Document:

EX-10.2

EXHIBIT 10.2

AMENDED AND RESTATED SECURITY AGREEMENT

AMENDED AND RESTATED SECURITY AGREEMENT (the “Security Agreement”), dated as of
December 15, 2005, between VON KARMAN FUNDING TRUST, a Delaware statutory trust (the
“Issuer”), and DEUTSCHE BANK TRUST COMPANY AMERICAS, as Collateral Agent (the
“Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Issuer and the Collateral Agent entered into that certain Security Agreement,
dated as of September 5, 2003 (the “Original Security Agreement”), in order to secure
repayment of certain indebtedness and liabilities of the Issuer;

WHEREAS, the Issuer and the Collateral Agent desire to amend and restate the Original Security
Agreement in its entirety;

WHEREAS, the Issuer and the Collateral Agent each agree, on the terms set forth herein, that
upon the effectiveness of this Security Agreement, the Original Security Agreement shall terminate
and be of no force and effect and that neither party shall have a claim (for money or otherwise)
based on, arising out of or relating to any provision of the Original Security Agreement;

WHEREAS, pursuant to Section 10.01 of the Original Security Agreement, the Issuer, the Swap
Counterparty and the Collateral Agent each hereby consent to the amendment and restatement of the
Original Security Agreement and Rating Agency Confirmation has been received by the Issuer; and

WHEREAS, the Issuer is entering into this Security Agreement with the Collateral Agent for the
purpose of, among other things, providing for the issuance of Secured Liquidity Notes and securing
and providing for the repayment of all amounts at any time and from time to time owing by the
Issuer to the Collateral Agent, the Indenture Trustee, any Swap Counterparty, the holders of the
Secured Liquidity Notes (including the Depositary as provided in Section 2(b)(ii) of the Depositary
Agreement), the holders of the Extended Notes and the holders of the Subordinated Notes (such
Persons, collectively, the “Secured Parties” and each, a “Secured Party”);

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants expressed
herein, it is hereby agreed by and between the Issuer and the Collateral Agent as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definitions. For all purposes of this Security Agreement, except as
otherwise expressly provided herein or unless the context otherwise requires, capitalized terms not
otherwise defined herein shall have the meanings assigned to such terms in the Definitions List
attached hereto as Schedule I (the “Definitions List”). All other capitalized terms used
herein shall have the meanings specified herein.

ARTICLE II

OBLIGATIONS SECURED

Section 2.01 Obligations Secured Hereby. (a) This Security Agreement is made to
provide for and secure repayment and performance of the indebtedness, obligations and liabilities
of the Issuer whether now existing or hereinafter incurred (such indebtedness and liabilities being
herein called the “Obligations”) specified in paragraph (b).

(b) Following an Event of Default, all payments or proceeds with respect to the Assigned
Collateral and any amounts on deposit in the Collateral Account shall be applied by the Collateral
Agent in the following order:

First, the repayment of amounts advanced, incurred or expended (including fees and
expenses of agents and counsel) by (a) the Collateral Agent, the Indenture Trustee, or the
Custodian, up to an aggregate amount of $25,000, and (b) the Owner Trustee, up to a maximum of
$5,000;

Second, the payment, in accordance with the allocation set forth in Section
2.02 below, of all amounts due and owing to each Swap Counterparty under the Interest Rate
Swaps (other than (x) the Party B Third Floating Amount as defined therein, and (y) termination
payments in connection with the early termination of each such Interest Rate Swap as provided for
in Part 5(b) of the Schedule to each such Interest Rate Swap);

Third, pro rata, (x) to the Depositary for repayment of any unreimbursed advances and
(y) to the payment of all indebtedness (including principal and all interest thereon), whether
absolute, fixed or contingent, at any time and from time to time due and owing by the Issuer to the
holders from time to time of the outstanding Secured Liquidity Notes and Extended Notes;

Fourth, the payment of all Reimbursable Expenses, provided, that, no Reimbursable
Expenses shall be paid with funds withdrawn from the Reserve Fund;

Fifth, the payment (pro rata, in accordance with the allocations set forth in
Section 2.03 hereof, to each Series of Subordinated Notes) of all amounts due and owing
(including all principal and interest) under all outstanding Series of Subordinated Notes including
the aggregate amount, if any, of Principal Amount Charge-Offs which have not been reinstated and
interest thereon;

Sixth, the payment, in accordance with the allocation set forth in Section
2.02 below, of all amounts due and owing to each Swap Counterparty under the Interest Rate
Swaps (other than the Party B Third Floating Amount as defined therein), in connection with the
early termination of each such Interest Rate Swap, as provided for in Part 5(b) of the Schedule to
each such Interest Rate Swap;

Seventh, the payment of all Reimbursable Expenses and all unpaid Allocated Expenses
without giving effect to any Maximum Indemnity Amount or the Budget Expense Limit;

Eighth, the payment of any unreimbursed Monthly Advances and Servicing Advances with
respect to any Mortgage Loan which has been sold, up to a maximum amount of the sale proceeds, and
to the payment of any unreimbursed Monthly Interest Advances;

Ninth, the payment, in accordance with the allocation set forth in Section
2.02 below and to the extent a Swap Default shall have occurred, of an amount equal to the
lesser of (x) the sum of (A) all amounts constituting interest collections on the Mortgage Loans
available for distribution pursuant to this Section 2.01(b) prior to giving effect to any
distributions hereunder (but reduced by any amount, payable under clause Second hereof)
plus (B) all amounts remaining from amounts previously on deposit in the Reserve Fund, and (y) all
amounts available for distribution pursuant to this clause Ninth, and

Tenth, any amounts remaining shall be paid to the Issuer.

Section 2.02 Allocations among Swap Counterparties. Amounts payable under
Second, Sixth and Ninth of Section 2.01(b) and amounts payable
under Section 6.03(a)(i), Section 6.03(b)(i) and Section 6.03(b)(xii) shall
be allocated to each Swap Counterparty in accordance with such Swap Counterparty’s Sharing
Percentage.

The Issuer shall cause the Servicer to provide the Collateral Agent in writing with determinations
of amounts due and payable, and such other information as the Collateral Agent may require in order
to make the allocations specified in this Section 2.02.

Section 2.03 Allocations among the Subordinated Noteholders. Amounts payable under
Fifth of Section 2.01(a) and amounts payable under Sections 6.03(b)(v),
6.03(b)(vi) and 6.03(b)(x) shall be allocated as follows:

(i) first, pro rata, to the holders of the Class A-1 Notes, an amount equal to the
lesser of (x) the amount available to make payments under Fifth of Section
2.01(a) and amounts payable under Sections 6.03(b)(v), 6.03(b)(vi) and
6.03(b)(x), as applicable, and (y) the amount necessary to pay the full amount that
is to be paid to such Class of Subordinated Notes at such time (including any Carry-Over
Interest Shortfall); and

(ii) second, pro rata, to the holders of the Class A-2 Notes, an amount equal to the
lesser of (x) the amount available to make payments under Fifth of Section
2.01(a) and amounts payable under Sections 6.03(b)(v), 6.03(b)(vi) and
6.03(b)(x), as applicable, and (y) the amount necessary to pay the full amount that
is to be paid to such Class of Subordinated Notes at such time (including any Carry-Over
Interest Shortfall), after giving effect to payments under clause (i) above.

The Issuer shall cause the Servicer to provide the Collateral Agent in writing with determinations
of amounts due and payable, and such other information as the Collateral Agent may require in order
to make the allocations specified in this Section 2.03.

ARTICLE III

REPRESENTATIONS AND WARRANTIES;

COMPANY AGENTS AND DEPOSITARY AGENTS; COVENANTS

Section 3.01 Representations and Warranties of the Issuer. The Issuer hereby
represents and warrants, for the benefit of the Collateral Agent and the other Secured Parties, as
follows as of the date hereof, and with respect to any of the following representations and
warranties which refers to another date, as of such date also in the terms of such representation
and warranty:

(a) Existence and Power. The Issuer (a) is a statutory trust duly formed, validly
existing and in good standing under the laws of the State of Delaware, (b) prior to the initial
issuance of any Secured Liquidity Notes hereunder, will be duly qualified to do business as a
foreign trust and in good standing under the laws of each jurisdiction where the character of its
property, the nature of its business or the performance of its obligations make such qualification
necessary, and (c) has all trust powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted and for purposes of the
transactions contemplated by this Security Agreement and the other Program Documents.

(b) Trust and Governmental Authorization. The execution, delivery and performance by
the Issuer of this Security Agreement and the other Program Documents to which it is a party (a)
are within the Issuer’s trust powers, (b) have been duly authorized by all necessary trust action,
(c) require no action by or in respect of, or filing with, any governmental body, agency or
official which has not been obtained and (d) do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the certificate of trust or the Trust Agreement of
the Issuer or of any law or governmental regulation, rule, contract, agreement, judgment,
injunction, order, decree or other instrument binding upon the Issuer or any of its Assets or
result in the creation or imposition of any Lien on any Asset of the Issuer, except for Liens
created by this Security Agreement or the other Program Documents. This Security Agreement and
each of the other Program Documents to which the Issuer is a party have been executed and delivered
by a duly authorized signatory of the Issuer.

(c) Binding Effect. This Security Agreement and each other Program Document, and each
Secured Liquidity Note when executed and delivered in accordance with the Depositary Agreement, is
a legal, valid and binding obligation of the Issuer enforceable against the Issuer in accordance
with its terms (except as such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors’
rights generally or by general equitable principles, whether considered in a proceeding at law or
in equity, including without limitation (i) the possible unavailability of specific performance,
injunctive relief or any other equitable remedy, (ii) concepts of materiality, reasonableness, good
faith and fair dealing, and (iii) that certain remedial or procedural provisions contained in this
Security Agreement may be limited or rendered unenforceable by applicable law, but such limitations
do not make the remedies and procedures that are afforded to the Collateral Agent inadequate for
the practical realization of the substantive benefits purported to be provided by this Security
Agreement).

(d) Financial Information; Financial Condition. All balance sheets, all statements of
operations, of shareholders’ equity and of cash flow, and other financial data (other than
projections) which have been or shall hereafter be furnished by the Issuer to the Collateral Agent
and the Rating Agencies pursuant to Section 3.05(c) have been and will be prepared in
accordance with GAAP (to the extent applicable) and do and will present fairly the financial
condition of the entities involved as of the dates thereof and the results of their operations for
the periods covered thereby, subject, in the case of all unaudited statements, to normal year-end
adjustments and lack of footnotes and presentation items.

(e) Litigation. Other than as disclosed in the most recent 10-K and 10-Q filings with
the Securities Exchange Commission by New Century Financial Corporation, there is no action, suit
or proceeding pending against or, to the knowledge of the Issuer, threatened against or affecting
the Issuer or its Assets before any court or arbitrator or any Governmental Authority which (x) is
reasonably likely to be adversely determined, and (y), if adversely determined, would be reasonably
likely, either in any one instance or in the aggregate, to (i) materially adversely affect the
financial position, results of operations, business, properties, performance, prospects or
condition (financial or otherwise) of the Issuer or (ii) in any manner draw into question the
validity or enforceability of this Security Agreement or any other Program Document or the ability
of the Issuer to perform its obligations hereunder or thereunder.

(f) Compliance with ERISA. Each member of the ERISA Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect
to each Benefit Plan and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Internal Revenue Code with respect to each Benefit Plan. No member of
the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Benefit Plan, (ii) failed to make any contribution or
payment to any Benefit Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made
any amendment to any Benefit Plan or Benefit Arrangement, which in any such case has resulted or
could reasonably be expected to result in the imposition of a Lien or the posting of a bond or
other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title
IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA.

(g) Tax Filings and Expenses. The Issuer has filed all Federal, state and local tax
returns and all other tax returns which, to the knowledge of the Issuer, are required to be filed
(whether informational returns or not), and has paid all taxes due, if any, pursuant to said
returns or pursuant to any assessment received by the Issuer, except such taxes, if any, as are
being contested in good faith and for which adequate reserves have been set aside on its books.
The Issuer has paid all fees and expenses required to be paid by it in connection with the conduct
of its business, the maintenance of its existence and its qualification as a foreign trust
authorized to do business in each State in which it is required to so qualify, except where the
failure to pay any such fees and expenses is not reasonably likely to have a material adverse
effect.

(h) Full Disclosure. All certificates, reports, statements, documents and other
information furnished to the Collateral Agent by or on behalf of the Issuer pursuant to any
provision of this Security Agreement or any Program Document, or in connection with or pursuant to
any amendment or modification of, or waiver under, this Security Agreement or any Program Document,
shall, at the time the same are so furnished, be complete and correct to the extent necessary to
give the Collateral Agent true and accurate knowledge of the subject matter thereof in all material
respects, and the furnishing of the same to the Collateral Agent shall constitute a representation
and warranty by the Issuer made on the date the same are furnished to the Collateral Agent to the
effect specified herein.

(i) Investment Company Act; Trust Indenture Act; Securities Act. The Issuer is not,
and is not controlled by, an “investment company” within the meaning of, and is not required to
register as an “investment company” under, the Investment Company Act. It is not necessary in
connection with the offer, issuance and sale of the Senior Notes under the circumstances
contemplated in this Security Agreement to register any security under the Securities Act or to
qualify any indenture under the Trust Indenture Act.

(j) Regulations T, U and X. The proceeds of the Senior Notes will not be used to
purchase or carry any “margin stock” (as defined or used in the regulations of the Board of
Governors of the Federal Reserve System, including Regulations T, U and X thereof). The Issuer is
not engaged in the business of extending credit for the purpose of purchasing or carrying any
margin stock.

(k) No Consent. No consent, action by or in respect of, approval or other
authorization of, or registration, declaration or filing with, any Governmental Authority or other
Person is required for the valid execution and delivery of this Security Agreement or for the
performance of any of the Issuer’s obligations hereunder or under any other Program Document other
than such consents, approvals, authorizations, registrations, declarations or filings as shall have
been obtained by the Issuer prior to the date hereof or as contemplated in Section 3.01(n).

(l) Solvency. Both before and after giving effect to the transactions contemplated by
this Security Agreement and the other Program Documents, the Issuer is solvent within the meaning
of the Bankruptcy Code and the Issuer is not the subject of any voluntary or involuntary case or
proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy or insolvency law and no Event of Bankruptcy has occurred with respect to the
Issuer.

(m) Subsidiary. The Issuer has no subsidiaries and owns no capital stock of, or other
interest in, any other Person, and during the term of this Security Agreement, the Issuer shall not
acquire or otherwise come to have one or more subsidiaries without the prior consent of the
Collateral Agent (on behalf of the holders of the Senior Notes).

(n) Security Interests.

(i) All action necessary (including the filing of UCC-1 financing statements for the
Collateral Agent’s Lien for the benefit of the Secured Parties) to protect, perfect, and
maintain the first-priority status of, the Collateral Agent’s security interest in the
Collateral now in existence and hereafter acquired or created hereby has been duly and
effectively taken.

(ii) No security agreement, financing statement, equivalent security or lien instrument
or continuation statement listing the Issuer as debtor covering all or any part of the
Collateral is on file or of record in any jurisdiction, except such as may have been filed,
recorded or made by the Issuer in favor of the Collateral Agent on behalf of the Secured
Parties in connection with this Security Agreement.

(iii) This Security Agreement creates a valid and continuing Lien on the Collateral in
favor of the Collateral Agent on behalf of the Secured Parties, which Lien is prior to all
other Liens (other than Permitted Liens and as otherwise permitted in this Security
Agreement), and is enforceable as such as against creditors of and purchasers from the
Issuer in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors’ rights generally or by general equitable principles, whether
considered in a proceeding at law or in equity and by an implied covenant of good faith and
fair dealing. All action necessary to perfect such prior security interest has been duly
taken.

(iv) The Issuer’s principal place of business and chief executive office shall be at:
18400 Von Karman, Suite 1000, Irvine, CA 92612-1514. Except prior to the date hereof under
the name Von Karman Funding LLC, the Issuer does not transact, and has not transacted,
business under any other name. The Issuer’s exact legal name is the name set forth for it
on the signature page below.

(v) All authorizations in this Security Agreement for the Collateral Agent to endorse
checks, instruments and securities and to execute, deliver and file financing statements,
continuation statements, security agreements and other instruments with respect to the
Collateral are powers coupled with an interest and are irrevocable.

(vi) The representations and warranties contained in Schedule III hereof are
incorporated herein by reference as though they were fully stated herein.

(vii) The Issuer is, and at all times has been, a limited liability company or
statutory trust organized exclusively under the laws of the State of Delaware, with its
principal place of business being in the State of California.

(viii) 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.

(o) Offering Memorandum. No offering memorandum or information circular used by the
Issuer in connection with the offer or sale of the Senior Notes contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not misleading.

(p) Non-Existence of Other Agreements. As of the date of the issuance of the first
Secured Liquidity Notes, other than as permitted by Section 3.05(w) hereof (i) the Issuer
is not a party to any contract or agreement of any kind or nature and (ii) the Issuer is not
subject to any obligations or liabilities of any kind or nature in favor of any third party,
including, without limitation, Contingent Obligations.

(q) Eligible Mortgage Loans. Based upon the representation of the Seller in the
Mortgage Loan Purchase and Servicing Agreement, each Mortgage Loan purchased by the Issuer is an
Eligible Loan.

(r) Other Representations. All representations and warranties of the Issuer made in
each Program Document to which it is a party are true and correct and are repeated herein as though
fully set forth herein.

(s) Special Purpose Entity. The Issuer is a special purpose entity formed exclusively
to enter into the Program Documents and the transactions contemplated thereby or incident thereto.

Section 3.02 Additional Representations and Warranties of the Issuer. The Issuer
represents and warrants to the Collateral Agent and the other Secured Parties that:

(a) (i) At the date of each deposit of Deposited Funds in the Collateral Account, the Issuer
was, is or will then be the lawful owner of, and had, has or will then have good title to, such
Deposited Funds free and clear of all Liens except the lien and security interest granted pursuant
to this Security Agreement in favor of the Collateral Agent; and (ii) the Issuer is and will be the
lawful owner of, and has and will have beneficial ownership of, all Collateral, free and clear of
all Liens except the lien and security interest granted pursuant to this Security Agreement in
favor of the Collateral Agent.

(b) The Issuer will warrant and defend the Collateral Agent’s right, title and interest in and
to the Collateral, for the benefit of the Collateral Agent and the Secured Parties and the income,
distributions and proceeds thereof against the claims and demands of all Persons whomsoever.

Section 3.03 Issuer Agents and Depositary Agents. (a) With the delivery of this
Security Agreement, the Issuer is furnishing to the Collateral Agent, and from time to time
thereafter may furnish to the Collateral Agent, a certificate (hereinafter called an “Issuer
Incumbency Certificate”) of an authorized signatory of the Issuer certifying the incumbency and
specimen signatures of officers and agents (such officers and agents being hereinafter called the
“Issuer Agents”) of the Issuer authorized to act, and to give instructions and notices, on
behalf of the Issuer hereunder. Until the Collateral Agent receives a subsequent Issuer Incumbency
Certificate, or unless a Trust Officer of the Collateral Agent shall have actual knowledge of the
lack of authority of any individual, the Collateral Agent shall be entitled conclusively to rely on
the last such Issuer Incumbency Certificate delivered to it for purposes of determining the
authorized Issuer Agents.

(b) The Collateral Agent acknowledges that each of the Persons specified in Section 3(e) of
the Depositary Agreement shall be deemed to be an authorized “Authenticating Representative” and
“Designated Representative” for purposes hereof.

Section 3.04 Representations and Warranties of the Collateral Agent. The Collateral
Agent represents and warrants to the Issuer and the Secured Parties that it has been duly organized
and is validly existing and in good standing under the laws of the State of New York and that this
Security Agreement has been duly authorized, executed and delivered by it.

Section 3.05 Covenants of the Issuer.

(a) Payment of Senior Notes. The Issuer shall pay the principal of (and premium, if
any) and interest on the Senior Notes pursuant to the provisions of this Security Agreement.
Principal and interest shall be considered paid on the date due to the extent that the Collateral
Agent holds on that date money designated for and sufficient to pay the principal and interest then
due.

(b) Maintenance of Office or Agency. The Issuer will maintain an office or agency
(which may be an office of the Collateral Agent or Depositary) where Senior Notes may be
surrendered for registration of transfer or exchange, where notices and demands to or upon the
Issuer in respect of the Senior Notes and this Security Agreement may be served, and where, at any
time when the Issuer is obligated to make a payment of principal and premium upon the Senior Notes,
the Senior Notes may be surrendered for payment. The Issuer will give prompt written notice to the
Collateral Agent of the location, and any change in the location, of such office or agency. If at
any time the Issuer shall fail to maintain any such required office or agency or shall fail to
furnish the Collateral Agent with the address thereof, such presentations and surrenders may be
made or served at the offices of the Collateral Agent’s agent, C/O DTC Transfer Agent Services, 55
Water Street, Jeanette Park Entrance, New York, NY 10005.

The Issuer may also from time to time designate one or more other offices or agencies where
the Senior Notes may be presented or surrendered for any or all such purposes and may from time to
time rescind such designations. The Issuer will give prompt written notice to the Collateral Agent
of any such designation or rescission and of any change in the location of any such other office or
agency.

(c) Information. The Issuer will:

(i) promptly provide the Collateral Agent, each Swap Counterparty and the Rating
Agencies with all financial and operational information with respect to the Program
Documents or the Issuer as the Collateral Agent may reasonably request; and will promptly
provide the Rating Agencies, the Collateral Agent, each Swap Counterparty, the Indenture
Trustee (on behalf of the holders of Subordinated Notes), the SLN Placement Agents and the
Depositary with all statements delivered under the Interest Rate Swaps, this Security
Agreement and the Mortgage Loan Purchase and Servicing Agreement;

(ii) deliver to the Collateral Agent and each Swap Counterparty, if and when any member
of the ERISA Group (i) gives or is required to give notice to the PBGC of any “reportable
event” (as defined in Section 4043 of ERISA) with respect to any Benefit Plan which might
constitute grounds for a termination of such Benefit Plan under Title IV of ERISA, or knows
that the plan administrator of any Benefit Plan has given or is required to give notice of
any such reportable event, a copy of the notice of such reportable event given or required
to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Benefit
Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of
intent to terminate any Benefit Plan under Section 4041(c) of ERISA, a copy of such notice
and other information filed with the PBGC; (vi) gives notice of withdrawal from any Benefit
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any
payment or contribution to any Benefit Plan or Multiemployer Plan or in respect of any
Benefit Arrangement or makes any amendment to any Benefit Plan or Benefit Arrangement which
has resulted or could result in the imposition of a Lien or the posting of a bond or other
security, a certificate of the Administrator setting forth details as to such occurrence and
action, if any, which the Issuer or applicable member of the ERISA Group is required or
proposes to take;

(iii) provide the Collateral Agent (on behalf of the holders of the Senior Notes), the
Indenture Trustee (on behalf of the Subordinated Noteholders), and each Swap Counterparty
with access to the books and records of the Issuer, and the books and records of the
Servicer, the Custodian, the Depositary and the Collateral Agent relating to the assets of
the Issuer, without charge, but only (i) upon the reasonable request of any requesting Swap
Counterparty or the Collateral Agent (acting at the direction of the Required Senior
Noteholders (or, if the Senior Notes have been paid in full, the Required Subordinated
Noteholders)) (for which purpose one Business Day shall be deemed reasonable during the
occurrence and continuation of an Event of Default), (ii) during normal business hours,
(iii) subject to the relevant party’s normal security and confidentiality procedures and
(iv) at offices designated by the relevant party;

(iv) provide the Rating Agencies, the Collateral Agent, each Swap Counterparty, the SLN
Placement Agents, the Depositary, the Indenture Trustee (on behalf of the holders of the
Subordinated Notes) and the Collateral Agent with any information that it may have with
respect to an Event of Default hereunder or provide notice to the Collateral Agent of any
default or event of default under any other agreement between the Issuer and any of the
Seller, the Servicer, the Depositary, each Swap Counterparty or the Collateral Agent as
promptly as practicable after the Issuer becomes aware of the occurrence of any Event of
Default or other default or event of default;

(v) promptly furnish to the Collateral Agent (on behalf of the holders of the Senior
Notes), each Swap Counterparty, the Indenture Trustee (on behalf of the holders of the
Subordinated Notes) and the SLN Placement Agents after receipt thereof copies of all written
communications received from the Rating Agencies with respect to the Senior Notes;

(vi) promptly upon its knowledge thereof give notice to the Collateral Agent (on behalf
of the holders of the Senior Notes), the Indenture Trustee (on behalf of the holders of the
Subordinated Notes), each Swap Counterparty and the Rating Agencies of the existence of any
litigation against the Issuer;

(vii) give prompt notice to the Collateral Agent (on behalf of the holders of the
Senior Notes), each Swap Counterparty, the Rating Agencies, the Indenture Trustee (on behalf
of the holders of the Subordinated Notes) and the SLN Placement Agents of any material
change to the articles of incorporation or by-laws of the Seller; and

(viii) provide, on or prior to June 30 of each year beginning in 2006, to the
Collateral Agent, the SLN Placement Agents and each Swap Counterparty a certificate of the
Issuer certifying that the ratings assigned by the Rating Agencies in respect of any
outstanding Notes have not been withdrawn or downgraded since the date hereof.

Delivery of such reports, information and documents to the Collateral Agent, the Custodian or the
Depositary under this section is for informational purposes only and each recipient’s receipt of
such shall not constitute constructive notice of any information contained therein or determinable
from information contained therein, including the Issuer’s compliance with any of its covenants.

(d) Payment of Obligations. The Issuer will pay and discharge in a timely manner in
accordance with the terms of the Program Documents, at or before maturity, all of its respective
material obligations and liabilities, including, without limitation, tax liabilities and other
governmental claims, except where the same may be contested in good faith by appropriate
proceedings, will maintain, in accordance with GAAP, reserves as appropriate for the accrual of any
of the same, and will comply in all material respects with its obligations in the Program
Documents.

(e) Conduct of Business and Maintenance of Existence. The Issuer will maintain its
existence as a statutory trust validly existing and in good standing under the laws of the State of
Delaware and duly qualified as a foreign trust licensed under the laws of each state in which the
failure to so qualify would have a material adverse effect on the business and operations of the
Issuer.

(f) Compliance with Laws. The Issuer will comply in all respects with all
Requirements of Law and all applicable laws, ordinances, rules, regulations, and requirements of
Governmental Authorities (including, without limitation, ERISA and the rules and regulations
thereunder) except where the necessity of compliance therewith is contested in good faith by
appropriate proceedings and where such noncompliance would not materially and adversely affect the
condition, financial or otherwise, operations, performance, properties or prospects of the Issuer
or its ability to carry out the transactions contemplated in this Security Agreement and each other
Program Document; provided, however, such noncompliance will not result in a Lien
(other than a Permitted Lien) on any Assets of the Issuer.

(g) Inspection of Property, Books and Records. The Issuer will keep proper books of
record and account in which full, true and correct entries shall be made of all dealings and
transactions in relation to its Assets, business and activities in accordance with GAAP; and will
permit the Collateral Agent and its agents and representatives to visit and inspect any of its
properties, to examine and make abstracts from any of its books and records and to discuss its
affairs, finances and accounts with its representatives, employees and independent public
accountants, all at such reasonable times upon reasonable notice and as often as may reasonably be
requested.

(h) Compliance with Program Documents. The Issuer will perform and comply with each
and every obligation, covenant and agreement required to be performed or observed by it in or
pursuant to this Security Agreement and each other Program Document to which it is a party and will
not take any action which would permit any party to have the right to refuse to perform any of its
respective obligations under any Program Document.

(i) Notice of Defaults.

(i) Promptly upon becoming aware of any Potential Event of Default or Event of Default
under this Security Agreement, the Issuer shall give the Collateral Agent, each Swap
Counterparty, any SLN Placement Agent, the Depositary, the Indenture Trustee (on behalf of
the holders of the Subordinated Notes) and the Rating Agencies notice thereof, together with
a certificate of the Issuer setting forth the details thereof and any action with respect
thereto taken or contemplated to be taken by the Issuer.

(ii) Promptly upon becoming aware of any default under any Program Document other than
this Security Agreement, the Issuer shall give the Collateral Agent, any SLN Placement
Agent, each Swap Counterparty, the Depositary, the Indenture Trustee (on behalf of the
holders of the Subordinated Notes) and the Rating Agencies notice thereof.

(j) Notice of Material Proceedings. Promptly upon becoming aware thereof, the Issuer
shall give the Collateral Agent, each Swap Counterparty and the Rating Agencies written notice of
the commencement or existence of any proceeding by or before any Governmental Authority against or
affecting the Issuer which is reasonably likely to have a material adverse effect on the business,
condition (financial or otherwise), results of operations, properties or performance of the Issuer
or the ability of the Issuer to perform its obligations under this Security Agreement or under any
other Program Document to which it is a party.

(k) Further Requests. The Issuer will promptly furnish to the Depositary, the
Collateral Agent, any Swap Counterparty and the Rating Agencies such other information as, and in
such form as such Swap Counterparty, the Depositary, the Collateral Agent or the Rating Agencies
may reasonably request in connection with the transactions contemplated hereby.

(l) Further Assurances.

(i) The Issuer shall do such further acts and things, and execute and deliver to the
Depositary, the Collateral Agent, any Swap Counterparty and the Secured Parties such
additional assignments, agreements, powers and instruments, as the Depositary, the
Collateral Agent, such Swap Counterparty or the Required Senior Noteholders (or, if the
Senior Notes have been paid in full, the Required Subordinated Noteholders) reasonably
determine to be necessary to carry into effect the purposes of this Security Agreement or
the other Program Documents or to better assure and confirm unto the Depositary, the
Collateral Agent or the Secured Parties their rights, powers and remedies hereunder
including, without limitation, the filing of any financing statement, amendment statement or
continuation statement under the UCC in effect in any jurisdiction with respect to the liens
and security interests granted hereby. The Issuer also hereby acknowledges that the
Collateral Agent has the right but not the obligation to file any such financing statement,
amendment statement or continuation statement without further authorization of the Issuer to
the extent permitted by applicable law. If any amount payable under or in connection with
any of the Collateral shall be or become evidenced by any promissory note, chattel paper or
other instrument, such note, chattel paper or instrument shall be deemed to be held in trust
and immediately pledged and physically delivered to the Collateral Agent hereunder, and
shall, subject to the rights of any Person in whose favor a prior Lien has been perfected,
be duly endorsed in a manner satisfactory to the Collateral Agent and delivered to the
Collateral Agent promptly. Without limiting the generality of the foregoing provisions of
this Section 3.05(1), the Issuer shall take all actions that are required to
maintain the security interest of the Collateral Agent on behalf of the Secured Parties in
the Collateral pledged pursuant to this Security Agreement as a perfected security interest
subject to no prior Liens, including, without limitation, filing all UCC financing
statements, continuation statements and amendments thereto necessary to achieve the
foregoing. The Issuer further agrees that it will not, without Rating Agency Confirmation
and the prior written consent of the Collateral Agent and each Swap Counterparty, exercise
any right, remedy, power or privilege available to it with respect to any obligor under the
Collateral, take any action to compel or secure performance or observance by any obligor of
its obligations to the Issuer, or give any consent, request, notice, direction, approval,
extension or waiver with respect to any obligor, except as otherwise expressly permitted by
the Program Documents. Notwithstanding anything herein to the contrary, the Collateral
Agent shall be under no obligation to file or prepare any financing statement or
continuation statement or to take any action or to execute any further documents or
instruments in order to create, preserve, or perfect the security interest granted herein,
such obligations being solely the obligations of the Issuer.

(ii) The Issuer will warrant and defend the Collateral Agent’s right, title and
interest in and to the Collateral and the income, distributions and proceeds thereof, for
the benefit of the Collateral Agent on behalf of the Secured Parties, against the claims and
demands of all Persons whomsoever.

(iii) The Issuer will provide to the Collateral Agent and the Swap Counterparties, no
more frequently than on June 30 of each year, an Opinion of Counsel to the effect that no
UCC financing or continuation statements are required to be filed with respect to any of the
Collateral in which a security interest may be perfected by the filing of UCC financing
statements.

(m) Certain Documents. The Issuer will not take any action that would permit (i) the
Seller or the Servicer to refuse to perform any of their respective obligations under the Program
Documents or (ii) the Depositary to refuse to perform its obligations under any Program Documents
to which it is a party. The Issuer will not terminate the SLN Placement Agent Agreement or the
Depositary Agreement before entering into a secured liquidity note placement agreement or
depositary agreement, as the case may be, which is substantially similar to the SLN Placement Agent
Agreement or the Depositary Agreement, as the case may be.

(n) Liens. The Issuer will not create, incur, assume or permit to exist any Lien upon
any of its Assets (including the Collateral), other than (i) Liens in favor of the Collateral Agent
for the benefit of the Secured Parties, (ii) Permitted Liens, (iii) Liens permitted under the
Program Documents and (iv) liabilities for services supplied or furnished to the Issuer (including
reasonable accountants’ and attorneys’ fees); provided, that the aggregate amount of the
liabilities described in subpart (iv) shall not exceed $500,000 at any one time outstanding.

(o) Other Indebtedness. The Issuer will not create, assume, incur, suffer to exist or
otherwise become or remain liable in respect of any Indebtedness other than (i) Indebtedness
hereunder and (ii) Indebtedness permitted under any other Program Document.

(p) Mergers. The Issuer will not merge or consolidate with or into any other Person.

(q) Sales of Assets. The Issuer will not sell, lease, transfer, liquidate or
otherwise dispose of any Assets, except as contemplated by the Program Documents.

(r) Capital Expenditures. The Issuer will not make any expenditure (by long-term or
operating lease or otherwise) for, or otherwise own, capital assets (both realty and personalty).

(s) Dividends. The Issuer shall not make any distributions to any holders of its
securities without the consent of each Swap Counterparty and the Collateral Agent, acting at the
direction of the Required Senior Noteholders (or, if the Senior Notes have been paid in full, the
Required Subordinated Noteholders) except as provided under the Program Documents.

(t) Name; Principal Office. The Issuer will neither (a) change the location of its
organization, chief executive office or principal place of business (within the meaning of the
applicable UCC) without sixty (60) days’ prior written notice to the Depositary and the Collateral
Agent, (b) change its name, (c) change its identity or jurisdiction of organization, nor (d) become
bound as a debtor under Section 9-203(d) of the Uniform Commercial Code by a security agreement
previously entered into by another person or entity without prior written notice to the Depositary
and the Collateral Agent sufficient to allow it to make all filings (including filings of financing
statements on form UCC-1) and recordings necessary to maintain the perfection of the interest of
the Collateral Agent on behalf of the Secured Parties in the Collateral pursuant to this Security
Agreement. In the event that the Issuer desires to so change its office or change its name, the
Issuer will make any required filings and prior to actually changing its office or its name the
Issuer will deliver to the Collateral Agent, each Swap Counterparty and the Depositary (i) an
Officer’s Certificate and (except with respect to a change of the location of the Issuer’s chief
executive office or principal place of business to a new location in the same county) an Opinion of
Counsel confirming that all required filings have been made to continue the perfected interest of
the Collateral Agent on behalf of the Secured Parties in the Collateral in respect of the new
office or new name of the Issuer and (ii) copies of all such required filings with the filing
information duly noted thereon by the office in which such filings were made.

(u) Organizational Documents. The Issuer will not amend any of its organizational
documents, including its certificate of trust or Trust Agreement, unless, prior to such amendment,
Rating Agency Confirmation shall have been obtained and the Collateral Agent and each Swap
Counterparty consent to such amendment.

(v) Investments. The Issuer will not make, incur, or suffer to exist any loan,
advance, guarantee, extension of credit or other investment in any Person other than pursuant to
the Program Documents and with respect to Eligible Investments and, in addition, without limiting
the generality of the foregoing, the Issuer will not direct the Collateral Agent to make any
Eligible Investments on the Issuer’s behalf that would have the effect of causing the Issuer to be
an “investment company” within the meaning of the Investment Company Act.

(w) No Other Agreements. The Issuer will not (a) enter into or be a party to any
agreement or instrument other than any Program Document, agreements entered into in the ordinary
course of its business or documents and agreements incidental thereto or (b) except as provided for
in Section 10.01, amend, modify or waive any provision of any Program Document to which it
is a party, or (c) give any approval or consent or permission not provided for in any Program
Document.

(x) Other Business. The Issuer will not engage in any business or enterprise or enter
into any transaction other than (i) as contemplated by the Program Documents or (ii) activities
related to or incidental to any of the foregoing.

(y) Secured Liquidity Notes. The Issuer shall not issue Secured Liquidity Notes to
the Seller, any Affiliate of the Seller or any trust or other entity to which the Seller or any
Affiliate of the Seller is a depositor or servicer bearing interest (or at a discount) in excess of
a commercially reasonable rate.

(z) Rule 144A Information Requirement. For so long as any of the Notes remain
outstanding and are “restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, the Issuer covenants and agrees that it shall, during any period in which it is not
subject to Section 13 or 15(d) under the Exchange Act, make available to any holder
of Notes in connection with any sale thereof and any prospective purchaser of Notes from such
holder of Notes in each case upon request, the information specified in, and meeting the
requirements of, Rule 144A(d)(4) under the Securities Act.

(aa) Use of Proceeds of Notes. The Issuer shall use the proceeds of Notes solely for
one or more of the following purposes: (a) to pay the Issuer’s Obligations when due, in accordance
with this Security Agreement; and (b) to acquire Eligible Loans from the Seller.

(bb) Program Document Information. The Issuer shall, or shall cause the Seller or
Servicer to, provide the Collateral Agent and each Swap Counterparty with copies of all reports,
notices, statements and certificates delivered under the Program Documents, and any other
information that the Collateral Agent or each Swap Counterparty shall reasonably request. Delivery
of such reports, notices, information and documents to the Collateral Agent under this section and
Section 3.05(z) is for informational purposes only and the Collateral Agent’s receipt of
such shall not constitute constructive notice of any information contained therein or determinable
from information contained therein, including the Issuer’s compliance with any of its covenants.

(cc) Non-Petition Agreement. The Issuer shall cause each party to the Program
Documents and each party to any other document incidental or related to any Program Document, to
covenant and agree 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 latest
maturing Note, 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.

ARTICLE IV

SECURED LIQUIDITY NOTES

Section 4.01 Conditions to Effectiveness. The ability of the Issuer to issue Secured
Liquidity Notes shall commence on the first day (the “Effective Date”) on which all of the
following conditions have been satisfied (or waived in accordance with this Security Agreement):

(a) Depositary Agreement. The Issuer and the Depositary shall have executed and
delivered the Depositary Agreement, which shall be in full force and effect, and the Collateral
Agent shall have received a fully executed counterpart thereof.

(b) Mortgage Loan Purchase and Servicing Agreement. The Seller, the Performance
Guarantor and the Issuer shall have executed and delivered the Mortgage Loan Purchase and Servicing
Agreement, which shall be in full force and effect, and the Collateral Agent shall have received a
fully executed counterpart thereof.

(c) Indenture and Subordinated Note Purchase Agreement. The Issuer and the Indenture
Trustee shall have executed and delivered the Indenture, and the Collateral Agent shall have
received a fully executed copy thereof, which shall be in full force and effect. The Issuer and
the Initial Purchaser of the Subordinated Notes shall have executed and delivered the Subordinated
Note Purchase Agreement, and the Collateral Agent shall have received a fully executed copy
thereof, which shall be in full force and effect, and the closing thereunder shall have occurred
(including the purchase of the Subordinated Notes by such purchaser). The Subordinated Notes shall
have been issued in an aggregate Principal Amount of not less than $105,000,000.

(d) [RESERVED]

(e) Trust Agreement. The Owner Trustee and the Administrator shall have executed and
delivered the Trust Agreement, and the Collateral Agent shall have received a fully executed copy
thereof, which shall be in full force and effect. A copy of each closing document delivered under
the Trust Agreement shall have been delivered to the Collateral Agent.

(f) Security Agreement. The Issuer and the Collateral Agent shall have executed and
delivered this Security Agreement, which shall be in full force and effect, and the Collateral
Agent shall have received a fully executed counterpart thereof.

(g) Custodial Agreement. The Issuer, the Seller, the Collateral Agent and the
Custodian shall have executed and delivered the Custodial Agreement, which shall be in full force
and effect, and the Collateral Agent shall have received a fully executed counterpart thereof.

(h) SLN Placement Agent Agreement. The Issuer and the SLN Placement Agents shall have
executed and delivered the SLN Placement Agent Agreement in respect of the Secured Liquidity Notes,
which shall be in full force and effect, and the Collateral Agent shall have received a fully
executed counterpart thereof.

(i) No Event of Default or Servicer Event of Default. No Event of Default or Servicer
Event of Default shall have occurred and be continuing on the Effective Date nor will any Event of
Default or Servicer Event of Default result from the consummation of the initial issuance of
Secured Liquidity Notes on such date.

(j) Representations and Warranties. All representations and warranties of (i) the
Issuer contained in this Security Agreement and in the other Program Documents or in any document,
certificate or financial or other statement delivered in connection herewith or therewith, (ii) the
Servicer contained in the Servicer Documents, and (iii) the Seller contained in the Seller
Documents shall be true and correct in all material respects and with the same force and effect as
though such representations and warranties had been made as of the Effective Date.

(k) Opinions of Counsel. The Collateral Agent shall have received signed opinions,
addressed to the Collateral Agent from Mayer, Brown, Rowe & Maw LLP, special counsel to the Seller
and the Issuer, and an opinion of counsel for each Swap Counterparty (which may be an opinion from
in-house counsel to such Swap Counterparty), as to such matters as the Collateral Agent may
reasonably request. The Collateral Agent shall have also received a copy, addressed to the
Collateral Agent or if not addressed to the Collateral Agent, then the Collateral Agent shall have
received a letter stating that the Collateral Agent shall be entitled to rely thereon, of each
opinion delivered to the Rating Agencies in connection with the rating of the Secured Liquidity
Notes.

(l) Closing Certificates. The Collateral Agent shall have received a certificate
dated the date hereof and executed by the chairman of the board, vice chairman of the board,
president, the Administrator, any vice president, secretary, treasurer, assistant secretary or any
assistant treasurer (or a Person with a delegation of authority from any such officer) of (i) the
Issuer stating that all of the conditions with respect to the Issuer specified in Section
4.01 are then satisfied, (ii) the Servicer stating that the conditions with respect to the
Servicer specified in Section 4.01 are then satisfied, and (iii) the Seller stating that
the conditions with respect to the Seller specified in Section 4.01 are then satisfied.

(m) Filings, etc. All filings (including, without limitation, pursuant to the UCC)
and recordings shall have been accomplished with respect to this Security Agreement in such
jurisdictions as may be required by law to establish, perfect, protect and preserve the rights,
titles, interests, remedies, powers, privileges, first priority liens and security interests of the
Collateral Agent in the Collateral covered by this Security Agreement and any giving of notice or
the taking of any other action to such end (whether similar or dissimilar) required by law shall
have been given or taken (it being understood that no filings of Assignments of Mortgages relating
to the Mortgage Loans purchased by the Issuer will generally be required). On or prior to the
Effective Date, the Collateral Agent shall have received satisfactory evidence as to any such
filing, recording, registration, giving of notice or other action so taken or made.

(n) Issuer Documents. The Collateral Agent shall have received copies of the
organizational documents of the Issuer and the Seller, Board of Directors resolutions or similar
authorizing resolutions of the Issuer and the Seller in respect of the Program Documents, as
applicable, and incumbency certificates of the Issuer and the Seller, all certified by appropriate
authorities.

(o) Bank Accounts. The Collateral Account, the Collection Account, the Allocated
Expense Account, the Extended Note Distribution Account and the Secured Liquidity Note Account
shall have been established.

(p) Accounting Letter. The Collateral Agent shall have received a letter from a
“big-four” accounting firm as to the accuracy of the information reviewed by them.

(q) Secured Liquidity Notes Ratings. The Secured Liquidity Notes shall have been
rated “A-l+” by S&P and “P-1” by Moody’s, the Collateral Agent shall have received a copy of each
letter evidencing any such rating and such ratings shall continue in full force and effect on the
Effective Date.

(r) Other Instruments and Documents. The Collateral Agent shall have received such
other instruments and documents as the Collateral Agent may have reasonably requested, and all
instruments and documents delivered pursuant to this Section 4.01 shall be reasonably
satisfactory in form and substance to the Collateral Agent.

(s) Fees. The fees and expenses of the Depositary, the Custodian, the Owner Trustee,
the Indenture Trustee and the Collateral Agent, and the fees and expenses of their counsel, and the
up-front fees payable to the Rating Agencies, shall have been paid on or prior to the Effective
Date.

(t) Effective Date. The Issuer shall have given notice to the Collateral Agent and
the Depositary of the Effective Date, in the form of a certificate in the form of Exhibit A
hereto.

(u) Interest Rate Swaps. The Issuer and each Swap Counterparty shall have executed
and delivered the applicable Interest Rate Swap, which shall be in full force and effect, and the
Collateral Agent shall have received a fully executed counterpart thereof. No Additional
Termination Event (as defined in the Interest Rate Swaps) shall have occurred and be continuing.

(v) Reserve Fund. The Collateral Agent shall have received evidence not later than
the date on which the Issuer first purchases a Mortgage Loan under the Mortgage Loan Purchase and
Servicing Agreement that the Reserve Fund has been established and funded in an amount equal to the
Required Reserve Fund Amount.

Section 4.02 Issuance of Secured Liquidity Notes. The issuance and payment provisions
of the Secured Liquidity Notes, to the extent not covered in this Security Agreement, will be as
set forth in the Depositary Agreement.

(a) The Issuer shall have the right to issue or deliver Classes of Secured Liquidity Notes
from time to time on and after the Effective Date, unless (i) any condition precedent
specified in Section 4.03 with respect to the issuance of Classes of Secured Liquidity
Notes has not been satisfied or waived or (ii) the issuance of Classes of Secured Liquidity Notes
is prohibited by the provisions of Section 4.02(c) hereof. If any of the events described
in clauses (i) and (ii) of the immediately preceding sentence has occurred, then the Issuer shall
not direct the Collateral Agent or the Depositary to issue or deliver Classes of Secured Liquidity
Notes.

(b) The Issuer agrees that each note constituting Secured Liquidity Notes shall (i) be in the
form attached to the Depositary Agreement and be completed in accordance with this Security
Agreement and the Depositary Agreement, (ii) be dated the date of issuance thereof, (iii) be made
payable to the order of a named payee or bearer, (iv) be in a face amount (if issued on a discount
basis) or a principal amount (if issued on an interest-bearing basis) of $250,000 or an integral
multiple of $1,000 in excess thereof and (v) be exempt from or sold in a transaction exempt from
the registration requirements of the Securities Act. Subject to the provisions of the Depositary
Agreement, all Secured Liquidity Notes shall be delivered and issued against payment therefor in
collected funds which are immediately available on the date of issuance, and otherwise in
accordance with the terms of this Security Agreement and the Depositary Agreement.

(c) After their initial sale, the Secured Liquidity Notes and Extended Notes may be resold
only (1) to the Issuer, to an SLN Placement Agent or any other authorized placement agent that is
registered as a broker/dealer under the Exchange Act, (2) through an SLN Placement Agent to (a) an
institutional accredited investor as that term is defined in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act or (b) a qualified institutional buyer (as defined in Rule
144A) in a transaction meeting the requirements of Rule 144A, or (3) to a qualified institutional
buyer in a transaction meeting the requirements of Rule 144A.

In furtherance of the foregoing, each purchaser of a Secured Liquidity Note will be deemed to
have represented and agreed as follows: (1) the purchaser understands that the Secured Liquidity
Notes are being issued only in transactions not involving any public offering within the meaning of
the Securities Act; (2) the purchaser is either (a) an institutional investor who (i) is an
“accredited investor” as that term is defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act (or is a fiduciary or agent (other than a U.S. bank or savings and loan
association) that is purchasing the Secured Liquidity Notes either for its own account or for the
account of one or more institutional accredited investors), (ii) has such knowledge and experience
(or is a fiduciary or agent with sole investment discretion having such knowledge and experience)
in financial and business matters that it (or such fiduciary or agent) is capable of evaluating the
merits and risks of investing in such Secured Liquidity Note, (iii) has had access to such
information (including without limitation information with respect to the Mortgage Loans and the
Swap Counterparties) as the purchaser deems necessary in order to make an informed investment
decision, and (iv) is purchasing the Secured Liquidity Notes for investment and not with a view to
distribution; or (b) in the case of sales of Secured Liquidity Notes pursuant to Rule 144A under
the Securities Act, a qualified institutional buyer as defined in Rule 144A (or a qualified
institutional buyer purchasing the Secured Liquidity Notes on behalf of one or more other qualified
institutional buyers); (3) if in the future the purchaser (or any such other investor or any other
fiduciary or agent representing such investor) decides to sell such Secured Liquidity Notes prior
to maturity, such Notes will be sold only in a transaction exempt from registration under the
Securities Act and only to (i) the Issuer or an SLN Placement Agent or through an SLN Placement
Agent to an investor reasonably believed by an SLN Placement Agent to be an institutional
accredited investor or a qualified institutional buyer or (ii) a qualified institutional buyer in a
transaction made pursuant to Rule 144A under the Securities Act; (4) the purchaser understands
that, although the Issuer and the SLN Placement Agents may repurchase the Secured Liquidity Notes
or Extended Notes the Issuer and the SLN Placement Agents are not obligated to do so, and
accordingly the purchaser (or any such other investor) should be prepared to hold such Secured
Liquidity Notes or Extended Notes until their Final Maturity; (5) if the purchaser is a qualified
institutional buyer, the purchaser acknowledges that the Secured Liquidity Notes sold to the
purchaser by an SLN Placement Agent may be sold to it pursuant to Rule 144A; and (6) either (i) the
purchaser is not, and is not acquiring the Secured Liquidity Note for, on behalf of or using the
assets of a Benefit Plan or any other employee benefit plan or retirement arrangement that is
subject to a law that is similar to Section 406 of ERISA or Section 4975 of the Code, or (ii)
assuming that the Secured Liquidity Notes are treated as indebtedness without substantial equity
features for purposes of the “plan asset” regulations under ERISA, the purchaser’s purchase,
holding and disposition of the Secured Liquidity Notes will not constitute a non-exempt “prohibited
transaction” under Section 406 of ERISA, Section 4975 of the Code or any similar or applicable law
by reason of the application of one or more statutory or administrative exemptions from such
prohibited transaction rules or otherwise.

(d) In the event that (i) an injunction suspending the issuance of Secured Liquidity Notes
shall have been issued or proceedings therefor shall have been initiated by the Securities and
Exchange Commission, (ii) the Issuer or any other Person shall have been found in a judicial or
administrative proceeding to have violated the Securities Act in connection with the issuance of
the Secured Liquidity Notes, or (iii) the Issuer or the SLN Placement Agents shall have filed a
registration statement with the Securities and Exchange Commission seeking to register the Secured
Liquidity Notes under the Securities Act, then, in any such event, the Issuer shall not thereafter
issue or sell any Secured Liquidity Notes. The Issuer shall give the Collateral Agent, the SLN
Placement Agents, the Depositary, each Swap Counterparty and the Rating Agencies notice of any of
the events described in this Section 4.02(d).

Section 4.03 Conditions Precedent to Issuance of Secured Liquidity Notes. The right
of the Issuer to issue Secured Liquidity Notes is subject to the conditions that at the time of
each such issuance and after giving effect thereto:

(a) Ratings. The Secured Liquidity Notes shall be rated “A-1+” by S&P, and “P-1” by
Moody’s.

(b) No Event of Default. No event of default under any Program Document and no Event
of Default and no Termination Event shall have occurred and be continuing and the Issuer shall have
made a determination that no event of default under any Program Document and no Event of Default
and no Termination Event will result from the issuance of such Secured Liquidity Notes.

(c) Representations and Warranties. All representations and warranties of the Issuer
contained in this Security Agreement and in the other Program Documents or in any document,
certificate or financial or other statement delivered in connection herewith or therewith shall be
true and correct in all material respects with the same force and effect as though such
representations and warranties had been made on and as of the day of such issuance.

(d) Accounts. The Reserve Fund, the Collateral Account, the Collection Account, the
Extended Notes Distribution Account and the Secured Liquidity Note Account, and any funds on
deposit in, or otherwise to the credit of, the Reserve Fund, Collateral Account, the Collection
Account, the Extended Notes Distribution Account and the Secured Liquidity Note Account shall not
be subject to any writ, order, stay, judgment, warrant of attachment or execution or similar
process.

(e) Borrowing Base. After giving effect to such issuance of Secured Liquidity Notes
on such day, the payment of Secured Liquidity Notes maturing or matured on such day, the payment of
outstanding Extended Notes on such day, the issuance of the Subordinated Notes on such day, the
payment of outstanding Subordinated Notes maturing or matured on such day and the purchase of
additional Mortgage Loans on such day, the sum of (A) the Credits Outstanding on such day and (B)
the Principal Amount of all Series of Subordinated Notes including the aggregate amount, if any, of
Principal Amount Charge-Offs which have not been reinstated as of such date, will not exceed the
sum of (A) the excess of the Outstanding Purchase Price of Mortgage Loans over the Outstanding
Purchase Price of any Defaulted Loans owned by the Issuer on such day, (B) the Capitalized Interest
Component on such day, and (C) any cash and Eligible Investments in the Collateral Account held by
the Issuer on such day (to the extent not included in the definition of Credits Outstanding). At
no time shall the aggregate principal amount of the Secured Liquidity Notes, Extended Notes and
Subordinated Notes then outstanding be greater than the then-current Program Utilization Amount.

(f) Downgrade. No downgrade, qualification or withdrawal of the long-term unsecured
debt rating of any Swap Counterparty below “AA-” by S&P, “Aa3” by Moody’s or, if rated by Fitch,
“AA-” by Fitch or of its short-term unsecured debt rating below “A-1+” by S&P, “P-1” by Moody’s or,
if rated by Fitch, “F1+” by Fitch shall have occurred and be continuing.

(g) Mortgage Loans Purchased. The aggregate amount of all Mortgage Loans purchased
and held by the Issuer at any given time does not, and will not, exceed the maximum amount set
forth in the Mortgage Loan Purchase and Servicing Agreement.

(h) Mortgage Loans Sold. The Issuer shall be in compliance with the Portfolio Aging
Limitations, the Portfolio Criteria and the Wet Funded Loan Limitation.

(i) SLN Maturity. Each Secured Liquidity Note has an Expected Maturity that is not
more than one hundred and eighty (180) calendar days after its issuance date and a Final Maturity
that is one hundred and eighty (180) calendar days after its Expected Maturity.

(j) No Extended Notes. No Extended Notes are outstanding unless after giving effect
to such new issuance of Secured Liquidity Notes sufficient funds will be available to fully repay
(x) all outstanding Extended Notes and (y) all Secured Liquidity Notes maturing on such date.

The Issuer hereby agrees that each issuance of Secured Liquidity Notes constitutes a
representation and warranty by the Issuer that the conditions specified above are then satisfied
and will be satisfied immediately after giving effect thereto.

Section 4.04 Conversion to Extended Notes. (a) Upon the failure of any Class of
Secured Liquidity Notes to be fully paid on its Expected Maturity, without any notice or other
further action by any Person, the Issuer shall be deemed to have advised the Clearing Agency that
such Class of Secured Liquidity Notes has been converted, as of such Expected Maturity, to a Class
of Extended Notes.

(b) Upon any such conversion with respect to any Class of Secured Liquidity Notes, the
Collateral Agent shall notify the Depositary of such conversion to a Class of Extended Notes. The
initial aggregate principal amount of each Class of Extended Notes deemed issued upon conversion of
the related Class of Secured Liquidity Notes shall be equal to the aggregate face amount of such
Class of Secured Liquidity Notes (or, in the case of Secured Liquidity Notes issued on an interest
bearing basis, the aggregate principal and accrued interest of such Class of Secured Liquidity
Notes). The Issuer shall provide written notice to the Rating Agencies and each Swap Counterparty
of any conversion of a Class of Secured Liquidity Notes to a Class of Extended Notes.

Section 4.05 Proceeds. The proceeds of Secured Liquidity Notes shall be used by the
Issuer only to (i) acquire Mortgage Loans, (ii) pay matured and maturing Secured Liquidity Notes,
including interest and/or discount thereon, (iii) pay outstanding Extended Notes, including
interest thereon, in accordance with the terms of the Program Documents, and (iv) make payments in
accordance with Sections 2.01 and 6.03 hereof.

Section 4.06 Calculation of Extended Note Interest. (a) For purposes of calculating
the Extended Note Rate for each Class of Extended Notes, the Issuer hereby appoints the Collateral
Agent as the Extended Note Calculation Agent. The Extended Note Calculation Agent may be removed
by the Issuer at any time. If the Extended Note Calculation Agent is unable or unwilling to act as
such or is removed by the Issuer, or if the Extended Note Calculation Agent fails to determine the
Extended Note Rate for each Class of Extended Notes and the Aggregate Extended Note Monthly
Interest for any Interest Period, the Issuer will promptly appoint as a replacement Extended Note
Calculation Agent a leading bank which is engaged in transactions in Eurodollar deposits in the
international Eurodollar market. The Extended Note Calculation Agent may not resign its duties
without a successor having been duly appointed by the Issuer.

(b) LIBOR shall be determined by the Extended Note Calculation Agent in accordance with the
following provisions:

(i) On the second Business Day prior to the commencement of the applicable Interest
Period (or, in the case of the initial Interest Period, on the related Expected Maturity)
(each such day, a “LIBOR Determination Date”), “LIBOR” shall equal the rate, as
obtained by the Extended Note Calculation Agent, for one-month Eurodollar deposits which
appears on Telerate Page 3750 (as defined in the publication “2000 ISDA Definitions”
published by the International Swaps and Derivatives Association, Inc.) 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 Extended 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 Extended Note Calculation Agent
by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the
LIBOR Determination Date made by the Extended Note Calculation Agent to the Reference Banks.
If, on any LIBOR Determination Date, at least two of the Reference Banks provide such
quotations, LIBOR shall equal such arithmetic mean of such quotations. If, on any LIBOR
Determination Date, only one 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 Extended Note Calculation Agent are quoting on the
relevant LIBOR Determination Date for one-month Eurodollar deposits in an amount determined
by the Extended Note Calculation Agent by reference to the principal London offices of
leading banks in the London interbank market; provided, however, that if the
Extended 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 Extended 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 Extended Note Calculation Agent will cause the Extended Note Rate for the
next Interest Period and the applicable Aggregate Extended Note Monthly Interest for such Interest
Period payable in respect of the Extended Notes on the related Distribution Date to be given to the
Issuer, the Depositary and any paying agent. The Extended Note Calculation Agent will also specify
to the Issuer and the Depositary the quotations upon which the Extended Note Rate is based, and in
any event the Extended 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 Extended Note Rate and the applicable Aggregate Extended Note Monthly Interest or
(ii) it has not determined and is not in the process of determining the Extended Note Rate and the
applicable Aggregate Extended Note Monthly Interest, together with its reasons therefor. For the
sole purpose of calculating the Extended 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 4.07 Payment of Extended Note Interest. (a) The discount representing
interest on each Secured Liquidity Note will be payable pursuant to the terms of the Depositary
Agreement on the related Expected Maturity or redemption date (if such Secured Liquidity Note is
redeemed prior to such Expected Maturity in accordance with Section 7.02 hereof) with funds
provided therefor pursuant to Section 6.03 of this Security Agreement; provided,
however, that if such funds provided under this Security Agreement are insufficient to
repay the face amount of all outstanding Secured Liquidity Notes having the same Expected Maturity
on such Expected Maturity, then no interest will be paid in respect of such Classes on such date
and such Classes shall thereupon be converted into Extended Notes pursuant to Section 4.04
hereof. With respect to the payment of interest on the Extended Notes, on each Distribution Date
commencing with the second Distribution Date following such Expected Maturity, the Collateral
Agent, in accordance with a certificate or other statement based upon the Servicer Report, shall
withdraw the amounts required to be withdrawn from the Collateral Account and deposit such amounts
in the Extended Notes Distribution Account, maintained with the Depositary, pursuant to this
Section 4.07 in respect of all funds available for such Interest Period and allocated to
the holders of the Extended Notes pursuant to Section 6.03(b) of this Security Agreement.

On each Determination Date, the Collateral Agent shall notify the Depositary and the Servicer
in writing as to the amount to be withdrawn and paid pursuant to this Section 4.07 from the
Collateral Account to the extent funds are anticipated to be available and allocable to the
Extended Notes in respect of (x) first, an amount equal to Extended Note Monthly Interest for the
related Interest Period and (y) second, an amount equal to the amount of any unpaid Extended Note
Shortfall as of the preceding Distribution Date (together with any accrued interest on such
Extended Note Shortfall). If the amounts described in this Section 4.07 are not sufficient
to pay Extended Note Monthly Interest on any Distribution Date, payments of interest to the holders
of Extended Notes will be reduced on a pro rata basis by the amount of such deficiency. The
aggregate amount, if any, of such deficiency on any Distribution Date shall be referred to as the
“Extended Note Shortfall.” Interest shall accrue on the Extended Note Shortfall at the Extended
Note Rate. On each Distribution Date, the Collateral Agent shall withdraw the amounts described in
this Section 4.07 from the Collateral Account and deposit such amounts in the Extended
Notes Distribution Account.

Section 4.08 Payment of Senior Note Principal. The principal in respect of each
Secured Liquidity Note will be payable pursuant to the terms of the Depositary Agreement on the
related Expected Maturity or redemption date (if such Secured Liquidity Note is redeemed prior to
such Expected Maturity in accordance with Section 7.02 hereof) with funds provided therefor
pursuant to Section 6.03 of this Security Agreement; provided, however,
that if such funds provided under this Security Agreement are insufficient to repay the face amount
of all outstanding Secured Liquidity Notes having the same Expected Maturity on such Expected
Maturity, then no principal will be paid in respect of such Classes on such date and such Classes
shall thereupon be converted into Extended Notes pursuant to Section 4.04 hereof;
provided, further, the principal in respect of the Secured Liquidity Notes may only
be paid if no Extended Notes would be outstanding after giving effect to all payments made on such
date. The principal in respect of any Extended Note (x) upon at least five Business Days’ notice
to DTC, the Depositary and the Collateral Agent, may be paid in whole, but not in part, on any day
at the option of the Issuer to the extent of available principal payments on the Mortgage Loans,
sale proceeds in respect of the Mortgage Loans, payments to the Issuer under the Interest Rate
Swaps in respect of the Mortgage Loans and proceeds from the issuance of new Classes of Secured
Liquidity Notes, provided that after giving effect to all payments made on such date no
outstanding Class of Extended Notes has the same or an earlier Final Maturity and (y) unless
earlier redeemed, will be repaid in full on the Final Maturity of such Extended Note. With respect
to each Class of Extended Notes, on the applicable principal payment date, in accordance with a
certificate or other statement based upon the related report generated by the Servicer, the
Collateral Agent shall withdraw the amount set forth therein as principal payable in respect of the
applicable Class of Extended Notes from the Collateral Account and deposit such amount in the
Extended Notes Distribution Account maintained with the Depositary, to be paid to the holders of
the applicable Class of Extended Notes on such date. On the Determination Date prior to the
related Final Maturity, the Collateral Agent shall notify the Servicer in writing as to the amount
of remaining principal outstanding in respect of the applicable Class of Extended Notes. On each
Final Maturity, in accordance with the related Servicer Report, the Collateral Agent shall withdraw
such amount of remaining principal in respect of the applicable Class of Extended Notes from the
Collateral Account and deposit such amount in the Extended Notes Distribution Account maintained
with the Depositary, to be paid to the holders of the applicable Class of Extended Notes. The
remaining entire principal amount (plus accrued interest thereon) of all Extended Notes of a Class
shall be due and payable on the applicable Final Maturity.

Section 4.09 Series Program Size of the Secured Liquidity Notes and Extended Notes.
The “Series Program Size” with respect to the Secured Liquidity Notes and Extended Notes,
collectively, as of the date hereof, shall be the Senior Notes Utilization Amount, such Senior
Notes Utilization Amount not to exceed $1,895,000,000 (for purposes of this paragraph, the “Series
Program Size Cap”) (as such Series Program Size Cap may be increased or decreased following the
Effective Date in accordance with the Program Documents). The Issuer may, with the consent of each
Swap Counterparty and the Collateral Agent, increase or decrease the Series Program Size Cap;
provided, however, that no increase or decrease in the Series Program Size Cap may
be made unless (i) after giving effect to such increase or decrease, the aggregate maximum notional
amount of the Interest Rate Swaps shall be at least equal to the Program Size and (ii) in the case
of an increase, the Issuer shall obtain written confirmation from each of the Rating Agencies that
such increase shall not cause the reduction or withdrawal of any rating on any Series of Senior
Notes or Subordinated Notes.

Section 4.10 Credit Amount Percentage. The “Credit Amount Percentage” with respect to
the Secured Liquidity Notes and the Extended Notes, collectively, shall be as set forth in the Side
Letter.

ARTICLE V

ASSIGNMENT

Section 5.01 Assignment. In order to secure and to provide for the repayment of the
Obligations, each of the Issuer and the Owner Trustee hereby assigns, conveys, transfers, delivers
and sets over unto the Collateral Agent for the benefit of the Secured Parties and hereby grants to
the Collateral Agent for the benefit of each Secured Party a security interest in, control over,
and lien on all of the following, including, without limitation, all accounts, money, chattel
paper, securities, investment property, instruments, documents, deposit accounts, certificates of
deposit, letters of credit, letter of credit rights, advices of credit, banker’s acceptances,
uncertificated securities, securities accounts, security entitlements, investment property, general
intangibles, contract rights, goods and other property consisting of, arising from or relating to
the following whether currently existing or hereafter acquired (all of the following indicated in
(i) through (v) being referred to as the “Assigned Collateral”):

(i) all right, title and interest of the Issuer in, to and under the Mortgage Loans
(including the contents of the Mortgage Loan Files) purchased by the Issuer from time to
time pursuant to the Mortgage Loan Purchase and Servicing Agreement, including without
limitation, all monies due and to become due to the Issuer under or in connection with such
Mortgage Loans, all dividends, earnings, income, rents, issues, profits or other
distributions of cash or other property in respect of such Mortgage Loans and all rights,
remedies, powers, privileges and claims of the Issuer, as holder of such Mortgage Loans,
against (i) the Seller under or with respect to the Mortgage Loan Purchase and Servicing
Agreement (whether arising pursuant to the terms of the Mortgage Loan Purchase and Servicing
Agreement or otherwise available to the Issuer at law or in equity), and (ii) the Servicer
under or with respect to the Mortgage Loan Purchase and Servicing Agreement (whether arising
pursuant to the terms of the 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 the Mortgage Loan Purchase and Servicing Agreement and the respective
obligations of the Seller and the Servicer thereunder and to give or withhold any and all
consents, requests, notices, directions, approvals, extensions or waivers under or with
respect to the Mortgage Loan Purchase and Servicing Agreement or the respective obligations
of the Seller or the Servicer thereunder to the same extent as the Issuer could but for the
assignment and security interest granted to the Collateral Agent in this Section
5.01;

(ii) all right, title and interest of the Issuer in, to and under the Program
Documents, including, without limitation, all monies due and to become due to the Issuer
thereunder or in connection therewith, whether payable as fees, expenses, costs,
indemnities, insurance recoveries, damages for the breach of any of the Program Documents or
otherwise, and all rights, remedies, powers, privileges and claims of the Issuer under or
with respect to the Program Documents (whether arising pursuant to the terms of the Program
Documents or otherwise available to the Issuer at law or in equity), including, without
limitation, the rights of the Issuer to enforce the Program Documents and to give or
withhold any and all consents, requests, notices, directions, approvals, extensions or
waivers under or with respect to the Program Documents to the same extent as the Issuer
could but for the assignment and security interest granted to the Collateral Agent in this
Section 5.01;

(iii) all right, title and interest of the Issuer in and to (x) monies on deposit in,
or securities, financial assets, investment property or other assets credited to, (A) the
Reserve Fund, (B) the Allocated Expenses Account, (C) any account maintained pursuant to the
Depositary Agreement and (D) the Collection Account (other than interest earned on amounts
deposited therein) and any other accounts maintained pursuant to the Mortgage Loan Purchase
and Servicing Agreement (excluding any escrow accounts maintained for obligors under the
Mortgage Loans), the Indenture, or this Security Agreement, (y) all Eligible Investments
held by the Issuer and (z) all cash held by the Issuer;

(iv) all additional property that may from time to time hereafter be subjected to the
grant and pledge hereof by the Issuer or by anyone on its behalf, including the deposit with
the Collateral Agent of additional monies by the Issuer; and

(v) all proceeds of any of the foregoing.

Notwithstanding the assignment and security interest so granted to the Collateral Agent, the
Issuer shall nevertheless be permitted, subject to the provisions of Sections 5.03 and
5.04 and of Article VII hereof, to give all consents, requests, notices,
directions, approvals, extensions or waivers, if any, which are required to be given by the Issuer
by the specific terms of the Mortgage Loan Purchase and Servicing Agreement and the Program
Documents and the assignment and security interest so granted to the Collateral Agent shall not
relieve the Issuer from the performance of any term, covenant, condition or agreement on the
Issuer’s part to be performed or observed under or in connection with the Program Documents, or
from any liability to the Seller or Servicer, or impose any obligation on the Collateral Agent or
the Secured Parties to perform or observe any such term, covenant, condition or agreement on the
Issuer’s part to be so performed or observed or impose any liability on the Collateral Agent or the
Secured Parties for any act or omission on the part of the Issuer relative thereto or from any
breach of any representation or warranty on the part of the Issuer contained in the Program
Documents, or made in connection therewith.

Section 5.02 Application of Assigned Collateral. The Issuer hereby acknowledges and
agrees that, until this Security Agreement is terminated, all monies and other cash proceeds due
and to become due to the Issuer under or in connection with the Assigned Collateral shall be paid
directly to the Collateral Agent and that the Issuer agrees if any such monies or other cash
proceeds shall be received by the Issuer, such monies and other cash proceeds will not be
commingled by the Issuer with any of its other funds or property, but will be held separate and
apart therefrom and shall be held in trust by the Issuer for, and promptly paid over to, the
Collateral Agent. Unless and until an Event of Default shall have occurred and be continuing, and
provided the Collateral Account or any funds on deposit in, or otherwise to the credit of, the
Collateral Account are not then subject to any writ, order, judgment, warrant of attachment,
execution or similar process, all monies and other cash proceeds received by the Collateral Agent
pursuant to this Article shall be deposited in the Collateral Account for application as provided
in Section 6.03 hereof. All monies and other cash proceeds held or deposited in the
Collateral Account after the occurrence and during the continuance of an Event of Default and all
monies and other cash proceeds received by the Collateral Agent pursuant to this Article V
while the Collateral Account or any funds on deposit in, or otherwise to the credit of, the
Collateral Account are subject to any writ, order, judgment, warrant of attachment, execution or
similar process, shall be applied by the Collateral Agent to the payment or repayment in full of
all outstanding Obligations, whether or not then due, in the order of priority specified in
Section 2.01 hereof; provided, however, that any monies or other cash
proceeds remaining after the payment or repayment in full of all outstanding Obligations shall be
paid to the Issuer.

For purposes of determining the application to be made of such monies and other cash proceeds
to the Servicer pursuant to clause Eighth of Section 2.01(b) hereof, the Collateral
Agent may rely exclusively upon a certificate or other statement (a copy of which shall also be
provided to the Issuer) of the Servicer as to the amount then owing to the Servicer. For purposes
of determining the application to be made of such monies and other cash proceeds to any holder of
any Secured Liquidity Notes pursuant to clause Third of Section 2.01(b) hereof, the
Collateral Agent may rely exclusively upon a certificate or other statement (a copy of which shall
also be provided to the Issuer) of the Depositary as to the amount then owing to such holder. For
purposes of determining the application to be made of such monies and other cash proceeds to any
holder of any Extended Notes pursuant to clause Third of Section 2.01(b) hereof,
the Collateral Agent may rely exclusively on a certificate or other statement (a copy of which
shall also be provided to the Issuer) of the Depositary as to the amount then owing to such holder.
For purposes of determining the application to be made of such monies and other cash proceeds to
the Subordinated Noteholders pursuant to clause Fifth of Section 2.01(b) hereof,
the Collateral Agent may rely exclusively upon a certificate or other statement (a copy of which
shall also be provided to the Issuer) of the Indenture Trustee as to the amount then owing to such
holder. For purposes of determining the application to be made of such monies and other cash
proceeds to each Swap Counterparty pursuant to clauses Second and Sixth of
Section 2.01(b) hereof, the Collateral Agent may rely exclusively upon a certificate or
other statement (a copy of which shall also be provided to the Issuer) of the Servicer, acting as
Calculation Agent under the related Interest Rate Swap, as to the amount then owing to each Swap
Counterparty. Any application to be made by the Collateral Agent of such monies and other cash
proceeds pursuant to clauses First, Third, Fourth or Seventh of
Section 2.01(b) hereof may be made upon the Collateral Agent’s, the Indenture Trustee’s or
the Custodian’s certificate or statement delivered to the Issuer setting forth in reasonable detail
the nature of the Collateral Agent’s, the Indenture Trustee’s or the Custodian’s claim and the
amount owing to the Collateral Agent, the Indenture Trustee or the Custodian on account thereof.

The Collateral Agent shall not be liable for any application of the monies and other cash
proceeds received by the Collateral Agent pursuant to this Article V made in accordance
with any certificate or direction delivered pursuant to this Section 5.02;
provided, however, that no application of the monies and other cash proceeds
received by the Collateral Agent pursuant to this Article V in accordance with any
certificate delivered pursuant to this Section 5.02 shall be deemed to restrict or limit
the right of the Issuer to contest with the purported obligee its respective liability in respect
of the amount set forth in such certificate.

Section 5.03 Performance of Agreements. Promptly, whether or not following a request
from the Collateral Agent to do so, and in any event at the Issuer’s own expense, the Issuer agrees
(a) to take all such lawful action as the Collateral Agent may reasonably request to compel or
secure the performance and observance by (i) the Seller or the Servicer of its obligations to the
Issuer under or in connection with the Mortgage Loan Purchase and Servicing Agreement in accordance
with the terms thereof, and (ii) any party to any Program Document in accordance with the terms
thereof, and (b) to exercise any and all rights, remedies, powers and privileges lawfully available
to the Issuer (i) under or in connection with the Mortgage Loan Purchase and Servicing Agreement
and (ii) under or in connection with any Program Document, in every case to the extent and in the
manner directed by the Collateral Agent, including, without limitation, the transmission of notices
of default on the part of the Seller or the Servicer or any party to any Program Document and the
institution of legal or administrative actions or proceedings to compel or secure performance by
the Seller or the Servicer or any party to any Program Document of their respective obligations.
Subject to Section 7.02, the Issuer further agrees that it will not, without the prior
written consent of the Collateral Agent (on behalf of the holders of the Senior Notes) and each
Swap Counterparty, (a) exercise any right, remedy, power or privilege available to it under or in
connection with the Mortgage Loan Purchase and Servicing Agreement, (b) take any action to compel
or secure performance or observance by (i) the Seller or the Servicer of its obligations to the
Issuer under or in connection with the Mortgage Loan Purchase and Servicing Agreement or (ii) any
party to any Program Document, or (c) give any consent, request, notice, direction, approval,
extension or waiver to the Seller or the Servicer under the Mortgage Loan Purchase and Servicing
Agreement not required to be exercised, taken, observed or given by the Issuer pursuant to the
terms of the Mortgage Loan Purchase and Servicing Agreement.

Section 5.04 Amendments; Waivers. Without intending in any manner to derogate from
the absolute nature of the assignment granted to the Collateral Agent by this Security Agreement or
the rights of the Collateral Agent hereunder, the Issuer agrees that it will not without Rating
Agency Confirmation and the prior written consent of the Collateral Agent and each Swap
Counterparty, agree to amend, modify, supplement, terminate, waive or surrender (x) the terms of
the Custodial Agreement or (y) the definition of “Assigned Collateral”, or assign its rights under
any of the Program Documents or agree to any amendment, modification, supplement, termination,
except as provided in Section 8.02 or 10.01 hereof, or surrender which would result
in the release of any security interest granted in the Assigned Collateral, the Collateral Account
or the Deposited Funds. If any such amendment, modification, supplement or waiver, as applicable,
shall be so consented to by the required consenting parties, the Issuer agrees, promptly following
a request by the required consenting parties to do so, to prepare, execute and deliver, in its own
name and at its own expense, such agreements, instruments, consents and other documents as the
required consenting parties may deem necessary or appropriate in the circumstances. Upon provision
of such direction by the required consenting parties, the Collateral Agent shall also execute and
deliver any such agreements, instruments, consents and other documents. The Issuer shall give
prior notice of any amendment to each of the Rating Agencies.

Section 5.05 Location of Records. The Issuer hereby covenants and agrees that its
chief place of business and chief executive office, and the place where its records pertaining to
the Assigned Collateral will be kept, shall at all times be located in the offices of Von Karman
Funding Trust, whose address is: 18400 Von Karman, Suite 1000, Irvine, CA 92612-1514.

Section 5.06 Notice of Default under Program Documents. The Issuer agrees, at its own
expense, to give the Collateral Agent, the Depositary, the SLN Placement Agents, each Swap
Counterparty and the Rating Agencies as soon as practicable (and in no event more than two Business
Days thereafter) written notice of each default coming to the Issuer’s attention on the part of any
Person, and of such Person’s obligations under or in respect of the Program Documents.

Section 5.07 Custody of Program Documents. Simultaneously with the execution and
delivery by the Issuer of this Security Agreement, the Issuer is delivering to the Collateral Agent
a counterpart of each Program Document currently in effect, which at all times shall be retained in
the custody and possession of the Collateral Agent until the termination of this Security
Agreement.

Section 5.08 Delivery of Assigned Collateral Including Eligible Investments. All
certificates representing or evidencing the Assigned Collateral (other than Mortgage Loans),
including, without limitation Eligible Investments, from time to time shall be delivered to and
held by or on behalf of the Collateral Agent pursuant hereto and shall, in the case of Assigned
Collateral (other than Mortgage Loans), be in suitable form for transfer by delivery, or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Collateral Agent. The Collateral Agent may appoint agents for the
purpose of holding Eligible Investments.

Section 5.09 Deliveries of Mortgage Loans. Each Mortgage Note, Mortgage and
Assignment of Mortgage in respect of each Mortgage Loan purchased by the Issuer from time to time
shall be delivered to and held by the Custodian in accordance with Sections 2 and 4
of the Custodial Agreement.

Section 5.10 No Liability. Neither the Collateral Agent, nor any director, officer,
employee, agent or stockholder of the Collateral Agent, shall be liable for any action taken or
omitted to be taken by it or them relative to any of the Collateral, except for its or their own
gross negligence, fraud, bad faith or willful misconduct, and the Collateral Agent shall not be
liable for any action or omission to act with respect to the Collateral (or any part thereof) on
the part of any agent, nominee, custodian or attorney of the Collateral Agent appointed and
selected by the Collateral Agent with reasonable care.

ARTICLE VI

COLLATERAL ACCOUNT;

RESERVE FUND; PAYMENT OF ALLOCATED EXPENSES

Section 6.01 Establishment of Collateral Account. For purposes of this Security
Agreement and the Depositary Agreement, the Collateral Agent shall at all times during the term of
this Security Agreement maintain in the State of New York, a special purpose, segregated,
non-interest bearing trust account in the name of and under the control of the Collateral Agent on
behalf of the Secured Parties as a general collateral account (said account being herein called the
“Collateral Account” and being identified as Account No. 38432). The operation of the
Collateral Account shall be governed by this Article VI.

It is understood and agreed by the Issuer, the Collateral Agent and the Depositary that there
shall be deposited in the Collateral Account the following monies, cash and proceeds: (a) the net
proceeds from the sale of Secured Liquidity Notes payable to the Issuer pursuant to the Depositary
Agreement, to the extent not required to repay advances made by the Depositary in accordance with
the Depositary Agreement, maturing Secured Liquidity Notes or outstanding Extended Notes on the
date of issuance of such Secured Liquidity Notes, whether or not presented to the Depositary for
payment, and to the extent not maintained in the Secured Liquidity Note Account pursuant to the
terms of the Depositary Agreement, (b) all monies received by the Collateral Agent pursuant to this
Security Agreement and required by the terms hereof to be deposited by or on behalf of the Issuer
in the Collateral Account (including, without limitation, interest on the Eligible Investments),
(c) all monies received by or on behalf of the Issuer under the Mortgage Loan Purchase and
Servicing Agreement, (d) all monies received by or on behalf of the Issuer as proceeds from the
sale of Mortgage Loans and payments of the Repurchase Price of any Mortgage Loan, and all Principal
Prepayments in full, (e) all monies required to be transferred to the Collateral Account from the
Collection Account, including principal and interest payments on Mortgage Loans, (f) all monies
received by or on behalf of the Issuer under the Interest Rate Swaps, (g) all monies received by or
on behalf of the Issuer from the sale of Subordinated Notes, and (h) any and all monies at any time
and from time to time received by or on behalf of the Issuer, and required by the terms of this
Security Agreement, or any related document to be deposited in the Collateral Account.

The Collateral Agent shall have complete dominion and control over the Collateral Account, and
the Issuer hereby agrees that only the Collateral Agent may make withdrawals from the Collateral
Account; provided, however, that the Issuer and the Depositary may request
withdrawals from the Collateral Account in accordance with the terms of Section 6.03
hereof.

Except for the Collateral Account, the Reserve Fund, the Collection Account, the Allocated
Expenses Account, the Secured Liquidity Note Account, the Extended Notes Distribution Account and
the accounts established pursuant to the Indenture, the Issuer agrees that it will not open or
maintain a bank account with any Person. The Collateral Agent shall give the Issuer, the Indenture
Trustee, and the Depositary immediate notice if the Collateral Account, the Reserve Fund, the
Collection Account, the Allocated Expenses Account, the Secured Liquidity Note Account, any account
established pursuant to the Indenture, or any Deposited Funds become subject to any writ, order,
judgment, warrant of attachment, execution or similar process to which it has notice. The
Collateral Agent shall have no right of set-off against amounts on deposit in the Collateral
Account, the Reserve Fund, any account established pursuant to the Indenture, or the Allocated
Expenses Account, and shall have no right to impose a lien on the any such account other than on
behalf of the Secured Parties.

Section 6.02 Assignment of Collateral Account. In order to secure and to provide for
the repayment of the Obligations, the Issuer hereby assigns, pledges, transfers and sets over unto
the Collateral Agent for the benefit of the Secured Parties, and hereby grants the Collateral Agent
for the benefit of the Secured Parties a security interest in the Collateral Account, and all
checks, instruments, notes, documents, securities, securities entitlements, other investment
property or funds at any time and from time to time on deposit in or otherwise to the credit of
such account or otherwise held by the Collateral Agent and all dividends, earnings, income, rents,
issues, profits or other distributions of cash or other property in respect of such checks,
instruments, documents, notes, securities, security entitlements, other investment property or
funds and all proceeds thereof (all such checks, instruments, documents, notes, securities,
security entitlements, other investment property, funds and dividends, earnings, income, rents,
issues, profits or other distributions of cash or other property in respect of such checks,
instruments, documents, notes, securities, security entitlements, other investment property or
funds and all proceeds being herein called the “Deposited Funds”) and all claims of the
Issuer in and to Deposited Funds. Throughout the term of this Security Agreement, the Collateral
Agent shall be a pledgee in possession and control of the Deposited Funds and shall have the sole
and exclusive right to endorse any check or any other instrument or security presented for deposit
in the Collateral Account and to withdraw or order a transfer of Deposited Funds from the
Collateral Account, subject to the provisions of Section 6.03, and the Issuer hereby
appoints the Collateral Agent the true and lawful attorney of the Issuer, with full power of
substitution, for the purpose of such endorsement or making any such withdrawal or ordering any
such transfer of Deposited Funds from such account, which appointment is coupled with an interest
and is irrevocable.

Section 6.03 Withdrawals and Transfers from the Collateral Account, Reserve Fund. (a)
It is understood that so long as no Event of Default shall have occurred and then be continuing,
the Issuer (by an Issuer Agent) with respect to each clause below, and the Depositary (by a
Designated Representative) with respect to clauses (ii) and (iii) below, shall each have the right
on any given day (other than a Payment Date) to instruct the Collateral Agent to withdraw, or order
the transfer of, Deposited Funds (other than funds deposited into the Collateral Account for a
Payment Date pursuant to Section 4.6(c) of the Mortgage Loan Purchase and Servicing
Agreement) (first to the extent of the funds originally deposited in the Collateral Account, then
to the extent of the funds originally deposited in the Collection Account and, thereafter, from the
remaining proceeds) from the Collateral Account for the following purposes in the following order
of priority:

(i) to the payment of any amounts due and owing to the Swap Counterparties in respect
of an Interim Payment Date under the Interest Rate Swaps, in respect of sales of Mortgage
Loans;

(ii) provided no Extended Notes would be outstanding after giving effect to all
payments made on such date, pro rata, to the Secured Liquidity Note Account for the payment
of amounts in respect of the Principal Component of, and accrued and unpaid interest or
accreted and unpaid discount on, of any Classes of Secured Liquidity Notes with an Expected
Maturity on such date (but only to the extent that such holders of Secured Liquidity Notes
cannot be paid, in accordance with the terms of the Program Documents, from the proceeds
derived through the issuance of additional Classes of Secured Liquidity Notes);

(iii) if such date is the Final Maturity for any Extended Notes, pro rata to the
payment of the principal and accrued and unpaid interest on such Extended Notes;

(iv) at the option of the Issuer, upon at least five (5) Business Days’ notice to DTC,
the Depositary and the Collateral Agent, to the payment of principal and accrued and unpaid
interest on any Extended Note, provided such Extended Note is paid in full on such date and
after giving effect to all payments made on such date, no outstanding Class of Extended
Notes has the same or an earlier Final Maturity than the Final Maturity of the Extended
Notes being prepaid pursuant to this clause (iv);

(v) unless an Extended Note Amortization Event, Termination Event or Event of Default
would be continuing after giving effect to all payments made on such date, to the payment of
all remaining Deposited Funds, less an amount equal to the amount (if any) deposited into
the Collateral Account pursuant to Section 6.05(g)(iii) and allocable to the payment of
Principal Component or the principal amount of Secured Liquidity Notes and Extended Notes
outstanding, to the Issuer to purchase additional Mortgage Loans;

provided, however, no withdrawals from the Collateral Account shall be made on any
day for the purposes set forth in clause (v) above unless, after giving effect to the issuance of
Secured Liquidity Notes on such day, the payment of Secured Liquidity Notes maturing or matured on
such day, the payment of outstanding Extended Notes on such day, the issuance of Subordinated Notes
on such day, the payment of Subordinated Notes maturing or matured on such day and the purchase of
additional Mortgage Loans on such day, the sum of (A) the Credits Outstanding on such day and (B)
the Principal Amount of all Series of Subordinated Notes including the aggregate amount, if any, of
Principal Amount Charge-Offs which have not been reinstated as of such date, would not exceed the
sum of (A) the excess of the Outstanding Purchase Price of Mortgage Loans over the Outstanding
Purchase Price of any Defaulted Loans owned by the Issuer on such day, (B) the Capitalized Interest
Component on such day, and (C) any cash and Eligible Investments in the Collateral Account held by
the Issuer on such day (to the extent not included in the definition of Credits Outstanding).

Any instruction delivered by the Issuer or the Depositary pursuant to the provisions of the
foregoing paragraph of this Section 6.03(a) shall be effective upon receipt of written
instructions from an Issuer Agent or, with respect to clauses (ii) and (iii) above, a Designated
Representative.

The Collateral Agent shall promptly comply with any such approved instructions made by the
Issuer or the Depositary in accordance with the provisions of the foregoing paragraphs of this
Section 6.03(a); provided, that any withdrawal and transfer pursuant to an
instruction received prior to 2:00 p.m. (New York City time) on any day shall be made on such day.

Upon the occurrence and during the continuance of an Event of Default, all rights of the
Issuer and the Depositary to request the Collateral Agent to withdraw, or order the transfer of,
Deposited Funds from the Collateral Account shall cease, and the Collateral Agent shall appropriate
and apply the Deposited Funds then, or at any time thereafter, on deposit in the Collateral
Account, in accordance with the provisions of Section 7.02.

(b) It is understood that so long as no Event of Default shall have occurred and then be
continuing, the Issuer (by an Issuer Agent) with respect to each clause below, and the Depositary
(by a Designated Representative) with respect to clauses (ii) and (iii) below, shall each have the
right on any Payment Date to instruct the Collateral Agent to withdraw, or order the transfer of,
Deposited Funds (first to the extent of the funds originally deposited in the Collateral Account,
then to the extent of the funds originally deposited in the Collection Account and, thereafter,
from the remaining proceeds) from the Collateral Account for the following purposes in the
following order of priority:

(i) to the payment of any amounts due and owing to the Swap Counterparties under the
Interest Rate Swaps, other than the Party B Second Floating Amount as defined therein;

(ii) pro rata (x) provided no Extended Notes would be outstanding after giving
effect to all payments made on such date, to the Secured Liquidity Note Account for the
payment of amounts in respect of the accrued and unpaid Interest Component and Capitalized
Interest Component of the Secured Liquidity Notes (including any shortfall interest), and
(y) to the Extended Notes Distribution Account for the payment of any interest due on any
Extended Notes in accordance with this Security Agreement and the Depositary Agreement
(including any shortfall interest);

(iii) pro rata (x) provided no Extended Notes would be outstanding after giving
effect to all payments made on such date, to the Secured Liquidity Note Account for the
payment of amounts in respect of the Principal Component of any Classes of Secured Liquidity
Notes with an Expected Maturity on such date (but only to the extent that such holders of
Secured Liquidity Notes cannot be paid, in accordance with the terms of the Program
Documents, from the proceeds derived through the issuance of additional Classes of Secured
Liquidity Notes), (y) to the Extended Notes Distribution Account for the payment of
principal in respect of any outstanding Class of Extended Notes if such day is the Final
Maturity for such Extended Notes and (z) at the option of the Issuer, to the Extended Notes
Distribution Account for the payment of principal and accrued interest on any unpaid
Extended Note on such Payment Date; provided such Extended Note is paid in full on
such date and after giving effect to all payments made on such Payment Date, no outstanding
Class of Extended Notes has the same or an earlier Final Maturity than the Final Maturity of
the Extended Notes being prepaid pursuant to this clause (z);

(iv) to the payment of all unpaid Reimbursable Expenses; provided, that
Reimbursable Expenses shall not be paid with any amounts withdrawn from the Reserve Fund and
deposited in the Collateral Account;

(v) to the payment (pro rata, in accordance with the allocations set forth in
Section 2.03 hereof, to each Series of Subordinated Notes) of all interest due and
owing on the Principal Amount of all outstanding Series of Subordinated Notes (including
interest on overdue interest, if any);

(vi) to the payment (pro rata, in accordance with the allocations set forth in
Section 2.03 hereof, to each Series of Subordinated Notes) of all Carry-Over
Interest Shortfall, if any;

(vii) subject to Section 4.25 of the Mortgage Loan Purchase and Servicing
Agreement, to the payment of any unreimbursed Monthly Advance and Servicing Advance with
respect to any Mortgage Loan which has been sold, to the extent of sale proceeds on deposit
in the Collateral Account in respect of such Mortgage Loan, and to the payment of any
unreimbursed Monthly Interest Advance;

(viii) to fund any increase in the amount on deposit in the Reserve Fund up to the
Required Reserve Fund Amount;

(ix) to the extent the Available Amount in the Reserve Fund exceeds the Required Draw
Amount, to purchase additional Mortgage Loans or to deposit funds in the Collateral Account,
in each case in an amount equal to the Principal Amount Charge-Offs, if any, reinstated on
such Payment Date, and to withdraw any such amount from the Reserve Fund;

(x) on the Scheduled Payment Date of any Series of Subordinated Notes, to pay (pro
rata, in accordance with the allocations set forth in Section 2.03 hereof, to each
Series of Subordinated Notes) the Principal Amount of such Series of Subordinated Notes;

(xi) to the payment of all unpaid Reimbursable Expenses not paid under (iv) above;
provided, that for purposes of this clause (xi), Reimbursable Expenses (x) shall be
calculated without regard to the limitation imposed by the Maximum Indemnity Amount, and (y)
shall not be paid with any amounts withdrawn from the Reserve Fund and deposited in the
Collateral Account;

(xii) to the Swap Counterparties, in accordance with the allocation set forth in
Section 2.02, to the extent a Swap Default shall have occurred, an amount equal to
the lesser of (x) the sum of (A) the Designated Excess Spread Amount for such Payment Date,
and (B) if a Termination Event shall have occurred, and all the Notes have been paid in full
(including, without limitation, any Principal Amount Charge-Offs in respect of the
Subordinated Notes not reinstated as of such date) such that no Notes or amounts owing in
respect of the Notes are outstanding, all amounts remaining from amounts previously on
deposit in the Reserve Fund, and (y) any amounts available for distribution pursuant to this
clause (xii) on such Payment Date; and

(xiii) so long as no Extended Note Amortization Event, Termination Event or Event of
Default has occurred and is continuing, to the payment of all remaining Deposited Funds,
less an amount equal to the amount (if any) deposited into the Collateral Account pursuant
to Section 6.05(g)(iii) and allocable to the payment of Principal Component or the
principal amount of Secured Liquidity Notes and Extended Notes outstanding, to the Issuer to
purchase additional Mortgage Loans;

provided, however, no withdrawals from the Collateral Account shall be made on any
day for the purposes set forth in clauses (iv) through (xiii) above unless, after giving effect to
the issuance of Secured Liquidity Notes on such day, the payment of Secured Liquidity Notes
maturing or matured on such day, the payment of outstanding Extended Notes on such day, the
issuance of Subordinated Notes on such day, the payment of Subordinated Notes maturing or matured
on such day and the purchase of additional Mortgage Loans on such day, the sum of (a) the Credits
Outstanding on such day and (b) the Principal Amount of all Series of Subordinated Notes including
the aggregate amount, if any, of Principal Amount Charge-Offs which have not been reinstated as of
such date, would not exceed the sum of (A) the excess of the Outstanding Purchase Price of Mortgage
Loans over the Outstanding Purchase Price of any Defaulted Loans owned by the Issuer on such day,
(B) the Capitalized Interest Component on such day, and (C) any cash and Eligible Investments in
the Collateral Account held by the Issuer on such day (to the extent not included in the definition
of Credits Outstanding).

Any instruction delivered by the Issuer or the Depositary pursuant to the provisions of the
foregoing paragraph of this Section 6.03(b) shall be effective upon receipt of written
instructions from an Issuer Agent or, with respect to clauses (ii) and (iii) above, a Designated
Representative.

The Collateral Agent shall promptly comply with any such approved instructions made by the
Issuer or the Depositary in accordance with the provisions of the foregoing paragraphs of this
Section 6.03(b); provided, that any withdrawal and transfer pursuant to an
instruction received prior to 2:00 p.m. (New York City time) on any day shall be made on such day.

Upon the occurrence and during the continuance of an Event of Default, all rights of the
Issuer and the Depositary to request the Collateral Agent to withdraw, or order the transfer of,
Deposited Funds from the Collateral Account shall cease, and the Collateral Agent shall appropriate
and apply the Deposited Funds then, or at any time thereafter, on deposit in the Collateral
Account, in accordance with the provisions of Section 7.02.

Section 6.04 Eligible Investments. (a) Monies held in the Collateral Account shall be
invested and the proceeds of investments shall be reinvested by the Collateral Agent in Eligible
Investments pursuant to the written direction of the Servicer prior to the occurrence and
continuation of an Event of Default. The Collateral Agent shall not be responsible or liable for
any loss resulting from the investment performance of any investment or reinvestment of monies held
in the Collateral Account or any other account maintained by the Collateral Agent for the purposes
of this Security Agreement in Eligible Investments. The Collateral Agent from time to time shall
provide the Issuer with statements of account relative to the Collateral Account or any other
account maintained by the Collateral Agent for the purposes of this Security Agreement in
accordance with the Collateral Agent’s customary practices. The parties recognize that the
statements of account to be provided by the Collateral Agent pursuant to the immediately preceding
sentence shall be derived from information to be supplied by the institution or institutions
maintaining such accounts; and the Collateral Agent shall not be required to prepare any statements
of account containing information which cannot be so derived and shall not be responsible for the
correctness or accuracy of the information received by it.

(b) Prior to the occurrence and continuation of an Event of Default, monies held in the
Collateral Account shall be invested at the direction of the Servicer in Eligible Investments
having maturities of no greater than one day; provided, that if there is no Secured
Liquidity Note or Extended Note then outstanding, monies held in the Collateral Account shall be
invested in Eligible Investments either payable on demand or having maturities of no greater than
the earlier of thirty (30) days or the next following Payment Date. All such Eligible Investments
shall be made in the name of, and shall be payable to, the Collateral Agent. If any Event of
Default shall have occurred and be continuing, monies held in the Collateral Account shall be
invested in the Default Investment.

(c) The Collateral Agent or its Affiliates are permitted to receive additional compensation
that could be deemed to be in the Collateral Agent’s economic self-interest for (i) serving as
investment advisor with respect to certain of the Eligible Investments where it is retained by the
Servicer to perform that role; or as administrator, shareholder, servicing agent, custodian or
sub-custodian with respect to certain Eligible Investments (provided that nothing in the foregoing
shall entitle the Collateral Agent to seek or recover such compensation from the Servicer, the
Issuer or any other party to the Program Documents), (ii) using Affiliates to effect transactions
in certain Eligible Investments, and (iii) effecting transactions in certain Eligible Investments.
The Collateral Agent does not guarantee the performance of any Eligible Investment.

Section 6.05 Reserve Fund. (a) The Collateral Agent shall establish and maintain, in
the name of the Collateral Agent, for the benefit of the Secured Parties, with an Eligible
Institution, a segregated, non-interest bearing trust account (the “Reserve Fund”) bearing
a designation clearly indicating that the funds deposited therein are held for the benefit of the
Secured Parties. The Reserve Fund shall at all times be an Eligible Account. The Reserve Fund
shall initially be established with the Collateral Agent. An initial deposit shall be made in the
Reserve Fund by the Issuer in the amount of the Required Reserve Fund Amount not later than the
Initial Closing Date. The Collateral Agent shall possess all right, title and interest in all
funds on deposit from time to time in the Reserve Fund and in all proceeds thereof. The Reserve
Fund shall be under the sole dominion and control of the Collateral Agent for the benefit of the
Secured Parties. If, at any time, the institution holding the Reserve Fund ceases to be an
Eligible Institution, the Collateral Agent shall within five Business Days establish a new Reserve
Fund meeting the conditions specified above with an Eligible Institution and shall transfer or
cause to be transferred any cash and/or any investments to such new Reserve Fund. The Collateral
Agent, at the direction of the Issuer, shall make deposits to and withdrawals from the Reserve Fund
in the amounts and at the times set forth in this Security Agreement. All withdrawals from the
Reserve Fund shall be made as set forth below.

(b) Prior to the occurrence and continuation of an Event of Default, funds on deposit in the
Reserve Fund shall be invested at the direction of the Servicer by the Collateral Agent in Eligible
Investments. Funds on deposit in the Reserve Fund on any Payment Date, after giving effect to any
withdrawals from the Reserve Fund on such Payment Date, shall be invested in such investments that
will mature so that such funds will be available for withdrawal on or prior to the following
Payment Date; provided, however, the Issuer shall instruct the Collateral Agent to
allow for Eligible Investments to mature on a daily basis sufficient to fund anticipated
withdrawals from the Reserve Fund under subsection (c) below in respect of Interim Payment Date
losses on the sale of Defaulted Loans and Delinquent Loans. No Eligible Investment shall be
disposed of prior to its maturity. The proceeds of any such investments shall be invested in such
investments that will be payable on demand or mature so that such funds will be available for
withdrawal on or prior to the Payment Date immediately following the date of such investment. If
any Event of Default shall have occurred and be continuing, monies held in the Reserve Fund shall
be invested in the Default Investment. The Collateral Agent shall maintain or cause to be
maintained by another Eligible Institution for the benefit of the Secured Parties possession or
control of the negotiable instruments or securities, if any, evidencing such Eligible Investments.
On each Payment Date, all interest and earnings (net of losses and investment expenses) on funds on
deposit in the Reserve Fund shall be deposited into the Reserve Fund until the amount on deposit in
the Reserve Fund equals the Required Reserve Fund Amount. On each Program Utilization Effective
Date, the Collateral Agent, in accordance with the written direction of the Servicer, shall pay to
the Company from amounts on deposit in the Reserve Fund, an amount equal to the amount referred to
in Section 6.05(g)(ii)(x). On each Payment Date, after giving effect to the withdrawals
from the Collateral Account pursuant to Section 6.03(b) hereof (and, if such date is also a
Program Utilization Effective Date, after giving effect to the payment referred to in the preceding
sentence), the Collateral Agent shall pay any amounts on deposit in the Reserve Fund in excess of
the Required Reserve Fund Amount by depositing the same into the Collateral Account for payment to
the Swap Counterparties in accordance with the priority of payments set forth in Section
2.01(b) or Section 6.03(b), as the case may be.

(c) The Collateral Agent, acting in accordance with the written directions of the Servicer,
shall on each Interim Payment Date withdraw from the Reserve Fund an amount equal to the lesser of
(x) the amount (each, a “Required Draw Amount”) by which the aggregate cash proceeds of
sales of Delinquent Loans and Defaulted Loans on such Interim Payment Date (plus or minus the
amount of any payments due under the Interest Rate Swaps on such Interim Payment Date) are less
than the aggregate Outstanding Purchase Price of such Mortgage Loans, and (y) the Available Amount
(exclusive of unmatured Eligible Investments) in the Reserve Fund, and deposit such amounts into
the Collateral Account; provided, that such amounts may not be used to pay Reimbursable
Expenses except under “Seventh” in Section 2.01(b).

(d) On each Payment Date, the Servicer, in accordance with the instructions set forth in the
Servicer Report delivered to the Collateral Agent, shall calculate (i) the amount (each, a
“Required Draw Amount”) equal to shortfalls in amounts received by the Issuer under the
Interest Rate Swaps in respect of Delinquent Loans and Defaulted Loans for which no Monthly
Advances were paid by the Servicer during such month, and (ii) the Available Amount in the Reserve
Fund available to pay such amounts as specified below in this Section 6.05(d). In the
event that for any Payment Date the Required Draw Amount is greater than zero, the Issuer shall
give written notice to the Collateral Agent of such positive Required Draw Amount on the related
Payment Date. On the Payment Date, the Required Draw Amount, if any, up to the Available Amount in
the Reserve Fund, shall be withdrawn by the Collateral Agent from the Reserve Fund, deposited into
the Collateral Account, and applied to pay shortfalls in amounts payable under Section
6.03(b)(ii), (v) and (vi); provided, that the Required Draw Amount
shall not be used to pay Reimbursable Expenses. In addition, on each Payment Date, the Collateral
Agent, in accordance with the instructions set forth in the Servicer Report, shall withdraw from
the Reserve Fund any amounts payable under Section 6.03(b)(ix) hereof.

(e) If any Event of Default shall have occurred and be continuing, at the direction of the
Collateral Agent on behalf of the Secured Parties, any amounts remaining in the Reserve Fund shall
be applied to the payment of the Obligations in the order of priority set forth in Section
2.01 hereof.

(f) Upon the payment in full of all amounts owing to the Secured Liquidity Noteholders, the
Extended Noteholders, the Subordinated Noteholders and each Swap Counterparty, the Collateral
Agent, acting in accordance with the instructions of the Servicer, shall withdraw from the Reserve
Fund and pay to the Issuer all amounts, if any, held in the Reserve Fund, and the Reserve Fund
shall be deemed to have terminated for all purposes of this Security Agreement.

(g) On any day, the Issuer may elect a Program Utilization Amount, which Program Utilization
Amount, subject to compliance with the following conditions (the “Program Utilization
Conditions”), shall become effective as of the Program Utilization Effective Date:

(i) Other than with respect to the Initial Closing Date, the Issuer shall give one (1)
Business Days’ prior written notice to the Collateral Agent, the Depositary, the SLN
Placement Agents and the Swap Counterparties setting forth (x) the Program Utilization
Amount it proposes to select (for purposes of this subsection (g), the “Selected
Tier”), and the proposed Program Utilization Effective Date, (y) the amounts that would
be payable pursuant to (ii) below if such Selected Tier were given effect to, and (z) the
amount of the decrease, if any, in the Credits Outstanding pursuant to (iii) below;

(ii) (x) If the Selected Tier is less than the Program Utilization Amount then in
effect, pursuant to Section 6.05(b) above, the Collateral Agent shall remit to the
Company the amount by which (1) the sum of the Available Amount in the Reserve Fund plus any
Unreimbursed Required Draw Amounts, exceeds (2) the Required Reserve Fund Amount for the
Selected Tier, or (y), if the Selected Tier is greater than the Program Utilization Amount
then in effect, the Issuer shall deposit into the Reserve Fund, from the proceeds of the
Commitment Fee, an amount equal to the amount by which (1) the Required Reserve Fund Amount
for the Selected Tier exceeds (2) the sum of the Available Amount in the Reserve Fund plus
any Unreimbursed Required Draw Amounts;

(iii) If both (x) the Selected Tier is less than the Program Utilization Amount then in
effect, and (y) the aggregate Credits Outstanding as of the proposed Program Utilization
Effective Date would be greater than the Senior Notes Utilization Amount permitted for such
Selected Tier, then the Issuer shall direct the Servicer to arrange for the sale of Mortgage
Loans with an aggregate Outstanding Purchase Price equal the amount by which the Credits
Outstanding as of the proposed Program Utilization Effective Date would exceed the Senior
Notes Utilization Amount permitted for such Selected Tier, such sales to close in time to
ensure that the aggregate proceeds of sale, together with the amounts (if any) payable by
the Swap Counterparties pursuant to the Interest Rate Swap, shall have been deposited into
the Collateral Account (as provided for herein) no later than the proposed Program
Utilization Effective Date; and

(iv) The Issuer shall give written notice to the Collateral Agent, the Depositary, the
SLN Placement Agents and the Swap Counterparties of the satisfaction of the conditions set
forth in (i) through (iii) above, and the occurrence of the Program Utilization Effective
Date.

Section 6.06 Payment of Allocated Expenses. The Collateral Agent shall establish and
maintain, in the name of the Issuer, for the benefit of the Issuer, with an Eligible Institution a
segregated trust account (the “Allocated Expenses Account”) bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the Issuer. The Allocated
Expenses Account shall initially be established with the Collateral Agent. The Collateral Agent
shall possess all right, title and interest in all funds on deposit from time to time in the
Allocated Expenses Account and in all proceeds thereof. The Allocated Expenses Account shall be
under the sole dominion and control of the Collateral Agent for the benefit of the Issuer. If, at
any time, the institution holding the Allocated Expenses Account ceases to be an Eligible
Institution, the Collateral Agent shall within five Business Days establish a new Allocated
Expenses Account meeting the conditions specified above with an Eligible Institution and shall
transfer or cause to be transferred any cash and/or any investments to such new Allocated Expenses
Account. On each Payment Date prior to giving effect to the payments pursuant to Section
6.03(b) hereof, the Collateral Agent, acting at the written direction of the Servicer, shall,
from the amount of net interest collections on Mortgage Loans and Eligible Investments, make a
deposit to the Allocated Expenses Account in the amount set forth in the Servicer Report received
from the Servicer as the Allocated Expenses to be due and owing on such Payment Date;
provided, however, that the sum of the aggregate Allocated Expenses paid during any
calendar year shall never exceed the Budget Expense Limit. Allocated Expenses for any given
calendar year in excess of the Budget Expense Limit shall accrue unpaid and, subsequently, shall be
paid, if at all, from amounts included in the Budget Expense Limit for any subsequent calendar year
as each Swap Counterparty and the Issuer may agree. The Collateral Agent, at the direction of the
Issuer, shall make withdrawals from the Allocated Expenses Account in the amounts and at the times
set forth in written payment instructions received from the Issuer. Upon the termination of this
Agreement and the payment in full of all Allocated Expenses, the Allocated Expenses Account shall
be deemed to have terminated for all purposes.

ARTICLE VII

DEFAULT

Section 7.01 Events of Default. Each of the following events shall constitute an
event of default under this Security Agreement with respect to the Senior Notes (or, if the Senior
Notes have been paid in full, the Subordinated Notes) (each, an “Event of Default”):

(a) Failure on the part of the Seller or the Servicer (i) to make any payment or deposit
required under the Mortgage Loan Purchase and Servicing Agreement on or before five (5) Business
Days after the date such payment or deposit is required to be made; provided,
however, that in respect of a breach of the covenant in Section 3.5(c) of the Mortgage Loan
Purchase and Servicing Agreement, the Repurchase Trigger shall apply instead of the foregoing five
(5) Business Day grace period, or (ii) to observe or perform in any material respect any other
material covenants or agreements of the Seller or the Servicer under the Mortgage Loan Purchase and
Servicing Agreement which failure in the case of clause (ii) continues unremedied for a period of
thirty (30) days after the earlier of the Issuer having actual knowledge, or written notice
thereof;

(b) Any representation or warranty made by the Seller pursuant to Section 3.1 of the Mortgage
Loan Purchase and Servicing Agreement proves to have been incorrect in any material respect when
made, and, if such representation or warranty is correctable, which continues to be incorrect in
any material respect for a period of sixty (60) days after the earlier of the Issuer having actual
knowledge, or written notice thereof;

(c) The Issuer defaults in the payment of any interest on any Note when the same becomes due
and payable;

(d) The Issuer defaults in the payment of any principal on any Note when the same becomes due
and payable;

(e) The Issuer fails to comply with any of its other agreements or covenants in, or provisions
of, the Senior Notes (or, if the Senior Notes have been paid in full, the Subordinated Notes) or
this Security Agreement and the failure to so comply materially and adversely affects the interests
of the Senior Noteholders (or, if the Senior Notes have been paid in full, the holders of the
Subordinated Notes) and continues to materially and adversely affect the interests of the Senior
Noteholders (or, if the Senior Notes have been paid in full, the holders of the Subordinated Notes)
for a period of thirty (30) days after the earlier of (i) the date on which the Issuer obtains
knowledge thereof or (ii) the date on which written notice of such failure, requiring the same to
be remedied, shall have been given to the Issuer by the Collateral Agent or to the Issuer and the
Collateral Agent by the Required Senior Noteholders (or, if the Senior Notes have been paid in
full, the Required Subordinated Noteholders);

(f) The occurrence of an Event of Bankruptcy with respect to the Issuer, the Seller, the
Servicer, or the Performance Guarantor;

(g) The Issuer shall have become an “investment company” or shall have become under the
“control” of an “investment company” under the Investment Company Act;

(h) Any representation or warranty or statement made or deemed made by the Issuer in this
Security Agreement or in any other Program Document or in any written certificate or statement made
or entered into in connection herewith or therewith shall prove to have been incorrect when made in
any material respect, and, if such representation, warranty or statement is capable of being
corrected, continues to be incorrect in any material respect for a period of sixty (60) days after
the earlier of the Issuer having actual knowledge, or written notice of such incorrect
representation, warranty or statement;

(i) Failure by the Issuer to observe or perform any covenant or agreement contained in any
Program Document which failure would materially and adversely affect the interests of the Secured
Parties and not constituting an Event of Default under any other clause of this Section
7.01 and the continuance of such failure for thirty (30) days after the Issuer shall have
obtained actual knowledge or received written notice;

(j) A Servicer Event of Default not constituting an Event of Default under any other clause of
this Section 7.01 shall have occurred and be continuing and such default shall not have
been cured or the Issuer shall not have replaced such Servicer in accordance with Section
10.1 of the Mortgage Loan Purchase and Servicing Agreement for a period of sixty (60) days
after the Issuer has notified the Collateral Agent of such Servicer Event of Default;

(k) The Issuer shall not be in compliance with Section 3.2, 3.4, 5.2 or 7.3 of
the Trust Agreement in any material respect and such noncompliance shall continue for a period of
thirty (30) days after the Issuer receives notice or has actual knowledge of such noncompliance;

(l) This Security Agreement shall cease, for any reason, to be in full force and effect in
accordance with its terms;

(m) The Interest Rate Swaps shall cease, for any reason, to be in full force and effect in an
aggregate maximum notional amount equal to the Program Size;

(n) [reserved];

(o) At any time the funds on deposit in the Reserve Fund shall be less than the Required
Reserve Fund Amount for thirty (30) consecutive days or more;

(p) At any time (A) the ratio of the aggregate Outstanding Purchase Price of all Mortgage
Loans (excluding Junior Loans) that are Delinquent Loans owned by the Issuer (including REO
Property and foreclosed property) to the aggregate Outstanding Purchase Price of all Mortgage Loans
(excluding Junior Loans) owned by the Issuer shall be more than two and one quarter percent (2.25%)
for thirty (30) consecutive days or more, or (B) the ratio of the aggregate Outstanding Purchase
Price of all Mortgage Loans (excluding Junior Loans) that are Three Payment Delinquent Loans owned
by the Issuer (including REO Property and foreclosed property) to the aggregate Outstanding
Purchase Price of all Mortgage Loans (excluding Junior Loans) owned by the Issuer shall be more
than one percent (1.0%) for thirty (30) consecutive days or more;

(q) The failure of the Issuer to maintain an agreement (in substantially the form of Exhibit B
to the Mortgage Loan Purchase and Servicing Agreement) 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, or there shall occur a withdrawal or reduction of the rating assigned
to such Rated Bidder below “P-1” by Moody’s and such withdrawal or reduction continues for a period
of thirty (30) days or more;

(r) The failure of any Swap Counterparty to pay amounts due and owing under its Interest Rate
Swap;

(s) The occurrence of a termination event under clause (h), (p) or (r) of Section 11.2 of the
Mortgage Loan Purchase and Servicing Agreement.

Section 7.02 Rights of the Collateral Agent upon Default. If an Event of Default
described in clause (f), (m), or (o) through (s), of Section 7.01 hereof shall have
occurred and be continuing, or if an Event of Default specified in any other clause of Section
7.01 hereof shall have occurred and be continuing and the Required Senior Noteholders (or, in
the event the Senior Notes have been paid in full, the Required Subordinated Noteholders) shall
have given the Collateral Agent written instructions to such effect the Collateral Agent shall, by
written notice to the Issuer, the holders of the Notes and the Depositary (with a copy to each SLN
Placement Agent), (w) declare the principal and premium (if applicable) of and accrued or accreted
interest in respect of the Senior Notes to be, whereupon the same shall become, forthwith due and
payable without presentment, demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Issuer, anything contained herein or in any Senior Note to the contrary
notwithstanding, (x) instruct the Issuer to cease purchasing Mortgage Loans and the Issuer and the
Depositary to cease issuing Secured Liquidity Notes, (y) notify the Servicer, the Seller, the
Indenture Trustee and each Swap Counterparty that an Event of Default has occurred, and (z)
appropriate and apply the Deposited Funds then, or at any time thereafter, on deposit in the
Collateral Account to the payment in full of all outstanding Obligations, whether or not then due,
in order of priority specified in Section 2.01 hereof; provided, that the
Collateral Agent shall comply with the requirements of Section 5.02 hereof;
provided, further, that if such Event of Default is not an Event of Default
described in clause (c) or (d) of Section 7.01 hereof, or an Event of
Default described in clause (f) of Section 7.01 hereof with respect to the Issuer,
and so long as the Collateral Agent has not disposed of or sold all of the Assigned Collateral
pursuant to Section 7.03 hereof, the amounts to be distributed pursuant to clauses
Second and Third of Section 2.01(b) hereof shall be distributed, in that
order, prior to the amounts to be distributed pursuant to clause First of Section
2.01(b) hereof. Any amounts obtained by the Collateral Agent on account of or as a result of
the exercise by the Collateral Agent of any right of offset or banker’s lien or right of attachment
or garnishment with respect to any funds at any time and from time to time on deposit in, or
otherwise to the credit of, the Collateral Account, shall be held by the Collateral Agent as
additional collateral security for the repayment of the Obligations and shall be applied as
provided in Sections 2.01, 5.02 and 6.03 hereof.

If any Event of Default shall have occurred and be continuing, the Collateral Agent may,
subject to Section 9.01 and at the direction (which direction shall be in writing) of the
Required Senior Noteholders (or, if the Senior Notes have been paid in full, the Required
Subordinated Noteholders) shall, exercise all rights, remedies, powers, privileges and claims of
the Issuer under the Mortgage Loan Purchase and Servicing Agreement or any Program Document,
including the right to give any consent, request, notice, direction, approval, extension or waiver
under the Mortgage Loan Purchase and Servicing Agreement or any Program Document, and any right of
the Issuer to take such action shall be suspended.

Except as provided in Section 7.03, no holder of a Secured Liquidity Note or an
Extended Note shall have any right to require the Collateral Agent to take or fail to take any
action under this Security Agreement.

Section 7.03 Realization upon Collateral; Remedies. If any Event of Default specified
in Section 7.01 hereof shall have occurred and be continuing, the Collateral Agent may, and
at the direction (which direction shall be in writing) of the Required Senior Noteholders (or, if
the Senior Notes have been paid in full, the Required Subordinated Noteholders) shall, subject to
the proviso in Section 11.2 of the Mortgage Loan Purchase and Servicing Agreement, exercise
any rights and remedies available to it under applicable law, including taking possession of the
Collateral and leasing, assigning, optioning, discounting, disposing of or selling the whole, or
from time to time any part of, the Collateral by private or public sale or sales in such order or
otherwise in such manner as the Collateral Agent may reasonably elect in its sole discretion;
provided, that any such sale shall be conducted in a commercially reasonable manner;
provided further, that from and after the date of an Event of Default, in the event
of a sale or disposition of a Defaulted Loan, a Delinquent Loan or a portfolio of Defaulted Loans
and/or Delinquent Loans (each, a “Pool”), the Collateral Agent shall use commercially
reasonable efforts to obtain three or more bids for each such Defaulted Loan, Delinquent Loan;
provided, however, that such bids shall be received within ten (10) Business Days
of one another. The Collateral Agent shall promptly notify the Subordinated Note Representative,
if any, of the highest bid price obtained on each such Defaulted Loan, Delinquent Loan or Pool and
the Subordinated Note Representative, if any, shall have up to two (2) Business Days from the time
of notification to elect to purchase such Defaulted Loan, Delinquent Loan or Pool 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 Counterparties with respect to the sale of such
Mortgage Loan or Mortgage Loans (the “Purchase Price”). If the Subordinated Note
Representative elects to purchase such Defaulted Loan, Delinquent Loan or Pool within such two
Business Day time period, the Subordinated Note Representative shall pay the Purchase Price for
such Defaulted Loan, Delinquent Loan or Pool within two (2) Business Days of the date of such
election. In the event that the Subordinated Note Representative fails to pay such Purchase Price
or fails to affirmatively elect to purchase such Defaulted Loan, Delinquent Loan or Pool, in either
case, within the applicable two Business Day time period, the Collateral Agent shall have the right
to sell such Defaulted Loan, Delinquent Loan or Pool to the highest bidder. Without limitation of
the Servicer’s obligations under Section 3.5(g) of the Mortgage Loan Purchase and Servicing
Agreement, the Collateral Agent shall use commercially reasonable efforts to arrange sales such
that all Defaulted Loans and Delinquent Loans are sold within the same applicable timeframe as is
set forth in Section 11.2 of the Mortgage Loan Purchase and Servicing Agreement for
non-Delinquent Loans and non-Defaulted Loans, and, in any event prior to the Final Maturity of the
Notes. The Collateral Agent may use the services of an investment bank in connection with any such
sale.

The Collateral Agent shall have, with respect to the Collateral, in addition to any other
rights and remedies which may be available to it at law or in equity or pursuant to this Security
Agreement or any other contract or agreement, all rights and remedies of a secured party under any
applicable version of the UCC of the relevant jurisdictions relating to the Collateral, and it is
expressly agreed that if the Collateral Agent should proceed to dispose of, utilize or sell the
Collateral, or any part thereof, in accordance with the provisions of relevant versions of the UCC,
ten (10) Business Days’ notice by the Collateral Agent to the Issuer shall be deemed to be
reasonable notice under any such provision requiring such notice.

The Issuer hereby expressly agrees that no notice of any sale or disposition of any Eligible
Investments need be given. Any sale or other disposition of Collateral by the Collateral Agent may
be made on such commercially reasonable terms as it may choose, without assuming any credit risk
and without any obligation to advertise or give notice of any kind other than that necessary under
applicable law. The Collateral Agent shall incur no liability as a result of the sale of the
Collateral, or any part thereof, at any private or public sale conducted in accordance with this
Security Agreement. The Collateral Agent, any Swap Counterparty, or the holders of the Senior
Notes may buy any Collateral at any public sale conducted in accordance with this Security
Agreement free of any right or equity of redemption of the Issuer, which right or equity is hereby
waived or released.

The Collateral Agent’s sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession shall be to deal with it in the same manner as the
Collateral Agent deals with similar property for its accounts generally, subject to Section 9-207
of the UCC. Neither the Collateral Agent nor any of its directors, officers, employees or agents
shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral, provided that it has acted in accordance with the instructions of the Secured Parties
and in compliance with applicable law and this Security Agreement.

Section 7.04 Waiver of Stays, etc. To the full extent that the Issuer may lawfully so
agree, the Issuer agrees that it will not at any time plead, claim or take the benefit of any
appraisement, valuation, stay, extension, moratorium or redemption law now or hereafter in force to
prevent or delay the enforcement of this Security Agreement in accordance with its terms or the
absolute sale of any portion of or all of the Collateral in accordance with this Security Agreement
or the possession thereof by any purchaser at any sale under and in compliance with this Security
Agreement, and the Issuer, for itself and all who may claim under the Issuer, as far as the Issuer
now or hereafter lawfully may do so, hereby waives the benefit of all such laws.

ARTICLE VIII

ADDITIONAL COLLATERAL DISPOSITION PROVISIONS

Section 8.01 Disposition of Mortgage Loans. (a) Upon two (2) Business Days’ notice
to the Collateral Agent, the Servicer may arrange for the sale of one or more Mortgage Loans and
the Custodian in accordance with the Custodial Agreement shall deliver each Mortgage Note, Mortgage
and Assignment of Mortgage in respect of each Mortgage Loan being sold to the purchaser on a
delivery versus payment basis, or, in the case of a whole-loan sale against delivery of a duly
executed bailee letter (which payment shall be made directly to the Collateral Account in
accordance with Section 4.6(b) of the Mortgage Loan Purchase and Servicing Agreement). The
Collateral Agent shall deposit all payments received by it from the Servicer in connection with the
sale from time to time of Mortgage Loans into the Collateral Account.

(b) The Servicer shall arrange for sales of Mortgage Loans owned by the Issuer to allow
compliance with Section 4.03(h) hereof and Section 4.1(a)(i) of the Mortgage Loan
Purchase and Servicing Agreement.

Section 8.02 Release of Security Interest. Any reduction in the amounts on deposit in
the Reserve Fund and the sale or disposition of any Mortgage Loans in accordance with Section
8.01 shall result in a release of the security interest in such reduction amount and such
Mortgage Loans granted pursuant to Section 5.01(i) and (iii) hereof. In the case
of any sale or disposition of Mortgage Loans by the Issuer, the security interest granted hereunder
in such Mortgage Loans shall be released concurrent with such sale or disposition. The remaining
portion of the amounts on deposit in the Reserve Fund and Mortgage Loans not sold or otherwise
disposed of shall remain subject to this Security Agreement in all respects.

Section 8.03 Termination Event Auction and Principal Paydown Auction. In the event a
Termination Event under the Mortgage Loan Purchase and Servicing Agreement or other event requires
that a Termination Event Auction or Principal Paydown Auction be conducted pursuant to Section
11.2 or Section 4.1(a) of the Mortgage Loan Purchase and Servicing Agreement, the
Collateral Agent hereby agrees to perform, on behalf of the Secured Parties, those actions which it
is called upon to perform in such Section 11.2 or Section 4.1(a).

ARTICLE IX

THE COLLATERAL AGENT

Section 9.01 Appointment and Powers of Collateral Agent. The Issuer and the Secured
Parties hereby appoint the Collateral Agent to take such action and to exercise such rights,
remedies, powers and privileges hereunder as are specifically authorized to be exercised by the
Collateral Agent by the terms hereof, together with such rights, remedies, powers and privileges as
are reasonably incidental thereto. The Collateral Agent may execute any of its duties as agent
hereunder by or through agents, nominees, attorneys, Affiliates or employees and shall be entitled
to retain experts (including counsel which may be counsel to the Issuer) and to act in reliance
upon the advice of such experts concerning all matters pertaining to the agencies hereby created
and its duties hereunder, and shall not be liable for any action taken or omitted to be taken by it
in good faith in accordance with the advice of such experts selected by it. The relationship
between the Collateral Agent and each Secured Party is that of agent and principal only, and
nothing herein shall be deemed to constitute the Collateral Agent a trustee for any Secured Party
or impose on the Collateral Agent any obligations other than those for which express provision is
made herein. Holders of the Secured Liquidity Notes, by their acceptance of their Secured
Liquidity Notes (or a beneficial interest therein), holders of the Extended Notes, by their
acceptance of their Extended Notes (or a beneficial interest therein), and holders of the
Subordinated Notes, by their acceptance of their Subordinated Notes (or a beneficial interest
therein), consent to the appointment of the Collateral Agent or any successor Collateral Agent
hereunder.

Except as required by the specific terms of this Security Agreement, the Collateral Agent
shall have no duty (of a fiduciary nature or otherwise) to exercise any right, power, remedy or
privilege granted to it hereby, or to take any affirmative action hereunder, unless directed to do
so by the Required Senior Noteholders (or, if the Senior Notes have been paid in full, the Required
Subordinated Noteholders) (and shall be fully protected in acting or refraining from acting
pursuant to such directions or lack of directions which shall be binding on the Secured Parties),
and shall not, except as expressly provided herein, without the prior approval of the Required
Senior Noteholders (or, if the Senior Notes have been paid in full, the Required Subordinated
Noteholders), consent to any material departure by the Issuer from the terms hereof or of any other
agreement or instrument relating to the Assigned Collateral, waive any default on the part of the
Issuer under the terms hereof or under the Assigned Collateral or amend, modify, supplement or
terminate, or agree to any surrender of, this Security Agreement or the Assigned Collateral, the
Collateral Account or the Deposited Funds, except as expressly provided herein; provided,
that the foregoing limitation on the authority of the Collateral Agent is for the benefit of the
Secured Parties and shall not impose any obligation on the Issuer to investigate or inquire into
the authority of the Collateral Agent in any circumstances, and the Issuer shall be fully protected
in carrying out any request, direction or instruction made or given to the Issuer by the Collateral
Agent in the exercise of any right, power, remedy or privilege granted to the Collateral Agent
hereby, receiving or acting upon any consent or waiver granted to the Issuer hereunder by the
Collateral Agent, or entering into any amendment or modification of, or supplement to, this
Security Agreement, and the Issuer shall not be subject to the claims of any Secured Party by
reason of the lack of authority of the Collateral Agent to take any such action nor shall the lack
of authority on the part of the Collateral Agent in any circumstances give rise to any claim on the
part of the Issuer against such Secured Party; provided further, that the
Collateral Agent shall not be required to take any action which is contrary to this Security
Agreement or any other agreement or instrument relating to the Assigned Collateral or applicable
law.

Neither the Collateral Agent, nor any of its respective directors, officers, employees,
Affiliates or agents, shall be liable to any Secured Party or the Issuer for any action taken or
omitted to be taken by it or them hereunder, or in connection herewith, except for its own gross
negligence, fraud, bad faith or willful misconduct; nor shall the Collateral Agent be responsible
to any other Secured Party for the validity, effectiveness, value, sufficiency or enforceability
against the Issuer of this Security Agreement or any other document furnished pursuant hereto or in
connection herewith, or of the Collateral (or any part thereof). In no event shall the Collateral
Agent be liable for special, indirect or consequential loss or damage of any kind whatsoever
(including, but not limited to lost profits). Without limiting the generality of the foregoing,
the Collateral Agent (i) makes no warranty or representation to any Secured Party (other than as
set forth in Section 3.04) and shall not be responsible to any Secured Party for any
statements, warranties or representations made in or in connection with this Security Agreement or
any other document relating to the Collateral, and (ii) shall not have any duty, except as
expressly provided herein, to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Security Agreement, any other Program Document or any
other agreements or instruments relating to the Collateral on the part of any party hereto or
thereto or to inspect any books and records relating to the Collateral.

In the absence of bad faith on the part of the Collateral Agent, the Collateral Agent shall be
entitled to conclusively rely, and shall be fully protected in such reliance, on any communication,
direction, instrument, resolution, certificate, affidavit, paper or other document reasonably
believed by it to be genuine and correct and to have been signed or sent by the proper Person or
Persons. The Collateral Agent shall be entitled to assume that no Event of Default hereunder shall
have occurred and be continuing, unless a Trust Officer of the Collateral Agent charged by the
Collateral Agent with the administration of any of its obligations under this Security Agreement or
with knowledge of and familiarity with the Collateral Agent’s obligations under this Security
Agreement has actual knowledge thereof or the Collateral Agent has received written notice from the
Secured Parties or the Issuer that they consider that such an Event of Default has occurred and is
continuing and specifying the nature thereof. The Collateral Agent shall be fully justified in
failing or refusing to take any action under this Security Agreement upon the advice of counsel or
unless the Collateral Agent shall be indemnified to its satisfaction against any and all liability
and expense which may be incurred by it by reason of taking or continuing to take any such action.
Nothing herein shall require the Collateral Agent to risk or expend its own funds, or to make
advances. The Collateral Agent may accept deposits from, lend money to and generally engage in any
kind of business with the Issuer and its Affiliates as if it were not the agent of the Secured
Parties.

The Collateral Agent may consult with counsel, and the advice of such counsel or any opinion
of counsel as to matters of law shall be full and complete authorization and protection to such
extent in respect of any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon. The Collateral Agent may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or Affiliates. The Assigned
Collateral held by the Collateral Agent in trust hereunder need not be segregated from other
collateral except to the extent required by law or the specific provisions hereof. Unless
otherwise specified herein, the Collateral Agent shall be under no obligation to invest money
received by it hereunder and shall have no liability for interest on any such money. The
Collateral Agent shall not be responsible for recording, re-recording, filing or re-filing this
Security Agreement, or any amendment hereto or any financing statement or continuation statement.

The Collateral Agent shall be under no obligation to exercise any of the trusts or powers
vested in it by this Security Agreement or to make any investigation of matters arising hereunder
or to institute, conduct or defend any litigation hereunder or in relation hereto at the request,
order or direction of any of the Secured Parties, pursuant to the provisions of this Security
Agreement, unless such Secured Parties shall have offered to the Collateral Agent reasonable
security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities
which may be incurred therein or thereby; the Collateral Agent shall not be required to expend or
risk its own funds or otherwise incur any financial liability in the performance of any of its
duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.

The Collateral Agent hereby acknowledges that it has been notified of the terms of Section
4.25 of the Mortgage Loan Purchase and Servicing Agreement, and is hereby specifically
authorized and directed by the Secured Parties to comply with any notice submitted to it regarding
reimbursement of Monthly Advances and/or Servicing Advances to an Advancing Person (as defined in
that Section) (or nominee), as contemplated by and given in compliance with that Section.

Section 9.02 Successor Collateral Agent. The Collateral Agent acting hereunder at any
time may resign by an instrument in writing addressed and delivered to the Issuer, the Indenture
Trustee and the Depositary, and may be removed at any time with or without cause by an instrument
in writing duly executed by or on behalf of the Issuer. Subject to the provisions of Section
9.03 hereof, the Issuer shall have the right to appoint a successor to the Collateral Agent
upon any such resignation or removal by an instrument of substitution complying with the
requirements of applicable law, or in the absence of any such requirements, without other formality
than appointment and designation in writing; provided, however, that no such
appointment shall be effective until receipt of written consent of each Swap Counterparty and
written confirmation from the Rating Agencies that such appointment would not result in the
reduction or withdrawal of its then current rating, if any, of the Secured Liquidity Notes, the
Extended Notes or the Subordinated Notes. Upon the making and acceptance of such appointment, the
execution and delivery by such successor Collateral Agent of a ratifying instrument pursuant to
which such successor Collateral Agent agrees to assume the duties and obligations imposed on the
Collateral Agent by the terms of this Security Agreement, and the delivery to such successor
Collateral Agent of the Assigned Collateral, any Deposited Funds and documents and instruments then
held by the retiring Collateral Agent, such successor Collateral Agent shall thereupon succeed to
and become vested with all the estate, rights, powers, remedies, privileges, immunities,
indemnities, duties and obligations hereby granted to or conferred or imposed upon the Collateral
Agent named herein, and one such appointment and designation shall not exhaust the right to appoint
and designate further successor Collateral Agents hereunder. No Collateral Agent shall be
discharged from its duties or obligations hereunder until the Assigned Collateral, any Deposited
Funds and documents and instruments then held by such Collateral Agent shall have been transferred
or delivered to the successor Collateral Agent, until all Deposited Funds held in the Collateral
Account (if maintained with the retiring Collateral Agent) shall have been transferred to a new
Collateral Account, and until such retiring Collateral Agent shall have executed and delivered to
the successor Collateral Agent appropriate instruments substituting such successor Collateral Agent
as attorney-in-fact of the Issuer for purposes of this Security Agreement and assigning the
retiring Collateral Agent’s security or other interest in the Assigned Collateral, the Collateral
Account, the Deposited Funds and Eligible Investments to the successor Collateral Agent. If no
successor Collateral Agent shall be appointed, as aforesaid, or if appointed, shall not have
accepted its appointment, within thirty (30) days after resignation or removal of the retiring
Collateral Agent, then, subject to the provisions of Section 9.03 hereof, the Collateral
Agent may at the expense of the Issuer petition a court of competent jurisdiction to appoint a
successor Collateral Agent. Each such successor Collateral Agent shall provide the Issuer with its
address and telephone and telecopier numbers to be used for purposes of Section 11.04
hereof, in a notice complying with the terms of said Section. Notwithstanding the resignation or
removal of any Collateral Agent hereunder, the provisions of this Article IX shall continue
to inure to the benefit of such Collateral Agent in respect of any action taken or omitted to be
taken by such Collateral Agent in its capacity as such while it was Collateral Agent under this
Security Agreement.

Subject to Section 9.03 hereof, any corporation into which the Collateral Agent may be
merged or converted or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Collateral Agent shall be a party, or any
corporation succeeding to the business of the Collateral Agent as a result of any of the foregoing
shall be the successor of the Collateral Agent hereunder without the execution or filing of any
paper with any party hereto or any further act on the part of any of the parties hereto except
where an instrument of transfer or succession is required by law to effect such succession,
anything herein to the contrary notwithstanding.

Section 9.03 Qualifications of Collateral Agent; Collateral Account. (a) Any
Collateral Agent at any time acting hereunder must at all times be a commercial bank or trust
company having its principal office in the District of Columbia or one of the States located in the
United States, be authorized to accept deposits and offer checking account facilities, have capital
and surplus of at least $100,000,000 and have a long-term unsecured debt rating from each of
Moody’s and S&P and, if rated by Fitch, Fitch in one of its generic credit rating categories which
signifies investment grade.

(b) The Collateral Account, if not held by the Collateral Agent, shall be held by a commercial
bank or trust company meeting the qualifications of the Collateral Agent set forth in Section
9.03(a). The Collateral Account shall at all times be an Eligible Account.

Section 9.04 Instructions. In any instance in which the Collateral Agent is permitted
to take action hereunder or under the Program Documents, the Collateral Agent shall, except as
expressly provided herein or in the Indenture, act in accordance with the written instructions
received, if any, from the Required Senior Noteholders (or, if the Senior Notes have been paid in
full, the Required Subordinated Noteholders).

Section 9.05 Duties of Collateral Agent. The Collateral Agent shall have no duty to
monitor the Servicer nor any liability for the actions or inactions of the Servicer,
provided that nothing in this Section 9.05 shall excuse the Collateral Agent from
performing its obligations under this Agreement.

ARTICLE X

AMENDMENTS, MODIFICATIONS,

WAIVERS AND CONSENTS

Section 10.01 Execution of Amendments, etc. No amendment, modification, supplement,
termination or waiver of or to any provision of this Security Agreement, nor any consent to any
departure by the Issuer from any provision of this Security Agreement, shall be effective unless
such amendment, modification, supplement, termination or waiver shall be in writing and signed by
each Swap Counterparty (such consent not to be unreasonably withheld), the Collateral Agent and the
Issuer; and Rating Agency Confirmation with respect to such action shall have been given. Any
waiver of any provision of this Security Agreement, and any consent to any departure by the Issuer
from the terms of any provision of this Security Agreement, shall be effective (i) only in the
specific instance and for the specific purpose for which given and (ii) after the Issuer has
provided prior notice thereof to the Rating Agencies. No notice to or demand upon the Issuer in
any instance hereunder shall entitle the Issuer to any other or further notice or demand in similar
or other circumstances.

ARTICLE XI

MISCELLANEOUS

Section 11.01 Sale of Certain Collateral. The Issuer recognizes that the Collateral
Agent may be unable to effect a public sale of the Assigned Collateral by reason of certain
prohibitions contained in the Securities Act and applicable state securities laws, and instead may
resort to one or more private sales of the Assigned Collateral to a restricted group of purchasers
who will be obliged to agree, among other things, to acquire such security for their own account
for investment and not with a view to the distribution or resale thereof. The Issuer acknowledges
and agrees that any such private sale or sales may result in prices and other terms less favorable
to the seller than if the disposition were made pursuant to a public sale and, notwithstanding such
circumstances, agrees that any such private sale or sales made in an otherwise commercially
reasonable manner shall not be deemed commercially unreasonable solely because of the private
nature of such sale or sales. The Collateral Agent is hereby authorized to use the services of an
investment bank, in connection with any such sale. The Collateral Agent and the Secured Parties
shall be under no obligation to delay a sale of any of the Assigned Collateral for the period of
time necessary to permit the issuer of any securities to register them for public sale under the
Securities Act or under applicable state securities laws, even if such issuers would agree to do
so.

Section 11.02 Further Assurances. The Issuer agrees that it will join with the
Collateral Agent in executing and, at its own expense, filing and re-filing such financing
statements, amendments thereto, continuation statements and other documents (including this
Security Agreement) in such offices as may be necessary or appropriate and wherever required in
order to perfect and preserve the rights and interests granted to the Collateral Agent hereby, and
hereby authorizes the Collateral Agent to arrange for the filing of financing statements and
amendments thereto and continuation statements relative to all or any part thereof without further
authorization of the Issuer where permitted by law, and agrees to do such further acts and things,
and to execute and deliver to the Collateral Agent such additional assignments, agreements, powers
and instruments, as are necessary to carry into effect the purposes of this Security Agreement or
to better assure and confirm unto the Collateral Agent its rights, powers and remedies hereunder
(including as the Collateral Agent or any Swap Counterparty may request). Notwithstanding the
foregoing, the Collateral Agent shall have no obligation in respect of the filing, re-filing,
recording or monitoring of any financing statements, amendments thereto, or continuation
statements, or of any other similar document or instrument relating to the security interest
granted herein.

Section 11.03 No Waiver; Cumulative Remedies. No failure on the part of the
Collateral Agent to exercise, and no delay on the part of the Collateral Agent in exercising, any
right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy by the Collateral Agent preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are
cumulative and are not exclusive of any other remedies that may be available to the Collateral
Agent, whether at law, in equity or otherwise.

Section 11.04 Notices, etc. Except where telephonic instructions or notices are
authorized herein to be given, all notices, demands, instructions and other communications required
or permitted to be given to or made upon any party hereto shall be in writing (including by
electronic or facsimile transmission) and shall be sent by prepaid first class mail, personally
delivered or sent by guaranteed overnight delivery or by electronic or facsimile transmission (to
be followed by prepaid first class mail, personal or guaranteed overnight delivery) and shall be
deemed to be given for purposes of this Purchase Agreement on the date that such writing is
received by the intended recipient thereof in accordance with the provisions of this Section
11.04. Unless otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 11.04, notices, demands, instructions and other
communications in writing shall be given to or made upon the parties at their respective addresses
(or to their respective facsimile numbers) indicated on Schedule II hereto, and, in the case of
telephonic instructions or notices, by calling the telephone number or numbers indicated for such
party on Schedule II hereto.

Section 11.05 Fees, Costs and Expenses, etc. The Issuer shall pay the Collateral
Agent such fees for its services as shall be agreed upon by the Issuer and the Collateral Agent,
provided however that the annual fees (which shall not include extraordinary fees) shall not exceed
0.01% per annum on the weighted average Outstanding Program Amount. Subject to Section
2.01, Section 6.03 and Section 6.06, the Issuer hereby agrees to (a) pay or
reimburse the Collateral Agent for all of its reasonable out-of-pocket costs and expenses incurred
in connection with the preparation and execution of, and any amendment, supplement or modification
to, this Security Agreement and any other documents prepared in connection herewith or therewith,
and the consummation of the transactions contemplated hereby and thereby, including, without
limitation, the reasonable fees and disbursements of counsel to the Collateral Agent, (b) reimburse
the Collateral Agent for all reasonable out-of-pocket costs and expenses (excluding expenses solely
attributable to internal overhead) incurred by the Collateral Agent in connection with the
enforcement of or preservation of any rights under this Security Agreement, (c) pay, indemnify, and
hold the Collateral Agent harmless from any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying stamp and other documentary
taxes, if any, which may be payable or determined to be payable in connection with the execution
and delivery of, or consummation of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of, this Security
Agreement, and any such other documents, and (d) indemnify and hold harmless the Owner Trustee, the
Collateral Agent and their respective officers, directors, employees and agents against any and all
liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by the Owner Trustee or the
Collateral Agent, relating to or arising out of this Security Agreement or under the other Program
Documents, or by the Owner Trustee or the Collateral Agent (as applicable) relating to or arising
out of the enforcement of this Security Agreement or the preservation of any of its rights to the
Assigned Collateral, the Collateral Account or any Deposited Funds; provided, that the
Owner Trustee or the Collateral Agent (as applicable) shall not have the right to be indemnified
hereunder for its own gross negligence, fraud, bad faith or willful misconduct. If the Issuer
shall fail to do any act or thing which it has covenanted to do hereunder or any representation or
warranty on the part of the Issuer contained herein or repeated and reaffirmed herein shall be
breached, the Collateral Agent may, with the consent of the Required Senior Noteholders (or if the
Senior Notes have been paid, then the Required Subordinated Noteholders) (but shall not be
obligated to), do the same or cause it to be done or remedy any such breach, and may expend its
funds for such purpose. Any and all amounts so expended by the Collateral Agent shall be repayable
to it by the Issuer. Subject to Section 2.01, Section 6.03 and Section
6.06, amounts payable to the Collateral Agent pursuant to this Section 11.05 shall be
paid as follows: (A) if the Collateral Agent provides the Issuer with notice of such amounts on or
before the last Business Day of the calendar month in which such amount arose, the Issuer shall pay
such amounts on the Payment Date occurring in the immediately succeeding calendar month and (B) if
the Collateral Agent provides such notice after the last Business Day of the calendar month in
which such amount arose, the Issuer shall pay such amounts on the Payment Date occurring in the
calendar month after the month in which the demand was made. The obligations of the Issuer under
this Section 11.05 shall survive the resignation or removal of the Collateral Agent and the
termination of this Security Agreement and the discharge of the other obligations of the Issuer
hereunder and shall also survive the termination of the Indenture in accordance with its
provisions.

Section 11.06 Collateral Agent Appointed Attorney-in-Fact. The Issuer hereby appoints
the Collateral Agent its attorney-in-fact, with full power of substitution, for the purpose of
taking such action and executing agreements, instruments and other documents, in the name of the
Issuer, as the Collateral Agent, the Swap Counterparties or the holders of the Senior Notes may
deem necessary or advisable to accomplish the purposes hereof, which appointment is coupled with an
interest and is irrevocable.

Section 11.07 Termination. Except as expressly otherwise provided herein, this
Security Agreement, and the assignments, pledges and security interests created or granted hereby,
shall terminate when (a) all Obligations shall have been fully paid and satisfied, and (b) all
Notes shall have been fully paid and satisfied, at which time the Collateral Agent shall, at the
written request of the Issuer, reassign (without recourse upon, or any warranty whatsoever by, the
Collateral Agent), and deliver to the Issuer all Assigned Collateral and documents then in the
custody or possession of the Collateral Agent and, if so requested by the Issuer, shall execute and
deliver to the Issuer for filing in each office in which any financing statement relative to the
Assigned Collateral or the agreements relating thereto or any part thereof shall have been filed, a
termination statement under the UCC releasing the Collateral Agent’s interest therein, and such
other documents and instruments as the Issuer may reasonably request, all without recourse upon or
warranty whatsoever by, the Collateral Agent, and at the cost and expense of the Issuer.

The Issuer and the Collateral Agent hereby agree that, if any Deposited Funds remain on
deposit in the Collateral Account after the payment in full of all of the Obligations, such amounts
shall, at the written request of the Issuer, be released by the Collateral Agent and paid to the
Servicer.

Section 11.08 Successors and Assigns; Benefit of Agreement. This Security Agreement
shall be binding upon and inure to the benefit of the Issuer and the Secured Parties and their
respective successors and assigns; provided, however, that the Issuer may not
assign any of its rights or obligations hereunder except with the prior written consent of the
Collateral Agent (on behalf of the holders of the Senior Notes), each Swap Counterparty, each of
the Rating Agencies and each Subordinated Noteholder. This Security Agreement shall also inure to
the benefit of the holders of the Notes, which are hereby expressly declared to be third party
beneficiaries hereof. Subject to the foregoing, no Person not a party to this Security Agreement
shall be deemed to be a third party beneficiary hereof nor shall any Person be empowered to enforce
the provisions of this Security Agreement, except as set forth in the preceding sentence, or in
Section 11.17, and to the extent such Person becomes a permitted successor or assign
hereunder.

Section 11.09 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL. THIS
SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW
YORK CITY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY CONSENTS TO PROCESS
BEING SERVED IN ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY
DOCUMENT DELIVERED PURSUANT HERETO BY THE MAILING OF A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO ITS RESPECTIVE ADDRESS SPECIFIED AT THE TIME
FOR NOTICES UNDER THIS SECURITY AGREEMENT OR TO ANY OTHER ADDRESS OF WHICH IT SHALL HAVE GIVEN
WRITTEN NOTICE TO THE OTHER PARTIES. THE FOREGOING SHALL NOT LIMIT THE ABILITY OF ANY PARTY HERETO
TO BRING SUIT IN THE COURTS OF ANY JURISDICTION.

EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY WITH
RESPECT TO ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

Section 11.10 Execution in Counterparts. This Security Agreement may be executed in
any number of counterparts and by different parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute one and the same Security Agreement.

Section 11.11 Section Headings. Section headings used in this Security Agreement are
for convenience only and shall not affect the construction of this Security Agreement.

Section 11.12 Non-petition Covenant. Notwithstanding any prior termination of this
Security Agreement, the Collateral Agent as such 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 last rated obligation of the Issuer including but not limited to the last Secured Liquidity
Note, Extended Note and Subordinated Note outstanding, 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, owner
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. This
Section 11.12 shall survive the termination of this Security Agreement.

Section 11.13 Severability. In case one or more of the provisions contained in this
Security Agreement shall be or shall be deemed to be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby. If any provision of this Security Agreement
shall be or shall be deemed to be illegal, invalid or unenforceable under the applicable laws and
regulations of one jurisdiction, such provision shall not thereby be rendered illegal, invalid or
unenforceable in any other jurisdiction.

Section 11.14 Entire Agreement. The parties hereto agree that the applicable
provisions of the Side Letter shall form a part of, and be included in, this Security Agreement for
all purposes, as though set forth herein. This Security Agreement constitutes the entire agreement
between the parties hereto with respect to the matters covered hereby and supersedes all prior
agreements and understandings with respect to such matters between the parties.

Section 11.15 Limited Recourse to the Issuer. Notwithstanding anything to the
contrary contained herein, all Obligations of the Issuer shall be payable by the Issuer only to the
extent of funds available therefor under Sections 2.01 6.03, and 6.06, and,
to the extent such funds are not available or are insufficient for the payment thereof, shall not
constitute a claim, as defined under Section 101 of the Bankruptcy Code, against the Issuer to the
extent of such unavailability or insufficiency until such time as the Issuer has assets sufficient
to pay such prior deficiency. This Section 11.15 shall survive the termination of this
Security Agreement.

Section 11.16 No Recourse. The obligations of the Issuer hereunder are solely the
obligations of the Issuer and no recourse shall be had with respect to this Security Agreement, any
of the obligations of the Issuer hereunder or for the payment of any fee or other amount payable
hereunder or for any claim based on, arising out of or relating to any provision of this Security
Agreement against any employee, officer, settlor, Affiliate, agent or servant of the Issuer. This
Section 11.16 shall survive the termination of this Security Agreement.

Section 11.17 Third Party Beneficiary. The parties hereto agree that each Swap
Counterparty shall be an express third party beneficiary of this Security Agreement, and entitled
to enforce any rights granted to it hereunder, except to the extent of its rights as a Secured
Party (which rights shall be enforced by the Collateral Agent on its behalf).

Section 11.18 No Recourse to Owner Trustee. It is expressly understood and agreed by
the parties hereto that (a) this Security Agreement is executed and delivered by Christiana Bank &
Trust Company, not individually or personally but solely as Owner Trustee of the Issuer, in the
exercise of the powers and authority conferred and vested in it as trustee, (b) each of the
representations, undertakings and agreements herein made on the part of the Issuer is made and
intended not as a personal representation, undertaking and agreement by Christiana Bank & Trust
Company but is made and intended for the purpose of binding only the Issuer, (c) nothing herein
contained shall be construed as creating any liability on Christiana Bank & Trust Company,
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 Christiana Bank &
Trust Company be personally liable for the payment of any indebtedness or expenses of the Issuer or
be liable for the breach or failure of any obligation, representation, warranty or covenant made or
undertaken by the Issuer under this Security Agreement or any other related documents.

1

IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
executed by their respective officers or agents thereunto duly authorized, as of the date first
above written.

VON KARMAN FUNDING TRUST

By: CHRISTIANA BANK & TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee

By: /s/ James M. Young

Name: James M. Young

Title: Assistant Vice President

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Collateral Agent

By: /s/ Eileen M. Hughes

Name: Eileen M. Hughes

Title: Vice President

2EX-10.3

EXHIBIT 10.3

SCHEDULE I

TO THE

AMENDED AND RESTATED

SECURITY AGREEMENT

DEFINITIONS LIST

“Acquisition Date Accrued Interest” means, with respect to any Mortgage Loan or
Additional Balance, the amount of interest, if any, accrued and unpaid on the date of acquisition
of such Mortgage Loan or Additional Balance by the Purchaser.

“Additional Balance” means, with respect to any HELOC, the outstanding principal
balance of any Draw or Draws after the Closing Date for such HELOC elected to be sold, upon the
Seller’s election, by the Seller to the Purchaser pursuant to Section 2.1(a) of the
Mortgage Loan Purchase and Servicing Agreement but excluding any Excluded Amounts.

“Administrator” means New Century Mortgage Corporation.

“Affiliate” means, with respect to a Person, any other Person which directly or
indirectly through one or more intermediaries controls, is controlled by or is under common control
with, such Person. The term “control” means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of the relevant Person.

“Affordability Loan” means a Mortgage Loan with Monthly Payments calculated on an
assumed forty (40) year amortization period, other than the final Monthly Payment which is (x) due
thirty (30) years from the date of origination, and (y) sufficient to fully amortize the unpaid
principal balance and accrued interest on the related Mortgage Note on such date.

“Aggregate Extended Note Monthly Interest” means, with respect to all Classes of
Extended Notes, the sum of all Extended Note Monthly Interest.

“Allocated Expenses” means the Issuer’s expenses (other than Reimbursable Expenses),
including, without limitation, Rating Agencies fees and expenses, the Administrator fees and
expenses, the Owner Trustee fees and expenses, Depositary fees and expenses, Indenture Trustee fees
and expenses, Collateral Agent fees and expenses, Custodian fees and expenses, due diligence fees
(such due diligence fees not to exceed $15,000 in any quarter) and other anticipated costs and
fees; provided, however, that in no event may the cumulative amount of Allocated
Expenses in any calendar year exceed the Budget Expense Limit.

“Allocated Expenses Account” shall have the meaning specified in Section 6.06
of the Security Agreement.

“Annual Noteholders Tax Statement” is defined in Section 6.4(b) of the Base
Indenture.

“Appraised Value” means the value set forth in an appraisal (or, with respect to
HELOCs, other documentation or evidence of value which is generally acceptable to prudent lending
institutions with respect to home equity lines of credit) made in connection with the origination
or subsequent servicing of the related Mortgage Loan as the value of the Mortgaged Property.

“Assets” means any interest of any kind in any assets or property of any kind tangible
or intangible, real, personal or mixed, now owned or hereafter acquired by the Issuer or such other
Person as the context may require.

“Assigned Collateral” has the meaning specified in Section 5.01 of the
Security Agreement.

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

“Authenticating Representative” shall have the meaning specified in Section
3.03(b) of the Security Agreement.

“Authorized Officer” means as to the Issuer, any authorized employee or agent of the
Administrator.

“Available Amount” shall mean on any day, in relation to the Reserve Fund, as the case
may be, the aggregate amount on deposit in the Reserve Fund as of such day.

“Average Outstanding Purchase Price” means, with respect to any Remittance Period, (i)
the sum of the Outstanding Purchase Prices of such Mortgage Loan at the end of each day during such
Remittance Period, divided by (ii) the number of days in such Remittance Period. For the avoidance
of doubt, the Outstanding Purchase Price on any day of a Terminated Loan or any other Mortgage Loan
not owned by the Issuer or outstanding at the end of any day shall be zero.

“Balloon Loan” means a Mortgage Loan with Monthly Payments calculated on an assumed
amortization period that is longer than the term of the related Mortgage Note, other than the final
Monthly Payment, which final Monthly Payment is sufficient to fully amortize the unpaid principal
balance and accrued interest on the related Mortgage Note on its maturity date.

“Bankruptcy Code” means The Bankruptcy Reform Act of 1978, as amended from time to
time, and as codified as 11 U.S.C. Section 101 et seq.

“Base Indenture” means the base indenture, dated as of the Initial Closing Date, by
and between the Purchaser and the Indenture Trustee, as the same may be at any time further
amended, modified or supplemented, exclusive of any Indenture Supplements.

“Benefit Arrangement” means at any time an employee benefit plan within the meaning of
Section 3(3) of ERISA which is not a Benefit Plan or a Multiemployer Plan and which is maintained
or otherwise contributed to by any member of the ERISA Group.

“Benefit Plan” means (i) an employee benefit plan as defined in Section 3(3) of ERISA
and which is subject to Title I of ERISA, (ii) a “Plan” as defined in Section 4975 of the Code and
which is subject to Section 4975 of the Code or (iii) an entity deemed to be investing the “plan
assets” (within the meaning of 29 C.F.R. Section 2510.3-101 or otherwise under ERISA) of any such
employee benefit plan or plan, including without limitation an insurance company general account.

“Bid Price” has the meaning assigned to such term in Section 4.2(e) of the
Mortgage Loan Purchase and Servicing Agreement.

“BIF” means the Bank Insurance Fund or any successor thereto.

“Book-Entry Notes” means beneficial interests in the Notes, ownership and transfers of
which shall be evidenced or made through book entries by a Clearing Agency as described in
Section 2.19 of the Base Indenture; provided that after the occurrence of a
condition whereupon book-entry registration and transfer are no longer permitted and Definitive
Notes are issued to the Note Owners, such Definitive Notes shall replace Book-Entry Notes.

“Budget Expense Limit” shall mean $5,000,000 or such other amount as each Swap
Counterparty and the Issuer may agree to in writing from time to time.

“Business Day” means any day other than (i) Saturday and Sunday or (ii) a day on which
banking institutions or foreign exchange markets in New York City are authorized or required by
law, regulation or executive order to be closed for business.

“Calculation Agent” means New Century Mortgage Corporation.

“Calculation Period” shall have the meaning specified in the Interest Rate Swaps.

“Capitalized Interest Component” means, as of any date of determination, the Principal
Component of Secured Liquidity Notes which represents capitalized interest on Secured Liquidity
Notes which matured after the immediately preceding Payment Date.

“Carry-Over Interest Shortfall” is defined in Section 2.6 of the Base
Indenture.

“Cash Equivalent Investment” means at any time, (a) securities with maturities of
ninety (90) days or less from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit and eurodollar time
deposits with maturities of ninety (90) days or less from the date of acquisition and overnight
bank deposits of any commercial bank having capital and surplus in excess of $500,000,000, (c)
repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this
definition, having a term of not more than seven days with respect to securities issued or fully
guaranteed or insured by the United States Government, (d) commercial paper of a domestic Company
rated at least “A-1+” or the equivalent thereof by S&P or “P-1” or the equivalent thereof by
Moody’s, and in either case maturing within ninety (90) days after the day of acquisition, (e)
securities with maturities of ninety (90) days or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by any political
subdivision or taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at least “A” by S&P or “A2” by
Moody’s, (f) securities with maturities of ninety (90) days or less from the date of acquisition
backed by standby letters of credit issued by any commercial bank satisfying the requirements of
clause (b) of this definition, or (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.

“Cash-Out Refinancing Loan” means a refinancing transaction with respect to a Mortgage
Loan, in which the amount received from the refinancing loan exceeds the aggregate amount required
for (x) repayment of the existing Mortgage Loan, plus closing costs and fees, and (y) satisfaction
of any outstanding subordinate mortgage liens, by an amount in excess of the lesser of (i) $2,000,
or (ii) two percent (2%) of the principal balance of the Mortgage Loan, and the terms of the
Mortgage Note allow the relevant Mortgagor to receive such excess amount for any purpose.

“Cede” means Cede & Co., a nominee of DTC, or any successor thereto.

“Class” means (x) with respect to any Secured Liquidity Notes, any Secured Liquidity
Notes with the same issuance date and Expected Maturity or any Extended Notes with the same
issuance date and Final Maturity, and (y) with respect to any Subordinated Notes, has the meaning
given in the related Supplement.

“Class A-1 Noteholder” shall have the meaning set forth in the Series 2006-A
Supplement.

“Class A-1 Notes” means the Series 2006-A VKF Subordinated Notes, Class A-1, issued
pursuant to the Series 2006-A Supplement.

“Class A-1 Principal Amount” shall have the meaning set forth in the Series 2006-A
Supplement.

“Class A-2 Noteholder” shall have the meaning set forth in the Series 2006-A
Supplement.

“Class A-2 Notes” means the Series 2006-A VKF Subordinated Notes, Class A-2, issued
pursuant to the Series 2006-A Supplement.

“Class A-2 Principal Amount” shall have the meaning set forth in the Series 2006-A
Supplement.

“Clearing Agency” means an organization registered as a “clearing agency” pursuant to
Section 17A of the Exchange Act or any successor provision thereto or Euroclear and Clearstream.
The initial Clearing Agency shall be DTC, Euroclear and Clearstream.

“Clearing Agency Participant” means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects book-entry
transfers and pledges of securities deposited with the Clearing Agency.

“Clearstream” means Clearstream Banking, societe anonyme.

“Closing Date” means the closing date specified in any Transfer Supplement, which is
the date as to which the sale of any Portfolio is designated to occur.

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

“Collateral” shall mean the Assigned Collateral, the Collateral Account and the
Deposited Funds.

“Collateral Account” means the Eligible Account maintained by the Collateral Agent as
more fully described in Section 6.01 of the Security Agreement.

“Collateral Agent” means Deutsche Bank Trust Company Americas, not in its individual
capacity but solely as Collateral Agent under the Security Agreement, or any successor Collateral
Agent under the Security Agreement.

“Collection Account” shall mean the collection account established pursuant to
Section 4.5 of the Mortgage Loan Purchase and Servicing Agreement and maintained by the
Servicer.

“Collections” means all payments on the Collateral.

“Combined LTV” or “CLTV” or “Combined Loan-to-Value Ratio” means (a)
with respect to any Mortgage Loan other than HELOCs, as of the date of origination, the ratio
(expressed as a percentage) on such date of (x) the outstanding principal amount of such Mortgage
Loan, plus the outstanding principal balance of any senior or junior lien mortgage loan which is
secured by a lien on the same Mortgaged Property, to (y) the lesser of (i) the most recently
obtained Appraised Value of the Mortgaged Property and (ii) if such Mortgage Loan was made to
finance the acquisition of the related Mortgaged Property, the purchase price of the Mortgaged
Property, and (b) with respect to any HELOC, the ratio (expressed as a percentage) as of any date
of (x) the Credit Limit for such HELOC, plus the outstanding principal balance of any first lien
mortgage loan which is secured by a lien on the same Mortgaged Property, to (y) the lesser of (i)
the most recently obtained Appraised Value of the Mortgaged Property and (ii) if such HELOC was
made in conjunction with the acquisition of the related Mortgaged Property, the purchase price of
the Mortgaged Property.

“Commitment Fee” means the commitment fee provided for in Section 15.1 of the
Mortgage Loan Purchase and Servicing Agreement.

“Company” means New Century Mortgage Corporation.

“Condemnation Proceeds” as to each Mortgage Loan, means all awards or settlements in
respect of a Mortgaged Property, whether permanent or temporary, partial or entire, by exercise of
the power of eminent domain or condemnation, to the extent not required to be released to the
Mortgagor pursuant to the terms of the related Loan Documents or, with respect to HELOCs, to any
holder of a mortgage senior to the lien of the related Mortgage (but excluding any Excluded Amounts
with respect to any HELOC).

“Contingent Obligation”, as applied to any Person, means any direct or indirect
liability, contingent or otherwise, of that Person (a) with respect to any indebtedness, lease,
dividend, letter of credit or other obligation of another if the primary purpose or intent thereof
by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such
obligation of another that such obligation of another will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such obligation will be
protected (in whole or in part) against loss in respect thereof or (b) under any letter of credit
issued for the account of that Person or for which that Person is otherwise liable for
reimbursement thereof. “Contingent Obligation” shall include (a) the direct or indirect guarantee,
endorsement (otherwise than for collection or deposit in the ordinary course of business),
co-making, discounting with recourse or sale with recourse by such Person of the obligation of
another and (b) any liability of such Person for the obligations of another through any agreement
(contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such obligation or any
security therefor, or to provide funds for the payment or discharge of such obligation (whether in
the form of loans, advances, stock purchases, capital contributions or otherwise), (ii) to maintain
the solvency of any balance sheet item, level of income or financial condition of another or (iii)
to make take-or-pay or similar payments if required regardless of non-performance by any other
party or parties to an agreement, if in the case of any agreement described under sub-clause
(i) or (ii) of this sentence the primary purpose or intent thereof is as described in
the preceding sentence. The amount of any Contingent Obligation shall be equal to the amount of
the obligation so guaranteed or otherwise supported.

“Contractual Obligation” as to any Person, means any material provision of any
agreement, instrument or other undertaking to which such Person is a party or by which it or any of
its property is bound or any material provision of any security issued by such Person.

“Corporate Trust Office” shall mean, with respect to the Collateral Agent, the
principal office of the Collateral Agent at which at any particular time its corporate trust
business shall be administered which office at the date of the execution of the Security Agreement
is located at 60 Wall Street, MS NYC 60-2606, New York, NY 10005, Attention: Commercial Paper
Group, or at any other time at such other address as the Collateral Agent may designate from time
to time by notice to the Noteholders and the Issuer.

“Credit Amount” means, with respect to a particular Series of Senior Notes, the
product of (x) the percentage specified in the related Supplement to the Indenture or in the
Security Agreement and (y) the Series Program Size specified in the related Supplement to the
Indenture or the Security Agreement (i.e., the Principal Amount of Subordinated Notes
associated with the Senior Notes).

“Credit Amount Percentage” means, with respect to any Series of Secured Liquidity
Notes and Extended Notes, collectively, the percentage specified in the Side Letter.

“Credit Limit” means the maximum unpaid principal balance for each HELOC permitted
under the terms of the related Credit Line Agreement.

“Credit Line Agreement” means the related credit line account agreement for a HELOC
executed by the related Mortgagor and any amendment or modification thereof.

“Credits Outstanding” means, as of the close of business on any day (1) the Principal
Component of all outstanding Secured Liquidity Notes, plus (2) the aggregate principal amount of
outstanding Extended Notes, minus (3) the Deposited Funds then on deposit in the Collateral Account
and allocable to the payment of Principal Component or principal amount of Secured Liquidity Notes
and Extended Notes outstanding, except to the extent that such funds are then subject to any writ,
order, stay, judgment, warrant of attachment or execution or similar process.

“Current Transfer Price” means, with respect to any Mortgage Loan, the prevailing
price at which mortgage loans are transferred by the Company to NC Capital Corporation, which is
periodically reset to reflect prevailing market conditions and a fair return on assets for each of
the Company and NC Capital Corporation based upon their respective roles, provided that,
the Current Transfer Price shall in any event be not less than the Outstanding Purchase Price (plus
accrued interest thereon) of such Mortgage Loan.

“Custodial Agreement” means the Amended and Restated Custodial Agreement, dated as of
the Initial Closing Date, entered into among the Seller, the Servicer, the Issuer, the Collateral
Agent and the Custodian, as the same may at any time be amended, modified or supplemented.

“Custodian” means Deutsche Bank National Trust Company, not in its individual capacity
but solely as Custodian under the Custodial Agreement, or any successor Custodian under the
Custodial Agreement.

“Customary Servicing Procedures” means procedures (including collection procedures)
that the Servicer customarily employs and exercises in servicing and administering non-prime
mortgage loans and home equity lines of credit for its own account which are in accordance with
accepted non-prime mortgage loan and home equity lines of credit servicing practices of prudent
mortgage lenders in the jurisdiction in which the Mortgaged Property is situated for properties of
a similar type.

“Cut-Off Date” means (i) with respect to the repurchase of a Mortgage Loan by the
Seller or the Servicer pursuant to Section 3.3, 6.2 or 7.1 of the Mortgage
Loan Purchase and Servicing Agreement, the date of such repurchase and (ii) with respect to any
other sale by the Purchaser of a Mortgage Loan, the time and date established by the Purchaser and
the Mortgage Loan Buyer as the time and date on and after which all principal and interest
collected and other benefits accruing on the Mortgage Loan shall belong to such Mortgage Loan
Buyer.

“Default Investment” means a money market fund whose investments are limited to
obligations issued by, or the full and timely payment of principal of and interest on which is
fully guaranteed by, the United States of America or any agency or instrumentality thereof (which
agency or instrumentality is backed by the full faith and credit of the United States of America),
deposits into which are available on demand or no later than the next following Business Day.

“Defaulted Loan” means any Mortgage Loan (i) which has a Monthly Payment that is past
its Due Date for a period of time extending beyond the close of business on the corresponding day
of the third calendar month immediately succeeding the month in which such Due Date occurred, or,
if there is no such corresponding day (e.g., as when the third calendar month is a 30-day
month and such Due Date occurred on the 31st day of a month), then on the last day of
such third calendar month, without giving effect to any Monthly Advance, or (ii) which is a
Delinquent Loan for which the Servicer has not made a Monthly Advance and the Servicer has
delivered a certificate pursuant to Section 5.1 of the Mortgage Loan Purchase and Servicing
Agreement or (iii) where any other event has occurred which gives the holder the right to
accelerate payment of the Mortgage Loan and/or take steps to foreclose on the Mortgage securing the
Mortgage Loan under the related Mortgage Note or other Loan Documents, including without limitation
the bankruptcy of the Mortgagor.

“Deferred Amount” means any amount payable or paid by a purchaser (other than the
Purchaser) of Mortgage Loans or the servicing rights in respect thereof after the settlement date
of the sale or securitization of such Mortgage Loans or servicing rights, in respect of deferred
sale price or deferred excess servicing fee, or other cash consideration for such sale or
securitization.

“Definitions List” means this Definitions List, as amended or modified from time to
time.

“Definitive Notes” is defined in Section 2.19(e) of the Base Indenture.

“Delinquency Rate” means for any Remittance Period, the rate equal to 12 times a
fraction, the numerator of which is the aggregate amount of Non-Recoverable Advances for such
Remittance Period and the denominator of which is the Average Outstanding Purchase Price of the
Mortgage Loans owned by the Issuer during such Remittance Period.

“Delinquent Loan” means any Mortgage Loan which has a Monthly Payment that is past its
Due Date for a period of time extending beyond the close of business on the corresponding day of
the month immediately succeeding the month in which such Due Date occurred, or, if there is no such
corresponding day (e.g., as when a 30-day month follows a 31-day month in which such Due
Date occurred on the 31st day of such month), then on the last day of such immediately
succeeding month, up to but not including the corresponding day of the third calendar month
immediately succeeding the month in which such Due Date occurred, or, if there is no such
corresponding day (e.g., as when the third calendar month is a 30-day month and such Due
Date occurred on the 31st day of a month), then on the last day of such third calendar
month, without giving effect to any Monthly Advance.

“Depositary” means Deutsche Bank Trust Company Americas, not in its individual
capacity but solely as Depositary under the Depositary Agreement, or any successor Depositary under
the Depositary Agreement.

“Depositary Agreement” means the Amended and Restated Depositary Agreement, dated as
of the Initial Closing Date, entered into by the Issuer and the Depositary, as the same may at any
time be amended, modified or supplemented.

“Depositary Incumbency Certificate” shall have the meaning specified in Section
3.03(a) of the Security Agreement.

“Deposited Funds” has the meaning specified in Section 6.02 of the Security
Agreement.

“Designated Excess Spread Amount” shall have the meaning specified in the Interest
Rate Swaps.

“Designated Representative” shall have the meaning specified in Section
3.03(b) of the Security Agreement.

“Determination Date” means the 24th day of each month, or if such day is
not a Business Day, the preceding Business Day.

“Distribution Account” means, with respect to any Series of Notes, an account
established as such pursuant to the related Supplement.

“Distribution Date” means (i) after the conversion of any Class of Secured Liquidity
Notes to a Class of Extended Notes and until such Extended Notes are paid in full, the
25th day of each calendar month (or if such day is not a Business Day, the next
following Business Day), (ii) each Final Maturity of each Class of Extended Notes outstanding, and
(iii) each date that Extended Notes are redeemed.

“Dollar” and the symbol “$” mean the lawful currency of the United States.

“Draw” means, with respect to any HELOC, a borrowing by the related Mortgagor under
the related Mortgage Note.

“DTC” means The Depository Trust Company.

“Due Date” means, with respect to each Mortgage Loan, the day on which the related
Monthly Payment on such Mortgage Loan is due, exclusive of any grace period.

“Effective Date” has the meaning specified in Section 4.01 of the Security
Agreement.

“Eligibility Criteria” has the meaning given in the Side Letter.

“Eligibility Representations” means the representations and warranties made by the
Seller with respect to each Mortgage Loan, set forth in Section 3.2 of the Mortgage Loan
Purchase and Servicing Agreement.

“Eligible Account” shall mean either (i) a segregated, non-interest bearing trust
account or (ii) a demand trust account with a bank having short-term debt ratings of “A-1+” by S&P,
“P-1” by Moody’s and, if rated by Fitch, “F1+” by Fitch. In either case, the Collateral Agent on
behalf of the Secured Parties shall at all times be (x) the “entitlement holder” (within the
meaning of Section 8-102(a) of the New York UCC) to the extent that the Collateral Account is a
“securities account” (within the meaning of Section 8-501(a) of the New York UCC), or (ii) the
“customer” (within the meaning of Section 4-104 of the New York UCC), to the extent that the
Collateral Account shall be a “deposit account” (within the meaning of Section 9-102(a) of the New
York UCC).

“Eligible Institution” shall mean (i) Deutsche Bank National Trust Company (while it
shall satisfy any one of requirements set forth in (ii), (iii), or the proviso below), or (ii) any
depositary institution, the deposits in which are insured by the Federal Deposit Insurance
Corporation and which at all times has a short-term unsecured debt rating of “A-1+” by S&P, “P-1”
by Moody’s and, if rated by Fitch, “F1+” by Fitch or (iii) a depositary institution acceptable to
the Rating Agencies; provided, however, that an institution which shall have
corporate trust powers and which maintains any account hereunder as a fully segregated trust
account with the trust department of such institution shall not be required to meet the foregoing
rating requirements, and need only at all times have a long-term unsecured debt rating of at least
“Baa3” by Moody’s so long as Moody’s is rating any of the Notes.

“Eligible Investments” means investments which mature no later than the Business Day
prior to the next following Payment Date in the following: (i) obligations issued by, or the full
and timely payment of principal of and interest on which is fully guaranteed by, the United States
of America or any agency or instrumentality thereof (which agency or instrumentality is backed by
the full faith and credit of the United States of America), (ii) commercial paper notes (other than
the Senior Notes) rated (at the time of purchase) at least “A-l+” by S&P, “P-1” by Moody’s and, if
rated by Fitch, “F1+” by Fitch, (iii) certificates of deposit, other deposits or bankers’
acceptances issued by or established with commercial banks having short-term deposit ratings (at
the time of purchase) of at least “A-l+” by S&P, “P-1” by Moody’s and, if rated by Fitch, “F1+” by
Fitch, (iv) repurchase agreements involving any of the Eligible Investments described in clauses
(i) through (iii) hereof so long as the other party to the repurchase agreement has short-term
unsecured debt obligations or short-term deposits rated (at the time of purchase) at least “A-l+”
by S&P, “P-1” by Moody’s and, if rated by Fitch, “F1+” by Fitch and (v) direct obligations of any
money market fund or other similar investment company all of whose investments consist of
obligations described in the foregoing clauses of this definition and that is rated “AAAm” by S&P
and “Aam” by Moody’s. In addition, any such Eligible Investment shall not have an “r” highlighter
affixed to its rating, and its term shall have a predetermined fixed dollar amount of principal due
at maturity that cannot vary or change. Interest on any Eligible Investment shall be tied to a
single interest rate index plus a single fixed spread, if any, and move proportionately with that
index. Without limitation of the foregoing, “Eligible Investments” may include investments for
which the Collateral Agent or its Affiliates serves as investment manager or advisor.

“Eligible Loan” means Mortgage Loans (including HELOCs and any Additional Balances
related thereto) that satisfy the Eligibility Criteria, Eligibility Representations, Portfolio
Aging Limitations and which, taken together with the other Mortgage Loans owned or to be owned by
the Purchaser, does not cause a breach of the Portfolio Criteria. An Eligible Loan includes,
without limitation, the Mortgage Loan File, Monthly Payments, Principal Prepayments, Liquidation
Proceeds, Condemnation Proceeds, Insurance Proceeds, REO Disposition Proceeds and all other rights,
benefits, proceeds and obligations arising from or in connection with such Eligible Loan, but
excludes any Excluded Amounts with respect to HELOCs.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any
successor statute of similar import, in each case as in effect from time to time. References to
sections of ERISA also refer to any successor sections.

“ERISA Group” means the Issuer and all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control which, together
with the Issuer, are treated as a single employer under Section 414 of the Internal Revenue Code.

“Euroclear” means Euroclear Bank S.A./N.V., as operator of the Euroclear System.

“Event of Bankruptcy” shall be deemed to have occurred with respect to a Person if:

(a) such Person shall become insolvent or admit in writing its inability to pay its
debts as they come due, or the commencement by such Person of a voluntary case under the
federal bankruptcy laws, as now or hereafter in effect, or any other present or future
federal or state bankruptcy, insolvency or similar law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of such Person or of any substantial part of its
property or the making by such Person of an assignment for the benefit of creditors or the
failure by such Person generally to pay its debts as such debts become due or the taking of
action by such Person in furtherance of any of the foregoing; or

(b) an involuntary petition or an involuntary proceeding shall have been filed or
commenced against such Person under the federal bankruptcy laws, as now or hereafter in
effect, or any other present or future federal or state bankruptcy laws, as now or hereafter
in effect, or any other present or future federal or state bankruptcy, insolvency or similar
law, or seeking the appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of such Person or of any substantial part of its
property, or seeking the winding up or liquidation of the affairs of such Person and such
petition or proceeding shall not have been dismissed for a period of thirty (30) days (in
the case of the Issuer), or sixty (60) days (in any other case), or an order or decree for
relief against such Person shall be entered in any such proceeding; or

(c) the board of directors of such Person (if such Person is a corporation or similar
entity) shall vote to implement any of the actions set forth in clause (b) above.

“Event of Default” (i) with respect to the Secured Liquidity Notes and the Extended
Notes, has the meaning specified in Section 7.01 of the Security Agreement, and (ii) with
respect to the Subordinated Notes, has the meaning specified in Section 9.1 of the Base
Indenture.

“Excess Spread Rate” means an annual rate for each Remittance Period equal to the
difference between (A) and (B) where (A) equals the Loan Rate for such Remittance Period and where
(B) equals the sum of (i) the Funding Rate for such Remittance Period, (ii) the Expense Rate for
such Remittance Period, and (iii) the Delinquency Rate for such Remittance Period.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Date” shall have the meaning specified in Section 2.12(a)(ii) of the
Base Indenture.

“Excluded Amount” means, with respect to any HELOC, any Draws made by the related
Mortgagor under such Mortgage Loan after the Closing Date for such HELOC which have not been
purchased by the Purchaser as an Additional Balance with respect to such HELOC in accordance with
Section 2.1(a) of the Mortgage Loan Purchase and Servicing Agreement, and the portion of
any and all collections received by the Servicer with respect to such HELOC allocated to such Draws
based on the pro rata allocation set forth in Section 4.27 of the Mortgage Loan Purchase
and Servicing Agreement.

“Expected Maturity” means, with respect to each Class of Secured Liquidity Notes, the
expected maturity date of such Class, which date shall be between one (1) and one hundred and
eighty (180) days from the date of issuance of such Class, as set forth in the related instructions
from the Issuer Agent delivered in accordance with Section 4 of the Depositary Agreement.

“Expense Rate” means, for any Remittance Period, the rate equal to 12 times a
fraction, the numerator of which is the aggregate Allocated Expenses and Servicing Fee for such
Remittance Period and the denominator of which is the Average Outstanding Purchase Prices of the
Mortgage Loans owned by the Issuer during such Remittance Period.

“Extended Note Amortization Event” means any time at which an Extended Note remains
outstanding for thirty (30) days following the conversion of the related Secured Liquidity Note;
provided, however, that any Extended Note Amortization Event shall cease to exist
and shall no longer be deemed to be continuing from the date all Extended Notes are paid in full.

“Extended Note Calculation Agent” means the Collateral Agent.

“Extended Note Monthly Interest” means, with respect to each Class of Extended Notes
and each Distribution Date on which accrued interest on such Class is payable, interest
distributions with respect to such Class of Extended Notes equal to the product of (i) the
outstanding principal amount of such Class of Extended Notes on the preceding Distribution Date (or
in the case of the first Distribution Date occurring after the related Expected Maturity, such
Expected Maturity) (after giving effect to all distributions and allocations made on such preceding
Distribution Date), (ii) the Extended Note Rate for the related Interest Period and (iii) the
actual number of days in such Interest Period divided by three hundred and sixty (360).

“Extended Note Rate” means, for each Distribution Date, One-Month LIBOR plus 0.25% per
annum.

“Extended Note Shortfall” has the meaning specified in Section 4.07 of the
Security Agreement.

“Extended Notes” means any one of the Extended Notes, resulting from the conversion of
a Secured Liquidity Note to an Extended Note pursuant to Section 4.04 of the Security
Agreement.

“Extended Notes Distribution Account” has the meaning set forth in Section
2(d) of the Depositary Agreement.

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

“FICO Score” means a statistical credit score obtained by many mortgage lenders in
connection with a loan application to help assess a borrower’s creditworthiness. A FICO Score is
generated by models developed by a third party and made available to lenders through three (3)
national credit bureaus. The FICO Score is based on a borrower’s historical credit data,
including, among other things, payment history, delinquencies on accounts, levels of outstanding
indebtedness, length of credit history, types of credit and bankruptcy experience.

“Final Maturity” means, with respect to each Class of Extended Notes, the date which
is 180 days following the Expected Maturity of such Class.

“Financial Covenants” means:

(i) the Performance Guarantor maintains, as of the last day of each of its
fiscal quarters, a Tangible Net Worth not less than the sum of (1) $750,000,000, and
(2) fifty percent (50%) of all increases in shareholders’ equity as of the last day
of its most recent fiscal quarter.

(ii) the Performance Guarantor shall maintain its (1) status as a real estate
investment trust for purposes of U.S. federal income tax, and (2) a ratio of Total
Indebtedness to Tangible Net Worth not greater than 15:1 measured on the last day of
each of its fiscal quarters.

(iii) the Performance Guarantor shall have, on a consolidated basis, Liquidity
in an amount equal to not less than $60,000,000.

“Financing” means (i) securitizing nonprime mortgage loans, or (ii) funding nonprime
mortgage loans through a commercial paper program, repurchase facility, or loan facility.

“First Lien Mortgage Loan” means a Mortgage Loan secured by a first lien Mortgage on
the related Mortgaged Property.

“First Pay Default Loan” means a Mortgage Loan for which the initial Monthly Payment
due thereon after origination is not made by the related Mortgagor within forty-five (45) days
after the Due Date therefor.

“First Tier Utilization” means an amount equal to $500,000,000.

“Fitch” means Fitch, Inc. and any successor thereto.

“Form” has the meaning given in Section 9.8(b) of the Base Indenture.

“Fourth Tier Utilization” means an amount equal to $2,000,000,000.

“Funding Rate” means, for any Remittance Period, the rate equal to the weighted
average interest rate of the outstanding Secured Liquidity Notes, Extended Notes, if any, and
Subordinated Notes on each day or such Remittance Period.

“GAAP” means generally accepted accounting principles set forth in the statements and
pronouncements of the Financial Accounting Standards Board and opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public Accountants or in such
other statements by such other entity as may be approved by a significant segment of the accounting
industry.

“Governmental Authority” means any Federal, state, local or foreign court or
governmental department, commission, board, bureau, agency, authority, instrumentality or
regulatory body.

“HELOC” means an open-end, revolving, home equity line of credit underwritten in
accordance with the Seller’s HELOC underwriting standards.

“High Cost Loan” means a mortgage loan classified as (a) a “high cost” loan under the
Home Ownership and Equity Protection Act of 1994, or (b) a “high cost”, “threshold”, “covered”,
“predatory” or similar loan under any applicable federal, state or local law.

“Holder” means the holder of a Note.

“Indebtedness” means, with respect to any Person at any time, without duplication, all
obligations of such Person which, in accordance with GAAP, consistently applied, should be
classified as liabilities on a consolidated balance sheet of such Person, but in any event
including: (a) all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of
such Person upon which interest charges are customarily paid or accrued, (d) all obligations of
such Person under conditional sale or other title retention agreements relating to property
purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred
purchase price of property or services, but excluding accrued expenses and trade payables incurred
and paid in the ordinary course of business, (f) all obligations of others secured by any lien on
property owned or acquired by such Person, whether or not the obligations secured thereby have been
assumed, (g) all capitalized lease obligations of such Person, (h) all obligations of such Person
in respect of interest rate protection agreements, (i) all obligations of such Person, actual or
contingent, in respect of letters of credit or banker’s acceptances, (j) all obligations of any
partnership or joint venture as to which such Person is or may become personally liable, and (k)
all guarantees by such Person of Indebtedness of others, less (l) the aggregate amount of any
indebtedness that is reflected on the balance sheet of such Person in respect of obligations
incurred pursuant to a securitization transaction, solely to the extent such obligations are
secured by the assets securitized thereby and are non-recourse to such Person.

“Indenture” means the Base Indenture, together with all Indenture Supplements, as the
same may at any time be amended, modified or supplemented.

“Indenture Event of Default” means an event of default as set forth in the Indenture.

“Indenture Supplement” or “Supplement” means an indenture supplement to the
Base Indenture with respect to any Series of Subordinated Notes.

“Indenture Trustee” means Deutsche Bank Trust Company Americas, not in its individual
capacity but solely as indenture trustee under the Indenture, or any successor indenture trustee
under the Indenture.

“Initial Closing Date” means December 15, 2005.

“Initial Principal Amount” means the original principal amount of any Subordinated
Notes.

“Initial Purchase Price” has the meaning given in the Side Letter.

“Initial Purchaser” means Citigroup Global Markets Inc. as initial purchaser of the
Subordinated Notes under the Subordinated Note Purchase Agreement.

“Insurance Proceeds” means, with respect to each Mortgage Loan, proceeds of insurance
policies insuring the related Mortgaged Property to the extent not required to be released to a
senior lienholder or the Mortgagor pursuant to the terms of the related Loan Documents (but
excluding, with respect to any HELOC, any Excluded Amounts with respect thereto).

“Insured Amount” has the meaning given in Section 4.10 of the Mortgage Loan
Purchase and Servicing Agreement.

“Interest Component” means, with respect to Secured Liquidity Notes outstanding at any
time, the sum of (a) the portion of the face amount of outstanding Secured Liquidity Notes issued
on a discount basis representing the discount incurred in respect thereof and (b) the amount of
interest that would accrue from the date of issuance to the Expected Maturity in respect of
outstanding Secured Liquidity Notes issued on an interest-bearing basis.

“Interest Only Loan” means a Mortgage Loan for which the Monthly Payment does not
include an amount in reduction of the principal balance of such Mortgage Loan, provided
that at the end of the applicable Interest Only Period, such Mortgage Loan shall
automatically be deemed no longer to be an Interest Only Loan.

“Interest Only Period” means for any Mortgage Loan, the period, if any, during which
the Monthly Payments due with respect to such Mortgage Loan do not include an amount in reduction
of the principal balance of such Mortgage Loan.

“Interest Period” means with respect to each Class of Extended Notes (i) initially,
the period from and including the Expected Maturity to but excluding the second Distribution Date
following such Expected Maturity and (ii) thereafter, the period from and including the immediately
preceding Distribution Date to and including the day immediately preceding such Distribution Date;
provided, however, in the case of the final payment of an Extended Note, the
Interest Period shall end on and include the day immediately preceding the date on which such
Extended Note is paid in full.

“Interest Rate Swap Event of Default” means an event of default under any Interest
Rate Swap.

“Interest Rate Swap Termination Event” means a termination event under any Interest
Rate Swap.

“Interest Rate Swaps” means the interest rate swap agreements, each dated as of the
date hereof, and any other interest rate swap agreement entered into between the Purchaser and a
Swap Counterparty separately, or any substitute interest rate swaps entered into pursuant to the
provisions of the Interest Rate Swaps, in each case as the same may be at any time amended,
modified or supplemented.

“Interim Payment Date” shall have the meaning set forth in each Interest Rate Swap.

“Internal Revenue Code” or “Code” means the Internal Revenue Code of 1986, as
amended, reformed or otherwise modified from time to time, and any successor statute of similar
import, in each case as in effect from time to time. References to sections of the Code also refer
to any successor sections.

“Investment Company Act” means the Investment Company Act of 1940, as amended.

“Issuer” or “Purchaser” means Von Karman Funding Trust, a Delaware statutory
trust, as issuer of the Notes.

“Issuer Agent” has the meaning set forth in Section 3.03(a) of the Security
Agreement.

“Issuer Incumbency Certificate” shall have the meaning specified in Section
3.03(a) of the Security Agreement.

“Issuer Order” and “Issuer Request” means a written order or request signed in
the name of the Issuer by any one of its Authorized Officers and delivered to the Indenture
Trustee.

“Junior Loan” means a HELOC or a Second Lien Mortgage Loan.

“Junior Loan Exposure Trigger Event” means at any time the ratio of the Outstanding
Purchase Price of all Junior Loans that are Delinquent Loans owned by the Purchaser on such day to
the Outstanding Purchase Price of all Junior Loans owned by the Purchaser on such day shall exceed
one and one half percent (1.5%) for sixty (60) consecutive days or more.

“Junior Loan Exposure Trigger Event Auction” has the meaning assigned to such term in
Section 2.8 of the Mortgage Loan Purchase and Servicing Agreement.

“LIBOR” has the meaning specified in Section 4.06 of the Security Agreement.

“LIBOR Business Day” shall mean any day on which dealings in deposits in U.S. dollars
are transacted in the London interbank market.

“LIBOR Determination Date” has the meaning specified in Section 4.06 of the
Security Agreement.

“Lien” means, when used with respect to any Person, any interest in any real or
personal property, asset or other right held, owned or being purchased or acquired by such Person
which secures payment or performance of any obligation, and shall include any mortgage, lien,
pledge, encumbrance, charge, retained security title of a conditional vendor or lessor, or other
security interest of any kind, whether arising under a security agreement, mortgage, lease, deed of
trust, chattel mortgage, assignment, pledge, retention or security title, financing or similar
statement, or notice or arising as a matter of law, judicial process or otherwise.

“Liquidation Proceeds” means all amounts received and retained in connection with the
liquidation of Defaulted Loans, but excluding, with respect to any HELOCs, any Excluded Amounts
related thereto.

“Liquidity” means, for any Person, the aggregate of all cash, Cash Equivalent
Investments, and Overcollateralization, less the amount of Restricted Cash owned by such Person.

“Loan Documents” has the meaning assigned to such term in Section 2.1(b) of
the Mortgage Loan Purchase and Servicing Agreement.

“Loan Rate” means, for any Remittance Period, the rate equal to the average of the
rates calculated for each day of such Remittance Period, which rate for each such day shall equal
(A) the sum, for each Mortgage Loan owned by the Issuer at the end of such day, of the product of
(i) the Mortgage Interest Rate of such Mortgage Loan and (ii) the Outstanding Purchase Price of
such Mortgage Loan divided by (B) the sum of the Outstanding Purchase Price of the Mortgage Loans
owned by the Issuer at the end of each day of such Remittance Period.

“Loan Termination Date” means each day on which a deposit is made into the Collateral
Account in respect of Terminated Loans.

“Loan-to-Value Ratio” or “LTV” means, with respect to each Mortgage Loan, the
ratio expressed as a percentage of the outstanding principal balance of the Mortgage Loan as of the
date of origination of the Mortgage Loan, to the lesser of (i) the most recently obtained Appraised
Value of the Mortgaged Property and (ii) if the Mortgage Loan was made to finance the acquisition
of the related Mortgaged Property, the purchase price of the Mortgaged Property.

“Market Value” means, with respect to any Mortgage Loan at any date, the price at
which such Mortgage Loan could be sold in its entirety to a single, third-party purchaser on arm’s
length terms, as determined by the Reference Agent in its sole discretion and taking into account
customary factors, including, but not limited to, market factors where such price is affected by
the Purchaser (if that be the case) being in default under the Program Documents. Where the
Reference Agent is called upon to determine the Market Value of a particular portfolio of Mortgage
Loans, the Reference Agent may, but shall not be obligated to, take into account the increase or
decrease in price attributable to such Mortgage Loans being part of such portfolio.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets,
operations, prospects or condition, financial or otherwise, of the Purchaser or (b) the ability of
the Purchaser, the Seller or the Servicer to perform any of its obligations under the Mortgage Loan
Purchase and Servicing Agreement or any of the other Program Documents.

“Maximum Indemnity Amount” for any calendar year shall mean the product of the Program
Size and 20 basis points.

“MERS” means Mortgage Electronic Registration Systems, Inc.

“MERS Mortgage” means any Mortgage that is recorded in the name of MERS, as nominee
for the Company (or in such substantially similar language as the Company deems appropriate).

“Monthly Advance” means amounts advanced by the Servicer in respect of Delinquent
Loans and Defaulted Loans pursuant to Section 5.1 of the Mortgage Loan Purchase and
Servicing Agreement.

“Monthly Certificate” is defined in Section 4.1(a) of the Base Indenture.

“Monthly Interest Advance” means, for any Monthly Remittance Date, an amount, not less
than zero, equal to (i) the product of (x) the Loan Rate for the related Remittance Period, (y) the
Average Outstanding Purchase Prices of the Mortgage Loans owned by the Issuer during the related
Remittance Period and (z) 1/12, minus (ii) all amounts on deposit in the Collection Account on such
Monthly Remittance Date representing interest collections on Mortgage Loans (including any Monthly
Servicer Advances made or to be made for the related Remittance Period), minus (iii) any Sold Loan
Interest Payment Amount payable by any Swap Counterparty on the next following Payment Date, minus
(iv) interest due on Mortgage Loans for which the Servicer will not make a Monthly Servicer Advance
for the related Remittance Period pursuant to a certificate delivered by it under Section
5.1 of the Mortgage Loan Purchase and Servicing Agreement, minus (v) reinvestment income
received during the related Remittance Period on amounts on deposit in the Reserve Fund (but only
to the extent that the Reserve Fund Available Amount exceeds the Required Reserve Fund Amount),
minus (vi) reinvestment income received during the related Remittance Period on amounts on deposit
in the Collateral Account.

“Monthly Noteholders Statement” means a statement substantially in the form of
Exhibit E to the Indenture.

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

“Monthly Remittance Date” means the 24th day of each month, or if such day
is not a Business Day, the preceding Business Day.

“Moody’s” means Moody’s Investors Service, Inc., and any successor thereto.

“Mortgage” means the mortgage, deed of trust or other instrument which creates a first
or second priority lien on an estate in fee simple in real property securing the Mortgage Note.

“Mortgage Interest Rate” means the annualized regular rate of interest borne on a
Mortgage Note relating to the Mortgage Loan.

“Mortgage Loan” means each non-prime mortgage loan (including HELOCs and any
Additional Balances related thereto sold, upon the Seller’s election, by the Seller to the
Purchaser pursuant to Section 2.1(a) of the Mortgage Loan Purchase and Servicing Agreement
or any Closing Date following the Closing Date for such HELOC, but excluding any Excluded Amounts)
identified in each Transfer Supplement.

“Mortgage Loan Buyer” means a Securitization Vehicle or other Person that is
purchasing a Portfolio from the Purchaser (other than the Seller or the Servicer in the case of a
repurchase of a Mortgage Loan pursuant to Section 3.3, 6.2 or 7.1 of the Mortgage
Loan Purchase and Servicing Agreement).

“Mortgage Loan Buyer Account” has the meaning assigned to such term in Section
4.6(f) of the Mortgage Loan Purchase and Servicing Agreement.

“Mortgage Loan File” means the items pertaining to each Mortgage Loan referred to in
Section 2.1(b) of the Mortgage Loan Purchase and Servicing Agreement, and any additional
documents required to be added to the Mortgage Loan File pursuant to the Mortgage Loan Purchase and
Servicing Agreement.

“Mortgage Loan Purchase and Servicing Agreement” means the amended and restated
Mortgage Loan Purchase and Servicing Agreement, dated as of the Initial Closing Date, among the
Issuer, the Seller and Servicer, and the Performance Guarantor, as the same may at any time be
amended, modified or supplemented.

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

“Mortgage Note” means the note or other evidence of the indebtedness of a Mortgagor
secured by a Mortgage, relating to a Mortgage Loan, other than HELOCs, and with respect to any
HELOC, the Credit Line Agreement.

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

“Mortgagee” means the lender on a Mortgage Note.

“Mortgagor” means the obligor on a Mortgage Note.

“Multiemployer Plan” means at any time an employee pension benefit plan within the
meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or
accruing an obligation to make contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a member of the ERISA
Group during such five year period.

“Net Worth” with respect to any Person, shall mean the excess of total assets of such
Person over total liabilities of such Person, determined in accordance with GAAP.

“Non-Recoverable Advances” means, for any Remittance Period, the amount of Monthly
Advances that the Servicer was not required to make pursuant to Section 5.1 of the Mortgage
Loan Purchase and Servicing Agreement, because such Monthly Advances were deemed not to be
recoverable in the Servicer’s reasonable judgment.

“Note Owner” means, with respect to a Book-Entry Note, the Person who is the
beneficial owner of such Book-Entry Note, as reflected on the books of the Clearing Agency, or on
the books of a Person maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules of such Clearing Agency).

“Note Rate” means, with respect to any Series of Notes, the rate at which interest
accrues on the Notes of such Series of Notes (or formula on the basis of which such rate shall be
determined) as stated in the applicable Supplement.

“Note Register” means the register maintained pursuant to Section 2.9(a) of
the Base Indenture, providing for the registration of the Notes and transfers and exchanges
thereof.

“Noteholder” means the holder of a Note.

“Notes” means, collectively, the Senior Notes and the Subordinated Notes.

“Obligations” has the meaning specified in Section 2.01 of the Security
Agreement.

“Officer’s Certificate” means a certificate signed by an Authorized Officer of the
Issuer.

“One-Month LIBOR” means the rate derived using the method set forth in Section
4.06(b) of the Security Agreement.

“One Payment Delinquent Loan” means any Delinquent Loan for which the Monthly Payment
that is most past due is a Monthly Payment that is more than one month but less than two months
past its Due Date (or, if the Due Date in any month does not correspond to a day in such month
(e.g, when a Due Date occurs on the 31st day of a 30 day calendar month) then on the
last day of such month) without giving effect to any Monthly Servicer Advance.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to
the Collateral Agent. The counsel may be an employee of or counsel to the Issuer, unless the
Required Senior Noteholders or each Swap Counterparty shall notify the Collateral Agent in writing
of objection thereto.

“Outstanding Program Amount” means, as of any day, the aggregate of the Outstanding
Purchase Price of all Mortgage Loans owned by the Purchaser on that day.

“Outstanding Purchase Price” means, with respect to any Mortgage Loan and any date of
determination, (i) the Initial Purchase Price of such Mortgage Loan (including, without limitation,
with respect to any HELOC, the Initial Purchase Price of any Additional Balance related thereto
sold, upon the Seller’s election, by the Seller to the Purchaser pursuant to Section 2.1(a)
of the Mortgage Loan Purchase and Servicing Agreement on any Closing Date subsequent to the Closing
Date for such HELOC), less (ii) the amounts of any payments received by the Purchaser in respect of
Acquisition Date Accrued Interest, less (iii) all previous principal payments made on such Mortgage
Loan after acquisition by the Purchaser and received by the Servicer prior to such date of
determination (excluding with respect to any HELOC, any Excluded Amounts related thereto);
provided, however, that after any Loan Termination Date or any date on which a
Mortgage Loan is repurchased by the Seller or the Servicer pursuant to Section 3.3,
6.2 or 7.1 of the Mortgage Loan Purchase and Servicing Agreement, the Outstanding
Purchase Price of such Terminated Loan or such repurchased Mortgage Loan shall be zero.

“Overcollateralization” means, as of any date of determination for any Person, the
excess of (i) the collateral value of assets pledged by that Person to a lender under a committed
warehouse or repurchase facility (after taking into account required haircuts) over (ii) the
aggregate amount of the advances or loans made by the lender to the borrower under any such
committed warehouse or repurchase facility.

“Owner Trustee” means Christiana Bank & Trust Company, acting not in its individual
capacity but solely as Owner Trustee under the Trust Agreement.

“Partial Termination” means the termination of a portion of each Interest Rate Swap in
accordance with Section 5 thereof.

“Paying Agent” shall have the meaning specified in Section 2.9(a) of the Base
Indenture.

“Payment Date” means the 25th day of each calendar month (or if any such
day is not a Business Day, the next following Business Day), commencing February 27, 2006.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding to all
or any of its functions under ERISA.

“Performance Guarantor” means New Century Financial Corporation, a Maryland
corporation, as performance guarantor pursuant to Section 13.1 of the Mortgage Loan
Purchase and Servicing Agreement.

“Permanent Global Note” has the meaning specified in Section 2.8(b) of the
Base Indenture.

“Permitted Liens” means (i) Liens for current taxes not delinquent or for taxes being
contested in good faith and by appropriate proceedings, and with respect to which adequate reserves
have been established, and are being maintained, in accordance with GAAP, (ii) mechanics’,
materialmen’s, landlords’, warehousemen’s and carrier’s Liens, and other Liens imposed by law,
securing obligations arising in the ordinary course of business that are not more than thirty days
past due or are being contested in good faith and by appropriate proceedings and with respect to
which adequate reserves have been established, and are being maintained, in accordance with GAAP
and (iii) the Liens in favor of the Collateral Agent pursuant to the Security Agreement.

“Person” means and includes an individual, a partnership, a corporation, a joint stock
company, a limited liability company, an unincorporated association, a joint venture or other
entity or a government or an agency or political subdivision or instrumentality thereof.

“Pool” is defined in Section 7.03 of the Security Agreement.

“Portfolio” means a Mortgage Loan and/or Additional Balance or pool of Mortgage Loans
and/or Additional Balances sold to the Purchaser on a Closing Date pursuant to the terms of the
Mortgage Loan Purchase and Servicing Agreement and the applicable Transfer Supplement.

“Portfolio Aging Limitations” is defined in the Side Letter.

“Portfolio Criteria” is defined in the Side Letter.

“Potential Event of Default” means any occurrence or event which, with the giving of
notice, the passage of time or both, would constitute an Event of Default.

“Principal Amount” means, with respect to any Series of Subordinated Notes and any
date of determination, the Initial Principal Amount of such Series of Subordinated Notes on the
date of issuance thereof, less the aggregate amount of any Principal Amount Charge-Offs allocated
to such Series of Subordinated Notes, plus the aggregate amount of any Principal Amount
Reinstatements allocated to such Series of Subordinated Notes, less any amounts paid to the holders
of such Series of Subordinated Notes in respect of the Principal Amount thereof.

“Principal Amount Charge-Off” is defined in Section 2.6 of the Base Indenture.

“Principal Amount Reinstatement” is defined in Section 2.6 of the Base
Indenture.

“Principal Component” means (a) the issue price of Secured Liquidity Notes issued on a
discount basis and (b) the principal amount of Secured Liquidity Notes issued on an
interest-bearing basis.

“Principal Paydown Auction” means an auction conducted in accordance with Section
4.1(a) of the Mortgage Loan Purchase and Servicing Agreement.

“Principal Prepayment” means any payment or other recovery of principal made on a
Mortgage Loan which is received in advance of its scheduled Due Date, including any prepayment
penalty or premium thereon, which is not accompanied by an amount of interest representing
scheduled interest due on any date or dates in any month or months subsequent to the month of
prepayment (but excluding any Excluded Amounts with respect to any HELOC).

“Principal Terms” is defined in Section 2.3 of the Base Indenture.

“Priority of Payments” means the priority of payments set forth in Section
2.01 or Section 6.03, as applicable, of the Security Agreement.

“Proceeds Account” as to each Mortgage Loan, means any separate account or accounts
created and maintained pursuant to Section 4.7 of the Mortgage Loan Purchase and Servicing
Agreement.

“Program” means the non-prime mortgage loan funding, sale and purchase program
contemplated by the Program Documents.

“Program Documents” means and includes the Security Agreement, the Indenture, the
Custodial Agreement, the Disbursement Account Agreement, the Mortgage Loan Purchase and Servicing
Agreement, the Trust Agreement, the Depositary Agreement, the Interest Rate Swaps, the Rated Bidder
Letter, the Subordinated Note Purchase Agreement and the SLN Placement Agent Agreement.

“Program Size” means the sum of the Series Program Sizes (as such limit may be
increased or decreased in accordance with the Program Documents).

“Program Utilization Amount” means, as of any day, the First Tier Utilization, Second
Tier Utilization, Third Tier Utilization, or Fourth Tier Utilization, as applicable, as selected by
the Issuer in compliance with the Program Utilization Conditions.

“Program Utilization Conditions” means the conditions set forth in Section
6.05(g) of the Security Agreement.

“Program Utilization Effective Date” means the first date on which all of the Program
Utilization Conditions shall have been fulfilled.

“Purchase Agreement” means the Mortgage Loan Purchase and Servicing Agreement.

“Purchase Price” has the meaning assigned to such term in Section 11.2 of the
Mortgage Loan Purchase and Servicing Agreement.

“Purchaser” means the Issuer.

“Qualified Depository” means any depository the accounts of which are insured by the
FDIC through the BIF or the SAIF and the debt obligations of which are rated “Aa2,” “AA” and “AA”
or better by Moody’s, S&P and, if rated by Fitch, Fitch, respectively, or such depository as shall
be acceptable to Moody’s, S&P and Fitch, as applicable.

“Qualified Institution” means a depositary institution or trust company (which may
include the Collateral Agent) organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia; provided, however, that at all
times such depositary institution or trust company is a member of the FDIC and has (i) from S&P a
long-term indebtedness rating not lower than “AA-” and a short-term indebtedness rating of “A-l+”,
from Moody’s a long-term indebtedness rating not lower than “A2” and a short-term indebtedness
rating of “P-1”, and from Fitch a long-term indebtedness rating not lower than “AA-” and a
short-term indebtedness rating of “F1+”, or (ii) such other rating which satisfies the Rating
Agency Confirmation Condition.

“Qualified Purchaser” means a regular purchaser in the market for non-prime mortgage
loans.

“Rated Bidder” has the meaning assigned to such term in Section 11.2 of the
Mortgage Loan Purchase and Servicing Agreement.

“Rated Bidder Letter” means the letter entered into pursuant to Section 11.2
of the Mortgage Loan Purchase and Servicing Agreement.

“Rating Agency” or “Rating Agencies” with respect to the Company or the Notes,
shall refer to S&P and Moody’s; and with respect to Eligible Investments, a Qualified Depositary,
or any Swap Counterparty, shall refer to S&P, Moody’s and, if applicable, Fitch.

“Rating Agency Confirmation” and “Rating Agency Confirmation Condition” mean,
with respect to any action, that each Rating Agency shall have notified the Issuer, the Collateral
Agent and the Depositary in writing that such action will not result in a reduction or withdrawal
of the rating (in effect immediately before the taking of such action) of any outstanding Notes
with respect to which it is a Rating Agency and, with respect to the issuance of Notes, “Rating
Agency Confirmation” and “Rating Agency Confirmation Condition” also mean, in addition to the
above, that each Rating Agency that is referred to in the Security Agreement as being required to
deliver its rating with respect to such Notes shall have notified the Issuer, the Collateral Agent
and the Depositary in writing that such rating has been issued by such Rating Agency.

“Reference Agent” means New Century Mortgage Corporation, or such other Person as may
be appointed as Reference Agent pursuant to the Reference Agent Agreement.

“Reference Agent Agreement” means the Reference Agent Agreement between the Issuer and
the Reference Agent, dated as of the Initial Closing Date.

“Reference Banks” has the meaning specified in Section 4.06 of the Security
Agreement.

“Refinanced Mortgage Loan” means a Mortgage Loan, none of the proceeds of which were
used to purchase the related Mortgage Property.

“Registrar” shall have the meaning specified in Section 2.9(a) of the Base
Indenture.

“Regulation S” shall have the meaning specified in Section 2.8(a)(ii) of the
Base Indenture.

“Reimbursable Expenses” shall mean an amount equal to any costs and expenses related
to indemnities, tax gross ups or other similar items, Initial Purchaser indemnity, SLN Placement
Agent indemnity, Collateral Agent indemnity, Custodian indemnity, Depositary indemnity, Indenture
Trustee indemnity, Owner Trustee indemnity, and any extraordinary expenses; provided,
however, that, on an annualized basis, Reimbursable Expenses may not exceed the Maximum
Indemnity Amount.

“Remittance Period” with respect to each Monthly Remittance Date, means the calendar
month immediately preceding such Monthly Remittance Date.

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

“REO Disposition Proceeds” means all amounts received with respect to a REO
Disposition pursuant to Section 4.17 of the Mortgage Loan Purchase and Servicing Agreement,
net of (i) costs related thereto (including unreimbursed Servicing Advances) and (ii) unreimbursed
Monthly Advances relating to the related Mortgage Loan (but excluding any Excluded Amounts with
respect to any HELOC).

“REO Property” means a Mortgaged Property acquired by the Servicer on behalf of the
Purchaser through foreclosure or by deed in lieu of foreclosure, as described in Section
4.17 of the Mortgage Loan Purchase and Servicing Agreement.

“Repurchase Price” means, with respect to each Mortgage Loan that is repurchased by
the Seller or the Servicer pursuant to Section 3.3, 6.2 or 7.1 of the Mortgage Loan
Purchase and Servicing Agreement, the Outstanding Purchase Price of such loan plus accrued and
unpaid interest to (but not including) the date of repurchase, as certified to the Collateral Agent
by the Servicer.

“Repurchase Trigger” means, with respect to the repurchase and sale obligations of the
Seller or the Servicer pursuant to Sections 3.3, 4.3 or 6.2 respectively,
any Mortgage Loan due for repurchase or sale pursuant to Sections 3.3, 4.3 or
6.2 may remain unsold or not repurchased (as the case may be) for thirty (30) days
following the date on which such Mortgage Loan was due for repurchase or within which such sale was
to be sought pursuant to Sections 3.3, 4.3 or 6.2, provided, that the
aggregate Outstanding Purchase Price of all Mortgage Loans unsold or not repurchased pursuant to
the foregoing shall not be greater than $3,000,000.

“Required Draw Amount” shall have the meaning specified in Section 6.05(c) or
Section 6.05(d) of the Security Agreement.

“Required Enhancement Amount” means on any day the sum of all Credit Amounts for all
outstanding Series of Senior Notes.

“Required Noteholders” means the Required Senior Noteholders and the Required
Subordinated Noteholders.

“Required Reserve Fund Amount” is defined in the Side Letter.

“Required Senior Noteholders” means Senior Noteholders holding in excess of fifty
percent (50%) of the aggregate principal amount of all Senior Notes voting as a single class
(excluding, for the purposes of making the foregoing calculations, any Senior Notes held by the
Seller or the Servicer or any Affiliate of the Seller or the Servicer).

“Required Subordinated Noteholders” means Class A-1 Noteholders holding in excess of
50% of the Class A-1 Principal Amount of the outstanding Class A-1 Notes (excluding Subordinated
Notes held by the Seller or any Affiliate of the Seller), or, if the Class A-1 Notes shall have
been paid in full, Class A-2 Noteholders holding in excess of 50% of the Class A-2 Principal Amount
of the outstanding Class A-2 Notes (excluding Subordinated Notes held by the Seller or any
Affiliate of the Seller).

“Requirements of Law” means, with respect to any Person or any of its property, the
certificate of incorporation or articles of association and by-laws or other organizational or
governing documents of such Person or any of its property, and any law, treaty, rule or regulation,
or determination of any arbitrator or Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its property is subject,
whether Federal, state or local (including, without limitation, usury laws, the Federal Truth in
Lending Act and retail installment sales acts).

“Reserve Fund” means the fund established by the Issuer pursuant to Section
6.05 of the Security Agreement.

“Restricted Cash” means all cash and Cash Equivalent Investments that are subject to a
Lien in favor of any Person other than the Collateral Agent on behalf of the Secured Parties, that
are required to be maintained by the Purchaser pursuant to a Contractual Obligation or as a result
of the operation of law.

“Restricted Global Note” shall have the meaning specified in Section 2.8(a) of the
Base Indenture.

“Rule 144A” shall have the meaning specified in Section 2.8(a)(ii) of the Base
Indenture.

“S&P” means Standard & Poor’s Ratings Service, a division of The McGraw-Hill
Companies, Inc.

“SAIF” means the Savings Association Insurance Fund, or any successor thereto.

“Sale Price” has the meaning assigned to such term in Section 4.2(e) of the
Mortgage Loan Purchase and Servicing Agreement.

“Scheduled Payment Date” means, with respect to any Series of Subordinated Notes, the
payment date set forth in the Indenture Supplement for such Series as the scheduled payment date
for the payment of the principal amount of such Subordinated Notes to each Subordinated Noteholder.

“Second Lien Mortgage Loan” means a Mortgage Loan, other than a HELOC, secured by a
second lien Mortgage on the related Mortgaged Property.

“Second Tier Utilization” means an amount equal to $1,000,000,000.

“Secured Liquidity Note Account” has the meaning set forth in Section 2 of the
Depositary Agreement.

“Secured Liquidity Notes” means any one of the Secured Liquidity Notes, executed from
time to time by the Issuer and authenticated by or on behalf of the Depositary, substantially in
the form of Exhibit A or Exhibit B to the Depositary Agreement.

“Secured Parties” is defined in the recitals to the Security Agreement.

“Securities Act” means the Securities Act of 1933, as amended.

“Securitization Vehicle” means a special purpose entity established for the purpose of
(i) securitizing mortgage loans or (ii) funding mortgage loans through a commercial paper program
or repurchase facility.

“Security Agreement” means the amended and restated Security Agreement, dated as of
the Initial Closing Date, between the Issuer and the Collateral Agent, as the same may at any time
be amended, modified or supplemented.

“Security Agreement Event of Default” means an event of default set forth in the
Security Agreement.

“Seller” means New Century Mortgage Corporation.

“Seller Documents” means the Mortgage Loan Purchase and Servicing Agreement and the
Custodial Agreement.

“Senior Noteholder” means the holder of a Senior Note.

“Senior Notes” means, collectively, the Secured Liquidity Notes and the Extended
Notes.

“Senior Notes Utilization Amount” means, as of any date of determination, the excess
of (x) the Program Utilization Amount, over (y) the sum of (1) the Principal Amount of the
Subordinated Notes, plus (2) the aggregate amount of any Principal Amount Charge-Offs that have not
been reinstated as of such date.

“Series” means (x) the Secured Liquidity Notes and Extended Notes (such Secured
Liquidity Notes and Extended Notes taken together as one series) or (y) any series of Subordinated
Notes, as the context may require.

“Series 2006-A Supplement” means the Supplement establishing the Series 2006-A VKF
Subordinated Notes, dated as of the Initial Closing Date.

“Series Closing Date” means, with respect to any Series of Subordinated Notes or
Senior Notes, the date of issuance of such Series of Subordinated Notes or Senior Notes, as
specified in the related Indenture Supplement or the Security Agreement.

“Series Program Size” means, with respect to the Secured Liquidity Notes and Extended
Notes, collectively, the amount set forth in Section 4.09 of the Security Agreement, as
increased or decreased in accordance with the Program Documents (including, without limitation, the
principal amount of Subordinated Notes required to be issued in connection therewith).

“Servicer” means New Century Mortgage Corporation, as Servicer under the Mortgage Loan
Purchase and Servicing Agreement, or any successor Servicer appointed under the Mortgage Loan
Purchase and Servicing Agreement.

“Servicer Documents” means the Mortgage Loan Purchase and Servicing Agreement and any
written certificates, statements or instruments delivered by the Servicer to the Issuer pursuant
thereto.

“Servicer Event of Default” means a “Servicer Event of Default” as defined in
Section 10.1 of the Mortgage Loan Purchase and Servicing Agreement.

“Servicer Report” has the meaning assigned to such term in Section 4.18 of the
Mortgage Loan Purchase and Servicing Agreement.

“Servicing Advances” means all customary, reasonable and necessary “out of pocket”
costs and expenses other than Monthly Advances (including reasonable attorneys’ fees and
disbursements) incurred in the performance by the Servicer in connection with a default or other
unanticipated occurrence with respect to each Mortgage Loan owned by the Purchaser (and not
including the performance of its ordinary and customary activities as Servicer), including, but not
limited to, the cost of (a) the preservation, restoration and protection of the Mortgaged Property,
(b) any enforcement or judicial proceedings, including foreclosures, (c) the management and
liquidation of any REO Property and (d) any advances of taxes, insurance premiums and other charges
made pursuant to Section 4.9 of the Mortgage Loan Purchase and Servicing Agreement as a
consequence of the default by the Mortgagor on its obligation to pay such amounts.

“Servicing Fee” with respect to the services provided by the Servicer pursuant to the
Mortgage Loan Purchase and Servicing Agreement, a monthly servicing fee of one half of one percent
(0.50%) per annum on the Outstanding Purchase Price of Mortgage Loans held by the Purchaser as of
the first day of such month.

“Servicing File” has the meaning assigned to such term in Section 2.1(b) of
the Mortgage Loan Purchase and Servicing Agreement.

“Side Letter” means the Side Letter, dated as of the date hereof, among the Company,
the Purchaser and the Collateral Agent.

“SLN Extension Event” means with respect to any Secured Liquidity Note, such Secured
Liquidity Note is not paid in full on its Expected Maturity and, as a result, such Secured
Liquidity Note is converted to an Extended Note pursuant to Section 4.04 of the Security
Agreement.

“SLN Placement Agent” means Citigroup Global Markets Inc., Banc of America Securities
LLC, and such others as may be appointed by the Issuer from time to time, each as a SLN Placement
Agent pursuant to the SLN Placement Agent Agreement.

“SLN Placement Agent Agreement” means the private placement agreement, dated as of
September 5, 2003, among the SLN Placement Agents, the Servicer and the Issuer, as the same may at
any time be amended, modified or supplemented.

“Subordinated Note Paying Agent” is defined in Section 2.9 of the Indenture.

“Subordinated Note Purchase Agreement” means each subordinated note purchase
agreement, if any, entered into by the Issuer, the Seller and the Initial Purchasers in connection
with the issuance of any Series of Subordinated Notes.

“Subordinated Note Registrar” is defined in Section 2.9 of the Indenture.

“Subordinated Noteholder” means a holder of a Subordinated Note.

“Subordinated Noteholder Representative” shall have the meaning set forth in the
related Supplement.

“Subordinated Notes” means the Series 2006-A VKF Subordinated Notes and each
additional series of subordinated notes that may be issued from time to time pursuant to the
Indenture.

“Subsidiary” means, with respect to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the time directly or
indirectly owned by such Person.

“Swap Counterparty” means Citibank, N.A., BNP Paribas, Calyon New York Branch, and
each Person which is a commercial bank or financial institution having a short-term credit rating
of “A-1+”, “P-1” and “F1+” from S&P, Moody’s and, if rated by Fitch, Fitch, respectively, and a
long-term credit rating of at least “AA-”, “Aa3” and “AA-” from S&P, Moody’s and, if rated by
Fitch, Fitch, respectively, and which becomes a swap counterparty under an Interest Rate Swap,
provided, however, that no such other Person may become a Swap Counterparty after
the date hereof without having first obtained Rating Agency Confirmation.

“Swap Default” means the occurrence of an event described in Section 11.2(e)(ii) of
the Mortgage Loan Purchase and Servicing Agreement, without giving effect to the Swap Trigger.

“Swap Failure” means the occurrence of an event described in Section 11.2(e)(ii) of
the Mortgage Loan Purchase and Servicing Agreement.

“Swap Trigger” means, with respect to the interest rate swap the subject of such
trigger, the failure for three (3) Business Days or more to pay or post an amount in excess of
$200,000 that is due for payment or posting pursuant to the terms of such interest rate swap.

“Tangible Net Worth” means, with respect to any Person, as of any date of
determination, the consolidated Net Worth of such Person and its subsidiaries, less the
consolidated net book value of all assets of such Person and its subsidiaries (to the extent
reflected as an asset on the balance sheet of such Person or any subsidiary of such Person at such
date) which will be treated as intangibles under GAAP, including, without limitation, such items as
deferred financing expenses, net leasehold improvements, goodwill, trademarks, trade names, service
marks, copyrights, patents, licenses and unamortized debt discount and expense; provided,
that, residual securities owned by such Person shall not be treated as intangibles for purposes of
this definition.

“Temporary Global Note” has the meaning specified in Section 2.16 of the Base
Indenture.

“Terminated Loan” has the meaning given in each Interest Rate Swap.

“Termination Event” shall have the meaning assigned to such term in Section
11.2 of the Mortgage Loan Purchase and Servicing Agreement.

“Termination Event Auction” shall have the meaning assigned to such term in
Section 11.2 of the Mortgage Loan Purchase and Servicing Agreement.

“Third Tier Utilization” means an amount equal to $1,500,000,000.

“Three Payment Delinquent Loan” means any Delinquent Loan for which the Monthly
Payment that is most past due is a Monthly Payment that is three months or more past its Due Date
(or, if the Due Date in any month does not correspond to a day in such month (e.g, when a Due Date
occurs on the 31st day of a 30 day calendar month), then on the last day of such month)
without giving effect to any Monthly Servicer Advance.

“Total Indebtedness” means, at any time, the aggregate Indebtedness of any Person and
its subsidiaries.

“Transfer Agent” has the meaning specified in Section 2.12(a)(iii) of the Base
Indenture.

“Transfer Supplement” means the document pursuant to which a Portfolio is sold by the
Seller to the Purchaser, a form of which is attached as Exhibit A (or any electronic medium
containing substantially equivalent information) to the Mortgage Loan Purchase and Servicing
Agreement.

“Trust Agreement” means the trust agreement of Von Karman Funding Trust, dated as of
the Initial Closing Date, between the Administrator and the Owner Trustee, as the same may at any
time be amended, modified or supplemented.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.

“Trust Officer” means, in relation to the Collateral Agent, any trust officer,
Director, Managing Director, Associate, Vice President or Assistant Vice President, or any other
officer customarily performing functions similar to those performed by the person who at the time
shall be such officer and is assigned to its Corporate Trust office, or to whom any corporate trust
matter is referred because of his or her knowledge of and familiarity with a particular subject, or
any successor thereto responsible for the administration of the Security Agreement.

“Two Payment Delinquent Loan” means any Delinquent Loan for which the Monthly Payment
that is most past due is a Monthly Payment that is more than two months but less than three months
past its Due Date (or, if the Due Date in any month does not correspond to a day in such month
(e.g, when a Due Date occurs on the 31st day of a 30 day calendar month), then on the
last day of such month) without giving effect to any Monthly Servicer Advance.

“UCC” means the Uniform Commercial Code as in effect from time to time in the
specified jurisdiction.

“United States” or “U.S.” means the United States of America, its fifty States
and the District of Columbia.

“Unreimbursed Required Draw Amounts” means, as of any day, the amount by which the
Required Reserve Fund Amount exceeds the Available Amount in the Reserve Fund, without giving
effect to any proposed change in the Program Utilization Amount.

“U.S. Government Obligations” means direct obligations of the United States of
America, or any agency or instrumentality thereof for the payment of which the full faith and
credit of the United States of America is pledged as to full and timely payment of such
obligations.

“U.S. Person” shall have the meaning under Regulation S under the Securities Act.

“Wet Funded Loan” means a Mortgage Loan that is originated or acquired by the Seller
and purchased by the Purchaser, prior to the delivery of the Mortgage Note to the Custodian.

“Wet Funded Loan Limitation” is defined in the Side Letter.

“written” or “in writing” means any form of written communication, including,
without limitation, by means of telex, telecopier device, computer, telegraph or cable.

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