARTICLE II




ADMINISTRATION AND SERVICING OF MORTGAGE LOANS




          2.1. The Servicer to Act as the Servicer. The Servicer, as an independent contractor, shall
service and administer the Mortgage Loans on an actual/actual basis in accordance with this
Agreement, giving due consideration to Accepted Servicing Practices, and shall have full power and
authority, acting alone or through the delegation of duties to third party servicing providers, to
do any and all things in connection with such servicing and administration which the Servicer may
deem necessary or desirable, consistent with the terms of this Agreement. Unless this Agreement is
terminated pursuant to the terms hereof or the Owner and the Servicer agree otherwise, the Owner
agrees that the Servicer shall be the exclusive provider to Owner (and any of its subsidiaries) of
the services set forth in this Agreement, and will provide such services with respect to all
residential mortgage loans and related real estate properties and interests owned by the Owner
which meet the eligibility criteria. The Servicer may perform its servicing responsibilities
through agents or independent contractors, but shall not thereby be released from any of its
responsibilities hereunder.



     From and after the initial Effective Date, the Servicer shall assume responsibility under this
Agreement to service and administer additional Mortgage Loans upon the delivery, in accordance with
all reasonable instructions and directions which the Servicer may give to the Owner, of the related
New Loan Data File and all related Mortgage Loan Documents by the Owner, provided that any new
Mortgage Loans that the Owner desires to make subject to this Agreement meet the Eligibility
Criteria then in effect. The Owner shall provide the New Loan Data File for each Mortgage Loan to
the Servicer promptly upon purchase or origination of the Mortgage Loan by the Owner, and in no
event later than fifteen (15) days before the Servicer is expected to perform servicing on that
Mortgage Loan. The Owner shall notify the Servicer within two (2) Business Days, in writing, of any
changes in the information contained in the New Loan Data File. The Owner agrees to provide the
Servicer, within two (2) Business Days after the Servicer’s request, copies of the Mortgage Note,
the Mortgage or any other documents the Owner has in its possession or which are held by the
Custodian with respect to a Mortgage Loan that the Servicer deems reasonably necessary in
connection with its performance of the servicing
of said Mortgage Loan. The Servicer shall cooperate with the Owner in connection with the
transfer of the servicing rights and obligations with respect to the Mortgage Loans.



9









 





     Consistent with the terms of this Agreement, the Servicer may waive, modify or vary any term
of any Mortgage Loan or consent to the postponement of strict compliance with any such term or in
any manner grant indulgence to any Mortgagor if in the Servicer’s reasonable and prudent
determination such waiver, modification, postponement or indulgence is not materially adverse to
the Owner, provided, however, the Servicer shall not make any future advances with respect to a
Mortgage Loan. Unless the Mortgagor is in default with respect to the Mortgage Loan or such default
is, in the judgment of the Servicer, imminent, the Servicer shall not permit any modification with
respect to any Mortgage Loan that would change the Mortgage Interest Rate, defer or forgive the
payment of principal (except for actual payments of principal) or change the final maturity date on
any Mortgage Loan. The Servicer shall request written consent from the Owner to permit such a
modification and the Owner shall provide written consent or notify the Servicer of its objection to
such modification within three (3) Business Days of its receipt of the Servicer’s request. Without
limiting the generality of the foregoing, the Servicer shall continue, and 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 any powers of
attorney and other documents necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties under this Agreement.



          2.2. Liquidation of Mortgage Loans. In the event that any payment due under any Mortgage
Loan and not postponed pursuant to Section 2.1 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 shall be consistent with Applicable Requirements. If foreclosure proceedings are
commenced, the Servicer shall make all necessary and proper Servicing Advances, subject to
reimbursement in accordance with the terms of this Agreement, provided, however, that the Servicer
shall not be required to expend funds in connection with any foreclosure or towards the restoration
or preservation of any Mortgaged Property, unless it shall determine that such preservation,
restoration and/or foreclosure is reasonably expected to increase the proceeds of liquidation of
the Mortgage Loan to the Owner after reimbursement to itself for such expenses.



     Notwithstanding anything to the contrary contained herein, in connection with a foreclosure or
acceptance of a deed in lieu of foreclosure, (a) the Servicer shall have no obligation to commence
or continue foreclosure proceedings or obtain title to Mortgaged Property securing a Mortgage Loan
as a result of or in lieu of foreclosure or otherwise if (i) such Mortgage Loan is subject to HOEPA
or any regulations related thereto, (ii) such Mortgage Loan qualifies as a High Cost Loan under a
state or local anti-predatory lending law or regulation, or (iii) the Servicer determines, in its
reasonable judgment, that foreclosure and/or acquisition of title to Mortgaged Property would
expose it to material risk or liability pertaining to the acts, errors or omissions of the
Originator or Prior Servicers and (b) in the event the Servicer has reasonable cause to believe
that a Mortgaged Property is contaminated by hazardous or toxic
substances or wastes. If the Owner otherwise requests an environmental inspection or review
of such Mortgaged Property, such an inspection or review is to be conducted by a qualified
inspector. The cost for such inspection or review shall be borne by the Owner. Upon completion



10









 







of
the inspection or review, the Servicer shall promptly provide the Owner with a written report of
the environmental inspection.



     After reviewing the environmental inspection report, the Owner shall determine how the
Servicer shall proceed with respect to the Mortgaged Property. In the event (a) the environmental
inspection report indicates that the Mortgaged Property is contaminated by hazardous or toxic
substances or wastes and (b) the Owner directs the Servicer to proceed with foreclosure or
acceptance of a deed in lieu of foreclosure, the Servicer shall be reimbursed for all costs and
expenses associated with such foreclosure or acceptance of a deed in lieu of foreclosure and any
related environmental clean up costs, as applicable, pursuant to the terms of this Agreement. In
the event the Owner directs the Servicer not to proceed with foreclosure or acceptance of a deed in
lieu of foreclosure, the Servicer shall be reimbursed for all Servicing Advances made with respect
to the related Mortgaged Property pursuant to the terms of this Agreement.



          2.3. Collection of Mortgage Loan Payments. Continuously from the date hereof until the
principal and interest on all Mortgage Loans are paid in full, 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, where required under Applicable Requirements, shall use commercially
reasonable efforts in ascertaining and estimating Escrow Payments and all other charges that will
become due and payable with respect to the Mortgage Loan and the Mortgaged Property.



          2.4. Reserved.



          2.5.  Reserved.



          2.6. Reserved(a).



          2.7. Payment of Taxes, Insurance and Other Charges. With respect to each Mortgage Loan
that provides for Escrow Payments, the Servicer shall maintain accurate records reflecting the
status of ground rents, taxes, assessments, water rates, sewer rents, and other charges which are
or may become a lien upon the Mortgaged Property and the status of PMI Policy premiums and fire and
hazard insurance coverage and shall obtain, from time to time, all bills for the payment of such
charges (including renewal premiums) and shall effect payment thereof, if required under Applicable
Requirements, prior to the applicable penalty or termination date, employing for such purpose
deposits of the Mortgagor, in an escrow account created and established by the Owner, which shall
have been
estimated and accumulated by the Servicer for such purposes, as allowed under the terms of the
Mortgage. Any Servicing Advances to effect payments of such charges are reimbursable in accordance
with the terms of this Agreement.



          2.8. Reserved.



          2.9. Maintenance of Hazard Insurance. Except as otherwise allowed under Section 2.11,
the Servicer shall cause to be maintained for each Mortgage Loan secured by a first lien on the
related Mortgaged Property hazard insurance, subject to reimbursement as a Servicing Advance in
accordance with the terms of this Agreement, such that all buildings upon the Mortgaged Property
are insured by an Insurer acceptable under Accepted Servicing Practices against loss by fire,
hazards of extended coverage and such other hazards as are customary in the



11









 







area where the
Mortgaged Property is located, 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 outstanding
principal balance of the Mortgage Loan. The Servicer is not responsible for maintaining such hazard
insurance with respect to Mortgage Loans secured by second liens. In the event a hazard insurance
policy shall be in danger of being terminated, or in the event the Insurer shall cease to be
acceptable under Accepted Servicing Practices, the Servicer shall notify the Owner and the related
Mortgagor, and shall use commercially reasonable efforts, as permitted by applicable law, to obtain
from another Qualified Insurer a replacement hazard insurance policy that meets the criteria set
forth in this Section 2.10. For purposes of this Agreement, the Owner acknowledges and agrees that
an Insurer shall not be disqualified as an “Insurer acceptable under Accepted Servicing Practices”
merely because such Insurer is an affiliate of the Servicer.



     If the related Mortgaged Property is located in an area identified by the Flood Emergency
Management Agency as having special flood hazards (and such flood insurance has been made
available), the Servicer shall cause to be maintained for such Mortgage Property a flood insurance
policy meeting the requirements of the current guidelines of the Federal Insurance Administration
is in effect with an Insurer acceptable under Accepted Servicing Practices in an amount
representing coverage equal to the lesser of (i) the minimum amount required, under the terms of
coverage, to compensate for any damage or loss on a replacement cost basis; (ii) the unpaid balance
of the related Mortgage; and (iii) the maximum amount of insurance which is available under the
Flood Disaster Protection Act of 1973, as amended. The cost of any flood insurance purchased by the
Servicer pursuant to the foregoing shall be reimbursable as a Servicing Advance in accordance with
the terms of this Agreement.



     If a Mortgage is secured by a unit in a condominium project, the Servicer shall verify that
the coverage required of the owners association, including hazard, flood, liability, and fidelity
coverage, is being maintained in accordance with Accepted Servicing Practices, and shall use its
commercially reasonable efforts to secure from the owners 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.



     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 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 as loss payee and shall be endorsed
with standard or union mortgagee clauses, without contribution, 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 or her insurance carrier or agent, provided, however, that the Servicer shall not accept any
such insurance policies from insurance companies unless such companies are acceptable under
Accepted Servicing Practices and are licensed to do business in the jurisdiction in which



12









 







the
Mortgaged Property is located. The Servicer shall determine whether such policies provide
sufficient risk coverage and amounts as set forth herein and whether they insure the Mortgaged
Property and properly describe the address of the Mortgaged Property.



          2.10. Maintenance of Mortgage Impairment Insurance. In the event that the Servicer
shall obtain and maintain a blanket policy insuring against losses arising from fire and hazards
covered under extended coverage on all of the Mortgage Loans secured by first liens on the related
Mortgaged Properties, 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. The Servicer shall prepare and make any claims on the blanket policy as deemed
necessary by the Servicer in accordance with Accepted Servicing Practices. The cost of any blanket
policy maintained on the Mortgage Loans and any loss which would be covered by such policy but for
a deductible clause shall be reimbursable as a Servicing Advance in accordance with the terms of
this Agreement. Upon request of the Owner, the Servicer shall cause to be delivered to the Owner a
certified true copy of such policy and a statement from the insurer thereunder that such policy
shall in no event be terminated or materially modified without thirty (30) days’ prior written
notice to the Owner.



          2.11. Maintenance of Fidelity Bond and Errors and Omissions Insurance. The Servicer
shall maintain with responsible companies, at its own expense, a blanket Fidelity Bond and an
Errors and Omissions Insurance Policy, with broad coverage on all of its officers, employees or
other persons acting in any capacity on behalf of the Servicer requiring such persons to handle
funds, money, documents or papers relating to the Mortgage Loans (the “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
the Servicer Employees. Such Fidelity Bond and Errors and Omissions Insurance Policy also shall
protect and insure the Servicer against losses in connection with 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 Agreement. The minimum coverage under any such Fidelity Bond
and Errors and Omissions Insurance Policy shall be at least equal to the amounts acceptable in
accordance with Applicable Requirements. Upon the request of the Owner, the Servicer shall cause to
be delivered to the Owner a certificate of insurance for such Fidelity Bond and Errors and
Omissions Insurance Policy and a statement from the surety and the 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.



          2.12. Inspections. The Servicer shall perform inspections on Mortgaged Property in
accordance with Applicable Requirements or as may be required by the issuer of the PMI Policy. The
Servicer shall keep a written report of each such inspection.



          2.13. 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



13









 







is in accordance
with Applicable Requirements. For claims greater than $15,000, the Servicer shall comply with the
following conditions in connection with any such release of Insurance Proceeds or Condemnation
Proceeds:




     (a) the Servicer shall receive satisfactory independent verification of completion of
repairs and issuance of any required approvals with respect thereto;




     (b) 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;




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




     (d) pending repairs or restoration, the Servicer shall place the Insurance Proceeds or
Condemnation Proceeds in an escrow account created and established by the Owner.



     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.



          2.14. Maintenance of PMI Policy; Claims. The Servicer shall maintain or cause the
Mortgagor to maintain in full force and effect, with respect to each Mortgage Loan with an existing
PMI Policy on the Effective Date, a PMI Policy insuring the portion over 78% until terminated
pursuant to the Home Owners Protection Act of 1998, 12 UCS §4901, et seq. In the event that such
PMI Policy shall be terminated other than as required by law, the Servicer shall obtain from
another Qualified Insurer a comparable replacement policy, with a total coverage equal to the
remaining coverage of such terminated
PMI Policy. If the insurer shall cease to be a Qualified Insurer, the Servicer shall determine
whether recoveries under the PMI Policy are jeopardized for reasons related to the financial
condition of such insurer, it being understood that the Servicer shall in no event have any
responsibility or liability for any failure to recover under the PMI Policy for such reason. If the
Servicer determines that recoveries are so jeopardized, it shall notify the Owner and the
Mortgagor, if required, and obtain from another Qualified Insurer a replacement insurance policy.
The Servicer shall not take any action which would result in noncoverage under any applicable PMI
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 4.1, the Servicer shall promptly notify the insurer under the related PMI
Policy, if any, of such assumption or substitution of liability in accordance with the terms of
such PMI Policy and shall take all actions which may be required by such insurer as a condition to
the continuation of coverage under such PMI 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 in a timely fashion in
accordance with the terms of such PMI Policy and, in this regard, to take such action as shall be
necessary to permit recovery under any PMI Policy respecting a defaulted Mortgage Loan.



14









 





          2.15. Title, Management and Disposition of REO Property. In the event that title to
any Mortgaged Property is acquired in foreclosure, by deed in lieu of foreclosure or otherwise
(including by purchase), the deed or certificate of sale shall be taken in the name of the Owner,
or, at the direction of the Owner, the deed or certificate of sale shall be taken in the name of a
nominee for the Owner. 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.



     The Servicer shall manage, conserve, protect and operate each REO Property for the Owner
solely for the purpose of its prompt disposition and sale. The Servicer, either itself or through
an agent selected by the Servicer, shall manage, conserve, protect and operate the REO Property 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 for a period not greater
than three years, except as otherwise provided below) on such terms and conditions as the Servicer
deems to be in the reasonable interest of the Owner.



     The Servicer shall use commercially reasonable efforts to dispose of the REO Property as soon
as possible and shall sell such REO Property in any event within three years after title has been
taken to such REO Property, unless (i) a REMIC election has not been made with respect to the
arrangement under which the Mortgage Loans and the REO Property are held, and (ii) the Servicer
determines, and gives an appropriate notice to the Owner to such effect, that a longer period is
necessary for the orderly liquidation of such REO Property or that to maximize recovery the REO
Property should be rented. If a period longer than three years is permitted under the foregoing
sentence and is necessary to sell any REO Property, the Servicer shall report monthly to the Owner
as to the progress being made in selling such REO Property.



     The Servicer shall also maintain on each REO Property fire and hazard insurance with extended
coverage in 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 Flood Disaster Protection Act of 1973, as amended, flood insurance in the amount required
above.



     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 reasonable interests of the Owner.



          2.16. REO Reports. Together with the statement furnished pursuant to Section 3.2, the
Servicer shall furnish to the Owner a monthly statement with respect to any REO Property, which
statement shall cover the operation of such REO Property for the previous month and the Servicer’s
efforts in connection with the sale of such REO Property and any rental of such REO Property
incidental to the sale thereof for the previous month.



          2.17. Liquidation Reports. Upon the foreclosure sale of any Mortgaged Property or the
acquisition thereof by the Owner pursuant to a deed in lieu of foreclosure, the Servicer shall
submit to the Owner a liquidation report with respect to such Mortgaged Property.



          2.18. Reports of Foreclosures and Abandonments of Mortgaged Property. Following the
foreclosure sale or abandonment of any Mortgaged Property, the Servicer shall



15









 







report such
foreclosure or abandonment as required pursuant to Section 6050J of the Code. The Servicer shall
file information reports with respect to the receipt of mortgage interest received in a trade or
business and information returns relating to cancellation of indebtedness income with respect to
any Mortgaged Property as required by the Code. Such reports shall be in form and substance
sufficient to meet the reporting requirements imposed by the Code.



          2.19. Reserved.



          2.20. Notification of Adjustments. With respect to each adjustable rate Mortgage Loan,
the Servicer shall adjust the Mortgage Interest Rate on the related Adjustment Date in compliance
with the requirements of applicable law and the related Mortgage and 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 adjustments.



          2.21. Transfer Notices.



               2.21.1. Within fifteen (15) days before the Servicer initiates servicing under this Agreement
or such other time period as mutually agreed to by the Owner and Servicer, the Servicer and the
Owner shall provide any required notice to the Mortgagors of the transactions contemplated herein
in accordance with Applicable Requirements. The parties shall cooperate to accomplish such
notification in a timely and efficient manner as will best facilitate the assumption by the
Servicer of the servicing responsibilities. The form of the notice to be sent to Mortgagors shall
be approved by the Owner and the Servicer before mailing.



               2.21.2. The Owner shall notify, or cause to be notified, all Insurers, by overnight or
registered mail, that all insurance premium billings for the Mortgage Loans must be sent to the
Servicer. Additionally, the Owner shall, prior to the applicable Effective Date, obtain the written
consent of any Insurers that have the contractual right to approve the assumption of the servicing
responsibilities by the Servicer.



               2.21.3. For any Mortgage Loan that provides for Escrow Payments, the Owner, with the
reasonable assistance of the Servicer, shall notify the applicable taxing authorities (except as
such is handled through the tax service company) of the assumption of the servicing
responsibilities by the Servicer and include instructions to deliver all notices and tax bills to
the Servicer or the applicable tax service provider, as the case may be, from and after the
Effective Date.



               2.21.4. The Owner shall notify all attorneys who, on the Effective Date, are providing legal
services to or on behalf of the Owner in connection with pending foreclosure or Litigation
involving one or more of the Mortgage Loans, of the transfer of the servicing rights and
obligations with respect to the Mortgage Loans to the Servicer.



               2.21.5. All notifications required to be made under this Section 2.22 shall be paid for by the
Owner.



          2.22. Privacy.



16









 





               2.22.1. Except in accordance with this Section 2.23, the Servicer shall not disclose any
Customer Information to any Person, including, but not limited to, any of the Servicer’s employees,
agents, or contractors, or any third party not affiliated with the Servicer. The Servicer shall
disclose such Customer Information only to the extent permitted by, or necessary to carry out the
Servicer’s express obligations and rights under, this Agreement and for no other purpose. If and to
the extent required by Applicable Requirements, the Servicer shall ensure that each vendor or other
Person to which the Servicer intends to disclose Customer Information shall, prior to any such
disclosure of information; agree to: (i) keep confidential any such Customer Information; and (ii)
use or disclose such Customer Information only to the extent necessary to carry out the Servicer’s
express obligations and rights under this Agreement.



               2.22.2. Without limiting the scope of the above, the Servicer shall use at least the same
physical and other security measures to protect all Customer Information in the Servicer’s
possession or control as the Servicer uses for its own confidential and proprietary information.



               2.22.3. Reserved.



          2.23. Losses and Expenses.



               2.23.1. The Owner shall remain responsible, as between the Owner and the Servicer, for losses
related to the Owner’s investment in the Mortgage Loans as distinct from (and which shall not
include) costs and expenses related to the performance of the servicing duties delegated to the
Servicer hereunder, for which the Servicer shall be responsible as provided in this Agreement.
Losses of the type referred to above for which the Owner shall remain responsible include, but are
not limited to: credit losses, special hazard insurance premiums, earthquake losses, losses
resulting from the absence or inadequacy of hazard insurance or flood insurance for a Mortgaged
Property in accordance with Applicable Requirements, foreclosure losses, REO Property losses, and
losses in connection with the Soldiers and Sailors Civil Relief Act (and any successor to such
Act).



               2.23.2. Within thirty (30) days after receipt of an invoice from the Servicer or such earlier
time as provided for in this Agreement, the Owner shall reimburse the Servicer for Servicing
Advances and the following expenses (“Expenses”): (i) any out-of-pocket expense the
Servicer incurs with the prior approval of the Owner in connection with its servicing and
administrative obligations set forth in this Agreement to the extent such expense is not ordinary
to the servicing function (but not including salaries, rent and other general operating expenses of
the Servicer normally classified as overhead); (ii) expenses that the Owner has expressly agreed to
pay or be liable for hereunder; and (iii) expenses incurred in connection with the performance by
the Servicer at the request of the Owner of any activity that is not specifically required to be
performed by the Servicer under this Agreement and is not reasonably ancillary to any specific
requirements of the Owner under this Agreement; (iv) amounts billed by third parties on a monthly
basis with or without the approval of the Owner, which shall include: appraisals (pre- and
post-foreclosure), title work, attorney fees (foreclosure, bankruptcy, and other), legal filing
fees, inspection fees (interviews, drive-bys, clean out inspections after vacated, professional
services such as property surveys, repair inspections, Environmental Protection Agency inspections,
etc.), property maintenance (utilities, lawn care, snow removal,



17









 







securing costs, repairs,
winterization, removal of debris, clean-up after vacated), condominium expenses (condo fees,
association fees, etc.), insurance (premiums and deductibles), taxes (property, estate,
assessments), photographs, loss drafts, and travel (transportation, meals, lodging, rental cars).
Except as otherwise expressly provided in this Agreement, each party shall pay its own expenses
incurred in connection with the preparation of and performance under this Agreement, including its
own legal fees and expenses of preparing and delivering the notices, documents, reports,
accountings and any other information required of it hereunder.



               2.23.3. On a monthly basis, following receipt of an invoice from the Servicer, the Owner shall
reimburse the Servicer for Servicing Advances that have been outstanding for thirty (30) days or
more and the interest due on all unreimbursed Servicing Advances made under this Agreement in an
amount equal to the prime rate published from time to time by The Wall Street Journal,
“Money Rates”, multiplied by the average daily outstanding balance of all Servicing Advances. Each
invoice shall be accompanied by appropriate supporting documentation describing and regarding the
amount and nature of such Servicing Advances made in accordance with Applicable Requirements and
this Agreement.



               2.23.4. (a) the Owner shall be solely responsible for all guaranty fees, credit enhancement
fees, custodial fees (and related shipping costs), trustee fees, and costs to record assignments.



               (b) Except as otherwise expressly set forth in this Agreement, the Servicer shall be solely
responsible for the direct and indirect internal and administrative costs associated with its
obligations as the Servicer of the Mortgage Loans hereunder, said costs to include but not be
limited to: personnel, facilities; supplies; mailing and computer system expenses, regardless of
whether the Servicer elects to contract with third party vendors to perform all or any portion of
such internal and administrative functions.



               2.23.5. Except as otherwise provided in this Section, any Litigation related solely to a
single Mortgage Loan (other than Litigation between or among the Owner or any of its affiliates, on
the one hand, and the Servicer and any of its affiliates, on the other hand) shall be managed by
the Servicer or its counsel on behalf of the Owner, including foreclosure, evictions, quiet title
and bankruptcy filings, the costs and expenses of which shall be subject to reimbursement pursuant
to the terms of this Agreement. The Servicer shall not manage (on behalf of the Owner or any of its
affiliates other than the Servicer) any class action claim in which the Owner or any of its
affiliates (other than the Servicer) is a defendant or any Litigation based upon a claim brought by
the Owner unless the Owner shall elect otherwise with respect to any particular Litigation(s), in
which case the Servicer shall manage and administer such Litigation(s) on behalf of the Owner or
any of its affiliates. The Servicer shall not, without the prior written consent of the Owner,
settle or compromise any claim against the Owner arising out of or relating to any class action
Litigation, other than any such settlement involving solely the payment of money damages not to
exceed Twenty-Five Thousand and 00/100 Dollars ($25,000.00) in any one (1) instance or One Hundred
Thousand and 00/100 Dollars ($100,000.00) in the aggregate for all such settlements during any
calendar quarter. The Servicer shall cooperate in obtaining or making available information or
documents respecting Mortgage Loans involved in Litigation as may be reasonably required by the
Owner or its counsel. The Owner shall reimburse the Servicer for any out-of-pocket costs that the
Servicer incurs in



18









 







connection with any Litigation described in this Section 2.24.5 (other than
Litigation between or among the Owner or its affiliates, on the one hand, and the Servicer or its
affiliates, on the other hand).



ARTICLE III




PAYMENTS TO OWNER




          3.1. Remittances. On each Remittance Date, the Servicer shall deposit any and all
funds collected as Servicer hereunder into cash collection account, account number 01580116808,
which account is maintained at The Huntington National Bank.



          3.2. Reserved.



          3.3. Monthly Advances by the Servicer. The Servicer shall not be required to advance
Delinquent monthly payments to the Owner.



ARTICLE IV




GENERAL SERVICING PROCEDURES




          4.1. Transfers of Mortgaged Property. The Servicer shall use commercially reasonable
efforts to enforce any “due-on-sale” provision contained in any Mortgage or Mortgage Note and to
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 or if the exercise of such rights would impair or threaten to impair any recovery
under the related PMI Policy, if any.



     If the Servicer reasonably believes it is unable under applicable law to enforce such
“due-on-sale” clause, the Servicer shall 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
guaranty insurer, a substitution of liability agreement with the owner of the Mortgaged Property
pursuant to which the original Mortgagor is released from liability and the owner 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, the 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, the outstanding principal amount of the Mortgage Loan nor any other materials terms
shall be changed without the Owner’s consent.




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     To the extent that any Mortgage Loan is assumable, the Servicer shall inquire diligently into
the credit worthiness of the proposed transferee, and shall use the underwriting criteria for
approving the credit of the proposed transferee which are used with respect to underwriting
mortgage loans of the same type as the Mortgage Loans. If the credit worthiness of the proposed
transferee does not meet such underwriting criteria, the Servicer shall diligently, to the extent
permitted by the Mortgage or the Mortgage Note and by applicable law, accelerate the maturity of
the Mortgage Loan.



          4.2. 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 promptly notify the Owner and
may request the release of any Mortgage Loan Documents. 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 sustain with respect to any Mortgage Loan not satisfied in
accordance with the procedures set forth herein.




          4.3. Servicing Compensation. As compensation for its services hereunder, the Servicer
shall be entitled to the fees specified in the Servicing Fee Schedule detailed on Exhibit D
to this Agreement, subject to an annual CPI Adjustment. Such fees shall be payable monthly. All
servicing compensation shall be fully earned if the Mortgage Loan is serviced for any portion of
the month and shall not be prorated.




     Additional servicing compensation in the form of Ancillary Income shall be retained by the
Servicer. Except as specifically provided for herein, the Servicer shall be required to pay all
expenses incurred by it in connection with its servicing activities hereunder (other than Servicing
Advances) and shall not be entitled to reimbursement thereof.




          4.4. Annual Independent Public Accountants’ Servicing Report. On or before June 30 of
each year beginning June 30, 2009, the Servicer, at the expense of the Owner, shall cause a firm of
independent public accountants which is a member of the American Institute of Certified Public
Accountants to furnish a statement to the Owner to the effect that such firm has examined certain
documents and records relating to the servicing of the mortgage loans similar in nature and that
such firm is of the opinion that the provisions of this or similar Agreements have been complied
with, and that, on the basis of such examination conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers, nothing has come to their attention which
would indicate that such servicing has not been conducted in compliance therewith, except for (i)
such exceptions as such firm shall believe to be immaterial, and (ii) such other exceptions as
shall be set forth in such statement. By providing the Owner a copy of a Uniform Single Attestation
Program Report from their independent public accountant’s on an annual basis, the Servicer shall be
considered to have fulfilled its obligations under this Section 4.4.




          4.5. Right to Examine Servicer Records. The Owner, or its designee, shall have the
right to examine and audit any and all of the books, records, or other information of the Servicer,
whether held by the Servicer or by another on its behalf, with respect to or concerning this
Agreement or the Mortgage Loans, during business hours or as otherwise acceptable to the Servicer,
upon reasonable advance notice. The Owner shall pay all of its or its designees’ costs and expenses
associated with such examination.




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          4.6. Compliance with REMIC Provisions. If a REMIC election has been made with respect
to the arrangement under which the Mortgage Loans and REO Property are held, the Servicer shall not
take any action, cause the REMIC to take any action or fail to take (or fail to cause to be taken)
any action that, under the REMIC Provisions, if taken or not taken, as the case may be, could (i)
endanger the status of the REMIC as a REMIC or (ii) result in the imposition of a tax upon the
REMIC (including but not limited to the tax on “prohibited transactions” as defined Section
860(a)(2) of the Code and the tax on “contributions” to a REMIC set forth in Section 860(d) of the
Code) unless the Servicer has received an Opinion of Counsel (at the expense of the party seeking
to take such action) to the effect that the contemplated action will not endanger such REMIC status
or result in the imposition of any such tax.




ARTICLE V




POSSESSION OF MORTGAGE FILES; BOOKS AND RECORDS; CUSTODIAL

AGREEMENT; DELIVERY OF DOCUMENTS; SERVICER TO COOPERATE




          5.1. Provision of Information. During the term of this Agreement, the Servicer shall
furnish to the Owner such periodic, special, or other reports or information, and copies or
originals of any documents contained in the Servicing File for each Mortgage Loan provided for
herein. All other special reports or information not provided for herein as shall be necessary,
reasonable, or appropriate with respect to the Owner or any regulatory agency will be provided at
the Owner’s expense. All such reports, documents or information shall be provided by and in
accordance with all reasonable instructions and directions which the Owner may give. The reports
to be delivered pursuant to this Section 5.1 shall, as applicable, include those listed on
Exhibit E to this Agreement.




          5.2. Financial Statements; Servicing Facility. In connection with marketing the
Mortgage Loans, the Owner may make available to a prospective Owner a Consolidated Statement of
Operations of the Servicer for the most recently completed two fiscal years for which such a
statement is available, as well as a Consolidated Statement of Condition at the end of the last two
fiscal years covered by such Consolidated Statement of Operations to the extent any such statements
have been prepared by or on behalf of the Servicer (and are available upon request to members or
stockholders of the Servicer or to the public at large).




          5.3. Possession of Mortgage Files; Maintenance of Servicing Files. The contents of
each Mortgage File not delivered to the Custodian are and shall be held in trust by the Servicer
for the benefit of the Owner as owner thereof. The Servicer shall maintain a Servicing File
consisting of a copy of the contents of each Mortgage File and the originals of the documents in
each Mortgage File not delivered to the Custodian. 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. All such
costs associated with the release, transfer and re-delivery to the Servicer shall be the
responsibility of the Owner.




          5.4. Books and Records; Transfers of Mortgage Loans. Except as otherwise provided in
this Agreement, all rights arising out of the Mortgage Loans, including, but not limited to, all
funds received on or in connection with the Mortgage Loans, shall be received and



21









 






held by the Servicer in trust for the benefit of the Owner as owner of the Mortgage Loans, and
any record title to the related Mortgages that the Servicer may have or acquire shall be for the
sole purpose of facilitating the servicing and the supervision of the servicing of the Mortgage
Loans.




     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. To the extent that original documents are not required for purposes of
realization of Liquidation Proceeds or Insurance Proceeds, documents maintained by the Servicer may
be in the form of microfilm or microfiche or such other reliable means of recreating original
documents, including but not limited to, optical imagery techniques so long as the Servicer
complies with document retention requirements in accordance with Applicable Requirements.



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



     The Servicer shall keep at its servicing office, or such other location as the Servicer may
designate from time to time, books and records in which, subject to such reasonable policies,
procedures, rules and regulations as it may prescribe, the Servicer shall note transfers of
Mortgage Loans. No transfer of a Mortgage Loan may be made unless such transfer is in compliance
with the terms hereof. For the purposes of this Agreement, the Servicer shall be under no
obligation to deal with any person with respect to this Agreement or the Mortgage Loans unless the
books and records show such person as the owner of the Mortgage Loan. The Owner may, subject to the
terms of this Agreement, sell and transfer one or more of the Mortgage Loans. The Owner also shall
advise the Servicer of the transfer. Upon receipt of notice of the transfer, the Servicer shall
mark its books and records to reflect the ownership of the Mortgage Loans of such assignee and
unless the Servicer agrees otherwise, the Servicer shall not be responsible for servicing the
transferred Mortgage Loan.



          5.5. Custodial Agreement; Delivery of Documents. The Owner has delivered and released,
or caused to be delivered and released, to the Custodian those Mortgage Loan Documents as required
by Exhibit B to this Agreement with respect to each Mortgage Loan.




     The Custodian has certified its receipt of all such Mortgage Loan Documents required to be
delivered pursuant to the Custodial Agreement, as evidenced by the trust receipt of the Custodian
in the form annexed to the Custodial Agreement. The Owner will be responsible for the fees and
expenses of the Custodian.



     The Servicer shall forward to the Custodian original documents evidencing an assumption,
modification, consolidation or extension of any Mortgage Loan entered into in accordance with
Section 2.1 or 4.1 within one (1) week of their execution, provided, however, that the Servicer
shall provide the Custodian with a certified true copy of any such document submitted for
recordation within ten (10) days of its execution, and shall provide the original of any document
submitted for recordation or a copy of such document certified by the appropriate



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public recording office to be a true and complete copy of the original within ten (10) days
following receipt of such document from the public recording office.



     From time to time, the Servicer may have a need for Mortgage Loan Documents to be released by
the Custodian. If the Servicer shall require any of the Mortgage Loan Documents, the Servicer shall
notify the Custodian in writing of such request. The Owner shall cause the Custodian to release
such documents, to the extent available, promptly upon request. To the extent that the Servicer
obtains possession of any such document which is held by the Custodian, the Servicer agrees that it
will act as the custodian and bailee and trustee of such documents for the benefit of the Owner
during the term of this Agreement.



ARTICLE VI




REPRESENTATIONS AND WARRANTIES 




          6.1. General Representations and Warranties. Each of the Servicer and the Owner hereby
represents and warrants to the other that, as of the initial Effective Date:




               6.1.1. Due Organization and Authority. It is a corporation or limited liability
company duly organized, validly existing and in good standing under the laws of the state of
incorporation and has all licenses necessary to carry on its business 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 it, and in any event it is in compliance with the laws of any such state to the extent
necessary to ensure the enforceability of the related Mortgage Loan and the servicing of such
Mortgage Loan in accordance with the terms of this Agreement. It has the full corporate power and
authority to execute and deliver this Agreement and to perform in accordance herewith. The
execution, delivery and performance of this Agreement by it and the consummation of the
transactions contemplated hereby have been duly authorized and approved by all necessary actions on
its part. This Agreement has been duly executed and delivered by it and constitutes legal, valid
and binding obligations of it, enforceable against it in accordance with its terms;



               6.1.2. No Conflicts. Neither the execution and delivery of this Agreement, or the
transactions contemplated hereby, nor the fulfillment of or compliance with the terms and
conditions of this Agreement will conflict with or result in a breach of any of its articles of
incorporation or by-laws or other governing documents or any legal restriction or any agreement or
instrument to which it is now a party or by which it is bound, or constitute a default or result in
the violation of any law, rule, regulation, order, judgment or decree to which it or its property
is subject, or, in the case of the Servicer only, impair the ability of the Owner to realize on the
Mortgage Loans, or impair the value of the Mortgage Loans;



               6.1.3. No Litigation Pending. There is no action, suit, proceeding or investigation
pending or threatened against it 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 it, or in any material impairment of the right or ability of it to carry on its business
substantially as now conducted, or in any material liability on the part of it,



23









 







or which would draw into question the validity of this Agreement or the Mortgage Loans or of
any action taken or to be contemplated herein, or which would be likely to impair materially the
ability of it to perform under the terms of this Agreement;



               6.1.4. 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 it of or
compliance by it with this Agreement, or if required, such approval has been obtained prior to the
applicable Effective Date; and



               6.1.5. Selection Process. As to the Owner only, the selection of the Mortgage Loans to
be serviced by the Servicer pursuant to this Agreement was not made in a manner so as to affect
adversely the interests of the Servicer.



          6.2. Representations, Warranties and Covenants of the Owner Regarding Individual Mortgage
Loans. As to each Mortgage Loan (including REO Property, as appropriate) the Owner hereby
represents, warrants and covenants to the Servicer that as of the applicable Effective Date:




               6.2.1. Mortgage Loans as Described. The information set forth in the Mortgage Loan
Schedule attached hereto as Exhibit A and the information on each Mortgage contained in
each electronic data file delivered to the Servicer is true and correct.



               6.2.2. Delivery of Books and Records. The Owner will, on or before the applicable
Effective Date, deliver, or cause to be delivered, to the Servicer or the Custodian, as applicable,
all of the books, records, data, files and Mortgage Loan Documents, including records on microfiche
or its equivalent, reasonably required by the Servicer to document and service each Mortgage Loan.
Such books, records, data, files and documents contain all of the items (including but not limited
to hazard insurance policies, flood insurance policies and private mortgage insurance policies)
which are required by the Applicable Requirements to service the Mortgage Loans and are true,
accurate and complete in all material respects. It is reasonable for the Servicer to rely thereon.



               6.2.3. Flood Insurance. If any of the Mortgage Loans are secured by Mortgaged
Properties located in Federal Emergency Management Agency designated flood areas, then (to the
extent required by Applicable Requirements) flood insurance policies are or will be in full force
and effect in the amounts required under Applicable Requirements or such Mortgage Loans are insured
through the Owner’s “gap coverage” flood insurance policy as of the applicable Effective Date.



               6.2.4. Hazard Insurance. As of the applicable Effective Date, all Mortgaged Properties
that are secured by a first lien are and will be insured against fire and have extended coverage
insurance in the amounts required under Applicable Requirements; all insurance premiums on such
insurance policies have been or will have been paid in a timely manner; and there have been or will
have been no fire losses on the Mortgaged Properties where the Owner’s estimate of loss is
materially greater than the net recovery from the fire insurance carrier. To the Owner’s knowledge,
there have been no fire losses on the Mortgaged Properties as to which there is a pending
coinsurance claim.



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               6.2.5. No Litigation. There is not pending or, to the Owner’s actual knowledge,
threatened, Litigation, or any order, injunction, settlement or decree outstanding, against or
relating to the Mortgage Loans or servicing thereof that could materially adversely affect the
servicing of the Mortgage Loans, the Mortgage Loans or the performance by the Owner or the Servicer
of their respective obligations under this Agreement. No Mortgagor is a named plaintiff in any
class action lawsuit.



               6.2.6. Tax Service/Flood Service. All of the Mortgage Loans that are secured by a
first lien on the related Mortgage Property have or will have a valid, fully paid, freely
transferable, life of the loan tax service contract and flood service contract as of the Effective
Date. The Owner shall reimburse the Servicer, for any costs or expenses incurred to transfer such
contracts or to obtain contracts that are not existing or transferable to the Servicer.



               6.2.7. Application of Payments. As of the applicable Effective Date, all calculations
required to be made by the Owner or Prior Servicers with respect to the amount of principal,
interest, escrow payments and other amounts due and owing by a Mortgagor from time to time under
each Mortgage Loan have been made in compliance with all Applicable Requirements. All invoices
transmitted to the Mortgagors by the Owner or Prior Servicers for principal, interest, escrow
payments and all other amounts due and payable under each Mortgage Loan have been prepared, and the
funds collected from the Mortgagors have been applied for the payment of such amounts, in
compliance with all Applicable Requirements.



               6.2.8. Compliance with Applicable Laws. Any and all requirements of any federal, state
or local law including usury, truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan have been
satisfied.



               6.2.9. High Cost Loans. No Mortgage Loan is a High Cost Loan or Covered Loan. No
Mortgage Loan is subject to the provisions of the Homeownership and Equity Protection Act of 1994
as amended or is considered a “high cost,” “predatory” or “abusive” loan (or a similarly designated
loan using different terminology) under any state, county or municipal laws or ordinances,
including without limitation, the provisions of the Georgia Fair Lending Act, New York Banking Law,
Section 6-1, the New Jersey Home Ownership Security Act of 2002 or any other statute or regulation
providing “assignee” or “originator” liability to holders of such mortgage loans.



               6.2.10. Prepayment Fees. Any prepayment fee contained in the Mortgage Loan Documents
is fully enforceable by the Servicer for the benefit of the Owner.



               6.2.11. Late Payment Fees. Any late payment fee contained in the Mortgage Loan
Documents is fully enforceable by the Servicer for the benefit of the Owner.



               6.2.12. Ownership. With respect to each Mortgage Loan, the Owner is the owner of all
the right, title and interest in and to the Mortgage Loan, free and clear of any claims or
encumbrances.



               6.2.13. No Fraud. There has been no error, omission, fraud, misrepresentation,
negligence or similar occurrence on the part of any person, including without



25









 




limitation the Mortgagor, any appraiser, any builder or developer, or any other party in
connection with the solicitation of the Mortgage Loan, the origination of the Mortgage Loan or the
application of any insurance in relation to such Mortgage Loan.




ARTICLE VII




THE SERVICER




          7.1. Indemnification; Third Party Claims.




               7.1.1. The Servicer shall indemnify the Owner, its affiliates and their respective officers,
directors, employees and agents (collectively, “Owner Indemnitees”) and hold each of the
Owner Indemnitees harmless from and against any and all third party claims and Damages that the
Owner and the Owner Indemnitees may sustain resulting from or related to the failure of the
Servicer to perform its duties in compliance with the terms of this Agreement and for any breach of
any representation or warranty of the Servicer contained herein. The Owner shall promptly notify
the Servicer of any claim covered hereby; provided, however, that the Servicer shall not be
relieved of its indemnification obligations hereunder due to the Owner’s failure to give such
notice except to the extent the Servicer has been prejudiced thereby. In connection with the
Servicer’s indemnification obligations hereunder, the Servicer may assume (with the prior written
consent of the Owner, if required pursuant to the terms hereof, and with counsel reasonably
satisfactory to the Owner) the defense of any such claim and pay all reasonable expenses in
connection therewith, including reasonable counsel fees, and promptly pay, discharge and satisfy
any judgment or decree which may be entered against the Owner or any other Owner Indemnitees in
respect of such claim. The Servicer agrees that it will not enter into any settlement of any such
claim without the consent of the Owner (which consent shall not be unreasonably withheld or
delayed) and such other Owner Indemnitees unless such settlement includes an unconditional release
of the Owner and such other Owner Indemnitees from all liability that is the subject matter of such
claim.



               7.1.2. The Owner shall indemnify the Servicer, its affiliates, and their respective officers,
directors, employees and agents (collectively, “Servicer Indemnitees”) and hold each of
such Persons harmless from and against any and all third party claims and Damages that the Servicer
or such Persons may sustain resulting from or related to the failure of the Owner to perform its
duties in compliance with the terms of this Agreement, for breach of any representation or warranty
of the Owner contained herein, and any other third party claims arising out of or relating to this
Agreement other than those for which the Servicer is to indemnify the Owner Indemnitees pursuant to
Section 7.1.1 hereof. The Servicer shall notify the Owner of any claim covered hereby; provided,
however, that the Owner shall not be relieved of its indemnification obligations hereunder due to
the Servicer’s failure to give such notice except to the extent the Owner has been prejudiced
thereby. In connection with the Owner’s indemnification obligations hereunder, the Owner may
assume (with the prior written consent of the Servicer, if required pursuant to the terms hereof,
and with counsel reasonably satisfactory to the Servicer) the defense of any such claim and pay all
reasonable expenses in connection therewith, including reasonable counsel fees, and promptly pay,
discharge and satisfy any judgment or decree which may be entered against the Servicer or any other
Servicer Indemnitees in respect of such claim. The Owner agrees that it will not enter into any
settlement of any such



26









 







claim without the consent of the Servicer (which consent shall not be unreasonably withheld or
delayed) and such other indemnified Person unless such settlement includes an unconditional release
of the Servicer and such other indemnified Person from all liability that is the subject matter of
such claim.



               7.1.3. In addition to the indemnification set forth in Section 7.1.2 hereof, the Owner shall
indemnify and hold the Servicer Indemnitees harmless from and against any Damages resulting from or
related to:




     (a) any failure of the Owner, any Prior Servicer or the Originator to have complied
with all Applicable Requirements with respect to the origination, purchase, sale,
securitization or servicing of the Mortgage Loans; or




     (b) the Servicer’s compliance with written instructions of the Owner to the extent that
such instructions are not in compliance with Applicable Requirements; or




     (c) any outstanding Servicing Advance as to which the Servicer is not reimbursed in
accordance with Article II hereof; or




     (d) the continuation by the Servicer of the past practices of the Owner or any Prior
Servicer that fail to comply with Applicable Requirements, except if and to the extent the
Servicer should have become aware of such violations under the standard of care pursuant to
Section 2.1 hereof; or




     (e) any failure of the Servicer to comply with Applicable Requirements or the
requirements of this Agreement as a result of there being any incorrect, incomplete or
missing Mortgage Loan Documents, Mortgage Files or Servicing Files as of the applicable
Effective Date; or




     (f) any Litigation commenced against the Servicer after the applicable Effective Date
as a result of the Servicer’s acting as, or status as, servicer of the Mortgage Loans
hereunder, to the extent that such Litigation does not arise out of or result from the
Servicer’s breach of any provision of this Agreement.



               7.1.4. The provisions of this Section 7.1 shall survive termination of this Agreement.



          7.2. Merger or Consolidation of the Servicer. The Servicer shall keep in full effect
its existence, rights and franchises as a corporation, and shall obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and enforceability of this Agreement
or any of the Mortgage Loans and to perform its duties under this Agreement.




     Any person into which the Servicer may be merged or consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Servicer shall be a party, or any Person
succeeding to the business of the Servicer, shall be the successor of the Servicer hereunder,
without the execution or filing of any paper or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding. Furthermore, in the event the



27









 







Servicer transfers or otherwise disposes of all or substantially all of its assets to an affiliate
of the Servicer, such affiliate shall satisfy the condition above, and shall also be fully liable
to the Owner for all of the Servicer’s obligations and liabilities hereunder.



          7.3. Limitation on Liability of the Servicer and Others. Neither the Servicer nor any
of the directors, officers, employees or agents of the Servicer shall be under any liability to the
Owner for any action taken or for refraining from the taking of any action in good faith pursuant
to this Agreement, or for errors in judgment, provided, however, that this provision shall not
protect the Servicer or any such person against any breach of warranties or representations made
herein, or failure to perform its obligations in compliance with any standard of care set forth in
this Agreement or any other liability which would otherwise be imposed under this Agreement. The
Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Servicer shall not be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its duties to service the Mortgage Loans in
accordance with this Agreement and which in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may, with the consent of the Owner, undertake any such action
which it may deem necessary or desirable with respect to this Agreement and the rights and duties
of the parties hereto. In such event, the Servicer shall be entitled to reimbursement from the
Owner of the reasonable legal expenses and costs of such action. In no event shall the Servicer be
liable for any loss of use, data, goodwill, revenues or profits (whether or not deemed to
constitute direct Damages) or any consequential, special, indirect, incidental, punitive or
exemplary loss, damage, or expense relating to the Services hereunder.




          7.4. Limitation on Assignment by the Servicer. The Owner has entered into this
Agreement with the Servicer and subsequent Owners 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, personnel, records and procedures, its integrity, reputation and financial standing,
and the continuance thereof. Therefore, the Servicer shall neither assign this Agreement or the
servicing hereunder without the prior written consent of the Owner, which consent shall not be
unreasonably withheld or delayed.




ARTICLE VIII




RESERVED




          8.1. Reserved.




ARTICLE IX




DEFAULT




          9.1. Events of Default. Each of the following shall constitute an Event of Default on
the part of the applicable party hereto:




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     (a) any failure by such party to remit to the other party any payment required to be
made under the terms of this Agreement, which continues unremedied for a period of thirty
(30) days after the date upon which written notice of such failure, requiring the same to be
remedied, shall have been given to such party; or




     (b) failure by such party duly to observe or perform any other of the material
covenants or agreements on the part of the party set forth in this Agreement or in the
Custodial Agreement, which continues unremedied for a period of ninety (90) days after the
date on which written notice of such failure, requiring the same to be remedied, shall have
been given to such party or by the Custodian; 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,
readjustment of debt, including bankruptcy, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have been entered
against such party and such decree or order shall have remained in force undischarged or
unstayed for a period of sixty (60) days; or




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




     (e) such party 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, bankruptcy or
reorganization statute, make an assignment for the benefit of its creditors, voluntarily
suspend payment of its obligations or cease its normal business operations for three (3)
Business Days; or




     (f) failure by such party to maintain the material licenses to do business in any
jurisdiction where the Mortgaged Property is located, but only to the extent such
non-qualification materially and adversely affects such party’s ability to perform its
obligations hereunder and such failure continues unremedied for a period of thirty (30) days
after the date upon which written notice of such failure, requiring the same to be remedied,
shall have been given to such party; provided, that if the breaching party shall have
promptly commenced and been diligently pursuing a cure or remedy for such breach, but the
breach shall have remained uncured after expiration of the thirty (30) day period, such
thirty (30) day period shall be extended for a reasonable period of time to allow for cure
or remedy of the breach, but in no event for more than one hundred twenty (120) days.



          9.2. Waiver of Defaults. By a written notice, the non-breaching Party may waive any
default by the breaching Party in the performance of its obligations hereunder and its
consequences. Upon any waiver of a past default, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived.




29









 








ARTICLE X




TERMINATION




          10.1. Termination. This Agreement shall terminate upon the earliest of: (i) the
liquidation and dissolution of the Owner; (ii) mutual consent of the Servicer and the Owner in
writing; or (iii) termination of this Agreement pursuant to Section 10.2. The termination of this
Agreement pursuant to this Article X shall not release either party from liability for its own
misrepresentation or for any breach by it of any covenant, agreement or warranty herein prior to
such termination.




          10.2. Termination With Cause. So long as an Event of Default shall have occurred and
shall not have been remedied, the non-breaching party, by notice in writing to the other party,
may, in addition to whatever rights such party may have at law or equity to damages, including
injunctive relief and specific performance, terminate this Agreement; provided, however, that any
termination by the Servicer in respect of an the Owner Event of Default shall be effective thirty
(30) days after the notice of termination or such lesser time as the Owner may require to find a
successor servicer. Upon written request from the Owner, the Servicer shall prepare, execute and
deliver to a successor servicer any and all documents and other instruments relating to the
Mortgage Loans, place in such successor’s possession all Mortgage Servicing Files and do or cause
to be done all other acts or things necessary or appropriate to effect the purposes of such notice
of termination, including, but not limited to, the transfer and endorsement or assignment of the
Mortgage Loans and related documents to the successor at the Servicer’s sole expense if the
termination is based on a Servicer Event of Default or the Owner’s sole expense if the termination
is based on an Owner Event of Default. The Servicer agrees to cooperate with the Owner and such
successor in effecting the termination of the Servicer’s responsibilities and rights hereunder. In
the event of a termination by the Servicer upon an Owner Event of Default pursuant to this Section
10.2, the Owner shall pay the Servicer any fees and costs for which the Servicer is entitled to
reimbursement hereunder.




ARTICLE XI




MISCELLANEOUS PROVISIONS




          11.1. Successor to the Servicer. Prior to termination of the Servicer’s
responsibilities and duties under this Agreement pursuant to Sections 10.1(ii), 10.1(iii) or 10.2,
the Owner shall (i) succeed to and assume all of the Servicer’s responsibilities, rights, duties
and obligations under this Agreement or (ii) appoint a successor to succeed to all rights and
assume all of the responsibilities, duties and liabilities of the Servicer under this Agreement. In
connection with such appointment and assumption, the Owner may make such arrangements for the
compensation of such successor out of payments on Mortgage Loans as it and such successor shall
agree, subject to payment of outstanding amounts due to the Servicer. In the event that the
Servicer’s duties, responsibilities and liabilities under this Agreement are terminated pursuant to
the aforementioned sections, the Servicer shall discharge such duties and responsibilities during
the period from the date it is notified of or delivers a notice of such termination until the
effective date thereof with the same degree of diligence and prudence which it is obligated to
exercise under this Agreement, and shall take no action whatsoever that might impair or prejudice
the




30









 







rights or financial condition of its successor. The resignation or removal of the Servicer
pursuant to the aforementioned Sections shall not become effective until a successor is appointed
pursuant to this Section 11.1; provided, however, that notwithstanding the foregoing, in the event
that the Servicer’s responsibilities and duties hereunder are terminated by the Servicer for an
Owner Event of Default, under no circumstance shall the effectiveness of the termination of the
Servicer’s responsibilities and duties hereunder be extended for more than 60 days after the
Servicer delivers its notice of termination to the Owner. Prior to the transfer of servicing with
respect to any Mortgage Loan hereunder, the Servicer shall be reimbursed by the Owner or the
successor servicer for any unpaid Servicing Fees and Servicing Advances with respect to such
Mortgage Loan.




     Any successor appointed as provided herein shall execute, acknowledge and deliver to the
Servicer and to the Owner an instrument accepting such appointment, whereupon such successor shall
become fully vested with all the rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer, with like effect as if originally named as a party to this Agreement.
Any termination or resignation of the Servicer or termination of this Agreement pursuant to Section
10.1(ii), 10.1(iii) or 10.2 shall not affect any claims that either party may have against the
other party arising out of the other party’s actions or failure to act prior to any such
termination or resignation.



     The Servicer shall deliver promptly to the successor servicer all Mortgage Files and related
documents and statements held by it hereunder. The Servicer shall execute and deliver such
instruments and do such other things as may reasonably be required to more fully and definitively
vest in the successor all such rights, powers, duties, responsibilities, obligations and
liabilities of the Servicer.



     Upon a successor’s acceptance of appointment as such, the Owner shall notify by mail the
Servicer of such appointment in accordance with Section 11.6.



          11.2. Other Activity. The Owner acknowledges and agrees that: (i) the Servicer’s
business is competitive with the business of the Owner and that the Servicer may, from time to
time, acquire and own one or more subsidiaries or investments in one or more other entities that
are direct competitors of, or that otherwise may have interests that do or could conflict with
those of the Owner or any of its subsidiaries; and (ii) the Servicer is currently providing, and
may in the future provide, the types of services to be provided hereunder for itself and to other
entities and may continue to provide such services or other services to other Persons in its sole
discretion.




          11.3. Amendment; Extension Not a Waiver. This Agreement sets forth the entire
agreement between the parties with respect to the subject matter hereof and supersedes any and all
prior or contemporaneous agreements with respect to the subject matter hereof. This Agreement may
be amended from time to time by, and only by, a writing signed by the Servicer and the Owner.




     No delay or omission in the exercise of any power, remedy or right herein provided or
otherwise available to any party hereto will impair or affect the right of such party thereafter to
exercise the same. Any extension of time or other indulgence granted to any party hereunder



31









 







will not otherwise alter or affect any power, remedy or right of any other party hereto, or
the obligations of the party to whom such extension or indulgence is granted.



          11.4. Governing Law; Venue. This Agreement shall be construed in accordance with the
laws of the State of New York applicable to agreements made and fully performed within the State of
New York and the obligations, rights and remedies of the parties hereunder shall be determined in
accordance with such laws.




     Any action or other legal proceeding brought under this Agreement will be subject to the
exclusive jurisdiction of any court of competent jurisdiction in the Borough of Manhattan in the
State of New York or the United States District Court for the Southern District of New York. Each
of the Owner and the Servicer consents to the jurisdiction of New York for actions or legal
proceedings brought by either party and waives any objection which it may have to the laying of the
venue of such suit, action or proceeding in any of such courts.



          11.5. Duration of Agreement. This Agreement shall continue in existence and effect
until terminated as herein provided. This Agreement shall continue notwithstanding transfers of the
Mortgage Loans by the Owner.




          11.6. Notices. All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed by registered
mail, postage prepaid, addressed as follows:



(a) if to the Servicer:



Franklin Credit Management Corporation

101 Hudson Street

Jersey City, NJ 07302

Attn: Chief Operating Officer



With a copy to:



Franklin Credit Management Corporation

101 Hudson Street

Jersey City, NJ 07302

Attn: General Counsel



or
such other address as may hereafter be furnished to the Owner in writing by the Servicer;



(ii) if to the Owner:



Bosco Credit LLC

c/o Franklin Credit Management Corporation

101 Hudson Street

Jersey City, NJ 07302

Attn: Thomas J. Axon




32









 







or
such other address as may hereafter be furnished to the Servicer in writing by the Owner;




          11.7. Severability of Provisions. If any provision of this Agreement is found to be
unenforceable by a court of competent jurisdiction, such unenforceable provision shall not affect
the other provisions, but such court shall have the authority to modify such unenforceable
provision to the extent necessary to render it enforceable, preserving to the fullest extent
permissible the intent of the parties.




          11.8. Relationship of Parties. The parties are entering into, and shall perform, this
Agreement as independent contractors. Nothing in this Agreement shall be construed to make either
party the agent of the other for any purpose whatsoever, to authorize either party to enter into
any contract or assume any obligation on behalf of the other or to establish a partnership,
franchise or joint venture between the parties.




          11.9. Execution; Successors and Assigns. This Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall constitute one and
the same agreement. Subject to Section 7.4, this Agreement shall inure to the benefit of and be
binding upon the Servicer and the Owner and their respective successors and assigns.




          11.10. Assignment by the Owner. The Owner shall have the right, without the consent of
the Servicer but subject to the limits set forth in Section 5.4 hereof, 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, by executing an Assignment and
Assumption Agreement and the assignee or designee shall accede to the rights and obligations
hereunder of the Owner with respect to such Mortgage Loans.




          11.11. Time of Payment. Unless otherwise specifically set forth in this Agreement, any
amount due to a party under this Agreement will be due and payable thirty (30) days following
receipt by the paying party of the invoice from the other party. All amounts will be payable by
wire transfer, in accordance with payment instructions provided from time to time. Any amount not
paid when due as set forth in this Agreement will bear interest until paid at a rate of interest
equal to the prime rate published from time to time by The Wall Street Journal, “Money
Rates.” If any portion of an amount due to a party under this Agreement is subject to a bona fide
dispute between the parties, the other party will pay to that party on the date such amount is due
all amounts not disputed in good faith.




          11.12. Force Majeure. The Servicer shall not be liable to any other Person for any
acts or omissions resulting from circumstances or causes beyond its reasonable control, including
fire or other casualty, act of God, strike or labor dispute, war, terrorism or other violence or
any governmental action or any acts or omissions of the other Person.




[Intentionally Blank — Next Page Signature Page]




33









 








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



	 	 	 	 	 
	 	FRANKLIN CREDIT MANAGEMENT CORPORATION

 	 
	 	By:  	/s/ Alexander Gordon Jardin
 	 
	 	 	Name:  	Alexander Gordon Jardin 	 
	 	 	Title:  	Chief Executive Officer 	 



34









 






	 	 	 	 	 



	 	 	 	 	 
	 	BOSCO CREDIT LLC

 	 
	 	By:  	/s/ Thomas J. Axon
 	 
	 	 	Name:  	Thomas J. Axon 	 
	 	 	Title:  	Managing Member 	 



 









 






	 	 	 	 	 



	 	 	 	 	 	 	 
	STATE OF NEW JERSEY

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss:
	COUNTY OF HUDSON

	 	 	)	 	 	 






     On
the
28th day of May, 2008 before me, a Notary Public in
and for said State, personally appeared Alexander Gordon Jardin, known to me to be
CEO of Franklin Credit Management Corporation, the corporation that executed the
within instrument and also known to me to be the person who executed it on behalf of said
corporation, and acknowledged to me that such corporation executed the within instrument.



     IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in
this certificate first above written.



	 	 	 	 	 
	 	 	 
	 	                                              /s/ Donna M. Bonfiglio
 	 
	 	Notary Public 	 
	 
	 	My Commission expires February 25, 2011 	 



2









 






	 	 	 	 	 



	 	 	 	 	 	 	 
	STATE OF NEW JERSEY)
	 	 	 	 	 	 
	 

	 	 	)	 	 	ss:
	COUNTY OF HUDSON)
	 	 	 	 	 	 






     On
the
28TH day of May, 2008 before me, a Notary Public in
and for said State, personally appeared Thomas Axon, known to me to be the Managing
Member of Bosco Credit LLC, the corporation that executed the within instrument and
also known to me to be the person who executed it on behalf of said corporation, and acknowledged
to me that such corporation executed the within instrument.



     IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in
this certificate first above written.



	 	 	 	 	 
	 	 	 
	 	                                              /s/ Donna M Bonfiglio
 	 
	 	Notary Public 	 
	 
	 	My Commission expires February 25, 2011 	 



3









 






	 	 	 	 	 



EXHIBIT A




MORTGAGE LOAN SCHEDULE





4









 








EXHIBIT B




CONTENTS OF EACH MORTGAGE FILE





     With respect to each Mortgage Loan, the Mortgage File shall include each of the following
items, which the Owner shall deliver to the Servicer for retention in the Servicing File:




	 	1.	 	The original Mortgage Note bearing all intervening endorsements, endorsed “Pay
to the order of                      without recourse” and signed in the name of the Owner by an
authorized officer (in the event that the Mortgage Loan was acquired by the Owner in a
merger, the signature must be in the following form: “[the Owner], successor by merger
to [name of predecessor]”; and in the event that the Mortgage Loan was acquired or
originated by the Owner while doing business under another name, the signature must be
in the following form: “[the Owner], formerly known as [previous name]”).
	 
	 	2.	 	The original of any guarantee executed in connection with the Mortgage Note (if
any).
	 
	 	3.	 	The original Mortgage, with evidence of recording thereon or a certified true
and correct copy of the Mortgage sent for recordation.
	 
	 	4.	 	The originals or certified true copies of any document sent for recordation of
all assumption, modification, consolidation or extension agreements, with evidence of
recording thereon.
	 
	 	5.	 	The original Assignment of Mortgage for each Mortgage Loan, in form and
substance acceptable for recording (except for the insertion of the name of the
assignee and recording information).
	 
	 	6.	 	Originals or certified true copies of documents sent for recordation of all
intervening assignments of the Mortgage with evidence of recording thereon.
	 
	 	7.	 	The original PMI Policy, where required pursuant to the Agreement.
	 
	 	8.	 	The original mortgagee policy of title insurance or evidence of title.
	 
	 	9.	 	Any security agreement, chattel mortgage or equivalent executed in connection
with the Mortgage.




With respect to each Mortgage Loan, the Mortgage File shall include each of the following items to
the extent in the possession of the Owner or in the possession of the Owner’s agent(s):





	 	10.	 	The original hazard insurance policy and, if required by law, flood insurance
policy, in accordance with Section 4.10 of the Agreement.
	 
	 	11.	 	Residential loan application.




 









 






	 	12.	 	Mortgage Loan closing statement.
	 
	 	13.	 	Verification of employment and income, if applicable.
	 
	 	14.	 	Verification of acceptable evidence of source and amount of down payment, if
applicable.
	 
	 	15.	 	Credit report on the Mortgagor.
	 
	 	16.	 	Residential appraisal report.
	 
	 	17.	 	Photograph of the Mortgaged Property.
	 
	 	18.	 	Survey of the Mortgage property, if required by the title owner or applicable
law.
	 
	 	19.	 	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.
	 
	 	20.	 	All required disclosure statements.
	 
	 	21.	 	If available, termite report, structural engineer’s report, water potability
and septic certification.
	 
	 	22.	 	Sales contract, if applicable.
	 
	 	23.	 	Evidence of payment of taxes and insurance premiums, 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.
	 
	 	24.	 	Amortization schedule, if available.
	 
	 	25.	 	Mortgage Loan payment history.
	 
	 	26.	 	Original power of attorney, if applicable.




B-2 









 











EXHIBIT C




ELIGIBILITY CRITERIA




	 	 	 
	Loan Types:

	 	Conventional
	 
	 	 
	Interest rate types:

	 	Fixed and adjustable rate
	 
	 	 
	Lien Position types:

	 	First and Second liens
	 
	 	 
	Collateral Types:

	 	1-4 family, residential properties
	 
	 	 
	Credit types:

	 	Prime and sub-prime






 









 





EXHIBIT D




SERVICING FEE SCHEDULE



In return for services rendered by Franklin Credit for the Owner, Franklin Credit will be
compensated as follows:




Servicing:





	 	I.	 	For Mortgage Loans less than 180 days contractually past due, Servicing Fees:






	 	a)	 	Franklin Credit will be paid a monthly servicing fee at a
Servicing Fee Rate equal to (x) the highest daily aggregate outstanding
principal balance of such Mortgage Loans serviced by the Servicer for the
previous month), times (y) ***, divided by (z) twelve. Each month the Servicer
will retain or receive an amount equal to such servicing fee.
	 
	 	b)	 	Franklin Credit will be paid ***, of the amount of each
principal payment indefeasibly collected, in each instance of the Mortgage
Loans serviced by Servicer for the Owner pursuant to the Loan Servicing
Agreement.






	 	II.	 	Other Fees






	 	A.	 	For Mortgage Loans less than 180 days contractually past due,
Ancillary Fees paid by borrowers to be retained by Franklin Credit (income
derived from Mortgage Loans):






	 	a.	 	Subordination fees
	 
	 	b.	 	Insufficient fund fees
	 
	 	c.	 	Late Payment Fees
	 
	 	d.	 	Prepayment Penalty Fees
	 
	 	e.	 	Release Fees
	 
	 	f.	 	Satisfaction fees
	 
	 	g.	 	All other incidental fees and charges
received by Franklin Credit






	 	B.	 	For all Mortgage Loans, Loan Level Charges:





	 	 	 	 	 
	 

	 	a) Loan Set Up Fee:
	 	$*** per Mortgage Loan
	 
	 

	 	b) Deboarding Fee:
	 	$*** per Mortgage Loan (exclusive of out of pocket transfer related expenses)







	 	III.	 	For all Mortgage Loans 180 or more days contractually past due, Resolution Fees :





	 	 	 
	Recovery Collection
	 	 
	(judgments and unsecured loans)

	 	*** of recovered amount per loan







	 	IV.	 	For all Mortgage Loans, Servicing Advances:




 









 










A. Servicing Advances: Third party charges (e.g., force place insurance, credit reports, title
searches, tax searches, appraisal/ bpo, legal fees, reo maintenance, taxes, insurance etc.) +
Advances reimbursed to Franklin Credit.




 









 








EXHIBIT E




REPORTS




Trial Balance




Principal and Interest Collections




Prepaid Loans




Delinquent Loans




Unscheduled Principal Collections (Curtailments)




Payoff/Foreclosure Collections




Remittances




Loan Transfers




Cutoff Summary




Investor Payment/Rate Changes




 









 





EXHIBIT F




APPROVAL MATRIX




	 	 	 	 	 	 	 
	Item	 	Lien Position	 	Servicer Delegated with Approval Authority	 	Owner Approval Required
	Repayment Plans

	 	All
	 	Repays up to 12 months with a minimum of 1
contractual payment down.
	 	Repays greater than 12 months duration or
repays with less than 1 contractual
payment down.
	Modifications

	 	All
	 	2 deferments per year. Rate reduction by
300 basis points.
	 	More than 2 deferments and on rate
reductions greater than 300 basis points.
	Settlement of Litigated Files

	 	All
	 	None
	 	Owner to approve all litigated files
based on recommendations by Franklin and
outside counsel.
	Short Sales

	 	All
	 	Approval to accept 50% or greater of
appraised value for current loans. 10% for
non-performing loans (over 45 past due at
time of purchase)
	 	Approval required if less than 50% of
appraised value for current loans and
less than 10% of appraised value for
non-performing loans.
	Deed-in-Lieu

	 	All
	 	None
	 	Owner to approve all Deeds in Lieu.
	Charge-Off

	 	All
	 	None
	 	Owner to approve all Charge-Offs.
	Foreclosure — Bidding Instructions

	 	All
	 	None
	 	Owner to approve all Bidding Instructions.
	Judgment — Additional Fee Requests

	 	All
	 	Franklin to approve additional fees up to 8
hours @ $175 per hour per judgment. Owner
to approve any additional amount(s).
Franklin will email Owner contact with
amount and reason.
	 	Owner to approve if greater than 8 hours
or if hourly fee is greater than $175
	Foreclosure After Bankruptcy Filed

	 	All
	 	None
	 	Owner to approve
	REO — Appraisals

	 	 	 	If appraisal cost is less than $450 per
property
	 	If appraisal cost is greater than $450
	REO — Marketing Plans

	 	 	 	List at 100% of reconciled Fair Market
Value (FMV). FMV is defined as the
estimated sales price based on the review
and reconciliation of BPOs and appraisals.
	 	Any property that requires repairs in
excess of $10,000.






 









 






	 	 	 	 	 	 	 
	Item	 	Lien Position	 	Servicer Delegated with Approval Authority	 	Owner
Approval Required
	REO — Negotiation of Offers

	 	 	 	Franklin may accept 95% of current list
price
	 	Owner approval required for less offers
less than 95% of current list price.
	REO — List Price Reductions

	 	 	 	Franklin to perform first price reduction
review after property has been on the
market for 30 days. Thereafter, reviews
will be performed every 30 days. Franklin
will provide reviews to Owner, make
recommendations, and discuss reduction
strategy with Owner.
	 	Owner to approve all reductions
	REO — Relocation Assistance

	 	 	 	Up to 75% of estimated eviction costs —
not to exceed $2,500 per property.
	 	Owner to approve amounts in excess of 75%
of estimated eviction costs or $2,500.
	REO — Property Preservation

	 	 	 	Up to $5,000 per property
	 	Owner approval required for expenses in
excess of $5,000 per property.
	REO — Property Preservation —
Emergency Repairs

	 	 	 	Franklin to approve and notify Owner
	 	None
	Subordinations

	 	2nd & HELOCS
	 	None
	 	Owner to approve all subordinations
	Escrow Waivers

	 	1st
	 	None
	 	Owner to approve all Escrow Waiver
Requests.
	Real Estate Tax Contracts

	 	 	 	None
	 	Owner to approve all Tax Contracts.
	Assumptions

	 	 	 	None
	 	Owner to approve all Assumptions.