Document:

Series 2005 - A Supplement to Base Indenture

 Exhibit 4.10 
 EXECUTION COPY 
 CARMEL MOUNTAIN FUNDING TRUST, 
 as Issuer 
 and 
 DEUTSCHE BANK TRUST COMPANY AMERICAS, 
 as
Indenture Trustee and Paying Agent 
  

 SERIES 2005-A SUPPLEMENT 
 dated as of May 10, 2005 
 to 
 BASE INDENTURE 
 dated as of May 10, 2005 
  

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page
	 ARTICLE 1 Definitions
	  	1
		
	 ARTICLE 2 SERIES 2005-A SUBORDINATED NOTES
	  	4
			
	 Section 2.1
	  	Payment of Principal	  	4
			
	 Section 2.2
	  	Payment of Interest	  	4
			
	 Section 2.3
	  	Calculation of Interest	  	5
			
	 Section 2.4
	  	Optional Repurchase	  	6
			
	 Section 2.5
	  	Final Scheduled Payment; Early Amortization	  	7
			
	 Section 2.6
	  	Series 2005-A Payment Account	  	8
		
	 ARTICLE 3 FORM AND TRANSFER RESTRICTIONS OF SERIES 2005-A NOTES
	  	9
			
	 Section 3.1
	  	Restricted Global Series 2005-A Subordinated Notes; Definitive Notes	  	9
			
	 Section 3.2
	  	2005-A Subordinated Note Sold Pursuant to Regulation S	  	9
			
	 Section 3.3
	  	Transfer and Exchange of Subordinated Notes	  	10
		
	 ARTICLE 4 GENERAL
	  	10
			
	 Section 4.1
	  	Information	  	10
			
	 Section 4.2
	  	Exhibits	  	10
			
	 Section 4.3
	  	Ratification of Base Indenture	  	10
			
	 Section 4.4
	  	Counterparts	  	10
			
	 Section 4.5
	  	Governing Law	  	11
			
	 Section 4.6
	  	Amendments	  	11
			
	 Section 4.7
	  	Discharge of Indenture	  	11
			
	 Section 4.8
	  	Notice to Rating Agencies	  	11
			
	 Section 4.9
	  	Action by Direction of Required Subordinated Noteholders	  	11
			
	 Section 4.10
	  	Protections Under Base Indenture	  	11
			
	 Section 4.11
	  	Statement of Intent	  	12
			
	 Section 4.12
	  	No Recourse	  	12

  

	Exhibit A:	Form of Restricted Global Series 2005-A Subordinated Note 

	Exhibit B:	Form of Definitive Note Series 2005-A Subordinated Note 

  

 -i- 

 SERIES 2005-A SUPPLEMENT, dated as of May 10, 2005 (this “Supplement”) between
CARMEL MOUNTAIN FUNDING TRUST a statutory trust established under the laws of Delaware (the “Issuer”), DEUTSCHE BANK TRUST COMPANY AMERICAS, a, New York banking corporation as indenture trustee (together with its successors in trust
thereunder as provided in the Base Indenture referred to below, the “Indenture Trustee”), and DEUTSCHE BANK TRUST COMPANY AMERICAS, as paying agent for the benefit of the Series 2005-A Subordinated Noteholders (the “Paying
Agent”), to the Base Indenture, dated as of May 10, 2005, between the Issuer and the Indenture Trustee (as further amended, modified or supplemented from time to time, exclusive of Supplements creating a new Series of Subordinated Notes,
the “Base Indenture”). 
 PRELIMINARY STATEMENT 
 WHEREAS, Sections 2.2, 2.3 and 12.1 of the Base Indenture provide, among other things, that the Issuer and the Indenture Trustee may
at any time and from time to time enter into a supplement to the Base Indenture for the purpose of authorizing the issuance of one or more Series of Subordinated Notes. 
 NOW, THEREFORE, the parties hereto agree as follows: 
 DESIGNATION 
 There is hereby created a Series of Subordinated Notes to be issued pursuant to the Base Indenture and this Supplement and such Series of Subordinated
Notes shall be designated as Variable Rate Subordinated Notes, Series 2005-A (the “Series 2005-A Subordinated Notes”). The Series 2005-A Subordinated Notes shall be issued in an Initial Principal Amount of $40,000,000. 

The proceeds from the sale of the Series 2005-A Subordinated Notes shall be deposited in the Collateral Account and shall be used by the Issuer to
acquire Mortgage Loans from the Seller, to invest in Eligible Investments or to pay any amounts due and owing on the Issuer’s outstanding obligations in accordance with the Program Documents. 
 ARTICLE 1 
 Definitions

 All capitalized terms not otherwise defined herein are defined in the Definitions List attached to the Security Agreement, dated as of
May 10, 2005 (the “Security Agreement”) between the Issuer and Deutsche Bank Trust Company Americas, as Collateral Agent, as Schedule I thereto. All Article, Section or Subsection references herein shall refer to
Articles, Sections or Subsections of the Base Indenture, except as otherwise provided herein. Unless otherwise stated herein or the context otherwise requires or if such term is otherwise defined in the Security Agreement, each capitalized term used
or defined herein shall relate only to the Series 2005-A Subordinated Notes and not to any other Series of Subordinated Notes issued by the Issuer. 
  

					
		  	1	  	2005-A Supplement

 The following words and phrases shall have the following meanings with respect to the Series 2005-A
Subordinated Notes and the definitions of such terms are applicable to the singular as well as the plural form of such terms and to the masculine as well as the feminine and neuter genders of such terms: 
 “LIBOR” shall be determined in accordance with Section 2.3(b)(i) hereof. 
 “LIBOR Determination Date” has the meaning specified in Section 2.3(b)(i) hereof. 
 “Optional Repurchase” has the meaning specified in Section 2.4 of this Supplement. 
 “Paying Agent” has the meaning specified in the initial paragraph hereto. 
 “Qualified Institutional Buyer” has the meaning specified in Section 3.1 hereof. 
 “Reference Banks” shall have the meaning specified in Section 2.3(b)(ii) hereof. 
 “Restricted Global Series 2005-A Subordinated Note” has the meaning specified in Section 3.1 hereof. 
 “Series 2005-A Carry-Over Interest Deficiency” means for each Payment Date an amount equal to the excess, if any, of (i) the Series
2005-A Carry-Over Interest Shortfall Amount for such Payment Date, over (ii) all amounts paid to the Series 2005-A Subordinated Noteholders in respect of the Series 2005-A Carry-Over Interest Shortfall Amount on such Payment Date.

 “Series 2005-A Carry-Over Interest Shortfall Amount” means for each Payment Date an amount equal to the product of
(i) the aggregate Principal Amount Charge-Offs allocated to the Series 2005-A Subordinated Notes on such Payment Date, plus the Series 2005-A Carry-Over Interest Deficiency on the preceding Payment Date (after giving effect to all
Principal Amount Charge-Offs and Principal Amount Reinstatements made on such preceding Payment Date in respect of the Series 2005-A Subordinated Notes), (ii) the applicable Series 2005-A Subordinated Note Rate for the preceding Series 2005-A
Interest Period and (iii) the actual number of days in such Series 2005-A Interest Period divided by 360. 
 “Series 2005-A
Closing Date” means May 10, 2005. 
 “Series 2005-A Collateral” means the Collateral and the Series 2005-A
Payment Account Collateral. 
 “Series 2005-A Final Scheduled Payment Date” means May 26, 2010. 
 “Series 2005-A Initial Purchaser” means Lehman Brothers Inc. 
 “Series 2005-A Interest Amount” means for each Payment Date an amount equal to the product of (i) the Series 2005-A Principal
Amount plus the Series 2005-A Interest 

  

					
		  	2	  	2005-A Supplement

 
Shortfall, each as of the preceding Payment Date (after giving effect to all payments and allocations made on such prior Payment Date or, with respect to the
first Payment Date for the Series 2005-A Subordinated Notes, on the Series 2005-A Closing Date), (ii) the applicable Series 2005-A Subordinated Note Rate for the preceding Series 2005-A Interest Period and (iii) the actual number of days
in such Series 2005-A Interest Period divided by 360. 
 “Series 2005-A Interest Period” means, with respect to any Payment
Date, the period from and including the immediately preceding Payment Date (or the Series 2005-A Closing Date in the case of the first Payment Date) to and including the day immediately preceding such Payment Date. 
 “Series 2005-A Interest Shortfall” means the excess, if any of (a) the Series 2005-A Interest Amount over (b) the amount paid
to the Series 2005-A Subordinated Noteholders in respect of the Series 2005-A Interest Amount for the related Series 2005-A Interest Period. 
 “Series 2005-A Payment Account” has the meaning specified in Section 2.6(a) hereof. 
 “Series
2005-A Payment Account Collateral” has the meaning specified in Section 2.6(d) hereof. 
 “Series 2005-A
Principal Amount” shall be an amount equal to (i) the Initial Principal Amount of the Series 2005-A Subordinated Notes issued on the Series 2005-A Closing Date, less (ii) the aggregate amount of any Principal Amount
Charge-Offs allocated to the Series 2005-A Subordinated Notes, plus (iii) the aggregate amount of any Principal Amount Reinstatements allocated to the Series 2005-A Subordinated Notes, less (iv) any amounts distributed to
Series 2005-A Subordinated Noteholders in respect of the Series 2005-A Principal Amount thereof. 
 “Series 2005-A Required
Subordinated Noteholders” means Series 2005-A Subordinated Noteholders holding in excess of 50% of the Series 2005-A Principal Amount (excluding Series 2005-A Subordinated Notes held by any Seller, the Servicer or Affiliate of any Seller or
the Servicer). 
 “Series 2005-A Subordinated Note Calculation Agent” means, with respect to the Series 2005-A Subordinated
Notes, Deutsche Bank Trust Company Americas, as agent for purposes of calculating the Series 2005-A Subordinated Note Rate, or its designee. 
 “Series 2005-A Subordinated Note Rate” means a per annum rate equal to LIBOR plus 1.45%. 
 “Series
2005-A Subordinated Noteholders” shall mean the holders of the Series 2005-A Subordinated Notes. 
 “Series 2005-A
Subordinated Notes” means any one of the Variable Rate Subordinated Notes, Series 2005-A, executed by the Issuer and authenticated by or on behalf of the Indenture Trustee, substantially in the form of Exhibit A or Exhibit B.

  

					
		  	3	  	2005-A Supplement

 “Subordinated Note Registrar” means Deutsche Bank Trust Company Americas, or any
successor subordinated note registrar. 
 “Subordinated Note Representative” has the meaning specified in
Section 2.5(c) hereof. 
 “Supplement” has the meaning set forth in the preamble. 
 “Transfer” has the meaning specified in Section 3.3 hereof. “Void Transfer” has the meaning specified in
Section 3.3 hereof. 
 ARTICLE 2 
 SERIES 2005-A SUBORDINATED NOTES 
 With respect to the Series 2005-A Subordinated Notes, the
following shall apply: 
 Section 2.1 Payment of Principal. 
 The Issuer will issue the Series 2005-A Subordinated Notes in the forms set forth as Exhibits A and B to this Supplement. The Series 2005-A
Subordinated Notes will be issued in an aggregate Series 2005-A Principal Amount of $40,000,000. Unless a Security Agreement Event of Default or an Indenture Event of Default that results in the cessation of the issuance of the Secured Liquidity
Notes or Term Notes occurs or an Optional Repurchase occurs, no Series 2005-A Principal Amount will be payable on the Series 2005-A Subordinated Notes until the Series 2005-A Final Scheduled Payment Date; provided, however, that, for
purposes of an Indenture Event of Default, until the Senior Notes are paid in full, no Series 2005-A Principal Amount will be due or become due. 
 Section 2.2 Payment of Interest. 
 (a) Interest will accrue during each Series 2005-A Interest Period on the
Series 2005 MSC Principal Amount plus the Series 2005 MSC Interest Shortfall, each as of the preceding Payment Date, at a per annum rate equal to the Series 2005-A Subordinated Note Rate, commencing on the Series 2005-A Closing Date; provided,
however, that, for purposes of an Indenture Event of Default, until the Senior Notes are paid in full, no interest will be due or become due. 
 (b) The Paying Agent will distribute from funds available therefor in the Series 2005-A Payment Account pro rata to Series 2005-A Subordinated Noteholders the Series 2005-A Interest Amount. The Series 2005-A Interest Amount will be
payable on each Payment Date to the holders of the Series 2005-A Subordinated Notes as of the close of business on the immediately preceding Note Record Date, commencing June 27, 2005 and ending on the Series 2005-A Final Scheduled Payment
Date. In the event that the Paying Agent or its designated agent receives funds in an amount less than the Series 2005-A Interest Amount, additional interest on the Series 2005-A Interest Shortfall shall accrue at the applicable Series 2005-A
Subordinated Note Rate. The Series 2005-A Interest Shortfall and additional interest on the 

  

					
		  	4	  	2005-A Supplement

 
Series 2005-A Interest Shortfall shall be paid to Series 2005-A Subordinated Noteholders in accordance with the Priority of Payments. 
 (c) In the event that the Series 2005-A Principal Amount is reduced by any Principal Amount Charge Off, additional interest on the aggregate Principal
Amount Charge-Offs allocated to the Series 2005-A Subordinated Notes and the Series 2005-A Carry-Over Interest Deficiency, each as of the preceding Payment Date, shall accrue at the applicable Series 2005-A Subordinated Note Rate. The related Series
2005-A Carry Over Interest Shortfall Amount and the Series 2005-A Carry Over Interest Deficiency shall be paid to the Series 2005-A Subordinated Noteholders in accordance with the Priority of Payments. 
 Section 2.3 Calculation of Interest. 
 (a) For purposes of calculating the Series 2005-A Subordinated Note Rate, Deutsche Bank Trust Company Americas is hereby appointed as, and hereby accepts such appointment and agrees to perform the duties of, the
Series 2005-A Subordinated Note Calculation Agent. The Series 2005-A Subordinated Note Calculation Agent may be removed by the Series 2005-A Required Subordinated Noteholders at any time. If the Series 2005-A Subordinated Note Calculation Agent is
unable or unwilling to act as such or is removed by the Series 2005-A Required Subordinated Noteholders, or if the Series 2005-A Subordinated Note Calculation Agent fails to determine the Series 2005-A Subordinated Note Rate, the Series 2005-A
Interest Amount, the Series 2005-A Interest Shortfall, the Series 2005-A Carry Over Interest Shortfall Amount and the Series 2005-A Interest Deficiency Amount for any Series 2005-A Interest Period, the Series 2005-A Required Subordinated Noteholders
will promptly appoint as a replacement Series 2005-A Subordinated Note Calculation Agent a leading bank which is engaged in transactions in Eurodollar deposits in the international Eurodollar market. The Series 2005-A Subordinated Note Calculation
Agent may not resign its duties without a successor having been duly appointed. 
 (b) LIBOR shall be determined by the Series 2005-A
Subordinated Note Calculation Agent in accordance with the following provisions: 
 (i) On the second Business Day prior to
the commencement of a Series 2005-A Interest Period (each such day, a “LIBOR Determination Date”), “LIBOR” shall equal the rate, as obtained by the Series 2005-A Subordinated Note Calculation Agent, for one-month
Eurodollar deposits which appears on Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 2000 Interest Rate and Currency Exchange Definitions) or such other page as may replace Telerate Page 3750, as it
relates to U.S. dollars, as of 11:00 a.m. (London time) on such LIBOR Determination Date. 
 (ii) If, on any LIBOR
Determination Date, such rate does not appear on Telerate Page 3750, the Series 2005-A Subordinated Note Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks to leading banks in the London interbank
market for one-month Eurodollar deposits in an amount determined by the Series 2005-A Subordinated Note Calculation Agent by reference to requests for quotations as of approximately 

  

					
		  	5	  	2005-A Supplement

 
11:00 a.m. (London time) on the LIBOR Determination Date made by the Series 2005-A Subordinated Note Calculation Agent to the Reference Banks. If, on any
LIBOR Determination Date, at least two (2) of the Reference Banks provide such quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one (1) or none of the Reference Banks provide
such quotations, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that leading banks in The City of New York selected by the Series 2005-A Subordinated Note Calculation Agent are quoting on the relevant LIBOR Determination
Date for one-month Eurodollar deposits in an amount determined by the Series 2005-A Subordinated Note Calculation Agent by reference to the principal London offices of leading banks in the London interbank market; provided, however,
that if the Series 2005-A Subordinated Note Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, “LIBOR” shall be LIBOR as determined on the previous LIBOR
Determination Date. As used herein, “Reference Banks” means four major banks in the London interbank market selected by the Series 2005-A Subordinated Note Calculation Agent. 
 As soon as possible after 11:00 a.m. (London time) on each LIBOR Determination Date, but in no event later than 11:00 a.m. (London time) on the Business
Day immediately following each LIBOR Determination Date, the Series 2005-A Subordinated Note Calculation Agent will cause the Series 2005-A Subordinated Note Rate, the Series 2005-A Interest Amount, the Series 2005-A Interest Shortfall, the Series
2005-A Carry Over Interest Shortfall Amount and the Series 2005-A Carry Over Interest Deficiency for the next Series 2005-A Interest Period payable in respect of the Series 2005-A Subordinated Notes on the related Payment Date to be given to the
Issuer and the Paying Agent. The Series 2005-A Subordinated Note Calculation Agent will also specify to the Issuer the quotations upon which the Series 2005-A Subordinated Note Rate is based, and in any event the Series 2005-A Subordinated Note
Calculation Agent shall notify the Issuer before 5:00 p.m. (London time) on each LIBOR Determination Date that either: (i) it has determined or is in the process of determining the Series 2005-A Subordinated Note Rate and the Series 2005-A
Interest Amount or (ii) it has not determined and is not in the process of determining the Series 2005-A Subordinated Note Rate and the Series 2005-A Interest Amount, together with its reasons therefor. For the sole purpose of calculating the
Series 2005-A Subordinated Note Rate, “Business Day” shall be any day on which dealings in deposits in U.S. dollars are transacted in the London interbank market. 
 Section 2.4 Optional Repurchase. 
 In connection with the termination of the Issuer’s Secured Liquidity Notes program (other than a termination through the replacement of such program with a facility having substantially similar terms; any such replacement facility may
be deemed to have substantially similar terms even though interest rate spreads may differ), and repayment of all of the Senior Notes and upon satisfaction of the requirements included in the Program Documents (including the payment of any amounts
due and owing to the Senior Secured Parties), the Series 2005-A Subordinated Notes, together with all other outstanding Series of Subordinated Notes, may be repurchased (an “Optional Repurchase”), in whole but not in part, by the
Issuer on any Payment Date upon not more than sixty (60) nor less than thirty (30) days’ prior notice to the 

  

					
		  	6	  	2005-A Supplement

 
Subordinated Noteholders at a price equal to the aggregate outstanding Principal Amount thereof together with any accrued and unpaid interest thereon, any
Interest Shortfall and interest thereon to the date of repurchase and the aggregate amount of all Principal Amount Charge-Offs that have not been reinstated (unless each holder of the Series 2005-A Subordinated Notes waives the payment of such
Principal Amount Charge-Offs); provided, that the Issuer shall effect an Optional Repurchase at the written request of any Swap Counterparty given no earlier than the sixtieth (60th) day following the date that the last Mortgage Loan has been
sold and all the Senior Notes have been satisfied following a Termination Event at a purchase price equal to the aggregate outstanding Principal Amount of the Subordinated Notes of all Series on such Payment Date, plus accrued and unpaid interest on
the unpaid aggregate Principal Amount of the Subordinated Notes of all Series and any Interest Shortfalls and interest thereon to the date of repurchase. 
 Section 2.5 Final Scheduled Payment; Early Amortization. 
 (a) The Series 2005-A Principal
Amount, plus the aggregate amount of any Principal Amount Charge-Offs allocated to the Series 2005-A Subordinated Notes which have not been reinstated, will be payable in full on the Series 2005-A Final Scheduled Payment Date, as the case may
be. 
 (b) Upon the occurrence of a Security Agreement Event of Default or an Indenture Event of Default that results in the cessation of the
issuance of the Secured Liquidity Notes or an Optional Repurchase, the Issuer will be prohibited from purchasing additional Mortgage Loans and, in such case, the principal collections on Mortgage Loans, the proceeds of sales of Mortgage Loans and
the amounts received from the Swap Counterparty will be available to be applied to the repayment of all Series of Subordinated Notes, subject to the Priority of Payments set forth in Section 7.02(b) of the Security Agreement. 

(c) In connection with any such Security Agreement Event of Default or Indenture Event of Default , upon a sale or disposition of a Defaulted Loan, a
Delinquent Loan or a portfolio of Defaulted Loans and/or Delinquent Loans (each, a “Portfolio”), the Collateral Agent shall use commercially reasonable efforts to obtain three (3) or more bids for each such Defaulted Loan,
Delinquent Loan or Portfolio; provided, however, that such bids shall be received within ten (10) Business Days of one another. The Collateral Agent shall promptly notify the holder of the largest Principal Amount of all Series of
Subordinated Notes or, if no single holder holds the largest Principal Amount of all Series of Subordinated Notes, such person as the Required Subordinated Noteholders shall designate (the “Subordinated Note Representative”), of the
highest bid price obtained. The Subordinated Note Representative shall have the option to purchase such Defaulted Loans, Delinquent Loans or Portfolio within certain time periods at a price at least equal to 102% of such highest bid price but in no
event more than the amount of the Outstanding Purchase Price of such Mortgage Loan or Mortgage Loans (plus accrued interest thereon) after giving effect to amounts payable by the Swap Counterparty with respect to the sale of such Mortgage Loan or
Mortgage Loans. The Subordinated Note Representative will have certain time periods specified in the Security Agreement within which to elect to purchase, and to pay for, such Defaulted Loans, Delinquent Loans or Portfolio. In the event that the
Subordinated Note Representative fails to elect to purchase or pay for such Defaulted Loans, Delinquent Loans or Portfolio within the applicable time period, the Collateral 

  

					
		  	7	  	2005-A Supplement

 
Agent shall have the right to sell such Defaulted Loans, Delinquent Loans or Portfolio to the highest bidder. 
 Section 2.6 Series 2005-A Payment Account. 
 (a) Establishment of Series 2005-A Payment Account. The Issuer shall establish and maintain in the name of the Indenture Trustee for the benefit of the Series 2005-A Subordinated Noteholders, or cause to be
established and maintained, a segregated non-interest bearing trust account (the “Series 2005-A Payment Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Series
2005-A Subordinated Noteholders. The Series 2005-A Payment Account will not be subjected to the lien of the Security Agreement. The Series 2005-A Payment Account shall be maintained (i) with a Qualified Institution, or (ii) as a segregated
trust account with the corporate trust department of a depository institution or trust company having corporate trust powers and acting as Indenture Trustee for funds deposited in the Series 2005-A Payment Account; provided that, if at any
time such Qualified Institution is no longer a Qualified Institution or the credit rating of any securities issued by such depositary institution or trust company shall be reduced to below “BBB-” by S&P or “Baa3” by
Moody’s, then the Issuer shall, within 30 days of such reduction, establish a new Series 2005-A Payment Account with a new Qualified Institution. If the Series 2005-A Payment Account is not maintained in accordance with the previous sentence,
the Issuer shall establish a new Payment Account, within ten (10) Business Days after obtaining knowledge of such fact, which complies with such sentence, and shall instruct the Indenture Trustee in writing to transfer all cash and Eligible
Investments from the non-qualifying Series 2005-A Payment Account into the new Series 2005-A Payment Account. Initially, the Series 2005-A Payment Account will be established with the Indenture Trustee. 
 (b) Administration of the Series 2005-A Payment Account. The Indenture Trustee, at the written instruction of the Servicer, may instruct the
institution maintaining the Series 2005-A Payment Account to invest funds on deposit in the Series 2005-A Payment Account from time to time in Eligible Investments; provided, however, that any such Eligible Investment shall mature not
later than the Business Day prior to the Payment Date following the date on which such funds were received, unless any Eligible Investment held in the Series 2005-A Payment Account is held with the Indenture Trustee, then such investment may mature
on such Payment Date and such funds shall be available for withdrawal on or prior to such Payment Date. All such Eligible Investments will be credited to the Series 2005-A Payment Account. 
 (c) Earnings from Series 2005-A Payment Account. All interest and earnings (net of losses and investment expenses) paid on funds on deposit in the
Series 2005-A Payment Account shall be deemed to be on deposit and available for distribution. 
 (d) Series 2005-A Payment Account
Constitutes Additional Collateral for Series 2005-A Subordinated Notes. In order to secure and provide for the repayment and payment of the Issuer’s obligations with respect to the Series 2005-A Subordinated Notes, the Issuer hereby grants
a security interest in and assigns, pledges, grants, transfers and sets over to the Paying Agent, for the benefit of the Series 2005-A Subordinated Noteholders, all of the Issuer’s right, title and interest in and to the following (whether now
or hereafter existing or acquired): (i) the Series 2005-A Payment Account, including any security entitlement thereto; 

  

					
		  	8	  	2005-A Supplement

 
(ii) all funds on deposit therein from time to time; (iii) all certificates and instruments, if any, representing or evidencing any or all of the Series
2005-A Payment Account or the funds on deposit therein from time to time; (iv) all Eligible Investments made at any time and from time to time with monies in the Series 2005-A Payment Account, whether constituting securities, instruments,
general intangibles, investment property, financial assets or other property; (v) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for the
Series 2005-A Payment Account, the funds on deposit therein from time to time or the Eligible Investments made with such funds; and (vi) all proceeds of any and all of the foregoing, including, without limitation, cash (the items in the
foregoing clauses (i) through (vi) are referred to, collectively, as the “Series 2005-A Payment Account Collateral”). The Paying Agent shall possess all right, title and interest in all funds on deposit from
time to time in the Series 2005-A Payment Account and in all proceeds thereof, and shall be the only person authorized to originate entitlement orders in respect of the Series 2005-A Payment Account. The Series 2005-A Payment Account Collateral
shall be under the sole dominion and control of the Paying Agent for the benefit of the Series 2005-A Subordinated Noteholders. 
 ARTICLE
3 
 FORM AND TRANSFER RESTRICTIONS OF SERIES 2005-A NOTES 
 Section 3.1 Restricted Global Series 2005-A Subordinated Notes; Definitive Notes 
 The Series 2005-A Subordinated Notes sold in the United States to persons who are qualified institutional buyers within the meaning of, and in reliance
on, Rule 144A under the Securities Act (“Qualified Institutional Buyers”) who are also “qualified purchasers” within the meaning of the Investment Company Act (“Qualified Purchasers”) will be issued in
book-entry form and represented by one or more permanent global notes without interest coupons (each, a “Restricted Global Series 2005-A Subordinated Note”), substantially in the form set forth in Exhibit A hereto, with such
legends as may be applicable thereto as set forth in the Base Indenture, deposited with a custodian for, and registered in the name of Cede & Co. as nominee of DTC, duly executed by the Issuer and authenticated by the Indenture Trustee in
the manner set forth in Section 2.7 of the Base Indenture. Beneficial interests in a Restricted Global Series 2005-A Subordinated Note will be shown on, and transfers thereof will be effected only through, records maintained by DTC and its
direct and indirect participants. 
 Section 3.2 2005-A Subordinated Note Sold Pursuant to Regulation S.

 The Series 2005-A Subordinated Notes sold outside the United States in reliance on Regulation S under the Securities Act shall be
issued in definitive, full registered, certificated form without interest coupons, substantially in the form set forth in Exhibit B hereto, duly executed by the Issuer and authenticated by the Indenture Trustee in the manner set forth
Section 2.7 of the Base Indenture. 
  

					
		  	9	  	2005-A Supplement

 Section 3.3 Transfer and Exchange of Subordinated Notes. 
 No Series 2005-A Subordinated Note may be issued, sold, transferred, assigned, participated, pledged, or otherwise disposed of (any such act, a
“Transfer”) to any Person except in accordance with the provisions of the Base Indenture and this Indenture Supplement and any attempted Transfer in violation of this Section shall be null and void (each, a “Void
Transfer”). If a Transfer of a Series 2005-A Subordinated Note is permitted pursuant to the Base Indenture and this Supplement, a transferee of a Series 2005-A Subordinated Note shall become a Subordinated Noteholder, and shall be entitled
to the rights and subject to the obligations of a Subordinated Noteholder under the Base Indenture and this Supplement upon such transferee’s acceptance of a Series 2005-A Subordinated Note duly registered in such transferee’s name
pursuant to this Section. 
 ARTICLE 4 
 GENERAL 
 Section 4.1 Information. 
 The Indenture Trustee, upon the written request of any Series 2005-A Subordinated Noteholder, shall provide to such Series 2005-A Subordinated Noteholder,
or its designated agent, copies of all requested information previously furnished to the Indenture Trustee or the Issuer pursuant to the Program Documents, as such information relates to the Series 2005-A Subordinated Notes or the Series 2005-A
Collateral. 
 Section 4.2 Exhibits. 
 The following exhibits attached hereto supplement the exhibits included in the Base Indenture. 
  

	 	Exhibit A	Form of Restricted Global Series 2005-A Subordinated Note 

  

	 	Exhibit B	Form of Definitive Note 

 Section 4.3
Ratification of Base Indenture. 
 As supplemented by this Supplement, the Base Indenture is in all respects ratified and
confirmed and the Base Indenture as so supplemented by this Supplement shall be read, taken, and construed as one and the same instrument. 
 Section 4.4 Counterparts. 
 This Supplement may be executed in any number of counterparts, each of which
so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument. 
  

					
		  	10	  	2005-A Supplement

 Section 4.5 Governing Law. 
 This Supplement shall be construed in accordance with the law of the State of New York (without giving effect to the provisions thereof regarding
conflicts of laws other than Section 5-1401 of the New York General Obligations Law), and the obligations, rights and remedies of the parties hereto shall be determined in accordance with such law. 
 Section 4.6 Amendments. 
 This Supplement may be modified or amended from time to time in accordance with the terms of the Base Indenture; provided, however, that if, pursuant to the terms of the Base Indenture or this Supplement, the consent of the
Series 2005-A Required Subordinated Noteholders is required for an amendment or modification of this Supplement, such requirement shall be satisfied if such amendment or modification is consented to by the Series 2005-A Required Subordinated
Noteholders. 
 Section 4.7 Discharge of Indenture. 
 Notwithstanding anything to the contrary contained in the Base Indenture, no discharge of the Indenture pursuant to Section 11.1(b) of the
Base Indenture will be effective as to the Series 2005-A Subordinated Notes without the consent of the Series 2005-A Required Subordinated Noteholders. 
 Section 4.8 Notice to Rating Agencies. 
 The Indenture Trustee shall provide to
each Rating Agency a copy of each notice, opinion of counsel, certificate, amendment or other item delivered to, or required to be provided by, the Indenture Trustee pursuant to this Supplement or any other Program Document. The Indenture Trustee
makes this covenant as a matter of courtesy and accommodation only and shall not be liable to any Person for any failure to comply therewith. 
 Section 4.9 Action by Direction of Required Subordinated Noteholders. 
 Subject to
Section 10.1 of the Base Indenture, the Indenture Trustee agrees that, so long as no Event of Default shall have occurred and be continuing with respect to any Series of Subordinated Notes other than the Series 2005-A Subordinated Notes,
it shall not exercise any rights or remedies available to it as a result of the occurrence of an Event of Default with respect to the Series 2005-A Subordinated Notes until the Indenture Trustee has obtained the written direction of the Series
2005-A Required Subordinated Noteholders in accordance with the terms of the Indenture. 
 Section 4.10 Protections Under Base
Indenture. 
 Deutsche Bank Trust Company Americas, as Paying Agent, Subordinated Note Registrar and Series 2005-A Subordinated
Note Calculation Agent hereunder, shall have all of the protections, etc., of the Indenture Trustee under Section 10 of the Base Indenture. 
  

					
		  	11	  	2005-A Supplement

 Section 4.11 Statement of Intent. 
 The Issuer, the Indenture Trustee and each Holder of a Series 2005-A Subordinated Note intends, by its acceptance of a Series 2005-A Subordinated Note, to
treat such Series 2005-A Subordinated Note as indebtedness for all United States federal, state and local income tax purposes. 
 Section 4.12 No Recourse. 
 It is expressly understood and agreed by the parties hereto that (a) this
Agreement is executed and delivered by U.S. Bank Trust National Association, not individually or personally but solely as Owner Trustee of the Carmel Mountain Funding Trust, in the exercise of the powers and authority conferred and vested in it,
(b) each of the representations, undertakings and agreements herein made on the part of the Carmel Mountain Funding Trust is made and intended not as personal representations, undertakings and agreements by U.S. Bank Trust National Association
but is made and intended for the purpose of binding only the Carmel Mountain Funding Trust, (c) nothing herein contained shall be construed as creating any liability on U.S. Bank Trust National Association, individually or personally, to
perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (d) under no circumstances shall
U.S. Bank Trust National Association be personally liable for the payment of any indebtedness or expenses of the Carmel Mountain Funding Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or
undertaken by the Carmel Mountain Funding Trust under this Agreement or any other related documents. 
  

					
		  	12	  	2005-A Supplement

 IN WITNESS WHEREOF, the Issuer, the Indenture Trustee and the Paying Agent have caused this Supplement to
be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. 
  

							
	 CARMEL MOUNTAIN FUNDING TRUST, as
 Issuer

	
	 By: U.S. Bank Trust National Association not in its
 individual capacity, but solely as Owner Trustee

			
		 	By:	 	 /s/ Patricia M. Child

		 		 	 Name:
	 	 Patricia M. Child

		 		 	 Title:
	 	 Vice President

	
	 DEUTSCHE BANK TRUST COMPANY
 AMERICAS,
 as Indenture Trustee and as Paying Agent

			
		 	By:	 	 /s/ Eileen M. Hughes

		 		 	 Name:
	 	 Eileen M. Hughes

		 		 	 Title:
	 	 Vice President

  

					
		  	S-1	  	2005-A Supplement

 EXHIBIT A 
 Form of Restricted Global Series 2005-A Subordinated Note 
 Exhibit A 
 Form of Restricted Global Series 2005-A Subordinated Note 
 CARMEL MOUNTAIN FUNDING TRUST 
 FORM OF RESTRICTED GLOBAL SUBORDINATED NOTE, SERIES 2005-A

 THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE
SECURITIES OR “BLUE SKY” LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF CARMEL MOUNTAIN FUNDING TRUST THAT THIS NOTE IS BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE ISSUER (UPON REDEMPTION THEREOF OR OTHERWISE), (2) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
WHO IS ALSO A QUALIFIED PURCHASER (AS DEFINED IN THE INVESTMENT COMPANY ACT, A “QUALIFIED PURCHASER”) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON (AS SUCH TERM IS DEFINED
IN REGULATION S OF THE SECURITIES ACT) WHO IS ALSO A QUALIFIED PURCHASER IN A TRANSACTION IN COMPLIANCE WITH REGULATION S OF THE SECURITIES ACT OR (4) IN A TRANSACTION COMPLYING WITH OR EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (SUBJECT IN THE CASE OF THIS CLAUSE (4) TO RECEIPT OF SUCH CERTIFICATES AND OTHER DOCUMENTS AS THE INDENTURE TRUSTEE MAY REQUIRE UNDER THE INDENTURE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER JURISDICTION. THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH ABOVE. 
 EACH PURCHASER REPRESENTS, WARRANTS AND COVENANTS FOR THE BENEFIT OF THE INDENTURE TRUSTEE AND THE ISSUER THAT EITHER (A) SUCH PURCHASER IS NOT AND IS NOT ACTING ON BEHALF OF (I) AN “EMPLOYEE BENEFIT
PLAN” (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT 

  

 A-1 

 
IS SUBJECT TO TITLE I OF ERISA, (II) A “PLAN” (AS DEFINED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
“CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE, (III) ANY ENTITY DEEMED TO BE INVESTING “PLAN ASSETS” (WITHIN THE MEANING OF UNITED STATES DEPARTMENT OF LABOR REGULATION 29 C.F.R. SECTION 2510.3-101 OR OTHERWISE UNDER
ERISA) OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN, OR (IV) A “GOVERNMENTAL PLAN” (AS DEFINED IN SECTION 3(32) OF ERISA) SUBJECT TO APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR SECTION
4975 OF THE CODE (“SIMILAR LAW”), (EACH OF THE FOREGOING A “BENEFIT PLAN”) OR (B) THE ACQUISITION AND HOLDING OF THIS NOTE WILL BE ELIGIBLE FOR, AND SATISFY ALL REQUIREMENTS OF, A UNITED STATES DEPARTMENT OF LABOR PROHIBITED
TRANSACTION CLASS EXEMPTION (OR, IN THE CASE OF A PURCHASER THAT IS A GOVERNMENTAL PLAN, WILL NOT VIOLATE ANY SIMILAR LAW). EACH PURCHASER THAT ACQUIRES A BENEFICIAL INTEREST IN THIS NOTE WILL BE DEEMED TO MAKE THE FOREGOING REPRESENTATION AND
WARRANTY. 
 UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. 
  

 A-2 

 CARMEL MOUNTAIN FUNDING TRUST 
 RESTRICTED GLOBAL SUBORDINATED NOTE, SERIES 2005-A 
  

			
	 CUSIP No.:
	  	up to $40,000,000
		
	 ISIN No.:
	  	
		
	 No.: R- 1
	  	

 Carmel Mountain Funding Trust, a Delaware statutory trust (the “Issuer”), for value
received, hereby promises to pay to CEDE & CO., (a) upon presentation and surrender of this Note (except as otherwise permitted by the Indenture referred to below), up to the principal amount of FORTY MILLION AND NO/100 DOLLARS (U.S.
$40,000,000) on May 26, 2010 (the “Series 2005-A Final Scheduled Payment Date”), unless the unpaid principal of this Note becomes due and payable at an earlier date by declaration of acceleration, call for redemption or otherwise, and
(b) interest thereon on the 25th day of each month (or if such day is not a Business Day, the next following Business Day), commencing June 27, 2005 (each, a “Payment Date”), at a rate of one-month LIBOR (determined as set forth
in the Indenture) plus 1.45% (the “Series 2005-A Subordinated Note Rate”) until the principal hereof is paid in full or duly provided for. 
 This Variable Rate Subordinated Note is one of a duly authorized issue of Notes of the Issuer, designated as the Carmel Mountain Funding Trust, Series 2005-A (the “Series 2005-A Subordinated Notes”), issued
under a Base Indenture dated as of May 10, 2005 (the “Base Indenture”), between the Issuer and Deutsche Bank Trust Company Americas, as indenture trustee (the “Indenture Trustee”), as supplemented by the Series 2005-A
Supplement dated as of May 10, 2005 (the “Series Supplement”). The term “Indenture,” unless the context otherwise requires, refers to the Base Indenture, as supplemented by the Series Supplement. The term “Security
Agreement” refers to the Security Agreement dated as of May 10, 2005, between the Issuer and Deutsche Bank Trust Company Americas, as collateral agent (the “Collateral Agent”). The Notes are subject to the terms of the Indenture
and Security Agreement. All capitalized terms used in this Note and not otherwise defined shall have the meanings assigned to them in the Series Supplement and Schedule I to the Security Agreement. In the event of any conflict or inconsistency
between the Indenture or Security Agreement and this Note, the Indenture or Security Agreement, as applicable, shall control. 
 Notwithstanding anything in the Indenture or this Note to the contrary, the holder of this Note acknowledges and agrees for the benefit of the holders of the Senior 

  

 A-3 

 
Notes that the rights of such holder in and to the Collateral and to receive payments shall be subordinate and junior to the holders of the Senior Notes
and to certain other fees, indemnities, expenses and obligations of the Issuer to the extent and in the manner set forth in the Indenture and the Security Agreement. 
 Except under certain circumstances set forth in the Indenture, the Series 2005-A Subordinated Notes are issuable only in registered, certificated form without coupons in minimum denominations of $200,000 and any
integral multiple of $1,000 in excess thereof. 
 This Note does not purport to summarize the Indenture or the Security Agreement and
reference is made to the Indenture and Security Agreement for the interests, rights and limitations of rights, benefits, obligations and duties evidenced thereby, and the rights, duties and immunities of the Indenture Trustee and Collateral Agent,
respectively. 
 Unless the certificate of authentication hereon has been duly executed by the Indenture Trustee by manual or facsimile
signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. 
 THIS NOTE SHALL
BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAWS OR CHOICE OF LAW PRINCIPLES THEREOF, OTHER THAN SECTIONS 5-1401 AND
5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW. 
  

 A-4 

 IN WITNESS WHEREOF, U.S. Bank Trust National Association, as Owner Trustee, on behalf of the Issuer and
not in its individual capacity, has caused this Note to be duly executed. 
  

					
	 CARMEL MOUNTAIN FUNDING TRUST

		
	 BY:
	 	 U.S. Bank Trust National Association, not in
 its individual capacity, but solely as Owner
 Trustee

		
	 By:
	 	  
		 	 Name:
	 	
		 	 Title:
	 	

 Dated:
[                    , 2005] 
 Restricted Global Note 
  

 S-1 

 CERTIFICATE OF AUTHENTICATION 
 This is one of the Notes referred to in the within-mentioned Indenture. 
  

					
	 DEUTSCHE BANK TRUST COMPANY
 AMERICAS,
 as Indenture Trustee

		
	 By:
	 	  
		 	 Name:
	 	
		 	 Title:
	 	

 Dated:
[                    , 2005] 
 Restricted Global Note 
  

 S-2 

 ASSIGNMENT 
 FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto 
 PLEASE INSERT SOCIAL SECURITY 
 OR OTHER IDENTIFYING NUMBER 
 OF ASSIGNEE 
  

	
	  
	  

 (Please print or type name and address, including postal zip code, of assignee) 
  

	
	  
	  

 the within Note , and all rights thereunder, hereby irrevocably constituting and appointing 
                                       
                                        
                                       Attorney to
transfer said Note on the books of the Term Note Registrar, with full power of substitution in the premises. 
 Dated: 
  

	
	        */
	Signature Guaranteed:
	
	        */

                     */ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the
within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. 

 SCHEDULE OF EXCHANGES IN RESTRICTED GLOBAL SUBORDINATED NOTE 
 The initial principal balance of this Restricted Global Note is $40,000,000. The following exchanges of a part of this Restricted Global Note have been made: 

 

									
	 Date of
 Exchange
	  	 Amount of
 decrease in
 Principal
 Balance of this Restricted
Global
 Note
	  	 Amount of
 increase in
 Principal
 Balance of this Restricted
Global
 Note
	  	 Principal
 Balance of this Restricted
Global
 Note
 following such
 decrease
 (or increase)
	  	 Signature of
 authorized
 officer
 of Indenture
 Trustee or
 securities
 custodian

 Exhibit B 
 Form of Definitive Series 2005-A Subordinated Note 
 CARMEL MOUNTAIN FUNDING TRUST 

FORM OF DEFINITIVE SUBORDINATED NOTE, SERIES 2005-A 
 THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES OR “BLUE SKY” LAWS. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES FOR
THE BENEFIT OF CARMEL MOUNTAIN FUNDING TRUST THAT THIS NOTE IS BEING ACQUIRED FOR ITS OWN ACCOUNT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE ISSUER (UPON REDEMPTION THEREOF OR
OTHERWISE), (2) TO A PERSON WHO THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) WHO IS ALSO A QUALIFIED PURCHASER (AS DEFINED IN THE INVESTMENT COMPANY ACT, A
“QUALIFIED PURCHASER”) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (3) OUTSIDE THE UNITED STATES TO A NON-U.S. PERSON (AS SUCH TERM IS DEFINED IN REGULATION S OF THE SECURITIES ACT) WHO IS ALSO A QUALIFIED PURCHASER IN A
TRANSACTION IN COMPLIANCE WITH REGULATION S OF THE SECURITIES ACT OR (4) IN A TRANSACTION COMPLYING WITH OR EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT IN THE CASE OF THIS CLAUSE (4) TO RECEIPT OF SUCH
CERTIFICATES AND OTHER DOCUMENTS AS THE INDENTURE TRUSTEE MAY REQUIRE UNDER THE INDENTURE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE RESALE RESTRICTIONS SET FORTH ABOVE. 
 EACH PURCHASER REPRESENTS, WARRANTS AND
COVENANTS FOR THE BENEFIT OF THE INDENTURE TRUSTEE AND THE ISSUER THAT EITHER (A) SUCH PURCHASER IS NOT AND IS NOT ACTING ON BEHALF OF (I) AN “EMPLOYEE BENEFIT PLAN” (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO TITLE I OF ERISA, (II) A “PLAN” (AS DEFINED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO SECTION
4975 OF THE CODE, (III) ANY ENTITY DEEMED TO BE INVESTING “PLAN ASSETS” (WITHIN THE MEANING OF UNITED STATES DEPARTMENT OF LABOR REGULATION 29 C.F.R. SECTION 

  

 B-1 

 
2510.3-101 OR OTHERWISE UNDER ERISA) OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN, OR (IV) A “GOVERNMENTAL PLAN” (AS DEFINED IN SECTION 3(32) OF
ERISA) SUBJECT TO APPLICABLE LAW THAT IS SUBSTANTIALLY SIMILAR TO THE FIDUCIARY RESPONSIBILITY PROVISIONS OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”), (EACH OF THE FOREGOING A “BENEFIT PLAN”) OR (B) THE ACQUISITION
AND HOLDING OF THIS NOTE WILL BE ELIGIBLE FOR, AND SATISFY ALL REQUIREMENTS OF, A UNITED STATES DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION (OR, IN THE CASE OF A PURCHASER THAT IS A GOVERNMENTAL PLAN, WILL NOT VIOLATE ANY SIMILAR
LAW). EACH PURCHASER THAT ACQUIRES A BENEFICIAL INTEREST IN THIS NOTE WILL BE DEEMED TO MAKE THE FOREGOING REPRESENTATION AND WARRANTY. 
  

 B-2 

 CARMEL MOUNTAIN FUNDING TRUST 
 VARIABLE RATE DEFINITIVE SUBORDINATED NOTE, SERIES 2005-A 
  

			
	 CUSIP No.: [            ]
	  	$[                            ]
		
	 ISIN No.:[            ]
	  	
		
	 No.: R- [            ]
	  	

 Carmel Mountain Funding Trust, a Delaware statutory trust (the “Issuer”), for value
received, hereby promises to pay to
[                                        
            ], (a) upon presentation and surrender of this Note (except as otherwise permitted by the Indenture referred to below), the principal amount of
[                                        
            ]AND [__]/100 DOLLARS (U.S.
$[                            ]) on May 26, 2010 (the “Series 2005-A Final Scheduled Payment
Date”), unless the unpaid principal of this Note becomes due and payable at an earlier date by declaration of acceleration, call for redemption or otherwise, and (b) interest thereon on the 25th day of each month (or if such day is not a
Business Day, the next following Business Day), commencing June 27, 2005 (each, a “Payment Date”), at a rate of one-month LIBOR (determined as set forth in the Indenture) plus 1.45% (the “Series 2005-A Subordinated Note
Rate”) until the principal hereof is paid in full or duly provided for. 
 This Variable Rate Subordinated Note is one of a duly
authorized issue of Notes of the Issuer, designated as the Carmel Mountain Funding Trust, Series 2005-A (the “Series 2005-A Subordinated Notes”), issued under a Base Indenture dated as of May 10, 2005 (the “Base Indenture”),
between the Issuer and Deutsche Bank Trust Company Americas, as indenture trustee (the “Indenture Trustee”), as supplemented by the Series 2005-A Supplement dated as of May 10, 2005 (the “Series Supplement”). The term
“Indenture,” unless the context otherwise requires, refers to the Base Indenture, as supplemented by the Series Supplement. The term “Security Agreement” refers to the Security Agreement dated as of May 10, 2005, between the
Issuer and Deutsche Bank Trust Company Americas, as collateral agent (the “Collateral Agent”). The Notes are subject to the terms of the Indenture and Security Agreement. All capitalized terms used in this Note and not otherwise defined
shall have the meanings assigned to them in the Series Supplement and Schedule I to the Security Agreement. In the event of any conflict or inconsistency between the Indenture or Security Agreement and this Note, the Indenture or Security Agreement,
as applicable, shall control. 
 Notwithstanding anything in the Indenture or this Note to the contrary, the holder of this Note
acknowledges and agrees for the benefit of the holders of the Senior 

  

 B-3 

 
Notes that the rights of such holder in and to the Collateral and to receive payments shall be subordinate and junior to the holders of the Senior Notes
and to certain other fees, indemnities, expenses and obligations of the Issuer to the extent and in the manner set forth in the Indenture and the Security Agreement. 
 Except under certain circumstances set forth in the Indenture, the Series 2005-A Subordinated Notes are issuable only in registered, certificated form without coupons in minimum denominations of $200,000 and any
integral multiple of $1,000 in excess thereof. 
 This Note does not purport to summarize the Indenture or the Security Agreement and
reference is made to the Indenture and Security Agreement for the interests, rights and limitations of rights, benefits, obligations and duties evidenced thereby, and the rights, duties and immunities of the Indenture Trustee and Collateral Agent,
respectively. 
 Unless the certificate of authentication hereon has been duly executed by the Indenture Trustee by manual or facsimile
signature, this Note shall not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose. 
 THIS NOTE SHALL
BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN WITHOUT REGARD TO THE CONFLICT OF LAWS OR CHOICE OF LAW PRINCIPLES THEREOF, OTHER THAN SECTIONS 5-1401 AND
5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW. 
  

 B-4 

 IN WITNESS WHEREOF, U.S. Bank Trust National Association, as Owner Trustee, on behalf of the Issuer and
not in its individual capacity, has caused this Note to be duly executed. 
  

							
	 CARMEL MOUNTAIN FUNDING TRUST

		
	 BY:
	 	 U.S. Bank Trust National Association, not in
 its individual capacity, but solely as Owner
 Trustee

		
	By:	 	  
		 	 Name:

		 	 Title:

 Dated:
[                    , 2005] 
 Definitive Subordinated Note 
  

 S-1 

 CERTIFICATE OF AUTHENTICATION 
 This is one of the Notes referred to in the within-mentioned Indenture. 
  

							
	 DEUTSCHE BANK TRUST COMPANY
 AMERICAS,
 as Indenture Trustee

		
	By:	 	  
		 	 Name:
	 	
		 	 Title:
	 	

 Dated:
[                    , 2005] 
 Definitive Subordinated Note 
  

 S-2 

 ASSIGNMENT 
 FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto 
 PLEASE INSERT SOCIAL SECURITY 
 OR OTHER IDENTIFYING NUMBER 
 OF ASSIGNEE 
  

	
	  
	  

 (Please print or type name and address, including postal zip code, of assignee) 
  

	
	  
	  

 the within Note , and all rights thereunder, hereby irrevocably constituting and appointing 
  

	
	  
	  

 Attorney to transfer said Note on the books of the Term Note Registrar, with full power of substitution in the
premises. 
 Dated: 
  

	
	        */
	Signature Guaranteed:
	
	        */

                         */ NOTICE: The signature to this assignment must correspond with the name as it appears
upon the face of the within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. 
 2005-A SupplementMorgage Loan Purchase and Servicing Agreement

 Exhibit 4.11 
 EXECUTION COPY 

 CARMEL MOUNTAIN FUNDING TRUST,

 as Issuer, 
 ACCREDITED HOME
LENDERS, INC., 
 as Seller and Servicer 
 and 
 ACCREDITED HOME LENDERS HOLDING CO., 
 as Performance Guarantor 
 MORTGAGE LOAN PURCHASE AND SERVICING AGREEMENT 
 dated as of May 10, 2005 
  

 TABLE OF CONTENTS 
  

					
	 	 	 	  	Page
	 ARTICLE I
	 	 DEFINITIONS
	  	1
			
	 ARTICLE II
	 	SALE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES; BOOKS AND RECORDS; CUSTODIAL AGREEMENT; DELIVERY OF DOCUMENTS	  	2
			
	 Section 2.1
	 	 Sale of Mortgage Loans; Possession of Mortgage Loan Files; Maintenance of Mortgage Loan Files
	  	2
			
	 Section 2.2
	 	 Determination of Initial Purchase Price
	  	5
			
	 Section 2.3
	 	 Purchase Commitment Term
	  	6
			
	 Section 2.4
	 	 Books and Records; Transfers of Mortgage Loans
	  	6
			
	 Section 2.5
	 	 Custodial Agreement
	  	6
			
	 Section 2.6
	 	 [Reserved]
	  	6
			
	 Section 2.7
	 	 Reserve Fund Deposit
	  	6
			
	 ARTICLE III
	 	 REPRESENTATIONS AND WARRANTIES; COVENANTS; REMEDIES AND BREACH
	  	7
			
	 Section 3.1
	 	 Representations and Warranties of the Company
	  	7
			
	 Section 3.2
	 	 Representations and Warranties Regarding Individual Mortgage Loans; Eligibility Representations
	  	10
			
	 Section 3.3
	 	 Remedies for Breach of Representations and Warranties
	  	21
			
	 Section 3.4
	 	 Conditions to Closing
	  	22
			
	 Section 3.5
	 	 Covenants of the Company and the Issuer
	  	24
			
	 Section 3.6
	 	 Representations and Warranties of the Issuer
	  	25
			
	 Section 3.7
	 	 Perfection Representations
	  	26
			
	 Section 3.8
	 	 Covenants of the Seller
	  	26
			
	 Section 3.9
	 	 Covenants of the Servicer
	  	27
			
	 Section 3.10
	 	 Deposit of Derivatives
	  	27
			
	 ARTICLE IV
	 	 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
	  	27
			
	 Section 4.1
	 	 The Company to Act as Servicer; Servicing and Administration of the Mortgage Loans
	  	27
			
	 Section 4.2
	 	 Sales
	  	29
			
	 Section 4.3
	 	 Liquidation of Mortgage Loans
	  	32
			
	 Section 4.4
	 	 Collection of Mortgage Loan Payments
	  	32
			
	 Section 4.5
	 	 Establishment of, and Deposits to, Collection Account
	  	32

  

 -i- 

 TABLE OF CONTENTS 
 (continued) 
  

					
	 	 	 	  	Page
			
	 Section 4.6
	 	 Permitted Withdrawals From Collection Account; Deposit into the Collateral Account
	  	33
			
	 Section 4.7
	 	 Establishment of, and Deposits to, Escrow Account
	  	35
			
	 Section 4.8
	 	 Permitted Withdrawals From Escrow Account
	  	36
			
	 Section 4.9
	 	 Servicing Advances
	  	36
			
	 Section 4.10
	 	 Protection of Accounts
	  	36
			
	 Section 4.11
	 	 Maintenance of Hazard Insurance
	  	36
			
	 Section 4.12
	 	 Maintenance of Mortgage Impairment Insurance
	  	37
			
	 Section 4.13
	 	 Maintenance of Fidelity Bond and Errors and Omissions Insurance Policy
	  	38
			
	 Section 4.14
	 	 Inspections
	  	38
			
	 Section 4.15
	 	 Restoration of Mortgaged Property
	  	38
			
	 Section 4.16
	 	 [Reserved]
	  	38
			
	 Section 4.17
	 	 Title, Management and Disposition of REO Property
	  	39
			
	 Section 4.18
	 	 Servicer Reports
	  	39
			
	 Section 4.19
	 	 Real Estate Owned Reports
	  	39
			
	 Section 4.20
	 	 Liquidation Reports
	  	39
			
	 Section 4.21
	 	 Reports of Foreclosures and Abandonments of Mortgaged Property
	  	40
			
	 Section 4.22
	 	 Servicer Advance Report
	  	40
			
	 Section 4.23
	 	 Monthly Disposition Report
	  	40
			
	 Section 4.24
	 	 Notice of Deemed Representations
	  	40
			
	 ARTICLE V
	 	 SERVICER ADVANCES
	  	40
			
	 Section 5.1
	 	 Monthly Servicer Advances
	  	40
			
	 ARTICLE VI
	 	 GENERAL SERVICING PROCEDURES
	  	40
			
	 Section 6.1
	 	 Transfers of Mortgaged Property
	  	40
			
	 Section 6.2
	 	 Satisfaction of Mortgages and Release of Mortgage Loan Files
	  	41
			
	 Section 6.3
	 	 Servicing Compensation
	  	41
			
	 Section 6.4
	 	 Annual Statement as to Compliance
	  	42
			
	 Section 6.5
	 	 Annual Independent Public Accountants’ Servicing Report
	  	42
			
	 Section 6.6
	 	 Right to Examine Servicer Records
	  	42

  

 -ii- 

 TABLE OF CONTENTS 
 (continued) 
  

					
	 	 	 	  	Page
			
	 ARTICLE VII
	 	 PURCHASE OBLIGATION
	  	42
			
	 Section 7.1
	 	 Servicer’s Purchase Obligations
	  	42
			
	 ARTICLE VIII
	 	 SERVICER TO COOPERATE
	  	43
			
	 Section 8.1
	 	 Provision of Information
	  	43
			
	 ARTICLE IX
	 	 THE SERVICER
	  	44
			
	 Section 9.1
	 	 Indemnification of Third-Party Claims
	  	44
			
	 Section 9.2
	 	 Existence of the Servicer
	  	44
			
	 Section 9.3
	 	 Limitation on Liability of Servicer and Others
	  	44
			
	 Section 9.4
	 	 Limitation on Resignation of Servicer
	  	45
			
	 Section 9.5
	 	 Limitation on Assignment of Rights and Obligations
	  	45
			
	 ARTICLE X
	 	 DEFAULT
	  	46
			
	 Section 10.1
	 	 Servicer Events of Default
	  	46
			
	 Section 10.2
	 	 Waiver of Defaults
	  	47
			
	 ARTICLE XI
	 	 TERMINATION
	  	48
			
	 Section 11.1
	 	 Termination of Agreement
	  	48
			
	 Section 11.2
	 	 Termination of Purchase Obligations
	  	48
			
	 Section 11.3
	 	 Termination of Servicing With Respect to Any Mortgage Loan
	  	51
			
	 ARTICLE XII
	 	 MISCELLANEOUS PROVISIONS
	  	51
			
	 Section 12.1
	 	 Successor to Servicer
	  	51
			
	 Section 12.2
	 	 Amendment
	  	53
			
	 Section 12.3
	 	 Governing Law
	  	53
			
	 Section 12.4
	 	 Duration of Agreement
	  	54
			
	 Section 12.5
	 	 Notices
	  	54
			
	 Section 12.6
	 	 Severability of Provisions
	  	55
			
	 Section 12.7
	 	 Relationship of Parties
	  	55
			
	 Section 12.8
	 	 Execution; Successors and Assigns
	  	55
			
	 Section 12.9
	 	 Recordation of Assignments of Mortgage
	  	55
			
	 Section 12.10
	 	 Assignment by the Issuer
	  	55
			
	 Section 12.11
	 	 Non-Petition Agreement
	  	55
			
	 Section 12.12
	 	 Waiver of Offset
	  	56

  

 -iii- 

 TABLE OF CONTENTS 
 (continued) 
  

					
	 	 	 	  	Page
			
	 Section 12.13
	 	 Limited Recourse
	  	56
			
	 Section 12.14
	 	 No Recourse
	  	56
			
	 ARTICLE XIII
	 	ACCREDITED HOME LENDERS HOLDING CO. GUARANTEE	  	56
			
	 Section 13.1
	 	 Guarantee of Servicer’s Performance and Payment Obligations
	  	56
			
	 ARTICLE XIV
	 	 ASSIGNMENT
	  	58
			
	 Section 14.1
	 	 Assignment
	  	58
			
	 Section 14.2
	 	 Third-Party Beneficiary
	  	58

  

 -iv- 

 MORTGAGE LOAN PURCHASE AND SERVICING AGREEMENT, dated as of May 10, 2005 (as amended, supplemented
or otherwise modified and in effect from time to time, the “Mortgage Loan Purchase and Servicing Agreement”), between CARMEL MOUNTAIN FUNDING TRUST, a Delaware statutory trust, as purchaser (the “Issuer”),
ACCREDITED HOME LENDERS, INC., a California corporation (the “Company”), as seller and servicer (in its capacity as seller hereunder, the “Seller,” and in its capacity as servicer hereunder, the
“Servicer”), and ACCREDITED HOME LENDERS HOLDING CO., a Delaware corporation, as guarantor (the “Performance Guarantor”) of the Servicer’s obligations hereunder. 
 W I T N E S S E T H: 
 WHEREAS, pursuant to this Mortgage Loan Purchase and Servicing Agreement, the Issuer has agreed to purchase from the Seller and the Seller has agreed to
sell to the Issuer from time to time Mortgage Loans constituting Eligible Loans until the termination of this Mortgage Loan Purchase and Servicing Agreement in accordance with Section 11.1 hereof. The Company wishes to service each
Mortgage Loan on behalf of the Issuer after the sale and purchase thereof. 
 WHEREAS, the Issuer and the Company, as Seller and Servicer,
wish to prescribe the manner of purchase of the Mortgage Loans and the management, servicing and control of the Mortgage Loans. 
 WHEREAS,
the Issuer intends to sell the Mortgage Loans and the Servicer will arrange for the sale of the Mortgage Loans on behalf of the Issuer to Mortgage Loan Buyers. 
 NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Issuer, the Seller, the
Servicer and, solely with respect to Article XIII herein, the Performance Guarantor, agree as follows: 
 ARTICLE I 
 DEFINITIONS 
 Whenever used herein,
the following words and phrases, unless the context otherwise requires, shall have the meanings assigned to such terms in the Definitions List attached as Schedule I to the Security Agreement, dated as of the date hereof, between the Issuer
and the Collateral Agent (the “Security Agreement”). 

 ARTICLE II 
 SALE OF MORTGAGE LOANS; POSSESSION OF MORTGAGE FILES; 
 BOOKS AND RECORDS; CUSTODIAL AGREEMENT;

 DELIVERY OF DOCUMENTS 
 Section 2.1 Sale of Mortgage Loans; Possession of Mortgage Loan Files; Maintenance of Mortgage Loan Files. (a) (i) From time to time, pursuant to any Transfer Supplement, the Seller may sell, transfer, assign, set over
and convey to the Issuer, without recourse, but subject to the terms hereof, all the right, title and interest of the Seller in and to each Mortgage Loan identified on such Transfer Supplement, including Wet Funded Loans; provided,
however, that the Issuer shall not at any time be required to purchase Mortgage Loans to the extent that, after giving effect to such purchase, the aggregate Outstanding Purchase Price of Mortgage Loans owned by the Issuer is greater than the
then-current Program Size; provided, further, that each Mortgage Loan transferred on each Closing Date must be an Eligible Loan. In connection with the sale of Mortgage Loans to the Issuer, the Seller shall sell, transfer, assign, set
over and convey to the Issuer all right, title, interest of the Seller in and to the servicing rights related to such Mortgage Loans. The Seller shall provide a notice to the Issuer, the Collateral Agent, the Indenture Trustee and each Swap
Counterparty not later than 6:00 p.m. Eastern time on the Business Day preceding the related Closing Date of its intention to sell a Portfolio to the Issuer pursuant to a Transfer Supplement (each, a “Purchase Notice”). In such
Purchase Notice, the Seller shall inform the Issuer of the intent to sell Mortgage Loans and the proposed aggregate Initial Purchase Price for each portfolio of Mortgage Loans that it intends to sell on such date. The subject Portfolio and related
servicing rights shall be sold by the Seller to the Issuer as described in Section 2.2 hereof. Each Transfer Supplement shall be executed by the Seller and the Issuer at the time of the sale of the subject Portfolio and related servicing
rights. Notwithstanding the foregoing, the Issuer may not purchase any Mortgage Loans during the continuation of an Extended Note Amortization Event or following the occurrence of an Early Accumulation Event. 
 (ii) Upon execution of any Transfer Supplement by the Seller and the Issuer and receipt by the Seller of the purchase price therefor, the Seller hereby
sells, assigns, transfers, sets over and conveys to the Issuer all right, title and interest of the Seller in, to and under each Mortgage Loan identified on such Transfer Supplement. It is intended that the transfer, assignment and conveyance herein
contemplated constitute a sale of the Mortgage Loans, conveying good title thereto free and clear of any liens, by the Seller to the Issuer and that the Mortgage Loans and related servicing rights not be part of the Seller’s estate in the event
of insolvency. In the event that the Mortgage Loans and related servicing rights are held to be property of the Seller or if for any other reason any Transfer Supplement is held or deemed not to absolutely sell and assign the Mortgage Loans and
related servicing rights, the parties intend that the Seller shall be deemed to have granted, and does hereby grant, to the Issuer a valid first priority security interest, free and clear of any lien, claim or interest of any other Person, in the
Seller’s right, title and interest in the Mortgage Loans and all related servicing rights and all collateral related thereto now existing or hereafter arising for the purpose of securing the rights of the Issuer under this Mortgage Loan
Purchase and Servicing Agreement, and that this Mortgage Loan Purchase and Servicing Agreement and the Transfer Supplement shall each constitute a security agreement under applicable law. 
  

 -2- 

 (iii) In the event that the Fair Market Value of any Mortgage Loan sold to the Issuer by the Seller
exceeds the Initial Purchase Price paid by the Issuer to the Seller under Section 2.2 hereof in respect of that Mortgage Loan, the Seller shall be deemed to have made a new contribution of capital to the Issuer in the amount of such
excess. 
 (b) Pursuant to Section 2.5 hereof, as soon as practicable but in any event on or before the date which is
(i) eight (8) Business Days after the sale of any Mortgage Loan to the Issuer if such Mortgage Loan was originated by the Seller not more than three (3) days prior to the sale to the Issuer (such a Mortgage Loan, a “Tier 1
Mortgage Loan”) or (ii) five (5) Business Days after the sale of any Mortgage Loan to the Issuer if such Mortgage Loan was originated by the Seller more than three (3) days prior to the sale to the Issuer (such a Mortgage
Loan, a “Tier 2 Mortgage Loan”), the Seller shall deliver and release each related Loan Document, including Mortgage Notes, Mortgages and Assignments of Mortgages, if any, on Wet Funded Loans (subject to the Wet Funded Loan
Limitation), to the Custodian, as bailee, for the Collateral Agent pursuant to the Custodial Agreement; provided, however, that any Tier 1 Mortgage Loan with respect to which the related Mortgage Note, Mortgage and Assignment of
Mortgage, if any, are not delivered on or before the date which is eight (8) Business Days after the sale of such Tier 1 Mortgage Loan to the Issuer shall be repurchased by the Seller on such ninth Business Day at the Repurchase Price in
accordance with Section 3.3 hereof; provided, further, that any Tier 2 Mortgage Loan with respect to which the related Mortgage Note, Mortgage and Assignment of Mortgage, if any, are not delivered on or before the date
which is five (5) Business Days after the sale of such Tier 2 Mortgage Loan to the Issuer shall be repurchased by the Seller on such sixth Business Day at the Repurchase Price in accordance with Section 3.3 hereof. If the Seller
does not repurchase the related Mortgage Loan on such ninth or sixth Business Day, as applicable, then the Servicer shall sell such Mortgage Loan on behalf of the Issuer. If the Servicer is unable to sell such Mortgage Loan by the fifteenth
(15th) day following the purchase by the Issuer of such Mortgage Loan, the Collateral Agent shall hold an
auction for such Mortgage Loan on such fifteenth (15th) day or if such day is not a Business Day, then on the
next succeeding Business Day. The Collateral Agent shall notify potential bidders of the auction including the Rated Bidder, who shall be obligated to make a bid at such auction. The Seller shall deliver any documents, records, statements or logs
relating to such Mortgage Loan other than the related Loan Documents not delivered to the Custodian (the “Servicing File”) to the Servicer and the contents of each related Servicing File shall be held in trust by the Servicer, as
bailee, for the benefit of the Issuer as owner and the Collateral Agent as secured party. The possession of each Servicing File by the Servicer is at the will of the Issuer for the sole purpose of servicing the related Mortgage Loan and such
retention and possession by the Servicer is in a custodial capacity only. Upon the sale of the Mortgage Loans to the Issuer as owner and the Collateral Agent as secured party, the ownership of each related Loan Document and the remainder of the
Mortgage Loan File shall vest immediately in the Issuer, and the ownership of all other records and documents with respect to the related Mortgage Loan prepared by or which come into the possession of the Servicer shall vest immediately in the
Issuer and shall be retained and maintained by the Servicer, in trust, at the will of the Issuer and the Collateral Agent and only in such custodial capacity. The Servicer’s books and records shall be marked appropriately to reflect clearly the
sale of the related Mortgage Loans to the Issuer as owner and the Collateral Agent as secured party. The Custodian shall only release its custody of the Loan Documents and other contents of a Mortgage Loan File in its possession in accordance with
the Custodial Agreement. 
  

 -3- 

 The Mortgage Loan File shall consist of the following documents (constituting, collectively, the
“Loan Documents”) and such other documents as the Issuer may reasonably require from time to time: 
 (i) The
original Mortgage Note (or, if such Mortgage Note is lost, a certified copy thereof along with a Lost Note Affidavit and Indemnity substantially in the form attached to the Custodial Agreement as Exhibit F) bearing all intervening endorsements,
endorsed “Pay to the order of             , without recourse.” The original Mortgage Note shall be accompanied by any riders thereto made in connection with the origination
of the related Mortgage Loan; 
 (ii) the original of any guarantee executed in connection with the Mortgage Note; 

(iii) the original Mortgage with evidence of recording thereon; 
 (iv) the originals of all assumption, modification, substitution, consolidation or extension agreements, with evidence of recording
thereon; 
 (v) except with respect to a MERS Mortgage (which shall not require an Assignment of Mortgage), the original duly
executed Assignment of Mortgage for each Mortgage Loan, in form and substance acceptable for recording; if the Mortgage Loan was acquired by the Seller in a merger, any Assignment of Mortgage must be made by “[Seller], successor by
merger to [name of predecessor].” If the Mortgage Loan was acquired or originated by the Seller while doing business under another name, any Assignment of Mortgage must be by “[Seller], formerly known as [previous
name].” If the Mortgage Loan was acquired by the Seller as receiver for another entity, any Assignment of Mortgage must be by “[Seller], receiver for [name of entity in receivership].” Any Assignment of Mortgage must
be duly recorded only if recordation is required as provided in Section 12.9 hereof. If any Assignment of Mortgage is to be recorded, the Mortgage shall be assigned to the Collateral Agent. If any Assignment of Mortgage is not to be
recorded but is otherwise required hereunder, such Assignment of Mortgage shall be delivered in blank; 
 (vi) the originals
of all intervening assignments of mortgage with evidence of recording thereon (if such recording is necessary as represented in Section 3.2(cc) hereof); 
 (vii) if available, either the original mortgagee title insurance policy, or original attorney’s opinion of title, or, if the policy
or opinion has not yet been issued, the irrevocable written commitment, interim binder or marked up binder for a title insurance policy or other evidence of title insurance customary in the area where the related Mortgage Property is located issued
by the title insurance company dated and certified as of the date the Mortgage Loan was funded; and 
 (viii) the original of
any security agreement, chattel mortgage or equivalent document executed in connection with the Mortgage. 
  

 -4- 

 In connection with the assignment of any Mortgage Loan registered on the MERS System, promptly after the
related Closing Date, the Seller will cause, at its own expense, the MERS System to indicate that such Mortgage Loan has been sold and transferred to the Issuer and pledged to the Collateral Agent for the benefit of the Secured Parties by including
(or deleting, in the case of a Mortgage Loan which is repurchased in accordance with this Agreement) in its computer files (a) the Collateral Agent’s organizational ID in the field “Investor” which identifies the Collateral Agent
and (b) a code which identifies this facility in the “Pool” field. The Seller and the Servicer will not alter the codes referenced in this paragraph with respect to any such Mortgage Loan during the term of this Mortgage Loan Purchase
and Servicing Agreement unless and until such Mortgage Loan is sold in accordance with the terms of this Mortgage Loan Purchase and Servicing Agreement. 
 If in connection with a Mortgage Loan, the Seller cannot deliver or cause to be delivered the original of a document required to be delivered with evidence of recording thereon on or prior to the Closing Date because
of a delay caused by the public recording office where such Mortgage has been delivered for recordation, (a) the Seller shall deliver or cause to be delivered to the Custodian a photocopy of such document, certified by the Seller or the closing
agent to be a true and complete copy of the original recorded document dispatched to the appropriate public recording office for recordation, and (b) the original recorded document or, if such public recording office retains the original
recorded document, a copy of such document certified by such public recording office to be a true and complete copy of the original recorded Mortgage will be promptly delivered to the Custodian upon receipt thereof by the Seller. Any provision in
this Mortgage Loan Purchase and Servicing Agreement or any other Program Document that requires a document to be delivered within eight (8) Business Days or five (5) Business Days after the sale of the related Tier 1 Mortgage Loan or Tier
2 Mortgage Loan, respectively, to the Issuer shall be deemed complied with if, under the circumstances described in the immediately preceding sentence, the document described in clause (a) of such sentence, is delivered within such eight
(8) Business Day or five (5) Business Day period. 
 Section 2.2 Determination of Initial Purchase Price. No later than
3:00 p.m. Eastern time on each Closing Date, the Seller shall deliver to the Issuer a Transfer Supplement. During any IPP Dispute Period, each of the Swap Counterparties shall have the right to dispute the Initial Purchase Price set forth in the
related Purchase Notice for any Mortgage Loan or portfolio of Mortgage Loans delivered during such IPP Dispute Period by 11:30 a.m. Eastern time on such Closing Date, such sale shall occur at the highest Initial Purchase Price acceptable to such
disputing Swap Counterparty or otherwise such sale must be abandoned or rescheduled by the Issuer and the Seller. If the Issuer does not agree with any purchase calculation, or if the disputing Swap Counterparty disputes any purchase calculation, or
the sale does not close for any other reason, then the Closing Date for the Mortgage Loan or portfolio of Mortgage Loans shall be rescheduled to a later date at the Seller’s option; it being understood that regardless of whether the rescheduled
Closing Date occurs after the end of the IPP Dispute Period, the provisions of this paragraph shall apply to such Mortgage Loan or portfolio of Mortgage Loans. If the Issuer does not agree with any purchase calculation, or the sale does not close
for any other reason, then the Closing Date for some or all of the Portfolio shall be rescheduled to a later date, at its option, by the Seller. The Issuer and the Seller shall use their best efforts to close the sale of any Portfolio on any such
Closing Date. On each Closing Date, the Issuer shall pay to the Seller the Initial Purchase Price of each Mortgage Loan purchased by it hereunder in 

  

 -5- 

 
immediately available funds not later than 4:00 p.m., Eastern time. Each Mortgage Loan must be an Eligible Loan. 
 Section 2.3 Purchase Commitment Term. Subject to the terms and conditions of the Program Documents (including, without limitation,
Section 3.4(b) hereof), the commitment of the Issuer under this Mortgage Loan Purchase and Servicing Agreement shall expire on the termination of this Mortgage Loan Purchase and Servicing Agreement, pursuant to Section 11.1 hereof.

 Section 2.4 Books and Records; Transfers of Mortgage Loans. From and after each related Closing Date, all rights arising with
respect to each Mortgage Loan sold pursuant to any Transfer Supplement, including but not limited to all funds received on or in connection with each Mortgage Loan, shall be received and held by the Servicer in trust for the benefit of the Issuer as
owner and the Collateral Agent as secured party. Pursuant to the Custodial Agreement, the Custodian shall hold all of the Loan Documents as described in the Custodial Agreement. 
 The Servicer shall be responsible for maintaining, and shall maintain, a complete set of books and records for each Mortgage Loan which shall be marked
clearly to reflect the ownership of each Mortgage Loan by the Issuer. To the extent that original documents are not required for purposes of realization of Liquidation Proceeds or Insurance Proceeds, documents maintained by the Servicer may be in
the form of microfilm or microfiche or such other reliable means of recreating original documents, including but not limited to, optical imagery techniques so long as the Servicer complies with its Customary Servicing Procedures. 
 The Servicer shall maintain with respect to each Mortgage Loan and shall make available for inspection by the Issuer, the Collateral Agent, the Indenture
Trustee, any Secured Liquidity Note Dealer, the Depositary or their respective designees, upon reasonable advance notice, at the offices of the Servicer during normal business hours the related Servicing File during the time the Issuer retains
ownership of a Mortgage Loan and thereafter pursuant to applicable laws and regulations. 
 Section 2.5 Custodial Agreement.
Pursuant to the Custodial Agreement, the Seller shall, from time to time in connection with the purchase of Mortgage Loans pursuant to the terms of this Mortgage Loan Purchase and Servicing Agreement, deliver to the Custodian, on or before the date
which is eight (8) Business Days after the related Closing Date, the Loan Documents with respect to such Mortgage Loans. The Custodian shall hold each Loan Document in trust, as bailee, initially for the Issuer and then for the Collateral Agent
pursuant to the Custodial Agreement. 
 Section 2.6 [Reserved]. 
 Section 2.7 Reserve Fund Deposit. On each Closing Date, the Seller shall deposit an amount into the Reserve Fund from the proceeds of the
sale of the Mortgage Loans to the Issuer that is required to cause the amount on deposit in the Reserve Fund to equal the Required Reserve Fund Amount on such Closing Date. In the event that proceeds of the sale of the Mortgage Loans to the Issuer
by the Seller are used to fund the Reserve Fund, the Issuer shall 

  

 -6- 

 
be deemed to have made a new issuance of equity to the Seller in the amount of the proceeds used to fund the Reserve Fund. 
 ARTICLE III 
 REPRESENTATIONS AND
WARRANTIES; 
 COVENANTS; REMEDIES AND BREACH 
 Section 3.1 Representations and Warranties of the Company. The Company, as Seller and Servicer, represents and warrants to the Issuer (and for the benefit of the Collateral Agent and the Indenture Trustee)
that as of each Closing Date: 
 (a) Due Organization and Authority. The Company is duly organized, validly existing and in good
standing under the laws of California and has all licenses necessary to carry on its business as now being conducted and is duly authorized, licensed, qualified and in good standing in each state where a Mortgaged Property is located if required to
conduct business of the type conducted by it, and in any event the Company is in compliance with the laws of any such state to the extent necessary to ensure the enforceability of any Mortgage Loan sold hereunder and the servicing of any such
Mortgage Loan in accordance with the terms of this Mortgage Loan Purchase and Servicing Agreement and any Transfer Supplement; the Company had the full power and authority to originate, hold and sell each Mortgage Loan and has the full power and
authority to service each Mortgage Loan and to execute and deliver this Mortgage Loan Purchase and Servicing Agreement and any Transfer Supplement to which it is a party and to perform its obligations in accordance herewith and therewith; the
execution, delivery and performance of this Mortgage Loan Purchase and Servicing Agreement and any Transfer Supplement to which it is a party and the performance of the transactions contemplated hereby and thereby have been duly and validly
authorized by the Company; all requisite corporate action has been taken by the Company to make this Mortgage Loan Purchase and Servicing Agreement and any Transfer Supplement to which it is a party valid and binding upon the Company pursuant to its
terms; this Mortgage Loan Purchase and Servicing Agreement and any Transfer Supplement to which it is a party each evidences the valid, binding and enforceable obligation of the Company, except that (i) the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, receivership and other similar laws relating to creditors’ rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor may be brought. 
 (b) Ordinary Course of Business.
The performance of the transactions contemplated by this Mortgage Loan Purchase and Servicing Agreement are in the ordinary course of business of the Company, and the transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by the
Company pursuant to this Mortgage Loan Purchase and Servicing Agreement are not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction. 
 (c) No Conflicts. Neither the execution and delivery of this Mortgage Loan Purchase and Servicing Agreement or any Transfer Supplement, the
origination or acquisition of Mortgage Loans by the Company, the sale of Mortgage Loans to the Issuer or the transactions 

  

 -7- 

 
contemplated hereby or thereby, nor the fulfillment of or compliance with the terms and conditions of this Mortgage Loan Purchase and Servicing Agreement or
any Transfer Supplement, will conflict with or result in a breach of any of the terms, conditions or provisions of the Company’s articles of incorporation or bylaws or any material agreement or instrument to which the Company is now a party or
by which it is bound, or constitute a default or result in an acceleration under any of the foregoing, or result in the violation in any material respect of any applicable law, rule, regulation, order, judgment or decree to which the Company or its
property is subject, or impair the ability of the Issuer to realize on the Mortgage Loans in any material respect, or impair the value of the Mortgage Loans in any material respect. 
 (d) Ability to Service. The Company services nonprime mortgage loans in accordance with its Customary Servicing Procedures. The Company has the
facilities, procedures and experienced personnel necessary for the servicing of the Mortgage Loans. 
 (e) Reasonable Servicing Fee.
The Servicer acknowledges and agrees that the Servicing Fee represents reasonable compensation for servicing, administering and arranging for the sale of the Mortgage Loans pursuant to this Mortgage Loan Purchase and Servicing Agreement and shall be
treated by the Servicer, for accounting and tax purposes, as compensation for the servicing and administration of the Mortgage Loans pursuant to this Mortgage Loan Purchase and Servicing Agreement. 
 (f) No Litigation Pending. Except as disclosed on Schedule 3.1(f) hereto (which schedule may be updated with the consent of the Swap
Counterparty and if the Rating Agency Confirmation is received), there is no action, suit, proceeding or investigation pending, or to its knowledge, threatened against the Company which, either in any one instance or in the aggregate, would result
in any material adverse change in the business, operations, financial condition, properties or assets of the Company, or in any material impairment of the right or ability of the Company to carry on its business substantially as now conducted, or
would result in any material liability on the part of the Company, or which would draw into question the validity of this Mortgage Loan Purchase and Servicing Agreement or any Transfer Supplement or the Mortgage Loans or of any action taken or to be
taken in connection with the obligations of the Company contemplated herein, or which would be likely to impair materially the ability of the Company to perform under the terms of this Mortgage Loan Purchase and Servicing Agreement or any Transfer
Supplement to which it is a party. 
 (g) No Consent Required. No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and performance by the Company of or compliance with this Mortgage Loan Purchase and Servicing Agreement or any Transfer Supplement or the sale of the Mortgage Loans, or if
required, such consent, approval, authorization or order has been obtained. 
 (h) Selection Process. Any Portfolio sold pursuant to a
Transfer Supplement was selected from mortgage loans originated by the Seller or acquired by the Seller from third parties and are Mortgage Loans which satisfy the Eligibility Criteria (other than the Eligibility Representations, which are the
subject of the representations set forth in Section 3.2 hereof), Portfolio Criteria and Wet Funded Loan Limitation, and any selection process employed by it was not made in a manner so as to materially adversely affect the interests of
the Issuer. 
  

 -8- 

 (i) No Untrue Information. Neither this Mortgage Loan Purchase and Servicing Agreement, any
Transfer Supplement nor any written statement, report or other document prepared by the Seller or to be prepared by the Seller pursuant to this Mortgage Loan Purchase and Servicing Agreement or in connection with the transactions contemplated hereby
contains any untrue statement of a material fact relating to the Seller or the Mortgage Loans. None of the offering documents prepared by Seller in connection with the offering of the Notes by the Issuer contains any untrue statement of a material
fact relating to the Seller or the Mortgage Loans or omits to state a fact necessary to make the statements herein or therein not materially misleading. 
 (j) Financial Statements. The Company has delivered to the Issuer audited consolidated financial statements of the Performance Guarantor as to its last complete fiscal year and of the Seller as to its fiscal
years ended December 31, 2001 and 2002 on a date more than one hundred twenty (120) days prior to the date hereof and the applicable Closing Date, as the case may be, and as to any later quarter ended on a date more than sixty
(60) days prior to the date hereof and the applicable Closing Date, as the case may be, unaudited consolidated balance sheets. All such financial statements fairly present the pertinent results of operations and changes in financial position at
the end of each such period of the Performance Guarantor’s and its consolidated subsidiaries and have been, and will be, prepared, as the case may be, pursuant to GAAP consistently applied throughout the periods involved, except as set forth in
the notes thereto. Except as disclosed on Schedule 3.1(j) (which Schedule may be updated with the consent of the Swap Counterparty so long as the Rating Agency Confirmation has been received), there has been no change in the business,
operations, financial condition, properties or assets of the Performance Guarantor and its consolidated subsidiaries since the date of its most recently provided financial statements that would have a Material Adverse Effect on its ability to
perform its obligations under this Mortgage Loan Purchase and Servicing Agreement. 
 (k) No Brokers’ Fees. Except as provided in
the Program Documents and the Engagement Letter, the Company has not dealt with any broker, investment banker, agent or other Person that may be entitled to any commission or compensation in connection with the sale of each Mortgage Loan to the
Issuer. 
 (l) Fair Consideration. The consideration received by the Seller in connection with the sale of the Mortgage Loans under
this Mortgage Loan Purchase and Servicing Agreement constitutes fair consideration and reasonably equivalent value for such Mortgage Loans. 
 (m) Ability to Perform. The Company does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Mortgage Loan Purchase and Servicing Agreement in all material
respects. The Company is not insolvent, nor will it be made insolvent by the sale of the Mortgage Loans to the Issuer, nor is the Company aware of any pending insolvency, and the sale of the Mortgage Loans to the Issuer is not undertaken to hinder,
delay or defraud any of the Company’s creditors. 
 (n) Company’s Origination. The Company’s decision to originate any
nonprime mortgage loan or to deny any nonprime mortgage loan application is an independent decision based upon the Company’s underwriting standards, and is in no way made as a result of 

  

 -9- 

 
the Issuer’s commitment to purchase Mortgage Loans pursuant to this Mortgage Loan Purchase and Servicing Agreement. 
 (o) [Reserved]. 
 (p)
Proper Approvals. The Company is a HUD approved mortgagee pursuant to Section 203 and Section 211 of the National Housing Act. 
 (q) Chief Executive Office. The principal place of business and chief executive office of the Company is located and has been located within the state of California for the five year period prior to the date of this Agreement. The
“location” of the Company as defined in the UCC is in the State of California. The Company has not changed its jurisdiction of formation during the five year period prior to the date of this Agreement. 
 (r) No Prior Names. The exact legal name of the Company is, and during the five-year period prior to this Agreement has been, the respective name
set forth for it on the signature page hereto and the Company has not had (i) any prior name other than Preferred Home Lenders, Inc., and MSK Financial Services, Inc., nor (ii) any trade other than Accolate Mortgage Company, Axiom
Financial Services, Check ‘n Go, Home Funds Direct and New Hampshire Accredited Home Lenders. 
 Section 3.2 Representations and
Warranties Regarding Individual Mortgage Loans; Eligibility Representations. With respect to each Mortgage Loan sold by the Seller to the Issuer, the Seller hereby represents and warrants to the Issuer (and for the benefit of the Collateral
Agent and the Indenture Trustee) that as of the related Closing Date: 
 (a) Eligibility of Mortgage Loans. The Mortgage Loan is an
Eligible Loan. 
 (b) Mortgage Loans as Described. The information set forth in the Mortgage Loan Schedule attached to the applicable
Transfer Supplement is complete, true and correct in all material respects. 
 (c) Valid First or Second Lien. The Mortgage is a
valid, subsisting and enforceable first or second lien of record (or is in the process of being recorded) on the Mortgaged Property, including all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing,
heating and air conditioning systems located in or annexed to such buildings that are not personal property, and all additions, alterations and replacements made at any time with respect to the foregoing, except that (i) the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, receivership and other similar laws relating to creditors’ rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The lien of the Mortgage is subject only to: 
 (1) the lien of current real property taxes and assessments not yet due and payable; 
  

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 (2) covenants, conditions and restrictions, rights of way, easements and other matters of
the public record as of the date of recording acceptable to mortgage lending institutions generally and specifically referred to in the lender’s title insurance policy or attorney’s opinion of title and (i) referred to or otherwise
considered in the appraisal made for the originator of the Mortgage Loan or (ii) which do not adversely affect the appraised value of the Mortgaged Property set forth in such appraisal; 
 (3) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security
intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property; and 
 (4) with respect to each Second Lien Mortgage Loan, a prior mortgage lien on the related Mortgaged Property. 
 Any security agreement, chattel
mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting and enforceable, (except that (i) the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, receivership and other similar laws relating to creditors’ rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought) (A) first lien and first priority security interest with respect to each First Lien Mortgage Loan, or (B) second lien and second priority security interest with
respect to each Second Lien Mortgage Loan, in either case, on the property described therein and the Seller has full right to sell and assign the same to the Issuer. 
 (d) Ownership. The Seller, or MERS, as the nominee for the Seller, is the sole owner of record and holder of the Mortgage Loan. Except for a lien of the Seller’s warehouse lender to be released immediately
upon payment of the related purchase price on the related Closing Date, the Mortgage Loan is not assigned or pledged, and the Seller has good and marketable title thereto, and has full right to transfer and sell the Mortgage Loan to the Issuer free
and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority, subject to no interest or participation of, or agreement with, any other party, to sell and assign the
Mortgage Loan pursuant to the related Transfer Supplement. 
 (e) No Additional Collateral. The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in Section 3.2(c) hereof. 
 (f) Conformance with Underwriting Standards. The Mortgage Loan was originated by the Seller, an Affiliate of the Seller or a broker for
simultaneous assignment to the Seller or was acquired by the Seller from a correspondent lender. The Mortgage Loan was underwritten (or, if acquired by the Seller from a correspondent lender, reunderwritten) to comply with the Seller’s
underwriting standards (which underwriting standards have been delivered to the Swap Counterparties and which underwriting standards shall not be materially amended, altered, modified or changed without the Swap Counterparty’s consent (which
shall 

  

 -11- 

 
not be unreasonably be withheld) which consent shall be deemed to have been given the Swap Counterparty has not responded within 5 Business Days after
receipt of notice by the Swap Counterparty of such proposed amendment, alteration, modification or change) in effect on the date of origination (or, if acquired by the Seller from a correspondent lender, on the date of acquisition) of such Mortgage
Loan. The related Mortgage Note and related Mortgage have been documented on forms similar to those used by Fannie Mae or Freddie Mac. The Seller has not made any representations to the related Mortgagor that are inconsistent with such Mortgage Note
or Mortgage. 
 (g) Payments Current. The Mortgage Loan is not a Delinquent Loan and none of the Mortgage Loans will have been
contractually delinquent for more than one calendar month more than once since the origination thereof. No Mortgage Loan is nor will it become a First Payment Default Mortgage Loan. 
 (h) No Mortgagor Bankruptcy. To the best of the Seller’s knowledge and belief, no Mortgagor is currently the subject of a bankruptcy or
similar proceeding. 
 (i) No Outstanding Charges. All taxes, governmental assessments, insurance premiums, water, sewer and municipal
charges, leasehold payments or ground rents with respect to the Mortgaged Property which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains
unpaid and which has been assessed but is not yet due and payable. The Company has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of
any amount required under the Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage Loan proceeds, whichever is greater, to the day which precedes by one (1) month the Due Date of
the first installment of principal and interest and except to fund an escrow of the kind described in the preceding sentence. 
 (j)
Original Terms Unmodified. The terms of the Mortgage Note and Mortgage have not been impaired, waived, altered or modified in any material respect from the date of origination except (i) by a written instrument which has been recorded,
if necessary, to protect the interests of the holder of the Mortgage Note, and which has been delivered to the Custodian or the Servicer, as required hereunder, and (ii) as permitted by the terms of the related Mortgage Note pursuant to the
Company’s Loss Mitigation Action Plan and as approved by the title insurer to the extent required by the title insurer and all such changes are reflected on the related Mortgage Loan Schedule, as applicable. The Mortgagor has not been released,
in whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent required by such policy and which agreement is part of the related Mortgage Loan File. 
 (k) No Defenses. The Mortgage Loan and the obligation of the Mortgagor to pay the unpaid principal of or interest on any Mortgage Note are not
subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, nor will the operation
of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, 

  

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in whole or in part, or subject the Mortgage Note or the Mortgage to any right of rescission, set-off, counterclaim or defense, including without limitation
the defense of usury, and no Mortgagor was a debtor in any state or federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was funded. 
 (l) Hazard Insurance. Pursuant to the terms of the Mortgage, all buildings or other improvements upon the Mortgaged Property are insured against loss by fire and hazards of extended coverage pursuant to
insurance policies conforming to the requirements of Section 4.11 hereof. If upon origination of the Mortgage Loan, the Mortgaged Property was in an area identified in the Federal Register by the Federal Emergency Management Agency as having
special flood hazards (and such flood insurance has been made available) a flood insurance policy meeting the requirements of the current guidelines of the Flood Insurance Administration is in effect which policy conforms to the requirements of
Section 4.11 hereof. All individual insurance policies contain a standard mortgagee clause naming (or that will name) the Company and its successors and assigns as mortgagee, and all currently due premiums thereon have been paid. The
Mortgage obligates the Mortgagor thereunder to maintain the hazard insurance policy at the Mortgagor’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
at such Mortgagor’s cost and expense, and to seek reimbursement therefor from the Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided
that the policy is not a “master” or “blanket” hazard insurance policy covering the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer and
is in full force and effect. The Company has not engaged in, and has no knowledge of the Mortgagor’s having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein,
or the validity and binding effect of either. 
 (m) Compliance with Applicable Laws. Any applicable requirements of federal, state or
local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity, or disclosure laws and applicable predatory and abusive lending laws applicable to the
Mortgage Loan, including the origination and servicing by the Company of the Mortgage Loan, have been complied with by the Company in all material respects and the consummation of the transactions contemplated hereby will not involve the violation
of any such laws and the Seller shall maintain or cause its agent to maintain in its possession available for inspection by any party evidence of compliance with all such requirements. 
 (n) No Satisfaction of Mortgage. The Mortgage has not been satisfied, cancelled, subordinated (except in the case of a Second Lien Mortgage Loan,
to the prior mortgage lien on the related Mortgaged Property) or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would
effect any such release, cancellation, subordination or rescission. The Company has not waived the performance by the Mortgagor of any action, if the Mortgagor’s failure to perform such action would cause the Mortgage Loan to be in default nor
has the Company waived any material default resulting from any action or inaction by the Mortgagor. 
  

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 (o) Location and Type of Mortgaged Property. The Mortgaged Property is located in the state
identified in the Mortgage Loan Schedule and consists of a parcel of real property with a detached single family residence erected thereon, or a two-to-four family dwelling, or an individual condominium unit or townhouse, or an individual unit in a
planned unit development, or a de minimus planned unit development. No residence or dwelling is a mobile home or manufactured housing dwelling that is not treated as real estate under applicable law. To the best of the Seller’s knowledge and
belief, no portion of the Mortgaged Property is used for commercial purposes; provided that any Mortgaged Property that contains a home office shall not be considered as being used for commercial purposes as long as the Mortgaged Property has
not been altered for commercial purposes. 
 (p) Validity of Mortgage Documents. The Mortgage Note and the Mortgage are genuine and
each is the legal, valid and binding obligation of the maker thereof enforceable pursuant to its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or
affecting creditors’ rights and to general equity principles, whether considered in a proceeding or action in equity or at law. All parties to the Mortgage Note and the Mortgage and any other related agreement had legal capacity to enter into
the Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage and any other related agreement, and the Mortgage Note and the Mortgage have been duly and properly executed by such parties. To the best of the Seller’s knowledge
and belief, the documents, instruments and agreements submitted for loan underwriting were not falsified and contain no untrue statement of material fact. 
 (q) Consolidation of Future Advances. Any advances made after the date of origination of the Mortgage Loan, but prior to the sale of the Mortgage Loan to the Issuer, have been consolidated with the outstanding
principal amount secured by the related Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The consolidated principal amount does not exceed the original principal amount of the
Mortgage Loan. 
 (r) Doing Business. All parties which have had any interest in the 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) in compliance with any applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and
(ii) organized under the laws of such state, (iii) qualified to do business in such state or (iv) not required to qualify to do business in such state. 
 (s) LTV. The LTV of the Mortgage Loan is not more than 100%. 
 (t) Title Insurance. The
Mortgage Loan is covered by: 
 (i) an attorney’s opinion of title, the form and substance of which is customary and
reasonably acceptable to mortgage lending institutions making nonprime mortgage loans in the area where the Mortgaged Property is located; or 
 (ii) either (A) an lender’s title insurance policy, issued in standard California Land Title Association form or American Land Title Association form, or other form 

  

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acceptable in a particular jurisdiction by a title insurance company authorized to transact business in the state where the related Mortgaged Property is
located, together with a condominium endorsement, extended coverage endorsement, and an adjustable rate mortgage endorsement (in each case, as applicable) issued by a title insurer qualified to do business in the jurisdiction where the Mortgaged
Property is located and in a form acceptable to Fannie Mae or Freddie Mac, insuring the Seller, its successors and assigns, as to the first or second priority lien of the Mortgage in an amount at least equal to the original principal amount of the
Mortgage Loan, and against any loss by reason of the invalidity or unenforceability of the lien, or (B) a binding commitment from such title insurer to issue the same; 
 in each case subject to the exceptions contained in clauses (1), (2), and (3), and with respect to each Second Lien Mortgage Loan, clause (4) of Section 3.2(c) hereof and
in all cases subject to the exceptions to title set forth in the title insurance policy (or commitment), attorney’s opinion of title, which exceptions are generally acceptable to mortgage lending institutions in connection with their regular
mortgage lending activities, and to such other exceptions to which similar properties are commonly subject and which do not individually, or in the aggregate, materially and adversely affect the benefits of the security intended to be provided by
the Mortgage. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required lender’s title insurance. Additionally, such lender’s title insurance policy affirmatively insures
ingress and egress, and against encroachments by or upon the Mortgaged Property or any interest therein. The originator of the Mortgage Loan, and its successors and assigns, is the sole insured of such lender’s title insurance policy (or
commitment), and such lender’s title insurance policy is in full force and effect or will be in force and effect upon issuance pursuant to the commitment. No claims have been made under such lender’s title insurance policy, and no prior
holder of the Mortgage, including the Seller, has done, by act or omission, anything which would impair the coverage of such lender’s title insurance policy including, without limitation, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained or realized by the related Seller or any agent of the related Seller, and no such unlawful liens have been received, retained or realized by the Seller or any agent of the
Seller. 
 (u) No Defaults. Except for any Monthly Payment not more than one month contractually delinquent, there is no default,
breach, violation or event of acceleration existing under the Mortgage or the Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or
event of acceleration, and neither the Seller nor its predecessors have waived any default, breach, violation or event of acceleration. To the best of the Seller’s knowledge and belief, with respect to each Second Lien Mortgage Loan,
(i) the first mortgage is in full force and effect, (ii) there is no default, breach, violation or event of acceleration existing under the prior mortgage or the related mortgage note, (iii) there is no event which, with the passage
of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration thereunder, (iv) the first mortgage does not provide for negative amortization, (v) no funds
provided to the Mortgagor from the Second Lien Mortgage Loan were concurrently used as a down payment for the prior mortgage, and either (A) the first mortgage contains a provision which allows or (B) applicable law requires, the Mortgagee
under 

  

 -15- 

 
the Second Lien Mortgage Loan to receive notice of, and affords such Mortgagee an opportunity to cure by payment in full or otherwise, any default under the
prior mortgage. 
 (v) No Mechanics’ Liens. There are no mechanics’ or similar liens or claims which have been filed for
work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the related Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the related Mortgage,
which are not insured against or otherwise covered by the applicable title policy. 
 (w) Location of Improvements; No Encroachments.
All improvements which were considered in determining the Appraised Value of the Mortgaged Property lay wholly within the boundaries and building restriction lines of the Mortgaged Property and no improvements on adjoining properties encroach upon
the Mortgaged Property. No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning and building law, ordinance or regulation. 
 (x) Customary Provisions. The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale and (ii) otherwise by
judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustee’s sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and marketable
title to the Mortgaged Property. There is no homestead or other exemption, other than any applicable Mortgagor redemption rights, available to a Mortgagor which would materially interfere with the right to sell the Mortgaged Property at a
trustee’s sale or the right to foreclose the Mortgage. The Mortgage Note has a stated final maturity. 
 (y) Occupancy of the
Mortgaged Property. The Mortgaged Property is capable of being lawfully occupied under applicable law. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and
with respect to the use and occupancy of the Mortgaged Property, including but not limited to certificates of occupancy and fire underwriting certificates, have been made by or obtained from the appropriate authorities. 
 (z) Deeds of Trust. In the event that the Mortgage constitutes a deed of trust, a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by the Issuer to the trustee under the deed of trust, except in connection with a trustee’s sale after default
by the Mortgagor. 
 (aa) [Reserved]. 
 (bb) Acceptable Investment. To the Seller’s knowledge, there exists no circumstance or condition with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor’s credit-standing
not reflected in the representations set forth herein, or in the documents delivered to the Custodian or in the Mortgage Loan File, that could reasonably be 

  

 -16- 

 
expected to cause private institutional investors to regard the Mortgage Loan as an unacceptable investment or cause the Mortgage Loan to become delinquent
or materially adversely affect the value or the marketability of the Mortgage Loan. 
 (cc) Delivery of Loan Documents. The Loan
Documents required to be delivered for the Mortgage Loan by the Seller under the Custodial Agreement (i) have been delivered to the Custodian on or prior to the Closing Date or (ii) will be delivered to the Custodian as soon as
practicable, but in no event later than eight (8) Business Days from the Closing Date. The Seller and/or its closing agent and/or the Custodian is in possession of a complete Mortgage Loan File with respect to the Mortgage Loan. Each Wet Funded
Loan was originated no more than eight (8) days prior to the Closing Date for such Wet Funded Loan. 
 (dd) Recording of
Mortgage. The original Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the related Mortgaged Property is located. The original Mortgage (in recordable form and acceptable for recording)
was recorded or is in the process of being recorded under the laws of the jurisdiction in which the related Mortgaged Property is located. All intervening assignments of the original Mortgage (other than unrecorded warehouse assignments and
assignments for which the related original Mortgage has not been returned from the applicable public recording office) have been delivered for recordation or have been recorded in the appropriate jurisdictions wherein such recordation is necessary
to perfect the lien thereof as against creditors of or purchasers from the Seller. The Assignment of Mortgage (other than with respect to a MERS Mortgage, which shall not require an assignment) is in recordable form and is acceptable for recording
under the laws of the jurisdiction in which the related Mortgaged Property is located. 
 (ee) Due on Sale. The Mortgage contains an
enforceable (subject to applicable law) provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the
Mortgagee thereunder, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and general principles
of equity applicable thereto. 
 (ff) No Graduated Payments. The Mortgage Loan is not a graduated payment nonprime mortgage loan and
does not have a shared appreciation or other contingent interest feature. 
 (gg) Mortgaged Property Undamaged. To the Seller’s
knowledge and belief, there is no proceeding pending or threatened for the total or partial condemnation of the Mortgaged Property. To the best of the Seller’s knowledge and belief, the Mortgaged Property is in good repair and undamaged by
waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to affect materially adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended.

 (hh) Collection Practices; Adjustable Rate Mortgage Loan Adjustments. The origination, collection and servicing practices used by
the Seller with respect to the Mortgage Loan have been in accordance with the Seller’s Customary Servicing Procedures and are in 

  

 -17- 

 
compliance in all material respects with all applicable laws and regulations and conform to customs in the nonprime mortgage origination and servicing
business. All Mortgage Interest Rate adjustments have been made in strict compliance with state and federal law and the terms of the related Mortgage Note. 
 (ii) Appraisal. The Servicing File contains an appraisal of the related Mortgaged Property signed prior to the approval of the nonprime mortgage loan application by a qualified appraiser, duly appointed by or
acceptable to the Seller, who, to the best of the Seller’s knowledge and belief, had no interest, direct or indirect, in the Mortgaged Property or in any loan made on the security thereof, and whose compensation was not affected by the approval
or disapproval of the Mortgage Loan, and the appraisal and appraiser both satisfied the requirements of Title XI of the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated thereunder, all as in effect
on the date that the Mortgage Loan was originated. 
 (jj) Servicemembers Civil Relief Act. The Mortgagor has not notified the Company
and the Company has no knowledge of any relief requested by the Mortgagor under the Servicemembers Civil Relief Act. 
 (kk) Environmental
Matters. To the Seller’s actual knowledge, the Mortgaged Property is free from any and all toxic or hazardous substances and there exists no violation of any local, state or federal environmental law, rule or regulation with respect to the
Mortgaged Property. There is no pending action or proceeding directly involving any Mortgaged Property of which the Seller is aware in which compliance with any environmental law, rule or regulation is an issue; and, to the best knowledge of the
Seller, nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation consisting of a prerequisite to use and enjoyment of said property. 
 (ll) No Construction Loans. No Mortgage Loan (i) was made for the construction or rehabilitation of a Mortgaged Property which has not been
completed or (ii) provides for future advances of funds by the Seller which have not yet been advanced or (iii) facilitates the trade-in or exchange of a Mortgaged Property. 
 (mm) Regarding the Mortgagor. The Mortgagor is one (1) or more natural persons or a trust acceptable under the Fannie Mae Guides. 

(nn) Consent. If the Mortgage Loan is a Second Lien Mortgage Loan, either (i) no consent for such Second Lien Mortgage Loan is required by
the holder of the related first lien mortgage or (ii) such consent has been obtained and is contained in the Servicing File. 
 (oo)
Mortgagor Acknowledgment. If the Mortgage Loan is an adjustable rate nonprime mortgage loan, the Mortgagor has received all disclosure materials required by applicable law with respect to the making of adjustable rate nonprime mortgage loans.
The Servicing File contains proof of such compliance. 
 (pp) No Buydown Provisions. The Mortgage Loan does not contain provisions
pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate account established by the Seller, the Mortgagor or anyone on behalf of the Mortgagor, 

  

 -18- 

 
or paid by any source other than the Mortgagor nor does it contain any other similar provisions currently in effect which may constitute a
“buydown” provision. 
 (qq) Schedule of Payments; Final Maturity. Each Mortgage Note with respect to a Mortgage Loan
provides for a schedule of substantially level and equal Monthly Payments (subject to adjustment in the case of Interest-Only Mortgage Loans at the end of the interest only payment period and to periodic adjustment in the case of Mortgage Loans that
have an adjustable interest rate) which are sufficient to amortize fully the principal balance of such Mortgage Note on or before its maturity date, except for Mortgage Loans that provide for a “balloon” payment due at maturity. If
an Interest–Only Mortgage Loan, such Mortgage Loan shall provide for substantially level and equal Monthly Payments that include principal payments to commence within 60 months of the origination of such Mortgage Loan (subject to periodic
adjustment in case of Mortgage Loans that have an adjustable interest rate). The Mortgage Loan has a final maturity date not later than thirty (30) years after the Closing Date for the purchase of such Mortgage Loan. 
 (rr) No Claim or Defense. If the Mortgage Loan is a “mortgage” as defined in 15 U.S.C. 1602(aa), the Mortgagor does not and will
not have a valid claim or defense with respect to such Mortgage Loan under such law. 
 (ss) No Taxes, Fees or Charges. The sale,
transfer, assignment and conveyance of the Mortgage Loan by the Seller pursuant to this Mortgage Loan Purchase and Servicing Agreement are not subject to and will not result in any tax, fee or governmental charge payable by the Seller or the Issuer
to any federal, state or local government other than such taxes, fees and governmental charges which have been or will be paid as due by the Seller. 
 (tt) Ground Lease. With respect to each Mortgaged Property subject to a ground lease (i) the current ground lessor has been identified and all ground rents which have previously become due and owing have
been paid, (ii) the ground lease term extends, or is automatically renewable, for at least five years beyond the maturity date of the related Mortgage Loan, (iii) the ground lease has been duly executed and recorded and is valid and in
full force and effect, (iv) the amount of the ground rent and any increases therein are clearly identified in the lease and are for predetermined amounts at predetermined times, (v) the ground rent payment is included in the
Mortgagor’s monthly payment as an expense item in determining the qualification of the Mortgagor for such Mortgage Loan, (vi) the holder of the original Mortgage or the assignee thereof has the right to cure defaults on the ground lease,
(vii) the terms and conditions of the leasehold do not prevent the free and absolute marketability of the Mortgaged Property, and (viii) the ground lessee is not in default under any provisions of the lease. 
 (uu) Mortgage Interest Rate. The Mortgage Interest Rate on the Mortgage Loan is calculated on the basis of a year of 360 days with twelve 30-day
months. 
 (vv) Negative Amortization. If the Mortgage Loan has a variable interest rate, it is not subject to negative amortization.

 (ww) 16 C.F.R. Part 433. The FTC holder regulation provided in 16 C.F.R. Part 433 does not apply to the Mortgage Loans. 

 

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 (xx) Rights Under Insurance Policies. The Seller has caused to be performed any and all acts
required to be performed to preserve the rights and remedies of the mortgagee in any insurance policies applicable to the Mortgage Loan including, without limitation, any necessary notifications of insurers, assignments of policies or interests
therein, and establishments of co-insured, joint loss payee and mortgagee rights in favor of the Servicer. 
 (yy) Prepayment Charge.
If the Mortgage Loan contains a provision that provides for the payment of a Prepayment Charge if the related Mortgage Note is voluntarily paid in full prior to the date such Mortgage Note is scheduled to be paid in full, such provision is
enforceable under applicable law, except as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditor’s rights and
general principles of equity applicable hereto. 
 (zz) Predatory Lending Regulations; High Cost Loans. None of the Mortgage Loans
(i) are classified as (x) “high cost” loans under the Home Ownership and Equity Protection Act of 1994 or (y) “high cost”, “threshold”, “covered” or “predatory” loans under any
applicable federal, state or local law or ordinance (or a similarly classified loan using different terminology under any applicable federal, state or local law or ordinance imposing heightened regulatory scrutiny or additional legal liability for
nonprime residential mortgage loans having high interest rates and/or points and fees) or (ii) are subject to any similar federal, state or local law or ordinance that would result in such Mortgage Loan being ineligible for inclusion in a rated
securitization transaction under the then current criteria and ongoing criteria of any Rating Agency. 
 (aaa) Property in Georgia. No
Mortgage Loan originated on or after March 7, 2003, secured by a Mortgaged Property located in Georgia is a “Covered Loan” or a “High Cost Home Loan” within the meaning of the Georgia Fair Lending Act, as amended (the
“Georgia Act”). In addition, no Mortgage Loan secured by a Mortgaged Property located in Georgia was originated between October 1, 2002 and March 7, 2003. 
 (bbb) Use of Mortgage Loan Proceeds. No proceeds from any Mortgage Loan were used to finance single-premium credit life insurance policies in
connection with the origination of the Mortgage Loan. 
 (ccc) No Material Errors, Omissions, Etc. To the best of the Seller’s
knowledge, no material error, omission, misrepresentation, negligence, fraud or similar occurrence with respect to a Mortgage Loan has taken place on the part of any person, including without limitation, the Seller, the Mortgagor, any appraiser, or
any other party involved in the origination of the Mortgage Loan or in the application of any insurance in relation to such Mortgage Loan. 
 (ddd) Proceeds Fully Disbursed. The proceeds of each Mortgage Loan have been fully disbursed, there is no requirement for, or ability to make, future advances thereunder and any and all requirements as to completion of any on-site or
off-site improvements and as to disbursements of any escrow funds therefor have been complied with, except any Mortgaged Property or Mortgage Loan subject to an escrow holdback as defined in the underwriting 

  

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guidelines of the Seller. All costs, fees and expenses incurred in making, closing or recording the Mortgage Loans were paid and the Mortgagor is not
entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage. 
 (eee) No Deficiencies. With respect to
escrow deposits and escrow payments (other than with respect to each Mortgage Loan which is indicated by the Seller to be a Second Lien Mortgage Loan and for which the mortgagee under the first lien is collecting escrow payments) all such payments
are in the possession of or under the control of the Seller, its servicer or its agent. There exist no deficiencies with respect to escrow deposits and payments, if such are required, for which customary arrangements for repayment thereof have not
been made, and no escrow deposits or payments of other charges or payments due the Seller have been capitalized under the Mortgage or the related Mortgage Note. 
 (fff) [Reserved]. 
 (ggg) Additional Payments. There is no obligation on the part of
the Seller or any other party under the terms of the Mortgage or related Mortgage Note to make payments in lieu of or in addition to those made by the Mortgagor or a guarantor of such Mortgagor’s obligations under the terms of a guarantee
included in the related Mortgage Loan File. 
 (hhh) Furnishing of Information. The Seller has fully furnished, in accordance with the
Fair Credit Reporting Act and its implementing regulations, accurate and complete information (e.g., favorable and unfavorable) on the Mortgagor’s credit files to Equifax, Experian and Trans Union Credit Information Company or their successors
the (“Credit Repositories”) on a monthly basis. 
 (iii) Deemed Representations. If any representation and warranty
reasonably required by mortgage loan buyers generally in purchases of nonprime mortgage loans having characteristics similar to the Mortgage Loan, or by Rating Agencies, commercial paper conduits or other Financing parties in connection with the
Financing of nonprime mortgage loans having characteristics similar to the Mortgage Loan is not covered by the representations and warranties in the foregoing subparagraphs (a) through (hhh) (each, a “Deemed
Representation”), then, upon notice thereof from the Seller, the Servicer, the Issuer or any Swap Counterparty, such Deemed Representation shall be deemed to have been made with respect to such Mortgage Loan by the Seller as of the
applicable Closing Date unless such Deemed Representation relates to the collectibility or credit risk of such Mortgage Loan and for which such Deemed Representation would constitute recourse to the Seller for the collectibility of such Mortgage
Loan. 
 Section 3.3 Remedies for Breach of Representations and Warranties. It is understood and agreed that the representations
and warranties set forth in Sections 3.1 and 3.2 hereof shall survive the sale of each Mortgage Loan to the Issuer and the delivery of the Servicing File to the Servicer and delivery of the Loan Documents to the Custodian and shall
inure to the benefit of the Issuer, the Collateral Agent, each Swap Counterparty and the Indenture Trustee notwithstanding any restrictive or qualified endorsement on any Mortgage Note or Assignment of Mortgage or the examination or failure to
examine any Mortgage Loan File. Upon discovery by either the Seller, the Servicer, any Swap Counterparty or the Issuer (i) of a breach of any of the foregoing representations and warranties, or (ii) that any of the 

  

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representations or warranties in Section 3.2 hereof were untrue at the time made without regard to any limitation contained therein concerning
the knowledge of any Person as to the facts stated therein, and in each case which materially and adversely affects the value of the Mortgage Loans or the interest of the Issuer (or which materially and adversely affects the interest of the Issuer
in the related Mortgage Loan in the case of a representation and warranty relating to a particular Mortgage Loan), the party discovering such breach or inaccuracy shall give prompt written notice to the other, the Collateral Agent, the Indenture
Trustee and each Swap Counterparty. 
 Except as provided in the next following sentence, within sixty (60) days of the earlier of
either discovery by or notice to the Seller of any such breach or inaccuracy (without regard to any limitation contained therein concerning the knowledge of any Person as to the facts stated therein) of a representation or warranty set forth in
Section 3.2 hereof that materially and adversely affects the value of any Mortgage Loan, the Seller shall use its best efforts promptly to cure such breach or inaccuracy in all material respects and, if such breach or inaccuracy cannot
be cured, or is not cured, within such sixty (60) day time period, the Seller shall repurchase such Mortgage Loan at the Repurchase Price. In the event that a breach shall involve any representation or warranty set forth in
Section 3.2(cc) hereof, the Seller shall repurchase all Mortgage Loans affected thereby on the ninth (9th) Business Day following the related Closing Date at the Repurchase Price. In the event that a breach shall involve any representation or warranty set forth in Section 3.1 hereof, and such breach cannot be cured, or
is not cured, within sixty (60) days of the earlier of either discovery by or notice to the Seller of such breach, the Seller shall repurchase all of the Mortgage Loans affected thereby at the Repurchase Price. In each case, the Seller shall
remit the Repurchase Price as certified by the Seller to the Collateral Agent, and the Collateral Agent shall deposit such amount into the Collateral Account maintained by the Collateral Agent on the day of receipt. Upon receipt of the Repurchase
Price by the Collateral Agent, the Issuer and the Seller shall arrange for the reassignment of the Mortgage Loan or Mortgage Loans to the Seller and the delivery to the Seller of any documents held by the Custodian or the Servicer relating to the
reassigned Mortgage Loan or Mortgage Loans. Notwithstanding the fact that a representation or warranty contained in Section 3.2 hereof may be limited to the Seller’s knowledge, such limitation shall not relieve the Seller of its
repurchase obligation under this Section 3.3. 
 In addition to such repurchase obligation, the Seller shall indemnify the
Issuer, the Collateral Agent, each Swap Counterparty and the Indenture Trustee and hold it harmless against any losses, damages, transfer taxes, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and
other reasonable costs and expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or resulting from, a breach of the representations and warranties of the Seller contained in this Mortgage Loan Purchase and
Servicing Agreement. The Seller shall not be obligated under this indemnity for any indirect or consequential damages. It is understood and agreed that the obligations of the Seller set forth in this Section 3.3 to cure or repurchase a
Mortgage Loan and to indemnify the Issuer, the Swap Counterparties, the Collateral Agent and the Indenture Trustee constitute the sole remedies of the Issuer, the Collateral Agent and the Indenture Trustee respecting a breach of the foregoing
representations and warranties. 
 Section 3.4 Conditions to Closing. (a) Conditions to Initial Closing. The
obligations of the parties hereto under this Mortgage Loan Purchase and Servicing Agreement 

  

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are subject to the condition precedent that the Issuer and the Company shall have received all of the following, each duly executed and dated as of the
Initial Closing Date (or such earlier date as shall be satisfactory to the Issuer and the Company) in form and substance satisfactory to the Issuer and the Company: 
 (i) Program Documents. This Mortgage Loan Purchase and Servicing Agreement and each of the other Program Documents, duly executed
by each of the parties thereto. 
 (ii) Resolutions; Organizational Documents. Certified copies of resolutions of the
Board of Directors of the Seller authorizing the execution, delivery and performance of this Mortgage Loan Purchase and Servicing Agreement and the other Program Documents to which it is a party, together with a certified copy of the organizational
documents and governing instruments, as applicable, of the Seller and the Issuer. 
 (iii) Incumbency and Signatures. A
Certificate of the Secretary or an Assistant Secretary of the Seller, the Depositary, the Administrator, the Collateral Agent, the Indenture Trustee, the Owner Trustee and the Swap Counterparties certifying the names of its officer or officers
authorized to sign this Mortgage Loan Purchase and Servicing Agreement, the Notes and the other Program Documents to which it is a party. 
 (iv) Good Standing Certificates. Good standing certificates for the Seller and the Issuer issued as of a recent date acceptable to the Issuer and the Seller by the Secretary of State of each jurisdiction that
the Issuer and the Seller deem necessary or desirable. 
 (v) Opinion of Counsel. Favorable opinions from counsel to
the Issuer, the Seller, each Swap Counterparty (which may be opinions of in-house counsel for the Swap Counterparty), the Collateral Agent, the Indenture Trustee and the Administrator, in form and substance acceptable to the Issuer and the Seller.

 (vi) UCC Financing Statements. A UCC-1 financing statement to be filed in California naming the Seller as debtor,
the Issuer as secured party and the Collateral Agent as assignee and the Mortgage Loans and the related servicing rights as collateral and a UCC-1 financing statement to be filed in Delaware naming the Issuer as debtor and the Collateral Agent as
secured party and the Collateral as collateral. 
 (vii) UCC Searches. A UCC search against the Seller conducted in the
office of the California Secretary of State and a UCC search against the Issuer conducted in the office of the Delaware Secretary of State. 
 (viii) Accounting Letter. A letter from Deloitte & Touche LLP, containing statements and information of the type ordinarily included in accountants’ “comfort letters” in compliance with
agreed upon procedures as agreed by Lehman Brothers and the Company, as to the accuracy of the information reviewed by them. 
 (ix) Ratings. A copy of letters evidencing that the Secured Liquidity Notes are rated at least “A-1+” and “P-1” by S&P and Moody’s respectively. 
  

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 (x) Offering Circulars. Final copies of (i) the Series 2005-A Preliminary
Variable Rate Subordinated Note Offering Circular; (ii) the Series 2005-A Final Variable Rate Subordinated Note Offering Circular; (iii) the Preliminary Secured Liquidity Note Offering Circular; and (iv) the Final Secured Liquidity
Note Offering Circular. 
 (xi) DTC Letter of Representations. A copy of a Letter of Representations relating to the
Secured Liquidity Notes and a Letter of Representations relating to the Series 2005-A Subordinated Notes executed by the Issuer and accepted and agreed to by The Depository Trust Company. 
 (xii) Other. Such other documents as the Issuer or the Company may reasonably request. 
 (b) Conditions to Each Closing Date. The obligation of the Issuer to purchase the Mortgage Loans that are the subject of any Transfer Supplement
shall be subject to satisfaction of each of the following conditions on or before the related Closing Date: 
 (i) To the best
of the Seller’s knowledge and belief, all of the representations and warranties of the Seller contained in this Mortgage Loan Purchase and Servicing Agreement shall be true and correct in all material respects as of such Closing Date and no
event shall have occurred which, with notice or the passage of time, would constitute a Servicer Event of Default under this Mortgage Loan Purchase and Servicing Agreement; 
 (ii) The Seller shall have delivered and released to the Custodian all documents required to be delivered to the Custodian pursuant to the
Custodial Agreement; 
 (iii) No Termination Event, Early Accumulation Event or Extended Note Amortization Event shall have
occurred and be continuing; and 
 (iv) All other material terms and conditions of this Mortgage Loan Purchase and Servicing
Agreement shall have been satisfied. 
 Section 3.5 Covenants of the Company and the Issuer. (a) Licenses. The
Company shall maintain its qualifications to do business and all licenses necessary to perform its obligations hereunder. 
 (b) Servicing
Standards. The Servicer will administer and service Mortgage Loans, and arrange for the sale of Mortgage Loans, pursuant to the terms of this Mortgage Loan Purchase and Servicing Agreement, the Mortgage Notes, applicable law and its Customary
Servicing Procedures. 
 (c) Delivery of Mortgage Note. The Seller shall deliver the related Loan Documents in accordance with
Section 2.1(b). 
 (d) Portfolio Criteria and Limitations. The Servicer agrees that as of any date of determination, the
Mortgage Loans shall satisfy the Portfolio Criteria, the Eligibility Criteria 

  

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set forth in clause (i) and (ii) of the definition thereof, the Portfolio Aging Limitations and the Wet Funded Loan Limitation.

 (e) Changes in Origination and Underwriting Criteria. The Company shall inform each Rating Agency rating any outstanding Notes of
any changes in the Company’s origination or underwriting practices and guidelines with respect to nonprime mortgage loans that would have a Material Adverse Effect. 
 (f) [Reserved]. 
 (g) Defaulted Loans. The Servicer shall sell on behalf of the Issuer
any Mortgage Loan that becomes a Defaulted Loan as soon as practicable after becoming a Defaulted Loan. 
 (h) Ten Percent Obligor.
The Servicer shall arrange for sales of Mortgage Loans to assure that the Outstanding Purchase Price of Mortgage Loans payable by a single obligor shall not exceed ten percent (10%) of the Outstanding Purchase Price of all Mortgage Loans owned
by the Issuer at any time. 
 (i) Factual Assumption in True-Sale/Non-Consolidation Opinion. The Company and the Issuer shall maintain
the truth and accuracy of all facts assumed by Dewey Ballantine LLP in the True-Sale/Non-Consolidation Opinion delivered on the Initial Closing Date and shall not take or omit to take any action that would result in a change to the continuing truth
and accuracy of any of the factual assumptions in the True-Sale/Non-Consolidation Opinion. 
 (j) Accounting Treatment of the Issuer.
The Company shall consolidate the assets and liabilities of the Issuer with the assets and liabilities of the Company in all financial statements published and prepared by the Company, the Issuer and their Affiliates in accordance with GAAP or any
successor accounting standard thereto. Such financial statements shall contain a footnote substantially to the effect that the Issuer is a Delaware statutory trust that has been established by the Company as a special-purpose warehouse finance
subsidiary of the Company, and that the Issuer has agreed to issue and sell the Notes. 
 (k) [Reserved.] 
 (l) Outstanding Notes. The Issuer shall not issue any Class of Notes if the issuance of such Class of Notes would cause the sum of (x) the
aggregate Credits Outstanding on such day, (y) the aggregate Principal Amount of Subordinated Notes outstanding on such day, and (z) the aggregate Principal Amount of Term Notes outstanding on such day to exceed the Program Size.

 Section 3.6 Representations and Warranties of the Issuer. 
 The Issuer represents and warrants to the Seller, the Servicer, the Collateral Agent and the Indenture Trustee that as of each Closing Date: 

(a) Due Organization. The Issuer is a statutory trust duly formed and validly existing under the laws of the State of Delaware; 
  

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 (b) Due Authorization; Enforceability. The Program Documents to which the Issuer is a party,
assuming due authorization, execution and delivery by the Owner Trustee, constitute valid and legally binding obligations of the Issuer, enforceable against the Issuer in accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles, regardless of whether such enforcement is considered in a proceeding in equity or at law;

 (c) No Conflicts. The execution and delivery of the Program Documents to which the Issuer is a party by the Issuer and its
performance of and compliance with the terms of the Program Documents to which the Issuer is a party will not violate the Issuer’s Trust Agreement or certificate of trust, and will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which the Issuer is a party or by which the Issuer or to which any property or assets of the Issuer is
subject; 
 (d) No Defaults. The Issuer is not in default with respect to any order or decree of any court or any order, regulation or
demand of any federal, state, municipal or governmental agency, which the default might have consequences that would materially and adversely affect the condition (financial or other) or operations of the Issuer or its properties or might have
consequences that would affect its performance hereunder; and 
 (e) No Litigation. No litigation is pending or, to the Issuer’s
knowledge, threatened against the Issuer which would prohibit its entering into this Mortgage Loan Purchase and Servicing Agreement or performing its obligations under this Mortgage Loan Purchase and Servicing Agreement. 
 (f) Chief Executive Office. The principal place of business and chief executive office of the Issuer is located and has been located within the
state of Delaware since its formation. The “location” of the Issuer as defined in the UCC is in the State of Delaware. 
 (g) No
Prior Names. The exact legal name of the Issuer is, and since its formation has been, the name set forth for it on the signature page hereto. 
 (h) Prior Security Agreement. The Issuer is not bound under Section 9-203(d) of the Uniform Commercial code by a security agreement previously entered into by another person or entity. 
 Section 3.7 Perfection Representations. The Perfection Representations shall be a part of this Mortgage Loan Purchase and Servicing Agreement
for all purposes. 
 Section 3.8 Covenants of the Seller. The Seller shall not (i) change its name, identity, or its type or
jurisdiction of organization or (ii) become bound as debtor under Section 9-203(d) of the UCC by a security agreement entered into by another person or entity unless it has first (x) made all filings in all relevant jurisdictions
under the UCC and other applicable law 

  

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as are necessary to continue and maintain the first-priority perfected ownership or security interest of the Collateral Agent in the Mortgage Loans, the
proceeds thereof, and the other property conveyed to the Issuer hereunder, and (y) delivered to the Servicer and the Collateral Agent an Opinion of Counsel to the effect that all necessary filings have been made under the UCC in all relevant
jurisdictions as are necessary to continue and maintain the first-priority perfected ownership or security interest of the Issuer and the Collateral Agent in the Mortgage Loans, the proceeds thereof, and the other property conveyed to the Issuer
hereunder. 
 Section 3.9 Covenants of the Servicer. 
 (a) The Servicer shall cause the Issuer to be in compliance with all applicable licensing and regulatory requirements. 
 (b) The Servicer covenants to maintain the perfection and priority of the security interest of the Issuer and the Collateral Agent, on behalf of the
Secured Parties, in the Mortgage Loans in accordance with paragraph 12 of the Perfection Representations. 
 Section 3.10
Deposit of Derivatives. The Company may cause the deposit of derivatives at any time to the Issuer and any such deposited derivatives shall become property of the Issuer. 
 ARTICLE IV 
 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS 
 Section 4.1 The Company to Act as Servicer; Servicing and Administration of the Mortgage Loans. (a) (i) The Company, as an
independent contract servicer, shall service and administer the Mortgage Loans in accordance with (1) the terms of this Mortgage Loan Purchase and Servicing Agreement, and the other Program Documents and (2) otherwise in accordance with
its Customary Servicing Procedures. The Company, as an independent contract servicer, shall exercise its discretion consistent (a) with the same care, skill, customary and reasonable practices and diligence with which it services and
administers similar mortgage loans for other third-party investors or (b) with the same care, skill, customary and reasonable practices and diligence with which, it services and administers similar nonprime mortgage loans which it owns,
whichever standard of care is higher. The Company, as an independent contract servicer, shall exercise its discretion consistent with the terms of this Mortgage Loan Purchase and Servicing Agreement and, with respect to the enforcement of defaulted
Mortgage Loans, in such manner as will maximize the receipt of principal and interest with respect thereto, including, but not limited to, the sale of any such Mortgage Loan to a third party, the modification of any such Mortgage Loan, or
foreclosure upon the related property with a mortgage and disposition thereof. 
 The Servicer shall arrange for the sale of the Mortgage
Loans in a manner consistent with the Portfolio Criteria, Portfolio Aging Limitations and Wet Funded Loan Limitation. Additionally, as the principal of any Notes becomes due and payable, whether pursuant to the terms thereof or by the occurrence of
a Security Agreement Event of Default or an Indenture Event of Default or optional repurchase, maturity or otherwise, the Issuer shall 

  

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cause the Servicer to arrange for the sale of Mortgage Loans at such times and in such manner so that the proceeds of the sale, together with amounts
received by the Issuer in connection with the Interest Rate Swap (taking into account the settlement period under the Interest Rate Swap), are available to pay amounts due and owing on such Notes; it being understood that the Servicer shall have no
obligation to purchase the Mortgage Loans or make any payment on the Notes. The Rated Bidder shall make bids on Mortgage Loans as required pursuant to the Rated Bidder Letter. The Servicer may arrange for the sale of Mortgage Loans through a
Financing. The Servicer may not arrange for the sale of any Mortgage Loan for consideration other than cash consideration. 
 (ii) Except to
the extent that this Mortgage Loan Purchase and Servicing Agreement provides for a contrary specific course of action, the Servicer will be required to service and administer each Mortgage Loan without regard to (a) any other relationship that
the Servicer, any sub-servicer or any Affiliate of the Servicer or any sub-servicer may have with the Mortgagors or any Affiliate of such Mortgagors, (b) the ownership of any Notes by the Servicer or any Affiliate of the Servicer, (c) the
Servicer’s obligations to make any Monthly Servicer Advances or Servicing Advances or to incur servicing expenses with respect to each Mortgage Loan, (d) the Servicer’s or any sub-servicer’s right to receive compensation for its
services under this Mortgage Loan Purchase and Servicing Agreement or with respect to any particular transaction or (e) the ownership, servicing or management for others by the Servicer or any sub-servicer of any other nonprime mortgage loans
or property. 
 (b) The Servicer may enter into additional servicing or sub-servicing agreements with third parties with respect to any of
its obligations hereunder, provided that any such agreement shall be consistent with the provisions of this Mortgage Loan Purchase and Servicing Agreement and no sub-servicer (or its agent or subcontractors) shall grant any modification, waiver or
amendment to any Mortgage Loan without the approval of the Servicer. Notwithstanding any servicing or sub-servicing agreement, any of the provisions of this Mortgage Loan Purchase and Servicing Agreement relating to agreements or arrangements
between the Servicer and any Person acting as servicer or sub-servicer (or its agents or subcontractors) or any reference to action taken through any Person acting as servicer or sub-servicer or otherwise, the Servicer shall remain obligated and
primarily liable to the Issuer for the servicing and administering of the Mortgage Loans and arranging for the sale of each Mortgage Loan pursuant to the provisions of this Mortgage Loan Purchase and Servicing Agreement without diminution of such
obligation or liability by virtue of such servicing or sub-servicing agreements or arrangements or by virtue of indemnification from any Person acting as servicer or sub-servicer (or its agents or subcontractors) to the same extent and under the
same terms and conditions as if the Servicer alone were engaging in such activities. In the event that the Servicer is a sub-servicer, the Issuer shall be entitled to proceed directly against the Servicer as sub-servicer to enforce the
Servicer’s obligations to the Issuer. There are no sub-servicers hereunder as of the date of this Mortgage Loan Purchase and Servicing Agreement and, if a Servicer Event of Default has occurred and is continuing the Servicer will terminate any
sub-servicer within ninety (90) days after being directed to do so by the Required Senior Noteholders or the Required Subordinated Noteholders. Neither the Collateral Agent nor the Indenture Trustee shall have any duty to monitor the Servicer
or any subservicer and shall have no liability for the actions or inactions of the Servicer or any subservicer. 
  

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 (c) (i) The Servicer shall, in accordance with Customary Servicing Procedures, have the right to
approve requests of Mortgagors for consent to (A) partial releases of Mortgage Loans and (B) alterations, removal, demolition or division of Mortgaged Properties subject to Mortgage Loans. No such request shall be approved by the Servicer
unless: (x) the provisions of the related Mortgage Note have been complied with; (y) the LTV (which may, for this purpose, be determined by the Servicer at the time of any such action in accordance with its Customary Servicing Procedures)
after any release does not exceed the LTV set forth for such Mortgage Loan in the related Mortgage Loan Schedule; and (z) the lien priority, Monthly Payment, Mortgage Interest Rate or maturity date of the related Mortgage is not affected except
in accordance with subparagraph (ii) below; provided, however, that the foregoing requirements (x), (y) and (z) shall not apply to any such situation described in this paragraph if such situation results from any
condemnation or easement activity by a Government Authority. 
 (ii) Notwithstanding anything else contained herein, the
Servicer may not agree to a modification or extension of any Mortgage Loan unless both (i) such Mortgage Loan is in default or a default thereon is reasonably foreseeable and (ii) such modification or extension would not result in the
Servicer agreeing to modifications or extensions on Mortgage Loans with aggregate Closing Date Outstanding Principal Balances of more than 10.0% of the aggregate Closing Date Outstanding Principal Balances of all Mortgage Loans held by the Issuer.
In addition, the Servicer may not agree to more than (i) one modification or extension with respect to any individual Mortgage Loan in a calendar year or (ii) three modifications or extensions of an individual Mortgage Loan during the life
of such Mortgage Loan. 
 (iii) Without limiting the generality of the foregoing, the Servicer shall continue, and is hereby
authorized and empowered, to execute and deliver on behalf of itself and the Issuer all instruments of satisfaction or cancellation, or of partial or full release, discharge and all other comparable instruments, with respect to each Mortgage Loan
and with respect to the related Mortgaged Property. If reasonably required by the Servicer, the Issuer shall furnish the Servicer with any powers of attorney, in recordable form, and other documents necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties under this Mortgage Loan Purchase and Servicing Agreement. 
 Section 4.2
Sales. (a) Subject to the servicing standards described in Section 4.1 hereof, the Servicer shall have full power and authority, acting alone, to do or cause to be done any and all things in connection with such servicing and
administration that it may deem necessary and desirable in connection with arranging for the sale by the Issuer of Mortgage Loans to Mortgage Loan Buyers. The Servicer shall have no liability to the Issuer with respect to any sale, provided that the
Servicer arranges for such sale in good faith pursuant to the procedures utilized by the Servicer in connection with any sale of nonprime mortgage loans held for its own account. The proceeds of sale of any Mortgage Loans will be remitted to the
Collateral Agent and will be deposited into the Collateral Account maintained by the Collateral Agent on the day of receipt. 
  

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 (b) With respect to each sale of Mortgage Loans entered into by the Issuer, the Company (in its capacity
as Servicer and as Seller) shall: 
 (i) cooperate fully with the Issuer, any prospective Mortgage Loan Buyer, or any party to
any agreement executed in connection with the sale of such Mortgage Loans, with respect to all reasonable requests and due diligence procedures and use its best efforts to facilitate such sale; 
 (ii) either (A) restate, as of the closing date of such sale, the representations and warranties contained in Section 3.1
hereof and state that, except as otherwise disclosed in writing by the Servicer to the Mortgage Loan Buyer, each of the representations and warranties with respect to such Mortgage Loans contained in Section 3.2 hereof, are true as of
the closing date of such sale (and for this purpose, references to the knowledge of the Seller shall mean the knowledge of the Servicer) or (B) negotiate such representations and warranties as are reasonably acceptable to such Mortgage Loan
Buyer; 
 (iii) deliver to the Issuer for inclusion in any prospectus or other offering material such written information
regarding the Seller, its nonprime mortgage loan origination and servicing experience and its nonprime mortgage loan delinquency, foreclosure and loss experience, and, as to the Performance Guarantor, its financial condition, as shall be reasonably
requested by the Issuer and indemnify and hold harmless the Issuer against any and all liabilities, losses and expenses arising under the Securities Act in connection with any material misstatement contained in such written information or any
omission of a material fact the inclusion of which was necessary to make such written information not materially misleading; 
 (iv) deliver to the Issuer and to any Person designated by the Issuer, such statements and audit letters of reputable, certified public accountants pertaining to the written information provided by the Servicer pursuant to clause
(iii) above as shall be reasonably requested by the Issuer; 
 (v) deliver to the Issuer, and to any Person
designated by the Issuer, such opinions of counsel as are customarily delivered by originators/servicers in connection with sales; and 
 (vi) no later than 4:00 p.m. Eastern time on the Business Day preceding the date that such Mortgage Loans are scheduled to be sold (each, a “Sale Date”) deliver to the Issuer, the Collateral Agent and
the Swap Counterparties a written notice (each, a “Sale Notice”), which shall, at a minimum, set forth the proposed sale price or aggregate sale price for such Mortgage Loans (the “Sale Price”), a summary
description of the procedures used by the Servicer on behalf of the Issuer to determine such Sale Price, and the proposed buyer of such Mortgage Loans (including whether such proposed buyer is a Securitization Vehicle). 
 All Mortgage Loans not sold or transferred pursuant to a sale shall continue to be serviced pursuant to the terms of this Mortgage Loan Purchase and
Servicing Agreement. 
  

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 (c) [Reserved] 
 (d) Upon the sale of any Mortgage Loan, the rights and obligations of the Servicer hereunder with respect to such Mortgage Loan shall be terminated on the effective date of such sale. Upon written request from the
Issuer, the Servicer shall prepare, execute and deliver to the successor entity designated by the Issuer any and all documents and other instruments, place or cause to be placed in such successor’s possession the Mortgage Loan File, and do or
cause to be done all other acts or things necessary or appropriate to effect the purposes of such termination, including but not limited to the transfer and endorsement or assignment of the Mortgage Loan and related documents, at the Servicer’s
sole expense. The Servicer shall cooperate with such successor in effecting the termination of the Servicer’s responsibilities and rights hereunder, including without limitation, the transfer to such successor for administration by it of all
cash amounts which shall at the time be credited by the Servicer to any Collection Account or thereafter received with respect to the Mortgage Loan, subject to the Servicer’s right to withdraw any amounts it is entitled pursuant to this
Mortgage Loan Purchase and Servicing Agreement. 
 (e) If the Servicer arranges for the sale of Mortgage Loans by the Issuer pursuant to the
Mortgage Loan Purchase and Servicing Agreement and the Sale Price of any Mortgage Loan or Mortgage Loans is anticipated to be less than the Outstanding Purchase Price of such Mortgage Loan or Mortgage Loans, the Servicer shall give each Swap
Counterparty written notice of the anticipated Sale Price of such Mortgage Loan or Mortgage Loans in advance of such sale. Such written notice shall also include a summary description of the procedure used in the determination of the Sale Price. The
Designated Swap Counterparty shall have two (2) Business Days from the receipt of such written notice to dispute the Sale Price; provided, that the Designated Swap Counterparty shall not dispute the Sale Price of any single Mortgage Loan if the
sale of such Mortgage Loan was pursuant to a sale agreement for a pool of Mortgage Loans and the aggregate Sale Price for such pool is equal to or greater than 102% of the aggregate Outstanding Principal Balances for the Mortgage Loans in such pool;
provided, further, that the Servicer may request in writing that the Designated Swap Counterparty waive its right to dispute a sale of a Mortgage Loan or Mortgage Loans; such request shall be deemed to have been granted if (i) the Designated
Swap Counterparty shall not have responded by the close of business San Diego time on the date such request was received by the Designated Swap Counterparty so long as such request was received by 3:00 Eastern time on such date (otherwise such
request shall be deemed to have been received on the next following Business Day) and (ii) (A) the Seller, as swap counterparty under each of the Back-to-Back Swaps, shall have made or shall make all payments, if any, to be made under the
Back-to-Back Swaps related to the sale of such Mortgage Loan or Mortgage Loans prior to or concurrent with such sale and (B) such payments under the Back-to-Back Swaps shall not be subject to the limitations set forth in the provisos of the
first sentence of the Party B First Floating Rate Amount (as defined in the Back-to-Back Swaps) or any similar limitation in any replacement Back-to-Back Swap. If the Designated Swap Counterparty disputes the Sale Price, the Servicer and the
Designated Swap Counterparty shall use their best efforts to resolve such dispute within two (2) Business Days of receipt by the Servicer of notice of such dispute. If the Designated Swap Counterparty disputes the Sale Price of any Mortgage
Loan or Mortgage Loans and such dispute is not resolved, then the Designated Swap Counterparty, or its designee, shall be permitted to purchase such Mortgage Loan or Mortgage Loans (the “Purchase Option”) at a price at least equal
to 102% of the Sale 

  

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Price (the “Bid Price”) within three (3) Business Days of receipt by the Designated Swap Counterparty of the written notice of the Sale
Price. If the Designated Swap Counterparty waives its right to dispute a sale of a Mortgage Loan or Mortgage Loans, fails to dispute the Sale Price within two (2) Business Days after receipt of notice of the Sale Price, or fails (or such
designee fails) to pay the Bid Price for such Mortgage Loan or Mortgage Loans within three (3) Business Days after receipt of notice of the Sale Price, the Servicer shall be permitted to sell such Mortgage Loan or Mortgage Loans in accordance
with the Mortgage Loan Purchase and Servicing Agreement. 
 Section 4.3 Liquidation of Mortgage Loans. In the event that any
payment due under any Mortgage Loan is not paid when the payment becomes due and payable, by Monthly Servicer Advance or otherwise, or in the event that the Mortgagor fails to perform any other covenant or obligation under the Mortgage Loan and such
failure continues beyond any applicable grace period, the Servicer shall take such action as the Servicer would take under similar circumstances with respect to a similar nonprime mortgage loan held for its own account for investment, which action
shall be consistent with its Customary Servicing Procedures and in the best interest of the Issuer as owner and the Collateral Agent on behalf of the Secured Parties; provided, however, that any Defaulted Loan will be sold by the
Servicer on behalf of the Issuer as soon as practicable after becoming a Defaulted Loan. 
 Section 4.4 Collection of Mortgage Loan
Payments. The Servicer shall proceed diligently, pursuant to the Servicer’s Customary Servicing Procedures, to collect all payments called for under the terms and provisions of each Mortgage Loan and shall follow such collection procedures
as are consistent with this Mortgage Loan Purchase and Servicing Agreement (including without limitation, the servicing standards set forth in Section 4.1 hereof). For Mortgage Loans with escrow accounts, the Servicer shall ascertain and
estimate, in accordance with the Servicer’s Customary Servicing Procedures, all charges that will become due and payable with respect to each Mortgage Loan and the Mortgaged Property, to the end that the installments payable by the Mortgagors
will be sufficient to pay such charges as and when they become due and payable. The Servicer shall segregate and hold all payments received by it with respect to Mortgage Loans separate and apart from any of its funds and general assets and in trust
for the Secured Parties and shall apply such payments as provided in Section 4.5 hereof. The accounts established by the Servicer pursuant to this Article IV may include any number of sub-accounts for convenience in administering
the Mortgage Loans. 
 Section 4.5 Establishment of, and Deposits to, Collection Account. The Servicer shall establish a single,
segregated Eligible Account which shall be designated as the collection account (the “Collection Account”), which shall be held in trust in the name of the Collateral Agent for the benefit of the Secured Parties, into which the
Servicer shall from time to time deposit, within two (2) Business Days of the receipt thereof, and retain therein, the following collections received by the Servicer: (a) all payments on account of scheduled principal on the Mortgage Loans
(net of charges against such amounts allowed pursuant to Section 4.6(a) hereof), (b) all payments on account of interest on the Mortgage Loans (including all Monthly Servicer Advances) (net of charges against such amounts allowed
pursuant to Sections 4.6(a), 4.6(d) and 4.6(e) hereof), (c) any partial Principal Prepayments and any Prepayment Charges, (d) all Insurance Proceeds including amounts required to be deposited pursuant to Sections
4.11 and 4.12 hereof (other than proceeds to be held in the Escrow Account 

  

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and applied to the restoration or repair of the related Mortgaged Property or released to the Mortgagor in accordance with the Servicer’s Customary
Servicing Procedures as specified in Section 4.15 hereof), (e) all Condemnation Proceeds which are not applied to the restoration or repair of the Mortgaged Property or released to the Mortgagor pursuant to Section 4.15
hereof, (f) any amounts required to be deposited by the Servicer pursuant to Section 4.12 hereof in connection with the deductible clause in any blanket hazard insurance policy, (g) any amounts received with respect to or
related to any REO Property and all REO Disposition Proceeds hereof and (h) any other amounts received with respect to or related to the Mortgage Loans (other than Principal Prepayments in full, which shall be deposited into the Collateral
Account), including but not limited to interest paid on funds deposited in the Collection Account, to the extent permitted by applicable law; provided, however, that all servicing related fees and charges described in
Section 6.3(b) hereof may be retained by the Servicer as and when collected and amounts received by the Servicer for the account of Mortgagors for the application towards the payment of taxes, insurance premiums, assessments and similar
items to the extent payable by the related Mortgagor shall be deposited in the related escrow account. For so long as the Security Agreement shall be in effect, the Collection Account shall be maintained in the name of the Collateral Agent.

 Section 4.6 Permitted Withdrawals From Collection Account; Deposit into the Collateral Account. (a) In connection with
amounts deposited by the Servicer into the Collection Account by mistake or overpayment or as otherwise required to make adjustments to amounts deposited therein in accordance with ordinary and normal servicing adjustments, the Servicer shall be
entitled to retain from time to time from collections on the Mortgage Loans owned by the Issuer prior to the deposit of such collections in the Collection Account amounts equal to the amounts so deposited by mistake or overpayment or the adjustments
so required, provided that the amounts so retained are reflected in the Servicer Report delivered to the Collateral Agent for the Remittance Period in which such retention occurred. 
 (b) Pursuant to the terms of the Security Agreement, the Collateral Agent shall establish the Collateral Account, which shall be held in trust in the
name of the Collateral Agent for the benefit of the Secured Parties and over which the Collateral Agent shall have exclusive control and the sole right of withdrawal. The proceeds of any sales of Mortgage Loans by the Issuer to Mortgage Loan Buyers,
Principal Prepayments in full of any Mortgage Loan, the Repurchase Price of any Mortgage Loans repurchased by the Seller or the Servicer pursuant to Section 3.3, 6.2 or 7.1 hereof, and any other amounts payable in
connection with the Seller’s or Servicer’s repurchase of any Mortgage Loan and certain other amounts as more fully set forth in the Security Agreement, shall be deposited directly into the Collateral Account on the same day of receipt. Any
and all funds at any time on deposit in, or otherwise to the credit of, the Collateral Account shall be held in trust by the Collateral Agent for the benefit of the Secured Parties. 
 (c) Subject to Sections 4.6(f) and (g) hereof, the Servicer shall, on or after each Monthly Remittance Date but no later than the
Business Day immediately preceding the next following Payment Date withdraw, or if the Collateral Agent has exercised its rights pursuant to the terms of the Account Control Agreement, request in writing the Collateral Agent to withdraw,
(A) all amounts on deposit in the Collection Account relating to the specified Remittance Period on such Monthly Remittance Date, plus (B) to the extent not included in the 

  

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amounts referred to in clause (A) above, all Monthly Servicer Advances deposited into the Collection Account with respect to the related
Remittance Period (net of charges against or withdrawals from the Collection Account pursuant to this Section 4.6) and deposit such amounts into the Collateral Account for application pursuant to the terms of the Security Agreement.

 (d) The Servicer shall be entitled to reimbursement for Monthly Servicer Advances previously made pursuant to Section 5.1
hereof, either by (x) requesting, by delivery of a Servicer Advance Report, the Collateral Agent to withdraw funds from the Collection Account to reimburse the Servicer for such Monthly Servicer Advances, or (y) retaining from interest
payments on the related Mortgage Loans the amount of such Monthly Servicer Advances prior to the deposit of such interest payments into the Collection Account, provided, however, that such retention is reflected in a Servicer Advance
Report delivered to the Collateral Agent no later than the Monthly Remittance Date for the Remittance Period in which such retention occurred, the Servicer’s right to reimbursement pursuant to this Section 4.6(d) being limited to
amounts received on the related Mortgage Loan that represent late payments of interest respecting which any such Monthly Servicer Advance was made, it being understood that, in the case of any such reimbursement, the Servicer’s right thereto
shall be prior to the rights of the Issuer, except that, where the Servicer is required to repurchase a Mortgage Loan pursuant to Sections 6.2 and 7.1 hereof, the Servicer’s right to such reimbursement shall be subsequent to the
payment to the Issuer of the Repurchase Price pursuant to such Sections 6.2 and 7.1 and all other amounts required to be paid to the Issuer with respect to such Mortgage Loan. 
 (e) The Servicer shall, on or after each Monthly Remittance Date but no later than the Business Day immediately preceding the next following Payment
Date, by delivery of the Servicer Report to the Collateral Agent, withdraw, or if the Collateral Agent has exercised its rights pursuant to the terms of the Account Control Agreement, request the Collateral Agent to withdraw and remit to the
Servicer, on such date of delivery from the amounts in the Collection Account referred to in clauses (A) and (B) of Section 4.6(c) hereof, an amount equal to (i) the Servicing Fee for the related Remittance
Period and (ii) if and to the extent previously deposited into the Collection Account, any unpaid servicing related fees and charges to which the Servicer is entitled pursuant to Section 6.3(b) hereof. Notwithstanding the foregoing,
the Servicer shall be entitled to retain from the interest payments on the Mortgage Loans owned by the Issuer prior to deposit of such payments into the Collection Account, the Servicing Fee to which it is entitled relating to such Mortgage Loans,
provided that any such retention is reflected in the Servicer Report delivered to the Collateral Agent for the Remittance Period in which such retention occurred; provided, further, however, that if the aggregate amount
of any such retention exceeds the Servicing Fee for the Remittance Period in which such retention occurred, the Servicer shall deposit the amount of such excess into the Collateral Account on or after the related Monthly Remittance Date but no later
than the Business Day immediately preceding the related Payment Date. 
 (f) Subject to the provisions of Section 4.6(g) hereof,
the Servicer may, on any Business Day, withdraw, or if the Collateral Agent has exercised its rights pursuant to the terms of the Account Control Agreement, request in writing the Collateral Agent to withdraw, any or all principal payments or
collections (including partial Principal Prepayments) on deposit in the Collection Account and deposit such amounts into the Collateral Account; provided, however, that any interest payment accompanying a principal payment (including a
partial 

  

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Principal Prepayment) shall only be deposited into the Collateral Account in accordance with Section 4.6(c) hereof. 
 (g) The Servicer shall separately account for amounts deposited into the Collection Account with respect to Mortgage Loans that have been identified for
sale by the Issuer to a Mortgage Loan Buyer. Upon the establishment by the Issuer and a Mortgage Loan Buyer of a Cut-Off Date for the sale of Mortgage Loans by the Issuer to the Mortgage Loan Buyer, all amounts (including Monthly Servicer Advances)
in respect of such Mortgage Loans which are deposited into the Collection Account on and after the Cut-Off Date and prior to the closing date for such sale (i) shall be held in the Collection Account and (ii) shall not be deposited into
the Collateral Account pursuant to Section 4.6(c) or (f) hereof but shall remain in the Collection Account until the closing or abandonment of such sale. Upon the closing of such sale, the Servicer shall, on the closing date
for such sale, request in writing the Collateral Agent to withdraw funds from the Collection Account representing the amounts deposited into the Collection Account in respect of the Mortgage Loans sold to the Mortgage Loan Buyer during the period on
and after the related Cut-Off Date and prior to such closing date and remit such amounts to the account designated by the Mortgage Loan Buyer. If the sale to the Mortgage Loan Buyer is abandoned, then either (i) if any portion of the amounts in
the Collection Account relating to such sale were included in the calculation of a Sold Loan Interest Payment Amount for a prior Payment Date, the Servicer shall, on the date such sale is abandoned, request the Collateral Agent to withdraw the
amounts in the Collection Account that were so included and the Collateral Agent shall deposit such amounts into the Collateral Account for application pursuant to the provisions of the Security Agreement, or (ii) if or to the extent that the
provisions of clause (i) are not applicable, the amounts in the Collection Account related to such sale shall no longer be accounted for separately and shall be available for application pursuant to the provisions of this Mortgage Loan Purchase
and Servicing Agreement. 
 Section 4.7 Establishment of, and Deposits to, Escrow Account. The Servicer shall establish and
maintain an Escrow Account, in the form of time deposit or demand accounts, in a manner which shall provide maximum available insurance thereunder. Funds deposited in the Escrow Account may be invested by the Servicer which shall be entitled to any
investment income therefrom except as otherwise required by law. Funds deposited in any Escrow Account may be drawn on by the Servicer pursuant to Section 4.8 hereof. 
 The Servicer shall deposit in such Escrow Account within two (2) Business Days and retain therein all amounts representing Insurance Proceeds or
Condemnation Proceeds which are to be applied to the restoration or repair of any Mortgaged Property. 
 The Servicer shall make withdrawals
from any Escrow Account only to effect such payments as are required under this Mortgage Loan Purchase and Servicing Agreement, as set forth in Section 4.8 hereof. To the extent required by law, the Servicer shall pay interest on
escrowed funds to the Mortgagor notwithstanding that such Escrow Account may be non-interest bearing or that interest paid thereon is insufficient for such purposes. 
  

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 Section 4.8 Permitted Withdrawals From Escrow Account. Withdrawals from any Escrow Account
may be made by the Servicer only: 
 (1) For transfer to the Collection Account and application to reduce the principal
balance of a Mortgage Loan in accordance with the terms of the related Mortgage and Mortgage Note; 
 (2) For application to
restoration or repair of the Mortgaged Property pursuant to the procedures outlined in Section 4.15 hereof; and 
 (3) To pay to the Mortgagor, to the extent required by law, any interest paid on the funds deposited in the Escrow Account. 
 Section 4.9 Servicing Advances. The Servicer shall make Servicing Advances with respect to each Mortgage Loan, including advances of taxes or other charges which are or may become a lien on the related Mortgaged Property, and
advances of premiums for fire and hazard insurance coverage on the related Mortgaged Property, to the extent not paid by the related Mortgagor, unless the Servicer provides an Officer’s Certificate to the Issuer stating that such Servicing
Advance would not be recoverable in its reasonable judgment. 
 Section 4.10 Protection of Accounts. Amounts on deposit in the
Collection Account may at the option of the Servicer be invested in Eligible Investments; provided, however, that in the event that amounts on deposit in the Collection Account exceed the amount fully insured by the FDIC (the “Insured
Amount”) the Servicer shall be obligated to invest the excess amount over the Insured Amount in Eligible Investments on the next Business Day as such excess amount becomes present in the Collection Account. Monies held in the Collection
Account shall be invested in Eligible Investments having maturities of no greater than one day; provided, however, that if there are no Secured Liquidity Notes then outstanding, monies held in the Collection Account shall be invested
in Eligible Investments having maturities of no greater than thirty (30) days. So long as there are Eligible Investments having maturities of greater than one (1) day, the Issuer shall not issue Secured Liquidity Notes. All such Eligible
Investments shall be made in the name of, and shall be payable to, the Collateral Agent. 
 Section 4.11 Maintenance of Hazard
Insurance. The Servicer shall cause to be maintained for each Mortgage Loan hazard insurance such that all buildings upon the Mortgaged Property are insured by a generally acceptable insurer pursuant to the Servicer’s Customary Servicing
Procedures against loss by fire and hazards of extended coverage in an amount which is at least equal to, to the extent permitted by applicable law, the lesser of (i) 100% of the replacement cost of all improvements to the Mortgaged Property
and (ii) the greatest of (a) the unpaid principal balance of the Mortgage Loan plus, in the case of a Second Lien Mortgage Loan, the unpaid principal balance of the first lien mortgage on the related Mortgaged Property, (b) an amount
such that the proceeds thereof shall be sufficient to prevent the Mortgagor or the loss payee from becoming a co-insurer, and (c) the amount necessary to compensate fully for any damage or loss to the improvements that are a part of such
Mortgaged Property on a replacement-cost basis. 
 If upon origination or acquisition of the Mortgage Loan, the related Mortgaged Property
was located in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) the Servicer shall cause to be in effect a flood insurance policy
meeting the 

  

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requirements of the current guidelines of the Flood Insurance Administration with a generally acceptable insurance carrier pursuant to the Servicer’s
Customary Servicing Procedures in an amount representing coverage equal to the least of (i) the full insurable value of the Mortgaged Property (or the unpaid principal balance of the Mortgage Loan (and, in the case of a Second Lien Mortgage
Loan, the unpaid principal balance of the first lien mortgage on the related Mortgaged Property) if replacement cost coverage is not available for the type of building insured), (ii) the outstanding principal balance of the Mortgage Loan and
(iii) the maximum amount of insurance which is available under the Flood Disaster Protection Act of 1973, as amended. If at any time during the term of the Mortgage Loan, the Servicer determines in accordance with applicable law, that a
Mortgaged Property is located in a special flood hazard area and is not covered by flood insurance or is covered in an amount less than the amount required by the Flood Disaster Protection Act of 1973, as amended, the Servicer shall notify the
related Mortgagor that the Mortgagor must obtain such flood insurance coverage, and if said Mortgagor fails to obtain the required flood insurance coverage within forty-five (45) days after such notification, the Servicer shall immediately
place in force the required flood insurance on the Mortgagor’s behalf. 
 The Servicer shall not interfere with the Mortgagor’s
freedom of choice in selecting either his insurance carrier or agent; provided, however, that the Servicer shall not accept any such insurance policies from insurance companies unless such companies are generally acceptable companies
pursuant to the Servicer’s Customary Servicing Procedures and are licensed to do business in the jurisdiction in which the Mortgaged Property is located. The Servicer shall determine that such policies provide sufficient risk coverage and
amounts, that they insure the property owner, and that they properly describe the property address. The Servicer shall furnish to the Mortgagor a formal notice of expiration of any such insurance in sufficient time for the Mortgagor to arrange for
renewal coverage by the expiration date. 
 Pursuant to Section 4.5 hereof, any amounts collected by the Servicer under any such
policies (other than amounts to be deposited in any Escrow Account and applied to the restoration or repair of the related Mortgaged Property or to be released to the Mortgagor in accordance with the Servicer’s Customary Servicing Procedures as
specified in Section 4.15 hereof) shall be deposited in the Collection Account subject to withdrawal pursuant to Section 4.6 hereof. 
 Section 4.12 Maintenance of Mortgage Impairment Insurance. If the Servicer shall obtain and maintain a blanket policy insuring against losses arising from fire and hazards covered under extended coverage
on all of the Mortgage Loans, then, to the extent such policy provides coverage in an amount equal to the amount required pursuant to Section 4.11 hereof and otherwise complies with all other requirements of Section 4.11, it
shall conclusively be deemed to have satisfied its obligations as set forth in such Section 4.11. Any amounts collected by the Servicer under any such policy relating to a Mortgage Loan (other than amounts to be deposited in any Escrow
Account and applied to the restoration or repair of the related Mortgaged Property or to be released to the Mortgagor in accordance with the Servicer’s Customary Servicing Procedure as specified in Section 4.15 hereof) shall be
deposited in the Collection Account subject to withdrawal pursuant to Section 4.6 hereof. Such policy may contain a deductible clause, in which case, in the event that there shall not have been maintained on the related Mortgaged
Property a policy complying with Section 4.11 hereof, and there shall have been a 

  

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loss which would have been covered by such policy, the Servicer shall deposit in the Collection Account at the time of such loss the amount not otherwise
payable under the blanket policy because of such deductible clause, such amount to be deposited from the Servicer’s funds, without reimbursement therefor. Upon request of the Issuer or the Collateral Agent, the Servicer shall cause to be
delivered to the Issuer a certified true copy of any such policy if maintained. 
 Section 4.13 Maintenance of Fidelity Bond and
Errors and Omissions Insurance Policy. The Servicer shall maintain with responsible companies, at its own expense, a blanket fidelity bond, with broad coverage on all officers, employees or other persons acting in any capacity requiring such
persons to handle funds, money, documents or papers relating to the Mortgage Loans. Such fidelity bond shall be in the form of the Mortgage Banker’s Blanket Bond and shall protect and insure the Servicer against losses, including forgery,
theft, embezzlement, fraud, and negligent acts of such persons. The Servicer shall also maintain with responsible companies, at its own expense, an errors and omissions insurance policy, with broad coverage on all officers, employees or other
persons acting in any capacity requiring such persons to handle funds, money, documents or papers relating to the Mortgage Loans. No provision of this Section 4.13 requiring such fidelity bond or errors and omissions insurance policy
shall diminish or relieve the Servicer from its duties and obligations as set forth in this Mortgage Loan Purchase and Servicing Agreement. The minimum coverage under such fidelity bond or errors and omissions insurance policy shall be at least
equal to the corresponding amounts required by the Servicer’s Customary Servicing Procedures. Upon the request of the Issuer or the Collateral Agent, the Servicer shall cause to be delivered to the Issuer a certified true copy of such fidelity
bond and such errors and omissions insurance policy. 
 Section 4.14 Inspections. The Servicer shall inspect the Mortgaged
Property in accordance with its Customary Servicing Procedures. 
 Section 4.15 Restoration of Mortgaged Property. The Servicer
need not obtain the approval of the Issuer prior to releasing any Insurance Proceeds or Condemnation Proceeds to the Mortgagor to be applied to the restoration or repair of the Mortgaged Property if such release is in accordance with the
Servicer’s Customary Servicing Procedures. At a minimum, the Servicer shall comply with the following conditions in connection with any such release of Insurance Proceeds or Condemnation Proceeds: 
 (1) The Servicer shall receive satisfactory independent verification of completion of repairs and issuance of any required approvals with
respect thereto; 
 (2) The Servicer shall take all steps necessary to preserve the priority of the lien of the Mortgage,
including, but not limited to, requiring waivers with respect to mechanics’ and materialmen’s liens; 
 (3) The
Servicer shall verify that the Mortgage Loan is not in default; and 
 (4) Pending repairs or restoration, the Servicer shall
place the Insurance Proceeds or Condemnation Proceeds in the Escrow Account. 
 Section 4.16 [Reserved]. 
  

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 Section 4.17 Title, Management and Disposition of REO Property. In the event that title to
any Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale shall be taken in the name of the Servicer as agent for the Secured Parties, or in the event the Servicer is not authorized or
permitted to hold title to real property in the state where the REO Property is located, or would be adversely affected under the “doing business” or tax laws of such state by so holding title, the deed or certificate of sale shall
be taken in the name of such Person or Persons as shall be reasonably acceptable to the Issuer and the Secured Parties. The Person or Persons holding such title other than the Servicer shall acknowledge in writing that such title is being held as
nominee for the Servicer. 
 The Servicer shall manage, conserve, protect and operate each REO Property for the Issuer solely for the purpose
of its prompt disposition and sale. The Servicer, either itself or through an agent selected by the Servicer, shall manage, conserve, protect and operate the REO Property in the manner that it manages, conserves, protects and operates other
foreclosed property for its own account, and in the manner that similar property in the locality as the REO Property is managed. The Servicer shall attempt to sell the REO Property on such terms and conditions as the Servicer deems to be in the best
interest of the Issuer. The Servicer shall dispose of the REO Property in accordance with the Servicer’s Customary Servicing Procedures as soon as possible. 
 The Servicer shall also maintain on each REO Property fire and hazard insurance with extended coverage in an amount which is at least equal to the maximum insurable value of the improvements which are a part of such
property, liability insurance and, to the extent required and available under the Flood Disaster Protection Act of 1973, as amended, flood insurance. 
 The disposition of REO Property shall be carried out by the Servicer at such price and upon such terms and conditions as the Servicer deems to be in the best interest of the Issuer. All REO Disposition Proceeds shall
be promptly deposited in the Collection Account. 
 Section 4.18 Servicer Reports. The Servicer shall deliver a report to the
Issuer, the Administrator, the Collateral Agent, the Indenture Trustee, the Custodian, each Swap Counterparty and the Secured Liquidity Note Dealers on or before 3:00 p.m. (Eastern time) one Business Day prior to each Payment Date (the
“Servicer Report”), a form of which is attached hereto as Exhibit C. 
 Section 4.19 Real Estate Owned
Reports. The Servicer shall furnish to the Issuer on or before each Payment Date a statement with respect to any REO Property covering the operation of such REO Property and the Servicer’s efforts in connection with the sale of such REO
Property and any rental of such REO Property incidental to the sale thereof. That statement shall be accompanied by such other information as the Issuer shall reasonably request. 
 Section 4.20 Liquidation Reports. As promptly as practicable following the foreclosure sale of any Mortgaged Property or the acquisition
thereof by the Issuer pursuant to a deed in lieu of foreclosure, the Servicer shall submit to the Issuer a liquidation report with respect to such Mortgaged Property. 
  

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 Section 4.21 Reports of Foreclosures and Abandonments of Mortgaged Property. Following the
foreclosure sale or abandonment of any Mortgaged Property, the Servicer shall report such foreclosure or abandonment as required pursuant to Section 6050J of the Code. 
 Section 4.22 Servicer Advance Report. The Servicer shall deliver a report (a “Servicer Advance Report”) to the Collateral
Agent and each Swap Counterparty from time to time pursuant to Section 4.6(d) hereof, a form of which is attached hereto as Exhibit D. 
 Section 4.23 Monthly Disposition Report. The Servicer shall on each Payment Date deliver to the Issuer, the Indenture Trustee, each Swap Counterparty and the Collateral Agent a report with respect to sales
of Mortgage Loans made by the Issuer to Mortgage Loan Buyers in the preceding Remittance Period in substantially the form attached as Exhibit E hereto. None of the Collateral Agent, any Swap Counterparty, the Owner Trustee or the Indenture
Trustee shall have any duty to examine any such report. 
 Section 4.24 Notice of Deemed Representations. Promptly, but no later
than five (5) Business Days after obtaining actual knowledge of a Deemed Representation that has not previously been disclosed by the Servicer to the Issuer, the Sellers and each Swap Counterparty, the Servicer shall provide written notice to
the Issuer, the Seller, the Collateral Agent and each Swap Counterparty of such Deemed Representation. 
 ARTICLE V 
 SERVICER ADVANCES 
 Section 5.1
Monthly Servicer Advances. On or after each Monthly Remittance Date, but no later than the Business Day immediately preceding the next following Payment Date, the Servicer shall deposit into the Collection Account from its own funds an amount
equal to the positive difference (if any) of (a) the Monthly Interest and (b) all payments of interest due on the Mortgage Loans during the related Remittance Period that are on deposit in the Collection Account on such Monthly Remittance
Date (“Monthly Servicer Advances”). The Servicer’s obligation to make such Monthly Servicer Advances as to any Mortgage Loan will continue through the last Monthly Payment due prior to the payment in full of the Mortgage Loan
or through the Payment Date for the distribution of all proceeds of sale of the Mortgage Loan and other payments or recoveries (including Insurance Proceeds and Condemnation Proceeds) with respect to the Mortgage Loan, unless, to the extent that
such Monthly Servicer Advance relates to interest payments which were due on Mortgage Loans that are Defaulted Loans or Delinquent Loans, the Servicer provides an Officer’s Certificate to the Issuer stating that such Monthly Servicer Advance
would not be recoverable in its reasonable judgment. 
 ARTICLE VI 
 GENERAL SERVICING PROCEDURES 
 Section 6.1 Transfers of Mortgaged
Property. The Servicer shall enforce any “due-on-sale” provision in accordance with the Servicer’s Customary Servicing Procedures and 

  

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applicable law contained in any Mortgage or Mortgage Note and to deny assumption by the Person to whom the Mortgaged Property has been or is about to be sold
whether by absolute conveyance or by contract of sale, and whether or not the Mortgagor remains liable on the Mortgage and the Mortgage Note. When the Mortgaged Property has been conveyed by the Mortgagor, the Servicer shall, to the extent it has
knowledge of such conveyance, exercise its rights to accelerate the maturity of such Mortgage Loan under the “due-on-sale” clause applicable thereto; provided, however, that the Servicer shall not exercise such rights
if prohibited by law from doing so. 
 If the Servicer reasonably believes it is unable under applicable law to enforce such
“due-on-sale” clause, the Servicer shall enter into (i) an assumption and modification agreement with the Person to whom the Mortgaged Property has been conveyed, pursuant to which such Person becomes liable under the Mortgage Note
and the original Mortgagor remains liable thereon or (ii) in the event that the Servicer is unable under applicable law to require that the original Mortgagor remain liable under the Mortgage Note, a substitution of liability agreement with the
purchaser of the Mortgaged Property pursuant to which the original Mortgagor is released from liability and the purchaser of the Mortgaged Property is substituted as Mortgagor and becomes liable under the Mortgage Note. 
 Section 6.2 Satisfaction of Mortgages and Release of Mortgage Loan Files. Upon the payment in full of each Mortgage Loan, or the receipt by
the Servicer of a notification that payment in full will be escrowed in a manner customary for such purposes, the Servicer shall notify the Issuer and the Collateral Agent in writing. 
 If the Servicer satisfies or releases a Mortgage without first having obtained payment in full of the indebtedness secured by the Mortgage or should the
Servicer otherwise prejudice any rights the Issuer may have under the mortgage instruments which materially and adversely affects the value of the related Mortgage Loan, upon written demand of the Issuer, the Servicer shall purchase the related
Mortgage Loan at the Repurchase Price by deposit thereof in the Collateral Account within two (2) Business Days of receipt of such demand by the Issuer. 
 Upon receipt of the Repurchase Price by the Collateral Agent, the Issuer and the Servicer shall arrange for the reassignment of the Mortgage Loans to the Servicer and the delivery to the Servicer of any documents held
by the Custodian relating to the reassigned Mortgage Loans. The Servicer shall, simultaneously with such assignment, give written notice to the Seller, the Collateral Agent, the Indenture Trustee and each Swap Counterparty that such purchase has
taken place, which notice shall contain the Repurchase Price. 
 Section 6.3 Servicing Compensation. As compensation for its
services hereunder, the Servicer shall be entitled to (a) the Servicing Fee and (b) any late payment charges, release fees, bad check charges, assumption fees and any other servicing-related fees (other than Prepayment Charges) collected
from Mortgagors with respect to the Mortgage Loans. The Servicer shall be required to pay all expenses incurred by it in connection with its servicing activities hereunder and shall not be entitled to reimbursement therefor except as specifically
provided herein. 
  

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 Section 6.4 Annual Statement as to Compliance. The Servicer shall deliver to the Issuer, the
Administrator, the Collateral Agent, the Indenture Trustee, the Secured Liquidity Note Dealers and each Swap Counterparty, on or before March 15 of each year beginning 2005, an Officer’s Certificate, stating that (i) a review of the
activities of the Servicer during the preceding calendar year and of performance under this Mortgage Loan Purchase and Servicing Agreement has been made under such officer’s supervision, and (ii) to the best of such officer’s
knowledge, based on such review, the Servicer has fulfilled its obligations in all material respects under this Mortgage Loan Purchase and Servicing Agreement throughout such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature and status thereof and the action being taken by the Servicer to cure such default. 
 Section 6.5 Annual Independent Public Accountants’ Servicing Report. On or before March 15 of each year beginning 2005, the Servicer, at its expense, shall cause a firm of independent public
accountants which is a member of the American Institute of Certified Public Accountants (which firm may also render services to the Servicer) to furnish a report to the Issuer, the Administrator, the Collateral Agent, the Indenture Trustee, the
Secured Liquidity Note Dealers and each Swap Counterparty stating that such firm has examined the Servicer’s overall servicing operations in accordance with the minimum standards identified in the Mortgage Bankers Association of America’s
Uniform Single Attestation Program for Mortgage Bankers (USAP), or the Audit Guide for Audits of HUD Approved Nonsupervised Mortgagees (to the extent that the procedures in such audit guide are applicable to the servicing obligations set forth
herein), and stating such firm’s conclusions relating thereto. Neither the Collateral Agent nor the Indenture Trustee shall have any duty to examine such report. 
 Section 6.6 Right to Examine Servicer Records. The Issuer, the Administrator, each Swap Counterparty, the Collateral Agent (acting on its own behalf or at the written direction of the Required Senior
Noteholders) and the Indenture Trustee (acting on its own behalf or at the written direction of the Required Subordinated Noteholders) or any of their agents, attorneys or representatives upon at least three (3) Business Days’ prior
notice, shall each have the right to reasonable access to (i) examine and make copies of and abstracts from the books, records, or other information of the Servicer, whether held by the Servicer, any subservicer or by any other Person on its
behalf and (ii) the officers or employees of Servicer at the Servicer’s offices in order to discuss matters, in each case, with respect to or concerning this Mortgage Loan Purchase and Servicing Agreement or the Mortgage Loans owned by the
Issuer, during regular business hours or at such other times as may be reasonable under applicable circumstances. 
 ARTICLE VII

 PURCHASE OBLIGATION 
 Section 7.1 Servicer’s Purchase Obligations. Upon the earlier of either knowledge of the Servicer or receipt by the Servicer of notice from the Issuer or any Swap Counterparty of a breach of any representation, warranty or
covenant made by the Company, in its capacity as Servicer, as set forth in Section 3.1 hereof, which materially and adversely affects the value of a Mortgage Loan, the Servicer shall, at the direction of the Issuer, use its best efforts

  

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to cure and correct any such breach, and, in the event such breach is not cured and corrected within sixty (60) days, the Servicer shall purchase the
Mortgage Loan at the Repurchase Price pursuant to Section 3.3 hereof. 
 Upon deposit by the Servicer of the Repurchase Price in
the Collateral Account, the Issuer, the Custodian and the Servicer shall arrange for the assignment of Mortgage Loans adversely affected by such breach to the Servicer according to the Servicer’s written instructions, which written notice shall
state the Repurchase Price, and the delivery to the Servicer of any documents held by the Issuer or the Custodian relating to such Mortgage Loans. The Servicer shall, simultaneously with such assignment, give written notice to the Seller, the
Collateral Agent, the Indenture Trustee and each Swap Counterparty that such purchase has taken place. 
 In addition to such purchase
obligation, the Servicer shall indemnify the Issuer, the Swap Counterparties, the Back-to-Back Swap Counterparties, the Collateral Agent, the Indenture Trustee, the Owner Trustee, each Secured Liquidity Note Dealer, each Initial Purchaser of
Subordinated Notes and each Initial Purchaser of Term Notes and hold it harmless against any losses, damages, transfer taxes, penalties, fines, forfeitures, reasonable and necessary legal fees and related costs, judgments, and other reasonable costs
and expenses resulting from any claim, demand, defense or assertion based on or grounded upon, or resulting from, a breach of any representation, warranty or covenant of the Servicer contained in this Mortgage Loan Purchase and Servicing Agreement.
The Servicer shall not be obligated under this indemnity for any indirect or consequential damages. It is understood and agreed that the obligations of the Servicer set forth in this Section 7.1 to cure or repurchase a Mortgage Loan and
to indemnify the Issuer, the Swap Counterparties, the Back-to-Back Swap Counterparties, the Collateral Agent, the Indenture Trustee, the Owner Trustee, each Secured Liquidity Note Dealer, each Initial Purchaser of Subordinated Notes and each Initial
Purchaser of Term Notes constitute the sole remedies of the Issuer, the Swap Counterparties, the Back-to-Back Swap Counterparties, the Collateral Agent, the Indenture Trustee, the Owner Trustee, each Secured Liquidity Note Dealer, each Initial
Purchaser of Subordinated Notes and each Initial Purchaser of Term Notes respecting a breach of such representations, warranties and covenants. 
 ARTICLE VIII 
 SERVICER TO COOPERATE 
 Section 8.1 Provision of Information. During the term of this Mortgage Loan Purchase and Servicing Agreement, the Servicer shall furnish to the Issuer, the Administrator, the Indenture Trustee (acting on
behalf of the Subordinated Noteholders), each Swap Counterparty and the Collateral Agent (acting on behalf of the Senior Noteholders) such periodic, special, or other reports or information as they may reasonably request from time to time in order
to effectuate the purposes and to carry out the terms of this Mortgage Loan Purchase and Servicing Agreement. All such reports, documents or information shall be provided by and in accordance with all reasonable instructions and directions which the
Issuer, the Administrator, the Indenture Trustee, any Swap Counterparty and the Collateral Agent may give. 
  

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 The Servicer shall execute and deliver all such instruments and take all such action as the Issuer, the
Indenture Trustee (acting on its own behalf or on behalf of the Subordinated Noteholders), any Swap Counterparty, the Collateral Agent (acting on its own behalf or on behalf of the Senior Noteholders), the Custodian, the Secured Liquidity Note
Dealers, the Initial Purchasers of the Subordinated Notes and the Initial Purchasers of the Term Notes may reasonably request from time to time, in order to effectuate the purposes and to carry out the terms of this Mortgage Loan Purchase and
Servicing Agreement. 
 ARTICLE IX 
 THE SERVICER 
 Section 9.1 Indemnification of Third-Party Claims. The Servicer agrees to indemnify and hold
harmless the Issuer, the Administrator, the Collateral Agent, the Indenture Trustee, the Owner Trustee, the Custodian, the Swap Counterparties, the Back-to-Back Swap Counterparties, the Secured Liquidity Note Dealers, the Initial Purchasers of the
Subordinated Notes and the Initial Purchasers of the Term Notes and their respective officers, directors, employees and agents (collectively, the “Indemnified Parties”) against any and all third party claims, losses, penalties,
fines, forfeitures, reasonable legal fees and related costs, judgments, and any other costs, fees and expenses that the Indemnified Parties sustain in any way related to the failure of the Servicer to perform its duties and service the Mortgage
Loans in strict compliance with the terms of this Mortgage Loan Purchase and Servicing Agreement or because of a breach of any representation, warranty or covenant made by the Servicer. The Servicer shall immediately notify the Indemnified Parties
if a claim is made by a third party with respect to a matter as to which the Servicer has agreed to indemnify and hold harmless such parties under this Section 9.1, and, so long as no potential conflict of interest exists between the
Servicer and such Indemnified Party, the Servicer shall assume the defense of any such claim and pay all expenses in connection therewith, including counsel fees, and promptly pay, discharge and satisfy any final judgment or decree which may be
entered against the Servicer or any Indemnified Parties in respect of such claim. The Servicer’s indemnification obligation pursuant to this Section 9.1 shall survive the termination of this Mortgage Loan Purchase and Servicing
Agreement. 
 Section 9.2 Existence of the Servicer. The Servicer shall keep in full effect its existence, rights and franchises
as a corporation, and shall obtain and preserve its qualification to do business as a foreign corporation in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Mortgage Loan
Purchase and Servicing Agreement or any of the Mortgage Loans and to perform its duties under this Mortgage Loan Purchase and Servicing Agreement. 
 Section 9.3 Limitation on Liability of Servicer and Others. Neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be under any liability to the Issuer for any action taken or for
refraining from the taking of any action in good faith pursuant to this Mortgage Loan Purchase and Servicing Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Servicer or any such person
against any breach of warranties or representations made herein, or failure to perform its obligations in compliance with any standard of care set forth in this Mortgage Loan Purchase and 

  

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Servicing Agreement, or any liability which would otherwise be imposed by reason of any breach of the terms and conditions of this Mortgage Loan Purchase and
Servicing Agreement. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on any document which it in good faith reasonably believes to be genuine and to have been adopted or signed by the proper
authorities respecting any matters arising hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties to service the Mortgage Loans in accordance with this
Mortgage Loan Purchase and Servicing Agreement and which in its opinion may involve it in any expense or liability; provided, however, that the Servicer may, with the consent of the Issuer, undertake any such action which it may deem
necessary or desirable with respect to this Mortgage Loan Purchase and Servicing Agreement and the rights and duties of the parties hereto. In such event, the Servicer shall be entitled to reimbursement from the Issuer of the reasonable legal
expenses and costs of such action. 
 Section 9.4 Limitation on Resignation of Servicer. The Issuer has entered into this
Mortgage Loan Purchase and Servicing Agreement with the Servicer in reliance upon the representations as to the adequacy of its servicing facilities, plant, personnel, records and procedures, its integrity, reputation and financial standing, and the
continuance thereof. The Servicer shall not resign from the obligations and duties hereby imposed on it as to each Mortgage Loan except by consent of each Swap Counterparty, the Collateral Agent (acting upon the written direction of the Required
Senior Noteholders) or, if no Senior Notes are outstanding, the Indenture Trustee (acting upon the written direction of the Required Subordinated Noteholders) or upon the determination that its duties hereunder are no longer permissible under
applicable law and such incapacity cannot reasonably be cured by the Servicer. Notice of any such determination permitting the resignation of the Servicer shall be delivered to each Rating Agency and any such determination shall be evidenced by an
Opinion of Counsel to such effect delivered to the Issuer which Opinion of Counsel shall be in form and substance acceptable to the Issuer. No such resignation shall become effective until a successor shall have assumed the Servicer’s
responsibilities and obligations hereunder in the manner provided in Section 12.1 hereof, subject to Rating Agency Confirmation. 
 Section 9.5 Limitation on Assignment of Rights and Obligations. The Servicer shall not assign, sell or otherwise transfer its rights, obligations, duties and agreements hereunder (a) except as permitted by
Section 4.1(b), Section 9.4 or Section 10.1 hereof, or (b) unless consented to in writing by each Swap Counterparty, the Collateral Agent (acting upon the written direction of the Required Senior Noteholders
or if no Senior Notes are outstanding, the Indenture Trustee (acting upon the written direction of the Required Subordinated Noteholders) or (c) unless, in the case of a sale or other disposition by the Servicer of all or substantially all of
its servicing business, whether by merger, consolidation, sale of assets or otherwise, the Issuer shall have received Rating Agency Confirmation; provided that nothing herein shall prohibit the Servicer from assigning or otherwise
transferring its right to receive any payments (including the Servicing Fee) hereunder. 
  

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 ARTICLE X 
 DEFAULT 
 Section 10.1 Servicer Events of Default. Each of the following shall constitute
a “Servicer Event of Default” on the part of the Servicer: 
 (a) Any failure by the Servicer to observe or perform in any
material respect any of the terms, covenants or agreements on the part of the Servicer set forth in this Mortgage Loan Purchase and Servicing Agreement, any Transfer Supplement or the Custodial Agreement (other than those set forth in clause
(i) below) which continues unremedied for a period of forty-five (45) days after the date on which the Servicer has actual knowledge or written notice of such failure; 
 (b) Any representation, warranty, statement or certification made by the Servicer shall prove to have been incorrect in any material respect as of the
time when made, and which continues to be incorrect in any material respect for forty-five (45) days after the date on which the Servicer has actual knowledge or written notice of such incorrect representation, warranty, statement or
certification; 
 (c) Any failure by the Servicer to maintain any required licenses to do business in any jurisdiction where the Mortgaged
Property is located, which failure has a material adverse effect on the ability of the Servicer to perform its functions under this Mortgage Loan Purchase and Servicing Agreement or materially impairs the value of the Mortgage Loans, and which
continues to be unremedied for a period of forty-five (45) days after the date on which the Servicer has actual knowledge or written notice of such failure; 
 (d) Application for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, including bankruptcy, marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the Servicer and, if such proceeding is being contested by the Servicer in good faith, such decree or order shall have remained in force undischarged or unstayed for a period
of forty-five (45) days; 
 (e) The Servicer shall admit in writing its inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency, bankruptcy or reorganization statute, make an assignment for the benefit of its creditors, voluntarily suspend payment of its obligations or cease its normal business operations for six
(6) Business Days; 
 (f) The Company or Performance Guarantor or any Affiliate thereof enters into a consent agreement or otherwise
agrees in writing with any federal or state regulatory agency or authority to restrict its activities, if the default of such agreement by the Company or Performance Guarantor or any Affiliate thereof entitles such applicable federal or state agency
to place the Company or Performance Guarantor in receivership or conservatorship; 
 (g) The Company or Performance Guarantor shall fail to
pay (after expiration of any applicable grace period) (i) any of its debt obligations in excess of the lesser of (x) $5,000,000 and (y) 2% of shareholder’s equity of the Performance Guarantor in the aggregate or 

  

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(ii) any of its payment obligations under any interest rate swap or similar hedging transaction with a notional amount in excess of the lesser of
(x) $5,000,000 and (y) 2% of shareholder’s equity of the Performance Guarantor in the aggregate; 
 (h) The Company or the
Performance Guarantor shall fail to observe or perform any of its obligations under any Back-to-Back Swap Agreement; or 
 (i) The failure on
the part of the Servicer to make (x) any Monthly Servicer Advance required by it under this Mortgage Loan Purchase and Servicing Agreement on or before the date such advance is required to be made or (y) any other payment or deposit in
excess of $1,000 required by it under this Mortgage Loan Purchase and Servicing Agreement and such failure continues unremedied until 3:00 p.m. Eastern time on the fifth Business Day immediately following the date such advance, payment or deposit is
required to be made. 
 At any time during the continuance of an event described in clauses (a) through (i) above,
the Issuer may, and shall at the written request of the Required Subordinated Noteholders, with the consent of the Required Senior Noteholders, and shall at the written request of the Swap Counterparties, terminate all of the rights and obligations
of the Servicer under this Mortgage Loan Purchase and Servicing Agreement and in and to the Mortgage Loans and the proceeds thereof other than the right to receive unpaid Servicing Fees and reimbursement of Servicing Advances and Monthly Servicer
Advances. Notice of such termination shall be given to the Collateral Agent, the Indenture Trustee, the Custodian, the Administrator, each Swap Counterparty and the Rating Agencies. Upon receipt by the Servicer of such written notice, all authority
and power of the Servicer under this Mortgage Loan Purchase and Servicing Agreement, whether with respect to the Mortgage Loans or otherwise, shall pass to and be vested in the successor appointed pursuant to Section 12.1 hereof. Upon
written request from the Issuer, the Servicer shall prepare, execute and deliver to the successor entity designated by the Issuer any and all documents and other instruments, place in such successor’s possession all Servicing Files, and do or
cause to be done all other acts or things necessary or appropriate to effect the purposes of such notice of termination, including but not limited to the transfer and endorsement or assignment of the Mortgage Loans and related documents, at the
Servicer’s sole expense. The Servicer shall cooperate with such successor in effecting the termination of the Servicer’s responsibilities and rights hereunder, including without limitation, the transfer to such successor for administration
by it of all cash amounts which shall at the time be credited by the Servicer to any Collection Account thereafter received with respect to the Mortgage Loans. 
 Section 10.2 Waiver of Defaults. With the consent of the Required Noteholders and each Swap Counterparty, the Issuer, by written notice to the Collateral Agent, may waive any default by the Servicer in the
performance of its obligations hereunder and its consequences. Upon any waiver of a past default, such default shall cease to exist, and any event of default arising therefrom shall be deemed to have been remedied for every purpose of this Mortgage
Loan Purchase and Servicing Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. Notice of any such waiver shall be given to each Rating Agency.

  

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 ARTICLE XI 
 TERMINATION 
 Section 11.1 Termination of Agreement. This Mortgage Loan Purchase and
Servicing Agreement shall terminate upon (x) the final payment, other liquidation (or any advance with respect thereto) or sale of the last Mortgage Loan held by the Issuer hereunder and (y) the payment in full of the Notes. 
 Section 11.2 Termination of Purchase Obligations. Each of the following shall constitute a termination event under this Mortgage Loan
Purchase and Servicing Agreement (each, a “Termination Event”): 
 (a) Any representation, warranty, statement, or
certification made by Performance Guarantor or the Company (excluding any representations or warranties made pursuant to Section 3.2 hereof) in any Program Document shall prove to have been incorrect in any material respect as of the
time when made, and which continues to be incorrect in any material respect for a period of forty-five (45) days after the date on which the Seller has actual knowledge or written notice of such incorrect representation, warranty, statement or
certification; 
 (b) (i) The failure on the part of the Seller to perform its obligations under Section 3.5(c) to
repurchase any Mortgage Loan with a defective Mortgage Loan File, or (ii) the failure on the part of the Seller or the Performance Guarantor to observe or perform in any material respect any of the other material terms, covenants or agreements
of the Seller or the Performance Guarantor contained in the Program Documents which continues unremedied for a period of forty-five (45) days after the date on which the Seller or the Performance Guarantor has actual knowledge or written notice
of such failure; 
 (c) Any Servicer Event of Default has occurred and is continuing after giving effect to any applicable grace period;

 (d) Application for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, including
bankruptcy, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Issuer, the Seller or Performance Guarantor and such decree or order shall have
remained in force undischarged or unstayed for a period of forty-five (45) days; 
 (e) The Issuer, Seller or Performance Guarantor
shall consent to the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Issuer, Seller or Performance Guarantor or of or
relating to all or substantially all of its property; 
 (f) The Issuer, Seller or Performance Guarantor shall admit in writing its inability
to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency, bankruptcy or reorganization statute, make an assignment for the benefit of its creditors, voluntarily suspend payment of its obligations
or cease its normal business operations for six (6) Business Days; 
  

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 (g) Non-compliance with the Portfolio Criteria or Wet Funded Loan Limitation, and such non-compliance
shall continue for a period of thirty (30) days; 
 (h) Non-compliance with the Portfolio Aging Limitations, and such non-compliance
shall continue for a period of fifteen (15) days; 
 (i) The Interest Rate Swaps shall cease, for any reason, to be in full force and
effect in accordance with their terms; 
 (j) (i) A Security Agreement Event of Default shall have been declared by the Required Senior
Noteholders (or, if the Senior Notes have been paid in full, the Required Subordinated Noteholders) and shall be continuing or an automatic Security Agreement Event of Default shall have occurred and be continuing or (ii) an Indenture Event of
Default shall have been declared by the Required Subordinated Noteholders and shall be continuing or an automatic Indenture Event of Default shall have occurred and be continuing; 
 (k) (i) Funds on deposit in the Reserve Fund shall be less than the Required Reserve Fund Amount (x) for sixty (60) consecutive days or
more if the deficiency is less than 0.25% of the Aggregate Outstanding Principal Balance, or (y) for two (2) consecutive Business Days if the deficiency is equal to or greater than 0.25% of the Aggregate Outstanding Principal Balance or
(ii) the Market Value Reserve Account shall be below the Market Value Requirement for two (2) Business Days or more; 
 (l) On the
last day of any calendar month, (i) the ratio of the Outstanding Principal Balance of all Delinquent Loans owned by the Issuer to the Aggregate Outstanding Principal Balance as of the last day of the calendar month, shall equal more than seven
percent (7%), or (ii) the ratio of the Outstanding Principal Balance of all Three Payment Delinquent Loans owned by the Issuer to the Aggregate Outstanding Principal Balance shall equal more than two percent (2%); 
 (m) The failure of the Issuer to maintain an agreement (in substantially the form attached hereto as Exhibit B) with a Rated Bidder to the effect
that such Rated Bidder agrees to submit a binding bid for all non-Delinquent Loans and non-Defaulted Loans in a Termination Event Auction and, in the case of a withdrawal or reduction of the rating assigned to the Rated Bidder below “P-1”
by Moody’s, such failure continues for a period of thirty (30) days or more and an acceptable Rated Bidder has not been appointed; 
 (n) One (1) or more Swap Counterparties fail to agree to any extension of any Interest Rate Swap, and a replacement Swap Counterparty or Swap Counterparties shall not have been obtained at least one (1) year prior to the scheduled
termination date in a maximum notional amount at least equal to the lesser of (x) the maximum notional amount of the Interest Rate Swap or Interest Rate Swaps represented by the non-extending Swap Counterparty or Swap Counterparties or
(y) if the Program Size has been modified, an amount equal to (i) the then-current Program Size less (ii) the maximum notional amount of all effective (as of such scheduled termination date) Interest Rate Swaps; 
 (o) An Interest Rate Swap Termination Event or an Interest Rate Swap Event of Default has occurred, unless the maximum notional amount of the Interest
Rate Swaps that are 

  

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not subject to an Interest Rate Swap Termination Event or an Interest Rate Swap Event of Default are equal to or greater than the then-current Program Size;

 (p) On any day following the third Payment Date under the Program Documents, the average of the Excess Spread Rate for the Remittance
Periods relating to each of the three most recent Payment Dates is less than three percent (3%);  
 (q) Failure to pay the
outstanding principal amount of any Series of Subordinated Notes on the Scheduled Payment Date for such Subordinated Notes; 
 (r) Failure of
the Servicer to make any Monthly Servicer Advance required by it under this Mortgage Loan Purchase and Servicing Agreement on or before the date such advance is required to be made; or 
 (s) The Outstanding Purchase Price of Mortgage Loans that have been owned by the Issuer for more than one year is equal to or greater than $1,000,000 for
fifteen (15) consecutive days; 
 provided, however, that at any time during the continuance of an event described in clauses
(a) through (c), the Issuer may, and shall (i) at the written request of the Required Subordinated Noteholders, with the consent of the Required Senior Noteholders (or, if the Senior Notes have been paid in full, such consent
will not be required), (ii) at the written request of the Collateral Agent acting pursuant to Section 4.11 of the Security Agreement, or (iii) in the case of a Servicer Event of Default as set forth in
Section 10.1(g) or (h) hereof, at the written request of any Swap Counterparty, notify the Seller that the commitment of the Issuer to purchase Mortgage Loans from the Seller shall terminate. Upon the occurrence of a
Termination Event described in clauses (d) through (s) (each, an “Automatic Termination Event”), the Issuer’s commitment to purchase Mortgage Loans from the Seller shall terminate automatically and an
Automatic Termination Event will be deemed to have occurred. Upon the declaration of a Termination Event by the Issuer or the occurrence of an Automatic Termination Event, the Issuer will no longer be permitted to purchase additional Mortgage Loans
and principal collections on Mortgage Loans, proceeds of sales of Mortgage Loans and amounts received from any Swap Counterparty will be retained under the Security Agreement and used to pay the outstanding obligations of the Issuer pursuant to the
terms thereof. If a Termination Event described in clauses (h) or (k) through (s) above occurs, a Security Agreement Event of Default described in clause (e) or (m) through
(r) of Section 7.01 of the Security Agreement occurs or an Indenture Event of Default described in clause (e) or (m) through (r) of Schedule I of the Indenture occurs, the Servicer
shall use its best efforts to sell all non-Delinquent Loans and non-Defaulted Loans within 90 days of the date on which such Termination Event, Security Agreement Event of Default or Indenture Event of Default occurred. In the event that all
non-Delinquent Loans and non-Defaulted Loans have not been so sold by such 90th day, the Collateral Agent shall hold
an auction (a “Termination Event Auction”) of the remaining non-Delinquent Loans and non-Defaulted Loans for settlement not later than the 118th day following the date on which such Termination Event, Security Agreement Event of Default or Indenture Event of Default occurred. The Servicer shall notify potential bidders of the Termination Event
Auction, including one bidder obligated to make a bid in any such auction; provided, however, that such bidder shall have a “P-1” rating from Moody’s (the “Rated Bidder”). During the Termination 

  

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Event Auction, the Servicer shall promptly notify the Designated Swap Counterparty of the highest bid price obtained in the Termination Event Auction for
each such non-Delinquent Loan and non-Defaulted Loan and the Designated Swap Counterparty shall have up to two (2) Business Days from the time of notification (but in no event beyond the 118th day referred to above) to elect to purchase such non-Delinquent Loans or non-Defaulted Loans at a price equal to 102% of such highest bid price but in no
event more than the amount of the Outstanding Purchase Price of such non-Delinquent Loans or non-Defaulted Loans (plus accrued interest thereon) (the “Purchase Price”). If the Designated Swap Counterparty elects to purchase such
non-Delinquent Loans or non-Defaulted Loans within such two (2) Business Day time period, the Designated Swap Counterparty shall pay the Purchase Price for such non-Delinquent Loans or non-Defaulted Loans within two (2) Business Days of
the date of such election (but in no event beyond the 118th day referred to above). If the Designated Swap
Counterparty fails to pay such Purchase Price or fails to affirmatively elect to purchase such non-Delinquent Loans or non-Defaulted Loans, in either case, within the applicable time period referred to above, the Servicer shall have the right to
sell such non-Delinquent Loans or non-Defaulted Loans to the highest bidder. 
 Section 11.3 Termination of Servicing With Respect to
Any Mortgage Loan. The servicing of any Mortgage Loan in accordance with the terms of this Mortgage Loan Purchase and Servicing Agreement shall terminate upon the occurrence of the following: (i) the receipt into the Collateral Account of
the proceeds of sale of such Mortgage Loan or the Repurchase Price of such Mortgage Loan or the receipt into the Collateral Account of the Principal Prepayment in full of such Mortgage Loan or (ii) the effectiveness of the termination of the
Servicer pursuant to Section 12.1 hereof. No termination of the Servicer pursuant to Section 12.1 hereof shall become effective until a successor shall have assumed the Servicer’s responsibilities and obligations
hereunder in the manner provided in Section 12.1. 
 Upon written request from the Issuer, the Servicer shall deliver all
Servicing Files and other documents relating to the Mortgage Loans held by it hereunder to the successor servicer, prepare, execute and deliver to the successor servicer designated by the Issuer any and all documents and other instruments, and do or
cause to be done all other acts or things necessary or appropriate to effect the purposes of such notice of termination, including but not limited to the transfer and endorsement or assignment of the Mortgage Loans and related documents, at the
Servicer’s sole expense. The Servicer shall cooperate with such successor in effecting the termination of the Servicer’s responsibilities and rights hereunder, including without limitation, the transfer to such successor for administration
by it of all cash amounts which shall at the time be credited by the Servicer to any Collection Account or thereafter received with respect to the Mortgage Loans. 
 ARTICLE XII 
 MISCELLANEOUS PROVISIONS 
 Section 12.1 Successor to Servicer. Prior to termination of the Servicer’s responsibilities and duties under this Mortgage Loan Purchase
and Servicing Agreement pursuant to Section 9.4 or 10.1 hereof, the Issuer shall appoint a successor servicer which shall succeed to all rights and assume all of the responsibilities, duties and liabilities of the Servicer 

  

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under this Mortgage Loan Purchase and Servicing Agreement prior to the termination of the Servicer’s responsibilities, duties and liabilities under this
Mortgage Loan Purchase and Servicing Agreement. In the event that the Servicer’s duties, responsibilities and liabilities under this Mortgage Loan Purchase and Servicing Agreement should be terminated pursuant to Section 9.4,
9.5(b) or (c) or 10.1 hereof, the Servicer shall discharge such duties, responsibilities and liabilities during the period from the date it acquires knowledge of such termination until the effective date thereof with the
degree of diligence and prudence which it is obligated to exercise under this Mortgage Loan Purchase and Servicing Agreement and shall take no action whatsoever that might impair or prejudice the rights or financial condition of its successor. The
resignation or removal of, or assignment by, the Servicer pursuant to Section 9.4, 9.5(b) or (g) or 10.1 hereof shall not become effective until (i) in the case of a resignation or removal pursuant to
Section 9.4 or 10.1 hereof, a successor shall be appointed by the Issuer pursuant to this Section 12.1, (ii) in the case of an assignment by the Servicer pursuant to Section 9.5(b) or
(c) hereof, the assignee accepts its appointment as Servicer as provided in the next paragraph of this Section 12.1, and (iii) in all cases, notice thereof shall have been given to the Rating Agencies and each Swap
Counterparty and the Issuer shall have received Rating Agency Confirmation, and, upon acceptance of appointment by a successor Servicer the obligations of such resigning or removed Servicer hereunder shall be terminated, provided that in no
event shall such resignation, removal or assignment relieve such resigning or removed Servicer of the representations and warranties made pursuant to Section 3.1 hereof and the remedies available to the Issuer under
Section 7.1 hereof, it being understood and agreed that the provisions of such Sections 3.1 and 7.1 shall be applicable to the Servicer notwithstanding any such resignation or removal of, or assignment by, the Servicer, or
the termination of this Mortgage Loan Purchase and Servicing Agreement. 
 Any successor to the Servicer permitted hereunder shall execute,
acknowledge and deliver to the Servicer and the Issuer an instrument accepting its appointment as Servicer, wherein the successor shall make the representations and warranties set forth in Section 3.1 hereof, whereupon such successor
shall become fully vested with all the rights, powers, duties, responsibilities, obligations and liabilities of the Servicer, with like effect as if originally named as a party to this Mortgage Loan Purchase and Servicing Agreement. Any termination
or resignation of the Servicer or termination of this Mortgage Loan Purchase and Servicing Agreement pursuant to Section 9.4, 9.5(b) or (c), 10.1 or 11.1 hereof shall not affect any claims that the Issuer may
have against the Servicer arising out of the Servicer’s actions or failure to act prior to any such termination or resignation. 
 The
Servicer shall deliver promptly to the successor servicer the funds in any Collection Account and all Servicing Files and related documents and statements held by it hereunder and the Servicer shall account for all funds and shall execute and
deliver such instruments and do such other things as may reasonably be required to more fully and definitively vest in the successor all such rights, powers, duties, responsibilities, obligations and liabilities of the Servicer. 
 The successor Servicer shall represent and warrant that it is a member of MERS in good standing and shall agree to comply in all material respects with
the rules and procedures of MERS in connection with the servicing of the Mortgage Loans that are registered with MERS, in which case the predecessor Servicer shall cooperate with the successor Servicer in causing 

  

 -52- 

 
MERS to revise its records to reflect the transfer of servicing to the successor Servicer as necessary under MERS’ rules and regulations. 
 Section 12.2 Amendment. This Mortgage Loan Purchase and Servicing Agreement may only be amended with the written consent of the Issuer, the
Seller, the Required Noteholders, each Swap Counterparty, and the Servicer, and upon written notice of such amendment to each Rating Agency; provided, however, that the Issuer may amend this Mortgage Loan Purchase and Servicing
Agreement without the consent of the Required Noteholders for one or more of the following purposes: (A) to add to the covenants and agreements pursuant to this Mortgage Loan Purchase and Servicing Agreement for the benefit of the holders of
the Notes; (B) to cure any ambiguity or to correct or supplement any defective or inconsistent provision contained in this Mortgage Loan Purchase and Servicing Agreement or in any amendment to this Mortgage Loan Purchase and Servicing
Agreement; (C) to add such provisions with respect to matters or questions arising under this Mortgage Loan Purchase and Servicing Agreement as may be necessary or desirable and not inconsistent with this Mortgage Loan Purchase and Servicing
Agreement; (D) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in the Mortgage Loan Purchase and Servicing Agreement or (E) to restructure the program, including to add AHL REIT as
a seller of Mortgage Loans, to provide for the holding of securities secured by Mortgage Loans by the Issuer and to modify the swap arrangements; provided, however, that such action shall not adversely affect in any material respect
the interests of any of the holders of the Notes; provided, further, that an Opinion of Counsel shall be furnished to the Collateral Agent or its designated agent to the effect that such amendment (x) will not prevent the Notes
from being characterized as debt for federal income tax purposes and (y) will not cause the Issuer to be characterized as an association (or a publicly traded partnership) taxable as a corporation or a taxable mortgage pool for U.S. federal
income tax purposes; provided, further, that no such action will be deemed to materially and adversely affect the interests of any of the holders of the Notes if the party requesting such action receives (1) an Officer’s
Certificate of the Issuer certifying that such action will not adversely affect in any material respect the interests of any of the holders of the Notes and (2) (x) an Opinion of Counsel stating that such action will not adversely affect
in any material respect the interests of any of the holders of the Notes or (y) Rating Agency Confirmation with respect to such action; provided, finally, that any amendment under clause (E) above shall be subject to
(1) Rating Agency Confirmation and (2) receipt by the Collateral Agent, the Indenture Trustee and the Swap Counterparties of an Opinion of Counsel that such restructuring shall not cause the Issuer to be required to be registered as an
“investment company” under the Investment Company Act. Any material amendment shall be subject to Rating Agency Confirmation. The costs and expenses associated with any such amendment shall be borne by the party requesting the amendment.

 Section 12.3 Governing Law. THIS PURCHASE AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL
OBLIGATIONS LAW). 
  

 -53- 

 Section 12.4 Duration of Agreement. This Mortgage Loan Purchase and Servicing Agreement shall
continue in existence and effect until terminated as provided in Section 11.1 hereof. 
 Section 12.5 Notices. All
demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by registered mail, postage prepaid, addressed as follows: 
  

	 	(i)	if to the Seller or Servicer: 

 Accredited Home Lenders,
Inc. 
 15090 Avenue of Science 
 San Diego, California 92128 
 Attn: Melissa Dant, Esq. 
 Telephone: (858) 676-2134 
 Facsimile: (858) 521-0614 
 or such other address as may hereafter be furnished to the Issuer in writing; 
  

	 	(ii)	if to the Issuer: 

 Camel Mountain Funding Trust

 c/o U.S. Bank Trust National Association 
 209 S. LaSalle Street 
 Chicago, IL 60604 
 Attn: Corporate Trust Administration 
 Telephone: (312) 325-8902 
 Facsimile: (312) 325-8905 
 with a copy to: 
 Carmel Mountain Funding
Trust 
 c/o Accredited Home Lenders, Inc. 
 15090 Avenue of Science 
 San Diego, California 92128 
 Attn: David Hertzel, Esq. 
 Telephone:
(858) 676-2104 
 Facsimile: (858) 521-0614 
  

	 	(iii)	if to the Performance Guarantor: 

 Accredited Home Lenders
Holding Co. 
 15090 Avenue of Science 
 San Diego, California 92128 
 Attn: John Buchanan 
 Telephone: (858) 676-2181 
 Facsimile: (858) 521-0291 
  

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 Section 12.6 Severability of Provisions. If any one or more of the covenants, agreements,
provisions or terms of this Mortgage Loan Purchase and Servicing Agreement shall be held invalid for any reason whatsoever, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Mortgage Loan Purchase and Servicing Agreement and shall in no way affect the validity or enforceability of the other provisions of this Mortgage Loan Purchase and Servicing Agreement. 
 Section 12.7 Relationship of Parties. Nothing herein contained shall be deemed or construed to create a partnership or joint venture between
the parties hereto and the services of the Servicer shall be rendered as an independent contractor and not as agent for the Issuer. 
 Section 12.8 Execution; Successors and Assigns. This Mortgage Loan Purchase and Servicing Agreement may be executed in one (1) or more counterparts and by the different parties hereto on separate counterparts, each of
which, when so executed, shall be deemed to be an original; such counterparts, together, shall constitute one (1) agreement. This Mortgage Loan Purchase and Servicing Agreement shall inure to the benefit of and be binding upon the Seller, the
Servicer and the Issuer and their respective successors and permitted assigns; provided, however, that, except for the assignment set forth in Article V of the Security Agreement, the rights of the Issuer to indemnity from the Seller
and the Servicer pursuant to Sections 3.3 and 7.1 hereof are not assignable and shall inure only to the benefit of the Issuer and to no other Person. 
 Section 12.9 Recordation of Assignments of Mortgage. To the extent permitted by applicable law, any Assignment of Mortgage is subject to recordation in the appropriate public office for real property
records in the county or other comparable jurisdiction in which the related Mortgaged Property is situated, such recordation to be effected at the Issuer’s expense if requested by the Issuer after the occurrence and during the continuation of a
Termination Event or at such other time as the Issuer deems necessary or prudent in its reasonable business judgment in order to preserve or protect the interests of the Issuer in any Mortgage Loan. 
 Section 12.10 Assignment by the Issuer. The Issuer shall have the right to assign its interest under this Mortgage Loan Purchase and
Servicing Agreement to the Collateral Agent for the benefit of the Secured Parties. 
 Section 12.11 Non-Petition Agreement.
Notwithstanding any prior termination of this Mortgage Loan Purchase and Servicing Agreement, each of the Company and the Performance Guarantor severally and not jointly covenants and agrees that it shall not, prior to the date which is one year and
one day (or if longer, the applicable preference period then in effect) after the payment in full of the Notes or rated obligations of the Issuer, acquiesce, petition or otherwise, directly or indirectly, invoke or cause the Issuer to invoke the
process of any governmental authority for the purpose of commencing or sustaining a case against the Issuer under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of its property or ordering the winding up or liquidation of the affairs of the Issuer. The provisions of this Section 12.11 shall survive the termination of this
Mortgage Loan Purchase and Servicing Agreement. 
  

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 Section 12.12 Waiver of Offset. The Servicer agrees to deliver to the Issuer all amounts
required by this Mortgage Loan Purchase and Servicing Agreement to be delivered by the Servicer to the Issuer free and clear of any offset, counterclaim or other deduction on account of, or in respect of, any obligation of the Issuer to the Servicer
hereunder. 
 Section 12.13 Limited Recourse. The Servicer agrees that the obligations of the Issuer to the Servicer under this
Mortgage Loan Purchase and Servicing Agreement are limited recourse obligations of the Issuer payable solely from the assets of the Issuer available for such purposes under the Security Agreement and that, upon application of all assets of the
Issuer available under the Security Agreement for such purposes, the Servicer shall have no recourse to the Issuer for any obligations of the Issuer to the Servicer to the extent such application does not provide for full satisfaction and payment of
such obligation. The provisions of this Section 12.13 shall survive the termination of this Mortgage Loan Purchase and Servicing Agreement. 
 Section 12.14 No Recourse. 
 It is expressly understood and agreed by the parties hereto that
(a) this Mortgage Loan Purchase and Servicing Agreement is executed and delivered by U.S. Bank Trust National Association, not individually or personally but solely as Owner Trustee of the Carmel Mountain Funding Trust, in the exercise of the
powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Carmel Mountain Funding Trust is made and intended not as personal representations, undertakings and
agreements by U.S. Bank Trust National Association but is made and intended for the purpose of binding only the Carmel Mountain Funding Trust, (c) nothing herein contained shall be construed as creating any liability on U.S. Bank Trust National
Association, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties
hereto and (d) under no circumstances shall U.S. Bank Trust National Association be personally liable for the payment of any indebtedness or expenses of the Carmel Mountain Funding Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Carmel Mountain Funding Trust under this Mortgage Loan Purchase and Servicing Agreement or any other related documents. 
 ARTICLE XIII 
 ACCREDITED HOME LENDERS HOLDING CO. GUARANTEE 

Section 13.1 Guarantee of Servicer’s Performance and Payment Obligations. For value received, and in consideration of the financial
accommodation accorded to the Company by the Issuer under this Mortgage Loan Purchase and Servicing Agreement, Accredited Home Lenders Holding Co. (the “Performance Guarantor”) hereby fully, unconditionally, and irrevocably
guarantees to the Issuer, the Collateral Agent (for its benefit and the benefit of the Senior Noteholders) the Indenture Trustee (for its benefit and the benefit of the Subordinated Noteholders), the Owner Trustee and each Swap Counterparty the due
performance of, and punctual payment of all amounts payable by, the Company, in its capacity as Servicer under this Mortgage Loan Purchase and Servicing Agreement when and as such obligations hereunder shall become due and, in the case of any
payments, payable. The Performance 

  

 -56- 

 
Guarantor will ensure the performance and payment of every act, duty, obligation, agreement and responsibility of the Servicer set forth herein. 

In case of the inability of the Servicer to punctually perform any such act, duty, obligation, responsibility or agreement or to pay punctually any
such amounts, the Performance Guarantor hereby agrees, upon written demand by the Issuer, to, as applicable, (i) perform any such act, duty, obligation, responsibility or agreement and (ii) pay or cause to be paid any such amount,
punctually when and as the same shall become due and, in the case of any payment, payable (exclusive of any grace period). 
 (A) The Performance Guarantor hereby agrees that its obligations under this Section 13.1 constitute a guarantee of performance and payment when due and not of collection. 
 (B) The Performance Guarantor hereby agrees that its obligations under this Section 13.1 shall be unconditional, irrespective
of the validity, regularity or enforceability of this Mortgage Loan Purchase and Servicing Agreement against the Servicer, the absence of any action to enforce the Servicer’s obligations under this Mortgage Loan Purchase and Servicing
Agreement, any waiver or consent by the Issuer, the holders of the Notes, the Indenture Trustee, the Owner Trustee, any Swap Counterparty or the Collateral Agent with respect to any provisions thereof, the entry by the Servicer and the Issuer into
additional transactions under this Mortgage Loan Purchase and Servicing Agreement or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor (other than the defenses of statute of limitations
or payment, which are not waived); provided, however, that the Performance Guarantor shall be entitled to exercise any right that the Servicer could have exercised under this Mortgage Loan Purchase and Servicing Agreement to cure any
default in respect of its obligations under this Mortgage Loan Purchase and Servicing Agreement or to set-off, counterclaim or withhold payment in respect of any event of default or potential event of default in respect of the Issuer or any
Affiliate, but only to the extent such right is provided to the Servicer under this Mortgage Loan Purchase and Servicing Agreement. The Performance Guarantor acknowledges that the Servicer and the Issuer may from time to time enter into one
(1) or more Transfer Supplements pursuant to this Mortgage Loan Purchase and Servicing Agreement and agrees that the obligations of the Performance Guarantor under this Section 13.1 will upon the execution of any such Transfer
Supplement by the Servicer and the Issuer extend to all such Transfer Supplements without the taking of further action by the Performance Guarantor. 
 (C) The Performance Guarantor hereby waives (i) promptness, diligence, presentment, demand of payment, protest, order and, except as set forth in paragraph (a) hereof, notice of any kind in connection with
this Mortgage Loan Purchase and Servicing Agreement and this Section 13.1 and (ii) any requirement that the Issuer, the Indenture Trustee, the Owner Trustee, any Swap Counterparty or the Collateral Agent exhaust any right to take
any action against the Servicer or 

  

 -57- 

 
any other person prior to or contemporaneously with proceeding to exercise any right against the Performance Guarantor under this Section 13.1.]

 ARTICLE XIV 
 ASSIGNMENT 
 Section 14.1 Assignment. Notwithstanding anything to the contrary contained in this Mortgage Loan
Purchase and Servicing Agreement, the Issuer hereby assigns, conveys, transfers, delivers and sets over unto the Collateral Agent for the benefit of the Secured Parties, all of its right, title and interest in, to and under, whether now owned or
existing, or hereafter acquired, this Mortgage Loan Purchase and Servicing Agreement including, without limitation, all monies due and to become due to the Issuer hereunder or in connection therewith, whether payable as fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of this Mortgage Loan Purchase and Servicing Agreement or otherwise, and all rights, remedies, powers, privileges and claims of the Issuer under or with respect to this Mortgage Loan Purchase
and Servicing Agreement (whether arising pursuant to the terms of this Mortgage Loan Purchase and Servicing Agreement or otherwise available to the Issuer at law or in equity), including, without limitation, the rights of the Issuer to enforce this
Mortgage Loan Purchase and Servicing Agreement and to give or withhold any and all consents, requests, notices, directions, approvals, extensions or waivers under or with respect to this Mortgage Loan Purchase and Servicing Agreement to the same
extent as the Issuer could but for the assignment and security interest granted to the Collateral Agent in this Section 14.1. The Issuer acknowledges the security interest in the Mortgage Loans of the Collateral Agent as representative
secured party for the Issuer, the Secured Parties and any other Persons to whom the Issuer owes the obligations secured by such Mortgage Loans. 
 The Issuer and the Seller shall each treat the Collateral Agent as the Issuer under this Mortgage Loan Purchase and Servicing Agreement and each consent to such assignment and acknowledge that the Collateral Agent shall enjoy the
Issuer’s rights under this Mortgage Loan Purchase and Servicing Agreement pursuant to the provisions of this Section 14.1. Without limiting the generality of the foregoing, the Issuer and the Seller shall each report to and
correspond and communicate with the Collateral Agent. The Collateral Agent shall have all rights of the Issuer to enforce the covenants and conditions set forth in this Mortgage Loan Purchase and Servicing Agreement with respect to the Mortgage
Loans, and the Issuer and the Seller, respectively, shall each follow the instructions of the Collateral Agent under this Mortgage Loan Purchase and Servicing Agreement. The Collateral Agent shall have the right to give any waivers or consents
required or allowed under this Mortgage Loan Purchase and Servicing Agreement, and such waivers and consents shall be binding upon the Issuer and any party for whom the Collateral Agent acts as representative secured party as if the Issuer or such
party had given the same. All amounts due the Issuer under this Mortgage Loan Purchase and Servicing Agreement shall be remitted to the Collateral Agent in accordance with the Collateral Agent’s instructions and in accordance with this Mortgage
Loan Purchase and Servicing Agreement. 
 Section 14.2 Third-Party Beneficiary. Each of the Collateral Agent, the Indenture
Trustee and the Custodian and their successors and assigns shall be an express third-party beneficiary of this Agreement and shall be entitled to rely upon and directly enforce any rights granted to them hereunder; including, without limitation, any
indemnity. 
  

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

			
	 ACCREDITED HOME LENDERS, INC.,
 as Seller and
Servicer 

		
	By:	 	 /s/ Melissa G. Dant

		 	Name: Melissa G. Dant
		 	Title: Senior Secondary Markets Counsel,
		 	 AVP & Ass’t Sec’y

	
	CARMEL MOUNTAIN FUNDING TRUST,
	as The Issuer
		
	By:	 	 U.S. Bank Trust National Association,
 not in its
individual capacity, but solely as
 Owner Trustee

		 	
	
		
	By:	 	 /s/ Patricia M. Child

		 	Name: Patricia M. Child
		 	Title: Vice President
	
	ACCREDITED HOME LENDERS HOLDING CO., solely in its capacity of Performance Guarantor of the Servicer’s obligations pursuant to Article XIII of this Mortgage Loan Purchase and
Servicing Agreement
		
	By:	 	 /s/ David E. Hertzel

		 	Name: David E. Hertzel
		 	Title: GC, AVP & Ass’t Sec’y

 Mortgage Loan Purchase and Servicing Agreement 

 SCHEDULE I 
 PERFECTION REPRESENTATIONS, WARRANTIES AND COVENANTS 
 In addition to the representations,
warranties and covenants contained in the Mortgage Loan Purchase and Servicing Agreement, to induce the Servicer and the Issuer to enter into the Mortgage Loan Purchase and Servicing Agreement, the Seller (other than with respect to paragraph 12)
and the Servicer (with respect to paragraph 12) hereby represents, warrants, and covenants to the Issuer and the Servicer as to itself as follows, on the date hereof and on each applicable Closing Date thereafter: 
 General 
 1. The Mortgage Loan Purchase and Servicing
Agreement creates a valid and continuing security interest (as defined in the applicable UCC) in the Mortgage Loans transferred by the Seller to the Issuer, including the related servicing rights and all collateral related thereto now existing or
hereafter arising in favor of the Issuer, which security interest is prior to all other liens, and is enforceable as such as against creditors of and purchasers from the Seller. 
 2. The Mortgage Loans transferred by the Seller to the Issuer constitute “instruments” and the related servicing rights constitute “general intangibles” within the meaning of the UCC as in effect
in the State of New York. 
 Creation 
 3.
With regard to those Mortgage Loans sold by the Seller to the Issuer hereunder, the Seller owns and has good and marketable title to such Mortgage Loans and related servicing rights free and clear of any lien, claim or encumbrance of any Person,
excepting only liens of the Seller’s warehouse lender to be released immediately upon payment of the related purchase price on the applicable Closing Date for the related Mortgage Loan and liens for taxes, assessments or similar governmental
charges or levies incurred in the ordinary course of business that are not yet due and payable or as to which any applicable grace period shall not have expired, or that are being contested in good faith by proper proceedings and for which adequate
reserves have been established, but only so long as foreclosure with respect to such a lien is not imminent and the use and value of the property to which the lien attaches is not impaired during the pendency of such proceeding. 
 4. The Seller has received or will receive all consents and approvals to its sale of Mortgage Loans and related servicing rights to the Issuer hereunder required by the
terms of such Mortgage Loans and related servicing rights that constitute instruments or payment intangibles. 
 Perfection:

 5. The Seller has caused or will have caused, within ten days after the effective date of the Mortgage Loan Purchase and Servicing Agreement, the
filing of all appropriate financing 

  

 I-1 

 
statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect in accordance with the UCC the sales of
Mortgage Loans and related servicing rights from the Seller to the Issuer, and the security interest in the Mortgage Loans and related servicing rights transferred by the Seller granted to the Issuer hereunder. 
 6. The Seller or its closing agent has in its possession the original copies of such instruments that constitute or evidence the Mortgage Loans sold by it to the Issuer,
and the Issuer has caused or will have caused within ten days of the effective date of the Mortgage Loan Purchase and Servicing Agreement, the filing of financing statements against the Issuer and the Seller in favor of the Collateral Agent for the
benefit of Secured Parties in connection herewith describing such Mortgage Loans and containing a statement that: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the
Collateral Agent for the benefit of the Secured Parties.” 
 Priority 
 7. Neither the Seller nor the Issuer has authorized the filing of, or is aware of any financing statements against itself or the Issuer that include a description of
collateral covering the Mortgage Loans, the related servicing rights or the Collateral, respectively, other than any financing statements (i) relating to the sale of Mortgage Loans and the related servicing rights by the Seller to the Issuer
under the Mortgage Loan Purchase and Servicing Agreement or relating to the transfer of the Assigned Collateral from the Issuer to the Collateral Agent under the Security Agreement, (ii) relating to the security interest granted to the Issuer
hereunder or the Collateral Agent pursuant to the Security Agreement, or (iii) that have been terminated. 
 8. The Seller is not aware of any judgment,
ERISA or tax lien filings against itself or the Issuer. 
 9. None of the instruments that constitute or evidence the Mortgage Loans transferred by the
Seller has any marks or notations indicating that they have been pledged, assigned or otherwise conveyed, without release or reconveyance, to any Person other than the Issuer hereunder or the Collateral Agent pursuant to the Security Agreement.

 10. Notwithstanding any other provision of the Mortgage Loan Purchase and Servicing Agreement or any other Program Document, the Perfection
Representations contained in this Schedule shall be continuing, and remain in full force and effect (notwithstanding any termination of any of the Program Documents or any replacement of the Servicer or termination of Servicer’s rights to act
as such) until such time as all Obligations have been finally and fully paid and performed. 
 11. The parties to the Mortgage Loan Purchase and Servicing
Agreement: (i) shall not, without obtaining a confirmation of the then-current rating of all outstanding Series of Notes, waive any of the Perfection Representations; and (ii) shall provide the Ratings Agencies and Swap Counterparties with
prompt written notice of any breach of the Perfection Representations, and shall not, without obtaining a confirmation of the then-current rating of the all outstanding Series of Notes (as determined after any adjustment or withdrawal of the ratings
following notice of such breach) waive a breach of any of the Perfection Representations. 
  

 I-2 

 12. The Servicer covenants that, in order to evidence the interests of the Issuer and the Collateral Agent under this
Mortgage Loan Purchase and Servicing Agreement and the Security Agreement, respectively, the Servicer shall take such action, or execute and deliver such instruments as may be necessary or advisable (including, without limitation, such actions as
are requested by the Issuer or the Collateral Agent) to maintain and perfect, as a first priority interest, the Issuer’s security interest in the Mortgage Loans and the Collateral Agent’s security interest in the Assigned Collateral. The
Servicer shall, from time to time and within the time limits established by law, prepare and present to the Issuer and the Collateral Agent for the Issuer or the Collateral Agent, as applicable, to authorize (based on the Opinion of Counsel
hereinafter provided for) the Servicer to file, all financing statements, amendments, continuations, initial financing statements in lieu of a continuation statement, terminations, partial terminations, releases or partial releases, or any other
filings necessary or advisable to continue, maintain and perfect the Issuer’s security interest in the Mortgage Loans as a first-priority interest and the Collateral Agent’s security interest in the Assigned Collateral as a first-priority
interest (each a “Filing”). The Servicer shall present each such Filing to the Issuer or the Collateral Agent, as applicable, together with a form of authorization for the Issuer’s signature or the Collateral Agent’s
signature, as applicable. Upon receipt of such Opinion of Counsel and form of authorization, the Issuer or the Collateral Agent, as applicable, shall promptly authorize in writing the Servicer to, and the Servicer shall, effect such Filing under the
Uniform Commercial Code. Notwithstanding anything else in the Program Documents to the contrary, the Servicer shall not have any authority to effect a Filing without obtaining written authorization from the Issuer or the Collateral Agent, as
applicable, in accordance with this paragraph. 
  

 I-3 

 EXHIBIT A 
 FORM OF TRANSFER SUPPLEMENT 
 [date] 
 Carmel Mountain Funding Trust 
 c/o Accredited Home Lenders, Inc. 
 15090 Avenue of Science 
 San Diego, California 92128 
 Attn: 
 Purchase Terms Letter 
 Ladies and Gentlemen: 
 Accredited Home Lenders, Inc. (the
“Company”) and Carmel Mountain Funding Trust (the “Issuer”) herewith confirm the terms and provisions of the Mortgage Loan Purchase and Servicing Agreement (the “Mortgage Loan Purchase and Servicing
Agreement”) entered into on May 10, 2005 pursuant to which the Company and the Issuer agreed upon the terms under which the Company would from time to time sell nonprime mortgage loans to the Issuer. In consideration of the promises
and the mutual agreements herein and therein set forth, the Company and the Issuer hereby agree to the terms and provisions of the sale of the nonprime mortgage loans described in the Mortgage Loan Schedule attached hereto as Exhibit I, as
set forth below and as described in more detail in the Mortgage Loan Purchase and Servicing Agreement. Upon execution of this Transfer Supplement by the Company and the Issuer and receipt of the Initial Purchase Price therefor, the Company hereby
sells, assigns, transfers, sets over and conveys to the Issuer all right, title and interest of the Company in, to and under each nonprime mortgage loan identified on the attached Mortgage Loan Schedule (collectively, the “Mortgage
Loans”). It is intended that the transfer, assignment and conveyance herein contemplated constitute a sale of the Mortgage Loans, conveying good title thereto free and clear of any liens, by the Company to the Issuer and that the Mortgage
Loans not be part of the Company’s estate in the event of insolvency. In the event that the Mortgage Loans are held to be property of the Company or if for any other reason this Transfer Supplement is held or deemed not to absolutely sell and
assign the Mortgage Loans, the parties intend that the Company shall be deemed to have granted, and does hereby grant, to the Issuer a valid security interest, free and clear of any lien, claim or interest of any other Person, in the Mortgage Loans
and all Assigned Collateral (as defined in the Security Agreement) related thereto now existing or hereafter arising for the purpose of securing the rights of the Issuer under the Mortgage Loan Purchase and Servicing Agreement, and that the Mortgage
Loan Purchase and Servicing Agreement and this Transfer Supplement shall each constitute a security agreement under applicable law. 
 (i) Closing Date:                     . The Initial Purchase Price shall be paid by the Issuer to the Company in immediately
available funds on such Closing Date. The aggregate Outstanding Principal Balance of the Mortgage Loans as of the Closing Date is $                . 

 

 A-1 

 (ii) Initial Purchase Price: The Initial Purchase Price for the Mortgage Loans
shall be $                . 
 (iii)
The Mortgage Loans: The Mortgage Loans have the characteristics set forth on the Mortgage Loan Schedule, set forth as Exhibit I attached hereto. 
 (iv) Representations and Warranties: Each representation and warranty of the Company set forth in Sections 3.1 and
3.2 of the Mortgage Loan Purchase and Servicing Agreement will be true and correct on the Closing Date as they relate to the Mortgage Loans. 
 (v) Terms: All references herein to the Mortgage Loans shall be deemed to refer only to the Mortgage Loans described in the Mortgage Loan Schedule attached hereto. Capitalized terms used herein but not
otherwise defined herein shall have the meanings ascribed to such terms in the Mortgage Loan Purchase and Servicing Agreement. 
 (vi) Governing Law: This Transfer Supplement will be governed by the law of the State of New York. 
  

 A-2 

 Kindly acknowledge your agreement and consent to the terms of this letter by signing and returning to us
the enclosed duplicate copy hereof. 
  

			
	 Very truly yours,

	
	ACCREDITED HOME LENDERS, INC.
		
	By:	 	  
		 	Name:
		 	Title:

  

			
	Dated:
                            
	
	ACCEPTED AND AGREED:
	
	CARMEL MOUNTAIN FUNDING TRUST
		
	By:	 	 Accredited Home Lenders, Inc., as
 Administrator

		 	
		
	By:	 	  
		 	Name:
		 	Title:

  

 A-3 

 Exhibit I to Transfer Supplement 
 Mortgage Loan Schedule 
  

	1.	identifying number for the Mortgage Loan: 

  

	2.	Mortgagor’s name: 

  

	3.	street address of the Mortgaged Property including the state code: 

  

	4.	code indicating whether the Mortgaged Property is a one family residence, a 2-4 family residence, an individual condominium unit or townhouse, an individual unit in a planned unit
development, or a unit of manufactured housing treated as real estate under applicable state law: 

  

	5.	months to maturity from the Closing Date based on the amortization schedule for such Mortgage Loan: 

  

	6.	Loan-to-Value Ratio: 

  

	7.	Mortgage Interest Rate: 

  

	8.	stated maturity date: 

  

	9.	amount of Monthly Payment: 

  

	10.	Outstanding Principal Balance: 

  

	11.	payment type (fixed rate or adjustable rate): 

  

	12.	Initial Purchase Price: 

  

	13.	Closing Date: 

  

	14.	first-priority or second-priority security interest: 

  

	15.	MERS number, if applicable: 

  

 A-4 

 EXHIBIT B 
 [RATED BIDDER] 
 [ADDRESS] 
 May __, 2005 
 Carmel Mountain Funding Trust 
 c/o Accredited Home Lenders, Inc. 
 15090
Avenue of Science 
 San Diego, California 92128 
 Attn: 
 Deutsche Bank Trust Company
Americas, as Collateral Agent 
 60 Wall Street 
 MSNYC60-2606

 New York, New York 10005 
 Attn: Commercial Paper Group

 Dear Sirs: 
 Reference is made to the
(i) Mortgage Loan Purchase and Servicing Agreement, dated as of May 10, 2005 (the “Mortgage Loan Purchase and Servicing Agreement”), among Accredited Home Lenders, Inc., as Seller and Servicer, Accredited Home Lenders
Holding Co., as Performance Guarantor, and Carmel Mountain Funding Trust, as purchaser (the “Issuer”) and (ii) Security Agreement, dated as of May 10, 2005 (the “Security Agreement”), between the Issuer and
Deutsche Bank Trust Company Americas, as Collateral Agent, each as may be amended, modified or supplemented. Capitalized terms used and not defined herein shall have the meanings assigned to such terms in the Mortgage Loan Purchase and Servicing
Agreement and the Security Agreement. 
 Pursuant to Section 11.2 of the Mortgage Loan Purchase and Servicing Agreement, if a
Termination Event set forth in clauses (h) or (k) through (s) thereof occurs or, pursuant to Section 7.01 of the Security Agreement, if a Security Agreement Event of Default set forth in clause
(e) or (m) through (r) thereof occurs or, pursuant to Schedule I of the Indenture, if an Indenture Event of Default set forth in clause (e) or (m) through (r) thereof
occurs, the Servicer is required to use its best efforts to sell all non-Delinquent Loans and non-Defaulted Loans for settlement within 90 days of the date on which such Termination Event, Security Agreement Event of Default or Indenture Event of
Default occurred. In the event that all non-Delinquent Loans and non-Defaulted Loans have not been so sold by such 90th day, the Collateral Agent shall hold an auction (a “Termination Event Auction”) of the remaining non-Delinquent Loans and non-Defaulted Loans for settlement not later than the 118th day following the date on which such Termination Event, Security Agreement Event of Default or Indenture Event of Default occurred (the
“Final Settlement Date”). Additionally, pursuant to Section 4.1 of the Mortgage Loan Purchase and Servicing Agreement, in the event the principal of any Notes becomes due and payable (a “Repayment
Event”), whether pursuant to the terms thereof or by the occurrence of a Security Agreement Event of Default or an Indenture Event of 

  

 B-1 

 
Default or optional repurchase, maturity or otherwise, the Servicer is required to arrange for the sale of Mortgage Loans at such times and in such manner so
that the proceeds of the sale, together with amounts received by the Issuer in connection with the Interest Rate Swap, are available to pay amounts due and owing on such Notes on the dates the Notes are required to be repaid (each, a
“Repayment Date”). Finally, pursuant to Section 3.5(c) of the Mortgage Loan Purchase and Servicing Agreement, in the event that the Seller fails to purchase any Mortgage Loans when they are required to do so, the
Servicer is required to arrange for the sale of such Mortgage Loans on behalf of the Issuer. If the Servicer is unable to sell such Mortgage Loans on behalf of the Issuer by the fifteenth (15th) day following the purchase of such Mortgage Loans by the Issuer, the Servicer is required to conduct an auction for such Mortgage Loans on such
fifteenth (15th) day or if such day is not a Business Day, then on the next succeeding Business Day (a
“Wet Funding Auction”). 
 In connection with any such Termination Event Auction or Repayment Event, [RATED BIDDER] (the
“Bank”), the Servicer, the Collateral Agent and the Issuer agree as follows: 
 (a) With respect to the Termination Event
Auction: 
 (i) the Bank shall participate in a Termination Event Auction and agrees to make a binding bid (the
“Bid”) for all Mortgage Loans which, as of the auction date, are non-Defaulted or non-Delinquent Loans. The amount of the Bid shall be determined in the sole discretion of the Bank and such Bid shall remain in effect until the Final
Settlement Date; and 
 (ii) if the Issuer accepts the Bid, the Issuer shall notify the Bank and the Collateral Agent of such
acceptance and the principal balance of Mortgage Loans to be purchased by the Bank (which amount may be all or a portion of the principal balance of the Mortgage Loans) in writing not later than two (2) Business Days prior to the Final
Settlement Date. Any such purchase of Mortgage Loans by the Bank shall be settled on or prior to the Final Settlement Date. 
 (b) With
respect to any Repayment Event, if requested by the Collateral Agent: 
 (i) the Bank agrees to make a Bid for the principal
balance of Mortgage Loans specified by the Collateral Agent which, as of the Bid date, are non-Defaulted Loans or non-Delinquent Loans. The amount of the Bid shall be determined in the sole discretion of the Bank and such Bid shall remain in effect
until such Repayment Date; and 
 (ii) if the Issuer accepts the Bid, the Issuer shall notify the Bank and the Collateral
Agent of such acceptance and the principal balance of Mortgage Loans to be purchased by the Bank (which amount may be all or a portion of the principal balance of the Mortgage Loans) in writing on or prior to 

  

 B-2 

 
such Repayment Date. Any such purchase of Mortgage Loans by the Bank shall be settled on or prior to such Repayment Date. 
 (c) With respect to any Wet Funding Auction, if requested by the Servicer: 
 (i) the Bank agrees to make a Bid for the principal balance of Mortgage Loans specified by the Servicer. The amount of the Bid shall be
determined in the sole discretion of the Bank and such Bid shall remain in effect until the close of business on the day that it was made; and 
 (ii) if the Servicer accepts that bid on behalf of the Issuer, the Servicer shall notify the Bank of such acceptance and the principal balance of Mortgage Loans to be purchased by the Bank (which amount may be all or
a portion of the principal balance of the Mortgage Loans) in writing on the day of such Wet Funding Auction. Any such purchase of Mortgage Loans by the Bank as a bidder in a Wet Funding Auction shall be settled on the day of such Wet Funding
Auction. 
 (d) If the Bank’s rating assigned by Moody’s is either downgraded below “P-1” or withdrawn, the Bank shall
give notice of such downgrade or withdrawal to the Issuer within three days of notice thereof. The Bank shall use its best efforts to assist the Issuer in finding a replacement rated bidder to assume the Bank’s obligations under this agreement.

 This agreement shall remain in full force and effect until all the Notes have been paid in full. This agreement and the Bank’s rights
and obligations hereunder may not be assigned or otherwise transferred by the Bank, whether by operation of law or otherwise, unless (i) the Issuer, the Servicer and the Collateral Agent consent in writing to such assignment, (ii) the
assignee has expressly assumed the obligations of the Bank hereunder by written instrument in form and substance satisfactory to the Issuer, the Servicer and the Collateral Agent and (iii) Rating Agency Confirmation with respect to such
assignment has been received by the Issuer. 
 In consideration of the above agreement the Issuer shall pay the Bank such fee as shall be
separately agreed between the Issuer and the Bank. 
  

 B-3 

 This agreement shall be governed by the internal laws of the State of New York and may be executed in
counterparts. 
  

			
	Very truly yours,
	
	[RATED BIDDER]
		
	By:	 	  
		 	Name:
		 	Title:

 Accepted and Agreed as of the date written above: 
  

			
	CARMEL MOUNTAIN FUNDING TRUST
		
	By:	 	 Accredited Home Lenders, Inc., as
 Administrator

		 	
		
	By:	 	  
		 	Name:
		 	Title:
	
	 ACCREDITED HOME LENDERS, INC.,
 as
Servicer

		
	By:	 	  
		 	Name:
		 	Title:
	
	 DEUTSCHE BANK TRUST COMPANY AMERICAS,
 as Collateral Agent

		
	By:	 	  
		 	Name:
		 	Title:

  

 B-4 

 EXHIBIT C 
 FORM OF SERVICER REPORT 
  

 C-1 

 EXHIBIT D 
 FORM OF SERVICER ADVANCE REPORT 
  

 D-1 

 EXHIBIT E 
 FORM OF MONTHLY DISPOSITION REPORT 
  

 E-1 

 EXHIBIT F 
 LOSS MITIGATION ACTION PLAN 
  

 F-1

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