CORRESPONDENT LOAN MANUAL

i

Revised 02/23/22

CORRESPONDENT

LOAN MANUAL

Revised 02/23/22 ii

Table of Contents OVERVIEW AND GENERAL INFORMATION .................................................................................................. 1

Purpose ................................................................................................................................................................ 1

Website ................................................................................................................................................................ 1

Revisions and Updates ......................................................................................................................................... 1

Forms ................................................................................................................................................................... 1

Questions ............................................................................................................................................................. 1

Hours of Operation .............................................................................................................................................. 1

DEFINITIONS .................................................................................................................................................... 2

100 LENDER ELIGIBILITY .................................................................................................................................. 8

200 COMMITMENTS ............................................................................................................................................ 8

201.00 Commitments Defined. ............................................................................................................................ 8

201.01 Best Efforts Commitments. .................................................................................................................. 8

201.02 Mandatory Commitments. ................................................................................................................... 8

202.00 Commitment Terms ................................................................................................................................. 8

202.01 Price. .................................................................................................................................................... 8

202.02 Lock Period. ......................................................................................................................................... 8

202.03 Lock Expiration Date. .......................................................................................................................... 8

202.04 Successful Delivery. ............................................................................................................................ 9

203.00 Requesting a Commitment ...................................................................................................................... 9

204.00 Lock Confirmation and Lock Variance ................................................................................................... 9

204.01 Commitment Confirmation. ................................................................................................................. 9

204.02 Lock Variance. ..................................................................................................................................... 9

205.00 Eligible Mortgage Loans ......................................................................................................................... 9

206.00 Maximum Mortgage Loans Per Mortgagor ........................................................................................... 10

207.00 Correspondent Responsibility for Commitments .................................................................................. 10

208.00 Price Changes ........................................................................................................................................ 10

209.00 Escrow Waivers ..................................................................................................................................... 10

210.00 Escrow Transfers ................................................................................................................................... 10

211.00 [RESERVED] ............................................................................................................................................ 10

212.00 [RESERVED] ............................................................................................................................................ 10

213.00 Late Delivery ......................................................................................................................................... 10

213.01 Best Efforts. ....................................................................................................................................... 10

213.02 Mandatory Commitment. ................................................................................................................... 10

214.00 Suspension Deficiency Cure Period ...................................................................................................... 11

214.01 Best Efforts Commitment - Servicing-Retained Mortgage Loans. .................................................... 11

Revised 02/23/22 iii

214.02 Mandatory Commitment - Servicing-Retained Mortgage Loans. ..................................................... 11

215.00 Lock Extension/Re-Pricing Policy ........................................................................................................ 11

215.01 Best Efforts Commitment - Servicing-Retained Mortgage Loans. ................................................... 11

215.02 Mandatory Commitment - Servicing-Retained Mortgage Loans. ..................................................... 12

215.03 Servicing-Released Mortgage Loans – Jumbo Mortgage Loan Products. ........................................ 12

216.00 Commitment Renegotiation ................................................................................................................... 13

217.00 Pair-Off Fees .......................................................................................................................................... 13

218.00 Fall-Out on Best Effort Commitments .................................................................................................. 14

219.00 Pipeline Report ...................................................................................................................................... 14

300 UNDERWRITING ......................................................................................................................................... 14

301.00 Delegated/Non-Delegated Mortgage Loan Underwriting ..................................................................... 14

301.01 Delegated Mortgage Loans. ............................................................................................................... 14

301.02 Non-Delegated Mortgage Loans. ....................................................................................................... 14

302.00 Basic Underwriting Guidelines .............................................................................................................. 14

303.00 Compliance with Applicable Regulations ............................................................................................. 15

304.00 AUS Sponsorship................................................................................................................................... 15

305.00 Responsibilities of the Correspondent ................................................................................................... 15

306.00 Delegated Underwriting General Instructions ....................................................................................... 15

307.00 Manual Underwriting............................................................................................................................. 16

308.00 Non-Delegated Mortgage Loan Products .............................................................................................. 16

309.00 CHL Underwriting ................................................................................................................................. 16

309.01 Submission. ........................................................................................................................................ 16

309.02 Appraisals. ......................................................................................................................................... 16

309.03 Underwriting Status. .......................................................................................................................... 16

309.04 Resubmission. .................................................................................................................................... 16

309.05 Suspense. ........................................................................................................................................... 17

309.06 Denial. ................................................................................................................................................ 17

309.07 Adverse Action Notice. ...................................................................................................................... 17

310.00 Disaster Area Policy .............................................................................................................................. 17

400 PURCHASE ................................................................................................................................................... 18

401.00 General Policies ..................................................................................................................................... 18

402.00 CHL Requirements ................................................................................................................................ 18

402.01 Hazard Insurance. .............................................................................................................................. 18

402.02 Flood Insurance. ................................................................................................................................ 19

403.00 Mortgage Note Endorsement ................................................................................................................. 19

404.00 Assignment of Mortgage ....................................................................................................................... 19

405.00 Mortgagee Clause .................................................................................................................................. 19

Revised 02/23/22 iv

406.00 Shipping Addresses ............................................................................................................................... 19

407.00 Stacking Order ....................................................................................................................................... 20

408.00 Property Taxes ....................................................................................................................................... 20

409.00 Escrow Holdback Loans - Generally ..................................................................................................... 20

410.00 Weather Related Escrows. ..................................................................................................................... 20

410.01 New Construction. ............................................................................................................................. 20

410.02 Existing Construction: ....................................................................................................................... 21

410.03 Timeline for Weather Related Repairs. ............................................................................................. 21

410.04 Escrow Holdback. .............................................................................................................................. 21

410.05 Required Signature on the Escrow Agreement. ................................................................................. 21

410.06 Who Holds the Escrow Funds............................................................................................................ 22

410.07 Tracking of Outstanding Escrow Funds. ........................................................................................... 22

410.08 Required Documentation for Escrow Holdbacks. ............................................................................. 22

411.00 Non-Weather Related Escrows .............................................................................................................. 22

411.01 Timeline for Non-Weather Related Repairs. ..................................................................................... 22

411.02 Required Signature on the Escrow Agreement. ................................................................................. 23

411.03 Holder of the Escrow Funds. ............................................................................................................. 23

411.04 Tracking of Outstanding Escrow Funds. ........................................................................................... 23

411.05 Required Documentation for Escrow Holdbacks. ............................................................................. 23

411.06 Required Repairs. .............................................................................................................................. 23

412.00 Mortgage Loan Purchase Review .......................................................................................................... 23

413.00 Mortgage Loan Purchased by CHL ....................................................................................................... 24

413.01 Fees Deducted at Purchase................................................................................................................. 24

413.02 Interest Adjustment on Mortgage Loans with No Payments Applied. .............................................. 24

413.03 Interest Adjustment on Mortgage Loans with One or More Payments Applied. .............................. 25

413.04 Calculation of First Payment to CHL. ............................................................................................... 25

500 POST-PURCHASE ........................................................................................................................................ 25

501.00 Servicing ................................................................................................................................................ 25

501.01 Servicing-Retained Mortgage Loans. ................................................................................................ 25

501.02 Servicing-Released Mortgage Loans. ................................................................................................ 26

502.00 Quality Control ...................................................................................................................................... 26

502.01 Pre-Purchase Underwriting Review. ................................................................................................. 26

502.02 Post-Purchase Quality Control. ......................................................................................................... 26

503.00 Post-Purchase Requirements ................................................................................................................. 26

504.00 Final Delivery ........................................................................................................................................ 26

505.00 Failure to Timely Transmit Required Mortgage Loan Documentation ................................................. 27

506.00 Specific HMDA Requirements .............................................................................................................. 27

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600 REPRESENTATIONS, WARRANTIES, AND COVENANTS .............................................................. 27

600.00 Overview ................................................................................................................................................ 27

601.00 Representations and Warranties Regarding the Correspondent ............................................................ 28

601.01 Organization and Good Standing. ...................................................................................................... 28

601.02 Authority and Capacity. ..................................................................................................................... 28

601.03 No Conflict. ....................................................................................................................................... 28

601.04 Compliance with Laws. ..................................................................................................................... 28

601.05 Performance. ...................................................................................................................................... 29

601.06 Ordinary Course Transaction. ............................................................................................................ 29

601.07 Litigation: Compliance with Laws..................................................................................................... 29

601.08 Statements Made. ............................................................................................................................... 29

601.09 Approved Correspondent. .................................................................................................................. 29

601.10 Home Ownership and Equity Protection Act – Predatory Lending. ................................................. 29

602.00 Representations and Warranties Regarding the Mortgage Loan ........................................................... 29

602.01 Valid First Lien. ................................................................................................................................. 30

602.02 Marketability. .................................................................................................................................... 30

602.03 Full Disbursement of Proceeds. ........................................................................................................ 30

602.04 No Defenses. ..................................................................................................................................... 31

602.05 Payments Current. .............................................................................................................................. 31

602.06 No Defaults. ....................................................................................................................................... 31

602.07 No Outstanding Charges. ................................................................................................................... 31

602.08 No Mechanics’ Liens. ........................................................................................................................ 31

602.09 Ownership. ......................................................................................................................................... 32

602.10 Occupancy of the Mortgage Property. ............................................................................................... 32

602.11 No Satisfaction of Mortgage. ............................................................................................................. 32

602.12 No Servicing Restrictions. ................................................................................................................. 32

602.13 No Refinance Agreements. ................................................................................................................ 32

602.14 No Adverse Selection. ....................................................................................................................... 33

602.15 No Right of Rescission, Defense, Offset or Counter Claim. ............................................................. 33

602.16 No Graduated Payment or Shared Appreciation Feature. ................................................................. 33

602.17 No Construction Loan. ....................................................................................................................... 33

602.18 No Liabilities. .................................................................................................................................... 33

602.19 No Predatory Lending........................................................................................................................ 33

602.20 Compliance with Consumer Protection Laws. .................................................................................. 34

602.21 Compliance with Regulation Z Lender Compensation Restrictions. ................................................ 34

602.02 Good Title. ......................................................................................................................................... 34

602.23 Interest Calculation. ........................................................................................................................... 34

Revised 02/23/22 vi

602.24 Governmental Requirements. ............................................................................................................ 34

602.25 Conventional Mortgage Loan Requirements. .................................................................................... 35

602.26 Regarding the Mortgagor. .................................................................................................................. 35

602.27 Qualified Mortgage. ........................................................................................................................... 35

602.28 Mechanics Liens or Related Litigation. ............................................................................................. 35

603.00 Mortgage Loan Information and Documentation .................................................................................. 35

603.01 Description of Mortgage Loans. ........................................................................................................ 35

603.02 Documents. ........................................................................................................................................ 36

603.03 Due on Sale. ....................................................................................................................................... 36

603.04 Appraisals. ......................................................................................................................................... 36

603.05 Original Terms Unmodified. .............................................................................................................. 37

603.06 Validity of Mortgage Documents. ..................................................................................................... 37

603.07 Credit Information. ............................................................................................................................ 37

603.08 Fraud. ................................................................................................................................................. 37

603.09 Additional Representations and Warranties. ..................................................................................... 38

604.00 Compliance ............................................................................................................................................ 38

604.01 Compliance with Applicable Requirements. ......................................................................................... 38

604.02 Servicing Performance. ...................................................................................................................... 38

604.03 Acceptable Investment. ...................................................................................................................... 38

604.04 Agency Requirements. ....................................................................................................................... 38

604.05 Non-Agency Jumbo Mortgage Loan Requirements. ......................................................................... 39

604.06 Doing Business. ................................................................................................................................. 39

604.07 Origination; Loan Terms by Approved Mortgagee. .......................................................................... 39

604.08 Underwriting. ..................................................................................................................................... 39

604.09 Compliance with Applicable Loan Manual Provisions. .................................................................... 39

604.10 Prepayment Fees. ............................................................................................................................... 39

604.11 No Discrimination. ............................................................................................................................. 39

604.12 Compliance with Consumer Protection Laws. .................................................................................. 40

604.13 Compliance with Regulation Z Lender Compensation Restrictions. ................................................ 40

604.14 Compliance with Anti-Money Laundering Laws. ............................................................................. 40

605.00 Insurance ................................................................................................................................................ 40

605.01 Private Mortgage Insurance. .............................................................................................................. 40

605.02 Government Mortgage Loans. ........................................................................................................... 41

605.03 Title Insurance. .................................................................................................................................. 41

605.04 Hazard and Flood Insurance. ............................................................................................................. 41

605.05 Coverage of Insurance. ...................................................................................................................... 42

606.00 Mortgage Property ................................................................................................................................. 42

Revised 02/23/22 vii

606.01 No Additional Collateral.................................................................................................................... 42

606.02 Location of Improvements. ................................................................................................................ 42

606.03 Environmental Matters. ..................................................................................................................... 42

606.04 No Encroachments. ............................................................................................................................ 43

606.05 Condominiums/Planned Unit Developments. ................................................................................... 43

606.06 Disaster Area Policy. ......................................................................................................................... 43

606.07 No Condemnation and Mortgage Property Undamaged. ................................................................... 43

606.08 Detrimental Conditions. ..................................................................................................................... 43

606.09 Location and Type of Mortgage Property. ......................................................................................... 43

606.10 Repairs and Improvements. ............................................................................................................... 44

606.11 Certificate of Occupancy. .................................................................................................................. 44

606.12 Leasehold Loans. ............................................................................................................................... 44

607.00 Covenants - General .............................................................................................................................. 44

607.01 Completion and Delivery of Documents. .......................................................................................... 45

607.02 Use of CHL’s Name. ......................................................................................................................... 45

607.03 No Solicitation. .................................................................................................................................. 45

607.04 Inspection of Records. ....................................................................................................................... 45

607.05 Credit Information. ............................................................................................................................ 45

607.06 No Discrimination. ............................................................................................................................. 46

608.00 Transfer of Servicing Covenants ........................................................................................................... 46

608.01 Notice to Mortgagors. ........................................................................................................................ 46

608.02 Notice to Mortgage Insurers. ............................................................................................................. 46

608.03 Notice to Taxing Authorities and Hazard Insurance Companies. ..................................................... 46

608.04 Internal Revenue Service Forms. ....................................................................................................... 46

608.05 Insurance Policies. ............................................................................................................................. 46

608.06 Payment of Hazard Insurance Policies. ............................................................................................. 46

608.07 Property Taxes. .................................................................................................................................. 47

608.08 Social Security Numbers.................................................................................................................... 47

608.09 Internal Revenue Service Forms. ....................................................................................................... 47

608.10 Escrow Analysis. ............................................................................................................................... 47

608.11 Mortgage Payments Received Prior to Transfer Date. ...................................................................... 47

608.12 Mortgage Payments Received on or After Transfer Date. ................................................................. 47

608.13 Recording of Assignments. ................................................................................................................ 47

700 CONFIDENTIAL INFORMATION .............................................................................................................. 47

701.00 Confidential Information Defined ......................................................................................................... 47

702.00 Treatment of Confidential Information .................................................................................................. 48

703.00 Duplication of Confidential Information ............................................................................................... 48

Revised 02/23/22 viii

704.00 Safeguarding Confidential Information ................................................................................................. 48

705.00 Audit ...................................................................................................................................................... 49

706.00 Exclusions .............................................................................................................................................. 49

707.00 Notice of Disclosure .............................................................................................................................. 49

708.00 Duration and Survival ............................................................................................................................ 50

709.00 Enforcement and Injunctive Relief ........................................................................................................ 50

800 REMEDIES .................................................................................................................................................... 50

801.00 General ................................................................................................................................................... 50

802.00 Repurchase ............................................................................................................................................. 50

803.00 Early Payment Default ........................................................................................................................... 51

804.00 Early Payoff ........................................................................................................................................... 51

805.00 Indemnification ...................................................................................................................................... 51

806.00 Offset ..................................................................................................................................................... 52

807.00 Mortgage Loan Document Corrections ................................................................................................. 52

808.00 Suspension or Termination of Selling Privileges .................................................................................. 52

809.00 Remedies Cumulative ............................................................................................................................ 53

810.00 Knowledge and Materiality ................................................................................................................... 53

EXHIBITS ............................................................................................................................................................. 55

EXHIBIT A ....................................................................................................................................................... 55

Revised 02.23.22 Page 1

OVERVIEW AND GENERAL INFORMATION

This Correspondent Loan Manual (“Loan Manual”), published by Cornerstone Home

Lending, Inc. (“CHL”), is intended solely for use by Correspondents, as defined herein, and should

not be distributed to Mortgagors or the general public. The information contained herein is

accurate as of the date of publication, but subject to change without prior notice. [See “REVISIONS

AND UPDATES” below].

Purpose

The Loan Manual is developed for the use of approved Correspondents participating in the

CHL Correspondent Loan Program (the “Program”) to assist in the delivery of marketable

Mortgage Loans to CHL. The Loan Manual is incorporated by reference into the Correspondent

Loan Purchase and Sale Agreement (“Agreement”) that you, the Correspondent, and CHL have

executed. The Loan Manual describes requirements that must be satisfied in order for a

Correspondent to deliver a purchasable and marketable Mortgage Loan to CHL.

Website

CHL publishes the Loan Manual electronically, via an adobe file, on its website:

www.chlcorrespondent.com (the “Website”) as well as Correspondent Memos, Eligible Mortgage

Loan Programs, and other announcements and information applicable to the Correspondent

Lending Division (“CLD”) and/or the origination and sale of Mortgage Loans to CHL through the

CLD (collectively, the “CLD Requirements”). Correspondent is responsible for monitoring the

Website for any revisions and updates to any of the above.

Revisions and Updates

The Loan Manual may be revised or updated from time to time. Revised and/or updated

Loan Manuals are published on the Website (“Published Loan Manual”) with the current revision

date (the “Current Revision Date”). All Mortgage Loans to be sold by Correspondent to CHL after

the Current Revision Date must be in compliance with the terms, conditions, requirements, and/or

guidelines of the Published Loan Manual and CLD Requirements. It is the Correspondent’s sole

responsibility to ensure that Mortgage Loans originated and sold to CHL on or after the Current

Revision Date are in full compliance with the Published Loan Manual and all CLD Requirements.

Forms

All forms referenced in the Loan Manual are posted in printable format under the “Become

a Partner” or under “Products & Program” links on the Website.

Questions

Please contact any of the Correspondent Department personnel listed on the “Contact Us”

link on the Website.

Hours of Operation

Standard hours of operation are 8:00 a.m. – 5:00 p.m. central time. CHL will announce all

holiday closures via the Website.

http://www.cmccorrespondent.com/


DEFINITIONS

Agency – means Fannie Mae, Freddie Mac, Ginnie Mae, FHA, USDA, and/or VA.

Agency Guidelines – means the applicable rules, regulations, guidelines, handbooks,

announcements, notices, letters, directives and instructions of an Agency as such may be amended,

modified, updated, restated, or supplemented from time to time.

Agreement – means the CHL Correspondent Loan Purchase and Sale Agreement including

all exhibits, schedules, amendments, modifications, and supplements thereto, and this Loan

Manual which is incorporated therein for all intents and purposes.

Applicable Law – means all applicable provisions of any and all federal, state, and local

laws, statutes, rules, regulations, administrative codes, and ordinances and any judgements,

decrees, directives, injunctions, orders, permits, or interpretations of any court or governmental

authority.

Applicable Requirements – means (i) all Applicable Laws, including but not limited to,

usury, truth-in-lending, real estate settlement, consumer credit, equal credit opportunity, fair

housing, fair credit reporting, anti-predatory or abusive lending, or unfair and deceptive acts and

practices (including the Equal Credit Opportunity Act (Regulation B), Fair Housing Act,

Consumer Credit Protection Act, Fair Credit Reporting Act, Truth-in-Lending Act (Regulation Z),

Real Estate Settlement Procedures Act (Regulation X), Home Mortgage Disclosure Act

(Regulation C), Home Ownership and Equity Protection Act, Appraisal Independence

Requirements (“AIR”), Home Ownership Protection Act (“HOPA”), and Uniform Mortgage Data

Program (“UMDP”); (ii) the applicable requirements and guidelines of any insurer, Agency, or

any other governmental agency, board, commission, instrumentality or other governmental or

quasi-governmental body or office including, but not limited to the Consumer Financial Protection

Bureau; (iii) all judicial and administrative judgments, orders, stipulations, awards, writs and

injunctions; and (iv) Agency Guidelines; (v) Investor Guidelines; and (vi) CHL Overlays.

AUS – means an “automated underwriting system,” of which DU, LP, and GUS are

examples thereof.

Best Effort Commitment – shall have the meaning set forth in Section 200.01 herein.

Bps – means basis points where one basis point is equal to 1/100th of 1% or 0.01%.

Business Day – means any day other than (i) a Saturday or Sunday or (ii) a day on which

CHL corporate offices are closed.

CHL – means Cornerstone Home Lending, Inc., a Texas Corporation.

CHL Overlays – means those underwriting requirements and guidelines of CHL for

Mortgage Loan products that are in addition to or beyond the requirements of the applicable

Agency Guidelines or Investor Guidelines and which requirements are set forth at the “Products

& Programs” link on the Website

Commitment – means the request made by the Correspondent to Lock a Mortgage Loan

(i) using CHL’s pricing engine located at the “Pricing Engine” link on the Website, (ii) at an

interest rate, Lock period, and Price based on (a) if the Mortgage Loan is Servicing-Retained or

Servicing-Released and (b) the Mortgage Loan characteristics inputted by Correspondent into the


pricing engine, and (iii) with delivery of such Mortgage Loan to CHL in purchasable form on or

before Lock Expiration Date (See Section 202.00 herein).

Confidential Information – shall have the meaning set forth in Section 700.00 herein.

Conventional Agency Mortgage Loan – means an Eligible Conventional Mortgage Loan

that is underwritten in accordance with Agency Guidelines and is eligible for inclusion in an

Agency security or pool.

Conventional Non-Agency Mortgage Loan – means an Eligible Mortgage Loan that is not

guaranteed or insured by a Government Agency.

Conventional Mortgage Loan – means either a Conventional Agency Mortgage Loan or a

Conventional Non-Agency Mortgage Loan.

Correspondent – means the Lender is approved to sell Mortgage Loans to CHL pursuant

to a fully executed, active Correspondent Loan Purchase and Sale Agreement.

Correspondent Program – means the collection of loan programs and products offered by

CHL to Correspondents subject to the Agreement and the Loan Manual, which loan programs and

products may change from time to time at CHL’s sole discretion.

Correspondent Memo – means the updates, memorandums, information bulletins, notices,

Eligible Loan Programs, and Agency or Investor guidelines transmitted to Correspondent and/or

published on the Website.

Delegated Mortgage Loan – means a Mortgage Loan for which the Correspondent has

been approved by CHL to underwrite the Mortgage Loan.

DU – means Desktop Underwriter®, the automated underwriting system of Fannie Mae

used to determine if a Mortgage Loan meets Fannie Mae’s eligibility requirements.

Early Payoff – shall have the meaning set forth in Section 804.00 herein.

Early Payment Default – means the Mortgagor did not make one or more of the four (4)

monthly payments due under the Mortgage Note following Transfer Date and the loan becomes

sixty (60) days or more delinquent.

Early Payoff – means a Mortgage Loan is paid in full for any reason within one hundred

eighty (180) days following the Transfer Date or CHL’s sale of the Mortgage Loan to a third party,

whichever is later.

Eligible Mortgage Loan – means, on any date of determination, a Mortgage Loan:

(i) is a Conventional Mortgage Loan, Jumbo Mortgage Loan, or a

Government Mortgage Loan;

(ii) complies with all applicable representations and warranties set forth

in the Agreement and the Manual (See Section 602.00 herein);


(iii) was originated within seventy-five (75) days of the Purchase Date;

and

(iv) meets all Applicable Requirements.

Escrow Agreement – means an escrow repair or holdback agreement, a form of which is

set forth under the Checklist & Forms section under the “Products & Programs” link on the

Website, or an agreement between the Correspondent and the Borrower on substantially the same

terms as the Escrow Agreement for the escrow of repair funds by the Correspondent.

Fall-Out Percentage – shall have the meaning set forth in Section 218.00 herein.

Fannie Mae– means the Federal National Mortgage Association or any successor thereto

(formerly referred to as “FNMA”).

FDIC – means the Federal Deposit Insurance Corporation or any successor thereto.

FHA – means the Federal Housing Administration or any successor thereto.

Freddie Mac – means the Federal Home Loan Mortgage Corporation or any successor

thereto (formerly referred to as “FHLMC”).

Ginnie Mae – means the Government National Mortgage Association or any successor

thereto (formerly referred to as “GNMA”).

Government Agency – means HUD, FHA, VA, or USDA.

Government Mortgage Loan – means an Eligible Mortgage Loan that is underwritten in

accordance with Government Agency Guidelines and is eligible for inclusion in Ginnie Mae pools.

Government Agency Guidelines – means the Agency Guidelines for HUD, FHA, VA

and/or USDA.

GUS – means the “Guaranteed Underwriting System”, the automated underwriting system

of the USDA used to determine if a Mortgage Loan meets USDA eligibility requirements.

HUD – means the United States Department of Housing and Urban Development or any

successor thereto.

Indirect Change in Ownership – means any change in the ownership of the

Correspondent’s parent, any owner of the parent, the ultimate parent, or any beneficial owner of

the Correspondent that does not own a direct interest in the Correspondent.

Investor – means a purchaser of Mortgage Loans from CHL other than an Agency.

Investor Guidelines – means the applicable rules, regulations, guidelines, handbooks,

announcements, notices, letters, directives and instructions of an Investor as such may be amended,

modified, updated, restated, or supplemented from time to time.

Lender – means a state or federal financial institution including a bank, credit union,

savings and loan association, or an approved lender.

Loan Manual – means this Correspondent Loan Manual as amended from time to time.


Loans-to-One Mortgagor Limitation – shall have the meaning set forth in Section 206.00

herein.

Lock (Locked) – means the Correspondent reserves a Price for a Mortgage Loan through

CHL’s pricing engine on the Website, which Price is based on an interest rate and a Lock Period

set forth in the pricing engine.

Lock Confirmation – means the change in status of the Mortgage Loan to “Locked” in

CHL’s pricing engine validating CHL’s receipt of the Correspondent’s Commitment.

Lock Expiration Date – means the last day of a Lock Period and the date Correspondent

must deliver the Mortgage Loan to CHL in purchasable form and in accordance with the Lock

Confirmation.

Lock Period – means the number of days from the date a Mortgage Loan is Locked to and

including the Lock Expiration Date.

Lock Variance – means the amount by which the aggregate outstanding principal balance

of the Mortgage Loans purchased by CHL varies from the Commitment amount in accordance

with Section 204.00 herein.

LP – means Loan Prospector®, the automated underwriting system of Freddie Mac used to

determine if a Mortgage Loan meets Freddie Mac eligibility requirements.

LTV – means loan to value ratio or percentage.

Major Disaster – means a disaster that causes substantial damage to numerous homes,

including, but not limited to, hurricanes, earthquakes, floods, landslides, tornadoes, wildfires,

volcanic eruptions, civil unrest, and terrorist attacks.

Mandatory Commitment – shall have the meaning set forth in Section 201.02 herein.

MERS – means collectively, MERSCORP, Inc. and Mortgage Electronic Registration

System, Inc., their successors and assigns.

MERS System – means the MERS mortgage electronic registry system.

MIC/LGC – means Mortgage Insurance Certificate issued by the FHA and Loan Guaranty

Certificate issued by the VA.

Mortgage – means the mortgage, deed of trust, or other instrument securing a Mortgage

Note which creates a first on an unsubordinated estate in fee simple or leasehold estate, if

applicable, in real property securing the Mortgage Note.

Mortgage Loan – means an Eligible Mortgage Loan first lien, residential mortgage loan,

together with the Servicing Rights thereto, which is subject to the Agreement and this Loan

Manual.

Mortgage Note – means the note or other evidence of indebtedness of a Mortgagor secured

by a Mortgage.

Mortgage Property – means the real property subject to the Mortgage Loan.


Mortgagor – means the obligor on a Mortgage Note and Mortgage, and, for the purposes

of this Manual, the borrower in the application process.

NCUA – means National Credit Union Association, or any successor thereto.

Non-Agency Jumbo Mortgage Loan – means an Eligible Mortgage Loan that is

underwritten in accordance with Investor Guidelines but not eligible for sale to an Agency or

inclusion in Agency securities or pools primarily because the Mortgage Loan amount exceeds

Agency loan limits.

Non-Delegated Mortgage Loan – means a Mortgage Loan underwritten by CHL on behalf

of the Correspondent.

Non-Delegated Mortgage Loan Product – shall have the meaning set forth in Section 3.08

herein.

Pair-Off Date – means the Commitment expiration date or the date CHL receives

notification from the Correspondent that delivery of the Mortgage Loan will not be made on or

before the Lock Expiration Date, whichever occurs first.

Pair-off Fee – means the difference between the Purchase Price set forth on the Lock

Confirmation Lock Confirmation and the current fifteen (15) day market price for the same interest

rate and Mortgage Loan program on the Pair-Off Date.

Person – means an individual, a corporation, a partnership, a limited liability company, a

joint venture, a trust, an unincorporated association or organization, a government body, agency

or instrumentality or any other entity.

Post-Purchase Suspension Period – shall have the meaning set forth in Section 215.03

herein.

Pre-Purchase Suspension Period – shall have the meaning set forth in Section 215.03

herein.

Price – means the unpaid principal balance of the Mortgage Loan multiplied by the

purchase price percentage.

Purchase Advice – means the written agreement between CHL and Correspondent

whereby CHL agrees to purchase an acceptable Eligible Mortgage Loan at a Purchase Price on the

Purchase Date and on the terms set forth in the Lock Confirmation, each in accordance with Section

204.00 herein.

Purchase Date – means with respect to a Mortgage Loan, the date set forth in Purchase

Advice as the “scheduled wire date” on which CHL is scheduled to purchase and Correspondent

is scheduled to sell the Mortgage Loan identified therein.

Purchase Price – means the amount to be paid by CHL to the Correspondent on the

Purchase Date pursuant to the Purchase Advice in exchange for the purchase of the Mortgage Loan

and related Servicing Rights identified therein, such Purchase Price being determined based on

Price as set forth on the Purchase Advice, plus any accrued and unpaid interest less any applicable

fees or offsets.


Prepayment Provision – means the provision in the Mortgage Loan requiring the payment

by the Mortgagor of a fee if the Mortgage Loan is prepaid in full or in part within the time periods

specified in the Mortgage Loan.

RESPA – means “in the Real Estate Settlement Procedures Act (12 U.S.C. §§ 2605, et.

seq.), as amended, and its implementing regulations (12 C.F.R. Part 1024), as amended.

Servicer – means the Person contractually obligated to administer the Servicing Rights

under the Applicable Requirements.

Servicing-Released – means with regard to a Mortgage Loan sold to an Investor or Agency,

CHL will not retain the related Servicing Rights.

Servicing-Retained – means with regard to a Mortgage Loan sold to an Investor or Agency,

CHL will retain the related Servicing.

Servicing Rights – mean the rights and obligations to administer, collect the payments for

principal, interest, taxes and insurance, pay taxes and insurance, remit collected payments, provide

default and foreclosure services, and any other related obligations for or in connection with the

Mortgage Loans, together with the right to receive any fees or amounts payable to such party under

any agreements with any owner of the Mortgage Loan arising from or connected to the Mortgage

Loan, and all rights, powers and privileges incident to any of the foregoing.

Suspension Deficiency Cure Period – means the Pre-Purchase Suspension Period or the

Post-Purchase Suspension Period.

SRP – means Servicing-Released premium which is the compensation paid for the sale of

the Servicing Rights to a Mortgage Loan.

Test Case(s) – shall have the meaning set forth in Section 309.00 herein.

Test Case Status – means a Mortgage Loan underwritten by Correspondent is subject to a

pre-purchase underwriting review by CHL.

Transfer Date – means the Purchase Date, the date on which CHL purchases a Mortgage

Loan and, if applicable, the Servicing Rights thereto.

USDA – means the United States Department of Agriculture and any successors thereto.

VA – means the U.S. Department of Veteran Affairs, or any successor thereto.

Website – means the series of web pages maintained by CHL that may be accessed by

Correspondent through the Internet at www.chlcorrespondent.com, or any additional or successor

website thereto.

Worst Case Pricing – shall have the meaning set forth in Section 215.03 herein.

http://www.chlcorrespondent.com/


100 LENDER ELIGIBILITY

The Lender application, eligibility, insurance, and compliance reporting requirements are

set forth in the Requirements & Checklist for Approval as a Correspondent under the “Become a

Partner” link on the Website.

200 COMMITMENTS

201.00 Commitments Defined.

Commitments establish the price on a Servicing-Retained or Servicing-Released basis that

CHL will pay and a price the Correspondent will accept for Mortgage Loans that have certain

characteristics and are delivered, in purchasable form to CHL on or before the Lock Expiration

Date. Changes to Mortgage Loan characteristics under Best Efforts Commitments may result in

an adjustment to the original Commitment Price prior to Mortgage Loan purchase. Changes to

Mortgage Loan Characteristics are not permitted under Mandatory Commitments.

201.01 Best Efforts Commitments.

A Best Efforts Commitments for Mortgage Loan product offerings means the Mortgage

Loan has been Locked subject to a best-efforts delivery. With regard to these products, the

Correspondent will use its best-effort to close the Mortgage Loan. Once closed, delivery of that

Mortgage Loan to CHL is required.

201.02 Mandatory Commitments.

A Mandatory Commitments for Mortgage Loan product offerings means the Mortgage

Loan has been Locked subject to a mandatory delivery. With regard to these products, the

Correspondent is required to deliver the Mortgage Loan to CHL at the Locked interest rate and

price as of a specified date. Late delivery or cancellation will result in Pair-Off fees in accordance

with Section 217.00 herein. Changes to Mortgage Loan characteristics are not permitted under

Mandatory Commitments (including but not limited to any characteristics used to determine Price).

202.00 Commitment Terms

202.01 Price.

CHL, in its sole discretion, may offer a Servicing Retained and/or a Servicing Released

price. (See Section 205.00 Eligible Mortgage Loans). The price quoted in the Commitment

remains effective, subject to certain conditions, until the Lock Expiration Date.

202.02 Lock Period.

The Lock Period (e.g. 7, 15, 30, 45, or 90 days) is determined by the Lock. All Lock

Periods are not available for all Mortgage Loan Products.

202.03 Lock Expiration Date.

The Lock Expiration Date is the date shown on the Lock Confirmation as the date the

Mortgage Loan must be delivered to CHL in purchasable form. If the Lock Expiration Date falls

on a weekend or a CHL holiday, the Lock Expiration Date will be extended to the next Business

Day.


202.04 Successful Delivery.

Correspondent must deliver to CHL the Mortgage Loan(s) subject to the Commitment on

or before the applicable Lock Expiration Date. Each Mortgage Loan must (i) be in purchasable

form, (ii) meet the Commitment requirements, and (iii) meet the product and documentation

criteria in effect on the date of the Lock Confirmation.

203.00 Requesting a Commitment

Commitments are requested through the Website. Each employee of Correspondent that

the Correspondent intends to request Commitments and accesses the Website must be issued

individual identification, authorizations, and passwords. These credentials may be requested

directly from the Website.

Lock deadlines are as follows:

Commitment Type Lock Cut-Off Time Overnight Price

Protection

Best Efforts 6:00 AM CT/CST – next Business Day Yes

Mandatory 3:30 PM CT/CST – same Business Day No

Jumbo Product 5:00 PM CT/CST – same Business Day No

204.00 Lock Confirmation and Lock Variance

204.01 Commitment Confirmation.

Unless a Lock is received after 5:00 pm CT/CST, CHL will transmit to the Correspondent

acceptance or denial of the Lock by email within the same Business Day. If the Lock is received

after 5:00 pm CT/CST, CHL will transmit to the Correspondent acceptance or denial of the Lock

by email the next Business Day. The Lock Confirmation will be available on the Website for

downloading or printing by the Correspondent.

204.02 Lock Variance.

The aggregate outstanding principal balance of the Mortgage Loans purchased must be

within a 10% variance (plus or minus) of the Commitment amount.

205.00 Eligible Mortgage Loans

CHL maintains a list of all Eligible Mortgage Loan section under the “Products &

Programs” “link on the Website. CHL, in its sole discretion, shall determine which, if any,

Mortgage Loan products are offered on a Servicing-Released or Servicing-Retained basis. All

Servicing-Retained Mortgage Loans must meet all Agency Guidelines and all CHL Overlays

applicable for the Mortgage Loan product. All Servicing-Released Mortgage Loans must meet all

applicable Agency Guidelines, Investor Guidelines, and/or CHL Overlays published for Servicing-

Released Mortgage Loans on the Website. All Servicing-Retained and Servicing-Released

Mortgage Loans must be salable in the secondary mortgage market at a sales price greater than the

Purchase Price. Notwithstanding anything herein to the contrary, Mortgage Loans in a HUD Test

Case period for HUD’s Direct Endorsement program are not eligible for sale to or purchase by

CHL.


206.00 Maximum Mortgage Loans Per Mortgagor

CHL limits the number of Mortgage Loans-to-one Mortgagor to six (6) Mortgage Loans

or $2,250,000 (Two Million Two Hundred Fifty Thousand dollars) in principal balance in the

aggregate (“Loans-to-One Mortgagor Limitation”). CHL may consider exceptions to the Loans-

to-One Mortgagor Limitation.

207.00 Correspondent Responsibility for Commitments

CHL accepts Commitment requests and modifications from Correspondent’s personnel,

and such Commitments and modifications are binding on the Correspondent. Correspondent is

solely responsible for ensuring that only authorized persons enter into Commitments with CHL.

CHL does not maintain lists of, or otherwise confirm that a person is authorized to act on behalf

of Correspondent as this is the Correspondents duty and obligation.

208.00 Price Changes

CHL establishes and/or modifies rates, prices, and fees for Mortgage Loan programs on a

continuous basis. CHL reserves the right to change the rates, prices and fees quoted for any

Mortgage Loan program at any time throughout the day CHL will approve Mortgage Loan

Commitments at the most recently available price.

209.00 Escrow Waivers

If permitted by Agency Guidelines or Investor Guidelines, CHL may allow an escrow

waiver on a Conventional Mortgage Loan, provided that the LTV is less than or equal to 80%.

Borrower(s) must sign an Escrow Waiver Agreement. CHL will assess a .25% reduction in the

price paid to the Correspondent at time of purchase.

210.00 Escrow Transfers

With regard to refinances of Mortgage Loans currently serviced by CHL, a Mortgagor is

not permitted to transfer of their escrow account from the current Mortgage Loan to the refinanced

Mortgage Loan.

211.00 [RESERVED]

212.00 [RESERVED]

213.00 Late Delivery

213.01 Best Efforts.

Mortgage Loans must be delivered in purchasable form to CHL on or before the Lock

Expiration Date. If a Mortgage Loan is delivered to CHL after the Lock Expiration Date, the

delivery is considered late and the related Lock and Lock Confirmation is cancelled.

213.02 Mandatory Commitment.

If a Mortgage Loan is delivered to CHL after the Lock Expiration Date, the delivery is

considered late the related Lock and Lock Confirmation is cancelled, the Mortgage Loan will be subject

to Pair-Off Fees (See Section 217.00 Pair-Off Fees).


214.00 Suspension Deficiency Cure Period

214.01 Best Efforts Commitment - Servicing-Retained Mortgage Loans.

If the Mortgage Loan is delivered on or before the Lock Expiration Date, but CHL has

identified the Mortgage Loan as having deficient documentation and, therefore, non-purchasable,

CHL will notify the Correspondent that CHL has suspended the purchase of the Mortgage Loan.

If suspended, Correspondent must deliver to CHL all documentation required to clear the

deficiencies the earlier of (i) the most current Lock Expiration Date or (ii) the Suspension

Deficiency Cure Period. Failure to clear all deficiencies within the Suspension Deficiency Cure

Period will result in re-pricing the Mortgage Loan (See Section 215.00 Lock Extension/Re-pricing

Policy). Mortgage Loans that have been suspended for purchase and have not cleared for purchase

within thirty (30) days of the suspense notice, may be returned to the Correspondent. If the

Mortgage Loan is returned to the Correspondent, CHL shall be under no obligation to purchase

such Mortgage Loan.

214.02 Mandatory Commitment - Servicing-Retained Mortgage Loans.

If the Mortgage Loan is delivered on or before the Lock Expiration Date, but CHL has

identified the Mortgage Loan as having deficient documentation, and, therefore, non-purchasable,

CHL will notify the Correspondent that CHL has suspended the purchase of the Mortgage Loan.

If suspended, Correspondent must deliver to CHL all documentation required to clear the

deficiencies the earlier of (i) the most current Lock Expiration Date or (ii) the Suspension

Deficiency Cure Period. Failure to clear all deficiencies within the above referenced time period

will result in re-pricing the Mortgage Loan (See Section 215.00 Lock Extension/Re-Pricing Policy)

and will be subject to a Pair-Off Fee (See Section 217.00 Pair-Off Fees). Mortgage Loans that

have been suspended for purchase and have not cleared for purchase within thirty (30) days of the

suspense notice, may be returned to the Correspondent. If the Mortgage Loan is returned to the

Correspondent, CHL shall be under no obligation to purchase such Mortgage Loan.

215.00 Lock Extension/Re-Pricing Policy

215.01 Best Efforts Commitment - Servicing-Retained Mortgage Loans.

A Best Efforts Commitment Servicing-Retained Mortgage Loan will be subject to re-

pricing if delivered to CHL is delivered to CHL in non-purchasable form, and the deficiency is not

cleared within the Suspension Deficiency Cure Period. Correspondent may request a Lock

extension on non-delivered Mortgage Loan within six (6) Business Days prior to the Lock

Expiration Date. CHL will not accept Lock extension requests on non-delivered Mortgage Loans

more than six (6) Business Days prior to the Lock Expiration Date. In the event of late delivery

or in the event the Mortgage Loan is non-purchasable due to a deficiency that is not cleared within

the Suspension Deficiency Cure Period, the Mortgage Loan will be re-priced. The new Purchase

Price will be the original Purchase Price, less extension fees.

If an extension is requested prior to the original Lock Expiration Date, an extension fee of

fifteen (15) basis points per week will be charged for the first two approved extensions. However,

if, as of the Lock Expiration Date, the market rate is equal to or greater than the original Lock, the

first week’s extension will be granted at the original price. Thereafter, an extension fee of twenty

(20) basis points per week will be assessed. No more than four (4) extensions or extensions

totalling thirty (30) days will be granted. Extensions are available for periods less than seven (7)

days at a fee of three (3) basis points per day. On extension requests for more than seven (7) days,

if the number of days requested is divisible by seven (7), charges will be based upon seven (7) day

extension charges. If the requested extension is not divisible by seven (7), the fee will be three (3)

basis points per day. Locks that have expired, Locks that have reached the maximum number of


days for extensions (thirty (30) days total), and Locks that have been expired for thirty (30) days

or more may be re-Locked and re-priced at current market rates as determined by the pricing engine

on or after the 31st day. In the event of extenuating circumstances, a Mortgage Loan may be re-

Locked prior to the Lock Expiration Date subject to applicable re-Locking fees as provided below.

If the Lock has been expired for less than thirty (30) days, the Mortgage Loan may be re-

Locked and will be re-priced at the lesser of the current Lock Price or the current market rate plus

the applicable re-Lock fee:

a. If original Lock period is forty-five (45) days or less, the re-Lock fee is 25 bps.

b. If original Lock period was greater than forty-five (45) days, re-Lock fee is 37.5 bps.

The Lock will automatically be re-Locked for the original Lock term. A shorter Lock term

may be requested, but the re-Lock fee will remain unchanged. In the event of a re-priced, re-

Locked, or extended Commitment, if a closed Mortgage Loan is not delivered or outstanding

deficiencies on a delivered Mortgage Loan are not corrected within the expiration period of the

new Commitment, the Mortgage Loan will be considered non-delivered and subject to the non-

delivery penalties (See Section 217.00 Pair-Off Fees).

215.02 Mandatory Commitment - Servicing-Retained Mortgage Loans.

A Mandatory Commitment Servicing-Retained Mortgage Loan will be subject to re-pricing

if it is delivered to CHL in non-purchasable form, and the deficiency is not cleared within the

Suspension Deficiency Cure Period. The adjusted purchase price will be the lower of the original

purchase price, plus extension fees, plus a deficient one-time fee of .125%. The extension fee for

the first two extensions will be fifteen (15) basis points per week. However, if the market rate is

the same or better than the original rate Locked, then as of the expiration date, the extension fee

for the first week will be assessed at the original price. Thereafter, an extension fee of twenty (20)

basis points per week will be assessed. The maximum number of extensions may not exceed four

one-week extensions (thirty (30) days total). If additional time is required, the Mortgage Loan will

be subject to a Pair-Off Fee (See Section 217.00 Pair-Off Fees). In the case of a re-priced, re-

Locked, or extended Commitment, if a closed Mortgage Loan is not delivered or outstanding

deficiencies on a delivered Mortgage Loan are not corrected within the expiration period of the

new Commitment, the Mortgage Loan will be considered non-delivered and become subject to the

non-delivery penalties (See Section 217.00 Pair-Off Fees).

215.03 Servicing-Released Mortgage Loans – Jumbo Mortgage Loan Products.

A Servicing-Released Mortgage Loan – Jumbo Mortgage Loan product will be subject to

re-pricing if the Mortgage Loan (i) is delivered to CHL after the Lock Expiration Date, (ii) is

delivered to CHL in non-purchasable form, and the deficiency is not cleared within the Pre-

Purchase Suspension Period, or (iii) the Investor conditions the Mortgage Loan post-purchase, and

the deficiency is not cleared within Post-Purchase Suspension Period.

Servicing-Released Mortgage Loans Jumbo Mortgage Loan Product

Extension Policy

Request must be made on or before Lock Expiration Date.

Limited to two (2) requests.

If Lock expires, must wait thirty (30) days to re-Lock, or Worst

Case Pricing.

Contact CHL Secondary for extension pricing:

[email protected] or 855-683-6683

http://[email protected]


Pre-Purchase

Suspension Period

If the Mortgage Loan is delivered on or before the Lock

Expiration Date, but CHL has identified the Mortgage Loan as

having deficient documentation and, therefore, non-

purchasable, CHL will notify the Correspondent that CHL has

suspended the purchase of the Mortgage Loan. If suspended,

Correspondent must deliver to CHL all documentation required

to clear the deficiencies the earlier of (i) the most current Lock

Expiration Date or (ii) three (3) days from notice of suspension.

Failure to clear all deficiencies within the above referenced

time period will result in re-pricing the Mortgage Loan. (See

Section 215.00 Lock Extension Re-Pricing Policy).

Mortgage Loans that have been suspended for purchase and

have not cleared for purchase within thirty (30) days of the

suspense notice, may be returned to the Correspondent. If the

Mortgage Loan is returned to the Correspondent, CHL shall be

under no obligation to purchase such Mortgage Loan.

Post Purchase

Suspension Period

Four (4) calendar days from first notification to submit required

documentation, or Mortgage Loan is subject to a 2.0 Bps/day

price adjustment.

216.00 Commitment Renegotiation

In cases where the market interest rate has declined, CHL will allow the Correspondent to

renegotiate the Commitment subject to the following:

(i) the Purchase Price must be better by at least one full point;

(ii) the Mortgagor’s interest rate on the Mortgage Loan must be lowered by at least

12.5 Bps; and

(iii) the Mortgage Loan must be within fourteen (14) calendar days of delivery to CHL.

The renegotiated rate to the Mortgagor will be based on current sixty (60) day price minus

twenty-five (25) Bps, not to exceed current Price to Correspondent. In the event a renegotiated

Mortgage Loan is not delivered by the Lock Expiration Date, the Purchase Price to Correspondent

will revert to the price connected with the new rate as of the date of the original Lock. Extension

fees and all other price adjustments will remain applicable.

217.00 Pair-Off Fees

Failure to deliver a closed Mortgage Loan subject to a Mandatory Commitment will result

in a “Pair-Off Fee”. Pair-off Fees are calculated as the difference between the Purchase Price on

the Lock Confirmation and the current fifteen (15) day market price for the same interest rate and

Mortgage Loan program as of the Pair-Off Date. If the current market price (for the same interest

rate) is higher (better) on the Pair-Off Date, a Pair-Off Fee equal to the difference between the

Commitment price and the market price will be charged. If the current market price (for the same

interest rate) is the same or lower (worse) on the Pair-Off Date, a .25% Pair-Off Fee may be

charged. The Pair-Off Fee must be remitted to CHL within ten (10) days of notification to

Correspondent.


218.00 Fall-Out on Best Effort Commitments

Correspondents maybe be subject to Pair-Off Fees on Mortgage Loans subject to a Best

Efforts Commitments if the Correspondent’s fails to deliver closed Mortgage Loans under Best

Efforts Commitments in excess of the Fall-Out Percentage described herein. The Fall-Out

Percentage is calculated by dividing the dollar amount of the Correspondent’s Locked Mortgage

Loans that are not delivered during a calendar quarter by the total dollar amount of the

Correspondent’s Locked Mortgage Loans during a calendar quarter. This calculation is done three

(3) months in arrears to allow sufficient time for the Mortgage Loans to be closed and delivered.

CHL understands that there are Mortgage Loans that are withdrawn by the Mortgagors or simply

cannot be closed for many reasons. However, a Fall-Out Percentage on Best Efforts Commitments

greater than 20% is considered excessive and may result in a Pair-Off Fee as described above. A

consistent pattern of excessive fallout may result in suspension or termination of the Correspondent

Loan Purchase Agreement at the sole discretion of CHL.

219.00 Pipeline Report

Correspondents may request a weekly pipeline report which will inform Correspondents

of the status of their Mortgage Loans (including cancellations). However, it is CHL’s intention to

communicate Lock expirations, deficient on-time delivery, etc. to the Correspondent as necessary.

300 UNDERWRITING

301.00 Delegated/Non-Delegated Mortgage Loan Underwriting

301.01 Delegated Mortgage Loans.

Correspondents will be specifically approved to underwrite Eligible Mortgage Loans on a loan-

by-loan basis. All Delegated Mortgage Loans must meet all applicable Agency Guidelines,

Investor Guidelines, and CHL Overlays. Correspondents may be approved for Delegated

Underwriting on the following loan products:

a. Conventional Agency Mortgage Loan products and VA Mortgage Loan products

offered by CHL;

b. Conventional Agency Mortgage Loan products, and FHA Mortgage Loan products, but

sponsored on all VA Mortgage Loan products offered by CHL; and/or

c. Conventional Agency Mortgage Loan products, but sponsored on VA Mortgage Loan

products offered by CHL.

301.02 Non-Delegated Mortgage Loans.

All Non-Delegated Mortgage Loans must be submitted for CHL underwriting prior to

Mortgage Loan closing. In addition, there may be specific Non-Delegated Mortgage Loan

Products offered by CHL that must be submitted for CHL underwriting prior to Mortgage Loan

closing. A list of Non-Delegated Mortgage Loan Products is set forth in Section 308.00 Non-

Delegated Mortgage Loan Products.

302.00 Basic Underwriting Guidelines

Servicing-Retained Mortgage Loans sold to CHL must meet Agency Guidelines and any

CHL Overlays. Servicing-Released Mortgage Loans must meet all Agency and Investor


guidelines. All Servicing-Retained and Servicing-Released Mortgage Loans must be salable in the

secondary mortgage market at a sales price greater than the Purchase Price.

303.00 Compliance with Applicable Regulations

With regard to Delegated Mortgage Loans, the Correspondent must underwrite each such

Mortgage Loan in compliance with the Applicable Requirements. The Correspondent shall not

discriminate against any applicant on the basis of race, religion, national origin, color, sex, marital

status, familial status, age (provided the applicant has the ability to enter into a binding contract)

or discriminate against an applicant due to all or part of the applicant’s income being derived

from any public assistance program.

304.00 AUS Sponsorship

CHL sponsors Correspondents with the ability to access Desktop Underwriter®(DU), Loan

Prospector®®(LP), and Guaranteed Underwriting System (“GUS”) sponsorship is available to

both existing and new DU, LP, and/or GUS users. Correspondents may add CHL as a sponsor

even if other options are currently in use. Please contact your CHL Account Executive or

Operations Manager for additional information.

305.00 Responsibilities of the Correspondent

Any and all representations and warranties of the Correspondent herein are made by the

Correspondent for all Mortgage Loans submitted for purchase to CHL, regardless of which person

or party actually performed the underwriting of the Mortgage Loan. For each Mortgage Loan

submitted to CHL for purchase, including Mortgage Loans underwritten by CHL, the

Correspondent shall (i) confirm that no changes occurred in the credit or property information from

that which was originally submitted unless disclosed to and approved by CHL, and (ii) provide an

unexpired credit package valid as of the day of closing. CHL communication with the

Correspondent shall not be shared with or forwarded to the Mortgagor. Communication with the

Mortgagor must come directly from the Correspondent.

306.00 Delegated Underwriting General Instructions

The following are general instructions for Mortgage Loans submitted for purchase under

the Delegated Underwriting authority:

a. The Correspondent’s underwriter must sign the Transmittal Summary (Fannie Mae

1008), FHA Loan Underwriting and Transmittal Summary (HUD-92900-LT), or Loan

Analysis Worksheet (LAS), and page 3 of the Uniform Residential Loan Application

(1003) Addendum.

b. Validation of AUS findings must be performed by the Correspondent’s underwriter(s).

c. Correspondents ongoing authority as a Delegated Underwriting is contingent upon the

Correspondent’s ability to deliver Mortgage Loans in accordance with Agency,

Investor, and/or CHL Overlays.

d. Correspondent is responsible for the underwriting decision regardless of whether the

Mortgage Loan is underwritten by Correspondent’s personnel, CHL’s personnel, or any

third party contract underwriters.

e. CHL must pre-approve all third party contract underwriters used by Correspondent.

f. CHL reserves the right to require, at a minimum, a prompt written response when areas

of non-compliance are noted.


307.00 Manual Underwriting

Manual underwriting will only be considered on FHA and VA Mortgage Loans and must

be approved by CHL on a loan by loan basis.

308.00 Non-Delegated Mortgage Loan Products

The following Mortgage Loan products are Non-Delegated Mortgage Loan Products and,

therefore, must be underwritten by CHL: (i) Non-Agency Jumbo Mortgage Loans, (ii) DU Refi

Plus, and (iii) Manufactured Housing. The guidelines for these products are located in the

Products Guidelines & Overlays section under the “Products & Programs” “link on the Website.

309.00 CHL Underwriting

Correspondents must submit all Non-Delegated Mortgage Loans to CHL for underwriting

prior to Mortgage Loan closing. All Correspondents must submit all Mortgage Loans related to

Non-Delegated Mortgage Loan Products (See Section 308.00 Non-Delegated Mortgage Loan

Products) to CHL for underwriting prior to closing. Additionally, in order to minimize repurchase

risk to the Correspondent, an initial number of Mortgage Loans will be re-underwritten by CHL

(“Test Cases”). Test Cases will be re-underwritten either pre-closing, pre-purchase, or post-

purchase. The number of Test Cases required will be determined by CHL in its sole discretion.

309.01 Submission.

Mortgage Loans submitted to CHL for underwriting should be uploaded to the secure

document portal located under the “Upload Files & Conditions” link on the Website. Use the

“U/W SUBMISSION” option when uploading.

309.02 Appraisals.

Correspondents must use experienced and professional “Certified Residential Appraiser”

or “Certified General Appraiser”. Appraisers must have an industry recognized designation such

as SRA, MAI, SREA, etc. CHL may require supplemental appraisal information, such as appraiser

comments or additional comparable, to ensure accurate valuations. CHL may also, on occasion

and in its sole discretion, determine that a review appraisal or a new appraisal is necessary. CHL

reserves the right to accept or reject any appraiser or appraisal submitted. Correspondent must

ensure that the appraiser does not appear on any Agency exclusionary list or is under suspension

or subject to sanctions by any regulatory or industry oversight agencies.

309.03 Underwriting Status.

All “underwriter to clear” conditions must be cleared by the underwriter prior to closing

the Mortgage Loan, and all other conditions must be satisfied prior to purchase of the closed

Mortgage Loan.

309.04 Resubmission.

If the Correspondent is resubmitting a credit package, the resubmitted credit package

should include updates of all documents that require updating or reflect material changes to the

original information. If the credit package is approved, CHL will e-mail an updated underwriting

approval. If the credit package expires prior to closing the Mortgage Loan, CHL will contact the

Correspondent to determine if the Correspondent wishes to resubmit an updated credit package or

withdraw the Mortgage Loan.


309.05 Suspense.

If the credit package is incomplete or incorrectly submitted, CHL will notify the

Correspondent that the credit package has been placed in a suspense until a corrected credit

package is received.

309.06 Denial.

If the credit package does not meet the applicable underwriting criteria, CHL will notify

the Correspondent that the package has been denied. The Correspondent may resubmit the credit

package if the deficiency can be corrected to CHL’s satisfaction.

309.07 Adverse Action Notice.

When a credit package submitted to CHL is denied, the Correspondent is responsible for

providing the statement of credit denial to the Mortgagor in compliance with the Equal Credit

Opportunity Act (ECOA) and Regulation B. The statement of denial must include the reasons

CHL denied the credit package. If the Correspondent ultimately closes the Mortgage Loan, no

statement of credit denial is required.

310.00 Disaster Area Policy

Any Mortgage Property in a disaster area as declared by the Federal Emergency

Management Agency (“FEMA”) or other Governmental Agency of competent jurisdiction has

passed inspection by a licensed inspector or contractor to determine safety, soundness, and

habitability. Disasters, both natural and man-made, can cause varying degrees of damage and

create potential risk. This section provides general guidelines to be following in the event of a

Major Disaster.

a. Prior Approval-Underwriter Discretion. Some disasters are not widespread and

may not be addressed by FEMA or CHL. FEMA does not always issue declarations immediately

following a disaster. If an underwriter has reason to believe that a property may have been damaged

in a disaster, the underwriter should require an acceptable re-inspection or certification to verify

the soundness of the property. This applies to both, conforming delegated loans underwritten by

the Correspondent as well as conforming Non-Delegated Mortgage Loans underwritten by a CHL

underwriter. See Jumbo Mortgage Loan product guidelines located in the Products Guidelines &

Overlays section under the “Products & Programs” “link on the Website.

b. Areas Subject to Disaster Policy. CHL’s Disaster Policy applies to those areas

with either: (i) Federal government issued Disaster Declaration requiring individual assistance, or

(ii) where CHL has issued a disaster notification. CHL’s assessment of the significance of an event

in a particular geographic area may redefine the affected area. That assessment will utilize data

provided by FEMA for counties eligible for individual assistance and other data sources. Until

FEMA issues a declaration, or CHL has issued a disaster notification, individual underwriters and

clients are responsible for determining potential impact to the subject property. See Prior Approval

Underwriter Discretion within this section. In general, the Disaster Policy should be followed

during an ongoing disaster, and up to ninety (90) days from the FEMA or CHL declaration. CHL

may extend disaster declarations. If a disaster is extended beyond the standard FEMA date, or a

disaster is not yet declared by FEMA, CHL will issue a memorandum with the following

information:

• Designated Disaster Area(s) by county or zip codes within a county;

• Effective Date;

• Duration; and

• Affected Transactions


c. Documentation Requirements. Prior to purchase, CHL will require a completed

and signed Certification of Property Condition Prior to Closing. A completed Certification of

Property Condition Prior to Closing is required when: (i) CHL has determined that a section of the

county has an increased risk of loss due to disaster; and/or (ii) notification from any government

sponsored Agency and/or CHL that an appraisal update is required for an area affected by a

disaster. Unless specific guidelines are issued for the disaster, final inspections or certifications of

value will be required for all loans secured by properties in the affected area, including loans

without an appraisal.

d. Employment. In the event of widespread property destruction, a re-verification of

the Mortgagor’s employment may be appropriate. Correspondents will be notified when re-

verification of employment is required.

e. Damaged Properties:

• Minor Damage - CHL will not require properties with minor damage not

affecting health, safety, habitability, soundness, or structural integrity of the

property to be repaired prior to loan purchase. However, professional estimates

of the repair costs should be obtained, and an escrow account established with

sufficient funds to guarantee completion of repairs. This policy falls within

CHL’s policy of allowing “weather related” escrows only.

• Major Damage - Any damage that affects health, safety, habitability, soundness,

or structural integrity must be repaired before the loan is eligible for purchase

by CHL.

400 PURCHASE

401.00 General Policies

CHL purchases Mortgage Loans that comply with the terms and condition of the Lock

Confirmation, the Manual, the applicable Mortgage Loan program, the applicable Agency and/or

Investor Guidelines, and the Applicable Requirements. However, not all Agency or Investor

products may be available for purchase by CHL at all times. Generally, CHL will not purchase

any Mortgage Loan that has been rejected by any other Investor; however, exceptions may be

considered on a case by case basis.

402.00 CHL Requirements

The following requirements may vary from Agency Guidelines or Investor Guidelines.

Correspondent is required to comply with CHL requirements as well as the applicable Agency

Guidelines or Investor Guidelines. Correspondent is responsible for curing any deficiencies with

the following requirements regardless of the Mortgage Loan’s purchase by CHL or an Agency or

Investor.

402.01 Hazard Insurance.

CHL requires a Correspondent to provide a current hazard insurance policy on all Mortgage

Loans sold to CHL unless the Correspondent is located in a binder state. The policy or binder, if

applicable, should reflect the Correspondent as the insured mortgagee and must be effective prior


to or on the date of closing. Coverage must be sufficient to comply with applicable requirements

set forth by the Agency or Investor purchasing or insuring the Mortgage Loan product. The policy

must cover all perils without exclusion of any coverages such as windstorm, hurricane or hail (if

applicable). In the event of a claim, the deductible must not create a financial hardship to the

Mortgagor(s). Once the Mortgage Loan has been purchased by CHL, Correspondent must notify

the insurer that the mortgagee loss payable clause is to be corrected to designate CHL as the insured

loss payee. The insurer and/or its agency must be licensed in all applicable respects to do business

in the state or other jurisdiction in which the Mortgaged Property is located. All insurance

premiums due prior to Mortgage Loan delivery, or within thirty (30) days after Mortgage Loan

delivery, to CHL must be paid by Correspondent. The CHL Loan Information Sheet must indicate

by date and amount the insurance premiums paid by the Correspondent and the next premium due

date for the payment of insurance by CHL.

402.02 Flood Insurance.

Insurance must be placed on a property located in a special hazard flood area where flood

insurance is mandatory as required by the Flood Disaster Protection Act of 1973, and the Flood

Insurance Reform Act of 2004. To the extent applicable, a flood insurance policy must have been

presented at closing along with a paid receipt showing the first full year’s premium paid in full.

The coverage limit must, at a minimum, be the amount available under the National Flood

Insurance Act of 1968, as amended in 1977. In the event of a claim, the deductible must not create

a financial hardship to the Mortgagor(s). If the property is not located in an area as described

above, the Correspondent represents and warrants (in addition to the representations and warranties

in Section 600 Representations, Warranties, and Covenants, that the location of the flood zone

relative to the subject property, as determined by an appraiser, engineer, or other source of such

information customarily relied upon by mortgage lenders, is true and accurate.

403.00 Mortgage Note Endorsement

For policies and procedures for endorsement of a promissory note, please refer to Collateral

Package Checklist in the Checklist & Forms section under the “Product & Program” link on the

Website. Endorsement by allonge is permitted, but names, dates, and other references therein must

match the Mortgage Note exactly. Endorsements must be signed by an officer authorized in the

Correspondent’s corporate resolution on file with CHL.

404.00 Assignment of Mortgage

All Mortgage Loans will be assigned from the Correspondent to CHL through the MERS

System. Correspondent must be registered with MERS as a “Lite” or “General” member. Third-

party originator (“TPO”) membership is not acceptable. Within seven (7) days of the Mortgage

Note date, the Mortgage Loan must be registered with MERS. Mortgage Loans must be transferred

to CHL through the MERS System within five (5) days after purchase.

405.00 Mortgagee Clause

Please refer to Servicing section under the “Contact Us” link on the Website for the

required form of loss payable clause address for hazard insurance, flood insurance (if applicable),

and private mortgage insurance policies.

406.00 Shipping Addresses

Mortgage Loan files submitted for purchase should be uploaded to the secure document

portal under the “Upload Files & Conditions” link on the Website. When uploading a Delegated

Underwriting file, use the “PURCHASE FILE” option. When uploading a Non-Delegated


Underwriting file, use the “CLOSING FILE” option. Collateral packages should be sent to:

CORNERSTONE HOME LENDING, INC.

1177 West Loop South, Suite 700

Houston, TX 77027

Attn: Servicing

407.00 Stacking Order

Please refer to Checklist & Forms section under the “Products & Programs” link on the

Website for the Delivery Submission Form for the stacking order for Mortgage Loans submitted

to CHL for purchase review, and the Pre-Underwriting Checklist for the stacking order for

Mortgage Loans submitted to CHL for underwriting.

408.00 Property Taxes

A fully completed tax information sheet must be in each file. Correspondents may use their

own form, but it must contain the same information as the CHL Tax Information Sheet set forth

under the Checklist & Forms section under the “Products & Programs” link on the Website. If

the subject property includes more than one parcel, the same information for each parcel must be

provided. Each file must include a corresponding tax search. Taxes that are due within thirty (30)

days of closing must be paid by the settlement agent with evidence of payment forwarded to CHL.

If the taxing authority has a "discount" date on which the taxes may be paid, this date must be used

to calculate escrows. CHL will pay taxes based on discount date.

409.00 Escrow Holdback Loans - Generally

As a general rule, CHL expects a Mortgage Property to be 100% complete as of Purchase

Date, subject only to the exceptions set forth herein. CHL will purchase Mortgage Loans subject

to escrowed funds for the completion of post-closing improvements to newly constructed

properties, provided that the escrows were established in accordance with the guidelines below.

CHL will also purchase Mortgage Loans secured by existing properties with escrows for weather

related improvements. In such cases, CHL will withhold the Servicing-Released premium until

completion of repairs is documented and escrow funds have been disbursed or released. CHL will

not purchase Conventional Agency Mortgage Loans secured by existing Mortgage Property with

escrows for non-weather-related improvements until completion of repairs is documented and

escrow funds have been dispersed or released. In such case, Correspondent must account for

completion of minor non-weather related repairs at the time of Locking the Mortgage Loan with

CHL.

410.00 Weather Related Escrows.

Government Mortgage Loans – exterior weather related only.

Non-Agency Jumbo Mortgage Loans – Please refer to Jumbo Product Program Eligibility

Guides under the “Products & Programs” link on the Website.

Conventional Agency Mortgage Loans – exterior weather related only.

410.01 New Construction.

CHL must receive a clear final inspection reflecting that home is complete with the

exception of (i) the minor weather-related items reflected in the Escrow Agreement, (ii) incomplete


items that do not affect the ability to obtain a Certificate of Completion, Certificate of Occupancy

or clear final inspection (example: landscaping, sod), and (iii) repairs/improvements not listed as

ineligible.

410.02 Existing Construction:

Eligible Repairs – Minor conditions or deferred maintenance items include, but are not

limited to:

a. exterior painting;

b. minor exterior plumbing leaks;

c. replacement of window glass and/or screens;

d. replacement of doors;

e. replacement of fixtures;

f. replacement of rotted exterior wood;

g. garage door repair; and/or

h. other “wear and tear” items at the discretion of the underwriter

Ineligible Repairs - include, but are not limited to, the following:

a. installation or repair of a swimming pool;

b. completion of a partially finished addition or renovation;

c. well/septic repairs;

d. roofing, including active roof leaks and curled or cupped room shingles;

e. extensive electrical or plumbing repair;

f. foundation or structural repairs, including cracks or settlement in the foundation or

water seepage;

g. termite damage (excluding minor repairs); and/or

h. environmental hazards

410.03 Timeline for Weather Related Repairs.

Repairs must be completed within one hundred twenty (120) days from Mortgage Note

date. If additional time is needed to complete repairs, extensions will be considered on a case-by-

case basis.

410.04 Escrow Holdback.

An escrow holdback must be established for the costs for completion. The costs for

completion must be verified with the contract or a cost to build/repair bid from the contractor(s)

who will be completing the repair(s). The escrow holdback must also include a contingency for

cost overruns but be equal to at least 100% of the contract/bid.

410.05 Required Signature on the Escrow Agreement.

All interested parties must sign the Escrow Agreement. CHL provides an Escrow

Agreement form in the Checklist & Forms section under the “Products & Programs” link on the

Website. Correspondents may use their version of an escrow agreement as long as terms and

conditions are substantially the same as the Escrow Agreement.


410.06 Who Holds the Escrow Funds.

The closing agent, Correspondent, or title company must hold the escrow funds. In no event

shall any other Person hold the escrow funds, including, but not limited to the builder, seller, or

Mortgagor.

410.07 Tracking of Outstanding Escrow Funds.

The Correspondent is responsible for the tracking, management, and follow-up on all

outstanding escrow funds and the related Escrow Agreement, including ordering final inspections

and managing/authorizing the disbursement of escrow funds. In the case of weather related

improvements where CHL has withheld the SRP from Purchase Amount, if improvements are not

made as agreed within ninety (90) days from Mortgage Note date, Correspondent will forfeit rights

its rights to SRP. Exceptions may be made on a case-by-case basis, but under no circumstances,

shall repair time exceed one hundred eighty (180) days from the Mortgage Note date.

410.08 Required Documentation for Escrow Holdbacks.

The following documentation is required on escrow holdbacks:

a. fully executed Escrow Agreement (or similar form provided by Correspondent);

b. copies of all contracts/repair bids from contractor(s) who will be performing repairs;

c. closing disclosure or other acceptable form of settlement statement documenting

escrow of funds at closing;

d. final inspection/documentation of completion of repairs;

e. evidence of release of escrow funds;

f. Conventional and FHA - If the closing disclosure or settlement statement indicates that

the Mortgagor is financially responsible for the required repairs, the source of funds

must be documented. Follow standard requirements for documentation of assets/funds

to close; and

g. FHA: Completed Mortgagee’s Insurance of Completion form (HUD-92300).

411.00 Non-Weather Related Escrows

Eligible Repairs: Minor internal repairs or deferred maintenance including, but not limited

to:

a. flooring upgrade;

b. minor electrical or plumbing repair;

c. replacement of interior doors;

d. replacement of fixtures; and/or

e. other “wear and tear” items at the discretion of the underwriter.

Ineligible Repairs: including, but are not limited to:

a. completion of a partially finished addition or renovation;

b. extensive electrical or plumbing repair;

c. major internal structural or dry wall repairs; and/or

d. environmental hazards.

411.01 Timeline for Non-Weather Related Repairs.

Repairs must be completed prior to purchase. Correspondent will be required to account

for completion of minor non-weather related repairs when Locking the Mortgage Loan with CHL.


Extension fees will apply. (See Section 215.00 Lock Extension/Re-Pricing Policy). CHL cannot

purchase Mortgage Loans beyond ninety (90) days from Mortgage Note date, without exception.

411.02 Required Signature on the Escrow Agreement.

All interested parties must sign the Escrow Agreement. CHL provides an Escrow

Agreement form in the Checklist & Forms section under the “Products & Programs” link on the

Website. Correspondents may use their version of an escrow agreement as long as terms and

conditions are substantially the same as the Escrow Agreement.

411.03 Holder of the Escrow Funds.

The closing agent, Correspondent, or title company must hold the escrow funds. In no event

shall any other Person hold the escrow funds, including, but not limited to the builder, seller, or

Mortgagor.

411.04 Tracking of Outstanding Escrow Funds.

The Correspondent is responsible for the tracking, management, and follow-up on all

outstanding escrow funds and the related Escrow Agreement, including ordering final inspections

and managing/authorizing the disbursement of escrow funds. CHL will not purchase a Mortgage

Loan from Correspondent until repairs are completed and escrow funds have been disbursed or

released.

411.05 Required Documentation for Escrow Holdbacks.

The following documentation is required on escrow holdbacks:

a. fully executed Escrow Agreement;

b. copies of all contracts/repair bids from contractor(s) who will be performing the

repairs;

c. closing disclosure or other form of settlement statement evidencing escrow of funds at

closing;

d. final inspection/documentation of completion of repairs; and

e. evidence of release of escrow funds.

411.06 Required Repairs.

If Mortgagor is financially responsible for the required repairs, the source of funds must be

documented.

412.00 Mortgage Loan Purchase Review

CHL will perform a Mortgage Loan purchase review, generally within three (3) to five (5)

Business Days from the receipt of a complete, accurate, and acceptable purchase submission

package. Any deficiencies will be noted on the CHL Purchase Pending Notification and faxed or

e-mailed to the Correspondent. Please refer to the Commitment section of this Loan Manual for

re-pricing policy on pending Mortgage Loans. In the event, CHL will be purchasing a Mortgage

Loan after the first payment date as indicated on the Mortgage Note, evidence of insurance

(MIC/LGC) will be required on all Government Mortgage Loans before they will be purchased by

CHL.

CHL may from time to time, at its sole discretion, accept and purchase a Mortgage Loan

that does not comply in every respect with the terms and conditions of this Loan Manual. Such

purchase does not constitute a waiver of (i) CHL’s right to reject any other Mortgage Loan that


does not comply with CHL’s requirements; or (ii) any other rights, remedies or recourse CHL may

have in this Loan Manual, or at law or in equity. Correspondent will not Lock, or submit for

purchase, any Mortgage Loan that has been Locked and/or rejected by any other Investor.

Exceptions may be considered on a case-by-case basis.

413.00 Mortgage Loan Purchased by CHL

If the purchase submission package is complete, accurate and all applicable underwriting

conditions have been satisfied, the Mortgage Loan will be eligible for purchase. At the time of

purchase, CHL will wire transfer the Purchase Price as set forth on the Lock Confirmation, with

adjustments for interest, escrow funds, fees and temporary buy-down funds, if applicable.

413.01 Fees Deducted at Purchase.

CHL will deduct from the Purchase Price the following fees:

a. Administration Fee:

1. $335 for all FHA, VA, USDA, manufactured housing and Conventional Mortgage

Loans underwritten by CHL.

2. $435 administration fee for all Non-Agency Jumbo Mortgage Loans at the time of

purchase.

b. Underwriting fee:

1. $450 underwriting fee for all FHA, VA, USDA, manufactured housing and

Conventional Mortgage Loans underwritten by CHL.

2. $575 underwriting fee for all Non-Agency Jumbo Mortgage Loans. All Non-

Agency Jumbo Mortgage Loans will be underwritten by CHL (i.e. underwriting

will not be delegated).

All fees will be deducted from the Purchase Price at the time of purchase.

413.02 Interest Adjustment on Mortgage Loans with No Payments Applied.

When CHL purchases a Mortgage Loan of which the first payment is due after the date of

purchase, the Correspondent will retain interest earned on the principal balance of the Mortgage

Loan for the period from Mortgage Loan disbursement to the Purchase Date. The following two

examples illustrate this interest adjustment:

Example #1: -Closing/disbursement date: 1/27

-First payment date: 3/1

-Days of interest collected at closing:

1/27 through 1/31 = five (5) days of interest

-CHL Purchase Date: 02/04

-Days of interest due to Correspondent:

2/1 through 2/3 = three (3) days of interest

In Example 1, the Correspondent collected five (5) days of interest at the time of closing.

CHL will pay the Correspondent an additional three (3) days of interest at the time of purchase,

which will be added to the wire transfer.

Example #2: -Closing date: 1/1

-Disbursement date: 1/15


-First payment date: 3/1

-Days of interest collected at closing:

1/15 through 1/31 = seventeen (17) days of interest


-Days of interest due to CHL:

1/24 through 1/31 = eight (8) days of interest

In Example 2, the Correspondent collected seventeen (17) days of interest at the time of

closing. The Correspondent will pay CHL eight (8) days of interest on the date of purchase, since

the Correspondent has already collected this interest from the Mortgagor at closing. The interest

owed to CHL will be deducted from the wire transfer to Correspondent.

413.03 Interest Adjustment on Mortgage Loans with One or More Payments Applied.

CHL will pay the Correspondent interest earned on the principal balance of the Mortgage

Loan for the period from the date of the last payment applied. The following example illustrates

this interest adjustment:

-Date last payment applied: 1/1


-Days of interest due Correspondent:

1/1 through 1/11 = eleven (11) days of interest

In the example above, CHL will pay the Correspondent an additional eleven (11) days of

interest at the time of purchase, which will be added to the wire transfer.

413.04 Calculation of First Payment to CHL.

In some instances, one or more payments may be collected and retained by the

Correspondent prior to the purchase of the Mortgage Loan by CHL. If the Mortgage Loan is

purchased after the 15th of the month prior to the month in which the first payment on the Mortgage

Loan is due as provided by the Mortgage Note, it will be purchased at an amortized balance, and

Correspondent shall be responsible for the collection, and correct application, of such payment.

If, at the time of Mortgage Loan purchase, one or more payments have been made on the Mortgage

Loan, Correspondent must provide a payment history to validate that the Mortgage Loan is not in

default and to ensure that the Mortgage Loan is purchased correctly. This procedure will allow

CHL to properly establish the Mortgage Loan account to be serviced. This will further help to

avoid lost payments, misdirected collection efforts, and generally serve the Mortgagor in the most

accurate, efficient and effective manner.

500 POST-PURCHASE

501.00 Servicing

501.01 Servicing-Retained Mortgage Loans.

With regard to Mortgage Loans sold to CHL under the Servicing-Retained option, the

Correspondent is responsible for notifying the appropriate parties of the change of Servicer in

accordance with all Applicable Requirements. CHL retains the right at its sole discretion to sell

the Servicing Rights of any and all Servicing-Retained Mortgage Loans. For further information

about Mortgage Loan servicing matters, please refer to Servicing section under the “Contact Us”

link on the Website.


501.02 Servicing-Released Mortgage Loans.

Mortgage Loans sold to CHL under the Servicing-Released option, or Mortgage Loan

products offered only through a Servicing-Released option, will not be retained by CHL.

Therefore, CHL will not warrant (i) Mortgage Loan servicing quality standards nor (ii) that the

Mortgagor will not be solicited for financial services, including but not limited to, Mortgage Loan

services, offered by the servicing institution, including. Servicing-Released Mortgage Loans are

not released from the representations and warranties as defined in Section 600.00 Representations,

Warranties, and Covenants.

502.00 Quality Control

502.01 Pre-Purchase Underwriting Review.

The first ten (10) Mortgage Loans that are Delegated Mortgage Loans will be submitted to

CHL by Correspondent and will be considered to be in a Test Case Status and shall remain in such

status until CHL evaluates the underwriting quality of the Delegated Mortgage Loans. Thereafter,

at CHL’s sole discretion, the CHL Underwriting Department may randomly audit the underwriting

quality of Delegated Mortgage Loans submitted to CHL by the Correspondent. Based on the

materiality of exceptions and/or recurrent exceptions, CHL reserves the right to require all

Delegated Mortgage Loans submitted by Correspondent to be in a Test Case Status. Repeated

material or recurrent exceptions may result in termination of Correspondent’s eligibility to

underwrite Mortgage Loans sold to CHL.

502.02 Post-Purchase Quality Control.

CHL’s Quality Control Department will audit 100% of the initial Mortgage Loans sold by

a Correspondent to CHL. Thereafter, at CHL’s sole discretion, the CHL Quality Control

Department will randomly audit 10% of all Mortgage Loans purchased from a Correspondent. In

the event there are material or recurrent exceptions, CHL will forward to Correspondents a

summary of the Quality Control report. CHL may require an appropriate explanation, additional

documentation, correction, indemnification, or repurchase of Mortgage Loans with material and/or

recurrent exceptions.

503.00 Post-Purchase Requirements

When a Mortgage Loan is purchased by CHL, Correspondent shall notify the following

parties of the sale and transfer of servicing, as applicable: (i) Mortgagor; (ii) hazard insurer

Company; (iii) private mortgage insurance company, and (iii) flood insurer. Notifications should

be prepared on the Correspondent’s letterhead and be transmitted within two (2) Business Days of

the Correspondent’s receipt of the Purchase Price from CHL. With regard to the notification to the

Mortgagor, such notification must be in full compliance with the Applicable Requirements and

include, among other information, CHL identified as the new Servicer. CHL’s Servicing

Department will provide the Mortgagor with a permanent payment coupon. All future payments

and servicing correspondence, as well as, payments received by the Correspondent after the

Purchase Date, should be transmitted to CHL’s Servicing Department as set forth in the Servicing

section under the “Contact Us” link on the Website.

504.00 Final Delivery

The following closing documents must be delivered to CHL immediately upon receipt, but

no later than one hundred twenty (120) days from the Mortgage Note date. CHL acknowledges

that exceptional circumstances may warrant an extension. In such event, the Correspondent must

submit all documents available for delivery, noting the circumstances along with an estimate of


the date the outstanding item will be available in the space provided on the Final Documentation

Transmittal form. Approval of any extensions to delivery of Final Documents shall be at CHL’s

sole discretion.

The Final Documentation Transmittal form is to be used when submitting:

a. Original recorded Mortgage/Deed of Trust/Deed to Secure Debt, and any addenda or

riders;

b. Original recorded Assignment of Mortgage/Deed of Trust/Deed to Secure Debt;

c. Original recorded Power of Attorney, if applicable;

d. Original Title Policy;

e. Payment history reflecting disbursements made from Mortgagor’s escrow account

(taxes, MI, etc.) or curtailments. NOTE: The payment history must be received by CHL

within thirty (30) days of the last payment received by Correspondent; and

f. Any other documentation indicated in Purchase Pending Notification as follow-up

documentation.

505.00 Failure to Timely Transmit Required Mortgage Loan Documentation

In the event complete documentation is not received within the one hundred twenty (120)

day period set forth above, CHL may restrict the Correspondent’s eligibility to request

Commitments until the delivery of the outstanding documentation is completed. Extended

violations of the delivery requirement may result in repurchase of the Mortgage Loan(s) at a price

determined according to the provisions of Section 802.00 Repurchase and/or termination of the

Agreement. Correspondent grants CHL a limited power of attorney to execute such documentation

or other measures necessary to secure its interest in Mortgage Loans purchased with incomplete

documentation. A form of limited power of attorney can be found under the Checklist & Forms

section under the “Products & Programs” link on the Website.

506.00 Specific HMDA Requirements

In the case of applications submitted to CHL through the Correspondent, CHL will report

those Mortgage Loans as originations that CHL approved (whether or not they closed in CHL’s

name). HMDA data on originations must be reported by the entity that makes the credit decision

and which by prior agreement, acquires the Mortgage Loan at or after closing. Additionally, CHL

must report the HMDA data for all applications that did not result in an origination, including, for

example, applications that CHL denied or that the applicant withdrew during the calendar year

covered by the report (whether or not they would have closed in CHL’s name).

600 REPRESENTATIONS, WARRANTIES, AND COVENANTS

600.00 Overview

Each and all the representations, warranties, and covenants contained in this Section 600

are made by the Correspondent to CHL, its successors and assigns, with respect to such matters

and at such times as specified herein, unless expressly waived in writing by CHL. Each

representation, warranty, and covenant is binding on the Correspondent regardless of whether the

subject matter thereof was under the control of the Correspondent or a third party. The

Correspondent acknowledges that, with respect to each Mortgage Loan purchased by CHL from

Correspondent, such Mortgage Loan was purchased by CHL in reliance on the representations,


warranties, and covenants made by Correspondent herein, and such representations, warranties,

and covenants were made by Correspondent to induce CHL to purchase the related Mortgage Loan.

The representations, warranties, and covenants made in this Section 600 or in any other section of

this Loan Manual or the Agreement shall survive delivery of the Mortgage Loans to CHL and shall

inure to the benefit of CHL, its successors and assigns notwithstanding any examination of the

Mortgage Loan documentation or any other related documentation by CHL and regardless of any

facts or information alleged to have been known, or should have been known, to CHL.

601.00 Representations and Warranties Regarding the Correspondent

The Correspondent represents and warrants the following as of the Purchase Date of each

Mortgage Loan sold by the Correspondent to CHL:

601.01 Organization and Good Standing.

The Correspondent is duly organized, validly existing, and in good standing under the laws

of the jurisdiction under which it was organized and is qualified to do business and is properly

licensed or registered as a Lender in each jurisdiction in which the Correspondent does business

or is exempt under Applicable Law from such qualification or licensing, and no demand for such

qualification or licensing has been made upon the Correspondent by any jurisdiction.

601.02 Authority and Capacity.

The Correspondent has all requisite corporate power, authority, and capacity to enter into

this Agreement and to perform the obligations required of it hereunder. The Agreement (assuming

the due authorization and execution of the Agreement by CHL) constitutes a valid and legally

binding agreement enforceable in accordance with its terms, except as such enforceability may be

limited by bankruptcy, insolvency, moratorium, reorganization, conservatorship and similar laws,

and by equitable principles affecting the enforceability of the rights of creditors. No consent,

approval, authorization, or order of, or registration or filing with, or notice to, any governmental

authority or court is required, under state or federal law or regulation prior to the execution,

delivery, and performance or consummation by the Correspondent of any other transaction

contemplated hereby. If the Correspondent is a depository institution, the Agreement shall be

maintained on file in the Correspondent’s official records in compliance with Applicable

Requirements.

601.03 No Conflict.

Neither the execution and delivery of this Agreement, nor the consummation of the

transactions contemplated by the Agreement, nor compliance with its terms and conditions, shall

conflict with, or result in the breach of, or constitute a default under, or result in the creation or

imposition of any lien, charge, or encumbrance of any nature upon (i) the properties or assets of

the Correspondent, (ii) any of the terms, conditions or provisions of the Correspondent’s

organizational documents, by-laws, operating agreement, company agreement or any similar

corporate governance documents of the Correspondent, or (iii) any mortgage, indenture, deed of

trust, loan or credit agreement, or other agreement or instrument to which the Correspondent is

now a party or by which it is bound.

601.04 Compliance with Laws.

No action, suit, proceeding, or investigation is pending, or to the Correspondent’s

knowledge, threatened, against the Correspondent before any court, administrative agency, or

other tribunal (i) asserting the invalidity of this Agreement, (ii) seeking to prevent, restrain, or

enjoin the consummation of any of the transactions contemplated thereby, or (iii) that which might


materially and adversely affect the performance by the Correspondent of its obligations under, or

the validity or enforceability of, this Agreement.

601.05 Performance.

The Correspondent does not believe, nor does Correspondent have any reason or cause to

believe, that it cannot perform each and every duty, obligation, and/or covenant contained in the

Agreement.

601.06 Ordinary Course Transaction.

The consummation of the transactions contemplated by the Agreement is in the ordinary

course of business of the Correspondent, and the sale, transfer, assignment, or conveyance of

Mortgage Loans and the related Servicing Rights by the Correspondent pursuant to the Agreement

are not subject to the bulk transfer, fraudulent conveyance, preferential transfer, or any similar

laws or regulations in effect in any applicable jurisdiction or under any Applicable Law.

601.07 Litigation: Compliance with Laws.

There is no litigation, proceeding or governmental investigation pending, or any order,

injunction, or decree outstanding, that might materially and adversely affect the Mortgage Loans

or the related Servicing Rights to be sold pursuant to this Agreement. Additionally, there is no

litigation, proceeding, or governmental investigation existing or pending, or to the knowledge of

the Correspondent, threatened, or any order, injunction or decree outstanding against, or relating

to, the Correspondent, that has not been disclosed by the Correspondent to CHL in writing that

could have an adverse effect upon the Mortgage Loans or the related Servicing Rights or the other

assets to be purchased by CHL under this Agreement, nor does the Correspondent know of any

basis for any such litigation, proceeding, or governmental investigation. The Correspondent has

not violated any Applicable Requirement which may materially and adversely affect the Mortgage

Loans or the related Servicing Rights to be sold pursuant to the Agreement.

601.08 Statements Made.

No representations, warranty, or written statement made by the Correspondent in the

Agreement, or in any schedule, written statement or certificate furnished to CHL by the

Correspondent in connection with this Agreement or the transactions contemplated thereunder,

contains, or will contain, any untrue statement of a material fact or omits, or will omit to state, a

material fact necessary to make the statements contained herein or therein not misleading.

601.09 Approved Correspondent.

The Correspondent meets all of the eligibility requirements set forth in the Requirements &

Checklist for Approval as a Correspondent under the “Become a Partner” link on the Website.

Correspondent is either a HUD-approved mortgagee or a state or federally chartered or regulated

financial entity.

601.10 Home Ownership and Equity Protection Act – Predatory Lending.

There is no litigation, proceeding or governmental investigation existing or pending or to

the knowledge of the Correspondent, threatened, or any order, injunction or decree outstanding

against, or relating to, the Correspondent, involving, directly or indirectly, expressly or implicitly,

any allegation of facts upon which a violation of the Home Ownership and Equity Protection Act

or any state, city, or district high cost home mortgage or predatory lending law could be based.

602.00 Representations and Warranties Regarding the Mortgage Loan


With respect to each Mortgage Loan sold by the Correspondent to CHL, the Correspondent

represents and warrants the following as of the applicable Purchase Date:

602.01 Valid First Lien.

The Mortgage is a valid, subsisting, enforceable first lien on the Mortgage Property, and

all installations and mechanical, electrical, plumbing, heating and air conditioning systems, and

other fixtures located in or annexed to such buildings or improvements, and all additions,

alterations and replacements made at any time with the respect to the foregoing, and such Mortgage

Property is owned by the Mortgagor in fee simple or is a leasehold estate, subject only to: (i) the

lien of current real property taxes and assessments not yet due and payable; (ii) covenants,

conditions and restrictions, rights of way, easements and other matters of public record as of the

date of recording acceptable to mortgage lending institutions generally and specifically referred to

in the lender’s title insurance policy delivered to the originator of the Mortgage Loan and (a)

referred to or otherwise considered in the appraisal made for the originator of the Mortgage Loan,

or (b) that do not adversely affect the appraised value of the Mortgage Property set forth in such

appraisal; and (iii) other matters to which like properties are commonly subject, and which do not

individually, or in the aggregate, materially interfere with the benefits of the security intended to

be provided by the Mortgage or the use, enjoyment, value, or marketability of the related Mortgage

Property. Any security agreement, chattel mortgage, or equivalent document related to, and

delivered in connection with, the Mortgage Loan establishes and creates a valid, subsisting, and

enforceable first lien and first priority security interest on the property described therein, and the

Correspondent has full right to sell and assign the same to CHL. All tax identifications and property

descriptions are legally sufficient, and tax segregations, where required, have been completed. The

Mortgage Property was not, as of the date of origination of the Mortgage Loan, and, as of the date

on which CHL purchased the Mortgage Loan, subject to a mortgage, deed of trust, deed to secure

debt or other security instrument creating a lien subordinate to the lien of the mortgage, unless

permitted under applicable guidelines and underwriting requirements. In the event the mortgage

constitutes a deed of trust, a trustee, duly qualified under Applicable Law to serve as such, has

been properly designated and currently so serves and is named in the deed of trust, and no fees or

expenses are or will become payable by CHL to the trustee under the deed of trust, except in

connection with a trustee’s sale after default by the Mortgagor, to the extent provided under the

deed of trust.

602.02 Marketability.

All Mortgage Loans purchased by CHL from Correspondent are salable in the secondary

market without penalty or discount and comply with applicable Agency Guidelines, Investor

Guidelines, and CHL Overlays. All Mortgage Loans must be acceptable for sale in the secondary

mortgage market at a sales price greater than the Purchase Price.

602.03 Full Disbursement of Proceeds.

Except as otherwise expressly provided in this Loan Manual, (i) the Mortgage Loan has

been closed, and the proceeds of the Mortgage Loan have been fully disbursed; (ii) the Mortgage

Loan includes no provision, and there is no requirement for future advances thereunder, and/or

(iii) any and all requirements for completion of any on-site or off-site improvements, and/or

disbursements of any escrow funds have been satisfied. All costs, fees, and expenses incurred in

making or closing the Mortgage Loan and the recording of the mortgage were paid. The FHA

mortgage insurance premium or the VA guaranty fee, if applicable, has been paid, and the

Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or

Mortgage. There is no obligation on the part of the Correspondent or any other party to make

supplemental payments in addition to those made by the Mortgagor. Any future advances that

were made in connection with the Mortgage Loan have been consolidated with the outstanding


principal amount secured by the mortgage, and the secured principal amount, as consolidated,

bears a single interest rate and single repayment term. Unless otherwise permitted in this Loan

Manual, the consolidated principal amount does not exceed the original principal amount of the

Mortgage Loan.

602.04 No Defenses.

The Mortgage Loan is not subject to any right of rescission, set-off. counterclaim or

defense, including without limitation, the defense of usury, nor will the operation of any of the

terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either

the Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to any right of

rescission, set-off, counterclaim or defense, including without limitation, the defense of usury, and

no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto,

and no Mortgagor was a debtor in any state or federal bankruptcy or insolvency proceeding at the

time the Mortgage Loan was originated, and as of the date CHL purchased the Mortgage Loan, the

Mortgage Loan was not subject to a bankruptcy plan, nor had the related Mortgagor filed

bankruptcy. The Mortgagor has not notified the Correspondent or any prior Servicer of the

Mortgage Loan, and the Correspondent has no knowledge of, any relief requested or allowed to

the Mortgagor under the Soldiers’ and Sailors’ Civil Relief Act of 1940 (“SCRA”).

602.05 Payments Current.

All payments due on the Mortgage Loan have been made by the Mortgagor. The Mortgage

Loan is not now, nor has not it been delinquent (i.e., more than thirty (30) days past due) prior to

the Purchase Date.

602.06 No Defaults.

No default, breach, violation, failure to comply, or event of acceleration exists under the

Mortgage or the Mortgage Note, and nor any event which, with the passage of time or with notice

and the expiration of any grace or cure period, would constitute a default, breach, violation, failure

to comply, or event of acceleration, and neither the Correspondent nor any of its predecessors in

interest has waived any default, breach, violation, failure to comply or event of acceleration. No

judicial or nonjudicial foreclosure proceeding is currently threatened or has been commenced with

respect to the Mortgage Loan.

602.07 No Outstanding Charges.

No default in compliance with the terms of the Mortgage has occurred, and all taxes,

governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold

payments or ground rents which have previously become due and owing have been paid. The

Correspondent has not advanced funds, nor induced, solicited, or knowingly received, any advance

of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount

required under the Mortgage Loan, except interest accruing from the date of the Mortgage Note or

date of disbursement of the Mortgage Loan proceeds, whichever is earlier, to the day which

precedes by one (1) month the due date of the first installment of principal and interest. The

Mortgagor has not used any subordinate financing to acquire the Mortgage Property, other than

subordinate financing acceptable to Fannie Mae, Freddie Mac, HUD or VA, pursuant to the

Agency’s requirements in effect at the time the Mortgage Loan was sold by the Correspondent to

CHL.

602.08 No Mechanics’ Liens.

Except as provided under the terms of construction financing documents (repair,

renovation, “Home-Style,” interim, or “one-time close”), no mechanics’ or similar liens or claims

have been filed for work, labor or material (and no rights outstanding under Applicable Law could


give rise to such liens) encumbering the Mortgage Property, and which are, or may be, liens prior

to, equal, or coordinate with, the lien of the Mortgage.

602.09 Ownership.

Immediately prior to CHL’s purchase of the Mortgage Loan, the Correspondent was the

sole legal, beneficial and equitable owner of record and holder of the Mortgage Loan. The

Mortgage Loan had not been assigned or pledged, and the Correspondent has good and marketable

title thereto, and had full right to transfer and sell the Mortgage Loan to CHL free and clear of any

encumbrance, equity, participation interests, lien, pledge, charge, claim, or security interest, and

had full right and authority subject to no interest or participation of, or agreement with, any other

party, to sell and assign the Mortgage Loan pursuant to the Agreement, and on the Purchase Date,

CHL received good and marketable title to the Mortgage Loan free of any encumbrance, equity,

participation interest, lien, pledge, charge, claim or security interest. There is no litigation pending

or, to the best of the Correspondent’s knowledge, threatened, affecting or relating to the

Correspondent which may in any way affect, by attachment of otherwise, the title or interest of

CHL in and to the Mortgage Loan, the Mortgage Property or the related Mortgage Note or

Mortgage.

602.10 Occupancy of the Mortgage Property.

Except where CHL has specifically agreed to the contrary, the Mortgage Property is

lawfully occupied by the Mortgagor under Applicable Law. All inspections, licenses, and

certificates required to be made or issued with respect to all occupied portions of the Mortgage

Property and, with respect to the use and occupancy of the same, including, but not limited to,

certificates of occupancy and fire underwriting certificates, have been made or obtained from the

appropriate authorities. With respect to each Mortgage Loan, the originator gave due consideration

to factors such as: (i) other real estate owned by the Mortgagor, (ii) commuting distance to work,

(iii) appraiser comments and notes, and (iv) any discrepancy between the Mortgagor’s mailing

address and the address of the Mortgage Property to determine whether the intended occupancy

status of the property as represented by the Mortgagor was true and correct.

602.11 No Satisfaction of Mortgage.

The mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in

part, and the Mortgage Property has not been released from the lien of the Mortgage, in whole or

in part, nor has any instrument been executed that would effectuate any such release, cancellation,

subordination, or rescission. The Correspondent has not waived the performance by the Mortgagor

of any action, if the Mortgagor’s failure to perform such action would cause the Mortgage Loan to

be in default resulting from any action or inaction by the Mortgagor.

602.12 No Servicing Restrictions.

Correspondent has not entered into a servicing agreement with respect to the Mortgage

Loan, or if any such servicing agreement has been entered into, it has been terminated or is

terminable at will, and there are no restrictions, contractual, statutory, or otherwise, which would

impair the ability of CHL or CHL’s designees to service the Mortgage Loan.

602.13 No Refinance Agreements.

Neither the Correspondent nor any of the Correspondent’s affiliates have entered into an

agreement, formal or informal, with the Mortgagor during the initial origination process of the

Mortgage Loan to refinance the Mortgage Loan at some future date as an inducement to the

Mortgagor to enter into the original mortgage transaction.


602.14 No Adverse Selection.

The Correspondent used no adverse selection procedures in selecting the Mortgage Loan

from among the outstanding first lien residential Mortgage Loan owned by it which were available

for sale to CHL.

602.15 No Right of Rescission, Defense, Offset or Counter Claim.

No Mortgage Loan is subject to any right of rescission, set off, counter-claim or defense,

including the defense of usury, nor will the operation of any of the terms of the Mortgage Loan,

the exercise of any right thereunder, render the Mortgage Loan unenforceable in whole or in part,

or subject to any right of rescission, set-off, counter-claim, or defense, including the defense of

usury. Furthermore, no such right of rescission, set-off, counter claim or defense has been asserted

with respect thereto. As applicable to refinance Mortgage Loans, the Mortgagor’s right of

rescission has not been waived. Correspondent is solely responsible for determining whether a

right of rescission is applicable and whether notice thereof is required, and if so, when and to

whom notice must be given.

602.16 No Graduated Payment or Shared Appreciation Feature.

The Mortgage Loan is not a graduated payment Mortgage Loan, and the Mortgage Loan

does not have a shared appreciation or other contingent interest feature.

602.17 No Construction Loan.

No Mortgage Loan was made in connection with the construction or rehabilitation of a

mortgaged property.

602.18 No Liabilities.

There are no liabilities on the part of the Correspondent with respect to the Mortgage Loan

arising from facts or circumstances prior to the date on which CHL purchased the Mortgage Loan

for which CHL would be responsible or exposed to successor liability as a result of its purchase of

the Mortgage Loan.

602.19 No Predatory Lending.

The Mortgage Loan does not meet the definition of a “high cost mortgage” set forth in

Section 1602(aa) of the Truth-in-Lending Act. The Mortgage Loan was originated in full

compliance with all state, city, or local “high cost” home mortgage or “predatory” lending laws,

ordinances, rules or regulations, and/or would not be considered a “high cost” or “predatory”

Mortgage Loan under any federal, state, local, or municipal laws, ordinances, rules, or regulations.

No predatory lending practices have been used in connection with the origination of any Mortgage

Loan. For purposes of this paragraph, “predatory lending” includes, but is not limited to, any

deceptive and/or abusive lending practice that is not in the best interest of the Mortgagor(s),

including, but not limited to, any one or more of the following practices: (i) lending solely on the

basis of the equity in the Mortgage Property without regard to the proper underwriting of the

Mortgagor’s payment ability, and/or in a manner that unreasonably jeopardizes the equity in the

Mortgage Property; (ii) frequent or serial refinancing of Mortgage Loans with fees that may erode

the equity in the Mortgage Property to generate fee income with no benefit to a Mortgagor; (iii)

use of pricing terms that far exceed the true risk and cost of making the Mortgage Loan; (iv)

including in the Mortgage Loan unearned or otherwise unwarranted fees for services; (v) making

it difficult for Mortgagors to reduce their indebtedness by adding unreasonably restrictive

Mortgage Loan terms and structures resulting in difficulty to reduce indebtedness; and/or (vi)

targeting customers who are less financially sophisticated or otherwise vulnerable to abusive

practices.


602.20 Compliance with Consumer Protection Laws.

Correspondent policies comply with all rules issued by the Consumer Financial Protection

Bureau (CFPB) under the Dodd-Frank Act and other applicable consumer protection laws and

regulations, as amended from time to time, including, but not limited to: (i) Ability to Repay and

Qualified Mortgage (ATR-QM); (ii) Equal Credit Opportunity Act (ECOA); and (iii) Truth-in-

Lending (TILA), including HOEPA, and statutes, rules, and regulations applicable to loan

originator compensation and higher-priced mortgage loans (HPML). Each loan sold to CHL by

the Correspondent strictly complies with CFPB rulings and guidance in accordance with the Dodd-

Frank Act and other Applicable Law.

602.21 Compliance with Regulation Z Lender Compensation Restrictions.

Specifically, without limitation of the applicability of Section 602.20 Compliance with

Consumer Protection Laws above, neither Correspondent nor any other party has paid

compensation to any loan originator that is based on a term or condition of the Mortgage Loan,

and no consumer has been steered to a product or program in order to enhance the loan

compensation for any loan originator.

602.02 Good Title.

Immediately prior to the transfer and assignment of the Mortgage Loan to the Buyer, the

Mortgage Loan had not been assigned or pledged, and Correspondent has good, indefeasible, and

marketable title thereto. Correspondent is the sole owner and holder of the Mortgage Loan, and

the indebtedness evidenced by each Mortgage Note, free and clear of any and all liens, of any

nature, and there has been no other sale, transfer, or assignment of security interest granted by the

Correspondent to any other party, nor are there any other restrictions limiting the transfer of the

Mortgage Loan, and Correspondent has full right, title and authority, subject to no interest or

participation of, agreement with, or approval of, any other person, to sell, assign and transfer the

Mortgage Loan pursuant to the Agreement and following the sale of each Mortgage Loan, the

Correspondent will own such Mortgage Loan free and clear of any encumbrance, equity,

participation interest, lien, pledge, charge, claim, or security interest. Correspondent intends to

relinquish all rights to possess, control, and monitor each Mortgage Loan.

602.23 Interest Calculation.

Interest on each Mortgage Loan is calculated in accordance with the related Mortgage Note

and Applicable Law, including, but not limited to, the applicable Agency and FHA Regulations.

None of the Mortgage Loans provides for simple interest calculation.

602.24 Governmental Requirements.

Each Mortgage Loan originated by Correspondent pursuant to Agency Guidelines

conforms with all applicable underwriting, lending, selling, and servicing requirements and, if

applicable, with all Ginnie Mae requirements for the inclusion of the Mortgage Loan in a Ginnie

Mae mortgage-backed security pool, or with all Fannie Mae or Freddie Mac, as applicable, for the

inclusion of the Mortgage Loan in a Fannie Mae or Freddie Mac mortgage-backed security. The

Correspondent has complied with all documentation requirements of the Agency, Investor and/or

document custodian within the time limitations described in Agency Guidelines or Investor

Guidelines, as applicable. If the Mortgage Loan is an FHA Mortgage Loan, the Mortgage Loan is

eligible for FHA insurance or fully insured by the FHA. If the Mortgage Loan is a VA Mortgage

Loan, the Mortgage Loan is eligible for a VA guaranty or is fully guaranteed by the VA. If the

Mortgage Loan is a USDA Mortgage Loan, the Mortgage Loan is eligible for a USDA loan note

guarantee or is fully guaranteed by the USDA. With regard to FHA Mortgage Loans, the Mortgage

Loan was not originated by the Correspondent during the “Post-Closing Test Case Phase” of

HUD’s Direct Endorsement program. With regard to VA Mortgage Loans, the Mortgage Loan


was not originated by the Correspondent during the Correspondent’s “One Year Probationary

Period” of VA’s Automatic Authority Program.

602.25 Conventional Mortgage Loan Requirements.

Each conventional Mortgage Loan conforms with all applicable requirements of the

Correspondent, Government Agency, or applicable Investor, including, but not limited to, all

requirements for the inclusion of such Conventional Mortgage Loans in any pool of Mortgage

Loans or private security, as designated by the CHL, Freddie Mac and Fannie Mae, and each

Conventional Mortgage Loan conforms with all pooling requirements of the applicable Agency or

Investor. If a Commitment requires the Mortgage Loan to be insured by a policy of private

mortgage insurance, the Mortgage Loan is fully eligible and qualified to be insured by such policy

of private mortgage insurance, such policy is in full force and effect, and no event or condition

exists which could give rise to, or result in, a revocation of or defense to the policy.

602.26 Regarding the Mortgagor.

The Mortgagor is one or more natural persons and/or trustees for an Illinois land trust or a

trustee under a “living trust,” and such “living trust” is in compliance with Fannie Mae or other

applicable guidelines for such trusts. The Mortgagor is not, and is not a relative of, or the relative

of a spouse of, an owner, officer, director, or employee of Correspondent or an affiliate of

Correspondent.

602.27 Qualified Mortgage.

Before the consummation of each purchased Mortgage Loan, Correspondent made a (i)

reasonable and good faith determination that the Mortgagor has a reasonable ability to repay the

purchased Mortgage Loan according to its terms, and at a minimum, Correspondent underwrote

such purchased Mortgage Loan in accordance with the eight underwriting factors set forth in 12

CFR 1026.43(c); and (ii) each purchased mortgage Loan is a “Qualified Mortgage” as defined in

12 CFR 1026.43(e), and in particular: (a) each purchased Mortgage Loan provides for regular,

substantially equal periodic payments (allowing for payment changes on adjustable rate mortgages

or Mortgage Loans with step-rate features) and does not result in negative amortization, allow the

consumer to defer repayment of principal, or result in balloon payments; (b) the Mortgage Loan

term does not exceed thirty (30) years; and (c) for purchased Mortgage Loans with note amounts

of $100,000 or greater, the total points and fees do not exceed 3% of the total Mortgage Loan

amount.

602.28 Mechanics Liens or Related Litigation.

As of the date of the certificate of completion, there were no mechanics’ or similar liens or

claims that have been filed for work, labor or material (and no rights were outstanding that under

the law could give rise to such liens) affecting the related Mortgage Property which are or may be

liens prior to, or equal or coordinate with, the lien of the related Mortgage. No litigation,

proceeding, claim, dispute, demand, or investigation was, is, or shall become, pending or

threatened relating to the Escrow Agreement, the work to be performed in accordance therewith,

the escrow funds, or any other matter related thereto.

603.00 Mortgage Loan Information and Documentation

603.01 Description of Mortgage Loans.

The information contained in all Commitments, advices, schedules, computer tapes, or

other documents or media prepared by the Correspondent or on behalf of the Correspondent or

otherwise furnished to CHL relating to the Mortgage Loan is complete, true, and correct.


603.02 Documents.

The Mortgage Note and the Mortgage are duly executed on forms promulgated by, or

otherwise acceptable to, Fannie Mae and Freddie Mac, FHA, VA or other government sponsored

enterprise, or Agency, insurer, or are instruments approved by CHL or Investor or otherwise given

prior approval by CHL, and the Correspondent has not made any representation to the Mortgagor

which is inconsistent with the mortgage instruments used. The Mortgage contains customary and

enforceable provisions such as to render the rights and remedies of the holder the Mortgage Loan

adequate for the realization against the Mortgage Property of the benefits of the security provided

thereby, including (i) in the case of a mortgage designated as a deed of trust, by trustee’s sale, and

(ii) otherwise, by judicial foreclosure. If the Mortgage is a deed of trust, a trustee, duly qualified

under Applicable Law to serve as such has been properly designated or appointed and currently so

serves and is named in the mortgage, and no fees or expenses are or will become payable by

Correspondent or CHL to the trustee under the deed of trust, except in connection with a trustee’s

sale after default under the Mortgage. Upon default by the Mortgagor and foreclosure on, or

trustee’s sale of, the Mortgage Property pursuant to the proper procedures, the holder of the

Mortgage Loan has the right to foreclose the Mortgage subject to applicable federal and state laws

and judicial precedent with respect to bankruptcy and right of redemption. Payments under the

Mortgage Note are due on the first day of each month with interest payable in arrears. Each original

Mortgage has been recorded or submitted for recordation in the jurisdiction in which the subject

property is located, and all subsequent assignments of the original Mortgage have been delivered

in the appropriate form for recording in all jurisdictions in which such recordation is necessary to

perfect the ownership of the mortgage by CHL.

603.03 Due on Sale.

The Mortgage contains an enforceable provision, to the extent not prohibited by Applicable

Law as of the date of such Mortgage, for the acceleration of the payment of the unpaid principal

balance of the Mortgage Loan in the event that the Mortgage Property is sold or transferred without

the prior written consent of the mortgagee thereunder. By the terms of the Mortgage Loan,

however, the provision for acceleration may not be exercised at the time of a transfer if prohibited

for federal law.

603.04 Appraisals.

The value of the Mortgage Property is a least equal to the appraised value stated in the

appraisal. The value of each Mortgage Property is supported by a written appraisal report prepared

by an appraiser licensed, certified, or recognized by the applicable government body or Agency in

which the subject property is located and in accordance with the requirements of Title XI of the

Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”). The appraisal

was prepared, in form and in substance, in conformity with (i) customary Fannie Mae or Freddie

Mac guidelines applicable at the time of origination for Mortgage Loan of the same or similar type;

and (ii) Uniform Standards of Professional Appraisal Practice (“USPAP”) standards and satisfies

all requirements under Applicable Law. The appraisal was completed and signed prior to final

approval of the mortgage. The appraisal obtained in connection with the origination of the

Mortgage Loan, as well as the appraiser who performed it, meet all of the Applicable Requirements

of the Underwriting chapter of this Loan Manual, and all AIR guidelines. The value of the

Mortgage Property is a least equal to the appraised value stated in the appraisal. The person

performing the appraisal or other valuation report had no ownership interest, direct or indirect, in

the Mortgage Property or in any Mortgage Loan secured thereby, and such person’s compensation

or referral of further business from the loan originator was not affected by, the approval or

disapproval of the Mortgage Loan.


603.05 Original Terms Unmodified.

Neither the terms of the Mortgage, the Mortgage Note, nor any terms thereof, have been

impaired, subordinated, canceled, waived, released, altered or modified in any respect, except by

a written instrument which has been recorded, if necessary, to protect the interests of CHL and

which has been delivered to, and previously approved by, CHL or its designee. The substance of

any such waiver, alteration or modification has been approved by any applicable issuer of a title

insurance policy or a private mortgage insurance policy covering the Mortgage Loan, to the extent

required by the policy, and its terms are reflected on the Mortgage Loan schedule delivered to

CHL in connection with the Mortgage Loan. No Mortgagor has been released, in whole or in part,

except in connection with an assumption agreement approved by any applicable issuer of a title

insurance policy covering the Mortgage Loan, to the extent required by the policy, and which

assumption agreement is part of the Mortgage Loan file delivered to CHL or its designee and the

terms of which are reflected in the Mortgage Loan schedule delivered to CHL in connection with

the Mortgage Loan.

603.06 Validity of Mortgage Documents.

The Mortgage Note and the Mortgage are genuine, and each is the legal, valid and binding

obligation of the maker thereof enforceable in accordance with its terms, except as such

enforcement may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium

or other similar laws relating to or affecting the rights of creditors generally, and by general equity

principles (regardless of whether such enforcement is considered in a proceeding in equity or at

law). All parties to the Mortgage Note and the Mortgage and any other related agreement had

legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note and

the Mortgage and any other related agreement have been duly and properly executed by such

parties. The documents, instruments and agreements submitted for Mortgage Loan underwriting

were not falsified and contain no untrue statement of material fact or omit to state a material fact

required to be stated therein or necessary to make the information and statements therein not

misleading. The Correspondent has reviewed all of the documents constituting the Mortgage Loan

file and has made such inquiries as it deems necessary to make and confirm the accuracy of the

representations and warranties set forth herein. No misrepresentation, error, or fraud has been

committed in connection with the origination of the Mortgage Loan.

603.07 Credit Information.

As to each consumer report (as defined in the Fair Credit Reporting Act, Public Law 91-

508) or other credit information furnished by the Correspondent to the CHL in connection with a

Mortgage Loan, Correspondent has full right and authority, and is not precluded by law or contract

from furnishing such information to CHL, and, to the best of Correspondent’s knowledge, CHL is

not precluded from furnishing the same to any subsequent or prospective purchaser of such

Mortgage Loan.

603.08 Fraud.

No fraudulent or negligent material misrepresentation has been made by or on the part of

(1) the loan originator, (2) the Mortgagor, (3) any appraiser, escrow agent, closing attorney, title

company, or other settlement service provider involved in the origination or closing of the

Mortgage Loan. The Mortgage Note, the Mortgage and any other agreement executed and

delivered by a Mortgagor in connection with a Mortgage Loan are genuine, and each is the legal,

valid and binding obligation of the maker thereof, enforceable in accordance with its terms. All

parties to the Mortgage Note and the Mortgage and any other related agreement had legal capacity

to enter into the Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage

and any other related agreement, and the Mortgage Note and the Mortgage and any other such

related agreement have been duly and properly executed by such persons. The documents,


instruments, and agreements submitted for underwriting of the Mortgage Loan were not falsified

and contain no untrue statement of material fact, nor do they omit to state a material fact required

to be stated therein or necessary to make the information and statements therein not misleading.

No fraud, error, omission, misrepresentation, negligence or similar occurrence was committed in

connection with the origination of the Mortgage Loan.

603.09 Additional Representations and Warranties.

All other representations and warranties made by the Correspondent with respect to the

Mortgage Loan are true and correct.

604.00 Compliance

604.01 Compliance with Applicable Requirements.

The Mortgage Loan complies with all Applicable Requirements.

604.02 Servicing Performance.

Prior to the Purchase Date, the Mortgage Loan has been properly serviced in accordance

with all Applicable Requirements, the terms of the Mortgage, Mortgage Note and related Mortgage

Loan documents. With respect to escrow deposits and escrow payments, all such payments are in

the possession of the Correspondent and there exist no deficiencies in connection therewith for

which customary arrangements for repayment thereof have not been made. All escrow payments

have been established in an amount sufficient to pay for every item which remains unpaid and

which has been assessed but is not yet due and payable. No escrow deposits or escrow payments

or other charges or payments due the Correspondent have been capitalized under the Mortgage or

the Mortgage Note. All mortgage payment and mortgage interest rate adjustments and notices

thereof have been made in strict compliance with all Applicable Requirements and the terms of

the related Mortgage Note and any applicable riders or modifications to the Mortgage Note. Any

interest required to be paid pursuant to all Applicable Requirements has been properly paid and

credited. All taxes, governmental assessments, insurance premiums, water, sewer and municipal

charges, leasehold payments, ground rents relating to the Mortgage Loan have been paid to the

extent such items are required to be paid pursuant to prudent mortgage banking standards and as

herein provided.

604.03 Acceptable Investment.

The Correspondent has no knowledge of any circumstances or conditions with respect to

the Mortgage Note, the Mortgage, the Mortgage Property, the Mortgagor or the Mortgagor’s credit

standing that could be expected to cause private institutional investors to regard the Mortgage Loan

as an unacceptable investment, cause the Mortgage Loan to become delinquent, or adversely affect

the value or marketability of the Mortgage Loan.

604.04 Agency Requirements.

If the Mortgage Loan was originated by Correspondent and purchased by CHL for sale to,

or insurance or guaranty by, an Agency, it complies with all applicable: (i) HUD or VA Guidelines,

including those relating to underwriting, and is accordingly insured or guaranteed by either FHA

or VA; (ii) GMNA Guidelines relating to Mortgage Loans included in the Ginnie Mae mortgage-

backed securities pools and all Ginnie Mae document custodian requirements (or shall be in

compliance, on or before prescribed dates); (iii) USDA/RD Guidelines, including those relating to

underwriting, and is insured or guaranteed by USDA/RD; (iv) Fannie Mae or Freddie Mac

Guidelines relating to Mortgage Loans sold directly to Fannie Mae or Freddie Mac or included in

mortgage-backed securities pools, and all Fannie Mae or Freddie Mac document custodian

requirements (or shall be in compliance, on or before prescribed dates).


604.05 Non-Agency Jumbo Mortgage Loan Requirements.

If the Mortgage Loan was purchased under CHL’s Non-Agency Eligible Jumbo Mortgage

Loan program, the Mortgage Loan complies with all applicable Investor guidelines, including

those related to underwriting.

604.06 Doing Business.

The Correspondent or other originator of the Mortgage Loan, if any, is (or during the period

when it held and disposed of its interest in the Mortgage Loan was) in compliance with any and

all Applicable Requirements including the laws of the state wherein the Mortgaged Property is

located. All other parties which having held any interest in the Mortgage Loan, whether as

mortgagee, assignee, pledgee, or otherwise are, or during the period in which they held and

disposed of such interest, were in compliance with any and all Applicable Requirements including

the laws of the state wherein the Mortgaged Property is located or in which organized

Correspondent is (i) organized, (ii) qualified to do business in any such state, (iii) a federal savings

and loan association or national bank having principal offices in such state, or (iv) not doing

business in such state.

604.07 Origination; Loan Terms by Approved Mortgagee.

If the Mortgage Loan is an FHA Mortgage Loan, the Mortgage Loan was originated by a

mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections

203 and 211 of the National Housing Act or a savings and loan association, a savings bank, a

commercial bank or similar banking institution which is supervised and examined by a federal or

state authority.

604.08 Underwriting.

All Mortgage Loans have been underwritten in accordance applicable Agency Guidelines,

Investor Guidelines, and/or CHL Overlays. All underwriting conditions relating to the Mortgage

Loan were fully satisfied, the satisfaction of which is properly documented in accordance with

standard industry practices, and such documentation has been submitted to CHL. All Mortgage

Loans purchased by CHL from Correspondent are salable in the secondary market without penalty

or discount and comply with applicable Agency Guidelines, Investor Guidelines, and/or CHL

Overlays.

604.09 Compliance with Applicable Loan Manual Provisions.

The Mortgage Loan and all documents related thereto, comply, in all material respects,

with all applicable terms, conditions and requirements set forth in this Loan Manual.

604.10 Prepayment Fees.

In the event that the Mortgage Note requires the Mortgagor to pay a fee if the Mortgage

Loan is prepaid in full or in part within the time periods specified in the mortgage note, the

provision in the Mortgage Note requiring the payment of such fee (the “Prepayment Provision”)

complies with all Applicable Requirements in connection with the Prepayment Provision have

been properly provided to the Mortgagor, and the enforcement of the Prepayment Provision in

accordance with the terms set forth in the Mortgage Note will be in compliance with all Applicable

Requirements.

604.11 No Discrimination.

The Correspondent makes credit accessible to all qualified applicants in accordance with

all Applicable Requirements and regulations. The Correspondent has not discriminated, and will

not discriminate, against credit applicants on the basis of any prohibited characteristic, including

race, color, religion, national origin, sex, marital or familial status, age (provided that the applicant


has the capacity to enter into a binding contract), handicap, sexual orientation or because all or

part of the applicant’s income is derived from a public assistance program or because of the

applicant’s good faith exercise of rights under the Federal Consumer Protection Act. Furthermore,

the Correspondent has not, and will not, discourage the completion of any credit application based

on any of the foregoing prohibited basis. In addition, the Correspondent has complied with all

anti-redlining provisions and ECOA laws applicable under state and federal statue and regulation.

604.12 Compliance with Consumer Protection Laws.

Correspondent’s policies and procedures comply with all rules issued by the Consumer

Finance Protection Bureau (“CFPB”) under the Dodd-Frank Act and other applicable consumer

protection laws and regulations as amended from time to time, including, but not limited to, (i)

Ability to Repay and Qualified Mortgage (“ATR-QM”); (ii) Equal Credit Opportunity Act

(“ECOA”); and (iii) Truth-in-Lending (“TILA”), including HOEPA, Loan Originator

Compensation and Higher-Priced Mortgage Loans (“HPML”). Each loan sold to CHL by the

Correspondent, must strictly comply with CFPB rules and guidance in accordance with the Dodd-

Frank Act and other Applicable Requirements.

604.13 Compliance with Regulation Z Lender Compensation Restrictions.

Specifically, without limitation of the applicability of Section 604.12 Compliance with

Consumer Protection Laws above, neither Correspondent nor any other party has paid

compensation to any loan originator in an amount that is based on a term or condition of the

Mortgage Loan, and no consumer has been steered to a product or program on the basis of

increased loan compensation for any loan originator.

604.14 Compliance with Anti-Money Laundering Laws.

Correspondent has complied with all applicable anti-money laundering laws and

regulations, including without limitation, the USA Patriot Act of 2001 (collectively, the “Anti-

Money Laundering Laws”) with respect to the Mortgage Loans. Correspondent has established an

anti-money laundering compliance program as required by the Anti-Money Laundering Laws, has

conducted the requisite due diligence in connection with the origination of each Mortgage Loan

for purposes of the Anti-Money Laundering Laws as applicable as of the origination date,

including with respect to determination of the legitimacy of the applicable Mortgagor and the

origin of the assets used by the said Mortgagor to purchase the property in question, and maintains,

and will maintain, sufficient information to identify the applicable Mortgagor for purposes of the

Anti-Money Laundering Laws.

605.00 Insurance

605.01 Private Mortgage Insurance.

In the event the Mortgage Loan has a loan-to-value ratio greater than 80%, the excess of

the principal balance of the Mortgage Loan over 75% of the appraised value is, and will be, insured

as to payment defaults by a private mortgage insurance policy. Correspondent is, and has been, in

compliance with all provisions of such private mortgage insurance policy; such policy is in full

force and effect, and all premiums due thereunder have been paid. Any Mortgage Loan subject to

a private mortgage insurance policy obligates the Mortgagor thereunder to maintain the private

mortgage insurance policy and to pay all premiums and charges in connection therewith. There

has been no act or omission which would, or may, invalidate or impair coverage of any such private

mortgage insurance policy. The private mortgage insurance policy is eligible for reinsurance by

CHL. There are no defenses, counterclaims, or rights of set-off against CHL affecting the validity

or enforceability of the private mortgage insurance policy.


605.02 Government Mortgage Loans.

If the Mortgage Loan was sold by the Correspondent to CHL pursuant to a Commitment

which provided that such Mortgage Loan would be guaranteed by the VA or USDA, or insured by

the FHA, the Mortgage Loan is fully guaranteed or insured, as applicable, on or before the

Purchase Date and all insurance premiums or guarantee fees due on or before the Purchase Date

are, or shall be, paid in full. In the event that an FHA loan was underwritten by CHL through an

authorized agent status, and/or a VA loan was underwritten by CHL through a sponsorship status,

CHL will be responsible for processing the insuring (obtaining MIC/LGC) of the Mortgage Loan.

Correspondent shall be fully liable for any indemnification, repurchase, or non-purchase, as

applicable, of such Mortgage Loan if the Mortgage Loan is uninsurable or if the VA or USDA

guaranty is unavailable.

605.03 Title Insurance.

The Mortgage Loan is covered by an ALTA form of lender’s title insurance policy or other

generally acceptable form of policy of insurance acceptable to Fannie Mae or Freddie Mac, issued

by, and the binding obligation of, a title insurer also acceptable to Fannie Mae or Freddie Mac and

qualified to do business in the jurisdiction where the Mortgage Property is located, insuring the

Correspondent, its successors and assigns, as to the first priority lien of the Mortgage in the original

principal amount of the Mortgage Loan (or the extent that a Mortgage Note provides for negative

amortization, the sum of such original principal amount and the maximum amount of negative

amortization in accordance with the Mortgage Note), and against any loss by reason of the

invalidity or unenforceability of the lien resulting from the provisions for the Mortgage providing

for adjustment in the mortgage interest rate and monthly payment. Where required by state law or

regulation, the Mortgagor has been given the opportunity to choose the carrier of the required title

insurance unless the premium for such insurance was not paid by the Mortgagor. Additionally,

such lender’s title insurance policy affirmatively insures ingress and egress, and against

encroachments by or upon the Mortgage Property or any interest therein. The Correspondent is the

sole insured of such lender’s title insurance policy, and such lender’s title insurance policy is in

full effect upon the consummation of the transactions contemplated by the Agreement and will

inure to the benefit of CHL without any further act. No claims have been made under such lender’s

title insurance policy, and no prior holder of the Mortgage, including the Correspondent, has done,

by act or omission, anything which would impair the coverage of such lender’s title insurance

policy.

605.04 Hazard and Flood Insurance.

The improvements upon the Mortgage Property are insured against loss by fire and other

hazards as required by Sections 402.02 Hazard Insurance and 402.02 Flood Insurance of this Loan

Manual, including flood insurance, if required under the National Flood Insurance Act of 1968, as

amended. The Mortgage requires the Mortgagor to maintain such casualty insurance at the

Mortgagor’s expense, and upon the Mortgagor’s failure to do so, authorizes the holder of the

mortgage to obtain and maintain such insurance at the Mortgagor’s expense and to seek

reimbursement therefore from the Mortgagor. The hazard insurance policy is the valid and binding

obligation of the insurer, and it is in full force and effect and will inure to the benefit of CHL upon

its purchase of the Mortgage Loan. All flood insurance and hazard insurance premiums have been

paid when due. Where required by state law or regulation, the Mortgagor has been given the

opportunity to choose the carrier of the hazard insurance unless either a “master” or “blanket”

hazard insurance policy covering the condominium project or planned unit development in which

the Mortgage Property is located was obtained. Additionally, if the Mortgage Property is an

individual unit in a condominium project or an individual unit in a planned unit development, then

general liability, fidelity and all other insurance required pursuant to the declarations or covenants

in Sections 402.02 Hazard Insurance and 402.02 Flood Insurance of this Loan Manual of the


owner’s association or regime is maintained in connection with such with the condominium project

or planned unit development, and each required insurance policy is in a form and amount, and is

issued by an insurer, that is acceptable to CHL, pursuant to Sections 402.02 Hazard Insurance and

402.02 Flood Insurance of this Loan Manual. Correspondent has obtained a life-of-loan

transferable flood certification contract for each Mortgage Loan with an approved flood policy

insurer, and each such contract is assignable without cost to CHL, its successors and assigns. The

Correspondent has not engaged in, and has no knowledge of, the Mortgagor’s or of any prior

Servicer of the Mortgage Loan having engaged in, any act or omission which would impair the

coverage of any such policy, the benefits of the endorsement provided therein or the validity and

binding effect of either.

605.05 Coverage of Insurance.

No action, inaction, or event has occurred, and no state of facts exists or has existed that

has resulted, or will result, in the exclusion from, denial of, or defense to coverage under any

applicable insurance policy or guarantee including, but not limited to, a title insurance policy, a

hazard insurance policy, a private mortgage insurance policy, FHA insurance coverage, a VA

guarantee, a USDA loan note guarantee, or a mortgage pool insurance policy obtained in

connection with the Mortgage Loan. In connection with the placement of any such insurance or

guarantee, no commission, fee, other unlawful compensation of value of any kind has been or will

be received by the Correspondent or any designee of the Correspondent or any corporation in

which the Correspondent or any officer, director, or employee of the Correspondent had a financial

interest at the time of placement of such insurance, and to the best of Correspondent’s knowledge,

no such commission, fee, or other unlawful compensation or value of any kind has been received

by any attorney, firm, or other person or entity.

606.00 Mortgage Property

606.01 No Additional Collateral.

The Mortgage Note is not, and has not, been secured by any collateral except the lien of

the corresponding Mortgage.

606.02 Location of Improvements.

All improvements which were considered in determining the appraised value of the

Mortgage Property are situated lay wholly within the boundaries and building restriction lines of

the Mortgage Property. No improvements on adjoining properties encroach upon the Mortgage

Property, or the policy of title insurance affirmatively insures against loss or damage by reason of

any violation, variation, encroachment or adverse circumstance which is either disclosed or would

have been disclosed by an accurate survey. No improvement located on or being part of the

Mortgage Property is in violation of any applicable zoning law or regulation.

606.03 Environmental Matters.

No action or proceeding is pending, nor to the best of Correspondent’s knowledge,

threatened, which directly involves the Mortgage Property and in which compliance with any

environmental law, rule, or regulation. is an issue. The Mortgage Property is free from any and all

toxic or hazardous substances, specifically including, but not limited to asbestos, and there exists

no violation of any local, state or federal environmental law, rule, or regulation. As of the date on

which CHL purchased the Mortgage Loan, the Mortgage Property was not within a one-mile radius

of any site listed in the National Priorities List as defined under the Comprehensive Environmental

Response Compensation and Liability Act of 1980, as amended, or on any similar state list of

hazardous wastes that are known to contain any hazardous substances or hazardous wastes.


606.04 No Encroachments.

No improvements on adjoining properties encroach upon the Mortgage Property in any

respect so as to affect the value or marketability of the Mortgage Loan or the Mortgage Property.

606.05 Condominiums/Planned Unit Developments.

If the Mortgage Property is a condominium unit or in a planned unit development, such

condominium or planned unit development project meets Agency eligibility requirements for sale

to the Agency or is located in a condominium or planned unit development project which received

Agency project approval and the representations and warranties required by Agency with respect

to such condominium or planned unit developments are deemed to have been made by the

Correspondent and remain true and correct in all respects. The mortgage file delivered to CHL in

connection with the Mortgage Loan contains all required condominium and planned unit

development riders to the Mortgage and Mortgage Note.

606.06 Disaster Area Policy.

Any Mortgage Property in a disaster area as declared by the Federal Emergency

Management Agency (“FEMA”) or other Governmental Agency of competent jurisdiction has

passed inspection by a licensed inspector or contractor to determine safety, soundness, and

habitability.

606.07 No Condemnation and Mortgage Property Undamaged.

There is no proceeding pending or threatened for the total or partial condemnation of the

Mortgage Property. The Mortgage Property is undamaged by waste, fire, earthquake or earth

movement, windstorm, flood, tornado or other casualty so as to affect adversely the value of the

Mortgage Property as security for the Mortgage Loan or the use for which the premises were

intended.

606.08 Detrimental Conditions.

As of the origination date and the Purchase Date of the Mortgage Loan, the Correspondent

did not know, nor did the Correspondent have any reason to know, that the Mortgage Property and

the improvements constructed thereon were subject to any detrimental conditions which could

reasonably be expected to adversely affect the market value of the Mortgage Property or the

drainage on or from the Mortgage Property.

606.09 Location and Type of Mortgage Property.

The Mortgage Property consists of a single parcel of real property with a detached single-

family residence erected thereon, or a two-to-four family dwelling, or an individual condominium

unit in a condominium project, or an individual unit in a planned unit development. No portion of

the Mortgage Property is used for commercial purposes; provided, however, that any

condominium unit, co-op project or planned unit development conforms to CHL, Investor and

insurer requirements with respect to such dwellings, and that no residence or dwelling is a mobile

home. If the Mortgage Property is a condominium unit, or a unit in a planned unit development

(other than a de minimis planned unit development) or a co-op unit, such condominium or planned

unit development project is (i) acceptable to Fannie Mae or Freddie Mac or (ii) located in a

condominium or planned unit development project which has received project approval from

Fannie Mae or Freddie Mac. The representations and warranties required by Fannie Mae with

respect to such condominium or planned unit development have been satisfied and remain true and

correct. No portion of the Mortgage Property is used for commercial purposes provided, however,

that mortgaged properties which contain a home office shall not be considered as being used for

commercial purposes as long as the Mortgage Property has not been altered for commercial


purposes and is not storing any chemicals or raw materials other than those commonly used for

homeowner repair, maintenance, and/or household purposes.

606.10 Repairs and Improvements.

All repairs or improvements, which if not made would result in the loss of any insurance

coverage, including FHA insurance, on the related Mortgage Property have been made to such

Mortgage Property, or set-aside amounts for such repairs or improvements have been included in

the related Mortgage and Mortgage Note, all in compliance with the Requirements of Law,

including, but not limited to, the applicable requirements of FHA Regulations. Except as otherwise

disclosed in writing to CHL, any repairs for which an advance has been made were completed and

passed an inspection in accordance with the FHA Regulations.

606.11 Certificate of Occupancy.

All inspections, licenses, and certificates required to be made or issued with respect to all

occupied portions of the Mortgage Property, and with respect to the use and occupancy of same,

including without limitation, certificates of occupancy and fire underwriting certificates, have been

made or obtained from the appropriate authorities.

606.12 Leasehold Loans.

If the Mortgage Loan is secured by a leasehold estate, the Correspondent represents and

warrants that: (i) the property subject to the lease is located in an area in which leasehold loans

have received market acceptance; (ii) the Mortgage and the title insurance policy cover the

improvements to the property and the Mortgagor’s leasehold interest in the land; (iii) the term of

the leasehold estate exceeds the maturity of the Mortgage Note by at least ten (10) years unless fee

simple title vests in the Mortgagor or an owner’s association on an earlier date; (iv) the leasehold

estate, and any purchase option with respect to the land, is assignable or transferable; (v) the lease

does not contain any default provisions that could give rise to termination of the lease except for

non-payment of the lease rents; (vi) the lease is valid, and in full force and effect and there is no

default under any provision of the lease; and (vii) the lease provides that: (a) the Mortgagor will

pay taxes, insurance and homeowner’s association dues related to the land, in addition to those the

Mortgagor is paying with respect to the improvements; (b) the Mortgagor retains voting rights in

any homeowner’s association; (c) if the lease contains an option for the Mortgagor to purchase the

fee interest in the land, the purchase is at the Mortgagor’s sole option, there is no time limit within

which the option must be exercised, and the purchase price is the lower of the (x) the current

appraised value of the land or (y) the product of the percentage of the total original appraised value

that represented the land alone and the appraised value of the land and improvements; (d) the

leasehold can be transferred, mortgaged and sublet an unlimited number of times either without

restriction or on payment of a reasonable fee and delivery of reasonable documentation to the

lessor; and (e) the lessor will provide written the mortgagee with at least thirty (30) days’ notice

of the Mortgagor’s default under the lease and allow the Mortgagee not less than thirty (30) days

the option to either cure the default or assume the Mortgagor’s rights under the lease, at the sole

election of the mortgagee. The lessor may not require a credit review or impose other qualifying

criteria on any transferee, mortgagee, or sub-lessee. The leasehold estate and the Mortgage may

not be impaired by any merger of title between lessor and lessee or by any default of a sublessor,

and the lease and the leasehold estate meet all of the requirements of Fannie Mae, Freddie Mac

and FHA, for leasehold loans.

607.00 Covenants - General

Each covenant is binding on the Correspondent regardless of whether the subject matter

thereof was under the control of the Correspondent or a third party. The Correspondent, without


limitation and in addition to any other covenants made in the Agreement, with respect to each

Mortgage Loan sold to CHL covenants the following:

607.01 Completion and Delivery of Documents.

The Correspondent shall properly complete and transmit all of CHL’s forms in a timely

manner and in accordance with the requirements set forth in this Loan Manual and the instructions

provided by CHL. All information contained in any form, communication, or document sent or

given to CHL by or on behalf of the Correspondent shall be true, correct, and complete.

607.02 Use of CHL’s Name.

The Correspondent shall confine its use of CHL’s logo and the CHL name to those uses, if

any, specifically authorized in the Loan Manual. In no instance may the Correspondent disclose

to any prospective Mortgagor, or the agents of the Mortgagor, that such Mortgagor’s Mortgage

Loan will be offered for sale to CHL. The Correspondent may not use CHL’s name or logo to

obtain any mortgage related services.

607.03 No Solicitation.

Neither the Correspondent nor any of the Correspondent’s affiliates shall specifically target

any Mortgage Loan sold to CHL for refinance or target the Mortgagor relating to any such

Mortgage Loan for the sale of any other financial products. The Correspondent and the

Correspondent’s affiliates may promote the terms they have for refinances or other financial

products by sending letters or promotional materials to the Mortgagors for (i) all Mortgage Loans

serviced by the Correspondent or originated by the Correspondent during a Specified Time Period,

(ii) specific types of Mortgage Loans (such as FHA-insured, VA-guaranteed, conventional fixed

rate, or conventional adjustable rate) serviced by the Correspondent or originated by the

Correspondent during a Specified Time Period or (iii) all Mortgage Loans with interest rates which

fall within specific ranges serviced by the Correspondent or originated during a Specified Time

Period. For the purposes of this section, “Specified Time Period” means a period of not less than

six (6) months commencing no later than three (3) months prior to origination of the applicable

Mortgage Loans. Neither the Correspondent nor any of the Correspondent’s affiliates may,

however, treat the Mortgage Loans sold to CHL as a different class of Mortgage Loans for the

purposes of advertising the availability of refinancing terms or other financial products.

Furthermore, neither the Correspondent nor any of the Correspondent’s affiliates will transfer or

otherwise disclose any information with respect to the Mortgage Loans sold to CHL or assist any

other person or entity in making a direct solicitation of the related Mortgagors.

607.04 Inspection of Records.

The Correspondent shall permit CHL and its agents during normal business hours to inspect

all books and records of the Correspondent pertaining to its mortgage lending operations and any

Mortgage Loan purchased by CHL from the Correspondent.

607.05 Credit Information.

With respect to each Mortgage Loan offered for sale to CHL by the Correspondent, the

Correspondent shall ensure it has full right and authority and is not precluded by law or contract

from furnishing CHL with the applicable consumer report (as defined in the Fair Credit Reporting

Act, Public Law 91-508) and all other credit information relating to such Mortgage Loan and CHL

shall not be precluded from furnishing such materials to any purchaser or prospective purchaser of

such Mortgage Loan. The foregoing shall not be construed to impose any obligation on CHL or

on any of CHL’s assignees of any Mortgage Loan from CHL, to keep the above described materials

confidential or to otherwise comply with the Fair Credit Reporting Act or any similar laws.


607.06 No Discrimination.

The Correspondent shall make credit accessible to all qualified applicants in accordance

with all Applicable Requirements. The Correspondent shall not discriminate against credit

applicants on the basis of any prohibited characteristic, including but not limited to race, color,

religion, gender, sex, or national origin.

608.00 Transfer of Servicing Covenants

With respect to each Mortgage Loan sold to CHL:

608.01 Notice to Mortgagors.

No later than fifteen (15) days prior to the effective date of transfer as defined in RESPA,

Seller shall notify each Mortgagor, by letter, of the assignment of the Servicing transferred

hereunder in accordance with RESPA and the regulations prescribed thereunder.

608.02 Notice to Mortgage Insurers.

The Correspondent shall, at the Correspondent’s expense, notify all relevant private

mortgage insurance companies no later than fifteen (15) days prior to the Transfer Date that all

insurance premium billings for the Mortgage Loan must be sent to CHL following the Transfer

Date.

608.03 Notice to Taxing Authorities and Hazard Insurance Companies.

No later than fifteen (15) days prior to the Transfer Date, the Correspondent shall, at the

Correspondent’s expense, transmit to the applicable taxing authorities and hazard insurance

companies and/or agents, notification of the assignment of the servicing and instructions to deliver

all notices, tax bills and insurance statements, as the case may be, to CHL from and after the

Transfer Date. The Correspondent shall provide CHL with copies of such notices and instructions

within five (5) Business Days of the Correspondent’s transmittal of such notices and instructions

to the foregoing entities.

608.04 Internal Revenue Service Forms.

The Correspondent shall mail, on or before the date required by law, all Internal Revenue

Service required forms to all parties entitled to receive same for period from January 1st until the

Transfer Date. The Correspondent shall provide copies of such forms to CHL upon request. CHL

shall be responsible for such Internal Revenue Service filings pertaining to events on and after the

Transfer Date.

608.05 Insurance Policies.

After the Transfer Date, the Correspondent shall deliver such insurance policies or

renewals as it may receive with respect to the Mortgage Loan or the servicing thereof to CHL

within five (5) Business Days after receipt of same by Correspondent.

608.06 Payment of Hazard Insurance Policies.

The Correspondent shall pay, prior to the Transfer Date, all hazard insurance premiums

due within thirty (30) days after the Transfer Date, provided that the Correspondent has received

bills for such insurance premiums prior to the Transfer Date. The Correspondent shall immediately

deliver to CHL all bills, and correspondence related to the Mortgage Loan and received by it

subsequent to the Transfer Date.


608.07 Property Taxes.

The Correspondent shall cause to be paid prior to the Transfer Date all tax bills (including

interest, late charges, and penalties in connection therewith) due within thirty (30) days of the

Transfer Date that are issued by a taxing authority and relate to Mortgage Property and that are

received by the Correspondent or its tax service provider prior to the Transfer Date. The

Correspondent or its tax service provider shall immediately forward to CHL all tax bills received

by the Correspondent after such date. The foregoing shall in no way impose upon the

Correspondent an obligation to pay any taxes (including interest, late charges, and penalties

associated therewith) for which a title insurer has an obligation to pay by virtue of the terms of a

mortgagee policy of title insurance which is issued in connection with the origination of the

Mortgage Loan and which insures CHL subsequent to the purchase.

608.08 Social Security Numbers.

The Mortgage Loan has a certified Social Security number as required by the Internal

Revenue Service, or if the Mortgage Loan does not have a certified Social Security number, the

Correspondent has exercised due diligence (as defined by Internal Revenue Service regulations)

to obtain such a number.

608.09 Internal Revenue Service Forms.

All Internal Revenue Service forms, including, but not limited to, forms 1099, 1099A and

1098, as appropriate, which are required to be filed with respect to the Mortgage Loan for activity

occurring on or before year end of the preceding calendar year have been filed.

608.10 Escrow Analysis.

If the Mortgage Loan was originated more than twelve (12) months prior to the Transfer

Date, the Correspondent has properly conducted such escrow analyses with respect to the

Mortgage Loan as required under Applicable Requirements. Any adjustment to the Mortgagor’s

escrow payment, refunds of escrow overages and collections of escrow shortages have been made

in accordance with Applicable Requirements.

608.11 Mortgage Payments Received Prior to Transfer Date.

Prior to the Transfer Date, all payments received by the Correspondent with respect to each

Mortgage Loan shall be properly applied by the Correspondent to the account of the respective

Mortgagor.

608.12 Mortgage Payments Received on or After Transfer Date.

Any payment with respect to a Mortgage Loan received by the Correspondent on or after

the Transfer Date shall not be processed by the Correspondent but shall instead be forwarded to

CHL at the Correspondent’s expense.

608.13 Recording of Assignments.

With respect to each Mortgage Loan purchased by CHL from the Correspondent, the

Correspondent shall promptly record an assignment of the Mortgage to CHL which complies with

all applicable provisions of state law in the applicable county recorder’s office.

700 CONFIDENTIAL INFORMATION

701.00 Confidential Information Defined


“Confidential Information” of a party shall mean and include information about hardware,

software, screens, specifications, designs, plans, drawings, data prototypes, discoveries, research,

developments, methods, processes, procedures, improvements, “know-how”, compilations,

market research, marketing techniques and plans, business plans and strategies, customer names

and other information related to customers, price lists, pricing policies and financial information

or other business and/or technical information and materials, in oral, demonstrative, written,

graphic, or machine-readable form, which is unpublished, not available to the general public or

trade, and which is maintained as confidential and proprietary information by the disclosing party

for regulatory, customer relations, and/or competitive reasons. Confidential Information shall also

include such confidential and proprietary information or materials belonging to a disclosing party

of, or to which, the other party may obtain knowledge or access through, or as a result of, the

performance of its obligations under the Agreement. Confidential Information also includes any

information described above which the disclosing party has obtained in confidence from another

party who treats it as proprietary or designates it as Confidential Information, whether or not owned

or developed by the disclosing party. Without limiting the foregoing, Confidential Information

shall include all such information provided to each party by the other party both before and after

the date of the Agreement.

702.00 Treatment of Confidential Information

Correspondent and CHL agree not to use Confidential Information (as defined above) of

the other for any purpose other than the fulfillment of its obligations under the Agreement,

Correspondent and CHL shall not disclose, publish, release, transfer or otherwise make available

Confidential Information of the other in any form to, or for the use or benefit of, any third person

or entity without the other party’s consent. Correspondent and CHL shall, however, be permitted

to disclose relevant aspects of the other party’s Confidential Information to its officers, agents,

subcontractors, and employees to the extent that such disclosure is reasonably necessary for the

performance of its duties and obligations under the Agreement and such disclosure is not

prohibited by Gramm-Leach-Bliley Act of 1999 (Public Law 106-102, 113 Stat. 1138), as it may

be amended from time to time (the “GLB Act”), the regulations promulgated thereunder, or other

Applicable Requirements; provided, however, that Correspondent and CHL shall take all

reasonable measures to ensure that Confidential Information of the other is not disclosed or

duplicated in contravention of these provisions by such officers, agents, subcontractors and

employees. Correspondent and CHL further agree to promptly notify the other in writing of any

misappropriation, or unauthorized disclosure or use by any person of Confidential Information

which may come to its attention and to take all steps reasonably necessary and/or requested by the

other to limit, stop or otherwise remedy such misappropriation, or unauthorized disclosure or use.

If the GLB Act, the regulations promulgated thereunder or other Applicable Requirements now or

hereafter in effect imposes a higher standard of confidentiality to the Confidential Information,

such standard shall prevail over the provisions of this section.

703.00 Duplication of Confidential Information

Correspondent and CHL will not make any more copies of the other’s written or graphic

materials containing Confidential Information than reasonably necessary for its use under the

terms of the Agreement, and each such copy shall be marked with the same proprietary notices as

appear on the originals.

704.00 Safeguarding Confidential Information

Correspondent and CHL shall establish commercially reasonable controls to ensure that

the confidentiality of the Correspondent Information and to ensure that the Confidential


Information is not disclosed contrary to the provisions of this section or any other applicable

privacy laws and regulations. Without limiting the foregoing, Correspondent and CHL shall

implement such physical and other security measures as are necessary to:

a. ensure the security and confidentiality of the Confidential Information;

b. protect against any threats or hazards to the security and integrity of the Confidential

Information; and

c. protect against any unauthorized access to or use of the Confidential Information.

Correspondent and CHL shall, at a minimum establish and maintain such data security

program as is necessary to meet the objectives of the Interagency Guidelines

Establishing Standards for Safeguarding Customer Information as set forth in the code

of Federal Regulations at 12 C.F.R. Parts 30, 208,211,225,263,308,364, 568 and 570.

To the extent that any duties and responsibilities under the Agreement are delegated to

an agent or other subcontractor, reasonable steps shall be taken to ensure that such

agents and subcontractor adhere to the same requirements.

705.00 Audit

Correspondent and CHL shall have the right, during regular office hours and upon

reasonable notice, to audit the other party to ensure compliance with the terms of the Agreement,

GLB and other privacy laws and regulations.

706.00 Exclusions

Notwithstanding anything to the contrary contained herein, neither Correspondent nor

CHL shall have any obligation with respect to any Confidential Information of the other party, or

any portion thereof, which the receiving party can establish by competent proof:

a. is or becomes generally known to companies engaged in the same or similar

businesses as the parties hereto on a non-confidential basis, through no wrongful

act of the receiving party;

b. is lawfully obtained by the receiving party from a third party which has no

obligation to maintain the information as confidential and which provides it to the

receiving party without any obligation to maintain the information as proprietary

or confidential;

c. was known prior to its disclosure to the receiving party without any obligation to

keep it confidential, as evidenced by tangible records kept by the receiving party in

the ordinary course of its business;

d. is independently developed by the receiving party without reference to the

disclosing party’s Confidential Information; or

e. is the subject of a written agreement whereby the non-disclosing party consents to

the use or disclosure of such Confidential Information.

707.00 Notice of Disclosure

If a receiving party or any of its representatives shall be under a legal obligation in any

administrative or judicial circumstance to disclose any Confidential Information, the receiving

party shall give the disclosing party prompt notice so that the disclosing party may seek a protective

order and/or waive the duty of nondisclosure; provided that in the absence of such order or waiver,

if the receiving party or any such representative shall, in the opinion of its counsel, stand liable for


contempt or suffer other censure or penalty for failure to disclose, disclosure pursuant to the order

of such tribunal may be made by the receiving party or its representative without liability

hereunder.

708.00 Duration and Survival

For as long as Correspondent and CHL continues to possess control of Confidential

Information furnished by the other, and for so long as the Confidential Information remains

unpublished, confidential and legally protectable as the property of the disclosing party, then

except as otherwise specified herein, the receiving party shall make no use of such Confidential

Information whatsoever, notwithstanding the expiration of the Agreement. Correspondent and

CHL acknowledge their understanding that the expiration of the Agreement shall not be deemed

to give either a right or license to use or disclose the Confidential Information of the other. Any

materials or documents, including copies which contain Confidential Information shall be

promptly returned upon request as necessary to prevent disclosure of Confidential Information to

third parties.

709.00 Enforcement and Injunctive Relief

Correspondent and CHL agree that the unauthorized disclosure or use of any Confidential

Information may cause immediate or irreparable injury to the party providing the Confidential

Information, and that such party may not be adequately compensated for such injury in monetary

damages. Correspondent and CHL therefore acknowledge and agree that, in such event, the other

shall be entitled to seek any temporary or permanent injunctive relief necessary to prevent such

unauthorized disclosure or use, and consent to the jurisdiction or any federal or state court of

competent jurisdiction for purposes of any suit hereunder and to service of process therein by

certified or registered mail, return receipt requested and/or such other manner, procedure, or means

of service authorized under Applicable Law or rules of procedure or by a court of competent

jurisdiction.

800 REMEDIES

801.00 General

CHL’s rights and remedies set forth herein are cumulative of any rights and remedies CHL

is entitled to assert at law or in equity, all of which are expressly reserved.

802.00 Repurchase

Upon discovery by the Correspondent of a breach of any representation, warranty or

covenant made by the Correspondent with respect to a Mortgage Loan, the Correspondent shall

promptly notify CHL in writing. Upon CHL’s receipt of such notice or upon CHL’s own discovery

of a breach by the Correspondent, CHL may, in its sole and absolute discretion, without regard to

the Correspondent’s actual or imputed knowledge of the breach (except to the extent that the

applicable representation, warranty or covenant is expressly conditioned upon the Correspondent’s

knowledge) in addition to and without limitation as to any other remedy accruing to CHL, demand

that the Correspondent repurchase the Mortgage Loan. Within thirty (30) calendar days of the

Correspondent’s receipt of the repurchase demand, the Correspondent shall either:


(i) cure the breach in all material respects to the satisfaction of CHL, the Agency and/or

the Investor, or

(ii) without any adjustment on the basis of fees or charges borne by the Correspondent,

repurchase the Mortgage Loan for an amount equal to the sum of:

(1) the outstanding principal balance of the Mortgage Note as calculated by CHL

or the Investor; plus

(2) interest on the outstanding principal balance of the Mortgage Loan at the

applicable Mortgage Loan interest rate from the date interest was last paid with respect to

the Mortgage Loan through the last day of the month of repurchase; plus

(3) the SRP, any other premiums charged by an Agency and/or Investor, and, if

applicable, the Purchase Premium paid by CHL for such Mortgage Loan; plus

(4) all out-of-pocket costs and expenses incurred by CHL in connection with the

repurchase of Mortgage Loan, including all documentary stamp taxes, recording fees,

transfer taxes, attorney fees, court costs, and other related legal expenses, plus

(5) a processing fee of $2,000 per Mortgage Loan.

Nothing in this paragraph shall operate as a waiver or limitation of CHL’s right to

unilaterally suspend or terminate Correspondent’s selling privileges in accordance with Section

808.00 Suspension or Termination of Selling Privileges below or to make a claim for

indemnification or damages.

803.00 Early Payment Default

In the event a Mortgage Loan is subject to an Early Payment Default, upon receipt of a

demand letter from CHL and pursuant to the terms of such demand letter, at CHL’s sole discretion,

Correspondent must either (a) repurchase the Mortgage Loan for an amount calculated in

accordance with Section 802.00 Repurchase herein or (b) indemnify CHL for all loss, cost, and/or

expenses incurred by CHL (including costs, fees, premiums or other charges or fees of an Investor

or Agency) arising from or related to such Mortgage Loan and/or the Early Payment Default.

Additionally, with regard to (b) above, CHL shall have the option to demand repurchase of said

Mortgage Loan for the life of the Mortgage Loan. With regard to both (a) and (b) above,

Correspondent shall remit to CHL a $2,000 processing fee per Mortgage Loan subject to an Early

Payment Default as well as any and all out-of-pocket costs and expenses incurred by CHL relating

thereto (including costs, fees, premiums or other charges or fees of an Investor or Agency).

804.00 Early Payoff

If a Mortgage Loan is subject to an Early Payoff, the Correspondent will be charged a fee

equal to the product of (i) the unpaid principal balance of the Mortgage Loan as of the payoff date

multiplied by (ii) the SRP, plus a $2,000 processing fee per Mortgage Loan subject to an Early

Payoff as well as any and all out-of-pocket costs and expenses incurred by CHL relating thereto

(including costs, fees, premiums or other charges or fees of an Investor or Agency).

805.00 Indemnification

The Correspondent shall indemnify CHL against, and hold CHL harmless from all losses,

liabilities, costs, expenses (including attorney’s fees), suits, actions and claims arising out of any

breach of a representation, warranty or covenant made by the Correspondent under the Agreement.

The foregoing indemnification shall include, but not be limited to, costs incurred by CHL in

connection with enforcing its rights under the Agreement or defending against any claim, demand


or assertion against CHL by a third party arising out of a breach of a representation, warranty or

covenant made by the Correspondent in the Agreement. The Correspondent’s indemnification

pursuant to this section shall survive the purchase and delivery of the Mortgage Loans, their

liquidation or repurchase, and any suspension or termination of the Correspondent’s selling

privileges or the termination of this Agreement (See Exhibit A).

806.00 Offset

CHL may offset against the purchase price for any Mortgage Loan delivered by the

Correspondent, or against any other amounts owed by CHL to the Correspondent pursuant to the

Agreement or any other contract or instrument between the Correspondent and CHL, any

outstanding amounts owed to CHL by the Correspondent or any affiliate of the Correspondent

including, but not limited to: (i) fees, penalties, and expenses arising out of the Correspondent’s

failure to timely deliver any final documentation; (ii) Pair-Off Fees, penalties or charges relating

to delivered or undelivered Mortgage Loans; (iii) EPOs, EPDs, or similar obligations of the

Correspondent to CHL; (iv) fees, costs, and expensed related to CHL repurchase of Mortgage

Loans; (v) costs and expenses arising out of the Correspondent’s breach of any of its

representations, warranties or covenants under the Agreement; and (vi) costs and expenses

incurred by CHL as a result of action taken by CHL based on CHL’s reasonable belief that the

Correspondent is no longer able to fulfill its obligations under the Agreement, including its

repurchase and indemnification obligations pursuant to this Manual.

807.00 Mortgage Loan Document Corrections

Although the Correspondent is solely responsible for the correction of all errors and

deficiencies in the documentation relating to each Mortgage Loan sold by the Correspondent to

CHL, in the interest of expediency or as may be necessary or appropriate based on Applicable Law

or Agency requirements, CHL may correct such errors or deficiencies at the expense of the

Correspondent. Correspondent shall reimburse CHL for any such expenses within thirty (30) days

after demand by CHL. The correction of any error or deficiency in a Mortgage Loan document by

CHL shall not be deemed as a waiver of any rights, claims, or recourse CHL may have against

Correspondent or any other party related to the Mortgage Loan.

808.00 Suspension or Termination of Selling Privileges

CHL may, in its sole and absolute discretion, suspend or terminate the Correspondent’s

selling privileges for any reason including, but not limited to, the following: (i) Correspondent

fails to perform any of its obligations under the Agreement or this Loan Manual within the

prescribed time periods; (ii) any representation or warranty made in the Agreement or this Loan

Manual is untrue in any material respect; (iii) Correspondent fails to meet the eligibility

requirements contained in the eligibility section (Section 100 Lender Eligibility) of this Loan

Manual; (iv) Correspondent’s HUD Compare Ratios exceed 150%.; (v) excessive fallout of

Mortgage Loans committed to be sold by the Correspondent to CHL; (vi) Correspondent’s fidelity

and/or errors and omissions insurance is canceled and coverage is not replaced; (vii) CHL

discovers excessive delinquencies or defaults on Mortgage Loans purchased from the

Correspondent; (viii) CHL, in its sole discretion, considers suspension or termination necessary to

protect its interests or enforce its rights; and/or (ix) Correspondent’s Mortgage Loan underwriting

quality fails to conform to the standards of CHL or Investors.

During a period of suspension or following termination, the Correspondent shall be

ineligible for new Commitments. Unless otherwise determined by CHL, Mortgage Loans under

Commitments outstanding at the time the termination or suspension becomes effective will be


purchased. CHL shall, in its sole and absolute discretion, determine the duration of any period of

suspension and shall prescribe the terms and conditions for reinstatement. Before notifying the

Correspondent of suspension or termination of the Correspondent’s selling privileges, CHL may,

in its sole and absolute discretion, issue a notice and warning to the Correspondent that it has

violated, is violating, or is about to violate, one or more provisions in the Agreement or this Loan

Manual, and that unless corrective action is taken within a stated specified time period, suspension

or termination of the Correspondent’s selling privileges may result. This warning may be given by

CHL as part of an audit report or as a result of any other review or investigation of the

Correspondent by CHL. Absent exigent circumstances, as determined by CHL in its sole

discretion, CHL will provide at least thirty (30) days prior written notice of intention to suspend

or terminate the Correspondent’s selling privileges. Any prior notice of termination or intent to

terminate shall not be construed so as to waive, prejudice, limit, release, or impair, or constitute an

election of remedies or recourse, all of which are expressly reserved.

Certain violations of the Agreement and this Loan Manual may be considered by CHL as

particularly serious or significant offenses. In such cases, CHL may determine that a shorter notice

period is necessary or advisable to protect CHL’s interests, and CHL may act without prior written

notice to suspend or terminate the Correspondent’s selling privileges. If prior written notice is not

provided, suspension or termination of the Correspondent’s selling privileges will become

effective upon verbal notice from CHL to the Correspondent. Written confirmation of a verbal

notice will follow with a statement of the basis for the suspension or termination.

The Correspondent may file a written appeal requesting any action or proposed action by

CHL to suspend or terminate the Correspondent’s selling privileges be reversed or modified. This

statement of appeal need not be in any particular form but should specify any mitigating

circumstances and other material information deemed relevant by the Correspondent. The

statement of appeal must be postmarked or and delivered to CHL no later than fifteen (15) calendar

days after the date the Correspondent receives the written notice from CHL as provided above. If

prior written notice is not provided, the Correspondent’s written statement of appeal must be

postmarked, or hand delivered no later than fifteen (15) calendar days after the date the

Correspondent receives written confirmation of the decision to suspend or terminate. If a written

statement of appeal is received within the required time period, CHL will determine whether the

suspension or termination (and the effective date thereof) will be delayed pending review of the

Correspondent’s written appeal. The Correspondent’s written appeal will be considered to

determine whether to affirm, reverse, or modify the action or proposed action to suspend or

terminate. Written notice of the determination to affirm, reverse or modify will be mailed to the

Correspondent within thirty (30) days of receipt of the Correspondent’s written statement.

809.00 Remedies Cumulative

All rights and remedies of CHL under the Agreement are in addition to all other rights and

remedies available to CHL in law or equity. CHL may exercise its rights and remedies

concurrently, independently, or in succession, and all such rights and remedies shall inure to the

benefit of CHL, its successors and/or assigns. The failure of CHL to exercise any of its remedies

under the Agreement with respect to a breach or default of the Correspondent does not constitute

a waiver of such remedy with respect to such breach or default or any subsequent breach or default.

810.00 Knowledge and Materiality

Further, for purposes of indemnification and repurchase under this section, a breach or

inaccuracy of a representation, warranty or covenant contained in this Agreement is deemed to

occur or exist either if such representation, warranty or covenant is actually inaccurate or breached


or if such representation, warranty or covenant would have been so breached or inaccurate if such

representation or warranty had not contained any limitation or qualification as to materiality,

material adverse effect, material adverse change or knowledge (it being the intention of the Parties

hereto that CHL be indemnified and held harmless from and against any and all Losses resulting

from, arising out of, or relating to the failure of any such representation, warranty or covenant to

be true, correct and complete in any respect, determined in each case without regard to any

limitation or qualification contained therein as to materiality, material adverse effect, material

adverse change or knowledge).


EXHIBITS

EXHIBIT A

FORM OF INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (“Agreement”) is made and entered into as

of the ____ day of _______________, 20__, by and between Cornerstone Home Lending, Inc.

(“CHL”) and _____________________________ (“Correspondent”). CHL and Correspondent

are hereinafter referred to individually as “the Party” and collectively as the “Parties.”

RECITALS

A. CHL has requested Correspondent to reimburse CHL for any and all potential losses that

CHL or its assigns may incur for the Mortgage Loan(s) listed on SCHEDULE 1

(“Indemnified Mortgage Loans,” whether one or more) resulting from an alleged breach

or breaches of the CHL Correspondent Loan Purchase and Sale Agreement between the

Parties executed on the _____ day of ______________, 20_____ and/or Correspondent

Loan Manual (together referred to hereinafter as the “Contract.)” Other capitalized terms

not defined herein shall have the same meaning assigned to them in the Contract.

B. CHL has purchased other Mortgage Loans from Correspondent under the Contract that

are not identified above as the Indemnified Mortgage Loan(s). Such Mortgage Loans are

hereinafter referred to as the “Excluded Mortgage Loans” and such Excluded Mortgage

Loans are not covered or affected by this Agreement.

C. Under the terms of the Contract, CHL properly notified Correspondent of a breach of

representations or warranties applicable to the Indemnified Mortgage Loan purchased

pursuant to the Contract or other failure to comply with the terms and conditions

thereunder (“Claims”). CHL requested that the Correspondent cure the defects or

repurchase the Mortgage Loan. However, Correspondent is either unwilling or unable to

cure the defects or repurchase the Mortgage Loan(s). Therefore, CHL has agreed to allow

Correspondent to indemnify CHL, and the Parties have agreed to enter into this

Agreement.

D. CHL and Correspondent desire to settle and resolve the Claims that CHL has made

concerning the Indemnified Mortgage Loan, and all claims or defenses that

Correspondent asserted or could have asserted, on the terms and conditions set forth in

this Agreement, and for the purposes of avoiding the burden, expense and uncertainty of

litigation.

E. CHL assumes no liabilities for any claims that may be asserted by the Mortgagors of the

Indemnified Mortgage Loan, and nothing herein shall be construed as an admission on

the part or CHL.

F. The Contract between CHL and Correspondent remains in full force and effect, except as

modified by the terms of this Agreement and only as applicable to the Indemnified

Mortgage Loan.

NOW, THEREFORE, in consideration of these recitals and the Parties’ mutual covenants,

forbearances and promises set forth in this Agreement, and other good and valuable


consideration, the receipt and sufficiency of which the Parties acknowledge by their signatures to

this Agreement, CHL and Correspondent agree as follows:

1. Indemnification Obligation

a. Correspondent agrees that it shall indemnify and hold CHL harmless from any losses,

including but not limited to damages (including, without limitation, actual, consequential,

statutory, contractual, liquidated, exemplary, or punitive) expenses, attorney fees, expert

fees, make-whole costs, CHL internal costs, servicing fees, ownership fees, litigation

fees, or other costs of any kind that CHL may incur or in any manner suffer related to the

Indemnified Mortgage Loan (hereinafter “Losses”). In order to provide CHL reasonable

assurance of protection against such Losses that are, or may be, incurred by CHL, on or

before _______________, Correspondent will pay CHL $_______________ as a deposit

(The “Deposit”) for losses on the Indemnified Mortgage Loans. The Deposit shall be

used to defray in whole or in part such Losses. The Deposit shall not limit the liability of

Correspondent in regard to Correspondent’s indemnification obligations under this

Agreement. The Parties agree that this Deposit may be comingled with CHL’s other

funds and may be utilized by CHL for its own business purposes at any time.

b. CHL shall use its sole business judgment and discretion regarding the administration or

servicing of the Indemnified Mortgage Loans or any property or other assets that relate to

the Indemnified Mortgage Loans. This discretion includes, among other things, any

decisions regarding foreclosure, disposal of foreclosed property (REO), utilization of

insurance. Subject to compliance with applicable Investor or Agency Guidelines, CHL

will use commercially reasonable efforts to consult with Correspondent on loss

mitigation options. From time to time, CHL shall calculate the Losses to date, and if these

calculated Losses exceed the Deposit, CHL may request additional funds to be deposited,

and Correspondent shall make such a deposit within five (5) Business Days of such

request. Upon CHL’s final determination of Losses, it shall send notice to Correspondent

with an accounting and a statement of the amount owed to CHL or the amount of the

Deposit to be returned to Correspondent. These amounts shall be paid within ten (10)

calendar days after the date of the notice.

c. Unless otherwise stated a written notice, payment of the Deposit shall be made in

immediately available funds via wire transfer upon execution of the Agreement as

follows:

Wire the funds to: J P Morgan Chase

ABA: 021000021

Account # 771521820

Credit to: Cornerstone Home Lending Inc.

2. Repurchase Obligation. At any time after the signing of this Agreement, CHL shall have the

right and the option to demand that Correspondent repurchase the Indemnified Mortgage

Loans, or if the property (or properties) related to the Indemnified Mortgage Loan have been

foreclosed and now owned by CHL, to demand that Correspondent repurchase the foreclosed

property or REO securing to the Indemnified Mortgage Loan. In either case, the repurchase

price shall be calculated to make CHL whole for all of its Losses.

3. Conditional Repurchase Option. At any time after the signing of this Agreement, if

Correspondent desires to repurchase an Indemnified Mortgage Loan, Correspondent shall

make such request in writing to CHL, and CHL will make such request to the applicable


Agency or Investor. If the Investor consents to the repurchase, CHL will repurchase the

Indemnified Mortgage Loan from the Investor in accordance with the Investor’s guidelines

and requirements and Correspondent shall thereupon immediately repurchase the

Indemnified Mortgage Loan from CHL and pay CHL the repurchase price, which shall be

calculated to make CHL whole for all its Losses. Notwithstanding anything herein to the

contrary, CHL shall have no obligation or liability to repurchase an Indemnified Mortgage

Loan from an Investor unless said Investor authorizes such repurchase.

4. Reservation of Rights This Agreement is intended to cover only Claims applicable to the

Indemnified Mortgage Loans set forth on Schedule 1. It is not intended to (i) limit any

indemnification, other or further obligations of the Correspondent under the Contract, except

with respect to the Indemnified Mortgage Loans; (ii) terminate the Contract; or (iii) include

or extend to any Mortgage Loans purchased after the date of this Agreement by

Correspondent pursuant to the terms of the Contract.

5. Mutual Release. Correspondent and CHL do hereby fully release and discharge each other

regarding the Claim and any defenses related thereto, and any and all past, present and future

persons, officers, employees, former employees, independent contractors, board, managers,

entities, affiliates, subsidiaries, parent companies, stockholders, investors, attorneys,

representatives, corporations, successors, assigns, agents, and partnerships associated with

them, from any and all claims, damages, losses, rights, demands, liabilities, obligations,

actions and causes of action known or unknown, existing or that may exist, that it has or may

have had, and did assert or could have asserted against each other with respect to the Claim.

However, this Mutual Release does not release or affect in any manner the obligations in this

Agreement including the Indemnification Obligations and/or the Repurchase Obligations as

described herein. This Mutual Release does not release or affect in any manner the

obligations of the Parties to abide by the Contract and to pursue the remedies thereunder as

they relate to any potential liability or obligation other than the Claim.

6. Representations and Warranties. To induce each other to enter into this Agreement, CHL and

Correspondent each represent and warrant that:

a. no statements or representations made by or on behalf of any of the Parties, except as

specifically recited in this Agreement, have influenced, induced or caused the Parties to

make this settlement and to execute this Agreement;

b. this Agreement contains the entire Agreement between the Parties with respect to the

Settlement of Claims to which it refers, and there do not exist any other written or oral

terms of agreements except for those contained in this Agreement;

c. only representations contained in this Agreement, and no others, shall be admissible to

establish the execution or inducement of this Agreement;

d. each of the undersigned has read and understands this Agreement in its entirety;

e. each of the undersigned has been represented by and has consulted with counsel in

connection with the negotiation, drafting and execution of this Agreement;

f. this Agreement has been jointly drafted by all of the Parties, and in the event of any

dispute arising out of this Agreement, the Parties waive application of any rule of

construction or interpretation against any other Party claiming the benefit or detriment of

being a draftsperson; and


g. each of the Parties is authorized and has obtained all of the necessary corporate

authorization to sign this Agreement in the capacity and manner set forth below.

7. Assignment and Third Party Beneficiaries. CHL, but not the Correspondent, has the right to

assign this Agreement to any other entity and will provide notice to the Correspondent after

the assignment. The benefits of and rights under this Agreement, including making

indemnification claims for any Losses incurred either before or after the assignment, shall

inure to the benefit of the assignee of this Agreement. Persons and entities affiliated with

CHL are hereby agreed to be third party beneficiaries of this Agreement.

8. Governing Law. This Agreement will be governed by, and interpreted, and construed in

accordance with the laws of the State of Texas.

9. Binding Effect. This Agreement will be binding on the Parties, their respective agents,

attorneys, successors, and assigns.

10. Confidentiality. Each of the Parties agrees not to disclose the terms of this Agreement to any

person or entity, other than to: (a) the Parties to this Agreement; (b) attorneys and

accountants representing the Parties; (c) such parties to whom a court having jurisdiction to

make such request by lawful subpoena or by court order may request or order the Parties to

disclose this information; (d) such parties to whom a Government Agency having jurisdiction

to make such request, or enter a summons, subpoena or order may request of order the Parties

to disclose this information; and (e) to the extent necessary to enforce the terms of the

Agreement as provided herein.

11. Arbitration. In the event of a dispute under this Agreement, in which any Party alleges a

breach of this Agreement, the Parties agree to submit their disputes to binding arbitration

before the American Arbitration Association by providing a written demand for arbitration

from the Party seeking arbitration, setting forth the specifics of the matter in controversy or

the claim being made. Any arbitration will occur in Houston, Texas, and will be governed by

the Commercial Arbitration Rules of the American Arbitration Association and the

substantive law of the State of Texas, without reference to the provisions relating to conflict

of laws. To the extent the arbitrator or arbitrators permit discovery, it shall be performed in a

cost effective manner taking into account the amount in controversy.

The arbitration shall be heard before a single arbitrator mutually agreeable to the Parties;

provided, that if the Parties cannot agree on the choice of arbitrator within twenty (20) days

after the first Party seeking arbitration has given written demand, then the arbitration shall be

conducted before an arbitrator selected in accordance with the American Arbitration

Association rules.

A hearing on the merits of all claims for which either Party seeks arbitration shall be

commenced not later than ninety (90) days from the date demand for arbitration is made by

the first Party seeking arbitration, or as soon as possible thereafter.

The arbitrators shall not have the power to alter, modify, amend, add to, or subtract from any

terms or provision of this Agreement, nor to rule upon or grant any extension, renewal, or

continuance of this Agreement. The arbitrators shall have the authority to grant any legal remedy

available had the Parties submitted the dispute to a judicial proceeding. THE PARTIES

HEREBY EXPRESSLY WAIVE THE RIGHT TO TRIAL BY JURY.


12. Prevailing Party Entitled to Attorneys’ Fees, Costs and Expenses. In the event there should arise

any dispute under this Agreement with allegations that any Party has breached this Agreement,

then the prevailing Party will be entitled to recover (in addition to his actual damages and any

other relief sought) its reasonable attorneys’ fees and costs, including, but not limited to, all

arbitration fees, expert witness fees, costs and expenses.

13. Voluntarily Entered. The Parties represent and warrant that this Agreement is executed

voluntarily by the Parties with the full knowledge of the consequences and implications of the

obligations contained herein. The Parties also represent and warrant that they have had the

opportunity to be represented by counsel of their choice throughout the negotiations which

preceded the execution of this Agreement, and in connection with the preparation and execution

of this Agreement, and that they have carefully and thoroughly reviewed this Agreement in its

entirety.

14. Severability. The Parties intend each and every term and provision of this Agreement to be

severable. Accordingly, in the event any term or provision in the Agreement is declared illegal,

invalid or otherwise unenforceable by a court of competent jurisdiction, such illegality, invalidity

or unenforceability will not affect the remaining terms and provisions of this Agreement, which

will remain fully valid, binding and enforceable.

15. Headings. The headings for the paragraphs of this Agreement are for convenience and reference

purposes only and will not in any way be construed as affecting the meaning or interpretation of

the text of this Agreement.

16. Counterparts. This Agreement may be executed in any number of counterparts any by any

number of counterpart signature pages, each of which shall be an original with the same effect as

if each of the signatures were affixed to the same instrument.

CORRESPONDENT CORNERSTONE HOME LENDING, INC.

___________________________________ __________________________________

By: _________________________ By: Jason P. Kershaw

Its: __________________________ Its: CLD Operations Manager


SCHEDULE 1

Mortgage Loan Number Borrower Name