**Exhibit 10.2(1)**

 

**EXECUTION VERSION**

 

 

 

MASTER REPURCHASE AGREEMENT

 

CREDIT SUISSE, NEW YORK BRANCH, as administrativeagent (“Administrative Agent”)

 

FIELDSTONE INVESTMENT CORPORATION, as seller (“Seller”),

 

FIELDSTONE MORTGAGE COMPANY, as seller (“Seller”)and

 

THE SEVERAL CONDUIT BUYERS AND COMMITTED BUYERS PARTYHERETO FROM TIME TO TIME

 

 

Dated November 8, 2005

 

 

 

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TABLE OF CONTENTS

 

 
| 1.     | Applicability                        |   |
|--------|--------------------------------------|--------|
|   |                                 |   |
| 2.     | Definitions                          |   |
|   |                                 |   |
| 3.     | Program; Initiation of  Transactions |   |
|   |                                 |   |
| 4.     | Repurchase                           |   |
|   |                                 |   |
| 5.     | Price Differential                   |   |
|   |                                 |   |
| 6.     | Margin Maintenance                   |   |
|   |                                 |   |
| 7.     | Income Payments                      |   |
|   |                                 |   |
| 8.     | Security Interest                    |   |
|   |                                 |   |
| 9.     | Payment and Transfer                 |   |
|   |                                 |   |
| 10.    | Conditions Precedent                 |   |
|   |                                 |   |
| 11.    | Program; Costs;  Illegality          |   |
|   |                                 |   |
| 12.    | Servicing                            |   |
|   |                                 |   |
| 13.    | Representations  and Warranties      |   |
|   |                                 |   |
| 14.    | Covenants                            |   |
|   |                                 |   |
| 15.    | Events of Default                    |   |
|   |                                 |   |
| 16.    | Remedies Upon Default                |   |
|   |                                 |   |
| 17.    | Reports                              |   |
|   |                                 |   |
| 18.    | Repurchase  Transactions             |   |
|   |                                 |   |
| 19.    | Single Agreement                     |   |
|   |                                 |   |
| 20.    | Notices and  Other Communications    |   |
|   |                                 |   |
| 21.    | Entire  Agreement; Severability      |   |
|   |                                 |   |
| 22.    | Non assignability                    |   |
|   |                                 |   |
| 23.    | Set-off                              |   |

 

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| 24.    | Binding  Effect; Governing Law; Jurisdiction                     |   |
|--------|------------------------------------------------------------------|--------|
|   |                                                             |   |
| 25.    | No Waivers, Etc.                                                 |   |
|   |                                                             |   |
| 26.    | Intent                                                           |   |
|   |                                                             |   |
| 27.    | Disclosure  Relating to Certain Federal Protections              |   |
|   |                                                             |   |
| 28.    | Power of Attorney                                                |   |
|   |                                                             |   |
| 29.    | Buyers and  Administrative Agent May Act Through Affiliates |   |
|   |                                                             |   |
| 30.    | Indemnification;  Obligations                                    |   |
|   |                                                             |   |
| 31.    | Counterparts                                                     |   |
|   |                                                             |   |
| 32.    | Confidentiality                                                  |   |
|   |                                                             |   |
| 33.    | Recording of  Communications                                     |   |
|   |                                                             |   |
| 34.    | Reserved                                                         |   |
|   |                                                             |   |
| 35.    | No  Proceedings; Waiver of Setoff                                |   |
|   |                                                             |   |
| 36.    | Periodic Due  Diligence Review                                   |   |
|   |                                                             |   |
| 37.    | Authorizations                                                   |   |
|   |                                                             |   |
| 38.    | Acknowledgement  Of Anti-Predatory Lending Policies              |   |
|   |                                                             |   |
| 39.    | Documents  Mutually Drafted                                      |   |
|   |                                                             |   |
| 40.    | General  Interpretive Principles                                 |   |
|   |                                                             |   |
| 41.    | The Administrative  Agent                                        |   |
|   |                                                             |   |
| 42.    | Wire Instructions                                                |   |
|   |                                                             |   |
| 43.    | Joint and Several                                                |   |
|   |                                                             |   |
| 44.    | Amendments and Waivers                                           |   |
|   |                                                             |   |

 

SCHEDULES

 
| Schedule 1 - Representations  and Warranties with Respect to Purchased Mortgage Loans |   |
|--------------------------------------------------------------------------------------------|--------|

 

Schedule 2 – Authorized Representatives

 

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EXHIBITS

 

Exhibit A – Form of Transaction Request

 

Exhibit B – Form of Purchase Confirmation

 

Exhibit C – Form of Mortgage Loan Schedule

 

Exhibit D – Form of Officer’s Compliance Certificate

 

Exhibit E – Reserved

 

Exhibit F – Form of Opinion of Sellers’ counsel

 

Exhibit G – Underwriting Guidelines

 

Exhibit H – Officer’s Certificate of the Sellers and CorporateResolutions of Sellers

 

Exhibit I – Sellers’ Tax Identification Number

 

Exhibit J – Existing Indebtedness

 

Exhibit K - Escrow Instruction Letter

 

Exhibit L – Reserved

 

Exhibit M – Form of Servicer Notice

 

Exhibit N – Commitments

 

Exhibit O – Mortgage Loan Reports

 

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PRELIMINARY STATEMENTS

 

WHEREAS,FIC entered into that certain Funding Agreement dated as of July 25, 2005by and among FIC, Fieldstone Investment Funding, LLC, Credit Suisse, New YorkBranch, as Facility Agent, and the several conduit lenders, committed lendersand group agents party hereto from time to time (the “Facility”); and

 

WHEREAS,FIC intends to replace the Facility with this Agreement upon entering into theProgram Agreements.

 

# **1.**     Applicability

# ** **

From time to time the parties hereto may enter intotransactions in which a Seller agrees to transfer to Buyers Mortgage Loans (ashereinafter defined) against the transfer of funds by Buyers, and each ConduitBuyer may, at its option, and such Conduit Buyer’s related Committed Buyersshall be obligated to, transfer to such Seller such Mortgage Loans at a datecertain or on demand, against the transfer of funds by such Seller.  This Agreement is a commitment by CommittedBuyers to engage in the Transactions as set forth herein up to the MaximumCommitted Purchase Price; provided, that the Committed Buyers shall have nocommitment to enter into any Transaction requested which would result in theaggregate Purchase Price of then outstanding Transactions to exceed the MaximumCommitted Purchase Price.  No more thanone (1) Transaction shall be made by the Buyers on any Business Day.  Each such transaction shall be referred toherein as a “Transaction” and, unless otherwise agreed in writing, shallbe governed by this Agreement, including any supplemental terms or conditionscontained in any annexes identified herein, as applicable hereunder.

 

# **2.**     Definitions

# ** **

All capitalized terms used herein but not definedshall have the meanings set forth in the Custodial Agreement.  Whenever used in this Agreement, thefollowing words and phrases, unless the context otherwise requires, shall havethe following meanings:

 

“Acceptable SPV” means a Person which issuesStructured Securities Debt.

 

“Acceptable State” means any state acceptablepursuant to Sellers’ Underwriting Guidelines.

 

“Accepted Servicing Practices” means, withrespect to any Mortgage Loan, those mortgage servicing practices of prudentmortgage lending institutions which service mortgage loans of the same type assuch Mortgage Loan in the jurisdiction where the related Mortgaged Property islocated.

 

“Act of Insolvency” means, with respect to any Personor its Affiliates, (i) the filing of a petition, commencing, orauthorizing the commencement of any case or proceeding, or the voluntaryjoining of any case or proceeding under any bankruptcy, insolvency,reorganization, liquidation, dissolution or similar law relating to theprotection of creditors, or suffering any such petition or proceeding to becommenced by another which is consented to, not timely contested or results inentry of an order for relief; (ii) the seeking of the appointment of a

 

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receiver, trustee, custodian or similar official for such party or anAffiliate or any substantial part of the property of either; (iii) theappointment of a receiver, conservator, or manager for such party or anAffiliate by any governmental agency or authority having the jurisdiction to doso; (iv) the making or offering by such party or an Affiliate of acomposition with its creditors or a general assignment for the benefit ofcreditors; (v) the admission by such party or an Affiliate of such partyof its inability to pay its debts or discharge its obligations as they becomedue or mature; or (vi) that any governmental authority or agency or anyperson, agency or entity acting or purporting to act under governmentalauthority shall have taken any action to condemn, seize or appropriate, or toassume custody or control of, all or any substantial part of the property ofsuch party or of any of its Affiliates, or shall have taken any action todisplace the management of such party or of any of its Affiliates or to curtailits authority in the conduct of the business of such party or of any of itsAffiliates.

 

“Administrative Agent” means Credit Suisse, NewYork Branch or any affiliate or successor thereto.

 

“Affiliate” means, with respect to any Person,any “affiliate” of such Person, as such term is defined in the Bankruptcy Code.

 

“Agency” means Freddie Mac, Fannie Mae or GNMA,as applicable.

 

“Agency Security” means a mortgage-backedsecurity issued by an Agency.

 

“Agreement” means this Master Repurchase Agreement,as it may be amended, supplemented or otherwise modified from time to time.

 

“Alpine” means Alpine Securitization Corp., aDelaware corporation, and its permitted successors and assigns.

 

“Appraised Value” means the value set forth inan appraisal made in connection with the origination of the related MortgageLoan as the value of the Mortgaged Property.

 

“Asset Tape” means a remittance report on amonthly basis or requested by Administrative Agent pursuant to Section 17dhereof containing servicing information, including, without limitation, thosefields reasonably requested by Administrative Agent from time to time, on aloan-by-loan basis and in the aggregate, with respect to the Purchased MortgageLoans serviced by Sellers or any Servicer for the month (or any portionthereof) prior to the Reporting Date.

 

“Asset Value” shall have the meaning set forthin the Pricing Side Letter.

 

“Assignment of Mortgage” means an assignment ofthe Mortgage, notice of transfer or equivalent instrument in recordable form,sufficient under the laws of the jurisdiction wherein the related MortgagedProperty is located to reflect the sale of the Mortgage to Buyers.

 

“Available Collections” means, on any date ofdetermination, all Collections, together with any investment income from fundson deposit in the Collection Account; provided

 

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that, Available Collections shall not include any Collections that havebeen set aside or removed by the Servicer solely in payment of the Servicer’saccrued and unpaid servicing fee.

 

“Bailee Letter” has the meaning assigned tosuch term in the Custodial Agreement.

 

“Bankruptcy Code” means the United StatesBankruptcy Code of 1978, as amended from time to time.

 

“Bid” has the meaning set forth in Section 4(c) hereof.

 

“BPO” means an opinion of the fair market valueof a Mortgaged Property given by a licensed real estate agent or broker whichgenerally includes three comparable sales and three comparable listings.

 

“Business Day” means any day other than (A) aSaturday or Sunday and (B) a public or bank holiday in New York City.

 

“Buydown Amount” has the meaning set forth in Section 5(c) hereof.

 

“Buyers” means, at any time, any of the ConduitBuyers and the Committed Buyers.

 

“Buying Group” means, at any time, a groupconsisting of a Conduit Buyer and such Conduit Buyer’s related Committed Buyersand the Administrative Agent.

 

“Capital Lease Obligations” means, for anyPerson, all obligations of such Person to pay rent or other amounts under alease of (or other agreement conveying the right to use) Property to the extentsuch obligations are required to be classified and accounted for as a capitallease on a balance sheet of such Person under GAAP, and, for purposes of thisAgreement, the amount of such obligations shall be the capitalized amountthereof, determined in accordance with GAAP.

 

“Cash Equivalents” means  (a) securities with maturities of 90days or less from the date of acquisition issued or fully guaranteed or insuredby the United States Government or any agency thereof, (b) certificates ofdeposit and eurodollar time deposits with maturities of 90 days or less fromthe date of acquisition and overnight bank deposits of the Administrative Agentor of any commercial bank having capital and surplus in excess of $500,000,000,(c) repurchase obligations of the Administrative Agent or of anycommercial bank satisfying the requirements of clause (b) of thisdefinition, having a term of not more than seven days with respect to securitiesissued or fully guaranteed or insured by the United States Government, (d) commercialpaper of a domestic issuer rated at least A-1 or the equivalent thereof byS&P or P-1 or the equivalent thereof by Moody’s and in either case maturingwithin 90 days after the day of acquisition, (e) securities withmaturities of 90 days or less from the date of acquisition issued or fullyguaranteed by any state, commonwealth or territory of the United States, by anypolitical subdivision or taxing authority of any such state, commonwealth orterritory or by any foreign government, the securities of which state,commonwealth, territory, political subdivision, taxing authority or foreigngovernment (as the case may be) are rated at least A by S&P or A by

 

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Moody’s, (f) securities with maturities of 90 days or less fromthe date of acquisition backed by standby letters of credit issued by the AdministrativeAgent or any commercial bank satisfying the requirements of clause (b) ofthis definition or (g) shares of money market mutual or similar fundswhich invest exclusively in assets satisfying the requirements of clauses (a) through(f) of this definition.

 

“Change in Control” means:

 

(A)          anytransaction or event as a result of which (i) any Person or Persons own,beneficially or of record, at least 15% of the outstanding stock of FIC or (ii) FICshall cease to own, directly or indirectly, 100% of any of its Subsidiaries; or

 

(B)           the sale,transfer, or other disposition of all or substantially all of a Seller’s assets(excluding any such action taken in connection with any securitizationtransaction in the ordinary course of business) except the sale, transfer orother disposition of substantially all of FMC’s assets to FIC.

 

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

 

“Collection Account” means one or more accountsestablished by the Servicer for the benefit of Buyers, into which allcollections and proceeds on or in respect of the Mortgage Loans shall be depositedby Servicer.

 

“Collections” means, with respect to anyMortgage Loan, all cash collections and other proceeds of such Mortgage Loanand Repurchase Assets with respect thereto.

 

“Combined Loan to Value Ratio” or “CLTV”means, with respect to any Second Lien Mortgage Loan, the sum of the originalprincipal balance of such Mortgage Loan and the outstanding principal balanceof any related first lien as of the date of origination of the Mortgage Loan,divided by the Appraised Value of the Mortgaged Property as of the originationdate.

 

“Commercial Paper” means the short-termpromissory notes of a Conduit Buyer issued by such Conduit Buyer in thecommercial paper market.

 

“Committed Buyer” means any Person that becomesa party to the Repurchase Agreement as a “Committed Buyer” hereunder.

 

“Commitment” means, at any time with respect toeach Committed Buyer, the amount set forth opposite such Committed Buyer’s nameon Exhibit N hereto (as such Exhibit N may be amended,supplemented or otherwise modified and in effect).

 

“Conduit Assignee” means any special purposevehicle issuing indebtedness in the commercial paper market that isadministered by Administrative Agent or one of its Affiliates and is rated atleast A-1 by S&P and P-1 by Moody’s.

 

“Conduit Buyer” means any Person that becomes aparty to the Repurchase Agreement as a “Conduit Buyer” hereunder.

 

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“Consolidated AdjustedTangible Net Worth” means, for the Sellers, the amount that would,in conformity with GAAP, equal the stockholder’s equity included on the balancesheet of the Sellers and their Subsidiaries, plus any preferred stock notalready included in the calculation of stockholder’s equity, plus anyIndebtedness of the Sellers and their Subsidiaries that is fully subordinatedto any obligations arising under this Repurchase Agreement, plus othercomprehensive loss arising from the FASB 133, minus any intangibles or goodwill(as defined under GAAP), minus any advances between the Sellers and theirAffiliates (other than consolidated subsidiaries or between FIC and FMC), minusany loans or advances to officers or directors of the Sellers (as reportedunder GAAP), minus other comprehensive income arising from FASB 133; provided,however, that the non-cash effect (gain or loss) of any mark-to-marketadjustments made directly to stockholder’s equity for fluctuation of the valueof financial instruments as mandated under FASB 133 shall be excluded from thecalculation of Consolidated Adjusted Tangible Net Worth.

 

“CP Disruption Event” means the inability ofany Conduit Buyer to raise (whether as a result of a prohibition or any otherevent or circumstance whatsoever) funds through the issuance of commercialpaper notes in the United States commercial paper market, including by virtueof (i) any disruption in the commercial paper market, (ii) insufficientavailability under any enhancement facility entered into by any Conduit Buyerwith respect to this Agreement or (iii) a downgrade of the rating of one ormore financial institutions extending credit to or for the account of anyBuyer.

 

“Credit Grade” means, with respect to aMortgagor, the risk category for such Mortgagor as determined in accordancewith the Underwriting Guidelines.

 

“Custodial Agreement” means the custodialagreement dated as of the date hereof, among Sellers, Administrative Agent andCustodian as the same may be amended from time to time.

 

“Custodial Fee” means the fee payable by theSellers to the Custodian pursuant to the Custodial Agreement.

 

“Custodial Mortgage Loan Schedule” has themeaning assigned to such term in the Custodial Agreement.

 

“Custodian” means Wells Fargo Bank, NationalAssociation or such other party specified by Administrative Agent and agreed toby Sellers, which approval shall not be unreasonably withheld.

 

“Defaulted Mortgage Loan” means a Mortgage Loan(i) as to which any scheduled payment, or part thereof, remains unpaid forsixty (60) days or more from the original scheduled due date for such payment; (ii) asto which an Act of Insolvency has occurred and is continuing with respect tothe Mortgagor thereof; (iii) as to which the related Mortgagor has failedto pay in full the first scheduled payment thereunder; (iv) which has beenidentified by a Seller or the Servicer as uncollectible; (v) which,consistent with the Underwriting Guidelines and the Accepted ServicingPractices, has been or should be written off as uncollectible; or (vi) asto which the related Mortgagor is otherwise in default thereunder; providedthat any Mortgage

 

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Loan as to which any scheduled payment remains unpaid in full after thescheduled due date therefor for more than thirty (30) days, but less than sixty(60) days, shall not constitute a Defaulted Mortgage Loan unless such MortgageLoan is otherwise a Defaulted Mortgage Loan for a reason described in clauses(i)-(v) above.

 

“Dollars” and “$” means dollars inlawful currency of the United States of America.

 

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

 

“Effective Date” means the date upon which theconditions precedent set forth in Section 10 shall have been satisfied.

 

“Electronic Tracking Agreement” means anElectronic Tracking Agreement among Administrative Agent, Sellers, MERS andMERSCORP, Inc., to the extent applicable as the same may be amended fromtime to time.

 

“Eligible Subservicer” means JPMorgan ChaseHome Finance LLC Bank, National Association, or such other Person as may be approvedin writing as a subservicer of Mortgage Loans by the Administrative Agent(acting at the direction of the Committed Buyers).

 

“ERISA” means the Employee Retirement IncomeSecurity Act of 1974, as amended from time to time.

 

“ERISA Affiliate” means any corporation ortrade or business that is a member of any group of organizations (i) describedin Section 414(b) or (c) of the Code of which a Seller is amember and (ii) solely for purposes of potential liability under Section 302(c)(11)of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) ofERISA and Section 412(n) of the Code, described in Section 414(m) or(o) of the Code of which a Seller is a member.

 

“Escrow Instruction Letter” means the EscrowInstruction Letter from Sellers to the Settlement Agent, in the form of Exhibit Khereto, as the same may be modified, supplemented and in effect from time totime.

 

“Escrow Payments” means, with respect to anyMortgage Loan, the amounts constituting ground rents, taxes, assessments, waterrates, sewer rents, municipal charges, mortgage insurance premiums, fire andhazard insurance premiums, condominium charges, and any other payments requiredto be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage orany other document.

 

“Event of Default” has the meaning specified inSection 15 hereof.

 

“Existing Indebtedness” has the meaningspecified in Section 13(a)(24) hereof.

 

“Facility Outstanding Principal” means, at anytime, the aggregate outstanding principal balance of all Mortgage Loans sold tothe Buyers by the Sellers.

 

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“Fannie Mae” means Fannie Mae, the governmentsponsored enterprise formerly known as the Federal National MortgageAssociation.

 

“FASB 133” means the Statement of FinancialAccounting Standards No. 133, or any successor statement thereto.

 

“FHA” means the Federal Housing Administration,an agency within the United States Department of Housing and Urban Development,or any successor thereto, and including the Federal Housing Commissioner andthe Secretary of Housing and Urban Development where appropriate under the FHARegulations.

 

“FIC” means Fieldstone Investment Corporation,a Maryland corporation, and its permitted successors and assigns.

 

“FICO” means Fair Isaac & Co., or anysuccessor thereto.

 

“Fidelity Insurance”means insurance coverage with respect to employee errors, omissions,dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary,property (other than money and securities) and computer fraud in an aggregateamount acceptable to Sellers’ regulators.

 

“Fitch” means Fitch Ratings, Inc., or any successor thereto.

 

“Fixed Rate Mortgage Loan” means a MortgageLoan that bears interest at a single fixed rate for its entire term.

 

“Floating Rate Mortgage Loan” means a MortgageLoan that is not a Fixed Rate Mortgage Loan.

 

“FMC” means Fieldstone Mortgage Company, aMaryland corporation, or its permitted successors and assigns.

 

“Foreclosed Loan” means a Mortgage Loan, theproperty securing which has been foreclosed upon by a Seller.

 

“Freddie Mac” means the Federal Home LoanMortgage Corporation or any successor thereto.

 

“Full Documentation” means, with respect to aMortgage Loan, that the related Mortgagor has provided the highest level ofinformation to the applicable Seller about its assets, liabilities, income,credit history and employment history, as determined for “full documentation”in accordance with the Underwriting Guidelines.

 

“GAAP” means generally accepted accountingprinciples in effect from time to time in the United States of America andapplied on a consistent basis.

 

“GNMA” means the Government National MortgageAssociation and any successor thereto.

 

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“Government Securities”means any security issued or guaranteed as to principal or interest by theUnited States, or by a person controlled or supervised by and acting as aninstrumentality of the government of the United States pursuant to authoritygranted by the Congress of the United States; or any certificate of deposit forany of the foregoing.

 

“Governmental Authority” means any nation orgovernment, any state or other political subdivision thereof, or any entity exercisingexecutive, legislative, judicial, regulatory or administrative functions over anySeller or Buyer, as applicable.

 

“Gross Margin” means, with respect to eachadjustable rate Mortgage Loan, the fixed percentage amount set forth in therelated Mortgage Note.

 

“Guarantee” means, as to any Person, anyobligation of such Person directly or indirectly guaranteeing any Indebtednessof any other Person or in any manner providing for the payment of anyIndebtedness of any other Person or otherwise protecting the holder of suchIndebtedness against loss (whether by virtue of partnership arrangements, byagreement to keep-well, to purchase assets, goods, securities or services, orto take-or-pay or otherwise); provided that the term “Guarantee” shallnot include (i) endorsements for collection or deposit in the ordinarycourse of business, or (ii) obligations to make servicing advances fordelinquent taxes and insurance or other obligations in respect of a MortgagedProperty, to the extent required by Administrative Agent.  The amount of any Guarantee of a Person shallbe deemed to be an amount equal to the stated or determinable amount of theprimary obligation in respect of which such Guarantee is made or, if not statedor determinable, the maximum reasonably anticipated liability in respectthereof as determined by such Person in good faith.  The terms “Guarantee” and “Guaranteed”used as verbs shall have correlative meanings.

 

“High Cost Mortgage Loan”means a Mortgage Loan classified as (a) a “high cost” loan under the HomeOwnership and Equity Protection Act of 1994 or (b) a “high cost,” “threshold,”“covered,” or “predatory” loan under any other applicable state, federal orlocal law (or a similarly classified loan using different terminology under alaw, regulation or ordinance imposing heightened regulatory scrutiny oradditional legal liability for residential mortgage loans having high interestrates, points and/or fees).

 

“Income” means with respect to any PurchasedMortgage Loan at any time until repurchased by a Seller, any principal receivedthereon or in respect thereof and all interest, dividends or otherdistributions thereon.

 

“Indebtedness” means, for any Person, suchPerson’s:  (a) obligations forborrowed money; (b) obligations representing the deferred purchase priceof Property other than accounts payable arising in the ordinary course of suchPerson’s business on terms customary in the trade; (c) obligations,whether or not assumed, secured by Liens or payable out of the proceeds orproduction from property now or hereafter owned or acquired by such Person; (d) obligationsthat are evidenced by notes, acceptances, or other instruments; (e) obligationsunder repurchase agreements, sale/buy-back agreements or like arrangements; (f) obligations(contingent or otherwise) of such Person in respect of letters of credit forthe account of such Person; and (g) Capital Lease Obligations.

 

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“Index” means, with respect to any adjustablerate Mortgage Loan, the index identified on the Mortgage Loan Schedule andset forth in the related Mortgage Note for the purpose of calculating the applicableMortgage Interest Rate.

 

“Interest Only Adjustment Date” means, withrespect to each Interest Only Loan, the date, specified in the related MortgageNote on which the Monthly Payment will be adjusted to include principal as wellas interest.

 

“Interest Only Loan” means a Mortgage Loanwhich only requires payments of interest for a period of time specified in therelated Mortgage Note.

 

“Interest Rate Adjustment Date” means the dateon which an adjustment to the Mortgage Interest Rate with respect to eachMortgage Loan becomes effective.

 

“Interest Rate Protection Agreement” means,with respect to any or all of the Purchased Mortgage Loans, any short sale of aUS Treasury Security, or futures contract, or mortgage related security, or eurodollarfutures contract, or options related contract, or interest rate swap, cap orcollar agreement, or similar arrangement providing for protection againstfluctuations in interest rates or the exchange of nominal interest obligations,either generally or under specific contingencies, entered into by a Seller andan Affiliate of Buyers or such other party acceptable to Administrative Agentin its sole discretion, which agreement is acceptable to Administrative Agentin its sole discretion.

 

“Jumbo Mortgage Loan” means an A quality firstlien Mortgage Loan which is not eligible for sale to an Agency.

 

“Law” shall mean any law (including commonlaw), constitution, statute, treaty, regulation, rule, ordinance, order,injunction, writ, decree or award of any Official Body.

 

“LIBOR” means for each day, the rate ofinterest (calculated on a per annum basis) equal to the overnight BritishBankers Association Rate as reported on the display designated as “BBAM” “Page DG84a” on Bloomberg (or such other display as may replace “BBAM” “Page DG8 4a”on Bloomberg) on such date of determination, and if such rate shall not be soquoted, the rate per annum at which Administrative Agent or an Affiliate isoffered Dollar deposits at or about 11:00 a.m., (New York City time), onsuch day, by prime banks in the interbank eurodollar market where theeurodollar and foreign currency exchange operations in respect of its loans arethen being conducted for delivery on such day for an overnight period, and inan amount comparable to the amount of the Purchase Price of Transactions to beoutstanding on such day.

 

“Lien” means any mortgage, lien, pledge,charge, security interest or similar encumbrance; provided, however, that aLien shall not include Permitted Liens.

 

“Loan to Value Ratio” or “LTV” means theratio of (i)(a) with respect to any first lien Mortgage Loan, the originaloutstanding principal amount of such Mortgage Loan and (b) with respect toany Second Lien Mortgage Loan, the outstanding principal amount of any relatedfirst lien as of the date of origination of such Mortgage Loan, to (ii) thelesser of (a) the Appraised Value of the Mortgaged Property at originationor (b) if the Mortgaged Property was

 

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purchased within 12 months of the origination of such Mortgage Loan,the purchase price of the Mortgaged Property.

 

“Margin Call” has the meaning specified in Section 6(a) hereof.

 

“Margin Deadline” has the meaning specified in Section 6(b) hereof.

 

“Margin Deficit” has the meaning specified in Section 6(a) hereof.

 

“Market Value” means, with respect to anyPurchased Mortgage Loan as of any date of determination, the whole-loanservicing released fair market value of such Purchased Mortgage Loan on suchdate as determined by Administrative Agent (or an Affiliate thereof) in its goodfaith discretion.

 

“Material Adverse Effect” means (a) amaterial adverse change in, or a material adverse effect upon, the operations,business, properties, condition (financial or otherwise) or prospects of theServicer or the Sellers, taken as a whole; (b) a material impairment ofthe ability of any of the Sellers or the Servicer to perform under any ProgramAgreement; or (c) a material adverse effect upon the legality, validity,binding effect or enforceability of any Program Agreement against Sellers orthe Servicer.

 

“Maximum Aggregate Purchase Price” shall havethe meaning set forth in the Pricing Side Letter.

 

“Maximum Committed Purchase Price” means, atany time, the sum of the Commitments of the Committed Buyers then in effect.

 

“Maximum Group Purchase Price” shall have themeaning set forth in the Pricing Side Letter.

 

“MERS” means Mortgage Electronic RegistrationSystems, Inc., a corporation organized and existing under the laws of theState of Delaware, or any successor thereto.

 

“MERS System” means the system of recordingtransfers of mortgages electronically maintained by MERS.

 

“Monthly Payment” means the scheduled monthlypayment of principal and/or interest on a Mortgage Loan.

 

“Moody’s” means Moody’s Investors Service, Inc.or any successors thereto.

 

“Mortgage” means each mortgage, assignment ofrents, security agreement and fixture filing, or deed of trust, assignment ofrents, security agreement and fixture filing, deed to secure debt, assignmentof rents, security agreement and fixture filing, or similar instrument creatingand evidencing a lien on real property and other property and rights incidentalthereto.

 

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“Mortgage File” means, with respect to aMortgage Loan, the documents and instruments relating to such Mortgage Loan andset forth in Exhibit F to the Custodial Agreement.

 

“Mortgage Interest Rate” means the rate ofinterest borne on a Mortgage Loan from time to time in accordance with theterms of the related Mortgage Note.

 

“Mortgage Interest Rate Cap” means, withrespect to an adjustable rate Mortgage Loan, the limit on each MortgageInterest Rate adjustment as set forth in the related Mortgage Note.

 

“Mortgage Loan” means any closed-end, fixed orfloating-rate, first lien or Second Lien Mortgage Loan, on a one-to-four-familyresidential mortgage or home equity loan evidenced by a promissory note andsecured by a mortgage, which Mortgage Loan has closed and been funded by a Seller,and which satisfies the requirements set forth in the Underwriting Guidelinesand Section 13(b) hereof; provided*,*however, that,except as expressly approved in writing by Administrative Agent, Mortgage Loansshall not include any “high-LTV” loans (i.e., a mortgage loan having aloan-to-value ratio in excess of 100% or in excess of such lower percentage setforth in the Underwriting Guidelines or with respect to Second Lien MortgageLoans, a combined loan-to value ratio, in excess of the lower of (i) thepercentage specified in the Underwriting Guidelines or (ii) 100%) or anyHigh Cost Mortgage Loans and; provided, further, that the origination date withrespect to such Mortgage Loan is no earlier than thirty (30) days prior to therelated Purchase Date.

 

“Mortgage Loan Documents” means the documentsin the related Mortgage File to be delivered to the Custodian.

 

“Mortgage Loan Schedule” means with respect toany Transaction as of any date, a mortgage loan schedule in the form ofeither (a)  Exhibit C attached hereto or (b) a computertape or other electronic medium generated by a Seller, and delivered to AdministrativeAgent and Custodian, which provides information (including, without limitation,the information set forth on Exhibit C attached hereto) relating tothe Purchased Mortgage Loans in a format acceptable to Administrative Agent.

 

“Mortgage Loan Schedule andException Report” has the meaning assigned to such term in theCustodial Agreement.

 

“Mortgage Note” means the promissory note orother evidence of the indebtedness of a Mortgagor secured by a Mortgage.

 

“Mortgaged Property” means the real propertysecuring repayment of the debt evidenced by a Mortgage Note.

 

“Mortgagor” means the obligor or obligors on aMortgage Note, including any person who has assumed or guaranteed theobligations of the obligor thereunder.

 

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“Multiemployer Plan” means a multiemployer plandefined as such in Section 3(37) of ERISA to which contributions have beenor are required to be made by a Seller or any ERISA Affiliate and that iscovered by Title IV of ERISA.

 

“Net Income” means, for any period and anyPerson, the net income of such Person for such period as determined inaccordance with GAAP.

 

“Net Worth” means, with respect to any Person,an amount equal to, on a consolidated basis, such Person’s stockholder equity(determined in accordance with GAAP).

 

“1934 Act” means the Securities Exchange Act of1934, as amended from time to time.

 

“Non-Utilization Fee” shall have the meaningset forth in the Pricing Side Letter.

 

“Notice Date” has the meaning given to it in Section 3(b) hereof.

 

“Obligations” means (a) all of Sellers’indebtedness, obligations to pay the Repurchase Price on the Repurchase Date,the Price Differential on each Price Differential Payment Date, and otherobligations and liabilities, to Buyers, their Affiliates or Custodian arisingunder, or in connection with, the Program Agreements, whether now existing orhereafter arising; (b) any and all sums paid by Buyers or on behalf ofBuyers in order to preserve any Purchased Mortgage Loan or its interesttherein; (c) in the event of any proceeding for the collection orenforcement of any of Sellers’ indebtedness, obligations or liabilitiesreferred to in clause (a), the reasonable expenses of retaking, holding,collecting, preparing for sale, selling or otherwise disposing of or realizingon any Purchased Mortgage Loan, or of any exercise by Buyers of their rightsunder the Program Agreements, including, without limitation, attorneys’ feesand disbursements and court costs; and (d) all of Sellers’ indemnityobligations to Buyers or Custodian or both pursuant to the Program Agreements.

 

“OFAC” has the meaning set forth in Section 13(a)(28)hereof.

 

“Official Body” shall mean any government orpolitical subdivision or any agency, authority, bureau, central bank,commission, department or instrumentality of any such government or politicalsubdivision, or any court, tribunal, grand jury or arbitrator, in each casewhether foreign or domestic.

 

“Outstanding Principal Balance” means, withrespect to any Mortgage Loan at any time, the then outstanding principal amountthereof.

 

“Participation Percentage” means, with respectto any Buyer at any time, a fraction, expressed as a percentage, the numeratorof which is such Buyer’s pro rata share of the aggregate outstanding PurchasePrice at such time, as determined by the Administrative Agent, and thedenominator of which is the aggregate outstanding Purchase Price of all Buyersat such time.

 

“PBGC” means the Pension Benefit GuarantyCorporation or any entity succeeding to any or all of its functions underERISA.

 

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“Permitted GuaranteeObligations” means (a) mortgage, repurchase and warehousefacilities whereby Sellers are jointly and severally liable thereunder; (b) mortgagerepurchase and warehouse facilities or other ordinary course transactions wherebyFIC guarantees the obligations of any of its Subsidiaries thereunder; and (c) theobligations of either Seller pursuant to surety bonds required in connectionwith state licensing and branch offices.

 

“Permitted Liens” means (i) liens ofcurrent real property taxes and assessments not yet due and payable, (ii) covenants,conditions and restrictions, rights of way, easements and other matters of thepublic record as of the date of recording being acceptable to mortgage lendinginstitutions generally and specifically referred to in the lender’s titleinsurance policy delivered to the Seller and which does not adversely affectthe Appraised Value of the Mortgaged Property, (iii) in the case of aMortgaged Property that is a condominium or an individual unit in a plannedunit development, liens for common charges permitted by statute, (iv) othermatters to which like properties are commonly subject, which do not,individually or in the aggregate, materially interfere with the benefits of thesecurity intended to be provided by the related Mortgage or the use, enjoyment,value or marketability of the related Mortgaged Property.

 

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

 

 “Plan”means an employee benefit or other plan established or maintained by any Selleror any ERISA Affiliate and covered by Title IV of ERISA, other than aMultiemployer Plan.

 

“Post Default Rate” shall have the meaning setforth in the Pricing Side Letter.

 

“Price Differential” means with respect to anyTransaction as of any date of determination, an amount equal to the product of (A) thePricing Rate for such Transaction and (B) the Purchase Price for suchTransaction, calculated daily on the basis of a 360-day year for the actualnumber of days during the period commencing on (and including) the PurchaseDate for such Transaction and ending on (but excluding) the date ofdetermination.

 

“Price Differential Payment Date” means, withrespect to a Purchased Mortgage Loan, the 5th day of the monthfollowing the related Purchase Date and each succeeding 5th day ofthe month thereafter; provided,**that, withrespect to such Purchased Mortgage Loan, the final Price Differential PaymentDate shall be the related Repurchase Date; and**provided*,*further*,*that if anysuch day is not a Business Day, the Price Differential Payment Date shall bethe next succeeding Business Day.

 

“Pricing Rate” shall have the meaning set forthin the Pricing Side Letter.

 

“Pricing Side Letter” means that certainPricing Side Letter, dated as of the date hereof, between the AdministrativeAgent and the Sellers, as the same may be amended from time to time.

 

“Principal” has the meaning given to it inAnnex I.

 

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“Program Agreements” means, collectively, thePricing Side Letter, the Servicing Agreement, if any, the Servicer Notice, ifany, the Custodial Agreement, this Agreement and the Electronic TrackingAgreement, if entered into.

 

“Prohibited Person” has the meaning set forthin Section 13(a)(28) hereof.

 

“Property” means any right or interest in or toproperty of any kind whatsoever, whether real, personal or mixed and whethertangible or intangible.

 

“Purchase Confirmation” means a confirmation ofa Transaction, in the form attached as Exhibit B hereto.

 

“Purchase Date” means the date on whichPurchased Mortgage Loans are to be transferred by the applicable Seller toBuyers.

 

“Purchase Price” means the price at which eachPurchased Mortgage Loan is transferred by the applicable Seller to Buyers,which shall equal:

 

(i) on the Purchase Date, the Asset Value of thePurchased Mortgage Loan on such date; and

 

(ii) on any day after the Purchase Date, exceptwhere Administrative Agent and the Sellers agree otherwise, the amountdetermined under the immediately preceding clause (i) decreased by theamount of any cash applied to reduce the Sellers’ obligations underclause (ii) of Section 4(b) hereof or under Section 6hereof.

 

“Purchase Price Percentage” shall have themeaning set forth in the Pricing Side Letter.

 

“Purchased Mortgage Loans” means the collectivereference to Mortgage Loans together with the Repurchase Assets related to suchMortgage Loans transferred by the applicable Seller to Buyers in a Transactionhereunder, listed on the related Mortgage Loan Schedule attached to therelated Transaction Request, which such Mortgage Loans the Custodian has beeninstructed to hold pursuant to the Custodial Agreement.

 

“Qualified Insurer” means a mortgage guarantyinsurance company duly authorized and licensed where required by law totransact mortgage guaranty insurance business and approved as an insurer byFannie Mae or Freddie Mac.

 

“Qualified Originator” means an originator ofMortgage Loans which is acceptable under the Underwriting Guidelines.

 

“Rating Agency”means each of Moody’s, S&P or Fitch or any successor thereof.

 

“Records” means all instruments, agreements andother books, records, and reports and data generated by other media for thestorage of information maintained by Sellers or any other person or entity withrespect to a Purchased Mortgage Loan. Records shall include the

 

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Mortgage Notes, anyMortgages, the Mortgage Files, the credit files related to the PurchasedMortgage Loan and any other instruments necessary to document or service aMortgage Loan.

 

“REO Property” means real property acquired by aSeller, including a Mortgaged Property acquired through foreclosure of aMortgage Loan or by deed in lieu of such foreclosure.

 

“Reporting Date” means the 5th dayof each month or, if such day is not a Business Day, the next succeedingBusiness Day.

 

“Repurchase Assets” has the meaning assignedthereto in Section 8 hereof.

 

“Repurchase Date” means the earlier of (i) theTermination Date, (ii) the date set forth in the applicable PurchaseConfirmation or (iii) the date determined by application of Section 16hereof.

 

“Repurchase Price” means the price at whichPurchased Mortgage Loans are to be transferred from Buyers to Sellers upontermination of a Transaction, which will be determined in each case (includingTransactions terminable upon demand) as the sum of the Purchase Price and theaccrued but unpaid Price Differential as of the date of such determination.

 

“Request for Certification” means a notice sentto the Custodian reflecting the sale of one or more Purchased Mortgage Loans toBuyers hereunder.

 

“Required Committed Buyers” means, at any time,Committed Buyers having Commitments at least equal to 66 2/3% of the MaximumCommitted Purchase Price, or, if the Commitments have been terminated, havingat least 66 2/3% of the Purchase Price outstanding with respect to Transactionshereunder.

 

“Requirement of Law” means, with respect to anyPerson, any law, treaty, rule or regulation or determination of an arbitrator,a court or other governmental authority, applicable to or binding upon suchPerson or any of its property or to which such Person or any of its property issubject.

 

“Responsible Officer” means as to any Person,the chief executive officer or, with respect to financial matters, the chief financialofficer of such Person, or, with respect to any certificates to be provided toBuyer hereunder, any of the chief executive officer, the chief financialofficer or the treasurer or such Person.

 

“S&P” means Standard & Poor’sRatings Services, or any successor thereto.

 

“SEC” means the Securities and ExchangeCommission, or any successor thereto.

 

“Second Lien Mortgage Loan” means a MortgageLoan secured by a second lien on the related Mortgaged Property.

 

“Seller” means each of (i) FieldstoneInvestment Corporation, a Maryland corporation, or its permitted successors andassigns and (ii) Fieldstone Mortgage Company, a Maryland corporation, orits permitted successors and assigns.

 

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“Servicer” means any servicer approved byAdministrative Agent in its sole discretion, which may be a Seller.

 

“Servicer Advance” has the meaning specified inSection 7(g) hereof.

 

“Servicer Notice” means the notice acknowledgedby the Servicer substantially in the form of Exhibit M hereto.

 

“Servicing Agreement” means any servicingagreement entered into among Sellers, Servicer, and/or Eligible Subservicer asthe same may be amended from time to time.

 

 “SettlementAgent” means, with respect to any Transaction the subject of which is aWet-Ink Mortgage Loan, the entity approved by Administrative Agent, in its solegood-faith discretion, which may be a title company, escrow company or attorneyin accordance with local law and practice in the jurisdiction where the relatedWet-Ink Mortgage Loan is being originated. A Settlement Agent is deemed approved unless Administrative Agentnotifies Sellers otherwise at any time electronically or in writing.

 

“SIPA” means the Securities Investor ProtectionAct of 1970, as amended from time to time.

 

“Structured SecuritiesDebt” means any Indebtedness incurred by an Acceptable SPV, providedthat (i) such Indebtedness is non-recourse to any shareholder or equityowner of such Acceptable SPV, (ii) such Indebtedness is publicly issued orprivately placed pursuant to a 144(a) offering and (iii) suchIndebtedness is rated by at least one of the Rating Agencies.

 

“Subordinated Debt” means, Indebtedness of Sellerswhich is (i) unsecured, (ii) no part of the principal of suchIndebtedness is required to be paid (whether by way of mandatory sinking fund,mandatory redemption, mandatory prepayment or otherwise) prior to the datewhich is one year following the Termination Date and (iii) the payment ofthe principal of and interest on such Indebtedness and other obligations of Sellersin respect of such Indebtedness are subordinated to the prior payment in fullof the principal of and interest (including post-petition obligations) on theTransactions and all other obligations and liabilities of Sellers to Buyershereunder on terms and conditions approved in writing (which may be byfacsimile or electronic mail) by Administrative Agent and all other terms andconditions of which are satisfactory in form and substance to AdministrativeAgent.

 

“Subsidiary” means, with respect to any Person,any corporation, partnership or other entity of which at least a majority ofthe securities or other ownership interests having by the terms thereofordinary voting power to elect a majority of the board of directors or otherpersons performing similar functions of such corporation, partnership or otherentity (irrespective of whether or not at the time securities or otherownership interests of any other class or classes of such corporation,partnership or other entity shall have or might have voting power by reason ofthe happening of any contingency) is at the time directly or indirectly ownedor controlled by such Person or one or more Subsidiaries of such Person or bysuch Person and one or more Subsidiaries of such Person.

 

“Termination Date” shall have the meaning setforth in the Pricing Side Letter.

 

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“Test Period” means any calendar quarter.

 

“Transaction” has the meaning set forth in Section 1hereof.

 

“Transaction Request” means a request from a Sellerto Administrative Agent, in the form attached as Exhibit A hereto,to enter into a Transaction.

 

“Trust Receipt and Certification” means, withrespect to any Transaction as of any date, a receipt and certification in theform attached as an exhibit to the Custodial Agreement.

 

“Underwriting Guidelines” means the standards,procedures and guidelines of the Sellers for underwriting and acquiringMortgage Loans, which are set forth in the written policies and procedures ofthe Sellers, a copy of which is attached hereto as Exhibit G andsuch other guidelines as are identified and approved in writing by AdministrativeAgent.

 

“Uniform Commercial Code” means the UniformCommercial Code as in effect on the date hereof in the State of New Yorkor the Uniform Commercial Code as in effect in the applicable jurisdiction.

 

“VA” means the U.S. Department of VeteransAffairs, an agency of the United States of America, or any successor theretoincluding the Secretary of Veterans Affairs.

 

“Violation Deadline” has the meaning assigned theretoin Section 4(c) hereof.

 

“WeightedAverage CLTV” means, at any time with respect to a group of Purchased MortgageLoans, the weighted average of all of the CLTVs for such Purchased MortgageLoans, weighted on the basis of the original Outstanding Principal Balance ofsuch Purchased Mortgage Loans.

 

“WeightedAverage FICO Score” means, at any time with respect to a group of PurchasedMortgage Loans, the weighted average of all FICO Scores for such Purchased MortgageLoans, weighted on the basis of the original Outstanding Principal Balance ofsuch Purchased Mortgage Loans.

 

“WeightedAverage LTV” means, at any time with respect to a group of Purchased MortgageLoans, the weighted average of all of the LTVs for such Purchased MortgageLoans, weighted on the basis of the original Outstanding Principal Balance ofsuch Purchased Mortgage Loans.

 

“Weighted Average Mortgage Interest Rate” means,at any time with respect to a group of Purchased Mortgage Loans, the weightedaverage of all Mortgage interest rates for such Purchased Mortgage Loans,weighted on the basis of the current Outstanding Principal Balance of such PurchasedMortgage Loans.

 

“Wet-Ink Documents” means, with respect to anyWet-Ink Mortgage Loan, the (a) Transaction Request and (b) theMortgage Loan Schedule.

 

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“Wet-Ink Mortgage Loan” means a Mortgage Loanwhich a Seller is selling to Buyers simultaneously with the originationthereof.

 

# **3.**     Program;Initiation of Transactions

# ** **

## a.             From timeto time, in the sole discretion of each Conduit Buyer, and as required by suchConduit Buyer’s related Committed Buyers, such Conduit Buyer may, and suchCommitted Buyers shall, purchase from Sellers certain Mortgage Loans that havebeen either originated by Sellers or purchased by Sellers from otheroriginators.  **ThisAgreement is a commitment by Committed Buyers to****enter into Transactions with the Sellers for an amount equal to theMaximum Committed Purchase Price.  ThisAgreement is neither a commitment by Conduit Buyers to enter into Transactionswith the Sellers nor a commitment by Committed Buyers to enter intoTransactions with the Sellers for amounts exceeding the Maximum CommittedPurchase Price, but rather sets forth the procedures to be used in connectionwith periodic requests for Buyers to enter into Transactions with the Sellers.  Each Seller hereby acknowledges that, beyondthe Maximum Committed Purchase Price, Buyers are under no obligation to agreeto enter into, or to enter into, any Transaction pursuant to this Agreement.** All Purchased Mortgage Loans shall exceed ormeet the Underwriting Guidelines, and shall be serviced by Servicer.  The aggregate Purchase Price of PurchasedMortgage Loans subject to outstanding Transactions shall not exceed the MaximumAggregate Purchase Price.  Buyer shallonly be required to enter into Transactions in which the Purchase Price withrespect thereto is at least $25,000,000.

##  

## b.             Withrespect to each Transaction involving Mortgage Loans which are not Wet-InkMortgage Loans, Sellers shall give Administrative Agent and Custodian priornotice by no later than 11:00 a.m. (New York City time) at least two (2) BusinessDays prior to any proposed Purchase Date (the date on which such notice isgiven, the “Notice Date”); provided, that the requested Purchase Pricemust be an aggregate amount of at least $25 million.  With respect to Wet-Ink Mortgage Loans, Sellersshall deliver notice of any proposed purchase on or before 3:00 p.m. (NewYork City time) on the Purchase Date.  Onthe Notice Date, Sellers shall (i) request that Buyers enter into aTransaction by furnishing to Administrative Agent a Transaction Request, (ii) deliverto Administrative Agent and Custodian a Mortgage Loan Schedule and (iii) deliverto Custodian, or the Administrative Agent, with respect to each Wet-InkMortgage Loan, either a Request for Certification and each Mortgage File orWet-Ink Documents for each Wet-Ink Mortgage Loan, as applicable, in accordancewith Section 10(b)(3) hereof. Following receipt of such request,Buyers may enter into such requested Transaction or may notify Sellers of itsintention not to enter into such Transaction in accordance with the conditionsprecedent set forth in Section 10 hereof. In the event the Mortgage Loan Schedule providedby a Seller contains erroneous computer data, is not formatted properly or thecomputer fields are otherwise improperly aligned, Administrative Agent shallprovide written or electronic notice to Sellers describing such error and Sellersshall correct the

 

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## computer data, reformat or properly align the computerfields itself and resubmit the Mortgage Loan Schedule as required herein.  Each Transaction Request shall be irrevocableand binding on the applicable Seller, and the Sellers shall indemnify theBuyers against any loss or expense incurred by the Buyers, either directly orindirectly, as a result of any failure by the applicable Seller to completesuch Transaction, including, without limitation, any actual loss or expenseincurred by the Buyers, either directly or indirectly, by reason of theliquidation or reemployment of funds acquired by the Buyers (including, withoutlimitation, funds obtained by Conduit Buyers by issuing Commercial Paper orpromissory notes, obtaining deposits as loans from third parties andreemployment of funds) for the Buyers to fund such Transaction.

##  

## c.             Upon thesatisfaction of the applicable conditions precedent set forth in Section 10hereof, Administrative Agent shall select a Buyer or Buyers (the “SelectedBuyers”) to fund such Transaction and, in its sole discretion, maysubdivide any requested Transaction into several Transactions to be enteredinto by one or more Selected Buyers and all of Sellers’ interest in theRepurchase Assets shall pass to such Selected Buyers on the Purchase Date,against the transfer of the Purchase Price to Sellers.  The portion of each Transaction made by aConduit Buyer shall be in such Conduit Buyer’s sole and absolute discretion,and any portion of such Transaction not made by the Conduit Buyer of a BuyingGroup will be made by the Committed Buyers of such Buying Group.  At its option, any Conduit Buyer shall acceptor reject any such Transaction Request by notice given to the AdministrativeAgent by telephone or telecopy.   On eachPurchase Date, the Administrative Agent shall record on its books and recordseach Buying Group’s pro rata share of each Transaction made to the applicableSeller, which records shall be conclusive evidence of Transactions entered intowith the applicable Seller, absent manifest error.  Upon transfer of the Mortgage Loans to SelectedBuyers as set forth in this Section and until termination of any relatedTransactions as set forth in Sections 4 or 16 of this Agreement, ownership ofeach Mortgage Loan, including each document in the related Mortgage File andRecords, is vested in Selected Buyers; provided that, prior to the recordationby the Custodian as provided for in the Custodial Agreement record title in thename of the applicable Seller to each Mortgage shall be retained by the Sellersin trust, for the benefit of Selected Buyers, for the sole purpose offacilitating the servicing and the supervision of the servicing of the MortgageLoans.

##  

## d.             Withrespect to each Wet-Ink Mortgage Loan, by no later than 12:00 noon, (New YorkCity time) on the fifth Business Day following the applicable Purchase Date, Sellersshall cause the related Settlement Agent to deliver to the Custodian theremaining documents in the Mortgage File.

##  

## e.             At the request of the Sellers made no laterthan forty-five (45) days prior to, but no earlier than sixty (60) days priorto, the Termination Date of this Agreement, the Administrative Agent may in itssole discretion extend the Termination Date for a period of 364 additional daysor such other period to be determined by Administrative Agent in its solediscretion by giving written notice

 

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## of such extension to the Sellers.Any failure by the Administrative Agent to deliver such notice of extensionshall be deemed to be the Administrative Agent’s determination not to extendthe then current Termination Date.

##  

# **4.**     Repurchase

# ** **

## a.             Therelated Seller shall repurchase the related Purchased Mortgage Loans from Buyerson each related Repurchase Date.  Suchobligation to repurchase exists without regard to any prior or interveningliquidation or foreclosure with respect to any Purchased Mortgage Loan (butliquidation or foreclosure proceeds received by Administrative Agent or anyBuyer shall be applied to reduce the Repurchase Price for such PurchasedMortgage Loan on each Price Differential Payment Date except as otherwiseprovided herein).  The related Seller isobligated to repurchase and take physical possession of the Purchased MortgageLoans from Buyers or its designee (including the Custodian) at such Seller’sexpense on the related Repurchase Date.

##  

## b.             Providedthat no Event of Default shall have occurred and is continuing, and AdministrativeAgent has received the related Repurchase Price upon repurchase of thePurchased Mortgage Loans by the related Seller, Buyers agree to release their ownershipinterest hereunder in the Purchased Mortgage Loans (including, the RepurchaseAssets related thereto) at the request of the related Seller.  With respect to payments in full by therelated Mortgagor of a Purchased Mortgage Loan, Sellers agree to (i) provideAdministrative Agent with a copy of a report from the related Servicerindicating that such Purchased Mortgage Loan has been paid in full, (ii) remitto Administrative Agent, within two Business Days, the Repurchase Price withrespect to such Purchased Mortgage Loans and (iii)  provide AdministrativeAgent a notice specifying each Purchased Mortgage Loan that has been prepaid infull.  Buyers agree to release their ownershipinterest in Purchased Mortgage Loans which have been prepaid in full afterreceipt of evidence of compliance with clauses (i) through (iii) ofthe immediately preceding sentence.

##  

# **5.**     PriceDifferential.

# ** **

## a.             On eachBusiness Day that a Transaction is outstanding, the Pricing Rate shall be resetand, unless otherwise agreed, the accrued and unpaid Price Differential shallbe settled in cash on each related Price Differential Payment Date.  Two Business Days prior to the PriceDifferential Payment Date, Administrative Agent shall give Sellers written orelectronic notice of the amount of the Price Differential due on such PriceDifferential Payment Date.  On the PriceDifferential Payment Date, Sellers shall pay to Administrative Agent the PriceDifferential for such Price Differential Payment Date (along with any otheramounts to be paid pursuant to Section 7 hereof), by wire transfer inimmediately available funds.

 

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## b.             IfSellers fail to pay all or part of the Price Differential by 11:00 a.m.(New York City time) on the related Price Differential Payment Date, withrespect to any Purchased Mortgage Loan, Sellers shall be obligated to pay to theAdministrative Agent (in addition to, and together with, the amount of suchPrice Differential) interest on the unpaid Repurchase Price at a rate per annumequal to the Post Default Rate until the Price Differential is received in fullby the Administrative Agent.

##  

# **6.**     MarginMaintenance

# ** **

## a.             If atany time the Asset Value of the Purchased Mortgage Loans subject to Transactionsis less than the then outstanding Purchase Price for all Transactions (a “MarginDeficit”), then the Administrative Agent may by notice to Sellers require Sellersto transfer to Administrative Agent cash in an amount equal to the MarginDeficit (such requirement, a “Margin Call”) .

##  

## b.             Anynotice given before 10:00 a.m. (New York City time) on a Business Dayshall be met, and the related Margin Call satisfied, no later than 5:00 p.m.(New York City time) on such Business Day; notice given after 10:00 a.m.(New York City time) on a Business Day shall be met, and the related MarginCall satisfied, no later than 5:00 p.m. (New York City time) on thefollowing Business Day (the foregoing time requirements for satisfaction of aMargin Call are referred to as the “Margin Deadlines”).  The failure of any Buyer, on any one or moreoccasions, to exercise its rights hereunder, shall not change or alter theterms and conditions to which this Agreement is subject or limit the right of suchBuyer to do so at a later date.  Sellersand Buyers each agree that a failure or delay by any Buyer to exercise itsrights hereunder shall not limit or waive such Buyer’s rights under thisAgreement or otherwise existing by law or in any way create additional rightsfor Sellers.

##  

## c.             In theevent that a Margin Deficit exists with respect to any Purchased Mortgage Loan,the Administrative Agent may retain any funds received by it to which the Sellerswould otherwise be entitled hereunder up to an amount not to exceed the MarginDeficit and upon providing notice to the Sellers, which funds (i) shall beheld by Administrative Agent against the related Margin Deficit and (ii) maybe applied by Administrative Agent against any Purchased Mortgage Loan forwhich the related Margin Deficit remains otherwise unsatisfied.  Notwithstanding the foregoing, the AdministrativeAgent retains the right, in its sole discretion, to make a Margin Call inaccordance with the provisions of this Section 6 to the extent thatAdministrative Agent has not exercised its rights under this subsection (c).

##  

# **7.**     IncomePayments

# ** **

## a.             IfIncome is paid in respect of any Purchased Mortgage Loan during the term of aTransaction, such Income shall be the property of Buyers.  Notwithstanding the foregoing, and providedno Event of Default has occurred and is continuing,

 

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## Administrative Agent agrees that if a third-partyServicer is in place for any Purchased Mortgage Loans, such Servicer shalldeposit such Income to the Collection Account. Sellers shall deposit all Income received in its capacity as Servicer ofany Purchased Mortgage Loans or pursuant to the preceding sentence to theCollection Account in accordance with Section 12(c) hereof.

##  

## b.             In theevent that an Event of Default has occurred and is continuing, notwithstandingany provision set forth herein, Sellers shall remit to Administrative Agent allIncome received with respect to each Purchased Mortgage Loan on the relatedPrice Differential Payment Date or on such other date or dates as AdministrativeAgent notifies Sellers in writing.

##  

## c.             TheServicer shall be permitted, in its reasonable discretion, to set aside and payfrom the Collection Account any accrued and unpaid servicing fee under anyServicing Agreement due and owing to it, and such amounts shall not constituteAvailable Collections.  All moneys heldby Servicer in the Collection Account shall, to the extent available fordistribution, be distributed by the Servicer on each Price Differential PaymentDate, in the following order of priority:

##  

### (1)           first,to the Servicer, to repay any outstanding Servicer Advances;

###  

### (2)           second,on a pro rata basis, (A) to the Servicer, the servicing fee under anyServicing Agreement and other reasonable amounts due and owing to the Servicer (tothe extent any portion of the accrued and unpaid servicing fees have not beenpreviously set aside from Collections by the Servicer in accordance with thefirst sentence of this Section 7(f)) and (ii) to the Custodian, theCustodial Fee and the reasonable out-of-pocket costs and expenses of theCustodian not covered by the Custodial Fee;

###  

### (3)           third,to the Administrative Agent, on behalf of itself and the Buyers (as applicable)in an amount sufficient to pay (as applicable and in the following order of priority):

###  

###### A. the Administrative Fee;

######  

###### B. to the Buyers, all accrued and unpaid PriceDifferential due and owing to the Buyers for the immediately preceding calendarmonth (to be distributed pro rata in proportion to each Buyer’s portions of theoutstanding Purchase Price);

######  

###### C. to the Buyers, all accrued and unpaid fees andother costs and expenses under the Pricing Side Letter;

######  

###### D. to the Buyers, (i) prior to the TerminationDate, any amount selected by the Sellers in their discretion toward a reductionof the outstanding Purchase Price, or any amount necessary to reduce theoutstanding Purchase Price to cure an Event of Default or to satisfy the

 

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######  

###### Margin Deficit and (ii) following the Termination Date, all remainingAvailable Collections will be used to reduce the outstanding Purchase Price tozero;

######  

###### E. to the Administrative Agent and the Buyers, allcosts, expenses and indemnification payments, if any, due and owing to suchPersons under this Agreement and the other Program Agreements; and

######  

### (4)           fourth,any remaining funds shall be paid to the Sellers (prior to the Termination Dateif, after giving effect to such payment, no Event of Default shall occur) or tothe Buyers and the Administrative Agent to reduce the outstanding Obligationsto zero (following the Termination Date), to the extent outstanding Obligationsremain due and owing.

###  

## d.             If onany Price Differential Payment Date Available Collections are not sufficient topay the sum of the amounts described in clauses (2) through (5) abovethat are due and payable, the Servicer may, in its sole discretion and solelyto the extent that the Servicer reasonably expects to be reimbursed in fullpursuant to Section 7(f)(1), advance an amount equal to such amounts dueand payable on such Price Differential Payment Date (each, a “ServicerAdvance”).

##  

# **8.**     SecurityInterest

# ** **

Although the parties intend that all Transactionshereunder be sales and purchases and not financings, in the event any suchTransactions are deemed to be financings, each Seller hereby pledges to AdministrativeAgent for the benefit of the Buyers as security for the performance by such Sellerof its Obligations and hereby grants, assigns and pledges to AdministrativeAgent for the benefit of the Buyers a fully perfected first priority securityinterest in the Purchased Mortgage Loans, the Records, and all relatedservicing rights, the Program Agreements (to the extent such Program Agreementsand Sellers’ right thereunder relate to the Purchased Mortgage Loans), anyProperty relating to the Purchased Mortgage Loans, all insurance policies andinsurance proceeds relating to any Purchased Mortgage Loan or the relatedMortgaged Property, including, but not limited to, any payments or proceedsunder any related primary insurance, hazard insurance, Income, the CollectionAccount, Interest Rate Protection Agreements, accounts (including any interestof Sellers in escrow accounts) and any other contract rights, instruments,accounts, payments, rights to payment (including payments of interest orfinance charges) general intangibles and other assets relating to the PurchasedMortgage Loans (including, without limitation, any other accounts) or anyinterest in the Purchased Mortgage Loans, and any proceeds (including therelated securitization proceeds) and distributions with respect to any of theforegoing and any other property, rights, title or interests as are specifiedon a Transaction Request and/or Trust Receipt and Certification, in allinstances, whether now owned or hereafter acquired, now existing or hereaftercreated (collectively, the “Repurchase Assets”); provided, however, asto any Purchased Mortgage Loan the security interest shall automaticallyterminate upon payment in full to Administrative Agent of the Repurchase Pricewith respect thereto.  Sellers agree toexecute, deliver and/or file such documents and perform such acts as may bereasonably necessary to fully perfect Administrative Agent’s security interestcreated hereby for the benefit of the Buyers. Furthermore, the Sellers

 

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hereby authorize the Administrative Agent to file financing statementsrelating to the Repurchase Assets, as the Administrative Agent, at its option,may deem appropriate.  The Sellers shallpay the filing costs for any financing statement or statements preparedpursuant to this Section.

 

# **9.**     Paymentand Transfer

# ** **

Unless otherwise mutually agreed in writing, alltransfers of funds to be made hereunder shall be made in Dollars, inimmediately available funds, without deduction, set-off or counterclaim, to theparty entitled thereto to the account specified in Section 42, or suchother account as such party shall specify to the others in writing..  Each party acknowledges that it has no rightsof withdrawal from the foregoing account. All Purchased Mortgage Loans transferred by one party hereto to theother party shall be in the case of a purchase by Buyers in suitable form fortransfer or shall be accompanied by duly executed instruments of transfer orassignment in blank and such other documentation as Administrative Agent mayreasonably request.  All PurchasedMortgage Loans shall be evidenced by a Trust Receipt and Certification.  Any Repurchase Price received by AdministrativeAgent after 2:00 p.m. (New York City time) shall be deemed received on thenext succeeding Business Day; provided, that Administrative Agent shall creditto the Sellers interest, if any, earned on such funds overnight.

 

# **10.**  ConditionsPrecedent

# ** **

## a.             InitialTransaction.  As conditions precedentto the initial Transaction, Administrative Agent shall have received on orbefore the day of such initial Transaction the following, in form and substancesatisfactory to Administrative Agent and duly executed by Sellers and eachother party thereto:

##  

### (1)           ProgramAgreements.  The Program Agreements(including without limitation a Custodial Agreement in a form acceptable to AdministrativeAgent) duly executed and delivered by the parties thereto and being in fullforce and effect, free of any modification, breach or waiver.

###  

### (2)           SecurityInterest.  Evidence that all otheractions necessary or, in the opinion of Administrative Agent, desirable toperfect and protect Buyers’ interest in the Purchased Mortgage Loans and otherRepurchase Assets have been taken, including, without limitation, dulyauthorized and filed Uniform Commercial Code financing statements on Form UCC-1.

###  

### (3)           OrganizationalDocuments.  A certified copy of each Seller’scharter, bylaws and corporate resolutions approving the Program Agreements andtransactions thereunder (either specifically or by general resolution) and alldocuments evidencing other necessary corporate action or governmental approvalsas may be required in connection with the Program Agreements.

###  

### (4)           GoodStanding Certificate.  A certifiedcopy of a good standing certificate from the jurisdiction of organization of eachSeller, dated as of no earlier than the date 10 Business Days prior to thePurchase Date with respect to the initial Transaction hereunder.

 

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### (5)           IncumbencyCertificate.  An incumbencycertificate of the corporate secretary of each Seller, certifying the names,true signatures and titles of the representatives duly authorized to requesttransactions hereunder and to execute the Program Agreements.

###  

### (6)           Opinionof Counsel.  In-house and outsidecounsel opinions of each Seller’s counsel, in form and substance substantiallyas set forth in Exhibit F attached hereto.

###  

### (7)           UnderwritingGuidelines.  A true and correct copyof the Underwriting Guidelines certified by an officer of Sellers.

###  

### (8)           Fees.  Payment of any fees due to AdministrativeAgent hereunder.

###  

### (9)           Insurance.  Evidencethat Sellers have added Buyers as additional loss payees under the Sellers’Fidelity Insurance.

###  

## b.             AllTransactions.  The obligation ofBuyers to enter into each Transaction pursuant to this Agreement is subject tothe following conditions precedent:

##  

### (1)           DueDiligence Review.  Without limitingthe generality of Section 36 hereof, Administrative Agent shall havecompleted, to its satisfaction, its due diligence review of the relatedMortgage Loans and Sellers and the Servicer.

###  

### (2)           RequiredDocuments.

###  

##### (a)           Withrespect to each Purchased Mortgage Loan which is not a Wet-Ink Mortgage Loan,the Mortgage File has been delivered to the Custodian on or prior to 3:00 p.m.(New York City time) two (2) Business Days prior to the Purchase Date;

#####  

##### (b)           Withrespect to each Wet-Ink Mortgage Loan, the Wet-Ink Documents have beendelivered to Administrative Agent or Custodian, as the case may be, by 3:00 p.m.(New York City time) on the Purchase Date.

#####  

### (3)           TransactionDocuments.  Administrative Agent orits designee shall have received on or before the day of such Transaction(unless otherwise specified in this Agreement) the following, in form andsubstance satisfactory to Administrative Agent and (if applicable) dulyexecuted:

###  

##### (a)           ATransaction Request delivered pursuant to Section 3(c) hereof and aPurchase Confirmation.

#####  

##### (b)           TheRequest for Certification and the related Custodial Mortgage Loan Schedule, andthe Trust Receipt.

 

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##### (c)           Suchcertificates, opinions of counsel or other documents as Administrative Agentmay reasonably request.

#####  

### (4)           No Event of Default.  No Event of Default shall have occurred andbe continuing;

###  

### (5)           Requirements of Law.  Administrative Agent shall not havedetermined that the introduction of or a change in any Requirement of Law or inthe interpretation or administration of any Requirement of Law applicable toBuyers has made it unlawful, and no Governmental Authority shall have assertedthat it is unlawful, for Buyers to enter into Transactions with a Pricing Ratebased on LIBOR.

###  

### (6)           Representations and Warranties.  Both immediately prior to the relatedTransaction and also after giving effect thereto and to the intended usethereof, the representations and warranties made by each Seller in each ProgramAgreement shall be true, correct and complete on and as of such Purchase Datein all material respects with the same force and effect as if made on and as ofsuch date (or, if any such representation or warranty is expressly stated tohave been made as of a specific date, as of such specific date).

###  

### (7)           Electronic Tracking Agreement.To the extent Sellers are selling Mortgage Loans which are registered on theMERS® System, an Electronic Tracking Agreement entered into, duly executed anddelivered by the parties thereto and being in full force and effect, free ofany modification, breach or waiver.

###  

### (8)           Material Adverse Effect.  No event has occurred and is continuing that,under the sole discretion of the Administrative Agent, is reasonably likely toresult in a Material Adverse Effect.

###  

### (9)           CP Disruption Event.  With respect to a particular Conduit Buyer, aCP Disruption Event shall not have occurred or be continuing;

###  

### (10)         Maximum Aggregate Purchase Price.  After giving effect to the requestedTransaction, the aggregate outstanding Purchase Price for all PurchasedMortgage Loans subject to then outstanding Transactions under this Agreementshall not exceed the Maximum Aggregate Purchase Price.

###  

### (11)         Satisfactory Standards. Thecredit, risk management and collection policies of the Sellers are satisfactoryto the Administrative Agent, and the Sellers have adequate ability tounderwrite Mortgage Loans and to administer the Underwriting Guidelines andAccepted Servicing Practices.

###  

# **11.  Program; Costs; Illegality**

# ** **

## a.             Sellersshall reimburse Administrative Agent for any of Administrative Agent’sreasonable out-of-pocket costs, including due diligence review costs and

 

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## reasonable attorney’s fees, incurred by AdministrativeAgent in determining the acceptability to Administrative Agent of any MortgageLoans.  Sellers shall also pay, orreimburse Administrative Agent if Administrative Agent shall pay, any terminationfee, which may be due any servicer. Sellers shall pay the fees and expenses of Administrative Agent’scounsel in connection with the Program Agreements. Legal fees for anysubsequent amendments to this Agreement or related documents shall be borne bySellers.  Sellers shall pay ongoingcustodial and bank fees and expenses, and any other ongoing fees and expenses underany other Program Agreement.

##  

## b.             IfAdministrative Agent determines that, due to the introduction of, any changein, or the compliance by Buyers with (i) any eurocurrency reserverequirement or (ii) the interpretation of any law, regulation or anyguideline or request from any central bank or other Governmental Authority(whether or not having the force of law), there shall be an increase in thecost to Buyers in engaging in the present or any future Transactions, thenSellers agree to pay to Administrative Agent, from time to time, upon demand byAdministrative Agent (with a copy to Custodian) the actual cost of additionalamounts as specified by Administrative Agent to compensate Buyers for suchincreased costs (the “Additional Costs”),provided that (A) Administrative Agent delivers to the Sellers acertificate setting forth in reasonable detail the amount and basis ofdetermination of such Additional Costs and such certificate as to anyAdditional Costs submitted by the Administrative Agent to the Sellers shall beconclusive in the absence of manifest error and (B) notwithstandinganything contained herein, neither Seller shall be obligated to compensateBuyers for any Additional Costs that Buyers become entitled to claim hereunderfor any period prior to the date that is 120 days prior to a notice ofsuch claim if Buyers or Administrative Agent knew or reasonably would have beenexpected to know of the circumstances giving rise to such Additional Costs andof the fact that such circumstances could be expected to result in a claim forAdditional Costs.

##  

## c.             Notwithstandingany other provision herein, if, after the Effective Date, the adoption of anylaw or bank regulatory guideline or any amendment or change in theinterpretation of any existing or future Law or bank regulatory guideline byany Official Body charged with the administration, interpretation orapplication thereof, or the compliance with any directive of any Official Body(in the case of any bank regulatory guideline, whether or not having the forceof Law), shall make it unlawful for any Buyer to acquire or maintain a MortgageLoan as contemplated by this Agreement, (i) such Buyer shall, within ten (10) daysafter receiving actual knowledge thereof, deliver a certificate to the Sellers(with a copy to the Administrative Agent) setting forth the basis for suchillegality, which certificate shall be conclusive absent manifest error and (ii) thecommitment of such Buyer hereunder to make a portion of a Mortgage Loan andcontinue any portion of a Mortgage Loan as such shall forthwith be suspended,and such suspension shall remain in effect so long as the circumstancedescribed above exists.

 

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## If circumstancessubsequently change so that it is no longer unlawful for an affected Buyer toacquire or to maintain a portion of a Mortgage Loan as contemplated hereunder,such Buyer will, as soon as reasonably practicable after such Buyer knows ofsuch change in circumstances, notify the Sellers and the Administrative Agent,and upon receipt of such notice, the obligations of such Buyer to acquire ormaintain its acquisition of portions of Mortgage Loans shall be reinstated.

##  

## Each Buyer agrees that,upon the occurrence of any event giving rise to the operation of Section 11(c) withrespect to such Buyer, it will, if requested by the Sellers and to the extentpermitted by law or by the relevant Official Body, endeavor in good faith tochange the office at which it books its portions of Mortgage Loans hereunder ifsuch change would make it lawful for such Buyer to continue to acquire or tomaintain its acquisition of portions of Mortgage Loans hereunder; provided,however, that such change may be made in such manner that such Buyer, in itssole determination, suffers no unreimbursed cost or expense or any otherdisadvantage whatsoever.

##  

## d.             Withrespect to any Transaction, Buyer and Administrative Agent may conclusivelyrely upon, and shall incur no liability to Sellers in acting upon, any requestor other communication that Buyer or Administrative Agent reasonably believesto have been given or made by a person on the certificate delivered pursuant toSection 10(a)(5) hereof.  Ineach such case, each Seller hereby waives the right to dispute AdministrativeAgent’s record of the terms of the Purchase Confirmation, request or othercommunication.

##  

## e.             Notwithstandingthe assignment of the Program Agreements with respect to each PurchasedMortgage Loan to Buyers, each Seller agrees and covenants with (x) Buyers andAdministrative Agent to enforce diligently Sellers’ rights and remedies set forthin the Program Agreements and (y) to provide Administrative Agent withprompt written notice of any Material Adverse Effect or event which, with thepassage of time, is reasonably likely to become a Material Adverse Effect, byany party to any Program Agreement and of which any Seller is aware.

##  

## f.              Anypayments made by Sellers to Administrative Agent shall be free and clear of,and without deduction or withholding for, any taxes; provided, however, that ifsuch payer shall be required by law to deduct or withhold any taxes from anysums payable to Administrative Agent, then such payer shall (A) make suchdeductions or withholdings and pay such amounts to the relevant authority inaccordance with applicable law, (B) pay to Administrative Agent the sumthat would have been payable had such deduction or withholding not been made,and (C) at the time Price Differential is paid, pay to AdministrativeAgent all additional amounts as specified by Administrative Agent to preservethe after-tax yield Administrative Agent would have received if such tax hadnot been imposed.

 

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# **12.**  Servicing

# ** **

## a.             Sellers,on Buyers’ behalf, shall contract with Servicer to, or if a Seller is theServicer, such Seller shall, service the Mortgage Loans consistent with thedegree of skill and care that such Seller customarily requires with respect tosimilar Mortgage Loans owned or managed by it and in accordance with AcceptedServicing Practices.  The Servicer shall (i) complywith all applicable Federal, State and local laws and regulations, (ii) maintainall state and federal licenses necessary for it to perform its servicingresponsibilities hereunder and (iii) not impair the rights of Buyers inany Mortgage Loans or any payment thereunder. Administrative Agent may terminate the servicing of any Mortgage Loanwith the then-existing servicer in accordance with Section 12(e) hereof.

##  

## b.             Sellersshall cause the Servicer to hold or cause to be held all escrow funds collectedby Servicer with respect to any Purchased Mortgage Loans in trust accounts andshall apply the same for the purposes for which such funds were collected.

##  

## c.             Sellersshall cause the Servicer to deposit all collections received by Servicer on thePurchased Mortgage Loans in the Collection Account no later than two (2) BusinessDays following receipt.

##  

## d.             UponAdministrative Agent’s request, Sellers shall provide promptly to AdministrativeAgent (i) a Servicer Notice addressed to and agreed to by the Servicer ofthe related Purchased Mortgage Loans, advising such Servicer of such matters asAdministrative Agent may reasonably request, including, without limitation,recognition by the Servicer of Buyers’ interest in such Purchased MortgageLoans and the Servicer’s agreement that upon receipt of notice of an Event ofDefault from Administrative Agent, it will follow the instructions of AdministrativeAgent with respect to the Purchased Mortgage Loans and any related Income withrespect thereto.

##  

## e.             Uponthe occurrence of an Event of Default hereunder or a material default under theServicing Agreement, Administrative Agent shall have the right to immediatelyterminate the Servicer’s right to service the Purchased Mortgage Loans underthe Servicing Agreement without payment of any penalty or termination fee.  Sellers and the Servicer shall cooperate intransferring the servicing of the Purchased Mortgage Loans to a successorservicer appointed by Administrative Agent in its sole discretion.

##  

## f.              Ifany Seller should discover that, for any reason whatsoever, any Seller or anyentity responsible to Seller for managing or servicing any such PurchasedMortgage Loan has failed to materially perform such Seller’s obligations underthe Program Agreements or any of the obligations of such entities with respectto the Purchased Mortgage Loans, Sellers shall promptly notify AdministrativeAgent.

 

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## g.             Servicermay not delegate any of its rights, duties or obligations except to an EligibleSubservicer upon notice to the Administrative Agent; provided that suchdelegation shall not relieve Servicer of its duties and obligations as Servicerhereunder and under the other Program Agreements or the Servicing Agreement.

##  

# **13.  Representations and Warranties**

# ** **

## a.             EachSeller represents and warrants to Buyers and Administrative Agent as of thedate hereof and as of each Purchase Date for any Transaction that:

##  

### (1)           Seller Existence.  Each Seller has been duly organized and isvalidly existing as a corporation****in goodstanding under the laws of the State of Maryland.

###  

### (2)           Licenses.  Each Seller is duly licensed or is otherwisequalified in each jurisdiction in which it transacts business for the businesswhich it conducts and is not in default of any applicable federal, state orlocal laws, rules and regulations unless, in either instance, the failureto take such action is not reasonably likely (either individually or in theaggregate) to cause a Material Adverse Effect (hereinbefore defined) and is inmaterial compliance with such state’s applicable laws, rules and regulations.  FMC has the requisite power and authority andlegal right to originate and purchase Mortgage Loans (as applicable) and toown, sell and grant a lien on all of its right, title and interest in and tothe Mortgage Loans, and to execute and deliver, engage in the transactionscontemplated by, and perform and observe the terms and conditions of, thisAgreement, each Program Agreement and any Transaction Request or, if applicable,Purchase Confirmation. FMC is an FHA Approved Mortgagee and VA Approved Lender.  FIC is a qualified REIT as defined by theCode.

###  

### (3)           Power.  Each Seller has all requisite corporate orother power, and has all governmental licenses, authorizations, consents andapprovals necessary to own its assets and carry on its business as now being oras proposed to be conducted, except where the lack of such licenses,authorizations, consents and approvals would not be reasonably likely to have aMaterial Adverse Effect.

###  

### (4)           Due Authorization.  Each Seller has all necessary corporate orother power, authority and legal right to execute, deliver and perform itsobligations under each of the Program Agreements, as applicable.  This Agreement, any Transaction Request,Purchase Confirmation and the Program Agreements have been (or, in the case ofProgram Agreements and any Transaction Request, Purchase Confirmation not yetexecuted, will be) duly authorized, executed and delivered by each Seller andServicer, all requisite or other corporate action having been taken, and eachis valid, binding and enforceable against each Seller in accordance with itsterms except as such enforcement may be affected by bankruptcy, by otherinsolvency laws, or by general principles of equity.

 

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### (5)           Financial Statements.  FIC has heretofore furnished toAdministrative Agent a copy of (a) its consolidated and consolidatingbalance sheet for the fiscal year of FIC ended December 31, 2004 and therelated consolidated statements of income and retained earnings and of cashflows for FIC and its consolidated Subsidiaries for such fiscal year, settingforth in each case in comparative form the figures for the previous year, withthe opinion thereon of a member of AICPA and (b) its consolidated andconsolidating balance sheet for the fiscal quarters of FIC ended March 31,2005, June 30, 2005 and September 30, 2005, and the relatedconsolidated statements of income and retained earnings and of cash flows for FICand its consolidated Subsidiaries for such quarterly fiscal periods, settingforth in each case in comparative form the figures for the previous year.  All such financial statements are completeand correct and fairly present, in all material respects, the consolidatedfinancial condition of FIC and its Subsidiaries and the consolidated results oftheir operations as at such dates and for such fiscal periods, all inaccordance with GAAP applied on a consistent basis.  Since December 31, 2004, there has beenno material adverse change in the consolidated business, operations orfinancial condition of FIC and its consolidated Subsidiaries taken as a wholefrom that set forth in said financial statements nor is any Seller aware of anystate of facts which (without notice or the lapse of time) would or couldresult in any such material adverse change. Each Seller has, on the date of the statements delivered pursuant tothis Section (the “Statement Date”)no knowledge of any liabilities, direct or indirect, fixed or contingent,matured or unmatured, or liabilities for taxes, long-term leases or unusualforward or long-term commitments not disclosed by, or reserved against in, saidbalance sheet and related statements, and at the present time there are nomaterial unrealized or anticipated losses from any loans, advances or other commitmentsof such Seller except as heretofore disclosed to Administrative Agent inwriting.

###  

### (6)           Event of Default.  There exists no Event of Default.

###  

### (7)           Solvency.  Each Seller is solvent and will not berendered insolvent by any Transaction and, after giving effect to suchTransaction, will not be left with an unreasonably small amount of capital withwhich to engage in its business.  NeitherSeller intends to incur, nor does it believe that it has incurred, debts beyondits ability to pay such debts as they mature and is not contemplating thecommencement of insolvency, bankruptcy, liquidation or consolidationproceedings or the appointment of a receiver, liquidator, conservator, trusteeor similar official in respect of such entity or any of its assets.  Sellers are not transferring any PurchasedMortgage Loans with any intent to hinder, delay or defraud any of theirrespective creditors.

###  

### (8)           No Conflicts.  The execution, delivery and performance by eachSeller and Servicer of this Agreement, any Transaction Request or PurchaseConfirmation hereunder and the Program Agreements do not conflict with any termor provision of the certificate of incorporation or by-laws of such Seller orany law, rule, regulation, order, judgment, writ, injunction or decree applicableto

 

31

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### any Seller of any court, regulatory body,administrative agency or governmental body having jurisdiction over any Seller,which conflict would have a Material Adverse Effect and will not result in anyviolation of any such mortgage, instrument, agreement or obligation to which anySeller is a party.

###  

### (9)           True and Complete Disclosure.  All information, reports, exhibits,schedules, financial statements or certificates of any Seller or Servicer orany Affiliate thereof or any of their officers furnished or to be furnished to AdministrativeAgent in connection with the initial or any ongoing due diligence of any Selleror any Affiliate or officer thereof, negotiation, preparation, or delivery ofthe Program Agreements are true and complete in all material respects and donot omit to disclose any material facts necessary to make the statements hereinor therein, in light of the circumstances in which they are made, notmisleading.  All financial statementshave been prepared in accordance with GAAP.

###  

### (10)         Approvals.  No consent, approval, authorization or orderof, registration or filing with, or notice to any governmental authority orcourt is required under applicable law in connection with the execution,delivery and performance by any Seller of this Agreement, any TransactionRequest, Purchase Confirmation and the Program Agreements.

###  

### (11)         Litigation.  Except as is disclosed in writing by Sellersand approved by Administrative Agent in writing, there are no actions, suits orproceedings pending or, to the knowledge of the Sellers threatened, against oraffecting the Sellers or their respective properties, in or before any court,arbitrator or other body, which, individually or in the aggregate, isreasonably likely to result in a Material Adverse Effect.

###  

### (12)         Material Adverse Change.  There has been no material adverse change inthe business, operations, financial condition, properties or prospects of any Selleror their Affiliates on a consolidated basis since the date set forth in themost recent financial statements supplied to Administrative Agent.

###  

### (13)         Ownership.  Upon payment of the Purchase Price and thefiling of the financing statement and delivery of the Mortgage Files to theCustodian and the Custodian’s receipt of the related Request for Certification,Buyers shall become the sole owner of the Purchased Mortgage Loans and relatedRepurchase Assets, free and clear of all liens and encumbrances.

###  

### (14)         Underwriting Guidelines.  The Underwriting Guidelines provided to AdministrativeAgent are the true and correct Underwriting Guidelines of the Sellers.

###  

### (15)         Taxes. Each Seller and itsSubsidiaries have filed all Federal income tax returns and all other materialtax returns that are required to be filed by them and have paid all taxes duepursuant to such returns or pursuant to

 

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### any assessment received by any of them, except for anysuch taxes as are being appropriately contested in good faith by appropriateproceedings diligently conducted and with respect to which adequate reserveshave been provided.  The charges,accruals and reserves on the books of each Seller and its Subsidiaries inrespect of taxes and other governmental charges are, in the opinion of such Seller,adequate.

###  

### (16)         Investment Company.  No Seller nor any of its Subsidiaries is an “investmentcompany”, or a company “controlled” by an “investment company,” within themeaning of the Investment Company Act of 1940, as amended.

###  

### (17)         Chief Executive Office; Jurisdictionor Organization. During the four months immediately preceding July 1,2001, FMC’s chief executive office is, and has been, located at 11000 BrokenLand Parkway, Suite 600, Columbia, MD 21044.  On the Effective Date, FMC’s jurisdiction oforganization is Maryland.  FIC’s chiefexecutive office is, and has been, located at 11000 Broken Land Parkway, Suite 600,Columbia, MD 21044.  On the EffectiveDate, FIC’s jurisdiction of organization is Maryland.  The Sellers shall provide AdministrativeAgent with thirty days advance notice of any change in any Seller’s chiefexecutive office or jurisdiction.  Duringthe preceding five years, neither Seller (a) has been known by or donebusiness under any other name, corporate or fictitious, except with respect toFMC, since January 1, 2000 under the name Broad Street Mortgage Co. and (b) hasfiled or had filed against it any bankruptcy receivership or similar petitionsnor has it made any assignments for the benefit of creditors.

###  

### (18)         Location of Books and Records.  The location where Sellers keep their booksand records, including all computer tapes and records relating to the PurchasedMortgage Loans and the related Repurchase Assets is their chief executiveoffices.

###  

### (19)         Minimum Consolidated AdjustedTangible Net Worth.  On the EffectiveDate, the Sellers’ Consolidated Adjusted Tangible Net Worth is not less than$400 million.

###  

### (20)         ERISA.  Each Plan to which a Seller or itsSubsidiaries make direct contributions, and, to the knowledge of any Seller,each other Plan and each Multiemployer Plan, is in compliance in all materialrespects with, and has been administered in all material respects in compliancewith, the applicable provisions of ERISA, the Code and any other Federal orState law.

###  

### (21)         Adverse Selection.  No Seller has selected the Purchased MortgageLoans in a manner so as to adversely affect Buyers’ interests.

###  

### (22)         Agreements.  No Seller nor any Subsidiary of such Selleris a party to any agreement, instrument, or indenture or subject to anyrestriction

 

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### materially and adversely affecting its business,operations, assets or financial condition, except as disclosed in the financialstatements described in Section 13(a)(5) hereof.  No Seller nor any Subsidiary of such Selleris in default in the performance, observance or fulfillment of any of theobligations, covenants or conditions contained in any agreement, instrument, orindenture which default could have a Material Adverse Effect.  No holder of any Indebtedness in excess of$20,000,000 of the Sellers or of any of their Subsidiaries has given notice ofany asserted default thereunder.

###  

### (23)         Other Credit Facilities.  Each Seller hereby represents and warrantsthat all credit facilities of the Sellers (other than Structured SecuritiesDebt) which are presently in effect are listed on Exhibit J (the “Existing Credit Facilities”) hereto.

###  

### (24)         Agency Approvals.  With respect to each Agency Security and tothe extent necessary, FMC is an FHA Approved Mortgagee and a VA ApprovedLender.  FMC is also approved by FannieMae as an approved lender and Freddie Mac as an approved seller/servicer, and,to the extent necessary, approved by the Secretary of Housing and Urban Developmentpursuant to Sections 203 and 211 of the National Housing Act.  In each such case, FMC is in good standing,with no event having occurred or FMC having any reason whatsoever to believe orsuspect will occur prior to the issuance of the Agency Security, including,without limitation, a change in insurance coverage which would either make FMCunable to comply with the eligibility requirements for maintaining all suchapplicable approvals or require notification to the relevant Agency or to theDepartment of Housing and Urban Development, FHA or VA.  Should FMC for any reason cease to possessall such applicable approvals, or should notification to the relevant Agency orto the Department of Housing and Urban Development, FHA or VA be required, FMCshall so notify Buyer immediately in writing. FMC has adequate financial standing, servicing facilities, proceduresand experienced personnel necessary for the sound servicing of mortgage loansof the same types as may from time to time constitute Mortgage Loans and inaccordance with Accepted Servicing Practices.

###  

### (25)         NoReliance.  Each Seller has made its own independentdecisions to enter into the Program Agreements and each Transaction and as towhether such Transaction is appropriate and proper for it based upon its ownjudgment and upon advice from such advisors (including without limitation,legal counsel and accountants) as it has deemed necessary.  Neither Seller is relying upon any advicefrom Buyer or Administrative Agent as to any aspect of the Transactions,including without limitation, the legal, accounting or tax treatment of suchTransactions.

###  

### (26)         PlanAssets. Neither Seller is anemployee benefit plan as defined in Section 3 of Title I of ERISA, or aplan described in Section 4975(e)(1) of the Code, and the PurchasedMortgage Loans are not “plan assets” within the meaning of 29 CFR §2510.3-101in any Seller’s hands.

 

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### (27)         Real Estate Investment Trust.  FIC has not engaged in any “prohibited transactions” as defined in Section 857(b)(6)(B)(iii) and(C) of the Code, which, either in any one instance or in the aggregate, isreasonably likely to result in a Material Adverse Effect or in any materialimpairment of the right or ability of FIC to carry on its businesssubstantially as now conducted, or in any material liability on the part ofFIC.  FIC for its current “tax year” (asdefined in the Code) is entitled to a dividends paid deduction, as described inSection 857(b)(2)B) of the Code, with respect to applicable dividends paidor deemed paid by it with respect to each tax year for which it claims such adeduction in its Form 1120-REIT filed with the United States InternalRevenue Service.

###  

### (28)         No Prohibited Persons. NeitherSeller nor any of their Affiliates, officers, directors, partners or members,is an entity or person (or to any Seller’s knowledge, owned or controlled by anentity or person): (i) that is listed in the Annex to, or is otherwisesubject to the provisions of Executive Order 13224 issued on September 24,2001 (“EO13224”); (ii) whose name appears on the United StatesTreasury Department’s Office of Foreign Assets Control (“OFAC”) mostcurrent list of “Specifically Designated National and Blocked Persons” (whichlist may be published from time to time in various mediums including, but notlimited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) whocommits, threatens to commit or supports “terrorism”, as that term is definedin EO13224; or (iv) who is otherwise affiliated with any entity or personlisted above (any and all parties or persons described in clauses (i) through(iv) above are herein referred to as a “Prohibited Person”).

###  

### (29)         Use of Proceeds.  No proceeds of any Transaction will be usedby any Seller in any way which would violate Regulation T, U or X of the Boardof Governors of the Federal Reserve System.

###  

## b.             Withrespect to every Purchased Mortgage Loan, each Seller represents and warrantsto Buyer and Administrative Agent as of the applicable Purchase Date for anyTransaction and each date thereafter that each representation and warranty setforth on Schedule 1 is true and correct.

##  

## c.             Therepresentations and warranties set forth in this Agreement shall survivetransfer of the Purchased Mortgage Loans to Buyers and shall continue for solong as the Purchased Mortgage Loans are subject to this Agreement.  Upon discovery by Sellers, Servicer,Administrative Agent or Buyers of any material breach of any of therepresentations or warranties set forth in this Agreement, the partydiscovering such breach shall promptly give notice of such discovery to theothers.  Subject to Administrative Agent’sright to determine the Market Value of the Purchased Mortgage Loans, theSellers shall have up to five (5) Business Days to verify any allegedbreach of representation or warranty for any Purchased Mortgage Loan.  Administrative Agent has the right torequire, in its unreviewable discretion, Sellers to repurchase within 1Business Day after receipt of notice from Administrative Agent any PurchasedMortgage Loan for which a

 

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## breach of one or more of the representations andwarranties referenced in Section 13(b) exists and which breach has amaterial adverse effect on the value of such Mortgage Loan or the interests ofBuyers.

##  

# **14.  Covenants**

# ** **

## Each Seller covenantswith each Buyer and Administrative Agent that, during the term of thisfacility:

##  

## a.             MinimumConsolidated Adjusted Tangible Net Worth. The Sellers shall maintain a Consolidated Adjusted Tangible Net Worth ofat least $400 million.

##  

## b.             Indebtednessto Consolidated Adjusted Tangible Net Worth Ratio.  The Sellers’ (i) combined ratio ofconsolidated Indebtedness to Consolidated Adjusted Tangible Net Worth shall notexceed 16:1 and (ii) combined ratio of consolidated Indebtedness (net ofnon-recourse Indebtedness) to Consolidated Adjusted Tangible Net Worth shallnot exceed 10:1.

##  

## c.             Litigation.The Sellers will promptly, and in any event within ten (10) days afterservice of process on any of the following, give to Administrative Agent noticeof all actions, suits or proceedings pending or, to the knowledge of theSellers threatened, against or affecting the Sellers or their respectiveproperties, in or before any court, arbitrator or other body, which,individually or in the aggregate, is reasonably likely to result in a MaterialAdverse Effect.

##  

## d.             Prohibitionof Fundamental Changes.  No Seller shallenter into any transaction of merger or consolidation or amalgamation, orliquidate, wind up or dissolve itself (or suffer any liquidation, winding up ordissolution) or sell all or substantially all of its assets; provided, that anySeller may merge or consolidate with (a) any wholly owned subsidiary of suchSeller, or (b) any other Person if such Seller, is the survivingcorporation; and provided further, that if after giving effect thereto, no Eventof Default would exist hereunder.

##  

## e.             Maintenanceof Profitability.  FIC shall notpermit, for any two consecutive Test Periods, its consolidated Net Income forany Test Period, before income taxes for such Test Period, distributions madeduring such Test Period, and without regard to unrealized gains or losses frommark to market valuations resulting from Sellers’ Interest Rate ProtectionAgreements during such Test Period, to be less than $1.00.

##  

## f.              Servicer;Asset Tape.  Sellers shall causeServicer to provide to Administrative Agent, electronically, in a formatmutually acceptable to Administrative Agent and Sellers, an Asset Tape by nolater than the Reporting Date.  TheSellers shall not cause the Purchased Mortgage Loans to be serviced by anyservicer other than a servicer expressly approved in writing by AdministrativeAgent, which approval shall be deemed granted by Administrative Agent withrespect to the Sellers with the execution of this Agreement.  The Purchased Mortgage Loans (other thanthose Purchased Mortgage Loans sold to

 

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## the Buyers by FMC) shall at all times be subservicedby an Eligible Subservicer pursuant to a binding and enforceable agreementbetween the Servicer and such Eligible Subservicer (copies of which, togetherwith all amendments and modifications thereto, shall be provided to theAdministrative Agent).

##  

## g.             Reserved.

##  

## h.             Insurance.  The Sellers will continue to maintain, foreach Seller and its subsidiaries, insurance coverage with respect to employeedishonesty, forgery or alteration, theft, disappearance and destruction,robbery and safe burglary, property (other than money and securities) andcomputer fraud in an aggregate amount acceptable to Fannie Mae and Freddie Mac.

##  

## i.              NoAdverse Claims.  The Sellers warrantand will defend, and shall cause any Servicer to defend, the right, title and interestof Buyers in and to all Repurchase Assets against all adverse claims anddemands.

##  

## j.              Assignment.  Except as permitted herein, neither Sellershall sell, assign, transfer or otherwise dispose of, or grant any option withrespect to, or pledge, hypothecate or grant a security interest in or lien onor otherwise encumber (except pursuant to the Program Agreements), any of thePurchased Mortgage Loans or any interest therein, provided that this Section shallnot prevent any transfer of Purchased Mortgage Loans in accordance with theProgram Agreements.

##  

## k.             SecurityInterest.  The Sellers shall do allthings necessary to preserve the Repurchase Assets so that they remain subjectto a first priority perfected security interest hereunder.  Without limiting the foregoing, the Sellerswill comply in all material respects with all rules, regulations and other lawsof any Governmental Authority and cause the Repurchase Assets to comply in allmaterial respects with all applicable rules, regulations and other laws.  The Sellers will not allow any default forwhich any Seller is responsible to occur under any Repurchase Assets or anyProgram Agreements and the Sellers shall fully perform or cause to be performedwhen due all of its obligations under any Repurchase Assets or the ProgramAgreements.

##  

## l.              Records.

##  

### (1)           Sellers shall collect and maintain orcause to be collected and maintained all Records relating to the PurchasedMortgage Loans in accordance with industry custom and practice for assetssimilar to the Purchased Mortgage Loans, including those maintained pursuant tothe preceding subparagraph, and all such Records shall be in Custodian’spossession unless Administrative Agent otherwise approves.  Sellers will not allow any such papers,records or files that are an original or an only copy to leave Custodian’spossession, except for individual items removed in connection with servicing aspecific Mortgage Loan, in which event Sellers will obtain or cause to beobtained a receipt from a

 

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### financially responsible person for any such paper,record or file.  Sellers of the PurchasedMortgage Loans will maintain all such Records not in the possession ofCustodian in good and complete condition in accordance with industry practicesfor assets similar to the Purchased Mortgage Loans and preserve them againstloss.

###  

### (2)           For so long as Buyers have aninterest in or lien on any Purchased Mortgage Loan, Seller swill hold or causeto be held all related Records in trust for Buyers.  Sellers shall notify, or cause to benotified, every other party holding any such Records of the interests and liensin favor of Buyers granted hereby.

###  

### (3)           Upon reasonable advance notice fromCustodian or Administrative Agent, Sellers shall (x) make any and all suchRecords available to Custodian or Administrative Agent during normal businesshours to examine any such Records, either by its own officers or employees, orby agents or contractors, or both, and make copies of all or any portion thereof,and (y) permit Buyer, Administrative Agent or its authorized agents todiscuss the affairs, finances and accounts of Sellers with its chief operatingofficer and chief financial officer and to discuss the affairs, finances andaccounts of Sellers with its independent certified public accountants.

###  

## m.            Books.  Sellers shall keep or cause to be kept inreasonable detail books and records of account of their assets and business andshall clearly reflect therein the transfer of Purchased Mortgage Loans to Buyers.

##  

## n.             Approvals.  Each Seller shall maintain all licenses,permits or other approvals necessary for Sellers to conduct their business andto perform their obligations under the Program Agreements, and Sellers shallconduct their business strictly in accordance with applicable law.

##  

## o.             MaterialChange in Business.  No Seller shall makeany material change in the nature of its business as carried on at the datehereof.

##  

## p.             UnderwritingGuidelines.  The Sellers shall giveAdministrative Agent prior notice of all intended material changes, amendmentsor modifications to the related Underwriting Guidelines which may affect thePurchased Mortgage Loans and Administrative Agent shall have three (3) BusinessDays following Administrative Agent’s receipt of such notice to notify theSellers of Administrative Agent’s approval, which shall not be unreasonablywithheld, or disapproval of the Sellers’ proposed amendments ormodifications.  If Administrative Agentdoes not notify the Sellers of Administrative Agent’s disapproval within three (3) BusinessDays, the proposed amendments or modifications shall be deemed approved.

##  

## q.             Distributions.If an Event of Default has occurred and is continuing, the Sellers shall notpay any dividends with respect to any capital stock or other

 

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## equity interests in such entity, whether now orhereafter outstanding, or make any other distribution in respect thereof,either directly or indirectly, whether in cash or property or in obligations ofany Seller.

##  

## r.              ApplicableLaw.  The Sellers shall comply, inall material respects, with the requirements of all applicable laws, rules,regulations and orders of any Governmental Authority.

##  

## s.             Existence.  The Sellers shall preserve and maintain theirlegal existence and all of their material rights, privileges, licenses andfranchises.

##  

## t.              ChiefExecutive Office; Jurisdiction of Organization.  No Seller shall move its chief executiveoffice from the address referred to in Section 13(a)(17) or change itsjurisdiction of organization from the jurisdiction referred to in Section 13(a)(17)unless it shall have provided Administrative Agent 30 days’ prior writtennotice of such change.

##  

## u.             Taxes.  Sellers shall timely file all tax returns thatare required to be filed by it and shall timely pay and discharge all taxes,assessments and governmental charges or levies imposed on it or on its incomeor profits or on any of its property prior to the date on which penaltiesattach thereto, except for any such tax, assessment, charge or levy (i) thepayment of which is being contested in good faith and by proper proceedings andagainst which adequate reserves are being maintained or (ii) of which theSellers have no knowledge.

##  

## v.             Transactionswith Affiliates.  The Sellers willnot enter into any transaction, including, without limitation, any purchase,sale, lease or exchange of property or the rendering of any service, with anyAffiliate which is not also a Seller hereunder, unless such transaction is (a) otherwisepermitted under the Program Agreements, (b) in the ordinary course of suchSeller’s business, or (c) upon fair and reasonable terms no less favorableto such Seller than it would obtain in a comparable arm’s-length transactionwith a Person which is not an Affiliate, or make a payment that is nototherwise permitted by this Section to any Affiliate which is not also aSeller hereunder.

##  

## w.            Reserved.

##  

## x.             Indebtedness.Neither Seller shall enter into any credit agreement or otherwise incur any additionalIndebtedness (1) except as expressly set forth in clause (2) below,without prior written notice to Administrative Agent (other than (a) pursuantto Existing Credit Facilities specified on Exhibit J hereto or anyincremental increases thereto, (b) Structured Securities Debt, (c) PermittedGuarantee Obligations and (d) usual and customary accounts payable for amortgage company) or (2) without the prior written consent ofAdministrative Agent in its sole good faith discretion with respect to any Seller’sacquisition or operation of any new line of business unrelated to that of aREIT or a mortgage

 

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## banker.  Therelevant Seller shall provide prompt written notice of any increase in itsExisting Credit Facilities specified on Exhibit J.

##  

## y.             Hedging.  The Sellers (i) have entered intoInterest Rate Protection Agreements, in accordance with the Sellers’ writtenpolicies regarding hedging, or a letter detailing such policies to be deliveredto the Administrative Agent upon Administrative Agent’s request, with respectto Purchased Mortgage Loans having terms with respect to protection againstfluctuations in interest rates acceptable to Administrative Agent in its solegood faith discretion; and (ii) shall give the Administrative Agent priornotice of all intended material changes, amendments or modifications to theSellers’ related written policies regarding hedging or letters delivered toAdministrative Agent detailing such policies.

##  

## z.             Trueand Correct Information.  Allinformation, reports, exhibits, schedules, financial statements or certificatesof Sellers, any Affiliate thereof or any of their officers furnished to AdministrativeAgent hereunder and during Administrative Agent’s diligence of Sellers are andwill be true and complete and do not omit to disclose any material factsnecessary to make the statements herein or therein, in light of thecircumstances in which they are made, not misleading.  All required financial statements,information and reports delivered by Sellers or Servicer to AdministrativeAgent pursuant to this Agreement shall be prepared in accordance with U.S.GAAP, or, if applicable, to SEC filings, the appropriate SEC accountingregulations.

##  

## aa.           Deliveryto Custodian.  Prior to the purchaseof a Mortgage Loan pursuant to this Agreement, the Sellers shall deliver, orcause to be delivered, to Administrative Agent or Custodian, as applicable, thedocumentation set forth in the Custodial Agreement with respect to suchMortgage Loan.  If upon examination ofthe documents included in the related Mortgage File, the Custodian determinesthat such documents do not satisfy the requirements set forth in the CustodialAgreement, the Custodian shall mark such Mortgage Loan as an exception on therelated Mortgage Loan Schedule and Exception Report.

##  

## bb.          AgencyApprovals; Servicing.  FMC shallmaintain its status with Fannie Mae as an approved lender and Freddie Mac as anapproved seller/servicer, in each case in good standing.  Should FMC, for any reason, cease to possessall such applicable Agency Approvals, or should notification to the relevantAgency or to The Department of Housing and Urban Development, FHA or VA berequired, FMC shall so notify Buyer immediately in writing.  Notwithstanding the preceding sentence, FMCshall take all necessary action to maintain all of their applicable AgencyApprovals at all times during the term of this Agreement and each outstandingTransaction.  FMC has adequate financialstanding, servicing facilities, procedures and experienced personnel necessaryfor the sound servicing of mortgage loans of the same types as may from time totime constitute Mortgage Loans and in accordance with Accepted ServicingPractices.

 

## cc.           Reserved.

 

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## dd.          NoPledge.  No Seller shall pledge,transfer or convey any security interest in the Collection Account to anyPerson without the express written consent of Administrative Agent.

##  

## ee.           Non-StructuredSecurities Indebtedness to Consolidated Adjusted Tangible Net Worth Ratio.  The Sellers’ ratio of consolidatedIndebtedness less Structured Securities Debt to Consolidated Adjusted TangibleNet Worth shall not exceed 10:1.

##  

## ff.            PlanAssets.  Neither Seller shall be anemployee benefit plan as defined in Section 3 of Title I of ERISA, or aplan described in Section 4975(e)(1) of the Code and no Seller shalluse “plan assets” within the meaning of 29 CFR §2510.3-101 to engage in thisRepurchase Agreement or any Transaction hereunder.

##  

## gg.          Maintenanceof Liquidity.  The Sellers shallmaintain cash, Cash Equivalents as well as unencumbered Mortgage Loans held forsale or securitization of at least $15 million.

##  

## hh.          CommittedWarehouse Facility.  While FIC or anAffiliate of FIC is the Servicer, the Servicer shall cause the Sellers tomaintain, at all times during the term of this Agreement, one or more committedloan facilities with one or more nationally recognized and established lenders(other than the Administrative Agent and its Affiliates) that, in the aggregateon a committed basis, have an aggregate committed amount of funds available tothe Sellers equal to at least $500,000,000.

##  

# **15.  Events of Default**

# ** **

Each of the following shall constitute an “Event ofDefault” hereunder:

 

## a.             PaymentFailure.  Failure of any Seller orServicer to (i) make any payment of Price Differential or Repurchase Priceor any other sum which has become due, on a Price Differential Payment Date ora Repurchase Date or otherwise, whether by acceleration or otherwise, under theterms of this Agreement, or (ii) cure any Margin Deficit when due pursuantto Section 6 hereof.

##  

## b.             CrossDefault.  Any Seller shall fail topay when due any amounts due under any agreement to which any such Person is aparty and under which any Indebtedness greater than $20,000,000 is governed(after giving effect to any applicable cure periods); or any Indebtedness owingby the Sellers greater than $20,000,000 shall be declared to be due and payableor required to be prepaid (other than by a regularly scheduled payment) priorto the date of maturity thereof.

##  

## c.             Assignment.  Assignment or attempted assignment by any Sellerof this Agreement or any rights hereunder without first obtaining the specificwritten consent of Administrative Agent, or the granting by any Seller of anysecurity

 

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## interest, lien or other encumbrances on any PurchasedMortgage Loans to any person other than Buyers.

##  

## d.             Insolvency.  An Act of Insolvency shall have occurred withrespect to any Seller.

##  

## e.             MaterialAdverse Change.  Any event having aMaterial Adverse Effect shall occur, in each case as determined by theAdministrative Agent in its sole good faith discretion.

##  

## f.              Breachof Financial Representation or Covenant or Obligation. A breach by any Selleror Servicer, as applicable, of any of the representations, warranties orcovenants or obligations set forth in Sections 13(a)(1),13(a)(7), 13(a)(12), 13(a)(19), 13(a)(24), 14a, 14b, 14d, 14e, 14s, 14v, 14x, 14dd,14ee, 14ff, 14gg or 14hh of this Agreement.

##  

## g.             Breachof Non-Financial Representation or Covenant.  A breach by any Seller or Servicer, asapplicable, of any other material representation, warranty or covenant setforth in this Agreement (and not otherwise specified in Section 15(f) above),if such breach is not cured within five (5) Business Days (other than therepresentations and warranties set forth in Schedule 1, which shall beconsidered solely for the purpose of determining the Market Value, the existenceof a Margin Deficit and the obligation to repurchase such Mortgage Loan) unless(i) such party shall have made any such representations and warrantieswith knowledge that they were materially false or misleading at the time madeor (ii) any such representations and warranties have been determined by AdministrativeAgent in its sole discretion to be materially false or misleading on a regularbasis.

##  

## h.             Changeof Control.  The occurrence of aChange in Control.

##  

## i.              Failureto Transfer.  Sellers fail to transferthe Purchased Mortgage Loans to Buyers on the applicable Purchase Date(provided Buyers have tendered the related Purchase Price).

##  

## j.              Judgment.  A final judgment or judgments for the paymentof money in excess of $20,000,000 in the aggregate shall be rendered against anySeller or any of its Affiliates by one or more courts, administrative tribunalsor other bodies having jurisdiction and the same shall not be satisfied,discharged (or provision shall not be made for such discharge) or bonded, or astay of execution thereof shall not be procured, within 30 days from the dateof entry thereof.

##  

## k.             GovernmentAction.  Any Governmental Authorityor any person, agency or entity acting or purporting to act under governmentalauthority shall have taken any action to condemn, seize or appropriate, or toassume custody or control of, all or any substantial part of the Property ofSellers, Servicer or any Affiliate thereof, or shall have taken any action todisplace the management of Sellers, Servicer or any Affiliate thereof or tocurtail its authority in the conduct of the business of Sellers, Servicer orany Affiliate thereof, or takes any action in the

 

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## nature of enforcement to remove, limit or restrict theapproval of Sellers, Servicer or Affiliate as an issuer, buyer or aseller/servicer of Mortgage Loans or securities backed thereby, and such actionprovided for in this subparagraph k shall not have been discontinued orstayed within 30 days.

##  

## l.              Inabilityto Perform.  An officer of a Sellershall admit its inability to, or its intention not to, perform any of the Sellers’Obligations hereunder.

##  

## m.            SecurityInterest.  This Agreement shall forany reason cease to create a valid, first priority security interest in anymaterial portion of the Purchased Mortgage Loans or other Repurchase Assetspurported to be covered hereby.

##  

## n.             FinancialStatements.  Sellers’ or Servicer’s auditedannual financial statements or the notes thereto or other opinions or conclusionsstated therein shall be qualified or limited by reference to the status ofSellers or Servicer as a “going concern” or a reference of similar import.

##  

## o.             Amendments.  Any material amendment is made to theUnderwriting Guidelines which was not previously approved by Buyer pursuant to Section 14(p).

##  

## p.             REITStatus.  The failure of FIC to at anytime continue to be qualified as a real estate investment trust as defined in Section 856of the Code.

##  

## q.             EligibleSubservicer.  Except with respect toFMC, the failure at any time to have a Person satisfying the definition of “EligibleSubservicer” obligated to perform the duties of Eligible Subservicer withrespect to Mortgage Loans and related property originated by FIC.

##  

An Event of Default shall be deemed to be continuingunless expressly waived by Administrative Agent in writing.

 

# **16.  Remedies Upon Default**

# ** **

In the event that an Event of Default shall haveoccurred:

 

## a.             AdministrativeAgent may, at its option (which option shall be deemed to have been exercisedimmediately upon the occurrence of an Act of Insolvency of any Seller or anyAffiliate), declare an Event of Default to have occurred hereunder and, uponthe exercise or deemed exercise of such option, the Repurchase Date for eachTransaction hereunder shall, if it has not already occurred, be deemedimmediately to occur (except that, in the event that the Purchase Date for anyTransaction has not yet occurred as of the date of such exercise or deemedexercise, such Transaction shall be deemed immediately canceled).  Administrative Agent shall (except upon theoccurrence of an Act of Insolvency) give notice to Sellers of the exercise ofsuch option as promptly as practicable.

 

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## b.             IfAdministrative Agent exercises or is deemed to have exercised the optionreferred to in subparagraph (a) of this Section, (i) Sellers’obligations in such Transactions to repurchase all Purchased Mortgage Loans, atthe Repurchase Price therefor on the Repurchase Date determined in accordancewith subparagraph (a) of this Section, shall thereupon becomeimmediately due and payable, (ii) all Income paid after such exercise ordeemed exercise shall be retained by Administrative Agent and applied, in AdministrativeAgent’s sole discretion, to the aggregate unpaid Repurchase Prices for alloutstanding Transactions and any other amounts owing by Sellers hereunder, and (iii) Sellersshall immediately deliver to Administrative Agent the Mortgage Files relatingto any Purchased Mortgage Loans subject to such Transactions then in Sellers’possession or control.

##  

## c.             AdministrativeAgent also shall have the right to obtain physical possession, and to commencean action to obtain physical possession, of all Records and files of Sellersrelating to the Purchased Mortgage Loans and all documents relating to thePurchased Mortgage Loans (including, without limitation, any legal, credit orservicing files with respect to the Purchased Mortgage Loans) which are then ormay thereafter come in to the possession of Sellers or any third party actingfor Sellers.  To obtain physicalpossession of any Purchased Mortgage Loans held by Custodian, AdministrativeAgent shall present to Custodian a Trust Receipt and Certification.  Buyer and Administrative Agent shall beentitled to specific performance of all agreements of Sellers contained in thisAgreement.

##  

## d.             AdministrativeAgent shall have the right to direct all servicers then servicing any PurchasedMortgage Loans to remit all collections thereon to Administrative Agent, and ifany such payments are received by Sellers, Seller shall not commingle theamounts received with other funds of Sellers and shall promptly pay them overto Administrative Agent.  AdministrativeAgent shall also have the right to terminate any one or all of the servicersthen servicing any Purchased Mortgage Loans with or without cause.  In addition, Administrative Agent shall havethe right to immediately sell the Purchased Mortgage Loans and liquidate allRepurchase Assets.  Such disposition ofPurchased Mortgage Loans may be, at Administrative Agent’s option, on either aservicing-released or a servicing-retained basis.  Buyers shall be entitled to place thePurchased Mortgage Loans in a pool for issuance of mortgage-backed securitiesat the then-prevailing price for such securities and to sell such securitiesfor such prevailing price in the open market. Administrative Agent shall also be entitled to sell any or all of suchMortgage Loans individually for the prevailing price. Administrative Agent shallalso be entitled, in its sole discretion to elect, in lieu of selling all or aportion of such Purchased Mortgage Loans, to give the Sellers credit for suchPurchased Mortgage Loans and the Repurchase Assets in an amount equal to theMarket Value of the Purchased Mortgage Loans against the aggregate unpaidRepurchase Price and any other amounts owing by the Sellers hereunder.

##  

## e.             Uponthe happening of one or more Events of Default, Administrative Agent may applyany proceeds from the liquidation of the Purchased Mortgage Loans

 

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## and Repurchase Assets to the Repurchase Priceshereunder and all other Obligations in the manner Administrative Agent deemsappropriate in its sole discretion.

##  

## f.              Sellersshall be liable to Buyers and Administrative Agent for (i) the amount ofall reasonable legal or other expenses (including, without limitation, allcosts and expenses of Buyers and Administrative Agent in connection with theenforcement of this Agreement or any other agreement evidencing a Transaction,whether in action, suit or litigation or bankruptcy, insolvency or othersimilar proceeding affecting creditors’ rights generally, further including,without limitation, the reasonable fees and expenses of counsel (including thecosts of internal counsel of Buyers and Administrative Agent) incurred inconnection with or as a result of an Event of Default, (ii) damages in anamount equal to the cost (including all fees, expenses and commissions) ofentering into replacement transactions and entering into or terminating hedgetransactions in connection with or as a result of an Event of Default, and (iii) anyother loss, damage, cost or expense directly arising or resulting from theoccurrence of an Event of Default in respect of a Transaction.

##  

## g.             Tothe extent permitted by applicable law, Sellers shall be liable to Buyers andAdministrative Agent for interest on any amounts owing by Sellers hereunder,from the date Sellers become liable for such amounts hereunder until suchamounts are (i) paid in full by Sellers or (ii) satisfied in full bythe exercise of Buyers’ or Administrative Agent’s rights hereunder.  Interest on any sum payable by Sellers underthis Section 16(g) shall be at a rate equal to the Post-Default Rate.

##  

## h.             Buyersand Administrative Agent shall have, in addition to its rights hereunder, anyrights otherwise available to it under any other agreement or applicable law.

##  

## i.              Buyersand Administrative Agent may exercise one or more of the remedies available to themimmediately upon the occurrence of an Event of Default and, except to theextent provided in subsections (a) and (d) of this Section, at anytime thereafter without notice to Sellers. All rights and remedies arising under this Agreement as amended fromtime to time hereunder are cumulative and not exclusive of any other rights orremedies which Buyers and Administrative Agent may have.

##  

## j.              Buyersand Administrative Agent may enforce their rights and remedies hereunderwithout prior judicial process or hearing, and each Seller hereby expresslywaives any defenses such Seller might otherwise have to require Buyers orAdministrative Agent to enforce their rights by judicial process.  Each Seller also waives any defense (otherthan a defense of payment or performance) such Seller might otherwise havearising from the use of nonjudicial process, enforcement and sale of all or anyportion of the Repurchase Assets, or from any other election of remedies.  Each Seller recognizes that nonjudicialremedies are

 

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## consistent with the usages of the trade, areresponsive to commercial necessity and are the result of a bargain at arm’slength.

##  

## k.             AdministrativeAgent shall have the right to perform reasonable due diligence with respect to eachSeller and the Mortgage Loans, which review shall be at the expense of Sellers.

##  

# **17.  Reports**

# ** **

## a.             Notices.  The Sellers shall immediately furnish toAdministrative Agent, notice of the occurrence of any Event of Defaulthereunder or material default or breach by the Sellers or Servicer of anyobligation under any Program Agreement or any material contract or agreement ofthe Sellers or Servicer or the occurrence of any event or circumstance thatsuch party reasonably expects will, with the passage of time, become an Eventof Default or such a default or breach by such party and the following:

##  

### (1)           as soon as available and in any eventwithin thirty (30) calendar days after the end of each calendar month, theunaudited consolidated and consolidating balance sheets of FIC and itsconsolidated Subsidiaries as at the end of such period and the relatedunaudited consolidated statements of income and retained earnings and of cashflows for FIC and its consolidated Subsidiaries for such period and the portionof the fiscal year through the end of such period, accompanied by a certificateof a Responsible Officer of FIC, which certificate shall state that saidconsolidated financial statements fairly present in all material respects theconsolidated financial condition and results of operations of FIC and itsconsolidated Subsidiaries in accordance with GAAP, consistently applied, as atthe end of, and for, such period (subject to normal year-end adjustments);

###  

### (2)           as soon as available and in any eventwithin ninety (90) days after the end of each fiscal year of FIC, theconsolidated and consolidating balance sheets of FIC and its consolidatedSubsidiaries as at the end of such fiscal year and the related consolidated statementsof income and retained earnings and of cash flows for FIC and its consolidatedSubsidiaries for such year, setting forth in each case in comparative form thefigures for the previous year, accompanied by an opinion thereon of independentcertified public accountants, a member of AICPA, which opinion shall not bequalified as to scope of audit or going concern and shall state that saidconsolidated and consolidating financial statements fairly present theconsolidated financial condition and results of operations of FIC and itsrespective consolidated Subsidiaries as at the end of, and for, such fiscalyear in accordance with GAAP;

###  

### (3)           such other prepared statements that AdministrativeAgent may reasonably request;

###  

### (4)           if applicable, copies of any 10-Ks, 10-Qs,registration statements and other “corporate finance” SEC filings (otherthan 8-Ks) by Sellers,

 

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### within 5 Business Days of their filing with theSEC; provided, that, Sellers or any Affiliate will provide Administrative Agentand Credit Suisse First Boston Corporation with a copy of the annual 10-K filedwith the SEC by Sellers or their Affiliates, no later than 90 days afterthe end of the year;

###  

### (5)           as soon as available, and in anyevent within thirty (30) days of receipt, copies of relevant portions of allfinal written Agency, FHA, VA, Governmental Authority and investor audits,examinations, evaluations, monitoring reviews and reports of its operations(including those prepared on a contract basis) which provide for or relate to (i) materialcorrective action required or (ii) material sanctions proposed, imposed orrequired, including without limitation notices of defaults, notices oftermination of approved status, notices of imposition of supervisory agreementsor interim servicing agreements, and notices of probation, suspension, ornon-renewal;

###  

### (6)           from time to time such otherinformation regarding the financial condition, operations, or business of the Sellersas Administrative Agent may reasonably request;

###  

### (7)           as soon as reasonably possible, andin any event within thirty (30) days after a Responsible Officer of any Sellerknows, or with respect to any Plan or Multiemployer Plan to which any Seller orany of its Subsidiaries makes direct contributions, has reason to believe, thatany of the events or conditions specified below with respect to any Plan orMultiemployer Plan has occurred or exists, a statement signed by a seniorfinancial officer of such Seller setting forth details respecting such event orcondition and the action, if any, that such Seller or its ERISA Affiliateproposes to take with respect thereto (and a copy of any report or noticerequired to be filed with or given to PBGC by such Seller or an ERISA Affiliatewith respect to such event or condition);

###  

### (8)           any reportable event, as defined in Section 4043(c) ofERISA and the regulations issued thereunder, with respect to a Plan, as towhich PBGC has not by regulation waived the requirement of Section 4043(a) ofERISA that it be notified within thirty (30) days of the occurrence of suchevent (provided that a failure to meet the minimum funding standard of Section 412of the Code or Section 302 of ERISA, including, without limitation, thefailure to make on or before its Due Date a required installment under Section 412(m)of the Code or Section 302(e) of ERISA, shall be a reportable eventregardless of the issuance of any waivers in accordance with Section 412(d) ofthe Code); and any request for a waiver under Section 412(d) of theCode for any Plan;

###  

### (9)           the distribution under Section 4041(c) ofERISA of a notice of intent to terminate any Plan or any action taken by theany Seller or an ERISA Affiliate to terminate any Plan;

###  

### (10)         the institution by PBGC of proceedingsunder Section 4042 of ERISA for the termination of, or the appointment ofa trustee to administer any

 

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### Plan, or the receipt by the any Seller or any ERISAAffiliate of a notice from a Multiemployer Plan that such action has been takenby PBGC with respect to such Multiemployer Plan;

###  

### (11)         the complete or partial withdrawal froma Multiemployer Plan by any Seller or any ERISA Affiliate that results inliability under Section 4201 or 4204 of ERISA (including the obligation tosatisfy secondary liability as a result of a purchaser default) that would havea Material Adverse Effect or the receipt by any Seller or any ERISA Affiliateof notice from a Multiemployer Plan that it is in reorganization or insolvencypursuant to Section 4241 or 4245 of ERISA or that it intends to terminateor has terminated under Section 4041A of ERISA;

###  

### (12)         the institution of a proceeding by afiduciary of any Multiemployer Plan against any Seller or any ERISA Affiliateto enforce Section 515 of ERISA, which proceeding is not dismissed withinthirty (30) days;

###  

### (13)         the adoption of an amendment to anyPlan that would result in the loss of tax-exempt status of the trust of whichsuch Plan is a part if the related Seller or an ERISA Affiliate fails toprovide timely security to such Plan in accordance with the provisions of Section 401(a)(29)of the Code or Section 307 of ERISA.

###  

### (14)         As soon as reasonably possible, noticeof any of the following events:

###  

##### (a)           changein the insurance coverage required of Sellers, Servicer or any other Personpursuant to any Program Agreement, with a copy of evidence of same attached;

#####  

##### (b)           immediatelyfollowing notice or knowledge of any material litigation against any Seller;

#####  

##### (c)           anymaterial dispute, litigation, investigation, proceeding or suspension between anySeller or Servicer, on the one hand, and any Governmental Authority;

#####  

##### (d)           anymaterial change in accounting policies or financial reporting practices of any Selleror Servicer;

#####  

##### (e)           theoccurrence of any material employment dispute and a description of the strategyfor resolving it that has the possibility of resulting in a Material AdverseEffect;

#####  

##### (f)            withrespect to any Purchased Mortgage Loan, immediately upon receipt of notice orknowledge thereof, that the underlying Mortgaged Property has been damaged bywaste, fire, earthquake or earth movement, windstorm,

 

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##### flood, tornado or other casualty, or otherwise damaged so as to affectadversely the value of such Mortgaged Loan;

#####  

##### (g)           anymaterial issues raised upon examination of Sellers or Sellers’ facilities byany Governmental Authority;

#####  

##### (h)           anymaterial change in the Indebtedness of any Seller, including, withoutlimitation, any material default, renewal, non-renewal, termination, increasein available amount or decrease in available amount related thereto;

#####  

##### (i)            promptlyupon receipt of notice or knowledge of (i) any default related to anyRepurchase Asset, (ii) any lien or security interest (other than securityinterests created hereby or by the other Program Agreements) on, or claimasserted against, any of the Purchased Mortgage Loans; and

#####  

##### (j)            anyother event, circumstance or condition that has resulted, or has a possibilityof resulting, in a Material Adverse Effect with respect to any Seller orServicer.

#####  

## b.             Officer’sCertificates.  Sellers will furnishto Administrative Agent, at the time Sellers furnish each set of financialstatements pursuant to Section 17(a)(1) or (2) above, a certificateof a Responsible Officer of each Seller in the form of Exhibit Dhereto certifying that, as of the date of such financial statements and as ofthe date of such certificates, such Seller is in compliance with all the termsof this Agreement and setting forth the basis for such compliance, includingthe calculation of each financial ratio and covenant required to be satisfiedherein.

##  

## c.             ComplianceCertificate.  For each month, FICshall deliver to Administrative Agent a compliance certificate certifying Sellers’compliance with the covenants in Section 14(a), (b), (e), (ee) and (gg)above and setting forth its calculation thereof and identifying all MortgageLoans purchased by Buyers and held by Custodian pending repurchase.

##  

## d.             MortgageLoan Reports.  The Sellers willfurnish to Administrative Agent, in the form of Exhibit O hereto,monthly electronic Mortgage Loan performance data, including, withoutlimitation, delinquency reports, pool analytic reports and static pool reports(i.e., delinquency, foreclosure and net charge-off reports) and monthlystratification reports summarizing the characteristics of the PurchasedMortgage Loans.

##  

## e.             AssetTape.  Sellers shall provide to AdministrativeAgent, electronically, in a format mutually acceptable to Administrative Agentand Sellers, an Asset Tape by no later than the Reporting Date.

##  

## f.              Other.Sellers shall deliver to Administrative Agent any other reports or informationreasonably requested by Administrative Agent or as otherwise required pursuantto this Agreement.

 

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# **18.  Repurchase Transactions**

# ** **

Each Buyer may, in its sole election, engage inrepurchase transactions with the Purchased Mortgage Loans or otherwise pledge,hypothecate, assign, transfer or otherwise convey the Purchased Mortgage Loanswith a counterparty of such Buyer’s choice. Unless an Event of Default shall have occurred, no such transactionshall relieve Buyers of their obligations to transfer Purchased Mortgage Loansto Sellers pursuant to Section 4 hereof, or of Buyers’ obligation tocredit or pay Income to, or apply Income to the obligations of, Sellerspursuant to Section 7 hereof.  Inthe event any Buyer engage in a repurchase transaction with any of thePurchased Mortgage Loans or otherwise pledges or hypothecates any of thePurchased Mortgage Loans, such Buyer shall have the right to assign to such Buyer’scounterparty any of the applicable representations or warranties herein and theremedies for breach thereof, as they relate to the Purchased Mortgage Loansthat are subject to such repurchase transaction.

 

# **19.  Single Agreement**

# ** **

Buyers, Administrative Agent and each Selleracknowledge that, and have entered hereunto, and will enter into eachTransaction hereunder, in consideration of and in reliance upon the fact that,all Transactions hereunder constitute a single business and contractualrelationship and have been made in consideration of each other.  Accordingly, each of Buyers, AdministrativeAgent and each Seller agrees (i) to perform all of its obligations inrespect of each Transaction hereunder, and that a default in the performance ofany such obligations shall constitute a default by it in respect of allTransactions hereunder, (ii) that each of them shall be entitled to set-offclaims and apply property held by them in respect of any Transaction againstobligations owing to them in respect of any other Transactions hereunder and (iii) thatpayments, deliveries and other transfers made by either of them in respect ofany Transaction shall be deemed to have been made in consideration of payments,deliveries and other transfers in respect of any other Transactions hereunder,and the obligations to make any such payments, deliveries and other transfersmay be applied against each other and netted.

 

# **20.  Notices and Other Communications**

# ** **

Any and all notices (with the exception of TransactionRequests or Purchase Confirmations, which shall be delivered via facsimile orelectronically only), statements, demands or other communications hereunder maybe given by a party to the other by mail, facsimile, messenger or otherwise tothe address specified below, or so sent to such party at any other placespecified in a notice of change of address hereafter received by the other.  All notices, demands and requests hereundermay be made orally, to be confirmed promptly in writing, or by othercommunication as specified in the preceding sentence.

 

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If to aSeller:

 

Fieldstone Mortgage Company11000 Broken Land ParkwaySuite 600Columbia, MD  21044Attention:  TreasurerPhone Number:  410-772-7275Fax Number:  443-367-2172

 

mkrebs@fmcmortgage.com

 

Fieldstone Investment Corporation11000 Broken Land ParkwaySuite 600Columbia, MD  21044Attention:  TreasurerPhone Number:  410-772-7275Fax Number:  443-367-2172

 

mkrebs@fmcmortgage.com

 

with acopy to:

 

Kevin GralleyHogan & Hartson, LLP111 S. Calvert St., Suite 1600Baltimore, MD  21202Phone Number:  410-659-2738Fax Number:  410-539-6981

 

kggralley@hhlaw.com

 

If to Administrative Agent:

 

Credit Suisse, New York Branch 11 Madison Avenue, 5th FloorNew York, NY 10010Attention:  Joseph Soave and Alex SmithPhone Number:  (212) 325-9103Fax Number:          (212) 325-0873

 

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with acopy to:

 

Credit Suisse, New York Branch Eleven Madison AvenueNew York, NY 10010Attention: Legal Department

 

# **21.  Entire Agreement; Severability**

# ** **

This Agreement shall supersede any existing agreementsbetween the parties containing general terms and conditions for repurchasetransactions.  Each provision andagreement herein shall be treated as separate and independent from any otherprovision or agreement herein and shall be enforceable notwithstanding theunenforceability of any such other provision or agreement.

 

# **22.  Non assignability**

# ** **

## The Program Agreementsare not assignable by any Seller.  Buyersmay from time to time assign all or a portion of its rights and obligationsunder this Agreement and the Program Agreements; provided*,*howeverthat Administrative Agent shall maintain as agent of Sellers, for review bySellers upon written request, a register of assignees and a copy of an executedassignment and acceptance by Buyers and assignee (“Assignment and Acceptance”),specifying the percentage or portion of such rights and obligationsassigned.  Upon such assignment, (a) suchassignee shall be a party hereto and to each Program Agreement to the extent ofthe percentage or portion set forth in the Assignment and Acceptance, and shallsucceed to the applicable rights and obligations of Buyers hereunder, and (b) Buyersshall, to the extent that such rights and obligations have been so assigned byit to either (i) an Affiliate of a Buyer which assumes the obligations of suchBuyer or (ii) to another Person approved by Sellers (such approval not tobe unreasonably withheld) which assumes the obligations of any Buyer, bereleased from its obligations hereunder and under the Program Agreements.  Unless otherwise stated in the Assignment andAcceptance, Sellers shall continue to take directions solely from AdministrativeAgent unless otherwise notified by Administrative Agent in writing.  Administrative Agent may distribute to anyprospective assignee any document or other information delivered to AdministrativeAgent by Sellers.

##  

# **23.  Set-off**

# ** **

## a.             In addition to any rights and remedies of Buyers andAdministrative Agent provided by law, Buyers and Administrative Agent shallhave the right, without prior notice to Sellers, any such notice being expresslywaived by Sellers to the extent permitted by applicable law, upon any amountbecoming due and payable by Sellers hereunder (whether at the stated maturity,by acceleration or otherwise) to set-off and appropriate and apply against suchamount any and all deposits (general or special, time or demand, provisional orfinal), in any currency, and any other credits, indebtedness or claims, in anycurrency, in each case whether direct or indirect, absolute or contingent,matured or unmatured, at any time held or owing by Buyers or any branch oragency thereof to or for the credit or the account of Sellers.  Administrative Agent agrees promptly tonotify Sellers after any such set-off and application made by Buyers or

 

52

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## AdministrativeAgent; provided, that the failure to give such notice shall not affect thevalidity of such set-off and application.

##  

## b.             If any Buyer (a “Benefited Buyer”) shall at anytime receive any payment of all or part of the Obligations owed to such Buyer,or Price Differential in respect thereof, or receive any assets in respectthereof (whether voluntarily or involuntarily, by set-off, pursuant to eventsor proceedings of the nature referred to in Section 15(d), or otherwise),in a greater proportion than any such payment to or asset received by any otherBuyer, if any, in respect of such other Buyer’s Transactions, such PriceDifferential or such other Obligations, such Benefited Buyer shall purchase forcash from the other Buyers a participating interest in such portion of eachsuch other Buyer’s Transactions, or shall provide such other Buyers with thebenefits of any such asset, or the proceeds thereof, as shall be necessary tocause such Benefited Buyer to share the excess payment or benefits of suchasset or proceeds ratably with each of the Buyers based upon the respectiveaggregate Purchase Prices of the Transactions held by them; provided, however,that if all or any portion of such excess payment or benefits is thereafter recoveredfrom such Benefited Buyer, such purchase shall be rescinded, and the purchaseprice and benefits returned, to the extent of such recovery, but withoutinterest.  Each Seller agrees that eachBuyer so purchasing a portion of another Buyer’s Transactions and anyparticipant may exercise all rights of payment (including, without limitation,rights of set-off) with respect to such portion as fully as if such Buyer werethe direct holder of such portion.

##  

# **24.  Binding Effect; Governing Law; Jurisdiction**

# ** **

## a.             ThisAgreement shall be binding and inure to the benefit of the parties hereto andtheir respective successors and permitted assigns.  Each Seller acknowledges that the obligationsof Buyers and Administrative Agent hereunder or otherwise are not the subjectof any guaranty by, or recourse to, any direct or indirect parent or otherAffiliate of Buyers or Administrative Agent. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY,THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWSPRINCIPLES THEREOF.

##  

## b.             EACHSELLER HEREBY WAIVES TRIAL BY JURY.  EACHSELLER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY COURTOF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THESOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAMAGREEMENTS IN ANY ACTION OR PROCEEDING.  EACHSELLER HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO,EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEWYORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OFNEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THEPROGRAM AGREEMENTS.

 

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# **25.  No Waivers, Etc.**

# ** **

No express or implied waiver of any Event of Defaultby either party shall constitute a waiver of any other Event of Default and noexercise of any remedy hereunder by any party shall constitute a waiver of itsright to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and noconsent by any party to a departure herefrom shall be effective unless anduntil such shall be in writing and duly executed by both of the partieshereto.  Without limitation on any of theforegoing, the failure to give a notice pursuant to Section 6(a), 16(a) orotherwise, will not constitute a waiver of any right to do so at a later date.

 

# **26.  Intent**

# ** **

## a.             Theparties recognize that each Transaction is a “repurchase agreement” asthat term is defined in Section 101 of Title 11 of the United StatesCode, as amended (except insofar as the type of Purchased Mortgage Loanssubject to such Transaction or the term of such Transaction would render suchdefinition inapplicable), and a “securities contract” as that term is definedin Section 741 of Title 11 of the United States Code, as amended(except insofar as the type of assets subject to such Transaction would rendersuch definition inapplicable).

##  

## b.             Itis understood that either party’s right to liquidate Purchased Mortgage Loansdelivered to it in connection with Transactions hereunder or to exercise anyother remedies pursuant to Section 16 hereof is a contractual right toliquidate such Transaction as described in Sections 555 and 559 ofTitle 11 of the United States Code, as amended.

##  

## c.             Theparties agree and acknowledge that if a party hereto is an “insureddepository institution,” as such term is defined in the Federal DepositInsurance Act, as amended (“FDIA”), then each Transaction hereunder is a“qualified financial contract,” as that term is defined in FDIA and anyrules, orders or policy statements thereunder (except insofar as the type ofassets subject to such Transaction would render such definition inapplicable).

##  

## d.             Itis understood that this Agreement constitutes a “netting contract” asdefined in and subject to Title IV of the Federal Deposit Insurance CorporationImprovement Act of 1991 (“FDICIA”) and each payment entitlement andpayment obligation under any Transaction hereunder shall constitute a “coveredcontractual payment entitlement” or “covered contractual paymentobligation”, respectively, as defined in and subject to FDICIA (exceptinsofar as one or both of the parties is not a “financial institution”as that term is defined in FDICIA).

##  

## e.             This Agreement is intended to be a “repurchase agreement”and a “securities contract,” within the meaning of Section 555 and Section 559under the Bankruptcy Code.

 

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# **27.  Disclosure Relating to Certain FederalProtections**

# ** **

The parties acknowledge that they have been advisedthat:

 

## a.             inthe case of Transactions in which one of the parties is a broker or dealerregistered with the SEC under Section 15 of the 1934 Act, the SecuritiesInvestor Protection Corporation has taken the position that the provisions ofthe SIPA do not protect the other party with respect to any Transactionhereunder;

##  

## b.             inthe case of Transactions in which one of the parties is a government securitiesbroker or a government securities dealer registered with the SEC under Section 15Cof the 1934 Act, SIPA will not provide protection to the other party withrespect to any Transaction hereunder; and

##  

## c.             inthe case of Transactions in which one of the parties is a financialinstitution, funds held by the financial institution pursuant to a Transactionhereunder are not a deposit and therefore are not insured by the FederalDeposit Insurance Corporation or the National Credit Union Share Insurance Fund,as applicable.

##  

# **28.  Power of Attorney**

# ** **

Each Seller hereby authorizes Administrative Agent tofile such financing statement or statements relating to the Repurchase Assetswithout Sellers’ signature thereon as Administrative Agent, at its option, maydeem appropriate.  Each Seller herebyappoints Administrative Agent as Sellers’ agent and attorney-in-fact to executeany such financing statement or statements in Sellers’ name and to perform allother acts which Administrative Agent deems appropriate to perfect and continueits ownership interest in and/or the security interest granted hereby, ifapplicable, and to protect, preserve and realize upon the Repurchase Assets,including, but not limited to, the right to endorse notes, complete blanks indocuments, transfer servicing, and sign assignments on behalf of Sellers as itsagent and attorney-in-fact.  This agencyand power of attorney is coupled with an interest and is irrevocable without AdministrativeAgent’s consent.  Notwithstanding theforegoing, the power of attorney hereby granted may be exercised only duringthe occurrence and continuance of any Event of Default hereunder. Sellers shallpay the filing costs for any financing statement or statements preparedpursuant to this Section 28.

 

# **29.  Buyers and Administrative Agent May ActThrough Affiliates**

# ** **

## Buyers and AdministrativeAgent may, from time to time, designate one or more affiliates for the purposeof performing any action hereunder.

##  

# **30.  Indemnification; Obligations**

# ** **

## a.             EachSeller agrees to hold Buyer, Administrative Agent and each of their respectiveAffiliates and their officers, directors, employees, agents and advisors (each,an “Indemnified Party”) harmless from and indemnify each IndemnifiedParty (and will reimburse each Indemnified Party as the same is incurred)against all liabilities, losses, damages, judgments, costs and expenses(including, without

 

55

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## limitation, reasonable fees and expenses of counsel)of any kind which may be imposed on, incurred by, or asserted against anyIndemnified Party relating to or arising out of this Agreement, any TransactionRequest, Purchase Confirmation, any Program Agreement or any transactioncontemplated hereby or thereby resulting from anything other than theIndemnified Party’s gross negligence or willful misconduct.  Each Seller also agrees to reimburse eachIndemnified Party for all reasonable expenses in connection with theenforcement of this Agreement and the exercise of any right or remedy providedfor herein, any Transaction Request, Purchase Confirmation and any ProgramAgreement, including, without limitation, the reasonable fees and disbursementsof counsel.  Each Seller’s agreements inthis Section 30 shall survive the payment in full of the Repurchase Priceand the expiration or termination of this Agreement.  Each Seller hereby acknowledges that itsobligations hereunder are recourse obligations of such Seller and are notlimited to recoveries each Indemnified Party may have with respect to thePurchased Mortgage Loans.  Each Selleralso agrees not to assert any claim against Buyers, Administrative Agent or anyof their Affiliates, or any of their respective officers, directors, employees,attorneys and agents, on any theory of liability, for special, indirect,consequential or punitive damages arising out of or otherwise relating to thefacility established hereunder, the actual or proposed use of the proceeds ofthe Transactions, this Agreement or any of the transactions contemplated thereby.  THE FOREGOING INDEMNITY AND AGREEMENT NOT TOASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOTGROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.

##  

## b.             Withoutlimitation to the provisions of Section 4, if any payment of theRepurchase Price of any Transaction is made by Sellers other than on the thenscheduled Repurchase Date thereto as a result of an acceleration of theRepurchase Date pursuant to Section 16 or for any other reason, Sellersshall, upon demand by Administrative Agent, pay to Administrative Agent anamount sufficient to compensate Buyers or Administrative Agent for any losses,costs or expenses that it may reasonably incur as of a result of such payment.

##  

## c.             Withoutlimiting the provisions of Section 30(a) hereof, if Sellers fail topay when due any costs, expenses or other amounts payable by them under thisAgreement, including, without limitation, fees and expenses of counsel andindemnities, such amount may be paid on behalf of Sellers by AdministrativeAgent, in its sole discretion.

##  

# **31.  Counterparts**

# ** **

This Agreement may be executed in one or morecounterparts, each of which shall be deemed to be an original, and all suchcounterparts shall together constitute one and the same instrument.

 

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# **32.  Confidentiality**

# ** **

This Agreement and its terms, provisions, supplementsand amendments, and notices hereunder, are proprietary to Buyers,Administrative Agent and Agent and shall be held by Sellers in strictconfidence and shall not be disclosed to any third party without the writtenconsent of Buyers and Administrative Agent except for (i) disclosure toSellers’ direct and indirect Affiliates and Subsidiaries, attorneys oraccountants, but only to the extent such disclosure is necessary and suchparties agree to hold all information in strict confidence, (ii)  disclosurerequired by law, rule, regulation or order of a court or other regulatory bodyincluding, without limitation, the SEC, (iii) disclosure to Personsperforming due diligence investigations of Sellers in connection with merger oracquisition transactions or in connection with any initial public offeringinvolving the Sellers or their Affiliates, or (iv) disclosure inconnection with any initial public offering involving the Sellers or theirAffiliates only with respect to (a) the existence of this RepurchaseAgreement, (b) the Maximum Aggregate Purchase Price, (c) the range oraverage of the calculation of the Purchase Price or Price Differential, (d) therestrictive covenants set forth in Section 14, (e) the sub-limitsrelated to Wet-Ink Mortgage Loans, (f) the Termination Date, (g) thedate of this Agreement and (h) the aggregate Purchase Price of outstandingTransactions as of a certain date, or (v) disclosure to Sellers’ currentand prospective warehouse lenders; and provided that, in no event shall eitherSeller disclose to any current or prospective warehouse lenders any other termsother than those referred to in (iv)(a), (b) and (d) above, includingwithout limitation, any information with respect to the calculation of thePurchase Price, Price Differential or any fees, without the express writtenconsent of Administrative or as is otherwise permitted pursuant to this Section 32.  Notwithstanding the foregoing or anything tothe contrary contained herein or in any other Program Agreement, the partieshereto may disclose to any and all Persons, without limitation of any kind, thefederal, state and local tax treatment of the Transactions, any fact relevantto understanding the federal, state and local tax treatment of theTransactions, and all materials of any kind (including opinions or other taxanalyses) relating to such federal, state and local tax treatment and that maybe relevant to understanding such tax treatment; provided that Sellers may notdisclose the name of or identifying information with respect to Buyers,Administrative Agent or Agent or any pricing terms (including, withoutlimitation, the Pricing Rate, Purchase Price Percentage and Purchase Price) orother nonpublic business or financial information (including any sublimits andfinancial covenants) that is unrelated to the federal, state and local taxtreatment of the Transactions and is not relevant to understanding the federal,state and local tax treatment of the Transactions, without the prior writtenconsent of the Buyers and Administrative Agent.

 

# **33.  Recording of Communications**

# ** **

Buyers, Administrative Agent and Sellers shall havethe right (but not the obligation) from time to time to make or cause to bemade tape recordings of communications between its employees and those of theother party with respect to Transactions. Buyers, Administrative Agent and Sellers consent to the admissibility ofsuch tape recordings in any court, arbitration, or other proceedings.  The parties agree that a duly authenticatedtranscript of such a tape recording shall be deemed to be a writingconclusively evidencing the parties’ agreement.

 

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# **34.  Reserved**

# ** **

# **35.  No Proceedings; Waiver of Setoff**

# ** **

## Each of theAdministrative Agent, the Buyers and Sellers hereby agrees that it will notinstitute against, or join any other Person in instituting against any Buyer,any proceedings of the type referred to in the definition of “Act of Insolvency”hereunder until one year and one day shall have elapsed since the last day onwhich any Commercial Paper remains outstanding.

##  

## Each of theAdministrative Agent, the Sellers, the Servicer, and the Buyers hereby waiveany right of setoff it may have or to which it may be entitled under thisAgreement from time to time against any Buyer or its assets.

##  

# **36.  Periodic Due Diligence Review**

# ** **

Each Seller acknowledges that Buyers andAdministrative Agent have the right to perform continuing due diligence reviewswith respect to the Sellers and the Mortgage Loans, for purposes of verifyingcompliance with the representations, warranties and specifications madehereunder, or otherwise, and each Seller agrees that upon reasonable (but noless than one (1) Business Day’s) prior notice unless an Event of Defaultshall have occurred, in which case no notice is required, to Sellers, Buyers,Administrative Agent or their authorized representatives will be permittedduring normal business hours to examine, inspect, and make copies and extractsof, the Mortgage Files and any and all documents, records, agreements,instruments or information relating to such Mortgage Loans in the possession orunder the control of Sellers and/or the Custodian.  Sellers also shall make available to Buyersand Administrative Agent a knowledgeable financial or accounting officer forthe purpose of answering questions respecting the Mortgage Files and theMortgage Loans.  Without limiting thegenerality of the foregoing, each Seller acknowledges that Buyers may purchaseMortgage Loans from Sellers based solely upon the information provided by Sellersto Buyers and Administrative Agent in the Mortgage Loan Schedule and therepresentations, warranties and covenants contained herein, and that Buyers andAdministrative Agent, at their option, have the right at any time to conduct apartial or complete due diligence review on some or all of the Mortgage Loanspurchased in a Transaction, including, without limitation, ordering Broker’sprice opinions, new credit reports and new appraisals on the related MortgagedProperties and otherwise re-generating the information used to originate suchMortgage Loan.  Buyers may underwritesuch Mortgage Loans themselves or engage a mutually agreed upon third partyunderwriter to perform such underwriting. Each Seller agrees to cooperate with Buyers, Administrative Agent andany third party underwriter in connection with such underwriting, including,but not limited to, providing Buyers, Administrative Agent and any third partyunderwriter with access to any and all documents, records, agreements,instruments or information relating to such Mortgage Loans in the possession,or under the control, of Sellers.  Each Sellerfurther agrees that Sellers shall pay all out-of-pocket costs and expensesincurred by Buyers and Administrative Agent in connection with Buyers’ orAdministrative Agent’s activities pursuant to this Section 36 (“DueDiligence Costs”).

 

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# **37.  Authorizations**

# ** **

Any of the persons whose signatures and titles appearon Schedule 2 are authorized, acting singly, to act for Sellers, Buyers orAdministrative Agent, as the case may be, under this Agreement.

 

# **38.  Acknowledgement Of Anti-Predatory LendingPolicies**

# ** **

Buyers have in place internal policies and proceduresthat expressly prohibit its purchase of any High Cost Mortgage Loan.

 

# **39. **Documents MutuallyDrafted

# ** **

The Sellers, the Buyers andthe Administrative Agentagree that this Agreement each other Program Agreement prepared in connectionwith the Transactions set forth herein have been mutually drafted andnegotiated by each party, and consequently such documents shall not beconstrued against either party as the drafter thereof.

 

# **40.  General Interpretive Principles.**

# ** **

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

 

## a.             theterms defined in this Agreement have the meanings assigned to them in thisAgreement and include the plural as well as the singular, and the use of anygender herein shall be deemed to include the other gender;

##  

## b.             accountingterms not otherwise defined herein have the meanings assigned to them inaccordance with generally accepted accounting principles;

##  

## c.             referencesherein to “Articles”, “Sections”, “Subsections”, “Paragraphs”, and othersubdivisions without reference to a document are to designated Articles,Sections, Subsections, Paragraphs and other subdivisions of this Agreement;

##  

## d.             areference to a Subsection without further reference to a Section is areference to such Subsection as contained in the same Section inwhich the reference appears, and this rule shall also apply to Paragraphsand other subdivisions;

##  

## e.             thewords “herein”, “hereof”, “hereunder” and other words of similar import referto this Agreement as a whole and not to any particular provision;

##  

## f.              theterm “include” or “including” shall mean without limitation by reason ofenumeration; and

##  

## g.             alltimes specified herein or in any other Program Document (unless expresslyspecified otherwise) are local times in New York, New York unless otherwisestated.

 

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# **41.  The Administrative Agent**

# ** **

## a.             Appointment. Each Buyer hereby irrevocably designates and appoints the AdministrativeAgent as the Administrative Agent of such Buyer under this Agreement and theother Program Agreements, and each such Buyer irrevocably authorizes theAdministrative Agent, in such capacity, to take such action on its behalf underthe provisions of this Agreement and the other Program Agreements and toexercise such powers and perform such duties as are expressly delegated to theAdministrative Agent by the terms of this Agreement and the other ProgramAgreements, together with such other powers as are reasonably incidentalthereto including, without limitation, all discretionary and ministerial rightsof the Buyer hereunder.  The signature ofthe Administrative Agent, delivered pursuant to this Agreement, shall bebinding on the Buyers hereunder and shall have the same effect as if signed bythe Buyers hereunder.  Notwithstandingany provision to the contrary elsewhere in this Agreement, the AdministrativeAgent shall not have any duties or responsibilities to any Buyer, except thoseexpressly set forth herein, or any fiduciary relationship with any Buyer, andno implied covenants, functions, responsibilities, duties, obligations orliabilities shall be read into this Agreement or any other Program Agreement orotherwise exist by any Buyer against the Administrative Agent.  The designation and appointment of theAdministrative Agent shall not release any Buyer from its obligations underthis Agreement.

##  

## b.             Delegation of Duties.  The Administrative Agent may execute any ofits duties under this Agreement and the other Program Agreements by or throughagents or attorneys-in- fact and shall be entitled to advice of counselconcerning all matters pertaining to such duties.  The Administrative Agent shall not beresponsible for the negligence to misconduct of any agents or attorneys-in-factselected by it with reasonable care.

##  

## c.             Exculpatory Provisions.  Neither the Administrative Agent nor any ofits officers, directors, employees, agents, attorneys-in-fact or Affiliatesshall be (i) liable for any action lawfully taken or omitted to be takenby it or such Person under or in connection with this Agreement or any otherProgram Agreement (except for its or such Person’s own gross negligence orwillful misconduct) or (ii) responsible in any manner to any of the Buyersfor any recitals statements, representations or warranties made by the Sellersor any officer thereof contained in this Agreement or any other ProgramAgreement or in any certificate, report, statements or other document referredto or provided for in, or received by the Administrative Agent under or inconnection with, this Agreement or any other Program Agreement or for thevalue, validity, effectiveness, genuineness, enforceability or sufficiency ofthis Agreement or any other Program Agreement or for any failure of the Sellersto perform their obligations hereunder or thereunder.  The Administrative Agent shall not be underany obligation to any Buyer to ascertain or to inquire as to the observance orperformance of any of the agreements contained in, or conditions of, thisAgreement or any other Program Agreement, or to inspect the properties, booksor records of the Sellers.  The partiesexpressly acknowledge that (a) Administrative Agent’s obligations underthe Agreement shall not include a guarantee of performance by its Principal orPrincipals and (b) the other party’s remedies shall not include a right ofsetoff in respect of rights or obligations, if any, of Administrative Agentarising in other transactions in which Administrative Agent is acting asprincipal.

 

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## d.             Reliance by Administrative Agent.  The Administrative Agent shall be entitled torely, and shall be fully protected in relying, upon any Transaction Request,writing, resolution, notice, consent, certificate, affidavit, letter,cablegram, telegram, telecopy, telex, or teletype message, statement, order orother document or conversation believed by it to be genuine and correct and to havebeen signed, sent or made by the proper Person or Persons and upon advice andstatements of legal counsel (including counsel to the Sellers or any otherparty to this Agreement), independent accountants and other experts selected bythe Administrative Agent.  TheAdministrative Agent shall be fully justified in failing or refusing to takeany action under this Agreement or any other Program Agreement unless it shallfirst receive such advice or concurrence of the Required Committed Buyers as itdeems appropriate or it shall first be indemnified to its satisfaction by theBuyers against any and all liability and expense which may be incurred by it byreason of taking or continuing to take any such action.  The Administrative Agent shall in all casesbe fully protected in acting, or in refraining from acting, under thisAgreement and the other Program Agreement in accordance with a request of RequiredCommitted Buyers, and such request and any action taken or failure to actpursuant thereto shall be binding upon all the Buyers and all future holders ofthe Purchased Mortgage Loans.

##  

## e.             Notices. Any (i) notices, requests, confirmations, Mortgage Loan Schedules,Trust Receipts, Income, cash or additional Mortgage Loans to be received by anyBuyer and (ii) judgments, approvals, agreements, determinations or noticesto be made by any Buyer under this Agreement shall be delivered to and made bythe Administrative Agent. Notwithstanding any provision to the contrary elsewhere in thisAgreement, the Administrative Agent shall not be deemed to have knowledge ornotice of the occurrence of any Event of Default hereunder unless theAdministrative Agent has received notice from a Buyer or the Sellers referringto this Agreement, describing such Event of Default and stating that suchnotice is a “notice of default”.  In theevent that the Administrative Agent receives such a notice, the AdministrativeAgent shall give notice thereof to the Buyers. The Administrative Agent shall take such action with respect to such Eventof Default as shall be reasonably directed by the Required Committed Buyers;provided that unless and until the Administrative Agent shall have receivedsuch directions, the Administrative Agent may (but shall not be obligated to)take such action, or refrain from taking such action, with respect to suchEvent of Default as it shall deem advisable in the best interests of theBuyers.  The Administrative Agent shallprovide to the Buyers, on each Business Day, the rate of the PricingDifferential and, not later than the opening of business on the Business Dayfollowing the receipt thereof by the Administrative Agent, a copy of the mostrecent margin base report.

##  

## f.              Non-Reliance on Administrative Agent and OtherBuyers.  Each Buyer expresslyacknowledges that neither the Administrative Agent nor any of its officers,directors, employees, agents, attorneys-in-fact or Affiliates has made anyrepresentations or warranties to its and that no act by the AdministrativeAgent hereinafter taken, including any review of the affairs of the Sellers,shall be deemed to constitute any representation or warranty by theAdministrative Agent to any Buyer.  EachBuyer represents to the Administrative Agent that it has, independently andwithout reliance upon the Administrative Agent or any other Buyer, and based onsuch documents and information as it deemed appropriate, made its own appraisalof and investigation into the business, operations, property, financial andother condition and creditworthiness of the Sellers and made its own decisionto enter into Transactions and purchase its Interests hereunder and enter intothis Agreement.  Each Buyer alsorepresents that it will,

 

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## independently andwithout reliance upon the Administrative Agent or any other Buyer, and based onsuch documents and information as it shall deem appropriate at the time,continue to make its own credit analysis, appraisals and decisions in taking ornot taking action under this Agreement and the other Program Agreements, and tomake such investigation as it deems necessary to inform itself as to thebusiness, operations, property, financial and other conditions andcreditworthiness of the Sellers.  Exceptfor notices, reports and other documents expressly required to be furnished tothe Buyers by the Administrative Agent hereunder or other under the otherProgram Agreement, the Administrative Agent shall not have any duty orresponsibility to provide any Buyer with any credit or other information concerningthe business, operations, property, condition (financial or otherwise),prospects or creditworthiness of the Sellers which may come into the possessionof the Administrative Agent or any of its officers, directors, employees,agents attorneys-in-fact or Affiliates.

##  

## g.             Indemnification. The Buyers agree to indemnify the Administrative Agent in its capacityas such (to the extent not reimbursed by the Sellers and without limiting orexpanding the obligation of the Sellers to do so), ratably according to theirrespective Participation Percentages in effect on the date on whichindemnification is sought, from and against any and all liabilities,obligations, losses, damages, penalties, actions, judgments, suits, costs,expenses or disbursements of any kind whatsoever which may at any time(including, without limitation, at any time following the payment of theRepurchase Price) be imposed on, incurred by or asserted against theAdministrative Agent in any way relating to or arising out of, this Agreement, anyof the other Program Agreements or any documents contemplated by or referred toherein or therein or the transactions contemplated hereby or thereby or anyaction taken or omitted by the Administrative Agent under or in connection withany of the foregoing; provided that no Buyer shall be liable for the payment ofany portion of such liabilities, obligations, losses, damages, penalties,actions, judgments, suits, costs, expenses or disbursements resulting solelyfrom the Administrative Agent’s gross negligence or willful misconduct.  The agreements in this Section shallsurvive the payment of the Repurchase Prices and all other amounts payablehereunder.

##  

## h.             Administrative Agent in Its Individual Capacity.  The Administrative Agent and its Affiliatesmay purchase assets from, make loans to, accept deposits from and generallyengage in any kind of business with the Sellers as though the AdministrativeAgent were not the Administrative Agent hereunder and under the other ProgramAgreements.  With respect to theTransactions entered into by it and the Interests purchased made by it, theAdministrative Agent shall have the same rights and powers under this Agreementand the other Program Agreements as any Buyer and may exercise the same asthough it were not the Administrative Agent, and the terms “Buyer” and “Buyers”shall include the Administrative Agent in its individual capacity.

##  

## i.              Successor Administrative Agent.  The Administrative Agent may resign asAdministrative Agent upon 30 days’ notice to the Buyers.  If the Administrative Agent shall resign asAdministrative Agent under this Agreement and the other Program Agreements,then the Required Committed Buyers shall appoint from among the Buyers asuccessor Administrative Agent for the Buyers, which successor AdministrativeAgent shall be approved by the Sellers (unless an Event of Default has occurredand is continuing), and any such successor Administrative Agent shall succeedto the rights, powers and duties of the Administrative Agent, and the term “AdministrativeAgent” shall mean such successor

 

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## AdministrativeAgent effective upon such appointment and approval, and the formerAdministrative Agent’s rights, powers and duties as Administrative Agent shallbe terminated, without any other or further act or deed on the part of suchformer Administrative Agent or any of the parties to this Agreement or anyholders of the Purchased Mortgage Loans or the Interests.  If no successor Administrative Agent has beenappointed and shall have accepted such appointment within 30 days after theretiring Administrative Agent’s giving notice of its resignation, then theretiring Administrative Agent, on behalf of the Buyers, may appoint aAdministrative Agent which shall be a Buyer or a commercial bank organizedunder the laws of the United States of America or any State thereof and havinga combined capital and surplus of at least $100,000,000 and which shall (unlessand Event of Default has occurred and is continuing) be reasonably acceptableto the Sellers.  Upon the acceptance ofany appointment as the Administrative Agent hereunder by a successorAdministrative Agent, such successor Administrative Agent shall thereuponsucceed to and become vested with all the rights, powers, privileges and dutiesof the retiring Administrative Agent, and the retiring Administrative Agentshall be discharged from its duties and obligations, under this Agreement andthe other Program Agreements.  After anyretiring Administrative Agent’s resignation as Administrative Agent, theprovisions of this Section 36 shall inure to the benefit as to any actionstaken or omitted to be taken by it while it was Buyer under this Agreement andthe other Program Agreements.

##  

## j.              Rights and Obligations of Sellers Not Affected.  It is understood that the provisions of this Section 36are intended to control the relationship between the Administrative Agent onthe one hand and Buyers on the other hand, and nothing set forth herein shallbe deemed to diminish or add to any rights of Sellers hereunder or to imposeadditional obligations on Sellers, except that any dealings by the Sellers withthe Administrative Agent shall be deemed to satisfy such requirement to dealwith the Buyer hereunder.

##  

## k.             Action Upon Certain Events.  To the extent the Administrative Agent isentitled to consent to or withhold its consent of any waiver or amendment ofthis Agreement or other Program Agreements in accordance with the terms hereofor thereof or otherwise take action upon the occurrence of an Event of Default,the Administrative Agent shall (i) give prompt notice to the Buyers of anysuch waiver, amendment, Event of Default of which it is aware and (ii) takesuch action with respect to such waiver, amendment, Event of Default as shallbe directed by the Required Committed Buyers.

##  

## l.              Additional Representations.  Administrative Agent hereby makes thefollowing representations, which shall continue during the term of anyTransaction:  Each Principal has dulyauthorized Administrative Agent to execute and deliver the Agreement on itsbehalf, has the power to so authorize Administrative Agent and to enter intothe Transactions contemplated by the Agreement and to perform the obligationsof Sellers or Buyers, as the case may be, under such Transactions, and hastaken all necessary action to authorize such execution and delivery byAdministrative Agent and such performance by it.

##  

## m.            Identification of Principals.  Administrative Agent agrees (a) toprovide the other party, prior to the date on which the parties agree to enterinto any Transaction under the Agreement, with a written list of Principals forwhich it intends to act as Administrative Agent (which list may be amended inwriting from time to time with the consent of the other party), and (b) toprovide the other party, before the close of business on the next business dayafter orally

 

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## agreeing to enterinto a Transaction, with notice of the specific Principal or Principals forwhom it is acting in connection with such Transaction.  If (i) Administrative Agent fails toidentify such Principal or Principals prior to the close of business on suchnext business day or (ii) the other party shall determine in its solediscretion that any Principal or Principals identified by Administrative Agentare not acceptable to it, the other party may reject and rescind anyTransaction with such Principal or Principals, return to Administrative Agentany Purchased Mortgage Loan or portion of the Purchase Price, as the case maybe, previously transferred to the other party and refuse any furtherperformance under such Transaction, and Administrative Agent shall immediatelyreturn to the other party any portion of the Purchase Price or PurchasedMortgage Loans, as the case may be, previously transferred to AdministrativeAgent in connection with such Transaction; provided*,*however,that (A) the other party shall promptly (and in any event within onebusiness day) notify Administrative Agent of its determination to reject andrescind such Transaction and (B) to the extent that any performance wasrendered by any party under any Transaction rejected by the other party, suchparty shall remain entitled to any Price Differential or other amounts thatwould have been payable to it with respect to such performance if suchTransaction had not been rejected.  Theother party acknowledges that Administrative Agent shall not have anyobligation to provide it with confidential information regarding the financialstatus of its Principals; Administrative Agent agrees, however, that it willassist the other party in obtaining from Administrative Agent’s Principals suchinformation regarding the financial status of such Principals as the otherparty may reasonably request.

##  

## n.             Multiple Principals.

##  

(a)                                  Inthe event that Administrative Agent proposes to act for more than one Principalhereunder, Administrative Agent and the other party shall elect whether (i) totreat Transactions under the Agreement as transactions entered into on behalfof separate Principals or (ii) to aggregate such Transactions as if theywere transactions by a single Principal. Failure to make such an election in writing shall be deemed an electionto treat Transactions under the Agreement as transactions on behalf of separatePrincipals.

 

(b)                                 Inthe event that Administrative Agent and the other party elect (or are deemed toelect) to treat Transactions under the Agreement as transactions on behalf ofseparate Principals, the parties agree that (i) Administrative Agent willprovide the other party, together with the notice described in clause (b) ofSubsection m of this Section 41, notice specifying theportion of each Transaction allocable to the account of each of the Principalsfor which it is acting (to the extent that any such Transaction is allocable tothe account of more than one Principal); (ii) the portion of anyindividual Transaction allocable to each Principal shall be deemed a separateTransaction under the Agreement; (iii) the margin maintenance obligationsof Sellers under Section 6(a) of the Agreement shall be determined ona Transaction-by-Transaction basis (unless the parties agree to determine suchobligations on a Principal-by-Principal basis); and (iv) Buyers’ andSellers’ remedies under the Agreement upon the occurrence of an Event ofDefault shall be determined as if Administrative Agent had entered into a

 

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separate Agreement with the other party on behalf ofeach of its Principals.

 

(c)                                  Inthe event that Administrative Agent and the other party elect to treatTransactions under the Agreement as if they were transactions by a singlePrincipal, the parties agree that (i) Administrative Agent’s notice under clause(b) of Subsection m of this Section 41 need onlyidentify the names of its Principals but not the portion of each Transactionallocable to each Principal’s account; (ii) the margin maintenanceobligations of Sellers under Section 6(a) of the Agreement shall,subject to any greater requirement imposed by applicable law, be determined onan aggregate basis for all Transactions entered into by Administrative Agent onbehalf of any Principal; and (iii) Buyers’ and Sellers’ remedies upon theoccurrence of an Event of Default shall be determined as if all Principals werea single Seller or Buyer, as the case may be.

 

(d)                                 Notwithstandingany other provision of the Agreement, the parties agree that any Transactionsby Administrative Agent on behalf of an employee benefit plan under ERISA shallbe treated as Transactions on behalf of separate Principals in accordance withSubsection n(b) of this Section 41 (and all margin maintenanceobligations of the parties shall be determined on a Transaction-by-Transactionbasis).

 

## o.             Interpretation of Terms.  All references to “Seller” or “Buyer”, as thecase may be, in the Agreement shall, subject to the provisions of this Section 41(including, among other provisions, the limitations on Administrative Agent’sliability in Subsection c of this Section 41), be construed toreflect that (i) each Principal shall have, in connection with anyTransaction or Transactions entered into by Administrative Agent on its behalf,the rights, responsibilities, privileges and obligations of a “Seller”or “Buyer”, as the case may be, directly entering into such Transactionor Transactions with the other party under the Agreement, and (ii) AdministrativeAgent’s Principal or Principals have designated Administrative Agent as theirsole agent for performance of Sellers’ obligations to Buyers or Buyers’obligations to Sellers, as the case may be, and for receipt of performance byBuyers of their obligations to Sellers or Sellers of its obligations to Buyers,as the case may be, in connection with any Transaction or Transactions underthe Agreement (including, among other things, as Administrative Agent for eachPrincipal in connection with transfers of Securities, cash or other propertyand as agent for giving and receiving all notices under the Agreement).  Both Administrative Agent and its Principalor Principals shall be deemed “parties” to the Agreement and allreferences to a “party” or “either party” in the Agreement shall bedeemed revised accordingly.

##  

# **42.  Wire Instructions**

# ** **

## a.             Anyamounts to be transferred by the Buyers or the Administrative Agent to Sellershereunder shall be sent by wire transfer in immediately available finds to theaccount of Sellers at:

 

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## JPMorgan Chase Bank,National AssociationABA# 021000021Account # 00113326327

## Account Name: FIC OperatingAccount

##  

## b.             Anyamounts to be transferred by Sellers to the Administrative Agent (for theaccount of the Buyers) hereunder shall be sent by wire transfer in immediatelyavailable funds to the account of the Administrative Agent at:

##  

## Bank of New YorkABA#  021-000-018Account # 890-038-7025Account Name:  Alpine SecuritizationCorp.

##  

## c.             Anyamounts to be transferred by the Administrative Agent to the Buyers hereundershall be sent by wire transfer in immediately available funds to the account ofthe applicable Buyers at:

##  

## Bank of New YorkABA#  021-000-018Account # 890-038-7025Account Name:  Alpine SecuritizationCorp.

##  

## d.             Amountsreceived after 2:00 p.m., New York City time, on any Business Day shall bedeemed to have been paid and received on the next succeeding Business Day.

##  

# **43.  Joint and Several**

# ** **

## Sellers, AdministrativeAgent and Buyers hereby acknowledge and agree that the Sellers are each jointlyand severally liable to Buyers and Administrative Agent for all of theirrespective obligations hereunder.

##  

# **44.  Amendments and Waivers**

# ** **

## Neither this Agreementnor any other Program Agreement, nor any terms hereof or thereof may beamended, supplemented, waived or modified except in accordance with theprovisions of this Section 44.  TheRequired Committed Buyers may, or with the written consent of the Required CommittedBuyers, the Administrative Agent, may, from time to time (i) enter intowith Sellers written amendments, supplements or modifications hereto and to theother Program Agreements for the purpose of adding any provisions to thisAgreement or the other Program Agreements or changing in any manner the rightsof Buyers or of Sellers hereunder or thereunder or (ii) waive, on suchterms and conditions as the Required Committed Buyers or the AdministrativeAgent, as the case may be, may specify in such instrument, any of therequirements of this Agreement or the other Program Agreements or any Event ofDefault and its consequences; provided, however, that no such waiver and nosuch amendment, supplement or modification shall (i) reduce the amount orextend the scheduled Repurchase Date or of any

 

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## installmentthereof, or reduce the stated rate of any Price Differential or any fee payablehereunder or extend the scheduled date of any payment thereof, or modify orincrease the types of Mortgage Loans eligible for a Transaction hereunder, ineach case without the consent of each Buyer affected thereby, or (ii) amend,modify or waive any provision of this Section 44 or amend the definitionsof “Pricing Rate”, “Purchase Price Percentage”, “Asset Value”,or reduce the percentage specified in the definition of Required Committed Buyers,or consent to the assignment or transfer by the Sellers of any of their rightsand obligations under this Agreement and the other Program Agreement, orrelease or subordinate the interests of the Administrative Agent or any Buyerin the Purchased Mortgage Loans, in each case without the written consent ofall the Buyers.  Any such waiver and anysuch amendment, supplement or modification shall apply equally to each of theBuyers and shall be binding upon Sellers, the Buyers, the Administrative Agentand all future holders of Purchased Mortgage Loans and the Interests.  In the case of any waiver, Sellers, theBuyers, and the Administrative Agent shall be restored to their formerpositions and rights hereunder and under the other Program Agreements, and anyEvent of Default waived shall be deemed to be cured and not continuing; but nosuch waiver shall extend to any subsequent or other Event of Default or impairany right consequent thereon.

 

**[**Signature Page Follows**]**

 

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IN WITNESS WHEREOF, eachparty has caused its name to be signed hereto by its respective officersthereunto duly authorized as of the date first above written.

 

 
|   | FIELDSTONE  MORTGAGE COMPANY,                            |
|--------|----------------------------------------------------------|
|   | as Seller                                                |
|   |                                                     |
|   |                                                     |
|   | By:                                                      |   |   |
|   |                                                     | Name: |
|   |                                                     | Title: |
|   |                                                     |
|   |                                                     |
|   | FIELDSTONE  INVESTMENT CORPORATION,                      |
|   | as Seller                                                |
|   |                                                     |
|   |                                                     |
|   | By:                                                      |   |   |
|   |                                                     | Name: |
|   |                                                     | Title: |
|   |                                                     |
|   |                                                     |
|   | CREDIT SUISSE, NEW YORK BRANCH, as Administrative  Agent |
|   |                                                     |
|   |                                                     |
|   | By:                                                      |   |   |
|   |                                                     | Name: |
|   |                                                     | Title: |
|   |                                                     |
|   | By:                                                      |   |   |
|   |                                                     | Name: |
|   |                                                     | Title: |

 

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| The Alpine  Lending Group: |                                                                   |
|----------------------------|------------------------------------------------------------------------|
|                       |                                                                   |
|                       | ALPINE  SECURITIZATION CORP.,                                          |
|                       | as a Conduit  Buyer                                                    |
|                       |                                                                   |
|                       |                                                                   |
|                       | By:                                                                    |   |   |
|                       |                                                                   | Name: |
|                       |                                                                   | Title: |
|                       |                                                                   |
|                       |                                                                   |
|                       | By:                                                                    |   |   |
|                       |                                                                   | Name: |
|                       |                                                                   | Title: |
|                       |                                                                   |
|                       |                                                                   |
|                       | CREDIT SUISSE, NEW YORK BRANCH, individually and  as a Committed Buyer |
|                       |                                                                   |
|                       |                                                                   |
|                       | By:                                                                    |   |   |
|                       |                                                                   | Name: |
|                       |                                                                   | Title: |
|                       |                                                                   |
|                       | By:                                                                    |   |   |
|                       |                                                                   | Name: |
|                       |                                                                   | Title: |

 

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**SCHEDULE 1**

 

**REPRESENTATIONS AND WARRANTIES WITH RESPECT TOPURCHASED MORTGAGE LOANS**

 

With respect to those representations and warrantieswhich are made to the best of each Seller’s knowledge, if it is discovered bythe Sellers, the Buyers or the Administrative Agent that the substance of suchrepresentation and warranty is inaccurate and such inaccuracy materially andadversely affects the value of the related Mortgage Loan or the interest of theBuyers, notwithstanding the Sellers’ lack of knowledge with respect to thesubstance of such representation and warranty, such inaccuracy shall be deemeda breach of the applicable representation and warranty.

 

(a)           Payments Current.  No payment required under the Mortgage Loanis delinquent more than 30 days nor has any payment under the Mortgage Loanbeen delinquent more than 30 days at any time since the origination of theMortgage Loan.  The first Monthly Paymentshall be made, or shall have been made, with respect to the Mortgage Loan onits Due Date or within the grace period, all in accordance with the terms ofthe related Mortgage Note.

 

(b)           No Outstanding Charges.  All taxes, governmental assessments,insurance premiums, water, sewer and municipal charges, leasehold payments orground rents which previously became due and owing have been paid.  Neither Sellers nor the Qualified Originatorfrom which Sellers acquired the Mortgage Loan has advanced funds, or induced,solicited or knowingly received any advance of funds by a party other than theMortgagor, directly or indirectly, for the payment of any amount required underthe Mortgage Loan, except for interest accruing from the date of the MortgageNote or date of disbursement of the proceeds of the Mortgage Loan, whichever isearlier, to the day which precedes by one month the Due Date of the firstinstallment of principal and interest thereunder.

 

(c)           Original Terms Unmodified.  The terms of the Mortgage Note and Mortgagehave not been impaired, waived, altered or modified in any respect, from thedate of origination; except by a written instrument which has been recorded, ifnecessary to protect the interests of Buyers, and which has been delivered tothe Custodian and the terms of which are reflected in the Mortgage LoanSchedule.  The substance of any suchwaiver, alteration or modification has been approved by the title insurer, tothe extent required, and its terms are reflected on the Mortgage LoanSchedule.  No Mortgagor in respect of theMortgage Loan has been released, in whole or in part, except in connection withan assumption agreement approved by the title insurer, to the extent requiredby such policy, and which assumption agreement is part of the Mortgage Filedelivered to the Custodian and the terms of which are reflected in the MortgageLoan Schedule.

 

(d)           No Defenses.  The Mortgage Loan is not subject to any rightof rescission, set-off, counterclaim or defense, including, without limitation,the defense of usury, nor will the operation of any of the terms of theMortgage Note or the Mortgage, or the exercise of any right thereunder, rendereither the Mortgage Note or the Mortgage unenforceable, in whole or in part andno such right of rescission, set-off, counterclaim or defense has been assertedwith respect

 

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thereto, and tothe best of Sellers’ knowledge, since the date of origination of the MortgageLoan, the Mortgaged Property has not been subject to any bankruptcy proceedingor foreclosure proceeding and the Mortgagor has not filed for protection underapplicable bankruptcy laws.  Seller hasno knowledge nor has it received any notice that any Mortgagor in respect ofthe Mortgage Loan is a debtor in any state or federal bankruptcy or insolvencyproceeding.

 

(e)           Hazard Insurance.  The Mortgage Loan obligates the Mortgagorthereunder to maintain a hazard insurance policy issued by a Qualified Insurer(“hazard insurance”) in an amount atleast equal to the lesser of (i) the amount necessary to fully compensatefor any damage or loss to the improvements which are part of such MortgagedProperty on a replacement cost basis and (ii) the outstanding principalbalance of the Mortgage Loan, in either case in an amount sufficient to avoidthe application of any “co-insurance provisions and consistent with the amountthat would have been required as of the date of origination in accordance withthe Underwriting Guidelines”, and, if it was in place at origination of theMortgage Loan, flood insurance, at the Mortgagor’s cost and expense.  If the Mortgaged Property is in an area identifiedby any federal Governmental Authority in the Federal Register as having specialflood hazards, a flood insurance policy is in effect which met the requirementsof Federal Emergency Management Agency at the time such policy was issued.  The Mortgage obligates the Mortgagor tomaintain the hazard insurance and, if applicable, flood insurance policy at theMortgagor’s cost and expense, and on the Mortgagor’s failure to do so,authorizes the holder of the Mortgage to obtain and maintain such insurance atthe Mortgagor’s cost and expense, and to seek reimbursement therefor from theMortgagor.  The Mortgaged Property iscovered by hazard insurance.  The HazardInsurance policies contain a standard mortgagee clause naming the applicableSeller, its successors and assigns (including, without limitation, subsequentowners of the Mortgage Loan), as mortgagee, and may not be reduced, terminatedor canceled without 30 days’ prior written notice to the mortgagee.  No such notice has been received bySellers.  All premiums on such insurancepolicy have been paid.  Where required bystate law or regulation, the Mortgagor has been given an opportunity to choosethe carrier of the required hazard insurance, provided the policy is not a “master”or “blanket” hazard insurance policy covering a condominium, or any hazardinsurance policy covering the common facilities of a planned unitdevelopment.  The hazard insurance policyis the valid and binding obligation of the insurer and is in full force andeffect.  The applicable Seller has notengaged in, and has no knowledge of the Mortgagor’s having engaged in, any actor omission which would impair the coverage of any such policy, the benefits ofthe endorsement provided for herein, or the validity and binding effect of eitherincluding, without limitation, no unlawful fee, commission, kickback or otherunlawful compensation or value of any kind has been or will be received,retained or realized by any attorney, firm or other Person, and no suchunlawful items have been received, retained or realized by Sellers.

 

(f)            Compliance with Applicable Laws.  Any and all requirements of any federal,state or local law including, without limitation, usury, truth-in-lending, realestate settlement procedures, consumer credit protection, equal creditopportunity or disclosure laws applicable to the Mortgage Loan have beencomplied with, the consummation of the transactions contemplated hereby willnot involve the violation of any such laws or regulations, and Seller shallmaintain or shall cause its agent to maintain in its possession, available forthe inspection of Buyers or Administrative Agent, and shall deliver toAdministrative Agent, upon demand, evidence of compliance with all suchrequirements.

 

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(g)           No Satisfaction of Mortgage.  The Mortgage has not been satisfied,canceled, subordinated (except in the case of a Second Lien Mortgage Loan, tothe first Mortgage Loan) or rescinded, in whole or in part (except for arelease that does not materially impair the security of the Mortgage Loan or arelease the effect of which is reflected in the loan-to-value ratio for theMortgage Loan as set forth in the Mortgage Loan Schedule), and the MortgagedProperty has not been released from the lien of the Mortgage, in whole or inpart, nor has any instrument been executed that would effect any such release,cancellation, subordination or rescission. The applicable Seller has not waived the performance by the Mortgagor ofany action, if the Mortgagor’s failure to perform such action would cause theMortgage Loan to be in default, nor has Seller waived any default resultingfrom any action or inaction by the Mortgagor.

 

(h)           Location and Type of MortgagedProperty.  The Mortgaged Property islocated in an Acceptable State as identified in the Mortgage Loan Schedule andconsists of either (i) a single parcel of real property or (ii) morethan one parcel of real property (as determined for tax purposes only) whichparcels are contiguous and are subject to a single deed or title, in each case,with a detached single family residence erected thereon, or a two- tofour-family dwelling, or an individual condominium unit in a low-risecondominium project, or an individual unit in a planned unit development or ade minimis planned unit development; provided, however, that any condominiumunit or planned unit development shall conform with the applicable Fannie Maeand Freddie Mac requirements regarding such dwellings or shall conform tounderwriting guidelines acceptable to Administrative Agent in its solediscretion and that no residence or dwelling is a mobile home.  No portion of the Mortgaged Property is usedfor commercial purposes; provided, that, the Mortgaged Property may be a mixeduse property if such Mortgaged Property conforms to underwriting guidelinesacceptable to Administrative Agent in its sole discretion.

 

(i)            Valid First or Second Lien.  The related Mortgage is a valid, subsisting,enforceable and perfected (a) with respect to each first lien MortgageLoan, first priority lien and first priority security interest, or (b) withrespect to each Second Lien Mortgage Loan, second priority lien and secondpriority security interest, in each case, on the real property included in theMortgaged Property, including all buildings on the Mortgaged Property and allinstallations and mechanical, electrical, plumbing, heating and airconditioning systems located in or annexed to such buildings, and alladditions, alterations and replacements made at any time with respect to theforegoing.  The lien of the Mortgage issubject only to:

 

(1)           the lien of current real propertytaxes and assessments not yet due and payable;

 

(2)           covenants, conditions andrestrictions, rights of way, easements and other matters of the public recordas of the date of recording acceptable to prudent mortgage lending institutionsgenerally and specifically referred to in Buyer’s title insurance policydelivered to the originator of the Mortgage Loan and (a) referred to orotherwise considered in the appraisal made for the originator of the MortgageLoan or (b) which do not adversely affect the Appraised Value of theMortgaged Property set forth in such appraisal;

 

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(3)           other matters to which likeproperties are commonly subject which do not materially interfere with thebenefits of the security intended to be provided by the Mortgage or the use,enjoyment, value or marketability of the related Mortgaged Property;

 

(4)           with respect to each Mortgage Loanwhich is a Second Lien Mortgage Loan a first lien on the Mortgaged Property;and

 

(5)           in the case of a Mortgaged Propertythat is a condominium or an individual unit in a planned unit development,liens for common charges permitted by statute.

 

Any security agreement, chattel mortgage or equivalentdocument related to and delivered in connection with the Mortgage Loanestablishes and creates a valid, subsisting and enforceable (i) withrespect to each first lien Mortgage Loan, first priority lien and firstpriority security interest, or (ii) with respect to each Second LienMortgage Loan, second priority lien and second priority security interest, ineach case, on the property described therein and Seller has full right topledge and assign the same to Buyers.

 

(j)            Validity of Mortgage Documents.  The Mortgage Note and the Mortgage and anyother agreement executed and delivered by a Mortgagor, if applicable, inconnection with a Mortgage Loan are genuine, and each is the legal, valid andbinding obligation of the maker thereof enforceable in accordance with itsterms, except as enforcement may be limited by bankruptcy, insolvency,reorganization, receivership, moratorium or other similar laws relating to oraffecting the rights of creditors generally, and by general equity principles(regardless of whether such enforcement is considered in a proceeding in equityor at law).  All parties to the MortgageNote, the Mortgage and any other such related agreement had legal capacity toenter into the Mortgage Loan and to execute and deliver the Mortgage Note, theMortgage and any such agreement, and the Mortgage Note, the Mortgage and anyother such related agreement have been duly and properly executed by suchrelated parties.

 

(k)           Full Disbursement of Proceeds.  There is no further requirement for futureadvances under the Mortgage Loan, and any and all requirements as to completionof any on-site or off-site improvement and as to disbursements of any escrowfunds therefor have been complied with. All costs, fees and expenses incurred in making or closing the MortgageLoan and the recording of the Mortgage were paid, and the Mortgagor is notentitled to any refund of any amounts paid or due under the Mortgage Note orMortgage.

 

(l)            Ownership.  The applicable Seller is the sole owner ofrecord and holder of the Mortgage Loan. The Mortgage Loan is not assigned or pledged except as provided in thisAgreement and Sellers have good and marketable title thereto, and have fullright to pledge and assign the Mortgage Loan to Buyers or their designees freeand clear of any encumbrance, equity, participation interest, lien, pledge,charge, claim or security interest, and has full right and authority subject tono interest or participation of, or agreement with, any other party, to selleach Mortgage Loan pursuant to this Agreement.

 

(m)          Doing Business.  All parties which have had any interest inthe Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are(or, during the period in which they held and disposed of such interest, were) (i) incompliance with any and all applicable

 

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licensingrequirements of the laws of the state wherein the Mortgaged Property islocated, and (ii) either (A) organized under the laws of such state, (B) qualifiedto do business in such state, (C) a federal savings and loan association,a savings bank or a national bank having a principal office in such state, or (D) notdoing business in such state; provided, if a warehouse lender that was theassignee of the Mortgage Loans was not authorized to do business in thejurisdiction where the Mortgaged Property is located, the applicable Sellerrepresents and warrants that the financing of the Mortgage Loan and the holdingof an interest in the Mortgage Loan by the warehouse lender did not constitutedoing business in that jurisdiction.

 

(n)           Title Insurance.  The Mortgage Loan is covered by either (i) anattorney’s opinion of title and abstract of title, the form and substance ofwhich is acceptable to prudent mortgage lending institutions making mortgageloans in the area wherein the Mortgaged Property is located or (ii) anALTA lender’s title insurance policy or other generally acceptable form ofpolicy or insurance acceptable to Fannie Mae or Freddie Mac and each such titleinsurance policy is issued by a title insurer acceptable to Fannie Mae orFreddie Mac and qualified to do business in the jurisdiction where theMortgaged Property is located, insuring the related Seller, its successors andassigns, as to the first or second priority lien of the Mortgage, asapplicable, in the original principal amount of the Mortgage Loan (or to theextent a Mortgage Note provides for negative amortization, the maximum amountof negative amortization in accordance with the Mortgage), subject only to theexceptions contained in clauses (1), (2) and (3) and, with respect toSecond Lien Mortgage Loans, clause (4) of paragraph (i) of this Schedule 1,and in the case of adjustable rate Mortgage Loans, against any loss by reasonof the invalidity or unenforceability of the lien resulting from the provisionsof the Mortgage providing for adjustment to the Mortgage Interest Rate andMonthly Payment. Where required by state law or regulation, the Mortgagor hasbeen given the opportunity to choose the carrier of the required mortgage titleinsurance. Additionally, such lender’s title insurance policy affirmativelyinsures ingress and egress and against encroachments by or upon the MortgagedProperty or any interest therein. The title policy does not contain any specialexceptions (other than the standard exclusions) for zoning and uses and hasbeen marked to delete the standard survey exception or to replace the standardsurvey exception with a specific survey reading. The related Seller, itssuccessors and assigns, are the sole insureds of such lender’s title insurancepolicy, and such lender’s title insurance policy is valid and remains in fullforce and effect and will be in force and effect upon the consummation of thetransactions contemplated by this Agreement. No claims have been made undersuch lender’s title insurance policy, and no prior holder or servicer of therelated Mortgage, including the related Seller, has done, by act or omission,anything which would impair the coverage of such lender’s title insurancepolicy, including without limitation, no unlawful fee, commission, kickback orother unlawful compensation or value of any kind has been or will be received,retained or realized by any attorney, firm or other Person, and no suchunlawful items have been received, retained or realized by the related Seller.

 

(o)           No Event of Defaults.  There is no material default, breach,violation or event of acceleration existing under the Mortgage or the MortgageNote which, with the passage of time or with notice and the expiration of anygrace or cure period, would constitute a material default, breach, violation orevent of acceleration, and neither any Seller nor its predecessors have waivedany default, breach, violation or event of acceleration.

 

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(p)           No Mechanics’ Liens.  To the best of any Seller’s knowledge, thereare no mechanics’ or similar liens or claims which have been filed for work,labor or material (and no rights are outstanding that under the law could giverise to such liens) affecting the Mortgaged Property which are or may be liensprior to, or equal or coordinate with, the lien of the Mortgage.

 

(q)           Location of Improvements; NoEncroachments.  Except as may beexpressly noted and considered in the appraisal of the Mortgaged Property, allimprovements which were considered in determining the Appraised Value of theMortgaged Property lie wholly within the boundaries and building restrictionlines of the Mortgaged Property, and no improvements on adjoining propertiesencroach upon the Mortgaged Property unless there exists in the Mortgage File atitle policy with endorsements which insure against losses sustained by theinsured as a result of such encroachments. No improvement located on or being part of the Mortgaged Property is inviolation of any applicable zoning and building law, ordinance or regulation.

 

(r)            Origination; Payment Terms.  The Mortgage Loan was originated by or in conjunction with a mortgageeapproved by the Secretary of Housing and Urban Development pursuant to Sections203 and 211 of the National Housing Act, a savings and loan association, asavings bank, a commercial bank, credit union, insurance company or similar bankinginstitution which is supervised and examined by a federal or stateauthority.  Principal and/or interestpayments on the Mortgage Loan commenced no more than 60 days after funds weredisbursed in connection with the Mortgage Loan. With respect to adjustable rate Mortgage Loans, the Mortgage InterestRate is adjusted on each Interest Rate Adjustment Date to equal the Index plusthe Gross Margin (rounded up or down to the nearest .125%), subject to theMortgage Interest Rate Cap.  The MortgageNote is payable on the first day of each month in equal monthly installments ofprincipal and/or interest (subject to an “interest only” period in the case ofInterest Only Loans), which installments of interest (a) with respect toadjustable rate Mortgage Loans are subject to change on the Interest RateAdjustment Date due to adjustments to the Mortgage Interest Rate on eachInterest Rate Adjustment Date and (b) with respect to Interest Only Loansare subject to change on the Interest Only Adjustment Date due to adjustmentsto the Mortgage Interest Rate on each Interest Only Adjustment Date, in bothcases with interest calculated and payable in arrears, sufficient to amortizethe Mortgage Loan fully by the stated maturity date, over an original term ofnot more than 30 years from commencement of amortization.  The Due Date of the first payment under theMortgage Note is no more than 60 days from the date of the Mortgage Note.

 

(s)           Customary Provisions.  The Mortgage Note has a stated maturity.  The Mortgage contains customary andenforceable provisions such as to render the rights and remedies of the holderthereof adequate for the realization against the Mortgaged Property of thebenefits of the security provided thereby, including, (i) in the case of aMortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwiseby judicial foreclosure.  Upon default bya Mortgagor on a Mortgage Loan and foreclosure on, or trustee’s sale of, theMortgaged Property pursuant to the proper procedures, the holder of theMortgage Loan will be able to deliver good and merchantable title to theMortgaged Property.  There is nohomestead or other exemption available to a Mortgagor which would interferewith the right to sell the Mortgaged Property at a trustee’s sale or the rightto foreclose the Mortgage.  The MortgageNote and Mortgage are on forms acceptable to Freddie Mac or Fannie Mae.

 

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(t)            Occupancy of the MortgagedProperty.  To the best of any Seller’sknowledge, as of the Purchase Date (i) the Mortgaged Property is lawfullyoccupied under applicable law and (ii) all inspections, licenses andcertificates required to be made or issued with respect to all occupiedportions of the Mortgaged Property and, with respect to the use and occupancyof the same, including but not limited to certificates of occupancy and fireunderwriting certificates, have been made or obtained from the appropriateauthorities.  Neither Seller has receivednotification from any Governmental Authority that the Mortgaged Property is inmaterial non-compliance with such laws or regulations, is being used, operatedor occupied unlawfully or has failed to have or obtain such inspection,licenses or certificates, as the case may be. With respect to any Mortgage Loan originated with an “owner-occupied”Mortgaged property, the Mortgagor represented at the time of origination of theMortgage Loan that the Mortgagor would occupy the Mortgaged Property as theMortgagor’s primary residence.

 

(u)           No Additional Collateral.  The Mortgage Note is not and has not beensecured by any collateral except the lien of the corresponding Mortgage and thesecurity interest of any applicable security agreement or chattel mortgagereferred to in clause (i) above.

 

(v)           Deeds of Trust.  In the event the Mortgage constitutes a deedof trust, a trustee, authorized and duly qualified under applicable law toserve as such, has been properly designated and currently so serves and isnamed in the Mortgage, and no fees or expenses are or will become payable bythe Custodian or Buyers to the trustee under the deed of trust, except inconnection with a trustee’s sale after default by the Mortgagor.

 

(w)          Transfer of Mortgage Loans.  Except with respect to Mortgage Loansintended for purchase by Ginnie Mae and for Mortgage Loans registered withMERS, the Assignment of Mortgage is in recordable form and is acceptable forrecording under the laws of the jurisdiction in which the Mortgaged Property islocated.

 

(x)            Due-On-Sale.  Except with respect to Mortgage Loansintended for purchase by Ginnie Mae, the Mortgage contains an enforceableprovision for the acceleration of the payment of the unpaid principal balanceof the Mortgage Loan in the event that the Mortgaged Property is sold or transferredwithout the prior written consent of the mortgagee thereunder.

 

(y)           No Buydown Provisions; NoGraduated Payments or Contingent Interests. Except with respect to Agency Mortgage Loans, the Mortgage Loan does notcontain provisions pursuant to which Monthly Payments are paid or partiallypaid with funds deposited in any separate account established by the applicableSeller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by anysource other than the Mortgagor nor does it contain any other similarprovisions which may constitute a “buydown” provision.  The Mortgage Loan is not a graduated paymentmortgage loan and the Mortgage Loan does not have a shared appreciation orother contingent interest feature.

 

(z)            Consolidation of Future Advances.  Any future advances made to the Mortgagorprior to the Purchase Date have been consolidated with the outstandingprincipal amount secured by the Mortgage, and the secured principal amount, asconsolidated, bears a single interest rate and single repayment term.  The lien of the Mortgage securing the

 

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consolidatedprincipal amount is expressly insured as having first or second lien priorityby a title insurance policy, an endorsement to the policy insuring themortgagee’s consolidated interest or by other title evidence acceptable toFannie Mae and Freddie Mac.  Theconsolidated principal amount does not exceed the original principal amount ofthe Mortgage Loan.

 

(aa)         No Condemnation Proceeding.  To the best of any Seller’s knowledge, thereis no proceeding pending for the total or partial condemnation and no eminentdomain proceedings pending affecting any Mortgaged Property.

 

(bb)         Collection Practices; EscrowDeposits; Interest Rate Adjustments. The origination and collection practices used by the originator, eachservicer of the Mortgage Loan and the applicable Seller with respect to theMortgage Loan have been in all respects in compliance with Accepted ServicingPractices, applicable laws and regulations, and have been in all respects legaland proper.  With respect to escrowdeposits and Escrow Payments, (other than with respect to each Second LienMortgage Loan and for which the mortgagee under the first lien is collectingEscrow Payments) all such payments are in the possession of, or under thecontrol of, the applicable Seller and there exist no deficiencies in connectiontherewith for which customary arrangements for repayment thereof have not beenmade.  All Escrow Payments have beencollected in full compliance with state and federal law.  If an escrow of funds has been established,it is not prohibited by applicable law and has been established in an amountsufficient to pay for every item that remains unpaid and has been assessed butis not yet due and payable.  No escrowdeposits or Escrow Payments or other charges or payments due the applicableSeller have been capitalized under the Mortgage or the Mortgage Note.  All Mortgage Interest Rate adjustments havebeen made in strict compliance with state and federal law and the terms of therelated Mortgage Note.  Any interestrequired to be paid pursuant to state, federal and local law has been properlypaid and credited.

 

(cc)         Conversion to Fixed Interest Rate.  Except (i) as allowed by Fannie Mae orFreddie Mac, (ii) as would be allowed by Fannie Mae or Freddie Mac but forlimits by such Agencies on loan amounts, or (iii) or otherwise asexpressly approved in writing by Administrative Agent, with respect toadjustable rate Mortgage Loans, the Mortgage Loan is not convertible to a fixedinterest rate Mortgage Loan.

 

(dd)         Other Insurance Policies.  No action, inaction or event has occurred andno state of facts exists or has existed that has resulted or will result in theexclusion from, denial of, or defense to coverage under any applicable specialhazard insurance policy, PMI Policy or bankruptcy bond, irrespective of thecause of such failure of coverage.  Inconnection with the placement of any such insurance, no commission, fee, orother compensation has been or will be received by the applicable Seller or byany officer, director, or employee of Seller or any designee of Seller or anycorporation in which Seller or any officer, director, or employee had afinancial interest at the time of placement of such insurance.

 

(ee)         Servicemembers Civil ReliefAct.  The Mortgagor has not notifiedthe applicable Seller, and such Seller has no knowledge, of any reliefrequested or allowed to the Mortgagor under the Servicemembers Civil Relief Actof 2003.

 

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(ff)           Appraisal.  The Mortgage File contains an appraisal ofthe related Mortgaged Property signed prior to the funding of the MortgageLoan, duly appointed by the related Seller, who had no interest, direct orindirect in the Mortgaged Property or in any loan made on the security thereof,and whose compensation is not affected by the approval or disapproval of theMortgage Loan, and the appraisal and appraiser both satisfy the requirements ofFannie Mae or Freddie Mac and Title XI of the Federal Institutions Reform,Recovery, and Enforcement Act of 1989 as amended and the regulationspromulgated thereunder, all as in effect on the date the Mortgage Loan wasoriginated.

 

(gg)         Disclosure Materials.  The Mortgagor has executed a statement to theeffect that the Mortgagor has received all disclosure materials required byapplicable law with respect to the making of adjustable rate mortgage loans,and the applicable Seller maintains such statement in the Mortgage File.

 

(hh)         Construction or Rehabilitation ofMortgaged Property.  No Mortgage Loanwas made in connection with the construction or rehabilitation of a MortgagedProperty or facilitating the trade-in or exchange of a Mortgaged Property.

 

(ii)           Capitalization of Interest.  The Mortgage Note does not by its termsprovide for the capitalization or forbearance of interest.

 

(jj)           No Equity Participation.  No document relating to the Mortgage Loanprovides for any contingent or additional interest in the form of participationin the cash flow of the Mortgaged Property or a sharing in the appreciation ofthe value of the Mortgaged Property.  Theindebtedness evidenced by the Mortgage Note is not convertible to an ownershipinterest in the Mortgaged Property or the Mortgagor and the applicable Sellerhas not financed nor does it own directly or indirectly, any equity of any formin the Mortgaged Property or the Mortgagor.

 

(kk)         No Defense to InsuranceCoverage.  No action has been takenor failed to be taken, no event has occurred and no state of facts exists orhas existed on or prior to the Purchase Date (whether or not known to theapplicable Seller on or prior to such date) which has resulted or will resultin an exclusion from, denial of, or defense to coverage under any privatemortgage insurance (including, without limitation, any exclusions, denials ordefenses which would limit or reduce the availability of the timely payment ofthe full amount of the loss otherwise due thereunder to the insured) whetherarising out of actions, representations, errors, omissions, negligence, orfraud of the applicable Seller, the related Mortgagor or any party involved inthe application for such coverage, including the appraisal, plans andspecifications and other exhibits or documents submitted therewith to theinsurer under such insurance policy, or for any other reason under suchcoverage, but not including the failure of such insurer to pay by reason ofsuch insurer’s breach of such insurance policy or such insurer’s financialinability to pay.

 

(ll)           Proceeds of Mortgage Loan.  The proceeds of the Mortgage Loan have notbeen and shall not be used to satisfy, in whole or in part, any debt owed orowing by the Mortgagor to the applicable Seller or any Affiliate orcorrespondent of Seller, except in connection with a refinanced Mortgage Loan;provided, however, that no such refinanced

 

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Mortgage Loanshall have been originated pursuant to a streamlined mortgage loan refinancing program.

 

(mm)       Origination Date.  Unless otherwise approved by theAdministrative Agent in writing, the origination date is no earlier than thirty(30) days prior to the related Purchase Date.

 

(nn)         Mortgage Submitted forRecordation.  The Mortgage either hasbeen or will promptly be submitted for recordation in the appropriategovernmental recording office of the jurisdiction where the Mortgaged Propertyis located.

 

(oo)         Documents Genuine.  To the best of any Seller’s knowledge, suchPurchased Mortgage Loan and all accompanying collateral documents are completeand authentic and all signatures thereon are genuine.  Such Purchased Mortgage Loan is a “closed”loan fully funded by the applicable Seller and held in the applicable Seller’sname.

 

(pp)         Bona Fide Loan.  Such Purchased Mortgage Loan arose from abona fide loan, complying with all applicable State and Federal laws andregulations, to persons having legal capacity to contract and is not subject toany defense, set-off or counterclaim.

 

(qq)         Other Encumbrances.  To the best of any Seller’s knowledge, anyproperty subject to any security interest given in connection with suchPurchased Mortgage Loan is not subject to any other encumbrances other than astated first mortgage, if applicable, and encumbrances which may be allowedunder the Underwriting Guidelines.

 

(rr)           Description.  Each Purchased Mortgage Loan conforms to thedescription thereof as set forth on the related Mortgage Loan Schedule deliveredto the Custodian and Administrative Agent.

 

(ss)         Located in U.S.  No collateral (including, without limitation,the related real property and the dwellings thereon and otherwise) relating toa Purchased Mortgage Loan is located in any jurisdiction other than in one ofthe fifty (50) states of the United States of America or the District ofColumbia.

 

(tt)           Underwriting Guidelines.  Each Purchased Mortgage Loan has beenoriginated in accordance with the Underwriting Guidelines (including allsupplements or amendments thereto) previously provided to Administrative Agent.

 

(uu)         Aging.  Such Purchased Mortgage Loan has not beensubject to a Transaction hereunder for more than 180 days.

 

(vv)         Primary Mortgage GuarantyInsurance.  Each Mortgage Loan isinsured as to payment defaults by a policy of primary mortgage guarantyinsurance in the amount required where applicable, and by an insurer approved,by the applicable Take-out Investor, if applicable, and all provisions of suchprimary mortgage guaranty insurance have been and are being complied with, suchpolicy is in full force and effect, and all premiums due thereunder have beenpaid.  Each Mortgage Loan which isrepresented to Administrative Agent to have, or to be eligible for, FHAinsurance is insured, or eligible to be insured, pursuant to the National Housing

 

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Act.  Each Mortgage Loan which is represented bySellers to be guaranteed, or to be eligible for guaranty, by the VA isguaranteed, or eligible to be guaranteed, under the provisions of Chapter 37 ofTitle 38 of the United States Code.  Asto each FHA insurance certificate or each VA guaranty certificate, Sellers havecomplied with applicable provisions of the insurance for guaranty contract andfederal statutes and regulations, all premiums or other charges due inconnection with such insurance or guarantee have been paid, there has been noact or omission which would or may invalidate any such insurance or guaranty,and the insurance or guaranty is, or when issued, will be, in full force andeffect with respect to each Mortgage Loan. There are no defenses, counterclaims, or rights of setoff affecting theMortgage Loans or affecting the validity or enforceability of any privatemortgage insurance or FHA insurance applicable to the Mortgage Loans or any VAguaranty with respect to the Mortgage Loans.

 

(ww)       Predatory Lending Regulations;High Cost Loans.  None of theMortgage Loans are classified as a High Cost Mortgage Loan.

 

(xx)          Wet-Ink Mortgage Loans.  With respect to each Mortgage Loan that is aWet-Ink Mortgage Loan, the Settlement Agent has been instructed in writing bySellers to hold the related Mortgage Loan Documents as agent and bailee forBuyers or Buyers’ agent and to promptly forward such Mortgage Loan Documents inaccordance with the provisions of the Custodial Agreement and the EscrowInstruction Letter.

 

(yy)         FHA Mortgage Insurance; VALoan Guaranty.  With respect to theFHA Loans, the FHA Mortgage Insurance Contract is in full force and effect andthere exists no impairment to full recovery without indemnity to the Departmentof Housing and Urban Development or the FHA under FHA Mortgage Insurance.  With respect to the VA Loans, the VA LoanGuaranty Agreement is in full force and effect to the maximum extent statedtherein.  All necessary steps have beentaken to keep such guaranty or insurance valid, binding and enforceable andeach of such is the binding, valid and enforceable obligation of the FHA andthe VA, respectively, to the full extent thereof, without surcharge, set-off ordefense.  Each FHA Loan and VA Loan wasoriginated in accordance with the criteria of an Agency for purchase of suchMortgage Loans.

 

 

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