株探米国株
英語
エドガーで原本を確認する
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

Form 10-Q

 

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

Or

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34416

 

PennyMac Mortgage Investment Trust

(Exact name of registrant as specified in its charter)

 

 

Maryland

27-0186273

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

 

 

3043 Townsgate Road, Westlake Village, California

91361

(Address of principal executive offices)

(Zip Code)

(818) 224-7442

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol (s)

Name of Each Exchange on Which Registered

Common Shares of Beneficial Interest, $0.01 Par Value

 

PMT

 

New York Stock Exchange

8.125% Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest, $0.01 Par Value

PMT PRA

New York Stock Exchange

8.00% Series B Cumulative Redeemable Preferred
Shares of Beneficial Interest, $0.01 Par Value

 

PMT PRB

 

New York Stock Exchange

6.75% Series C Cumulative Redeemable Preferred
Shares of Beneficial Interest, $0.01 Par Value

 

PMT PRC

 

New York Stock Exchange

8.50% Senior Note Due 2028

PMTU

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

 

Accelerated filer

☐

Non-accelerated filer

☐

 

Smaller reporting company

☐

 

 

 

 

Emerging growth company

 

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

 

Class

Outstanding at October 30, 2023

Common Shares of Beneficial Interest, $0.01 par value

86,624,044

 

 

 

PENNYMAC MORTGAGE INVESTMENT TRUST

FORM 10-Q

September 30, 2023

TABLE OF CONTENTS

 

 

 

Page

Special Note Regarding Forward-Looking Statements

1

PART I. FINANCIAL INFORMATION

4

Item 1.

Financial Statements (Unaudited)

4

 

Consolidated Balance Sheets

4

 

Consolidated Statements of Operations

6

 

Consolidated Statements of Changes in Shareholders’ Equity

7

 

Consolidated Statements of Cash Flows

9

 

Notes to Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

58

 

Our Company

58

 

Results of Operations

61

 

Net Investment Income

62

 

Expenses

72

 

Balance Sheet Analysis

74

 

Asset Acquisitions

74

 

Investment Portfolio Composition

75

 

Cash Flows

78

 

Liquidity and Capital Resources

79

 

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

82

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

83

Item 4.

Controls and Procedures

84

PART II. OTHER INFORMATION

85

Item 1.

Legal Proceedings

85

Item 1A

 

Risk Factors

 

85

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

85

Item 3.

Defaults Upon Senior Securities

85

Item 4.

Mine Safety Disclosures

85

Item 5.

Other Information

85

Item 6.

Exhibits

86

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains certain forward-looking statements that are subject to various risks and uncertainties. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” “continue,” “plan” or other similar words or expressions.

Forward-looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward-looking information. Examples of forward-looking statements include the following:

•
projections of our revenues, income, earnings per share, capital structure or other financial items;
•
descriptions of our plans or objectives for future operations, products or services;
•
forecasts of our future economic performance, interest rates, profit margins and our share of future markets; and
•
descriptions of assumptions underlying or relating to any of the foregoing expectations regarding the timing of generating any revenues.

Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. There are a number of factors, many of which are beyond our control that could cause actual results to differ significantly from management’s expectations. Some of these factors are discussed below.

You should not place undue reliance on any forward-looking statement and should consider the following uncertainties and risks, as well as the risks and uncertainties discussed elsewhere in this Report and the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission (“SEC”) on February 24, 2023.

Factors that could cause actual results to differ materially from historical results or those anticipated include, but are not limited to:

•
changes in interest rates and other macroeconomic conditions;
•
our ability to comply with various federal, state and local laws and regulations that govern our business;
•
changes in our investment objectives or investment or operational strategies, including any new lines of business or new products and services that may subject us to additional risks;
•
changes in real estate values, housing prices and housing sales;
•
the degree and nature of our competition;
•
volatility in our industry, the debt or equity markets, the general economy or the real estate finance and real estate markets specifically, whether the result of market events or otherwise;
•
events or circumstances which undermine confidence in the financial and housing markets or otherwise have a broad impact on financial and housing markets, such as the sudden instability or collapse of large depository institutions or other significant corporations, terrorist attacks, natural or man-made disasters, or threatened or actual armed conflicts;
•
changes in general business, economic, market, employment and domestic and international political conditions, or in consumer confidence and spending habits from those expected;
•
the availability of, and level of competition for, attractive risk-adjusted investment opportunities in loans and mortgage-related assets that satisfy our investment objectives;
•
the inherent difficulty in winning bids to acquire loans, and our success in doing so;
•
the concentration of credit risks to which we are exposed;
•
our dependence on our Manager and servicer, potential conflicts of interest with such entities and their affiliates, and the performance of such entities;
•
changes in personnel and lack of availability of qualified personnel at our Manager, servicer or their affiliates;
•
the availability, terms and deployment of short-term and long-term capital;
•
the adequacy of our cash reserves and working capital; our substantial amount of debt;

1

 

•
•
our ability to maintain the desired relationship between our financing and the interest rates and maturities of our assets;
•
the timing and amount of cash flows, if any, from our investments;
•
our exposure to risks of loss and disruptions in operations resulting from adverse weather conditions, man-made or natural disasters, climate change and pandemics such as the COVID-19 pandemic;
•
unanticipated increases or volatility in financing and other costs, including a rise in interest rates;
•
the performance, financial condition and liquidity of borrowers;
•
the ability of our servicer, which also provides us with fulfillment services, to approve and monitor correspondent sellers and underwrite loans to investor standards;
•
incomplete or inaccurate information or documentation provided by customers or counterparties, or adverse changes in the financial condition of our customers and counterparties;
•
our indemnification and repurchase obligations in connection with loans we purchase and later sell or securitize;
•
the quality and enforceability of the collateral documentation evidencing our ownership and rights in the assets in which we invest;
•
increased rates of delinquency, default and/or decreased recovery rates on our investments;
•
the performance of loans underlying mortgage-backed securities in which we retain credit risk;
•
our ability to foreclose on our investments in a timely manner or at all;
•
the degree to which our hedging strategies may or may not protect us from interest rate volatility;
•
the effect of the accuracy of or changes in the estimates we make about uncertainties, contingencies and asset and liability valuations when measuring and reporting upon our financial condition and results of operations;
•
our ability to maintain appropriate internal control over financial reporting;
•
technology failures, cybersecurity risks and incidents, and our ability to mitigate cybersecurity risks and cyber intrusions;
•
our ability to obtain and/or maintain licenses and other approvals in those jurisdictions where required to conduct our business;
•
our ability to detect misconduct and fraud;
•
changes in our CRT arrangements and agreements;
•
developments in the secondary markets for our loan products;
•
legislative and regulatory changes that impact the loan industry or housing market;
•
changes in regulations that impact the business, operations or governance of mortgage lenders and/or publicly-traded companies or such changes that increase the cost of doing business with such entities;
•
the Consumer Financial Protection Bureau and its issued and future rules and the enforcement thereof;
•
changes in government support of homeownership;
•
our ability to effectively identify, manage and hedge our credit, interest rate, prepayment, liquidity and climate risks;
•
changes in government or government-sponsored home affordability programs;
•
limitations imposed on our business and our ability to satisfy complex rules for us to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes and qualify for an exclusion from the Investment Company Act of 1940 and the ability of certain of our subsidiaries to qualify as REITs or as taxable REIT subsidiaries for U.S. federal income tax purposes, as applicable, and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;
•
changes in governmental regulations, accounting treatment, tax rates and similar matters (including changes to laws governing the taxation of REITs, or the exclusions from registration as an investment company); our ability to make distributions to our shareholders in the future;

2

 

•
•
our failure to deal appropriately with issues that may give rise to reputational risk; and
•
our organizational structure and certain requirements in our charter documents.

Other factors that could also cause results to differ from our expectations may not be described in this Report or any other document. Each of these factors could by itself, or together with one or more other factors, adversely affect our business, results of operations and/or financial condition.

Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made.

 

3

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands, except share information)

 

ASSETS

 

 

 

 

 

 

Cash

 

$

236,396

 

 

$

111,866

 

Short-term investments at fair value

 

 

150,059

 

 

 

252,271

 

Mortgage-backed securities at fair value pledged to creditors

 

 

4,665,970

 

 

 

4,462,601

 

Loans acquired for sale at fair value ($1,019,247 and $1,801,368 pledged to creditors, respectively)

 

 

1,025,730

 

 

 

1,821,933

 

Loans at fair value ($1,370,220 and $1,510,148 pledged to creditors, respectively)

 

 

1,372,118

 

 

 

1,513,399

 

Derivative assets ($7,010 and $1,262 pledged to creditors, respectively)

 

 

29,750

 

 

 

84,940

 

Deposits securing credit risk transfer arrangements pledged to creditors

 

 

1,237,294

 

 

 

1,325,294

 

Mortgage servicing rights at fair value ($4,038,113 and $3,962,820 pledged to creditors, respectively)

 

 

4,108,661

 

 

 

4,012,737

 

Servicing advances ($76,740 and $100,888 pledged to creditors, respectively)

 

 

93,614

 

 

 

197,972

 

Due from PennyMac Financial Services, Inc.

 

 

2,252

 

 

 

3,560

 

Other ($2,466 and $3,297 pledged to creditors, respectively)

 

 

301,492

 

 

 

134,991

 

Total assets

 

$

13,223,336

 

 

$

13,921,564

 

LIABILITIES

 

 

 

 

 

 

Assets sold under agreements to repurchase

 

$

6,020,716

 

 

$

6,616,528

 

Mortgage loan participation purchase and sale agreements

 

 

23,991

 

 

 

—

 

Notes payable secured by credit risk transfer and mortgage servicing assets

 

 

2,825,591

 

 

 

2,804,028

 

Unsecured senior notes

 

 

599,754

 

 

 

546,254

 

Asset-backed financing of variable interest entities at fair value

 

 

1,279,059

 

 

 

1,414,955

 

Interest-only security payable at fair value

 

 

28,288

 

 

 

21,925

 

Derivative and credit risk transfer strip liabilities at fair value

 

 

140,494

 

 

 

167,226

 

Accounts payable and accrued liabilities

 

 

92,633

 

 

 

160,212

 

Due to PennyMac Financial Services, Inc.

 

 

27,613

 

 

 

36,372

 

Income taxes payable

 

 

202,967

 

 

 

151,778

 

Liability for losses under representations and warranties

 

 

33,152

 

 

 

39,471

 

Total liabilities

 

 

11,274,258

 

 

 

11,958,749

 

 

 

 

 

 

 

Commitments and contingencies ─ Note 17

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Preferred shares of beneficial interest, $0.01 par value per share, authorized 100,000,000 shares,
   issued and outstanding 22,400,000, liquidation preference $560,000,000

 

 

541,482

 

 

 

541,482

 

Common shares of beneficial interest—authorized, 500,000,000 common shares of $0.01
   par value; issued and outstanding, 86,760,408 and 88,888,889 common shares, respectively

 

 

868

 

 

 

889

 

Additional paid-in capital

 

 

1,923,130

 

 

 

1,947,266

 

Accumulated deficit

 

 

(516,402

)

 

 

(526,822

)

Total shareholders’ equity

 

 

1,949,078

 

 

 

1,962,815

 

Total liabilities and shareholders’ equity

 

$

13,223,336

 

 

$

13,921,564

 

 

The accompanying notes are an integral part of these consolidated financial statements.

4

 

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

Assets and liabilities of consolidated variable interest entities (“VIEs”) included in total assets and liabilities (the assets of each VIE can only be used to settle liabilities of that VIE) are summarized below:

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

ASSETS

 

 

 

 

 

 

Loans at fair value

 

$

1,370,021

 

 

$

1,509,942

 

Derivative assets at fair value

 

 

7,010

 

 

 

1,262

 

Deposits securing credit risk transfer arrangements

 

 

1,237,294

 

 

 

1,325,294

 

Other—interest receivable

 

 

4,160

 

 

 

4,343

 

 

$

2,618,485

 

 

$

2,840,841

 

LIABILITIES

 

 

 

 

 

 

Asset-backed financings at fair value

 

$

1,279,059

 

 

$

1,414,955

 

Derivative and credit risk transfer strip liabilities at fair value

 

 

70,860

 

 

 

160,553

 

Interest-only security payable at fair value

 

 

28,288

 

 

 

21,925

 

Accounts payable and accrued liabilities—interest payable

 

 

4,160

 

 

 

4,343

 

 

$

1,382,367

 

 

$

1,601,776

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5

 

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands, except per common share amounts)

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

Net loan servicing fees:

 

 

 

 

 

 

 

 

 

 

 

 

From nonaffiliates

 

 

 

 

 

 

 

 

 

 

 

 

Contractually specified

 

$

166,809

 

 

$

162,987

 

 

$

496,522

 

 

$

461,021

 

Other

 

 

3,752

 

 

 

4,246

 

 

 

14,521

 

 

 

20,539

 

 

 

170,561

 

 

 

167,233

 

 

 

511,043

 

 

 

481,560

 

Change in fair value of mortgage servicing rights

 

 

160,926

 

 

 

66,974

 

 

 

(64,515

)

 

 

504,474

 

Mortgage servicing rights hedging results

 

 

(50,689

)

 

 

154,269

 

 

 

(81,584

)

 

 

(87,651

)

 

 

280,798

 

 

 

388,476

 

 

 

364,944

 

 

 

898,383

 

From PennyMac Financial Services, Inc.

 

 

500

 

 

 

1,648

 

 

 

1,494

 

 

 

13,232

 

 

 

 

281,298

 

 

 

390,124

 

 

 

366,438

 

 

 

911,615

 

Net gains on loans acquired for sale:

 

 

 

 

 

 

 

 

 

 

 

 

From nonaffiliates

 

 

11,704

 

 

 

3,110

 

 

 

19,463

 

 

 

12,375

 

From PennyMac Financial Services, Inc.

 

 

1,854

 

 

 

1,203

 

 

 

5,014

 

 

 

3,562

 

 

 

13,558

 

 

 

4,313

 

 

 

24,477

 

 

 

15,937

 

Loan origination fees

 

 

3,226

 

 

 

13,215

 

 

 

15,227

 

 

 

42,417

 

Net (losses) gains on investments and financings

 

 

(109,544

)

 

 

(253,336

)

 

 

13,761

 

 

 

(713,081

)

Net interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

158,926

 

 

 

109,658

 

 

 

474,629

 

 

 

251,419

 

Interest expense

 

 

183,918

 

 

 

114,080

 

 

 

550,445

 

 

 

255,744

 

Net interest expense

 

 

(24,992

)

 

 

(4,422

)

 

 

(75,816

)

 

 

(4,325

)

Results of real estate acquired in settlement of loans

 

 

(251

)

 

 

966

 

 

 

(251

)

 

 

1,195

 

Other

 

 

134

 

 

 

205

 

 

 

411

 

 

 

646

 

Net investment income

 

 

163,429

 

 

 

151,065

 

 

 

344,247

 

 

 

254,404

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Earned by PennyMac Financial Services, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

Loan servicing fees

 

 

20,257

 

 

 

20,247

 

 

 

61,023

 

 

 

61,670

 

Loan fulfillment fees

 

 

5,531

 

 

 

18,407

 

 

 

22,895

 

 

 

55,807

 

Management fees

 

 

7,175

 

 

 

7,731

 

 

 

21,510

 

 

 

23,758

 

Professional services

 

 

2,133

 

 

 

2,394

 

 

 

5,537

 

 

 

7,671

 

Compensation

 

 

1,961

 

 

 

1,368

 

 

 

4,779

 

 

 

4,354

 

Loan origination

 

 

710

 

 

 

2,430

 

 

 

3,785

 

 

 

8,054

 

Loan collection and liquidation

 

 

1,890

 

 

 

690

 

 

 

3,378

 

 

 

5,118

 

Safekeeping

 

 

467

 

 

 

2,986

 

 

 

2,707

 

 

 

6,402

 

Other

 

 

4,885

 

 

 

4,433

 

 

 

14,559

 

 

 

13,001

 

Total expenses

 

 

45,009

 

 

 

60,686

 

 

 

140,173

 

 

 

185,835

 

Income before provision for income taxes

 

 

118,420

 

 

 

90,379

 

 

 

204,074

 

 

 

68,569

 

Provision for income taxes

 

 

56,998

 

 

 

78,466

 

 

 

57,331

 

 

 

146,519

 

Net income (loss)

 

 

61,422

 

 

 

11,913

 

 

 

146,743

 

 

 

(77,950

)

Dividends on preferred shares

 

 

10,455

 

 

 

10,455

 

 

 

31,364

 

 

 

31,364

 

Net income (loss) attributable to common shareholders

 

$

50,967

 

 

$

1,458

 

 

$

115,379

 

 

$

(109,314

)

Earnings (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.59

 

 

$

0.01

 

 

$

1.31

 

 

$

(1.19

)

Diluted

 

$

0.51

 

 

$

0.01

 

 

$

1.20

 

 

$

(1.19

)

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

86,760

 

 

 

90,594

 

 

 

87,613

 

 

 

92,221

 

Diluted

 

 

111,088

 

 

 

90,594

 

 

 

111,941

 

 

 

92,221

 

 

The accompanying notes are an integral part of these consolidated financial statements.

6

 

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

 

 

 

Quarter ended September 30, 2023

 

 

 

Preferred shares

 

 

Common shares

 

 

 

 

 

 

 

 

 

Number

 

 

 

 

 

Number

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

of

 

 

 

 

 

of

 

 

Par

 

 

paid-in

 

 

Accumulated

 

 

 

 

 

 

shares

 

 

Amount

 

 

shares

 

 

value

 

 

capital

 

 

deficit

 

 

Total

 

 

 

(in thousands, except per share amounts)

 

Balance at June 30, 2023

 

 

22,400

 

 

$

541,482

 

 

 

86,761

 

 

$

868

 

 

$

1,921,710

 

 

$

(532,564

)

 

$

1,931,496

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

61,422

 

 

 

61,422

 

Share-based compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,420

 

 

 

—

 

 

 

1,420

 

Dividends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(10,455

)

 

 

(10,455

)

Common shares ($0.40 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(34,805

)

 

 

(34,805

)

Balance at September 30, 2023

 

 

22,400

 

 

$

541,482

 

 

 

86,761

 

 

$

868

 

 

$

1,923,130

 

 

$

(516,402

)

 

$

1,949,078

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended September 30, 2022

 

 

 

Preferred shares

 

 

Common shares

 

 

 

 

 

 

 

 

 

Number

 

 

 

 

 

Number

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

of

 

 

 

 

 

of

 

 

Par

 

 

paid-in

 

 

Accumulated

 

 

 

 

 

 

shares

 

 

Amount

 

 

shares

 

 

value

 

 

capital

 

 

deficit

 

 

Total

 

 

 

(in thousands, except per share amounts)

 

Balance at June 30, 2022

 

 

22,400

 

 

$

541,482

 

 

 

91,081

 

 

$

911

 

 

$

1,972,849

 

 

$

(444,602

)

 

$

2,070,640

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11,913

 

 

 

11,913

 

Share-based compensation

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

959

 

 

 

—

 

 

 

959

 

Dividends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(10,455

)

 

 

(10,455

)

Common shares ($0.47 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(42,228

)

 

 

(42,228

)

Repurchase of common shares

 

 

—

 

 

 

—

 

 

 

(987

)

 

 

(10

)

 

 

(13,488

)

 

 

—

 

 

 

(13,498

)

Balance at September 30, 2022

 

 

22,400

 

 

$

541,482

 

 

 

90,094

 

 

$

901

 

 

$

1,960,320

 

 

$

(485,372

)

 

$

2,017,331

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7

 

 

 

Nine months ended September 30, 2023

 

 

 

Preferred shares

 

 

Common shares

 

 

 

 

 

 

 

 

 

Number

 

 

 

 

 

Number

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

of

 

 

 

 

 

of

 

 

Par

 

 

paid-in

 

 

Accumulated

 

 

 

 

 

 

shares

 

 

Amount

 

 

shares

 

 

value

 

 

capital

 

 

deficit

 

 

Total

 

 

 

(in thousands, except per share amounts)

 

Balance at December 31, 2022

 

 

22,400

 

 

$

541,482

 

 

 

88,889

 

 

$

889

 

 

$

1,947,266

 

 

$

(526,822

)

 

$

1,962,815

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

146,743

 

 

 

146,743

 

Share-based compensation

 

 

—

 

 

 

—

 

 

 

146

 

 

 

1

 

 

 

2,853

 

 

 

—

 

 

 

2,854

 

Dividends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(31,364

)

 

 

(31,364

)

Common shares ($1.20 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(104,959

)

 

 

(104,959

)

Repurchase of common shares

 

 

—

 

 

 

—

 

 

 

(2,274

)

 

 

(22

)

 

 

(26,989

)

 

 

—

 

 

 

(27,011

)

Balance at September 30, 2023

 

 

22,400

 

 

$

541,482

 

 

 

86,761

 

 

$

868

 

 

$

1,923,130

 

 

$

(516,402

)

 

$

1,949,078

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30, 2022

 

 

 

Preferred shares

 

 

Common shares

 

 

 

 

 

 

 

 

 

Number

 

 

 

 

 

Number

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

of

 

 

 

 

 

of

 

 

Par

 

 

paid-in

 

 

Accumulated

 

 

 

 

 

 

shares

 

 

Amount

 

 

shares

 

 

value

 

 

capital

 

 

deficit

 

 

Total

 

 

 

(in thousands, except per share amounts)

 

Balance at December 31, 2021

 

 

22,400

 

 

$

541,482

 

 

 

94,897

 

 

$

949

 

 

$

2,081,757

 

 

$

(256,670

)

 

$

2,367,518

 

Cumulative effect of adoption of ASU 2020-06

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(50,347

)

 

 

9,394

 

 

 

(40,953

)

Balance at January 1, 2022

 

 

22,400

 

 

 

541,482

 

 

 

94,897

 

 

 

949

 

 

 

2,031,410

 

 

 

(247,276

)

 

 

2,326,565

 

Net loss

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(77,950

)

 

 

(77,950

)

Share-based compensation

 

 

—

 

 

 

—

 

 

 

85

 

 

 

1

 

 

 

2,607

 

 

 

—

 

 

 

2,608

 

Dividends:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(31,364

)

 

 

(31,364

)

Common shares ($1.41 per share)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(128,782

)

 

 

(128,782

)

Repurchase of common shares

 

 

—

 

 

 

—

 

 

 

(4,888

)

 

 

(49

)

 

 

(73,697

)

 

 

—

 

 

 

(73,746

)

Balance at September 30, 2022

 

 

22,400

 

 

$

541,482

 

 

 

90,094

 

 

$

901

 

 

$

1,960,320

 

 

$

(485,372

)

 

$

2,017,331

 

 

The accompanying notes are an integral part of these consolidated financial statements.

8

 

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Cash flows from operating activities

 

 

 

 

 

 

Net income (loss)

 

$

146,743

 

 

$

(77,950

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Change in fair value of mortgage servicing rights

 

 

64,515

 

 

 

(504,474

)

Mortgage servicing rights hedging results

 

 

81,584

 

 

 

87,651

 

Net gains on loans acquired for sale

 

 

(24,477

)

 

 

(15,937

)

Net (gains) losses on investments and financings

 

 

(13,761

)

 

 

713,081

 

Accrual of unearned discounts and amortization of purchase premiums on
   mortgage-backed securities, loans at fair value, and asset-backed financings

 

 

8,050

 

 

 

(11,355

)

Amortization of debt issuance costs

 

 

11,147

 

 

 

11,855

 

Results of real estate acquired in settlement of loans

 

 

251

 

 

 

(1,195

)

Share-based compensation expense

 

 

3,421

 

 

 

3,130

 

Purchase of loans acquired for sale at fair value from nonaffiliates

 

 

(63,699,477

)

 

 

(67,083,546

)

Purchase of loans acquired for sale at fair value from PennyMac Financial Services, Inc.

 

 

—

 

 

 

(298,862

)

Sale to nonaffiliates and repayment of loans acquired for sale

 

 

13,576,673

 

 

 

31,922,573

 

Sale of loans acquired for sale to PennyMac Financial Services, Inc.

 

 

50,812,386

 

 

 

36,544,166

 

Repurchase of loans subject to representation and warranties

 

 

(50,537

)

 

 

(72,933

)

Decrease in servicing advances

 

 

103,636

 

 

 

123,552

 

Decrease in due from PennyMac Financial Services, Inc.

 

 

1,308

 

 

 

12,393

 

Repurchase of real estate previously sold as loans acquired for sale

 

 

(456

)

 

 

—

 

Increase in other assets

 

 

(187,922

)

 

 

(223,929

)

(Decrease) increase in accounts payable and accrued liabilities

 

 

(68,352

)

 

 

4,550

 

Decrease in due to PennyMac Financial Services, Inc.

 

 

(8,759

)

 

 

(7,785

)

Increase in income taxes payable

 

 

51,189

 

 

 

150,519

 

Net cash provided by operating activities

 

 

807,162

 

 

 

1,275,504

 

Cash flows from investing activities

 

 

 

 

 

 

Net decrease (increase) in short-term investments

 

 

102,212

 

 

 

(184,344

)

Purchase of mortgage-backed securities at fair value

 

 

(3,108,701

)

 

 

(3,114,891

)

Sale and repayment of mortgage-backed securities at fair value

 

 

2,880,273

 

 

 

1,294,352

 

Repurchase of loans at fair value

 

 

(119

)

 

 

—

 

Repayment of loans at fair value

 

 

72,925

 

 

 

133,361

 

Net settlement of derivative financial instruments

 

 

(56,025

)

 

 

22,840

 

Distribution from credit risk transfer arrangements

 

 

136,033

 

 

 

418,087

 

Purchase of mortgage servicing rights at fair value

 

 

(14,637

)

 

 

—

 

Transfer of mortgage servicing rights relating to delinquent loans to Agency

 

 

653

 

 

 

—

 

Sale of real estate acquired in settlement of loans

 

 

3,803

 

 

 

7,619

 

Decrease in margin deposits

 

 

44,065

 

 

 

80,275

 

Net cash provided by (used in) investing activities

 

 

60,482

 

 

 

(1,342,701

)

 

The accompanying notes are an integral part of these consolidated financial statements.

Statements continued on the next page

9

 

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Continued)

 

 

Nine months ended September 30,

 

 

2023

 

 

2022

 

 

(in thousands)

 

Cash flows from financing activities

 

 

 

 

 

Sale of assets under agreements to repurchase

 

92,891,387

 

 

 

94,543,430

 

Repurchase of assets sold under agreements to repurchase

 

(93,488,136

)

 

 

(94,807,378

)

Issuance of mortgage loan participation purchase and sale agreements

 

1,739,456

 

 

 

3,067,648

 

Repayment of mortgage loan participation purchase and sale agreements

 

(1,715,465

)

 

 

(3,100,550

)

Issuance of notes payable secured by credit risk transfer and mortgage servicing assets

 

615,000

 

 

 

713,476

 

Repayment of notes payable secured by credit risk transfer and mortgage servicing assets

 

(595,303

)

 

 

(355,324

)

Issuance of Unsecured senior notes

 

53,500

 

 

 

—

 

Issuance of asset-backed financings at fair value

 

—

 

 

 

382,423

 

Repayment of asset-backed financings at fair value

 

(70,455

)

 

 

(130,698

)

Payment of debt issuance costs

 

(8,344

)

 

 

(8,932

)

Payment of dividends to preferred shareholders

 

(31,364

)

 

 

(31,364

)

Payment of dividends to common shareholders

 

(105,812

)

 

 

(131,318

)

Payment of vested share-based compensation tax withholdings

 

(567

)

 

 

(522

)

Repurchase of common shares

 

(27,011

)

 

 

(73,746

)

Net cash (used in) provided by financing activities

 

(743,114

)

 

 

67,145

 

Net increase (decrease) in cash

 

124,530

 

 

 

(52

)

Cash at beginning of period

 

111,866

 

 

 

58,983

 

Cash at end of period

$

236,396

 

 

$

58,931

 

Supplemental cash flow information

 

 

 

 

 

Payments (refunds), net:

 

 

 

 

 

Income taxes

$

6,142

 

 

$

(4,000

)

Interest

$

562,109

 

 

$

244,232

 

Non-cash investing activities:

 

 

 

 

 

Receipt of mortgage servicing rights as proceeds from sales of loans

$

249,925

 

 

$

543,255

 

Unsettled purchase of mortgage servicing rights

$

1,626

 

 

$

—

 

Exchange of mortgage servicing spread for interest-only stripped securities
   and interest receivable

$

105,096

 

 

$

—

 

Retention of subordinate mortgage-backed securities in loan securitizations

$

—

 

 

$

23,485

 

Recognition of loans at fair value resulting from initial consolidation
   of variable interest entities

$

—

 

 

$

405,908

 

Transfer of loans and advances to real estate acquired in settlement of loans

$

1,182

 

 

$

—

 

Non-cash financing activities:

 

 

 

 

 

Recognition of asset-backed financings resulting from initial consolidation of VIEs

$

—

 

 

$

382,423

 

Dividends declared, not paid

$

34,805

 

 

$

42,228

 

 

The accompanying notes are an integral part of these consolidated financial statements.

10

 

PENNYMAC MORTGAGE INVESTMENT TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Organization

PennyMac Mortgage Investment Trust (“PMT” or the “Company”) is a specialty finance company, which, through its subsidiaries (all of which are wholly-owned), invests in residential mortgage-related assets. The Company operates in four segments: credit sensitive strategies, interest rate sensitive strategies, correspondent production, and corporate:

•
The credit sensitive strategies segment represents the Company’s investments in credit risk transfer (“CRT”) arrangements referencing loans from its own correspondent production, including CRT agreements (“CRT Agreements”) and other CRT securities (together, “CRT arrangements”) and subordinate mortgage-backed securities (“MBS”).
•
The interest rate sensitive strategies segment represents the Company’s investments in mortgage servicing rights (“MSRs”), Agency and senior non-Agency MBS and the related interest rate hedging activities.
•
The correspondent production segment represents the Company’s operations aimed at serving as an intermediary between lenders and the capital markets by purchasing, pooling and reselling newly originated prime credit quality loans either directly or in the form of MBS, using the services of PNMAC Capital Management, LLC (“PCM”) and PennyMac Loan Services, LLC (“PLS”), both indirect controlled subsidiaries of PennyMac Financial Services, Inc. (“PFSI”), a publicly-traded mortgage banking and investment management company separately listed on the New York Stock Exchange.

The Company primarily sells the loans it acquires through its correspondent production activities to government-sponsored entities ("GSEs") such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) or to PLS for sale into securitizations guaranteed by the Government National Mortgage Association ("Ginnie Mae") or the GSEs. Fannie Mae, Freddie Mac and Ginnie Mae are each referred to as an “Agency” and, collectively, as the “Agencies.”

•
The corporate segment includes management fees, corporate expense amounts and certain interest income and expense.

The Company conducts substantially all of its operations and makes substantially all of its investments through its subsidiary, PennyMac Operating Partnership, L.P. (the “Operating Partnership”), and the Operating Partnership’s subsidiaries. A wholly-owned subsidiary of the Company is the sole general partner, and the Company is the sole limited partner, of the Operating Partnership.

The Company believes that it qualifies, and has elected to be taxed, as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended. To maintain its tax status as a REIT, the Company is required to distribute at least 90% of its taxable income in the form of qualifying distributions to shareholders.

Note 2—Basis of Presentation

The Company’s consolidated financial statements have been prepared in compliance with accounting principles generally accepted in the United States (“GAAP”) as codified in the Financial Accounting Standards Board’s Accounting Standards Codification for interim financial information and with the Securities and Exchange Commission’s instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, these financial statements and notes do not include all of the information required by GAAP for complete financial statements. This interim consolidated information should be read together with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

These unaudited consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations that may be anticipated for the full year. Intercompany accounts and transactions have been eliminated.

Preparation of financial statements in compliance with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results will likely differ from those estimates.

The Company held no restricted cash during the periods presented. Therefore, the consolidated statements of cash flows do not include references to restricted cash.

Note 3—Concentration of Risks

As discussed in Note 1 – Organization above, PMT’s operations and investing activities are centered in residential mortgage-related assets, including CRT arrangements, subordinate MBS, Agency and senior Non-Agency MBS and MSRs. CRT arrangements and subordinate MBS are more sensitive to borrower credit performance than other mortgage-related investments such as traditional loans and Agency MBS. Fixed-rate Agency and senior non-Agency MBS are sensitive to changes in market interest rates. MSRs are sensitive to changes in prepayment rate activity and expectations.

11

 

Credit Risk

Note 6 – Variable Interest Entities details the Company’s investments in CRT arrangements whereby the Company sold pools of loans into Fannie Mae guaranteed loan securitizations which became reference pools underlying the CRT arrangements. Fannie Mae transferred interest-only (“IO”) ownership interests and recourse obligations based upon securitized reference pools of loans subject to the CRT arrangements into trust entities, and the Company acquired the IO ownership interest and assumed the recourse obligations in the CRT arrangements.

The Company also invests in subordinate MBS, which are among the first beneficial interests in the issuing trusts to absorb credit losses on the underlying loans.

The Company’s retention of credit risk through its investment in CRT arrangements and subordinate MBS subjects it to risks associated with delinquency and foreclosure similar to the risks of loss associated with owning the underlying loans, which is greater than the risk of loss associated with selling such loans to the Agencies without the retention of such credit risk in the case of CRT arrangements and investing in senior mortgage pass through securities in the case of subordinate MBS.

CRT Agreements are structured such that loans that reach a specific number of days delinquent trigger losses chargeable to the CRT Agreements based on the size of the loan and a contractual schedule of loss severity. Therefore, the risks associated with delinquency and foreclosure may in some instances, be greater than the risks associated with owning the related loans because the structure of the CRT Agreements provides that the Company may be required to absorb losses in the event of delinquency or foreclosure even when there is ultimately no loss realized with respect to such loans (e.g., as a result of a borrower’s re-performance). In contrast, the structure of the Company’s investment in CRT strips requires PMT to absorb losses only when the reference loans realize losses.

Fair Value Risk

The Company is exposed to fair value risk in addition to the risks specific to credit and, as a result of prevailing market conditions, may be required to recognize losses associated with adverse changes to the fair value of its investments in MSRs, CRT arrangements, and MBS:

•
The fair value of MSRs is sensitive to changes in prepayment speeds, estimates of cost to service the underlying loans or the returns demanded by market participants;
•
The fair values of CRT arrangements and subordinate MBS are sensitive to market perceptions of future credit performance of the underlying loans as well as the actual credit performance of such loans and to the returns required by market participants to hold such investments; and
•
The fair values of fixed-rate Agency and senior non-Agency pass through MBS are sensitive to changes in market interest rates.

Note 4—Transactions with Related Parties

The Company enters into transactions with subsidiaries of PFSI in support of its operating, investing and financing activities as summarized below.

Operating Activities

Loan Servicing

The Company has a loan servicing agreement with PLS (the “Servicing Agreement”) pursuant to which PLS provides subservicing for the Company's portfolio of MSRs, loans held for sale, loans held in VIEs (prime servicing) and its portfolio of residential loans purchased with credit deterioration (special servicing). The Servicing Agreement provides for servicing fees earned by PLS that are established at a per loan monthly amount based on the delinquency, bankruptcy and/or foreclosure status of the serviced loan or real estate acquired in settlement of loans (“REO”). The Servicing Agreement expires on June 30, 2025, subject to automatic renewal for additional 18-month periods, unless terminated earlier in accordance with its terms.

12

 

Prime Servicing

The base servicing fees for prime loans subserviced by PLS on the Company’s behalf are $7.50 per month for fixed-rate loans and $8.50 per month for adjustable-rate loans.

To the extent that these prime loans become delinquent, PLS is entitled to an additional servicing fee per loan ranging from $10 to $55 per month and based on the delinquency, bankruptcy and foreclosure status of the loan or $75 per month if the underlying mortgaged property becomes REO.

PLS is also entitled to customary ancillary income and certain market-based fees and charges, including boarding and deboarding fees, liquidation and disposition fees, assumption, modification and origination fees and certain fees for pandemic-related forbearance and modification activities.

Special Servicing

The base servicing fee rates for loans purchased with credit deterioration (distressed loans) range from $30 per month for current loans up to $95 per month for loans in foreclosure proceedings. The base servicing fee rate for REO is $75 per month. PLS also receives a supplemental servicing fee of $25 per month for each distressed loan.

PLS receives activity-based fees for modifications, foreclosures and liquidations that it facilitates with respect to distressed loans, as well as other market-based refinancing and loan disposition fees.

MSR Recapture Agreement

The Company has an MSR recapture agreement with PFSI. Pursuant to the terms of the MSR recapture agreement, if PFSI refinances (recaptures) mortgage loans for which the Company previously held the MSRs, PFSI is generally required to transfer and convey to the Company cash in an amount equal to:

•
40% of the fair market value of the MSRs relating to the recaptured loans subject to the first 15% of the “recapture rate”;
•
35% of the fair market value of the MSRs relating to the recaptured loans subject to the “recapture rate” in excess of 15% and up to 30%; and
•
30% of the fair market value of the MSRs relating to the recaptured loans subject to the “recapture rate” in excess of 30%.

The “recapture rate” means, during each month, the ratio of (i) the aggregate unpaid principal balance of all recaptured loans, to (ii) the aggregate unpaid principal balance of all mortgage loans for which the Company held the MSRs and that were refinanced or otherwise paid off in such month. PFSI has further agreed to allocate sufficient resources to target a recapture rate of at least 15%.

The MSR recapture agreement expires, unless terminated earlier in accordance with its terms, on June 30, 2025, subject to automatic renewal for additional 18-month periods, unless terminated in accordance with its terms.

Following is a summary of loan servicing fees earned by PLS:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Loan servicing fees:

 

 

 

 

 

 

 

 

 

 

 

 

Loans acquired for sale at fair value

 

$

112

 

 

$

258

 

 

$

569

 

 

$

780

 

Loans at fair value

 

 

33

 

 

 

111

 

 

 

184

 

 

 

427

 

MSRs

 

 

20,112

 

 

 

19,878

 

 

 

60,270

 

 

 

60,463

 

 

$

20,257

 

 

$

20,247

 

 

$

61,023

 

 

$

61,670

 

Average investment in loans:

 

 

 

 

 

 

 

 

 

 

 

 

Acquired for sale at fair value

 

$

868,808

 

 

$

1,763,506

 

 

$

1,613,347

 

 

$

1,884,840

 

At fair value

 

$

1,437,418

 

 

$

1,659,183

 

 

$

1,479,525

 

 

$

1,655,022

 

Average MSR portfolio UPB

 

$

231,333,064

 

 

$

224,756,659

 

 

$

231,333,990

 

 

$

220,988,459

 

 

Correspondent Production Activities

The Company is provided fulfillment and other services by PLS under an amended and restated mortgage banking services agreement. The Company does not hold the Ginnie Mae approval required to issue securities guaranteed by Ginnie Mae MBS and act as a servicer. Accordingly, under the agreement, PLS currently purchases loans saleable in accordance with the Ginnie Mae MBS Guide “as is” and without recourse of any kind from the Company at cost less any administrative fees paid by the correspondent to the Company plus accrued interest and a sourcing fee.

13

 

The Company may also sell conventional loans to PLS under the same arrangement subject to mutual agreement between the parties.

Fulfillment and sourcing fees are summarized below:

•
Fulfillment fees shall not exceed the following:
(i)
the number of loan commitments issued by the Company multiplied by a pull-through factor of either .99 or .80 depending on whether the loan commitments are subject to a “mandatory trade confirmation” or a “best efforts lock confirmation”, respectively, and then multiplied by $585 for each pull-through adjusted loan commitment up to and including 16,500 per quarter and $355 for each pull-through adjusted loan commitment in excess of 16,500 per quarter, plus
(ii)
$315 multiplied by the number of purchased loans up to and including 16,500 per quarter and $195 multiplied by the number of purchased loans in excess of 16,500 per quarter, plus
(iii)
$750 multiplied by the number of all purchased loans that are sold or securitized to parties other than Fannie Mae and Freddie Mac; provided however, that no fulfillment fee shall be due or payable to PLS with respect to any Ginnie Mae loans or, as of October 1, 2022, designated Fannie Mae or Freddie Mac loans acquired by PLS.
•
Sourcing fees range from one to two basis points of the loans' unpaid principal balance (“UPB”), generally based on the average number of calendar days the loans are held by PMT before purchase by PLS.

The mortgage banking services agreement expires, unless terminated earlier in accordance with its terms, on June 30, 2025, subject to automatic renewal for additional 18-month periods, unless terminated in accordance with its terms.

The Company may purchase newly originated conforming balance non-government insured or guaranteed loans from PLS under a mortgage loan purchase and sale agreement.

Following is a summary of correspondent production activity between the Company and PLS:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Loan fulfillment fees earned by PLS

 

$

5,531

 

 

$

18,407

 

 

$

22,895

 

 

$

55,807

 

UPB of loans fulfilled by PLS

 

$

2,760,000

 

 

$

10,226,513

 

 

$

12,418,084

 

 

$

30,319,475

 

 

 

 

 

 

 

 

 

 

 

 

 

Sourcing fees received from PLS included in
   Net gains on loans acquired for sale

 

$

1,854

 

 

$

1,203

 

 

$

5,014

 

 

$

3,562

 

UPB of loans sold to PLS:

 

 

 

 

 

 

 

 

 

 

 

 

Government guaranteed or insured

 

$

8,606,835

 

 

$

12,261,222

 

 

$

29,127,889

 

 

$

35,643,210

 

Conventional conforming

 

 

9,932,593

 

 

 

—

 

 

 

21,013,357

 

 

 

—

 

 

$

18,539,428

 

 

$

12,261,222

 

 

$

50,141,246

 

 

$

35,643,210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of loans acquired for sale from PLS

 

$

—

 

 

$

—

 

 

$

—

 

 

$

298,862

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax service fees paid to PLS

 

$

579

 

 

$

2,192

 

 

$

2,690

 

 

$

6,938

 

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Loans included in Loans acquired for sale at fair value
   pending sale to PLS

 

$

499,132

 

 

$

159,671

 

 

Management Fees

The Company has a management agreement with PCM pursuant to which PMT pays PCM management fees as follows:

•
A base management fee that is calculated quarterly and is equal to the sum of (i) 1.5% per year of average shareholders’ equity up to $2 billion, (ii) 1.375% per year of average shareholders’ equity in excess of $2 billion and up to $5 billion, and (iii) 1.25% per year of average shareholders’ equity in excess of $5 billion.
•
A performance incentive fee that is calculated quarterly at a defined annualized percentage of the amount by which “net income,” on a rolling four-quarter basis and before deducting the incentive fee, exceeds certain levels of return on “equity.”

The performance incentive fee is equal to the sum of: (a) 10% of the amount by which “net income” for the quarter exceeds (i) an 8% return on “equity” plus the “high watermark”, up to (ii) a 12% return on “equity”; plus (b) 15% of the amount by which “net income” for the quarter exceeds (i) a 12% return on “equity” plus the “high watermark”, up to (ii) a 16% return on “equity”; plus (c) 20% of the amount by which “net income” for the quarter exceeds a 16% return on “equity” plus the “high watermark.”

14

 

For the purpose of determining the amount of the performance incentive fee:

“Net income” is defined as net income or loss attributable to the Company’s common shares of beneficial interest (“Common Shares”) calculated in accordance with GAAP, and adjusted to exclude one-time events pursuant to changes in GAAP and certain other non-cash charges after discussion between PCM and the Company’s independent trustees and after approval by a majority of the Company’s independent trustees.

“Equity” is the weighted average of the issue price per Common Share of all of the Company’s public offerings, multiplied by the weighted average number of Common Shares outstanding (including restricted share units) in the rolling four-quarter period.

“High watermark” is the quarterly adjustment that reflects the amount by which the “net income” (stated as a percentage of return on "equity") in that quarter exceeds or falls short of the lesser of 8% and the average Fannie Mae 30-year MBS yield (the "Target Yield") for the four quarters then ended. The “high watermark” starts at zero and is adjusted quarterly. If the “net income” is lower than the Target Yield, the “high watermark” is increased by the difference. If the “net income” is higher than the Target Yield, the “high watermark” is reduced by the difference. Each time a performance incentive fee is earned, the “high watermark” returns to zero. As a result, the threshold amounts required for PCM to earn a performance incentive fee are adjusted cumulatively based on the performance of PMT’s “net income” over (or under) the Target Yield, until the “net income” in excess of the Target Yield exceeds the then-current cumulative “high watermark” amount.

The base management fee and the performance incentive fee are both payable quarterly in arrears. The performance incentive fee may be paid in cash or a combination of cash and the Company’s Common Shares (subject to a limit of no more than 50% paid in Common Shares), at the Company’s option.

In the event of termination of the management agreement between the Company and PCM, PCM may be entitled to a termination fee in certain circumstances. The termination fee is equal to three times the sum of (a) the average annual base management fee, and (b) the average annual performance incentive fee earned by PCM, in each case during the 24-month period before termination of the management agreement.

Following is a summary of management fee expenses:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Base management

 

$

7,175

 

 

$

7,731

 

 

$

21,510

 

 

$

23,758

 

Performance incentive

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

$

7,175

 

 

$

7,731

 

 

$

21,510

 

 

$

23,758

 

Average shareholders' equity amounts used
   to calculate base management fee expense

 

$

1,897,964

 

 

$

2,048,887

 

 

$

1,917,525

 

 

$

2,128,916

 

 

Expense Reimbursement

Under the management agreement, PCM is entitled to reimbursement of its organizational and operating expenses, including third-party expenses, incurred on the Company’s behalf, it being understood that PCM and its affiliates shall allocate a portion of their personnel’s time to provide certain legal, tax and investor relations services for the direct benefit of the Company. PCM is reimbursed $165,000 per fiscal quarter, such amount to be reviewed annually and to not preclude reimbursement for any other services performed by PCM or its affiliates.

The Company is required to pay PCM and its affiliates a portion of rent, telephone, utilities, office furniture, equipment, machinery and other office, internal and overhead expenses of PCM and its affiliates required for the Company’s and its subsidiaries’ operations. These expenses are allocated based on the ratio of the Company’s and its subsidiaries’ proportion of gross assets compared to all remaining gross assets managed or owned by PCM and/or its affiliates as calculated at each fiscal quarter end.

15

 

Following is a summary of the Company’s reimbursements to PCM and its affiliates for expenses:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Reimbursement of:

 

 

 

 

 

 

 

 

 

 

 

 

Expenses incurred on the Company’s behalf, net

 

$

5,893

 

 

$

705

 

 

$

15,532

 

 

$

8,896

 

Common overhead incurred by PCM and its
   affiliates

 

 

1,489

 

 

 

2,574

 

 

 

5,450

 

 

 

6,247

 

Compensation

 

 

165

 

 

 

165

 

 

 

495

 

 

 

495

 

 

$

7,547

 

 

$

3,444

 

 

$

21,477

 

 

$

15,638

 

Payments and settlements during the year (1)

 

$

9,190

 

 

$

41,509

 

 

$

72,446

 

 

$

110,835

 

 

(1)
Payments and settlements include payments and netting settlements made pursuant to master netting agreements between the Company and PFSI for the operating, investing and financing activities itemized in this Note.

Financing Activities

PFSI held 75,000 of the Company’s Common Shares at both September 30, 2023 and December 31, 2022.

Amounts Receivable from and Payable to PFSI

Amounts receivable from and payable to PFSI are summarized below:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

(in thousands)

 

Due from PFSI-Miscellaneous receivables

 

$

2,252

 

 

$

3,560

 

 

 

 

 

 

 

Due to PFSI:

 

 

 

 

 

 

Correspondent production fees

 

$

9,183

 

 

$

6,835

 

Management fees

 

 

7,175

 

 

 

7,307

 

Loan servicing fees

 

 

6,760

 

 

 

6,740

 

Allocated expenses and expenses and costs
    paid by PFSI on PMT’s behalf

 

 

2,672

 

 

 

11,447

 

Fulfillment fees

 

 

1,823

 

 

 

4,043

 

 

$

27,613

 

 

$

36,372

 

 

The Company has also transferred cash to PLS to fund loan servicing advances and REO property acquisition and preservation costs on its behalf. Such amounts are included in various balance sheet items as summarized below:

Balance sheet line including advance amount

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Loan servicing advances

 

$

93,614

 

 

$

197,972

 

Real estate acquired in settlement of loans

 

 

2,109

 

 

 

3,479

 

 

$

95,723

 

 

$

201,451

 

 

Note 5—Loan Sales

The following table summarizes cash flows between the Company and transferees in transfers of loans that are accounted for as sales where the Company maintains continuing involvement with the loans:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Cash flows:

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales

 

$

3,107,613

 

 

$

9,709,969

 

 

$

13,576,673

 

 

$

31,922,573

 

Loan servicing fees received

 

$

166,809

 

 

$

162,987

 

 

$

496,522

 

 

$

461,021

 

 

16

 

The following table summarizes for the dates presented collection status information for loans that are accounted for as sales where the Company maintains continuing involvement:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

UPB of loans outstanding

 

$

230,066,301

 

 

$

229,858,573

 

Collection status (UPB)

 

 

 

 

 

 

Delinquency:

 

 

 

 

 

 

30-89 days delinquent

 

$

2,005,518

 

 

$

1,903,007

 

90 or more days delinquent:

 

 

 

 

 

 

Not in foreclosure

 

$

944,892

 

 

$

880,841

 

In foreclosure

 

$

69,656

 

 

$

70,921

 

Bankruptcy

 

$

170,596

 

 

$

123,239

 

Custodial funds managed by the Company (1)

 

$

2,760,857

 

 

$

1,783,157

 

 

(1)
Custodial funds include borrower and investor custodial cash accounts relating to loans serviced under mortgage servicing agreements and are not included on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the loans’ borrowers and investors, and these fees are included in Interest income in the Company’s consolidated statements of operations.

Note 6—Variable Interest Entities

The Company is a variable interest holder in various VIEs that relate to its investing and financing activities.

Credit Risk Transfer Arrangements

The Company has previously entered into certain loan sales arrangements pursuant to which it accepted credit risk relating to the loans sold in exchange for a portion of the interest earned on such loans. These arrangements absorb scheduled or realized credit losses on such loans and include CRT Agreements and other CRT securities.

The Company, through its subsidiary, PennyMac Corp. (“PMC”), entered into CRT arrangements with Fannie Mae, pursuant to which the Company sold pools of loans into Fannie Mae-guaranteed securitizations while retaining recourse obligations as part of the retention of IO ownership interests in such loans and include:

•
CRT Agreements, which are structured such that loans that reach a specific number of days delinquent (including loans in forbearance) trigger losses chargeable to the CRT Agreements based on the size of the loan and a contractual schedule of loss severity; and
•
Other CRT securities, which require the Company to absorb losses only when the reference loans realize credit losses.

The Company placed Deposits securing CRT arrangements into the subsidiary trust entities to secure its recourse obligations. The Deposits securing CRT arrangements represent the Company’s maximum contractual exposure to claims under its recourse obligations and are the sole source of settlement of losses under the CRT arrangements.

The Company’s exposure to losses under its recourse obligations was initially established at rates ranging from 3.5% to 4.0% of the UPB of the loans sold under the CRT arrangements. As the UPB of the underlying loans subject to each CRT arrangement is reduced through repayments, the percentage exposure of each CRT arrangement will increase to maximums ranging from 4.5% to 5.0% of outstanding UPB, although the total dollar amount of exposure to losses does not increase.

The Company has concluded that the subsidiary trust entities holding its CRT arrangements are VIEs and the Company is the primary beneficiary of the VIEs as it is the holder of the primary beneficial interests, which absorb the variability of the trusts’ results of operations. For CRT Agreements, the Company recognizes its IO ownership interests and recourse obligations on the consolidated balance sheets as CRT Derivatives in Derivative assets and Derivative and credit risk transfer strip liabilities. For other CRT securities, the Company recognizes its IO ownership interests and recourse obligations as CRT strips which are also included on the consolidated balance sheet in Derivative and credit risk transfer strip liabilities. Gains and losses on the derivatives and strips (including the IO ownership interest sold to nonaffiliates) included in the CRT arrangements are included in Net (losses) gains on investments and financings in the consolidated statements of operations.

17

 

Following is a summary of the CRT arrangements:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

Net (losses) gains on investments and financings:

 

 

 

 

 

 

 

 

 

 

 

 

CRT Derivatives and strips:

 

 

 

 

 

 

 

 

 

 

 

 

CRT derivatives

 

 

 

 

 

 

 

 

 

 

 

 

Realized

 

$

4,051

 

 

$

4,624

 

 

$

12,504

 

 

$

34,982

 

Valuation changes

 

 

9,113

 

 

 

(365

)

 

 

26,619

 

 

 

(42,154

)

 

 

13,164

 

 

 

4,259

 

 

 

39,123

 

 

 

(7,172

)

CRT strips

 

 

 

 

 

 

 

 

 

 

 

 

Realized

 

 

11,241

 

 

 

13,589

 

 

 

35,529

 

 

 

47,430

 

Valuation changes

 

 

9,977

 

 

 

(11,788

)

 

 

68,601

 

 

 

(103,284

)

 

 

21,218

 

 

 

1,801

 

 

 

104,130

 

 

 

(55,854

)

Interest-only security payable at fair value

 

 

(4,228

)

 

 

(1,701

)

 

 

(6,363

)

 

 

(10,593

)

 

 

30,154

 

 

 

4,359

 

 

 

136,890

 

 

 

(73,619

)

Interest income — Deposits securing CRT arrangements

 

 

16,419

 

 

 

6,978

 

 

 

46,410

 

 

 

9,584

 

 

$

46,573

 

 

$

11,337

 

 

$

183,300

 

 

$

(64,035

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net payments made (recoveries received) to settle losses
    (recoveries) on CRT arrangements

 

$

496

 

 

$

180

 

 

$

2,252

 

 

$

(20,249

)

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Carrying value of CRT arrangements:

 

 

 

 

 

 

Derivative assets - CRT derivatives

 

$

7,010

 

 

$

1,262

 

Derivative and credit risk transfer strip liabilities:

 

 

 

 

 

 

CRT derivatives

 

 

(2,268

)

 

 

(23,360

)

CRT strips

 

 

(68,592

)

 

 

(137,193

)

 

 

(70,860

)

 

 

(160,553

)

Deposits securing CRT arrangements

 

 

1,237,294

 

 

 

1,325,294

 

Interest-only security payable at fair value

 

 

(28,288

)

 

 

(21,925

)

 

 

$

1,145,156

 

 

$

1,144,078

 

 

 

 

 

 

 

CRT arrangement assets pledged to secure borrowings:

 

 

 

 

 

 

Derivative assets

 

$

7,010

 

 

$

1,262

 

Deposits securing CRT arrangements (1)

 

$

1,237,294

 

 

$

1,325,294

 

 

 

 

 

 

 

UPB of loans underlying CRT arrangements

 

$

23,613,675

 

 

$

25,315,524

 

Collection status (UPB):

 

 

 

 

Delinquency

 

 

 

 

 

 

Current

 

$

23,028,327

 

 

$

24,673,719

 

30-89 days delinquent

 

$

384,340

 

 

$

409,049

 

90-180 days delinquent

 

$

116,110

 

 

$

112,286

 

180 or more days delinquent

 

$

66,178

 

 

$

93,717

 

Foreclosure

 

$

18,720

 

 

$

26,753

 

Bankruptcy

 

$

61,364

 

 

$

54,395

 

 

(1)
Deposits securing credit risk transfer strip liabilities also secure $70.9 million and $160.6 million in CRT derivative and CRT strip liabilities at September 30, 2023 and December 31, 2022, respectively.

Subordinate Mortgage-Backed Securities

The Company retains or purchases subordinate MBS in transactions sponsored by PMC or a nonaffiliate. Cash inflows from the loans underlying these securities are distributed to investors and service providers in accordance with the respective securities' contractual priority of payments and, as such, most of these inflows must be directed first to service and repay the senior securities.

18

 

The rights of holders of subordinate securities to receive distributions of principal and/or interest, as applicable, are subordinate to the rights of holders of senior securities. After senior securities are repaid, substantially all cash inflows will be directed to subordinate securities, including those held by the Company, until they are fully repaid.

The Company’s retention or purchase of subordinate MBS exposes PMT to the credit risk in the underlying loans because the Company’s investments are among the first beneficial interests to absorb credit losses on those assets. The Company’s exposure to losses from its investments in subordinate MBS is limited to its recorded investment in such securities.

Whether the Company concludes that it is the primary beneficiary of the VIEs issuing the subordinate MBS and therefore consolidates these entities is based on its exposure to losses that could be significant to the VIEs and its power to direct activities that most significantly impact the VIEs’ economic performance:

•
Certain of the Company’s investments in subordinate MBS either do not expose the Company to losses or residual returns that could be significant to the issuing VIE or the Company has concluded that it does not have the power to direct the activities that most significantly impact the VIE’s economic performance. These investments are classified as subordinate credit-linked securities in its investment in MBS as shown in Note 8 – Mortgage-Backed Securities.
•
For other investments in subordinate MBS, comprised of transactions backed by loans purchased by the Company that were subsequently included in securitizations sponsored by the Company or a nonaffiliate and serviced by PLS, the Company concluded that it is the primary beneficiary of the VIEs as it has the power, through PLS, in its role as the servicer or sub-servicer of the majority of the loans, to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance and, as a holder of subordinate securities, is exposed to losses or residual returns that could potentially be significant to the VIEs. Therefore, PMT consolidates the VIEs that issue those subordinate MBS.

The Company recognizes the interest income earned on the loans owned by the VIEs and the interest expense attributable to the asset-backed securities issued to nonaffiliates by its consolidated VIEs on its consolidated statements of operations.

Following is a summary of the Company’s investment in subordinate mortgage-backed securities held in consolidated VIEs:

 

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Net investment income

 

 

 

 

 

 

 

 

 

 

 

 

Fair value changes:

 

 

 

 

 

 

 

 

 

 

 

 

Loans at fair value

 

$

(54,082

)

 

$

(99,267

)

 

$

(61,318

)

 

$

(318,300

)

Asset-backed financings at fair value

 

 

58,474

 

 

 

92,993

 

 

 

66,108

 

 

 

298,834

 

Interest income

 

 

9,505

 

 

 

16,002

 

 

 

38,315

 

 

 

44,587

 

Interest expense

 

 

13,652

 

 

 

14,265

 

 

 

38,796

 

 

 

40,308

 

 

 

$

245

 

 

$

(4,537

)

 

$

4,309

 

 

$

(15,187

)

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Loans at fair value

 

$

1,370,021

 

 

$

1,509,942

 

Asset-backed financings at fair value

 

$

1,279,059

 

 

$

1,414,955

 

Subordinate MBS retained at fair value pledged to
   secure Assets sold under agreements to repurchase

 

$

80,298

 

 

$

84,044

 

 

Note 7— Fair Value

The Company’s consolidated financial statements include assets and liabilities that are measured at or based on their fair values. Measurement at or based on fair value may be on a recurring or nonrecurring basis depending on the accounting principles applicable to the specific asset or liability and whether the Company has elected to carry the item at its fair value as discussed in the following paragraphs.

The Company groups its assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the observability of the inputs used to determine fair value. These levels are:

•
Level 1—Quoted prices in active markets for identical assets or liabilities.
•
Level 2—Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company.

19

 

•
Level 3—Prices determined using significant unobservable inputs. In situations where significant observable inputs are unavailable, unobservable inputs may be used. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability, and are based on the best information available in the circumstances.

As a result of the difficulty in observing certain significant valuation inputs affecting “Level 3” fair value assets and liabilities, the Company is required to make judgments regarding these items’ fair values. Different persons in possession of the same facts may reasonably arrive at different conclusions as to the inputs to be applied in valuing these assets and liabilities and their fair values. Such differences may result in significantly different fair value measurements. Likewise, due to the general illiquidity of some of these assets and liabilities, subsequent transactions may be at values significantly different from those reported.

The Company reclassifies its assets and liabilities between levels of the fair value hierarchy when the inputs required to establish fair value at a level of the fair value hierarchy are no longer readily available, requiring the use of lower-level inputs, or when the inputs required to establish fair value at a higher level of the hierarchy become available.

Fair Value Accounting Elections

The Company identified all of PMT’s non-cash financial assets and MSRs to be accounted for at fair value. The Company has elected to account for these assets at fair value so such changes in fair value will be reflected in income as they occur and more timely reflect the results of the Company’s performance.

The Company identified PMT’s asset-backed financings of VIEs and interest only security payable to be accounted for at fair value to reflect the generally offsetting changes in fair value of these borrowings to changes in fair value of the assets at fair value collateralizing these financings. For other borrowings, the Company has determined that historical cost accounting is more appropriate because under this method debt issuance costs are amortized over the term of the debt facilities, thereby matching the debt issuance cost to the periods benefiting from the availability of these facilities.

20

 

Financial Statement Items Measured at Fair Value on a Recurring Basis

Following is a summary of financial statement items that are measured at fair value on a recurring basis:

 

 

September 30, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

$

150,059

 

 

$

—

 

 

$

—

 

 

$

150,059

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

4,562,437

 

 

 

103,533

 

 

 

4,665,970

 

Loans acquired for sale at fair value

 

 

—

 

 

 

1,020,848

 

 

 

4,882

 

 

 

1,025,730

 

Loans at fair value

 

 

—

 

 

 

1,370,021

 

 

 

2,097

 

 

 

1,372,118

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Call options on interest rate futures purchase contracts

 

 

641

 

 

 

—

 

 

 

—

 

 

 

641

 

Put options on interest rate futures purchase contracts

 

 

19,256

 

 

 

—

 

 

 

—

 

 

 

19,256

 

Forward purchase contracts

 

 

—

 

 

 

1,287

 

 

 

—

 

 

 

1,287

 

Forward sale contracts

 

 

—

 

 

 

30,348

 

 

 

—

 

 

 

30,348

 

MBS put options

 

 

—

 

 

 

169

 

 

 

—

 

 

 

169

 

CRT derivatives

 

 

—

 

 

 

—

 

 

 

7,010

 

 

 

7,010

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

1,970

 

 

 

1,970

 

Total derivative assets before netting

 

 

19,897

 

 

 

31,804

 

 

 

8,980

 

 

 

60,681

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(30,931

)

Total derivative assets after netting

 

 

19,897

 

 

 

31,804

 

 

 

8,980

 

 

 

29,750

 

Mortgage servicing rights at fair value

 

 

—

 

 

 

—

 

 

 

4,108,661

 

 

 

4,108,661

 

 

$

169,956

 

 

$

6,985,110

 

 

$

4,228,153

 

 

$

11,352,288

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed financings at fair value

 

$

—

 

 

$

1,279,059

 

 

$

—

 

 

$

1,279,059

 

Interest-only security payable at fair value

 

 

—

 

 

 

—

 

 

 

28,288

 

 

 

28,288

 

Derivative and credit risk transfer strip liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Put options on interest rate futures sell contracts

 

 

1,688

 

 

 

—

 

 

 

—

 

 

 

1,688

 

Forward purchase contracts

 

 

—

 

 

 

9,994

 

 

 

—

 

 

 

9,994

 

Forward sales contracts

 

 

—

 

 

 

1,464

 

 

 

—

 

 

 

1,464

 

CRT derivatives

 

 

—

 

 

 

—

 

 

 

2,268

 

 

 

2,268

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

5,318

 

 

 

5,318

 

Total derivative liabilities before netting

 

 

1,688

 

 

 

11,458

 

 

 

7,586

 

 

 

20,732

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

51,170

 

Total derivative liabilities after netting

 

 

1,688

 

 

 

11,458

 

 

 

7,586

 

 

 

71,902

 

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

68,592

 

 

 

68,592

 

Total derivative and credit risk transfer strip liabilities

 

 

1,688

 

 

 

11,458

 

 

 

76,178

 

 

 

140,494

 

 

$

1,688

 

 

$

1,290,517

 

 

$

104,466

 

 

$

1,447,841

 

 

 

21

 

 

 

December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

$

252,271

 

 

$

—

 

 

$

—

 

 

$

252,271

 

Mortgage-backed securities at fair value

 

 

—

 

 

 

4,462,601

 

 

 

—

 

 

 

4,462,601

 

Loans acquired for sale at fair value

 

 

—

 

 

 

1,811,225

 

 

 

10,708

 

 

 

1,821,933

 

Loans at fair value

 

 

—

 

 

 

1,509,942

 

 

 

3,457

 

 

 

1,513,399

 

Derivative assets:

 

 

 

 

 

 

 

 

 

 

 

 

Call options on interest rate futures purchase contracts

 

 

2,906

 

 

 

—

 

 

 

—

 

 

 

2,906

 

Put options on interest rate futures purchase contracts

 

 

8,130

 

 

 

—

 

 

 

—

 

 

 

8,130

 

Forward purchase contracts

 

 

—

 

 

 

418

 

 

 

—

 

 

 

418

 

Forward sale contracts

 

 

—

 

 

 

43,435

 

 

 

—

 

 

 

43,435

 

MBS put options

 

 

—

 

 

 

2,783

 

 

 

—

 

 

 

2,783

 

CRT derivatives

 

 

—

 

 

 

—

 

 

 

1,262

 

 

 

1,262

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

3,877

 

 

 

3,877

 

Total derivative assets before netting

 

 

11,036

 

 

 

46,636

 

 

 

5,139

 

 

 

62,811

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

22,129

 

Total derivative assets after netting

 

 

11,036

 

 

 

46,636

 

 

 

5,139

 

 

 

84,940

 

Mortgage servicing rights at fair value

 

 

—

 

 

 

—

 

 

 

4,012,737

 

 

 

4,012,737

 

 

$

263,307

 

 

$

7,830,404

 

 

$

4,032,041

 

 

$

12,147,881

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-backed financings at fair value

 

$

—

 

 

$

1,414,955

 

 

$

—

 

 

$

1,414,955

 

Interest-only security payable at fair value

 

 

—

 

 

 

—

 

 

 

21,925

 

 

 

21,925

 

Derivative liabilities and credit risk transfer strips:

 

 

 

 

 

 

 

 

 

 

 

 

Forward purchase contracts

 

 

—

 

 

 

15,196

 

 

 

—

 

 

 

15,196

 

Forward sales contracts

 

 

—

 

 

 

17,279

 

 

 

—

 

 

 

17,279

 

CRT derivatives

 

 

—

 

 

 

—

 

 

 

23,360

 

 

 

23,360

 

Interest rate lock commitments

 

 

—

 

 

 

—

 

 

 

4,355

 

 

 

4,355

 

Total derivative liabilities before netting

 

 

—

 

 

 

32,475

 

 

 

27,715

 

 

 

60,190

 

Netting

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(30,157

)

Total derivative liabilities after netting

 

 

—

 

 

 

32,475

 

 

 

27,715

 

 

 

30,033

 

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

137,193

 

 

 

137,193

 

Total derivative and credit risk transfer strip
   liabilities

 

 

—

 

 

 

32,475

 

 

 

164,908

 

 

 

167,226

 

 

$

—

 

 

$

1,447,430

 

 

$

186,833

 

 

$

1,604,106

 

 

22

 

The following is a summary of changes in items measured at fair value on a recurring basis using Level 3 inputs that are significant to the estimation of the fair values of the assets and liabilities at either the beginning or end of the periods presented:

 

 

Quarter ended September 30, 2023

 

Assets (1)

 

Interest-only stripped securities

 

 

Loans
acquired
for sale

 

 

Loans at
fair value

 

 

CRT
derivatives

 

 

Interest rate
lock
commitments

 

 

CRT
strips

 

 

Mortgage
servicing
rights

 

 

Total

 

 

 

(in thousands)

 

Balance, June 30, 2023

 

$

—

 

 

$

6,630

 

 

$

2,665

 

 

$

(4,394

)

 

$

(1,298

)

 

$

(78,569

)

 

$

3,977,938

 

 

$

3,902,972

 

Purchases and issuances

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,618

 

 

 

—

 

 

 

16,263

 

 

 

22,881

 

Repayments and sales

 

 

—

 

 

 

(1,383

)

 

 

(510

)

 

 

(4,028

)

 

 

—

 

 

 

(11,241

)

 

 

—

 

 

 

(17,162

)

Amounts received pursuant to sales
  of loans

 

 

—

 

 

 

(496

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

58,560

 

 

 

58,064

 

Changes in fair value included in results
of operations arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument -
   specific credit risk

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other factors

 

 

(14

)

 

 

131

 

 

 

(58

)

 

 

13,164

 

 

 

(16,255

)

 

 

21,218

 

 

 

160,926

 

 

 

179,112

 

 

 

(14

)

 

 

131

 

 

 

(58

)

 

 

13,164

 

 

 

(16,255

)

 

 

21,218

 

 

 

160,926

 

 

 

179,112

 

Exchange of mortgage servicing spread
    for interest-only stripped securities
    and accrued interest

 

 

103,547

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(105,096

)

 

 

(1,549

)

Transfers of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—

 

Interest rate lock commitments to loans
   acquired for sale (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,587

 

 

 

—

 

 

 

—

 

 

 

7,587

 

Mortgage servicing rights relating to
   delinquent loans to Agency

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

70

 

 

 

70

 

Balance, September 30, 2023

 

$

103,533

 

 

$

4,882

 

 

$

2,097

 

 

$

4,742

 

 

$

(3,348

)

 

$

(68,592

)

 

$

4,108,661

 

 

$

4,151,975

 

Changes in fair value recognized during
the quarter relating to assets still held at
September 30, 2023

 

$

(14

)

 

$

(104

)

 

$

(74

)

 

$

9,113

 

 

$

(3,348

)

 

$

9,977

 

 

$

160,926

 

 

$

176,476

 

 

(1)
For the purpose of this table, CRT derivative, interest rate lock commitment (“IRLC”), and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to loans acquired for sale at fair value upon purchase of the respective loans.

 

Liabilities

 

Quarter ended September 30, 2023

 

 

 

(in thousands)

 

Interest-only security payable:

 

 

 

Balance, June 30, 2023

 

$

24,060

 

Changes in fair value included in results of operations arising from:

 

 

 

Changes in instrument - specific credit risk

 

 

—

 

Other factors

 

 

4,228

 

 

 

4,228

 

Balance, September 30, 2023

 

$

28,288

 

Changes in fair value recognized during the quarter relating
to liability outstanding at September 30, 2023

 

$

4,228

 

 

 

 

23

 

 

Quarter ended September 30, 2022

 

Assets (1)

 

Loans
acquired
for sale

 

 

Loans at
fair
value

 

 

CRT
derivatives

 

 

Interest
rate lock
commitments

 

 

CRT
strips

 

 

Mortgage
servicing
rights

 

 

Total

 

 

 

(in thousands)

 

Balance, June 30, 2022

 

$

20,376

 

 

$

3,979

 

 

$

(22,511

)

 

$

(1,656

)

 

$

(118,333

)

 

$

3,695,609

 

 

$

3,577,464

 

Purchases and issuances

 

 

20,803

 

 

 

—

 

 

 

—

 

 

 

(19,218

)

 

 

—

 

 

 

—

 

 

 

1,585

 

Repayments and sales

 

 

(30,170

)

 

 

(47

)

 

 

(4,223

)

 

 

—

 

 

 

(13,589

)

 

 

—

 

 

 

(48,029

)

Amounts received pursuant to sales
  of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

178,001

 

 

 

178,001

 

Changes in fair value included in results
of operations arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument - specific credit
   risk

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other factors

 

 

(1,230

)

 

 

56

 

 

 

4,259

 

 

 

(71,443

)

 

 

1,801

 

 

 

66,974

 

 

 

417

 

 

 

(1,230

)

 

 

56

 

 

 

4,259

 

 

 

(71,443

)

 

 

1,801

 

 

 

66,974

 

 

 

417

 

Transfers of interest rate lock
   commitments to loans acquired
   for sale (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

49,474

 

 

 

—

 

 

 

—

 

 

 

49,474

 

Balance, September 30, 2022

 

$

9,779

 

 

$

3,988

 

 

$

(22,475

)

 

$

(42,843

)

 

$

(130,121

)

 

$

3,940,584

 

 

$

3,758,912

 

Changes in fair value recognized during
the quarter relating to assets still held at
September 30, 2022

 

$

(813

)

 

$

44

 

 

$

(365

)

 

$

(42,843

)

 

$

(11,788

)

 

$

66,974

 

 

$

11,209

 

 

(1)
For the purpose of this table, CRT derivative, IRLC, and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to loans acquired for sale at fair value upon purchase of the respective loans.

Liabilities

 

Quarter ended September 30, 2022

 

 

 

(in thousands)

 

Interest-only security payable:

 

 

 

Balance, June 30, 2022

 

$

19,485

 

Changes in fair value included in income arising from:

 

 

 

Changes in instrument-specific credit risk

 

 

—

 

Other factors

 

 

1,701

 

 

 

1,701

 

Balance, September 30, 2022

 

$

21,186

 

Changes in fair value recognized during the quarter relating
to liability outstanding at September 30, 2022

 

$

1,701

 

 

24

 

 

 

Nine months ended September 30, 2023

 

Assets (1)

 

Interest-only stripped securities

 

 

Loans
acquired
for sale

 

 

Loans at
fair
value

 

 

CRT
derivatives

 

 

Interest rate
lock
commitments

 

 

CRT
strips

 

 

Mortgage
servicing
rights

 

 

Total

 

 

 

(in thousands)

 

Balance, December 31, 2022

 

$

—

 

 

$

10,708

 

 

$

3,457

 

 

$

(22,098

)

 

$

(478

)

 

$

(137,193

)

 

$

4,012,737

 

 

$

3,867,133

 

Purchases and issuances

 

 

—

 

 

 

4,262

 

 

 

119

 

 

 

—

 

 

 

2,687

 

 

 

—

 

 

 

16,263

 

 

 

23,331

 

Repayments and sales

 

 

—

 

 

 

(9,787

)

 

 

(534

)

 

 

(12,283

)

 

 

—

 

 

 

(35,529

)

 

 

—

 

 

 

(58,133

)

Amounts received pursuant to sales of loans

 

 

—

 

 

 

(496

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

249,925

 

 

 

249,429

 

Changes in fair value included in results
of operations arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument - specific
   credit risk

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other factors

 

 

(14

)

 

 

195

 

 

 

(485

)

 

 

39,123

 

 

 

(3,578

)

 

 

104,130

 

 

 

(64,515

)

 

 

74,856

 

 

 

(14

)

 

 

195

 

 

 

(485

)

 

 

39,123

 

 

 

(3,578

)

 

 

104,130

 

 

 

(64,515

)

 

 

74,856

 

Exchange of mortgage servicing spread
    for interest-only stripped securities
    and interest receivable

 

 

103,547

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(105,096

)

 

 

(1,549

)

Transfers of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

—

 

Loans to REO

 

 

—

 

 

 

—

 

 

 

(460

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(460

)

Interest rate lock commitments to loans
   acquired for sale (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,979

)

 

 

—

 

 

 

—

 

 

 

(1,979

)

Mortgage servicing rights relating to
   delinquent loans to Agency

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(653

)

 

 

(653

)

Balance, September 30, 2023

 

$

103,533

 

 

$

4,882

 

 

$

2,097

 

 

$

4,742

 

 

$

(3,348

)

 

$

(68,592

)

 

$

4,108,661

 

 

$

4,151,975

 

Changes in fair value recognized during
the period relating to assets still held at
September 30, 2023

 

$

(14

)

 

$

(74

)

 

$

(1,011

)

 

$

26,619

 

 

$

(3,348

)

 

$

68,601

 

 

$

(64,515

)

 

$

26,258

 

 

(1)
For the purpose of this table, CRT derivative, IRLC, and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to loans acquired for sale at fair value upon purchase of the respective loans.

 

Liabilities

 

Nine months ended September 30, 2023

 

 

 

(in thousands)

 

Interest-only security payable:

 

 

 

Balance, December 31, 2022

 

$

21,925

 

Changes in fair value included in results of operations arising from:

 

 

 

Changes in instrument - specific credit risk

 

 

—

 

Other factors

 

 

6,363

 

 

 

6,363

 

Balance, September 30, 2023

 

$

28,288

 

Changes in fair value recognized during the period relating
to liability outstanding at September 30, 2023

 

$

6,363

 

 

 

25

 

 

 

Nine months ended September 30, 2022

 

Assets (1)

 

Loans
acquired
for sale

 

 

Loans at
fair
value

 

 

CRT
derivatives

 

 

Interest
rate lock
commitments

 

 

CRT strips

 

 

Mortgage
servicing
rights

 

 

Total

 

 

 

(in thousands)

 

Balance, December 31, 2021

 

$

30,129

 

 

$

4,161

 

 

$

18,964

 

 

$

2,451

 

 

$

(26,837

)

 

$

2,892,855

 

 

$

2,921,723

 

Purchases and issuances

 

 

72,365

 

 

 

—

 

 

 

—

 

 

 

(88,901

)

 

 

—

 

 

 

—

 

 

 

(16,536

)

Repayments and sales

 

 

(89,310

)

 

 

(677

)

 

 

(34,267

)

 

 

—

 

 

 

(47,430

)

 

 

—

 

 

 

(171,684

)

Amounts received pursuant to sales
  of loans

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

543,255

 

 

 

543,255

 

Changes in fair value included in results
of operations arising from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Changes in instrument - specific credit
   risk

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Other factors

 

 

(3,405

)

 

 

504

 

 

 

(7,172

)

 

 

(250,913

)

 

 

(55,854

)

 

 

504,474

 

 

 

187,634

 

 

 

(3,405

)

 

 

504

 

 

 

(7,172

)

 

 

(250,913

)

 

 

(55,854

)

 

 

504,474

 

 

 

187,634

 

Transfers of interest rate lock
   commitments to loans acquired
   for sale (2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

294,520

 

 

 

—

 

 

 

—

 

 

 

294,520

 

Balance, September 30, 2022

 

$

9,779

 

 

$

3,988

 

 

$

(22,475

)

 

$

(42,843

)

 

$

(130,121

)

 

$

3,940,584

 

 

$

3,758,912

 

Changes in fair value recognized during
the period relating to assets still held at
September 30, 2022

 

$

(1,121

)

 

$

159

 

 

$

(42,154

)

 

$

(42,843

)

 

$

(103,284

)

 

$

504,474

 

 

$

315,231

 

(1)
For the purpose of this table, CRT derivative, IRLC, and CRT strip asset and liability positions are shown net.
(2)
The Company had transfers among the fair value levels arising from transfers of IRLCs to loans acquired for sale at fair value upon purchase of the respective loans.

Liabilities

 

Nine months ended September 30, 2022

 

 

 

(in thousands)

 

Interest-only security payable:

 

 

 

Balance, December 31, 2021

 

$

10,593

 

Changes in fair value included in results of operations arising from:

 

 

 

Changes in instrument-specific credit risk

 

 

—

 

Other factors

 

 

10,593

 

 

 

10,593

 

Balance, September 30, 2022

 

$

21,186

 

Changes in fair value recognized during the period relating
to liability outstanding at September 30, 2022

 

$

10,593

 

 

26

 

Financial Statement Items Measured at Fair Value under the Fair Value Option

Following are the fair values and related principal amounts due upon maturity of loans accounted for under the fair value option:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Fair value

 

 

Principal
amount due
upon maturity

 

 

Difference

 

 

Fair value

 

 

Principal
amount due
upon maturity

 

 

Difference

 

 

 

(in thousands)

 

Loans acquired for sale at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current through 89 days delinquent

 

$

1,025,027

 

 

$

1,015,017

 

 

$

10,010

 

 

$

1,819,551

 

 

$

1,795,445

 

 

$

24,106

 

90 or more days delinquent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in foreclosure

 

 

427

 

 

 

618

 

 

 

(191

)

 

 

1,666

 

 

 

1,927

 

 

 

(261

)

In foreclosure

 

 

276

 

 

 

397

 

 

 

(121

)

 

 

716

 

 

 

809

 

 

 

(93

)

 

 

703

 

 

 

1,015

 

 

 

(312

)

 

 

2,382

 

 

 

2,736

 

 

 

(354

)

 

$

1,025,730

 

 

$

1,016,032

 

 

$

9,698

 

 

$

1,821,933

 

 

$

1,798,181

 

 

$

23,752

 

Loans at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held in consolidated VIEs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current through 89 days delinquent

 

$

1,369,087

 

 

$

1,718,390

 

 

$

(349,303

)

 

$

1,508,540

 

 

$

1,788,911

 

 

$

(280,371

)

90 or more days delinquent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in foreclosure

 

 

934

 

 

 

1,276

 

 

 

(342

)

 

 

1,231

 

 

 

1,642

 

 

 

(411

)

In foreclosure

 

 

—

 

 

 

—

 

 

 

—

 

 

 

171

 

 

 

226

 

 

 

(55

)

 

 

934

 

 

 

1,276

 

 

 

(342

)

 

 

1,402

 

 

 

1,868

 

 

 

(466

)

 

 

1,370,021

 

 

 

1,719,666

 

 

 

(349,645

)

 

 

1,509,942

 

 

 

1,790,779

 

 

 

(280,837

)

Distressed:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current through 89 days delinquent

 

 

564

 

 

 

775

 

 

 

(211

)

 

 

498

 

 

 

682

 

 

 

(184

)

90 or more days delinquent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Not in foreclosure

 

 

401

 

 

 

1,989

 

 

 

(1,588

)

 

 

1,230

 

 

 

2,964

 

 

 

(1,734

)

In foreclosure

 

 

1,132

 

 

 

2,546

 

 

 

(1,414

)

 

 

1,729

 

 

 

2,728

 

 

 

(999

)

 

 

1,533

 

 

 

4,535

 

 

 

(3,002

)

 

 

2,959

 

 

 

5,692

 

 

 

(2,733

)

 

 

2,097

 

 

 

5,310

 

 

 

(3,213

)

 

 

3,457

 

 

 

6,374

 

 

 

(2,917

)

 

$

1,372,118

 

 

$

1,724,976

 

 

$

(352,858

)

 

$

1,513,399

 

 

$

1,797,153

 

 

$

(283,754

)

 

Following are the changes in fair value included in current period results of operations by consolidated statement of operations line item for financial statement items accounted for under the fair value option:

 

 

Quarter ended September 30, 2023

 

 

 

Net loan
servicing fees

 

 

Net gains on loans acquired for sale

 

 

Net (losses) gains on investments and financings

 

 

Net interest
expense

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities at fair value

 

$

—

 

 

$

—

 

 

$

(144,031

)

 

$

1,048

 

 

$

(142,983

)

Loans acquired for sale at fair value

 

 

—

 

 

 

(13,106

)

 

 

—

 

 

 

—

 

 

 

(13,106

)

Loans at fair value

 

 

—

 

 

 

—

 

 

 

(54,141

)

 

 

(5,153

)

 

 

(59,294

)

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

21,218

 

 

 

—

 

 

 

21,218

 

MSRs at fair value

 

 

160,926

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

160,926

 

 

$

160,926

 

 

$

(13,106

)

 

$

(176,954

)

 

$

(4,105

)

 

$

(33,239

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

—

 

 

$

—

 

 

$

(4,228

)

 

$

—

 

 

$

(4,228

)

Asset-backed financing of VIEs at fair value

 

 

—

 

 

 

—

 

 

 

58,474

 

 

 

1,132

 

 

 

59,606

 

 

$

—

 

 

$

—

 

 

$

54,246

 

 

$

1,132

 

 

$

55,378

 

 

27

 

 

 

 

 

 

 

Quarter ended September 30, 2022

 

 

 

Net loan
servicing fees

 

 

Net gains on loans acquired for sale

 

 

Net (losses) gains on investments and financings

 

 

Net interest
expense

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities at fair value

 

$

—

 

 

$

—

 

 

$

(251,477

)

 

$

229

 

 

$

(251,248

)

Loans acquired for sale at fair value

 

 

—

 

 

 

(129,873

)

 

 

—

 

 

 

—

 

 

 

(129,873

)

Loans at fair value

 

 

—

 

 

 

—

 

 

 

(99,211

)

 

 

533

 

 

 

(98,678

)

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

1,801

 

 

 

—

 

 

 

1,801

 

MSRs at fair value

 

 

66,974

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

66,974

 

 

$

66,974

 

 

$

(129,873

)

 

$

(348,887

)

 

$

762

 

 

$

(411,024

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

—

 

 

$

—

 

 

$

(1,701

)

 

$

—

 

 

$

(1,701

)

Asset-backed financings at fair value

 

 

—

 

 

 

—

 

 

 

92,993

 

 

 

993

 

 

 

93,986

 

 

$

—

 

 

$

—

 

 

$

91,292

 

 

$

993

 

 

$

92,285

 

 

 

 

 

 

 

Nine months ended September 30, 2023

 

 

 

Net loan
servicing fees

 

 

Net gains on loans acquired for sale

 

 

Net (losses) gains on investments and financings

 

 

Net interest
expense

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities at fair value

 

$

—

 

 

$

—

 

 

$

(127,434

)

 

$

(1,172

)

 

$

(128,606

)

Loans acquired for sale at fair value

 

 

—

 

 

 

(7,215

)

 

 

—

 

 

 

—

 

 

 

(7,215

)

Loans at fair value

 

 

—

 

 

 

—

 

 

 

(61,803

)

 

 

(6,212

)

 

 

(68,015

)

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

104,130

 

 

 

—

 

 

 

104,130

 

MSRs at fair value

 

 

(64,515

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(64,515

)

 

$

(64,515

)

 

$

(7,215

)

 

$

(85,107

)

 

$

(7,384

)

 

$

(164,221

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

—

 

 

$

—

 

 

$

(6,363

)

 

$

—

 

 

$

(6,363

)

Asset-backed financings at fair value

 

 

—

 

 

 

—

 

 

 

66,108

 

 

 

666

 

 

 

66,774

 

 

$

—

 

 

$

—

 

 

$

59,745

 

 

$

666

 

 

$

60,411

 

 

 

 

Nine months ended September 30, 2022

 

 

 

Net loan
servicing fees

 

 

Net gains on loans acquired for sale

 

 

Net (losses) gains on investments and financings

 

 

Net interest
expense

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities at fair value

 

$

—

 

 

$

—

 

 

$

(620,500

)

 

$

13,481

 

 

$

(607,019

)

Loans acquired for sale at fair value

 

 

—

 

 

 

(510,250

)

 

 

—

 

 

 

—

 

 

 

(510,250

)

Loans at fair value

 

 

—

 

 

 

—

 

 

 

(317,796

)

 

 

(543

)

 

 

(318,339

)

Credit risk transfer strips

 

 

—

 

 

 

—

 

 

 

(55,854

)

 

 

—

 

 

 

(55,854

)

MSRs at fair value

 

 

504,474

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

504,474

 

 

$

504,474

 

 

$

(510,250

)

 

$

(994,150

)

 

$

12,938

 

 

$

(986,988

)

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-only security payable at fair value

 

$

—

 

 

$

—

 

 

$

(10,593

)

 

$

—

 

 

$

(10,593

)

Asset-backed financings at fair value

 

 

—

 

 

 

—

 

 

 

298,834

 

 

 

1,583

 

 

 

300,417

 

 

$

—

 

 

$

—

 

 

$

288,241

 

 

$

1,583

 

 

$

289,824

 

 

28

 

Financial Statement Item Measured at Fair Value on a Nonrecurring Basis

Following is a summary of the carrying value of assets that were remeasured during the period based on fair value on a nonrecurring basis:

Real estate acquired in settlement of loans

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

 

(in thousands)

 

September 30, 2023

 

$

—

 

 

$

—

 

 

$

1,114

 

 

$

1,114

 

December 31, 2022

 

$

—

 

 

$

—

 

 

$

1,292

 

 

$

1,292

 

 

The following table summarizes the fair value changes recognized during the periods on assets held at period end that were remeasured at fair value on a nonrecurring basis:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Real estate asset acquired in settlement of loans

 

$

(258

)

 

$

(119

)

 

$

(288

)

 

$

(199

)

The Company remeasures its REO based on fair value when it evaluates the REO for impairment. The Company evaluates its REO for impairment with reference to the respective properties’ fair values less costs to sell. REO may be revalued after acquisition due to the Company receiving greater access to the property, the property being held for an extended period or receiving indications that the property’s fair value may not be supported by developing market conditions. Any subsequent change in fair value to a level that is less than or equal to the property’s cost is recognized in Results of real estate acquired in settlement of loans in the Company’s consolidated statements of operations.

Fair Value of Financial Instruments Carried at Amortized Cost

Most of the Company’s borrowings are carried at amortized cost. The Company’s Assets sold under agreements to repurchase, Mortgage loan participation purchase and sale agreements, Notes payable secured by credit risk transfer and mortgage servicing assets and the Exchangeable Notes defined in Note 15 are classified as “Level 3” fair value liabilities due to the Company’s reliance on unobservable inputs to estimate these instruments’ fair values. The Company classifies the 2023 Senior Notes, defined in Note 15, as “Level 2” fair value liabilities.

The Company has concluded that the fair values of these borrowings other than term notes and term loans included in Notes payable secured by credit risk transfer and mortgage servicing assets and Unsecured senior notes approximate the agreements’ carrying values due to the borrowing agreements’ variable interest rates and short maturities.

The Company estimates the fair value of the term notes and term loans included in Notes payable secured by credit risk transfer and mortgage servicing assets indications of fair value provided by nonaffiliate brokers for the term notes and pricing services for Unsecured senior notes and internal estimates of fair value for the term loans. The fair value and carrying value of these liabilities are summarized below:

 

 

September 30, 2023

 

 

December 31, 2022

 

Instrument

 

Carrying value

 

 

Fair value

 

 

Carrying value

 

 

Fair value

 

 

 

(in thousands)

 

Notes payable secured by credit risk transfer
      and mortgage servicing assets

 

$

2,825,591

 

 

$

2,804,737

 

 

$

2,804,028

 

 

$

2,721,391

 

Unsecured senior notes

 

$

599,754

 

 

$

567,189

 

 

$

546,254

 

 

$

471,781

 

Valuation Governance

Most of the Company’s assets, its Asset-backed financings at fair value, Interest-only security payable at fair value and Derivative and credit risk transfer strip liabilities at fair value are carried at fair value with changes in fair value recognized in current period results of operations. A substantial portion of these items are “Level 3” fair value assets and liabilities which require the use of unobservable inputs that are significant to the estimation of the fair values of the assets and liabilities. Unobservable inputs reflect the Company’s own judgments about the factors that market participants use in pricing an asset or liability and are based on the best information available under the circumstances.

Due to the difficulty in estimating the fair values of “Level 3” fair value assets and liabilities, the Company has assigned responsibility for estimating the fair value of these assets and liabilities to specialized staff within its capital markets group and subjects the valuation process to significant senior management oversight.

With respect to “Level 3” valuations other than IRLCs, the capital markets valuation staff reports to PFSI’s senior management valuation committee, which oversees the valuations. The capital markets valuation staff monitors the models used for valuation of the Company’s “Level 3” fair value assets and liabilities other than IRLCs, including the models’ performance versus actual results, and reports those results to PFSI’s senior management valuation committee.

29

 

PFSI’s senior management valuation committee includes the Company’s chief financial, risk, credit, and capital markets officers as well as other senior members of the Company’s finance, capital markets and risk management staffs.

The capital markets valuation staff is responsible for reporting to PFSI’s senior management valuation committee on the changes in the valuation of the non-IRLC “Level 3” fair value assets and liabilities, including major factors affecting the valuation and any changes in model methods and inputs. To assess the reasonableness of its valuations, the capital markets valuation staff presents an analysis of the effect on the valuation of changes to the significant inputs to the models and, for MSRs, comparisons of its estimates of fair value and key inputs to those procured from nonaffiliate brokers and published surveys.

The fair value of the Company’s IRLCs is developed by its capital markets risk management staff and is reviewed by capital markets operations staff.

Valuation Techniques and Inputs

The following is a description of the techniques and inputs used in estimating the fair values of “Level 2” and “Level 3” fair value assets and liabilities:

Mortgage-Backed Securities

The Company’s categorization of its current holdings of MBS is based on whether the respective security is a pass-through security or an IO security:

•
The Company categorizes the majority of its current holdings of MBS as “Level 2” fair value assets. Fair value of these securities is established based on quoted market prices for the Company’s MBS holdings or similar securities.
•
The Company categorizes its current holdings of interest-only stripped ("IO") securities as “Level 3” fair value assets. The Company uses a discounted cash flow approach to estimate the fair value of its IO securities.

The key inputs used in the estimation of the fair value of IO securities include discount rate (pricing spread) and prepayment rate (prepayment speed). Significant changes to those inputs in isolation may result in a significant change in the IO securities fair value measurement. Changes in these key inputs are not directly related.

Following are the key inputs used in determining the fair value of IO securities:

 

 

September 30, 2023

 

Fair value (in thousands)

 

$

103,533

 

UPB of securities (in thousands)

 

$

425,682

 

Weighted average interest rate

 

4.9%

 

Key inputs (1)

 

 

 

Pricing spread (2)

 

 

 

Range

 

5.6% – 5.6%

 

Weighted average

 

5.6%

 

Annual total prepayment speed (3)

 

 

 

Range

 

8.1% – 8.2%

 

Weighted average

 

8.1%

 

Equivalent life (in years)

 

 

 

Range

 

5.4 - 8.8

 

Weighted average

 

8.7

 

 

(1)
Weighted-average inputs are based on the UPB of the underlying loans.
(2)
Pricing spread represents a margin that is applied to a reference forward rate to develop periodic discount rates. The Company uses the pricing spread over the United States Treasury (“Treasury”) securities yield curve for the purpose of discounting cash flows relating to IO securities.
(3)
Prepayment speed is measured using Life Total Conditional Prepayment Rate (“CPR”). Equivalent life is provided as supplementary information.

Changes in the fair value of MBS are included in Net (losses) gains on investments and financings in the consolidated statements of operations.

30

 

Loans

Fair value of loans is estimated based on whether the loans are saleable into active markets:

•
Loans that are saleable into active markets, comprised of most of the Company’s loans acquired for sale at fair value and all of the loans at fair value held in VIEs, are categorized as “Level 2” fair value assets:
•
For loans acquired for sale, the fair values are established using the loans’ contracted selling price or quoted market price or market price equivalent.
•
For the loans at fair value held in VIEs, the quoted indications of fair value of all of the individual securities issued by the securitization trusts are used to derive fair values for the loans. The Company obtains indications of fair value from nonaffiliate brokers based on comparable securities and validates the brokers’ indications of fair value using pricing models and inputs the Company believes are similar to the pricing models and inputs used by other market participants. The Company adjusts the fair values received from brokers to include the fair value of MSRs attributable to the loans included in the VIEs.
•
Loans that are not saleable into active markets, comprised of previously sold loans that the Company repurchased pursuant to the representation and warranties it provided to the purchaser and distressed loans, are categorized as “Level 3” fair value assets:
•
Fair value for loans acquired for sale categorized as “Level 3” assets is estimated using a discounted cash flow approach or their contracted selling price when applicable. Inputs to the discounted cash flow model include current interest rates, payment status, property types, discount rates and forecasts of future interest rates, home prices, prepayment speeds, default speeds and loss severities.
•
Distressed loans’ fair values are estimated based on the expected resolution from the individual asset’s disposition strategy. When a cash flow projection is used to estimate the fair value, those cash flows are discounted at annual rates up to 20%.

Derivative and Credit Risk Transfer Strip Assets and Liabilities

CRT Derivatives

The Company categorizes CRT derivatives as “Level 3” fair value assets and liabilities. The fair value of CRT derivatives is based on indications of fair value provided to the Company by nonaffiliate brokers for the certificates representing the beneficial interests in the trusts holding the Deposits securing credit risk transfer arrangements pledged to creditors, the recourse obligations and the IO ownership interests. Together, the recourse obligation and the IO ownership interest comprise the CRT derivative. Fair value of the CRT derivatives is derived by deducting the balance of the Deposits securing credit risk transfer arrangements pledged to creditors from the fair value of the certificates.

The Company assesses the fair values it receives from nonaffiliate brokers using the discounted cash flow approach. The significant unobservable inputs used by the Company in its review and approval of the valuation of CRT derivatives are the discount rates, voluntary and involuntary prepayment speeds and the remaining loss expectations of the reference loans. Changes in fair value of CRT derivatives are included in Net (losses) gains on investments and financings in the consolidated statements of operations.

31

 

Following is a quantitative summary of key unobservable inputs used in the Company’s review and approval of broker-provided fair values for CRT derivatives:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(dollars in thousands)

 

Fair value

 

 

 

 

 

 

CRT derivatives

 

 

 

 

 

 

Assets

 

$

7,010

 

 

$

1,262

 

Liabilities

 

$

2,268

 

 

$

23,360

 

UPB of loans in reference pools

 

$

5,556,206

 

 

$

5,972,060

 

Key inputs (1)

 

 

 

 

 

 

Discount rate

 

 

 

 

 

 

Range

 

10.1% – 11.4%

 

 

8.7% – 11.1%

 

Weighted average

 

11.0%

 

 

10.8%

 

Voluntary prepayment speed (2)

 

 

 

 

 

 

Range

 

6.7% – 7.4%

 

 

7.5% – 8.3%

 

Weighted average

 

7.3%

 

 

7.6%

 

Involuntary prepayment speed (3)

 

 

 

 

 

 

Range

 

0.2% – 0.8%

 

 

0.5% – 1.3%

 

Weighted average

 

0.4%

 

 

0.6%

 

Remaining loss expectation

 

 

 

 

 

 

Range

 

0.3% – 0.4%

 

 

0.4% – 0.7%

 

Weighted average

 

0.3%

 

 

0.6%

 

 

(1)
Weighted average inputs are based on fair value amounts of the CRT Agreements, except for remaining loss expectation which is based on the UPB of the loans in the reference pools.
(2)
Voluntary prepayment speed is measured using Life Voluntary CPR.
(3)
Involuntary prepayment speed is measured using Life Involuntary CPR.

Interest Rate Lock Commitments

The Company categorizes IRLCs as “Level 3” fair value assets and liabilities. The Company estimates the fair value of IRLCs based on quoted Agency MBS prices, the probability that the loans will be purchased under the commitments (the “pull-through rate”) and the Company’s estimate of the fair value of the MSRs it expects to receive upon sale of the loans.

The significant unobservable inputs used in the fair value measurement of the Company’s IRLCs are the pull-through rates and the estimated MSRs attributed to the mortgage loans subject to the commitments. Significant changes in the pull-through rate or the MSR component of the IRLCs, in isolation, may result in a significant change in the IRLCs’ fair value. The financial effects of changes in these inputs are generally inversely correlated as increasing interest rates have a positive effect on the fair value of the MSR component of an IRLC’s fair value, but also increase the pull-through rate for the loan principal and interest payment cash flow component that has decreased in fair value. Changes in fair value of IRLCs are included in Net gains on loans acquired for sale in the consolidated statements of operations.

Following is a quantitative summary of key unobservable inputs used in the valuation of IRLCs:

 

 

September 30, 2023

 

 

December 31, 2022

 

Fair value (in thousands) (1)

 

$

(3,348

)

 

$

(478

)

Committed amount (in thousands)

 

$

1,459,919

 

 

$

1,484,384

 

Key inputs (2)

 

 

 

 

 

 

Pull-through rate

 

 

 

 

 

 

Range

 

62.6% – 100%

 

 

54.8% – 100%

 

Weighted average

 

85.4%

 

 

92.1%

 

MSR fair value expressed as

 

 

 

 

 

 

Servicing fee multiple

 

 

 

 

 

 

Range

 

3.6 – 7.0

 

 

1.9 – 7.1

 

Weighted average

 

5.3

 

 

4.7

 

Percentage of UPB

 

 

 

 

 

 

Range

 

0.9% – 2.8%

 

 

0.7% – 3.1%

 

Weighted average

 

1.9%

 

 

1.9%

 

 

(1)
For purposes of this table, IRLC asset and liability positions are shown net.
(2)
Weighted-average inputs are based on the committed amounts.

32

 

Hedging Derivatives

Fair value of derivative financial instruments actively traded on exchanges are categorized by the Company as “Level 1” fair value assets and liabilities. Fair values of derivative financial instruments based on observable interest rates, volatilities and prices in the MBS or other markets are categorized by the Company as “Level 2” fair value assets and liabilities. Changes in the fair value of hedging derivatives are included in Net loan servicing fees – from nonaffiliates – Mortgage servicing rights hedging results, Net gains on loans acquired for sale or Net (losses) gains on investments and financings, as applicable, in the consolidated statements of operations.

Credit Risk Transfer Strips

The Company categorizes CRT strips as “Level 3” fair value assets or liabilities. The fair value of CRT strips is based on indications of fair value provided to the Company by nonaffiliate brokers for the securities representing the beneficial interests in the trusts holding the Deposits securing credit risk transfer arrangements pledged to creditors, the IO ownership interest and recourse obligation. Together, the IO ownership interest and the recourse obligation comprise the CRT strip.

Fair value of the CRT strips is derived by deducting the balance of the Deposits securing credit risk transfer arrangements pledged to creditors from the fair value of the securities derived from indications provided by the nonaffiliate brokers. Through December 31, 2021, the Company applied adjustments to the fair value derived from these indications to account for contractual restrictions limiting PMT’s ability to sell certain of the certificates. During the quarter ended March 31, 2022, the contractual restrictions on the Company’s ability to sell the certificates were removed. The Company recognized the effect of the removal of this restriction in Net (losses) gains on investments and financings during the quarter ended March 31, 2022.

The Company assesses the indications of fair value it receives from nonaffiliate brokers using the discounted cash flow approach. The significant unobservable inputs used by the Company in its review and approval of the valuation of the CRT strips are the discount rate, voluntary and involuntary prepayment speeds and the remaining loss expectations of the reference loans. Changes in fair value of CRT strips are included in Net (losses) gains on investments and financings in the consolidated statements of operations.

Following is a quantitative summary of key unobservable inputs used in the Company’s review and approval of the broker-provided fair values used to derive the fair value of the CRT strip liabilities:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(dollars in thousands)

 

Fair value

 

$

68,592

 

 

$

137,193

 

UPB of loans in the reference pools

 

$

18,057,469

 

 

$

19,343,464

 

Key inputs (1)

 

 

 

 

 

 

Discount rate

 

 

 

 

 

 

Range

 

8.7% – 11.0%

 

 

4.3% – 11.3%

 

Weighted average

 

10.7%

 

 

10.5%

 

Voluntary prepayment speed (2)

 

 

 

 

 

 

Range

 

6.5% – 7.8%

 

 

7.7% – 7.9%

 

Weighted average

 

6.7%

 

 

7.7%

 

Involuntary prepayment speed (3)

 

 

 

 

 

 

Range

 

0.2% – 0.4%

 

 

0.6% – 2.0%

 

Weighted average

 

0.2%

 

 

0.8%

 

Remaining loss expectation

 

 

 

 

 

 

Range

 

0.5% – 1.7%

 

 

0.7% – 2.0%

 

Weighted average

 

0.7%

 

 

0.9%

 

 

(1)
Weighted average inputs are based on fair value amounts of the CRT arrangements, except for remaining loss expectation which is based on the UPB of the loans in the reference pools.
(2)
Voluntary prepayment speed is measured using Life Voluntary CPR.
(3)
Involuntary prepayment speed is measured using Life Involuntary CPR.

Mortgage Servicing Rights

The Company categorizes MSRs as “Level 3” fair value assets. The Company uses a discounted cash flow approach to estimate the fair value of MSRs. The fair value of MSRs is derived from the net positive cash flows associated with the servicing agreements. The Company receives a servicing fee based on the remaining UPB of the loans subject to the servicing agreements and generally has the right to receive other remuneration including various mortgagor-contracted fees such as late charges and collateral reconveyance charges, and is generally entitled to retain any placement fees earned on certain custodial funds held pending remittance of mortgagor principal, interest, tax and insurance payments.

33

 

The key inputs used in the estimation of the fair value of MSRs include the applicable pricing spreads, the prepayment speeds of the underlying loans, and the annual per-loan cost to service the loans, all of which are unobservable. Significant changes to any of those inputs in isolation could result in a significant change in the MSR fair value measurement. Changes in these key inputs are not directly related. Changes in the fair value of MSRs are included in Net loan servicing fees – From nonaffiliates – Change in fair value of mortgage servicing rights in the consolidated statements of operations.

MSRs are generally subject to loss in fair value when mortgage interest rates decrease, when returns required by market participants (pricing spreads) increase, or when annual per-loan cost of servicing increases. Reductions in the fair value of MSRs affect income primarily through recognition of the change in fair value.

Following are the key inputs used in determining the fair value of MSRs at the time of initial recognition:

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(MSR recognized and UPB of underlying loans amounts in thousands)

 

MSR recognized

 

$

58,560

 

 

$

178,001

 

 

$

249,925

 

 

$

543,255

 

UPB of underlying loans

 

$

3,052,557

 

 

$

9,538,175

 

 

$

13,458,182

 

 

$

31,767,152

 

Weighted average annual servicing fee rate (in basis points)

 

38

 

 

38

 

 

40

 

 

34

 

Key inputs (1)

 

 

 

 

 

 

 

 

 

 

 

 

Pricing spread (2)

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

5.5% – 8.5%

 

 

5.5% – 8.7%

 

 

5.5% – 8.8%

 

 

5.5% – 8.9%

 

Weighted average

 

5.5%

 

 

6.2%

 

 

5.8%

 

 

6.4%

 

Prepayment speed (3)

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

10.1% – 22.7%

 

 

6.8% – 18.9%

 

 

10.1% – 22.7%

 

 

6.0% – 18.9%

 

Weighted average

 

11.3%

 

 

10.1%

 

 

12.3%

 

 

9.1%

 

Equivalent average life (in years)

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

3.2 - 7.2

 

 

4.1 – 9.5

 

 

2.8 - 7.2

 

 

4.0 – 9.5

 

Weighted average

 

7.1

 

 

7.7

 

 

6.8

 

 

8.0

 

Annual per-loan cost of servicing

 

 

 

 

 

 

 

 

 

 

 

 

Range

 

$69 – $71

 

 

$80 – $80

 

 

$68 – $71

 

 

$80 – $80

 

Weighted average

 

$71

 

 

$80

 

 

$69

 

 

$80

 

 

(1)
Weighted average inputs are based on UPB of the underlying loans.
(2)
The Company uses the pricing spread over the Treasury securities yield curve for the purpose of discounting cash flows relating to MSRs.
(3)
Prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided as supplementary information.

34

 

Following is a quantitative summary of key inputs used in the valuation of MSRs as of the dates presented, and the effect on the fair value from adverse changes in those inputs:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(Fair value, UPB of underlying loans and
effect on fair value amounts in thousands)

 

Fair value

 

$

4,108,661

 

 

$

4,012,737

 

UPB of underlying loans

 

$

231,545,013

 

 

$

229,971,035

 

Weighted average annual servicing fee rate (in basis points)

 

28

 

 

29

 

Weighted average note interest rate

 

3.6%

 

 

3.5%

 

Key inputs (1)

 

 

 

 

 

 

Pricing spread (2)

 

 

 

 

 

 

Range

 

5.6% - 8.7%

 

 

4.9% – 8.8%

 

Weighted average

 

5.6%

 

 

5.7%

 

Effect on fair value of (3):

 

 

 

 

 

 

5% adverse change

 

$(52,357)

 

 

$(52,004)

 

10% adverse change

 

$(103,437)

 

 

$(102,727)

 

20% adverse change

 

$(201,939)

 

 

$(200,497)

 

Prepayment speed (4)

 

 

 

 

 

 

Range

 

4.9% – 16.9%

 

 

5.1% – 17.4%

 

Weighted average

 

5.9%

 

 

6.3%

 

Equivalent average life (in years)

 

 

 

 

 

 

Range

 

2.9 - 10.4

 

 

3.5 – 9.3

 

Weighted average

 

9.2

 

 

8.9

 

Effect on fair value of (3):

 

 

 

 

 

 

5% adverse change

 

$(47,226)

 

 

$(51,044)

 

10% adverse change

 

$(93,108)

 

 

$(100,544)

 

20% adverse change

 

$(181,071)

 

 

$(195,201)

 

Annual per-loan cost of servicing

 

 

 

 

 

 

Range

 

$68 – $72

 

 

$69 – $69

 

Weighted average

 

$71

 

 

$69

 

Effect on fair value of (3):

 

 

 

 

 

 

5% adverse change

 

$(17,748)

 

 

$(17,629)

 

10% adverse change

 

$(35,495)

 

 

$(35,258)

 

20% adverse change

 

$(70,991)

 

 

$(70,515)

 

 

(1)
Weighted-average inputs are based on the UPB of the underlying loans.
(2)
The Company uses a pricing spread over the Treasury securities yield curve for the purpose of discounting cash flows relating to MSRs.
(3)
These sensitivity analyses are limited in that they were performed as of a particular date; only account for the estimated effect of the movements in the indicated inputs; do not incorporate changes in those inputs in relation to other inputs; are subject to the accuracy of the models and inputs used; and do not incorporate other factors that would affect the Company’s overall financial performance in such events, including operational adjustments to account for changing circumstances. For these reasons, these analyses should not be viewed as earnings forecasts.
(4)
Prepayment speed is measured using Life Total CPR, which includes both voluntary and involuntary prepayments. Equivalent average life is provided as supplementary information.

Real Estate Acquired in Settlement of Loans

REO is measured based on its fair value on a nonrecurring basis and is categorized as a “Level 3” fair value asset. Fair value of REO is established by using a current estimate of fair value from either a broker’s price opinion, a full appraisal, or the price given in a pending contract of sale.

35

 

REO fair values are reviewed by PLS staff appraisers when the Company obtains multiple indications of fair value and there is a significant difference between the indications of fair value. PLS staff appraisers will attempt to resolve the difference between the indications of fair value. In circumstances where the staff appraisers are not able to generate adequate data to support a fair value conclusion, the staff appraisers obtain an additional appraisal to determine fair value. Recognized changes in the fair value of REO are included in Results of real estate acquired in settlement of loans in the consolidated statements of operations.

Note 8— Mortgage-Backed Securities

Following is a summary of activity in the Company’s holdings of MBS:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Balance at beginning of period

 

$

4,731,341

 

 

$

3,853,076

 

 

$

4,462,601

 

 

$

2,666,768

 

Purchases

 

 

64,384

 

 

 

354,015

 

 

 

3,108,701

 

 

 

3,114,891

 

Sales

 

 

—

 

 

 

—

 

 

 

(2,629,540

)

 

 

(1,079,826

)

Repayments

 

 

(90,319

)

 

 

(75,555

)

 

 

(250,733

)

 

 

(214,526

)

Exchange of mortgage servicing spread for interest-only
   stripped mortgage-backed securities

 

 

103,547

 

 

 

—

 

 

 

103,547

 

 

 

—

 

Changes in fair value included in income arising from:

 

 

 

 

 

 

 

 

 

 

 

 

Accrual (amortization) of net purchase premiums
   (discounts)

 

 

1,048

 

 

 

229

 

 

 

(1,172

)

 

 

13,481

 

Valuation adjustments

 

 

(144,031

)

 

 

(251,477

)

 

 

(127,434

)

 

 

(620,500

)

 

 

(142,983

)

 

 

(251,248

)

 

 

(128,606

)

 

 

(607,019

)

Balance at end of period

 

$

4,665,970

 

 

$

3,880,288

 

 

$

4,665,970

 

 

$

3,880,288

 

 

Following is a summary of the Company’s investment in MBS:

 

 

September 30, 2023

 

Security type (1)

 

Principal
balance

 

 

Unamortized
net purchase
premiums (discounts)

 

 

Cumulative
valuation
changes

 

 

Fair value (1)

 

 

 

(in thousands)

 

Agency fixed-rate pass-through securities

 

$

4,403,330

 

 

$

494

 

 

$

(233,304

)

 

$

4,170,520

 

Subordinate credit-linked securities

 

 

259,863

 

 

 

(3,831

)

 

 

21,053

 

 

 

277,085

 

Senior non-Agency securities

 

 

127,172

 

 

 

(3,760

)

 

 

(8,580

)

 

 

114,832

 

 

$

4,790,365

 

 

$

(7,097

)

 

$

(220,831

)

 

 

4,562,437

 

Interest-only stripped mortgage-backed
  securities

 

 

 

 

 

 

 

 

 

 

 

103,533

 

 

 

 

 

 

 

 

 

 

 

 

$

4,665,970

 

 

 

 

December 31, 2022

 

Security type (1)

 

Principal
balance

 

 

Unamortized
net purchase
premiums (discounts)

 

 

Cumulative
valuation
changes

 

 

Fair value (1)

 

 

 

(in thousands)

 

Agency fixed-rate pass-through securities

 

$

4,693,045

 

 

$

30,423

 

 

$

(460,966

)

 

$

4,262,502

 

Subordinate credit-linked securities

 

 

184,620

 

 

 

52

 

 

 

(6,774

)

 

 

177,898

 

Senior non-Agency securities

 

 

28,103

 

 

 

(876

)

 

 

(5,026

)

 

 

22,201

 

 

$

4,905,768

 

 

$

29,599

 

 

$

(472,766

)

 

$

4,462,601

 

 

(1)
All MBS have maturities of more than ten years and are pledged to secure Assets sold under agreements to repurchase.

36

 

Note 9—Loans Acquired for Sale at Fair Value

Following is a summary of the distribution of the Company’s loans acquired for sale at fair value:

Loan type

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

GSE eligible — held for sale to nonaffiliates (1)

 

$

520,702

 

 

$

1,651,554

 

Held for sale to PLS (2)

 

 

499,132

 

 

 

159,671

 

Jumbo

 

 

1,014

 

 

 

—

 

Home equity lines of credit

 

 

1,903

 

 

 

2,424

 

Repurchased pursuant to representations and warranties

 

 

2,979

 

 

 

8,284

 

 

$

1,025,730

 

 

$

1,821,933

 

Loans pledged to secure:

 

 

 

 

 

 

Assets sold under agreements to repurchase

 

$

994,057

 

 

$

1,801,368

 

Mortgage loan participation purchase and sale agreements

 

 

25,190

 

 

 

—

 

 

$

1,019,247

 

 

$

1,801,368

 

 

(1)
GSE eligibility refers to the eligibility of loans for sale to Fannie Mae or Freddie Mac. The Company sells or finances a portion of its GSE eligible loan production to or with other investors, including PLS.
(2)
The Company sells a portion of its loan production to PLS, including all of its loans eligible for inclusion in Ginnie Mae securities. The Company is not approved by Ginnie Mae as an issuer of Ginnie Mae-guaranteed securities which are backed by government-insured or guaranteed loans. The Company earns a sourcing fee for all loans that it purchases from correspondent sellers and subsequently sells to PLS as described in Note 4 – Transactions with Related Parties – Operating activities – Correspondent Production Activities.

Note 10—Loans at Fair Value

Loans at fair value are comprised primarily of loans held in VIEs securing asset-backed financings as described in Note 6 –Variable Interest Entities – Subordinate Mortgage-Backed Securities.

Following is a summary of the distribution of the Company’s loans at fair value:

Loan type

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Loans in VIEs:

 

 

 

 

 

 

Agency-conforming loans secured by investment properties

 

$

1,323,199

 

 

$

1,459,160

 

Fixed interest rate jumbo loans

 

 

46,822

 

 

 

50,782

 

 

 

1,370,021

 

 

 

1,509,942

 

Distressed loans

 

 

2,097

 

 

 

3,457

 

 

$

1,372,118

 

 

$

1,513,399

 

Loans at fair value pledged to secure:

 

 

 

 

 

 

Asset-backed financings at fair value (1)

 

$

1,370,021

 

 

$

1,509,942

 

Assets sold under agreements to repurchase

 

 

199

 

 

 

206

 

 

$

1,370,220

 

 

$

1,510,148

 

 

(1)
As discussed in Note 6 ‒ Variable Interest Entities ‒ Subordinate Mortgage-Backed Securities, the Company holds a portion of the securities issued by the VIEs. At September 30, 2023 and December 31, 2022, $80.3 million and $84.0 million, respectively, of such retained securities were pledged to secure Assets sold under agreements to repurchase.

 

Note 11—Derivative and Credit Risk Transfer Strip Assets and Liabilities

Derivative and credit risk transfer assets and liabilities are summarized below:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Derivative assets

 

$

29,750

 

 

$

84,940

 

 

$

29,750

 

 

$

84,940

 

 

 

 

 

 

 

Derivative liabilities

 

$

71,902

 

 

$

30,033

 

Credit risk transfer strip liabilities

 

 

68,592

 

 

 

137,193

 

 

$

140,494

 

 

$

167,226

 

 

37

 

The Company records all derivative and CRT strip assets and liabilities at fair value and records changes in fair value in current period results of operations.

Derivative Activities

The Company holds and issues derivative financial instruments in connection with its operating, investing and financing activities. Derivative financial instruments are created as a result of certain of the Company’s operations and the Company also enters into derivative transactions as part of its interest rate risk management activities.

Derivative financial instruments created as a result of the Company’s operations include:

•
IRLCs that are created when the Company commits to purchase loans acquired for sale; and
•
CRT Agreements whereby the Company retained a recourse obligation relating to certain loans it sold into Fannie Mae guaranteed securitizations as part of the retention of IO ownership interests in such loans.

The Company engages in interest rate risk management activities in an effort to reduce the variability of earnings caused by the effects of changes in interest rates on the fair value of certain of its assets and liabilities. The Company bears price risk related to its mortgage production, servicing assets and MBS financing activities due to changes in market interest rates as discussed below:

•
The Company is exposed to losses if market mortgage interest rates increase, because market interest rate increases generally cause the fair value of MBS, IRLCs and loans acquired for sale to decrease.
•
The Company is exposed to losses if market mortgage interest rates decrease, because market interest rate decreases generally cause the fair value of MSRs to decrease.

To manage the price risk resulting from these interest rate risks, the Company uses derivative financial instruments with the intention of moderating the risk that changes in market interest rates will result in unfavorable changes in the fair value of the Company’s MBS, inventory of loans acquired for sale, IRLCs and MSRs. The Company does not designate and qualify any of its derivative financial instruments for hedge accounting.

Cash flows from derivative financial instruments relating to hedging of IRLCs and loans acquired for sale are included in Cash flows from operating activities in Sale to nonaffiliates and repayment of loans acquired for sale at fair value. Cash flows from derivative financial instruments relating to hedging of MSRs are included in Cash flows from investing activities.

38

 

Derivative Notional Amounts and Fair Value of Derivatives

The Company had the following derivative assets and liabilities recorded within Derivative assets and Derivative and credit risk transfer liabilities and related margin deposits on the consolidated balance sheets:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

 

 

 

Fair value

 

 

 

 

 

Fair value

 

 

 

Notional

 

 

Derivative

 

 

Derivative

 

 

Notional

 

 

Derivative

 

 

Derivative

 

Instrument

 

amount (1)

 

 

assets

 

 

liabilities

 

 

amount (1)

 

 

assets

 

 

liabilities

 

 

(in thousands)

 

Hedging derivatives subject to master netting
   arrangements (2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Call options on interest rate futures purchase
   contracts

 

 

350,000

 

 

$

641

 

 

$

—

 

 

 

1,950,000

 

 

$

2,906

 

 

$

—

 

Put options on interest rate futures purchase
   contracts

 

 

2,280,000

 

 

 

19,256

 

 

 

—

 

 

 

1,785,000

 

 

 

8,130

 

 

 

—

 

Put options on interest rate futures sale
   contracts

 

 

200,000

 

 

 

—

 

 

 

1,688

 

 

 

—

 

 

 

—

 

 

 

—

 

Forward purchase contracts

 

 

3,936,766

 

 

 

1,287

 

 

 

9,994

 

 

 

3,929,833

 

 

 

418

 

 

 

15,196

 

Forward sale contracts

 

 

9,547,291

 

 

 

30,348

 

 

 

1,464

 

 

 

11,661,925

 

 

 

43,435

 

 

 

17,279

 

MBS put options

 

 

100,000

 

 

 

169

 

 

 

—

 

 

 

1,050,000

 

 

 

2,783

 

 

 

—

 

Bond futures

 

 

3,066,000

 

 

 

—

 

 

 

—

 

 

 

867,900

 

 

 

—

 

 

 

—

 

Other derivatives not subject to master netting
    arrangements:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CRT derivatives

 

 

5,556,206

 

 

 

7,010

 

 

 

2,268

 

 

 

5,972,060

 

 

 

1,262

 

 

 

23,360

 

Interest rate lock commitments

 

 

1,459,919

 

 

 

1,970

 

 

 

5,318

 

 

 

1,484,384

 

 

 

3,877

 

 

 

4,355

 

Total derivative instruments before netting

 

 

 

 

 

60,681

 

 

 

20,732

 

 

 

 

 

 

62,811

 

 

 

60,190

 

Netting

 

 

 

 

 

(30,931

)

 

 

51,170

 

 

 

 

 

 

22,129

 

 

 

(30,157

)

 

 

 

 

$

29,750

 

 

$

71,902

 

 

 

 

 

$

84,940

 

 

$

30,033

 

Margin deposits (received from) placed
  with derivative counterparties included
  in derivative balances above, net

 

 

 

 

$

(82,101

)

 

 

 

 

 

 

 

$

52,286

 

 

 

 

Derivative assets pledged to secure:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable secured by credit risk transfer
   and mortgage servicing assets

 

 

 

 

$

7,010

 

 

 

 

 

 

 

 

$

1,262

 

 

 

 

 

(1) Notional amounts provide an indication of the volume of the Company’s derivative activity.

(2) All hedging derivatives are interest rate derivatives that are used as economic hedges.

Netting of Financial Instruments

The Company has elected to net derivative asset and liability positions, and cash collateral placed with or received from its counterparties when such positions are subject to a legally enforceable master netting arrangement and the Company intends to set off. The derivative financial instruments that are not subject to master netting arrangements are CRT derivatives and IRLCs. As of September 30, 2023 and December 31, 2022, the Company was not a party to any reverse repurchase agreements or securities lending transactions that are required to be disclosed in the following tables.

39

 

Derivative Assets, Financial Instruments and Collateral Held by Counterparty

The following table summarizes by significant counterparty the amount of derivative asset positions after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance qualifying for setoff accounting.

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Net amount

 

 

Gross amounts

 

 

 

 

 

Net amount

 

 

Gross amounts

 

 

 

 

 

 

of assets

 

 

not offset in the

 

 

 

 

 

of assets

 

 

not offset in the

 

 

 

 

 

 

presented

 

 

consolidated

 

 

 

 

 

presented

 

 

consolidated

 

 

 

 

 

 

in the

 

 

balance sheet

 

 

 

 

 

in the

 

 

balance sheet

 

 

 

 

 

 

consolidated

 

 

 

 

 

Cash

 

 

 

 

 

consolidated

 

 

 

 

 

Cash

 

 

 

 

 

 

balance

 

 

Financial

 

 

collateral

 

 

Net

 

 

balance

 

 

Financial

 

 

collateral

 

 

Net

 

 

 

sheet

 

 

instruments

 

 

received

 

 

amount

 

 

sheet

 

 

instruments

 

 

received

 

 

amount

 

Counterparty

 

(in thousands)

 

CRT derivatives

 

$

7,010

 

 

$

—

 

 

$

—

 

 

$

7,010

 

 

$

1,262

 

 

$

—

 

 

$

—

 

 

$

1,262

 

Interest rate lock commitments

 

 

1,970

 

 

 

—

 

 

 

—

 

 

 

1,970

 

 

 

3,877

 

 

 

—

 

 

 

—

 

 

 

3,877

 

RJ O’Brien & Associates, LLC

 

 

18,209

 

 

 

—

 

 

 

—

 

 

 

18,209

 

 

 

11,036

 

 

 

—

 

 

 

—

 

 

 

11,036

 

Mizuho Financial Group

 

 

1,182

 

 

 

—

 

 

 

—

 

 

 

1,182

 

 

 

127

 

 

 

—

 

 

 

—

 

 

 

127

 

Bank of America, N.A.

 

 

1,097

 

 

 

—

 

 

 

—

 

 

 

1,097

 

 

 

14,666

 

 

 

—

 

 

 

—

 

 

 

14,666

 

Morgan Stanley & Co. LLC

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

33,703

 

 

 

—

 

 

 

—

 

 

 

33,703

 

Wells Fargo Securities, LLC

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,980

 

 

 

—

 

 

 

—

 

 

 

6,980

 

Credit Suisse Securities (USA) LLC

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

5,827

 

 

 

—

 

 

 

—

 

 

 

5,827

 

Goldman Sachs & Co. LLC

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,789

 

 

 

—

 

 

 

—

 

 

 

2,789

 

Barclays Capital Inc.

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,013

 

 

 

—

 

 

 

—

 

 

 

2,013

 

J.P. Morgan Securities LLC

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

110

 

 

 

—

 

 

 

—

 

 

 

110

 

Other

 

 

282

 

 

 

—

 

 

 

—

 

 

 

282

 

 

 

2,550

 

 

 

—

 

 

 

—

 

 

 

2,550

 

 

$

29,750

 

 

$

—

 

 

$

—

 

 

$

29,750

 

 

$

84,940

 

 

$

—

 

 

$

—

 

 

$

84,940

 

 

Derivative Liabilities, Financial Liabilities and Collateral Pledged by Counterparty

The following table summarizes by significant counterparty the amount of derivative liabilities and assets sold under agreements to repurchase after considering master netting arrangements and financial instruments or cash pledged that do not meet the accounting guidance to qualify for setoff accounting. All assets sold under agreements to repurchase represent sufficient collateral or exceed the liability amount recorded on the consolidated balance sheet.

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Net amount

 

 

Gross amounts

 

 

 

 

 

Net amount

 

 

Gross amounts

 

 

 

 

 

 

of liabilities

 

 

not offset in the

 

 

 

 

 

of liabilities

 

 

not offset in the

 

 

 

 

 

 

presented

 

 

consolidated

 

 

 

 

 

presented

 

 

consolidated

 

 

 

 

 

 

in the

 

 

balance sheet

 

 

 

 

 

in the

 

 

balance sheet

 

 

 

 

 

 

consolidated

 

 

Financial

 

 

Cash

 

 

 

 

 

consolidated

 

 

Financial

 

 

Cash

 

 

 

 

 

 

balance

 

 

instruments

 

 

collateral

 

 

Net

 

 

balance

 

 

instruments

 

 

collateral

 

 

Net

 

 

 

sheet

 

 

(1)

 

 

pledged

 

 

amount

 

 

sheet

 

 

(1)

 

 

pledged

 

 

amount

 

Counterparty

 

(in thousands)

 

CRT derivatives

 

$

2,268

 

 

$

—

 

 

$

—

 

 

$

2,268

 

 

$

23,360

 

 

$

—

 

 

$

—

 

 

$

23,360

 

Interest rate lock commitments

 

 

5,318

 

 

 

—

 

 

 

—

 

 

 

5,318

 

 

 

4,355

 

 

 

—

 

 

 

—

 

 

 

4,355

 

J.P. Morgan Securities LLC

 

 

1,564,749

 

 

 

(1,560,086

)

 

 

—

 

 

 

4,663

 

 

 

1,605,813

 

 

 

(1,605,813

)

 

 

—

 

 

 

—

 

Barclays Capital Inc.

 

 

835,314

 

 

 

(834,773

)

 

 

—

 

 

 

541

 

 

 

1,115,265

 

 

 

(1,115,265

)

 

 

—

 

 

 

—

 

Bank of America, N.A.

 

 

814,453

 

 

 

(814,453

)

 

 

—

 

 

 

—

 

 

 

1,239,293

 

 

 

(1,239,293

)

 

 

—

 

 

 

—

 

Atlas Securitized Products, L.P.

 

 

775,968

 

 

 

(775,968

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Wells Fargo Securities, LLC

 

 

633,576

 

 

 

(604,904

)

 

 

—

 

 

 

28,672

 

 

 

262,512

 

 

 

(262,512

)

 

 

—

 

 

 

—

 

Daiwa Capital Markets

 

 

350,089

 

 

 

(350,000

)

 

 

—

 

 

 

89

 

 

 

439,089

 

 

 

(439,089

)

 

 

—

 

 

 

—

 

Amherst Pierpont Securities LLC

 

 

302,341

 

 

 

(302,341

)

 

 

—

 

 

 

—

 

 

 

283,928

 

 

 

(283,294

)

 

 

—

 

 

 

634

 

Morgan Stanley & Co. LLC

 

 

243,616

 

 

 

(216,040

)

 

 

—

 

 

 

27,576

 

 

 

218,730

 

 

 

(218,730

)

 

 

—

 

 

 

—

 

Goldman Sachs & Co. LLC

 

 

189,682

 

 

 

(189,429

)

 

 

—

 

 

 

253

 

 

 

156,952

 

 

 

(156,952

)

 

 

—

 

 

 

—

 

Citigroup Global Markets Inc.

 

 

178,693

 

 

 

(176,899

)

 

 

—

 

 

 

1,794

 

 

 

197,229

 

 

 

(195,807

)

 

 

—

 

 

 

1,422

 

Mizuho Financial Group

 

 

72,196

 

 

 

(72,196

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

BNP Paribas

 

 

68,697

 

 

 

(68,651

)

 

 

—

 

 

 

46

 

 

 

153,220

 

 

 

(153,220

)

 

 

—

 

 

 

—

 

RBC Capital Markets, L.P.

 

 

48,301

 

 

 

(48,301

)

 

 

—

 

 

 

—

 

 

 

268,581

 

 

 

(268,581

)

 

 

—

 

 

 

—

 

Nomura Holdings America, Inc

 

 

7,937

 

 

 

(7,849

)

 

 

—

 

 

 

88

 

 

 

4,444

 

 

 

(4,444

)

 

 

—

 

 

 

—

 

Credit Suisse Securities (USA) LLC

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

675,639

 

 

 

(675,639

)

 

 

—

 

 

 

—

 

Other

 

 

594

 

 

 

—

 

 

 

—

 

 

 

594

 

 

 

262

 

 

 

—

 

 

 

—

 

 

 

262

 

 

$

6,093,792

 

 

$

(6,021,890

)

 

$

—

 

 

$

71,902

 

 

$

6,648,672

 

 

$

(6,618,639

)

 

$

—

 

 

$

30,033

 

 

40

 

 

(1)
Amounts represent the UPB of Assets sold under agreements to repurchase.

Following are the net gains (losses) recognized by the Company on derivative financial instruments and the consolidated statements of operations line items where such gains and losses are included:

 

 

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

Derivative activity

 

Consolidated statements of operations line

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

 

(in thousands)

 

Interest rate lock
    commitments

 

Net gains on loans acquired for sale
   (1)

 

$

(2,050

)

 

$

(41,187

)

 

$

(2,870

)

 

$

(45,294

)

CRT derivatives

 

Net (losses) gains on investments
   and financings

 

$

13,164

 

 

$

4,259

 

 

$

39,123

 

 

$

(7,172

)

Hedged item:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock
   commitments and loans
   acquired for sale

 

Net gains on loans acquired for sale

 

$

24,092

 

 

$

172,520

 

 

$

22,742

 

 

$

560,138

 

Mortgage servicing rights

 

Net loan servicing fees

 

$

(50,689

)

 

$

154,269

 

 

$

(81,584

)

 

$

(87,651

)

 

(1)
Represents net change in fair value of IRLCs from the beginning to the end of the reporting period. Amounts recognized at the date of commitment and fair value changes recognized during the period until purchase of the underlying loan or cancellation of the commitment are shown in the rollforward of IRLCs for the period in Note 7 – Fair Value – Financial Statement Items Measured at Fair Value on a Recurring Basis.

Note 12—Mortgage Servicing Rights

Following is a summary of MSRs:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

Balance at beginning of period

 

$

3,977,938

 

 

$

3,695,609

 

 

$

4,012,737

 

 

$

2,892,855

 

Purchases

 

 

16,263

 

 

 

—

 

 

 

16,263

 

 

 

—

 

MSRs resulting from loan sales

 

 

58,560

 

 

 

178,001

 

 

 

249,925

 

 

 

543,255

 

Transfer to Agency of mortgage servicing
   rights relating to delinquent loans

 

 

70

 

 

 

—

 

 

 

(653

)

 

 

—

 

Exchange of mortgage servicing spread for
     interest-only stripped mortgage-backed
      securities and interest receivable

 

 

(105,096

)

 

 

—

 

 

 

(105,096

)

 

 

—

 

Changes in fair value:

 

 

 

 

 

 

 

 

 

 

 

 

Due to changes in inputs used in valuation
    model (1)

 

 

263,139

 

 

 

162,730

 

 

 

232,414

 

 

 

775,792

 

Other changes in fair value (2)

 

 

(102,213

)

 

 

(95,756

)

 

 

(296,929

)

 

 

(271,318

)

 

 

160,926

 

 

 

66,974

 

 

 

(64,515

)

 

 

504,474

 

Balance at end of period

 

$

4,108,661

 

 

$

3,940,584

 

 

$

4,108,661

 

 

$

3,940,584

 

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Fair value of mortgage servicing rights pledged to secure Assets
     sold under agreements to repurchase and Notes payable
    secured by credit risk transfer and mortgage servicing assets

 

$

4,038,113

 

 

$

3,962,820

 

 

(1)
Primarily reflects changes in pricing spread, prepayment speed, servicing cost, and UPB of underlying loan inputs.
(2)
Represents changes due to realization of expected cash flows.

41

 

Servicing fees relating to MSRs are recorded in Net loan servicing fees – from nonaffiliates on the Company’s consolidated statements of operations and are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Contractually-specified servicing fees

 

$

166,809

 

 

$

162,987

 

 

$

496,522

 

 

$

461,021

 

Ancillary and other fees:

 

 

 

 

 

 

 

 

 

 

 

 

Late charges

 

 

878

 

 

 

662

 

 

 

2,442

 

 

 

1,883

 

Other

 

 

2,874

 

 

 

3,584

 

 

 

12,079

 

 

 

18,656

 

 

 

3,752

 

 

 

4,246

 

 

 

14,521

 

 

 

20,539

 

 

$

170,561

 

 

$

167,233

 

 

$

511,043

 

 

$

481,560

 

Average MSR servicing portfolio

 

$

231,333,064

 

 

$

224,756,659

 

 

$

231,333,990

 

 

$

220,988,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From PFSI—MSR recapture fees

 

$

500

 

 

$

1,648

 

 

$

1,494

 

 

$

13,232

 

UPB of loans recaptured

 

$

77,403

 

 

$

284,821

 

 

$

270,720

 

 

$

2,446,282

 

 

Note 13— Other Assets

Other assets are summarized below:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(dollars in thousands)

 

Derivative margin deposits

 

$

163,863

 

 

$

51,463

 

Correspondent lending receivables

 

 

64,834

 

 

 

8,967

 

Interest receivable

 

 

43,051

 

 

 

31,027

 

Servicing fees receivable

 

 

13,861

 

 

 

15,727

 

Other receivables

 

 

6,464

 

 

 

7,657

 

Real estate acquired in settlement of loans

 

 

5,318

 

 

 

7,734

 

Other

 

 

4,101

 

 

 

12,416

 

 

 

$

301,492

 

 

$

134,991

 

Real estate acquired in settlement of loans pledge to secure
   Assets sold under agreements to repurchase

 

$

2,466

 

 

$

3,297

 

 

Note 14— Short-Term Debt

The borrowing facilities described throughout these Notes 14 and 15 contain various covenants, including financial covenants governing the Company and its subsidiaries’ net worth, debt-to-equity ratio, and liquidity. Management believes that the Company was in compliance with these covenants as of September 30, 2023.

Assets Sold Under Agreements to Repurchase

Following is a summary of financial information relating to assets sold under agreements to repurchase:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(dollars in thousands)

 

Weighted average interest rate (1)

 

 

5.97

%

 

 

3.09

%

 

 

5.81

%

 

 

2.02

%

Average balance

 

$

5,714,082

 

 

$

5,789,433

 

 

$

6,451,377

 

 

$

5,363,690

 

Total interest expense

 

$

87,414

 

 

$

46,691

 

 

$

284,027

 

 

$

87,310

 

Maximum daily amount outstanding

 

$

6,318,746

 

 

$

6,649,005

 

 

$

9,412,768

 

 

$

8,395,930

 

 

(1)
Excludes the effect of amortization of debt issuance costs of $1.4 million and $3.8 million for the quarter and nine months ended September 30, 2023, respectively, and $1.7 million and $6.1 million for the quarter and nine months ended September 30, 2022, respectively.

 

42

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(dollars in thousands)

 

Carrying value:

 

 

 

 

 

 

Unpaid principal balance

 

$

6,021,890

 

 

$

6,618,639

 

Unamortized debt issuance costs

 

 

(1,174

)

 

 

(2,111

)

 

 

$

6,020,716

 

 

$

6,616,528

 

Weighted average interest rate

 

 

6.08

%

 

 

5.03

%

Available borrowing capacity (1):

 

 

 

 

 

 

Committed

 

$

465,855

 

 

$

217,279

 

Uncommitted

 

 

5,054,453

 

 

 

4,762,056

 

 

$

5,520,308

 

 

$

4,979,335

 

Margin deposits placed with (received from) counterparties included in
   Other assets (Accounts payable and accrued liabilities), net

 

$

93,467

 

 

$

(13,630

)

Assets securing agreements to repurchase:

 

 

 

 

 

 

Mortgage-backed securities

 

$

4,665,970

 

 

$

4,462,601

 

Loans acquired for sale at fair value

 

$

994,057

 

 

$

1,801,368

 

Loans at fair value:

 

 

 

 

 

 

Securities retained in asset-backed financings

 

$

80,298

 

 

$

84,044

 

Distressed

 

$

199

 

 

$

206

 

Deposits securing credit risk transfer arrangements

 

$

79,490

 

 

$

455,552

 

Mortgage servicing rights (2)

 

$

2,106,489

 

 

$

2,092,794

 

Servicing advances

 

$

46,280

 

 

$

100,888

 

Real estate acquired in settlement of loans

 

$

2,466

 

 

$

3,297

 

 

(1)
The amount the Company is able to borrow under asset repurchase agreements is tied to the fair value of unencumbered assets eligible to secure those agreements and the Company’s ability to fund the agreements’ margin requirements relating to the assets financed.
(2)
Beneficial interests in Fannie Mae MSRs are pledged to secure both Assets sold under agreements to repurchase and Notes payable secured by credit risk transfer and mortgage servicing assets.

Following is a summary of maturities of outstanding advances under repurchase agreements by maturity date:

Remaining maturity at September 30, 2023 (1)

 

Unpaid
principal
balance

 

 

 

(in thousands)

 

Within 30 days

 

$

3,661,146

 

Over 30 to 90 days

 

 

1,889,816

 

Over 90 days to 180 days

 

 

—

 

Over 180 days to 1 year

 

 

—

 

Over 1 year to 2 years

 

 

470,928

 

 

$

6,021,890

 

Weighted average maturity (in months)

 

 

2.8

 

 

(1)
The Company is subject to margin calls during the period the repurchase agreements are outstanding and therefore may be required to repay a portion of the borrowings before the respective repurchase agreements mature if the fair value (as determined by the applicable lender) of the assets securing those repurchase agreements decreases.

43

 

The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and interest payable) and maturity information relating to the Company’s assets sold under agreements to repurchase is summarized by pledged asset and counterparty below as of September 30, 2023:

Loans, REO and MSRs

 

 

 

 

 

Weighted-average maturity

Counterparty

 

Amount at risk

 

 

Advances

 

Facility

 

 

(in thousands)

 

 

 

 

 

Goldman Sachs & Co. LLC

 

$

1,757

 

 

December 19, 2023

 

December 23, 2023

Barclays Capital Inc.

 

$

2,507

 

 

December 20, 2023

 

November 13, 2024

Atlas Securitized Products, L.P.

 

$

53,974

 

 

December 21, 2023

 

June 27, 2025

Bank of America, N.A.

 

$

15,506

 

 

November 3, 2023

 

June 12, 2025

JPMorgan Chase & Co.

 

$

128

 

 

December 3, 2023

 

June 16, 2025

Citibank, N.A.

 

$

8,935

 

 

December 14, 2023

 

June 27, 2025

Wells Fargo Securities, LLC

 

$

1,027

 

 

December 16, 2023

 

May 3, 2025

Morgan Stanley & Co. LLC

 

$

9,731

 

 

December 25, 2023

 

January 27, 2025

BNP Paribas Corporate & Institutional Banking

 

$

3,309

 

 

December 24, 2023

 

September 30, 2025

RBC Capital Markets, L.P.

 

$

1,194

 

 

December 27, 2023

 

August 9, 2024

 

Securities

Counterparty

 

Amount at risk

 

 

Weighted average maturity

 

 

(in thousands)

 

 

 

Goldman Sachs & Co. LLC

 

$

25,485

 

 

October 30, 2023

Barclays Capital Inc.

 

$

52,386

 

 

November 3, 2023

Bank of America, N.A.

 

$

36,519

 

 

October 28, 2023

JPMorgan Chase & Co.

 

$

46,287

 

 

October 22, 2023

Citibank, N.A.

 

$

32,657

 

 

October 16, 2023

Wells Fargo Securities, LLC

 

$

27,848

 

 

October 13, 2023

Amherst Pierpont Securities LLC

 

$

9,401

 

 

October 18, 2023

Daiwa Capital Markets America Inc.

 

$

9,255

 

 

October 27, 2023

Nomura Holdings America, Inc

 

$

3,543

 

 

October 3, 2023

Mizuho Financial Group

 

$

1,977

 

 

November 22, 2023

 

CRT arrangements

Counterparty

 

Amount at risk

 

 

Weighted average maturity

 

 

(in thousands)

 

 

 

Goldman Sachs & Co. LLC

 

$

34,219

 

 

October 27, 2023

Mortgage Loan Participation Purchase and Sale Agreement

One of the borrowing facilities secured by loans acquired for sale is in the form of a mortgage loan participation purchase and sale agreement. Participation certificates, each of which represents an undivided beneficial ownership interest in a pool of loans that have been pooled with Fannie Mae or Freddie Mac, are sold to the lender pending the securitization of such loans and the sale of the resulting security. The commitment between the Company and a nonaffiliate to sell such security is also assigned to the lender at the time a participation certificate is sold.

The purchase price paid by the lender for each participation certificate is based on the trade price of the security, plus an amount of interest expected to accrue on the security to its anticipated delivery date, minus a present value adjustment, any related hedging costs and a holdback amount. The holdback amount is based on a percentage of the purchase price and is not required to be paid to the Company until the settlement of the security and its delivery to the lender.

The mortgage loan participation purchase and sale agreement is summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(dollars in thousands)

 

Average balance

 

$

22,043

 

 

$

31,092

 

 

$

20,991

 

 

$

33,586

 

Weighted average interest rate (1)

 

 

6.69

%

 

 

3.69

%

 

 

6.46

%

 

 

2.53

%

Total interest expense

 

$

403

 

 

$

320

 

 

$

1,109

 

 

$

728

 

Maximum daily amount outstanding

 

$

46,303

 

 

$

81,360

 

 

$

90,565

 

 

$

88,633

 

 

44

 

 

(1)
Excludes the effect of amortization of debt issuance costs of $31,000 and $94,000 for the quarter and nine months ended September 30, 2023, respectively, and $31,000 and $94,000 for the quarter and nine months ended September 30, 2022, respectively.

 

 

 

September 30, 2023

 

 

 

(dollars in thousands)

 

Carrying value:

 

 

 

Amount outstanding

 

$

23,991

 

Unamortized debt issuance costs

 

 

—

 

 

$

23,991

 

Weighted average interest rate

 

 

6.57

%

Loans acquired for sale pledged to secure mortgage loan participation
   purchase and sale agreement

 

$

25,190

 

 

Note 15— Long-Term Debt

Notes Payable Secured By Credit Risk Transfer and Mortgage Servicing Assets

CRT Arrangement Financing

The Company, through various wholly-owned subsidiaries, issued secured term notes (the “CRT Term Notes”) to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”). All of the CRT Term Notes rank pari passu with each other.

Following is a summary of the CRT Term Notes outstanding:

CRT

 

 

 

 

 

 

Unpaid

 

 

Annual

 

Maturity date

Term
Notes

 

Issuance date

 

Issuance amount

 

 

principal
balance

 

 

interest rate spread (1)

 

Stated

 

Optional extension (2)

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

2023 1R

 

April 5, 2023

 

$

235,000

 

 

$

222,152

 

 

4.40%

 

March 25, 2025

 

—

2021 1R

 

March 4, 2021

 

$

659,156

 

 

 

277,133

 

 

2.90%

 

February 28, 2024

 

February 27, 2026

2020 1R

 

February 14, 2020

 

$

350,000

 

 

 

52,600

 

 

3.35%

 

February 27, 2025

 

(3)

2019 3R

 

October 16, 2019

 

$

375,000

 

 

 

49,257

 

 

3.70%

 

October 29, 2024

 

(3)

2019 2R

 

June 11, 2019

 

$

638,000

 

 

 

166,249

 

 

3.75%

 

May 28, 2025

 

(3)

 

 

 

 

 

 

$

767,391

 

 

 

 

 

 

 

 

(1)
Interest rates are charged based at a spread to the Secured Overnight Financing Rate ("SOFR").
(2)
The indentures relating to these issuances provide the Company with the option to extend the maturity dates of certain of the CRT Term Notes under the conditions specified in the respective agreements.
(3)
Stated maturity date reflects the exercise by the Company of its option to extend the maturity of this issuance.

Fannie Mae MSR Financing

The Company, through a subsidiary, PMT ISSUER TRUST-FMSR, finances MSRs and ESS pledged or sold by PMC through a combination of repurchase agreements and term financing.

The repurchase agreement financing for Fannie Mae MSRs is effected through the issuance of a Series 2017-VF1 Note dated December 20, 2017 (the "FMSR VFN") by PMT ISSUER TRUST-FMSR to PMC which is then sold to qualified institutional buyers under an agreement to repurchase. The amount outstanding under the FMSR VFN is included in Assets sold under agreements to repurchase in the Company’s consolidated balance sheets. The FMSR VFN has a committed borrowing capacity of $1 billion and matures on June 27, 2025.

The Company’s term financing for Fannie Mae MSRs through PMT ISSUER TRUST – FMSR is effected through the issuance of term notes (the “FT-1 Term Notes”) to qualified institutional buyers under Rule 144A of the Securities Act and a series of syndicated term loans with various lenders (the “FT-1 Term Loans”).

On May 25, 2023, the Company, through its indirect, wholly-owned subsidiaries, PMT ISSUER TRUST - FMSR and PMC, entered into a syndicated series of term notes for $155 million (the “Series 2023-FTL1 Loan”), as part of the structured finance transaction that PMC uses to finance Fannie Mae MSRs and related excess servicing spread. On August 16, 2023, two additional lenders were added to the Series 2023-FTL1 Loan and the overall note balance increased by $215 million to $370 million. The initial five-year term of the Series 2023-FTL1 Loan is set to expire on May 25, 2028, unless the Company exercises a one-year optional extension.

45

 

The Series 2023-FTL1 Loan ranks pari passu with the Series 2021-FT1 and Series 2022-FT1 term notes, and the Amended and Restated Series 2017-VF1 Master Repurchase Agreement dated June 29, 2018.

The FT-1 Term Notes and FTL-1 Term Loans and the FMSR VFN are secured by certain participation certificates relating to Fannie Mae MSRs and rank pari passu with each other.

Following is a summary of the term financing of the Company’s Fannie Mae MSRs:

 

 

 

 

 

 

 

Unpaid

 

 

Annual

 

Maturity date

Issuance

 

Issuance date

 

Issuance amount

 

 

principal
balance

 

 

interest rate spread (1)

 

Stated

 

Optional extension (2)

 

 

 

 

(in thousands)

 

 

 

 

 

 

 

Term Loans

 

 

 

 

 

 

 

 

 

 

 

 

2023

 

May 25, 2023

 

$

370,000

 

 

$

370,000

 

 

3.00%

 

May 25, 2028

 

May 25, 2029

Term Notes

 

 

 

 

 

 

 

 

 

 

 

 

2022

 

June 28, 2022

 

$

305,000

 

 

 

305,000

 

 

4.19%

 

June 25, 2027

 

(3)

2021

 

March 30, 2021

 

$

350,000

 

 

 

350,000

 

 

3.00%

 

March 25, 2026

 

March 27, 2028

 

 

 

 

 

 

 

$

1,025,000

 

 

 

 

 

 

 

 

(1)
Interest rates are charged at a spread to SOFR.
(2)
The indentures relating to these issuances provide the Company with the option of extending the maturity dates of certain of the FT-1 Term Notes and FTL-1 Term Loans under the conditions specified in the respective agreements.
(3)
Either June 26, 2028 or June 25, 2029.

Freddie Mac MSR and Servicing Advance Receivables Financing

The Company, through PMC and PMH, finances certain MSRs (including any related excess servicing spread) relating to loans pooled into Freddie Mac securities through various credit agreements. The total loan amount available under the agreements is approximately $2.0 billion, bearing interest at an annual rate equal to SOFR plus a spread as defined in each agreement. The agreements have a weighted average maturity of March 2025. The total loan amount available under the agreements may be reduced by other debt outstanding with the counterparties. Advances under the credit agreements are secured by MSRs relating to loans serviced for Freddie Mac guaranteed securities.

On August 10, 2023, the Company, through its indirect, wholly owned subsidiaries, PMT ISSUER TRUST - FHLMC SAF, PMT SAF Funding, LLC, and PMC, entered into a structured finance transaction that PMC will use to finance Freddie Mac servicing advance receivables (the “Series 2023-VF1”). The maturity date of the related Series 2023-VF1, Class A-VF1 Variable Funding Note is August 9, 2025 and has a maximum principal amount of $150 million.

Following is a summary of financial information relating to notes payable secured by credit risk transfer and mortgage servicing assets:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(dollars in thousands)

 

Average balance

 

$

3,106,809

 

 

$

2,801,845

 

 

$

2,995,752

 

 

$

2,550,910

 

Weighted average interest rate (1)

 

 

8.70

%

 

 

5.37

%

 

 

8.28

%

 

 

4.19

%

Total interest expense

 

$

69,952

 

 

$

39,818

 

 

$

191,049

 

 

$

84,597

 

Maximum daily amount outstanding

 

$

3,380,951

 

 

$

3,235,376

 

 

$

3,403,116

 

 

$

3,544,637

 

 

(1)
Excludes the effect of amortization of debt issuance costs of $1.9 million and $5.4 million for the quarter and nine months ended September 30, 2023, respectively, and $1.9 million and $4.7 million for the quarter and nine months ended September 30, 2022, respectively.

 

46

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(dollars in thousands)

 

Carrying value:

 

 

 

 

 

 

Unpaid principal balance:

 

 

 

 

 

 

CRT arrangement financing

 

$

767,391

 

 

$

592,694

 

Fannie Mae MSR and servicing advance
   receivables financing

 

 

1,025,000

 

 

 

1,105,000

 

Freddie Mac MSR financing

 

 

1,040,000

 

 

 

1,115,000

 

 

 

 

2,832,391

 

 

 

2,812,694

 

Unamortized debt issuance costs

 

 

(6,800

)

 

 

(8,666

)

 

$

2,825,591

 

 

$

2,804,028

 

Weighted average interest rate

 

 

8.71

%

 

 

7.30

%

Assets securing notes payable:

 

 

 

 

 

 

Mortgage servicing rights (1)

 

$

4,038,113

 

 

$

3,962,820

 

Servicing advances

 

$

30,460

 

 

$

—

 

CRT Agreements:

 

 

 

 

 

 

Deposits securing CRT arrangements

 

$

1,157,804

 

 

$

869,742

 

Derivative assets

 

$

7,010

 

 

$

1,262

 

 

(1)
Beneficial interests in Freddie Mac MSRs are pledged as collateral for the Notes payable secured by credit risk transfer and mortgage servicing assets. Beneficial interests in Fannie Mae MSRs are pledged for both Assets sold under agreements to repurchase and Notes payable secured by credit risk transfer and mortgage servicing assets.

Unsecured Senior Notes

Exchangeable Senior Notes

PMC has issued $345 million aggregate principal amount of exchangeable senior notes (the “2026 Exchangeable Notes”) due 2026 and $210 million aggregate principal amount of exchangeable senior notes due 2024 (the “2024 Exchangeable Notes” and, together with the 2026 Exchangeable Notes, the “Exchangeable Notes”) in private offerings. The 2026 Exchangeable Notes will mature on March 15, 2026 unless repurchased or exchanged in accordance with their terms before such date. The 2024 Exchangeable Notes will mature on November 1, 2024 unless repurchased or exchanged in accordance with their terms before such date. Each series of Exchangeable Notes bears interest at a rate of 5.50% per year, payable semiannually.

The 2026 Exchangeable Notes and the 2024 Exchangeable Notes are fully and unconditionally guaranteed by the Company and are exchangeable for Common Shares, cash, or a combination thereof, at PMC’s election, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date, subject to the satisfaction of certain conditions if the exchange occurs before December 15, 2025 and August 1, 2024, respectively. The exchange rates are equal to 46.1063 and 40.101 Common Shares per $1,000 principal amount of the 2026 Exchangeable Notes and 2024 Exchangeable Notes, respectively, and are subject to adjustment upon the occurrence of certain events, but will not be adjusted for any accrued and unpaid interest.

2023 Senior Notes

The Company issued $53.5 million principal amount of unsecured 8.50% senior notes due September 30, 2028 (“the 2023 Senior Notes” and, together with the 2024 Exchangeable Notes and the 2026 Exchangeable Notes, the “Senior Notes”) during September 2023. The 2023 Senior Notes bear interest at a rate of 8.50% per year, payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year, beginning on December 30, 2023.

On or after September 30, 2025, PMT may redeem for cash all or any portion of the 2023 Senior Notes, at its option, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

The 2023 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by PMC, including the due and punctual payment of principal of and interest on the 2023 Senior Notes, whether at stated maturity, upon acceleration, call for redemption or otherwise.

Following is financial information relating to the Unsecured Senior Notes:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Average balance

 

$

553,338

 

 

$

545,047

 

 

$

549,063

 

 

$

539,703

 

Weighted average interest rate (1)

 

 

5.56

%

 

 

5.55

%

 

 

5.60

%

 

 

5.67

%

Interest expense

 

$

8,541

 

 

$

8,349

 

 

$

25,316

 

 

$

25,004

 

 

47

 

 

(1)
Excludes the effect of amortization of debt issuance costs of $790,000 and $2.3 million for the quarter and nine months ended September 30, 2023, respectively, and $718,000 and $2.1 million for the quarter and nine months ended September 30, 2022, respectively.

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Carrying value:

 

 

 

 

 

 

UPB

 

$

608,500

 

 

$

555,000

 

Unamortized debt issuance costs

 

 

(8,746

)

 

 

(8,746

)

 

$

599,754

 

 

$

546,254

 

Asset-Backed Financing of Variable Interest Entities at Fair Value

Following is a summary of financial information relating to the asset-backed financings of VIEs at fair value described in Note 6 ‒ Variable Interest Entities ‒ Subordinate Mortgage-Backed Securities:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(dollars in thousands)

 

Average balance

 

$

1,342,093

 

 

$

1,540,957

 

 

$

1,381,994

 

 

$

1,549,797

 

Total interest expense

 

$

13,652

 

 

$

14,265

 

 

$

38,796

 

 

$

40,308

 

Weighted average interest rate (1)

 

 

3.70

%

 

 

3.42

%

 

 

3.69

%

 

 

3.34

%

 

(1)
Excludes the effect of amortization of debt issuance cost and premiums of $1.1 million and $666,000 for the quarter and nine months ended September 30, 2023, respectively, and $1.0 million and $1.6 million for the quarter and nine months ended September 30, 2022, respectively.

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(dollars in thousands)

 

Fair value

 

$

1,279,059

 

 

$

1,414,955

 

Unpaid principal balance

 

$

1,610,955

 

 

$

1,681,410

 

Weighted average interest rate

 

 

3.22

%

 

 

3.22

%

The asset-backed financings are non-recourse liabilities and are secured solely by the assets of consolidated VIEs and not by any other assets of the Company. The assets of the VIEs are the only source of funds for repayment of the securities.

Maturities of Long-Term Debt

Contractual maturities of long-term debt obligations (based on final maturity dates) are as follows:

 

 

 

 

Twelve months ended September 30,

 

 

 

 

 

Total

 

 

2024

 

 

2025

 

 

2026

 

 

2027

 

 

2028

 

 

Thereafter

 

 

(in thousands)

 

Notes payable secured by credit risk transfer
    and mortgage servicing assets (1)

$

2,832,391

 

 

$

717,133

 

 

$

1,090,258

 

 

$

350,000

 

 

$

305,000

 

 

$

370,000

 

 

$

—

 

Unsecured senior notes

 

608,500

 

 

 

—

 

 

 

210,000

 

 

 

345,000

 

 

 

—

 

 

 

53,500

 

 

 

—

 

Asset-backed financings at fair value (2)

 

1,610,955

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,610,955

 

Interest-only security payable at fair value (2)

 

28,288

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

28,288

 

Total

$

5,080,134

 

 

$

717,133

 

 

$

1,300,258

 

 

$

695,000

 

 

$

305,000

 

 

$

423,500

 

 

$

1,639,243

 

(1)
Based on stated maturity. As discussed above, certain of the Notes payable secured by credit risk and mortgage servicing assets allow the Company to exercise optional extensions.
(2)
Contractual maturity does not reflect expected repayment as borrowers of the underlying loans generally have the right to repay their loans at any time.

48

 

Note 16—Liability for Losses Under Representations and Warranties

Following is a summary of the Company’s liability for losses under representations and warranties:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Balance, beginning of period

 

$

37,069

 

 

$

39,441

 

 

$

39,471

 

 

$

40,249

 

Provision for losses:

 

 

 

 

 

 

 

 

 

 

 

 

Pursuant to loan sales

 

 

448

 

 

 

996

 

 

 

2,126

 

 

 

3,442

 

Reduction in liability due to change in estimate

 

 

(4,365

)

 

 

(817

)

 

 

(7,920

)

 

 

(3,512

)

Losses incurred

 

 

—

 

 

 

(122

)

 

 

(525

)

 

 

(681

)

Balance, end of period

 

$

33,152

 

 

$

39,498

 

 

$

33,152

 

 

$

39,498

 

UPB of loans subject to representations and
    warranties at end of period

 

 

 

 

 

 

 

$

228,679,429

 

 

$

225,129,199

 

 

Note 17—Commitments and Contingencies

Commitments

The following table summarizes the Company’s outstanding contractual commitments:

 

 

September 30, 2023

 

 

 

(in thousands)

 

Commitments to purchase loans acquired for sale

 

$

1,459,919

 

 

Litigation

From time to time, the Company may be involved in various legal and regulatory proceedings, claims and legal actions arising in the ordinary course of business. The amount, if any, of ultimate liability with respect to such matters cannot be determined, but despite the inherent uncertainties of litigation, management believes that the ultimate disposition of any such proceedings and exposure will not have, individually or taken together, a material adverse effect on the financial condition, results of operations, or cash flows of the Company.

Note 18—Shareholders’ Equity

Preferred Shares of Beneficial Interest

Preferred shares of beneficial interest are summarized below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per share, period ended September 30,

 

Preferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter

 

 

Nine months

 

Share
 series

 

Description (1)

 

Number of shares

 

 

Liquidation preference

 

 

Issuance discount

 

 

Carrying value

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Fixed-to-floating rate cumulative redeemable

 

(in thousands, except dividends per share)

 

A

 

8.125% Issued March 2017

 

 

4,600

 

 

$

115,000

 

 

$

3,828

 

 

$

111,172

 

 

$

0.51

 

 

$

0.51

 

 

$

1.53

 

 

$

1.53

 

B

 

8.00% Issued July 2017

 

 

7,800

 

 

 

195,000

 

 

 

6,465

 

 

 

188,535

 

 

$

0.50

 

 

$

0.50

 

 

$

1.50

 

 

$

1.50

 

Fixed-rate cumulative redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

C

 

6.75% Issued August 2021

 

 

10,000

 

 

 

250,000

 

 

 

8,225

 

 

 

241,775

 

 

$

0.42

 

 

$

0.42

 

 

$

1.26

 

 

$

1.26

 

 

 

 

 

22,400

 

 

$

560,000

 

 

$

18,518

 

 

$

541,482

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)
Par value is $0.01 per share.

In March 2021, the United Kingdom's Financial Conduct Authority announced that after June 30, 2023, the USD LIBOR for a three-month tenor would cease publication or no longer be representative. In connection with the cessation of representative USD LIBOR, in March 2022, the U.S. Congress enacted the Adjustable Interest Rate (LIBOR) Act, and, in December 2022, the Board of Governors of the Federal Reserve System issued a final rule thereunder (the "LIBOR Rule”). The LIBOR Rule provides that, with respect to any reference in the terms of a security requiring a poll or inquiries for quotes or information related to USD LIBOR (“Polling Provisions”) contained in so called “fallback provisions” applicable in the event USD LIBOR is not published, such Polling Provisions shall be disregarded and deemed null and void and without any force or effect.

In accordance with the Articles Supplementary for each of the Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series A Preferred Shares”) and the Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Shares of Beneficial Interest (the “Series B Preferred Shares”), and disregarding the Polling Provisions contained therein, the applicable dividend rate for dividend periods from and after March 15, 2024, in the case of the Series A Preferred Shares, or June 15, 2024, in the case of the Series B Preferred Shares, will be calculated at the dividend rate in effect for the immediately preceding dividend period.

49

 

As a result, the Series A Preferred Shares and Series B Preferred Shares will continue to accumulate dividends from and after March 15, 2024, in the case of the Series A Preferred Shares, or June 15, 2024, in the case of the Series B Preferred Shares, at their annual fixed rate and will not transition to floating reference rates.

The Series A Preferred Shares, the Series B Preferred Shares and Series C Preferred Shares will not be redeemable before March 15, 2024, June 15, 2024 and August 24, 2026, respectively, except in connection with the Company’s qualification as a REIT for U.S. federal income tax purposes or upon the occurrence of a change of control. On or after the date the Preferred Shares become redeemable, or 120 days after the first date on which such change of control occurs, the Company may, at its option, redeem any or all of the Preferred Shares at $25.00 per share plus any accumulated and unpaid dividends to, but not including, the redemption date.

The Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless redeemed or repurchased by the Company or converted into Common Shares in connection with a change of control by the holders of the Preferred Shares.

Common Shares of Beneficial Interest

“At-The-Market” (“ATM”) Equity Offering Program

The Company periodically enters into ATM equity offering programs allowing it to offer and sell securities on an as-and-when-needed basis through designated broker-dealers. On June 15, 2021, the Company entered into a new ATM equity offering program allowing it to offer up to $200 million of its Common Shares, all of which were available for issuance as of September 30, 2023.

Common Share Repurchase Program

The Company has a Common Share repurchase program. On October 24, 2022, the Company’s board of trustees approved an increase to PMT's Common Share repurchase authorization from $400 million to $500 million before transaction fees.

The following table summarizes the Company’s Common Share repurchase activity:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

Cumulative

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

total (1)

 

 

 

(in thousands)

 

Common Shares repurchased

 

 

—

 

 

 

987

 

 

 

2,274

 

 

 

4,888

 

 

 

28,965

 

Cost of Common Shares repurchased (2)

 

$

—

 

 

$

13,498

 

 

$

27,011

 

 

$

73,746

 

 

$

425,751

 

 

(1)
Amounts represent the Common Share repurchase program total from its inception in August 2015 through September 30, 2023.
(2)
Cumulative total cost of Common Shares repurchased includes $579,000 of transaction fees.

50

 

Note 19— Net Gains on Loans Acquired for Sale

Net gains on loans acquired for sale are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

From nonaffiliates:

 

 

 

 

 

 

 

 

 

 

 

 

Cash losses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales of loans

 

$

(71,105

)

 

$

(390,543

)

 

$

(260,697

)

 

$

(1,128,355

)

Hedging activities

 

 

(30,155

)

 

 

233,139

 

 

 

(52,822

)

 

 

695,238

 

 

 

(101,260

)

 

 

(157,404

)

 

 

(313,519

)

 

 

(433,117

)

Non-cash gains:

 

 

 

 

 

 

 

 

 

 

 

 

Receipt of MSRs in mortgage loan sale transactions

 

 

58,560

 

 

 

178,001

 

 

 

249,925

 

 

 

543,255

 

Provision for losses relating to representations
   and warranties provided in loan sales:

 

 

 

 

 

 

 

 

 

 

 

 

Pursuant to loans sales

 

 

(448

)

 

 

(996

)

 

 

(2,126

)

 

 

(3,442

)

Reduction of liability due to change in estimate

 

 

4,365

 

 

 

817

 

 

 

7,920

 

 

 

3,512

 

 

 

3,917

 

 

 

(179

)

 

 

5,794

 

 

 

70

 

Changes in fair value of loans and derivatives

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments

 

 

(2,050

)

 

 

(41,187

)

 

 

(2,870

)

 

 

(45,294

)

Loans

 

 

(1,710

)

 

 

84,498

 

 

 

4,569

 

 

 

82,561

 

Hedging derivatives

 

 

54,247

 

 

 

(60,619

)

 

 

75,564

 

 

 

(135,100

)

 

 

50,487

 

 

 

(17,308

)

 

 

77,263

 

 

 

(97,833

)

 

 

112,964

 

 

 

160,514

 

 

 

332,982

 

 

 

445,492

 

Total from nonaffiliates

 

 

11,704

 

 

 

3,110

 

 

 

19,463

 

 

 

12,375

 

From PFSI ‒ cash gains

 

 

1,854

 

 

 

1,203

 

 

 

5,014

 

 

 

3,562

 

 

$

13,558

 

 

$

4,313

 

 

$

24,477

 

 

$

15,937

 

 

Note 20— Net (losses) gains on investments and financings

Net (losses) gains on investments and financings are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

From nonaffiliates:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

$

(144,031

)

 

$

(251,477

)

 

$

(127,434

)

 

$

(620,500

)

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

Held in VIEs

 

 

(54,082

)

 

 

(99,267

)

 

 

(61,318

)

 

 

(318,300

)

Distressed

 

 

(59

)

 

 

56

 

 

 

(485

)

 

 

504

 

CRT arrangements

 

 

30,154

 

 

 

4,359

 

 

 

136,890

 

 

 

(73,619

)

Asset-backed financings

 

 

58,474

 

 

 

92,993

 

 

 

66,108

 

 

 

298,834

 

 

$

(109,544

)

 

$

(253,336

)

 

$

13,761

 

 

$

(713,081

)

 

51

 

Note 21—Net interest expense

Net interest expense is summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term investments

 

$

6,288

 

 

$

1,993

 

 

$

19,311

 

 

$

3,571

 

Mortgage-backed securities

 

 

66,563

 

 

 

36,070

 

 

 

180,244

 

 

 

91,121

 

Loans acquired for sale at fair value

 

 

14,720

 

 

 

27,921

 

 

 

77,487

 

 

 

70,611

 

Loans at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

Held in consolidated variable interest entities

 

 

9,505

 

 

 

16,002

 

 

 

38,315

 

 

 

44,587

 

Distressed

 

 

9

 

 

 

16

 

 

 

33

 

 

 

204

 

Deposits securing CRT arrangements

 

 

16,419

 

 

 

6,978

 

 

 

46,410

 

 

 

9,584

 

Placement fees relating to custodial funds

 

 

44,005

 

 

 

20,239

 

 

 

110,602

 

 

 

31,152

 

Other

 

 

1,417

 

 

 

439

 

 

 

2,227

 

 

 

589

 

 

 

158,926

 

 

 

109,658

 

 

 

474,629

 

 

 

251,419

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Assets sold under agreements to repurchase

 

 

87,414

 

 

 

46,691

 

 

 

284,027

 

 

 

87,310

 

Mortgage loan participation purchase and
   sale agreements

 

 

403

 

 

 

320

 

 

 

1,109

 

 

 

728

 

Notes payable secured by credit risk transfer and
   mortgage servicing assets

 

 

69,952

 

 

 

39,818

 

 

 

191,049

 

 

 

84,597

 

Unsecured senior notes

 

 

8,541

 

 

 

8,349

 

 

 

25,316

 

 

 

25,004

 

Asset-backed financings at fair value

 

 

13,652

 

 

 

14,265

 

 

 

38,796

 

 

 

40,308

 

Interest shortfall on repayments of loans serviced
   for Agency securitizations

 

 

1,503

 

 

 

3,504

 

 

 

4,322

 

 

 

14,975

 

Interest on loan impound deposits

 

 

2,079

 

 

 

1,133

 

 

 

4,737

 

 

 

2,822

 

Other

 

 

374

 

 

 

—

 

 

 

1,089

 

 

 

—

 

 

 

183,918

 

 

 

114,080

 

 

 

550,445

 

 

 

255,744

 

Net interest expense

 

$

(24,992

)

 

$

(4,422

)

 

$

(75,816

)

 

$

(4,325

)

 

Note 22—Share-Based Compensation

The Company has adopted an equity incentive plan (“2019 Plan”) which provides for the issuance of equity based awards based on PMT’s Common Shares that may be made by the Company to its officers and trustees, and the members, officers, trustees, directors and employees of PCM, PFSI, or their affiliates and to PCM, PFSI and other entities that provide services to PMT and the employees of such other entities.

The 2019 Plan is administered by the Company’s compensation committee, pursuant to authority delegated by PMT’s board of trustees, which has the authority to make awards to the eligible participants referenced above, and to determine what form the awards will take, and the terms and conditions of the awards.

The 2019 Plan allows for the grant of restricted and performance-based share and unit awards.

52

 

The shares underlying award grants will again be available for award under the 2019 Plan if:

•
any shares subject to an award granted under the equity incentive plan are forfeited, canceled, exchanged or surrendered;
•
an award terminates or expires without a distribution of shares to the participant; or
•
shares are surrendered or withheld by PMT as payment of either the exercise price of an award and/or withholding taxes for an award.

Restricted share units have been awarded to trustees and officers of the Company and to other employees of PFSI and its subsidiaries at no cost to the grantees. Such awards generally vest over a one- to three-year period.

The following table summarizes the Company’s share-based compensation activity:

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Grants:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted share units

 

 

—

 

 

 

—

 

 

 

172

 

 

 

134

 

Performance share units

 

 

—

 

 

 

—

 

 

 

166

 

 

 

151

 

 

 

—

 

 

 

—

 

 

 

338

 

 

 

285

 

Grant date fair value:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted share units

 

$

—

 

 

$

—

 

 

$

2,212

 

 

$

2,101

 

Performance share units

 

 

—

 

 

 

—

 

 

 

2,088

 

 

 

2,350

 

 

$

—

 

 

$

—

 

 

$

4,300

 

 

$

4,451

 

Vestings:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted share units

 

 

—

 

 

 

—

 

 

 

140

 

 

 

79

 

Performance share units (1)

 

 

—

 

 

 

—

 

 

 

48

 

 

 

41

 

 

 

—

 

 

 

—

 

 

 

188

 

 

 

120

 

Forfeitures:

 

 

 

 

 

 

 

 

 

 

 

 

Restricted share units

 

 

—

 

 

 

—

 

 

 

6

 

 

 

—

 

Performance share units

 

 

—

 

 

 

—

 

 

 

—

 

 

 

11

 

 

 

—

 

 

 

—

 

 

 

6

 

 

 

11

 

Compensation expense relating to share-based grants

 

$

1,420

 

 

$

959

 

 

$

3,421

 

 

$

3,130

 

 

(1)
The actual number of performance-based restricted share units (“RSUs”) that vested during the nine months ended September 30, 2023, was 48,372 Common Shares, which is approximately 39% of the originally granted performance-based RSUs.

 

 

 

September 30, 2023

 

 

 

Restricted share units

 

 

Performance share units

 

Shares expected to vest:

 

 

Number of units (in thousands)

 

 

251

 

 

 

260

 

Grant date average fair value per unit

 

$

14.29

 

 

$

14.07

 

 

Note 23—Income Taxes

The Company’s effective tax rate was 48.1% and 28.1% with consolidated pretax income of $118.4 million and $204.1 million for the quarter and nine months ended September 30, 2023. The Company’s taxable REIT subsidiary (“TRS”) recognized a tax expense of $57.1 million on pretax income of $234.0 million and a tax expense of $56.5 million on pretax income of $221.9 million for the quarter and nine months ended September 30, 2023. For the same periods in 2022, the TRS recognized a tax expense of $80.8 million on pretax income of $344.8 million and a tax expense of $151.3 million on pretax income of $765.2 million, respectively. The Company’s reported consolidated pretax income for the quarter and nine months ended September 30, 2022 was $90.4 million and $68.6 million, respectively. The primary difference between the Company’s effective tax rate and the statutory tax rate is generally attributable to nontaxable REIT income resulting from the dividends paid deduction.

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, as of September 30, 2023, the valuation allowance remains zero. The conclusion was primarily based on the fact that the TRS has reported cumulative GAAP income over the last three-year period ending September 30, 2023. The amount of deferred tax assets considered realizable could be adjusted in future periods based on future income.

53

 

In general, cash dividends declared by the Company will be considered ordinary income to the shareholders for income tax purposes. Some portion of the dividends may be characterized as capital gain distributions or a return of capital. For tax years beginning after December 31, 2017, the 2017 Tax Cuts and Jobs Act (subject to certain limitations) provides a 20% deduction from taxable income for ordinary REIT dividends.

Note 24—Earnings Per Common Share

The Company grants restricted share units that entitle the recipients to receive dividend equivalents during the vesting period on a basis equivalent to the dividends paid to holders of Common Shares. Unvested share-based compensation awards containing non-forfeitable rights to receive dividends or dividend equivalents (collectively, “dividends”) are classified as “participating securities” and are included in the basic earnings per share calculation using the two-class method.

Under the two-class method, all earnings (distributed and undistributed) are allocated to Common Shares and participating securities based on their respective rights to receive dividends. Basic earnings per share is determined by dividing net income available to common shareholders (net income reduced by preferred dividends and income attributable to the participating securities) by the weighted average Common Shares outstanding during the period.

The following table summarizes the basic and diluted earnings per share calculations:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands except per share amounts)

 

Net income (loss)

 

$

61,422

 

 

$

11,913

 

 

$

146,743

 

 

$

(77,950

)

Dividends on preferred shares

 

 

(10,455

)

 

 

(10,455

)

 

 

(31,364

)

 

 

(31,364

)

Effect of participating securities—share-based
  compensation awards

 

 

(147

)

 

 

(111

)

 

 

(332

)

 

 

(318

)

Net income (loss) attributable to common shareholders

 

 

50,820

 

 

 

1,347

 

 

 

115,047

 

 

 

(109,632

)

Interest on Exchangeable Notes, net of income taxes

 

 

6,359

 

 

 

—

 

 

 

18,773

 

 

 

—

 

Loss attributable to participating securities

 

 

(4

)

 

 

—

 

 

 

(35

)

 

 

—

 

Diluted net income (loss) attributable to common
   shareholders

 

 

57,175

 

 

 

1,347

 

 

 

133,785

 

 

 

(109,632

)

Weighted average basic shares outstanding

 

 

86,760

 

 

 

90,594

 

 

 

87,613

 

 

 

92,221

 

Dilutive securities‒Shares issuable pursuant
   to exchange of the Exchangeable Notes

 

 

24,328

 

 

 

—

 

 

 

24,328

 

 

 

—

 

Diluted weighted average shares outstanding

 

 

111,088

 

 

 

90,594

 

 

 

111,941

 

 

 

92,221

 

Basic earnings (loss) per share

 

$

0.59

 

 

$

0.01

 

 

$

1.31

 

 

$

(1.19

)

Diluted earnings (loss) per share

 

$

0.51

 

 

$

0.01

 

 

$

1.20

 

 

$

(1.19

)

 

Calculation of diluted earnings per share requires certain potentially dilutive shares to be excluded when the inclusion of such shares would be anti-dilutive. The following table summarizes the potentially dilutive shares excluded from the diluted earnings per share calculation as inclusion of such shares would have been antidilutive:

 

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Shares issuable under share-based compensation plan

 

 

188

 

 

 

136

 

 

 

166

 

 

 

127

 

Shares issuable pursuant to exchange of the Exchangeable
  Senior Notes

 

 

—

 

 

 

24,328

 

 

 

—

 

 

 

24,328

 

 

Note 25—Segments

The Company operates in four segments as described in Note 1 ‒ Organization.

The Company’s reportable segments are identified based on PMT’s investment strategies. The Company’s chief operating decision-maker is its chief executive officer. The following disclosures about the Company’s business segments are presented consistent with the way the Company’s chief operating decision-maker organizes and evaluates financial information for making operating decisions and assessing performance.

54

 

Financial highlights by operating segment are summarized below:

 

 

Credit

 

 

Interest rate

 

 

 

 

 

 

 

 

 

 

 

 

sensitive

 

 

sensitive

 

 

Correspondent

 

 

 

 

 

 

 

 Quarter ended September 30, 2023

 

strategies

 

 

strategies

 

 

production

 

 

Corporate

 

 

Total

 

 

 

(in thousands)

 

Net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loan servicing fees

 

$

—

 

 

$

281,298

 

 

$

—

 

 

$

—

 

 

$

281,298

 

Net gains on loans acquired for sale

 

 

—

 

 

 

—

 

 

 

13,558

 

 

 

—

 

 

 

13,558

 

Net (losses) gains on investments and financings

 

 

38,772

 

 

 

(148,316

)

 

 

—

 

 

 

—

 

 

 

(109,544

)

Net interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

26,235

 

 

 

114,430

 

 

 

14,656

 

 

 

3,605

 

 

 

158,926

 

Interest expense

 

 

23,235

 

 

 

142,942

 

 

 

16,388

 

 

 

1,353

 

 

 

183,918

 

 

 

3,000

 

 

 

(28,512

)

 

 

(1,732

)

 

 

2,252

 

 

 

(24,992

)

Other

 

 

(251

)

 

 

—

 

 

 

3,360

 

 

 

—

 

 

 

3,109

 

 

 

41,521

 

 

 

104,470

 

 

 

15,186

 

 

 

2,252

 

 

 

163,429

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan fulfillment and servicing fees
   payable to PFSI

 

 

33

 

 

 

20,224

 

 

 

5,531

 

 

 

—

 

 

 

25,788

 

Management fees

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,175

 

 

 

7,175

 

Other

 

 

492

 

 

 

2,683

 

 

 

809

 

 

 

8,062

 

 

 

12,046

 

 

 

525

 

 

 

22,907

 

 

 

6,340

 

 

 

15,237

 

 

 

45,009

 

Pretax income (loss)

 

$

40,996

 

 

$

81,563

 

 

$

8,846

 

 

$

(12,985

)

 

$

118,420

 

Total assets at end of quarter

 

$

1,620,322

 

 

$

10,079,073

 

 

$

1,134,812

 

 

$

389,129

 

 

$

13,223,336

 

 

 

 

Credit

 

 

Interest rate

 

 

 

 

 

 

 

 

 

 

 

 

sensitive

 

 

sensitive

 

 

Correspondent

 

 

 

 

 

 

 

Quarter ended September 30, 2022

 

strategies

 

 

strategies

 

 

production

 

 

Corporate

 

 

Total

 

 

 

(in thousands)

 

Net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loan servicing fees

 

$

—

 

 

$

390,124

 

 

$

—

 

 

$

—

 

 

$

390,124

 

Net gains on loans acquired for sale

 

 

—

 

 

 

—

 

 

 

4,313

 

 

 

—

 

 

 

4,313

 

Net (losses) gains on investments and financings

 

 

(2,230

)

 

 

(251,106

)

 

 

—

 

 

 

—

 

 

 

(253,336

)

Net interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

12,415

 

 

 

68,152

 

 

 

27,862

 

 

 

1,229

 

 

 

109,658

 

Interest expense

 

 

14,097

 

 

 

80,782

 

 

 

18,322

 

 

 

879

 

 

 

114,080

 

 

 

(1,682

)

 

 

(12,630

)

 

 

9,540

 

 

 

350

 

 

 

(4,422

)

Other

 

 

978

 

 

 

—

 

 

 

13,408

 

 

 

—

 

 

 

14,386

 

 

 

(2,934

)

 

 

126,388

 

 

 

27,261

 

 

 

350

 

 

 

151,065

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan fulfillment and servicing fees
   payable to PFSI

 

 

57

 

 

 

20,190

 

 

 

18,407

 

 

 

—

 

 

 

38,654

 

Management fees

 

 

—

 

 

 

—

 

 

 

—

 

 

 

7,731

 

 

 

7,731

 

Other

 

 

708

 

 

 

2,688

 

 

 

2,789

 

 

 

8,116

 

 

 

14,301

 

 

 

765

 

 

 

22,878

 

 

 

21,196

 

 

 

15,847

 

 

 

60,686

 

Pretax income (loss)

 

$

(3,699

)

 

$

103,510

 

 

$

6,065

 

 

$

(15,497

)

 

$

90,379

 

Total assets at end of quarter

 

$

1,656,994

 

 

$

9,365,974

 

 

$

2,505,398

 

 

$

417,574

 

 

$

13,945,940

 

 

 

 

 

55

 

 

 

Credit

 

 

Interest rate

 

 

 

 

 

 

 

 

 

 

 

 

sensitive

 

 

sensitive

 

 

Correspondent

 

 

 

 

 

 

 

Nine months ended September 30, 2023

 

strategies

 

 

strategies

 

 

production

 

 

Corporate

 

 

Total

 

 

 

(in thousands)

 

Net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loan servicing fees

 

$

—

 

 

$

366,438

 

 

$

—

 

 

$

—

 

 

$

366,438

 

Net gains on loans acquired for sale

 

 

—

 

 

 

—

 

 

 

24,477

 

 

 

—

 

 

 

24,477

 

Net (losses) gains on investments and financings

 

 

161,867

 

 

 

(148,106

)

 

 

—

 

 

 

—

 

 

 

13,761

 

Net interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

72,775

 

 

 

315,168

 

 

 

77,292

 

 

 

9,394

 

 

 

474,629

 

Interest expense

 

 

62,790

 

 

 

406,098

 

 

 

78,259

 

 

 

3,298

 

 

 

550,445

 

 

 

9,985

 

 

 

(90,930

)

 

 

(967

)

 

 

6,096

 

 

 

(75,816

)

Other

 

 

(251

)

 

 

—

 

 

 

15,638

 

 

 

—

 

 

 

15,387

 

 

 

171,601

 

 

 

127,402

 

 

 

39,148

 

 

 

6,096

 

 

 

344,247

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan fulfillment and servicing fees
   payable to PFSI

 

 

142

 

 

 

60,881

 

 

 

22,895

 

 

 

—

 

 

 

83,918

 

Management fees

 

 

—

 

 

 

—

 

 

 

—

 

 

 

21,510

 

 

 

21,510

 

Other

 

 

2,039

 

 

 

5,155

 

 

 

4,224

 

 

 

23,327

 

 

 

34,745

 

 

 

2,181

 

 

 

66,036

 

 

 

27,119

 

 

 

44,837

 

 

 

140,173

 

Pretax income (loss)

 

$

169,420

 

 

$

61,366

 

 

$

12,029

 

 

$

(38,741

)

 

$

204,074

 

Total assets at end of period

 

$

1,620,322

 

 

$

10,079,073

 

 

$

1,134,812

 

 

$

389,129

 

 

$

13,223,336

 

 

 

 

 

Credit

 

 

Interest rate

 

 

 

 

 

 

 

 

 

 

 

 

sensitive

 

 

sensitive

 

 

Correspondent

 

 

 

 

 

 

 

Nine months ended September 30, 2022

 

strategies

 

 

strategies

 

 

production

 

 

Corporate

 

 

Total

 

 

 

(in thousands)

 

Net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loan servicing fees

 

$

—

 

 

$

911,615

 

 

$

—

 

 

$

—

 

 

$

911,615

 

Net gains on loans acquired for sale

 

 

5

 

 

 

—

 

 

 

15,932

 

 

 

—

 

 

 

15,937

 

Net (losses) gains on investments and financings

 

 

(104,946

)

 

 

(608,135

)

 

 

—

 

 

 

—

 

 

 

(713,081

)

Net interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

20,391

 

 

 

158,158

 

 

 

70,436

 

 

 

2,434

 

 

 

251,419

 

Interest expense

 

 

34,653

 

 

 

177,622

 

 

 

41,980

 

 

 

1,489

 

 

 

255,744

 

 

 

(14,262

)

 

 

(19,464

)

 

 

28,456

 

 

 

945

 

 

 

(4,325

)

Other

 

 

1,237

 

 

 

—

 

 

 

43,021

 

 

 

—

 

 

 

44,258

 

 

 

(117,966

)

 

 

284,016

 

 

 

87,409

 

 

 

945

 

 

 

254,404

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loan fulfillment and servicing fees
   payable to PFSI

 

 

167

 

 

 

61,503

 

 

 

55,807

 

 

 

—

 

 

 

117,477

 

Management fees

 

 

—

 

 

 

—

 

 

 

—

 

 

 

23,758

 

 

 

23,758

 

Other

 

 

5,242

 

 

 

5,425

 

 

 

11,176

 

 

 

22,757

 

 

 

44,600

 

 

 

5,409

 

 

 

66,928

 

 

 

66,983

 

 

 

46,515

 

 

 

185,835

 

Pretax income (loss)

 

$

(123,375

)

 

$

217,088

 

 

$

20,426

 

 

$

(45,570

)

 

$

68,569

 

Total assets at end of period

 

$

1,656,994

 

 

$

9,365,974

 

 

$

2,505,398

 

 

$

417,574

 

 

$

13,945,940

 

 

 

 

56

 

Note 26—Regulatory Capital and Liquidity Requirements

The Company, through PMC, is subject to financial eligibility requirements established by the Federal Housing Finance Agency for sellers/servicers eligible to sell or service mortgage loans with Fannie Mae and Freddie Mac.

The Agencies’ capital and liquidity amounts and requirements are summarized below:

 

 

Net worth (1)

 

 

Tangible net worth /
total assets ratio (1)

 

 

Liquidity (1)

 

Fannie Mae and Freddie Mac

 

Actual

 

 

Required

 

 

Actual

 

 

Required

 

 

Actual

 

 

Required

 

 

 

(dollars in thousands)

 

September 30, 2023 (2)

 

$

872,644

 

 

$

588,227

 

 

 

13

%

 

 

6

%

 

$

432,844

 

 

$

205,181

 

December 31, 2022

 

$

1,138,331

 

 

$

586,436

 

 

 

16

%

 

 

6

%

 

$

343,286

 

 

$

79,372

 

 

(1)
Calculated in accordance with the Agencies’ requirements.
(2)
The Agencies adopted revised capital and liquidity requirements, most of which became effective on September 30, 2023. The amounts shown for September 30, 2023 are in compliance with those requirements. The Agencies have pending origination liquidity requirements that will be effective on December 31, 2023. The Company believes it is in compliance with the Agencies’ pending liquidity requirements as of September 30, 2023.

Noncompliance with the Agencies’ capital and liquidity requirements can result in the Agencies taking various remedial actions up to and including removing the Company’s ability to sell loans to and service loans on behalf of the Agencies.

Note 27—Subsequent Events

Management has evaluated all events and transactions through the date the Company issued these consolidated financial statements. During this period, all agreements to repurchase assets that matured before the date of this Report were extended or renewed.

 

57

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read with the consolidated financial statements and the related notes of PennyMac Mortgage Investment Trust (“PMT”) included within this Quarterly Report on Form 10-Q (this “Report”).

Statements contained in this Report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to be materially different from those expressed or implied in such statements. You can identify these forward-looking statements by words such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “estimate,” “intend,” “plan” and other similar expressions. You should consider our forward-looking statements in light of the risks discussed under the heading “Risk Factors,” as well as our consolidated financial statements, related notes, and the other financial information appearing elsewhere in this Report and our other filings with the United States Securities and Exchange Commission (“SEC”). The forward-looking statements contained in this Report are made as of the date hereof and we assume no obligation to update or supplement any forward-looking statements.

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our consolidated results of operations and financial condition. Unless the context indicates otherwise, references in this Report to the words “we,” “us,” “our” and the “Company” refer to PMT and its affiliates.

Our Company

We are a specialty finance company that invests in mortgage-related assets. Our objective is to provide attractive risk-adjusted returns to our investors over the long-term, primarily through dividends and secondarily through capital appreciation. A significant portion of our investment portfolio is comprised of mortgage-related assets that we have created through our correspondent production activities, including mortgage servicing rights (“MSRs”), subordinate mortgage-backed securities (“MBS”), and credit risk transfer (“CRT”) arrangements, which include CRT Agreements (“CRT Agreements”) and CRT strips that absorb credit losses on certain of the loans we sold. We also invest in Agency and senior non-Agency MBS, subordinate credit-linked MBS and interest-only ("IO") stripped MBS. We have also historically invested in distressed mortgage assets (distressed loans and real estate acquired in settlement of loans (“REO”)), which we have substantially liquidated.

We are externally managed by PNMAC Capital Management, LLC (“PCM”), an investment adviser that specializes in and focuses on U.S. mortgage assets. Our loans and MSRs are serviced by PennyMac Loan Services, LLC (“PLS”). PCM and PLS are both indirect controlled subsidiaries of PennyMac Financial Services, Inc. (“PFSI”), a publicly-traded mortgage banking and investment management company separately listed on the New York Stock Exchange.

We operate our business in four segments: Credit sensitive strategies, Interest rate sensitive strategies, Correspondent production and our Corporate operations as described below:

•
The credit sensitive strategies segment represents our investments in CRT arrangements referencing loans from our own correspondent production, including CRT agreements and other CRT securities (together, “CRT arrangements”) and subordinate MBS.
•
The interest rate sensitive strategies segment represents our investments in MSRs, Agency, senior non-Agency and IO stripped MBS and the related interest rate hedging activities.
•
The correspondent production segment represents our operations aimed at serving as an intermediary between lenders and the capital markets by purchasing, pooling and reselling newly originated prime credit quality loans either directly or in the form of MBS, using the services of PCM and PLS.

We primarily sell the loans we acquire through our correspondent production activities to government-sponsored entities ("GSEs") such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) or to PLS for sale into securitizations guaranteed by the Government National Mortgage Association (“Ginnie Mae”) or the GSEs. Fannie Mae, Freddie Mac and Ginnie Mae are each referred to as an “Agency” and, collectively, as the “Agencies.”

•
The corporate segment includes management fees, corporate expense amounts and certain interest income and expense.

Our Investment Activities

Credit Sensitive Investments

CRT Arrangements

We held net CRT-related investments (comprised of deposits securing CRT arrangements, CRT derivatives, CRT strips and an interest-only security payable) totaling approximately $1.1 billion at September 30, 2023.

58

 

Subordinate Credit-Linked Mortgage-Backed Securities

Subordinate credit-linked MBS provide us with a higher yield than senior securities. However, we retain credit risk in the subordinate credit-linked MBS since they are the first securities to absorb credit losses relating to the underlying loans. We purchased approximately $70.6 million of subordinate credit-linked MBS during the nine months ended September 30, 2023. We held subordinate credit-linked MBS with fair values totaling approximately $277.1 million at September 30, 2023.

As the result of the Company’s consolidation of the variable interest entities that issued certain subordinate MBS as described in Note 6 – Variable Interest Entities – Subordinate Mortgage-Backed Securities to the consolidated financial statements included in this Report, we include the loans underlying these transactions with unpaid principal balances (“UPB”) totaling approximately $1.8 billion on our consolidated balance sheet as of September 30, 2023.

Interest Rate Sensitive Investments

Our interest rate sensitive investments include:

•
Mortgage servicing rights. During the quarter and nine months ended September 30, 2023, we received approximately $58.6 million and $249.9 million, respectively, of MSRs as proceeds from sales of loans acquired for sale. We held approximately $4.1 billion of MSRs at fair value at September 30, 2023.
•
REIT-eligible Agency, senior non-Agency and IO MBS, or mortgage-related securities. We purchased approximately $408.5 million Agency fixed-rate pass-through securities and senior non-Agency MBS, net of sales during the nine months ended September 30, 2023. We held Agency fixed-rate pass-through, senior non-Agency and IO MBS with fair values totaling approximately $4.4 billion at September 30, 2023.

Correspondent Production

Our correspondent production activities involve the acquisition and sale of newly originated prime credit quality residential loans. Correspondent production has served as the source of our investments in MSRs, private label non-Agency securitizations and CRT arrangements. Our correspondent production and resulting investment activity are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Sales of loans acquired for sale:

 

 

 

 

 

 

 

 

 

 

 

 

To nonaffiliates

 

$

3,107,613

 

 

$

9,709,969

 

 

$

13,576,673

 

 

$

31,922,573

 

To PennyMac Financial Services, Inc.

 

 

18,725,228

 

 

 

12,561,276

 

 

 

50,812,386

 

 

 

36,544,166

 

 

$

21,832,841

 

 

$

22,271,245

 

 

$

64,389,059

 

 

$

68,466,739

 

Net gains on loans acquired for sale

 

$

13,558

 

 

$

4,313

 

 

$

24,477

 

 

$

15,937

 

Investment activities resulting from correspondent production:

 

 

 

 

 

 

 

 

 

 

 

 

Receipt of MSRs as proceeds from sales of loans

 

$

58,560

 

 

$

178,001

 

 

$

249,925

 

 

$

543,255

 

Retention of interests in securitizations of loans secured
    by investment properties, net of associated
    asset-backed financings

 

$

—

 

 

$

—

 

 

$

—

 

 

$

23,485

 

During the nine months ended September 30, 2023, we purchased newly originated prime credit quality residential loans with fair values totaling $63.7 billion as compared to $67.4 billion for the nine months ended September 30, 2022, in our correspondent production business. To the extent that we purchase loans that are insured by the U.S. Department of Housing and Urban Development through the Federal Housing Administration, or insured or guaranteed by the U.S. Department of Veterans Affairs or U.S. Department of Agriculture, we and PLS have agreed that PLS will fulfill and purchase such loans, as PLS is a Ginnie Mae approved issuer and we are not. This arrangement has enabled us to compete with other correspondent aggregators that purchase both government and conventional loans. During the nine months ended September 30, 2023, we also sold $21.0 billion, in UPB of conventional loans to PLS in order to optimize our use and allocation of capital.

Our purchase volume included $50.8 billion and $36.5 billion of loans we sold to PLS during the nine months ended September 30, 2023 and 2022, respectively. We receive a sourcing fee from PLS based on the UPB of each loan that we sell to PLS under such arrangement, and earn interest income on the loan for the period we hold it before the sale to PLS. During the nine months ended September 30, 2023, we received sourcing fees totaling $5.0 million, relating to $50.1 billion, in UPB of loans that we sold to PLS.

59

 

Taxation

We believe that we qualify to be taxed as a REIT and as such will not be subject to federal income tax on that portion of our income that is distributed to shareholders as long as we meet applicable REIT asset, income and share ownership tests. If we fail to qualify as a REIT, and do not qualify for certain statutory relief provisions, our profits will be subject to income taxes and we may be precluded from qualifying as a REIT for the four tax years following the year we lose our REIT qualification.

A portion of our activities, including our correspondent production business, is conducted in our taxable REIT subsidiary (“TRS”), which is subject to corporate federal and state income taxes. Accordingly, we make a provision for income taxes with respect to the operations of our TRS. We expect that the effective rate for the provision for income taxes may be volatile in future periods. Our goal is to manage the business to take full advantage of the tax benefits afforded to us as a REIT.

We evaluate our deferred tax assets quarterly to determine if valuation allowances are required based on the consideration of all available positive and negative evidence using a “more-likely-than-not” standard with respect to whether deferred tax assets will be realized. Our evaluation considers, among other factors, taxable loss carryback availability, expectations of sufficient future taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences, and available tax planning strategies that could be implemented, if required. The ultimate realization of our deferred tax assets depends primarily on our ability to generate future taxable income during the periods in which the related deferred tax assets become deductible.

Non-Cash Investment Income

A substantial portion of our net investment income is comprised of non-cash items, including fair value adjustments and recognition of the fair value of assets created and liabilities incurred in loan sale transactions. Because we have elected, or are required by accounting principles generally accepted in the United States (“GAAP”), to record certain of our financial assets (comprised of MBS, loans acquired for sale at fair value, and loans at fair value), our derivatives and CRT strips, our MSRs, and our asset-backed financings and interest-only security payable at fair value, a substantial portion of the income or loss we record with respect to such assets and liabilities results from non-cash changes in fair value.

The amounts of net non-cash investment (loss) income items included in net investment income are as follows:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(dollars in thousands)

 

Net (losses) gains on investments and financings:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

$

(144,031

)

 

$

(251,477

)

 

$

(127,434

)

 

$

(620,500

)

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

Held in variable interest entities

 

 

(54,082

)

 

 

(99,267

)

 

 

(61,318

)

 

 

(318,300

)

Distressed

 

 

(88

)

 

 

44

 

 

 

(515

)

 

 

495

 

CRT arrangements

 

 

19,090

 

 

 

(12,153

)

 

 

95,220

 

 

 

(145,438

)

Interest-only security payable at fair value

 

 

(4,228

)

 

 

(1,701

)

 

 

(6,363

)

 

 

(10,593

)

Asset-backed financings at fair value

 

 

58,474

 

 

 

92,993

 

 

 

66,108

 

 

 

298,834

 

 

 

(124,865

)

 

 

(271,561

)

 

 

(34,302

)

 

 

(795,502

)

Net gains on loans acquired for sale (1)

 

 

112,964

 

 

 

160,514

 

 

 

332,982

 

 

 

445,492

 

Net loan servicing fees‒MSR valuation adjustments (2)

 

 

162,605

 

 

 

94,690

 

 

 

(35,444

)

 

 

462,347

 

 

$

150,704

 

 

$

(16,357

)

 

$

263,236

 

 

$

112,337

 

Net investment income

 

$

163,429

 

 

$

151,065

 

 

$

344,247

 

 

$

254,404

 

Non-cash items as a percentage of net investment income

 

 

92

%

 

 

(11

%)

 

 

76

%

 

 

44

%

 

(1)
Amount represents MSRs received, liability for representations and warranties incurred in loan sales transactions and changes in fair value of loans, IRLCs and hedging derivatives held at period end.
(2)
Includes fair value changes related to MSR derivative hedging instruments.

We receive or pay cash relating to:

•
Our investment in mortgage-backed securities through monthly principal and interest payments from the issuer of such securities or from the sale of the investment;
•
Loan investments when the investments are paid down, paid off or sold, when payments of principal and interest occur on such loans or when the properties acquired in settlement of loans are sold;
•
CRT arrangements through a portion of the interest payments collected on loans in the CRT arrangements’ reference pools, interest payments from the investment of the deposits securing the arrangement in short-term investments and the release to us of the deposits securing the arrangements as principal on such loans is repaid; Hedging instruments when we receive or make margin deposits as the fair value of respective instruments change, when the instruments mature or when we effectively cancel the transactions through offsetting trades;

60

 

•
•
Our liability for representations and warranties when we repurchase loans or settle loss claims from investors; and
•
MSRs in the form of loan servicing fees and placement fees on the deposits we manage on behalf of the borrowers and investors in the loans we service.

Results of Operations

 

Business Trends

Due to ongoing inflationary pressures, the U.S. Federal Reserve continued to raise the federal funds rate during the nine months ended September 30, 2023 and continues to reduce the federal government’s overall holdings of Treasury and mortgage-backed securities. Higher interest rates and a slowing economy and housing market are expected to continue to reduce the size of the mortgage origination market from an estimated $2.3 trillion in 2022 to a projected range of $1.6 trillion to $1.8 trillion for 2023 according to mortgage lending industry economists.

Higher interest rates have caused a decrease in mortgage production activities and increased competition in the mortgage production business, while also leading to a reduction in prepayment speeds in our mortgage servicing portfolio from the same time in the prior year. Higher interest rates have increased the costs of floating rate borrowings and have generated more interest income from our custodial placement fees on deposits and loans held for sale. We have also increased our sales of conventional loans to PLS during the nine months ended September 30, 2023, and we intend to continue to sell a portion of our conventional loans to PLS in the fourth quarter of 2023 to optimize our use and allocation of capital.

Increasing interest rates may also lead to a reduction in economic activity and slowing home price growth or depreciation, which could lead to increasing mortgage delinquencies or defaults and increased losses. If these effects are realized, they could negatively affect the performance of our credit-sensitive assets such as CRT or subordinate credit-linked notes. However, many of the loans underlying our assets have favorable credit characteristics including low loan-to-value ratios, which are likely to help offset the negative effects of credit performance in an economic downturn.

The competitive landscape for our correspondent business has also been affected by the exit of several large entities, which may present an opportunity for growth of our share in that business.

The following is a summary of our key performance measures:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(dollar amounts in thousands, except per common share amounts)

 

Net investment income

 

$

163,429

 

 

$

151,065

 

 

$

344,247

 

 

$

254,404

 

Expenses

 

 

45,009

 

 

 

60,686

 

 

 

140,173

 

 

 

185,835

 

Pretax income

 

 

118,420

 

 

 

90,379

 

 

 

204,074

 

 

 

68,569

 

Provision for income taxes

 

 

56,998

 

 

 

78,466

 

 

 

57,331

 

 

 

146,519

 

Net income (loss)

 

 

61,422

 

 

 

11,913

 

 

 

146,743

 

 

 

(77,950

)

Dividends on preferred shares

 

 

10,455

 

 

 

10,455

 

 

 

31,364

 

 

 

31,364

 

Net income (loss) attributable to common
   shareholders

 

$

50,967

 

 

$

1,458

 

 

$

115,379

 

 

$

(109,314

)

Pretax income (loss) by segment:

 

 

 

 

 

 

 

 

 

 

 

 

Credit sensitive strategies

 

$

40,996

 

 

$

(3,699

)

 

$

169,420

 

 

$

(123,375

)

Interest rate sensitive strategies

 

 

81,563

 

 

 

103,510

 

 

 

61,366

 

 

 

217,088

 

Correspondent production

 

 

8,846

 

 

 

6,065

 

 

 

12,029

 

 

 

20,426

 

Corporate

 

 

(12,985

)

 

 

(15,497

)

 

 

(38,741

)

 

 

(45,570

)

 

$

118,420

 

 

$

90,379

 

 

$

204,074

 

 

$

68,569

 

Annualized return on average common
  shareholders' equity

 

 

14.5

%

 

 

0.4

%

 

 

10.8

%

 

 

(8.9

)%

Earnings (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.59

 

 

$

0.01

 

 

$

1.31

 

 

$

(1.19

)

Diluted

 

$

0.51

 

 

$

0.01

 

 

$

1.20

 

 

$

(1.19

)

Dividends per common share

 

$

0.40

 

 

$

0.47

 

 

$

1.20

 

 

$

1.41

 

 

61

 

 

 

 

September 30, 2023

 

 

December 31, 2022

 

Total assets

 

$

13,223,336

 

 

$

13,921,564

 

Book value per common share

 

$

16.01

 

 

$

15.78

 

Closing price per common share

 

$

12.40

 

 

$

12.39

 

Our results of operations increased by $49.5 million and $224.7 million during the quarter and nine months ended September 30, 2023, as compared to the quarter and nine months ended September 30, 2022, reflecting the effect of decreased losses on MBS, increased valuation of CRT-related investments and a reduced provision for income taxes, offset by the fair value performance of our MSR investments.

 

The increase in the quarterly pretax results is summarized below:

•
Our credit sensitive strategies segment recognized a $25.8 million increase in net gains on our CRT arrangements as credit spreads tightened due to supply and demand dynamics and an improving macroeconomic outlook compared to the quarter ended September 30, 2022, in which the macroeconomic outlook was worsening.
•
Our interest rate sensitive strategies segment benefited less due to reduced interest rate sensitivity of our assets during the quarter ended September 30, 2023, as compared to the quarter ended September 30, 2022, resulting in a $107.4 million decrease in valuation losses on MBS, offset by a $108.8 million decrease in net servicing fees caused by lower valuation gains net of hedge impact in MSRs.
•
Our correspondent production segment recognized a $9.2 million increase in gains on sales of loans during the quarter ended September 30, 2023, reflecting improved gain on sale margins and a reduction of our liability for representations and warranties partially offset by reduced volume of sales to nonaffiliates.

The increase in the nine months pretax results is summarized below:

•
Our credit sensitive strategies segment recognized a $210.5 million increase in net gains on our CRT arrangements as credit spreads tightened due to supply and demand dynamics and an improving macroeconomic outlook compared to the effect of credit spread widening on CRT fair values during the nine months ended September 30, 2022.
•
Our interest rate sensitive strategies segment benefited less from the slower rise in interest rates and reduced interest rate sensitivity of our assets during the nine months ended September 30, 2023, as compared to the significantly increasing interest rates in the nine months ended September 30, 2022, resulting in a $493.1 million decrease in losses on MBS, offset by a $545.2 million decrease in net servicing fees caused by reduced valuation gains net of hedges in our investment in MSRs.
•
Our correspondent production segment recognized an $8.5 million increase in gains on sales of loans held for sale during the nine months ended September 30, 2023, reflecting improved gain on sale margins and a reduction in our liability for representations and warranties partially offset by reduced volume of sale to nonaffiliates.

 

Net Investment Income

Our net investment income is summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Net loan servicing fees

 

$

281,298

 

 

$

390,124

 

 

$

366,438

 

 

$

911,615

 

Net gains on loans acquired for sale

 

 

13,558

 

 

 

4,313

 

 

 

24,477

 

 

 

15,937

 

Net loan origination fees

 

 

3,226

 

 

 

13,215

 

 

 

15,227

 

 

 

42,417

 

Net (losses) gains on investments and financings

 

 

(109,544

)

 

 

(253,336

)

 

 

13,761

 

 

 

(713,081

)

Net interest expense

 

 

(24,992

)

 

 

(4,422

)

 

 

(75,816

)

 

 

(4,325

)

Other

 

 

(117

)

 

 

1,171

 

 

 

160

 

 

 

1,841

 

 

$

163,429

 

 

$

151,065

 

 

$

344,247

 

 

$

254,404

 

 

62

 

Net Loan Servicing Fees

Our net loan servicing fees have two primary components: fees earned for servicing loans and the effects of MSR valuation changes, net of hedging results, as summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

 

(in thousands)

Loan servicing fees

 

$

170,561

 

 

$

167,233

 

 

$

511,043

 

 

$

481,560

 

 

Effect of MSRs and hedging results

 

 

110,737

 

 

 

222,891

 

 

 

(144,605

)

 

 

430,055

 

 

Net loan servicing fees

 

$

281,298

 

 

$

390,124

 

 

$

366,438

 

 

$

911,615

 

 

 

Following is a summary of our loan servicing fees:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Contractually-specified servicing fees

 

$

166,809

 

 

$

162,987

 

 

$

496,522

 

 

$

461,021

 

Ancillary and other fees:

 

 

 

 

 

 

 

 

 

 

 

 

Late charges

 

 

878

 

 

 

662

 

 

 

2,442

 

 

 

1,883

 

Other

 

 

2,874

 

 

 

3,584

 

 

 

12,079

 

 

 

18,656

 

 

 

3,752

 

 

 

4,246

 

 

 

14,521

 

 

 

20,539

 

 

$

170,561

 

 

$

167,233

 

 

$

511,043

 

 

$

481,560

 

Average MSR servicing portfolio

 

$

231,333,064

 

 

$

224,756,659

 

 

$

231,333,990

 

 

$

220,988,459

 

Loan servicing fees relate to our MSRs which are primarily related to servicing we provide for loans included in Agency securitizations. These fees are contractually established at an annualized percentage of the UPB of the loans serviced and we collect these fees from borrower payments. Other loan servicing fees are comprised primarily of borrower-contracted fees, such as late charges and reconveyance fees, and fees charged to correspondent lenders for loans repaid by the borrower shortly after purchase.

The change in contractually-specified fees during the quarter and nine months ended September 30, 2023, as compared to the same periods in 2022, is due primarily to increased servicing fees resulting from the growth in our loan servicing portfolio.

We have elected to carry our servicing assets at fair value. Changes in fair value have two components: changes due to realization of the contractual servicing fees and changes due to changes in inputs used to estimate the fair value of such items. We endeavor to moderate the effects of changes in fair value primarily by entering into derivatives transactions.

Changes in fair value of MSRs and hedging results are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

(in thousands)

 

Change in fair value of MSRs

 

 

 

 

 

 

 

 

 

 

 

 

Changes in valuation inputs used in valuation
   model

 

$

263,139

 

 

$

162,730

 

 

$

232,414

 

 

$

775,792

 

Recapture income from PFSI

 

 

500

 

 

 

1,648

 

 

 

1,494

 

 

 

13,232

 

Hedging results

 

 

(50,689

)

 

 

154,269

 

 

 

(81,584

)

 

 

(87,651

)

 

 

212,950

 

 

 

318,647

 

 

 

152,324

 

 

 

701,373

 

Realization of cash flows

 

 

(102,213

)

 

 

(95,756

)

 

 

(296,929

)

 

 

(271,318

)

 

 

110,737

 

 

 

222,891

 

 

 

(144,605

)

 

 

430,055

 

Average balance of mortgage servicing rights

 

$

4,054,265

 

 

$

3,780,826

 

 

$

4,014,783

 

 

$

3,499,318

 

 

Changes in fair value due to changes in valuation inputs used in our valuation model during the quarter and nine months ended September 30, 2023, reflect the effects of significantly increasing interest rates. The magnitude of the change in fair value of the MSRs compared to the same periods in 2022 is impacted by both the magnitude of the interest rate changes and the interest rate and prepayment sensitivity of the MSR in each period, which changes based on the relationship of the interest rates of the underlying mortgages and the level of market interest rates.

63

 

The decrease in loan recapture income from PFSI reflects the decrease in refinancing activity in our MSR portfolio during the quarter and nine months ended September 30, 2023, as compared to the same periods in 2022. We have an agreement with PFSI that requires that when PFSI refinances a loan for which we held the MSRs, we receive a recapture fee. The MSR recapture agreement is summarized in Note 4 ‒ Transactions with Related Parties – Operating Activities to the consolidated financial statements included in this Report.

Hedging results reflect valuation losses in hedges against interest rates during the quarter and nine months ended September 30, 2023, during which interest rates increased, as do the hedging results from the nine months ended September 30, 2022. Hedging results reflect valuation gains in hedges against increasing costs of financing and discount rates during the quarter ended September 30, 2022, during which short term interest rates in particular rose very sharply.

 

Changes in realization of cash flows are influenced by changes in the level of servicing assets and liabilities and changes in estimates of remaining cash flows to be realized. During the quarter and nine months ended September 30, 2023, realization of cash flows increased primarily due to growth of our investment in MSRs as compared to the same periods in 2022.

 

Following is a summary of our loan servicing portfolio:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

UPB of loans outstanding

 

$

230,066,301

 

 

$

229,858,573

 

Collection status (UPB)

 

 

 

 

 

 

Delinquency:

 

 

 

 

 

 

30-89 days delinquent

 

$

2,005,518

 

 

$

1,903,007

 

90 or more days delinquent:

 

 

 

 

 

 

Not in foreclosure

 

$

944,892

 

 

$

880,841

 

In foreclosure

 

$

69,656

 

 

$

70,921

 

Bankruptcy

 

$

170,596

 

 

$

123,239

 

Custodial funds managed by the Company (1)

 

$

2,760,857

 

 

$

1,783,157

 

 

(1)
Custodial funds include borrower and investor custodial cash accounts relating to loans serviced under mortgage servicing agreements and are not included on the Company’s consolidated balance sheets. The Company earns placement fees on certain of the custodial funds it manages on behalf of the loans’ borrowers and investors, which are included in Interest income in the Company’s consolidated statements of operations.

 

Following is a summary of characteristics of our MSR servicing portfolio as of September 30, 2023:

 

 

 

 

 

 

 

 

 

Average

 

 

Loan type

 

UPB

 

 

Loan count

 

 

Note rate

 

 

Seasoning (months)

 

 

Remaining
maturity (months)

 

 

Loan size

 

 

FICO credit score at origination

 

 

Original LTV (1)

 

 

Current LTV (1)

 

 

60+ Delinquency (by UPB)

 

 

 

(Dollars and loan count in thousands)

 

Agency:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fannie Mae

 

$

117,021,669

 

 

 

442

 

 

 

3.7

%

 

 

37

 

 

 

310

 

 

$

265

 

 

 

757

 

 

 

75

%

 

 

54

%

 

 

0.8

%

Freddie Mac

 

 

111,135,933

 

 

 

390

 

 

 

3.6

%

 

 

28

 

 

 

317

 

 

$

285

 

 

 

761

 

 

 

74

%

 

 

58

%

 

 

0.4

%

Other (2)

 

 

3,387,411

 

 

 

14

 

 

 

4.2

%

 

 

32

 

 

 

323

 

 

$

247

 

 

 

757

 

 

 

72

%

 

 

55

%

 

 

0.7

%

 

 

$

231,545,013

 

 

 

846

 

 

 

3.6

%

 

 

33

 

 

 

314

 

 

$

274

 

 

 

759

 

 

 

75

%

 

 

56

%

 

 

0.6

%

 

(1)
Loan-to-Value.
(2)
Represents MSRs on conventional loans sold to private investor.

64

 

Net Gains on Loans Acquired for Sale

Our net gains on loans acquired for sale are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

From non-affiliates:

 

 

 

 

 

 

 

 

 

 

 

 

Cash losses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales of loans

 

$

(71,105

)

 

$

(390,543

)

 

$

(260,697

)

 

$

(1,128,355

)

Hedging activities

 

 

(30,155

)

 

 

233,139

 

 

 

(52,822

)

 

 

695,238

 

 

 

(101,260

)

 

 

(157,404

)

 

 

(313,519

)

 

 

(433,117

)

Non-cash gains:

 

 

 

 

 

 

 

 

 

 

 

 

Receipt of MSRs in loan sale transactions

 

 

58,560

 

 

 

178,001

 

 

 

249,925

 

 

 

543,255

 

Provision for losses relating to representations
   and warranties provided in loan sales:

 

 

 

 

 

 

 

 

 

 

 

 

Pursuant to loan sales

 

 

(448

)

 

 

(996

)

 

 

(2,126

)

 

 

(3,442

)

Reduction in liability due to change in estimate

 

 

4,365

 

 

 

817

 

 

 

7,920

 

 

 

3,512

 

 

 

3,917

 

 

 

(179

)

 

 

5,794

 

 

 

70

 

Changes in fair value of financial instruments during
  the periods:

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments

 

 

(2,050

)

 

 

(41,187

)

 

 

(2,870

)

 

 

(45,294

)

Loans

 

 

(1,710

)

 

 

84,498

 

 

 

4,569

 

 

 

82,561

 

Hedging derivatives

 

 

54,247

 

 

 

(60,619

)

 

 

75,564

 

 

 

(135,100

)

 

 

50,487

 

 

 

(17,308

)

 

 

77,263

 

 

 

(97,833

)

 

 

112,964

 

 

 

160,514

 

 

 

332,982

 

 

 

445,492

 

Total from nonaffiliates

 

 

11,704

 

 

 

3,110

 

 

 

19,463

 

 

 

12,375

 

From PFSI—cash

 

 

1,854

 

 

 

1,203

 

 

 

5,014

 

 

 

3,562

 

 

$

13,558

 

 

$

4,313

 

 

$

24,477

 

 

$

15,937

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate lock commitments issued on loans acquired
  for sale:

 

 

 

 

 

 

 

 

 

 

 

 

To nonaffiliates

 

$

3,492,877

 

 

$

10,646,885

 

 

$

14,402,777

 

 

$

31,921,109

 

To PFSI

 

 

10,333,029

 

 

 

—

 

 

 

21,637,229

 

 

 

—

 

 

 

$

13,825,906

 

 

$

10,646,885

 

 

$

36,040,006

 

 

$

31,921,109

 

Acquisition of loans for sale (UPB):

 

 

 

 

 

 

 

 

 

 

 

 

To nonaffiliates

 

$

2,760,001

 

 

$

10,226,513

 

 

$

12,418,084

 

 

$

30,319,475

 

To PFSI

 

 

18,780,719

 

 

 

12,160,616

 

 

 

50,461,568

 

 

 

35,540,023

 

 

$

21,540,720

 

 

$

22,387,129

 

 

$

62,879,652

 

 

$

65,859,498

 

The changes in Net gains on loans acquired for sale during the quarter and nine months ended September 30, 2023, as compared to the same periods in 2022, reflect the effect of increased gain on sale margins for mortgage loans and a reduction in our liability for representations and warranties partially offset by reduced volume of sales to nonaffiliates.

Non-cash elements of gain on sale of loans:

Interest Rate Lock Commitments

Our Net gains on loans acquired for sale includes our estimates of gains or losses we expect to realize upon the sale of mortgage loans we have committed to purchase but have not yet purchased or sold. Therefore, we recognize a substantial portion of our net gains before we purchase the loans. These gains are reflected on our balance sheet as IRLC derivative assets and liabilities. We adjust the fair value of our IRLCs as the loan acquisition process progresses until we complete the acquisition or the commitment is canceled. Such adjustments are included in our Net gains on loans acquired for sale. The fair value of our IRLCs becomes part of the carrying value of our loans when we complete the purchase of the loans. The methods and key inputs we use to measure the fair value of IRLCs are summarized in Note 7 – Fair value – Valuation Techniques and Inputs to the consolidated financial statements included in this Report.

65

 

The MSRs and liability for representations and warranties we recognize represent our estimate of the fair value of future benefits and costs we will realize for years in the future. These estimates change as circumstances change, and changes in these estimates are recognized in our results of operations in subsequent periods. Subsequent changes in the fair value of our MSRs significantly affect our results of operations.

Mortgage Servicing Rights

The methods we use to measure and update the measurements of our MSRs as well as the effect of changes in valuation inputs on MSR fair value are detailed in Note 7 – Fair value – Valuation Techniques and Inputs to the consolidated financial statements included in this Report.

Liability for Losses Under Representations and Warranties

We recognize a liability for losses we expect to incur relating to the representations and warranties we provide to purchasers in our loan sales transactions. The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including but not limited to the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law.

We recorded a provision for losses relating to representations and warranties relating to current loan sales of $448,000 and $2.1 million, respectively, for the quarter and nine months ended September 30, 2023, and $1.0 million and $3.4 million, respectively, for the same periods in 2022. The decrease in the provision relating to current loan sales reflects the decrease of our loan sales volume to nonaffiliates and reduced default and loss-given default assumptions.

In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with the identified defects or indemnify the investor or insurer against credit losses attributable to the loans with indemnified defects. In such cases, we bear any subsequent credit loss on the loans. Our credit loss may be reduced by any recourse we have to correspondent sellers that, in turn, had sold such loans to us and breached similar or other representations and warranties. In such event, we have the right to seek a recovery of those repurchase losses from that correspondent seller.

Following is a summary of the indemnification, repurchase and loss activity and loans subject to representations and warranties:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Indemnification activity (UPB):

 

 

 

 

 

 

 

 

 

 

 

 

Loans indemnified at beginning of period

 

$

12,148

 

 

$

4,750

 

 

$

8,108

 

 

$

2,782

 

New indemnifications

 

 

1,734

 

 

 

907

 

 

 

6,522

 

 

 

2,875

 

Less: Indemnified loans repaid, expired or refinanced

 

 

1,980

 

 

 

682

 

 

 

2,728

 

 

 

682

 

Loans indemnified at end of period

 

$

11,902

 

 

$

4,975

 

 

$

11,902

 

 

$

4,975

 

Indemnified loans indemnified by correspondent lenders at
  end of period

 

 

 

 

 

 

 

$

4,076

 

 

$

1,312

 

UPB of loans with deposits received from correspondent sellers
   collateralizing prospective indemnification losses at end of
   period

 

 

 

 

 

 

 

$

4,190

 

 

$

2,047

 

Repurchase activity (UPB):

 

 

 

 

 

 

 

 

 

 

 

 

Loans repurchased

 

$

13,908

 

 

$

20,909

 

 

$

50,849

 

 

$

72,933

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Loans repurchased by correspondent sellers

 

 

14,383

 

 

 

19,076

 

 

 

46,063

 

 

 

60,448

 

Loans resold or repaid by borrowers

 

 

1,469

 

 

 

10,884

 

 

 

11,081

 

 

 

25,967

 

Net loans repurchased (resolved) with losses chargeable to
    liability to representations and warranties

 

$

(1,944

)

 

$

(9,051

)

 

$

(6,295

)

 

$

(13,482

)

Losses charged to liability for representations and warranties

 

$

—

 

 

$

122

 

 

$

525

 

 

$

681

 

At end of period:

 

 

 

 

 

 

 

 

 

 

 

 

Loans subject to representations and warranties

 

 

 

 

 

 

 

$

228,679,429

 

 

$

225,129,199

 

Liability for representations and warranties

 

 

 

 

 

 

 

$

33,152

 

 

$

39,498

 

 

66

 

 

The losses on representations and warranties we have recorded to date have been moderated by our ability to recover most of the losses inherent in the repurchased loans from the correspondent sellers. As the outstanding balance of loans, we purchase and sell subject to representations and warranties increases, as the loans sold mature, as our investors’ and guarantors’ loss mitigation strategies change and as our correspondent sellers’ ability and willingness to repurchase loans change, we expect that the level of repurchase activity and associated losses may increase.

The method we use to estimate the liability for representations and warranties is a function of our estimates of future defaults, loan repurchase rates, severity of loss in the event of default and the probability of reimbursement by the correspondent loan seller. We establish a liability at our estimate of its fair value at the time loans are sold and review our liability estimate on a periodic basis.

The amount of the liability for representations and warranties is difficult to estimate and requires considerable judgment. The level of loan repurchase losses is dependent on economic factors, investor loss mitigation strategies, our ability to recover any losses inherent in the repurchased loan from the correspondent seller and other external conditions that change over the lives of the underlying loans. We may be required to incur losses related to such representations and warranties for several periods after the loans are sold or liquidated.

We record adjustments to our liability for losses on representations and warranties as economic fundamentals change, as investor and Agency evaluations of their loss mitigation strategies (including claims under representations and warranties) change and as economic conditions affect our correspondent sellers’ ability or willingness to fulfill their recourse obligations to us. Such adjustments may be material to our financial position and results of operations in future periods.

Adjustments to our liability for representations and warranties are included as a component of our Net gains on loans acquired for sale at fair value. We recorded a $4.4 million and $7.9 million, respectively, reduction in liability for representations and warranties during the quarter and nine months ended September 30, 2023, and an $817,000 and $3.5 million reduction in liability for representations and warranties during the same periods in 2022 due to the effects of certain loans reaching specified performance histories identified by the Agencies as sufficient to limit repurchase claims relating to such loans.

Loan Origination Fees

Loan origination fees represent fees we charge correspondent sellers relating to our purchase of loans from those sellers. The decrease in fees during the quarter and nine months ended September 30, 2023, as compared to the same periods in 2022, reflects a decrease in our purchases of loans with delivery fees.

Net (losses) gains on investments and financings

Net (losses) gains on investments and financings are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

From nonaffiliates:

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities

 

$

(144,031

)

 

$

(251,477

)

 

$

(127,434

)

 

$

(620,500

)

Loans at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

Held in consolidated variable interest entities

 

 

(54,082

)

 

 

(99,267

)

 

 

(61,318

)

 

 

(318,300

)

Distressed

 

 

(59

)

 

 

56

 

 

 

(485

)

 

 

504

 

CRT arrangements

 

 

30,154

 

 

 

4,359

 

 

 

136,890

 

 

 

(73,619

)

Asset-backed financings at fair value

 

 

58,474

 

 

 

92,993

 

 

 

66,108

 

 

 

298,834

 

 

$

(109,544

)

 

$

(253,336

)

 

$

13,761

 

 

$

(713,081

)

The increase in net gains on investments for the quarter and nine months ended September 30, 2023, as compared to the same periods in 2022, was primarily due to improved performance from our investments in MBS and CRT arrangements as interest rates increased at a slower rate during 2023 as compared to 2022, reducing losses on MBS, and credit spreads tightened (a decrease in the interest rate premium demanded by investors for instruments over those that are considered “risk free”), in 2023 as compared to widening in 2022, which benefited the fair value of our investment in CRT arrangements.

Mortgage-Backed Securities

During the quarter and nine months ended September 30, 2023, we recognized net valuation losses of $144.0 million and $127.4 million, respectively, as compared to valuation losses of $251.5 million and $620.5 million, respectively, for the same periods in 2022. The changes recognized reflect a slower rate of increase in interest rates along with credit spread tightening during the quarter and nine months ended September 30, 2023, as compared to the effect of significantly increasing interest rates and credit spread widening on fair value during the same periods in 2022.

67

 

Loans at fair value – Held in VIEs and Asset-Backed Financings at Fair Value

Loans at fair value held in VIEs and Asset-backed financings at fair value recorded net valuation gains of $4.4 million and $4.8 million, respectively, during the quarter and nine months ended September 30, 2023, as compared to a net loss of $6.3 million and $19.5 million, respectively, during the same periods in 2022. The net gain during the quarter and nine months ended September 30, 2023, reflects the effect of credit spread tightening during the periods compared to the same periods in 2022 when interest rates increased significantly and credit spreads widened.

CRT Arrangements

The activity in and balances relating to our CRT arrangements are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Net investment income:

 

 

 

 

 

 

 

 

 

 

 

 

Net (losses) gains on investments and financings:

 

 

 

 

 

 

 

 

 

 

 

 

CRT Derivatives and strips:

 

 

 

 

 

 

 

 

 

 

 

 

CRT derivatives

 

 

 

 

 

 

 

 

 

 

 

 

Realized

 

$

4,051

 

 

$

4,624

 

 

$

12,504

 

 

$

34,982

 

Valuation changes

 

 

9,113

 

 

 

(365

)

 

 

26,619

 

 

 

(42,154

)

 

 

13,164

 

 

 

4,259

 

 

 

39,123

 

 

 

(7,172

)

CRT strips

 

 

 

 

 

 

 

 

 

 

 

 

Realized

 

 

11,241

 

 

 

13,589

 

 

 

35,529

 

 

 

47,430

 

Valuation changes

 

 

9,977

 

 

 

(11,788

)

 

 

68,601

 

 

 

(103,284

)

 

 

21,218

 

 

 

1,801

 

 

 

104,130

 

 

 

(55,854

)

Interest-only security payable at fair value

 

 

(4,228

)

 

 

(1,701

)

 

 

(6,363

)

 

 

(10,593

)

 

 

30,154

 

 

 

4,359

 

 

 

136,890

 

 

 

(73,619

)

Interest income — Deposits securing CRT arrangements

 

 

16,419

 

 

 

6,978

 

 

 

46,410

 

 

 

9,584

 

 

$

46,573

 

 

$

11,337

 

 

$

183,300

 

 

$

(64,035

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net payments made (recoveries received) to settle losses
    (recoveries) on CRT arrangements

 

$

496

 

 

$

180

 

 

$

2,252

 

 

$

(20,249

)

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Carrying value of CRT arrangements:

 

 

 

 

 

 

Derivative assets - CRT derivatives

 

$

7,010

 

 

$

1,262

 

Derivative and credit risk transfer strip liabilities:

 

 

 

 

 

 

CRT derivatives

 

 

(2,268

)

 

 

(23,360

)

CRT strips

 

 

(68,592

)

 

 

(137,193

)

 

 

(70,860

)

 

 

(160,553

)

Deposits securing CRT arrangements

 

 

1,237,294

 

 

 

1,325,294

 

Interest-only security payable at fair value

 

 

(28,288

)

 

 

(21,925

)

 

 

$

1,145,156

 

 

$

1,144,078

 

 

 

 

 

 

 

CRT arrangement assets pledged to secure borrowings:

 

 

 

 

 

 

Derivative assets

 

$

7,010

 

 

$

1,262

 

Deposits securing CRT arrangements (1)

 

$

1,237,294

 

 

$

1,325,294

 

 

 

 

 

 

 

UPB of loans underlying CRT arrangements

 

$

23,613,675

 

 

$

25,315,524

 

Collection status (UPB):

 

 

 

 

Delinquency

 

 

 

 

 

 

Current

 

$

23,028,327

 

 

$

24,673,719

 

30-89 days delinquent

 

$

384,340

 

 

$

409,049

 

90-180 days delinquent

 

$

116,110

 

 

$

112,286

 

180 or more days delinquent

 

$

66,178

 

 

$

93,717

 

Foreclosure

 

$

18,720

 

 

$

26,753

 

Bankruptcy

 

$

61,364

 

 

$

54,395

 

 

68

 

(1)
Deposits securing credit risk transfer strip liabilities also secure $70.9 million and $160.6 million in CRT strip and CRT derivative liabilities at September 30, 2023, and December 31, 2022, respectively.

The performance of our investments in CRT arrangements during the quarter and nine months ended September 30, 2023 reflects credit spread tightening for CRT securities in the credit markets. This contrasts with CRT investments' fair value losses during the same periods in 2022, when credit spreads widened.

Net interest expense

Net interest expense is summarized below:

 

Quarter ended September 30, 2023

 

 

Quarter ended September 30, 2022

 

 

Interest

 

 

 

 

 

Interest

 

 

Interest

 

 

 

 

 

Interest

 

 

income/

 

 

Average

 

 

yield/

 

 

income/

 

 

Average

 

 

yield/

 

 

expense

 

 

balance

 

 

cost %

 

 

expense

 

 

balance

 

 

cost %

 

 

(dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term investments

$

6,288

 

 

$

431,256

 

 

 

5.78

%

 

$

1,993

 

 

$

205,742

 

 

 

3.84

%

Mortgage-backed securities

 

66,563

 

 

 

4,711,723

 

 

 

5.60

%

 

 

36,070

 

 

 

3,990,746

 

 

 

3.59

%

Loans acquired for sale at fair value

 

14,720

 

 

 

868,808

 

 

 

6.72

%

 

 

27,921

 

 

 

1,763,506

 

 

 

6.28

%

Loans at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held by variable interest entities

 

9,505

 

 

 

1,434,993

 

 

 

2.63

%

 

 

16,002

 

 

 

1,655,206

 

 

 

3.84

%

Distressed

 

9

 

 

 

2,425

 

 

 

1.47

%

 

 

16

 

 

 

3,977

 

 

 

1.60

%

 

9,514

 

 

 

1,437,418

 

 

 

2.63

%

 

 

16,018

 

 

 

1,659,183

 

 

 

3.83

%

Deposits securing CRT arrangements

 

16,419

 

 

 

1,255,966

 

 

 

5.19

%

 

 

6,978

 

 

 

1,404,375

 

 

 

1.97

%

 

113,504

 

 

 

8,705,171

 

 

 

5.17

%

 

 

88,980

 

 

 

9,023,552

 

 

 

3.91

%

Placement fees relating to custodial funds

 

44,005

 

 

 

 

 

 

 

 

 

20,239

 

 

 

 

 

 

 

Other

 

1,417

 

 

 

 

 

 

 

 

 

439

 

 

 

 

 

 

 

$

158,926

 

 

$

8,705,171

 

 

 

7.24

%

 

$

109,658

 

 

$

9,023,552

 

 

 

4.82

%

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets sold under agreements to repurchase

$

87,414

 

 

$

5,714,082

 

 

 

6.07

%

 

$

46,691

 

 

$

5,789,433

 

 

 

3.20

%

Mortgage loan participation purchase and sale
   agreements

 

403

 

 

 

22,043

 

 

 

7.25

%

 

 

320

 

 

 

31,092

 

 

 

4.08

%

Notes payable secured by credit risk transfer
    and mortgage servicing assets

 

69,952

 

 

 

3,106,809

 

 

 

8.93

%

 

 

39,818

 

 

 

2,801,845

 

 

 

5.64

%

Senior notes

 

8,541

 

 

 

553,338

 

 

 

6.12

%

 

 

8,349

 

 

 

545,047

 

 

 

6.08

%

Asset-backed financings at fair value

 

13,652

 

 

 

1,342,093

 

 

 

4.04

%

 

 

14,265

 

 

 

1,540,957

 

 

 

3.67

%

 

179,962

 

 

 

10,738,365

 

 

 

6.65

%

 

 

109,443

 

 

 

10,708,374

 

 

 

4.05

%

Interest shortfall on repayments of loans serviced
   for Agency securitizations

 

1,503

 

 

 

 

 

 

 

 

 

3,504

 

 

 

 

 

 

 

Interest on loan impound deposits

 

2,079

 

 

 

 

 

 

 

 

 

1,133

 

 

 

 

 

 

 

Other

 

374

 

 

 

 

 

 

 

 

 

—

 

 

 

 

 

 

 

 

183,918

 

 

$

10,738,365

 

 

 

6.80

%

 

 

114,080

 

 

$

10,708,374

 

 

 

4.23

%

Net interest expense

$

(24,992

)

 

 

 

 

 

 

 

$

(4,422

)

 

 

 

 

 

 

 

69

 

 

 

Nine months ended September 30, 2023

 

 

Nine months ended September 30, 2022

 

 

Interest

 

 

 

 

 

Interest

 

 

Interest

 

 

 

 

 

Interest

 

 

income/

 

 

Average

 

 

yield/

 

 

income/

 

 

Average

 

 

yield/

 

 

expense

 

 

balance

 

 

cost %

 

 

expense

 

 

balance

 

 

cost %

 

 

(dollars in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term investments

$

19,311

 

 

$

511,194

 

 

 

5.05

%

 

$

3,571

 

 

$

277,409

 

 

 

1.72

%

Mortgage-backed securities

 

180,244

 

 

 

4,603,082

 

 

 

5.24

%

 

 

91,121

 

 

 

3,347,658

 

 

 

3.64

%

Loans acquired for sale at fair value

 

77,487

 

 

 

1,613,347

 

 

 

6.42

%

 

 

70,611

 

 

 

1,884,840

 

 

 

5.01

%

Loans at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held by variable interest entities

 

38,315

 

 

 

1,476,435

 

 

 

3.47

%

 

 

44,587

 

 

 

1,651,010

 

 

 

3.61

%

Distressed

 

33

 

 

 

3,090

 

 

 

1.43

%

 

 

204

 

 

 

4,012

 

 

 

6.80

%

 

38,348

 

 

 

1,479,525

 

 

 

3.47

%

 

 

44,791

 

 

 

1,655,022

 

 

 

3.62

%

Deposits securing CRT arrangements

 

46,410

 

 

 

1,285,327

 

 

 

4.83

%

 

 

9,584

 

 

 

1,508,150

 

 

 

0.85

%

 

361,800

 

 

 

9,492,475

 

 

 

5.10

%

 

 

219,678

 

 

 

8,673,079

 

 

 

3.39

%

Placement fees relating to custodial funds

 

110,602

 

 

 

 

 

 

 

 

 

31,152

 

 

 

 

 

 

 

Other

 

2,227

 

 

 

 

 

 

 

 

 

589

 

 

 

 

 

 

 

$

474,629

 

 

$

9,492,475

 

 

 

6.69

%

 

$

251,419

 

 

$

8,673,079

 

 

 

3.88

%

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets sold under agreements to repurchase

$

284,027

 

 

$

6,451,377

 

 

 

5.89

%

 

$

87,310

 

 

$

5,363,690

 

 

 

2.18

%

Mortgage loan participation purchase and sale
   agreements

 

1,109

 

 

 

20,991

 

 

 

7.06

%

 

 

728

 

 

 

33,586

 

 

 

2.90

%

Notes payable secured by credit risk transfer
    and mortgage servicing assets

 

191,049

 

 

 

2,995,752

 

 

 

8.53

%

 

 

84,597

 

 

 

2,550,910

 

 

 

4.43

%

Senior notes

 

25,316

 

 

 

549,063

 

 

 

6.16

%

 

 

25,004

 

 

 

539,703

 

 

 

6.19

%

Asset-backed financings at fair value

 

38,796

 

 

 

1,381,994

 

 

 

3.75

%

 

 

40,308

 

 

 

1,549,797

 

 

 

3.48

%

 

540,297

 

 

 

11,399,177

 

 

 

6.34

%

 

 

237,947

 

 

 

10,037,686

 

 

 

3.17

%

Interest shortfall on repayments of loans serviced
   for Agency securitizations

 

4,322

 

 

 

 

 

 

 

 

 

14,975

 

 

 

 

 

 

 

Interest on loan impound deposits

 

4,737

 

 

 

 

 

 

 

 

 

2,822

 

 

 

 

 

 

 

Other

 

1,089

 

 

 

 

 

 

 

 

 

—

 

 

 

 

 

 

 

 

550,445

 

 

$

11,399,177

 

 

 

6.46

%

 

 

255,744

 

 

$

10,037,686

 

 

 

3.41

%

Net interest expense

$

(75,816

)

 

 

 

 

 

 

 

$

(4,325

)

 

 

 

 

 

 

 

70

 

The effects of changes in the yields and costs and composition of our investments on our net interest expense are summarized below:

 

 

Quarter ended September 30, 2023

 

 

Nine months ended September 30, 2023

 

 

 

vs.

 

 

vs.

 

 

 

Quarter ended September 30, 2022

 

 

Nine months ended September 30, 2022

 

 

 

Increase (decrease)
due to changes in

 

 

Increase (decrease)
due to changes in

 

 

 

Rate

 

 

Volume

 

 

Total

 

 

Rate

 

 

Volume

 

 

Total

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and short-term investments

 

$

1,355

 

 

$

2,940

 

 

$

4,295

 

 

$

10,964

 

 

$

4,776

 

 

$

15,740

 

Mortgage-backed securities

 

 

23,085

 

 

 

7,408

 

 

 

30,493

 

 

 

48,043

 

 

 

41,080

 

 

 

89,123

 

Loans acquired for sale at fair value

 

 

1,837

 

 

 

(15,038

)

 

 

(13,201

)

 

 

18,017

 

 

 

(11,141

)

 

 

6,876

 

Loans at fair value:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Held by variable interest entities

 

 

(4,567

)

 

 

(1,930

)

 

 

(6,497

)

 

 

(1,692

)

 

 

(4,580

)

 

 

(6,272

)

Distressed

 

 

(1

)

 

 

(6

)

 

 

(7

)

 

 

(132

)

 

 

(39

)

 

 

(171

)

 

 

(4,568

)

 

 

(1,936

)

 

 

(6,504

)

 

 

(1,824

)

 

 

(4,619

)

 

 

(6,443

)

Deposits securing CRT arrangements

 

 

10,252

 

 

 

(811

)

 

 

9,441

 

 

 

38,445

 

 

 

(1,619

)

 

 

36,826

 

 

 

31,961

 

 

 

(7,437

)

 

 

24,524

 

 

 

113,645

 

 

 

28,477

 

 

 

142,122

 

Placement fees relating to custodial
  funds

 

 

 

 

 

 

 

 

23,766

 

 

 

 

 

 

 

 

 

79,450

 

Other

 

 

 

 

 

 

 

 

978

 

 

 

 

 

 

 

 

 

1,638

 

 

$

31,961

 

 

$

(7,437

)

 

$

49,268

 

 

$

113,645

 

 

$

28,477

 

 

$

223,210

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets sold under agreements to
   repurchase

 

$

41,338

 

 

$

(615

)

 

$

40,723

 

 

$

175,803

 

 

$

20,914

 

 

$

196,717

 

Mortgage loan participation
   purchase and sale agreement

 

 

196

 

 

 

(113

)

 

 

83

 

 

 

735

 

 

 

(354

)

 

 

381

 

Notes payable secured by credit risk
   transfer and mortgage servicing
   assets

 

 

25,402

 

 

 

4,732

 

 

 

30,134

 

 

 

89,536

 

 

 

16,916

 

 

 

106,452

 

Senior notes

 

 

64

 

 

 

128

 

 

 

192

 

 

 

(120

)

 

 

432

 

 

 

312

 

Asset-backed financings at fair value

 

 

1,331

 

 

 

(1,944

)

 

 

(613

)

 

 

3,052

 

 

 

(4,564

)

 

 

(1,512

)

 

 

68,331

 

 

 

2,188

 

 

 

70,519

 

 

 

269,006

 

 

 

33,344

 

 

 

302,350

 

Interest shortfall on repayments of
   loans serviced for Agency
   securitizations

 

 

 

 

 

 

 

 

(2,001

)

 

 

 

 

 

 

 

 

(10,653

)

Interest on loan impound deposits

 

 

 

 

 

 

 

 

946

 

 

 

 

 

 

 

 

 

1,915

 

Other

 

 

 

 

 

 

 

 

374

 

 

 

 

 

 

 

 

 

1,089

 

 

 

68,331

 

 

 

2,188

 

 

 

69,838

 

 

 

269,006

 

 

 

33,344

 

 

 

294,701

 

Increase in net interest (expense) income

 

$

(36,370

)

 

$

(9,625

)

 

$

(20,570

)

 

$

(155,361

)

 

$

(4,867

)

 

$

(71,491

)

The increase in net interest expense during the quarter and nine months ended September 30, 2023, as compared to the same periods in 2022, is due to an increase in interest costs attributable to financing non-interest earning MSR assets along with faster repricing of our debt than our interest earning assets, partially offset by an increase in placement fees relating to custodial funds.

71

 

Expenses

Our expenses are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Earned by PennyMac Financial Services, Inc.:

 

 

 

 

 

 

 

 

 

 

 

 

Loan servicing fees

 

$

20,257

 

 

$

20,247

 

 

$

61,023

 

 

$

61,670

 

Loan fulfillment fees

 

 

5,531

 

 

 

18,407

 

 

 

22,895

 

 

 

55,807

 

Management fees

 

 

7,175

 

 

 

7,731

 

 

 

21,510

 

 

 

23,758

 

Professional services

 

 

2,133

 

 

 

2,394

 

 

 

5,537

 

 

 

7,671

 

Loan origination

 

 

710

 

 

 

2,430

 

 

 

3,785

 

 

 

8,054

 

Compensation

 

 

1,961

 

 

 

1,368

 

 

 

4,779

 

 

 

4,354

 

Safekeeping

 

 

467

 

 

 

2,986

 

 

 

2,707

 

 

 

6,402

 

Loan collection and liquidation

 

 

1,890

 

 

 

690

 

 

 

3,378

 

 

 

5,118

 

Other

 

 

4,885

 

 

 

4,433

 

 

 

14,559

 

 

 

13,001

 

 

$

45,009

 

 

$

60,686

 

 

$

140,173

 

 

$

185,835

 

Expenses decreased $15.7 million and $45.7 million, or 26% and 25%, respectively, during the quarter and nine months ended September 30, 2023, as compared to the same periods in 2022, as discussed below.

Loan Servicing Fees

Loan servicing fees payable to PLS are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Loan servicing fees:

 

 

 

 

 

 

 

 

 

 

 

 

Loans acquired for sale at fair value

 

$

112

 

 

$

258

 

 

$

569

 

 

$

780

 

Loans at fair value

 

 

33

 

 

 

111

 

 

 

184

 

 

 

427

 

MSRs

 

 

20,112

 

 

 

19,878

 

 

 

60,270

 

 

 

60,463

 

 

$

20,257

 

 

$

20,247

 

 

$

61,023

 

 

$

61,670

 

Average investment in loans:

 

 

 

 

 

 

 

 

 

 

 

 

Acquired for sale at fair value

 

$

868,808

 

 

$

1,763,506

 

 

$

1,613,347

 

 

$

1,884,840

 

At fair value

 

$

1,437,418

 

 

$

1,659,183

 

 

$

1,479,525

 

 

$

1,655,022

 

Average MSR portfolio UPB

 

$

231,333,064

 

 

$

224,756,659

 

 

$

231,333,990

 

 

$

220,988,459

 

Loan servicing fees increased by $10,000 and decreased $647,000 during the quarter and nine months ended September 30, 2023, respectively, as compared to the same periods in 2022. We incur loan servicing fees primarily in support of our MSR portfolio. The limited growth or decrease in loan servicing fees is due to reductions in COVID-19 pandemic-related forbearance and modification activities, partially offset by growth in our MSR portfolio.

Loan Fulfillment Fees

Loan fulfillment fees represent fees we pay to PLS for the services it performs on our behalf in connection with our acquisition, packaging and sale of loans. Fulfillment fees decreased $12.9 million and $32.9 million during the quarter and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. The decrease was due to a decrease in loan commitment volume. Our loan fulfillment fee structure is described in Note 4 – Transactions with Related Parties to the consolidated financial statements included in this Report.

72

 

Management Fees

Management fees payable to PCM are summarized below:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Base

 

$

7,175

 

 

$

7,731

 

 

$

21,510

 

 

$

23,758

 

Performance incentive

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

$

7,175

 

 

$

7,731

 

 

$

21,510

 

 

$

23,758

 

Average shareholders' equity amounts used
   to calculate base management fee expense

 

$

1,897,964

 

 

$

2,048,887

 

 

$

1,917,525

 

 

$

2,128,916

 

 

Management fees decreased by $556,000 and $2.2 million during the quarter and nine months ended September 30, 2023, respectively, as compared to the same periods in 2022. This decrease reflects the decrease in our average shareholders’ equity during the quarter and nine months ended September 30, 2023, as compared to the same periods in 2022.

Loan origination

Loan origination expenses decreased $1.7 million and $4.3 million, or 71% and 53%, during the quarter and nine months ended September 30, 2023, respectively, as compared to the same periods in 2022, primarily reflecting a decrease in our loan originations purchased for sale to nonaffiliates.

Other Expenses

Other expenses are summarized below:

 

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Common overhead allocation from PFSI

 

$

1,489

 

 

$

2,574

 

 

$

5,450

 

 

$

6,247

 

Technology

 

 

601

 

 

 

455

 

 

 

1,521

 

 

 

1,538

 

Bank service charges

 

 

483

 

 

 

600

 

 

 

1,478

 

 

 

1,790

 

Insurance

 

 

472

 

 

 

385

 

 

 

1,494

 

 

 

1,190

 

Other

 

 

1,840

 

 

 

419

 

 

 

4,616

 

 

 

2,236

 

 

$

4,885

 

 

$

4,433

 

 

$

14,559

 

 

$

13,001

 

 

Income Taxes

We have elected to treat PMC as a TRS. Income from a TRS is only included as a component of REIT taxable income to the extent that the TRS makes dividend distributions of income to us. A TRS is subject to corporate federal and state income tax. Accordingly, a provision for income taxes for PMC is included in the accompanying consolidated statements of operations.

The Company’s effective tax rate was 48.1% and 28.1% with consolidated pretax income of a $118.4 million and $204.1 million for the quarter and nine months ended September 30, 2023. The Company’s TRS recognized a tax expense of $57.1 million on pretax income of $234.0 million and a tax expense of $56.5 million on pretax income of $221.9 million for the quarter and nine months ended September 30, 2023. For the same periods in 2022, the TRS recognized tax expense of $80.8 million on pretax income of $344.8 million and tax expense of $151.3 million on pretax income of $765.2 million, respectively. The Company’s reported consolidated pretax income for the quarter and nine months ended September 30, 2022 was $90.4 million and $68.6 million, respectively. The primary difference between the Company’s effective tax rate and the statutory tax rate is generally attributable to nontaxable REIT income resulting from the dividends paid deduction. The higher effective tax rate for the quarter ended September 30, 2023 is the result of realizing pretax GAAP income at the TRS, where the tax provision is recorded, while realizing a loss in the quarter for the rest of the Company's consolidated subsidiaries, excluding the TRS and its subsidiaries.

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. On the basis of this evaluation, as of September 30, 2023, the valuation allowance remains zero as a result of cumulative GAAP income at the TRS for the three-year period ended September 30, 2023. The amount of deferred tax assets considered realizable could be adjusted in future periods based on future income.

In general, cash dividends declared by the Company will be considered ordinary income to the shareholders for income tax purposes. Some portion of the dividends may be characterized as capital gain distributions or a return of capital. For tax years beginning after December 31, 2017, the 2017 Tax Cuts and Jobs Act (subject to certain limitations) provides a 20% deduction from taxable income for ordinary REIT dividends.

73

 

Balance Sheet Analysis

Following is a summary of key balance sheet items as of the dates presented:

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Assets

 

 

 

 

 

 

Cash

 

$

236,396

 

 

$

111,866

 

Investments:

 

 

 

 

 

 

Short-term

 

 

150,059

 

 

 

252,271

 

Mortgage-backed securities at fair value

 

 

4,665,970

 

 

 

4,462,601

 

Loans acquired for sale at fair value

 

 

1,025,730

 

 

 

1,821,933

 

Loans at fair value

 

 

1,372,118

 

 

 

1,513,399

 

Derivative assets

 

 

29,750

 

 

 

84,940

 

Deposits securing credit risk transfer arrangements

 

 

1,237,294

 

 

 

1,325,294

 

MSRs

 

 

4,108,661

 

 

 

4,012,737

 

 

 

12,589,582

 

 

 

13,473,175

 

Other

 

 

397,358

 

 

 

336,523

 

Total assets

 

$

13,223,336

 

 

$

13,921,564

 

Liabilities

 

 

 

 

 

 

Debt:

 

 

 

 

 

 

Short-term

 

$

6,044,707

 

 

$

6,616,528

 

Long-term

 

 

4,732,692

 

 

 

4,787,162

 

 

 

10,777,399

 

 

 

11,403,690

 

Other

 

 

496,859

 

 

 

555,059

 

Total liabilities

 

 

11,274,258

 

 

 

11,958,749

 

Shareholders’ equity

 

 

1,949,078

 

 

 

1,962,815

 

Total liabilities and shareholders’ equity

 

$

13,223,336

 

 

$

13,921,564

 

Total assets decreased by approximately $698.2 million, or 5%, during the period from December 31, 2022 through September 30, 2023, primarily due to a decrease of $796.2 million in Loans acquired for sale at fair value, a decrease of $ 141.3 million in Loans at fair value and a decrease in Deposits securing credit risk transfer arrangements of $88.0 million, partially offset by a $203.4 million increase in Mortgage-backed securities at fair value and a $95.9 million increase in MSRs.

Asset Acquisitions

Our asset acquisitions are summarized below.

Correspondent Production

Following is a summary of our correspondent production acquisitions at fair value:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Correspondent loan purchases:

 

 

 

 

 

 

 

 

 

 

 

 

GSE eligible — held for sale to nonaffiliates (1)

 

$

12,810,679

 

 

$

10,329,858

 

 

$

33,722,514

 

 

$

30,956,741

 

Held for sale to PLS (2)

 

 

8,945,053

 

 

 

12,454,277

 

 

 

29,975,859

 

 

 

36,425,554

 

Jumbo loans

 

 

—

 

 

 

1,317

 

 

 

1,002

 

 

 

5,029

 

Advances to home equity lines of credit

 

 

52

 

 

 

15

 

 

 

102

 

 

 

112

 

 

$

21,755,784

 

 

$

22,785,467

 

 

$

63,699,477

 

 

$

67,387,436

 

 

(1)
GSE eligibility refers to the eligibility of loans for sale to Fannie Mae or Freddie Mac. The Company sells or finances a portion of its GSE eligible loan production to other investors, including PLS.
(2)
The Company sells a portion of its production to PLS, including all of its loans eligible for inclusion in Ginnie Mae securities. The Company is not approved by Ginnie Mae as an issuer of Ginnie Mae-guaranteed securities which are backed by government-insured or guaranteed loans. The Company earns a sourcing fee for all loans that it purchases from correspondent sellers and subsequently sells to PLS as described in Note 4 – Transactions with Related Parties – Operating activities – Correspondent Production Activities.

74

 

During the quarter and nine months ended September 30, 2023, we purchased for sale $21.8 billion and $63.7 billion, respectively, in fair value of correspondent production loans as compared to $22.8 billion and $67.4 billion during the same periods in 2022.

Other Investment Activities

Following is a summary of our acquisitions of mortgage-related investments held in our credit and interest rate sensitive strategies segments:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Credit sensitive assets:

 

 

 

 

 

 

 

 

 

 

 

 

Subordinate credit-linked securities

 

$

6,555

 

 

$

59,001

 

 

$

70,616

 

 

$

184,670

 

Loans secured by investment properties, net of
  associated asset-backed financing

 

 

—

 

 

 

—

 

 

 

—

 

 

 

23,485

 

 

 

 

6,555

 

 

 

59,001

 

 

 

70,616

 

 

 

208,155

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate sensitive assets:

 

 

 

 

 

 

 

 

 

 

 

 

Agency fixed-rate pass-through securities (net of sales)

 

 

—

 

 

 

295,014

 

 

 

308,742

 

 

 

1,821,576

 

Interest-only stripped mortgage-backed securities

 

 

103,547

 

 

 

—

 

 

 

103,547

 

 

 

—

 

Senior non-Agency securities

 

 

57,829

 

 

 

—

 

 

 

99,803

 

 

 

28,819

 

Mortgage servicing rights:

 

 

 

 

 

 

 

 

 

 

 

 

Purchased

 

 

16,263

 

 

 

—

 

 

 

16,263

 

 

 

—

 

Received in loan sales (1)

 

 

(46,536

)

 

 

178,001

 

 

 

144,829

 

 

 

543,255

 

 

 

131,103

 

 

 

473,015

 

 

 

673,184

 

 

 

2,393,650

 

 

$

137,658

 

 

$

532,016

 

 

$

743,800

 

 

$

2,601,805

 

 

(1)
Net of exchange of servicing spread for IO mortgage-backed securities and interest receivable.

Our acquisitions during the quarter and nine months ended September 30, 2023 and 2022 were financed through the use of a combination of proceeds from borrowings and liquidations of existing investments. We continue to identify additional means of increasing our investment portfolio through cash flow from our business activities, existing investments, borrowings, and transactions that minimize current cash outlays. However, we expect that, over time, our ability to continue our investment portfolio growth will depend on our ability to raise additional equity capital.

Investment Portfolio Composition

Mortgage-Backed Securities

Following is a summary of our MBS holdings:

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

Average

 

 

 

Fair

 

 

Principal/

 

 

Life

 

 

 

 

 

Fair

 

 

 

 

 

Life

 

 

 

 

 

 

value

 

 

Notional

 

 

(in years)

 

 

Coupon

 

 

value

 

 

Principal

 

 

(in years)

 

 

Coupon

 

 

 

(dollars in thousands)

 

Agency pass-through securities

 

$

4,170,520

 

 

$

4,403,330

 

 

 

8.9

 

 

 

5.1

%

 

$

4,262,502

 

 

$

4,693,045

 

 

 

10.1

 

 

 

3.5

%

Subordinate credit-linked securities

 

 

277,085

 

 

 

259,863

 

 

 

4.6

 

 

 

12.3

%

 

 

177,898

 

 

 

184,620

 

 

 

4.6

 

 

 

11.2

%

Senior non-Agency securities

 

 

114,832

 

 

 

127,172

 

 

 

10.1

 

 

 

5.1

%

 

 

22,201

 

 

 

28,103

 

 

 

14.3

 

 

 

2.5

%

 

 

4,562,437

 

 

 

4,790,365

 

 

 

 

 

 

 

 

 

4,462,601

 

 

 

4,905,768

 

 

 

 

 

 

 

Interest-only stripped mortgage
  -backed securities

 

 

103,533

 

 

 

425,682

 

 

 

8.7

 

 

 

4.9

%

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

$

4,665,970

 

 

$

5,216,047

 

 

 

 

 

 

 

 

$

4,462,601

 

 

$

4,905,768

 

 

 

 

 

 

 

 

75

 

Credit Risk Transfer Arrangements

Following is a summary of the composition of the loans underlying our investment in funded CRT arrangements:

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

(in thousands)

 

Carrying value of CRT arrangements:

 

 

 

 

 

 

Derivative assets - CRT derivatives

 

$

7,010

 

 

$

1,262

 

Derivative and credit risk transfer strip liabilities:

 

 

 

 

 

 

CRT strips

 

 

(68,592

)

 

 

(137,193

)

CRT derivatives

 

 

(2,268

)

 

 

(23,360

)

 

 

(70,860

)

 

 

(160,553

)

Deposits securing CRT arrangements

 

 

1,237,294

 

 

 

1,325,294

 

Interest-only security payable at fair value

 

 

(28,288

)

 

 

(21,925

)

 

$

1,145,156

 

 

$

1,144,078

 

UPB of loans subject to credit guarantee obligations

 

$

23,613,675

 

 

$

25,315,524

 

 

Following is a summary of the composition of the loans underlying our investment in CRT arrangements as of September 30, 2023:

 

 

Year of origination

 

 

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

 

Total

 

 

(in millions)

 

UPB:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding

 

$

4,793

 

 

$

10,974

 

 

$

2,853

 

 

$

2,408

 

 

$

1,966

 

 

$

620

 

 

$

23,614

 

Liquidations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances

 

$

0.4

 

 

$

4.9

 

 

$

54.1

 

 

$

158.9

 

 

$

118.1

 

 

$

59.3

 

 

$

395.7

 

Losses

 

$

0.1

 

 

$

0.3

 

 

$

5.5

 

 

$

19.8

 

 

$

12.3

 

 

$

7.1

 

 

$

45.1

 

Modifications:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances

 

$

66.8

 

 

$

546.4

 

 

$

300.7

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

913.9

 

Losses

 

$

1.1

 

 

$

12.3

 

 

$

9.8

 

 

$

—

 

 

$

—

 

 

$

—

 

 

$

23.2

 

 

 

 

 

Year of origination

 

Original debt-to income ratio

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

 

Total

 

 

(in millions)

 

<25%

 

$

987

 

 

$

1,636

 

 

$

261

 

 

$

302

 

 

$

292

 

 

$

66

 

 

$

3,544

 

25 - 30%

 

 

770

 

 

 

1,388

 

 

 

232

 

 

 

277

 

 

 

266

 

 

 

69

 

 

 

3,002

 

30 - 35%

 

 

846

 

 

 

1,679

 

 

 

334

 

 

 

371

 

 

 

338

 

 

 

93

 

 

 

3,661

 

35 - 40%

 

 

831

 

 

 

1,966

 

 

 

458

 

 

 

436

 

 

 

374

 

 

 

112

 

 

 

4,177

 

40 - 45%

 

 

828

 

 

 

2,375

 

 

 

677

 

 

 

616

 

 

 

518

 

 

 

168

 

 

 

5,182

 

>45%

 

 

531

 

 

 

1,930

 

 

 

891

 

 

 

406

 

 

 

178

 

 

 

112

 

 

 

4,048

 

 

$

4,793

 

 

$

10,974

 

 

$

2,853

 

 

$

2,408

 

 

$

1,966

 

 

$

620

 

 

$

23,614

 

Weighted average

 

 

33.4

%

 

 

35.8

%

 

 

39.0

%

 

 

36.5

%

 

 

35.0

%

 

 

35.6

%

 

 

35.7

%

 

 

 

Year of origination

 

Origination FICO credit score

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

 

Total

 

 

(in millions)

 

600 - 649

 

$

33

 

 

$

152

 

 

$

66

 

 

$

29

 

 

$

18

 

 

$

11

 

 

$

309

 

650 - 699

 

 

237

 

 

 

1,038

 

 

 

605

 

 

 

365

 

 

 

243

 

 

 

122

 

 

 

2,610

 

700 - 749

 

 

1,131

 

 

 

3,227

 

 

 

1,006

 

 

 

819

 

 

 

620

 

 

 

189

 

 

 

6,992

 

750 or greater

 

 

3,385

 

 

 

6,529

 

 

 

1,169

 

 

 

1,191

 

 

 

1,085

 

 

 

298

 

 

 

13,657

 

Not available

 

 

7

 

 

 

28

 

 

 

7

 

 

 

4

 

 

 

—

 

 

 

—

 

 

 

46

 

 

$

4,793

 

 

$

10,974

 

 

$

2,853

 

 

$

2,408

 

 

$

1,966

 

 

$

620

 

 

$

23,614

 

Weighted average

 

 

765

 

 

 

754

 

 

 

736

 

 

 

745

 

 

 

751

 

 

 

742

 

 

 

753

 

 

76

 

 

 

Year of origination

 

Origination loan-to value ratio

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

 

Total

 

 

(in millions)

 

<80%

 

$

2,262

 

 

$

3,884

 

 

$

920

 

 

$

786

 

 

$

802

 

 

$

252

 

 

$

8,906

 

80-85%

 

 

800

 

 

 

2,104

 

 

 

671

 

 

 

684

 

 

 

529

 

 

 

164

 

 

 

4,952

 

85-90%

 

 

310

 

 

 

618

 

 

 

131

 

 

 

124

 

 

 

109

 

 

 

36

 

 

 

1,328

 

90-95%

 

 

432

 

 

 

1,159

 

 

 

329

 

 

 

292

 

 

 

216

 

 

 

64

 

 

 

2,492

 

95-100%

 

 

989

 

 

 

3,209

 

 

 

802

 

 

 

522

 

 

 

310

 

 

 

104

 

 

 

5,936

 

 

$

4,793

 

 

$

10,974

 

 

$

2,853

 

 

$

2,408

 

 

$

1,966

 

 

$

620

 

 

$

23,614

 

Weighted average

 

 

80.7

%

 

 

83.3

%

 

 

83.4

%

 

 

82.4

%

 

 

80.6

%

 

 

80.9

%

 

 

82.4

%

 

 

 

Year of origination

 

Current loan-to value ratio (1)

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

 

Total

 

 

(in millions)

 

<80%

 

$

4,778

 

 

$

10,922

 

 

$

2,837

 

 

$

2,407

 

 

$

1,966

 

 

$

620

 

 

$

23,530

 

80-85%

 

 

12

 

 

 

35

 

 

 

10

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

58

 

85-90%

 

 

3

 

 

 

10

 

 

 

4

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

17

 

90-95%

 

 

—

 

 

 

4

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4

 

95-100%

 

 

—

 

 

 

2

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

3

 

>100%

 

 

—

 

 

 

1

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 

$

4,793

 

 

$

10,974

 

 

$

2,853

 

 

$

2,408

 

 

$

1,966

 

 

$

620

 

 

$

23,614

 

Weighted average

 

 

53.2

%

 

 

52.9

%

 

 

50.4

%

 

 

45.3

%

 

 

41.2

%

 

 

38.7

%

 

 

50.5

%

 

(1) Based on current UPB compared to estimated fair value of the property securing the loan.

 

 

 

Year of origination

 

Geographic distribution

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

 

Total

 

 

(in millions)

 

California

 

$

497

 

 

$

1,074

 

 

$

355

 

 

$

255

 

 

$

378

 

 

$

114

 

 

$

2,673

 

Florida

 

 

531

 

 

 

1,059

 

 

 

368

 

 

 

252

 

 

 

211

 

 

 

55

 

 

 

2,476

 

Texas

 

 

575

 

 

 

954

 

 

 

229

 

 

 

204

 

 

 

246

 

 

 

95

 

 

 

2,303

 

Virginia

 

 

253

 

 

 

489

 

 

 

103

 

 

 

112

 

 

 

137

 

 

 

60

 

 

 

1,154

 

Maryland

 

 

186

 

 

 

464

 

 

 

129

 

 

 

138

 

 

 

130

 

 

 

35

 

 

 

1,082

 

Other

 

 

2,751

 

 

 

6,934

 

 

 

1,669

 

 

 

1,447

 

 

 

864

 

 

 

261

 

 

 

13,926

 

 

$

4,793

 

 

$

10,974

 

 

$

2,853

 

 

$

2,408

 

 

$

1,966

 

 

$

620

 

 

$

23,614

 

 

 

 

Year of origination

 

Regional geographic
distribution (1)

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

 

Total

 

 

(in millions)

 

Northeast

 

$

446

 

 

$

1,358

 

 

$

334

 

 

$

352

 

 

$

253

 

 

$

91

 

 

$

2,834

 

Southeast

 

 

1,629

 

 

 

3,768

 

 

 

1,025

 

 

 

828

 

 

 

618

 

 

 

191

 

 

 

8,059

 

Midwest

 

 

443

 

 

 

1,151

 

 

 

243

 

 

 

227

 

 

 

177

 

 

 

45

 

 

 

2,286

 

Southwest

 

 

1,254

 

 

 

2,435

 

 

 

539

 

 

 

469

 

 

 

367

 

 

 

130

 

 

 

5,194

 

West

 

 

1,021

 

 

 

2,262

 

 

 

712

 

 

 

532

 

 

 

551

 

 

 

163

 

 

 

5,241

 

 

 

$

4,793

 

 

$

10,974

 

 

$

2,853

 

 

$

2,408

 

 

$

1,966

 

 

$

620

 

 

$

23,614

 

 

(1)
Northeast consists of CT, DE, ME, MA, NH, NJ, NY, PA, PR, RI, VT, VI; Southeast consists of AL, DC, FL, GA, KY, MD, MS, NC, SC, TN, VA, WV; Midwest consists of IL, IN, IA, MI, MN, NE, ND, OH, SD, WI; Southwest consists of AZ, AR, CO, KS, LA, MO, NM, OK, TX, UT; and West consists of AK, CA, GU, HI, ID, MT, NV, OR, WA and WY.

 

77

 

 

 

Year of origination

 

Collection status

 

2020

 

 

2019

 

 

2018

 

 

2017

 

 

2016

 

 

2015

 

 

Total

 

 

(in millions)

 

Delinquency

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current - 89 Days

 

$

4,774

 

 

$

10,867

 

 

$

2,800

 

 

$

2,395

 

 

$

1,959

 

 

$

618

 

 

$

23,413

 

90 - 179 Days

 

 

12

 

 

 

55

 

 

 

30

 

 

 

12

 

 

 

6

 

 

 

2

 

 

 

117

 

180+ Days

 

 

5

 

 

 

42

 

 

 

17

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

65

 

Foreclosure

 

 

2

 

 

 

10

 

 

 

6

 

 

 

—

 

 

 

1

 

 

 

—

 

 

 

19

 

 

$

4,793

 

 

$

10,974

 

 

$

2,853

 

 

$

2,408

 

 

$

1,966

 

 

$

620

 

 

$

23,614

 

Bankruptcy

 

$

3

 

 

$

25

 

 

$

18

 

 

$

6

 

 

$

8

 

 

$

1

 

 

$

61

 

 

Cash Flows

Our cash flows for the quarters ended September 30, 2023 and 2022 are summarized below:

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Operating activities

 

$

807,162

 

 

$

1,275,504

 

Investing activities

 

 

60,482

 

 

 

(1,342,701

)

Financing activities

 

 

(743,114

)

 

 

67,145

 

Net cash flows

 

$

124,530

 

 

$

(52

)

Our cash flows resulted in a net increase in cash of $124.5 million during the nine months ended September 30, 2023, as discussed below.

Operating activities

Cash provided by operating activities totaled $807.2 million during the nine months ended September 30, 2023, as compared to cash provided by our operating activities of $1.3 billion during the nine months ended September 30, 2022. Cash flows from operating activities are most influenced by cash flows from loans acquired for sale as shown below:

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Operating cash flows from:

 

 

 

 

 

 

Loans acquired for sale

 

$

639,045

 

 

$

1,011,398

 

Other

 

 

168,117

 

 

 

264,106

 

 

$

807,162

 

 

$

1,275,504

 

Cash flows from loans acquired for sale primarily reflect changes in the level of production inventory from the beginning to end of the periods presented. Our inventory of loans held for sale decreased during both of the nine month periods ended September 30, 2023.

Investing activities

Net cash provided by our investing activities was $60.5 million for the nine months ended September 30, 2023, as compared to net cash used in our investing activities of $1.3 billion for the nine months ended September 30, 2022, primarily due to the increase of our sales and repayments of MBS in excess of purchases of our investments in such assets as well as a decrease in short-term investments and margin deposits.

Financing activities

Net cash used in our financing activities was $743.1 million for the nine months ended September 30, 2023, as compared to net cash provided by our financing activities of $67.1 million for the nine months ended September 30, 2022. This change primarily reflects decreased financing requirements relating to loans acquired for sale.

As discussed below in Liquidity and Capital Resources, our Manager continually evaluates and pursues additional sources of financing to provide us with future investing capacity. We do not raise equity or enter into borrowings for the purpose of financing the payment of dividends. We believe that our cash earnings, are adequate to fund our operating expenses and dividend payment requirements. However, we manage our liquidity in the aggregate and are reinvesting our cash flows in new investments as well as using such cash to fund our dividend requirements.

78

 

Liquidity and Capital Resources

Our liquidity reflects our ability to meet our current obligations (including the purchase of loans from correspondent sellers, our operating expenses and, when applicable, retirement of, and margin calls relating to, our debt and derivatives positions), make investments as our Manager identifies them, pursue our share repurchase program and make distributions to our shareholders. We generally need to distribute at least 90% of our taxable income each year (subject to certain adjustments) to our shareholders to qualify as a REIT under the Internal Revenue Code. This distribution requirement limits our ability to retain earnings and thereby replenish or increase capital to support our activities.

We expect our primary sources of liquidity to be cash flows from our investment portfolio, including cash earnings on our investments, cash flows from business activities, liquidation of existing investments and proceeds from borrowings and/or additional equity offerings. When we finance a particular asset, the amount borrowed is less than the asset’s fair value and we must provide the cash in the amount of such difference. Our ability to continue making investments is dependent on our ability to invest the cash representing such difference.

Debt Financing

Our current debt financing strategy is to finance our assets where we believe such borrowing is prudent, appropriate and available. We make collateralized borrowings in the form of sales of assets under agreements to repurchase, loan participation purchase and sale agreements and notes payable, including secured term financing for our MSRs and our CRT arrangements that has allowed us to more closely match the term of our borrowings to the expected lives of the assets securing those borrowings. We have also borrowed money by issuing unsecured senior notes.

Our debt financing is summarized below:

 

 

Assets financed

 

Financing

 

MBS

 

 

Loans acquired
for sale

 

 

Loans at
 fair value

 

 

CRT assets

 

 

Servicing assets (1)

 

 

REO

 

 

Total

 

 

 

(in thousands)

 

Borrowings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short term

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets sold under agreements to
   repurchase

 

$

4,493,881

 

 

$

946,568

 

 

$

63,341

 

 

$

45,998

 

 

$

470,928

 

 

$

—

 

 

$

6,020,716

 

Mortgage loan participation purchase
   and sale agreements

 

 

—

 

 

 

23,991

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

23,991

 

Long term

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Notes payable secured by CRT
   arrangements and MSRs

 

 

—

 

 

 

—

 

 

 

—

 

 

 

765,738

 

 

 

2,059,853

 

 

 

—

 

 

 

2,825,591

 

Asset-backed financings at fair value

 

 

—

 

 

 

—

 

 

 

1,279,059

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,279,059

 

Interest-only security payable

 

 

—

 

 

 

—

 

 

 

—

 

 

 

28,288

 

 

 

—

 

 

 

—

 

 

 

28,288

 

   Total secured borrowings

 

 

4,493,881

 

 

 

970,559

 

 

 

1,342,400

 

 

 

840,024

 

 

 

2,530,781

 

 

 

—

 

 

 

10,177,645

 

Senior notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

599,754

 

Total borrowings

 

$

4,493,881

 

 

$

970,559

 

 

$

1,342,400

 

 

$

840,024

 

 

$

2,530,781

 

 

$

—

 

 

 

10,777,399

 

Shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,949,078

 

Total financing

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

12,726,477

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets pledged to secure borrowings

 

$

4,665,970

 

 

$

1,019,247

 

 

$

1,370,220

 

 

$

1,244,304

 

 

$

4,114,853

 

 

$

2,466

 

 

$

12,417,060

 

Debt-to-equity ratio:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excluding non-recourse debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.9:1

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5.5:1

 

 

(1)
Amounts pledged to secure borrowings include MSRs and pledged servicing advances.

Sales of Assets Under Agreements to Repurchase

Our repurchase agreements represent the sales of assets together with agreements for us to buy back the assets at a later date. Following is a summary of the activities in our repurchase agreements financing:

 

 

Quarter ended September 30,

 

 

Nine months ended September 30,

 

Assets sold under agreements to repurchase

 

2023

 

 

2022

 

 

2023

 

 

2022

 

 

 

(in thousands)

 

Average balance outstanding

 

$

5,714,082

 

 

$

5,789,433

 

 

$

6,451,377

 

 

$

5,363,690

 

Maximum daily balance outstanding

 

$

6,318,746

 

 

$

6,649,005

 

 

$

9,412,768

 

 

$

8,395,930

 

Ending balance

 

 

 

 

 

 

 

$

6,020,716

 

 

$

6,409,796

 

 

79

 

The difference between the maximum and average daily amounts outstanding is primarily due to timing of loan purchases and sales in our correspondent production business. The total facility size of our assets sold under agreements to repurchase was approximately $11.5 billion at September 30, 2023.

Because a significant portion of our current debt facilities consists of short-term borrowings, we expect to either renew these facilities in advance of maturity in order to ensure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.

As discussed above, all of our repurchase agreements, and mortgage loan participation purchase and sale agreements have short-term maturities:

•
The transactions relating to loans and REO under agreements to repurchase generally provide for terms of approximately one to two years;
•
The transactions relating to loans under mortgage loan participation purchase and sale agreements provide for terms of approximately one year; and
•
The transactions relating to assets under notes payable provide for terms ranging from two to five years.

The amount at risk (the fair value of the assets pledged plus the related margin deposit, less the amount advanced by the counterparty and accrued interest) relating to our assets sold under agreements to repurchase is summarized by counterparty below as of September 30, 2023:

Counterparty

 

Amount at risk

 

 

(in thousands)

 

Goldman Sachs & Co. LLC

 

$

61,461

 

Barclays Capital Inc.

 

 

54,893

 

Atlas Securitized Products, L.P.

 

 

53,974

 

Bank of America, N.A.

 

 

52,025

 

JPMorgan Chase & Co.

 

 

46,415

 

Citibank, N.A.

 

 

41,592

 

Wells Fargo Securities, LLC

 

 

28,875

 

Morgan Stanley & Co. LLC

 

 

9,731

 

Amherst Pierpont Securities LLC

 

 

9,401

 

Daiwa Capital Markets America Inc.

 

 

9,255

 

Nomura Holdings America, Inc.

 

 

3,543

 

BNP Paribas Corporate & Institutional Banking

 

 

3,309

 

Mizuho Financial Group

 

 

1,977

 

RBC Capital Markets, L.P.

 

 

1,194

 

 

$

377,645

 

 

•
All repurchase agreements arrangements that matured between September 30, 2023 and the date of this Report have been renewed, extended or replaced.

Unsecured Senior Notes

We issued $53.5 million principal amount of our unsecured 8.50% senior notes due September 30, 2028 (the “2023 Senior Notes”) during September 2023. The 2023 Senior Notes bear interest at a rate of 8.50% per year, payable quarterly in arrears on March 30, June 30, September 30 and December 30 of each year, beginning on December 30, 2023.

On or after September 30, 2025, we may redeem for cash all or any portion of the 2023 Senior Notes, at our option, at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No “sinking fund” will be provided for the 2023 Senior Notes.

The 2023 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by PennyMac Corp ("PMC"), including the due and punctual payment of principal of and interest on the Unsecured Senior Notes, whether at stated maturity, upon acceleration, call for redemption or otherwise (“PMC Guarantee”). PMC’s operations and investing activities are centered in residential mortgage-related assets, including the creation of and investment in MSRs and CRT Agreements.

80

 

Under the terms of the PMC Guarantee, holders of the 2023 Senior Notes will not be required to exercise their remedies against us before they proceed directly against PMC. PMC’s obligations under the guarantee are limited to the maximum amount that will not, after giving effect to all other contingent and fixed liabilities of PMC, result in the guarantee constituting a fraudulent transfer or conveyance. The PMC Guarantee will:

•
rank equal in right of payment to any of PMC’s existing and future unsecured and unsubordinated indebtedness and guarantees of PMC;
•
be effectively subordinated in right of payment to any of PMC’s existing and future secured indebtedness and secured guarantees to the extent of the value of the assets securing such indebtedness or guarantees; and
•
be structurally subordinated to all existing and future indebtedness and other liabilities (including trade payables) and (to the extent not held by PMC) preferred stock, if any, of PMC’s subsidiaries and of any entity PMC accounts for using the equity method of accounting.

The following summarized financial information for PMT and PMC is presented on a combined basis. Intercompany balances and transactions between PMT and PMC have been eliminated:

 

 

 

September 30, 2023

 

 

 

(in thousands)

 

Loans acquired for sale at fair value

 

$

1,025,730

 

Mortgage servicing rights at fair value

 

 

4,119,211

 

Other assets

 

 

 

From nonaffiliates

 

 

638,510

 

From PFSI

 

 

2,251

 

From non-issuer or non-guarantor subsidiaries

 

 

1,300,818

 

Total assets

 

$

7,086,520

 

 

 

 

 

Total liabilities

 

 

 

Payable to nonaffiliates

 

$

2,014,410

 

Payable to non-issuer or non-guarantor subsidiaries

 

 

3,996,448

 

Payable to PFSI

 

 

19,131

 

 

 

$

6,029,989

 

 

 

 

 

 

 

Nine months ended September 30, 2023

 

 

(in thousands)

 

Net investment income

 

 

From nonaffiliates

$

500,322

 

From PFSI

 

6,508

 

From non-issuer or non-guarantor subsidiaries (1)

 

(228,256

)

Expenses

 

 

From nonaffiliates

 

23,970

 

From PFSI

 

94,325

 

Pre-tax income

 

160,279

 

Provision for income taxes

 

39,108

 

Net income

$

121,171

 

 

(1)
Excludes equity in earnings of non-guarantor subsidiaries.

Debt Covenants

Our debt financing agreements require us and certain of our subsidiaries to comply with various financial covenants. As of the filing of this Report, these financial covenants include the following:

•
a minimum of $75 million in unrestricted cash and cash equivalents among the Company and/or our subsidiaries; a minimum of $75 million in unrestricted cash and cash equivalents among our Operating Partnership and its consolidated subsidiaries; a minimum of $25 million in unrestricted cash and cash equivalents between PMC and PennyMac Holdings, LLC (“PMH”); a minimum of $25 million in unrestricted cash and cash equivalents at PMC; and a minimum of $10 million in unrestricted cash and cash equivalents at PMH; a minimum tangible net worth for the Company of $1.25 billion; a minimum tangible net worth for our Operating Partnership of $1.25 billion; a minimum tangible net worth for PMH of $250 million; and a minimum tangible net worth for PMC of $300 million;

81

 

•
•
a maximum ratio of total indebtedness to tangible net worth of less than 10:1 for PMC and PMH and 8.5:1 for the Company and our Operating Partnership; and
•
at least two warehouse or repurchase facilities that finance amounts and assets similar to those being financed under our existing debt financing agreements.

Although these financial covenants limit the amount of indebtedness we may incur and impact our liquidity through minimum cash reserve requirements, we believe that these covenants currently provide us with sufficient flexibility to successfully operate our business and obtain the financing necessary to achieve that purpose.

PLS is also subject to various financial covenants, both as a borrower under its own financing arrangements and as our servicer under certain of our debt financing agreements. The most significant of these financial covenants currently include the following:

•
a minimum in unrestricted cash and cash equivalents of $100 million;
•
a minimum tangible net worth of $1.25 billion;
•
a maximum ratio of total indebtedness to tangible net worth of 10:1; and
•
at least one other warehouse or repurchase facility that finances amounts and assets that are similar to those being financed under certain of our existing secured financing agreements.

Many of our debt financing agreements contain a condition precedent to obtaining additional funding that requires us to maintain positive net income for at least one (1) of the previous two consecutive quarters, or other similar measures. For the most recent fiscal quarter, the Company is compliant with all such conditions. However, we may be required to obtain waivers from certain lenders in the future if this condition precedent is not met.

Our debt financing agreements also contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional assets in an amount sufficient to eliminate any margin deficit. A margin deficit will generally result from any decline in the market value (as determined by the applicable lender) of the assets subject to the related financing agreement, although in some instances we may agree with the lender upon certain thresholds (in dollar amounts or percentages based on the market value of the assets) that must be exceeded before a margin deficit will arise. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice.

Regulatory Capital and Liquidity Requirements

In addition to the financial covenants imposed upon us and PLS as our servicer under our debt financing agreements, we, through PMC and/or PLS, as applicable, are also subject to liquidity and net worth requirements established by the Federal Housing Finance Agency (“FHFA”) for Agency sellers/servicers and Ginnie Mae for single-family issuers. FHFA and Ginnie Mae have established minimum liquidity and net worth requirements for approved non-depository single-family sellers/servicers in the case of FHFA, and for approved single-family issuers in the case of Ginnie Mae.

In August 2022, the Agencies issued revised capital and liquidity requirements. Most of the requirements became effective on September 30, 2023 for issuers of securities guaranteed by Ginnie Mae and seller/servicers of mortgage loans to Fannie Mae and Freddie Mac. We believe that we and PLS are in compliance with Agencies’ revised requirements. The origination liquidity requirements issued by the Agencies will be effective on December 31, 2023 and risk-based capital requirements issued by Ginnie Mae will be effective on December 31, 2024. We believe that we and PLS are in compliance with the pending applicable requirements as of September 30, 2023.

Our Manager continues to explore a variety of additional means of financing our business, including debt financing through bank warehouse lines of credit, repurchase agreements, term financing, securitization transactions and unsecured debt and equity offerings. However, there can be no assurance as to how much additional financing capacity such efforts will produce, what form the financing will take or that such efforts will be successful.

Off-Balance Sheet Arrangements

Off-Balance Sheet Arrangements

As of September 30, 2023, we have not entered into any off-balance sheet arrangements.

82

 

Critical Accounting Estimates

Preparation of financial statements in compliance with GAAP requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Certain of these estimates significantly influence the portrayal of our financial condition and results, and they require us to make difficult, subjective or complex judgments. Our critical accounting policies primarily relate to our fair value estimates.

Our Annual Report on Form 10-K for the year ended December 31, 2022 contains a discussion of our critical accounting policies, which utilize relevant critical accounting estimates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, real estate values and other market-based risks. The primary market risks that we are exposed to are real estate risk, credit risk, interest rate risk, prepayment risk, inflation risk and market value risk.

Our primary trading asset is our inventory of loans acquired for sale. We believe that such assets’ fair values respond primarily to changes in the market interest rates for comparable recently-originated loans. Our other market-risk assets are a substantial portion of our investments and are primarily comprised of MSRs, CRT arrangements and MBS. We believe that the fair values of MSRs and MBS also respond primarily to changes in the market interest rates for comparable loans or yields on MBS. Changes in interest rates are reflected in the prepayment speeds underlying these investments and in the pricing spread (an element of the discount rate) used in their valuation. We believe that the primary market risks to the fair values of our investment in CRT arrangements are changes in market credit spreads and the fair value of the real estate securing the loans underlying such arrangements.

The following sensitivity analyses are limited in that they were performed at a particular point in time; only contemplate the movements in the indicated variables; do not incorporate changes to other variables; are subject to the accuracy of various models and assumptions used; and do not incorporate other factors that would affect our overall financial performance in such scenarios, including operational adjustments made by management to account for changing circumstances. For these reasons, the following estimates should not be viewed as earnings forecasts.

Mortgage-backed securities at fair value

The following table summarizes the estimated change in fair value of our mortgage-backed securities as of September 30, 2023, given several hypothetical (instantaneous) changes in interest rates and parallel shifts in the yield curve:

Interest rate shift in basis points

 

-200

 

 

-75

 

 

-50

 

 

50

 

 

75

 

 

200

 

 

 

(in thousands)

 

Change in fair value

 

$

293,452

 

 

$

154,495

 

 

$

106,221

 

 

$

(113,878

)

 

$

(172,339

)

 

$

(465,122

)

Mortgage Servicing Rights

The following tables summarize the estimated change in fair value of MSRs as of September 30, 2023, given several shifts in pricing spread, prepayment speeds and annual per-loan cost of servicing:

Change in fair value attributable to shift in:

 

-20%

 

 

-10%

 

 

-5%

 

 

+5%

 

 

+10%

 

 

+20%

 

 

 

(in thousands)

 

Pricing spread

 

$

223,092

 

 

$

108,718

 

 

$

53,676

 

 

$

(52,357

)

 

$

(103,437

)

 

$

(201,939

)

Prepayment speed

 

$

203,650

 

 

$

98,736

 

 

$

48,632

 

 

$

(47,226

)

 

$

(93,108

)

 

$

(181,071

)

Annual per-loan cost of servicing

 

$

70,991

 

 

$

35,495

 

 

$

17,748

 

 

$

(17,748

)

 

$

(35,495

)

 

$

(70,991

)

 

CRT Arrangements

Following is a summary of the effect on fair value of various changes to the pricing spread input used to estimate the fair value of our CRT arrangements given several shifts in pricing spread:

Pricing spread shift in basis points

 

-100

 

 

-50

 

 

-25

 

 

25

 

 

50

 

 

100

 

 

 

(in thousands)

 

Change in fair value

 

$

43,030

 

 

$

21,176

 

 

$

10,505

 

 

$

(10,343

)

 

$

(20,526

)

 

$

(40,426

)

 

Following is a summary of the effect on fair value of various instantaneous changes in home values from those used to estimate the fair value of our CRT arrangements given several shifts:

Property value shift in %

 

-15%

 

 

-10%

 

 

-5%

 

 

5%

 

 

10%

 

 

15%

 

 

 

(in thousands)

 

Change in fair value

 

$

(25,997

)

 

$

(15,231

)

 

$

(6,774

)

 

$

5,491

 

 

$

9,972

 

 

$

13,645

 

 

83

 

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. However, no matter how well a control system is designed and operated, it can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.

Our management has conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report as required by paragraph (b) of Rules 13a-15 and 15d-15 under the Exchange Act. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective, as of the end of the period covered by this Report, to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

84

 

PART II. OTHER INFORMATION

From time to time, we may be involved in various legal actions, claims and proceedings arising in the ordinary course of business. As of September 30, 2023, we were not involved in any material legal actions, claims or proceedings.

Item 1A. Risk Factors

There are no material changes from the risk factors set forth under Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 24, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

There were no sales of unregistered equity securities during the quarter and nine months ended September 30, 2023.

The following table provides information about our repurchases of Common Shares of beneficial interest (“Common Shares”) during the quarter ended September 30, 2023:

Period

 

Total
number of
shares
purchased

 

 

Average
price paid
per share

 

 

Total number of
shares
purchased as
part of publicly
announced plans
or programs (1)

 

 

Amount
available for
future share
repurchases
under the
plans or
programs (1)

 

 

 

(in thousands, except average price paid per share)

 

July 1, 2023 – July 31, 2023

 

 

—

 

 

$

—

 

 

 

—

 

 

$

74,828

 

August 1, 2023 –August 31, 2023

 

 

—

 

 

$

—

 

 

 

—

 

 

$

74,828

 

September 1, 2023 – September 30, 2023

 

 

—

 

 

$

—

 

 

 

—

 

 

$

74,828

 

 

(1)
On October 24, 2022, the Company’s board of trustees approved an increase to the Company’s common share repurchase authorization from $400 million to $500 million (the “share repurchase program”). The share repurchase program does not require the Company to purchase a specific number of Common Shares, and the timing and amount of any Common Shares repurchased are based on market conditions and other factors, including price, regulatory requirements and capital availability. Common share repurchases may be effected through privately negotiated transactions or open market purchases, including pursuant to a trading plan implemented pursuant to Rule 10b5-1 of the Exchange Act. The share repurchase program does not have an expiration date but may be suspended, modified or discontinued at any time without prior notice.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

(c) Trading Plans

As of September 30, 2023, no trustee or Section 16 officer adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S- K).

85

 

Item 6. Exhibits

 

 

 

 

 

 

Incorporated by Reference from the

Below-Listed Form (Each Filed under

SEC File Number 001-34416)

Exhibit No.

 

Exhibit Description

 

Form

 

Filing Date

 

 

 

 

 

 

 

 3.1

 

Declaration of Trust of PennyMac Mortgage Investment Trust, as amended and restated.

 

10-Q

 

November 6, 2009

 

 

 

 

 

 

 

 3.2

 

Second Amended and Restated Bylaws of PennyMac Mortgage Investment Trust

 

8-K

 

March 16, 2018

 

 

 

 

 

 

 

 3.3

 

Articles Supplementary classifying and designating the 8.125% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Shares of Beneficial Interest.

 

8-A

 

March 7, 2017

 

 

 

 

 

 

 

  3.4

 

Articles Supplementary classifying and designating the 8.00% Series B Fixed-to-Floating Rate Cumulative Redeemable Preferred Shares of Beneficial Interest.

 

8-A

 

June 30, 2017

 

 

 

 

 

 

 

 3.5

 

Articles Supplementary classifying and designating the 6.75% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest.

 

8-A

 

August 20, 2021

 

 

 

 

 

 

 

 4.1

 

Indenture, dated as of September 21, 2023, among PennyMac Mortgage Investment Trust, as issuer, PennyMac Corp., as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee.

 

8-K

 

September 21, 2023

 

 

 

 

 

 

 

 4.2

 

First Supplemental Indenture, dated as of September 21, 2023, among PennyMac Mortgage Investment Trust, as issuer, PennyMac Corp., as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee.

 

8-K

 

September 21, 2023

 

 

 

 

 

 

 

 4.3

 

Form of 8.50% Senior Notes due 2028 (included in Exhibit 4.2 hereto).

 

8-K

 

September 21, 2023

 

 

 

 

 

 

 

10.1

 

Indenture by and among PMT ISSUER TRUST - FHLMC SAF, PennyMac Corp., Citibank, N.A., Barclays Bank PLC, dated August 10, 2023.

 

8-K

 

August 16, 2023

 

 

 

 

 

 

 

10.2^

 

Series 2023-VF1 Indenture Supplement by and among PMT ISSUER TRUST - FHLMC SAF, PennyMac Corp., Citibank, N.A., Barclays Bank PLC, dated August 10, 2023.

 

8-K

 

August 16, 2023

 

 

 

 

 

 

 

10.3

 

Receivables Sale Agreement by and between PennyMac Corp. and PMT SAF Funding, LLC, dated August 10, 2023

 

8-K

 

August 16, 2023

 

 

 

 

 

 

 

10.4

 

Receivables Pooling Agreement by and between PMT SAF Funding, LLC and PMT ISSUER TRUST - FHLMC SAF, dated August 10, 2023.

 

8-K

 

August 16, 2023

 

 

 

 

 

 

 

10.5^

 

Variable Funding Note Purchase Agreement by and among PMT ISSUER TRUST – FHLMC SAF, Sheffield Receivables Company LLC, Barclays Bank PLC, Citibank, N.A., PennyMac Corp., and PMT SAF Funding, LLC, dated August 10, 2023.

 

8-K

 

August 16, 2023

 

 

 

 

 

 

 

10.6^

 

Amendment No. 1 and Joinder, dated August 16, 2023, to the Series 2023-FTL1 Indenture Supplement and Loan Agreement, dated as of May 25, 2023, by and among PMT ISSUER TRUST - FMSR, Citibank, N.A., PennyMac Corp., Atlas Securitized Products, L.P., and the syndicated lenders party thereto.

 

8-K

 

August 17, 2023

 

 

 

 

 

 

 

10.7

 

Amendment No. 7 to the Base Indenture, dated as of August 16, 2023, by and among PMT ISSUER TRUST – FMSR, Citibank, N.A., PennyMac Corp. and Atlas Securitized Products, L.P.

 

8-K

 

August 17, 2023

 

 

 

 

 

 

 

10.8

 

Underwriting Agreement, dated September 18, 2023, among the Company and the Guarantor, on the one hand, and Piper Sandler & Co., as representative of the several Underwriters named therein, on the other hand

 

8-K

 

September 21, 2023

 

 

 

 

 

 

 

10.9

 

Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023, by and among PMT ISSUER TRUST - FMSR, PMT CO-ISSUER TRUST I – FMSR, PennyMac Corp., PennyMac Holdings, LLC, PennyMac Mortgage Investment Trust, Atlas Securitized Products, L.P., and Citibank, N.A.

 

*

 

 

 

 

 

 

 

 

 

86

 

10.10

 

Amended and Restated Guaranty, dated as of October 10, 2023, by PennyMac Mortgage Investment Trust, in favor of PMT ISSUER TRUST - FMSR and PMT CO-ISSUER TRUST I – FMSR.

 

*

 

 

 

 

 

 

 

 

 

10.11

 

Second Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023, by and among Atlas Securitized Products, L.P., PennyMac Corp., and PennyMac Holdings, LLC.

 

*

 

 

 

 

 

 

 

 

 

10.12

 

Second Amended and Restated Guaranty, dated as of October 10, 2023, by PennyMac Mortgage Investment Trust, in favor of Nexera Holding LLC and Citibank, N.A.

 

*

 

 

 

 

 

 

 

 

 

10.13^

 

Amended and Restated Base Indenture, as dated October 10, 2023, by and among PMT ISSUER TRUST - FMSR, PMT CO-ISSUER TRUST I – FMSR, Citibank, N.A, PennyMac Corp., PennyMac Holdings, LLC, and Atlas Securitized Products, L.P.

 

*

 

 

 

 

 

 

 

 

 

10.14^

 

Amended and Restated Series 2017-VF1 Indenture Supplement, dated as of October 10, 2023, by and among PMT ISSUER TRUST – FMSR, PMT CO-ISSUER TRUST I – FMSR, Citibank, N.A., PennyMac Corp., PennyMac Holdings, LLC, Atlas Securitized Products, L.P.,

 

*

 

 

 

 

 

 

 

 

 

10.15^

 

Amended and Restated Series 2021-FT1 Indenture Supplement, dated as of October 10, 2023, by and among PMT ISSUER TRUST – FMSR, PMT CO-ISSUER TRUST I – FMSR, Citibank, N.A., PennyMac Corp., PennyMac Holdings, LLC, Atlas Securitized Products, L.P.,

 

*

 

 

 

 

 

 

 

 

 

10.16^

 

Amended and Restated Series 2022-FT1 Indenture Supplement, dated as of October 10, 2023, by and among PMT ISSUER TRUST – FMSR, PMT CO-ISSUER TRUST I – FMSR, Citibank, N.A., PennyMac Corp., PennyMac Holdings, LLC, Atlas Securitized Products, L.P.,

 

*

 

 

 

 

 

 

 

 

 

10.17

 

Amendment No. 2 to Series 2023-FTL1 Indenture Supplement and Loan Agreement, dated as of October 10, 2023, by and among PMT ISSUER TRUST - FMSR, PMT CO-ISSUER TRUST I – FMSR, Citibank, N.A., PennyMac Corp., PennyMac Holdings, LLC and Atlas Securitized Products, L.P.

 

*

 

 

 

 

 

 

 

 

 

22

 

List of Guarantor Subsidiaries

 

*

 

 

 

 

 

 

 

 

 

31.1

 

Certification of David A. Spector pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

*

 

 

 

 

 

 

 

 

 

31.2

 

Certification of Daniel S. Perotti pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

*

 

 

 

 

 

 

 

 

 

32.1**

 

Certification of David A. Spector pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

**

 

 

 

 

 

 

 

 

 

32.2**

 

Certification of Daniel S. Perotti pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

**

 

 

 

 

 

 

 

 

 

101

 

Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 (ii) the Consolidated Statements of Operation for the quarter and six months ended September 30, 2023 and September 30, 2022, (iii) the Consolidated Statements of Changes in Stockholders’ Equity for the quarter and six months ended September 30, 2023 and September 30, 2022, (iv) the Consolidated Statements of Cash Flows for the six months ended September 30, 2023 and September 30, 2022 and (v) the Notes to the Consolidated Financial Statements.

 

*

 

 

101.INS

 

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

 

87

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

 

 

 

 

* Filed herewith.

** The certifications attached hereto as Exhibits 32.1 and 32.2 are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

^ Portions of the exhibit have been redacted.

 

 

88

 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Pennymac Mortgage Investment Trust

(Registrant)

 

 

 

 

 

Dated: November 1, 2023

 

By:

 

/s/ David A. Spector

 

 

 

 

David A. Spector

 

 

 

 

Chairman and Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

Dated: November 1, 2023

 

By:

 

/s/ Daniel S. Perotti

 

 

 

 

Daniel S. Perotti

 

 

 

 

Senior Managing Director and Chief Financial Officer

(Principal Financial Officer)

 

89

EX-10.9 2 pmt-ex10_9.htm EX-10.9 EX-10.9

EXHIBIT 10.9

 

 

 

 

 

 

AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

among

PMT ISSUER TRUST – FMSR

(the “Issuer Buyer”)

and

PMT CO-ISSUER TRUST I – FMSR
(the “Co-Issuer Buyer”)

and

PENNYMAC CORP.

(the “PMC Seller”)

and

PENNYMAC HOLDINGS, LLC
(the “PMH Seller”)

and

PENNYMAC MORTGAGE INVESTMENT TRUST
(“Guarantor”)

Dated as of October 10, 2023

 

 

TABLE OF CONTENTS

Page

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

- 3 -

Section 1.01

Definitions

- 3 -

Section 1.02

Interpretation

- 3 -

ARTICLE II

GENERAL TERMS

- 4 -

Section 2.01

Transactions

- 4 -

Section 2.02

Procedure for Entering into Transactions

- 5 -

Section 2.03

Repurchase; Payment of Repurchase Price; Optional Payments

- 5 -

Section 2.04

Price Differential

- 6 -

Section 2.05

Margin Maintenance

- 7 -

Section 2.06

Payment Procedure

- 7 -

Section 2.07

Net Payments

- 8 -

Section 2.08

Recourse

- 8 -

Section 2.09

Taxes

- 8 -

Section 2.10

Indemnity

- 9 -

i

Section 2.11

Dedicated Account

- 9 -

Section 2.12

Additional Participation Agreements and Participation Certificates

- 10 -

Section 2.13

Termination

- 10 -

ARTICLE III

REPRESENTATIONS AND WARRANTIES

- 10 -

Section 3.01

Sellers’ and Guarantor Existence

- 10 -

Section 3.02

Licenses

- 11 -

Section 3.03

Power

- 11 -

Section 3.04

Due Authorization

- 11 -

Section 3.05

No Event of Default

- 11 -

Section 3.06

Solvency

- 11 -

Section 3.07

No Conflicts

- 11 -

Section 3.08

True and Complete Disclosure

- 12 -

Section 3.09

Approvals

- 12 -

Section 3.10

Ownership

- 12 -

Section 3.11

The Servicing Contracts and Participation Agreements

- 12 -

ii

Section 3.12

Investment Company

- 13 -

Section 3.13

Chief Executive Office; Jurisdiction of Organization

- 13 -

Section 3.14

Location of Books and Records

- 13 -

Section 3.15

ERISA

- 13 -

Section 3.16

Fannie Mae Approvals; Servicing Facilities

- 13 -

Section 3.17

Plan Assets

- 14 -

Section 3.18

No Prohibited Persons

- 14 -

Section 3.19

Compliance with 1933 Act

- 14 -

Section 3.20

Eligible Assets

- 14 -

ARTICLE IV

CONVEYANCE; REPURCHASE ASSETS; SECURITY INTEREST

- 14 -

Section 4.01

Ownership

- 14 -

Section 4.02

Security Interest

- 15 -

Section 4.03

Further Documentation

- 16 -

Section 4.04

Limited Pledge of Fannie Mae Servicing

- 16 -

Section 4.05

Changes in Locations, Name, etc

- 17 -

iii

Section 4.06

The Buyers’ Appointment as Attorney-in-Fact

- 17 -

Section 4.07

Performance by any Buyer of a Seller’s Obligations

- 19 -

Section 4.08

Proceeds

- 19 -

Section 4.09

Remedies

- 19 -

Section 4.10

Limitation on Duties Regarding Preservation of Repurchase Assets

- 20 -

Section 4.11

Powers Coupled with an Interest

- 21 -

Section 4.12

Release of Security Interest

- 21 -

Section 4.13

Reinstatement

- 21 -

Section 4.14

Subordination

- 21 -

ARTICLE V

CONDITIONS PRECEDENT

- 22 -

Section 5.01

Initial Transaction

- 22 -

Section 5.02

All Transactions

- 23 -

ARTICLE VI

COVENANTS

- 24 -

Section 6.01

Financial Covenants

- 24 -

Section 6.02

Prohibition of Fundamental Changes

- 24 -

iv

Section 6.03

[Reserved

- 24 -

Section 6.04

Asset Schedule

- 24 -

Section 6.05

No Adverse Claims

- 25 -

Section 6.06

Assignment

- 25 -

Section 6.07

Security Interest

- 25 -

Section 6.08

Records

- 25 -

Section 6.09

Books

- 26 -

Section 6.10

Approvals

- 26 -

Section 6.11

Material Change in Business

- 26 -

Section 6.12

Collections on Assets and the Dedicated Account

- 26 -

Section 6.13

Applicable Law

- 27 -

Section 6.14

Existence

- 27 -

Section 6.15

Chief Executive Office; Jurisdiction of Organization

- 27 -

Section 6.16

Taxes

- 27 -

Section 6.17

Termination of Servicing Notice

- 27 -

Section 6.18

True and Correct Information

- 27 -

v

Section 6.19

Servicing

- 27 -

Section 6.20

No Pledge

- 28 -

Section 6.21

Plan Assets

- 28 -

Section 6.22

Sharing of Information

- 28 -

Section 6.23

Modification of the Servicing Contracts and Participation Agreements

- 28 -

Section 6.24

[Reserved]

- 28 -

Section 6.25

No Modification of the Participation Agreements

- 28 -

Section 6.26

No Subservicing

- 29 -

ARTICLE VII

DEFAULTS/RIGHTS AND REMEDIES OF THE BUYERS UPON DEFAULT

- 29 -

Section 7.01

Events of Default

- 29 -

Section 7.02

No Waiver

- 32 -

Section 7.03

Due and Payable

- 32 -

Section 7.04

Fees

- 32 -

Section 7.05

Default Rate

- 32 -

ARTICLE VIII

ENTIRE AGREEMENT; AMENDMENTS
AND WAIVERS; SEPARATE ACTIONS BY THe BUYERS

- 33 -

vi

Section 8.01

Entire Agreement; Amendments

- 33 -

Section 8.02

Waivers, Separate Actions by the Buyers

- 33 -

ARTICLE IX

SUCCESSORS AND ASSIGNS

- 33 -

Section 9.01

Successors and Assigns

- 33 -

Section 9.02

Transfers

- 33 -

Section 9.03

Buyers and Participant Register

- 34 -

ARTICLE X

MISCELLANEOUS

- 35 -

Section 10.01

Survival

- 35 -

Section 10.02

Nonliability of the Buyers

- 35 -

Section 10.03

Governing Law; Jurisdiction, Waiver of Jury Trial: Waiver of Damages

- 35 -

Section 10.04

Notices

- 36 -

Section 10.05

Severability

- 38 -

Section 10.06

Section Headings

- 39 -

Section 10.07

Counterparts

- 39 -

Section 10.08

Periodic Due Diligence Review

- 39 -

vii

Section 10.09

Hypothecation or Pledge of Repurchase Assets

- 40 -

Section 10.10

Non-Confidentiality of Tax Treatment

- 40 -

Section 10.11

Set-off

- 41 -

Section 10.12

Intent

- 41 -

Section 10.13

Third Party Beneficiaries

- 42 -

Section 10.14

Owner Trustee Limitation of Liability

- 42 -

Section 10.15

Actions and Discretion of the Buyers

- 43 -

Section 10.16

Consent, Authorization and Acknowledgement of Amended and Restated Agreement

- 43 -

Section 10.17

Amendment and Restatement

- 43 -

Section 10.18

Reaffirmation of PC Repo Guaranty

- 44 -

 

Schedule 1-A Representations and Warranties Regarding the Assets

Schedule 1-B Representations and Warranties Regarding the Assets Consisting of Participation Certificates

Schedule 1-C [Reserved]

Schedule 1-D Representations and Warranties Regarding the Eligible Securities

Schedule 1-E Representations and Warranties Regarding the Pledged Margin Securities

Schedule 2 Participation Agreements and Participation Certificates

Schedule 3 Responsible Officers of Sellers and Guarantor

Exhibit A Form of Transaction Notice

Exhibit B Form of Request for Approval of Participation Agreements and Participation Certificates

viii

 

AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

Exhibit C Form of Margin Excess Notice This Amended and Restated Master Repurchase Agreement (as the same may be amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) is made as of October 10, 2023 (the “Effective Date”), among PMT ISSUER TRUST - FMSR, as a buyer (the “Issuer Buyer”), PMT CO-ISSUER TRUST I – FMSR, as a buyer (the “Co-Issuer Buyer”, and collectively with the Issuer Buyer, the “Buyers” or the “Issuer Trusts”), PENNYMAC CORP. (“PMC”), as a seller (the “PMC Seller”), PENNYMAC HOLDINGS, LLC (“PMH”), as a seller (the “PMH Seller”, collectively with PENNYMAC CORP., the “Sellers”), and PENNYMAC MORTGAGE INVESTMENT TRUST, as guarantor (the “Guarantor”), and consented and agreed to by ATLAS SECURITIZED PRODUCTS, L.P., as administrative agent (the “Administrative Agent”), 100% of the VFN Repo Buyers (as defined in the Series 2017-VF1 Indenture Supplement), and CITIBANK, N.A., as indenture trustee (“Citibank”, and in such capacity, the “Indenture Trustee”).

W I T N E S S E T H:

WHEREAS, the Sellers have made, and may in the future make, the MSRs subject to this Agreement, subject to certain Participation Agreements in order to create Portfolio Excess Spread evidenced by Participation Certificates;

WHEREAS, the Issuer Buyer and the PMC Seller have entered into that certain Master Repurchase Agreement (the “Original Agreement”), dated as of December 20, 2017 (the “Closing Date”);

WHEREAS, the Issuer Buyer and the PMC Seller have agreed, subject to the terms of this Agreement, that the Original Agreement be amended and restated on the date hereof;

WHEREAS, the Issuer Trusts, Citibank, as Indenture Trustee, as paying agent (in such capacity, the “Paying Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), PMC, as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), PMH, as co-issuer administrator (the “Co-Issuer Administrator”) and Administrative Agent, are parties to that certain Amended and Restated Base Indenture, dated as of the Effective Date (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), as supplemented by the Amended and Restated Series 2017-VF1 Indenture Supplement, dated as of the Effective Date by and among the Issuer Buyer, the Co-Issuer Buyer, the Indenture Trustee, Citibank, as the calculation agent (in such capacity, the “Calculation Agent”), the Paying Agent, the Securities Intermediary, the Administrator, the Servicer, the Co-Issuer Administrator, and the Administrative Agent (the “Series 2017-VF1 Indenture Supplement”), the Amended and Restated Series 2018-FT1 Indenture Supplement, dated as of the Effective Date by and among the Issuer Buyer, the Co-Issuer Buyer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer, the Co-Issuer Administrator, and the Administrative Agent (the “Series 2018-FT1 Indenture Supplement”), the Amended and Restated Series 2021-FT1 Indenture Supplement, dated as of the Effective Date by and among the Issuer Buyer, the Co-Issuer Buyer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer, the Co-Issuer Administrator, and the Administrative Agent (the “Series 2021-FT1 Indenture Supplement”), the Amended and Restated Series 2022-FT1 Indenture Supplement, dated as of the Effective Date by and among the Issuer Buyer, the Co-Issuer Buyer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer, the Co-Issuer Administrator, and the Administrative Agent (the “Series 2022-FT1 Indenture Supplement”) and the Series 2023-FTL1 Indenture Supplement and Loan Agreement, dated as of May 25, 2023, as amended by Amendment No.

1

 

1 and Joinder thereto, dated as of August 16, 2023 and as further amended by Amendment No. 2 thereto, dated as of October 10, 2023 (and as may be further amended, modified or supplemented from time to time hereafter, the “Series 2023-FTL1 Indenture Supplement”), by and among the Issuer, the Co-Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Co-Issuer Administrator, the Servicer, the Administrative Agent and the Lenders (as defined therein);

WHEREAS, there is currently one Outstanding Series of Variable Funding Notes, the Series 2017-VF1 Note (the “Series 2017-VF1 Note”), which was issued to PMC and PMH pursuant to the terms of the Series 2017-VF1 Indenture Supplement, and which was purchased by Nexera Holding LLC (“Nexera”), as a buyer, and Citibank, as a buyer, pursuant to the terms of the Second Amended and Restated Master Repurchase Agreement, dated as of the date hereof (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Series 2017-VF1 Repurchase Agreement”), pursuant to which PMC and PMH sold all of their rights, title and interest in the Series 2017-VF1 Note to Nexera and Citibank;

WHEREAS, pursuant to Section 10.15 of the Original PC Repurchase Agreement, any provision providing for the exercise of any action or discretion by Buyer shall be exercised by the Indenture Trustee at the written direction of either 100% of the VFN Noteholders or the Majority Noteholders of all Outstanding Notes;

WHEREAS, pursuant to Section 10.2(a) of the Base Indenture, the Servicer shall not amend any PC Documents without the prior written consent of the Majority Noteholders of all Outstanding Notes, except for the purposes listed thereto and with (i) the consent of the Issuer Trusts (evidenced by its execution of such amendment), the Indenture Trustee and the Administrative Agent, (ii) upon delivery of an Issuer and Co-Issuer Tax Opinion (unless such Issuer and Co-Issuer Tax Opinion is waived by 100% of the VFN Noteholders) and (iii) upon delivery by the Issuer Trusts to the Indenture Trustee of an Officer's Certificate to the effect that the Issuer Trusts reasonably believe that such amendment could not have a material Adverse Effect and is not reasonably expected to have a material Adverse Effect on the Noteholders of the Notes at any time in the future;

WHEREAS, pursuant to Section 10.3(e)(iii) of the Base Indenture, so long as any Note is Outstanding and until all obligations have been paid in full, the Company shall not consent to any amendment, modification or waiver of any term or condition of any Transaction Document, without the prior written consent of the Administrative Agent;

WHEREAS, pursuant to Section 4.1(a)(iii) of the Trust Agreement, the consent of each of the Owners (as defined in the Trust Agreement) (provided that no Event of Default has occurred and is continuing), the Administrative Agent, the Series Required Noteholders (as defined in the Base Indenture) of all Variable Funding Notes is required for the amendment or other change to any Transaction Document in circumstances where the consent of any Noteholder or the Administrative Agent is required (other than an amendment or supplement to the Base Indenture pursuant to Section 12.1 thereof); WHEREAS, the Original Agreement is a Transaction Document and a PC Document;

2

 

WHEREAS, (i) pursuant to the Trust Agreement, PMC is the sole Owner and (ii) pursuant to the Series 2017-VF1 Indenture Supplement, with respect to the Series 2017-VF1 Note, any Action provided by the Base Indenture or the Series 2017-VF1 Indenture Supplement to be given or taken by a Noteholder shall be taken by Nexera and Citibank, as buyers of the Series 2017-VF1 Note under the Series 2017-VF1 Repurchase Agreement and therefore Nexera and Citibank collectively are 100% of the VFN Noteholders of the Outstanding Notes;

WHEREAS, from time to time the parties hereto may enter into transactions in which the applicable Seller agrees to transfer to the applicable Buyer Participation Certificates or to designate additional MSRs to the existing Participation Certificates, against the delivery of Consideration by the applicable Buyer, with a simultaneous agreement by the applicable Buyer to transfer to the applicable Seller such Participation Certificates at a date certain or on demand, against the transfer of funds by the applicable Seller. Each such transaction shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any annexes identified herein, as applicable hereunder;

WHEREAS, the PMC Seller pledged certain MSRs in connection with the Transactions and the PMH Seller will pledge certain Sold MSR Excess Spread in connection with the Transactions;

WHEREAS, each of the Buyers has required and the Guarantor has agreed that it will Guarantee the Obligations hereunder; and

WHEREAS, the Guarantor will receive a benefit, either directly or indirectly, from the Sellers for entering into the PC Repo Guaranty.

NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Buyers, the Sellers and the Guarantor hereby agree as follows.

ARTICLE IDEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.01 Definitions. For all purposes of this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires, any capitalized terms used and not defined herein shall have the meaning set forth in Appendix A of the Base Indenture.

Section 1.02 Interpretation. For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:

(i) reference to and the definition of any document (including this Agreement) shall be deemed a reference to such document as it may be amended or modified from time to time; (ii) all references to an “Article,” “Section,” “Schedule” or “Exhibit” are to an Article or Section hereof or to a Schedule or an Exhibit attached hereto;

3

 

(iii) defined terms in the singular shall include the plural and vice versa and the masculine, feminine or neuter gender shall include all genders;

(iv) the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement;

(v) unless otherwise specified herein, the term “or” has the inclusive meaning represented by the term “and/or” and the term “including” is not limiting;

(vi) in the computation of periods of time from a specified date to a later specified date, unless otherwise specified herein, the words “commencing on” mean “commencing on and including,” the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”;

(vii) periods of days referred to in this Agreement shall be counted in calendar days unless Business Days are expressly prescribed and references in this Agreement to months and years shall be to months and calendar years unless otherwise specified;

(viii) accounting terms not otherwise defined herein and accounting terms partly defined herein to the extent not defined, shall have the respective meanings given to them under GAAP;

(ix) “including” and words of similar import will be deemed to be followed by “without limitation”;

(x) references to any statute, law, rule or regulation shall be deemed a reference to such statute, law, rule or regulation as it may be amended or modified from time to time; and

(xi) all references to payments or deliveries of “cash” shall be understood to mean “immediately available funds” or “available funds held in a deposit account,” as the context may require.

ARTICLE IIGENERAL TERMS

Section 2.01 Transactions. During the Commitment Period, and subject to the terms and conditions of this Agreement, (i) the Issuer Buyer agrees to enter into Transactions with the PMC Seller pursuant to which the PMC Seller will sell the Retained MSR Excess Spread PC and any other Participation Certificates, as applicable, to the Issuer Buyer and (ii) the Co-Issuer Buyer agrees to enter into Transactions with the PMH Seller pursuant to which the PMH Seller will sell the Sold MSR Excess Spread PC and, from time to time, any other Participation Certificates, as applicable, to the Co-Issuer Buyer, in each case for the applicable Purchase Price.

4

 

Each Seller may pay the related Repurchase Price in whole or in part at any time during the Commitment Period, and additional Transactions may be entered into in accordance with the terms and conditions hereof. The Buyers’ obligation to enter into Transactions pursuant to the terms of this Agreement shall terminate on the Termination Date. Notwithstanding the foregoing, the Buyers shall have no commitment or obligation to enter into Transactions to the extent the Purchase Price of such Transaction exceeds the related Asset Base (determined after giving effect to such proposed purchase).

Section 2.02 Procedure for Entering into Transactions. (a) Each Seller may enter into Transactions with the related Buyer during the Commitment Period on any Purchase Date; provided, that the applicable Seller shall have given the applicable Buyer irrevocable notice (each, a “Transaction Notice”) with a copy to the Administrative Agent and the Indenture Trustee, which notice (i) shall be substantially in the form of Exhibit A hereto, (ii) shall be signed by a Responsible Officer of the applicable Seller and be received by the related Buyer prior to 1:00 p.m. (New York time) one (1) Business Day prior to the related Purchase Date, (iii) shall specify (A) the Dollar amount of the requested Purchase Price, (B) the requested Purchase Date, (C) the information required to be included in the Asset Schedule with respect to each Participation Certificate subject of such Transaction in mutually acceptable electronic form and (D) a copy of the related “Funding Certification” being delivered pursuant to the Indenture in connection with such Transaction, if applicable, and (iv) shall have attached to it a revised Asset Schedule, dated as of the date of such notice. Each Transaction Notice on any Purchase Date shall be in an amount equal to at least $25,000.

(b) If the applicable Seller shall deliver to the related Buyer a Transaction Notice that satisfies the requirements of Section 2.02(a), such Buyer will notify such Seller prior to the requested Purchase Date of its intent to remit the requested Purchase Price, and the form or forms of the Consideration that will be provided, including (i) the portion of such Purchase Price that will paid in cash, if any (ii) the Note Balance, or increased Note Balance, of any Variable Funding Note owned by such Buyer and (iii) the increased value of the Owner Trust Certificate of the related Buyer, which increase will result from the deemed capital contribution to the related Buyer of any portion of the Purchase Price not paid pursuant to clause (i) or (ii) above. If all applicable conditions precedent set forth in Article V have been satisfied on or prior to the Purchase Date, then subject to the foregoing, on the Purchase Date, the related Buyer shall deliver the Consideration to the applicable Seller, including remitting any cash portion of the requested Purchase Price identified by such Buyer in Dollars and in immediately available funds to the account specified by the applicable Seller, in Schedule 5 to the Base Indenture.

(c) Upon entering into each Transaction hereunder, the Asset Schedule shall be automatically updated to include each of the Assets listed on the Asset Schedule attached to the Transaction Notice.

Section 2.03 Repurchase; Payment of Repurchase Price; Optional Payments.

(a) The Sellers promise to, jointly and severally, (i) repurchase the Purchased Assets and pay the Repurchase Price and all other outstanding Obligations on the related Termination Date and (ii) pay any and all Required Payments on the related MRA Payment Date.

5

 

(b) Without limiting the foregoing, on each MRA Payment Date, the Sellers shall sweep all amounts received with respect to MSRs to the Dedicated Account in accordance with Section 6.12 hereof to be applied in accordance with Section 2.07 hereof.

(c) Each of the Sellers may, at its option, elect to make a payment (an “Optional Payment”) to the related Buyer in respect of any Interim Payment Date or Payment Date for the purpose of reducing such Buyer’s Purchase Price. Such payment shall be made to the Dedicated Account.

(d) If the Buyers intend to use any or all of an Optional Payment to effect a redemption of any portion of a Class of Notes pursuant to Section 13.1 of the Base Indenture, the related Seller shall contemporaneously pay to the related Buyer all accrued and unpaid Price Differential owed by such Seller on the amount so redeemed, together with the applicable Specified Call Premium Amounts (as defined in any applicable Indenture Supplement) then due and payable, if any.

(e) If either of the Sellers intends to use Pledged Margin Securities to satisfy a Margin Call in accordance with Section 2.05, (i) such Pledged Margin Securities shall be deposited in a Pledged Margin Securities Account and (ii) such Pledged Margin Securities shall comply with the representations and warranties to be agreed upon by the Buyers, the Administrative Agent and the Sellers to be set forth on Schedule 1-D.

(f) If either of the Sellers intends to use Eligible Securities to satisfy a Margin Call in accordance with Section 2.05, (i) such Eligible Securities shall be deposited in a Eligible Securities Account and (ii) such Eligible Securities shall comply with the representations and warranties to be agreed upon by the Buyers, the Administrative Agent and the Sellers to be set forth on Schedule 1-C.

Section 2.04 Price Differential.

(a) On each MRA Payment Date, the related Seller hereby promises to pay to the related Buyer all accrued and unpaid Price Differential owed to such Buyer on the Transactions, as invoiced by such Buyer to the related Seller two (2) Business Days prior to the related MRA Payment Date (the “Price Differential Statement Date”); provided that if the applicable Buyer fails to deliver such statement on the Price Differential Statement Date, on such MRA Payment Date the related Seller shall pay the amount which such Seller calculates as the Price Differential due to such Buyer and upon delivery of the statement, the related Seller shall remit to such Buyer any shortfall, or the related Buyer shall refund to the related Seller any excess, in the Price Differential paid. Price Differential shall accrue each day on the Purchase Price at a rate per annum equal to the Pricing Rate.

(b) In addition to the payment of the Price Differential, on each MRA Payment Date, the related Seller hereby promises to pay to the related Buyer accrued and unpaid amounts representing Expenses, if any, owed to such Buyer.

Section 2.05 Margin Maintenance.

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(a) If at any time the aggregate outstanding amount of any Purchase Price exceeds the related Asset Base in effect at such time, as determined on each Interim Payment Date (or, on a daily basis, in the event of the delivery of Eligible Securities or pledging of Pledged Margin Securities) after taking into account any Transaction being effected on such date (such excess, a “Margin Deficit”), then the related Buyers may by notice to the related Seller require such Seller to eliminate the Margin Deficit (such requirement, a “Margin Call”) by (i) making a Margin Call Payment, (ii) if there is no Borrowing Base Deficiency at such time, the reduction of the value of the related Owner Trust Certificate, or (iii) in the sole discretion of the Buyers (not to be unreasonably withheld), pledging a Pledged Margin Security to related Buyer.

(b) Notice delivered pursuant to Section 2.05(a) may be given by any written or electronic means. With respect to a Margin Call, any notice given before 5:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the following Business Day. With respect to a Margin Call, any notice given after 5:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the second (2nd) Business Day following the date of such notice. The failure of any Buyer, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of any Buyer to do so at a later date. Each of the Sellers and each of the Buyers agree that a failure or delay by any Buyer to exercise its rights hereunder shall not limit or waive such Buyer’s rights under this Agreement or otherwise existing by law or in any way create additional rights for the Sellers.

(c) In the event that a Margin Deficit exists, each Buyer may retain any funds received by it to which the Sellers would otherwise be entitled hereunder, which funds (i) may be held by such Buyer against the related Margin Deficit or (ii) may be applied by such Buyer against the related Purchase Price. Notwithstanding the foregoing, each of the Buyers retains the right, in its sole discretion, to make a Margin Call in accordance with the provisions of this Section 2.05.

(d) If the aggregate outstanding amount of an Asset Base exceeds the related Purchase Price as determined on each MRA Payment Date (such excess, a “Margin Excess”), then the related Seller may deliver a Margin Excess Notice to the related Buyer and request that such Buyer deliver additional Consideration in an amount not to exceed the amount of such Margin Excess indicated in such Margin Excess Notice. The related Seller shall deliver such Margin Excess Notice at least one (1) Business Day prior to the Interim Payment Date on which such Seller wishes to receive such amount. If the Margin Excess Notice has been timely provided, the related Buyer shall provide Consideration to the related Seller in the requested amount on the specified Interim Payment Date, which Consideration shall consist of (i) cash, to the extent the related Buyer has excess cash or is able to obtain cash by effectuating an increase in the VFN Principal Balance, (ii) release of Eligible Securities, (iii) issuance of additional Notes and (iv) otherwise, an increase in the value of the Owner Trust Certificate of the applicable Buyer.

Section 2.06 Payment Procedure. The Sellers shall deposit or cause to be deposited all amounts constituting collections, payments and proceeds of Assets (including all fees and proceeds of sale) in the Dedicated Account as set forth in Section 6.12, within two (2) Business Days of receipt thereof or in the case of related liquidation or insurance proceeds, as promptly as reasonably practical following receipt of any related liquidation or insurance proceeds. The Sellers shall cause the Subservicer to remit directly to the Dedicated Account all amounts that constitute collections, payments and proceeds of Assets owed by Subservicer to the Sellers. The Sellers absolutely, unconditionally, and irrevocably, shall make, or shall cause its Subservicer to make, all payments required to be made by the Sellers hereunder whether or not sufficient amounts are on deposit in the Dedicated Account.

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Section 2.07 Net Payments. (a) On each MRA Payment Date, the Sellers shall pay all amounts due and owing under Sections 2.03, 2.04 or 2.05; however, prior to the occurrence of an Event of Default, such payments shall be netted against amounts otherwise distributable to the holder of the applicable Owner Trust Certificate under the Indenture, and such payment obligation shall be deemed paid and satisfied upon the payment of the related Net Payment Amount for such MRA Payment Date.

(b) Notwithstanding any other provision of this Agreement, PMC Seller shall be entitled to retain, from payments on, or relating to, the Mortgage Loans, all Ancillary Income, the Base Servicing Fee and the Advance Reimbursement Amounts. Ancillary Income, the Base Servicing Fee and the Advance Reimbursement Amounts shall not be required to be deposited into the Dedicated Account, and shall not be subject to any offset, netting or withdrawal under this Agreement.

Section 2.08 Recourse. Notwithstanding anything else to the contrary contained or implied herein or in any other Program Agreement, (i) the Buyers shall have full, unlimited recourse against the Sellers and the Guarantor and their respective assets in order to satisfy the Obligations, and (ii) solely with respect to the Sellers, all obligations of each Seller (excluding PMC’s obligations relating to its servicing functions) hereunder, including payment of any amounts owed on any date, shall be joint and several obligations of the Sellers.

Section 2.09 Taxes. (a) Any and all payments by any Seller or the Guarantor under or in respect of this Agreement or any other Program Agreements to which any Seller or the Guarantor is a party shall be made free and clear of, and without deduction or withholding for or on account of, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto, whether now or hereafter imposed, levied, collected, withheld or assessed by any taxation authority or other Governmental Authority (collectively, “Taxes”), unless required by law. If any Seller or the Guarantor shall be required under any applicable Requirement of Law to deduct or withhold any Taxes from or in respect of any sum payable under or in respect of this Agreement or any of the other Program Agreements to any Buyer (including for purposes of this Section 2.09, any assignee, successor or participant), (i) such Seller or the Guarantor, as applicable, shall make all such deductions and withholdings in respect of Taxes, (ii) such Seller or the Guarantor, as applicable, shall pay the full amount deducted or withheld in respect of Taxes to the relevant taxation authority or other Governmental Authority in accordance with any applicable Requirement of Law, and (iii) the sum payable by such Seller or the Guarantor, as applicable, shall be increased as may be necessary so that after such Seller or the Guarantor, as applicable, has made all required deductions and withholdings (including deductions and withholdings applicable to additional amounts payable under this Section 2.09), such Buyer receives an amount equal to the sum it would have received had no such deductions or withholdings been made in respect of Non-Excluded Taxes. For purposes of this Agreement, the term “Non-Excluded Taxes” means Taxes other than, in the case of the Buyers, Taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the jurisdiction under the laws of which the related Buyer is organized, or any political subdivision thereof, unless such Taxes are imposed as a result of the related Buyer having executed, delivered or performed its obligations or received payments under, or enforced, this Agreement or any of the other Program Agreements (in which case such Taxes will be treated as Non-Excluded Taxes).

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(b) In addition, the Sellers and the Guarantor hereby agree to pay any present or future stamp, recording, documentary, excise, property or value-added taxes, or similar taxes, charges or levies that arise from any payment made under or in respect of this Agreement or any other Program Agreement or from the execution, delivery or registration of, any performance under, or otherwise with respect to, this Agreement or any other Program Agreement (collectively, “Other Taxes”).

(c) The Sellers and the Guarantor hereby agree to indemnify the Buyers for, and to hold each of them harmless against, the full amount of Non-Excluded Taxes and Other Taxes, and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable by the Sellers or the Guarantor, as applicable, under this Section 2.09 imposed on or paid by the related Buyer and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. The indemnity by the Sellers and the Guarantor provided for in this Section 2.09 shall apply and be made whether or not the Non-Excluded Taxes or Other Taxes for which indemnification hereunder is sought have been correctly or legally asserted. Amounts payable by the Sellers and the Guarantor under the indemnity set forth in this Section 2.09(c) shall be paid within ten (10) days from the date on which the related Buyer makes written demand therefor.

(d) Without prejudice to the survival of any other agreement of the Sellers hereunder, the agreements and obligations of the Sellers contained in this Section 2.09 shall survive the termination of this Agreement and the other Program Agreements. Nothing contained in this Section 2.09 shall require any Buyer to make available any of its tax returns or any other information that it deems to be confidential or proprietary.

Section 2.10 Indemnity. Each of the Sellers agrees to indemnify the Buyers and to hold the Buyers harmless from any loss or expense that the Buyers may sustain or incur as a consequence of (i) a default by the Sellers in payment when due of the Repurchase Price, Required Payment, Margin Deficit or Price Differential or (ii) a default by the Sellers in making any prepayment of Repurchase Price after the related Seller has given a notice thereof in accordance with Section 2.03.

Section 2.11 Dedicated Account.

Amounts received on account of MSRs and Portfolio Excess Spread (excluding Ancillary Income, Base Servicing Fee and Advance Reimbursement Amounts) and retained by PMC pursuant to the related Servicing Contract or paid to either Seller pursuant to the related Participation Agreement, as the case may be, shall, subject to Section 6.12, promptly, in any event within two (2) Business Days after receipt, be deposited in the Dedicated Account. Prior to an Event of Default, funds deposited in the Dedicated Account (including any interest paid on such funds) may only be used in accordance with Section 6.12. On or after the occurrence of an Event of Default, amounts on deposit in the Dedicated Account may only be used in accordance with Section 6.12 and only to pay the Obligations hereunder. Upon the Termination Date and the payment of all amounts due by the Sellers hereunder, all amounts on deposit in the Dedicated Account shall be remitted to the Sellers.

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Section 2.12 Additional Participation Agreements and Participation Certificates.

In the event that a Seller wishes to enter into a Transaction with respect to a Participation Agreement or Participation Certificate not listed on Schedule 2 hereto, such Seller shall deliver a written request, substantially in the form of Exhibit B hereto. Upon receipt of the request and filing of a UCC-3 amendment adding the additional Participation Agreement or Participation Certificate, Schedule 2 shall be automatically updated to include each additional Participation Agreement and Participation Certificate identified thereon, and the Asset Schedule shall also be updated.

Section 2.13 Termination. (a) Notwithstanding anything to the contrary set forth herein, if a Seller Termination Option occurs, the Sellers may, upon five (5) Business Days’ prior notice of such event, terminate this Agreement and the Termination Date shall be deemed to have occurred (upon the expiration of the five (5) Business Days).

(b) In the event that a Seller Termination Option as described in clause (a) of the definition thereof has occurred and the Sellers have notified the Buyers of their option to terminate this Agreement, the Buyers shall have the right to withdraw such request for payment within three (3) Business Days of the Sellers’ notice of their exercise of the Seller Termination Option and the Sellers shall no longer have the right to terminate this Agreement.

(c) The Sellers shall remain responsible for all costs incurred by the Buyers pursuant to Section 2.09 hereunder and any cost or expenses incurred by the Buyers under the Indenture.

ARTICLE IIIREPRESENTATIONS AND WARRANTIES

Each of the Sellers, solely with respect to itself, and the Guarantor, in each case, represents and warrants to the Buyers as of the Closing Date, the Effective Date and as of each Purchase Date for any Transaction that:

Section 3.01 Sellers’ and Guarantor Existence. Each of the Sellers and the Guarantor has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware.

Section 3.02 Licenses. Each of the Sellers and the Guarantor is duly licensed or is otherwise qualified in each jurisdiction in which it transacts business for the business which it conducts and is not in default of any applicable federal, state or local laws, rules and regulations unless, in either instance, the failure to take such action is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect and is not in default of such state’s applicable laws. The Sellers have the requisite power and authority and legal right to own, sell and grant a lien on all of its right, title and interest in and to the Assets. Each of the Sellers and the Guarantor has the requisite power and authority and legal right to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, this Agreement, each Program Agreement, any Transaction Notice and any Excess Margin Notice.

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Section 3.03 Power. Each of the Sellers and the Guarantor has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect.

Section 3.04 Due Authorization. Each of the Sellers and the Guarantor has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Program Agreements, as applicable. This Agreement, any Transaction Notice and the Program Agreements have been (or, in the case of Program Agreements and any Transaction Notice not yet executed, will be) duly authorized, executed and delivered by the Sellers and the Guarantor, all requisite or other corporate action having been taken, and each is valid, binding and enforceable against the Sellers and the Guarantor in accordance with its terms except as such enforcement may be affected by bankruptcy, by other insolvency laws, or by general principles of equity.

Section 3.05 No Event of Default. There exists no Event of Default under Section 7.01 hereof, which default gives rise to a right to accelerate indebtedness as referenced in Section 7.03 hereof, under any mortgage, borrowing agreement or other instrument or agreement pertaining to indebtedness for borrowed money or to the repurchase of mortgage loans or securities.

Section 3.06 Solvency. Each of the Sellers and the Guarantor is solvent and will not be rendered insolvent by any Transaction and, after giving effect to such Transaction, will not be left with an unreasonably small amount of capital with which to engage in its business. Neither of the Sellers nor the Guarantor intends to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they mature and is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such entity or any of its assets. The Sellers are not selling and/or pledging any Repurchase Assets with any intent to hinder, delay or defraud any of its creditors.

Section 3.07 No Conflicts. The execution, delivery and performance by each of the Sellers and the Guarantor of this Agreement, any Transaction Notice hereunder and the Program Agreements do not conflict with any term or provision of the organizational documents of the Sellers or the Guarantor or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to the Sellers or the Guarantor of any court, regulatory body, administrative agency or governmental body having jurisdiction over the Sellers or the Guarantor, which conflict would have a Material Adverse Effect and will not result in any violation of any such mortgage, instrument, agreement, obligation or Servicing Contract to which the Sellers or the Guarantor is a party.

Section 3.08 True and Complete Disclosure. All information, reports, exhibits, schedules, financial statements or certificates of the Sellers, the Guarantor or any Affiliate thereof or any of their officers furnished or to be furnished to the Buyers in connection with the initial or any ongoing due diligence of the Sellers, the Guarantor or any Affiliate thereof or officer thereof, negotiation, preparation, or delivery of the Program Agreements are true and complete in all material respects and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading.

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Section 3.09 Approvals. No consent, approval, authorization or order of, registration or filing with, or notice to any Governmental Authority or court is required under Applicable Law in connection with the execution, delivery and performance by the Sellers or the Guarantor of this Agreement, any Transaction Notice and the Program Agreements.

Section 3.10 Ownership. (a) Each Seller has good title to all of its related Repurchase Assets, free and clear of all mortgages, security interests, restrictions, Liens and encumbrances of any kind other than the Liens created hereby or contemplated herein.

(b) Each item of the Repurchase Assets was acquired by the related Seller in the ordinary course of its business, in good faith, for value and without notice of any defense against or claim to it on the part of any Person.

(c) There are no agreements or understandings between the Sellers and any other party which would modify, release, terminate or delay the attachment of the security interests granted to the Buyers under this Agreement.

(d) The provisions of this Agreement are effective to create in favor of the Buyers a valid security interest in all right, title and interest of the Sellers in, to and under the Repurchase Assets.

(e) Upon the filing of financing statements on Form UCC-1 naming the related Buyer as “Secured Party” and the related Seller as “Debtor”, and describing the related Repurchase Assets, in the recording offices of the Secretary of State of Delaware the security interests granted hereunder in the Repurchase Assets will constitute fully perfected first priority security interests under the Uniform Commercial Code in all right, title and interest of the related Seller in, to and under such Repurchase Assets which can be perfected by filing under the Uniform Commercial Code.

Section 3.11 The Servicing Contracts and Participation Agreements. Each of the Buyers has received copies of each Servicing Contract and Participation Agreement (including all exhibits and schedules referred to therein or delivered pursuant thereto), all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof and all agreements and other material documents relating thereto, and each Seller hereby certifies that the copies delivered to the Buyers by such Seller are true and complete. None of such documents has been amended, supplemented or otherwise modified (including waivers) since the respective dates thereof, except by amendments, copies of which have been delivered to the Buyers. Each such document to which each Seller is a party has been duly executed and delivered by such Seller and is in full force and effect, and no default or material breach has occurred and is continuing thereunder.

Section 3.12 Investment Company. No Seller nor any of their Subsidiaries is an “investment company”, or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act; provided, however, that any entity that is under the management of PNMAC Capital Management LLC in its capacity as an “investment adviser” within the meaning of the Investment Advisers Act of 1940 and is otherwise not directly or indirectly owned or controlled by any Seller shall not be deemed a “Subsidiary” for the purposes of this Section 3.12.

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Section 3.13 Chief Executive Office; Jurisdiction of Organization. On the Effective Date, each Seller’s chief executive office, is, and has been, located at 3043 Townsgate Road, Suite 300, Westlake Village, CA 91361, with respect to PMC Seller, in Suite 300 and with respect to PMH Seller, in Suite 310. On the date hereof, each Seller’s jurisdiction of organization is the State of Delaware. Each Seller shall provide the Buyers with thirty (30) days advance notice of any change in such Seller’s principal office or place of business or jurisdiction. Neither Seller has a trade name. During the preceding five (5) years, each Seller has not been known by or done business under any other name, corporate or fictitious, and has not filed or had filed against it any bankruptcy receivership or similar petitions nor has it made any assignments for the benefit of creditors.

Section 3.14 Location of Books and Records. The location where each Seller keeps its books and records, including all computer tapes and records relating to the Repurchase Assets is its chief executive office.

Section 3.15 ERISA. Each Plan to which the Sellers, the Guarantor or their Subsidiaries make direct contributions, and, to the knowledge of the Sellers and the Guarantor, each other Plan and each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law.

Section 3.16 Fannie Mae Approvals; Servicing Facilities. The PMC Seller has adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same types as may from time to time constitute Mortgage Loans and in accordance with Accepted Servicing Practices. The PMC Seller is a Fannie Mae approved seller/servicer. If and to the extent that any FHA Loans, USDA Loans or VA Loans are Subject Mortgages, the PMC Seller is an FHA Approved Mortgagee and a VA Approved Lender. The PMC Seller is also approved, to the extent necessary, by the Secretary of HUD pursuant to Sections 203 and 211 of the National Housing Act. In each such case, the PMC Seller is in good standing, with no event having occurred or the PMC Seller having any reason whatsoever to believe or suspect will occur, including a change in insurance coverage which would either make the PMC Seller unable to comply with the eligibility requirements for maintaining all such applicable approvals or require notification to Fannie Mae or, if applicable, to HUD, FHA, VA or the USDA. Should the PMC Seller for any reason cease to possess all such applicable approvals, or should notification to Fannie Mae or, if applicable, to HUD, FHA, VA or the USDA be required, the PMC Seller shall so notify the Buyers promptly in writing.

Section 3.17 Plan Assets. Neither the Sellers nor the Guarantor is an “employee benefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, a plan described in Section 4975 of the Code that is subject to Section 4975 of the Code, or an entity that is deemed to hold “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA). Neither the Sellers nor the Guarantor is subject to any state or local statute regulating investments or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA which would be violated by the Transactions contemplated hereunder.

Section 3.18 No Prohibited Persons.

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Neither the Sellers nor any of their Affiliates, officers, directors, partners or members, is an entity or person (or to the Sellers’ knowledge, owned or controlled by an entity or person): (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (“EO13224”); (ii) whose name appears on OFAC’s most current list of “Specifically Designated National and Blocked Persons” (which list may be published from time to time in various mediums including the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports “terrorism”, as that term is defined in EO13224; (iv) that is (1) the subject of any Sanctions or (2) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions; or (v) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (v) above are herein referred to as a “Prohibited Person”).

Section 3.19 Compliance with 1933 Act. Neither the Sellers nor anyone acting on their behalf has offered, transferred, pledged, sold or otherwise disposed of the Participation Certificates, any interest in the Participation Certificates or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Participation Certificates, any interest in the Participation Certificates or any other similar security from, or otherwise approached or negotiated with respect to the Participation Certificates, any interest in the Participation Certificates or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action which would constitute a distribution of the Participation Certificates under the 1933 Act or which would render the disposition of the Participation Certificates a violation of Section 5 of the 1933 Act or require registration pursuant thereto.

Section 3.20 Eligible Assets. All Assets that are subject to a Transaction under this Agreement are Eligible Assets.

ARTICLE IVCONVEYANCE; REPURCHASE ASSETS; SECURITY INTEREST

Section 4.01 Ownership. Upon payment (or deemed payment) of the Purchase Price, each Buyer shall become the sole owner of the Purchased Assets allocated to such Buyer (other than the related MSRs, which are pledged, and not sold, to the applicable Buyer), free and clear of all liens and encumbrances, but subject to the rights of Fannie Mae pursuant to the Acknowledgment Agreement with Fannie Mae.

Section 4.02 Security Interest. (a) Although the parties intend that all Transactions hereunder be sales and purchases and not loans (other than for tax and accounting purposes, the intent of which is addressed in Section 10.12(e), and other than the MSRs, which are pledged, and not sold, to the applicable Buyer), in the event any such Transactions are deemed to be loans, and in any event, each Seller hereby pledges to the related Buyer as security for the performance by such Seller of its Obligations and hereby grants, assigns and pledges to the related Buyer a fully perfected first priority security interest in all of such Seller’s right, title and interest in, to and under each of the following items of property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (in the case of all MSRs, subject and subordinated to Fannie Mae’s rights under the Acknowledgment Agreement and the Fannie Mae Requirements), is hereinafter referred to as the “Repurchase Assets”:

(i) each related Participation Certificate and all MSRs related thereto, whether such MSRs are in existence on the date such Participation Certificate becomes the subject of a Transaction hereunder or arise thereafter, and whether or not such Assets or the related Mortgage Loans are listed on an Asset Schedule;

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(ii) all MSRs arising under or related to any Servicing Contract as reflected in the Schedule of Mortgages or Request for Approval for Transfer;

(iii) all rights to reimbursement or payment of Assets and/or amounts due in respect thereof under the related Servicing Contract, Fannie Mae MBS, the Acknowledgment Agreement or the related Participation Agreements;

(iv) any rights in the Dedicated Account and to the amounts on deposit therein;

(v) all rights under the Retained Excess Spread Participation Agreement (in the case of the PMC Seller) and the Excess Spread Participation Agreement (in the case of the PMH Seller);

(vi) any rights in the Pledged Margin Securities Account and to the amounts on deposit therein;

(vii) any rights in the Eligible Securities Account and to the amounts on deposit therein;

(viii) all records, instruments or other documentation evidencing any of the foregoing;

(ix) all “general intangibles”, “accounts”, “chattel paper”, “securities accounts”, “investment property”, “deposit accounts” and “money” as defined in the Uniform Commercial Code relating to or constituting any and all of the foregoing (including all of each Seller’s rights, title and interest in and under the Participation Agreements and the Servicing Contracts); and

(x) any and all replacements, substitutions, distributions on or proceeds of any and all of the foregoing.

(b) Each Seller hereby assigns, pledges, conveys and grants a security interest in all of its right, title and interest in, to and under the Repurchase Assets to the related Buyer to secure such Seller’s Obligations. Each Seller agrees to mark its computer records and tapes to evidence the interests granted to the Buyers hereunder.

(c) The parties acknowledge that Fannie Mae has certain rights under the Acknowledgment Agreement and Fannie Mae Requirements, including the right to terminate the PMC Seller and either market the servicing rights and seek competitive bids for all or part of the Servicing Rights or retain all or part of the Servicing Rights and arrange for the Appraised Market Value to be established, as more particularly set forth therein. To the extent that Fannie Mae requires a transfer of MSRs to a new servicer, and in order to secure the Sellers’ obligations to effect such transfer, each of the Sellers hereby assigns, pledges, conveys and grants a security interest in all of its right, title and interest in, to and under the MSRs to such new servicer, whether now owned or hereafter acquired, now existing or hereafter created and wherever located.

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(d) [Reserved].

(e) The foregoing provisions of this Section are intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and the Transactions hereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.

Section 4.03 Further Documentation. At any time and from time to time, upon the written request of the Buyers, and at the sole expense of the Sellers, the Sellers will promptly and duly execute and deliver, or will promptly cause to be executed and delivered, such further instruments and documents and take such further action as the Buyers may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any applicable jurisdiction with respect to the Liens created hereby.

Section 4.04 Limited Pledge of Fannie Mae Servicing. Each of the Buyers acknowledges and agrees that the security interest created hereby is subject to the following provision to be included in each financing statement filed in respect hereof (defined terms used below shall have the meaning set forth in the Acknowledgment Agreement):

“The Security Interest described in this financing statement is subordinate to all rights of Fannie Mae under (i) the terms of the Fifth Amended and Restated Acknowledgment Agreement, dated effective October 10, 2023, as amended, restated or supplemented from time to time, with respect to the Security Interest among Fannie Mae, PennyMac Corp. (the “Servicer”), PennyMac Holdings, LLC, PennyMac Mortgage Investment Trust and Citibank, N.A., solely as Indenture Trustee under the Base Indenture, and not in its individual capacity, (ii) the terms of the Fourth Amended and Restated Subordination of Interest Agreement, with respect to the Security Interest (as defined therein), among Fannie Mae, PennyMac Corp., and PennyMac Holdings, LLC, and (iii) the Mortgage Selling and Servicing Contract, the Fannie Mae Selling Guide, the Fannie Mae Servicing Guide and all supplemental servicing instructions or directives provided by Fannie Mae, all applicable master agreements, recourse agreements, repurchase agreements, indemnification agreements, loss-sharing agreements, and any other agreements between Fannie Mae and the Servicer, and all as amended, restated or supplemented from time to time (collectively, the “Fannie Mae Lender Contract”), which rights include the right of Fannie Mae to terminate the Fannie Mae Lender Contract with or without cause and the right to sell, or have transferred, the Servicing Rights.”

Section 4.05 Changes in Locations, Name, etc. Each Seller shall not (a) change the location of its chief executive office/chief place of business from that specified in Section 3.13 or (b) change its name or identity, unless it shall have given the Buyers at least thirty (30) days’ prior written notice thereof and shall have delivered to the Buyers all Uniform Commercial Code financing statements and amendments thereto as the Buyers shall request and taken all other actions deemed necessary by the Buyers to continue its perfected status in the Repurchase Assets with the same or better priority.

Section 4.06 The Buyers’ Appointment as Attorney-in-Fact.

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(a) Each Seller hereby irrevocably constitutes and appoints each Buyer and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Seller and in the name of such Seller or in its own name, from time to time in the applicable Buyer’s discretion if an Event of Default shall have occurred and be continuing, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Seller hereby gives each Buyer the power and right, on behalf of such Seller, without assent by, but with notice to, such Seller to do the following:

(i) in the name of such Seller or its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any Repurchase Assets and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the applicable Buyer for the purpose of collecting any and all such moneys due with respect to any Repurchase Asset whenever payable;

(ii) to pay or discharge taxes and Liens levied or placed on or threatened against the Repurchase Assets;

(iii) except to the extent inconsistent with the related Servicing Contracts and the Acknowledgment Agreement, request that MSRs be transferred to the Buyers or to another servicer approved by Fannie Mae and perform (without assuming or being deemed to have assumed any of the obligations of the PMC Seller thereunder) all aspects of each Servicing Contract that is a Purchased Asset;

(iv) request distribution to the related Buyer of sale proceeds or any applicable contract termination fees arising from the sale or termination of such MSRs and remaining after satisfaction of the PMC Seller’s relevant obligations to Fannie Mae, including costs and expenses related to any such sale or transfer of such MSRs and other amounts due for unmet obligations of the PMC Seller to Fannie Mae under the Fannie Mae Lender Contract;

(v) deal with investors and any and all subservicers and master servicers in respect of any of the Repurchase Assets in the same manner and with the same effect as if done by the PMC Seller; and

(vi) (A) to direct any party liable for any payment under any Repurchase Assets to make payment of any and all moneys due or to become due thereunder directly to the applicable Buyer or as the applicable Buyer shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Repurchase Asset; (C) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any of the Repurchase Assets; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Repurchase Assets or any portion thereof and to enforce any other right in respect of any Repurchase Assets; (E) to defend any suit, action or proceeding brought against such Seller with respect to any Repurchase Assets; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as the Buyers may deem appropriate; and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Repurchase Assets as fully and completely as though the applicable Buyer were the absolute owner thereof for all purposes, and to do, at such Buyer’s option and such Seller’s expense, at any time, and from time to time, all acts and things which the applicable Buyer deems necessary to protect, preserve or realize upon the Repurchase Assets and such Buyer’s Liens thereon and to effect the intent of this Agreement, all as fully and effectively as such Seller might do.

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(b) Each Seller hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable until such time as all Obligations have been paid in full and this Agreement is terminated.

(c) Each Seller also authorizes each Buyer, at any time and from time to time, to execute, in connection with any sale provided for in Section 4.08 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Repurchase Assets.

(d) The powers conferred on each Buyer are solely to protect such Buyer’s interests in the Repurchase Assets and shall not impose any duty upon such Buyer to exercise any such powers. Each Buyer shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the related Buyer nor any of its officers, directors, or employees shall be responsible to any Seller for any act or failure to act hereunder, except for such Buyer’s own gross negligence or willful misconduct.

Notwithstanding anything to the contrary herein or any of the other Program Agreements, any appointment set forth in this Section 4.06, as well as any Buyer’s exercise (or purported exercise) of any right, power or authority given by any Seller hereunder, shall be subject to the Fannie Mae Lender Contract and the Acknowledgment Agreement and any and all instruments, agreements, invoices or other writings which give rise to or otherwise evidence any of the MSRs.

Section 4.07 Performance by any Buyer of a Seller’s Obligations. If any Seller fails to perform or comply with any of its agreements contained in the Program Agreements and any Buyer may itself perform or comply, or otherwise cause performance or compliance, with such agreement, the reasonable (under the circumstances) out-of-pocket expenses of any such Buyer actually incurred in connection with such performance or compliance, together with interest thereon at a rate per annum equal to the Pricing Rate shall be payable by the related Seller to the related Buyer on demand and shall constitute Obligations. Such interest shall be computed on the basis of the actual number of days elapsed from the preceding MRA Payment Date to and excluding such date of determination and a 360 day year.

Section 4.08 Proceeds. If an Event of Default shall occur and be continuing, (a) all proceeds of Repurchase Assets received by any Seller consisting of cash, checks and other liquid assets readily convertible to cash items shall be held by such Seller in trust for the applicable Buyer, segregated from other funds of such Seller, and shall forthwith upon receipt by such Seller be turned over to the applicable Buyer in the exact form received by such Seller (duly endorsed by such Seller to the applicable Buyer, if required) and (b) any and all such proceeds received by any Buyer (whether from a Seller or otherwise) may, in the sole discretion of such Buyer, be held by such Buyer as collateral security for, and/or then or at any time thereafter may be applied by such Buyer against, the Obligations (whether matured or unmatured), such application to be in such order as such Buyer shall elect.

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Any balance of such proceeds remaining after the Obligations shall have been paid in full and this Agreement shall have been terminated shall be paid over to the applicable Seller or to whomsoever may be lawfully entitled to receive the same. Notwithstanding anything to the contrary herein or in any of the other Program Agreements, the provisions of this Section 4.08 shall be subject to the applicable Servicing Contracts and the Acknowledgment Agreement entered into with Fannie Mae.

Section 4.09 Remedies. If an Event of Default shall occur and be continuing, each Buyer may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Uniform Commercial Code (including such Buyer’s rights to a strict foreclosure under Section 9-620 of the Uniform Commercial Code). Without limiting the generality of the foregoing, such Buyer may seek the appointment of a receiver, liquidator, conservator, trustee, or similar official in respect of the Sellers or any of the Sellers’ property. Without limiting the generality of the foregoing, the related Buyer may terminate a Participation Interest in accordance with the applicable Participation Agreement. Without limiting the generality of the foregoing, each Buyer without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required under this Agreement or by law referred to below) to or upon the Sellers or any other Person (each and all of which demands, presentments, protests, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Repurchase Assets, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Repurchase Assets or any part thereof (or contract to do any of the foregoing), in one or more parcels or as an entirety at public or private sale or sales, at any exchange, broker’s board or office of such Buyer or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Each Buyer shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Repurchase Assets so sold, free of any right or equity of redemption in the Sellers, which right or equity is hereby waived or released. Each Seller further agrees, at the related Buyer’s request, to assemble the Repurchase Assets and make them available to the related Buyer at places which such Buyer shall reasonably select, whether at the Sellers’ premises or elsewhere. Such Buyer shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable (under the circumstances) out-of-pocket costs and expenses of every kind actually incurred therein or incidental to the care or safekeeping of any of the Repurchase Assets or in any way relating to the Repurchase Assets or the rights of such Buyer hereunder, including reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations, in such order as such Buyer may elect, and only after such application and after the payment by such Buyer of any other amount required or permitted by any provision of law, including Section 9-615 of the Uniform Commercial Code, need such Buyer account for the surplus, if any, to the related Seller. To the extent permitted by Applicable Law, each Seller waives all claims, damages and demands it may acquire against any Buyer arising out of the exercise by such Buyer of any of its rights hereunder, other than those claims, damages and demands arising from the gross negligence or willful misconduct of such Buyer. If any notice of a proposed sale or other disposition of Repurchase Assets shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition.

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Each Seller shall remain liable for any deficiency (plus accrued interest thereon as contemplated herein) if the proceeds of any sale or other disposition of the Repurchase Assets are insufficient to pay the Obligations and the fees and disbursements in amounts reasonable under the circumstances, of any attorneys employed by the applicable Buyer to collect such deficiency. Notwithstanding anything to the contrary herein or in any of the other Program Agreements, the remedies set forth in this Section 4.09 shall be subject to the applicable Servicing Contracts and the Acknowledgment Agreement entered into with Fannie Mae.

Section 4.10 Limitation on Duties Regarding Preservation of Repurchase Assets. Indenture Trustee’s duty with respect to the custody, safekeeping and physical preservation of the Repurchase Assets in its possession, under Section 9-207 of the Uniform Commercial Code or otherwise, shall be to deal with it in the same manner as the related Buyer deals with similar property for its own account. Neither the applicable Buyer nor any of its directors, officers or employees shall be liable for failure to demand, collect or realize upon all or any part of the Repurchase Assets or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Repurchase Assets upon the request of any Seller or otherwise.

Section 4.11 Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Repurchase Assets are irrevocable and powers coupled with an interest.

Section 4.12 Release of Security Interest. Upon the latest to occur of (a) the repayment to Buyers of all Obligations and the performance of all obligations under the Program Agreements, or (b) the occurrence of the Termination Date, each Buyer shall release its security interest in any remaining Repurchase Assets hereunder and shall promptly execute and deliver to the Sellers such documents or instruments as Sellers shall reasonably request to evidence such release; provided, that such release shall not be required until such time as the Acknowledgment Agreement is terminated.

Section 4.13 Reinstatement. All security interests created by this Article IV shall continue to be effective, or be reinstated, as the case may be, if at any time any payment, or any part thereof, of any Obligation of PMC Seller, PMH Seller or the Guarantor is rescinded or must otherwise be restored or returned by the related Buyer upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of PMC Seller, PMH Seller or the Guarantor or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, PMC Seller, PMH Seller or the Guarantor or any substantial part of its property, or otherwise, all as if such release had not been made.

Section 4.14 Subordination.

(a) [Reserved].

(b) [Reserved].

(c) If an Act of Insolvency of any Seller occurs, each Seller agrees not to contest (or support any other Person contesting) any request by any Buyer for adequate protection, or any objection by any Buyer to any motion, relief, action or proceeding based on any Buyer claiming a lack of adequate protection.

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(d) Until the obligations under the Program Agreements are paid in full, each Seller shall not oppose any request by any Buyer for relief from the automatic stay or any other stay in any Act of Insolvency of any Seller.

(e) Each Seller shall not oppose or seek to challenge any claim by any Buyer for allowance and payment in any Act of Insolvency of any Seller, of obligations under the Program Agreements consisting of post-petition interest, fees, costs or other charges to the extent of the value of any Buyer’s lien, encumbrance, pledge or other claims on the assets that are the subject of this Agreement, without regard to the existence of a lien, encumbrance, pledge or other claims applicable to the obligations of the other parties to the Program Agreements.

(f) Each Seller shall not seek in any Act of Insolvency of itself, to be treated as part of the same class of creditors as any Buyer and shall not oppose any pleading or motion by any Buyer advocating that any Buyer and such Seller should be treated as separate classes of creditors. Each Seller acknowledges and agrees that its rights with respect to the Repurchase Assets are and shall continue to be at all times junior and subordinate to the rights of the Buyers under this Agreement.

ARTICLE VCONDITIONS PRECEDENT

Section 5.01 Initial Transaction. The obligation of the Buyers to enter into Transactions with the Sellers hereunder is subject to the satisfaction, immediately prior to or concurrently with the entering into such Transaction, of the condition precedent that the Buyers shall have received all of the following items, each of which shall be satisfactory to the Buyers and its counsel in form and substance:

(a) Program Agreements. The Program Agreements, in all instances duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver.

(b) Security Interest. Evidence that all other actions necessary or, in the opinion of the Buyers, desirable to perfect and protect the Buyers’ interest in the Purchased Assets and Repurchase Assets have been taken, including duly authorized and filed Uniform Commercial Code financing statements on Form UCC-1.

(c) Organizational Documents. A certificate of the corporate secretary of each of the Sellers and the Guarantor in form and substance acceptable to the Buyers, attaching certified copies of each Seller’s and the Guarantor’s charter, bylaws and corporate resolutions approving the Program Agreements and transactions thereunder (either specifically or by general resolution) and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the Program Agreements, and with respect to the Guarantor, a certification to the effect that the Guarantor has complied with, satisfied, observed and performed in all material respects all the terms, covenants, agreements and conditions of the Transaction Documents as required pursuant to this Agreement.

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(d) Good Standing Certificate. A certified copy of a good standing certificate from the jurisdiction of organization of each Seller and the Guarantor, dated as of no earlier than the date ten (10) Business Days prior to the Effective Date.

(e) Incumbency Certificate. An incumbency certificate of the corporate secretary of each Seller and the Guarantor, certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Program Agreements.

(f) Servicing Contracts. Fully executed copies of each Servicing Contract certified as true, correct and complete by PMC Seller.

(g) Fees. Each Buyer shall have received payment in full of all fees and Expenses which are payable hereunder to such Buyer on or before such date.

(h) Insurance. Evidence that PMC Seller has added each Buyer as an additional loss payee under such Seller’s Fidelity Insurance.

Section 5.02 All Transactions. The obligation of the Buyers to enter into each Transaction pursuant to this Agreement is subject to the following conditions precedent:

(a) Due Diligence Review. Without limiting the generality of Section 10.08 hereof, each Buyer shall have completed, to its satisfaction, its due diligence review of the related Assets and the Sellers and the Guarantor.

(b) Transaction Notice and Asset Schedule. In accordance with Section 2.02 hereof, the related Buyer shall have received from the related Seller a Transaction Notice with an updated Asset Schedule which includes Assets related to a proposed Transaction hereunder on such Business Day.

(c) No Margin Deficit. After giving effect to each new Transaction, the aggregate outstanding amount of the Purchase Price shall not exceed the Asset Base then in effect.

(d) No Default. No Default or Event of Default shall have occurred and be continuing.

(e) Requirements of Law. The related Buyer shall not have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to each Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for such Buyer to enter into any Transaction.

(f) Representations and Warranties. Both immediately prior to the related Transaction and also after giving effect thereto and to the intended use thereof, the representations and warranties made by the Sellers in each Program Agreement shall be true, correct and complete on and as of such Purchase Date in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).

(g) Servicing Contracts; Assets. The Buyers shall have:

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(i) received the related Servicing Contract relating to any Purchased Assets, which such Buyer shall have determined prior to financing the first Asset that relates to such Servicing Contract that such Servicing Contract is in form and substance satisfactory to such Buyer in its sole discretion;

(ii) received copies of all other consents and notices required under the related Servicing Contract and with respect to the MSRs, the Acknowledgment Agreement, each in form and substance satisfactory to the applicable Buyer; and

(iii) received a copy of the Participation Agreement, which the Buyer shall have determined, prior to entering into the first Transaction related to an Asset that relates to such Participation Agreement, is in form and substance satisfactory to such Buyer in its sole discretion.

Notwithstanding the requirements set forth in Section 5.02(g)(ii) hereof, each Buyer hereby agrees to enter into Transactions with the Sellers with respect to the MSRs. Any failure to repay the Purchase Price with respect to the MSRs in accordance with this section shall result in an immediate Event of Default.

(h) [Reserved].

(i) Participation Certificate. With respect to any Asset that constitutes a Seller’s Participation Certificate, the applicable Buyer shall have received the original Participation Certificate registered into the name of the Indenture Trustee as designee of the applicable Buyer.

(j) Financing Statements. All financing statements, amendments to financing statements and other documents required to be recorded or filed in order to perfect the Buyers’ security interests in such Assets, and protect such Assets and the other related Assets against all creditors of, and purchasers from, the Sellers and all other Persons whatsoever have been duly filed in each filing office necessary for such purpose, and all filing fees and taxes, if any, payable in connection with such filings have been paid in full.

ARTICLE VICOVENANTS

Each of the Sellers covenants and agrees, solely with respect to itself, that until the payment and satisfaction in full of all Obligations, whether now existing or arising hereafter, shall have occurred:

Section 6.01 Financial Covenants. Each of the Sellers shall at all times comply with their respective financial covenants and/or financial ratios, if applicable, as set forth in the Pricing Side Letter.

Section 6.02 Prohibition of Fundamental Changes. Neither Seller shall enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets; provided that either Seller may merge or consolidate with (a) any wholly owned subsidiary of the related Seller, or (b) any other Person if the related Seller is the surviving entity; and provided further, that if after giving effect thereto, no Default would exist hereunder.

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Section 6.03 [Reserved.]

Section 6.04 Asset Schedule. Each Seller shall at all times maintain a current list (which may be stored in electronic form) of all Assets. Each Seller shall deliver to the Buyers on each Determination Date for any Interim Payment Date a cumulative Asset Schedule as of the last Business Day of the preceding week, each of which, when so delivered, shall replace the current Asset Schedule and which may be delivered in electronic form. As of each date an updated Asset Schedule is delivered in accordance with this Section 6.04, each of the Sellers hereby certifies, represents and warrants to the Buyers that each such updated Asset Schedule is true, complete and correct in all material respects.

Section 6.05 No Adverse Claims. Each of the Sellers warrants and will defend the right, title and interest of the Buyers in and to all Purchased Assets against all adverse claims and demands.

Section 6.06 Assignment. Except as permitted herein, neither Seller shall sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Agreements), any of the Purchased Assets or any interest therein, provided that this Section 6.06 shall not prevent any transfer of Purchased Assets in accordance with the Program Agreements.

Section 6.07 Security Interest. Each of the Sellers shall do all things necessary to preserve the Purchased Assets so that they remain subject to a first priority perfected security interest hereunder. Without limiting the foregoing, each of the Sellers will comply with all rules, regulations and other laws of any Governmental Authority and cause the Purchased Assets or the related Repurchase Assets to comply with all applicable rules, regulations and other laws. Neither Seller will allow any default for which each of the Sellers is responsible to occur under any Purchased Assets or the related Repurchase Assets or any Program Agreement and each of the Sellers shall fully perform or cause to be performed when due all of its obligations under any Purchased Assets or the related Repurchase Assets and any Program Agreement.

Section 6.08 Records. (a) Each of the Sellers, as applicable, shall collect and maintain or cause to be collected and maintained all Records relating to the Purchased Assets in accordance with industry custom and practice for assets similar to the Purchased Assets, including those maintained pursuant to Section 6.09, and all such Records shall be in the related Seller’s possession unless each Buyer otherwise approves. Neither Seller will allow any such papers, records or files that are an original or an only copy to leave the Seller’s possession, except for individual items removed in connection with servicing a specific Mortgage Loan, in which event Sellers will obtain or cause to be obtained a receipt from a financially responsible person for any such paper, record or file. Each of the Sellers will maintain all such Records in good and complete condition in accordance with industry practices for assets similar to the Purchased Assets and preserve them against loss.

(b) For so long as the related Buyer has an interest in or lien on any Purchased Assets or Repurchase Assets, the related Seller will hold or cause to be held all related Records in trust for the Buyers.

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The related Seller shall notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of the Buyers granted hereby.

(c) Upon reasonable advance notice from the Buyers, the Sellers shall (x) make any and all such Records available to the Buyers to examine any such Records, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, and (y) permit each of the Buyers or its authorized agents to discuss the affairs, finances and accounts of the Sellers with its chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of the Sellers with its independent certified public accountants.

Section 6.09 Books. Each of the Sellers shall keep or cause to be kept in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of Purchased Assets (other than the related MSRs, which are pledged, and not sold to the Buyers) to the Buyers.

Section 6.10 Approvals. Each of the Sellers shall maintain all licenses, permits or other approvals necessary for each of the Sellers to conduct its business and to perform its obligations under the Program Agreements, and each of the Sellers shall conduct its business strictly in accordance with Applicable Law. The PMC Seller shall maintain its status as an approved Fannie Mae seller/servicer (“Fannie Mae Approvals”). The PMC Seller shall service all Assets in accordance with the Fannie Mae Lender Contract and any and all instruments, agreements, invoices or other writings which give rise to or otherwise evidence any of the MSRs in all material respects. Should the PMC Seller, for any reason, cease to possess all such Fannie Mae Approvals, or should notification to Fannie Mae or, if and to the extent that any FHA Loans, USDA Loans or VA Loans are Subject Mortgages, to HUD, FHA, USDA or VA as described in Section 3.16 hereof be required, the PMC Seller shall so notify the Buyers promptly in writing. Notwithstanding the preceding sentence, the PMC Seller shall take all necessary action to maintain all of its Fannie Mae Approvals at all times during the term of this Agreement.

Section 6.11 Material Change in Business. None of the Sellers or the Guarantor shall make any material change in the nature of their respective businesses as carried on at the Closing Date with respect to the PMC Seller or the Effective Date with respect to the PMH Seller.

Section 6.12 Collections on Assets and the Dedicated Account.

(a) Except as permitted under Section 6.12(b), prior to the PMC Seller or any Subservicer making any withdrawal from the custodial account or any other clearing account maintained under the related Servicing Contract, the PMC Seller or the Subservicer shall instruct the related depository institution to remit all Collections and other payments and proceeds in respect of MSRs, including Portfolio Excess Spread, to the Dedicated Account (but only to the extent that such funds are payable to the PMC Seller or the Subservicer free and clear of any Fannie Mae rights or other restrictions on transfer set forth in such Servicing Contract). Except as permitted under Section 6.12(b), neither the PMC Seller nor the Subservicer shall withdraw or direct the withdrawal or remittance of any Collections from any custodial account into which such amounts have been deposited other than to remit to the Dedicated Account.

(b) So long as (i) no Event of Default has occurred hereunder or (ii) no Event of Default (as defined in the Series 2017-VF1 Repurchase Agreement) has occurred under the Series 2017-VF1 Repurchase Agreement, the PMC Seller shall be permitted to offset, net, withdraw or direct the withdrawal or remittance of any amounts which have been or are to be deposited into the Dedicated Account provided that prior to any offset, net, withdraw or direct the withdrawal or remittance of any such amounts, the PMC Seller shall deposit funds into the Collection and Funding Account until the amounts on deposit therein are at least equal to the Required Reserve Amount for the next succeeding MRA Payment Date.

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Upon the occurrence of an Event of Default hereunder or upon an Event of Default (as defined in the Series 2017-VF1 Repurchase Agreement) under the Series 2017-VF1 Repurchase Agreement, PMC Seller shall be required to deposit or cause to be deposited all amounts constituting Collections and payments and proceeds of Assets (including all fees and proceeds of sale) in the Dedicated Account in accordance with the requirements set forth in Section 6.12(a) without exercising any right of offset, netting or withdrawal.

(c) PMC Seller shall be permitted to retain the Base Servicing Fee, any Ancillary Income and Advance Reimbursement Amounts that PMC Seller is entitled to retain pursuant to Section 2.07(b) at all times.

(d) The Sellers shall (i) allocate and track the Collections and other payments and proceeds in respect of MSRs to the related Participation Certificate and (ii) provide, or cause to be provided, to the Paying Agent amounts to be distributed to the holders of the Owner Trust Certificates.

(e) To the extent amounts are offset, netted, withdrawn or remitted from the Dedicated Account, the PMC Seller shall cause the applicable amounts be distributed to the Sellers based on the amounts it is entitled under the related Participation Agreement.

Section 6.13 Applicable Law. The Sellers and the Guarantor shall comply with the requirements of all Applicable Laws of any Governmental Authority.

Section 6.14 Existence. The Sellers and the Guarantor shall preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises.

Section 6.15 Chief Executive Office; Jurisdiction of Organization. The Sellers shall not move their respective chief executive office from the address referred to in Section 3.13 or change their respective jurisdiction of organization from the jurisdiction referred to in Section 3.13 unless they shall have provided the Buyers at least thirty (30) days’ prior written notice of such change.

Section 6.16 Taxes. Each of the Sellers and the Guarantor shall timely file all tax returns that are required to be filed by them and shall timely pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.

Section 6.17 Termination of Servicing Notice. PMC Seller shall give notice to the Buyers promptly upon (a) receipt or notice or knowledge of any default, notice of termination of servicing for cause under any Servicing Contract or other servicing agreement regardless of whether such agreement or the rights thereunder constitute Purchased Assets hereunder or (b) receipt or notice or knowledge of any resignation of servicing, termination of servicing or notice of resignation of or termination of servicing, under any Servicing Contract or other servicing agreement regardless of whether such agreement or the rights thereunder constitute Purchased Assets hereunder.

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Section 6.18 True and Correct Information. All required financial statements, information and reports delivered by the related Seller and the Guarantor to the Buyers pursuant to this Agreement shall be prepared in accordance with GAAP, or, if applicable to SEC filings, the appropriate SEC accounting regulations.

Section 6.19 Servicing. The PMC Seller shall maintain adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same types as may from time to time constitute Mortgage Loans and in accordance with Accepted Servicing Practices and the Servicing Contracts.

Section 6.20 No Pledge. Except as contemplated herein, none of the PMC Seller, the PMH Seller or the Guarantor shall (a) pledge, transfer or convey any security interest in the Dedicated Account to any Person without the express written consent of the Buyers (at the written direction of the Indenture Trustee on behalf of the Noteholders) or (b) pledge, grant a security interest or assign any existing or future rights to service any of the Repurchase Assets or to be compensated for servicing any of the Repurchase Assets, or pledge or grant to any other Person any security interest in any Assets or Servicing Contracts.

Section 6.21 Plan Assets. Neither Seller shall use “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) to engage in this Agreement or any Transaction hereunder if it would cause any Buyer to incur any prohibited transaction excise tax penalties under Section 4975 of the Code or otherwise constitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or on Section 4975 of the Code. Transactions to or with either of the Sellers or the Guarantor shall not be subject to any state or local statute regulating investments of or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA which would be violated by the Transactions contemplated hereunder.

Section 6.22 Sharing of Information. Each of the Sellers and the Guarantor shall allow the Buyers to exchange information related to each of the Sellers and the Guarantor and the Transactions hereunder with noteholders or other third party lenders or investors and each of the Sellers and the Guarantor shall permit each such person to share such information with the Buyers.

Section 6.23 Modification of the Servicing Contracts and Participation Agreements. The PMC Seller shall not consent with respect to any Servicing Contracts or Participation Agreements related to any Asset that constitutes a Purchased Asset or Repurchase Asset, to (i) the modification, amendment or termination of such Servicing Contracts or Participation Agreements, (ii) the waiver of any provision of such Servicing Contracts or Participation Agreements or (iii) the resignation of the PMC Seller as servicer under the Servicing Contracts, or the assignment, transfer, or material delegation of any of its rights or obligations, under such Servicing Contracts or Participation Agreements, without the prior written consent of the Buyers (at the written direction of the Indenture Trustee on behalf of the Noteholders). Notwithstanding anything to the contrary herein or any of the other Program Agreements, Fannie Mae has the absolute and unconditional right to modify the Fannie Mae Lender Contract at any time.

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Section 6.24 [Reserved].

Section 6.25 No Modification of the Participation Agreements. Neither Seller shall consent, with respect to the Participation Agreements related to any Purchased Assets or Repurchase Assets, to (i) the modification, amendment or termination of such Participation Agreements, (ii) the waiver of any provision of such Participation Agreements or (iii) the assignment, transfer, or material delegation of any of its rights or obligations, under Participation Agreements, without the prior written consent of the Buyers (at the written direction of the Indenture Trustee on behalf of the Noteholders). Notwithstanding anything to the contrary set forth in the Participation Agreements, each Buyer is hereby appointed and is an intended third party beneficiary thereof, with full enforcement rights as if a party thereto.

Section 6.26 No Subservicing. Except with respect to an Eligible Subservicing Agreement, neither Seller shall permit any of the Purchased Assets or Repurchase Assets to be subject to any subservicing agreement or subservicing arrangement without the prior written consent of the Buyers (at the written direction of the Indenture Trustee on behalf of the Noteholders).

ARTICLE VIIDEFAULTS/RIGHTS AND REMEDIES OF THE BUYERS UPON DEFAULT

Section 7.01 Events of Default. Each of the following events or circumstances shall constitute an “Event of Default”:

(a) Payment Failure. Failure of any Seller (which failure continues for a period of two (2) Business Days following written notice (which may be in electronic form) from any Buyer) to (i) make any payment of Price Differential or Repurchase Price or any other sum which has become due, on an MRA Payment Date or otherwise, whether by acceleration or otherwise, under the terms of this Agreement, or (ii) cure any Margin Deficit when due pursuant to Section 2.05 hereof.

(b) Assignment. Assignment or attempted assignment by any Seller or the Guarantor of this Agreement or any rights hereunder without first obtaining the specific written consent of the Buyers (at the written direction of the Indenture Trustee on behalf of the Noteholders), or the granting by any Seller of any security interest, lien or other encumbrances on any Purchased Assets or Repurchase Assets to any person other than the Buyers.

(c) Insolvency. An Act of Insolvency shall have occurred with respect to any Seller, the Guarantor or any Affiliate thereof.

(d) Immediate Breach of Representation or Covenant or Obligation. A breach by any Seller of any of the representations, warranties or covenants or obligations set forth in Sections 3.01 (Sellers and Guarantor Existence), 3.06 (Solvency), 6.02 (Prohibition of Fundamental Changes), 6.14 (Existence), 6.20 (No Pledge) or 6.21 (Plan Assets) of this Agreement.

(e) Additional Breach of Representation or Covenant. A material breach by any Seller or the Guarantor of any other material representation, warranty or covenant set forth in this Agreement (and not otherwise specified in Section 7.01(d) above), if such breach is not cured within thirty (30) days.

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(f) Guarantor Breach. A breach by the Guarantor of any material representation, warranty or covenant set forth in the PC Repo Guaranty or any other Program Agreement if such breach is not cured within thirty (30) days (provided that the breach of the covenant in Section 6(c) of the PC Repo Guaranty shall not be entitled to such cure period), any “event of default” by the Guarantor under the PC Repo Guaranty, any repudiation of the PC Repo Guaranty by the Guarantor, or if the PC Repo Guaranty is not enforceable against the Guarantor.

(g) Change in Control. The occurrence of a Change in Control.

(h) Government Action. Any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of any Seller, the Guarantor or any Affiliate thereof, or shall have taken any action to displace the management of any Seller, the Guarantor or any Affiliate thereof or to curtail its authority in the conduct of the business of any Seller, the Guarantor or any Affiliate thereof, or takes any action in the nature of enforcement to remove, limit or restrict the approval of the any Seller, the Guarantor or Affiliate thereof as an issuer, buyer or a seller/servicer of Mortgage Loans or securities backed thereby, and such action provided for in this subparagraph (h) shall not have been discontinued or stayed within thirty (30) days.

(i) Inability to Perform. A Responsible Officer of any Seller or the Guarantor shall admit its inability to, or its intention not to, perform any of the Sellers’ Obligations or the Guarantor’s obligations hereunder or the PC Repo Guaranty.

(j) Security Interest. This Agreement shall for any reason cease to create a valid, first priority security interest in any material portion of the Repurchase Assets purported to be covered hereby.

(k) Financial Statements. Any Seller’s or the Guarantor’s audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of such Seller or the Guarantor as a “going concern” or a reference of similar import.

(l) Validity of Agreement. For any reason, this Agreement at any time shall not be in full force and effect in all material respects or shall not be enforceable in all material respects in accordance with its terms, or any Lien granted pursuant thereto shall fail to be perfected and of first priority, or any Seller or any Affiliate of such Seller shall seek to disaffirm, terminate, limit or reduce its obligations hereunder or the Guarantor’s obligations under the PC Repo Guaranty;

(m) Dedicated Account. Except as permitted under Section 6.12(b), any Seller or any other Person shall have withdrawn any amounts on deposit in the Dedicated Account without the consent of the Buyers (at the written direction of the Indenture Trustee on behalf of the Noteholders) other than funds deposited or withdrawn in error.

(n) Deposit and Remittance Requirements. The PMC Seller shall fail to comply with the deposit and remittance requirements set forth in the Fannie Mae Lender Contract (subject to any cure period provided therein) or Section 4.2(a) of the Base Indenture (and such failure under Section 4.2(a) of the Base Indenture continues unremedied for a period of two (2) Business Days after a Responsible Officer of the PMC Seller obtains actual knowledge of such failure, or receives written notice from the Indenture Trustee or any Noteholder of such failure).

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(o) [Reserved].

(p) Approved Mortgagee; Approved Servicer; Eligible Subservicer.

(i) The PMC Seller ceases to be (A) if and to the extent that any FHA Loans, USDA Loans or VA Loans are Subject Mortgages, a HUD approved mortgagee pursuant to Section 203 of the National Housing Act or (B) a Fannie Mae approved seller/servicer or HUD, if and to the extent that any FHA Loans, USDA Loans or VA Loans are Subject Mortgages, or Fannie Mae, as applicable, suspends, rescinds, halts, eliminates, withdraws, annuls, repeals, voids or terminates the status of PMC Seller as either (1) if and to the extent that any FHA Loans, USDA Loans or VA Loans are Subject Mortgages, a HUD approved mortgagee pursuant to Section 203 of the National Housing Act or (2) a Fannie Mae approved seller/servicer; or

(ii) A Subservicer Termination Event; provided that no Event of Default shall occur if, upon a Subservicer Termination Event, a replacement Eligible Subservicer (i) is identified by Administrator or the Co-Issuer Administrator that meets all the qualifications of an Eligible Subservicer within thirty (30) days and (ii) such Eligible Subservicer replaces the Subservicer within sixty (60) days, of such Subservicer Termination Event.

(q) Fraud; Violation of Requirements. (i) Any Seller engages or has engaged in fraud or other reckless or intentional wrongdoing in connection herewith or any other Program Agreement or any document submitted pursuant thereto or otherwise in connection with any MBS, or in connection with any federal mortgage insurance or loan guaranty program, or other federal program related to any of the Mortgage Loans; or (ii) any Seller has used any payments, collections, recoveries or other funds pertaining in any way to the Mortgage Loans in violation of the requirements of the Fannie Mae Lender Contract or any and all instruments, agreements, invoices or other writings which give rise to or otherwise evidence any of the MSRs.

(r) Change to Fannie Mae Lender Contract. Any change to the Fannie Mae Lender Contract or any and all instruments, agreements, invoices or other writings which give rise to or otherwise evidence any of the MSRs that would result in a Material Adverse Effect on any Seller.

(s) Improper Transfer of Participation Certificate. Either of PMC or PMH sells and/or contributes any Participation Certificate to any Person other than the Issuer Trusts or the Indenture Trustee.

(t) Cross Acceleration. (i) An “event of default” has occurred and is continuing under the Indenture, (ii) any Seller or Affiliates thereof shall be in default under (i) any Indebtedness, in the aggregate, in excess of $100,000,000 of any Seller or any Affiliate thereof which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration

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of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness, or (iii) any other contract or contracts, in the aggregate in excess of $100,000,000 to which any Seller or any Affiliate thereof is a party which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary of such contract.

Section 7.02 No Waiver. An Event of Default shall be deemed to be continuing unless expressly waived by the Indenture Trustee on behalf of the Noteholders in writing.

Section 7.03 Due and Payable. Upon the occurrence of any Event of Default which has not been waived in writing by the Buyers (at the written direction of the Indenture Trustee on behalf of the Noteholders), the Buyers may (at the written direction of the Indenture Trustee on behalf of the Noteholders), by notice to the Sellers, declare all Obligations to be immediately due and payable, and any obligation of the Buyers to enter into Transactions with the Sellers shall thereupon immediately terminate. Upon such declaration, the Obligations shall become immediately due and payable, both as to Purchase Price outstanding and Price Differential, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or other evidence of such Obligations to the contrary notwithstanding, except with respect to any Event of Default set forth in Section 7.01(c), in which case all Obligations shall automatically become immediately due and payable without the necessity of any notice or other demand, and any obligation of the Buyers to enter into Transactions with the Sellers shall immediately terminate. The Buyers may enforce payment of the same and exercise any or all of the rights, powers and remedies possessed by the Buyers, whether under this Agreement or any other Program Agreement or afforded by Applicable Law.

Section 7.04 Fees. The remedies provided for herein are cumulative and are not exclusive of any other remedies provided by law. Each Seller agrees to pay to the Buyers’ reasonable attorneys’ fees and reasonable legal expenses incurred in enforcing the Buyers’ rights, powers and remedies under this Agreement and each other Program Agreement.

Section 7.05 Default Rate. Without regard to whether either Buyer has exercised any other rights or remedies hereunder, if an Event of Default shall have occurred and be continuing, the applicable Pricing Rate shall be increased as set forth in the Pricing Side Letter, but in no event shall the Pricing Rate exceed the maximum amount permitted by law.

Section 7.06 Acknowledgement of Security Interest Grant to Indenture Trustee. Notwithstanding anything to the contrary contained in this Agreement, each of the Sellers and Buyers acknowledge that, pursuant to the Base Indenture, each Buyer has granted to the Indenture Trustee a security interest in all of its right, title and interest in and to, whether now owned or hereinafter acquired and wheresoever located, all rights and claims of such Buyer under this Agreement. The Sellers each consent to such security interest grant and acknowledge that the Indenture Trustee shall receive the benefit of each Buyer’s rights under this Agreement pursuant to the Base Indenture.

ARTICLE VIII

 

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ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; SEPARATE ACTIONS BY THE BUYERS

Section 8.01 Entire Agreement; Amendments. This Agreement (including the Schedules and Exhibits hereto) constitutes the entire agreement of the parties hereto and supersedes any and all prior or contemporaneous agreements, written or oral, as to the matters contained herein, and no modification or waiver of any provision hereof or any of the Program Agreements, nor consent to the departure by the Sellers therefrom, shall be effective unless the same is in writing, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which it is given. Any amendment of this Agreement which affects the rights, duties, immunities, obligations or liabilities of the Owner Trustee in its capacity as owner trustee under the Trust Agreement shall require the written consent of the Owner Trustee.

Section 8.02 Waivers, Separate Actions by the Buyers. Any amendment or waiver effected in accordance with this Article VIII shall be binding upon the Buyers and the Sellers; and the Buyers’ failure to insist upon the strict performance of any term, condition or other provision of this Agreement or any of the Program Agreements, or to exercise any right or remedy hereunder or thereunder, shall not constitute a waiver by the Buyers of any such term, condition or other provision or Default or Event of Default in connection therewith, nor shall a single or partial exercise of any such right or remedy preclude any other or future exercise, or the exercise of any other right or remedy; and any waiver of any such term, condition or other provision or of any such Default or Event of Default shall not affect or alter this Agreement or any of the Program Agreements, and each and every term, condition and other provision of this Agreement and the Program Agreements shall, in such event, continue in full force and effect and shall be operative with respect to any other then existing or subsequent Default or Event of Default in connection therewith. An Event of Default hereunder or under any of the Program Agreements shall be deemed to be continuing unless and until waived in writing by the Buyers, as provided in Section 7.02.

ARTICLE IXSUCCESSORS AND ASSIGNS

Section 9.01 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, any portion thereof, or any interest therein. The Sellers shall not have the right to assign all or any part of this Agreement or any interest herein without the prior written consent of the Buyers (at the written direction of the Indenture Trustee on behalf of the Noteholders).

Section 9.02 Transfers.

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(a) Each Buyer may in accordance with Applicable Law at any time assign, pledge, hypothecate, or otherwise transfer to one or more banks, financial institutions, investment companies, investment funds or any other Person (each, a “Transferee”) all or a portion of such Buyer’s rights and obligations under this Agreement and the other Program Agreements; provided, that (i) each Seller has consented to such assignment, pledge, hypothecation, or other transfer; provided, however, any such Seller’s consent shall not be required in the event that (A) such Transferee is an Affiliate of the Administrative Agent or (B) an Event of Default has occurred; (ii) absent an Event of Default, the related Buyer shall give at least ten (10) days’ prior notice thereof to the related Seller; and (iii) that each such sale shall represent an interest in the Transactions in an aggregate Purchase Price of $1,000,000 or more, other than with respect to a participating interest consisting of a pro rata interest in all payments due to such Buyer under this Agreement and prior to an Event of Default such Buyer receives an opinion of a nationally recognized tax counsel experienced in such matters that such sale will not result in either of the Issuer or Co-Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes. In the event of any such assignment, pledge, hypothecation or transfer by a Buyer of such Buyer’s rights under this Agreement and the other Program Agreements, the Sellers shall continue to deal solely and directly with such Buyer in connection with such Buyer’s rights and obligations under this Agreement. The Buyers (acting as agent for the Sellers) shall maintain at its address referred to in Section 10.04 a register (the “Register”) for the recordation of the names and addresses of Transferees, and the Purchase Price outstanding and Price Differential in the Transactions held by each thereof. The entries in the Register shall be prima facie conclusive and binding, and the Sellers may treat each Person whose name is recorded in the Register as the owner of the Transactions recorded therein for all purposes of this Agreement. No assignment shall be effective until it is recorded in the Register.

(b) Each Buyer may distribute to any prospective assignee any document or other information delivered to such Buyer by the Sellers.

Section 9.03 Buyers and Participant Register. (a) Subject to acceptance and recording thereof pursuant to paragraph (b) of this Section 9.03, from and after the effective date specified in each assignment and acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such assignment and acceptance, have the rights and obligations of the applicable Buyer under this Agreement.

(b) The Sellers or an agent of the Sellers shall maintain a register (the “Transaction Register”) on which it will record the Transactions entered into hereunder, and each assignment and acceptance and participation. The Transaction Register shall include the names and addresses of the Buyers (including all assignees, successors and participants), and the Purchase Price of the Transactions entered into by the Buyers. Failure to make any such recordation, or any error in such recordation shall not affect the Sellers’ obligations in respect of such Transactions. If any Buyer sells a participation in any Transaction, it shall provide the related Seller, or maintain as agent of the related Seller, the information described in this paragraph and permit the related Seller to review such information as reasonably needed for the related Seller to comply with its obligations under this Agreement or under any Applicable Law or governmental regulation or procedure.

ARTICLE XMISCELLANEOUS

Section 10.01 Survival. This Agreement and the other Program Agreements and all covenants, agreements, representations and warranties herein and therein and in the certificates delivered pursuant hereto and thereto, shall survive the entering into of the Transaction and shall continue in full force and effect so long as any Obligations are outstanding and unpaid.

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Section 10.02 Nonliability of the Buyers. The parties hereto agree that, notwithstanding any affiliation that may exist between the Sellers and the Buyers, the relationship between the Sellers and the Buyers shall be solely that of arms-length participants. No Buyer shall have any fiduciary responsibilities to the Sellers. Each Seller (i) agrees that no Buyer shall have any liability to such Seller (whether sounding in tort, contract or otherwise) for losses suffered by such Seller in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by this agreement, the other loan documents or any other agreement entered into in connection herewith or any act, omission or event occurring in connection therewith, unless it is determined by a judgment of a court that is binding on such Buyer (which judgment shall be final and not subject to review on appeal), that such losses were the result of acts or omissions on the part of such Buyer constituting gross negligence or willful misconduct and (ii) waives, releases and agrees not to sue upon any claim against each Buyer (whether sounding in tort, contract or otherwise), except a claim based upon gross negligence or willful misconduct. Whether or not such damages are related to a claim that is subject to such waiver and whether or not such waiver is effective, no Buyer shall have any liability with respect to, and each Seller hereby waives, releases and agrees not to sue upon any claim for, any special, indirect, consequential or punitive damages suffered by such Seller in connection with, arising out of, or in any way related to the transactions contemplated or the relationship established by this Agreement, the other loan documents or any other agreement entered into in connection herewith or therewith or any act, omission or event occurring in connection herewith or therewith, unless it is determined by a judgment of a court that is binding on the related Buyer (which judgment shall be final and not subject to review on appeal), that such damages were the result of acts or omissions on the part of a Buyer, as applicable, constituting willful misconduct or gross negligence.

Section 10.03 Governing Law; Jurisdiction, Waiver of Jury Trial: Waiver of Damages. (a) This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Each Seller acknowledges that the obligations of the Buyers hereunder or otherwise are not the subject of any guaranty by, or recourse to, any direct or indirect parent or other Affiliate of the Buyers or any Buyer. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

(b) EACH OF SELLERS AND GUARANTOR HEREBY WAIVES TRIAL BY JURY. EACH OF SELLERS AND GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS DOCUMENTS IN ANY ACTION OR PROCEEDING. EACH OF SELLERS AND GUARANTOR HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO, EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.

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(c) Each Seller further irrevocably consents to the service of process of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Seller at the address set forth in Section 10.04 hereof.

(d) Nothing herein shall affect the right of the Buyers to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Seller in any other jurisdiction.

(e) Each Seller waives the posting of any bond otherwise required of the Buyers in connection with any judicial process or proceeding to enforce any judgment or other court order entered in favor of the Buyers, or to enforce by specific performance, temporary restraining order or preliminary or permanent injunction this Agreement or any of the other Program Agreements.

Section 10.04 Notices. Any and all notices (with the exception of Transaction Notices, which shall be delivered via facsimile only), statements, demands or other communications hereunder may be given by a party to the other by mail, email, facsimile, messenger or otherwise to the address specified below, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence.

If to the PMC Seller or the Guarantor:

PennyMac Corp.

3043 Townsgate Road, Suite 300

Westlake Village, CA 91361

Attention: Pamela Marsh/Josh Smith

Phone Number: (805) 330-6059/(818) 224-7078

E-mail: pamela.marsh@pennymac.com;

josh.smith@pennymac.com

with a copy to:

 

PennyMac Corp.

3043 Townsgate Road, Suite 300

Westlake Village, CA 91361

Attention: Derek Stark
Phone Number: (818) 746-2289
E-mail: derek.stark@pnmac.com

If to the PMH Seller:

PennyMac Holdings, LLC

3043 Townsgate Road, Suite 310

Westlake Village, CA 91361

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Attention: Pamela Marsh/Josh Smith

Phone Number: (805) 330-6059/(818) 224-7078

E-mail: pamela.marsh@pennymac.com;

josh.smith@pennymac.com

with a copy to:

 

PennyMac Holdings, LLC

3043 Townsgate Road, Suite 310

Westlake Village, CA 91361

Attention: Derek Stark
Phone Number: (818) 746-2289
E-mail: derek.stark@pnmac.com

If to the Issuer Buyer:

PMT ISSUER TRUST - FMSR

c/o Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington, Delaware 19801

Attention: Corporate Trust Administration

Phone Number: (302) 888-7437

Fax Number: (302) 421-9137

E-mail: MBrzoska@wsfsbank.com

With a copy to

Pennymac Corp.

3043 Townsgate Road, Suite 300

Westlake Village, CA 91361

Attention: Pamela Marsh/Josh Smith

Phone Number: (805) 330-6059/(818) 224-7078

E-mail: pamela.marsh@pennymac.com; josh.smith@pennymac.com

With a copy to the Administrative Agent:

Atlas Securitized Products, L.P.

3 Bryant Park

New York, New York 10036

Phone Number: (212) 525-3200

E-mail: AtlasSPGeneralCounsel@Atlas-SP.com

If to the Co-Issuer Buyer:

PMT CO-ISSUER TRUST I – FMSR

c/o Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington, Delaware 19801

Attention: Corporate Trust Administration

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Phone Number: (302) 888-7437

Fax Number: (302) 421-9137

E-mail: MBrzoska@wsfsbank.com

With a copy to

Pennymac Holdings, LLC

3043 Townsgate Road, Suite 310

Westlake Village, CA 91361

Attention: Pamela Marsh/Josh Smith

Phone Number: (805) 330-6059/(818) 224-7078

E-mail: pamela.marsh@pennymac.com; josh.smith@pennymac.com

With a copy to the Administrative Agent:

Atlas Securitized Products, L.P.

3 Bryant Park

New York, New York 10036

Phone Number: (212) 525-3200

E-mail: AtlasSPGeneralCounsel@Atlas-SP.com

Section 10.05 Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. In case any provision in or obligation under this Agreement or any other Program Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

Section 10.06 Section Headings. The Article and Section headings in this Agreement are inserted for convenience of reference only and shall not in any way affect the meaning or construction of any provision of this Agreement.

Section 10.07 Counterparts. This Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. The words “executed,” “signed,” “signature,” and words of like import as used above and elsewhere in this Agreement or in any other certificate, agreement or document related to this transaction shall include, in addition to manually executed signatures, images of manually executed signatures transmitted by facsimile or other electronic format (including, without limitation, “pdf,” “tif” or “jpg”) and other electronic signatures (including, without limitation, any electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record). The use of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent, communicated, received, or stored by electronic means) shall be of the same legal effect, validity, enforceability and admissibility as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code.

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Each party to this Agreement hereby consents to the use of any secure third party electronic signature capture service providers (including, without limitation, DocuSign), as long as such service providers use system logs and audit trails that establish a temporal and process link between the presentation of identity documents and the electronic signing, together with identifying information that can be used to verify the electronic signature and its attribution to the signer’s identity and evidence of the signer’s agreement to conduct the transaction electronically and of the signer’s execution of each electronic signature. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Agreement.

Section 10.08 Periodic Due Diligence Review. The Sellers and the Guarantor acknowledge that each of the Buyers has the right to perform continuing due diligence reviews with respect to the Sellers and the Guarantor and the Assets, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and the Sellers and the Guarantor agree that upon reasonable (but no less than five (5) Business Days’) prior notice unless an Event of Default shall have occurred, in which case no notice is required, to the Sellers or the Guarantor, the Buyers or their authorized representatives will be permitted during normal business hours, and in a manner that does not unreasonably interfere with the ordinary conduct of the Sellers’ or the Guarantor’s business, to examine, inspect, and make copies and extracts of, any and all documents, records, agreements, instruments or information relating to such Assets in the possession or under the control of the Sellers or the Guarantor. The Sellers and the Guarantor also shall make available to the Buyers a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Assets. Without limiting the generality of the foregoing, the Sellers and the Guarantor acknowledge that the Buyers may enter into a Transaction related to any Purchased Assets from the Sellers based solely upon the information provided by the Sellers to the Buyers in the Asset Schedule and the representations, warranties and covenants contained herein, and that the Buyers, at their option, have the right at any time to conduct a partial or complete due diligence review on some or all of the Assets related to a Transaction. The Sellers and the Guarantor agree to cooperate with the Buyers and any third party underwriter in connection with such underwriting, including, providing the Buyers and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession, or under the control, of the Sellers or the Guarantor.

Section 10.09 Hypothecation or Pledge of Repurchase Assets. Subject to the applicable Acknowledgment Agreement, the Buyers shall have free and unrestricted use of all Repurchase Assets and nothing in this Agreement shall preclude the Buyers from engaging in repurchase transactions with all or a portion of the Repurchase Assets or otherwise pledging, repledging, transferring, hypothecating, or rehypothecating all or a portion of the Repurchase Assets other than with respect to a participating interest consisting of a pro rata interest in all payments due to Buyers under this Agreement and prior to an Event of Default each of the Buyers receives an opinion of a nationally recognized tax counsel experienced in such matters that such sale will not result in either of the Issuer or Co-Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes.

38

 

Section 10.10 Non-Confidentiality of Tax Treatment. (a) This Agreement and its terms, provisions, supplements and amendments, and notices hereunder, are proprietary to the Buyers or the Sellers and the Guarantor, as applicable, and shall be held by each party hereto, as applicable in strict confidence and shall not be disclosed to any third party without the written consent of the Buyers (at the written direction of the Administrative Agent), the Sellers or the Guarantor, as applicable, except for (i) disclosure to the Buyers’, the Sellers’ or the Guarantor’s direct and indirect Affiliates and Subsidiaries, attorneys or accountants, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, (ii) disclosure to the parties to the Indenture, including, noteholders and investors related thereto, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, or (iii) disclosure required by law, rule, regulation or order of a court or other regulatory body. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Program Agreements, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that the Sellers may not disclose the name of or identifying information with respect to the Buyers or any pricing terms (including the Pricing Rate, Purchase Price Percentage and Purchase Price) or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the federal, state and local tax treatment of the Transactions and is not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of the Buyers (at the written direction of the Administrative Agent).

(b) Notwithstanding anything in this Agreement to the contrary, each Seller shall comply with all applicable local, state and federal laws, including all privacy and data protection law, rules and regulations that are applicable to the Repurchase Assets and/or any applicable terms of this Agreement (the “Confidential Information”). Each Seller understands that the Confidential Information may contain “nonpublic personal information”, as that term is defined in Section 509(4) of the Gramm-Leach-Bliley Act (the “GLB Act”), and each Seller agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the GLB Act and other applicable federal and state privacy laws. Each Seller shall implement such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of the “nonpublic personal information” of the “customers” and “consumers” (as those terms are defined in the GLB Act) of the Buyers, the Administrative Agent or any Affiliate of the Administrative Agent which such Seller holds, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Each Seller represents and warrants that it has implemented appropriate measures to meet the objectives of Section 501(b) of the GLB Act and of the applicable standards adopted pursuant thereto, as now or hereafter in effect. Upon request, each Seller will provide evidence reasonably satisfactory to allow the Buyers to confirm that the providing party has satisfied its obligations as required under this section. Without limitation, this may include the Buyers’ review of audits, summaries of test results, and other equivalent evaluations of such Seller. Each Seller shall notify the Buyers promptly following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of the Buyers, the Administrative Agent or any Affiliate of the Administrative Agent provided directly to such Seller by the Buyers or the Administrative Agent or an Affiliate of the Administrative Agent. Each Seller shall provide such notice to the Buyers by personal delivery, by facsimile with confirmation of receipt, or by overnight courier with confirmation of receipt to the applicable requesting individual.

39

 

Section 10.11 Set-off. In addition to any rights and remedies of the Buyers hereunder and by law, the Buyers shall have the right, without prior notice to the Sellers or the Guarantor, any such notice being expressly waived by the Sellers and the Guarantor to the extent permitted by Applicable Law to set-off and appropriate and apply against any Obligation from the applicable Seller, the Guarantor or any Affiliate thereof to the Buyers, the Administrative Agent or any Affiliate of the Administrative Agent any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return funds to the applicable Seller), credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from the Buyers, the Administrative Agent or any Affiliate of the Administrative Agent to or for the credit or the account of any Seller, the Guarantor or any Affiliate thereof. Each of the Buyers agrees promptly to notify the Sellers or the Guarantor after any such set off and application made by the Buyers; provided that the failure to give such notice shall not affect the validity of such set off and application.

Section 10.12 Intent.

(a) The parties recognize that this Agreement and each Transaction hereunder is a “master netting agreement” as that term is defined in Section 101(38A) of the Bankruptcy Code, and a “securities contract” as that term is defined in Section 741 of the Bankruptcy Code, as amended and that all payments hereunder are deemed “margin payments” or “settlement payments” as defined in the Bankruptcy Code.

(b) It is understood that either party’s right to liquidate Purchased Assets delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Section 7.03 hereof is a contractual right to liquidate such Transaction as described in Section 555 and Section 561 of the Bankruptcy Code.

(c) The parties agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

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

(e) This Agreement is intended to be a “securities contract,” within the meaning of Section 555 under the Bankruptcy Code, and a “master netting agreement,” within the meaning of Section 561 under the Bankruptcy Code. It is the intention of the parties that, for U.S. federal income tax purposes and for accounting purposes, each Transaction constitute a financing, and that the applicable Seller be (except to the extent that the related Buyer shall have exercised its remedies following an Event of Default) the owner of the Purchased Assets for such purposes.

40

 

Unless prohibited by applicable law, the related Seller and Buyer shall treat the Transactions as described in the preceding sentence (including on any and all filings with any U.S. federal, state, or local taxing authority and agree not to take any action inconsistent with such treatment).

(f) The parties intend that Citibank, N.A., a “commercial bank”, will hold each Participation Certificate as a “custodian” on behalf of the Buyers, each of which is a “customer” in connection with a “securities contract” (as each such term is used in Section 101(22) of the Bankruptcy Code). The parties intend that in such capacity, Citibank, N.A. is serving as a “financial institution” (as defined in Section 101(22) of the Bankruptcy Code).

Section 10.13 Third Party Beneficiaries. (a) The Administrative Agent, the Owner Trustee and the Indenture Trustee shall be express third party beneficiaries of this Agreement.

Section 10.14 Owner Trustee Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by WSFS, not individually or personally but solely as trustee of the Issuer Trusts, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, warranties, undertakings and agreements herein made on the part of each of the Issuer Trusts is made and intended not as personal representations, warranties, undertakings and agreements by WSFS but is made and intended for the purpose of binding only the Issuer Trusts, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has made no investigation as to the accuracy or completeness of any representations or warranties made by the Issuer Trusts in this Agreement and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness or expenses of the Issuer Trusts or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer Trusts under this Agreement or any other related documents.

Section 10.15 Actions and Discretion of the Buyers. Any provision providing for the exercise of any action or discretion by any Buyer shall be exercised by the Indenture Trustee at the written direction of either 100% of the VFN Noteholders or the Majority Noteholders of all Outstanding Notes. To the extent there are conflicting directions between 100% of the VFN Noteholders and the Majority Noteholders, the Indenture Trustee will take its direction from 100% of the VFN Noteholders. In addition, and notwithstanding any other provision in this Agreement to the contrary, any approvals, consents, votes or other rights exercisable by any Buyer under this Agreement shall be exercised by the Indenture Trustee on behalf of Noteholders.

Section 10.16 Consent, Authorization and Acknowledgement of Amended and Restated Agreement. As of the date hereof, the terms and conditions of the Original Agreement, shall be amended and restated as set forth herein and the Original Agreement shall be superseded by this Agreement. The rights and obligations of the parties evidenced by the Original Agreement shall be evidenced by this Agreement and shall continue to be in full force and effect as set forth in this Agreement. Each of the parties hereto hereby consents to this Agreement and acknowledges and agrees that the amendments effected by this Agreement shall become effective on the date hereof. Pursuant to Section 10.15 of the Original Agreement, each of Nexera and Citibank, as 100% of the VFN Noteholders, hereby directs the Indenture Trustee to direct the Issuer Buyer to enter into this Agreement, and the Indenture Trustee hereby directs the Issuer Buyer to enter into this Agreement.

41

 

Section 10.17 Amendment and Restatement. The Issuer Buyer, the Guarantor and the PMC Seller entered into the Original Agreement. The Buyers, the Sellers and the Guarantor desire to enter into this Agreement in order to amend and restate the Original Agreement in its entirety. The amendment and restatement of the Original Agreement shall become effective on the Effective Date, and each of the Buyers, the Sellers and the Guarantor shall hereafter be bound by the terms and conditions of this Agreement and the other Program Agreements. This Agreement amends and restates the terms and conditions of the Original Agreement, and is not a novation of any of the agreements or obligations incurred pursuant to the terms of the Original Agreement. Accordingly, all of the agreements and obligations incurred pursuant to the terms of the Original Agreement are hereby ratified and affirmed by the parties hereto and remain in full force and effect. For the avoidance of doubt, it is the intent of the Buyers, the Sellers and the Guarantor that the security interests and liens granted in the Purchased Assets or Repurchase Assets pursuant to Original Agreement shall continue in full force and effect. All references to the Original Agreement in any Program Agreement or other document or instrument delivered in connection therewith shall be deemed to refer to this Agreement and the provisions hereof.

 

Section 10.18 Reaffirmation of PC Repo Guaranty. Guarantor hereby (i) agrees that the benefits of the PC Repo Guaranty are hereby extended to all Buyers under this Agreement, (ii) agrees that amending and restating of the Original Agreement shall not be a defense to the liability of Guarantor or impair the rights of Buyers under the PC Repo Guaranty, (iii) ratifies and affirms all of the terms, covenants, conditions and obligations of the PC Repo Guaranty and (iv) acknowledges and agrees that such PC Repo Guaranty is and shall continue to be in full force and effect.

[Signature Pages Follow]

 

42

 

IN WITNESS WHEREOF, the Sellers, the Guarantor, the Buyers, Indenture Trustee and Administrative Agent have caused this Amended and Restated Master Repurchase Agreement to be executed and delivered by their duly authorized officers or trustees as of the date first above written.

 

PMT ISSUER TRUST - FMSR, as a Buyer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By:  /s/ Mark H. Brozoska

Name:  Mark H. Brzoska

Title:    Vice President

 

 

[Signature page to A&R PC Master Repurchase Agreement – PMT Issuer Trust FMSR

& PMT Co-Issuer Trust I - FMSR]

 

 

PMT CO-ISSUER TRUST I – FMSR, as a Buyer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By:  /s/ Mark H. Brzoska

Name:  Mark H. Brzoska

Title:    Vice President

 

 

 

[Signature page to A&R PC Master Repurchase Agreement – PMT Issuer Trust FMSR

& PMT Co-Issuer Trust I - FMSR]

 

PENNYMAC CORP., as a Seller

By: /s/ Pamela Marsh

Name: Pamela Marsh

Title: Senior Managing Director and Treasurer

 

[Signature page to A&R PC Master Repurchase Agreement – PMT Issuer Trust FMSR

& PMT Co-Issuer Trust I - FMSR]

 

PENNYMAC HOLDINGS, LLC, as a Seller

By: /s/ Pamela Marsh

Name: Pamela Marsh

Title: Senior Managing Director and Treasurer

 

[Signature page to A&R PC Master Repurchase Agreement – PMT Issuer Trust FMSR

& PMT Co-Issuer Trust I - FMSR]

 

PENNYMAC MORTGAGE INVESTMENT TRUST, as Guarantor

By: /s/ Pamela Marsh

Name: Pamela Marsh

Title: Senior Managing Director and Treasurer

 

[Signature page to A&R PC Master Repurchase Agreement – PMT Issuer Trust FMSR

& PMT Co-Issuer Trust I - FMSR]

 

CONSENTED AND AGREED TO BY:

ATLAS SECURITIZED PRODUCTS, L.P., as Administrative Agent

By: Atlas Securitized Products GP, LLC, its general partner

By: /s/ Dominic Obaditch

Name: Dominic Obaditch

Title: Authorized Signatory

 

[Signature page to A&R PC Master Repurchase Agreement – PMT Issuer Trust FMSR

& PMT Co-Issuer Trust I - FMSR]

 

CITIBANK, N.A., as Indenture Trustee NEXERA HOLDING LLC, as a VFN Repo Buyer

By: /s/ Valerie Delgado

Name: Valerie Delgado

Title: Senior Trust Officer

 

[Signature page to A&R PC Master Repurchase Agreement – PMT Issuer Trust FMSR

& PMT Co-Issuer Trust I - FMSR]

 

By: /s/ Steve Abreu

Name: Steve Abreu

Title: CEO

 

 

[Signature page to A&R PC Master Repurchase Agreement – PMT Issuer Trust FMSR

& PMT Co-Issuer Trust I - FMSR]

 

CITIBANK, N.A., as a VFN Repo Buyer

By: /s/ Arunthathi Theivakumaran

Name: Arunthathi Theivakumaran

Title: Vice President

[Signature page to A&R PC Master Repurchase Agreement – PMT Issuer Trust FMSR

& PMT Co-Issuer Trust I - FMSR]

 

SCHEDULE 1-A

REPRESENTATIONS AND WARRANTIES REGARDING THE SERVICING CONTRACTS

PMC Seller makes the following representations and warranties to the Buyers, with respect to Servicing Contracts subject to each Transaction, as of the date of this Agreement, the date of any Transaction, and while the Program Agreements are in full force and effect. PMH Seller, solely to the extent specified below, makes the following representations and warranties to the Buyers with respect to the Sold MSR Excess Spread. The representations and warranties shall be limited to Servicing Contracts that are acquired on or after the date of this Agreement. For purposes of this Schedule 1-A and the representations and warranties set forth herein, a breach of a representation or warranty shall be deemed to have been cured with respect to the Servicing Contracts if and when the applicable Seller has taken or caused to be taken action such that the event, circumstance or condition that gave rise to such breach no longer adversely affects such Servicing Contracts.

(a) Asset Schedule. The Asset Schedule most recently submitted to the Buyer is a true and correct list of the Assets pledged hereunder as of the date of submission.

(b) Servicing Contracts. All of the Servicing Contracts with respect to such Assets are in full force and effect and have not been modified in any material respect and PMC as servicer has not been terminated thereunder.

(c) Assignment. Pursuant to this Agreement, each of PMC Seller and PMH Seller grants to the applicable Buyer a valid security interest in all the right, title and interest of such Seller in and to the Repurchase Assets and the other Related Security, which security interest is perfected and of first priority, enforceable against, and creating an interest prior in right to, all creditors of and purchasers from the applicable Seller.

(d) No Liens. Each of PMC Seller and PMH Seller represents that each Purchased Asset conveyed and pledged on such Purchase Date by such Seller is owned by the applicable Seller free and clear of any Lien, except as provided herein (and in the case of all MSRs, subject and subordinated to Fannie Mae’s rights under the Acknowledgment Agreement and the Fannie Mae Requirements), and is not subject to any dispute or other Adverse Claim, except as provided herein. Each Buyer’s security interest in such Purchased Assets, the Related Security and the Collections with respect thereto, is free and clear of any Lien, except as provided herein. The Sellers have not and will not prior to the time of the pledge of any such interest to the related Buyer have sold, pledged, assigned, transferred or subjected and will not thereafter sell, pledge, assign, transfer or subject to a Lien any of such Purchased Assets, the Related Security or the Collections other than in accordance with the terms of this Agreement and the Program Agreements.

(e) Filings. On or prior to each Purchase Date, all financing statements and other documents required to be recorded or filed in order to perfect each Buyer’s security interest in, and protect the Assets and the other related Assets against all creditors of, and purchasers from, the Sellers and all other Persons whatsoever have been duly filed in each filing office necessary for such purpose, and all filing fees and taxes, if any, payable in connection with such filings have been paid in full.

Schedule 1-A-1

 

(f) Collection Policy. PMC Seller has complied in all material respects with the Collection Policy in regard to each Asset and related Servicing Contract. PMC Seller has not extended or modified the terms of any Asset or the related Servicing Contract except in accordance with the Collection Policy.

(g) Adverse Selection. PMC Seller has not selected the Purchased Assets in a manner that will adversely affect the Buyers’ interests.

(h) No Subservicing. Except as otherwise disclosed to the Buyer, all of the Purchased Assets hereunder constitute direct servicing rights (and not subservicing rights.)

(i) Good Title. Each of PMC Seller and PMH Seller represents that it has good title to all of the Repurchase Assets applicable to such Seller pledged or sold by it hereunder, free and clear of all mortgages, security interests, restrictions, Liens and encumbrances of any kind other than the Liens created by the Program Agreements.

(j) No Defenses. Each item of the Repurchase Assets was acquired by PMC Seller or PMH Seller, as applicable, in the ordinary course of its business, in good faith, for value and without notice of any defense against or claim to it on the part of any Person and there are no agreements or understandings between the Sellers and any other party which would modify, release, terminate or delay the attachment of the security interests granted to the Buyers under this Agreement and no obligor has any defense, set off, claim or counterclaim against the Sellers that can be asserted against either Buyer, whether in any proceeding to enforce the applicable Buyer’s rights in the related Mortgage Loan or otherwise.

(k) Servicing Compliance with Applicable Laws. PMC Seller has complied with the terms of each Servicing Contract and Applicable Laws in all material respects.

Schedule 1-A-2

 

SCHEDULE 1-B

REPRESENTATIONS AND WARRANTIES RE: ASSETS CONSISTING OF PARTICIPATION CERTIFICATES

Each Seller, solely with respect to itself, makes the following representations and warranties to the Buyers, with respect to such Seller’s Participation Certificate subject to each Transaction, as of the date of this Agreement, the date of any Transaction, and while the Program Agreements are in full force and effect. The representations and warranties shall be limited to Participation Certificates that are acquired on or after the date of this Agreement. For purposes of this Schedule 1-B and the representations and warranties set forth herein, a breach of a representation or warranty shall be deemed to have been cured with respect to the Participation Certificates if and when the related Seller has taken or caused to be taken action such that the event, circumstance or condition that gave rise to such breach no longer adversely affects such Participation Certificates.

(a) The representations and warranties made by the related Seller with respect to the related Servicing Contract set forth on Schedule 1-A are true and correct in all material respects.

(b) The Participation Certificate evidences a Participation Interest in the Portfolio Excess Spread.

(c) The applicable Seller has good and marketable title to, and is the sole owner and holder of, such Participation Certificate. The applicable Seller is transferring such Participation Certificate free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such Participation Certificate, other than the first priority security interest of the related Buyer granted pursuant to this Agreement, and no Participation Certificate document is subject to any assignment, participation, or pledge.

(d) No (i) monetary default, breach or violation exists with respect to any agreement or other document governing or pertaining to such Participation Certificate, the related Portfolio Excess Spread, (ii) material non-monetary default, breach or violation exists with respect to such Participation Certificate and the related Portfolio Excess Spread, or (iii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration.

(e) None of the Participation Certificates (i) is dealt in or traded on a securities exchange or in a securities market, or (ii) is held in a deposit account. For purposes of this paragraph (e), capitalized terms undefined in this Agreement have the meaning given to such term in the Uniform Commercial Code.

(f) The Participation Certificate constitutes all the issued and outstanding Participation Interests of all classes issued pursuant to the related Participation Agreement and is certificated.

(g) The Participation Certificate has been duly and validly issued.

Schedule 1-B-1

 

(h) All consents of any Person required for the grant of the security interests in the Participation Certificates to the applicable Buyer provided for herein have been obtained and are in full force and effect.

(i) Upon delivery to the applicable Buyer of the Participation Certificates (and assuming the continuing possession by such Buyer of such certificate in accordance with the requirements of Applicable Law) and the filing of a financing statement covering the Participation Certificate in the State of Delaware and naming the related Seller as debtor and the related Buyer as secured party, the related Seller has pledged to the related Buyer all of its right, title and interest to the Participation Certificates to the related Buyer. The Lien granted hereunder is a first priority Lien in the Participation Certificate.

(j) The Seller has not waived or agreed to any waiver under, or agreed to any amendment or other modification of, the Participation Agreement without the consent of the Buyers (at the written direction of the Indenture Trustee on behalf of the Noteholders).

(k) Participation Agreement.

(i) Each Participation Agreement with respect to the related Assets is in full force and effect and, except to the extent approved in writing by the Administrative Agent, on behalf of the related Buyer, the terms of the Participation Agreement have not been impaired, altered or modified in any respect.

(ii) A true and correct copy of each Participation Agreement has been delivered to the Buyer.

(iii) The related Seller has complied with all terms of each Participation Agreement to which it is a party subject to a Transaction hereunder and has fulfilled all obligations with respect thereto.

(iv) Except to the extent approved in writing by the Administrative Agent, on behalf of the Buyers, there is no material default, breach, violation or event of acceleration existing under any Participation Agreement and no event has occurred which, with the passage of time or giving of notice or both and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of termination thereunder, and the Sellers have not waived any such default, breach, violation or event of termination.

(v) Each Participation Agreement is genuine, and is the legal, valid and binding obligation of each Seller party thereto enforceable in accordance with its terms, except as such enforcement may be affected by bankruptcy, by other insolvency laws or by general principles of equity. Each Seller party thereto had legal capacity to enter into such Participation Agreement, and such Participation Agreement has been duly and properly executed by each Seller party thereto.

(vi) Pursuant to each Participation Agreement, to the extent the sale would be re-characterized, each Seller party thereto grants to the holder a valid security interest in all the right, title and interest of such Seller in and to the related Portfolio Excess Spread, which security interest is perfected and of first priority, enforceable against, creating an interest prior in right to, all creditors of such Seller.

Schedule 1-B-2

 

Schedule 1-B-3

 

SCHEDULE 1-C

RESERVED

 

 

Schedule 1-C-1

 

SCHEDULE 1-D

REPRESENTATIONS AND WARRANTIES REGARDING THE ELIGIBLE SECURITIES

 

[TO BE PROVIDED]

Schedule 1-D-1

 

SCHEDULE 1-E

REPRESENTATIONS AND WARRANTIES REGARDING THE PLEDGED MARGIN SECURITIES

 

 

[TO BE PROVIDED]

Schedule 1-E-1

 

SCHEDULE 2

PARTICIPATION AGREEMENTS AND PARTICIPATION CERTIFICATES

Participation Agreements

Fourth Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of October 10, 2023, between PennyMac Holdings, LLC, as purchaser, and PennyMac Corp., as seller, as amended, restated or modified from time to time.

Amended and Restated Retained Spread Participation Agreement, dated October 10, 2023, between PennyMac Corp., as company, and PennyMac Corp., as initial participant, as amended, restated, supplemented or modified from time to time.

Participation Certificates

Retained MSR Excess Spread PC

Sold MSR Excess Spread PC SCHEDULE 3 RESPONSIBLE OFFICERS – SELLERS AND GUARANTOR

Schedule 2-1

 

PENNYMAC CORP. AUTHORIZATIONS

Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for PennyMac Corp. under this Agreement:

Responsible Officers for execution of Program Agreements and amendments

Name

 

Title

 

Signature

Pamela Marsh

 

Senior Managing Director and
Treasurer

 

 

 

Responsible Officers for execution of Transaction Notices and day-to-day operational functions

Name

 

Title

 

Signature

Pamela Marsh

 

Senior Managing Director and
Treasurer

 

 

Maurice Watkins

 

Senior Managing Director,
Capital Markets Operations

 

 

Thomas Rettinger

 

Senior Managing Director, Head of Portfolio Risk Management

 

 

Richard Hetzel

 

Authorized Representative

 

 

Ryan Huddleston

 

Authorized Representative

 

 

Adeshola Makinde

 

Authorized Representative

 

 

Kevin Chamberlain

 

Executive Vice President, Treasury

 

 

Schedule 3-1

 

Virginia Movsessian

 

Executive Vice President, Secondary Marketing Operations

 

 

Angela Everest

 

Authorized Representative

 

 

Adriana Villalobos

 

Authorized Representative

 

 

 

 

Schedule 3-2

 

PENNYMAC HOLDINGS, LLC AUTHORIZATIONS

Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for PennyMac Holdings, LLC under this Agreement:

Responsible Officers for execution of Program Agreements and amendments

Name

 

Title

 

Signature

Pamela Marsh

 

Senior Managing Director and
Treasurer

 

 

 

Responsible Officers for execution of Transaction Notices and day-to-day operational functions

Name

 

Title

 

Signature

Pamela Marsh

 

Senior Managing Director and
Treasurer

 

 

Maurice Watkins

 

Senior Managing Director,
Capital Markets Operations

 

 

Thomas Rettinger

 

Senior Managing Director, Head of Portfolio Risk Management

 

 

Richard Hetzel

 

Authorized Representative

 

 

Ryan Huddleston

 

Authorized Representative

 

 

Adeshola Makinde

 

Authorized Representative

 

 

Kevin Chamberlain

 

Authorized Representative

 

 

Angela Everest

 

Authorized Representative

 

 

 

Schedule 3-3

 

PENNYMAC MORTGAGE INVESTMENT TRUST RESPONSIBLE OFFICERS

Name

 

Title

 

Signature

Pamela Marsh

 

Senior Managing Director,
Treasurer

 

 

 

Schedule 3-4

 

EXHIBIT A

FORM OF TRANSACTION NOTICE

Dated: [_________]

PMT ISSUER TRUST - FMSR

c/o Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington, Delaware 19801

Attention: Corporate Trust Administration

Phone Number: (302) 888-7437

Fax Number: (302) 421-9137

E-mail: MBrzoska@wsfsbank.com

PMT CO-ISSUER TRUST I – FMSR

c/o Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington, Delaware 19801

Attention: Corporate Trust Administration

Phone Number: (302) 888-7437

Fax Number: (302) 421-9137

E-mail: MBrzoska@wsfsbank.com

Atlas Securitized Products, L.P.

3 Bryant Park

New York, New York 10036

Phone Number: (212) 525-3200

E-mail: AtlasSPGeneralCounsel@Atlas-SP.com

Citibank, N.A.

Agency & Trust

388 Greenwich Street

New York, NY 10013

Attention: PMT ISSUER TRUST – FMSR Collateralized Notes

Phone Number: (714) 845-4102

Fax Number: (714) 262-4576

email: valerie.delgado@citi.com

TRANSACTION NOTICE

Ladies and Gentlemen:

We refer to the Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023 (the “Agreement”), among PMT ISSUER TRUST – FMSR (the “Issuer Buyer”), PMT CO-ISSUER TRUST I – FMSR (the “Co-Issuer Buyer”, and collectively with PMT ISSUER TRUST – FMSR, the “Buyers”), PennyMac Corp. (the “PMC Seller”), PennyMac Holdings, LLC (the “PMH Seller”, collectively with the PMC Seller, the “Sellers”) and PennyMac Mortgage Investment Trust (the “Guarantor”).

Exhibit A-1

 

Each capitalized term used but not defined herein shall have the meaning specified in the Agreement. This notice is being delivered by the [PMC Seller][PMH Seller][Sellers] pursuant to Section 2.02 of the Agreement.

Please be notified that the [PMC Seller][PMH Seller][Sellers] hereby irrevocably requests that the [Issuer Buyer][Co-Issuer Buyer] enter into the following Transaction(s) with the [PMC Seller][PMH Seller][Sellers] as follows:

Purchase Price of Transaction

Amount of Asset Base

Outstanding Purchase Price

 

 

 

 

 

 

The requested Purchase Date is _______________.

The [PMC Seller][PMH Seller][Sellers] requests that the proceeds of the Purchase Price be deposited in the [PMC Seller’s][PMH Seller’s][Sellers’] account at _______, ABA Number _______, account number ____, References: _____, Attn: _______.

The Sellers hereby represent and warrant that each of the representations and warranties made by such Sellers in each of the Program Agreements to which it is a party is true and correct in all material respects, in each case, on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date. Attached hereto is a true and correct Asset Schedule, which includes the Assets to be subject to the requested Transaction.

PENNYMAC CORP., as a Seller

By:

PENNYMAC HOLDINGS, LLC, as a Seller

By:

Exhibit A-2

 

[Asset Schedule]

Exhibit A-3

 

EXHIBIT B

FORM OF REQUEST FOR APPROVAL OF
PARTICIPATION AGREEMENTS OR PARTICIPATION CERTIFICATES

 

Dated: [_________]

 

PMT ISSUER TRUST - FMSR

c/o Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington, Delaware 19801

Attention: Corporate Trust Administration

Phone Number: (302) 888-7437

Fax Number: (302) 421-9137

E-mail: MBrzoska@wsfsbank.com

PMT CO-ISSUER TRUST I – FMSR

c/o Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington, Delaware 19801

Attention: Corporate Trust Administration

Phone Number: (302) 888-7437

Fax Number: (302) 421-9137

E-mail: MBrzoska@wsfsbank.com

REQUESTFOR APPROVAL OF
PARTICIPATION AGREEMENTOR PARTICIPATION CERTIFICATE

Ladies and Gentlemen:

We refer to the Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023 (the “Agreement”), by and among PMT ISSUER TRUST – FMSR (the “Issuer Buyer”), PMT CO-ISSUER TRUST I – FMSR (the “Co-Issuer Buyer”, and collectively with the Issuer Buyer, the “Buyers”), PennyMac Corp. (the “PMC Seller”), PennyMac Holdings, LLC (the “PMH Seller”, and collectively with the PMC Seller, the “Sellers”) and PennyMac Mortgage Investment Trust (the “Guarantor”). Each capitalized term used but not defined herein shall have the meaning specified in the Agreement. This request is being delivered by the Sellers pursuant to Section 2.12 of the Agreement.

The [PMC Seller][PMH Seller] hereby requests that the following Participation Agreement(s) or Participation Certificate(s) be approved as eligible Participation Agreement(s) or Participation Certificate(s), as applicable:

PARTICIPATION CERTIFICATES:

Description of Participation Certificate

Participation Date

Exhibit B-1

 

 

 

 

PARTICIPATION AGREEMENTS:

Description of Participation Agreement

Portfolio Mortgage Loans

Participation Date

 

 

 

 

 

[PENNYMAC CORP., as a Seller

By: ]

[PENNYMAC HOLDINGS, LLC, as a Seller

By: ]

ACKNOWLEDGED AND AGREED:

[PMT ISSUER TRUST - FMSR, as a Buyer

By:

Name:

Title:]

[PMT CO-ISSUER TRUST I – FMSR], as a Buyer

By:

Name:

Title:]

 

Exhibit B-2

 

EXHIBIT C

FORM OF MARGIN EXCESS NOTICE

Dated: [_________]

PMT ISSUER TRUST - FMSR

c/o Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington, Delaware 19801

Attention: Corporate Trust Administration

Phone Number: (302) 888-7437

Fax Number: (302) 421-9137

E-mail: MBrzoska@wsfsbank.com

PMT CO-ISSUER TRUST I – FMSR

c/o Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington, Delaware 19801

Attention: Corporate Trust Administration

Phone Number: (302) 888-7437

Fax Number: (302) 421-9137

E-mail: MBrzoska@wsfsbank.com

Atlas Securitized Products, L.P.

3 Bryant Park

New York, New York 10036

Phone Number: (212) 525-3200

E-mail: AtlasSPGeneralCounsel@Atlas-SP.com

Citibank, N.A.

Agency & Trust

388 Greenwich Street

New York, NY 10013

Attention: PMT ISSUER TRUST – FMSR Collateralized Notes

Phone Number: (714) 845-4102

Fax Number: (714) 262-4576

email: valerie.delgado@citi.com

MARGIN EXCESS NOTICE

Ladies and Gentlemen:

We refer to the Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023 (the “Agreement”), among PMT ISSUER TRUST – FMSR (the “Issuer Buyer”), PMT CO-ISSUER TRUST I – FMSR (the “Co-Issuer Buyer”, and collectively with Issuer Buyer, the “Buyers”), PennyMac Corp.

Exhibit C-1

 

(the “PMC Seller”), PennyMac Holdings, LLC (the “PMH Seller”, and collectively with the PMC Seller, the “Sellers”) and PennyMac Mortgage Investment Trust (the “Guarantor”). Each capitalized term used but not defined herein shall have the meaning specified in the Agreement. This notice is being delivered by the [PMC Seller][PMH Seller][Sellers] pursuant to Section 2.05(d) of the Agreement.

Please be notified that the [PMC Seller][PMH Seller][Sellers] hereby requests that [the Issuer Buyer][the Co-Issuer Buyer] deliver additional Consideration in an amount equal to the Margin Excess indicated below:

Margin Excess $[___________]

The Sellers hereby represent and warrant that each of the representations and warranties made by such Seller in each of the Program Agreements to which it is a party is true and correct in all material respects, in each case, on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date.

 

PENNYMAC CORP., as a Seller

By:

PENNYMAC HOLDINGS, LLC, as a Seller

By:

Exhibit C-2

EX-10.10 3 pmt-ex10_10.htm EX-10.10 EX-10.10

EXHIBIT 10.10

 

 

 

AMENDED AND RESTATED GUARANTY

by

PENNYMAC MORTGAGE INVESTMENT TRUST, as guarantor

 

 

Dated as of October 10, 2023

 

 

 

 

 

 

TABLE OF CONTENTS

Page

1. Defined Terms

2

2. Guaranty

2

3. Right of Set-off

3

4. Subrogation

3

5. Amendments, etc. with Respect to the Obligations

3

6. Guaranty Absolute and Unconditional

4

7. Reinstatement

5

8. Payments

5

9. Event of Default

6

10. Severability

6

11. Headings

6

12. No Waiver; Cumulative Remedies

6

13. Waivers and Amendments; Successors and Assigns; Governing Law

6

14. Notices

6

15. Governing Law; Jurisdiction; Waivers

6

16. Integration; Counterparts

7

17. Third Party Beneficiaries

8

18. Acknowledgments

8

19. Events of Default

8

20. Amendment and Restatement

9

21. Owner Trustee Limitation of Liability

9

 

 

 

i

 

 

AMENDED AND RESTATED GUARANTY

This AMENDED AND RESTATED GUARANTY, dated as of October 10, 2023 (as may be amended, restated, supplemented or otherwise modified from time to time, this “Guaranty”), is made by PENNYMAC MORTGAGE INVESTMENT TRUST (“Guarantor”), in favor of PMT ISSUER TRUST - FMSR, a statutory trust organized under the laws of Delaware (a “Buyer”) and PMT CO-ISSUER TRUST I – FMSR, a statutory trust organized under the laws of Delaware (a “Buyer”, and together with PMT ISSUER TRUST – FMSR, the “Buyers”), and acknowledged and agreed to by PMT ISSUER TRUST – FMSR, as Buyer under the Original Guaranty (as defined below).

RECITALS

WHEREAS, Guarantor has entered into that certain Guaranty, dated as of December 20, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Original Guaranty”), in favor of PMT Issuer Trust - FMSR, as Buyer;

WHEREAS, pursuant to Section 13 of the Original Guaranty, the Original Guaranty may be amended, supplemented or otherwise modified by a written instrument executed by Guarantor and PMT Issuer Trust - FMSR, as Buyer;

WHEREAS, pursuant to the Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023 (as may be amended, restated, supplemented or otherwise modified from time to time, the “PC Repurchase Agreement”), among PENNYMAC CORP., as a seller (“PMC Seller”), PENNYMAC HOLDINGS, LLC, as a seller (“PMH Seller” and, together with PMC Seller, the “Sellers”), Guarantor and Buyers, Buyers have agreed from time to time to enter into Transactions with Sellers. It is a condition precedent to the obligation of Buyers to enter into Transactions with Sellers under the PC Repurchase Agreement that Guarantor shall have executed and delivered this Guaranty to Buyers;

WHEREAS, as a condition precedent to entering into the PC Repurchase Agreement, the Guarantor is required to execute and deliver this Guaranty;

WHEREAS, the Guarantor will receive a benefit, either directly or indirectly from the Sellers for entering into this Guaranty; and

WHEREAS, pursuant to the Amended and Restated Base Indenture, dated as of October 10, 2023, among PMT ISSUER TRUST - FMSR, as issuer (the “Issuer”), PMT CO-ISSUER TRUST I – FMSR, as co-issuer (the “Co-Issuer”), PMC Seller, as servicer and as administrator, PMH Seller, as co-issuer administrator, Citibank, N.A., as indenture trustee (in such capacity, the “Indenture Trustee”), calculation agent, paying agent and securities intermediary and Atlas Securitized Products, L.P., as administrative agent (together with all schedules and exhibits thereto, as may be amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture,” and collectively with each supplement to the Base Indenture executed and delivered in conjunction with the issuance of the related Series of Notes, including the schedules and exhibits thereto, the “Indenture”), Buyers will grant to the Indenture Trustee for the benefit and security of the holders of the notes issued under the Indenture (the “Noteholders”) and the

 

 

DOCPROPERTY "DocID" \* MERGEFORMAT USActive 58259976.6

 

Indenture Trustee, in its individual capacity (the Noteholder and the Indenture Trustee, together, the “Secured Parties”), a security interest in all its right, title and interest in and to the PC Repurchase Agreement and this Guaranty.

NOW, THEREFORE, in consideration of the foregoing premises, to induce Buyer to enter into the PC Repurchase Agreement and to enter into Transactions thereunder, Guarantor hereby agrees with Buyer, as follows:

1. Defined Terms. (a) Unless otherwise defined herein, terms which are defined in the PC Repurchase Agreement and used herein are so used as so defined.

(b) For purposes of this Guaranty, “Obligations” shall mean all obligations and liabilities of Sellers to Buyers, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, or out of or in connection with the PC Repurchase Agreement and any other Program Agreements and any other document made, delivered or given in connection therewith or herewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to Buyers that are required to be paid by Sellers pursuant to the terms of the Program Agreements and costs of enforcement of this Guaranty reasonably incurred) or otherwise.

2. Guaranty. (a) Guarantor hereby unconditionally and irrevocably guarantees to Buyers the prompt and complete payment and performance by Sellers when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.

(b) Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by Buyers in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, Guarantor under this Guaranty. This Guaranty shall remain in full force and effect until the later of (i) the termination of the PC Repurchase Agreement and (ii) the Obligations are paid in full, notwithstanding that from time to time prior thereto Sellers may be free from any Obligations.

(c) No payment or payments made by Sellers or any other Person or received or collected by Buyers from Sellers or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of Guarantor hereunder which shall, notwithstanding any such payment or payments, remain liable for the amount of the outstanding Obligations until the outstanding Obligations are paid in full.

(d) Guarantor agrees that whenever, at any time, or from time to time, Guarantor shall make any payment to Buyers on account of Guarantor’s liability hereunder, Guarantor will notify Buyers in writing that such payment is made under this Guaranty for such purpose.

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3. Right of Set-off. Buyers are hereby irrevocably authorized at any time and from time to time without notice to Guarantor, any such notice being hereby waived by Guarantor, to set-off and appropriate and apply any and all monies and other property of Guarantor, deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Buyers or any Affiliate thereof to or for the credit or the account of Guarantor, or any part thereof in such amounts as Buyers may elect, on account of the Obligations and liabilities of Guarantor hereunder and claims of every nature and description of Buyers against Guarantor, in any currency, whether arising hereunder, under the PC Repurchase Agreement or otherwise, as Buyers may elect, whether or not Buyers have made any demand for payment and although such Obligations and liabilities and claims may be contingent or unmatured. Buyers shall notify Guarantor promptly of any such set-off and the application made by Buyers, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of Buyers under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which Buyers may have.

4. Subrogation. Notwithstanding any payment or payments made by Guarantor hereunder or any set-off or application of funds of Guarantor by Buyers, Guarantor shall not be entitled to be subrogated to any of the rights of Buyers against Sellers or any other guarantor or any collateral security or guarantee or right of offset held by Buyers for the payment of the Obligations, nor shall Guarantor seek or be entitled to seek any contribution or reimbursement from Sellers or any other guarantor in respect of payments made by Guarantor hereunder, until all amounts owing to Buyers by Sellers on account of the Obligations are paid in full and the PC Repurchase Agreement is terminated. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amounts shall be held by Guarantor for the benefit of Buyers, segregated from other funds of Guarantor, and shall, forthwith upon receipt by Guarantor, be turned over to Buyers in the exact form received by Guarantor (duly indorsed by Guarantor to Buyers, if required), to be applied against the Obligations, whether matured or unmatured, in such order as Buyers may determine.

5. Amendments, etc. with Respect to the Obligations. Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against Guarantor, and without notice to or further assent by Guarantor, any demand for payment of any of the Obligations made by Buyer may be rescinded by Buyers, and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by Buyers, and the PC Repurchase Agreement, and the other Program Agreements and any other document in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, pursuant to its terms and as Buyers may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by Buyers for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Buyers shall have no obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guaranty or any property subject thereto. When making any demand hereunder against Guarantor, Buyers may, but shall be under no obligation to, make a similar demand on Sellers and any failure by Buyers to make any such demand or to collect any payments from Sellers or any release of Sellers shall not relieve Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of Buyers against Guarantor. For the purposes hereof “demand” shall include, but is not limited to, the commencement and continuance of any legal proceedings.

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6. Guaranty Absolute and Unconditional. (a) Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by Buyers upon this Guaranty or acceptance of this Guaranty; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived in reliance upon this Guaranty; and all dealings between Sellers or Guarantor, on the one hand, and Buyers, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty. Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Sellers or the Guaranty with respect to the Obligations. This Guaranty shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (i) the validity or enforceability of the PC Repurchase Agreement, the other Program Agreements, any of the Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by Buyers, (ii) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by Sellers against Buyers, or (iii) any other circumstance whatsoever (with or without notice to or knowledge of Sellers or Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of Sellers for the Obligations, or of Guarantor under this Guaranty, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against Guarantor, Buyers may, but shall be under no obligation, to pursue such rights and remedies that they may have against Sellers or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by Buyers to pursue such other rights or remedies or to collect any payments from Sellers or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of Sellers or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of Buyers against Guarantor. This Guaranty shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon Guarantor and their successors and assigns thereof, and shall inure to the benefit of Buyers, and successors, indorsees, transferees and assigns, until all the Obligations and the obligations of Guarantor under this Guaranty shall have been satisfied by payment in full, notwithstanding that from time to time during the term of the PC Repurchase Agreement Sellers may be free from any Obligations.

(b) Without limiting the generality of the foregoing, Guarantor hereby agrees, acknowledges, and represents and warrants to Buyers as follows:

(i) Guarantor hereby waives any defense arising by reason of, and any and all right to assert against Buyers any claim or defense based upon, an election of remedies by Buyers which in any manner impairs, affects, reduces, releases, destroys and/or extinguishes Guarantor’s (x) subrogation rights, (y) rights to proceed against Sellers or any other guarantor for reimbursement or contribution, and/or (z) any other rights of Guarantor to proceed against Sellers, against any other guarantor, or against any other person or security.

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(ii) Guarantor is presently informed of the financial condition of Sellers and of all other circumstances which diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Guarantor hereby covenants that it will make its own investigation and will continue to keep itself informed of each Seller’s financial condition, the status of other guarantors, if any, of all other circumstances which bear upon the risk of nonpayment and that it will continue to rely upon sources other than Buyers for such information and will not rely upon Buyers for any such information. Absent a written request for such information by Guarantor to Buyers, Guarantor hereby waives its right, if any, to require Buyers to disclose to Guarantor any information which Buyers may now or hereafter acquire concerning such condition or circumstances including, but not limited to, the release of or revocation by any other guarantor.

(iii) Guarantor has independently reviewed the PC Repurchase Agreement and related agreements and has made an independent determination as to the validity and enforceability thereof, and in executing and delivering this Guaranty to Buyers, Guarantor is not in any manner relying upon the validity, and/or enforceability, and/or attachment, and/or perfection of any Liens or security interests of any kind or nature granted by Sellers or any other guarantor to Buyers, now or at any time and from time to time in the future.

(iv) Guarantor is not required to register as an “investment company” under the Investment Company Act of 1940, as amended from time to time.

(c) Guarantor hereby covenants that it shall not merge, consolidate, amalgamate, liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets; provided that Guarantor may merge or consolidate with (i) any wholly owned subsidiary of Guarantor, (ii) any other Person if Guarantor is the surviving entity, or (iii) with the prior written consent of the Administrative Agent, so long that, in each case, after giving effect thereto, no Default would exist hereunder.

7. Reinstatement. This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by a Buyer upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of either Seller or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, either Seller or any substantial part of its property, or otherwise, all as though such payments had not been made.

8. Payments. Guarantor hereby agrees that the Obligations will be paid to Buyers without set-off or counterclaim in U.S. Dollars.

9. Event of Default. If an Event of Default under the PC Repurchase Agreement shall have occurred and be continuing, Guarantor agrees that, as between Guarantor and the Buyers, the Obligations may be declared to be due in accordance with the terms of the PC Repurchase Agreement for purposes of this Guaranty notwithstanding any stay, injunction or other prohibition which may prevent, delay or vitiate any such declaration as against the Sellers and that, in the event of any such declaration (or attempted declaration), such Obligations shall forthwith become due by Guarantor for purposes of this Guaranty.

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10. Severability. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

11. Headings. The paragraph headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

12. No Waiver; Cumulative Remedies. Buyers shall not by any act (except by a written instrument pursuant to Section 13 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of Buyers, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by Buyers of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Buyers would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.

13. Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms or provisions of this Guaranty may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Guarantor and Buyers, provided that any provision of this Guaranty may be waived by Buyers in a letter or agreement executed by Buyers or by facsimile or electronic transmission from Buyers to the Guarantor. This Guaranty shall be binding upon the personal representatives, successors and assigns of Guarantor and shall inure to the benefit of Buyers and their successors and assigns.

14. Notices. Notices delivered in connection with this Guaranty shall be given in accordance with Section 10.04 of the PC Repurchase Agreement.

15. Governing Law; Jurisdiction; Waivers.

(a) THIS GUARANTY AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS GUARANTY, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW)

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AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

(b) THE GUARANTOR SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

(c) THE GUARANTOR CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(d) THE GUARANTOR AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH HEREIN OR AT SUCH OTHER ADDRESS OF WHICH EACH OTHER PARTY HERETO SHALL HAVE BEEN NOTIFIED IN WRITING, EXCEPT THAT WITH RESPECT TO THE INDENTURE TRUSTEE, CALCULATION AGENT, PAYING AGENT AND SECURITIES INTERMEDIARY, SERVICE OF PROCESS MAY ONLY BE MADE AS REQUIRED BY APPLICABLE LAW;

(e) THE GUARANTOR AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND

(f) THE GUARANTOR WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.

16. Integration; Counterparts. This Guaranty represents the agreement of Guarantor with respect to the subject matter hereof and there are no promises or representations by Buyers relative to the subject matter hereof not reflected herein. This Guaranty may be executed in any number of counterparts and all of such counterparts shall together constitute one and the same instrument. The parties agree that this Guaranty, any addendum or amendment hereto or any other document necessary for the consummation of the transactions contemplated by this Guaranty may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention, including but not limited to DocuSign.

7

 

17. Third Party Beneficiaries. Each of the Secured Parties and the Administrative Agent shall be a third party beneficiary of this Guaranty and shall be entitled to enforce the Guarantor’s Obligations hereunder to the same extent as if it was a signatory hereto.

18. Acknowledgments. Guarantor hereby acknowledges that:

(a) Guarantor has been advised by counsel in the negotiation, execution and delivery of this Guaranty and the other Program Agreements;

(b) Buyers do not have any fiduciary relationship to Guarantor, Guarantor does not have any fiduciary relationship to Buyers and the relationship between Buyers and Guarantor is solely that of surety and creditor;

(c) no joint venture exists between Buyers and Guarantor or among Buyers, Sellers and Guarantor;

(d) this Guaranty is “a security agreement or arrangement or other credit enhancement” that is “related to” and provided “in connection with” the PC Repurchase Agreement and each Transaction thereunder and is within the meaning of Sections 101(38A)(A) and 741(7)(A)(xi) of the Bankruptcy Reform Act of 1978, 11 U.S.C. §§ 101 et seq., as amended (the “Bankruptcy Code”) and is, therefore to the extent of damages in connection with the PC Repurchase Agreement, measured in accordance with Section 562 of the Bankruptcy Code (i) a “securities contract” as that term is defined in Section 741(7)(A)(xi) of the Bankruptcy Code and (ii) a “master netting agreement” as that term is defined in Section 101(38A) of the Bankruptcy Code; and

(e) Buyers’ right to cause the termination, liquidation or acceleration of, or to offset or net termination values, payment amounts or other transfer obligations arising under or in connection with the PC Repurchase Agreement and this Guaranty is in each case a contractual right to cause the termination, liquidation or acceleration of, or to offset or net termination values, payment amounts or other transfer obligations arising under or in connection with this Guaranty as described in Sections 362(b)(6), 362(b)(27), 555 and/or 561 of the Bankruptcy Code.

19. Events of Default. Each of the following events or circumstances shall constitute an “Event of Default” under this Guaranty:

(a) For any reason, this Guaranty at any time shall not be in full force and effect in all material respects or shall not be enforceable in all material respects in accordance with its terms, or Guarantor or any Affiliate of Guarantor shall seek to disaffirm, terminate, limit or reduce its obligations hereunder.

8

 

(b) A material breach by Guarantor of the representation or warranty in Section 6(b)(iv) hereof, if not cured within thirty (30) days following the occurrence of such breach.

(c) Breach of the covenant in Section 6(c) hereof.

20. Amendment and Restatement. The Guarantor entered into the Original Guaranty. PMT ISSUER TRUST - FMSR and the Guarantor desire to enter into this Guaranty in order to amend and restate the Original Guaranty in its entirety. The amendment and restatement of the Original Guaranty shall become effective on the date hereof, and each of the PMT ISSUER TRUST - FMSR and the Guarantor shall hereafter be bound by the terms and conditions of this Guaranty and the other Program Agreements. All references to the Original Guaranty in any Program Agreement or other document or instrument delivered in connection therewith shall be deemed to refer to this Guaranty and the provisions hereof.

21. Owner Trustee Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Guaranty is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely as trustee of the Buyers, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, warranties, undertakings and agreements herein made on the part of a Buyer is made and intended not as personal representations, warranties, undertakings and agreements by WSFS but is made and intended for the purpose of binding only such Buyer, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has made no investigation as to the accuracy or completeness of any representations or warranties made by a Buyer in this Guaranty and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness or expenses of a Buyer or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by a Buyer under this Guaranty or any other related documents.

 

[Signature page follows]

9

 

IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered as of the date first above written.

PENNYMAC MORTGAGE INVESTMENT TRUST, as Guarantor

By: /s/ Pamela Marsh

Name: Pamela Marsh

Title: Senior Managing Director and Treasurer

 

 

[Signature Page to PC Repo Guaranty]

 

 

 

ACKNOWLEDGED AND AGREED:

PMT ISSUER TRUST – FMSR, as a buyer PMT CO-ISSUER TRUST I – FMSR, as a buyer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

 

[Signature Page to PC Repo Guaranty]

 

 

 

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

 

[Signature Page to PC Repo Guaranty]

 

 

EX-10.11 4 pmt-ex10_11.htm EX-10.11 EX-10.11

EXHIBIT 10.11

SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

among

ATLAS SECURITIZED PRODUCTS, L.P.,
as Administrative Agent

and

THE BUYERS FROM TIME TO TIME PARTY HERETO,
as Buyers

and

PENNYMAC CORP.,
as a Seller

and

PENNYMAC HOLDINGS, LLC.,
as a Seller

PMT ISSUER TRUST – FMSR AND PMT CO-ISSUER TRUST I – FMSR

MSR COLLATERALIZED NOTES, SERIES 2017‑VF1

Dated as of October 10, 2023

 

 

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS

Section 1.01

Certain Defined Terms

2

Section 1.02

Other Defined Terms

10

ARTICLE II GENERAL TERMS

Section 2.01

Transactions

10

Section 2.02

Procedure for Entering into Transactions

11

Section 2.03

Repurchase; Payment of Repurchase Price

12

Section 2.04

Price Differential

12

Section 2.05

Margin Maintenance

12

Section 2.06

Payment Procedure

13

Section 2.07

Application of Payments

13

Section 2.08

Use of Purchase Price and Transaction Requests

14

Section 2.09

Recourse

14

Section 2.10

Requirements of Law

14

Section 2.11

Taxes

15

Section 2.12

Indemnity

17

Section 2.13

Additional Balance and Additional Funding

17

Section 2.14

Commitment Fee

17

Section 2.15

Termination

17

ARTICLE III REPRESENTATIONS AND WARRANTIES

Section 3.01

Sellers’ Existence

18

Section 3.02

Licenses

18

Section 3.03

Power

18

Section 3.04

Due Authorization

18

Section 3.05

Financial Statements

18

Section 3.06

No Event of Default

19

Section 3.07

Solvency

19

Section 3.08

No Conflicts

20

Section 3.09

True and Complete Disclosure

20

Section 3.10

Approvals

20

Section 3.11

Litigation

20

Section 3.12

Material Adverse Change

20

-i-

 

Section 3.13

Ownership

21

Section 3.14

The Note

21

Section 3.15

Taxes

21

Section 3.16

Investment Company

22

Section 3.17

Chief Executive Office; Jurisdiction of Organization

22

Section 3.18

Location of Books and Records

22

Section 3.19

ERISA

22

Section 3.20

Financing of Note and Additional Balances

22

Section 3.21

Agreements

22

Section 3.22

Other Indebtedness

22

Section 3.23

No Reliance

22

Section 3.24

Plan Assets

23

Section 3.25

No Prohibited Persons

23

Section 3.26

Compliance with 1933 Act

23

Section 3.27

Anti-Money Laundering Laws

23

ARTICLE IV CONVEYANCE; REPURCHASE ASSETS; SECURITY INTEREST

Section 4.01

Ownership

24

Section 4.02

Security Interest

24

Section 4.03

Further Documentation

25

Section 4.04

Changes in Locations, Name, etc

25

Section 4.05

Performance by Buyer of Sellers’ Obligations

25

Section 4.06

Proceeds

26

Section 4.07

Remedies

26

Section 4.08

Limitation on Duties Regarding Preservation of Repurchase Assets

27

Section 4.09

Powers Coupled with an Interest

27

Section 4.10

Release of Security Interest

27

Section 4.11

Reinstatement

27

Section 4.12

Subordination

28

ARTICLE V CONDITIONS PRECEDENT

Section 5.01

Initial Transaction

28

Section 5.02

All Transactions

29

Section 5.03

Closing Subject to Conditions Precedent

30

ARTICLE VI COVENANTS

Section 6.01

Litigation

33

-ii-

 

Section 6.02

Prohibition of Fundamental Changes

33

Section 6.03

Monthly Reporting

33

Section 6.04

No Adverse Claims

33

Section 6.05

Assignment

34

Section 6.06

Security Interest

34

Section 6.07

Records

34

Section 6.08

Books

34

Section 6.09

Approvals

34

Section 6.10

Material Change in Business

35

Section 6.11

Distributions

35

Section 6.12

Applicable Law

35

Section 6.13

Existence

35

Section 6.14

Chief Executive Office; Jurisdiction of Organization

35

Section 6.15

Taxes

35

Section 6.16

Transactions with Affiliates

35

Section 6.17

Guarantees

35

Section 6.18

Indebtedness

35

Section 6.19

True and Correct Information

35

Section 6.20

No Pledge

36

Section 6.21

Plan Assets

36

Section 6.22

Sharing of Information

36

Section 6.23

Modification of the Base Indenture and Series 2017‑VF1 Indenture Supplement

36

Section 6.24

Reporting Requirements

36

Section 6.25

Liens on Substantially All Assets

39

Section 6.26

Litigation Summary

39

Section 6.27

Hedging

39

Section 6.28

MSR Valuation

39

Section 6.29

Most Favored Status

39

Section 6.30

Servicer Administration

40

Section 6.31

Threshold Events and Commitment Modifications

40

ARTICLE VII DEFAULTS/RIGHTS AND REMEDIES OF BUYER UPON DEFAULT

Section 7.01

Events of Default

40

Section 7.02

No Waiver

42

Section 7.03

Due and Payable

42

Section 7.04

Fees

43

Section 7.05

Default Rate

44

-iii-

 

ARTICLE VIII ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; SEPARATE ACTIONS BY BUYER

Section 8.01

Entire Agreement; Amendments

44

Section 8.02

Waivers, Separate Actions by Buyers

44

ARTICLE IX SUCCESSORS AND ASSIGNS

Section 9.01

Successors and Assigns

44

Section 9.02

Participations and Transfers

45

Section 9.03

Buyer and Participant Register

46

ARTICLE X AGENT PROVISIONS

Section 10.01

Appointment of Administrative Agent

46

Section 10.02

Powers and Duties

47

Section 10.03

General Immunity

47

Section 10.04

Administrative Agent to Act as Buyer

48

Section 10.05

Buyers’ Representations, Warranties and Acknowledgment

48

Section 10.06

Right to Indemnity

48

Section 10.07

Successor Administrative Agent

49

Section 10.08

Delegation of Duties

50

Section 10.09

Right to Realize on Collateral

50

ARTICLE XI MISCELLANEOUS

Section 11.01

Survival

51

Section 11.02

Indemnification

51

Section 11.03

Nonliability of Buyer

51

Section 11.04

Governing Law; Submission to Jurisdiction; Waivers

52

Section 11.05

Notices

53

Section 11.06

Severability

55

Section 11.07

Section Headings

55

Section 11.08

Counterparts

55

Section 11.09

Periodic Due Diligence Review

56

Section 11.10

Hypothecation or Pledge of Repurchase Assets

56

Section 11.11

Non-Confidentiality of Tax Treatment

57

-iv-

 

Section 11.12

Intent

58

Section 11.13

Amendment and Restatement

59

Section 11.14

Reaffirmation of VFN Repo Guaranty

59

 

Schedule 1 – Responsible Officers of Sellers

Schedule 2 – Asset Schedule

Schedule 3 – Administrative Agent Account

Exhibit A – Form of Transaction Notice

 

 

-v-

 

SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

Exhibit B – Existing Indebtedness This Second Amended and Restated Master Repurchase Agreement (this “Agreement”) is made as of October 10, 2023, among ATLAS SECURITIZED PRODUCTS, L.P., as administrative agent (the “Administrative Agent”), the Buyers (as defined herein) from time to time party hereto, PENNYMAC CORP., as a seller (“PMC Seller” or “PMC”) and PENNYMAC HOLDINGS, LLC, as a seller (“PMH Seller” or “PMH”, and together with PMC Seller, the “Sellers”). Capitalized terms have the meanings specified in Sections 1.01 and 1.02.

W I T N E S S E T H:

WHEREAS, pursuant to the Base Indenture and the Series 2017‑VF1 Indenture Supplement, PMT ISSUER TRUST - FMSR (“Issuer”) and PMT CO-ISSUER TRUST I - FMSR (“Co-Issuer”) have duly authorized the issuance of a Series of Notes, as a single Class of Variable Funding Note, known as the “PMT ISSUER TRUST - FMSR and PMT CO-ISSUER TRUST I - FMSR MSR Collateralized Notes, SERIES 2017‑VF1” (the “Note”);

WHEREAS, from time to time the parties hereto may enter into Transactions;

WHEREAS, the Sellers are the owner of the Note;

WHEREAS, the Sellers wish to sell their interests in the Note to Buyers pursuant to the terms of this Agreement;

WHEREAS, the Administrative Agent, Nexera Holding LLC (“Nexera”), as a buyer, Citibank, N.A. (“Citibank”), as a buyer, and PMC, as a seller, previously entered into an amended and restated master repurchase agreement, dated as of June 29, 2018 (such agreement, the “Original Agreement”); and

WHEREAS, the Administrative Agent, Nexera, Citibank and PMC desire to amend and restate the Original Agreement in its entirety, on the terms and subject to the conditions as set forth herein;

NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Administrative Agent, Buyers and the Sellers hereby agree as follows.

 

 

ARTICLE I DEFINITIONS

Section 1.01 Certain Defined Terms. Capitalized terms used herein shall have the indicated meanings:

“Additional Balance” has the meaning set forth in Section 2.13.

“Additional Funding” has the meaning set forth in Section 2.13.

“Additional Repurchase Assets” has the meaning set forth in Section 4.02(c).

“Adjusted Tangible Net Worth” has the meaning set forth in the Pricing Side Letter.

“Administrative Agent” has the meaning given to such term in the preamble to this Agreement.

“Administrative Agent Account” means the account identified on Schedule 3 hereto.

“Advance Verification Agent Report” has the meaning assigned to such term in the Base Indenture.

“Aggregate Committed Amount” means the sum of all Committed Amounts.

“Agreement” has the meaning given to such term in the preamble to this Agreement.

“Amortization Date” has the meaning assigned to the term in the Pricing Side Letter.

“Amortization Payment Amount” has the meaning assigned to the term in the Pricing Side Letter.

“Anti-Money Laundering Laws” shall have the meaning set forth in Section 3.27.

“Applicable Lending Office” means the “lending office” of a Buyer (or of an Affiliate of such Buyer) designated on the signature page hereof or such other office of a Buyer (or of an Affiliate of such Buyer) as such Buyer may from time to time specify to Sellers in writing as the office by which the Transactions are to be made and/or maintained.

“Asset Schedule” means Schedule 2 attached hereto, which lists the Note and the terms thereof, as such schedule shall be updated from time to time in accordance with Section 2.02 hereof, including in connection with Administrative Agent’s approval of any Additional Balances pursuant to Section 2.13.

“Asset Value” has the meaning assigned to such term in the Pricing Side Letter.

-2-

 

“Base Indenture” means the Amended and Restated Base Indenture, dated as of October 10, 2023, among the Issuer, Co-Issuer, Citibank, N.A., as indenture trustee, as calculation agent, as paying agent and as securities intermediary, PMC, as administrator and as servicer, PMH, as co-issuer administrator, and Administrative Agent, as administrative agent, as amended, restated, supplemented or otherwise modified from time to time.

“Base Rate” has the meaning assigned to such term in the Pricing Side Letter.

“Buyer” means each Person listed on the signature pages to this Agreement as Buyer, together with their successors, and any assignee of and Participant or Transferee of such Person in the Transaction, other than any such Person that ceases to be a Buyer pursuant to this Agreement.

“Capital Event” shall occur if Citi Buyer shall have determined that the adoption of or any change in Citi Buyer’s internal policies regarding capital adequacy, or in the interpretation or application thereof, or compliance by Citi Buyer with any internal directive regarding capital adequacy made subsequent to June 27, 2023, shall have the effect of reducing the rate of return on Citi Buyer’s capital as a consequence of its obligations hereunder to a level below that which Citi Buyer could have achieved but for such adoption, change or compliance in Citi Buyer’s capital adequacy policies by an amount deemed by Citi Buyer to be material.

“Capital Event Amortization Period” means, the three hundred sixty-five (365) day period that commences on and follows a Capital Event Notice Date.

“Capital Event Notice Date” means the date on which Citi Buyer provides written notice to Sellers and Administrative Agent of the occurrence of a Capital Event.

“Citi Amortization Period” shall mean a Rating Trigger Event Amortization Period or a Capital Event Amortization Period, individually or collectively as the context may require.

“Citi Buyer” means Citibank, N.A., as a buyer under this Agreement.

“Closing Date” has the meaning assigned to the term in the Pricing Side Letter.

“Co-Issuer” has the meaning given to such term in the recitals to this Agreement.

“Commitment Fee” has the meaning assigned to the term in the Pricing Side Letter.

“Commitment Modification” shall have the meaning set forth in the definition of Committed Amount.

“Committed Amount” has the meaning assigned to the term in the Pricing Side Letter.

“Confidential Information” has the meaning set forth in Section 11.11(b).

“Defaulting Buyer” has the meaning set forth in Section 2.02.

-3-

 

“Effective Date” has the meaning assigned to the term in the Pricing Side Letter.

“ERISA Event of Termination” means with respect to any Seller or the VFN Guarantor (i) with respect to any Plan, a reportable event, as defined in Section 4043 of ERISA, as to which the PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified with thirty (30) days of the occurrence of such event, or (ii) the withdrawal of any Seller, the VFN Guarantor or any ERISA Affiliate thereof from a Plan during a plan year in which it is a substantial employer, as defined in Section 4001(a)(2) of ERISA, or (iii) the failure by any Seller, the VFN Guarantor or any ERISA Affiliate thereof to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA with respect to any Plan, including the failure to make on or before its due date a required installment under Section 412(m) of the Code (or Section 430(j) of the Code as amended by the Pension Protection Act) or Section 302(e) of ERISA (or Section 303(j) of ERISA, as amended by the Pension Protection Act), or (iv) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by any Seller, the VFN Guarantor or any ERISA Affiliate thereof to terminate any plan, or (v) the failure to meet requirements of Section 436 of the Code resulting in the loss of qualified status under Section 401(a)(29) of the Code, or (vi) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (vii) the receipt by any Seller, the VFN Guarantor or any ERISA Affiliate thereof of a notice from a Multiemployer Plan that action of the type described in the previous clause (vi) has been taken by the PBGC with respect to such Multiemployer Plan, or (viii) any event or circumstance exists which may reasonably be expected to constitute grounds for any Seller, the VFN Guarantor or any ERISA Affiliate thereof to incur liability under Title IV of ERISA or under Sections 412(b) or 430(k) of the Code with respect to any Plan.

“Event of Default” has the meaning assigned to such term in Section 7.01.

“Existing Indebtedness” has the meaning specified in Section 3.22.

“Expenses” means all present and future expenses reasonably incurred by or on behalf of Administrative Agent and Buyers in connection with the negotiation, execution or enforcement of this Agreement or any of the other Program Agreements and any amendment, supplement or other modification or waiver related hereto or thereto, whether incurred heretofore or hereafter, which expenses shall include the reasonable and documented cost of title, lien, judgment and other record searches; reasonable and documented attorneys’ fees; any ongoing audits or due diligence costs in connection with valuation, entering into Transactions or determining whether a Margin Deficit may exist; and costs of preparing and recording any UCC financing statements or other filings necessary to perfect the security interest created hereby.

“GLB Act” has the meaning set forth in Section 11.11(b).

“Governmental Actions” means any and all consents, approvals, permits, orders, authorizations, waivers, exceptions, variances, exemptions or licenses of, or registrations, declarations or filings with, any Governmental Authority required under any Governmental Rules.

-4-

 

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions over Administrative Agent, Sellers or Buyers, as applicable.

“Governmental Rules” means any and all laws, statutes, codes, rules, regulations, ordinances, orders, writs, decrees and injunctions, of any Governmental Authority and any and all legally binding conditions, standards, prohibitions, requirements and judgments of any Governmental Authority.

“Indenture” means the Base Indenture, together with the Series 2017‑VF1 Indenture Supplement thereto.

“Indenture Trustee” means Citibank, N.A., its permitted successors and assigns.

“Issuer” has the meaning given to such term in the recitals to this Agreement.

“Margin” has the meaning assigned to the term in the Pricing Side Letter.

“Margin Call” has the meaning set forth in Section 2.05(a).

“Margin Deficit” has the meaning set forth in Section 2.05(a).

“Market Value” means, with respect to the Note as of any date of determination, and without duplication, the fair market value of the Note on such date as reasonably determined by Administrative Agent.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of any Seller or any Affiliate that is a party to any Program Agreement taken as a whole; (b) a material impairment of the ability of any Seller or any Affiliate that is a party to any Program Agreement to perform under any Program Agreement and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Agreement against any Seller or any Affiliate that is a party to any Program Agreement.

“Maximum Purchase Price” has the meaning assigned to the term in the Pricing Side Letter.

“Maximum Purchase Price Modification” shall have the meaning set forth in the definition of Maximum Purchase Price.

“Net Income” has the meaning given to such term in the Pricing Side Letter.

“Nexera” means Nexera Holding LLC.

“Non-Excluded Taxes” has the meaning set forth in Section 2.11(a).

“Note” has the meaning given to such term in the recitals to this Agreement.

“Note Rating Agency” has the meaning assigned to such term in the Base Indenture.

-5-

 

“Notice” or “Notices” means all requests, demands and other communications, in writing (including facsimile transmissions and e-mails), sent by overnight delivery service, facsimile transmission, electronic transmission or hand-delivery to the intended recipient at the address specified in Section 11.05 or, as to any party, at such other address as shall be designated by such party in a written notice to the other party.

“Obligations” means (a) all of Sellers’ indebtedness, obligations to pay the outstanding principal balance of the Purchase Price, together with interest thereon on the Termination Date, outstanding interest due on each Price Differential Payment Date, and other obligations and liabilities, to Administrative Agent, Buyers and each of their Affiliates arising under, or in connection with, the Program Agreements, whether now existing or hereafter arising; (b) any and all sums reasonably incurred and paid by Administrative Agent or Buyers or on behalf of Administrative Agent or Buyers in order to preserve any Repurchase Asset or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Sellers’ indebtedness, obligations or liabilities referred to in this definition, the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Repurchase Asset, or of any exercise by Administrative Agent and Buyers of their respective rights under the Program Agreements, including reasonable attorneys’ fees and disbursements and court costs; and (d) all of Sellers’ indemnity obligations to Administrative Agent and Buyers pursuant to the Program Agreements.

“Officer’s Compliance Certificate” has the meaning assigned to such term in the Pricing Side Letter.

“Other Taxes” has the meaning set forth in Section 2.11(b).

“Participant” has the meaning set forth in Section 9.02(a).

“PMC” has the meaning given to such term in the preamble to this Agreement.

“PMH” has the meaning given to such term in the preamble to this Agreement.

“Price Differential” means with respect to any Transaction as of any date of determination, an amount equal to the product of (A) the Pricing Rate for such Transaction and (B) the Purchase Price for such Transaction, calculated daily on the basis of a 360 day year for the actual number of days during the Price Differential Period.

“Price Differential Payment Date” means, for as long as any Obligations shall remain owing by any Seller to Administrative Agent and Buyers, each Payment Date.

“Price Differential Period” means, the period from and including a Price Differential Payment Date (or the Purchase Date for any date of determination before the first Price Differential Payment Date), up to but excluding the next Price Differential Payment Date.

“Price Differential Statement Date” has the meaning set forth in Section 2.04.

“Pricing Rate” means Base Rate plus the applicable Margin.

-6-

 

“Pricing Side Letter” means the fifth amended and restated pricing side letter, dated as of the Effective Date, by and among Administrative Agent, VFN Guarantor, Buyers and Sellers as amended, restated, supplemented or otherwise modified from time to time.

“Primary Repurchase Assets” has the meaning set forth in Section 4.02(a).

“Program Agreements” means this Agreement, the Pricing Side Letter, each Side Letter Agreement, the VFN Repo Guaranty, the Subservicer Side Letter Agreement, the PC Repurchase Agreement, the PC Repo Guaranty, the Excess Spread Participation Agreement, the Retained Excess Spread Participation Agreement, the Base Indenture and the Series 2017‑VF1 Indenture Supplement.

“Pro Rata Share” means, with respect to each Buyer, for purposes of the initial Transaction, 50%, and thereafter, the percentage obtained from the fraction: (i) the numerator of which is the outstanding Purchase Price attributable to such Buyer and (ii) the denominator of which is the aggregate outstanding Purchase Price.

“Purchase Date” means, subject to the satisfaction of the conditions precedent set forth in Article V hereof, each Funding Date on which a Transaction is entered into by Administrative Agent (as agent for Buyers) pursuant to Section 2.02 or such other mutually agreed upon date as more particularly set forth on Exhibit A hereto.

“Purchase Price” means the price at which each Purchased Asset (or portion thereof) is transferred by Sellers to Buyers (or Administrative Agent, as agent and bailee for Buyers), which shall equal on any date of determination, the difference between (i) the sum of (a) the Asset Value of such Purchased Asset on the related Purchase Date, plus (b) the product of the Purchase Price Percentage and the principal amount of any Additional Balances related to such Purchased Asset, minus (ii) the sum of (a) any Repurchase Price paid with respect to such Purchased Asset pursuant to Section 2.03, plus (b) any Additional Note Payment made with respect to such Purchased Asset pursuant to Section 4.4(b) or Section 4.5(e) of the Indenture, plus (c) any Redemption Amount paid pursuant to Section 13.1 of the Indenture, plus (d) any funds applied by Administrative Agent against the Purchase Price pursuant to Section 2.05(c).

“Purchase Price Percentage” has the meaning assigned to the term in the Pricing Side Letter.

“Purchased Assets” means, collectively, the Note (including all outstanding Additional Balances thereunder) together with the Repurchase Assets related to such Note, until such Note has been repurchased by Sellers in accordance with the terms of this Agreement.

“Rating Trigger Event” means any occurrence which results in the failure of the Note to maintain an investment grade rating by a Note Rating Agency.

“Rating Trigger Event Amortization Period” means, the three hundred sixty-five (365) day period that commences on and follows the date on which any Rating Trigger Event occurs.

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“Records” means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Sellers, or any other person or entity with respect to the Purchased Assets.

“Register” has the meaning set forth in Section 9.02(b).

“Repurchase Assets” has the meaning set forth in Section 4.02(c).

“Repurchase Date” means the earlier of (i) the Termination Date or (ii) the date requested by Sellers on which the Repurchase Price is paid pursuant to Section 2.03.

“Repurchase Price” means the price at which Purchased Assets are to be transferred by or on behalf of Buyers to Sellers upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price and the accrued but unpaid Price Differential as of the date of such determination.

“Repurchase Rights” has the meaning set forth in Section 4.02(c).

“Required Buyers” means, at any time (a) Buyers (other than Defaulting Buyers) owning an aggregate of greater than sixty-six and two-thirds percent (66 2/3%) of the Obligations outstanding at such time (excluding the portion of the Obligations owed to a Defaulting Buyer), or (b) at any time there are no Obligations outstanding, “Required Buyers” shall mean the Buyers (other than Defaulting Buyers) holding an aggregate Pro Rata Share of greater than sixty-six and two-thirds percent (66 2/3%) of Committed Amounts (excluding the Committed Amounts of any Defaulting Buyers); provided that notwithstanding anything contained herein to the contrary during a Citi Amortization Period, the Buyers’ Committed Amounts for purposes of calculating the Required Buyers shall be such Buyers’ Committed Amounts as of the commencement of such Citi Amortization Period.

“Responsible Officer” means as to any Person, the chief executive officer or, with respect to financial matters, the chief financial officer or treasurer of such Person. The Responsible Officers of PMH Seller and PMC Seller as of the Effective Date are listed on Schedule 1-A and Schedule 1-B, respectively, hereto.

“Seller” or “Sellers” has the meaning assigned to such term in the preamble to this Agreement and includes PMC’s or PMH’s permitted successors and assigns.

“Seller Termination Option” means (a) (i) a Buyer has or shall incur costs in connection with those matters provided for in Section 2.10 or 2.11 and (ii) Administrative Agent, on behalf of Buyer, requests that Sellers pay to such Buyer those costs in connection therewith or (b) Administrative Agent has declared in writing that an event described in Section 5.02(g)(A) has occurred.

“Series 2017‑VF1 Indenture Supplement” means the Amended and Restated Series 2017‑VF1 Indenture Supplement, dated as of October 10, 2023, among the Issuer, Co-Issuer, Citibank, N.A., as indenture trustee, as calculation agent, as paying agent and as securities intermediary, PMC, as administrator and as servicer, PMH, as co-issuer administrator, and Administrative Agent, as administrative agent, as amended, restated, supplemented or otherwise modified from time to time.

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“Side Letter Agreement” has the meaning assigned to such term in the Pricing Side Letter.

“Taxes” has the meaning assigned to such term in Section 2.11(a).

“Termination Date” has the meaning assigned to such term in the Pricing Side Letter.

“Test Period” has the meaning assigned to such term in the Pricing Side Letter.

“Threshold Event” shall mean with respect to a Buyer, a Transaction Notice submitted by either of the Sellers which, if satisfied as to such Buyer’s Pro Rata Share, would exceed the aggregate maximum purchase price such Buyer has agreed to provide Sellers and their Affiliates pursuant to this Agreement and any other agreement set forth in the related Side Letter Agreement.

“Transaction” means a transaction pursuant to which either Seller transfers a Note or Additional Balances, as applicable, to Buyers (or to Administrative Agent, as agent and bailee for Buyers) against the transfer of funds by Buyers, with a simultaneous agreement by Buyers (or by Administrative Agent, as agent and bailee for Buyers) to transfer such Note or Additional Balances, as applicable, back to Sellers at a date certain or on demand, against the transfer of funds by Sellers.

“Transaction Document” has the meaning assigned to such term in Appendix A to the Indenture.

“Transaction Notice” has the meaning assigned to such term in Section 2.02(a).

“Transaction Register” has the meaning assigned to such term in Section 9.03(b).

“Transferee” has the meaning set forth in Section 9.02(b).

“Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in effect on the Closing Date in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction.

“VFN Guarantor” means PennyMac Mortgage Investment Trust, in its capacity as guarantor under the VFN Repo Guaranty.

“VFN Repo Guaranty” means the Second Amended and Restated Guaranty, dated as of the Effective Date, pursuant to which VFN Guarantor fully and unconditionally guarantees the obligations of Sellers hereunder, as amended, restated, supplemented or otherwise modified from time to time.

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Section 1.02 Other Defined Terms. (a) Any capitalized terms used and not defined herein shall have the meaning set forth in the Base Indenture or the Series 2017‑VF1 Indenture Supplement, as applicable.

(b) The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified herein, the term “or” has the inclusive meaning represented by the term “and/or” and the term “including” is not limiting. All references to Sections, subsections, Articles and Exhibits shall be to Sections, subsections, and Articles of, and Exhibits to, this Agreement unless otherwise specifically provided.

(c) Reference to and the definition of any document (including this Agreement) shall be deemed a reference to such document as it may be amended, restated, supplemented or otherwise modified from time to time.

(d) In the computation of periods of time from a specified date to a later specified date, unless otherwise specified herein the words “commencing on” mean “commencing on and including,” the word “from” means “from and including” and the words “to” and “until” each means “to but excluding.”

ARTICLE II GENERAL TERMS

Section 2.01 Transactions. Subject to the terms and conditions hereof, Buyers severally, not jointly, agree to enter into Transactions with Sellers for a Purchase Price outstanding at any one time not to exceed the Aggregate Committed Amount; however, the Buyers may agree from time to time to enter into Transactions with Sellers for a Purchase Price outstanding in excess of the Aggregate Committed Amount but not to exceed the Maximum Purchase Price. No Buyer shall have any commitment or obligation to enter into a Transaction in connection with the Note to the extent (i) the outstanding Purchase Price related to such Buyer after giving effect to such Transaction exceeds the related Committed Amount for such Buyer or (ii) if the Transaction is requested on or after the Amortization Date. During the term of this Agreement, Sellers may request Transactions, Sellers may pay the Repurchase Price in whole or in part at any time during such period without penalty, and additional Transactions may be entered into in accordance with the terms and conditions hereof. Buyers’ obligation to enter into Transactions pursuant to the terms of this Agreement shall terminate on the Termination Date. All Transactions, whether for the Committed Amount or on an uncommitted basis up to the Maximum Purchase Price, shall be effected by Buyers simultaneously and proportionately to their respective Pro Rata Shares, it being understood that (i) an uncommitted Transaction shall not be entered unless both Buyers agree to proportionately fund such Transaction; and (ii) no Buyer shall be responsible for any default by any other Buyer in such other Buyer’s obligation to enter into a Transaction nor shall any Pro Rata Share of any Buyer be increased or decreased as a result of a default by any other buyer in such other Buyer’s obligation to enter into a Transaction hereunder, except to the extent agreed to by the non-Defaulting Buyer pursuant to Section 2.02(b). Following the commencement of the Citi Amortization Period, uncommitted Transactions may be effected by Buyers disproportionately without reference to the related Commitment Share.

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Section 2.02 Procedure for Entering into Transactions. (a) Each Seller may enter into Transactions with Buyers under this Agreement on any Purchase Date; provided, that the applicable Seller shall have given Administrative Agent and Buyers irrevocable notice (each, a “Transaction Notice”), which notice (i) shall be substantially in the form of Exhibit A, (ii) shall be signed by a Responsible Officer of the applicable Seller and be received by Administrative Agent and Buyers prior to 1:00 p.m. (New York time) one (1) Business Day prior to the related Purchase Date, and (iii) shall specify: (A) the Maximum VFN Principal Balance of the Note; (B) the Initial Note Balance of the Note; (C) the Dollar amount of the requested Purchase Price; (D) the requested Purchase Date; (E) the Repurchase Date; (F) the Pricing Rate or Repurchase Price applicable to the Transaction; and (G) any additional terms or conditions of the Transaction not inconsistent with this Agreement. Each Transaction Notice on any Purchase Date shall be in an amount equal to at least $500,000.

(b) If a Seller delivers to the Buyers a Transaction Notice that satisfies the requirements of Section 2.02(a) and all applicable conditions precedent set forth in Article V have been satisfied or waived on or prior to the Purchase Date, then subject to the foregoing, on the Purchase Date, each Buyer shall remit its Pro Rata Share of the requested Purchase Price in U.S. Dollars and in immediately available funds to Administrative Agent at the account specified in Schedule 3 (or such other account designated in writing by the Administrative Agent) no later than 11:00 a.m. (New York time) on the date specified in the Transaction Notice as the Purchase Date, and upon satisfaction or waiver of all applicable conditions set forth herein, the Administrative Agent shall deposit such proceeds into the account of the applicable Seller specified in Schedule 5 to the Base Indenture not later than 3:00 p.m. (New York time) on the Purchase Date (or such other account designated by Sellers in the Transaction Notice).

The failure of any Buyer to advance the proceeds of its Pro Rata Share of any Transaction required to be advanced hereunder shall not relieve any other Buyer of its obligation to advance the proceeds of its Pro Rata Share of any such Transaction required to be advanced hereunder.

If a Buyer does not intend to fund its Pro Rata Share of the requested Purchase Price, such Buyer shall, within one (1) Business Day of the related Purchase Date, notify the Administrative Agent, the other Buyers and the Sellers of its intent not to fund together with a description of the reason for not remitting its Pro Rata Share of the requested Purchase Price.

The liabilities and obligations of each Buyer hereunder shall be several and not joint, and neither the Administrative Agent nor any Buyer shall be responsible for the performance by any other Buyer of its obligations hereunder. Each Buyer shall be liable to Sellers only for the amount of its respective Committed Amount. If a Buyer does not perform its obligations hereunder with respect to its Committed Amount (such Buyer a “Defaulting Buyer”), all or any part of such Defaulting Buyer’s participation in any Transaction shall be reallocated among the non-Defaulting Buyers in accordance with their respective Pro Rata Shares, but only to the extent that (x) such non-Defaulting Buyer has consented to such reallocation, (y) such reallocation does not cause the aggregate Committed Amount held by any non-Defaulting Buyer to exceed such non-Defaulting Buyer’s Committed Amount and (z) to the extent requested in writing by the Administrative Agent, the Sellers shall confirm that the conditions set forth in this Section 2.02 are satisfied at the time of such reallocation.

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Any Buyer previously designated as a Defaulting Buyer shall no longer be deemed a Defaulting Buyer once each Buyer’s proportionate share of the outstanding Purchase Price constituting Committed Amounts with respect to the aggregate outstanding Purchase Price constituting Committed Amounts is equal to its respective Commitment Share. For the avoidance of doubt, no Buyer shall be designated as a Defaulting Buyer based on such Buyer’s failure to enter into Transactions with Sellers during a Citi Amortization Period.

(c) Upon entering into each Transaction hereunder, the Asset Schedule shall be automatically updated and replaced with the Asset Schedule attached to the related Transaction Notice.

Section 2.03 Repurchase; Payment of Repurchase Price. (a) The Sellers promise, jointly and severally, to repurchase the Purchased Assets and pay all outstanding Obligations on the Termination Date.

(b) On each Price Differential Payment Date following the Amortization Date, Sellers shall pay to Administrative Agent in immediately available funds the Amortization Payment Amount.

(c) By notifying Administrative Agent and each Buyer in writing at least one (1) Business Day in advance, Sellers shall be permitted, at their option, to prepay, subject to Section 2.12, the Purchase Price in whole or in part at any time, together with accrued and unpaid interest on the amount so prepaid.

Section 2.04 Price Differential. On each Price Differential Payment Date, each of the Sellers hereby promises to pay to Administrative Agent all accrued and unpaid Price Differential on the Transactions, as invoiced by Administrative Agent to Sellers three (3) Business Days prior to the related Price Differential Payment Date (the “Price Differential Statement Date”); provided, that on each Price Differential Payment Date prior to the occurrence and continuation of an Event of Default, the estimated Price Differential owed hereunder shall be subject to a true-up of the amount determined by Administrative Agent and agreed by Sellers one (1) Business Day prior to the related Price Differential Payment Date. If Administrative Agent fails to deliver such statement on the Price Differential Statement Date, on such Price Differential Payment Date Sellers shall pay the amount which Sellers calculate as the Price Differential due and upon delivery of the statement, Sellers shall remit to Administrative Agent any shortfall, or Administrative Agent shall refund to Sellers any excess, in the Price Differential paid.

Section 2.05 Margin Maintenance. (a) If at any time the aggregate outstanding amount of the Purchase Price of the Note is greater than the Asset Value or the Maximum Purchase Price for the related Transaction (such excess, a “Margin Deficit”), then Administrative Agent may, and, at the direction of all Buyers, shall, by notice to Sellers require Sellers to transfer to Administrative Agent cash in an amount at least equal to the Margin Deficit (such requirement, a “Margin Call”).

(b) Notice delivered pursuant to Section 2.05(a) may be given by any written or electronic means. With respect to a Margin Call, any notice given before 5:00 p.m.

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(New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the following Business Day. With respect to a Margin Call, any notice given after 5:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the second (2nd) Business Day following the date of such notice. The failure of Administrative Agent, on any one or more occasions, to exercise the rights of Buyers hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Administrative Agent to do so at a later date. Each of the Sellers, each of the Buyers, and the Administrative Agent each agree that a failure or delay by Administrative Agent to exercise the rights of Buyers hereunder shall not limit or waive Administrative Agent’s rights under this Agreement or otherwise existing by law or in any way create additional rights for the Sellers.

(c) In the event that a Margin Deficit exists, Administrative Agent may retain any funds received by it to which the Sellers would otherwise be entitled hereunder, which funds (i) may be held by Administrative Agent against the related Margin Deficit or (ii) may be applied by Administrative Agent against the Purchase Price. Notwithstanding the foregoing, Administrative Agent retains the right, in its sole discretion, to make a Margin Call in accordance with the provisions of this Section 2.05.

Section 2.06 Payment Procedure. The Sellers absolutely, unconditionally, and irrevocably, shall make, or cause to be made, all payments required to be made by Sellers hereunder. Sellers shall deposit or cause to be deposited all amounts constituting collection, payments and proceeds of the Note (including all fees and proceeds of sale to a third party) to the Administrative Agent Account.

Section 2.07 Application of Payments. (a) On each Price Differential Payment Date prior to the occurrence of an Event of Default, all amounts deposited into the Administrative Agent Account from and after the immediately preceding Price Differential Payment Date (or the Closing Date in connection with the initial Price Differential Payment Date), or received by Administrative Agent from the Issuer and Co-Issuer in Administrative Agent’s capacity as VFN Noteholder on behalf of Buyers, shall be applied by the Administrative Agent as follows:

(i) first, to each Buyer, pro rata, the payment of any accrued and unpaid Price Differential owing;

(ii) second, to each Buyer, pro rata, the payment of Purchase Price outstanding to satisfy any Margin Deficit owing;

(iii) third, to each Buyer, pro rata, the payment of any unpaid Amortization Payment Amount;

(iv) fourth, to payment of all other costs and fees payable pursuant to this Agreement, first to Administrative Agent and then to each Buyer on a pro rata basis;

(v) fifth, to each Buyer, pro rata, the payment of the Purchase Price outstanding as a result of any Additional Note Payment made pursuant to Section 4.4(b) or Section 4.5(e) of the Indenture; and

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(vi) sixth, any remainder to each Seller based upon an allocation percentage to be provided by Sellers to the Administrative Agent.

(b) Notwithstanding the preceding provisions, if an Event of Default shall have occurred hereunder, all funds related to the Note shall be applied by the Administrative Agent as follows:

(i) first, to each Buyer, pro rata, the payment of any accrued and unpaid Price Differential owing;

(ii) second, to each Buyer, pro rata, the payment of Purchase Price until reduced to zero;

(iii) third, to payment of all other costs and fees payable pursuant to this Agreement, first to Administrative Agent and then to each Buyer, on a pro rata basis;

(iv) fourth, to the payment of any other Obligations; and

(v) fifth, any remainder to each Seller based upon an allocation percentage to be provided by Sellers to the Administrative Agent.

Section 2.08 Use of Purchase Price and Transaction Requests. The Purchase Price shall be used by Sellers to satisfy their obligations under the Indenture and for general corporate purposes.

Section 2.09 Recourse. Notwithstanding anything else to the contrary contained or implied herein or in any other Program Agreement, (i) Administrative Agent and Buyers shall have full, unlimited recourse against the Sellers and their assets in order to satisfy the Obligations, and (ii) solely with respect to the Sellers, all obligations of each Seller (excluding PMC’s obligations relating to its servicing functions) hereunder, including payment of any amounts owed on any date, shall be joint and several obligations of the Sellers.

Section 2.10 Requirements of Law. (a) If any Requirement of Law (other than with respect to any amendment made to a Buyer’s certificate of trust and trust agreement or other organizational or governing documents) or any change in the interpretation or application thereof or compliance by such Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the Closing Date:

(i) shall subject such Buyer to any tax of any kind whatsoever with respect to this Agreement or the Transactions (excluding income taxes, branch profits taxes, franchise taxes or similar taxes imposed on a Buyer as a result of any present or former connection between such Buyer and the United States, other than any such connection arising solely from such Buyer having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement) or change the basis of taxation of payments to such Buyer in respect thereof;

(ii) shall impose, modify or hold any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, or other extensions of credit by, or any other acquisition of funds by, any office of such Buyer which is not otherwise included in the determination of the Price Differential hereunder; or

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(iii) shall impose on such Buyer any other condition; and the result of any of the foregoing is to increase the cost to such Buyer, by an amount which such Buyer deems to be material, of entering, continuing or maintaining this Agreement or any other Program Agreement, the Transactions or to reduce any amount due or owing hereunder in respect thereof, then, in any such case, Sellers shall promptly pay such Buyer such additional amount or amounts as calculated by such Buyer in good faith as will compensate such Buyer for such increased cost or reduced amount receivable.

(b) If a Buyer shall have determined that the adoption of or any change in any Requirement of Law (other than with respect to any amendment made to such Buyer’s certificate of incorporation and by-laws or other organizational or governing documents) regarding capital adequacy or in the interpretation or application thereof or compliance by such Buyer or any corporation Controlling such Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the Closing Date shall have the effect of reducing the rate of return on such Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which such Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by such Buyer to be material, then from time to time, Sellers shall promptly pay to such Buyer such additional amount or amounts as will compensate such Buyer for such reduction.

(c) If a Buyer becomes entitled to claim any additional amounts pursuant to this Section 2.10, it shall promptly notify Sellers of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section 2.10 submitted by such Buyer to Sellers shall be conclusive in the absence of manifest error.

Section 2.11 Taxes. (a) Any and all payments by or on behalf of any Seller under or in respect of this Agreement or any other Program Agreements to which any Seller is a party shall be made free and clear of, and without deduction or withholding for or on account of, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto, whether now or hereafter imposed, levied, collected, withheld or assessed by any taxation authority or other Governmental Authority (collectively, “Taxes”), unless required by law. If any Seller shall be required under any applicable Requirement of Law to deduct or withhold any Taxes from or in respect of any sum payable under or in respect of this Agreement or any of the other Program Agreements to Administrative Agent and any Buyer (including for purposes of Section 2.10 and this Section 2.11, any assignee, successor or participant), (i) such Seller shall make all such deductions and withholdings in respect of Taxes, (ii) such Seller shall pay the full amount deducted or withheld in respect of Taxes to the relevant taxation authority or other Governmental Authority in accordance with any applicable Requirement of Law, and (iii) the sum payable by such Seller shall be increased as may be necessary so that after such Seller has made all required deductions and withholdings (including deductions and withholdings applicable to additional amounts payable under this Section 2.11) Administrative Agent and Buyers receive an amount equal to the sum they would have received had no such deductions or withholdings been made in respect of Non-Excluded Taxes.

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For purposes of this Agreement the term “Non-Excluded Taxes” are Taxes other than, in the case of Administrative Agent and Buyers, Taxes that are (i) imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the jurisdiction under the laws of which Administrative Agent or the related Buyer is organized or of their Applicable Lending Office, or any political subdivision thereof, unless such Taxes are imposed as a result of Administrative Agent or the related Buyer having executed, delivered or performed its obligations or received payments under, or enforced, this Agreement or any of the other Program Agreements (in which case such Taxes will be treated as Non-Excluded Taxes) and (ii) imposed pursuant to FATCA.

(b) In addition, the Sellers hereby agree to pay any present or future stamp, recording, documentary, excise, property or value-added taxes, or similar taxes, charges or levies that arise from any payment made under or in respect of this Agreement or any other Program Agreement or from the execution, delivery or registration of, any performance under, or otherwise with respect to, this Agreement or any other Program Agreement (collectively, “Other Taxes”).

(c) The Sellers hereby, jointly and severally, agree to indemnify Administrative Agent and Buyers for, and to hold each of them harmless against, the full amount of Non-Excluded Taxes and Other Taxes, and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable by any Seller under this Section 2.11 imposed on or paid by Administrative Agent or Buyers and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. The indemnity by the Sellers provided for in this Section 2.11 shall apply and be made whether or not the Non-Excluded Taxes or Other Taxes for which indemnification hereunder is sought have been correctly or legally asserted. Amounts payable by any Seller under the indemnity set forth in this Section 2.11(c) shall be paid within ten (10) days from the date on which Administrative Agent makes written demand therefor.

(d) Without prejudice to the survival of any other agreement of the Sellers hereunder, the agreements and obligations of the Sellers contained in this Section 2.11 shall survive the termination of this Agreement and the other Program Agreements. Nothing contained in Section 2.10 or this Section 2.11 shall require Administrative Agent or any Buyer to make available any of their tax returns or any other information that they deem to be confidential or proprietary.

(e) Administrative Agent and Buyers will timely furnish Sellers, or any agent of Sellers, any tax forms or certifications (such as an applicable IRS Form W-8, IRS Form W-9 or any successors to such IRS forms) that it is legally entitled to provide and that Sellers or their agents may reasonably request (A) to permit Sellers or their agents to make payments to it without, or at a reduced rate of, deduction or withholding, (B) to enable Sellers or their agents to qualify for a reduced rate of withholding or deduction in any jurisdiction from or through which Sellers or their agents receive payments and (C) to enable Sellers or their agents to satisfy reporting and other obligations under the Code and Treasury Regulations and under any other applicable laws, and shall update or replace such tax forms or certifications as appropriate or in accordance with their terms or subsequent amendments, and acknowledges that the failure to provide, update or replace any such tax forms or certifications may result in the imposition of withholding or back-up withholding upon payments to Administrative Agent and Buyers.

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Section 2.12 Indemnity. Without limiting, and in addition to, the provisions of Section 10.02, each of the Sellers, jointly and severally, agrees to indemnify the Administrative Agent and each Buyer and to hold each of them harmless from any loss or expense that Administrative Agent or Buyers may sustain or incur as a consequence of (i) a default by any Seller in payment when due of the Repurchase Price or Price Differential or (ii) a default by any Seller in making any prepayment of Repurchase Price after such Seller has given a notice thereof in accordance with Section 2.03.

Section 2.13 Additional Balance and Additional Funding. In the event that any Seller wishes an increase in the VFN Principal Balance, such Seller shall deliver to Administrative Agent and Buyers a copy of the VFN Note Balance Adjustment Request that is delivered under the Indenture. If all the Funding Conditions required pursuant to Section 5.02 hereof and in the Indenture have been satisfied, or if such request is made on or after the Amortization Date, with the consent of the Administrative Agent, in its sole discretion (provided that the consent of the Administrative Agent shall not be required in the event that the aggregate outstanding Purchase Price, after giving effect to the requested increase, does not exceed the Aggregate Committed Amount and if such request occurs prior to the Amortization Date), then such increase in the VFN Principal Balance (such increase, an “Additional Balance”), (i) the outstanding VFN Principal Balance set forth in the Asset Schedule hereof shall be automatically updated and (ii) if requested by Sellers, each Buyer shall thereupon deliver to Administrative Agent in cash its Pro Rata Share of the amount equal to the product of such Additional Balance and the Purchase Price Percentage (the “Additional Funding”).

Section 2.14 Commitment Fee. Sellers shall pay the Commitment Fee, if any, as specified in the Pricing Side Letter. Such payment shall be made in Dollars in immediately available funds, without deduction, set off or counterclaim, to Administrative Agent at such account designated in writing by Administrative Agent.

Section 2.15 Termination. (a) Notwithstanding anything to the contrary set forth herein, if a Seller Termination Option occurs, the Sellers may, upon five (5) Business Days’ prior written notice to Administrative Agent and each Buyer of such event, upon payment of the applicable Repurchase Price and satisfaction of the other termination conditions set forth in the Indenture, terminate this Agreement and the Termination Date shall be deemed to have occurred (upon the expiration of such five (5) Business Day period).

(b) In the event that a Seller Termination Option as described in clause (a) of the definition thereof has occurred and the Sellers have notified Administrative Agent and each Buyer in writing of its option to terminate this Agreement, the affected Buyer shall have the right to withdraw its request for payment within three (3) Business Days of Sellers’ notice of its exercise of Seller Termination Option and the Sellers shall no longer have the right to terminate this Agreement.

(c) For the avoidance of doubt, Sellers shall remain responsible for all costs actually incurred by Administrative Agent or Buyers pursuant to Sections 2.10 and 2.11.

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ARTICLE III REPRESENTATIONS AND WARRANTIES

Each of the Sellers, solely with respect to itself, represents and warrants to Administrative Agent and Buyers as of the Closing Date, the Effective Date and as of each Purchase Date for any Transaction that:

Section 3.01 Sellers’ Existence. Each of the Sellers has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware.

Section 3.02 Licenses. Each of the Sellers is duly licensed or is otherwise qualified in each jurisdiction in which it transacts business for the business which it conducts and is not in default of any applicable federal, state or local laws, rules and regulations unless, in either instance, the failure to take such action is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect and is not in default of such state’s applicable laws, rules and regulations. The Sellers have the requisite power and authority and legal right to own, sell and grant a lien on all of its right, title and interest in and to the Note. Each of the Sellers has the requisite power and authority and legal right to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, this Agreement, each other Program Agreement and any Transaction Notice.

Section 3.03 Power. Each of the Sellers has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect.

Section 3.04 Due Authorization. Each of the Sellers has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Program Agreements, as applicable. This Agreement, any Transaction Notice and the Program Agreements have been (or, in the case of Program Agreements and any Transaction Notice not yet executed, will be) duly authorized, executed and delivered by the Sellers, all requisite or other corporate action having been taken, and each is valid, binding and enforceable against the Sellers in accordance with its terms except as such enforcement may be affected by bankruptcy, by other insolvency laws, or by general principles of equity.

Section 3.05 Financial Statements. (A) Each of the Sellers has heretofore furnished to Administrative Agent and each Buyer a copy of (a) its balance sheet for the fiscal year of such Seller ended December 31, 2022 and the related statements of income for such Seller for such fiscal year, with the opinion thereon of Deloitte & Touche LLP and (b) its balance sheet for the quarterly fiscal period of such Seller ended June 30, 2023 and the related statements of income for such Seller for such quarterly fiscal period. All such financial statements are accurate, complete and correct and fairly present, in all material respects, the financial condition of Sellers (subject to normal year-end adjustments) and the results of such Seller’s operations as at such dates and for such fiscal periods, all in accordance with GAAP applied on a consistent basis, and to the best of such Seller’s knowledge, do not omit any material fact as of the date(s) thereof.

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Since June 30, 2023, there has been no material adverse change in the consolidated business, operations or financial condition of Sellers from that set forth in said financial statements nor are the Sellers aware of any state of facts which (with notice or the lapse of time) would or could result in any such material adverse change. Each of the Sellers has no liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of Sellers except as heretofore disclosed to Administrative Agent and each Buyer in writing.

(B) Sellers have heretofore caused VFN Guarantor to furnish to Administrative Agent and each Buyer a copy of (a) its balance sheet for the fiscal year of VFN Guarantor ended December 31, 2022 and the related statements of income for VFN Guarantor for such fiscal year, with the opinion thereon of Deloitte & Touche LLP and (b) its balance sheet for the quarterly fiscal period of VFN Guarantor ended June 30, 2023 and the related statements of income for VFN Guarantor for such quarterly fiscal period. All such financial statements are accurate, complete and correct and fairly present, in all material respects, the financial condition of VFN Guarantor (subject to normal year-end adjustments) and the results of its operations as at such dates and for such fiscal periods, all in accordance with GAAP applied on a consistent basis, and to the best of Sellers’ knowledge, do not omit any material fact as of the date(s) thereof. Since June 30, 2023, there has been no material adverse change in the consolidated business, operations or financial condition of VFN Guarantor from that set forth in said financial statements nor are Sellers aware of any state of facts which (with notice or the lapse of time) would or could result in any such material adverse change. VFN Guarantor has no liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of VFN Guarantor except as heretofore disclosed to Administrative Agent and each Buyer in writing.

Section 3.06 No Event of Default. There exists no Event of Default under Section 7.01 hereof, which default gives rise to a right to accelerate indebtedness as referenced in Section 7.03 hereof, under any mortgage, borrowing agreement or other instrument or agreement pertaining to indebtedness for borrowed money or to the repurchase of mortgage loans or securities.

Section 3.07 Solvency. Each of the Sellers is solvent and will not be rendered insolvent by any Transaction and, after giving effect to such Transaction, will not be left with an unreasonably small amount of capital with which to engage in its business. Neither of the Sellers intends to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they mature and is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such entity or any of its assets.

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The Sellers are not selling and/or pledging any Repurchase Assets with any intent to hinder, delay or defraud any of its creditors.

Section 3.08 No Conflicts. The execution, delivery and performance by each of the Sellers of this Agreement, any Transaction Notice hereunder and the Program Agreements do not conflict with any term or provision of the organizational documents of the Sellers or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to the Sellers of any court, regulatory body, administrative agency or governmental body having jurisdiction over the Sellers, which conflict would have a Material Adverse Effect and will not result in any violation of any such mortgage, instrument, agreement or obligation to which the Sellers are a party.

Section 3.09 True and Complete Disclosure. All information, reports, exhibits, schedules, financial statements or certificates of the Sellers or any Affiliate thereof or any of their officers furnished or to be furnished to Administrative Agent and Buyers in connection with the initial or any ongoing due diligence of the Sellers or any Affiliate thereof or officer thereof, negotiation, preparation, or delivery of the Program Agreements, taken as a whole, are true and complete in all material respects and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. All financial statements have been prepared in accordance with GAAP.

Section 3.10 Approvals. No consent, approval, authorization or order of, registration or filing with, or notice to any Governmental Authority or court is required under applicable law in connection with the execution, delivery and performance by the Sellers of this Agreement, any Transaction Notice and the Program Agreements.

Section 3.11 Litigation. There is no action, proceeding or investigation pending with respect to which either of the Sellers has received service of process or, to the best of each of the Sellers’ knowledge threatened against it before any court, administrative agency or other tribunal (A) asserting the invalidity of this Agreement, any Transaction, Transaction Notice or any Program Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, any Transaction Notice or any Program Agreement, (C) makes a claim individually or in the aggregate in an amount greater than 5% of either of the Sellers’ Adjusted Tangible Net Worth, (D) which requires filing with the SEC in accordance with the 1934 Act or any rules thereunder, (E) which has resulted in the voluntary or involuntary suspension of a license, a cease and desist order, or such other action as could adversely impact Sellers’ business, or (F) which might materially and adversely affect the validity of the Purchased Assets or the performance by it of its obligations under, or the validity or enforceability of, this Agreement, any Transaction Notice or any Program Agreement.

Section 3.12 Material Adverse Change. There has been no material adverse change in the business, operations, financial condition, properties or prospects of Sellers or their Affiliates since the date set forth in the most recent financial statements supplied to Administrative Agent and Byers that is reasonably likely to have a Material Adverse Effect on Sellers.

Section 3.13 Ownership. (a) Each Seller has good title to all of the related Repurchase Assets, free and clear of all mortgages, security interests, restrictions, Liens and encumbrances of any kind other than the Liens created hereby or contemplated herein.

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(b) Each item of the Repurchase Assets was acquired by the Sellers in the ordinary course of its business, in good faith, for value and without notice of any defense against or claim to it on the part of any Person.

(c) There are no agreements or understandings between the Sellers and any other party which would modify, release, terminate or delay the attachment of the security interests granted to Administrative Agent under this Agreement.

(d) The provisions of this Agreement are effective to create in favor of Administrative Agent a valid security interest in all right, title and interest of the related Seller in, to and under the Repurchase Assets.

(e) Upon the filing of financing statements on Form UCC-1 naming Administrative Agent as “Secured Party” and each related Seller as “Debtor”, and describing the Repurchase Assets, in the recording offices of the Secretary of State of Delaware the security interests granted hereunder in the Repurchase Assets will constitute fully perfected first priority security interests under the Uniform Commercial Code in all right, title and interest of the related Seller in, to and under such Repurchase Assets to the extent that such security interests can be perfected by filing under the Uniform Commercial Code.

Section 3.14 The Note. Each of the Sellers has (i) delivered the Note to Administrative Agent, (ii) duly endorsed the Note to Administrative Agent or Administrative Agent’s designee, (iii) notified the Indenture Trustee of such transfer and (iv) completed all documents required to effect such transfer in the Note Register, including receipt by the Note Registrar of the Rule 144A Note Transfer Certificate and such other information and documents that may be required pursuant to the terms of the Indenture. In addition, Administrative Agent has received all other Program Agreements (including all exhibits and schedules referred to therein or delivered pursuant thereto), all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof and all agreements and other material documents relating thereto, and each Seller hereby certifies that the copies delivered to Administrative Agent by such Seller are true and complete. None of such documents has been amended, supplemented or otherwise modified (including waivers) since the respective dates thereof, except by amendments, copies of which have been delivered to Administrative Agent. Each such document to which each Seller is a party has been duly executed and delivered by such Seller and is in full force and effect, and no default or material breach has occurred and is continuing thereunder.

Section 3.15 Taxes. Each of the Sellers and their Subsidiaries have timely filed all tax returns that are required to be filed by them and have paid all taxes, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. The charges, accruals and reserves on the books of each of the Sellers and their Subsidiaries in respect of taxes and other governmental charges are, in the opinion of Sellers, adequate.

Section 3.16 Investment Company. Neither Seller nor any of its Subsidiaries is an “investment company”, or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act.

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Section 3.17 Chief Executive Office; Jurisdiction of Organization. On the Effective Date, each Seller’s chief executive office, is, and has been, located at the address specified in Section 11.05 for notices. On the Effective Date, each Seller’s jurisdiction of organization is the State of Delaware. Each Seller shall provide Administrative Agent with thirty (30) days advance notice of any change in such Seller’s principal office or place of business or jurisdiction. Neither Seller has a trade name. During the preceding five (5) years, each Seller has not been known by or done business under any other name, corporate or fictitious, and has not filed or had filed against it any bankruptcy receivership or similar petitions nor has it made any assignments for the benefit of creditors.

Section 3.18 Location of Books and Records. The location where each Seller keeps its books and records, including all computer tapes and records relating to the Repurchase Assets is its chief executive office.

Section 3.19 ERISA. Each Plan to which the Sellers or their Subsidiaries make direct contributions, and, to the knowledge of the Sellers, each other Plan and each Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law.

Section 3.20 Financing of Note and Additional Balances. Each Transaction will be used to purchase the Note and funding of the Additional Balances as provided herein, which Note will be conveyed and/or sold by Sellers to Buyers.

Section 3.21 Agreements. Neither Sellers nor any Subsidiary of Sellers is a party to any agreement, instrument, or indenture or subject to any restriction materially and adversely affecting its business, operations, assets or financial condition, except as disclosed in the financial statements described in Section 3.05 hereof. Neither Sellers nor any Subsidiary of Sellers is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement, instrument, or indenture which default could have a material adverse effect on the business, operations, properties, or financial condition of Sellers as a whole. No holder of any indebtedness of Sellers or of any of their Subsidiaries has given notice of any asserted default thereunder.

Section 3.22 Other Indebtedness. All Indebtedness (other than Indebtedness evidenced by this Agreement) of Sellers existing on the Effective Date is listed on Exhibit B hereto (the “Existing Indebtedness”).

Section 3.23 No Reliance. Each of the Sellers has made its own independent decisions to enter into the Program Agreements and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including legal counsel and accountants) as it has deemed necessary. Each of the Sellers is not relying upon any advice from Administrative Agent or Buyers as to any aspect of the Transactions, including the legal, accounting or tax treatment of such Transactions.

Section 3.24 Plan Assets.

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Neither of the Sellers is an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code, and the Purchased Assets are not “plan assets” within the meaning of 29 CFR § 2510.3 101 as amended by Section 3(42) of ERISA, in Sellers’ hands, and transactions by or with Sellers are not subject to any state or local statute regulating investments or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.

Section 3.25 No Prohibited Persons. Neither the Sellers nor any of their Affiliates, officers, directors, partners or members, (i) is an entity or person (or to the Sellers’ knowledge, owned or controlled by an entity or person) that (A) is currently the subject of any Sanctions or (B) resides, is organized or chartered, or has a place of business in a country or territory that is currently the subject of Sanctions or (ii) is engaging or will engage in any dealings or transactions prohibited by Sanctions or will directly or indirectly use the proceeds of any transactions contemplated hereunder, or lend, contribute or otherwise make available such proceeds to or for the benefit of any person or entity, for the purpose of financing or supporting, directly or indirectly, the activities of any person or entity that is currently the subject of Sanctions.

Section 3.26 Compliance with 1933 Act. Neither the Sellers nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of the Note, any interest in the Note or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Note, any interest in the Note or any other similar security from, or otherwise approached or negotiated with respect to the Note, any interest in the Note or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action which would constitute a distribution of the Note under the 1933 Act or which would render the disposition of the Note a violation of Section 5 of the 1933 Act or require registration pursuant thereto.

Section 3.27 Anti-Money Laundering Laws. The operations of each Seller and each of their subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, including the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where such Seller or any of their subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving any Seller or any of their subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the best knowledge of any Seller, threatened.

ARTICLE IV CONVEYANCE; REPURCHASE ASSETS; SECURITY INTEREST

Section 4.01 Ownership. Upon payment of the Purchase Price and delivery of the Note to Administrative Agent on behalf of the Buyers, Buyers shall become the sole owner of the Purchased Assets, free and clear of all liens and encumbrances.

Section 4.02 Security Interest. (a) Although the parties intend (other than for U.S.

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federal tax purposes) that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, and in any event, each Seller hereby pledges to Administrative Agent, for the benefit of Buyers, as security for the performance by such Seller of its Obligations and hereby grants, assigns and pledges to Administrative Agent a fully perfected first priority security interest in all of such Seller’s right, title and interest in, to and under each of the following items of property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, is hereinafter referred to as the “Primary Repurchase Assets”:

(i) the Note identified on the Asset Schedule;

(ii) all rights to reimbursement or payment of the Note and/or amounts due in respect thereof under the Note identified on the Asset Schedule;

(iii) all records, instruments or other documentation evidencing any of the foregoing;

(iv) all “general intangibles”, “accounts”, “chattel paper”, “securities accounts”, “investment property”, “deposit accounts” and “money” as defined in the Uniform Commercial Code relating to or constituting any and all of the foregoing (including all of each Seller’s rights, title and interest in and under the Base Indenture and the Series 2017‑VF1 Indenture Supplement); and

(v) any and all replacements, substitutions, distributions on or proceeds of any and all of the foregoing.

(b) Each Seller hereby assigns, pledges, conveys and grants a security interest in all of its right, title and interest in, to and under the related Repurchase Assets to Administrative Agent, for the benefit of Buyers, to secure the Obligations. Each Seller agrees to mark its computer records, tapes and other electronic medium to evidence the interests granted to Administrative Agent hereunder.

(c) Subject to the priority interest of the Indenture Trustee, Administrative Agent, Buyers and Sellers hereby agree that in order to further secure Sellers’ Obligations hereunder, Sellers hereby grant to Administrative Agent, for the benefit of Buyers, a security interest (subject and subordinated to Fannie Mae’s rights under the Acknowledgment Agreement and the Fannie Mae Requirements) in (i) as of the Closing Date with respect to the PMC Seller and as of the Effective Date with respect to the PMH Seller, Sellers’ rights (but not its obligations) under the Program Agreements including any rights to receive payments thereunder or any rights to collateral thereunder whether now owned or hereafter acquired, now existing or hereafter created (collectively, the “Repurchase Rights”) and (ii) all collateral however defined or described under the Program Agreements to the extent not otherwise included under the definitions of Primary Repurchase Assets or Repurchase Rights (such collateral, “Additional Repurchase Assets,” and collectively with the Primary Repurchase Assets and the Repurchase Rights, the “Repurchase Assets”).

(d) [Reserved.]

(e) The foregoing provisions of this Section 4.02 are intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and the Transactions hereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.

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Section 4.03 Further Documentation. At any time and from time to time, upon the written request of Administrative Agent, and at the sole expense of the Sellers, the Sellers will promptly and duly execute and deliver, or will promptly cause to be executed and delivered, such further instruments and documents and take such further action as Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any applicable jurisdiction with respect to the Liens created hereby. Each of the Sellers also hereby authorizes Administrative Agent to file any such financing or continuation statement to the extent permitted by applicable law.

Section 4.04 Changes in Locations, Name, etc. Each Seller shall not (a) change the location of its chief executive office/chief place of business from that specified in Section 3.17 or (b) change its name or identity, unless it shall have given Administrative Agent at least thirty (30) days’ prior written notice thereof and shall have delivered to Administrative Agent all Uniform Commercial Code financing statements and amendments thereto as Administrative Agent shall request and taken all other actions deemed necessary by Administrative Agent to continue its perfected status in the Repurchase Assets with the same or better priority.

Section 4.05 Performance by Buyer of Sellers’ Obligations. If any Seller fails to perform or comply with any of its agreements contained in the Program Agreements and Administrative Agent may itself perform or comply, or otherwise cause performance or compliance, with such agreement, the reasonable (under the circumstances) out-of-pocket expenses of Administrative Agent actually incurred in connection with such performance or compliance, together with interest thereon at a rate per annum equal to the Pricing Rate shall be payable by either Seller to Administrative Agent on demand and shall constitute Obligations. Such interest shall be computed on the basis of the actual number of days in each Price Differential Period and a 360‑day year.

Section 4.06 Proceeds. If an Event of Default shall occur and be continuing, (a) all proceeds of Repurchase Assets received by any Seller consisting of cash, checks and other liquid assets readily convertible to cash items shall be held by such Seller in trust for Administrative Agent segregated from other funds of such Seller, and shall forthwith upon receipt by such Seller be turned over to Administrative Agent in the exact form received by such Seller (duly endorsed by such Seller to Administrative Agent, if required) and (b) any and all such proceeds received by Administrative Agent (whether from a Seller or otherwise) may, in the sole discretion of Administrative Agent, be held by Administrative Agent as collateral security for, and/or then or at any time thereafter may be applied by Administrative Agent against, the Obligations (whether matured or unmatured), such application to be in such order as Administrative Agent shall elect. Any balance of such proceeds remaining after the Obligations shall have been paid in full and this Agreement shall have been terminated shall be paid over to the applicable Seller or to whomsoever may be lawfully entitled to receive the same.

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Section 4.07 Remedies. If an Event of Default shall occur and be continuing, Administrative Agent may exercise (and at the direction of the Required Buyers shall exercise), in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Uniform Commercial Code (including Administrative Agent’s rights to a strict foreclosure under Section 9‑620 of the Uniform Commercial Code). Without limiting the generality of the foregoing, Administrative Agent may seek (and at the direction of the Required Buyers shall seek) the appointment of a receiver, liquidator, conservator, trustee, or similar official in respect of the Sellers or any of the Sellers’ property. Without limiting the generality of the foregoing, Administrative Agent may terminate (and at the direction of the Required Buyers shall terminate) the Participation Interest in accordance with the Participation Agreement. Administrative Agent without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required under this Agreement or by law referred to below) to or upon the Sellers or any other Person (each and all of which demands, presentments, protests, advertisements and notices are hereby waived), may (and at the direction of the Required Buyers shall) in such circumstances forthwith collect, receive, appropriate and realize upon the Repurchase Assets, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Repurchase Assets or any part thereof (or contract to do any of the foregoing), in one or more parcels or as an entirety at public or private sale or sales, at any exchange, broker’s board or office of Administrative Agent or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Administrative Agent shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Repurchase Assets so sold, free of any right or equity of redemption in the Sellers, which right or equity is hereby waived or released. Each Seller further agrees, at Administrative Agent’s request, to assemble the Repurchase Assets and make them available to Administrative Agent at places which Administrative Agent shall reasonably select, whether at either of the Sellers’ premises or elsewhere. Administrative Agent shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable (under the circumstances) out-of-pocket costs and expenses of every kind actually incurred therein or incidental to the care or safekeeping of any of the Repurchase Assets or in any way relating to the Repurchase Assets or the rights of Administrative Agent hereunder, including reasonable attorneys’ fees and disbursements of Administrative Agent or Buyers, to the payment in whole or in part of the Obligations, in such order as Administrative Agent may elect (or shall elect at the direction of the Required Buyers), and only after such application and after the payment by Administrative Agent of any other amount required or permitted by any provision of law, including Section 9‑615 of the Uniform Commercial Code, need Administrative Agent account for the surplus, if any, to the related Seller. To the extent permitted by applicable law, each Seller waives all claims, damages and demands it may acquire against Administrative Agent arising out of the exercise by Administrative Agent of any of its rights hereunder, other than those claims, damages and demands arising from the gross negligence or willful misconduct of Administrative Agent. If any notice of a proposed sale or other disposition of Repurchase Assets shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. Each Seller, jointly and severally, shall remain liable for any deficiency (plus accrued interest thereon as contemplated herein) if the proceeds of any sale or other disposition of the Repurchase Assets are insufficient to pay the Obligations and the fees and disbursements in amounts reasonable under the circumstances, of any attorneys employed by Administrative Agent to collect such deficiency.

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Notwithstanding anything to the contrary herein or in any of the other Program Agreements, the remedies set forth in this Section 4.07 concerning any actions with respect to the MSRs arising under or related to any Servicing Contract shall be subject to the Acknowledgment Agreement entered into with Fannie Mae.

Section 4.08 Limitation on Duties Regarding Preservation of Repurchase Assets. Administrative Agent’s duty with respect to the custody, safekeeping and physical preservation of the Repurchase Assets in its possession, under Section 9‑207 of the Uniform Commercial Code or otherwise, shall be to deal with it in the same manner as Administrative Agent deals with similar property for its own account. Neither Administrative Agent nor any of its directors, officers or employees shall be liable for failure to demand, collect or realize upon all or any part of the Repurchase Assets or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Repurchase Assets upon the request of any Seller or otherwise.

Section 4.09 Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Repurchase Assets are irrevocable and powers coupled with an interest.

Section 4.10 Release of Security Interest. Upon the latest to occur of (a) the repayment to Administrative Agent and Buyers of all Obligations hereunder, and (b) the occurrence of the Termination Date, Administrative Agent shall release its security interest in any remaining Repurchase Assets hereunder and shall promptly execute and deliver to the related Seller such documents or instruments as such Seller shall reasonably request to evidence such release.

Section 4.11 Reinstatement. All security interests created by this Article IV shall continue to be effective, or be reinstated, as the case may be, if at any time any payment, or any part thereof, of any Obligation of the Sellers is rescinded or must otherwise be restored or returned by Administrative Agent or Buyers upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Sellers or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Sellers or any substantial part of their property, or otherwise, all as if such release had not been made.

Section 4.12 Subordination. Neither of the Sellers shall seek in any Insolvency Event of the Issuer and Co-Issuer to be treated as part of the same class of creditors as Administrative Agent and Buyers and shall not oppose any pleading or motion by Administrative Agent and Buyers advocating that Administrative Agent and Buyers and such Seller should be treated as separate classes of creditors. Each Seller acknowledges and agrees that its rights with respect to the Repurchase Assets are and shall continue to be at all times while the obligations are outstanding junior and subordinate to the rights of Administrative Agent and Buyers under this Agreement.

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ARTICLE V CONDITIONS PRECEDENT

Section 5.01 Initial Transaction. The obligation of Administrative Agent and Buyers to enter into Transactions with the Sellers hereunder is subject to the satisfaction, immediately prior to or concurrently with the entering into such Transaction, of the condition precedent that Administrative Agent and Buyers shall have received all of the following items, each of which shall be satisfactory to Administrative Agent and its counsel in form and substance:

(a) Program Agreements and Note. The Program Agreements and Note, in all instances duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver.

(b) Security Interest. Evidence that all other actions necessary or, in the opinion of Administrative Agent, desirable to perfect and protect Administrative Agent’s interest in the Repurchase Assets have been taken, including duly authorized and filed Uniform Commercial Code financing statements on Form UCC‑1.

(c) Organizational Documents. A certificate of the corporate secretary of each of the Sellers in form and substance acceptable to Administrative Agent, attaching certified copies of each Seller’s certificates of formation, operating agreements and corporate resolutions approving the Program Agreements and transactions thereunder (either specifically or by general resolution) and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the Program Agreements.

(d) Good Standing Certificate. A certified copy of a good standing certificate from the jurisdiction of organization of each Seller, dated as of no earlier than the date ten (10) Business Days prior to the Effective Date.

(e) Incumbency Certificate. An incumbency certificate of the corporate secretary of each of Sellers, certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Program Agreements.

(f) Fees. Administrative Agent and Buyers shall have received payment in full of all fees and Expenses (including the Commitment Fee, if any) which are payable hereunder to Administrative Agent and Buyers on or before such date.

Section 5.02 All Transactions. The obligation of Administrative Agent and Buyers to enter into each Transaction pursuant to this Agreement is subject to the following conditions precedent:

(a) Transaction Notice and Asset Schedule. In accordance with Section 2.02 hereof, Administrative Agent shall have received from the related Seller a Transaction Notice with an updated Asset Schedule which includes the Note and any Additional Balance, if applicable, related to a proposed Transaction hereunder on such Business Day. Buyers shall have received a copy of the Note and any Additional Balance, if applicable.

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(b) No Margin Deficit. After giving effect to each new Transaction, the aggregate outstanding amount of the Purchase Price shall not exceed the Asset Value of the Note then in effect.

(c) No Default. No Default or Event of Default shall have occurred and be continuing.

(d) Requirements of Law. Administrative Agent and Buyers shall not have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Administrative Agent and Buyers has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Administrative Agent or Buyers to enter into Transactions with a Pricing Rate based on Base Rate.

(e) Representations and Warranties. Both immediately prior to the related Transaction and also after giving effect thereto and to the intended use thereof, the representations and warranties made by the Sellers in each Program Agreement shall be true, correct and complete on and as of such Purchase Date in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).

(f) Note. Administrative Agent shall have received the Note and evidence of the Additional Balances relating to any Purchased Assets, which is in form and substance satisfactory to Administrative Agent in its sole discretion.

(g) Material Adverse Change. None of the following shall have occurred and/or be continuing:

(A) a Buyer’s corporate bond rating as calculated by S&P or Moody’s has been lowered or downgraded to a rating below investment grade by S&P or Moody’s;

(B) an event or events shall have occurred in the good faith determination of Administrative Agent resulting in the effective absence of a “lending market” for financing debt obligations secured by mortgage loans or servicing receivables or securities backed by mortgage loans or servicing receivables or an event or events shall have occurred resulting in Buyers not being able to finance the Note through the “lending market” with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events; or

(C) there shall have occurred a material adverse change in the financial condition of a Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of such Buyer to fund its obligations under this Agreement.

(h) Maintenance of Profitability. VFN Guarantor shall not permit (i) Net Income before taxes, calculated without regard to any market-driven value changes on securities, mortgage servicing rights, other assets owned by VFN Guarantor and any hedge instruments related to such securities, rights and other assets for the Test Period ending June 2022 to be less than $1.00 or (ii) thereafter, Net Income, for each other Test Period, to be less than $1.00 for one of the two prior Test Periods.

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(i) Fees. Administrative Agent and Buyers shall have received payment in full of all fees and Expenses (including the Commitment Fee, if any) which are payable hereunder to Administrative Agent and Buyers on or before such date.

(j) Threshold Event. No Threshold Event shall occur after giving effect to such Transaction.

(k) Rating Trigger Event. No Rating Trigger Event has occurred.

(l) Capital Event. Citi Buyer has not provided written notice to Sellers and Administrative Agent of the occurrence of a Capital Event.

Section 5.03 Closing Subject to Conditions Precedent. The obligation of Buyers to purchase the Note is subject to the satisfaction on or prior to the Effective Date of the following conditions (any or all of which may be waived by Administrative Agent and Buyers):

(a) Performance by the Issuer, Co-Issuer, PMC and PMH. All the terms, covenants, agreements and conditions of the Transaction Documents to be complied with, satisfied, observed and performed by Issuer, Co-Issuer, PMC and PMH on or before the Effective Date shall have been complied with, satisfied, observed and performed in all material respects.

(b) Representations and Warranties. Each of the representations and warranties of Issuer, Co-Issuer, PMC and PMH made in the Transaction Documents shall be true and correct in all material respects as of the Effective Date (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof and except to the extent they expressly relate to an earlier or later time).

(c) Officer’s Certificate. Administrative Agent and Buyers shall have received in form and substance reasonably satisfactory to Administrative Agent and Buyers an officer’s certificate from PMC, an officer’s certificate from PMH, a certificate of an Authorized Officer of Issuer and a certificate of an Authorized Officer of Co-Issuer, dated the Effective Date, each certifying to the satisfaction of the conditions set forth in the preceding paragraphs (a) and (b), in each case together with incumbency, by-laws, resolutions and good standing.

(d) Opinions of Counsel to Issuer, Co-Issuer, PMC and PMH. Counsel to Issuer, Co-Issuer, PMC and PMH shall have delivered to Administrative Agent and Buyers favorable opinions, dated the Effective Date and satisfactory in form and substance to Administrative Agent and Buyers and their respective counsel, relating to corporate matters, enforceability, securities contract, non-consolidation and perfection and an opinion as to which state’s law applies to security interest and perfection matters. In addition to the foregoing, PMC, as servicer, shall have caused its counsel to deliver to Administrative Agent and Buyers an opinion as to certain tax matters dated as of the Effective Date, satisfactory in form and substance to Administrative Agent and Buyers and their respective counsel.

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(e) Officer’s Certificate of Indenture Trustee. Administrative Agent and Buyers shall have received in form and substance reasonably satisfactory to Administrative Agent and Buyers an Officer’s Certificate from Indenture Trustee, dated the Effective Date, with respect to the Base Indenture, together with incumbency and good standing.

(f) Opinions of Counsel to the Indenture Trustee. Counsel to Indenture Trustee shall have delivered to Administrative Agent and Buyers a favorable opinion dated the Effective Date and reasonably satisfactory in form and substance to Administrative Agent and Buyers and their respective counsel related to the enforceability of the Base Indenture.

(g) Opinions of Counsel to the Owner Trustee. Delaware counsel to the Owner Trustee of Issuer and Co-Issuer shall have delivered to Administrative Agent and Buyers favorable opinions regarding the formation, existence and standing of Issuer and Co-Issuer and of Issuer’s and Co-Issuer’s execution, authorization and delivery of each of the Transaction Documents to which it is a party and such other matters as Administrative Agent or Buyers may reasonably request, dated the Effective Date and reasonably satisfactory in form and substance to Administrative Agent and Buyers and their respective counsel.

(h) Filings and Recordations. Administrative Agent and Buyers shall have received evidence reasonably satisfactory to Administrative Agent and Buyers of (i) the completion of all recordings, registrations and filings as may be necessary or, in the reasonable opinion of Administrative Agent or Buyers, desirable to perfect or evidence: (A) the assignment by PMC, as a Seller, and PMH, as a Seller, to Issuer and Co-Issuer, respectively, of the ownership interest in the Collateral conveyed pursuant to the PC Repurchase Agreement and the proceeds thereof and (ii) the completion of all recordings, registrations, and filings as may be necessary or, in the reasonable opinion of Administrative Agent or Buyers, desirable to perfect or evidence the grant of a first priority perfected security interest in Issuer’s and Co-Issuer’s ownership interest in the Collateral in favor of Indenture Trustee, subject to no Liens prior to the Lien created by the Base Indenture.

(i) Documents. Administrative Agent shall have received the Note and Administrative Agent and Buyers shall have received a duly executed counterpart of each of the other Transaction Documents, in form acceptable to Administrative Agent and Buyers and Administrative Agent and each and every document or certification delivered by any party in connection with any such Transaction Documents or the Note, and each such document shall be in full force and effect.

(j) Actions or Proceedings. No action, suit, proceeding or investigation by or before any Governmental Authority shall have been instituted to restrain or prohibit the consummation of, or to invalidate, any of the transactions contemplated by the Transaction Documents, the Note and the documents related thereto in any material respect.

(k) Approvals and Consents. All Governmental Actions of all Governmental Authorities required with respect to the transactions contemplated by the Transaction Documents, the Note and the documents related thereto shall have been obtained or made.

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(l) Fees, Costs and Expenses. The fees, costs and expenses payable by Issuer, Co-Issuer, PMC and PMH on or prior to the Effective Date pursuant to this Agreement or any other Transaction Document shall have been paid in full.

(m) Other Documents. PMC and PMH shall have furnished to Administrative Agent and Indenture Trustee such other opinions, information, certificates and documents as Administrative Agent and Indenture Trustee may reasonably request.

(n) MSR Valuation Agent. PMC shall have engaged the MSR Valuation Agent pursuant to an agreement reasonably satisfactory to Administrative Agent.

(o) Proceedings in Contemplation of Sale of the Note. All actions and proceedings undertaken by Issuer, Co-Issuer, PMC and PMH in connection with the issuance and sale of the Note as herein contemplated shall be satisfactory in all respects to Administrative Agent and its counsel.

(p) Advance Rate Trigger Event, Servicer Termination Events, Events of Default and Funding Interruption Events. No Advance Rate Trigger Event, Servicer Termination Event, Event of Default or Funding Interruption Event shall then be occurring.

(q) Satisfaction of Conditions. Each of the Funding Conditions shall have been satisfied.

(r) Rating Trigger Event. No Rating Trigger Event has occurred.

(s) Capital Event. Citi Buyer has not provided written notice to Seller and Administrative Agent of the occurrence of a Capital Event.

If any condition specified in this Section 5.03 shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Administrative Agent and the Buyers by notice to PMC and to PMH at any time at or prior to the Effective Date, and neither the Administrative Agent nor any Buyer shall incur any liability as a result of such termination.

ARTICLE VI COVENANTS

Each of the Sellers covenants and agrees, solely with respect to itself, that until the payment and satisfaction in full of all Obligations, whether now existing or arising hereafter, shall have occurred:

Section 6.01 Litigation. Each of the Sellers will promptly, and in any event within ten (10) days after service of process on any of the following, give to Administrative Agent and each Buyer notice of all litigation, actions, suits, arbitrations, investigations (including any of the foregoing which are threatened or pending) or other legal or arbitrable proceedings affecting either of the Sellers or any of its Subsidiaries or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Program Agreements or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim individually or in the aggregate in an amount greater than 5% of either of the Sellers’ Adjusted Tangible Net Worth, or (iii) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect.

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On the fifth (5th) day of each calendar month (or if such day is not a Business Day, the next succeeding Business Day), Sellers will provide to Administrative Agent and each Buyer a litigation docket listing all litigation, actions, suits, arbitrations, investigations (including any of the foregoing which are threatened or pending) or other legal or arbitrable proceedings affecting Sellers or any of their Subsidiaries or affecting any of the Property of any of them before any Governmental Authority. Sellers will promptly provide to Administrative Agent and each Buyer notice of any judgment, which with the passage of time, could cause an Event of Default hereunder.

Section 6.02 Prohibition of Fundamental Changes. Neither Seller shall enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets; provided, that either Seller may merge or consolidate with (a) any wholly owned subsidiary of the related Seller, or (b) any other Person if the related Seller is the surviving entity; and provided further, that if after giving effect thereto, no Default would exist hereunder.

Section 6.03 Monthly Reporting. Sellers shall ensure that each Buyer receives all reports and information that the Administrative Agent and the VFN Noteholders are entitled to receive pursuant to the Indenture (including the Advance Verification Agent Report, as delivered on a quarterly or other periodic basis, and all other reports and information delivered by the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator or the Indenture Trustee relating to the Note). Each Buyer agrees to be bound by any confidentiality provisions reasonably requested by Sellers and upon request of Sellers execute and deliver a separate confidentiality agreement memorializing such provisions.

Section 6.04 No Adverse Claims. Each of the Sellers warrants and will defend the right, title and interest of Administrative Agent and Buyers in and to all Purchased Assets against all adverse claims and demands.

Section 6.05 Assignment. Except as permitted herein, neither Seller shall sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Agreements), any of the Purchased Assets or any interest therein, provided that this Section 6.05 shall not prevent any transfer of Purchased Assets in accordance with the Program Agreements.

Section 6.06 Security Interest. Each of the Sellers shall do all things necessary to preserve the Purchased Assets so that they remain subject to a first priority perfected security interest hereunder. Without limiting the foregoing, each of the Sellers will comply with all rules, regulations and other laws of any Governmental Authority and cause the Purchased Assets to comply with all applicable rules, regulations and other laws. Neither Seller will allow any default for which each of the Sellers is responsible to occur under any Purchased Assets or any Program Agreement and each of the Sellers shall fully perform or cause to be performed when due all of its obligations under any Purchased Assets and any Program Agreement.

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Section 6.07 Records. (a) Each of the Sellers shall collect and maintain or cause to be collected and maintained all Records relating to the Purchased Assets in accordance with industry custom and practice for assets similar to the Purchased Assets, including those maintained pursuant to Section 6.08, and all such Records shall be in the related Seller’s or Administrative Agent’s possession unless Administrative Agent otherwise approves. Each of the Sellers will maintain all such Records in good and complete condition in accordance with industry practices for assets similar to the Purchased Assets and preserve them against loss.

(b) For so long as Administrative Agent and Buyers have an interest in or lien on any Purchased Assets, the Sellers will hold or cause to be held all related Records in trust for Administrative Agent and Buyers. The Sellers shall notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of Administrative Agent and Buyers granted hereby.

(c) Upon reasonable advance notice from Administrative Agent or a Buyer, the Sellers shall (x) make any and all such Records available to Administrative Agent and each Buyer to examine any such Records, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, and (y) permit Administrative Agent or any Buyer or their authorized agents to discuss the affairs, finances and accounts of each Seller with its chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of each Seller with its independent certified public accountants.

Section 6.08 Books. Each of the Sellers shall keep or cause to be kept in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of Purchased Assets to Buyers.

Section 6.09 Approvals. Each of the Sellers shall maintain all licenses, permits or other approvals necessary for each of the Sellers to conduct its business and to perform its obligations under the Program Agreements, and each of the Sellers shall conduct its business strictly in accordance with applicable law.

Section 6.10 Material Change in Business. Neither Seller shall make any material change in the nature of its business as carried on at the Closing Date, with respect to the PMC Seller, and the Effective Date, with respect to the PMH Seller.

Section 6.11 Distributions. If an Event of Default has occurred and is continuing, Sellers shall not pay any dividends with respect to any capital stock or other equity interests in such entity, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Sellers.

Section 6.12 Applicable Law. The Sellers shall comply with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority.

Section 6.13 Existence. The Sellers shall preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises.

Section 6.14 Chief Executive Office; Jurisdiction of Organization. Each Seller shall not move its chief executive office from the address referred to in Section 3.17 or change its jurisdiction of organization from the jurisdiction referred to in Section 3.17 unless it shall have provided Administrative Agent at least thirty (30) days’ prior written notice of such change.

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Section 6.15 Taxes. Each of the Sellers shall timely file all tax returns that are required to be filed by it and shall timely pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.

Section 6.16 Transactions with Affiliates. Other than the purchase of the Note, Sellers will not enter into any transaction, including any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction (a) does not result in a Default hereunder, (b) is in the ordinary course of the Sellers’ business and (c) is upon fair and reasonable terms no less favorable to Sellers than they would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate, or make a payment that is not otherwise permitted by this Section 6.16 to any Affiliate.

Section 6.17 Guarantees. Sellers shall not create, incur, assume or suffer to exist any Guarantees, except (i) to the extent reflected in the related Seller’s financial statements or notes thereto and (ii) to the extent the aggregate Guarantees of Sellers do not exceed $250,000.

Section 6.18 Indebtedness. Sellers shall not incur any additional material Indebtedness other than (i) the Existing Indebtedness specified on Exhibit B hereto; (ii) Indebtedness incurred with Buyers or their Affiliates; (iii) Indebtedness incurred in connection with new or existing secured lending facilities and (iv) usual and customary accounts payable for a mortgage company), without the prior written consent of Administrative Agent and each Buyer.

Section 6.19 True and Correct Information. All information, reports, exhibits, schedules, financial statements or certificates of Sellers, any Affiliate thereof or any of their officers furnished to Administrative Agent and Buyers hereunder and during Administrative Agent’s and Buyers’ diligence of Sellers are and will be true and complete in all material respects and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. All required financial statements, information and reports delivered by the related Seller to Administrative Agent and Buyers pursuant to this Agreement shall be prepared in accordance with U.S. GAAP, or, if applicable, to SEC filings, the appropriate SEC accounting regulations.

Section 6.20 No Pledge. Except as contemplated herein, Sellers shall not pledge, grant a security interest or assign any existing or future rights to service any of the Repurchase Assets or pledge or grant to any other Person any security interest in the Note.

Section 6.21 Plan Assets. Neither Seller shall act on behalf of an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code and Sellers shall not use “plan assets” within the meaning of 29 CFR § 2510.3 101, as amended by Section 3(42) of ERISA to engage in this Agreement or any Transaction hereunder. Transactions to or with Sellers shall not be subject to any state or local statute regulating investments of or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA.

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Section 6.22 Sharing of Information. Each of the Sellers shall allow Administrative Agent and Buyers to exchange information related to each of the Sellers and the Transactions hereunder with third party lenders and each of the Sellers shall permit each third party lender to share such information with Administrative Agent and Buyers.

Section 6.23 Modification of the Base Indenture and Series 2017‑VF1 Indenture Supplement. Sellers shall not consent with respect to any of the Base Indenture and the Series 2017‑VF1 Indenture Supplement related to the Purchased Assets, to (i) the modification, amendment or termination of such the Base Indenture and the Series 2017‑VF1 Indenture Supplement, (ii) the waiver of any provision of the Base Indenture and the Series 2017‑VF1 Indenture Supplement, or (iii) the resignation of PMC as servicer under the Base Indenture and the Series 2017‑VF1 Indenture Supplement, or the assignment, transfer, or material delegation of any of its rights or obligations, under such the Base Indenture and the Series 2017‑VF1 Indenture Supplement, without the prior written consent of Administrative Agent and each Buyer exercised in such Person’s sole discretion.

Section 6.24 Reporting Requirements. (a) Sellers shall furnish to Administrative Agent and each Buyer (i) promptly, copies of any material and adverse notices (including notices of defaults, breaches, potential defaults or potential breaches) and any material financial information that is not otherwise required to be provided by Sellers hereunder which is given to Sellers’ lenders, (ii) promptly, notice of the occurrence of (1) any Event of Default hereunder; (2) any default or material breach by any Seller of any obligation under any Program Agreement or any material contract or agreement of such Seller or (3) the occurrence of any event or circumstance that such party reasonably expects has resulted in, or will, with the passage of time, result in, a Material Adverse Effect or an Event of Default and (iii) the following:

(1) as soon as available and in any event within forty (40) calendar days after the end of each calendar month, the unaudited balance sheet of each Seller, as at the end of such period and the related unaudited consolidated statements of income for each Seller for such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of each Seller, which certificate shall state that said consolidated financial statements or financial statements, as applicable, fairly present in all material respects the consolidated financial condition or financial condition, as applicable, and results of operations of each Seller in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end adjustments);

(2) as soon as available and in any event within forty (40) calendar days after the end of each calendar quarter, the unaudited cash flow statements of each Seller, as at the end of such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of each Seller, which certificate shall state that said consolidated financial statements or financial statements, as applicable, fairly present in all material respects the consolidated financial condition or financial condition, as applicable, and results of operations of each Seller, in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end adjustments);

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(3) as soon as available and in any event within ninety (90) days after the end of each fiscal year of each Seller, the balance sheet of each Seller, as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for each Seller for such year, setting forth in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion and the scope of audit shall be acceptable to Administrative Agent and each Buyer in their sole discretion, shall have no “going concern” qualification and shall state that said consolidated financial statements or financial statements, as applicable, fairly present the consolidated financial condition or financial condition, as applicable, and results of operations of each Seller as at the end of, and for, such fiscal year in accordance with GAAP;

(4) such other prepared statements that Administrative Agent or a Buyer may reasonably request;

(5) from time to time such other information regarding the financial condition, operations, or business of each Seller as Administrative Agent or a Buyer may reasonably request;

(6) as soon as reasonably possible, and in any event within thirty (30) days after a Responsible Officer of each Seller has knowledge of the occurrence of any ERISA Event of Termination, stating the particulars of such ERISA Event of Termination in reasonable detail;

(7) as soon as reasonably possible, notice of any of the following events:

a. any material dispute, litigation, investigation, proceeding or suspension between any Seller on the one hand, and any Governmental Authority or any Person;

b. any material change in accounting policies or financial reporting practices of any Seller;

c. any material issues raised upon examination of any Seller or such Seller’s facilities by any Governmental Authority;

d. any material change in the Indebtedness of any Seller, including any default, renewal, non-renewal, termination, increase in available amount or decrease in available amount related thereto; e. promptly upon receipt of notice or knowledge of any lien or security interest (other than security interests created hereby or by the other Program Agreements) on, or claim asserted against, any of the Purchased Assets; and

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f. any other event, circumstance or condition that has resulted, or has a reasonable possibility of resulting, in a Material Adverse Effect with respect to any Seller.

(b) Officer’s Certificates. Each of the Sellers will furnish to Administrative Agent and each Buyer, at the time such Seller furnishes each set of financial statements pursuant to Section 6.24(a)(iii)(1), (2) or (3) above, an Officer’s Compliance Certificate of such Seller.

(c) Other. Each of the Sellers shall deliver to Administrative Agent and each Buyer any other reports or information reasonably requested by Administrative Agent or a Buyer or as otherwise required pursuant to this Agreement and the Indenture (including the Advance Verification Agent Report, as delivered on a quarterly or other periodic basis, and all other reports and information delivered by the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator or the Indenture Trustee relating to the Note).

(d) Regulatory Reporting Compliance. The PMC Seller shall, on or before the last Business Day of the fifth (5th) month following the end of each of the PMC Seller’s fiscal years (December 31), beginning with the fiscal year ending in 2022, deliver to Administrative Agent and each Buyer a copy of the results of any Uniform Single Attestation Program for Mortgage Bankers or an Officer’s Certificate that satisfies the requirements of Item 1122(a) of Regulation AB, an independent public accountant’s report that satisfies the requirements of Item 1123 of Regulation AB, or similar review conducted on the PMC Seller by its accountants, and such other reports as the PMC Seller may prepare relating to its servicing functions as Seller.

Section 6.25 Liens on Substantially All Assets. Neither of the Sellers shall grant a security interest to any Person other than Administrative Agent or an Affiliate of Administrative Agent in substantially all assets of the related Seller unless Sellers have entered into an amendment to this Agreement that grants to Administrative Agent a pari passu security interest on such assets.

Section 6.26 Litigation Summary. On each date on which the Officer’s Compliance Certificate is delivered, Sellers shall provide to Administrative Agent and each Buyer a true and correct summary of all material actions, notices, proceedings and investigations pending with respect to which each of the Sellers has received service of process or other form of notice or, to the best of the related Seller’s knowledge, threatened against it, before any court, administrative or governmental agency or other regulatory body or tribunal.

Section 6.27 Hedging. On each date on which the Officer’s Compliance Certificate is delivered, each of the Sellers shall provide to the Administrative Agent and each Buyer, with respect to its respective portfolio, a report comparing the change in mark to market of hedging contracts to the change in mark to market of MSRs across such Seller’s entire portfolio for the prior calendar month.

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Section 6.28 MSR Valuation. Sellers shall provide to Administrative Agent and each Buyer a detailed summary of the fair market value and Market Value Percentage of MSRs from the most recently delivered Market Value Report in accordance with the timing requirements of Section 3.3(g) of the Base Indenture.

Section 6.29 Most Favored Status. Sellers, Administrative Agent and Buyers each agree that should any Seller or any Affiliate thereof enter into a repurchase agreement or credit facility with any Person other than Administrative Agent or a Buyer or an Affiliate of Administrative Agent or a Buyer which by its terms provides any of the following (each, a “More Favorable Agreement”):

(a) more favorable terms with respect to any guaranties or financial covenants of either PMC Seller or PMH Seller, including covenants covering the same or similar subject matter set forth or referred to in Section 6.11 hereof and Section 2 of the Pricing Side Letter;

(b) a security interest to any Person other than Administrative Agent or an Affiliate of Administrative Agent in substantially all assets of Sellers or any Affiliate thereof; or

(c) a requirement that each of the Sellers has added or will add any Person other than Administrative Agent or an Affiliate of Administrative Agent as a loss payee under the related Seller’s Fidelity Insurance;

then the terms of this Agreement shall be deemed automatically amended to include such more favorable terms contained in such More Favorable Agreement, such that such terms operate in favor of Administrative Agent, Buyers or an Affiliate of Administrative Agent or Buyers; provided, that in the event that such More Favorable Agreement is terminated, upon notice by Sellers to Administrative Agent of such termination, the original terms of this Agreement shall be deemed to be automatically reinstated. Administrative Agent, Sellers and Buyers further agree to execute and deliver any new guaranties, agreements or amendments to this Agreement evidencing such provisions, provided that the execution of such amendment shall not be a precondition to the effectiveness of such amendment, but shall merely be for the convenience of the parties hereto. Promptly upon Sellers or any Affiliate thereof entering into a repurchase agreement or other credit facility with any Person other than Administrative Agent or a Buyer, Sellers shall deliver to Administrative Agent and each Buyer a true, correct and complete copy of such repurchase agreement, loan agreement, guaranty or other financing documentation.

Section 6.30 Servicer Administration. If at any time PMC intends to service the Mortgage Loans directly without a subservicer, PMC shall not less than 120 days prior to the anticipated servicing transfer date, provide notice to Administrative Agent of such intention and solicit Administrative Agent’s prior written consent, which Administrative Agent shall have sixty (60) days from the receipt of the notice to provide and which consent may not be unreasonably withheld. If Administrative Agent denies the request for consent in writing, then PMC shall repurchase the Note not later than the later of (x) the sixtieth (60th) day following receipt of Administrative Agent’s denial letter or (y) such anticipated servicing transfer date.

Section 6.31 Threshold Events and Commitment Modifications. Sellers shall not request any Transaction that would cause a Threshold Event for any Buyer. Sellers shall provide prompt notice of any Commitment Modification and/or Maximum Purchase Price Modification for any Buyer to Administrative Agent and each Buyer.

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ARTICLE VII DEFAULTS/RIGHTS AND REMEDIES OF BUYER UPON DEFAULT

Section 7.01 Events of Default. Each of the following events or circumstances shall constitute an “Event of Default”:

(a) Payment Failure. Failure of any Seller to (i) make any payment (which failure continues for a period of two (2) Business Days following written notice (which may be in electronic form) from Administrative Agent) of Price Differential or Repurchase Price or any other sum which has become due, on a Price Differential Payment Date or a Repurchase Date or otherwise, whether by acceleration or otherwise, under the terms of this Agreement, any other warehouse and security agreement or any other document, in each case evidencing or securing Indebtedness of Sellers to Administrative Agent or Buyers to any Affiliate of Administrative Agent or Buyers, or (ii) cure any Margin Deficit when due pursuant to Section 2.05 hereof.

(b) Cross Default. Any Seller or Affiliates thereof shall be in default under (i) any Program Agreement or any Other Financing Agreement; provided that any such default under the Indenture shall constitute an “Event of Default” only if it continues unremedied for a period of two (2) Business Days after a Responsible Officer of either Seller obtains actual knowledge of such failure, or receives written notice from Administrative Agent of such default; (ii) any Indebtedness, in the aggregate, in excess of $1 million of either Seller or any Affiliate thereof which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness, or (iii) any other contract or contracts, in the aggregate in excess of $1 million to which either Seller or any Affiliate thereof is a party which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary of such contract.

(c) Assignment. Assignment or attempted assignment by any Seller of this Agreement or any rights hereunder without first obtaining the specific written consent of Administrative Agent, or the granting by any Seller of any security interest, lien or other encumbrances on any Purchased Assets to any person other than Administrative Agent.

(d) Insolvency. An Act of Insolvency shall have occurred with respect to any Seller or any Affiliate thereof.

(e) Material Adverse Change. Any material adverse change in the Property, business, financial condition or operations of any Seller or any of its Affiliates shall occur, in each case as determined by Administrative Agent in its sole good faith discretion, or any other condition shall exist which, in Administrative Agent’s sole good faith discretion, constitutes a material impairment of such Seller’s ability to perform its obligations under this Agreement or any other Program Agreement.

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(f) Immediate Breach of Representation or Covenant or Obligation. A breach by any Seller of any of the representations, warranties or covenants or obligations set forth in Section 3.01 (Seller Existence), Section 3.07 (Solvency), Section 3.12 (Material Adverse Change), Section 3.22 (Other Indebtedness), Section 6.02 (Prohibition of Fundamental Changes), Section 6.13 (Existence), Section 6.17 (Guarantees), Section 6.18 (Indebtedness), Section 6.20 (No Pledge) or Section 6.21 (Plan Assets) of this Agreement.

(g) Additional Breach of Representation or Covenant. A material breach by any Seller of any other material representation, warranty or covenant set forth in this Agreement (and not otherwise specified in Section 7.01(f) above), if such breach is not cured within five (5) Business Days or, in the case of a breach of Section 6.02, three (3) Business Days, and in the case of a breach of Section 2 of the Pricing Side Letter (Financial Covenants), one (1) Business Day.

(h) Change in Control. The occurrence of a Change in Control.

(i) Failure to Transfer. Either of the Sellers fails to transfer the Note or a material portion of the other Purchased Assets to Administrative Agent on the applicable Purchase Date (provided Administrative Agent has tendered the related Purchase Price on behalf of Buyers).

(j) Judgment. A final judgment or judgments for the payment of money in excess of $10,000,000 shall be rendered against either Seller or any of their Affiliates by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within thirty (30) days from the date of entry thereof.

(k) Government Action. Any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of any Seller or any Affiliate thereof, or shall have taken any action to displace the management of any Seller or any Affiliate thereof or to curtail its authority in the conduct of the business of any Seller or any Affiliate thereof, or takes any action in the nature of enforcement to remove, limit or restrict the approval of Sellers or Affiliate as an issuer, buyer or a seller/servicer of mortgage loans or securities backed thereby, and such action provided for in this subparagraph (k) shall not have been discontinued or stayed within thirty (30) days.

(l) Inability to Perform. A Responsible Officer of any Seller or VFN Guarantor shall admit its inability to, or its intention not to, perform any of the Seller’s Obligations or VFN Guarantor’s obligations hereunder or the VFN Repo Guaranty.

(m) Security Interest. This Agreement shall for any reason cease to create a valid, first priority security interest in any material portion of the Repurchase Assets purported to be covered hereby.

(n) Financial Statements. Any Seller’s audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of such Seller as a “going concern” or a reference of similar import.

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(o) Validity of Agreement. For any reason, this Agreement at any time shall not be in full force and effect in all material respects or shall not be enforceable in all material respects in accordance with its terms, or any Lien granted pursuant thereto shall fail to be perfected and of first priority, or any Seller or any Affiliate of such Seller shall seek to disaffirm, terminate, limit or reduce its obligations hereunder or VFN Guarantor’s obligations under the VFN Repo Guaranty.

(p) VFN Guarantor Breach. A breach by VFN Guarantor of any material representation, warranty or covenant set forth in the VFN Repo Guaranty or any other Program Agreement, any “event of default” by VFN Guarantor under the VFN Repo Guaranty, any repudiation of the VFN Repo Guaranty by VFN Guarantor, or if the VFN Repo Guaranty is not enforceable against VFN Guarantor.

(q) Rating Trigger Event. To the extent a Rating Trigger Event has occurred and Seller fails to pay the Obligations outstanding on the date of such Rating Trigger Event in full on or before the conclusion of the Rating Trigger Event Amortization Period.

(r) Capital Event. To the extent a Capital Event has occurred and Seller fails to pay the Obligations outstanding on the date of such Capital Event in full on or before the conclusion of the Capital Event Amortization Period.

Section 7.02 No Waiver. An Event of Default shall be deemed to be continuing unless expressly waived by Administrative Agent, at the direction of the Required Buyers, in writing.

Section 7.03 Due and Payable.

(a) Event of Default. Upon the occurrence of any Event of Default which has not been waived in writing by Administrative Agent, Administrative Agent may (or shall, at the direction of the Required Buyers), by notice to the Sellers, declare all Obligations to be immediately due and payable, and any obligation of Administrative Agent and Buyers to enter into Transactions with the Sellers shall thereupon immediately terminate. Upon such declaration, the Obligations shall become immediately due and payable, both as to Purchase Price outstanding and Price Differential, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or other evidence of such Obligations to the contrary notwithstanding, except with respect to any Event of Default set forth in Section 7.01(d), in which case all Obligations shall automatically become immediately due and payable without the necessity of any notice or other demand, and any obligation of Administrative Agent and Buyers to enter into Transactions with the Sellers shall immediately terminate. Administrative Agent may (or shall at the direction of the Required Buyers) enforce payment of the same and exercise any or all of the rights, powers and remedies possessed by Administrative Agent and Buyers, whether under this Agreement or any other Program Agreement or afforded by applicable law.

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(b) Rating Trigger Event. Upon the occurrence of a Rating Trigger Event, (i) the Obligations outstanding as of such date shall be immediately due and payable in full and the Sellers shall pay such amounts to the related Buyer on or before the conclusion of the Rating Trigger Event Amortization Period, and (ii) any obligations of any Buyer to enter into any Transactions with the Sellers shall thereupon immediately terminate. Upon the conclusion of the Rating Trigger Event Amortization Period, any outstanding Obligations as of such date owed to either Buyer shall become immediately due and payable, both as to Purchase Price outstanding and Price Differential, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or other evidence of such Obligations to the contrary notwithstanding. Each Buyer may enforce payment of the same and exercise any or all of the rights, powers and remedies possessed by such buyer, whether under this Agreement or any other Program Agreement or afforded by applicable law.

(c) Capital Event. On a Capital Event Notice Date, (i) the Obligations outstanding as of such date shall be immediately due and payable in full and the Sellers shall pay such amounts to the related Buyer on or before the conclusion of the Capital Event Amortization Period, and (ii) any obligation of any Buyer to enter into any Transactions with the Sellers shall thereupon immediately terminate. Upon the conclusion of the Capital Event Amortization Period, any outstanding Obligations as of such date owed to either Buyer, shall become immediately due and payable, both as to Purchase Price outstanding and Price Differential, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or other evidence of such Obligations to the contrary notwithstanding. Each Buyer may enforce payment of the same and exercise any or all of the rights, powers and remedies possessed by such Buyer, whether under this Agreement or any other Program Agreement or afforded by applicable law.

Section 7.04 Fees. The remedies provided for herein are cumulative and are not exclusive of any other remedies provided by law. In addition to each Seller’s obligations contained in Section 3 of the Pricing Side Letter, each Seller, jointly and severally, agrees to pay to Administrative Agent reasonable attorneys’ fees and reasonable legal expenses incurred in enforcing Administrative Agent’s and Buyers’ rights, powers and remedies under this Agreement and each other Program Agreement.

Section 7.05 Default Rate. Without regard to whether Administrative Agent has exercised any other rights or remedies hereunder, if an Event of Default shall have occurred and be continuing, the applicable Margin in respect of the Pricing Rate shall be increased, to the extent permitted by law, as set forth in clause (ii) of the definition of “Margin”.

ARTICLE VIII ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS; SEPARATE ACTIONS BY BUYER

Section 8.01 Entire Agreement; Amendments. This Agreement (including the Schedules and Exhibits hereto) constitutes the entire agreement of the parties hereto and supersedes any and all prior or contemporaneous agreements, written or oral, as to the matters contained herein, and no modification or waiver of any provision hereof or any of the Program Agreements, nor consent to the departure by the Sellers therefrom, shall be effective unless the same is in writing, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which it is given. This Agreement may not be amended, modified or supplemented except by a writing executed by the Sellers, Administrative Agent and Required Buyers.

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Section 8.02 Waivers, Separate Actions by Buyers. Any amendment or waiver effected in accordance with this Article VIII shall be binding upon Administrative Agent, Buyers and the Sellers; and Administrative Agent’s or a Buyer’s failure to insist upon the strict performance of any term, condition or other provision of this Agreement or any of the Program Agreements, or to exercise any right or remedy hereunder or thereunder, shall not constitute a waiver by Administrative Agent or such Buyer of any such term, condition or other provision or Default or Event of Default in connection therewith, nor shall a single or partial exercise of any such right or remedy preclude any other or future exercise, or the exercise of any other right or remedy; and any waiver of any such term, condition or other provision or of any such Default or Event of Default shall not affect or alter this Agreement or any of the Program Agreements, and each and every term, condition and other provision of this Agreement and the Program Agreements shall, in such event, continue in full force and effect and shall be operative with respect to any other then existing or subsequent Default or Event of Default in connection therewith. An Event of Default hereunder or under any of the Program Agreements shall be deemed to be continuing unless and until waived in writing by Administrative Agent and Buyers.

ARTICLE IX SUCCESSORS AND ASSIGNS

Section 9.01 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, any portion thereof, or any interest therein. The Sellers shall not have the right to assign all or any part of this Agreement or any interest herein without the prior written consent of Administrative Agent and Buyers.

Section 9.02 Participations and Transfers. (a) A Buyer may in accordance with applicable law at any time sell to one or more banks or other entities (“Participants”) participating interests in all or a portion of such Buyer’s rights and obligations under this Agreement and the other Program Agreements; provided, that (i) each Seller has consented to such sale; provided, however, any such Seller’s consent shall not be required in the event that (A) such Participant is an Affiliate of such Buyer or (B) an Event of Default has occurred; (ii) each such sale shall represent an interest in a Transaction in a Purchase Price of $1,000,000 or more and (iii) other than with respect to a participating interest consisting of a pro rata interest in all payments due to such Buyer under this Agreement and prior to an Event of Default such Buyer receives an opinion of a nationally recognized tax counsel experienced in such matters that such sale will not result in Issuer or Co-Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes. In the event of any such sale by a Buyer of participating interests to a Participant, such Buyer shall remain a party to the Transaction for all purposes under this Agreement and Sellers shall continue to deal solely and directly with such Buyer in connection with its rights and obligations under this Agreement.

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(b) A Buyer may in accordance with applicable law at any time assign, pledge, hypothecate, or otherwise transfer to one or more banks, financial institutions, investment companies, investment funds or any other Person (each, a “Transferee”) all or a portion of such Buyer’s rights and obligations under this Agreement and the other Program Agreements; provided, that (i) each Seller has consented to such assignment, pledge, hypothecation, or other transfer; provided, however, any such Seller’s consent shall not be required in the event that (A) such Transferee is an Affiliate of such Buyer or (B) an Event of Default has occurred; (ii) absent an Event of Default, such Buyer shall give at least ten days’ prior notice thereof to the Sellers; and (iii) that each such sale shall represent an interest in the Transactions in an aggregate Purchase Price of $1,000,000 or more and (iv) other than with respect to an assignment, pledge, hypothecation or transfer consisting of a pro rata interest in all payments due to such Buyer under this Agreement and prior to an Event of Default such Buyer received an opinion of a nationally recognized tax counsel experienced in such matters that such assignment, pledge, hypothecation or transfer will not result in either of the Issuer or Co-Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes. In the event of any such assignment, pledge, hypothecation or transfer by a Buyer of its rights under this Agreement and the other Program Agreements, the Sellers shall continue to deal solely and directly with such Buyer in connection with its rights and obligations under this Agreement. Administrative Agent (acting as agent for the Sellers) shall maintain at its address referred to in Section 11.05 a register (the “Register”) for the recordation of the names and addresses of Transferees, and the Purchase Price outstanding and Price Differential in the Transactions held by each thereof. The entries in the Register shall be prima facie conclusive and binding, and the Sellers may treat each Person whose name is recorded in the Register as the owner of the Transactions recorded therein for all purposes of this Agreement. No assignment shall be effective until it is recorded in the Register.

(c) All actions taken by a Buyer pursuant to this Section 9.02 shall be at the expense of such Buyer. A Buyer may distribute to any prospective assignee any document or other information delivered to such Buyer by the Sellers.

Section 9.03 Buyer and Participant Register.

(a) Subject to acceptance and recording thereof pursuant to paragraph (b) of this Section 9.03, from and after the effective date specified in each assignment and acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such assignment and acceptance, have the rights and obligations of a Buyer under this Agreement. Any assignment or transfer by a Buyer of rights or obligations under this Agreement that does not comply with this Section 9.03 shall be treated for purposes of this Agreement as a sale by such Buyer of a participation in such rights and obligations in accordance with Section 9.02.

(b) The Sellers or an agent of the Sellers shall maintain a register (the “Transaction Register”) on which it will record the Transactions entered into hereunder, and each assignment and acceptance and participation. The Transaction Register shall include the names and addresses of Buyers (including all assignees, successors and Participants), and the Purchase Price of the Transactions entered into by Buyers. Failure to make any such recordation, or any error in such recordation shall not affect the Sellers’ obligations in respect of such Transactions. If a Buyer sells a participation in any Transaction, it shall provide the Sellers, or maintain as agent of the Sellers, the information described in this paragraph and permit the Sellers to review such information as reasonably needed for Sellers to comply with its obligations under this Agreement or under any applicable law or governmental regulation or procedure.

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ARTICLE X AGENT PROVISIONS

Section 10.01 Appointment of Administrative Agent. (a) Each Buyer hereby irrevocably appoints Atlas Securitized Products, L.P., as Administrative Agent hereunder and under the other Program Agreements, and each Buyer hereby authorizes Atlas Securitized Products, L.P., in such capacity, to act as its agent in accordance with the terms hereof. The provisions of this Article X are solely for the benefit of Administrative Agent and Buyers, and Sellers shall not have any rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties hereunder, Administrative Agent shall act solely as an agent of Buyers and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Sellers.

(b) The Required Buyers may, to the extent permitted by applicable law, and with the consent of Sellers (such consent not to be required if an Event of Default has occurred and is continuing and not to be unreasonably withheld), by notice in writing to such Person remove such Person as Administrative Agent and, with the consent of Sellers (such consent not to be required if an Event of Default has occurred and is continuing and not to be unreasonably withheld), appoint a successor Administrative Agent. If no such successor Administrative Agent shall have been so appointed by the Required Buyers and shall have accepted such appointment within thirty (30) days (or such earlier day as shall be agreed by the Required Buyers and Sellers), then such removal shall nonetheless become effective in accordance with such notice on the date thirty (30) days (or such earlier day as shall be agreed by the Required Buyers and Sellers) after the Administrative Agent’s receipt of such notice of removal.

Section 10.02 Powers and Duties. Each Buyer irrevocably authorizes Administrative Agent to take such action on such Buyer’s behalf and to exercise such powers, rights and remedies hereunder and under the other Program Agreements as are specifically delegated or granted to Administrative Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Administrative Agent shall have only those duties and responsibilities that are expressly specified herein and the other Program Agreements. Administrative Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. Administrative Agent shall not have, by reason hereof or any of the other Program Agreements, a fiduciary relationship in respect of any Buyer; and nothing herein or any of the other Program Agreements, expressed or implied, is intended to or shall be so construed as to impose upon Administrative Agent any obligations in respect hereof or any of the other Program Agreements except as expressly set forth herein or therein.

Section 10.03 General Immunity.

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(a) No Responsibility for Certain Matters. Except for Administrative Agent’s failure to perform a specifically required task set forth herein (and which failure constitutes gross negligence, bad faith or willful misconduct, as determined by a court of competent jurisdiction in a final, non-appealable order), Administrative Agent shall not be responsible for the execution, effectiveness, genuineness, validity, enforceability, collectability or sufficiency hereof or any other Program Agreement or with respect to any other party for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by or on behalf of Buyers or any other party in connection with the Program Agreements and the transactions contemplated thereby or for the financial condition or business affairs of Sellers or any other Person liable for the payment of any Obligations, nor shall Administrative Agent be required (except as set forth herein or in the Program Agreements) to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Program Agreements or as to the use of the proceeds of the Transactions or as to the existence or possible existence of any Event of Default or Default.

(b) Exculpatory Provisions. Neither Administrative Agent nor any of its officers, partners, directors, employees or agents shall be liable for any action taken or omitted by Administrative Agent under or in connection with any of the Program Agreements except to the extent caused by Administrative Agent’s gross negligence, bad faith or willful misconduct, as determined by a court of competent jurisdiction in a final, non-appealable order. Administrative Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection herewith or any of the other Program Agreements or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until Administrative Agent shall have received instructions in respect thereof from Buyers and, upon receipt of such instructions from the Required Buyers, Administrative Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Sellers), accountants, experts and other professional advisors selected by it; (ii) no Buyer shall have any right of action whatsoever against Administrative Agent as a result of Administrative Agent acting or (where so instructed) refraining from acting hereunder or any of the other Program Agreements in accordance with the instructions of the Required Buyers; and (iii) no action taken or omitted by Administrative Agent shall be considered to have resulted from Administrative Agent’s gross negligence, bad faith or willful misconduct if such action or omission was done at the direction of the Required Buyers.

Section 10.04 Administrative Agent to Act as Buyer. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, Administrative Agent in its individual capacity as a Buyer, to the extent it becomes a Buyer hereunder. To the extent that it becomes a Buyer hereunder, Administrative Agent shall have the same rights and powers as any other Buyer and may exercise the same as if it were not performing the duties and functions delegated to it hereunder, and the term “Buyer” shall, unless the context clearly otherwise indicates, include Administrative Agent in its individual capacity. Administrative Agent and its Affiliates may accept deposits from, lend money to, own securities of, and generally engage in any kind of banking, trust, financial advisory or other business with Sellers or any of their Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Sellers for services in connection herewith and otherwise without having to account for the same to Buyers.

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Section 10.05 Buyers’ Representations, Warranties and Acknowledgment. (a) Each Buyer represents and warrants that it has made its own independent investigation of the financial condition and affairs of Sellers in connection with the Transactions hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Sellers. Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Buyers or to provide any Buyer with any credit or other information with respect thereto, whether coming into its possession before the making of the Transactions or at any time or times thereafter, and Administrative Agent shall not have any responsibility with respect to the accuracy of or the completeness of any information provided to Buyers.

(b) Unless otherwise agreed to by Buyers and Sellers, each Buyer, by delivering its signature page to this Agreement and entering into Transactions with Sellers hereunder shall be deemed to have acknowledged receipt of, and consented to and approved, each Program Agreement and each other document required to be approved by Administrative Agent or Buyers, as applicable on the Closing Date, the Effective Date or such other funding date. Each Buyer acknowledges that by agreeing to remit its Pro Rata Share of the Purchase Price on any Purchase Date, such Buyer agrees that all conditions precedent to entering into such Transaction have been met on such Purchase Date.

Section 10.06 Right to Indemnity. (a) Each Buyer, pro rata based on its outstanding Purchase Price, severally, but not jointly, shall, and hereby agrees to indemnify Administrative Agent, any Affiliate of the Administrative Agent, and their respective directors, officers, agents and employees (each, an “Indemnitee Agent Party”), and hold such Indemnitee Agent Party harmless to the extent that such Indemnitee Agent Party shall not have been reimbursed by Sellers, from and against any and all losses, claims, damages, liabilities, deficiencies, judgments or expenses incurred by any of them (except to the extent that it has resulted from the gross negligence or willful misconduct of such Indemnitee Agent Party) which may be imposed on, incurred by or asserted against such Indemnitee Agent Party in exercising its powers, rights and remedies or performing its duties hereunder or under the other Program Agreements or otherwise in its capacity as an Indemnitee Agent Party in any way relating to or arising out of this Agreement or the other Program Agreements, including amounts paid in settlement, court costs and reasonable fees and disbursements of counsel incurred in connection with any such litigation, investigation, claim or proceeding or any advice rendered in connection with any of the foregoing. If any indemnity furnished to any Indemnitee Agent Party for any purpose shall, in the opinion of such Indemnitee Agent Party, be insufficient or become impaired, such Indemnitee Agent Party may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished; provided, in no event shall this sentence require any Buyer to indemnify any Indemnitee Agent Party against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement in excess of such Buyer’s pro rata portion of the outstanding Purchase Price thereof; and provided, further, this sentence shall not be deemed to require any Buyer to indemnify any Indemnitee Agent Party against any liability, obligation, loss, damage, penalty, action, judgment, suit, cost, expense or disbursement described in the proviso in the immediately preceding sentence.

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(b) Promptly after receipt by the Indemnitee Agent Party of notice of the commencement of any action regarding which a claim in respect thereof is to be made against Buyers, the Indemnitee Agent Party shall notify Buyers in writing of the commencement thereof, but the omission to so notify will not relieve Buyers from any liability which they may have under this Agreement or from any other liability which they may have, except to the extent that they have been prejudiced in any material respect by the failure by the Indemnitee Agent Party to provide prompt notice. Upon receipt of notice by Buyers, Buyers will be entitled to participate in the related action, and they may elect by written notice delivered to the Indemnitee Agent Party to assume the defense thereof. Upon receipt of notice by the Indemnitee Agent Party of the Buyers’ election to assume the defense of such action, Buyers shall not be liable to the Indemnitee Agent Party for legal expenses incurred by such party in connection with the defense thereof unless (i) Buyers shall not have employed counsel to represent the Indemnitee Agent Party within a reasonable time after receipt of notice of commencement of the action, (ii) Buyers have authorized in writing the employment of separate counsel for the Indemnitee Agent Party, or (iii) the Indemnitee Agent Party has previously engaged counsel and reasonable legal expenses are necessary (a) to transfer the file to the Buyers’ designated counsel, or (b) to pursue immediate legal action necessary to preserve the legal rights or defenses of the Indemnitee Agent Party as against a third party claimant, and such legal action must occur prior to said transfer. Buyers shall not settle any suit or claim without the Indemnitee Agent Party’s written consent unless such settlement solely involves the payment of money by parties other than the Indemnitee Agent Party and includes unconditional release of the Indemnitee Agent Party from all liability on all matters that are the subject of such proceeding or claim.

Section 10.07 Successor Administrative Agent. (a) Administrative Agent may resign at any time by giving thirty (30) days’ prior written notice thereof to Buyers. Upon any such notice of resignation, Buyers shall have the right to appoint a successor administrative agent; provided, that the retiring Administrative Agent shall continue to hold the Collateral and all liens and security interest therein for the benefit of Buyers until a successor administrative agent is appointed.

(b) Upon the acceptance of any appointment as Administrative Agent hereunder by a successor administrative agent, that successor administrative agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent and the retiring Administrative Agent shall promptly (i) transfer to such successor administrative agent all sums and items of Collateral held under the Program Agreements, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor administrative agent under the Program Agreements, and (ii) execute and deliver to such successor administrative agent such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor administrative agent of the security interests created under the Program Agreements, whereupon such retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the provisions of this Article X and Section 11.02 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent hereunder.

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(c) Notwithstanding anything herein to the contrary, Administrative Agent may assign its rights and duties as Administrative Agent hereunder to an Affiliate without written notice to, the Buyers; provided, that Sellers and Buyers may deem and treat such assigning Administrative Agent as Administrative Agent for all purposes hereof, unless and until such assigning Administrative Agent provides written notice to Sellers and Buyers of such assignment. Upon such assignment such Affiliate shall succeed to and become vested with all rights, powers, privileges and duties as Administrative Agent hereunder and under the other Program Agreements.

Section 10.08 Delegation of Duties. Administrative Agent may perform any of its duties and exercise its rights and powers hereunder or under any other Program Agreement by or through (i) any one or more of its Affiliates or (ii) any one or more sub agents appointed by Administrative Agent with the prior consent of the Required Buyers. Administrative Agent and any such sub agent may perform any and all of its duties and exercise its rights and powers by or through their respective Affiliates and their respective officers, partners, directors, trustees, employees and agents. The exculpatory provisions of this Article X shall apply to any such Affiliate or sub agent and to such other parties as are listed above provided that notwithstanding this Section 10.08, no such delegation relieves the Administrative Agent of its duties or obligations under this Agreement.

Section 10.09 Right to Realize on Collateral. Anything contained in any of the Program Agreements to the contrary notwithstanding, Sellers, Administrative Agent and each Buyer hereby agree that (i) no Buyer shall have any right individually to realize upon any of the Collateral, it being understood and agreed that all powers, rights and remedies hereunder may be exercised solely by Administrative Agent, on behalf of Buyers in accordance with the terms hereof and all powers, rights and remedies under the Program Agreements may be exercised solely by Administrative Agent, and (ii) in the event of a foreclosure by Administrative Agent on any of the Collateral pursuant to a public or private sale, Administrative Agent or any Buyer may be the purchaser of any or all of such Collateral at any such sale and Administrative Agent, as agent for and representative of Buyers (but not any Buyer or Buyers in its or their respective individual capacities unless Buyers shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any collateral payable by Administrative Agent at such sale.

ARTICLE XI MISCELLANEOUS

Section 11.01 Survival. This Agreement and the other Program Agreements and all covenants, agreements, representations and warranties herein and therein and in the certificates delivered pursuant hereto and thereto, shall survive the entering into of the Transaction and shall continue in full force and effect so long as any Obligations are outstanding and unpaid.

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Section 11.02 Indemnification. Sellers shall, and hereby agree to, jointly and severally, indemnify, defend and hold harmless Administrative Agent, each Buyer, any Affiliate of Administrative Agent, any Affiliate of any Buyer and their respective directors, officers, agents and employees from and against any and all losses, claims, damages, liabilities, deficiencies, judgments or expenses incurred by any of them (except to the extent that it is finally judicially determined to have resulted from their own gross negligence or willful misconduct) as a consequence of, or arising out of or by reason of any litigation, investigations, claims or proceedings which arise out of or are in any way related to, (i) this Agreement or any other Program Agreement or the transactions contemplated hereby or thereby, (ii) the PMC Seller’s servicing practices or procedures; (iii) any actual or proposed use by the related Seller of the proceeds of the Purchase Price, and (iv) any Default, Event of Default or any other breach by the related Seller of any of the provisions of this Agreement or any other Program Agreement, including amounts paid in settlement, court costs and reasonable fees and disbursements of counsel incurred in connection with any such litigation, investigation, claim or proceeding or any advice rendered in connection with any of the foregoing. If and to the extent that any Obligations are unenforceable for any reason, Sellers hereby agree to make the maximum contribution to the payment and satisfaction of such Obligations which is permissible under applicable law. Sellers’ obligations set forth in this Section 11.02 shall survive any termination of this Agreement and each other Program Agreement and the payment in full of the Obligations, and are in addition to, and not in substitution of, any other of its obligations set forth in this Agreement or otherwise. In addition, Sellers shall, upon demand, pay to Administrative Agent and the Buyers all costs and expenses (including the reasonable fees and disbursements of counsel) paid or incurred by Administrative Agent and Buyers in (i) enforcing or defending its rights under or in respect of this Agreement or any other Program Agreement, (ii) collecting the Purchase Price outstanding, (iii) foreclosing or otherwise collecting upon any Repurchase Assets and (iv) and obtaining any legal, accounting or other advice in connection with any of the foregoing.

Section 11.03 Nonliability of Buyer. The parties hereto agree that, notwithstanding any affiliation that may exist between or among Administrative Agent, the Sellers and Buyers, the relationship between and among Administrative Agent, Sellers and Buyers shall be solely that of arms-length participants. Neither Administrative Agent nor any Buyer shall have any fiduciary responsibilities to Sellers. Each Seller (i) agrees that neither Administrative Agent nor any Buyer shall have any liability to such Seller (whether sounding in tort, contract or otherwise) for losses suffered by such Seller in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by this Agreement, the other loan documents or any other agreement entered into in connection herewith or any act, omission or event occurring in connection therewith, unless it is determined by a judgment of a court that is binding on Administrative Agent and Buyers (which judgment shall be final and not subject to review on appeal), that such losses were the result of acts or omissions on the part of Administrative Agent or Buyers constituting gross negligence or willful misconduct and (ii) waives, releases and agrees not to sue upon any claim against Administrative Agent or any Buyer (whether sounding in tort, contract or otherwise), except a claim based upon gross negligence or willful misconduct. Whether or not such damages are related to a claim that is subject to such waiver and whether or not such waiver is effective, neither Administrative Agent nor any Buyer shall have any liability with respect to, and each Seller hereby waives, releases and agrees not to sue upon any claim for, any special, indirect, consequential or punitive damages suffered by such Seller in connection with, arising out of, or in any way related to the transactions contemplated or the relationship established by this Agreement, the other loan documents or any other agreement entered into in connection herewith or therewith or any act, omission or event occurring in connection herewith or therewith, unless it is determined by a judgment of a court that is binding on Administrative Agent and Buyers (which judgment shall be final and not subject to review on appeal), that such damages were the result of acts or omissions on the part of Administrative Agent or Buyers, as applicable, constituting willful misconduct or gross negligence.

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Section 11.04 Governing Law; Submission to Jurisdiction; Waivers. (a) This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Each Seller acknowledges that the obligations of the Administrative Agent and Buyers hereunder or otherwise are not the subject of any VFN Repo Guaranty by, or recourse to, any direct or indirect parent or other Affiliate of Buyers. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5‑1401 AND 5‑1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

(b) EACH OF THE PARTIES HERETO AND THE BUYERS HEREBY IRREVOCABLY AND UNCONDITIONALLY:

(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH HEREIN OR AT SUCH OTHER ADDRESS OF WHICH EACH OTHER PARTY HERETO SHALL HAVE BEEN NOTIFIED IN WRITING; PROVIDED THAT, AT THE TIME OF SUCH MAILING AN ELECTRONIC COPY OF SUCH SERVICE OF PROCESS IS ALSO SENT BY ELECTRONIC MAIL TO THE PERSONS SPECIFIED IN THE ADDRESS FOR NOTICES FOR SUCH PARTY ON THE SIGNATURE PAGE HERETO (OR SUCH OTHER PERSONS OF WHICH THE OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED);

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(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND

(v) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THE TRANSACTIONS CONTEMPLATED THEREBY AND HEREBY.

Section 11.05 Notices. Any and all notices (with the exception of Transaction Notices, which shall be delivered via facsimile only), statements, demands or other communications hereunder may be given by a party to the other by mail, email, facsimile, messenger or otherwise to the address specified below, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence.

If to PMC Seller:

PennyMac Corp.
3043 Townsgate Road, Suite 300
Westlake Village, CA 91361
Attention: Pamela Marsh/Josh Smith
Phone Number: (805) 330-6059/ (818) 746-2877
Email: pamela.marsh@pennymac.com; josh.smith@pennymac.com;
contract.finance@pennymac.com

 

with a copy to:

PennyMac Corp.
3043 Townsgate Road, Suite 300
 

-53-

 

Westlake Village, CA 91361
Attention: Derek Stark

Phone Number: (818) 746-2289

Email: derek.stark@pennymac.com

If to PMH Seller:

PennyMac Holdings, LLC
3043 Townsgate Road, Suite 310
Westlake Village, CA 91361
Attention: Pamela Marsh/Josh Smith
Phone Number: (805) 330-6059/ (818) 746-2877
Email: pamela.marsh@pennymac.com; josh.smith@pennymac.com;
contract.finance@pennymac.com

with a copy to:

PennyMac Corp.
3043 Townsgate Road, Suite 300
Westlake Village, CA 91361
Attention: Jeff Grogin
Phone Number: (818) 224-7050
Email: jeff.grogin@pnmac.com

If to Administrative Agent:

Atlas Securitized Products, L.P.
3 Bryant Park
New York, NY 10036
Phone Number: (212) 525-3200
Email: AtlasSPGeneralCounsel@Atlas-SP.com

If to Nexera:

Nexera Holding LLC
2100 Powell Street
Emeryville, CA 94608

If to Citibank, N.A., as a Buyer: CITIBANK, N.A. 388 Greenwich Street Trading, 6th Floor New York, NY 10013 Attention: Bobbie Theibakumaran Phone Number: (212) 723-6753 Email: bobbie.theivakumaran@citi.com with a copy to: CITIBANK, N.A.

-54-

 

388 Greenwich Street Trading, 6th Floor

New York, NY 10013

Attention: James Kessler

Phone Number: (212) 723-6377

Email: james.kessler@citi.com

Section 11.06 Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. In case any provision in or obligation under this Agreement or any other Program Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

Section 11.07 Section Headings. The Article and Section headings in this Agreement are inserted for convenience of reference only and shall not in any way affect the meaning or construction of any provision of this Agreement.

Section 11.08 Counterparts. This Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. The words “executed,” “signed,” “signature,” and words of like import as used above and elsewhere in this Agreement or in any other certificate, agreement or document related to this transaction shall include, in addition to manually executed signatures, images of manually executed signatures transmitted by facsimile or other electronic format (including, without limitation, “pdf,” “tif” or “jpg”) and other electronic signatures (including, without limitation, any electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record). The use of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent, communicated, received, or stored by electronic means) shall be of the same legal effect, validity, enforceability and admissibility as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code. Each party to this Agreement hereby consents to the use of any secure third party electronic signature capture service providers (including, without limitation, DocuSign), as long as such service providers use system logs and audit trails that establish a temporal and process link between the presentation of identity documents and the electronic signing, together with identifying information that can be used to verify the electronic signature and its attribution to the signer’s identity and evidence of the signer’s agreement to conduct the transaction electronically and of the signer’s execution of each electronic signature. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Agreement.

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Section 11.09 Periodic Due Diligence Review. Each of the Sellers acknowledges that Administrative Agent and Buyers have the right to perform continuing due diligence reviews with respect to Sellers and the Purchased Assets, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and each of the Sellers agrees that upon reasonable (but no less than five (5) Business Days’) prior written notice unless an Event of Default shall have occurred, in which case no notice is required, to Sellers, Administrative Agent or its authorized representatives will be permitted during normal business hours, and in a manner that does not unreasonably interfere with the ordinary conduct of the related Seller’s business, to examine, inspect, and make copies and extracts of, any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession or under the control of Sellers. Each of the Sellers also shall make available to Buyers and Administrative Agent a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Purchased Assets. Without limiting the generality of the foregoing, each of the Sellers acknowledges that Buyers may enter into a Transaction related to any Purchased Assets from Sellers based solely upon the information provided by Sellers to Buyers in the Asset Schedule and the representations, warranties and covenants contained herein, and that Administrative Agent, at its option or upon the request of Buyers, has the right at any time to conduct a partial or complete due diligence review on some or all of the Purchased Assets related to a Transaction. Each of the Sellers agrees to cooperate with Administrative Agent and Buyers and any third party underwriter in connection with such underwriting, including providing Administrative Agent and Buyers and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession, or under the control, of Sellers.

Section 11.10 Hypothecation or Pledge of Repurchase Assets. Buyers shall have free and unrestricted use of all Repurchase Assets and nothing in this Agreement shall preclude Buyers from engaging in repurchase transactions with all or part of its pro rata portion of the Repurchase Assets or otherwise pledging, repledging, transferring, hypothecating, or rehypothecating all or a portion of its pro rata portion of the Repurchase Assets; provided that prior to an Event of Default, such pledge, repledge, transfer, hypothecation or rehypothecation is treated as a financing or hedging transaction for U.S. federal income tax purposes or a pro rata interest in all payments due to Buyers under this Agreement; provided, further that other than with respect to a pro rata interest in all payments due to Buyers under this Agreement and prior to an Event of Default Buyers receive an opinion of a nationally recognized tax counsel experienced in such matters that such repurchase transaction, pledge, repledge, transfer, hypothecation or rehypothecation will not result in Issuer or Co-Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes.

Section 11.11 Non-Confidentiality of Tax Treatment. (a) This Agreement and its terms, provisions, supplements and amendments, and notices hereunder, are proprietary to Buyers or Sellers, as applicable and shall be held by each party hereto, as applicable in strict confidence and shall not be disclosed to any third party without the written consent of the Required Buyers or Sellers, except for (i) disclosure to Buyers’ or Sellers’ direct and indirect Affiliates and Subsidiaries, attorneys or accountants, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, or (ii) disclosure required by law, rule, regulation or order of a court or other regulatory body.

-56-

 

Notwithstanding the foregoing or anything to the contrary contained herein or in any other Program Agreements, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that Sellers may not disclose the name of or identifying information with respect to Buyers or any pricing terms (including the Pricing Rate, Purchase Price Percentage, Purchase Price and Commitment Fee (if any)) or other nonpublic business or financial information (including any sublimits) that is unrelated to the federal, state and local tax treatment of the Transactions and is not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of Administrative Agent and Buyers.

(b) Notwithstanding anything in this Agreement to the contrary, Sellers shall comply with all applicable local, state and federal laws, including all privacy and data protection law, rules and regulations that are applicable to the Repurchase Assets and/or any applicable terms of this Agreement (the “Confidential Information”). Each of the Sellers understands that the Confidential Information may contain “nonpublic personal information”, as that term is defined in Section 509(4) of the Gramm-Leach Bliley Act (the “GLB Act”), and each of the Sellers agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the GLB Act and other applicable federal and state privacy laws. Sellers shall implement such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of the “nonpublic personal information” of the “customers” and “consumers” (as those terms are defined in the GLB Act) of Administrative Agent, Buyers or any Affiliate of Administrative Agent or Buyers which Sellers hold, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Each of the Sellers represents and warrants that it has implemented appropriate measures to meet the objectives of Section 501(b) of the GLB Act and of the applicable standards adopted pursuant thereto, as now or hereafter in effect. Upon request, Sellers will provide evidence reasonably satisfactory to allow Administrative Agent to confirm that the providing party has satisfied its obligations as required under this Section 11.11. Without limitation, this may include Administrative Agent’s review of audits, summaries of test results, and other equivalent evaluations of Sellers. Sellers shall notify Administrative Agent and Buyers immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of Administrative Agent, Buyers or any Affiliate of Administrative Agent or Buyers provided directly to Sellers by Administrative Agent, Buyers or any Affiliate of Administrative Agent or Buyers. Sellers shall provide such notice to Administrative Agent by personal delivery, by facsimile with confirmation of receipt, or by overnight courier with confirmation of receipt to the applicable requesting individual.

(c) Set-off. In addition to any rights and remedies of Administrative Agent and Buyers hereunder and by law, Administrative Agent and Buyers shall have the right, without prior notice to Sellers, any such notice being expressly waived by Sellers to the extent permitted by applicable law to set-off and appropriate and apply against any Obligation from Sellers or any Affiliate thereof to Administrative Agent, Buyers or any of their Affiliates any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return funds to Sellers), credits, indebtedness or claims, in any currency, in each case

-57-

 

whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from Administrative Agent, Buyers or any Affiliate thereof to or for the credit or the account of Sellers or any Affiliate thereof. Administrative Agent agrees promptly to notify Sellers after any such set off and application made by a Buyer; provided that the failure to give such notice shall not affect the validity of such set off and application.

Section 11.12 Intent. (a) The parties recognize that this Agreement and each Transaction hereunder is a “master netting agreement” as that term is defined in Section 101(38A) of the Bankruptcy Code, and a “securities contract” as that term is defined in Section 741 the Bankruptcy Code, and that all payments hereunder are deemed “margin payments” or “settlement payments” as defined in the Bankruptcy Code.

(b) It is understood that any party’s right to liquidate Purchased Assets delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Section 7.03 hereof is a contractual right to liquidate such Transaction as described in Sections 555 and Section 561 of the Bankruptcy Code.

(c) The parties agree and acknowledge that if a party hereto is an “insured depository institution,” as such term is defined in the Federal Deposit Insurance Act, as amended (“FDIA”), then each Transaction hereunder is a “qualified financial contract,” as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).

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

(e) This Agreement is intended to be a “securities contract,” within the meaning of Section 555 under the Bankruptcy Code, and a “master netting agreement,” within the meaning of Section 561 under the Bankruptcy Code.

(f) It is the intention of the parties that, for U.S. federal income tax purposes and for accounting purposes, each Transaction constitute a financing, and that Sellers be (except to the extent that Administrative Agent shall have exercised its remedies following an Event of Default) the owner of the Purchased Assets for such purposes. Unless prohibited by applicable law, Administrative Agent, Sellers and Buyers shall treat the Transactions as described in the preceding sentence (including on any and all filings with any U.S. federal, state, or local taxing authority and agree not to take any action inconsistent with such treatment).

Section 11.13 Amendment and Restatement. The Administrative Agent, Buyers and PMC entered into the Original Agreement. The Administrative Agent, Buyers and Sellers desire to enter into this Agreement in order to amend and restate the Original Agreement in its entirety. The amendment and restatement of the Original Agreement shall become effective on the Effective Date, and each of the Administrative Agent, the Buyers and Sellers shall hereafter be bound by the terms and conditions of this Agreement and the other Program Agreements.

-58-

 

This Agreement amends and restates the terms and conditions of the Original Agreement, and is not a novation of any of the agreements or obligations incurred pursuant to the terms of the Original Agreement. Accordingly, all of the agreements and obligations incurred pursuant to the terms of the Original Agreement are hereby ratified and affirmed by the parties hereto and remain in full force and effect. For the avoidance of doubt, it is the intent of the Administrative Agent, Buyers and Sellers that the security interests and liens granted in the Purchased Assets or Repurchase Assets pursuant to Original Agreement shall continue in full force and effect. All references to the Original Agreement in any Program Agreement or other document or instrument delivered in connection therewith shall be deemed to refer to this Agreement and the provisions hereof.

Section 11.14 Reaffirmation of VFN Repo Guaranty. VFN Repo Guarantor hereby (i) agrees that the benefits of the VFN Repo Guaranty are hereby extended to all Buyers under this Agreement, (ii) agrees that amending and restating of the Original Agreement shall not be a defense to the liability of VFN Repo Guarantor or impair the rights of Buyers under the VFN Repo Guaranty, (iii) ratifies and affirms all of the terms, covenants, conditions and obligations of the VFN Guaranty and (iv) acknowledges and agrees that such VFN Guaranty is and shall continue to be in full force and effect.

 

[Signature Pages Follow]

 

-59-

 

IN WITNESS WHEREOF, Administrative Agent, Sellers and Buyers have caused this Second Amended and Restated Master Repurchase Agreement to be executed and delivered by their duly authorized officers or trustees as of the date first above written.

ATLAS SECURITIZED PRODUCTS, L.P., as Administrative Agent

By: Atlas Securitized Products GP, LLC, its

general partner

By: /s/ Dominic Obaditch
Name: Dominic Obaditch
Title: Authorized Signatory

PENNYMAC CORP.,
as a Seller

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

PENNYMAC HOLDINGS, LLC,
as a Seller

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

PENNYMAC MORTGAGE INVESTMENT TRUST, solely with respect to Section 11.14, as VFN Guarantor NEXERA HOLDING LLC, as Buyer

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

[Signature Page to Second A&R Master Purchase Agreement]

 

By: /s/ Steve Abreu
Name: Steve Abreu
Title: CEO

CITIBANK, N.A.,
as Buyer

By: /s/ Arunthathi Theivakumaran
Name: Arunthathi Theivakumaran
Title: Vice President

 

[Signature Page to Second A&R Master Purchase Agreement]

 

SCHEDULE 1-A

RESPONSIBLE OFFICERS – PMC

PMC AUTHORIZATIONS

Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for PMC under this Agreement:

Responsible Officers for execution of Program Agreements and amendments:

Name

Title

Signature

Pamela Marsh

Senior Managing Director and
Treasurer

 

Responsible Officers for execution of Transaction Notices and day-to-day operational functions:

Name

Title

Signature

Pamela Marsh

Senior Managing Director and
Treasurer

 

Maurice Watkins

Senior Managing Director,
Capital Markets Operations

 

Thomas Rettinger

Senior Managing Director, Head of Portfolio Risk Management

 

Richard Hetzel

Authorized Representative

 

Ryan Huddleston

Authorized Representative

 

Adeshola Makinde

Authorized Representative

 

Kevin Chamberlain

Executive Vice President, Treasury

 

Virginia Movsessian

Executive Vice President, Secondary Marketing Operations

 

Sch. 1-A

 

Name

Title

Signature

Angela Everest

Authorized Representative

 

Adriana Villalobos

Authorized Representative

 

 

 

Sch. 1-A

 

SCHEDULE 1-B

RESPONSIBLE OFFICERS – PMH

PMH AUTHORIZATIONS

Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for PMH under this Agreement:

Responsible Officers for execution of Program Agreements and amendments:

Name

Title

Signature

Pamela Marsh

Senior Managing Director and
Treasurer

 

 

Responsible Officers for execution of Transaction Notices and day-to-day operational functions:

Name

Title

Signature

Pamela Marsh

Senior Managing Director and
Treasurer

 

Maurice Watkins

Senior Managing Director,
Capital Markets Operations

 

Thomas Rettinger

Senior Managing Director, Head of Portfolio Risk Management

 

Richard Hetzel

Authorized Representative

 

Ryan Huddleston

Authorized Representative

 

Adeshola Makinde

Authorized Representative

 

Kevin Chamberlain

Authorized Representative

 

Angela Everest

Authorized Representative

 

 

Sch. 2-1

 

SCHEDULE 2

ASSET SCHEDULE

Note

Initial Note Balance

Additional Balance(s)

Outstanding VFN Principal Balance

Maximum VFN Principal Balance

PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR, Class A-VF1 Variable Funding Note

$548,603,517.10

$0

$548,603,517.10

$1,000,000,000

Nexera Pro Rata Share

$274,301,758.55

$0

$274,301,758.55

$500,000,000

Citibank Pro Rata Share

$274,301,758.55

$0

$274,301,758.55

$500,000,000

 

 

Sch. 2-2

 

SCHEDULE 3ADMINISTRATIVE AGENT’S ACCOUNT

 Name of Bank: Citibank, N.A.

 ABA Number of Bank: 021000089

 Name of Account: Atlas Sec Prod Funding 2 LP – Resi We refer to the Second Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023 (the “Agreement”), among PennyMac Corp.

 Ref: Residential

 Account Number: 3138195

 

 

Sch. 3-1

 

EXHIBIT A

FORM OF TRANSACTION NOTICE

Dated: []

[BUYERS’ ADDRESSES]

TRANSACTION NOTICE

Ladies and Gentlemen:

(“PMC”), PennyMac Holdings, LLC (“PMH”, and together with PMC, the “Sellers”), the buyers party thereto (“Buyers”) and Atlas Securitized Products, L.P. (“Administrative Agent”). Each capitalized term used but not defined herein shall have the meaning specified in the Agreement. This notice is being delivered by the [PMC][PMH][Sellers] pursuant to Section 2.02 of the Agreement.

Please be notified that [PMC][PMH][each of the Sellers] hereby irrevocably requests that the Buyers enter into the following Transaction(s) with [PMC][PMH][Sellers] as follows:

1. Maximum VFN Principal Balance: $[]

2. Initial Note Balance/Purchase Price requested: $[]

3. Additional Balance/Purchase Price requested: $[]

4. Purchase Date: []

5. Repurchase Date: []

6. Pricing Rate / Repurchase Price: $[]

[PMC][PMH][Each of the Sellers] requests that the proceeds of the Purchase Price be deposited in [PMC][PMH][Sellers]’s account at [], ABA Number [], account number [], References: [], Attn: [].

Each of the Sellers hereby represents and warrants that each of the representations and warranties made by such Seller in each of the Program Agreements to which it is a party is true and correct in all material respects, in each case, on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date. Attached hereto is a true and complete updated copy of the Asset Schedule.

PennyMac Corp., as a Seller PennyMac Holdings, LLC, as a Seller

By:

Exh. A-1

 

By:

 

 

Exh. A-2

 

Asset Schedule

Note

Initial Note Balance

Additional Balance(s)

Outstanding VFN Principal Balance

Maximum VFN Principal Balance

PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I– FMSR, Class A-VF1 Variable Funding Note

$[________]

$[________]

$[________]

$[________]

 

 

Exh. A-3

 

EXHIBIT B

EXISTING INDEBTEDNESS
[See Attached]

 

Exh. B-1

EX-10.12 5 pmt-ex10_12.htm EX-10.12 EX-10.12

EXHIBIT 10.12

 

SECOND AMENDED AND RESTATED GUARANTY

by

PENNYMAC MORTGAGE INVESTMENT TRUST, as guarantor

Dated as of October 10, 2023

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

Page

1. Defined Terms

- 1 -

2. Guaranty

- 2 -

3. Right of Set-off

- 2 -

4. Subrogation

- 3 -

5. Amendments, etc. with Respect to the Obligations

- 3 -

6. Guaranty Absolute and Unconditional

- 3 -

7. Reinstatement

- 5 -

8. Payments

- 5 -

9. Event of Default

- 5 -

10. Severability

- 5 -

11. Headings

- 6 -

12. No Waiver; Cumulative Remedies

- 6 -

13. Waivers and Amendments; Successors and Assigns; Governing Law

- 6 -

14. Notices

- 6 -

15. Jurisdiction

- 6 -

16. Integration

- 7 -

17. Third Party Beneficaries

- 8 -

18. Acknowledgments 8

19. Events of Default 8

20. Amendment and Restatement 8

 

 

ii

 

SECOND AMENDED AND RESTATED GUARANTY

This SECOND AMENDED AND RESTATED GUARANTY, dated as of October 10, 2023 (as may be amended, restated, supplemented or otherwise modified from time to time, this “Guaranty”), is made by PENNYMAC MORTGAGE INVESTMENT TRUST(“Guarantor”), in favor of, and consented and agreed to by, the buyers from time to time party to the VF1 Repurchase Agreement (as defined herein) (each a “Buyer”, and collectively, the “Buyers”).

RECITALS

WHEREAS, Guarantor has entered into that certain Amended and Restated Guaranty, dated as of June 29, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the “Original Guaranty”), in favor of Nexera Holding LLC (“Nexera”) and Citibank, N.A. (“Citibank”), as Buyers;

WHEREAS, pursuant to Section 13 of the Original Guaranty, the Original Guaranty may be amended, supplemented or otherwise modified by a written instrument executed by Guarantor and Buyers;

WHEREAS, pursuant to the Second Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023 (as may be amended, restated, supplemented or otherwise modified from time to time, the “VF1 Repurchase Agreement”), among PennyMac Corp., as a seller (“PMC Seller”), PennyMac Holdings LLC, as a seller (“PMH Seller” and, together with PMC Seller, the “Sellers”), the buyers from time to time party thereto and Atlas Securitized Products, L.P., as administrative agent (the “Administrative Agent”), the Buyers have agreed from time to time to enter into Transactions with Sellers;

WHEREAS, it is a condition precedent to the obligation of the Buyers to enter into Transactions with Sellers under the VF1 Repurchase Agreement that Guarantor shall have executed and delivered this Guaranty to the Buyers;

WHEREAS, as a condition precedent to entering into the VF1 Repurchase Agreement, the Guarantor is required to execute and deliver this Guaranty;

WHEREAS, the Guarantor will receive a benefit, either directly or indirectly from the Sellers for entering into this Guaranty; and

NOW, THEREFORE, in consideration of the foregoing premises, to induce the Buyers to enter into the VF1 Repurchase Agreement and to enter into Transactions thereunder, Guarantor hereby agrees with the Buyers, as follows:

1. Defined Terms. (a) Unless otherwise defined herein, terms which are defined in the VF1 Repurchase Agreement and used herein are so used as so defined.

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(b) For purposes of this Guaranty, “Obligations” shall mean all obligations and liabilities of Sellers to the Buyers, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, or out of or in connection with the VF1 Repurchase Agreement and any other Program Agreements and any other document made, delivered or given in connection therewith or herewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to Buyers that are required to be paid by Sellers pursuant to the terms of the Program Agreements and costs of enforcement of this Guaranty reasonably incurred) or otherwise.

2. Guaranty. (a) Guarantor hereby unconditionally and irrevocably guarantees to the Buyers the prompt and complete payment and performance by Sellers when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.

(b) Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by the Buyers in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, Guarantor under this Guaranty. This Guaranty shall remain in full force and effect until the later of (i) the termination of the VF1 Repurchase Agreement and (ii) the Obligations are paid in full, notwithstanding that from time to time prior thereto Sellers may be free from any Obligations.

(c) No payment or payments made by Sellers or any other Person or received or collected by the Buyers from Sellers or any other Person by virtue of any action or proceeding or any set-off or appropriation or application, at any time or from time to time, in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of Guarantor hereunder which shall, notwithstanding any such payment or payments, remain liable for the amount of the outstanding Obligations until the outstanding Obligations are paid in full.

(d) Guarantor agrees that whenever, at any time, or from time to time, Guarantor shall make any payment to the Buyers on account of Guarantor’s liability hereunder, Guarantor will notify the Buyers in writing that such payment is made under this Guaranty for such purpose.

3. Right of Set-off. The Buyers are hereby irrevocably authorized at any time and from time to time without notice to Guarantor, any such notice being hereby waived by Guarantor, to set-off and appropriate and apply any and all monies and other property of Guarantor, deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Buyers or any Affiliate thereof to or for the credit or the account of Guarantor, or any part thereof in such amounts as the Buyers may elect, on account of the Obligations and liabilities of Guarantor hereunder and claims of every nature and description of the Buyers against Guarantor, in any currency, whether arising hereunder, under the VF1 Repurchase Agreement or otherwise, as the Buyers may elect, whether or not the Buyers have made any demand for payment and although such Obligations and liabilities and claims may be contingent or unmatured. The Buyers shall notify Guarantor promptly of any such set-off and the application made by the Buyers, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Buyers under this paragraph are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Buyers may have.

2

 

4. Subrogation. Notwithstanding any payment or payments made by Guarantor hereunder or any set-off or application of funds of Guarantor by the Buyers, Guarantor shall not be entitled to be subrogated to any of the rights of the Buyers against Sellers or any other guarantor or any collateral security or guarantee or right of offset held by Buyer for the payment of the Obligations, nor shall Guarantor seek or be entitled to seek any contribution or reimbursement from Sellers or any other guarantor in respect of payments made by Guarantor hereunder, until all amounts owing to the Buyers by Sellers on account of the Obligations are paid in full and the VF1 Repurchase Agreement is terminated. If any amount shall be paid to Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amounts shall be held by Guarantor for the benefit of the Buyers, segregated from other funds of Guarantor, and shall, forthwith upon receipt by Guarantor, be turned over to the Buyers in the exact form received by Guarantor (duly indorsed by Guarantor to the Buyers, if required), to be applied against the Obligations, whether matured or unmatured, in such order as Buyers may determine.

5. Amendments, etc. with Respect to the Obligations. Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against Guarantor, and without notice to or further assent by Guarantor, any demand for payment of any of the Obligations made by the Buyers may be rescinded by the Buyers, and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Buyers, and the VF1 Repurchase Agreement, and the other Program Agreements and any other document in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, pursuant to its terms and as the Buyers may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Buyers for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. The Buyers shall have no obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guaranty or any property subject thereto. When making any demand hereunder against Guarantor, the Buyers may, but shall be under no obligation to, make a similar demand on Sellers and any failure by Buyers to make any such demand or to collect any payments from Sellers or any release of Sellers shall not relieve Guarantor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of Buyer against Guarantor. For the purposes hereof “demand” shall include, but is not limited to, the commencement and continuance of any legal proceedings.

6. Guaranty Absolute and Unconditional. (a) Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by Buyers upon this Guaranty or acceptance of this Guaranty; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived in reliance upon this Guaranty; and all dealings between Sellers or Guarantor, on the one hand, and Buyers, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guaranty. Guarantor waives

3

 

diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon Sellers or the Guaranty with respect to the Obligations. This Guaranty shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (i) the validity or enforceability of the VF1 Repurchase Agreement, the other Program Agreements, any of the Obligations or any collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by Buyers, (ii) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by Sellers against Buyers, or (iii) any other circumstance whatsoever (with or without notice to or knowledge of Sellers or Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of Sellers for the Obligations, or of Guarantor under this Guaranty, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against Guarantor, Buyer may, but shall be under no obligation, to pursue such rights and remedies that they may have against Sellers or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by Buyers to pursue such other rights or remedies or to collect any payments from Sellers or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of Sellers or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of Buyers against Guarantor. This Guaranty shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon Guarantor and their successors and assigns thereof, and shall inure to the benefit of Buyers, and successors, indorsees, transferees and assigns, until all the Obligations and the obligations of Guarantor under this Guaranty shall have been satisfied by payment in full, notwithstanding that from time to time during the term of the VF1 Repurchase Agreement Sellers may be free from any Obligations.

(b) Without limiting the generality of the foregoing, Guarantor hereby agrees, acknowledges, and represents and warrants to Buyers as follows:

(i) Guarantor hereby waives any defense arising by reason of, and any and all right to assert against Buyers any claim or defense based upon, an election of remedies by Buyers which in any manner impairs, affects, reduces, releases, destroys and/or extinguishes Guarantor’s (x) subrogation rights, (y) rights to proceed against Sellers or any other guarantor for reimbursement or contribution, and/or (z) any other rights of Guarantor to proceed against Sellers, against any other guarantor, or against any other person or security.

(ii) Guarantor is presently informed of the financial condition of Sellers and of all other circumstances which diligent inquiry would reveal and which bear upon the risk of nonpayment of the Obligations. Guarantor hereby covenants that it will make its own investigation and will continue to keep itself informed of each Seller’s financial condition, the status of other guarantors, if any, of all other circumstances which bear upon the risk of nonpayment and that it will continue to rely upon sources other than Buyers for such information and will not rely upon Buyers for any such information. Absent a written request for such information by Guarantor to Buyers, Guarantor hereby waives its right, if any, to require Buyers to disclose to Guarantor any information which Buyers may now or hereafter acquire concerning such condition or circumstances including, but not limited to, the release of or revocation by any other guarantor.

4

 

(iii) Guarantor has independently reviewed the VF1 Repurchase Agreement and related agreements and has made an independent determination as to the validity and enforceability thereof, and in executing and delivering this Guaranty to Buyers, Guarantor is not in any manner relying upon the validity, and/or enforceability, and/or attachment, and/or perfection of any Liens or security interests of any kind or nature granted by Sellers or any other guarantor to Buyers, now or at any time and from time to time in the future.

(iv) Guarantor is not required to register as an “investment company” under the Investment Company Act of 1940, as amended from time to time.

(c) Guarantor hereby covenants that it shall not merge, consolidate, amalgamate, liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets; provided that Guarantor may merge or consolidate with (i) any wholly owned subsidiary of Guarantor, (ii) any other Person if Guarantor is the surviving entity; or (iii) with the prior written consent of the Buyers and the Administrative Agent, so long that, in each case, after giving effect thereto, no Default would exist hereunder.

7. Reinstatement. This Guaranty shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by a Buyer upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of either Seller or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, either Seller or any substantial part of its property, or otherwise, all as though such payments had not been made.

8. Payments. Guarantor hereby agrees that the Obligations will be paid to Buyer without set-off or counterclaim in U.S. Dollars.

9. Event of Default. If an Event of Default under the VF1 Repurchase Agreement shall have occurred and be continuing, Guarantor agrees that, as between Guarantor and the Buyers, the Obligations may be declared to be due in accordance with the terms of the VF1 Repurchase Agreement for purposes of this Guaranty notwithstanding any stay, injunction or other prohibition which may prevent, delay or vitiate any such declaration as against the Sellers and that, in the event of any such declaration (or attempted declaration), such Obligations shall forthwith become due by Guarantor for purposes of this Guaranty.

10. Severability. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

5

 

11. Headings. The paragraph headings used in this Guaranty are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

12. No Waiver; Cumulative Remedies. Buyers shall not by any act (except by a written instrument pursuant to Section 13 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of Buyers, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by Buyers of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Buyers would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law.

13. Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms or provisions of this Guaranty may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Guarantor and Buyers, provided that any provision of this Guaranty may be waived by Buyers in a letter or agreement executed by Buyers or by facsimile or electronic transmission from Buyers to the Guarantor. This Guaranty shall be binding upon the personal representatives, successors and assigns of Guarantor and shall inure to the benefit of Buyers and their successors and assigns.

14. Notices. Notices delivered in connection with this Guaranty shall be given in accordance with Section 10.05 of the VF1 Repurchase Agreement.

15. Governing Law; Jurisdiction; Waivers.

(a) THIS GUARANTY AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS GUARANTY, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

(b) THE GUARANTOR SUBMITS ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

6

 

(c) THE GUARANTOR CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(d) THE GUARANTOR AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH HEREIN OR AT SUCH OTHER ADDRESS OF WHICH EACH OTHER PARTY HERETO SHALL HAVE BEEN NOTIFIED IN WRITING, EXCEPT THAT WITH RESPECT TO THE INDENTURE TRUSTEE, CALCULATION AGENT, PAYING AGENT AND SECURITIES INTERMEDIARY, SERVICE OF PROCESS MAY ONLY BE MADE AS REQUIRED BY APPLICABLE LAW;

(e) THE GUARANTOR AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND

(f) THE GUARANTOR WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.

16. Integration; Counterparts. This Guaranty represents the agreement of Guarantor with respect to the subject matter hereof and there are no promises or representations by Buyer relative to the subject matter hereof not reflected herein. This Guaranty may be executed in any number of counterparts and all of such counterparts shall together constitute one and the same instrument. The parties agree that this Guaranty, any addendum or amendment hereto or any other document necessary for the consummation of the transactions contemplated by this Guaranty may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention, including but not limited to DocuSign.

17. Third Party Beneficiaries. Each of the Secured Parties and the Administrative Agent shall be a third party beneficiary of this Guaranty and shall be entitled to enforce the Guarantor’s Obligations hereunder to the same extent as if it was a signatory hereto.

7

 

18. Acknowledgments. Guarantor hereby acknowledges that:

(a) Guarantor has been advised by counsel in the negotiation, execution and delivery of this Guaranty and the other Program Agreements;

(b) Buyers do not have any fiduciary relationship to Guarantor, Guarantor does not have any fiduciary relationship to Buyers and the relationship between Buyers and Guarantor is solely that of surety and creditor;

(c) no joint venture exists between Buyers and Guarantor or among Buyers, Sellers and Guarantor;

(d) this Guaranty is “a security agreement or arrangement or other credit enhancement” that is “related to” and provided “in connection with” the PC Repurchase Agreement and each Transaction thereunder and is within the meaning of Sections 101(38A)(A) and 741(7)(A)(xi) of the Bankruptcy Reform Act of 1978, 11 U.S.C. §§ 101 et seq., as amended (the “Bankruptcy Code”) and is, therefore to the extent of damages in connection with the PC Repurchase Agreement, measured in accordance with Section 562 of the Bankruptcy Code (i) a “securities contract” as that term is defined in Section 741(7)(A)(xi) of the Bankruptcy Code and (ii) a “master netting agreement” as that term is defined in Section 101(38A) of the Bankruptcy Code; and

(e) Buyers’ right to cause the termination, liquidation or acceleration of, or to offset or net termination values, payment amounts or other transfer obligations arising under or in connection with the PC Repurchase Agreement and this Guaranty is in each case a contractual right to cause the termination, liquidation or acceleration of, or to offset or net termination values, payment amounts or other transfer obligations arising under or in connection with this Guaranty as described in Sections 362(b)(6), 362(b)(27), 555 and/or 561 of the Bankruptcy Code.

19. Events of Default. Each of the following events or circumstances shall constitute an “Event of Default” under this Guaranty:

(a) For any reason, this Guaranty at any time shall not be in full force and effect in all material respects or shall not be enforceable in all material respects in accordance with its terms, or Guarantor or any Affiliate of Guarantor shall seek to disaffirm, terminate, limit or reduce its obligations hereunder.

(b) A material breach by Guarantor of the representation or warranty in Section 6(b)(iv) hereof, if not cured within thirty (30) days following the occurrence of such breach, or breach of the covenant in Section 6(c) hereof.

20. Amendment and Restatement. The Guarantor entered into the Original Guaranty. The Buyers and the Guarantor desire to enter into this Guaranty in order to amend and restate the Original Guaranty in its entirety. The amendment and restatement of the Original Guaranty shall become effective on the date hereof, and each of the Buyers and the Guarantor shall hereafter be bound by the terms and conditions of this Guaranty and the other Program Agreements. All references to the Original Guaranty in any Program Agreement or other

8

 

document or instrument delivered in connection therewith shall be deemed to refer to this Guaranty and the provisions hereof.

[Signature page follows]

9

 

IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered as of the date first above written.

PENNYMAC MORTGAGE INVESTMENT TRUST, as Guarantor

By: /s/ Pamela Marsh

Name: Pamela Marsh

Title: Senior Managing Director and Treasurer

 

 

[Signature Page to Second A&R Guaranty (VF1 Master Repurchase Agreement)]

 

 

 

CONSENTED AND AGREED TO BY:

 

NEXERA HOLDING LLC, as a buyer CITIBANK, N.A., as a buyer

By: /s/ Steve Abreu

Name: Steve Abreu

Title: CEO

 

 

 

 

 

[Signature Page to Second A&R Guaranty (VF1 Master Repurchase Agreement)]

 

 

 

By: /s/ Arunthathi Theivakumaran

Name: Arunthathi Theivakumaran

Title: Vice President

[Signature Page to Second A&R Guaranty (VF1 Master Repurchase Agreement)]

 

 

EX-10.13 6 pmt-ex10_13.htm EX-10.13 EX-10.13

EXHIBIT 10.13

[INFORMATION INDICATED WITH BRACKETS HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

AMENDED AND RESTATED BASE INDENTURE

PMT ISSUER TRUST – FMSR
as Issuer

and

PMT CO-ISSUER TRUST I – FMSR
as Co-Issuer

and

CITIBANK, N.A.
as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary and

PENNYMAC CORP.
as Servicer and Administrator

and

PENNYMAC HOLDINGS, LLC
as Co-Issuer Administrator

and

ATLAS SECURITIZED PRODUCTS, L.P.
as Administrative Agent

Dated as of October 10, 2023

PMT ISSUER TRUST – FMSR

PMT CO-ISSUER TRUST I – FMSR

MSR COLLATERALIZED NOTES, ISSUABLE IN SERIES

 

 

 

TABLE OF CONTENTS

Page

ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

Section 1.1. Definitions

5

Section 1.2. Interpretation

5

Section 1.3. Compliance Certificates and Opinions

6

Section 1.4. Form of Documents Delivered to Indenture Trustee

7

Section 1.5. Acts of Noteholders

8

Section 1.6. Notices, etc., to Indenture Trustee, Issuer, Co-Issuer, Administrator, Co-Issuer Administrator, the Administrative Agent and Note Rating Agencies

9

Section 1.7. Notices to Noteholders; Waiver

10

Section 1.8. Administrative Agent

11

Section 1.9. Effect of Headings and Table of Contents

12

Section 1.10. Successors and Assigns

12

Section 1.11. Severability of Provisions

12

Section 1.12. Benefits of Indenture

13

Section 1.13. Governing Law

13

Section 1.14. Counterparts

13

ARTICLE II THE TRUST ESTATE

Section 2.1. Contents of Trust Estate

14

Section 2.2. Asset Files

17

Section 2.3. Duties of Custodian with Respect to the Asset Files

18

Section 2.4. Application of Trust Money

19

ARTICLE III ADMINISTRATION OF PARTICIPATION CERTIFICATES; REPORTING TO INVESTORS

Section 3.1. Duties of the Calculation Agent

20

Section 3.2. Reports by Administrator, the Co-Issuer Administrator and Indenture Trustee

22

Section 3.3. Annual Statement as to Compliance; Notice of Default; Reports

26

Section 3.4. Access to Certain Documentation and Information

29

Section 3.5. Indenture Trustee to Make Reports Available

30

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ARTICLE IV THE TRUST ACCOUNTS; PAYMENTS

Section 4.1. Trust Accounts

32

Section 4.2. Collections and Disbursements of Portfolio Collections by Servicer

33

Section 4.3. Fundings

33

Section 4.4. Interim Payment Dates

36

Section 4.5. Payment Dates

36

Section 4.6. Series Reserve Account; Expense Reserve Account

41

Section 4.7. Collection and Funding Account; Eligible Securities Account

44

Section 4.8. Note Payment Account

44

Section 4.9. Securities Accounts

45

Section 4.10. Notice of Adverse Claims

47

Section 4.11. No Gross Up

48

Section 4.12. Advance Rate Trigger Event Trigger Period, Early Amortization Period and Full Amortization Period

48

ARTICLE V NOTE FORMS

Section 5.1. Forms Generally

49

Section 5.2. Forms of Notes

49

Section 5.3. Reserved

50

Section 5.4. Book-Entry Notes

50

Section 5.5. Beneficial Ownership of Global Notes

53

Section 5.6. Notices to Depository

54

ARTICLE VI THE NOTES

Section 6.1. General Provisions; Notes Issuable in Series; Terms of a Series or Class Specified in an Indenture Supplement

54

Section 6.2. Denominations

56

Section 6.3. Execution, Authentication and Delivery and Dating

56

Section 6.4. Temporary Notes

57

Section 6.5. Registration, Transfer and Exchange

57

Section 6.6. Mutilated, Destroyed, Lost and Stolen Notes

63

Section 6.7. Payment of Interest; Interest Rights Preserved; Withholding Taxes

64

Section 6.8. Persons Deemed Owners

64

Section 6.9. Cancellation

64

Section 6.10. New Issuances of Notes

65

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ARTICLE VII SATISFACTION AND DISCHARGE; CANCELLATION OF NOTES HELD BY THE ISSUER, THE CO-ISSUER, PMC OR PMH

Section 7.1. Satisfaction and Discharge of Indenture

68

Section 7.2. Application of Trust Money

68

Section 7.3. Cancellation of Notes Held by the Issuer, the Co-Issuer or PMC

69

Section 7.4. Termination of Servicer’s Servicing Rights; Fannie Mae’s Rights

69

ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

Section 8.1. Events of Default

70

Section 8.2. Acceleration of Maturity; Rescission and Annulment

73

Section 8.3. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee

74

Section 8.4. Indenture Trustee May File Proofs of Claim

75

Section 8.5. Indenture Trustee May Enforce Claims Without Possession of Notes

75

Section 8.6. Application of Money Collected

76

Section 8.7. Sale of Collateral Requires Consent of Noteholders

76

Section 8.8. Limitation on Suits

76

Section 8.9. Limited Recourse

77

Section 8.10. Restoration of Rights and Remedies

77

Section 8.11. Rights and Remedies Cumulative

77

Section 8.12. Delay or Omission Not Waiver

78

Section 8.13. Control by Noteholders

78

Section 8.14. Waiver of Past Defaults

78

Section 8.15. Sale of Trust Estate

79

Section 8.16. Undertaking for Costs

80

Section 8.17. Waiver of Stay or Extension Laws

80

Section 8.18. Notice of Waivers

80

ARTICLE IX THE ISSUER

Section 9.1. Representations and Warranties of Issuer Trusts

80

Section 9.2. Liability of Issuer; Indemnities

84

Section 9.3. Merger or Consolidation, or Assumption of the Obligations, of the Issuer Trusts

86

Section 9.4.

Issuer Trusts May Not Own Notes

87

Section 9.5. Covenants of Issuer

87

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ARTICLE X THE ADMINISTRATOR AND SERVICER; THE CO-ISSUER ADMINISTRATOR

Section 10.1. Representations and Warranties of PMC, as Administrator and as Servicer

92

Section 10.2. Covenants of PMC, as Administrator and as Servicer

95

Section 10.3. Negative Covenants of PMC

100

Section 10.4. Liability of PMC, as Administrator and as Servicer; Indemnities

101

Section 10.5. Merger or Consolidation, or Assumption of the Obligations, of PMC

103

Section 10.6. Representations and Warranties of PMH, as Co-Issuer Administrator

104

Section 10.7. Covenants of PMH, as Co-Issuer Administrator

106

Section 10.8. Negative Covenants of PMH

109

Section 10.9. Liability of PMH, as Co-Issuer Administrator; Indemnities

109

Section 10.10. Merger or Consolidation, or Assumption of the Obligations, of PMH

111

ARTICLE XI THE INDENTURE TRUSTEE SECTION

Section 11.1. Certain Duties and Responsibilities

112

Section 11.2. Notice of Defaults

113

Section 11.3. Certain Rights of Indenture Trustee

113

Section 11.4. Not Responsible for Recitals or Issuance of Notes

117

Section 11.5. Indenture Trustee’s Appointment as Attorney-In-Fact

117

Section 11.6. Money Held in Trust

119

Section 11.7. Compensation and Reimbursement Limit on Compensation, Reimbursement and Indemnity

119

Section 11.8. Corporate Indenture Trustee Required; Eligibility

120

Section 11.9. Resignation and Removal; Appointment of Successor

121

Section 11.10. Acceptance of Appointment by Successor

122

Section 11.11. Merger, Conversion, Consolidation or Succession to Business

123

Section 11.12. Appointment of Authenticating Agent

123

Section 11.13. Direction to Indenture Trustee under the PC Repo Guaranty

124

Section 11.14. Representations and Covenants of the Indenture Trustee

125

Section 11.15. Indenture Trustee’s Application for Instructions from the Issuer and Co-Issuer

125

ARTICLE XII AMENDMENTS AND INDENTURE SUPPLEMENTS

Section 12.1. Supplemental Indentures and Amendments Without Consent of Noteholders

125

Section 12.2. Supplemental Indentures and Amendments with Consent of Noteholders

127

Section 12.3. Execution of Amendments

129

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Section 12.4. Effect of Amendments

129

Section 12.5. Reference in Notes to Indenture Supplements

129

Section 12.6. Amendments to Appendix A

130

ARTICLE XIII EARLY REDEMPTION OF NOTES

Section 13.1. Optional Redemption

130

Section 13.2. Notice

131

ARTICLE XIV MISCELLANEOUS

Section 14.1. No Petition

132

Section 14.2. No Recourse

132

Section 14.3. Tax Treatment

132

Section 14.4. Alternate Payment Provisions

133

Section 14.5. Termination of Obligations

133

Section 14.6. Final Payment

133

Section 14.7. Base Servicing Fee

134

Section 14.8. Owner Trustee Limitation of Liability

134

Section 14.9. Communications with Rating Agencies

134

Section 14.10. Authorized Representatives

135

Section 14.11. Performance of the Issuer’s and the Co-Issuer’s Duties by the Owner Trustee, the Administrator and the Co-Issuer Administrator

135

Section 14.12. Noteholder or Note Owner Communications with the Indenture Trustee

135

Section 14.13. Third-Party Beneficiaries

136

 

SCHEDULES AND EXHIBITS

Schedule 1 Participation Certificates Schedule

Schedule 2 Participation Agreements Schedule

Schedule 3 Eligible Securities Schedule

Schedule 4 Required Information Regarding Portfolio Mortgage Loans

Schedule 5 Wire Instructions

Exhibit A-1 Form of Global Rule 144A Note

Exhibit A-2 Form of Definitive Rule 144A Note

Exhibit A-3 Form of Global Regulation S Note

Exhibit A-4 Form of Definitive Regulation S Note Exhibit B-1 Form of Transferee Certificate for Transfers of Notes pursuant to Rule 144A

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Exhibit B-2 Form of Transferee Certificate for Transfer of Notes pursuant to Regulation S

Exhibit C-1 Authorized Representatives of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary

Exhibit C-2 Authorized Representatives of PMC, as Servicer and as Administrator

Exhibit C-3 Authorized Representatives of PMH, as Co-Issuer Administrator

Exhibit C-4 Authorized Representatives of the Administrative Agent

Exhibit C-5 Authorized Representatives of the Issuer

Exhibit C-6 Authorized Representatives of the Co-Issuer

Exhibit D Form of Certificate of Authentication of Indenture Trustee and Authenticating Agent

Appendix A Defined Terms

 

 

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PREAMBLE

Exhibit E Form of Risk Retention Certification This Amended and Restated Base Indenture (together with the exhibits and schedules hereto, as amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture,” and collectively with the Indenture Supplements (as defined herein), the “Indenture”), is made and entered into as of October 10, 2023, by and among PMT ISSUER TRUST - FMSR, a statutory trust organized under the laws of the State of Delaware (the “Issuer”), PMT CO-ISSUER TRUST I – FMSR, a statutory trust organized under the laws of the State of Delaware (“Co-Issuer” and together with the Issuer, each, an “Issuer Trust” and collectively, the “Issuer Trusts”), CITIBANK, N.A. (“Citibank”), a national banking association, in its capacity as Indenture Trustee (the “Indenture Trustee”), and as Calculation Agent, Paying Agent and Securities Intermediary (in each case, as defined herein), PENNYMAC CORP., a corporation organized under the laws of the State of Delaware (“PMC”), as Servicer (as defined herein) and as Administrator (as defined herein), PENNYMAC HOLDINGS, LLC, a limited liability corporation organized under the laws of the State of Delaware (“PMH”), in its capacity as Co-Issuer Administrator (as defined herein) and ATLAS SECURITIZED PRODUCTS, L.P. (“Atlas”), a Delaware limited partnership, as an Administrative Agent (as defined herein). Capitalized terms used herein have the meanings specified in Section 1.1.

PRELIMINARY STATEMENT

WHEREAS, pursuant to the Retained Excess Spread Participation Agreement, PMC has created the Retained MSR Excess Spread PC, which represents a Participation Interest in Retained MSR Excess Spread;

WHEREAS, pursuant to the Excess Spread Participation Agreement, PMC has created the Sold MSR Excess Spread PC, which represents a Participation Interest in Sold MSR Excess Spread related to all Sold MSR Portfolios, and sold such Sold MSR Excess Spread PC to PMH;

WHEREAS, pursuant to the PC Repurchase Agreement, PMC, as a Repo Seller, has sold to the Issuer, as Repo Buyer, all of its right, title and interest in, to and under the Retained MSR Excess Spread PC and PMH, as a Repo Seller, has sold to the Co-Issuer, as Repo Buyer, all of its right, title and interest in, to and under the Sold MSR Excess Spread PC;

WHEREAS, the Guarantor has issued the PC Repo Guaranty in favor of the Issuer Trusts with respect to the obligations of PMC as a Repo Seller and PMH as a Repo Seller under the PC Repurchase Agreement;

WHEREAS, on the Closing Date, the Issuer, Citi, PMC and Atlas entered into the Original Base Indenture, providing for, among other things, the Issuer’s authority to jointly issue different Series of Notes from time to time, on the terms and subject to the conditions set forth herein;

WHEREAS, on the Closing Date, the Issuer duly authorized the issuance of the Series 2017-VF1 Note No. 1, which was cancelled and replaced by the Series 2017-VF1 Note No.

 

 

2 on June 29, 2018, which will be cancelled and replaced by the Series 2017-VF1 Note No. 3 as of the date hereof;

WHEREAS, on March 30, 2021, the Issuer duly authorized the issuance of the Series 2021-FT1 Note No. 1, which will be cancelled and replaced by the Series 2021-FT1 Amended and Restated Note No. 1 as of the date hereof;

WHEREAS, on June 28, 2022, the Issuer duly authorized the issuance of the Series 2022-FT1 Note No. 1, which will be cancelled and replaced by the Series 2022-FT1 Amended and Restated Note No. 1 as of the date hereof;

WHEREAS, as of the date hereof, the Original Base Indenture will be amended and restated to join the Co-Issuer and the Co-Issuer Administrator as parties to the Base Indenture; and

WHEREAS, all things necessary to make this Base Indenture a valid agreement of the Issuer Trusts, in accordance with its terms, have been done.

NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows.

GRANTING CLAUSE

Subject to the interests of Fannie Mae as set forth below and in the Acknowledgment Agreement, each of the Issuer Trusts hereby Grants to the Indenture Trustee for the benefit and security of the Noteholders and the Indenture Trustee, in its individual capacity (each, a “Secured Party” and collectively, the “Secured Parties”), a security interest in all its right, title and interest in and to the following, whether now owned or hereafter acquired and wheresoever located (collectively, the “Collateral”), and all monies, “securities,” “instruments,” “accounts,” “general intangibles,” “payment intangibles,” “goods,” “letter of credit rights,” “chattel paper,” “financial assets,” “investment property” (the terms in quotations are defined in the UCC) and other property consisting of, arising from or relating to any of the following:

(i) all right, title and interest of the Issuer Trust, as applicable, in, to and under (A) the Retained MSR Excess Spread PC, (B) the Sold MSR Excess Spread PC and (C) all monies due or to become due thereon, and all amounts received or receivable with respect thereto, and all proceeds thereof (including “proceeds” as defined in the UCC in effect in all relevant jurisdictions, including all amounts collected by the Servicer or any Subservicer on its behalf for servicing compensation (not including Advance Reimbursement Amounts or Ancillary Income) under any Participation Certificate);

(ii) all right, title and interest of the Issuer Trust, as applicable, in, to and under any Eligible Securities and all monies due or to become due thereon, and all amounts received or receivable with respect thereto, and all proceeds thereof (including “proceeds” as defined in the Uniform Commercial Code in effect in all relevant jurisdictions);

(iii) all rights and claims of the Issuer Trust, as applicable, as a Repo Buyer under the PC Repurchase Agreement; (iv) all rights and claims of the Issuer Trust, as applicable, as a buyer under the Dedicated Account Pledge Agreement;

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(v) all rights and claims of the Issuer Trust, as applicable, pursuant to the PC Repo Guaranty;

(vi) all rights and claims of the Issuer Trust, as applicable, to the additional collateral pledged to the Issuer Trust, to support PMC’s obligations and PMH’s obligations under the PC Repurchase Agreement, including any and all rights (A) as assignee of PMC and PMH, respectively, to rights to payment on the Participation Certificates, and under all related documents, instruments and agreements pursuant to which PMC and PMH acquired, or acquired an interest in, any of the Participation Certificates and (B) as pledgee of the MSRs;

(vii) all rights and claims of the Issuer Trust under the Acknowledgment Agreement;

(viii) the Trust Accounts and all amounts and property on deposit or credited to the Trust Accounts (excluding any investment earnings thereon) from time to time (whether or not constituting or derived from payments, collections or recoveries received, made or realized in respect of the Participation Certificates);

(ix) any rights in the Dedicated Account and to the amounts on deposit therein;

(x) all other monies, securities, reserves and other property now or at any time in the possession of the Indenture Trustee or its bailee, agent or custodian and relating to any of the foregoing; and

(xi) all present and future claims, demands, causes and choses in action in respect of any and all of the foregoing and all payments on or under, and all proceeds of every kind and nature whatsoever in respect of, any and all of the foregoing and all payments on or under, and all proceeds of every kind and nature whatsoever in conversion thereof, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, checks, deposit accounts, rights to payment of any and every kind, and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing.

The Security Interest in the Trust Estate is Granted to secure the Notes issued pursuant to this Base Indenture (and the obligations under this Base Indenture and any Indenture Supplement) equally and ratably without prejudice, priority or distinction between any Note and any other Note by reason of difference in time of issuance or otherwise, except as otherwise expressly provided in this Base Indenture or in any Indenture Supplement, and to secure (1) the payment of all amounts due on such Notes, (2) the payment of all other sums payable by the Issuer Trusts under this Base Indenture or any Indenture Supplement and (3) compliance by the Issuer Trusts with the provisions of this Base Indenture or any Indenture Supplement. This Base Indenture, as it may be supplemented, including by each Indenture Supplement, is a security agreement within the meaning of the UCC.

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The Indenture Trustee acknowledges the Grant of such Security Interest, and agrees to perform the duties herein in accordance with the terms hereof.

Notwithstanding anything to the contrary in this Base Indenture or any of the other Transaction Documents, the security interest of the Indenture Trustee for the benefit of the Noteholders created hereby with respect to the Participation Certificates and the MSRs is subject to the following provisions, which provisions shall be included in each financing statement filed in respect hereof:

The Security Interest described in this financing statement is subordinate to all rights of Fannie Mae under (i) the terms of an Acknowledgment Agreement, with respect to the Security Interest (as defined therein) among Fannie Mae, PennyMac Corp. (the “Servicer”), PennyMac Holdings, LLC, PennyMac Mortgage Investment Trust and Citibank, N.A., solely as Indenture Trustee under the amended and restated Base Indenture, dated October 10, 2023, and not in its individual capacity, (ii) the terms of a Subordination of Interest Agreement, with respect to the Security Interest (as defined therein), among Fannie Mae, the Servicer and PennyMac Holdings, LLC, and (iii) the Mortgage Selling and Servicing Contract, the Fannie Mae Selling Guide, the Fannie Mae Servicing Guide and all supplemental servicing instructions or directives provided by Fannie Mae, all applicable master agreements, recourse agreements, repurchase agreements, indemnification agreements, loss-sharing agreements, and any other agreements between Fannie Mae and the Servicer, and all as amended, restated or supplemented from time to time (collectively, the “Fannie Mae Lender Contract”), which rights include the right of Fannie Mae to terminate the Fannie Mae Lender Contract with or without cause and the right to sell, or have transferred, the Servicing Rights.

Each of the Issuer Trusts hereby authorizes (i) with respect to the Issuer, the Administrator, on behalf of the Issuer and the Indenture Trustee, and (ii) with respect to the Co-Issuer, the Co-Issuer Administrator, on behalf of the Co-Issuer and the Indenture Trustee, and, in each case, its assignees, successors and designees to file one or more UCC financing statements, financing statement amendments and continuation statements to perfect the security interest granted above. In addition, each of the Issuer Trusts hereby consents to the filing of a financing statement describing the Collateral covered thereby as “all assets of the Debtor, now owned or hereafter acquired,” or such similar language as the Administrator or the Co-Issuer Administrator, as applicable, on behalf of the Indenture Trustee, and its assignees, successors and designees may deem appropriate.

Subject to the interests and rights of Fannie Mae as set forth in this Base Indenture and in the Acknowledgment Agreement and the Fannie Mae Requirements, the parties hereto intend that the Security Interest Granted under this Base Indenture shall give the Indenture Trustee on behalf of the Secured Parties a first priority perfected security interest in, to and under the Collateral, and all other property described in this Base Indenture as a part of the Trust Estate and all proceeds of any of the foregoing in order to secure the obligations of the Issuer Trusts to the Indenture Trustee and the Noteholders under the Notes, this Base Indenture, the related Indenture Supplement, and all of the other Transaction Documents.

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The Indenture Trustee on behalf of the Secured Parties shall have all the rights, powers and privileges of a secured party under the UCC. Each of the Issuer Trusts agrees to execute and file all filings (including filings under the UCC) and take all other actions reasonably necessary in any jurisdiction to provide third parties with notice of the Security Interest Granted pursuant to this Base Indenture and to perfect such Security Interest under the UCC.

AGREEMENTS OF THE PARTIES

To set forth or to provide for the establishment of the terms and conditions upon which the Notes are to be authenticated, issued and delivered, and in consideration of the premises and the purchase of Notes by the Noteholders thereof, it is mutually covenanted and agreed as set forth in this Base Indenture, for the equal and proportionate benefit of all Noteholders of the Notes or of a Series or Class thereof, as the case may be.

LIMITED RECOURSE

The obligation of the Issuer Trusts to make payments of principal, interest and other amounts on the Notes is limited in recourse as set forth in Section 8.9.

Article I

Definitions and Other Provisions of General Application

Section 1.1. Definitions. For all purposes of this Indenture, except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Definitions attached hereto as Appendix A which is incorporated by reference herein. All other capitalized terms used herein shall have the meanings specified herein.

Section 1.2. Interpretation. For all purposes of this Base Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(a) reference to and the definition of any document (including this Base Indenture) shall be deemed a reference to such document as it may be amended, restated, supplemented or otherwise modified from time to time;

(b) all references to an “Article,” “Section,” “Schedule” or “Exhibit” are to an Article or Section hereof or to a Schedule or an Exhibit attached hereto;

(c) defined terms in the singular shall include the plural and vice versa and the masculine, feminine or neuter gender shall include all genders;

(d) the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Base Indenture shall refer to this Base Indenture as a whole and not to any particular provision of this Base Indenture; (e) unless otherwise specified herein, the term “or” has the inclusive meaning represented by the term “and/or” and the term “including” is not limiting;

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(f) in the computation of periods of time from a specified date to a later specified date, unless otherwise specified herein, the words “commencing on” mean “commencing on and including,” the word “from” means “from and including” and the words “to” and “until” each means “to but excluding”;

(g) periods of days referred to in this Base Indenture shall be counted in days unless Business Days are expressly prescribed and references in this Base Indenture to months and years shall be to months and years unless otherwise specified;

(h) accounting terms not otherwise defined herein and accounting terms partly defined herein to the extent not defined, shall have the respective meanings given to them under GAAP;

(i) “including” and words of similar import will be deemed to be followed by “without limitation”;

(j) references to any Transaction Document (including this Base Indenture) and any other agreement shall be deemed a reference to such Transaction Document or agreement as it may be amended, restated, supplemented or otherwise modified from time to time;

(k) references to any statute, law, rule or regulation shall be deemed a reference to such statute, law, rule or regulation as it may be amended or modified from time to time;

(l) all references to payments or deliveries of “cash” shall be understood to mean “immediately available funds” or “available funds held in a deposit account,” as the context may require;

(m) references to a Person shall be deemed a reference to its permitted successors and assigns;

(n) all references to “Issuer Trust” herein in the singular are interpreted to apply to either the Issuer or the Co-Issuer, as applicable, individually; and

(o) all references to Issuer Trusts herein shall be deemed to apply to both Issuer Trusts.

Section 1.3. Compliance Certificates and Opinions. Upon any application or request by the Issuer Trusts to the Indenture Trustee to take any action under any provision of this Base Indenture, the Issuer and Co-Issuer will furnish to the Indenture Trustee (1) an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Base Indenture relating to the proposed action have been complied with and (2) except as provided below, an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Base Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

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No such certificate or opinion shall be required in any instance where 100% of the Noteholders have consented to the related amendment, modification or action and all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or supplement, or with respect to any other modification or action, directed the Indenture Trustee in writing to permit such modification or action without receiving such certificate or opinion.

Every certificate with respect to compliance with a condition or covenant provided for in this Base Indenture will include:

(a) a statement to the effect that each individual signing such certificate has read such covenant or condition and the definitions herein relating thereto;

(b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate are based;

(c) a statement to the effect that such individual has made such examination or investigation as is necessary to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

Section 1.4. Form of Documents Delivered to Indenture Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, one or more specified Persons, one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to the other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of the Issuer Trusts may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless the Issuer Trusts know, or in the exercise of reasonable care should know, that the certificate or opinion or representations are erroneous. Any such certificate or opinion of, or representation by, counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, the Issuer Trusts stating that the information with respect to such factual matters is in the possession of the Issuer Trusts, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations are erroneous.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Base Indenture, they may, but need not, be consolidated and form one instrument.

Section 1.5. Acts of Noteholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action (each, an “Action”) provided by this Base Indenture to be given or taken by Noteholders of any Class may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by an agent duly appointed in writing. Except as herein otherwise expressly provided, such Action will become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuer Trusts. Such instrument or instruments and any such record (and the Action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Noteholders signing such instrument or instruments and so voting at any meeting.

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Proof of execution of any such instrument or of a writing appointing any such agent, or the holding by any Person of a Note, will be sufficient for any purpose of this Base Indenture and (subject to Section 11.1) conclusive in favor of the Indenture Trustee and the Issuer Trusts, if made in the manner provided in this Section 1.5.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness to such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by an officer of a corporation or a member of a partnership, on behalf of such corporation or partnership, such certificate or affidavit will also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the person executing the same, may also be proved in any other manner which the Indenture Trustee deems sufficient.

(c) The ownership of Notes will be proved by the Note Register.

(d) Any Action by a Noteholder will bind all subsequent Noteholders of such Noteholder’s Note, in respect of anything done or suffered to be done by the Indenture Trustee, or the Issuer Trusts in reliance thereon whether or not notation of such Action is made upon such Note.

(e) Without limiting the foregoing, a Noteholder entitled hereunder to take any Action hereunder with regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount. Any notice given or Action taken by a Noteholder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Noteholders of each such different part.

(f) Without limiting the generality of the foregoing, unless otherwise specified pursuant to one or more Indenture Supplements, a Noteholder, including a Depository that is the Noteholder of a Global Note representing Book-Entry Notes, may make, give or take, by a proxy or proxies duly appointed in writing, any Action provided in this Base Indenture to be made, given or taken by a Noteholder, and a Depository that is the Noteholder of a Global Note may provide its proxy or proxies to the beneficial owners of interests in or security entitlements to any such Global Note through such Depository’s standing instructions and customary practices.

(g) The Issuer Trusts may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in or security entitlements to any Global Note held by a Depository entitled under the procedures of such Depository to make, give or take, by a proxy or proxies duly appointed in writing, any Action provided in this Base Indenture to be made, given or taken by Noteholders. If such a record date is fixed, the Noteholders on such record date or their duly appointed proxy or proxies, and only such Persons, shall be entitled to make, give or take such Action, whether or not such Noteholders remain Noteholders after such record date. No such Action shall be valid or effective if made, given or taken more than ninety (90) days after such record date.

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Section 1.6. Notices, etc., to Indenture Trustee, Issuer, Co-Issuer, Administrator, Co-Issuer Administrator, the Administrative Agent and Note Rating Agencies. (a) Any Action of Noteholders or other document provided or permitted by this Base Indenture to be made upon, given or furnished to, or filed with, the Indenture Trustee by any Noteholder or by the Issuer Trusts will be sufficient for every purpose hereunder if in writing (which shall include electronic transmission) and personally delivered, express couriered, electronically transmitted or mailed by registered or certified mail to the Indenture Trustee (or the bank serving as Indenture Trustee in any of its capacities) at its Corporate Trust Office, or the Issuer Trusts or the Administrator or the Co-Issuer Administrator by the Indenture Trustee or by any Noteholder will be sufficient for every purpose hereunder (except with respect to notices to the Indenture Trustee of an Event of Default as provided in Section 8.1) if in writing (which shall include electronic transmission) and personally delivered, express couriered, electronically transmitted or mailed by registered or certified mail, addressed to it at: (i) in the case of the Indenture Trustee, in any of its capacities: Citibank, N.A., Agency & Trust, 388 Greenwich Street Trading, New York, NY 10013, Attention: Agency & Trust - PMT ISSUER TRUST – FMSR Collateralized Notes, email: valerie.delgado@citi.com and solely for purposes of the transfer, surrender or exchanges of Notes, at 480 Washington Boulevard, 30th Floor, Jersey City, New Jersey 07310, Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes; (ii) in the case of Servicer and Administrator: 3043 Townsgate Road, Suite 300, Westlake Village, CA 91361, Attention: PMT ISSUER TRUST – FMSR Collateralized Notes, email: pamela.marsh@pnmac.com; josh.smith@pnmac.com; mortgage.finance@pnmac.com (with a copy to Chris Gavin, Esq., Winston & Strawn LLP, 200 Park Ave, #4000, New York, NY 10169, email: CGavin@winston.com); (iii) in the case of the Issuer: to the Administrator (with copy to: Wilmington Savings Fund Society, FSB, as Owner Trustee, 500 Delaware Avenue, 11th Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration, email: MBrzoska@wsfsbank.com); (iv) in the case of the Co-Issuer: to the Co-Issuer Administrator (with copy to: Wilmington Savings Fund Society, FSB, as Owner Trustee, 500 Delaware Avenue, 11th Floor, Wilmington, Delaware 19801, Attention: Corporate Trust Administration, email: MBrzoska@wsfsbank.com); (v) in the case of Atlas, as Administrative Agent: 3 Bryant Park, New York, NY 10036, email: AtlasSPGeneralCounsel@Atlas-SP.com; (vi) in the case of the Disposition Manager, Pentalpha Surveillance LLC, 501 John James Audubon Parkway, Suite 401, Amherst, New York, 14228, Attention: PMT ISSUER TRUST - FMSR, email: notices@pentalphasurveillance.com; or (vii) in any case at any other address previously furnished in writing by any such party to the other parties hereto.

(b) Where this Base Indenture provides for notice to or consent from any Note Rating Agency, such notice or consent will only be required to the extent that any Outstanding Class is then currently being rated at the request of PMC, and as specified in the related Indenture Supplement, and if no Outstanding Class is being so rated, including in the event ratings unsolicited by PMC are being issued, such notice or consent provisions shall be of no force or effect. In the event that an Indenture Supplement provides that one or more Classes obtain a rating, any notice shall be sufficient for every purpose hereunder (except with respect to notices to the Indenture Trustee of an Event of Default as provided in Section 3.3 or Section 8.1) if in writing (which shall include electronic transmission) and personally delivered, express couriered, electronically transmitted or mailed by registered or certified mail, addressed to it at the address set forth in the related Indenture Supplement.

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Failure to give such notice will not affect any other rights or obligations created hereunder and will not under any circumstance constitute an Adverse Effect.

Section 1.7. Notices to Noteholders; Waiver. (a) Where this Base Indenture, any Indenture Supplement or any Note provides for notice to registered Noteholders of any event, such notice will be sufficiently given (unless expressly provided otherwise herein, in such Indenture Supplement or in such Note) if in writing and mailed by overnight courier, sent by facsimile, sent by electronic transmission or personally delivered to each Noteholder of a Note affected by such event, at such Noteholder’s address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Noteholders is given by mail, facsimile, electronic transmission or delivery, none of the failure to mail, send by facsimile, send by electronic transmission or deliver such notice, or any defect in any notice so mailed, to any particular Noteholders will affect the sufficiency of such notice with respect to other Noteholders and any notice that is mailed, sent by facsimile, sent by electronic transmission or delivered in the manner herein provided shall conclusively have been presumed to have been duly given.

Where this Base Indenture, any Indenture Supplement or any Note provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver will be the equivalent of such notice. Waivers of notice by Noteholders will be filed with the Indenture Trustee, but such filing will not be a condition precedent to the validity of any action taken in reliance upon such waiver.

(b) In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or otherwise, it will be impractical to mail notice of any event to any Noteholder of a Note when such notice is required to be given pursuant to any provision of this Base Indenture, then any method of notification as will be satisfactory to the Indenture Trustee and the Issuer Trusts will be deemed to be a sufficient giving of such notice.

(c) The Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary each agree to accept and act upon instructions or directions pursuant to this Base Indenture or any document executed in connection herewith sent by unsecured email, facsimile transmission or other similar unsecured electronic methods; provided, however, that the Indenture Trustee shall have received an incumbency certificate (attached hereto as Exhibits C-1 through C-6) listing such person as a person designated to provide such instructions or directions, which incumbency certificate may be amended whenever a person is added or deleted from the listing. If such person elects to give the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary email or facsimile instructions (or instructions by a similar electronic method) and the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary in its discretion elects to act upon such instructions, the Indenture Trustee’s, Calculation Agent’s, Paying Agent’s and Securities Intermediary’s reasonable understanding of such instructions, as applicable, shall be deemed controlling.

(d) None of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary shall be liable for any losses, costs or expenses arising directly or indirectly from the Indenture Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflicting with or being inconsistent with a prior written instruction except as a result of their respective willful misconduct, negligence or bad faith.

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Any Person providing such instructions or directions agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, including the risk of Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary acting on unauthorized instructions, and the risk of interception and misuse by third parties and acknowledges and agrees that there may be more secure methods of transmitting such instructions than the method(s) selected by it and agrees that the security procedures (if any) to be followed in connection with its transmission of such instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances.

Section 1.8. Administrative Agent.

(a) Discretion of Administrative Agent. Any provision providing for the exercise of discretion of the Administrative Agent means that such discretion may be executed in the reasonable discretion of the Administrative Agent. In addition, as further provided in the definition of “Administrative Agent” herein and notwithstanding any other provision in this Base Indenture to the contrary, any approvals, consents, votes or other rights exercisable by the Administrative Agent under this Base Indenture (other than any Indenture Supplement related to a specific Series) shall require the approval, consent, vote or other exercise of rights of each Person specified by name under the definition of “Administrative Agent” or in its stead its Affiliate or successor as noticed to the Indenture Trustee, unless otherwise specified in any Indenture Supplement related to a specific Series.

(b) Nature of Duties. The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Base Indenture, a related Indenture Supplement or in the other Transaction Documents. The Administrative Agent shall not have by reason of this Base Indenture or any Transaction Document a fiduciary relationship in respect of any Noteholder. Nothing in this Base Indenture or any of the Transaction Documents, express or implied, is intended to or shall be construed to impose upon the Administrative Agent any obligations in respect of this Base Indenture or any of the other Transaction Documents except as expressly set forth herein or therein. Each Noteholder shall make its own independent investigation of the financial condition and affairs of the Issuer Trusts in connection with the purchase of any Note and shall make its own appraisal of the creditworthiness of the Issuer Trusts and the value of the Collateral, and the Administrative Agent shall have no duty or responsibility, either initially or on a continuing basis, to provide any Noteholder with any credit or other information with respect thereto, whether coming into its possession before the Closing Date, as applicable, or at any time or times thereafter.

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(c) Rights, Exculpation, Etc. The Administrative Agent and its directors, officers, agents or employees shall not be liable for any action taken or omitted to be taken by it under or in connection with this Base Indenture or the other Transaction Documents. Without limiting the generality of the foregoing, the Administrative Agent: (i) may consult with legal counsel (including counsel to the Administrative Agent or counsel to the Issuer or counsel to the Co-Issuer), independent public accountants, and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel or experts; (ii) makes no warranty or representation to any Noteholder and shall not be responsible to any Noteholder for any statements, certificates, warranties or representations made in or in connection with this Base Indenture or the other Transaction Documents; (iii) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Base Indenture or the other Transaction Documents on the part of any Person, the existence or possible existence of any default or Event of Default, or to inspect the Collateral or other property (including the books and records) of any Person; (iv) shall not be responsible to any Noteholder for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Base Indenture or the other Transaction Documents or any other instrument or document furnished pursuant hereto or thereto; and (v) shall not be deemed to have made any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Indenture Trustee’s Adverse Claim thereon, or any certificate prepared by the Issuer Trusts in connection therewith, nor shall the Administrative Agent be responsible or liable to the Noteholders for any failure to monitor or maintain any portion of the Collateral. Without limiting the foregoing and notwithstanding any understanding to the contrary, no Noteholder shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting under this Base Indenture, the Notes or any of the other Transaction Documents in its own interests as a Noteholder or otherwise.

(d) Reliance. The Administrative Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Base Indenture or any of the other Transaction Documents and its duties hereunder or thereunder, upon advice of counsel selected by it.

Section 1.9. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and will not affect the construction hereof.

Section 1.10. Successors and Assigns. All covenants and agreements in this Base Indenture by the Issuer Trusts will bind its successors and assigns, whether so expressed or not. All covenants and agreements of the Indenture Trustee in this Base Indenture shall bind its successors, co-trustees and agents of the Indenture Trustee.

Section 1.11. Severability of Provisions. In case any provision in this Base Indenture or in the Notes will be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

Section 1.12. Benefits of Indenture. Nothing in this Base Indenture or in any Notes, expressed or implied, will give to any Person, other than the parties hereto and their successors hereunder, any Authenticating Agent or Paying Agent, the Note Registrar, the Securities Intermediary, the Calculation Agent, any Secured Party and the Noteholders of Notes (or such of them as may be affected thereby), any benefit or any legal or equitable right, remedy or claim under this Base Indenture.

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Section 1.13. Governing Law.

THIS BASE INDENTURE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS BASE INDENTURE, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

THE SECURITIES INTERMEDIARY, THE ADMINISTRATOR, THE ISSUER, THE CO-ISSUER ADMINISTRATOR AND THE CO-ISSUER AGREE THAT THEY WILL NOT CHANGE THE APPLICABLE LAW IN FORCE WITH RESPECT TO ISSUES REFERRED TO IN ARTICLE 2(1) OF THE HAGUE SECURITIES CONVENTION TO A STATE OTHER THAN THE STATE OF NEW YORK.

Section 1.14. Counterparts. This Base Indenture may be executed in any number of counterparts, each of which so executed will be deemed to be an original, but all such counterparts will together constitute but one and the same instrument. Delivery of an executed counterpart of a signature page to this Base Indenture by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Base Indenture.

EACH OF THE PARTIES HERETO AND THE NOTEHOLDERS, BY THEIR ACCEPTANCE OF THE NOTES, HEREBY IRREVOCABLY AND UNCONDITIONALLY:

(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS BASE INDENTURE, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;

(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH HEREIN OR AT SUCH OTHER ADDRESS OF WHICH EACH OTHER PARTY HERETO SHALL HAVE BEEN NOTIFIED IN WRITING, EXCEPT THAT WITH RESPECT TO THE INDENTURE TRUSTEE, CALCULATION AGENT, PAYING AGENT AND SECURITIES INTERMEDIARY, SERVICE OF PROCESS MAY ONLY BE MADE AS REQUIRED BY APPLICABLE LAW;

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(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION;

(e) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS BASE INDENTURE OR THE TRANSACTIONS CONTEMPLATED HEREBY; AND

(f) AGREES THAT IN THE EVENT THAT ANY TERM OR PROVISION CONTAINED HEREIN SHALL CONFLICT WITH OR BE INCONSISTENT WITH ANY TERM OR PROVISION CONTAINED IN ANY INDENTURE SUPPLEMENT, THE TERMS AND PROVISIONS OF THE APPLICABLE INDENTURE SUPPLEMENT SHALL GOVERN WITH RESPECT TO THE RELATED SERIES OF NOTES, TO THE EXTENT OF SUCH CONFLICT.

Article II

The Trust Estate

Section 2.1. Contents of Trust Estate.

(a) Grant of Trust Estate. The Issuer Trusts have Granted the Trust Estate to the Indenture Trustee, and the Indenture Trustee has accepted this Grant, pursuant to the Granting Clause.

(b) Addition and Removal of Participation Certificates and Mortgage Loans.

(i) Addition of Participation Certificates and Mortgage Loans.

(A) PMC and PMH may at any time designate any Participation Certificates as additional Participation Certificates to be sold to the Issuer Trusts under the PC Repurchase Agreement, whereupon such Participation Certificate shall be added to the Collateral for purposes of this Base Indenture if (1) the Administrative Agent (in its sole discretion) has approved such Participation Certificate for addition and (2) written notice of such addition has been provided to the Note Rating Agencies for the Outstanding Notes. Prior to the addition of any Participation Certificates, as provided in this Section 2.1(b), the Administrator and the Co-Issuer Administrator must certify to the Indenture Trustee in writing that it has filed all financing statements or amendments to financing statements to ensure that the Indenture Trustee’s Security Interest in any additional Participation Certificate, and, if applicable, in the related MSRs, is perfected and of first priority.

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(B) If any Participation Certificates are added as Collateral, the Administrator and the Co-Issuer Administrator shall update the Participation Certificate Schedule and furnish it to the Indenture Trustee, and the most recently furnished schedule shall be maintained by the Indenture Trustee as the definitive Participation Certificate Schedule.

(C) From time to time, in accordance with the Retained Excess Spread Participation Agreement or the Excess Spread Participation Agreement, as applicable, Mortgage Loans may be added to (i) the Retained MSR Portfolio or (ii) the Sold MSR Excess Spread PC in connection with a new confirmation being entered into thereunder, and when such Mortgage Loans are added, the Administrator and the Co-Issuer Administrator shall provide an updated Participation Certificate Schedule to reflect any such additions, to the Indenture Trustee and the Administrative Agent, and any new Participation Certificate Schedule shall automatically become the new updated schedule thereof.

(ii) Removal of the Participation Certificates and Mortgage Loans.

(A) PMC and PMH, as applicable, may remove: any Participation Certificate from the Collateral, whereupon such Participation Certificate and the related MSRs shall no longer constitute Collateral for purposes of this Base Indenture, if PMC and PMH, as applicable, shall have repurchased such Participation Certificate for the full PMC Repurchase Price or PMH Repurchase Price, as applicable, and such PMC Repurchase Price or PMH Repurchase Price, as applicable, has been deposited into the Collection and Funding Account by no later than 10:00 a.m. New York City time on each Payment Date (or such other time as may be agreed to from time to time by the Servicer, the Administrator, the Co-Issuer Administrator, the Indenture Trustee and the Administrative Agent), for application in accordance with Section 4.5 (subject to Section 2.06 of the PC Repurchase Agreement).

(B) In accordance with the Retained Excess Spread Participation Agreement or the Excess Spread Participation Agreement, as applicable, PMC and PMH may cause the removal of the MSRs related to Subject Mortgages underlying a Participation Certificate, whereupon such MSRs shall no longer constitute Collateral for purposes of this Base Indenture; provided, that PMC and PMH shall have repurchased such MSRs for the full PMC Repurchase Price and PMH Repurchase Price and shall have deposited such PMC Repurchase Price and PMH Repurchase Price into the Collection and Funding Account by no later than 10:00 a.m. New York City time on each Payment Date (or such other time as may be agreed to from time to time by the Servicer, the Administrator, the Co-Issuer Administrator, the Indenture Trustee and the Administrative Agent), for application in accordance with Section 4.5.

(C) If any Participation Certificates are no longer Collateral, the Administrator and the Co-Issuer Administrator, as applicable, shall update the Participation Certificate Schedule and furnish it to the Indenture Trustee, and the most recently furnished schedule shall be maintained by the Indenture Trustee as the definitive Participation Certificate Schedule.

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(D) If any MSRs are removed from the Participation Agreements, PMC and PMH, as applicable, shall provide an updated schedule to the applicable Participation Certificate to reflect any such removals, to the Indenture Trustee and the Administrative Agent within ten (10) Business Days of such removal, and any new schedule to the the applicable Participation Certificate, shall automatically become the new updated schedule thereof.

(c) Protection of Transfers to, and Back-up Security Interests of Issuer. The Administrator and the Co-Issuer Administrator shall take all actions as may be necessary to ensure that the Trust Estate is Granted to the Indenture Trustee pursuant to this Base Indenture. Each of the Administrator and the Co-Issuer Administrator, at its own expense, shall make (or cause to be made) all initial filings on or about the date of this Base Indenture and shall forward a copy of such filing or filings to the Indenture Trustee. In addition, and without limiting the generality of the foregoing, each of the Administrator and the Co-Issuer Administrator, at its own expense at the reasonable request of the Administrative Agent, shall prepare and forward for filing, or shall cause to be forwarded for filing, all filings necessary to maintain the effectiveness of any original filings necessary under the relevant UCC to perfect and maintain the first priority status of the Indenture Trustee’s security interest in the Trust Estate, including (i) continuation statements, and (ii) such other statements as may be occasioned by (A) any change of name of any of PMC, PMH or the Issuer Trusts, (B) any change of location of the jurisdiction of any of PMC, PMH or the Issuer Trusts, (C) any transfer of any interest of PMC, PMH or the Issuer Trusts in any item in the Trust Estate or (D) any change under the applicable UCC or other applicable laws. The Administrator and the Co-Issuer Administrator shall enforce the Servicer’s obligations pursuant to the PC Repurchase Agreement, on behalf of the Issuer, the Co-Issuer and the Indenture Trustee.

Section 2.2. Asset Files.

(a) Indenture Trustee. The Indenture Trustee agrees to hold, in trust on behalf of the Noteholders, within two (2) Business Days of the execution and delivery of this Base Indenture, the following documents relating to each Participation Certificate:

(i) each original Participation Certificate;

(ii) a copy of each Determination Date Report in electronic form listing each Participation Certificate Granted to the Trust Estate and any other information required in any related Indenture Supplement;

(iii) a copy of each Funding Certification delivered by the Administrator and the Co-Issuer Administrator, which shall be maintained in electronic format;

(iv) the current Participation Certificate Schedule; and

(v) any other documentation provided for in any Indenture Supplement; provided that the Indenture Trustee shall have no responsibility to ensure the validity or sufficiency of the Participation Certificates.

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(b) Administrator or Co-Issuer Administrator as Custodian. To reduce administrative costs, the Administrator or the Co-Issuer Administrator will act as custodian for the benefit of the Noteholders of the following documents relating to each Participation Certificate:

(i) a copy of the related Participation Certificate and each amendment and modification thereto;

(ii) any documents other than those identified in Section 2.2(a) received from or made available by the Servicer, securities administrator or other similar party in respect of such Participation Certificate; and

(iii) any and all other documents that the Issuer, the Co-Issuer, the Servicer, PMH or PMC, as the case may be, shall keep on file, in accordance with its customary procedures, relating to such Participation Certificate.

(c) Delivery of Updated Participation Certificate Schedule and Eligible Securities Schedule.

(i) The Administrator and the Co-Issuer Administrator, as applicable, shall deliver to the Indenture Trustee an updated Participation Certificate Schedule prior to the addition, modification or deletion of any Participation Certificate as Collateral and the Indenture Trustee shall hold the most recently delivered version as the definitive Participation Certificate Schedule. The Administrator and the Co-Issuer Administrator each represents and warrants, as of the date hereof and as of the date any new Participation Certificate is added as Collateral, that the Participation Certificate Schedule, as it may be updated by the Administrator and the Co-Issuer Administrator from time to time and delivered to the Indenture Trustee, is a true, complete and accurate list of all Participation Certificates.

(ii) The Administrator and the Co-Issuer Administrator shall deliver to the Indenture Trustee an updated schedule of Eligible Securities prior to the addition, modification or deletion of any Eligible Security as Collateral and the Indenture Trustee shall hold the most recently delivered version as the definitive schedule. The Administrator and the Co-Issuer Administrator each represents and warrants, as of the date hereof and as of the date any new Eligible Security is added as Collateral, that the schedule of Eligible Securities, as it may be updated by the Administrator and the Co-Issuer Administrator from time to time and delivered to the Indenture Trustee, is a true, complete and accurate list of all Eligible Securities.

(d) Marking of Records. The Administrator and the Co-Issuer Administrator, respectively, shall ensure that, from and after the time of the sale or contribution of the Participation Certificates to the Issuer Trusts, respectively, under the PC Repurchase Agreement and the Grant thereof to the Indenture Trustee pursuant to this Base Indenture, any records (including any computer records and back-up archives) maintained by or on behalf of the Servicer that refer to any Participation Certificate indicate clearly the interest of the Issuer Trusts and the Security Interest of the Indenture Trustee in such Participation Certificate and that such Participation Certificate is owned by the related Issuer Trust and subject to the Indenture Trustee’s Security Interest. Indication of the Issuer’s and the Co-Issuer’s ownership of a Participation Certificate and the Security Interest of the Indenture Trustee shall be deleted from or modified on such records when, and only when, such Participation Certificate has been paid in full, repurchased, or assigned by the related Issuer Trust and released by the Indenture Trustee from its Security Interest.

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(e) Custodian. PMC, as a Repo Seller, PMH, as a Repo Seller, the Issuer, the Co-Issuer and the Administrative Agent each confirm, and each Noteholder is deemed to confirm, that it is treating Citibank, in its capacity as a Custodian, as holding each original Participation Certificate as a “custodian” on behalf of the Issuer Trusts as a “customer” in connection with a “securities contract” (as each such term is used in Section 101(22) of the Bankruptcy Code), and each such Person confirms (or is deemed to confirm, in the case of the Noteholders) that in such capacity Citibank is serving as a “financial institution” (as defined in Section 101(22) of the Bankruptcy Code). Citibank confirms that it is a “commercial bank” (as such term is used in such Section 101(22) and acknowledges such treatment by such Persons.

Section 2.3. Duties of Custodian with Respect to the Asset Files.

(a) Safekeeping. The Indenture Trustee, the Administrator and the Co-Issuer Administrator, each in its capacity as custodian (each, a “Custodian”) pursuant to Section 2.2(b), shall hold the portion of the Asset Files that it is required to maintain under Section 2.2 in its possession from time to time for the use and benefit of all present and future Noteholders, and maintain such accurate and complete accounts, records and computer systems pertaining to each Asset File as shall enable the Calculation Agent and the Indenture Trustee to comply with this Base Indenture. Each Custodian shall promptly report to the Issuer Trusts any failure on its part to hold the Asset Files and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure. The Indenture Trustee shall have no responsibility or liability for any actions or omissions of the Administrator or the Co-Issuer Administrator in its capacity as Custodian or otherwise.

(b) Maintenance of and Access to Records. Each Custodian shall maintain each portion of the Asset File that it is required to maintain under this Base Indenture at its offices at the Corporate Trust Office (in the case of the Indenture Trustee) or 3043 Townsgate Road, Suite 300, Westlake Village, CA 91361 (in the case of the Servicer) as the case may be, or at such other office as shall be specified to the Indenture Trustee and the Issuer Trusts by thirty (30) days’ prior written notice. The Administrator and the Co-Issuer Administrator shall take all actions necessary, or reasonably requested by the Administrative Agent, the Majority Noteholders of all Outstanding Notes or the Indenture Trustee, to amend any existing financing statements and continuation statements, and file additional financing statements to further perfect or evidence the rights, claims or security interests of the Indenture Trustee under any of the Transaction Documents (including the rights, claims or security interests of the Issuer Trusts under the PC Repurchase Agreement which have been assigned to the Indenture Trustee). The Indenture Trustee, the Administrator and the Co-Issuer Administrator, in their capacities as Custodian(s), shall make available to the Issuer Trusts, the Calculation Agent, the Administrative Agent, any group of Interested Noteholders and the Indenture Trustee (in the case of the Administrator and the Co-Issuer Administrator) or their

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duly authorized representatives, attorneys or auditors the portion of the Asset Files that it is required to maintain under this Base Indenture and the accounts, books and records maintained by the Indenture Trustee, the Administrator or the Co-Issuer Administrator with respect thereto as promptly as reasonably practicable following not less than two (2) Business Days’ prior written notice for examination during normal business hours and in a manner that does not unreasonably interfere with such Person’s ordinary conduct of business.

Neither a Custodian nor any of its directors, officers or employees shall be liable to anyone for any error of judgment, or for any act done or step taken or omitted to be taken by it (or any of its directors, officers of employees), or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection herewith, unless such action constitutes gross negligence, willful misconduct or bad faith of such Custodian. Knowledge or information acquired by Citibank in its capacity as Custodian hereunder shall not be imputed to Citibank in any other capacity in which it may act hereunder or to any affiliate of Citibank and vice versa. The Custodian shall be deemed to have the same rights, immunities and protections as the Indenture Trustee hereunder, except that the Custodian shall not be subject to a prudent person standard under any circumstances.

Section 2.4. Application of Trust Money. All money deposited with the Indenture Trustee or the Paying Agent pursuant to Section 4.2 shall be held in trust and applied by the Indenture Trustee or the Paying Agent, as the case may be, in accordance with the provisions of the Notes and this Base Indenture, to the payment to the Persons entitled thereto, of the principal, interest, fees, costs and expenses (or payments in respect of the Funding Amount or other amount) for whose payment such money has been deposited with the Indenture Trustee or the Paying Agent.

Article III

Administration of Participation Certificates; Reporting to Investors

Section 3.1. Duties of the Calculation Agent.

(a) General. The Calculation Agent shall initially be Citibank. The Calculation Agent is appointed for the purpose of making calculations and verifications as provided in this Section 3.1(a). The Calculation Agent, as agent for the Noteholders, shall provide all services necessary to fulfill the role of Calculation Agent as set forth in this Base Indenture.

By no later than 1:00 p.m. New York City time on the first (1st) Business Day prior to each Interim Payment Date or Payment Date, as applicable, the Administrator and Co-Issuer Administrator shall prepare and deliver to the Calculation Agent, the Indenture Trustee, the Paying Agent, the Administrative Agent and the VFN Noteholders a report (the “Administrators’ Calculation Report”) containing the detailed information described in this Section 3.1(a) and pursuant to Section 3.2(b).

By 2:00 p.m.

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New York City time on each Payment Date (or such other time as may be agreed to from time to time by the Servicer, the Administrator, the Co-Issuer Administrator, the Indenture Trustee and the Administrative Agent), based upon the Administrators’ Calculation Report and any additional information provided to the Indenture Trustee and the Calculation Agent by the Administrator and the Co-Issuer Administrator pursuant to the Fannie Mae Lender Contract and the Transaction Documents, as well as each applicable Determination Date Report, all available reports issued by the Servicer, the Market Value Report issued by the MSR Valuation Agent and any report issued as to the Market Value of any Eligible Securities (to the extent any Eligible Securities are on deposit in the Eligible Securities Account) as of the Determination Date, the Calculation Agent shall perform certain calculations and verifications as follows:

(i) an indication (yes or no) as to whether a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period preceding the upcoming Payment Date;

(ii) if the Full Amortization Period is in effect, the Series Available Funds for each Series for the upcoming Payment Date;

(iii) if required by any VFN Noteholder, the aggregate Funding Amount to be paid on the upcoming Funding Date, and the amount to be drawn on each Class of VFNs Outstanding in respect of such Funding Amount, and the portion of such Funding Amount that is to be paid using Available Funds pursuant to Section 4.5(a)(1)(viii);

(iv) if any Note is Outstanding, the amount, if any, to be paid on each such Class in reduction of the aggregate principal balance on the upcoming Payment Date;

(v) the amount of Fees to be paid on the upcoming Payment Date, the amount remaining before the applicable Expense Limit is reached (before and after giving effect to such payments), and, if applicable, any amounts in excess of the Expense Limit to be carried forward to a subsequent year or Payment Date;

(vi) the Required Available Funds, the Expense Reserve Required Amount and the Series Reserve Required Amount, if applicable, for each Series of Notes for the upcoming Payment Date;

(vii) the Weighted Average Advance Rate for the facility to be used in calculating whether a Borrowing Base Deficiency exists and for each Series and Class of Variable Funding Notes;

(viii) the Series Invested Amount and, if applicable, the Class Invested Amount for each Series and Class for the upcoming Payment Date;

(ix) the Interest Payment Amount, the Default Supplemental Fee and the Step-Up Fee for each Class of Outstanding Notes for the upcoming Payment Date, and the Interest Amount, the Cumulative Interest Shortfall Amount, the Cumulative Default Supplemental Fee Shortfall Amount and the Cumulative Step-Up Fee Shortfall Amount for each Class of Notes for the Interest Accrual Period related to the upcoming Payment Date;

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(x) an indication (yes or no) as to whether an Advance Rate Trigger Event, Early Amortization Event or Event of Default hereunder has occurred; and (xi) verification of the calculation of the Stop-Loss Cap and the Stop-Loss Cap Required Amount for the upcoming Payment Date as of the last day of the immediately preceding month, which shall be calculated by PMC on a monthly basis and on a quarterly basis will be calculated using the Servicer SDQ Rate provided by Fannie Mae for such quarter to the extent available from Fannie Mae.

The Calculation Agent does not receive any loan data or financial information independent from what is supplied to it by the Administrator and the Co-Issuer Administrator. Thus, any components of the calculations or verifications to be performed by the Calculation Agent that require loan data information, including pool balance, SDQ balance, and non-SDQ loan balances, as well as any financial statement data (including any PIPs), are taken as provided by the Administrator and the Co-Issuer Administrator without verification or recalculation.

(b) Termination of Calculation Agent. The Issuer Trusts (with the consent of the Majority Noteholders for each Series) may at any time terminate the Calculation Agent without cause upon sixty (60) days’ prior notice. If at any time the Calculation Agent shall fail to resign after written request therefor as set forth in this Section 3.1(b), or if at any time the Calculation Agent shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Calculation Agent or of its property shall be appointed, or if any public officer shall take charge or Control of the Calculation Agent or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Majority Noteholders of all Outstanding Notes may remove the Calculation Agent and if the same entity serves as both Calculation Agent and Indenture Trustee, the Majority Noteholders of all Outstanding Notes shall also remove the Indenture Trustee as provided in Section 11.9(c). If the Calculation Agent resigns or is removed under the authority of the immediately preceding sentence, then a successor Calculation Agent shall be appointed pursuant to Section 11.9. The Issuer Trusts shall give each Note Rating Agency and the Noteholders notice of any such resignation or removal of the Calculation Agent and appointment and acceptance of a successor Calculation Agent. Notwithstanding the foregoing, no resignation, removal or termination of the Calculation Agent shall be effective until the resignation, removal or termination of the predecessor Calculation Agent and until the acceptance of appointment by the successor Calculation Agent as provided herein. Any successor Indenture Trustee appointed shall also be the successor Calculation Agent hereunder, if the predecessor Indenture Trustee served as Calculation Agent and no separate Calculation Agent is appointed. Notwithstanding anything to the contrary herein, the Indenture Trustee may not resign as Calculation Agent unless it also resigns as Indenture Trustee pursuant to Section 11.9(b).

(c) Successor Calculation Agents. Any successor Calculation Agent appointed hereunder shall execute, acknowledge and deliver to the Issuer Trusts and to its predecessor Calculation Agent an instrument accepting such appointment under this Base Indenture, and thereupon the resignation or removal of the predecessor Calculation Agent shall become effective and such successor Calculation Agent, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor under this Base Indenture, with like effect as if originally named as Calculation Agent. The predecessor Calculation Agent shall deliver to the successor Calculation Agent all documents and statements held by it under this Base Indenture. The Issuer Trusts and the predecessor Calculation Agent shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Calculation Agent all such rights,

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powers, duties and obligations. Upon acceptance of appointment by a successor Calculation Agent as provided in this Section 3.1, the Issuer Trusts shall mail notice of the succession of such successor Calculation Agent under this Base Indenture to all Noteholders at their addresses as shown in the Note Register and shall give notice by mail to each applicable Note Rating Agency. If either of the Issuer Trusts fails to mail such notice within ten (10) days after acceptance of appointment by the successor Calculation Agent, the successor Calculation Agent shall cause such notice to be mailed at the expense of the Administrator and the Co-Issuer Administrator, as applicable.

Section 3.2. Reports by Administrator, the Co-Issuer Administrator and Indenture Trustee.

(a) Determination Dates; Determination Date Reports. The Indenture Trustee shall report to the Administrator and the Co-Issuer Administrator, by no later than 2:00 p.m. New York City time on the second (2nd) Business Day before each Funding Date (or such other time as may be agreed to from time to time by Administrator, the Co-Issuer Administrator, the Indenture Trustee and the Administrative Agent), the amount of Available Funds that will be available to be applied toward Funding Amounts or to pay principal on any applicable Notes on the upcoming Payment Date or Interim Payment Date. If the Administrator and the Co-Issuer Administrator supply no information to the Indenture Trustee in their Determination Date Report concerning Funding Amounts or payments on any Variable Funding Note in respect of an Interim Payment Date, then the Indenture Trustee shall apply no Available Funds to pay Funding Amounts or to make payment on any Note on such Interim Payment Date, unless an Event of Default has occurred and is continuing, in which case the Indenture Trustee shall apply the Available Funds pursuant to Section 4.5(a)(ii).

By no later than 10:00 a.m. New York City time on the first (1st) Business Day prior to each Funding Date that is an Interim Payment Date and by no later than 2:00 p.m. New York City time on the second (2nd) Business Day prior to each Funding Date that is a Payment Date (or such other time as may be agreed to from time to time by the Administrator, the Co-Issuer Administrator, the Indenture Trustee and the Administrative Agent), the Administrator and the Co-Issuer Administrator shall prepare and deliver to the Issuer, the Co-Issuer, the Indenture Trustee, the Calculation Agent, the Administrative Agent, each VFN Noteholder and the Paying Agent a report (the “Determination Date Report”) (in electronic form) setting forth (i) each data item required to be reported pursuant to Section 4.3, (ii) the information reported in the Administrators’ Calculation Report, and (iii) any additional information necessary to prepare the Payment Date Report pursuant to Section 3.2(b).

(b) Payment Date Report. By 2:00 p.m. New York City time on each Payment Date (or such other time as may be agreed to from time to time by the Servicer, the Administrator, the Co-Issuer Administrator, the Indenture Trustee and the Administrative Agent), based upon information provided to the Indenture Trustee and the Calculation Agent by the Administrator and the Co-Issuer Administrator pursuant to the Fannie Mae Lender Contract and the Transaction Documents and contained in the Administrators’ Calculation Report, as well as each applicable Determination Date Report, all available reports issued by the Servicer, the Market Value Report issued by the MSR Valuation Agent and any report issued as to the Market Value of any Eligible Securities (to the extent any Eligible Securities are on deposit in the Eligible Securities Account)

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as of the Determination Date, the Indenture Trustee shall make available on its website to the Issuer, the Co-Issuer, the Calculation Agent, the Administrator, the Co-Issuer Administrator, the Paying Agent, the Administrative Agent, each Noteholder and each Note Rating Agency, and solely during the Default Period, the Disposition Manager, a report (the “Payment Date Report”) reporting the following for such Payment Date and the related Collection Period preceding such Payment Date:

(i) the amount of Available Funds and Required Available Funds for such Payment Date (segregating out any cash amounts that are on deposit in the Collection and Funding Account which the Administrator and the Co-Issuer Administrator have instructed the Indenture Trustee to use in accordance with Section 4.5(a)(1)(viii));

(ii) (A) the aggregate amount of all Collections received and deposited into the Collection and Funding Account during such Collection Period and (B) the Total Collections for such Payment Date;

(iii) all Funding Amounts paid during such Collection Period separately identifying the portion thereof paid from funds in the Collection and Funding Account and the portion thereof paid using proceeds of fundings of an increase in VFN Principal Balance(s) for each Class of VFNs;

(iv) the amount on deposit in any Trust Accounts set forth under any Indenture Supplement as of the close of business on the last Payment Date;

(v) the amount on deposit in the Series Reserve Account for each Series, and, if applicable, the amount the Indenture Trustee is to withdraw from each such Series Reserve Account and deposit into the Note Payment Account on such Payment Date for application to the related Series of Notes;

(vi) the amount on deposit in the Expense Reserve Account, and, if applicable, the amount the Indenture Trustee is to withdraw from the Expense Reserve Account and deposit into the Note Payment Account on such Payment Date for application to the related Series of Notes;

(vii) the amount of each payment required to be made by the Indenture Trustee or the Paying Agent pursuant to Section 4.5 on such Payment Date;

(viii) the unpaid Note Balance for each Class and Series of Notes and for all Outstanding Notes in the aggregate (before and after giving effect to any principal payments to be made on such Payment Date);

(ix) a statement indicating whether a Borrowing Base Deficiency existed at such time and whether it will exist as of the close of business on such Payment Date after all payments and distributions described in Section 4.5(a);

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(x) any Eligible Securities as of the Determination Date and the unpaid principal balance of the Portfolio; (xi) (A) the aggregate Available Funds collected, separately identifying (1) the aggregate Retained MSR Excess Spread, Retained MSR Excess Spread Collections, the Sold MSR Excess Spread and the Total Collections included therein, and (2) the aggregate amount of proceeds collected during the Collection Period preceding the upcoming Payment Date for all Participation Certificates less any amounts distributed on any Interim Payment Date during such Collection Period; and (B) separately identifying any PMH Repurchase Price, PMC Repurchase Price and any payments under the PC Repo Guaranty; and

(xii) an indication (yes or no) as to whether Servicer is in compliance with the following Fannie Mae servicer eligibility requirements (collectively, the “Fannie Mae Eligibility Requirements”):

(A) its Lender Adjusted Net Worth is equal to or greater than the lender adjusted net worth required by the Fannie Mae Lender Contract;

(B) its Lender Adjusted Net Worth to total assets ratio is equal to or greater than the minimum capital required by the Fannie Mae Lender Contract;

(C) its Liquidity is equal to or greater than the liquidity requirement set forth in the Fannie Mae Lender Contract; and

(D) an indication (yes or no) as to whether a Servicer Termination Event has occurred.

The Payment Date Report shall also state any other information required pursuant to any related Indenture Supplement necessary for the Paying Agent and the Indenture Trustee to make the payments required by Section 4.5(a) and all information necessary for the Indenture Trustee to make available to Noteholders pursuant to Section 3.5.

On each day on which a Payment Date Report is to be delivered, PMC and PMH shall deliver to the Indenture Trustee a certification substantially in the form attached hereto as Exhibit E.

Noteholders of any Series of Term Notes shall receive solely the Payment Date Report and shall not receive the Market Value Report prepared by the MSR Valuation Agent.

(c) Interim Payment Date Reports. By no later than 3:00 p.m. New York City time on each Interim Payment Date on which there is a VFN Outstanding and on which the Full Amortization Periods have not yet begun and on which payments pursuant to clause (iii) with respect to a Class of Notes are being made, the Indenture Trustee shall prepare and deliver to the Issuer, the Co-Issuer, the Calculation Agent, the Administrator, the Co-Issuer Administrator, the Paying Agent, the Administrative Agent and each VFN Noteholder a report (an “Interim Payment Date Report”) in electronic form, setting forth the following for such Interim Payment Date and the Collection Period preceding such Interim Payment Date:

(i) the amount of Available Funds and Required Available Funds for such Interim Payment Date; (ii) the aggregate amount of all Collections received and deposited into the Collection and Funding Account during such Collection Period;

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(iii) the total of all (A) payments in respect of each Class of Notes (separately identifying interest and principal paid on each Class of Variable Funding Notes) made on the Interim Payment Date that occurred during such Collection Period, (B) all Funding Amounts that were paid in respect of any Participation Certificate created or acquired on or after the Cut-off Date and sold by PMC and PMH, as Repo Sellers, to the Issuer Trusts, as Repo Buyers, under the PC Repurchase Agreement during such Collection Period, separately identifying the portion thereof paid from funds on deposit in the Collection and Funding Account and the portion thereof paid using proceeds of an increase in VFN Principal Balance(s) for each Class of VFNs, and (C) all Net Excess Cash Amounts paid to the holders of the Owner Trust Certificates on the Interim Payment Date that occurred during such Collection Period;

(iv) the amount on deposit in the Series Reserve Account for each Series and the Series Reserve Required Amount for such Series Reserve Account, if applicable, and the amount to be deposited into each Series Reserve Account on such Interim Payment Date, if applicable;

(v) the amount on deposit in the Expense Reserve Account for each Series and the Expense Reserve Required Amount for the Expense Reserve Account and the amount to be deposited into the Expense Reserve Account on such Interim Payment Date, if applicable;

(vi) the amounts required to be deposited on such Interim Payment Date into any other Trust Account referenced in any related Indenture Supplement;

(vii) (A) the Collateral Value as of the end of such Collection Period and as of the close of business on such Interim Payment Date for each Outstanding Series of Notes, and (B) a calculation demonstrating whether a Borrowing Base Deficiency exists; and

(viii) any other amounts specified in an Indenture Supplement.

On each day on which an Interim Payment Date Report is to be delivered, PMC and PMH shall deliver to the Indenture Trustee a certification substantially in the form attached hereto as Exhibit E.

(d) No Duty to Verify or Recalculate. Notwithstanding anything contained herein to the contrary, none of the Calculation Agent (except as described in Section 3.1(a)), the Indenture Trustee or the Paying Agent shall have any obligation to verify or recalculate any information provided to them by the Administrator, the Co-Issuer Administrator or any other Person, and may rely on such information in making the allocations and payments to be made pursuant to Article IV. The Indenture Trustee may conclusively rely without investigation on the most recent Determination Date Report provided to the Indenture Trustee by the Administrator and the Co-Issuer Administrator in preparing the Determination Date Reports and Interim Payment Date Reports (if any).

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Section 3.3. Annual Statement as to Compliance; Notice of Default; Reports.

(a) Annual Officer’s Certificates.

(i) The Servicer shall deliver to each Note Rating Agency and the Indenture Trustee, on or before March 31 of each year, beginning on March 31, 2023, an Officer’s Certificate of the Servicer, executed by a Responsible Officer, stating that (A) a review of the activities of the Servicer during the preceding 12-month period ended December 31 and of its performance under this Base Indenture and the PC Repurchase Agreement has been made under the supervision of the officer executing the Officer’s Certificate, and (B) PMC and PMH have fulfilled all their obligations under this Base Indenture and the PC Repurchase Agreement in all material respects throughout such period or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof.

(ii) The Administrator and the Co-Issuer Administrator shall deliver to each Note Rating Agency and the Indenture Trustee, on or before March 31 of each year, beginning on March 31, 2023, an Officer’s Certificate executed by a Responsible Officer of the Administrator and the Co-Issuer Administrator, respectively, stating that (A) a review of the activities of the Issuer, the Co-Issuer, the Administrator and the Co-Issuer Administrator during the preceding 12-month period ended December 31 (or, in the case of the first such statement from the Co-Issuer Administrator, from the date hereof through December 31, 2023) and of its performance under this Base Indenture and the PC Repurchase Agreement has been made under the supervision of the officer executing the Officer’s Certificate, and (B) each of the Administrator and the Co-Issuer Administrator has fulfilled all its obligations under this Base Indenture in all material respects throughout such period or, if there has been a default in the fulfillment of any such obligation, specifying each such default and the nature and status thereof.

(b) Notice of Advance Rate Trigger Event, Early Amortization Event or Event of Default. The Indenture Trustee shall deliver to the Noteholders, the Issuer, the Co-Issuer, the Disposition Manager, Fannie Mae (in connection with an Event of Default only) and each Note Rating Agency, promptly after a Responsible Officer has obtained actual knowledge thereof, but in no event later than five (5) Business Days thereafter or such shorter time period as may be required by any Note Rating Agency, written notice specifying the nature and status of any Advance Rate Trigger Event, Early Amortization Event or any Event of Default, as applicable.

(c) Annual Regulation AB/USAP Report. The Servicer shall, on or before the last Business Day of the fifth month following the end of each of the Servicer’s fiscal years (December 31), beginning with the fiscal year ending on December 31, 2023, deliver to the Indenture Trustee who shall forward to each Noteholder a copy of the results of any Regulation AB required attestation report or Uniform Single Attestation Program for Mortgage Bankers or similar review conducted on the Servicer by its accountants and any other reports reasonably requested by the Administrative Agent, including any notices from Fannie Mae.

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(d) Annual Lien Opinion. Within one hundred (100) days after the end of each fiscal year of each of the Administrator and the Co-Issuer Administrator, the Administrator and the Co-Issuer Administrator shall deliver to the Indenture Trustee an Opinion of Counsel from outside counsel to the effect that, subject to the Acknowledgment Agreement and the Fannie Mae Requirements, (i) the Indenture Trustee has a perfected security interest in the Participation Certificates identified in an exhibit to such opinion, and that, based on a review of UCC search reports (copies of which shall be attached thereto) and review of other certifications and other materials, (x) there are no UCC-1 filings indicating an Adverse Claim with respect to such Participation Certificates that has not been released, (y) either (A) stating that, from the date of the previous annual lien opinion until the date of the opinion for the current fiscal year, in the opinion of such counsel, such action has been taken with respect to the execution and filing of any financing statements and continuation statements as is necessary to maintain the perfected security interest of the Indenture Trustee in the Participation Certificates or (B) stating that in the opinion of such counsel no such action was necessary to maintain such lien and security interest and (z) stating any actions that, in the opinion of such counsel, will need to be taken with respect to the execution and filing of any financing statements and continuation statements in order to maintain the perfected security interest of the Indenture Trustee in the Participation Certificate through April 10 in the following year, and (ii) each of the Issuer Trusts has a perfected security interest in the related Repurchase Assets under the PC Repurchase Agreement, and that, based on a review of UCC search reports (copies of which shall be attached thereto) and review of other certifications and other materials, (x) there are no UCC-1 filings indicating an Adverse Claim with respect to such Repurchase Assets that has not been released, (y) either (A) stating that, from the date of the previous annual lien opinion until the date of the opinion for the current fiscal year, in the opinion of such counsel, such action has been taken with respect to the execution and filing of any financing statements and continuation statements as is necessary to maintain the perfected security interest of the Issuer Trusts in the Repurchase Assets or (B) stating that in the opinion of such counsel no such action was necessary to maintain such lien and security interest and (z) stating any actions that, in the opinion of such counsel, will need to be taken with respect to the execution and filing of any financing statements and continuation statements in order to maintain the perfected security interest of the Issuer Trusts in the Repurchase Assets through April 10 in the following year.

(e) Other Information. In addition, the Administrator and the Co-Issuer Administrator shall forward to the Administrative Agent, upon its reasonable request, such other information, documents, records or reports respecting (i) PMC or any of its respective Affiliates party to the Transaction Documents, (ii) the condition or operations, financial or otherwise, of PMC or any of its respective Affiliates party to the Transaction Documents, (iii) the Fannie Mae Lender Contract, the related Mortgage Loans and the Participation Certificates or (iv) the transactions contemplated by the Transaction Documents, including access to the Servicer’s management and records. The Administrative Agent shall and shall cause its respective representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) or the Administrative Agent may reasonably determine that such disclosure is consistent with its obligations hereunder; provided, however, that the Administrative Agent may disclose on a confidential basis any such information to its agents, attorneys and auditors in connection with the performance of its responsibilities hereunder.

(f) MSR Monthly Report. On a monthly basis and in no event later than the fifteenth (15th) day of each month (or, if such day is not a Business Day, the Business Day following such day), PMC shall deliver to the Indenture Trustee and the MSR Valuation Agent the monthly data file with respect to all Mortgage Loans (the “MSR Monthly Report”) subject to the terms and conditions of this Base Indenture, which shall include all updates to the Mortgage Loans as of the last day of the immediately preceding month.

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(g) Market Value Report. The MSR Valuation Agent shall calculate the fair market value and the valuation percentage of the MSRs, the Portfolio Excess Spread and the Base Servicing Fee on each Borrowing Base Determination Date in accordance with the MSR Valuation Agent Agreement. The MSR Valuation Agent shall deliver to the Indenture Trustee, the Servicer, the Administrator, the Co-Issuer Administrator, the Administrative Agent and the Disposition Manager, a monthly report (the “Market Value Report”) no later than the Determination Date prior to the related Payment Date, stating (i) the fair market value and the valuation percentage of the MSRs, the Portfolio Excess Spread and the Base Servicing Fee as of the related Borrowing Base Determination Date, and (ii) the fair market value and the valuation percentage of the MSRs, which assumes that the 10-year U.S. Treasury rate (mid-mark) declines or increases by more than 0.375% from the 10-year U.S. Treasury rate (mid-mark) as of the most recent Borrowing Base Determination Date (as determined by the MSR Valuation Agent).

(h) In the event that the MSR Valuation Agent does not provide its Market Value Report by the Determination Date for two (2) consecutive months, PMC shall be required to terminate the MSR Valuation Agent and appoint a replacement MSR Valuation Agent who shall be (i) an eligible MSR Valuation Agent and (ii) required to deliver a Market Value Report no later than the tenth (10th) day of the month immediately following appointment of the replacement MSR Valuation Agent.

(i) MSR Valuation Agent. PMC shall have the right to remove and replace the MSR Valuation Agent without cause with prior written consent of the Administrative Agent.

(j) Disposition Manager. The Disposition Manager will have the duties specifically set forth in the Disposition Management Agreement, including a requirement to assist in the engagement of an appropriate third party broker and coordinate the sale of the MSRs in accordance with the rights and responsibilities of the Indenture Trustee as secured party under the Acknowledgment Agreement. Prior to the occurrence and continuation of an Event of Default, subject to payment of applicable termination fees, PMC shall have the right to remove and replace the Disposition Manager without cause with prior written consent of the Administrative Agent and Fannie Mae. The Disposition Manager shall have the right to resign under the circumstances described in the Disposition Management Agreement. No resignation or removal of the Disposition Manager and no appointment of a successor Disposition Manager will become effective until the acceptance of appointment by a successor Disposition Manager. Pursuant to the Disposition Management Agreement, if no successor Disposition Manager shall have been appointed and shall have accepted appointment within sixty (60) days after the giving of a notice of resignation, the resigning Disposition Manager may petition any court of competent jurisdiction for the appointment of a successor Disposition Manager, and the costs of the Disposition Manager in connection with such petition shall be reimbursable in accordance with the Disposition Management Agreement. Notwithstanding anything in this Base Indenture to the contrary, in the event of any conflict between this Base Indenture (or any provision of this Base Indenture) and the Disposition Management Agreement, the terms of the Disposition Management Agreement shall prevail.

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Section 3.4. Access to Certain Documentation and Information.

(a) Access to Information. Notwithstanding anything to the contrary contained in this Section 3.4, Section 2.3, or in any other Section hereof, the Servicer, on reasonable prior written notice (of not less than five (5) Business Days), shall permit the Administrative Agent, the Indenture Trustee, the MSR Valuation Agent or any agent or independent certified public accountants selected by the Indenture Trustee, during the Servicer’s normal business hours, and in a manner that does not unreasonably interfere with the Servicer’s conduct of its regular business, to examine all the books of account, records, reports and other papers of the Servicer relating to the Portfolio Mortgage Loans, Fannie Mae Lender Contract and the Participation Certificates, to make copies and extracts therefrom, and to discuss the Servicer’s affairs, finances and accounts relating to the Portfolio Mortgage Loans, Fannie Mae Lender Contract and the Participation Certificates with the Servicer’s officers and employees, all at such times and as often as reasonably may be requested; provided that any such Person seeking access to any information or documentation pursuant to this Section 3.4(a) has agreed with the Servicer to be bound by any confidentiality provisions reasonably requested by the Servicer and shall upon request execute and deliver a separate confidentiality agreement memorializing such provisions. Unless an Event of Default that has not been waived in accordance with the terms hereof shall have occurred, any out-of-pocket costs and expenses incident to the exercise by the Indenture Trustee or any Noteholder of any right under this Section 3.4 shall be borne by the requesting Noteholder(s). The parties hereto acknowledge that the Indenture Trustee shall not exercise any right pursuant to this Section 3.4 prior to any event set forth in the preceding sentence unless directed to do so by a group of Interested Noteholders, and the Indenture Trustee has been provided with indemnity satisfactory to it by such Interested Noteholders. The Indenture Trustee shall have no liability for action or inaction in accordance with the preceding sentence.

In the event that such rights are exercised following the occurrence of an Event of Default that has not been waived in accordance with the terms hereof and is continuing, all reasonable and customary out-of-pocket costs and expenses actually incurred by the Indenture Trustee shall be borne by PMC. Prior to any such payment, PMC shall be provided with commercially reasonable documentation of such costs and expenses. Notwithstanding anything contained in this Section 3.4 to the contrary, in no event shall the books of account, records, reports and other papers of PMC or the Issuer Trusts relating to the Portfolio Mortgage Loans and the Participation Certificates be examined by independent certified public accountants at the direction of the Indenture Trustee or any Interested Noteholder pursuant to the exercise of any right under this Section 3.4 more than one time during any 12-month period at the expense of the Administrator and the Co-Issuer Administrator, unless an Event of Default has occurred that has not been waived in accordance with the terms hereof during such twelve-month period, in which case more than one examination may be conducted during a twelve-month period, but such extra audits shall be at the sole expense of the Noteholder(s) requesting such audit(s).

(b) Access to Issuer. Each of the Issuer Trusts agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee (at the written direction of the Majority Noteholders), the MSR Valuation Agent or the Administrative Agent at the expense of the Administrator and the Co-Issuer Administrator no more than one time during any 12-month period (unless an Event of Default has occurred that has not been waived in accordance with the terms hereof during such twelve-month period, in which case more than one examination may be

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conducted during a twelve-month period, but such extra audits shall be at the sole expense of the party requesting such audit(s)), to examine all of its books of account, records, reports, and other papers, to make copies and extracts therefrom, to cause such books to be audited by independent certified public accountants, and to discuss its affairs, finances and accounts its officers, employees, and independent certified public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee, the MSR Valuation Agent and the Administrative Agent shall and shall cause their respective representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) or the Indenture Trustee, the MSR Valuation Agent or the Administrative Agent, as applicable, may reasonably determine that such disclosure is consistent with its obligations hereunder; provided, however, that the Indenture Trustee may disclose on a confidential basis any such information to its agents, attorneys and auditors in connection with the performance of its responsibilities hereunder. Without limiting the generality of the foregoing, neither the Indenture Trustee, the MSR Valuation Agent or the Administrative Agent shall disclose information to any of its Affiliates or any of their respective directors, officers, employees and agents, that may provide any servicer advance financing to PMC, PMH, the Issuer, the Co-Issuer or any of their Affiliates, except in such Affiliate’s capacity as Noteholder.

Section 3.5. Indenture Trustee to Make Reports Available.

(a) Monthly Reports on Indenture Trustee’s Website. Notwithstanding any other provision of this Base Indenture that requires Citibank, in any capacity, to deliver or provide to any Person the Payment Date Report (and, at its option, any additional files containing the same information in an alternative format), Citibank, in any capacity, shall be entitled, in lieu of such delivery, to make such report available each month to any interested parties, including Fannie Mae, via the Indenture Trustee’s internet website and such other information as the Indenture Trustee may have in its possession, but only with the use of a password provided by the Indenture Trustee. In connection with providing access to the Indenture Trustee’s internet website, the Indenture Trustee may require registration and the acceptance of a disclaimer. The Indenture Trustee’s internet website shall initially be located at www.sf.citidirect.com. Assistance in using the Indenture Trustee’s website can be obtained by calling the Indenture Trustee’s investor relations desk at 1-888-855-9695. Parties that are unable to use the above distribution option are entitled to have a paper copy mailed to them via first class mail or by overnight courier by calling the investor relations desk and requesting a copy. The Indenture Trustee shall have the right to change the way the Payment Date Reports are distributed in order to make such distribution more convenient and/or more accessible to the above parties and the Indenture Trustee shall provide timely and adequate notification to all above parties regarding any such changes. The Indenture Trustee shall not be required to make available via its website any information that in its judgment is confidential, may include any Nonpublic Personal Information or could otherwise violate applicable law, or could result in personal liability to the Indenture Trustee. In addition, the Indenture Trustee shall have no liability for the failure to include or post any information that it has not actually received or is not in a form or format that will allow it to post any such information on its website.

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(b) Notwithstanding any provision herein to the contrary, including Sections 3.1, 3.2 and 3.5 hereof, the Indenture Trustee, the Administrative Agent and any other party hereto shall not deliver, or make available, the Market Value Information to any Noteholder of any Series of Term Notes prior to the occurrence, or following the cure or waiver, of an Event of Default; and prior to the occurrence, or during the continuation, of an Event of Default, any Determination Date Report, Interim Payment Date Report, Payment Date Report made available to any Noteholders of Outstanding Series of Term Notes by Citibank, in any capacity, pursuant to this Section 3.5 or otherwise hereunder shall be redacted to remove any Market Value Information prior to being made so available.

(c) Annual Reports. Within sixty (60) days after the end of each year, the Indenture Trustee shall furnish to each Person (upon the written request of such Person), who at any time during the year was a Noteholder a statement containing (i) information regarding payments of principal, interest and other amounts on such Person’s Notes, aggregated for such year or the applicable portion thereof during which such person was a Noteholder and (ii) such other customary information as may be deemed necessary or desirable for Noteholders to prepare their tax returns. Such obligation shall be deemed to have been satisfied to the extent that substantially comparable information is provided pursuant to any requirements of the Code as are from time to time in force. The Indenture Trustee shall prepare and provide to the Internal Revenue Service and to each Noteholder any information reports required to be provided under federal income tax law, including IRS Form 1099.

Article IV

The Trust Accounts; Payments

Section 4.1. Trust Accounts. The Indenture Trustee shall establish and maintain, or cause to be established and maintained, (i) the Trust Accounts (other than the Expense Reserve Account), each of which shall be an Eligible Account, for the benefit of the Secured Parties, and (ii) an Expense Reserve Account, which shall be an Eligible Account, for the benefit of the Indenture Trustee and the MSR Valuation Agent. The accounts established pursuant to this Section 4.1 are established in the name of the Issuer, and the Issuer shall manage and administer such accounts in accordance with the terms of this Base Indenture as agent on behalf of itself and Co-Issuer. All amounts held in the Trust Accounts shall, to the extent permitted by this Base Indenture and applicable laws, rules and regulations, be invested in Permitted Investments by the depository institution or trust company then maintaining such Trust Account only upon written direction of the Administrator and the Co-Issuer Administrator to the Indenture Trustee; provided, however, that in the event the Administrator and the Co-Issuer Administrator fail to provide such written direction to the Indenture Trustee, and until the Administrator and the Co-Issuer Administrator provide such written direction, the Indenture Trustee shall not invest funds on deposit in any Trust Account. Funds deposited into a Trust Account on a Business Day after 1:30 p.m. New York City time will not be invested until the following Business Day. Investments held in Permitted Investments in the Trust Accounts shall not be sold or disposed of prior to their maturity (unless an Event of Default has occurred). Earnings on investment of funds in any Trust Account shall be remitted by the Indenture Trustee upon the Administrator’s and the Co-Issuer Administrator’s request to the account or other location of the Administrator’s and the Co-Issuer Administrator’s designation on the first (1st) Business Day of the month following the month in which such earnings on investment of funds is received. Any losses and investment expenses relating to any investment of funds in any Trust Account shall be for the account of the Administrator and the Co-Issuer Administrator, which shall deposit or cause to be deposited the amount of such loss (to the extent not offset by income from other investments of funds in the related Trust Account) in the related Trust Account promptly upon the realization of such loss.

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The taxpayer identification number associated with each of the Trust Accounts shall be that of the Issuer, and the Issuer shall report for federal, state and local income tax purposes the respective portions of the income attributable to each Issuer Trust, if any, earned on funds in the relevant Trust Account. Each of the Administrator and the Co-Issuer Administrator hereby acknowledges that all amounts on deposit in each Trust Account (excluding investment earnings on deposit in the Trust Accounts) are held in trust by the Indenture Trustee for the benefit of the Secured Parties, subject to any express rights of the Issuer Trusts set forth herein, and shall remain at all times during the term of this Base Indenture under the sole dominion and control of the Indenture Trustee.

So long as the Indenture Trustee complies with the provisions of this Section 4.1, the Indenture Trustee shall not be liable for the selection of investments or for investment losses incurred thereon by reason of investment performance, liquidation prior to stated maturity or otherwise in any Trust Account. The Indenture Trustee shall have no liability in respect of losses incurred in any Trust Account as a result of the liquidation of any investment prior to its stated maturity or the failure to be provided with timely written investment direction.

In order to comply with the laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions, including those relating to the funding of terrorist activities and money laundering, including Section 326 of the USA Patriot Act of the United States (“Applicable Law”), the Indenture Trustee is required to obtain, verify, record and update certain information relating to individuals and entities which maintain a business relationship with the Indenture Trustee. Accordingly, each of the parties agrees to provide to the Indenture Trustee upon its request from time to time such identifying information and documentation as may be available for such party in order to enable the Indenture Trustee to comply with Applicable Law.

All parties to this Base Indenture agree, and each Noteholder of each Series by its acceptance of the related Note will be deemed to have agreed, that such Noteholder shall have no claim or interest in the amounts on deposit in any Trust Account created under this Base Indenture or any related Indenture Supplement related to an unrelated Series except as expressly provided herein or therein.

The Indenture Trustee or its Affiliates are permitted to receive additional compensation that could be deemed to be for the Indenture Trustee’s economic self-interest for (a) serving as investment adviser, administrator, shareholder, servicing agent with respect to certain of the Permitted Investments, (b) using Affiliates to effect transactions in certain Permitted Investments and (c) effecting transactions in certain Permitted Investments. Such compensation is not payable or reimbursable under this Base Indenture.

The State of New York is the Securities Intermediary’s jurisdiction for purposes of the UCC, and the laws of the State of New York are applicable to all issues specified in Article 2(1) of the Hague Securities Convention. This Base Indenture is the only “account agreement” in respect of the Trust Accounts.

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Section 4.2. Collections and Disbursements of Portfolio Collections by Servicer.

(a) Daily Deposits of Portfolio Amounts. The Servicer shall remit all Portfolio Collections in accordance with the respective Participation Certificates, Participation Agreements and the PC Repurchase Agreement. Any amounts that shall be remitted to the Issuer Trusts shall be remitted directly to the Collection and Funding Account.

(b) Payment Dates. On each Payment Date, the Indenture Trustee shall transfer from the Collection and Funding Account to the Note Payment Account all funds then on deposit therein. Except in the case of Redemption Amounts, which may be remitted by the Issuer Trusts directly to the Note Payment Account, none of the Servicer, the Administrator, the Co-Issuer Administrator, the Issuer, the Co-Issuer, the Calculation Agent nor the Indenture Trustee shall remit to the Note Payment Account, and each shall take all reasonable actions to prevent other Persons from remitting to the Note Payment Account, amounts which do not constitute payments, collections or recoveries received, made or realized in respect of the Participation Certificates or the other Collateral or the initial cash, if any, deposited by the Noteholders with the Indenture Trustee on the date hereof, and the Indenture Trustee will return to the Issuer, the Co-Issuer or the Servicer any such amounts upon receiving written evidence reasonably satisfactory to the Indenture Trustee that such amounts are not a part of the Trust Estate.

Section 4.3. Fundings.

(a) Funding Certifications. By no later than 1:00 p.m. New York City time on the Business Day prior to each Funding Date (or such other time as may be agreed to from time to time by the Administrator, the Co-Issuer Administrator, the Indenture Trustee and the Administrative Agent), the Administrator and the Co-Issuer Administrator shall prepare and deliver to the Issuer, the Co-Issuer, the Indenture Trustee, the Calculation Agent and the Administrative Agent (and, on any Interim Payment Date, each applicable VFN Noteholder) a certification (each, a “Funding Certification”) containing a list of each Funding Condition and presenting a “yes” or “no” answer beside each indicating whether such Funding Condition has been satisfied and shall state in writing the amount to be funded on that Funding Date.

(b) VFN Draws, Discretionary Paydowns and Permanent Reductions. With respect to each VFN:

(i) From time to time, the Collateral Value may increase due to (i) the addition of Mortgage Loans to the Retained MSR Portfolio or the Sold MSR Portfolio, as applicable, or (ii) increases in the value of the MSRs that underlie the Retained MSR Portfolio and the Sold MSR Portfolio. By no later than 1:00 p.m. New York City time on the Business Day prior to any Payment Date or Interim Payment Date during the Revolving Period for such VFN on which any applicable Class of Variable Funding Notes is Outstanding, the Administrator, on behalf of the Issuer, and the Co-Issuer Administrator, on behalf of the Co-Issuer, may deliver, or cause to be delivered, to each Noteholder of such Variable Funding Notes and to the Indenture Trustee a Funding Certification and a report (a “VFN Note Balance Adjustment Request”) for such upcoming Funding Date, requesting such Noteholders to fund a VFN Principal Balance increase on any Class or Classes of VFNs in the amount(s) specified in such request, which request shall instruct the Indenture Trustee to recognize an increase in the related VFN Principal Balance, but not in excess of the lesser of (x) the related Maximum VFN Principal Balance or (y) the greatest amount that would not cause a Borrowing Base Deficiency.

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The VFN Note Balance Adjustment Request shall also state the amount, if any, of any principal payment to be made on each Outstanding Class of VFNs on the upcoming Interim Payment Date or Payment Date. The amount to be funded shall be based on the change in Collateral Value from the most recent Interim Payment Date or Payment Date.

(ii) If the related Funding Certification indicates that all Funding Conditions have been met, and the Administrative Agent agrees, in its sole discretion, the applicable VFN Funding Sources shall fund the VFN Principal Balance increase by remitting pro rata (based on each such VFN Funding Source’s percentage of the Maximum VFN Principal Balance) the amount stated in the request to the Indenture Trustee by 12:00 p.m. (noon) New York City time on the related Funding Date, whereupon the Indenture Trustee shall adjust its records to reflect the increase of the VFN Principal Balance (which increase shall be the aggregate of the amounts received by the Indenture Trustee from the applicable VFN Funding Sources) by the later of (i) 2:00 p.m. New York City time on such Funding Date, or (ii) two hours after the receipt by the Indenture Trustee of such funds from the VFN Funding Sources, so long as, after such increase, no Borrowing Base Deficiency will exist, determined based on the VFN Note Balance Adjustment Request and Determination Date Report. The Indenture Trustee shall be entitled to rely conclusively on any VFN Note Balance Adjustment Request and the related Determination Date Report and Funding Certification. The Indenture Trustee shall make available on a password-protected portion of its website to the Issuer Trusts or their respective designee and each applicable VFN Funding Source and any related VFN Noteholder, notice on such Funding Date as reasonably requested by either or both of the Issuer Trusts of any increase in the VFN Principal Balance. The Indenture Trustee shall apply and remit any such payment by the VFN Funding Sources toward the payment of the related Funding Amounts as described in Section 4.3(c). If on any Funding Date there is more than one Series with Outstanding Variable Funding Notes, VFN Draws on such Funding Date shall be made on a pro rata basis among all applicable Outstanding Series of VFNs in their Revolving Periods based on their respective available Borrowing Capacities, unless otherwise provided in the related Indenture Supplement and any applicable Note Purchase Agreement. If any VFN Funding Source does not fund its share of a requested VFN Draw, one or more other VFN Funding Sources may fund all or a portion of such draw, but no other VFN Funding Source shall have any obligation to do so. Draws on VFNs of different Classes within the same Series need not be drawn pro rata relative to each other.

(c) Payment of Funding Amounts.

(i) Subject to its receipt of a duly executed Funding Certification from the Administrator and the Co-Issuer Administrator pursuant to Section 4.3(a) stating that all Funding Conditions have been satisfied, and approval by the Administrative Agent in its sole discretion, the Indenture Trustee shall remit to the Issuer Trusts (or their designee), by the close of business New York City time on each Funding Date, the amount of the aggregate Funding Amount on such Funding Date without causing the related VFN Principal Balance to exceed either (I) the related Maximum VFN Principal Balance or (II) the amount that would cause a Borrowing Base Deficiency.

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(ii) Subject to its receipt of a duly executed Funding Certification from the Administrator and the Co-Issuer Administrator pursuant to Section 4.3(a) indicating that all Funding Conditions have been satisfied, the Indenture Trustee shall remit to the Issuer Trusts (or their designees) by the close of business on each Interim Payment Date or Payment Date occurring at any time when not all Outstanding Notes are in Full Amortization Periods, the amount of the aggregate Funding Amount to be funded on such Interim Payment Date or Payment Date, using any amounts funded by VFN Funding Sources in respect of such Funding Amount as described in Section 4.3(b).

(d) To the extent the Issuance Date for any Series of Term Notes occurs on a Business Day other than a Payment Date or an Interim Payment Date, the Indenture Trustee shall pay the proceeds of any such issuance in accordance with the flows of funds provided to the Indenture Trustee at the joint written direction of the Administrator, the Co-Issuer Administrator and the Administrative Agent, with the consent of each VFN Noteholder, so long as the Administrator, the Co-Issuer Administrator and the Administrative Agent confirm in such direction (x) that the specified flow of funds is correct; (y) whether there will be an Additional Note Payment made or deemed to have been made in connection with the issuance of such Series, and after giving effect to such payment, if any, the amount of VFN Principal Balance; and (z) that after giving effect to the payment of amounts in accordance with the specified flow of funds and the reduction of the VFN Principal Balance, if any, no Borrowing Base Deficiency will exist. No consent or instruction of any Noteholder of any Series of Term Notes shall be required in connection with payment amounts in accordance such joint written direction for any Series of Term Notes.

Section 4.4. Interim Payment Dates. (a) On each Interim Payment Date, the Indenture Trustee shall allocate and pay or deposit (as specified below) all Available Funds held in the Collection and Funding Account as set forth below, in the following order of priority and in the amounts set forth in the Interim Payment Date Report for such Interim Payment Date:

(i) pro rata, to (A) to the extent required pursuant to the related Indenture Supplement, the Series Reserve Account for each Series, the amount required to be deposited therein so that, after giving effect to such deposit, the amount on deposit in such Series Reserve Account shall be equal to the related Series Reserve Required Amount, and (B) to the Expense Reserve Account, the amount required to be deposited therein so that, after giving effect to such deposit, the amount on deposit in the Expense Reserve Account shall be equal to the related Expense Reserve Required Amount;

(ii) to be retained in the Collection and Funding Account, the Required Available Funds;

(iii) at the direction of the Administrator and the Co-Issuer Administrator, (A) to pay down the VFN Principal Balance of each Outstanding Class of VFNs pro rata, based on their respective Note Balances, to remove any Borrowing Base Deficiency on an Interim Payment Date that is an Interim Borrowing Base Payment Date and/or such other amount as may be designated by the Administrator and the Co-Issuer Administrator or (B) to reserve cash in the Collection and Funding Account; and

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(iv) any Net Excess Cash Amount or Eligible Securities, at the written direction of the Administrator and the Co-Issuer Administrator, to the holders of the Owner Trust Certificates, it being understood that no such Net Excess Cash Amounts may be paid to the holders of the Owner Trust Certificates under this clause (iv) if, after the payment of such cash amounts, such payment would result in a Borrowing Base Deficiency; provided, that amounts due and owing to the Owner Trustee or the Indenture Trustee and not previously paid hereunder or under any other Transaction Document shall be paid prior to such payment.

(b) To the extent provided in the related Indenture Supplement, during the Revolving Period, on each Interim Payment Date, with the prior written consent of the Administrative Agent (such consent not to be unreasonably withheld), the holders of the Owner Trust Certificates may make Additional Note Payments to a Noteholder of a Series or Class of VFNs. Such Additional Note Payments shall be applied to pay down the VFN Principal Balance of each Outstanding Class of VFNs pro rata, based on their respective Note Balances, such amount as may be designated by the Administrator and the Co-Issuer Administrator.

Section 4.5. Payment Dates. (a) On each Payment Date, the Indenture Trustee shall transfer all funds on deposit in the Collection and Funding Account for such Payment Date to the Note Payment Account. On each Payment Date, the Paying Agent shall apply such Available Funds, VFN Series Available Funds or Term Note Series Available Funds, as applicable (and other amounts as specifically noted in clause (a)(1)(iv) below), in the following order of priority and in the amounts set forth in the Payment Date Report for such Payment Date:

(1) Prior to commencement of the Full Amortization Period, the Available Funds shall be allocated in the following order of priority:

(i) to the Indenture Trustee (in all its capacities), the Indenture Trustee Fee, to the Owner Trustee and the Owner Trustee Fee plus, (subject, in the case of expenses and indemnification amounts, to the applicable Expense Limit) all reasonable out-of-pocket expenses and indemnification amounts owed to the Indenture Trustee (in all capacities) and the Owner Trustee (in all capacities) on such Payment Date;

(ii) to each Person (other than the Indenture Trustee or the Owner Trustee) entitled to receive Fees on such date, the Fees payable to any such Person with respect to the related Collection Period or Interest Accrual Period, plus (subject, in the case of expenses and indemnification amounts, to the applicable Expense Limit, and allocated pro rata based on the amounts due to each such Person) all reasonable out-of-pocket expenses and indemnification amounts owed for Administrative Expenses of the Issuer Trusts, pursuant to the Transaction Documents or owed or payable by the Indenture Trustee, in its capacity as such, to Fannie Mae or any other Person pursuant to the Transaction Documents with respect to expenses, indemnification amounts, and other amounts to the extent such expenses, indemnification amounts and other amounts have been invoiced or noticed to the Administrator, the Co-Issuer Administrator and the Indenture Trustee, and thereafter from other Available Funds, if necessary;

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(iii) to the Noteholders of each Series of Notes, pro rata based on their respective interest entitlement amounts, the Interest Payment Amount (for all Series) and the Step-Up Fee (for all Series, if any) for the current Payment Date, for each such Series; provided that if the amount of Available Funds on deposit in the Collection and Funding Account on such day is insufficient to pay all amounts in respect of any Series pursuant to this clause (iii), the Indenture Trustee shall withdraw from the Series Reserve Account for such Series an amount equal to the lesser of the amount then on deposit in such Series Reserve Account and the amount of such shortfall for disbursement to the Noteholders of such Series in reduction of such shortfall, with all such amounts paid to a Series under this clause (iii) allocated among the Classes of such Series as provided in the related Indenture Supplement;

(iv) pro rata, to (A) the Series Reserve Account for each Series, any amount required to be deposited therein so that, after giving effect to such deposit, the amount on deposit in such Series Reserve Account on such day equals the related Series Reserve Required Amount, if applicable, and (B) the Expense Reserve Account, any amount required to be deposited therein so that, after giving effect to such deposit, the amount on deposit in the Expense Reserve Account on such day equals the Expense Reserve Required Amount;

(v) the Early Amortization Event Payment Amount to be paid on such Payment Date on each Class of Outstanding Notes that is in its Early Amortization Period, if applicable;

(vi) to the Noteholders of each Series of Term Notes, pro rata, the Scheduled Principal Payment Amount;

(vii) to the extent necessary to avoid any Borrowing Base Deficiency, at the direction of the Administrator and the Co-Issuer Administrator, either (1) to pay down the respective VFN Principal Balances of each Outstanding Class of VFNs, until the earlier of the removal of any Borrowing Base Deficiency with respect to each Outstanding Class of VFNs or reduction of all VFN Principal Balances to zero, paid pro rata among each VFN Class based on their respective Note Balances, or (2) to reserve cash in the Collection and Funding Account;

(viii) pro rata, based on their respective invoiced or reimbursable amounts and without regard to the applicable Expense Limit, (A) to the Indenture Trustee (in all its capacities) and the Owner Trustee (in all capacities) for any amounts payable to the Indenture Trustee and the Owner Trustee pursuant to this Base Indenture or the Trust Agreements, as applicable, to the extent not paid under clause (i) above, (B) to the MSR Valuation Agent for any amounts payable to the MSR Valuation Agent pursuant to this Base Indenture to the extent not paid under clause (ii) above, (C) to the Securities Intermediary for any indemnification amounts owed to the Securities Intermediary as described in Section 4.9; (D) all Administrative Expenses of the Issuer Trusts not paid

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under clause (ii) above; or (E) any other amounts payable pursuant to this Base Indenture or any other Transaction Document and not paid under clause (ii) above;

(ix) if and to the extent so directed in writing by the Administrator on behalf of the Issuer and the Co-Issuer Administrator on behalf of the Co-Issuer, to the Noteholders of each Class of VFNs, an amount to be applied to pay down the respective VFN Principal Balances equal to the lesser of (A) the amount specified by the Administrator and the Co-Issuer Administrator and (B) the amount necessary to reduce the VFN Principal Balances to zero, paid pro rata among each VFN Class based on their respective Note Balances; and

(x) any Net Excess Cash Amount or Eligible Securities at the direction of the Administrator and the Co-Issuer Administrator, to the holders of the Owner Trust Certificates, to the extent that following any such payment, there would not be a Borrowing Base Deficiency; provided that amounts due and owing to the Owner Trustee or the Indenture Trustee and not previously paid hereunder or under any other Transaction Document shall be paid prior to such payment.

(2) On and after the commencement of the Full Amortization Period, all Available Funds for each Series shall be allocated in the following order of priority:

(i) to the Indenture Trustee (in all its capacities), the Indenture Trustee Fee, to the Owner Trustee, the Owner Trustee Fee, and to the Disposition Manager, the Disposition Manager Fee payable on such Payment Date, plus (without regard, in the case of expenses and indemnification amounts, to the applicable Expense Limit) all reasonable out-of-pocket expenses and indemnification amounts owed to the Indenture Trustee (in all capacities), the Owner Trustee (in all capacities) and the Disposition Manager on such Payment Date, with respect to expenses and indemnification amounts to the extent such expenses and indemnification amounts have been invoiced or noticed to the Administrator and the Co-Issuer Administrator; provided that if the amount of Available Funds is not sufficient to pay the full amounts owed to the Indenture Trustee pursuant to this clause (i), the Indenture Trustee shall withdraw from the Expense Reserve Account an amount equal to the lesser of the amount then on deposit in the Expense Reserve Account and the amount of such shortfall for disbursement to the Indenture Trustee in reduction of such shortfall;

(ii) to each Person (other than the Indenture Trustee, the Owner Trustee or the Disposition Manager) entitled to receive Fees on such date, the Fees payable to any such Person with respect to the related Collection Period or Interest Accrual Period, as applicable, plus (subject, in the case of expenses and indemnification amounts, to the applicable Expense Limit and allocated pro rata based on the amounts due to each such Person) all reasonable out-of-pocket expenses and indemnification amounts owed for Administrative Expenses of the Issuer Trusts with respect to expenses, indemnification amounts and other amounts to the extent such expenses, indemnification amounts and other amounts have been invoiced or noticed to the Administrator, the Co-Issuer Administrator and the Indenture Trustee;

(iii) thereafter, the VFN Series Available Funds or the Term Note Series Available Funds, as applicable, for each Outstanding Series shall be allocated in the following order of priority (or in such other order of priority as specified in the related Indenture Supplement):

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(A) to pay any costs, reasonable out-of-pocket expenses and indemnification amounts owed with respect to any Hedging Instruments for such Series;

(B) to the Noteholders of the related Series of Notes, (a) the related Cumulative Interest Shortfall Amounts attributable to unpaid Interest Amounts (for all Series) from prior Payment Dates, and (b) the Interest Amounts (for all Series) for the current Payment Date, for each such Class; provided that if the amount of related VFN Series Available Funds or Term Note Series Available Funds, as applicable, is insufficient for any Class pursuant to this clause (iii)(B), the Indenture Trustee shall withdraw from the Series Reserve Account for such Class an amount equal to the lesser of the amount then on deposit in such Series Reserve Account and the amount of such shortfall for disbursement to the Noteholders of such Class in reduction of such shortfall, with all such amounts paid to a Series under this clause (iii)(B) allocated among the Classes of such Series as provided in the related Indenture Supplement;

(C) to the Noteholders of the related Series of Notes, remaining VFN Series Available Funds or Term Note Series Available Funds, as applicable, up to the aggregate unpaid Note Balances to reduce Note Balances in the order specified in the related Indenture Supplement, until all such Note Balances have been reduced to zero;

(D) to the Noteholders of the related Series of Notes, remaining Series Available Funds up to the Default Supplemental Fee and the Step-Up Fee for the current Payment Date and related shortfalls, for each such Class in the order specified in the related Indenture Supplement; and

(E) to other Series in accordance with the applicable priority of payments for such Series, to the extent the VFN Series Available Funds or the Term Note Series Available Funds, as applicable, for such other Series were insufficient to make such payments, allocated among such other Series pro rata based on the amounts of their respective shortfalls;

(iv) out of all remaining VFN Series Available Funds and Term Note Series Available Funds for all Series, pro rata, based on their respective invoiced or reimbursable amounts and without regard to the applicable Expense Limit, (A) to the MSR Valuation Agent for any amounts payable to the MSR Valuation Agent pursuant to this Base Indenture to the extent not paid under clause (ii) above, (B) to the Securities Intermediary for any indemnification amounts owed to the Securities Intermediary as described in Section 4.9, and (C) all Administrative Expenses of the Issuer Trusts not paid under clause (ii) above; provided that if the amount of related VFN Series Available Funds or Term Note Series Available Funds, as applicable, is not sufficient to pay the full amounts owed to the MSR Valuation Agent pursuant to subclause (A) of this clause (iv), the Indenture Trustee shall withdraw from the Expense Reserve Account an amount equal to the lesser of the amount then on deposit in the Expense Reserve Account and the amount of such shortfall for disbursement to the MSR Valuation Agent in reduction of such shortfall;

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(v) out of all remaining VFN Series Available Funds and Term Note Series Available Funds for all Series, to pay any other amounts required to be paid before Net Excess Cash Amounts pursuant to one or more Indenture Supplements; and

(vi) out of all remaining VFN Series Available Funds and Term Note Series Available Funds for all Series, any Net Excess Cash Amount, at the written direction of the Administrator and the Co-Issuer Administrator, to the holders of the Owner Trust Certificates.

The amounts payable under clause (i) or (ii) of Section 4.5(a)(2) above shall be paid out of each Series’ VFN Series Available Funds or Term Note Series Available Funds, as applicable, based on such Series’ Series Allocation Percentage of such amounts payable on such Payment Date. If, on any Payment Date, the VFN Series Available Funds or Term Note Series Available Funds, as applicable, for any Series is less than the amount payable under clauses (i) and (ii) above out of such Series’ VFN Series Available Funds or Term Note Series Available Funds, as applicable (any such difference, a “Shortfall Amount”), the amount of such Shortfall Amount shall be paid out of the VFN Series Available Funds or Term Note Series Available Funds, as applicable, for each Series that does not have a Shortfall Amount, in each case, based on such Series’ relative Series Invested Amount.

(b) On each Payment Date, the Indenture Trustee shall instruct the Paying Agent to pay to, or as directed by, each Noteholder of record on the related Record Date the amount to be paid to such Noteholder in respect of the related Note on such Payment Date by wire transfer if appropriate instructions are provided to the Indenture Trustee in writing no later than five (5) Business Days prior to the related Record Date.

(c) Notwithstanding anything to the contrary in this Base Indenture, the Indenture Supplement providing for the issuance of any Series of Notes within which there are one or more Classes of Notes may specify the allocation of payments among such Classes payable pursuant to Section 4.5 hereof, providing for the subordination of such payments on the subordinated Series or Class, and any such provision in such an Indenture Supplement shall have the same effect as if set forth in this Base Indenture and any related Indenture Supplement, all to the extent an Issuer Trusts’ Tax Opinion is delivered as to such Series at its issuance.

(d) On each Payment Date, the Indenture Trustee shall make available, in the same manner as described in Section 3.5, a report stating all amounts paid to the Indenture Trustee (in all its capacities) or Citibank (in all its capacities) pursuant to this Section 4.5 on such Payment Date.

(e) To the extent provided in the related Indenture Supplement, during the Revolving Period, on each Payment Date, and with the prior written consent of the Administrative Agent, the holders of the Owner Trust Certificates may make Additional Note Payments to a Noteholder of a Series or Class of VFNs. Such Additional Note Payments shall be applied to pay down the VFN Principal Balance of each Outstanding Class of VFNs pro rata, based on their respective Note Balances, such amount as may be designated by the Administrator and the Co-Issuer Administrator.

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Section 4.6. Series Reserve Account; Expense Reserve Account.

(a) Series Reserve Account.

(i) Pursuant to Section 4.1, the Indenture Trustee shall establish and maintain a Series Reserve Account or Trust Accounts for each Series, each of which shall be an Eligible Account, for the benefit of the Secured Parties of such Series. If any such account loses its status as an Eligible Account, the funds in such account shall be moved to an account that qualifies as an Eligible Account within thirty (30) days. On or prior to the Issuance Date for each Series, the Issuer Trusts shall cause an amount equal to the related Series Reserve Required Amount(s), if applicable, to be deposited into the related Series Reserve Account(s). Thereafter, on each Payment Date and Interim Payment Date, the Indenture Trustee shall withdraw Available Funds from the Note Payment Account and deposit them into each such Series Reserve Account pursuant to, and to the extent required by, Section 4.5(a) and the related Indenture Supplement.

(ii) On each Payment Date, an amount equal to the aggregate of amounts described in clauses (i), (ii) and (iii) of Section 4.5(a)(1) or clauses (i) and (ii) of Section 4.5(a)(2) allocable to the related Series, as appropriate, and which is not payable out of Available Funds or the related VFN Series Available Funds or Term Note Series Available Funds, as applicable, due to an insufficiency of Available Funds or VFN Series Available Funds or Term Note Series Available Funds, as applicable, shall be withdrawn from such Series Reserve Account by the Indenture Trustee and remitted to the Note Payment Account for payment in respect of the related Class’ allocable share of such items as described in Section 4.5(a) or the related Indenture Supplement. On any Payment Date on which amounts are withdrawn from such Series Reserve Account pursuant to Section 4.5(a), no funds shall be withdrawn from the Collection and Funding Account (or from the Note Payment Account for deposit into the Collection and Funding Account) to pay Funding Amounts or amounts to the Issuer Trusts pursuant to Section 4.3 if, after giving effect to the withdrawals described in the preceding sentences, the amount then on deposit in such Series Reserve Account is less than the related Series Reserve Required Amount, if applicable. All Collections received in the Collection and Funding Account shall be deposited into the related Series Reserve Accounts until the amount on deposit in each Series Reserve Account equals the related Series Reserve Required Amount, if applicable, as described in Section 4.5 and the related Indenture Supplement. For purposes of the foregoing, the portion of any such fees and expenses payable under Section 4.5(a)(1)(i) or (ii) shall equal the related Series Allocation Percentage of the amounts payable under such clause.

(iii) If on any Payment Date the amount on deposit in a Series Reserve Account is equal to or greater than the aggregate Note Balance for the related Series (after payment on such Payment Date of the amounts described in Section 4.5) the Indenture Trustee will withdraw from such Series Reserve Account the aggregate Note Balance for such Series and remit it to the Noteholders of the Notes of such Series in reduction of the aggregate Note Balance for all Classes of Notes of such Series that are Outstanding.

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On the Stated Maturity Date for the latest maturing Class in a Series, the balance on deposit in the related Series Reserve Account shall be applied as a principal payment on the Notes of that Series to the extent necessary to reduce the aggregate Note Balance for that Series to zero. On any Payment Date after payment of principal on the Notes and when no Event of Default has occurred, the Indenture Trustee shall withdraw from each Series Reserve Account the amount by which the balance of the Series Reserve Account exceeds the related Series Reserve Required Amount, if applicable, and pay such amount to the holders of the Owner Trust Certificates.

(iv) Amounts held in a Series Reserve Account shall be invested in Permitted Investments to the extent the Administrator and the Co-Issuer Administrator provide written direction to the Indenture Trustee, as provided in Section 4.1; provided, however, if no such direction is provided, all amounts shall remain uninvested.

(v) On any Payment Date, after payment of all amounts pursuant to Section 4.5(a), during the Full Amortization Period, the Indenture Trustee shall withdraw from each Series Reserve Account the amount by which the amount on deposit in such Series Reserve Account exceeds the related Series Reserve Required Amount, if applicable, and shall apply such excess to reduce the Note Balances of the Notes of the related Series, pursuant to Section 4.5. Such principal payment shall be made in accordance with the terms and provisions of the related Indenture Supplement. On any Payment Date following the payment in full of all principal payable in respect of the related Series or Class of Notes, the Indenture Trustee shall withdraw any remaining amounts from the related Series Reserve Account and distribute it to the holders of the Owner Trust Certificates. Amounts paid pursuant to the preceding sentence shall be released from the Security Interest.

(vi) If on any Funding Date, the amount on deposit in one or more Series Reserve Accounts is less than the related Series Reserve Required Amounts, if applicable, then the Administrator and the Co-Issuer Administrator may direct the Indenture Trustee to transfer from the Collection and Funding Account to such Series Reserve Accounts an amount equal to the amount by which the respective Series Reserve Required Amounts, if applicable, exceed the respective amounts then on deposit in the related Series Reserve Accounts.

(vii) Any funds on deposit in any Series Reserve Account are to be applied to make any required payments in respect of the related Series or Class of Notes only, and no other Series or Class of Notes shall have any interest or claim against such amounts on deposit. Notwithstanding the foregoing, if any Series or Class of Notes is deemed to have an interest or claim on the funds on deposit in the Series Reserve Account established for another Series, it shall not receive any amounts on deposit in such Series Reserve Account unless and until the Series or Class of Notes related to such Series Reserve Account are paid in full and are no longer Outstanding. The provisions of this Section 4.6(a)(vii) constitute a “subordination agreement” for purposes of Section 510(a) of the Bankruptcy Code.

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(b) Expense Reserve Account.

(i) Pursuant to Section 4.1, the Indenture Trustee established and has maintained an Expense Reserve Account, which shall be an Eligible Account, for the benefit of the Indenture Trustee and the MSR Valuation Agent. If any such account loses its status as an Eligible Account, the funds in such account shall be moved to an account that qualifies as an Eligible Account within thirty (30) days. On each Payment Date and Interim Payment Date, the Indenture Trustee shall withdraw Available Funds from the Note Payment Account and deposit them into the Expense Reserve Account pursuant to, and to the extent required by Section 4.5(a).

(ii) On each Payment Date, an amount equal to the aggregate of amounts described in clause (i) of Section 4.5(a)(2) which is not payable out of Series Available Funds due to an insufficiency of Series Available Funds shall be withdrawn from the Expense Reserve Account by the Indenture Trustee and remitted to the Note Payment Account for payment in respect of the related Class’ allocable share of such items as described in Section 4.5(a). On any Payment Date on which amounts are withdrawn from the Expense Reserve Account pursuant to Section 4.5(a), no funds shall be withdrawn from the Collection and Funding Account (or from the Note Payment Account for deposit into the Collection and Funding Account) to pay Funding Amounts or amounts to the Issuer Trusts pursuant to Section 4.3 if, after giving effect to the withdrawals described in the preceding sentences, the amount then on deposit in the Expense Reserve Account is less than the Expense Reserve Required Amount. All Collections received in the Collection and Funding Account shall be deposited into the Expense Reserve Account until the amount on deposit in the Expense Reserve Account equals the Expense Reserve Required Amount, as described in Section 4.5.

(iii) Amounts held in the Expense Reserve Account shall be invested in Permitted Investments at the direction of the Administrator and the Co-Issuer Administrator as provided in Section 4.1.

(iv) On any Payment Date, after payment of all amounts pursuant to Section 4.5(a), during the Full Amortization Period, the Indenture Trustee shall withdraw from the Expense Reserve Account the amount by which the amount on deposit in the Expense Reserve Account exceeds the Expense Reserve Required Amount, if applicable, and shall apply such excess to reduce the Note Balances of the Notes of all Series, pursuant to Section 4.5. Such principal payment shall be made in accordance with the terms and provisions of the related Indenture Supplement. On any Payment Date following the payment in full of all principal payable in respect of all Series or Classes of Notes and the payment in full of all amounts payable to the Indenture Trustee and the MSR Valuation Agent, the Indenture Trustee shall withdraw any remaining amounts from the Expense Reserve Account and distribute it to the holders of the Owner Trust Certificates. Amounts paid pursuant to the preceding sentence shall be released from the Security Interest.

(v) If on any Funding Date, the amount on deposit in the Expense Reserve Accounts is less than the Expense Reserve Required Amount, if applicable, then the Administrator and the Co-Issuer Administrator may direct the Indenture Trustee to transfer from the Collection and Funding Account to the Expense Reserve Account an amount equal to the amount by which the Expense Reserve Required Amount exceeds the amounts then on deposit in the Expense Reserve Account.

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Section 4.7. Collection and Funding Account; Eligible Securities Account. Pursuant to Section 4.1, the Indenture Trustee has established and shall maintain the Collection and Funding Account and the Eligible Securities Account, each of which shall be an Eligible Account, for the benefit of the Secured Parties. If any such account loses its status as an Eligible Account, the funds or securities, as applicable, in such account shall be moved to an account that qualifies as an Eligible Account within thirty (30) days. The Indenture Trustee shall deposit and withdraw Available Funds from the Collection and Funding Account pursuant to, and to the extent required by Section 4.5.

Amounts held in the Collection and Funding Account shall be invested in Permitted Investments at the written direction of the Administrator and the Co-Issuer Administrator as provided in Section 4.1; provided, however, if no such direction is provided, all amounts shall remain uninvested.

Section 4.8. Note Payment Account. (a) Pursuant to Section 4.1, the Indenture Trustee established and shall maintain the Note Payment Account, which shall be an Eligible Account, for the benefit of the Secured Parties. If the Note Payment Account loses its status as an Eligible Account, the funds in such account shall be moved to an account that qualifies as an Eligible Account within thirty (30) days. The Note Payment Account shall be funded to the extent that (i) the Issuer Trusts shall remit to the Indenture Trustee the Redemption Amount for a Class of Notes pursuant to Section 13.1, (ii) the Indenture Trustee shall remit thereto any Available Funds from the Collection and Funding Account pursuant to Section 4.2(b), (iii) the Indenture Trustee shall transfer amounts from an applicable Series Reserve Account pursuant to, and to the extent required by, Section 4.6, and (iv) the Indenture Trustee shall transfer amounts from the Expense Reserve Account pursuant to, and to the extent required by, Section 4.6.

(b) On each Payment Date, an amount equal to the aggregate of amounts described in Section 4.5(a) shall be withdrawn from the Note Payment Account by the Indenture Trustee and remitted to the Noteholders and other Persons or accounts described therein for payment as described in that Section, and upon payments of all sums payable hereunder as described in Section 4.5(a), as applicable, any remaining amounts then on deposit in the Note Payment Account shall be released from the Security Interest and paid at the direction of the Administrator and the Co-Issuer Administrator to the holders of Owner Trust Certificates unless it would cause a Borrowing Base Deficiency.

(c) Amounts held in the Note Payment Account may be invested in Permitted Investments at the direction of the Administrator and the Co-Issuer Administrator as provided in Section 4.1.

Section 4.9. Securities Accounts.

(a) Securities Intermediary. The Issuer, the Co-Issuer and the Indenture Trustee hereby appoint Citibank, as Securities Intermediary with respect to the Trust Accounts. The

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Security Entitlements and all Financial Assets credited to the Trust Accounts, including all amounts, securities, investments, Financial Assets, investment property and other property from time to time deposited in or credited to such account and all proceeds thereof, held from time to time in the Trust Accounts will continue to be held by the Securities Intermediary for the Indenture Trustee for the benefit of the Secured Parties. Upon the termination of this Base Indenture, the Indenture Trustee shall inform the Securities Intermediary of such termination. By acceptance of their Notes or interests therein, the Noteholders and all beneficial owners of Notes shall be deemed to have appointed Citibank, as Securities Intermediary. Citibank hereby accepts such appointment as Securities Intermediary.

(i) With respect to any portion of the Trust Estate that is credited to the Trust Accounts, the Securities Intermediary agrees that:

(A) with respect to any portion of the Trust Estate that is held in deposit accounts, each such deposit account shall be subject to the security interest granted pursuant to this Base Indenture, and the Securities Intermediary shall comply with instructions originated by the Indenture Trustee directing dispositions of funds in the deposit accounts without further consent of the Issuer Trusts and otherwise shall be subject to the exclusive custody and control of the Securities Intermediary, and the Securities Intermediary shall have sole signature authority with respect thereto;

(B) any and all property credited to the Trust Accounts shall be treated by the Securities Intermediary as Financial Assets;

(C) any portion of the Trust Estate that is, or is treated as, a Financial Asset shall be physically delivered (accompanied by any required endorsements) to, or credited to an account in the name of, the Securities Intermediary or other eligible institution maintaining any Trust Account in accordance with the Securities Intermediary’s customary procedures such that the Securities Intermediary or such other institution establishes a Security Entitlement in favor of the Indenture Trustee with respect thereto over which the Securities Intermediary or such other institution has “control” (as defined in the UCC); and

(D) it will use reasonable efforts to promptly notify the Indenture Trustee and the Issuer Trusts if any other Person claims that it has a property interest in a Financial Asset in any Trust Account and that it is a violation of that Person’s rights for anyone else to hold, transfer or deal with such Financial Asset.

(ii) The Securities Intermediary hereby confirms that (A) each Trust Account is an account to which Financial Assets are or may be credited, and the Securities Intermediary shall, subject to the terms of this Base Indenture treat the Indenture Trustee as entitled to exercise the rights that comprise any Financial Asset credited to any Trust Account, (B) any portion of the Trust Estate in respect of any Trust Account will be promptly credited by the Securities Intermediary to such account, and (C) all securities or other property underlying any Financial Assets credited to any Trust Account shall be registered in the name of the Securities Intermediary, endorsed to the Securities Intermediary or in blank or credited to another securities account maintained in the name of the Securities Intermediary, and in no case will any Financial Asset credited to any Trust Account be registered in the name of the Issuer, the Co-Issuer, the Administrator or the Co-Issuer Administrator, payable to the order of the Issuer, the Co-Issuer, the Administrator or the Co-Issuer Administrator or specially endorsed to any of such Persons.

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(iii) If at any time the Securities Intermediary shall receive an Entitlement Order from the Indenture Trustee directing transfer or redemption of any Financial Asset relating to any Trust Account, the Securities Intermediary shall comply with such Entitlement Order without further consent by the Issuer, the Co-Issuer, the Administrator or the Co-Issuer Administrator or any other Person. If at any time the Indenture Trustee notifies the Securities Intermediary in writing that this Base Indenture has been discharged in accordance herewith, then thereafter if the Securities Intermediary shall receive any order from the Issuer Trusts directing transfer or redemption of any Financial Asset relating to any Trust Account, the Securities Intermediary shall comply with such Entitlement Order without further consent by the Indenture Trustee or any other Person.

(iv) In the event that the Securities Intermediary has or subsequently obtains by agreement, operation of law or otherwise a security interest in any Trust Account or any Financial Asset or Security Entitlement credited thereto, the Securities Intermediary hereby agrees that such security interest shall be subordinate to the security interest of the Indenture Trustee. The Financial Assets and Security Entitlements credited to the Trust Accounts will not be subject to deduction, set-off, banker’s lien, or any other right in favor of any Person other than (i) the Indenture Trustee in the case of the Trust Accounts and (ii) the Owner Trustee Lien.

(v) There are no other agreements entered into between the Securities Intermediary in such capacity, and the Securities Intermediary agrees that it will not enter into any agreement with, the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, or any other Person (other than the Indenture Trustee) with respect to any Trust Account. In the event of any conflict between this Base Indenture (or any provision of this Base Indenture) and any other agreement now existing or hereafter entered into, the terms of this Base Indenture shall prevail.

(vi) The rights and powers granted herein to the Indenture Trustee have been granted in order to perfect its interest in the Trust Accounts and the Security Entitlements to the Financial Assets credited thereto, and are powers coupled with an interest and will not be affected by the bankruptcy of the Issuer, the Co-Issuer, the Administrator or the Co-Issuer Administrator nor by the lapse of time. The obligations of the Securities Intermediary hereunder shall continue in effect until the interest of the Indenture Trustee in the Trust Accounts and in such Security Entitlements, has been terminated pursuant to the terms of this Base Indenture and the Indenture Trustee has notified the Securities Intermediary of such termination in writing.

(b) Definitions; Choice of Law. Capitalized terms used in this Section 4.9 and not defined herein shall have the meanings assigned to such terms in the New York UCC. For purposes of Section 8-110(e) of the New York UCC, the “securities intermediary’s jurisdiction” shall be the State of New York. The Securities Intermediary, the Administrator, the Co-Issuer Administrator, the Issuer Trusts agree that they will not change the applicable law in force with respect to issues referred to in Article 2(1) of the Hague Securities Convention to a state other than the State of New York.

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(c) Limitation on Liability. None of the Securities Intermediary or any director, officer, employee or agent of the Securities Intermediary shall be under any liability to the Indenture Trustee or the Noteholders for any action taken, or not taken, in good faith pursuant to this Base Indenture, or for errors in judgment; provided, however, that this provision shall not protect the Securities Intermediary against any liability to the Indenture Trustee or the Noteholders which would otherwise be imposed by reason of the Securities Intermediary’s willful misconduct, bad faith or negligence in the performance of its obligations or duties hereunder. The Securities Intermediary and any director, officer, employee or agent of the Securities Intermediary may rely in good faith on any document of any kind which, on its face, is properly executed and submitted by any Person respecting any matters arising hereunder. The Securities Intermediary shall be under no duty to inquire into or investigate the validity, accuracy or content of such document.

(d) Representations, Warranties and Covenants of the Securities Intermediary. The Securities Intermediary represents and warrants that, as of the date hereof, the Securities Intermediary has a physical office in the United States and is engaged in a business or other regular activity of maintaining securities accounts. The Securities Intermediary agrees that, at all times while this Indenture is in effect, it shall maintain a physical office in the United States that satisfies the criteria set forth in Article 4(1)(a) or (b) of the Hague Securities Convention.

Section 4.10. Notice of Adverse Claims. Except for the claims and interests of the Secured Parties in the Trust Accounts, the Securities Intermediary has no actual knowledge of any claim to, or interest in, any Trust Account or in any financial asset credited thereto. If any Person asserts any Adverse Claim (including any writ, garnishment, judgment, warrant of attachment, execution or similar process) against any Trust Account or in any financial asset carried therein of which a Responsible Officer of the Securities Intermediary has actual knowledge, the Securities Intermediary will promptly notify the Noteholders, the Indenture Trustee and the Issuer Trusts thereof.

Section 4.11. No Gross Up. No Person, including the Issuer, shall be obligated to pay any additional amounts to the Noteholders or Note Owners as a result of any withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges.

Section 4.12. Advance Rate Trigger Event Trigger Period, Early Amortization Period and Full Amortization Period. Upon the occurrence of an Advance Rate Trigger Event, the Advance Rate Trigger Event shall continue, unless, the Majority Noteholders for each Series of Variable Funding Notes that are Outstanding, plus the Administrative Agent, notify the Indenture Trustee and the Disposition Manager that either (i) they have waived the occurrence of such Advance Rate Trigger Event or (ii) they have acknowledged that the Advance Rate Trigger Event has been cured for each Outstanding Series of Variable Funding Notes that is still in its Revolving Period.

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Upon the occurrence of an Early Amortization Event, the Revolving Period for all Classes and Series of the Notes shall automatically terminate and the Early Amortization Period for all Outstanding Notes shall commence without further action on the part of any Person, unless, together, the Majority Noteholders of all Outstanding Notes that are not Variable Funding Notes and the Majority Noteholders for each Series of Variable Funding Notes that are Outstanding, plus the Administrative Agent, notify the Indenture Trustee and the Disposition Manager that either (i) they have waived the occurrence of such Early Amortization Event and consent to the continuation of the Revolving Period for each Outstanding Series that is still in its Revolving Period or (ii) they acknowledge that the Early Amortization Event has been cured and consent to the continuation of the Revolving Period for each Outstanding Series that is still in its Revolving Period.

Upon the occurrence of an Event of Default, the Revolving Period for all Classes and Series of the Notes shall automatically terminate and the Full Amortization Period for all Outstanding Notes shall commence without further action on the part of any Person, unless, together, the Majority Noteholders of all Outstanding Notes that are not Variable Funding Notes and the Majority Noteholders for each Series of Variable Funding Notes that are Outstanding, plus the Administrative Agent, notify the Indenture Trustee and the Disposition Manager that either (i) they have waived the occurrence of such Event of Default and consent to the continuation of the Revolving Period for each Outstanding Series that is still in its Revolving Period or (ii) they acknowledge that the Event of Default has been cured and consent to the continuation of the Revolving Period for each Outstanding Series that is still in its Revolving Period; provided, upon waiver or cure of an Event of Default and continuation of a Revolving Period, any hourly fees incurred by the Disposition Manager during any Default Period shall be paid on the immediately following Payment Date pursuant to Section 4.5(a)(1)(ii).

The obligation of the Issuer Trusts to pay or reserve any Default Supplemental Fee, Step-Up Fee, Cumulative Interest Shortfall Amount, Cumulative Default Supplemental Fee Shortfall Amount or Cumulative Step-Up Fee Shortfall Amount shall begin only upon the occurrence of an Early Amortization Event or Event of Default, as applicable, and commencement of the Early Amortization Period or Full Amortization Period, as applicable, as described in this Section 4.12.

Article V

Note Forms

Section 5.1. Forms Generally. The Notes will have such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Base Indenture or the applicable Indenture Supplement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon, as may be required to comply with applicable laws or regulations or with the rules of any securities exchange, or as may, consistently herewith, be determined by the Issuer Trusts, as evidenced by the Issuer’s and the Co-Issuer’s execution of such Notes. Any portion of the text of any Note may be set forth on the reverse thereof, with an appropriate reference thereto on the face of the Note.

The Definitive Notes and the Global Notes representing the Book-Entry Notes will be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders) or may be produced in any other manner, all as determined by the Issuer Trusts, as evidenced by the Issuer’s and the Co-Issuer’s execution of such Notes.

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Section 5.2. Forms of Notes.

(a) Forms Generally. Subject to Section 5.2(b), each Note will be in one of the forms approved from time to time by or pursuant to this Base Indenture. Without limiting the generality of the foregoing, the Indenture Supplement for any Series of Notes shall specify whether the Notes of such Series, or of any Class within such Series, shall be issuable as Definitive Notes or as Book-Entry Notes.

(b) Issuer and Co-Issuer Certificate. Before the delivery of a Note to the Indenture Trustee for authentication in any form approved by or pursuant to an Issuer and Co-Issuer Certificate, the Issuer Trusts will deliver to the Indenture Trustee the Issuer and Co-Issuer Certificate by or pursuant to which such form of Note has been approved, which Issuer and Co-Issuer Certificate will have attached thereto a true and correct copy of the form of Note which has been approved thereby. Any form of Note approved by or pursuant to an Issuer and Co-Issuer Certificate must be acceptable as to form to the Indenture Trustee, such acceptance to be evidenced by the Indenture Trustee’s authentication of Notes in that form of a Certificate of Authentication signed by an Indenture Trustee Authorized Officer and delivered to the Issuer Trusts.

(c) (i) Rule 144A Notes. Notes sold by the Issuer Trusts (other than Regulation S Notes) shall bear a legend generally to the effect that resales of such Notes or interests therein may be made only to qualified institutional buyers in transactions exempt from the registration requirements of the 1933 Act in reliance on Rule 144A (“each, a “Rule 144A Note”) and shall be issued initially in the form of (A) one or more permanent Global Notes in fully registered form (each, a “Rule 144A Global Note”), substantially in the form attached hereto as Exhibit A-1 or (B) one or more permanent Definitive Notes in fully registered form (each, a “Rule 144A Definitive Note”), substantially in the form attached hereto as Exhibit A-2. The aggregate principal amounts of the Rule 144A Global Notes or Rule 144A Definitive Notes may from time to time be increased or decreased by adjustments made on the records of the Indenture Trustee, or the Depository or its nominee, as the case may be, as hereinafter provided.

(ii) Regulation S Notes. Notes sold in offshore transactions in reliance on Regulation S (each, a “Regulation S Note”) shall be issued in the form of (A) one or more permanent Global Notes in fully registered form (each, a “Regulation S Global Note”), substantially in the form attached hereto as Exhibit A-3 or (B) one or more permanent Definitive Notes in fully registered form (each, a “Regulation S Definitive Note”), substantially in the form attached hereto as Exhibit A-4. The aggregate principal amounts of the Regulation S Global Notes or the Regulation S Definitive Notes may from time to time be increased or decreased by adjustments made on the records of the Indenture Trustee or the Depository or its nominee, as the case may be, as hereinafter provided.

Section 5.3. Reserved.

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Section 5.4. Book-Entry Notes.

(a) Issuance of Book-Entry Notes. If the Issuer Trusts establish pursuant to Sections 5.2 and 6.1 that the Notes of a particular Series or Class are to be issued as Book-Entry Notes, then the Issuer Trusts will execute and the Indenture Trustee or its agent will, in accordance with Section 6.3 and with the Issuer and Co-Issuer Certificate delivered to the Indenture Trustee or its agent under Section 6.3, authenticate and deliver, one or more definitive Global Notes, which, unless otherwise provided in the applicable Indenture Supplement (1) will represent, and will be denominated in an amount equal to the aggregate, Initial Note Balance of the Outstanding Notes of such Series or Class to be represented by such Global Note or Notes, or such portion thereof as the Issuer Trusts will specify in an Issuer and Co-Issuer Certificate, (2) will be registered in the name of the Depository for such Global Note or Notes or its nominee, (3) will be delivered by the Indenture Trustee or its agent to the Depository or pursuant to the Depository’s instruction (and which may be held by the Indenture Trustee as custodian for the Depository, if so specified in the related Indenture Supplement or Depository Agreement), (4) if applicable, will bear a legend substantially to the following effect: “Unless this Note is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to the Issuer Trusts or their agents for registration of transfer, exchange or payment, and any Note issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), any transfer, pledge or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the registered owner hereof, Cede & Co., has an interest herein” and (5) may bear such other legend as the Issuer Trusts, upon advice of counsel, deems to be applicable.

(b) The Note Registrar and the Indenture Trustee may deal with the Depository as the sole Noteholder of the Book-Entry Notes for all purposes of this Indenture and will not be obligated to the Note Owners, except as stated in Section 14.12.

(c) The rights of the Note owners may be exercised only through the Depository and will be limited to those established by law and agreements between the Note Owners and the Depository and/or its participants under the Depository Agreement.

(d) If this Section 5.4(a) conflicts with other terms of this Indenture, this Section 5.4(a) will control.

(e) The Depository will make book-entry transfers among its participants and receive and transmit payments of principal of and interest on the Book-Entry Notes to the participants.

(f) The Indenture Trustee, the Note Registrar, and the Paying Agent shall have no responsibility or liability for any actions taken or not taken by the Depository.

(g) If this Indenture requires or permits actions to be taken based on instructions or directions of the Noteholders of a stated percentage of Note Balance of the Notes, the Depository will be deemed to represent those Noteholders only if it has received instructions to that effect form Note Owners and/or the Depository’s participants owning or representing, the required percentage of the beneficial interest of the Notes and has delivered the instructions to the Indenture Trustee.

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(h) The Issuer Trusts in issuing Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Indenture Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Noteholders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer Trusts will promptly notify the Indenture Trustee in writing of any change in the “CUSIP” numbers.

(i) Transfers of Global Notes only to Depository Nominees. Notwithstanding any other provisions of this Section 5.4 or of Section 6.5, and subject to the provisions of paragraph (c) below, unless the terms of a Global Note or the applicable Indenture Supplement expressly permit such Global Note to be exchanged in whole or in part for individual Notes, a Global Note may be transferred, in whole but not in part and in the manner provided in Section 6.5, only to a nominee of the Depository for such Global Note, or to the Depository, or a successor Depository for such Global Note selected or approved by the Issuer Trusts, or to a nominee of such successor Depository.

(j) Limited Right to Receive Definitive Notes. Except under the limited circumstances described below, Note Owners of beneficial interests in Global Notes will not be entitled to receive Definitive Notes. With respect to Notes issued within the United States, unless otherwise specified in the applicable Indenture Supplement, or with respect to Notes issued outside the United States, if specified in the applicable Indenture Supplement:

(i) If at any time the Depository for a Global Note notifies the Issuer Trusts that it is unwilling or unable to continue to act as Depository for such Global Note or if at any time the Depository for the Notes for such Series or Class ceases to be a Clearing Corporation, the Issuer Trusts will appoint a successor Depository with respect to such Global Note. If a successor Depository for such Global Note is not appointed by the Issuer Trusts within ninety (90) days after the Issuer Trusts receives such notice or becomes aware of such ineligibility, the Issuer Trusts will execute, and the Indenture Trustee or its agent will, in accordance with Section 6.3 and with the Issuer and Co-Issuer Certificate delivered to the Indenture Trustee or its agent under Section 6.3 requesting the authentication and delivery of individual Notes of such Series or Class in exchange for such Global Note, will authenticate and deliver, individual Notes of such Series or Class of like tenor and terms in an aggregate Initial Note Balance equal to the Initial Note Balance of the Global Note in exchange for such Global Note.

(ii) The Issuer Trusts may at any time and in its sole discretion determine that the Notes of any Series or Class or portion thereof issued or issuable in the form of one or more Global Notes will no longer be represented by such Global Note or Notes. In such event the Issuer Trusts will execute, and the Indenture Trustee or its agent in accordance with Section 6.3 and with the Issuer and Co-Issuer Certificate delivered to the Indenture Trustee or its agent under Section 6.3 for the authentication and delivery of individual Notes of such Series or Class in exchange in whole or in part for such Global Note, will authenticate and deliver individual Notes of such Series or Class of like tenor and terms in definitive form in an aggregate Initial Note Balance equal to the Initial Note Balance of such Global Note or Notes representing such Series or Class or portion thereof in exchange for such Global Note or Notes.

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(iii) If specified by the Issuer Trusts pursuant to Sections 5.2 and 6.1 with respect to Notes issued or issuable in the form of a Global Note, the Depository for such Global Note may surrender such Global Note in exchange in whole or in part for individual Notes of such Series or Class of like tenor and terms in definitive form on such terms as are acceptable to the Issuer Trusts and such Depository. Thereupon the Issuer Trusts will execute, and the Indenture Trustee or its agent will, in accordance with Section 6.3 and with the Issuer and Co-Issuer Certificate delivered to the Indenture Trustee or its agent under Section 6.3, authenticate and deliver, without service charge, (A) to each Person specified by such Depository a new Note or Notes of the same Series or Class of like tenor and terms and of any authorized denomination as requested by such Person in an aggregate Initial Note Balance equal to the Initial Note Balance of the portion of the Global Note or Notes specified by the Depository and in exchange for such Person’s beneficial interest in the Global Note; and (B) to such Depository a new Global Note of like tenor and terms and in an authorized denomination equal to the difference, if any, between the Initial Note Balance of the surrendered Global Note and the aggregate Initial Note Balance of Notes delivered to the Noteholders thereof.

(iv) If any Event of Default has occurred with respect to such Global Notes, and Owners of Notes evidencing more than 50% of the Global Notes of that Series or Class (measured by Voting Interests) advise the Indenture Trustee and the Depository that a Global Note is no longer in the best interest of the Note Owners, the Owners of Global Notes of that Series or Class may exchange their beneficial interests in such Notes for Definitive Notes in accordance with the exchange provisions herein.

(v) In any exchange provided for in any of the preceding four paragraphs, the Issuer Trusts will execute and the Indenture Trustee or its agent will, in accordance with Section 6.3 and with the Issuer and Co-Issuer Certificate delivered to the Indenture Trustee or its agent under Section 6.3, authenticate and deliver Definitive Notes in definitive registered form in authorized denominations. Upon the exchange of the entire Initial Note Balance of a Global Note for Definitive Notes, such Global Note will be canceled by the Indenture Trustee or its agent. Except as provided in the preceding paragraphs, Notes issued in exchange for a Global Note pursuant to this Section will be registered in such names and in such authorized denominations as the Depository for such Global Note, pursuant to instructions from its direct or indirect participants or otherwise, will instruct the Indenture Trustee or the Note Registrar. The Indenture Trustee or the Note Registrar will deliver such Notes to the Persons in whose names such Notes are so registered.

Section 5.5. Beneficial Ownership of Global Notes. Until Definitive Notes have been issued to the applicable Noteholders to replace any Global Notes with respect to a Series or Class pursuant to Section 5.4 or as otherwise specified in any applicable Indenture Supplement:

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(a) the Issuer, the Co-Issuer and the Indenture Trustee may deal with the applicable clearing agency or Depository and the Depository Participants for all purposes (including the making of payments) as the authorized representatives of the respective Note Owners; and

(b) the rights of the respective Note Owners will be exercised only through the applicable Depository and the Depository Participants and will be limited to those established by law and agreements between such Note Owners and the Depository and/or the Depository Participants. Pursuant to the operating rules of the applicable Depository, unless and until Definitive Notes are issued pursuant to Section 5.4, the Depository will make book-entry transfers among the Depository Participants and receive and transmit payments of principal and interest on the related Notes to such Depository Participants.

For purposes of any provision of this Base Indenture requiring or permitting actions with the consent of, or at the direction of, Noteholders evidencing a specified percentage of the Note Balance of Outstanding Notes, such direction or consent may be given by Note Owners (acting through the Depository and the Depository Participants) owning interests in or security entitlements to Notes evidencing the requisite percentage of principal amount of Notes.

Section 5.6. Notices to Depository. Whenever any notice or other communication is required to be given to Noteholders with respect to which Book-Entry Notes have been issued, unless and until Definitive Notes will have been issued to the related Note Owners, the Indenture Trustee will give all such notices and communications to the applicable Depository, and shall have no obligation to report directly to such Note Owners.

Article VI

The Notes

Section 6.1. General Provisions; Notes Issuable in Series; Terms of a Series or Class Specified in an Indenture Supplement.

(a) Amount Unlimited. The aggregate Initial Note Balance of Notes which may be authenticated and delivered and Outstanding under this Base Indenture is not limited.

(b) Series and Classes. The Notes may be issued in one or more Series or Classes up to an aggregate Note Balance for such Series or Class as from time to time may be authorized by the Issuer Trusts. All Notes of each Series or Class under this Base Indenture will in all respects be equally and ratably entitled to the benefits hereof with respect to such Series or Class without preference, priority or distinction on account of (1) the actual time of the authentication and delivery, or (2) Stated Maturity Date of the Notes of such Series or Class, except as specified in the applicable Indenture Supplement for such Series or Class of Notes.

Each Note issued must be part of a Series of Notes for purposes of allocations pursuant to the related Indenture Supplement. A Series of Notes is created pursuant to an Indenture Supplement. A Class of Notes is created pursuant to an Indenture Supplement for the applicable Series.

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Each Series and Class of Notes will be secured by the Trust Estate.

Each Series of Notes may, but need not be, subdivided into multiple Classes. Notes belonging to a Class in any Series may be entitled to specified payment priorities over other Classes of Notes in that Series.

(c) Provisions Required in Indenture Supplement. Before the initial issuance of Notes of each Series, there shall also be established in or pursuant to an Indenture Supplement provision for:

(i) the Series designation;

(ii) the Initial Note Balance of such Series of Notes and of each Class, if any, within such Series, and the Maximum VFN Principal Balance for such Series (if it is a Series or Class of Variable Funding Notes);

(iii) whether such Notes are subdivided into Classes;

(iv) whether such Series of Notes are Term Notes, Variable Funding Notes or a combination thereof;

(v) the Note Interest Rate at which such Series of Notes or each related Class of Notes will bear interest, if any, or the formula or index on which such rate will be determined, including all relevant definitions, and the date from which interest will accrue;

(vi) the Stated Maturity Date for such Series of Notes or each related Class of Notes;

(vii) if applicable, the appointment by the Indenture Trustee of an Authenticating Agent in one or more places other than the location of the office of the Indenture Trustee with power to act on behalf of the Indenture Trustee and subject to its direction in the authentication and delivery of such Notes in connection with such transactions as will be specified in the provisions of this Base Indenture or in or pursuant to the applicable Indenture Supplement creating such Series;

(viii) if such Series of Notes or any related Class will be issued in whole or in part in the form of a Global Note or Global Notes, the terms and conditions, if any, in addition to those set forth in Section 5.4, upon which such Global Note or Global Notes may be exchanged in whole or in part for other Definitive Notes; and the Depository for such Global Note or Global Notes (if other than the Depository specified in Section 1.1);

(ix) the subordination, if any, of such Series of Notes or any related Class(es) to any other Notes of any other Series or of any other Class within the same Series;

(x) the Record Date for any Payment Date of such Series of Notes or any related Class, if different from the last day of the month before the related Payment Date;

(xi) any Default Supplemental Fee Rate, if applicable; (xii) any Step-Up Fee Rate, if applicable;

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(xiii) if applicable, under what conditions any additional amounts will be payable to Noteholders of the Notes of such Series;

(xiv) the Administrative Agent for such Series of Notes;

(xv) any other terms of such Notes as stated in the related Indenture Supplement; and

(xvi) all upon such terms as may be determined in or pursuant to an Indenture Supplement with respect to such Series or Class of Notes.

(d) Forms of Series or Classes of Notes. The form of the Notes of each Series or Class will be established pursuant to the provisions of this Base Indenture and the related Indenture Supplement creating such Series or Class. The Notes of each Series or Class will be distinguished from the Notes of each other Series or Class in such manner, reasonably satisfactory to the Indenture Trustee, as the Issuer Trusts may determine.

Section 6.2. Denominations. Except as provided in Section 6.1(b), the Notes of each Series or Class will be issuable in such denominations and currency as will be provided in the provisions of this Base Indenture or in or pursuant to the applicable Indenture Supplement. In the absence of any such provisions with respect to the Term Notes of any Series or Class, the Term Notes of that Series or Class will be issued in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof. In the absence of any such provisions with respect to the Variable Funding Notes of any Series or Class, the Variable Funding Notes of that Series or Class will be issued in accordance with the terms of the related Indenture Supplement.

Section 6.3. Execution, Authentication and Delivery and Dating. (a) The Notes will be executed on behalf of the Issuer Trusts by an Issuer Authorized Officer and a Co-Issuer Authorized Officer, by manual or facsimile signature.

(b) Notes bearing the manual or facsimile signatures of individuals who were at any time an Issuer Authorized Officer and Co-Issuer Authorized Officer will bind the Issuer Trusts, as applicable, notwithstanding that such individuals or any of them have ceased to hold such offices before the authentication and delivery of such Notes or did not hold such offices at the date of issuance of such Notes.

(c) At any time and from time to time after the execution and delivery of this Base Indenture, the Issuer Trusts may deliver Notes executed by the Issuer Trusts to the Indenture Trustee for authentication; and the Indenture Trustee will, upon delivery of an Issuer and Co-Issuer Certificate, authenticate and deliver such Notes as provided in this Base Indenture and not otherwise.

(d) Before any such authentication and delivery, the Indenture Trustee will be entitled to receive, in addition to any Officer’s Certificate and Opinion of Counsel required to be furnished to the Indenture Trustee pursuant to Section 1.3, the Issuer and Co-Issuer Certificate and any other opinion or certificate relating to the issuance of the Series or Class of Notes required to be furnished pursuant to Section 5.2 or Section 6.10.

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(e) The Indenture Trustee will not be required to authenticate such Notes if the issue thereof will adversely affect the Indenture Trustee’s own rights, duties or immunities under the Notes and this Base Indenture.

(f) Unless otherwise provided in the form of Note for any Series or Class, all Notes will be dated the date of their authentication.

(g) No Note will be entitled to any benefit under this Base Indenture or be valid or obligatory for any purpose unless there appears on such Note a Certificate of Authentication substantially in the form provided for herein executed by the Indenture Trustee by manual signature of an Authorized Signatory, and such certificate upon any Note will be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.

Section 6.4. Temporary Notes. (a) Pending the preparation of definitive Notes of any Series or Class, the Issuer Trusts may execute, and, upon receipt of the documents required by Section 6.3, together with an Issuer and Co-Issuer Certificate, the Indenture Trustee will authenticate and deliver, temporary Notes which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Notes in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the Issuer Trusts may determine, as evidenced by each of the Issuer Trusts’ execution of such Notes.

(b) If temporary Notes of any Series or Class are issued, the Issuer Trusts will cause permanent Notes of such Series or Class to be prepared without unreasonable delay. After the preparation of permanent Notes, the temporary Notes of such Series or Class will be exchangeable for permanent Notes of such Series or Class upon surrender of the temporary Notes of such Series or Class at the office or agency of the Issuer Trusts in a Place of Payment, without charge to the Noteholder; and upon surrender for cancellation of any one or more temporary Notes each of the Issuer Trusts will execute and the Indenture Trustee or its agent will, in accordance with Section 6.3 and with the Issuer and Co-Issuer Certificate delivered to the Indenture Trustee or its agent under Section 6.3, authenticate and deliver in exchange therefore a like Initial Note Balance of permanent Notes of such Series or Class of authorized denominations and of like tenor and terms. Until so exchanged the temporary Notes of such Series or Class will in all respects be entitled to the same benefits under this Base Indenture as permanent Notes of such Series or Class.

Section 6.5. Registration, Transfer and Exchange.

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(a) Note Register. The Indenture Trustee, acting as Note Registrar, shall keep or cause to be kept a register (herein sometimes referred to as the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Issuer Trusts will provide for the registration of Notes, or of Notes of a particular Series or Class, and for transfers of Notes. Any such register will be in written form or in any other form capable of being converted into written form within a reasonable time. At all reasonable times the information contained in such register or registers will be available for inspection by the Issuer Trusts or the Indenture Trustee at the Corporate Trust Office. The Issuer, the Co-Issuer, the Indenture Trustee, the Note Registrar, the Paying Agent and any agents of any of them, may treat a Person in whose name a Note is registered as the owner of such Note for the purpose of receiving payments in respect of such Note and for all other purposes, and none of the Issuer, the Co-Issuer, the Indenture Trustee, the Note Registrar, the Paying Agent or any agent of any of them, shall be affected by notice to the contrary. None of the Issuer, the Co-Issuer, the Indenture Trustee, any agent of the Indenture Trustee, any Paying Agent or the Note Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership of a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership.

(b) Exchange of Notes. Subject to Section 5.4, upon surrender for transfer of any Note of any Series or Class at the Place of Payment, the Issuer Trusts may execute, and, upon receipt of the documents required by Section 6.3 and such surrendered Note, together with an Issuer and Co-Issuer Certificate, the Indenture Trustee will authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of such Series or Class of any authorized denominations, of a like aggregate Initial Note Balance and Stated Maturity Date and of like terms. Subject to Section 5.4, Notes of any Series or Class may be exchanged for other Notes of such Series or Class of any authorized denominations, of a like aggregate Initial Note Balance and Stated Maturity Date and of like terms, upon surrender of the Notes to be exchanged at the Place of Payment. Whenever any Notes are so surrendered for exchange, the Issuer Trusts will execute, and the Indenture Trustee or the related Authenticating Agent will authenticate and deliver the Notes which the Noteholders making the exchange are entitled to receive.

(c) Issuer Obligations. All Notes issued upon any transfer or exchange of Notes shall be the valid and legally binding obligations of the Issuer Trusts, evidencing the same debt, and entitled to the same benefits under this Base Indenture, as the Notes surrendered upon such transfer or exchange.

(d) Endorsement of Notes to be Transferred or Exchanged. Every Note presented or surrendered for transfer or exchange will (if so required by the Issuer, the Co-Issuer, the Note Registrar or the Indenture Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Issuer, the Co-Issuer, the Indenture Trustee, and the Note Registrar duly executed, by the Noteholder thereof or such Noteholder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Securities Transfer Agent’s Medallion Program (“STAMP”).

(e) No Service Charge. Unless otherwise provided in the Note to be transferred or exchanged, no service charge will be assessed against any Noteholder for any transfer or exchange of Notes, but the Issuer, the Co-Issuer, the Indenture Trustee, and the Note Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any transfer or exchange of Notes before the transfer or exchange will be complete, other than exchanges pursuant to Section 5.4 not involving any transfer.

(f) Deemed Representations by Transferees of Rule 144A Notes. Each transferee (including the initial Noteholder or Owner) of a Rule 144A Note or of a beneficial interest therein shall be deemed by accepting such Note or beneficial interest, to have made all the certifications, representations and warranties set forth in the Rule 144A Note Transfer Certificate attached to Exhibit B-1 attached hereto.

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(g) Deemed Representations by Transferees of Regulation S Notes. Each transferee (including the initial Noteholder or Owner) of a Regulation S Note or of a beneficial therein shall be deemed by accepting such Note or beneficial interest, to have made all the certifications, representations and warranties set forth in the Regulation S Note Transfer Certificate attached to Exhibit B-2 attached hereto.

(h) Conditions to Transfer. No sale, pledge or other transfer (a “Transfer”) of any Notes shall be made unless that Transfer is made pursuant to an effective registration statement under the 1933 Act and effective registration or qualification under applicable state securities laws or is made in a transaction that does not require such registration or qualification. If a Transfer is made without registration under the 1933 Act (other than in connection with the initial issuance thereof by the Issuer Trusts), then the Note Registrar, the Indenture Trustee, Administrator and the Co-Issuer Administrator, on behalf of the Issuer Trusts, respectively, shall refuse to register such Transfer unless the Note Registrar receives either:

(i) the Regulation S Note Transfer Certificate or Rule 144A Note Transfer Certificate and such other information as may be required pursuant to this Section 6.5; or

(ii) if the Transfer is to be made to an Issuer Affiliate in a transaction that is exempt from registration under the 1933 Act, an Opinion of Counsel reasonably satisfactory to the Issuer, the Co-Issuer and the Note Registrar to the effect that such Transfer may be made without registration under the 1933 Act (which Opinion of Counsel shall not be an expense of the Trust Estate or of the Issuer, the Co-Issuer, the Indenture Trustee or the Note Registrar in their respective capacities as such).

None of the Administrator, the Co-Issuer Administrator, the Issuer, the Co-Issuer, the Indenture Trustee or the Note Registrar is obligated to register or qualify the Notes under the 1933 Act or any other securities law or to take any action not otherwise required under this Base Indenture to permit the transfer of any Note without registration or qualification. Any Noteholder of a Note desiring to effect such a Transfer shall, and upon acquisition of such a Note shall be deemed to have agreed to, indemnify the Indenture Trustee, the Note Registrar, the Administrator, the Co-Issuer Administrator, the Servicer, the Issuer Trusts against any liability that may result if the Transfer is not so exempt or is not made in accordance with the 1933 Act and applicable state securities laws.

In connection with any Transfer of Notes in reliance on Rule 144A, the Administrator and the Co-Issuer Administrator shall furnish upon request of a Noteholder to such Noteholder and any prospective purchaser designated by such Noteholder the information required to be delivered under paragraph (d)(4) of Rule 144A.

In the event that a Note is transferred to a Person that does not meet the requirements of this Section 6.5 and/or the requirements of the related Indenture Supplement, such transfer will be of no force and effect, will be void ab initio, and will not operate to transfer any right to such Person, notwithstanding any instructions to the contrary to the Issuer, the Co-Issuer, the Indenture Trustee or any intermediary; and the Indenture Trustee shall not make any payment on such Note for as long as such Person is the Noteholder of such Note and the Indenture Trustee shall have the right to compel such Person to transfer such Note to a Person who does meet the requirements of this Section 6.5.

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(i) Transfers of Ownership Interests in Global Notes. Transfers of beneficial interests in a Global Note representing Book-Entry Notes may be made only in accordance with the rules and regulations of the Depository (and, in the case of a Regulation S Global Note only to beneficial owners who are not “U.S. persons” (as such term is defined in Regulation S) in accordance with the rules and regulations of Euroclear or Clearstream) and the transfer restrictions contained in the legend on such Global Note and exchanges or transfers of interests in a Global Note may be made only in accordance with the following:

(i) General Rules Regarding Transfers of Global Notes. Subject to clauses (ii) through (vii) of this Section 6.5(i), Transfers of a Global Note representing Book-Entry Notes shall be limited to Transfers of such Global Note in whole, but not in part, to nominees of the Depository or to a successor of the Depository or such successor’s nominee.

(ii) Rule 144A Global Note to Regulation S Global Note. If an owner of a beneficial interest in a Rule 144A Global Note related to a Series and/or Class deposited with or on behalf of the Depository wishes at any time to exchange its interest in such Rule 144A Global Note for an interest in a Regulation S Global Note for that Series and/or Class, or to transfer its interest in such Rule 144A Global Note to a Person who wishes to take delivery thereof in the form of an interest in a Regulation S Global Note for that Series and/or Class, such Note Owner (or transferee), provided such Note Owner (or transferee) is not a “U.S. person” (as such term is defined in Regulation S), may, subject to the rules and procedures of the Depository, exchange or cause the exchange of such interest in such Rule 144A Global Note for a beneficial interest in the Regulation S Global Note for that Series and/or Class. Upon the receipt by the Indenture Trustee of (A) instructions from the Depository directing the Indenture Trustee to cause to be credited a beneficial interest in a Regulation S Global Note in an amount equal to the beneficial interest in such Rule 144A Global Note to be exchanged but not less than the minimum denomination applicable to the owner’s Notes held through a Regulation S Global Note, (B) a written order given in accordance with the Depository’s procedures containing information regarding the participant account of the Depository and, in the case of a transfer pursuant to and in accordance with Regulation S, the Euroclear or Clearstream account to be credited with such increase and (C) a certificate (each, a “Regulation S Note Transfer Certificate”) in the form of Exhibit B-2 hereto given by the Note Owner or its transferee stating that the exchange or transfer of such interest has been made in compliance with the transfer restrictions applicable to the Global Notes, including the requirements that the Note Owner or its transferee is not a “U.S. person” (as such term is defined in Regulation S) and the transfer is made pursuant to and in accordance with Regulation S, then the Indenture Trustee and the Note Registrar, shall reduce the principal amount of the Rule 144A Global Note for the related Series and/or Class and increase the principal amount of the Regulation S Global Note for the related Series and/or Class by the aggregate principal amount of the beneficial interest in the Rule 144A Global Note to be exchanged, and shall instruct Euroclear or Clearstream, as applicable, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Note for the related Series and/or Class equal to the reduction in the principal amount of the Rule 144A Global Note for the related Series and/or Class.

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(iii) Regulation S Global Note to Rule 144A Global Note. If an owner of a beneficial interest in a Regulation S Global Note related to a Series and/or Class deposited with or on behalf of the Depository wishes at any time to transfer its interest in such Regulation S Global Note to a Person who wishes to take delivery thereof in the form of an interest in a Rule 144A Global Note for such Series and/or Class, such owner’s transferee may, subject to the rules and procedures of the Depository, exchange or cause the exchange of such interest for an equivalent beneficial interest in a Rule 144A Global Note for such Series and/or Class. Upon the receipt by the Indenture Trustee and the Note Registrar, of (A) instructions from the Depository directing the Indenture Trustee and the Note Registrar, to cause to be credited a beneficial interest in a Rule 144A Global Note in an amount equal to the beneficial interest in such Regulation S Global Note to be exchanged but not less than the minimum denomination applicable to such owner’s Notes held through a Rule 144A Global Note, to be exchanged, such instructions to contain information regarding the participant account with the Depository to be credited with such increase, and (B) a certificate (each, a “Rule 144A Note Transfer Certificate”) in the form of Exhibit B-1 hereto given by the transferee of such beneficial interest, then the Indenture Trustee will reduce the principal amount of the Regulation S Global Note and increase the principal amount of the Rule 144A Global Note for the related Series and/or Class by the aggregate principal amount of the beneficial interest in the Regulation S Global Note for the related Series and/or Class to be transferred and the Indenture Trustee and the Note Registrar, shall instruct the Depository, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Note for the related Series and/or Class equal to the reduction in the principal amount of the Regulation S Global Note for the related Series and/or Class.

(iv) Transfers of Interests in Rule 144A Global Note. An owner of a beneficial interest in a Rule 144A Global Note may transfer such interest in the form of a beneficial interest in such Rule 144A Global Note in accordance with the procedures of the Depository without the provision of written certification.

(v) Transfers of Interests in Regulation S Global Note. An owner of a beneficial interest in a Regulation S Global Note may transfer such interest in the form of a beneficial interest in such Regulation S Global Note in accordance with the applicable procedures of Euroclear and Clearstream without the provision of written certification.

(vi) Regulation S Global Note to Regulation S Definitive Note. Subject to Section 5.4(j) hereof, an owner of a beneficial interest in a Regulation S Global Note for the related Series and/or Class deposited with or on behalf of a Depository may at any time transfer such interest for a Regulation S Definitive Note upon provision to the Indenture Trustee, the Issuer, the Co-Issuer and the Note Registrar of a Regulation S Note Transfer Certificate.

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(vii) Rule 144A Global Note to Rule 144A Definitive Note. Subject to Section 5.4(j) hereof, an owner of a beneficial interest in a Rule 144A Global Note deposited with or on behalf of a Depository may at any time transfer such interest for a Rule 144A Definitive Note, upon provision to the Indenture Trustee, the Issuer, the Co-Issuer and the Note Registrar of a Rule 144A Note Transfer Certificate.

(j) Transfers of Definitive Notes. In the event of any Transfer of a Regulation S Definitive Note, a Regulation S Note Transfer Certificate shall be provided prior to the Indenture Trustee’s or Note Registrar’s registration of such Transfer. In the event of any Transfer of a Rule 144A Definitive Note, a Rule 144A Note Transfer Certificate shall be provided prior to the Indenture Trustee’s or Note Registrar’s registration of such Transfer.

(k) ERISA Restrictions. Neither the Note Registrar nor the Indenture Trustee shall register the Transfer of any Definitive Notes unless the prospective transferee has delivered to the Indenture Trustee and the Note Registrar a certification to the effect that either (i) for so long as it holds such Notes or interest therein, it is not, and is not acquiring, holding or transferring the Notes, or any interest therein, on behalf of, or using “plan assets” (within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA) of, an “employee benefit plan” as defined in Section 3(3) of ERISA, a plan described in section 4975(e)(1) of the Code, an entity which is deemed to hold the “plan assets” of any such employee benefit plan or plan pursuant to 29 C.F.R. Section 2510.3-101, as modified by section 3(42) of ERISA (the “Plan Asset Regulations”), which employee benefit plan, plan or entity is subject to Title I of ERISA or section 4975 of the Code, or a governmental, non-U.S., non-electing church or other plan which is subject to any U.S. federal, state, local or other law that is substantially similar to Title I of ERISA or section 4975 of the Code (“Similar Law”), or (ii) (A) it believes that such Notes are properly treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulations and agrees to so treat such Notes and (B) the transferee’s acquisition, holding and subsequent disposition of the Notes or any interest therein will satisfy the requirements of Prohibited Transaction Class Exemption (“PTCE”) 84-14 (relating to transactions effected by a qualified professional asset manager), PTCE 90-1 (relating to investments by insurance company pooled separate accounts), PTCE 91-38 (relating to investments in bank collective investment funds), PTCE 95-60 (relating to transactions involving insurance company general accounts), PTCE 96-23 (relating to transactions directed by an in-house professional asset manager) or the statutory prohibited transaction exemption for service providers set forth in section 408(b)(17) of ERISA and section 4975(d)(20) of the Code or a similar class, statutory or administrative exemption and will not result in a non-exempt prohibited transaction under section 406 of ERISA or section 4975 of the Code (or, in the case of a governmental, non-U.S., non-electing church or other plan subject to such Similar Law, will not violate any such Similar Law). In the case of any Book-Entry Note, each transferee of such Note or any beneficial interest therein by virtue of its acquisition of such Note will be deemed to represent either (i) or (ii) above.

(l) No Liability of Indenture Trustee for Transfers. To the extent permitted under applicable law, the Indenture Trustee (in any of its capacities) shall be under no liability to any Person for any registration of transfer of any Note that is in fact not permitted by this Section 6.5 or for making any payments due to the Noteholder thereof or taking any other action with respect to such Noteholder under the provisions of this Base Indenture so long as the transfer was registered by the Indenture Trustee and the Note Registrar in accordance with the requirements of this Base Indenture.

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(m) Deemed Representations regarding Fannie Mae´s Rights. Each transferee of a Term Note or of a beneficial interest therein, by accepting such Term Note or beneficial interest, shall be deemed to have made, acknowledged and represented to and with the Indenture Trustee and Fannie Mae, each of the following statements:

(i) the rights of any Noteholder will be subject and subordinate in all respects to all rights, powers, and prerogatives of Fannie Mae under the Fannie Mae Lender Contract, and no Noteholder enjoys privity of contract with Fannie Mae or is entitled to any benefit under the Acknowledgment Agreement except to the extent that the Indenture Trustee is entering into and shall perform under the Acknowledgment Agreement in its capacity as Indenture Trustee for the benefit of the Noteholders;

(ii) Fannie Mae has the right to terminate the Servicer with or without cause and controls the process for the disposition of assets under the Acknowledgment Agreement in the event of a termination of the Servicer or other transfer of MSRs;

(iii) pursuant to the Fannie Mae Lender Contract, Fannie Mae has the right to offset liabilities owed to it subject to the Acknowledgment Agreement against fees and compensation paid to the Servicer prior to any distribution of excess servicing to any Noteholder; and

(iv) Holders of any Term Notes further agree that, from time to time, Fannie Mae and the Servicer have the right to agree to effect amendments to the Acknowledgment Agreement, and Fannie Mae may make changes to the Fannie Mae Guide. Such Noteholders will be deemed to have consented to the terms of any amendments, restatements, modifications or any other supplements entered into with respect to the Transaction Documents as may be necessary or advisable in the Administrator’s and the Co-Issuer Administrator’s discretion for the terms of the Transaction Documents to conform to the terms set forth in any amendments to the Acknowledgment Agreement or changes to the Fannie Mae Guide.

Section 6.6. Mutilated, Destroyed, Lost and Stolen Notes. (a) If (1) any mutilated Note is surrendered to the Indenture Trustee or the Note Registrar, the Issuer Trusts, the Note Registrar or the Indenture Trustee receive evidence to their satisfaction of the destruction, loss or theft of any Note, and (2) there is delivered to the Issuer, the Co-Issuer, the Note Registrar or the Indenture Trustee such security or indemnity as may be required by them to save each of them harmless, then, in the absence of notice to the Issuer, the Co-Issuer, the Note Registrar or the Indenture Trustee that such Note has been acquired by a protected purchaser, the Issuer Trusts may execute, and, upon receipt of the documents required by Section 6.3, together with an Issuer and Co-Issuer Certificate, the Indenture Trustee will authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note of like tenor, Series or Class, Stated Maturity Date and Initial Note Balance, bearing a number not contemporaneously Outstanding.

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(b) In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Issuer Trusts in their discretion may, instead of issuing a new Note, pay such Note on a Payment Date in accordance with Section 4.5.

(c) Upon the issuance of any new Note under this Section, the Issuer, the Co-Issuer, the Indenture Trustee, or the Note Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Indenture Trustee) connected therewith.

(d) Every new Note issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Note will constitute an original additional contractual obligation of the Issuer Trusts, whether or not the mutilated, destroyed, lost or stolen Note will be at any time enforceable by anyone, and will be entitled to all the benefits of this Base Indenture equally and proportionately with any and all other Notes of the same Series or Class duly issued hereunder.

(e) The provisions of this Section are exclusive and will preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

Section 6.7. Payment of Interest; Interest Rights Preserved; Withholding Taxes. (a) Unless otherwise provided with respect to such Note pursuant to Section 6.1, interest payable on any Note will be paid to the Person in whose name that Note (or one or more Predecessor Notes) is registered at the close of business on the most recent Record Date.

(b) Subject to Section 6.7(a), each Note delivered under this Base Indenture upon transfer of or in exchange for or in lieu of any other Note will carry the rights to interest and fees accrued or principal accreted and unpaid, and to accrue or accrete, which were carried by such other Note.

(c) The right of any Noteholder to receive interest and fees on or principal of any Note shall be subject to any applicable withholding or deduction imposed pursuant to the Code or other applicable tax law, including foreign withholding and deduction. Any amounts properly so withheld or deducted shall be treated as actually paid to the appropriate Noteholder. In addition, in order to receive payments on its Notes free of U.S. federal withholding and backup withholding tax, each Noteholder shall timely furnish the Indenture Trustee on behalf of the Issuer Trusts, (1) any applicable IRS Form W-9, W-8BEN, W-8BEN-E, W-8ECI or W-8IMY (with any applicable attachments) and (2) any documentation that is required under FATCA to enable the Issuer, the Co-Issuer, the Indenture Trustee and any other agent of the Issuer Trusts to determine their duties and liabilities with respect to any taxes they may be required to withhold in respect of such Note or the Noteholder of such Note or beneficial interest therein, in each case, prior to the first Payment Date after such Noteholder’s acquisition of Notes and at such time or times required by law or that the Indenture Trustee on behalf of the Issuer Trusts or their respective agents may reasonably request, and shall update or replace such IRS form or documentation in accordance with its terms or its subsequent amendments. Each Noteholder will provide the applicable replacement IRS form or documentation every three (3) years (or sooner if there is a transfer to a new Noteholder or if required by applicable law). In each case above, the applicable IRS form or documentation shall be properly completed and signed under penalty of perjury.

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Section 6.8. Persons Deemed Owners. The Issuer, the Co-Issuer, the Indenture Trustee, the Note Registrar and any agent of the Issuer, the Co-Issuer, the Indenture Trustee or the Note Registrar may treat the Person in whose name the Note is registered in the Note Registrar as the owner of such Note for the purpose of receiving payment of principal of and (subject to Section 6.7) interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and neither the Issuer, the Co-Issuer, the Indenture Trustee, the Note Registrar, nor any agent of the Issuer, the Co-Issuer, the Indenture Trustee, or the Note Registrar will be affected by notice to the contrary.

Section 6.9. Cancellation. All Notes surrendered for payment, redemption, transfer, conversion or exchange will, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and, if not already canceled, will be promptly canceled by it. The Issuer Trusts may at any time deliver to the Indenture Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer Trusts may have acquired in any manner whatsoever, and all Notes so delivered will be promptly canceled by the Indenture Trustee. No Note will be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section, except as expressly permitted by this Base Indenture. The Indenture Trustee will dispose of all canceled Notes in accordance with its customary procedures.

Section 6.10. New Issuances of Notes.

(a) Issuance of New Notes. The Issuer Trusts may, from time to time, direct the Indenture Trustee, on behalf of the Issuer Trusts, to issue new Notes of any Series or Class, so long as the conditions precedent set forth in Section 6.10(b) are satisfied if, at the time of issuance, other Notes have already been issued and remain Outstanding. On or before the Issuance Date of new Notes of any Series or Class of Notes, the Issuer Trusts shall execute and deliver the required Indenture Supplement which shall incorporate the principal terms with respect to such additional Series or Class of Notes. The Indenture Trustee shall execute any such Indenture Supplement without the consent of any Noteholders, the Issuer Trusts shall execute the Notes of such Series or Class and the Notes of such Series or Class shall be delivered to the Indenture Trustee (along with the other deliverables required hereunder) for authentication and delivery. Notwithstanding the foregoing, the conditions to the issuance of the new Notes contemplated by Section 6.10(b) shall not apply to the issuance of any Series of Notes on the Closing Date.

(b) Conditions to Issuance of New Notes. The issuance of the Notes of any Series or Class after the Closing Date pursuant to this Section 6.10 shall be subject to the satisfaction of the following conditions:

(i) no later than ten (10) Business Days before the date that the new issuance is to occur, the Issuer Trusts deliver to the Indenture Trustee, each VFN Noteholder and each Note Rating Agency that has rated any Outstanding Note that will remain Outstanding after the new issuance, notice of such new issuance;

(ii) on or prior to the date that the new issuance is to occur, the Issuer Trusts deliver to the Indenture Trustee and each Note Rating Agency that has rated any Outstanding Note that will remain Outstanding after the new issuance, an Issuer and Co-Issuer Certificate to the effect that (x) the Issuer Trusts reasonably believe that the new issuance will not cause a material Adverse Effect on any Outstanding Notes or a Secured Party, and (y) all conditions precedent set forth in this Base Indenture to the issuance of such Notes have been met, an Issuer Trusts’ Tax Opinion with respect to such proposed issuance, and an Opinion of Counsel:

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(A) to the effect that all instruments furnished to the Indenture Trustee conform to the requirements of this Base Indenture for the Indenture Trustee to authenticate and deliver such Notes;

(B) to the effect that the form and terms of such Notes have been established in conformity with the provisions of this Base Indenture; and

(C) covering such other matters as the Indenture Trustee may reasonably request;

(iii) on or prior to the date that the new issuance is to occur, the Issuer Trusts will have delivered to the Indenture Trustee and each Note Rating Agency that is at that time rating Outstanding Notes that will remain Outstanding after the new issuance, an Opinion of Counsel to the effect that the Issuer Trusts have the requisite power and authority to issue such Notes and such Notes have been duly authorized and delivered by the Issuer Trusts and, assuming due authentication and delivery by the Indenture Trustee, constitute legal, valid and binding obligations of the Issuer Trusts enforceable in accordance with their terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws and legal principles affecting creditors’ rights generally from time to time in effect and to general equitable principles, whether applied in an action at law or in equity) and are entitled to the benefits of this Base Indenture, equally and ratably with all other Outstanding Notes, if any, of such Series or Class subject to the terms of this Base Indenture and each Indenture Supplement;

(iv) if any additional conditions to the new issuance are specified in writing to the Issuer Trusts by a Note Rating Agency that is at that time rating any Outstanding Note that will remain Outstanding after the new issuance, the Issuer Trusts satisfy such conditions, if they are applicable to such Notes;

(v) either (1) the Issuer obtains written confirmation from each Note Rating Agency that is at that time rating any Outstanding Note at the request of the Issuer that will remain Outstanding after the new issuance that the new issuance will not have a Ratings Effect on any Outstanding Notes that are rated by such Note Rating Agency at the request of the Issuer or (2) if the Administrator, the Co-Issuer Administrator and the Administrative Agents determine in their reasonable judgment that an applicable Note Rating Agency no longer provides such written confirmation described in the foregoing clause (1), (a) the Administrator and the Co-Issuer Administrator shall provide notice of such new issuance to the related Note Rating Agency and (b) each of the parties that would be Administrative Agents after giving effect to the new issuance shall have provided their prior written consent to such new issuance which may be given in reliance in part on the Issuer and Co-Issuer Certificate delivered pursuant to Section 6.10(b)(ii) above; (vi) no Event of Default shall have occurred and be continuing, as evidenced by an Issuer and Co-Issuer Certificate, unless (a) the proceeds of such new Notes are applied in whole or in part to redeem all other Outstanding Notes and/or (b) the Noteholders of any Notes that will remain Outstanding consent to such issuance of new Notes;

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(vii) on or prior to the date that the new issuance is to occur, the Issuer Trusts will have delivered to the Indenture Trustee an Indenture Supplement and, if applicable, the Issuer and Co-Issuer Certificate;

(viii) unless an Issuer Trusts’ Tax Opinion is provided, any Class of VFN must have the same Stated Maturity Date and Interim Payment Date as any and all other Outstanding Classes of VFNs;

(ix) if any Class of VFNs is treated as not outstanding for United States federal income tax purposes, each Class of VFNs must be treated as not outstanding for United States federal income tax purposes, and the financing of each such Class of VFNs shall be subject to the requirement for an Issuer Trusts’ Tax Opinion;

(x) for any new Series with respect to which there is a new Administrative Agent not currently set forth under the terms of the definition of “Administrative Agent,” the Administrative Agent shall have consented to the issuance of such Series, unless the Notes in respect of which the existing Administrative Agent’s consent is required, are paid in full and all related commitments terminated in writing by the Issuer Trusts and any remaining accrued commitment fees paid in full to such terminated Administrative Agent, in connection with the issuance of the new Series with the different Administrative Agent; and

(xi) any other conditions specified in the applicable Indenture Supplement; provided, however, that any one of the aforementioned conditions may be eliminated (other than clause (v) above and the requirement for an Issuer Trusts’ Tax Opinion) or modified as a condition precedent to any new issuance of a Series or Class of Notes if the Issuer Trusts have obtained approval from each Note Rating Agency that is at that time rating any Outstanding Notes that will remain Outstanding after the new issuance.

(c) No Notice or Consent Required to or from Existing Noteholders and Owners. Except as provided in Section 6.10(b) above, the Issuer, the Co-Issuer and the Indenture Trustee will not be required to provide prior notice to or to obtain the consent of any Noteholder or Note Owner of Notes of any Outstanding Series or Class to issue any additional Notes of any Series or Class.

(d) Other Provisions. There are no restrictions on the timing or amount of any additional issuance of Notes of an Outstanding Series or Class within a Series, of Notes, so long as the conditions described in Section 6.10(b) are met or waived.

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(e) Sale Proceeds. The proceeds of sale of any new Series of Notes shall be wired to the Collection and Funding Account, and the Indenture Trustee shall disburse such sale proceeds at the direction of the Administrator on behalf of the Issuer and the Co-Issuer Administrator on behalf of the Co-Issuer, except to the extent such funds are needed to ensure that no the Borrowing Base Deficiency exists. The Administrator on behalf of the Issuer and the Co-Issuer Administrator on behalf of the Co-Issuer may direct the Issuer and Co-Issuer, respectively, to apply such proceeds to reduce pro rata based on Series Invested Amount, the VFN Principal Balance of any Classes of Variable Funding Notes, or to redeem any Series of Notes in accordance with Section 13.1. In the absence of any such direction, the proceeds of such sale shall be distributed to PMC and PMH, or at the Administrator’s and Co-Issuer Administrator’s direction on the Issuance Date for the newly issued Notes. The Administrator and the Co-Issuer Administrator shall deliver to the Indenture Trustee a report demonstrating that the release of sale proceeds pursuant to the Issuer’s and the Co-Issuer’s direction will not cause a Borrowing Base Deficiency, as a precondition to the Indenture Trustee releasing such proceeds.

(f) Increase or Reduction in Maximum VFN Principal Balance. The increase or reduction in the Maximum VFN Principal Balance in respect of any Outstanding Class of Notes, the increase or decrease of any Advance Rates in respect thereof and/or the increase or decrease of interest rates in respect thereof shall not constitute an issuance of “new Notes” for purpose of this Section 6.10.

Article VII

Satisfaction and Discharge; Cancellation of Notes Held by the Issuer, the Co-Issuer, PMC or PMH

Section 7.1. Satisfaction and Discharge of Indenture. This Base Indenture will cease to be of further effect with respect to any Series or Class of Notes (except as to any surviving rights of transfer or exchange of Notes of that Series or Class expressly provided for herein or in the form of Note for that Series or Class), and the Indenture Trustee, on demand of and at the expense of the Issuer Trusts, will execute proper instruments acknowledging satisfaction and discharge of this Base Indenture, when:

(a) all Notes of that Series or Class theretofore authenticated and delivered (other than (i) Notes of that Series or Class which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 6.6, and (ii) Notes of that Series or Class for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer Trusts and thereafter repaid to the Issuer Trusts or discharged from that trust) have been delivered to the Indenture Trustee canceled or for cancellation or have been redeemed in accordance with Article XIII hereof or the applicable Indenture Supplement (in which case, such redeemed Notes shall be deemed to have been canceled and shall be immediately surrendered to the Indenture Trustee in exchange for the related redemption price);

(b) with respect to the discharge of this Base Indenture for each Series or Class, the Issuer Trusts have paid or caused to be paid all sums payable hereunder (including payments to the Indenture Trustee (in all its capacities) pursuant to Section 11.7 with respect to the Notes or in respect of Fees, and any and all other amounts due and payable pursuant to this Base Indenture; and

(c) the Issuer Trusts have delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Base Indenture with respect to the Notes of that Series or Class have been complied with.

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Notwithstanding the satisfaction and discharge of this Base Indenture with respect to any Series or Class of Notes, the obligations of the Administrator and the Co-Issuer Administrator to the Indenture Trustee with respect to any Series or Class of Notes under Section 11.7 and of the Issuer Trusts to the Securities Intermediary under Section 4.9 and the obligations and rights of the Indenture Trustee under Section 7.2 and Section 11.7, respectively, will survive such satisfaction and discharge.

Section 7.2. Application of Trust Money. All money and obligations deposited with the Indenture Trustee pursuant to Section 7.1 and all money received by the Indenture Trustee in respect of such obligations will be held in trust and applied by it or the Paying Agent, in accordance with the provisions of the Class of Notes in respect of which it was deposited and this Base Indenture and the related Indenture Supplement, to the payment to the Persons entitled thereto, of the principal and interest for whose payment that money and obligations have been deposited with or received by the Indenture Trustee or the Paying Agent.

Section 7.3. Cancellation of Notes Held by the Issuer, the Co-Issuer or PMC. If the Issuer, the Co-Issuer, PMC or any of their respective Affiliates holds any Notes, that Noteholder may, subject to any provision of a related Indenture Supplement limiting the repayment of such Notes by notice from that Noteholder to the Indenture Trustee, cause the Notes to be repaid and canceled, whereupon the Notes will no longer be Outstanding; provided, that, such repayment and cancelation shall be subject to the written consent of the Administrative Agent.

Section 7.4. Termination of Servicer’s Servicing Rights; Fannie Mae’s Rights. (a) The Security Interest is subject and subordinate to all rights, remedies, and prerogatives of Fannie Mae under and in connection with the Acknowledgment Agreement and the Fannie Mae Requirements and each Noteholder acknowledges such senior rights, remedies and prerogatives upon the acquisition of an interest in a Note. Notwithstanding anything to the contrary in this Indenture or any other Transaction Document, each Noteholder agrees to the following:

(1) the rights of any Noteholder will be subject and subordinate in all respects to all rights, powers, and prerogatives of Fannie Mae under the Fannie Mae Lender Contract, and no Noteholder enjoys privity of contract with Fannie Mae or is entitled to any benefit under the Acknowledgment Agreement except to the extent that the Indenture Trustee is entering into and shall perform under the Acknowledgment Agreement in its capacity as Indenture Trustee for the benefit of the Noteholders;

(2) Fannie Mae has the right to terminate the Servicer with or without cause and controls the process for the disposition of assets under the Acknowledgment Agreement in the event of a termination of the Servicer or other transfer of MSRs;

(3) pursuant to the Fannie Mae Lender Contract, Fannie Mae has the right to offset liabilities owed to it subject to the Acknowledgment Agreement against fees and compensation paid to the Servicer prior to any distribution of excess servicing to any Noteholder; and (4) Noteholders of any Term Notes further agree that, from time to time, Fannie Mae and the Servicer have the right to agree to effect amendments to the Acknowledgment Agreement, and Fannie Mae may make changes to the Fannie Mae Guide.

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Such Noteholders will be deemed to have consented to the terms of any amendments, restatements, modifications or any other supplements entered into with respect to the Transaction Documents as may be necessary or advisable in the Administrator’s and the Co-Issuer Administrator’s discretion for the terms of the Transaction Documents to conform to the terms set forth in any amendments to the Acknowledgment Agreement or changes to the Fannie Mae Guide.

(b) As a result of the termination of the Servicer’s Servicing Rights in all or a portion of the Collateral, Issuer acknowledges that:

(1) the Indenture Trustee, on behalf of the Noteholders, shall have rights pursuant to and in accordance with the Acknowledgment Agreement with respect to the MSRs related to the Subject Mortgages (including, (i) the ability to retain the servicing of, with the consent of Fannie Mae, the Subject Mortgages and (ii) the ability to appoint, with the consent of Fannie Mae, a proposed new servicer that will assume the duties rights and obligations of the Servicer with respect to the Subject Mortgages); and

(2) notwithstanding such rights, none of the Indenture Trustee, the Administrative Agent or the Noteholders shall have any responsibility, express or implied, to protect or consider Servicer’s rights or interests in connection with any of the Indenture Trustee’s actions or inactions pursuant to the Acknowledgment Agreement, including the receipt of any amounts with respect to the Subject Mortgages following any transfer of Issuer responsibility.

(c) Any Distributable Funds received by the Indenture Trustee shall be applied first, to satisfy any costs and expenses of the Indenture Trustee, the transferee servicer or any of their affiliates in connection with any of the transactions contemplated by any of the Transaction Documents and second, to reduce the other obligations.

(d) The Servicer acknowledges that, notwithstanding the termination of its Servicing Rights under the Fannie Mae Lender Contract, it remains obligated in accordance with the terms hereof to the extent that any amounts payable to the Indenture Trustee, the Administrative Agent, the Noteholders or any Indemnified Party hereunder have not been paid in full.

(e) Any provision providing for the exercise of any action or discretion by the Indenture Trustee, (i) with respect to Sections 5, 6 or 7 of the Acknowledgment Agreement as a result of a Transfer/Engagement Request or termination of Servicing Rights under the Fannie Mae Lender Contract, shall be exercised by the Indenture Trustee at the written direction of 100% of the VFN Noteholders, and (ii) with respect to any other provision of the Acknowledgment Agreement (other than Sections 5, 6 and 7 thereof), shall be exercised by the Indenture Trustee at the written direction of the Majority Noteholders of all Outstanding Notes.

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Article VIII

Events of Default and Remedies

Section 8.1. Events of Default.

“Event of Default” means, any one of the following events (whatever the reason for such Event of Default, and whether it is voluntary or involuntary, or effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) unless otherwise specified in any Indenture Supplement with respect to any Class, default (which default continues for a period of two (2) Business Days following written notice (which may be in electronic form) from the Indenture Trustee or the Administrative Agent), in the payment: (1) of (i) any interest or any Fees due and owing on any Payment Date, (ii) any Scheduled Principal Payment Amount due and owing on any date, or (iii) any Early Amortization Event Payment Amount due and owing on any date; or (2) in full of all accrued and unpaid interest and the outstanding Note Balance of the Notes of any Series or Class on or before the applicable Stated Maturity Date;

(b) the occurrence of an Insolvency Event as to the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator or the Servicer;

(c) the Issuer, the Co-Issuer or the Trust Estate shall have become subject to registration as an “investment company” within the meaning of the Investment Company Act as determined by a court of competent jurisdiction in a final and non-appealable order;

(d) either PMC or PMH sells, transfers, pledges or otherwise disposes of the related Owner Trust Certificate (except to a wholly-owned subsidiary of PMC or PMH, respectively) other than pursuant to the terms and provisions of the Transaction Documents, whether voluntarily or by operation of law, foreclosure or other enforcement by a Person of its remedies against PMC or PMH, respectively, except with the consent of the Administrative Agent;

(e) (i) any material provision of any Transaction Document shall at any time for any reason (other than pursuant to the express terms thereof) cease to be valid and binding on or enforceable against the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer or any of their respective Affiliates intended to be a party thereto, (ii) the validity or enforceability of any Transaction Document shall be contested by the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer or any of their respective Affiliates, (iii) a proceeding shall be commenced by the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer or any of their respective Affiliates or any governmental body having jurisdiction over the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer or any of their respective Affiliates, seeking to establish the invalidity or unenforceability of any Transaction Document, or (iv) the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer or any of their respective Affiliates shall deny in writing that it has any liability or obligation purported to be created under any Transaction Document; (f) the Administrator, the Co-Issuer Administrator or any Affiliate thereof has taken any action which, or failed to take any action, the omission of which could reasonably be expected to materially impair the interests of the Issuer Trusts in the Participation Certificates or the security interest or rights of the Indenture Trustee in the Trust Estate, subject only to the interests and rights of Fannie Mae; provided, however, that if the event is capable of being cured in all respects by corrective action and has not resulted in a material adverse effect on the Noteholders’ interests in the Trust Estate, such event shall not become an Event of Default unless it remains uncured for two (2) Business Days following its occurrence;

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(g) following a Payment Date on which a draw is made on a Series Reserve Account, the amount on deposit in such Series Reserve Account is not increased back to the related Series Reserve Required Amount (if applicable) within the time frame set forth in the related Indenture Supplement;

(h) (A) any United States federal income tax is imposed on either of the Issuer or the Co-Issuer, separately or collectively, as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for United States federal income tax purposes or any U.S. withholding tax is imposed on payments to the Issuer Trusts with respect to the Participation Certificates or (B) a tax, ERISA, or other government lien, in any case, other than Permitted Liens, is imposed on the Participation Certificates or any property of either of the Issuer Trusts;

(i) the occurrence of a Borrowing Base Deficiency which continues for a period of two (2) Business Days following written notice from the Indenture Trustee or the Administrative Agent;

(j) the occurrence and continuation of an “Event of Default” (as defined in the PC Repurchase Agreement) under the PC Repurchase Agreement;

(k) the occurrence of an “Event of Default” (as defined in the PC Repo Guaranty) under the PC Repo Guaranty;

(l) any failure by PMC or PMH to deliver the report containing (i) any Determination Date Report pursuant to Section 3.2 or (ii) any MSR Monthly Report pursuant to Section 3.3(f), which continues unremedied for a period of five (5) Business Days after a Responsible Officer of PMC or PMH shall have obtained actual knowledge of such failure, or shall have received written or electronic notice from the Indenture Trustee or any Noteholder of such failure;

(m) (i) (A) PMC or PMH shall fail to materially comply with the requirements of Sections 10.2(n), 10.3(a), 10.3(b), 10.3(c) or 10.3(d), or (B) PMC or PMH shall fail to provide notice of an Event of Default pursuant to the requirements set forth in Section 4.12; or (ii) the Issuer, the Co-Issuer, the Servicer, the Administrator or the Co-Issuer Administrator shall breach or default in the due observance or performance of any of its other covenants or agreements in this Base Indenture, any Indenture Supplement or any other Transaction Document in any material respect (subject to any cure period provided therein), and any such default shall continue for a period of five (5) Business Days after the earlier to occur of (a) actual discovery by a Responsible Officer of the Issuer, the Co-Issuer, the Servicer, the Administrator or the Co-Issuer Administrator, as applicable, or (b) the date on which written or electronic notice of such failure, requiring the same to be remedied, shall have been given from the Indenture Trustee or any Noteholder to a Responsible Officer of the Issuer, the Co-Issuer, the Servicer, the Administrator or the Co-Issuer Administrator;

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(n) (i) any representation or warranty of the Issuer, the Co-Issuer, the Servicer, the Administrator or the Co-Issuer Administrator made in this Base Indenture, any Indenture Supplement or any other Transaction Document in any material respect (other than under the PC Repurchase Agreement) shall prove to have been breached in any material respect as of the time when the same shall have been made or deemed made, and continues uncured and unremedied for a period of ten (10) Business Days after the earlier to occur of (a) actual discovery by a Responsible Officer of the Issuer, the Co-Issuer, the Servicer, the Administrator or the Co-Issuer Administrator, as applicable, or (b) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to a Responsible Officer of the Issuer, the Co-Issuer, the Servicer, the Administrator or the Co-Issuer Administrator, as applicable;

(o) (a) a final judgment or judgments for the payment of money in excess of $50,000 in the aggregate shall be rendered against the Issuer Trusts by one or more courts, administrative tribunals or other bodies having jurisdiction over them, (b) an order of any court, administrative agency, arbitrator or governmental body rendered against PMC, PMH or the Issuer Trusts, which would have a material Adverse Effect on the transactions contemplated hereunder or (c) an event has occurred which with notice or lapse of time or both would constitute such a default under clause (b) herein with respect to any such order of any court, administrative agency, arbitrator or governmental body;

(p) following a Payment Date on which a draw is made on the Expense Reserve Account, the amount on deposit in the Expense Reserve Account is not increased back to the related Expense Reserve Required Amount prior to the next Payment Date;

(q) the occurrence of any action by Fannie Mae pursuant to the Acknowledgment Agreement to terminate the rights of PMC as servicer;

(r) the occurrence of a Subservicer Termination Event;

(s) the occurrence of any other event designated as an Event of Default in the related Indenture Supplement.

Upon the occurrence of any such event none of the Administrator, the Co-Issuer Administrator nor the Servicer shall be relieved from performing its obligations in a timely manner in accordance with the terms of this Base Indenture, and each of the Administrator, the Co-Issuer Administrator and the Servicer shall provide the Indenture Trustee, each Note Rating Agency for each Note then Outstanding, the Disposition Manager and the Noteholders prompt notice of such failure or delay by it, together with a description of its effort to perform its obligations. Each of the Administrator, the Co-Issuer Administrator, the Servicer and the Disposition Manager shall promptly notify the Indenture Trustee in writing of any Event of Default or an event which with notice, the passage of time or both would become an Event of Default of which it has actual knowledge.

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For purposes of this Section 8.1, the Indenture Trustee shall not be deemed to have knowledge of an Event of Default unless a Responsible Officer of the Indenture Trustee assigned to and working in the Corporate Trust Office has actual knowledge thereof or unless written notice of any event which is in fact such an Event of Default is received by the Indenture Trustee from the Administrative Agent and such notice references the Notes, the Trust Estate or this Base Indenture. The Indenture Trustee shall provide notice of defaults in accordance with Section 3.3(b) and Section 11.2.

Section 8.2. Acceleration of Maturity; Rescission and Annulment. (a) If an Event of Default of the kind specified in clauses (b), (c) or (q) of Section 8.1 occurs, the unpaid principal amount of all of the Notes shall automatically become immediately due and payable without notice, presentment or demand of any kind, and if an Insolvency Event under Section 8.1(b) has occurred with respect to PMC or PMH, the Indenture Trustee shall exercise the Issuer Trusts’ rights to accelerate and terminate the PC Repurchase Agreement and shall liquidate the Collateral as provided in Section 8.7 of this Agreement. If any other Event of Default occurs and is continuing, then and in each and every such case, the Indenture Trustee, at the written direction of (i) any of the Administrative Agent, (ii) the Majority Noteholders of all Outstanding Notes that are not Variable Funding Notes (excluding any Retained Notes) or (iii) the Majority Noteholders for any Series of Variable Funding Notes Outstanding (excluding any Retained Notes), may declare the Note Balance of all the Outstanding Notes and all interest and principal accrued and unpaid (if any) thereon and all other amounts due and payable under any Transaction Document to be due and payable immediately, and upon any such declaration each Note will become and will be immediately due and payable and the Revolving Period with respect to such Series or Class shall immediately terminate, anything in this Base Indenture, the related Indenture Supplement(s) or in the Notes to the contrary notwithstanding. Such payments are subject to the allocation, deposits and payment sections of this Base Indenture and of the related Indenture Supplement(s).

(b) At any time after such a declaration of acceleration has been made or an automatic acceleration has occurred with respect to the Notes of any Series or Class and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereafter provided in this Article VIII, the Majority Noteholders of all Outstanding Notes, by written notice to the Issuer, the Co-Issuer and the Indenture Trustee, may rescind and annul such declaration and its consequences if:

(i) the Issuer Trusts have paid or deposited with the Indenture Trustee a sum sufficient to pay (A) all overdue installments of interest on such Notes, (B) the principal of such Notes which has become due otherwise than by such declaration of acceleration, and interest thereon at the rate or rates prescribed therefor by the terms of such Notes, to the extent that payment of such interest is lawful, (C) interest upon overdue installments of interest at the rate or rates prescribed therefore by the terms of such Notes to the extent that payment of such interest is lawful, and (D) all sums paid by the Indenture Trustee hereunder and the reasonable compensation, expenses and disbursements of the Indenture Trustee or the bank serving as Indenture Trustee (in any of its capacities), their agents and counsel, all other amounts due under Section 4.5; and (ii) all Events of Default, other than the nonpayment of the principal of such Notes which has become due solely by such acceleration, have been cured or waived as provided in Section 8.14.

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No such rescission will affect any subsequent default or impair any right consequent thereon.

Section 8.3. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee. Each of the Issuer Trusts covenants that if:

(a) either the Issuer or the Co-Issuer defaults in the payment of interest on any Notes when such interest becomes due and payable, which default continues for a period of two (2) Business Days following written notice from the Indenture Trustee of such default; or

(b) either the Issuer or the Co-Issuer defaults in the payment of the principal of any Series or Class of Notes on the Stated Maturity Date thereof;

(c) then the Issuer Trusts will, upon demand of the Indenture Trustee, pay (subject to the allocation provided in Section 4.5(a)(2) hereof and any related Indenture Supplement) to the Indenture Trustee, for the benefit of the Noteholders of any such Notes, the whole amount then due and payable on any such Notes for principal and interest, together with any Cumulative Interest Shortfall Amounts, unless otherwise specified in the applicable Indenture Supplement, and in addition thereto, will pay such further amount as will be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and the bank serving as Indenture Trustee (in any of its capacities), their agents and counsel and all other amounts due under Section 4.5.

If the Issuer Trusts fail to pay such amounts forthwith upon such demand, the Indenture Trustee may, in its own name and as trustee of an express trust, institute a judicial proceeding for the collection of the sums so due and unpaid, and may directly prosecute such proceeding to judgment or final decree, and the Indenture Trustee may enforce the same against the Issuer Trusts or any other obligor upon the Notes and collect the money adjudged or decreed to be payable in the manner provided by law and this Base Indenture.

Section 8.4. Indenture Trustee May File Proofs of Claim. In case of the pendency of any Insolvency Event or other similar proceeding or event relative to the Issuer Trusts or any other obligor upon the Notes or the property of the Issuer Trusts or of such other obligor, the Indenture Trustee (irrespective of whether the principal of the Notes will then be due and payable as therein expressed or by declaration or otherwise) will be entitled and empowered by intervention in such proceeding or otherwise:

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(a) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary and advisable in order to have the claims of the Indenture Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel and all other amounts due under Section 4.5) and of the Noteholders allowed in such judicial proceeding; and (b) to collect and receive any funds or other property payable or deliverable on any such claims and to distribute the same; and any receiver, assignee, trustee, liquidator or other similar official in any such proceeding is hereby authorized by each Noteholder to make such payment to the Indenture Trustee and the bank serving as Indenture Trustee (in all its capacities), and in the event that the Indenture Trustee consents to the making of such payments directly to the Noteholders, to pay to the Indenture Trustee and the bank serving as Indenture Trustee (in all its capacities) any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and the bank serving as Indenture Trustee (in all its capacities), their agents and counsel, and any other amounts due the Indenture Trustee and the bank serving as Indenture Trustee (in all its capacities) under Section 4.5.

Nothing herein contained will be deemed to authorize the Indenture Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Noteholder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such proceeding.

Section 8.5. Indenture Trustee May Enforce Claims Without Possession of Notes. All rights of action and claims under this Base Indenture or the Notes of any Series or Class are subject to the Acknowledgment Agreement and the Fannie Mae Requirements and may be prosecuted and enforced by the Indenture Trustee, without the possession of any of the Notes of such Series or Class or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Indenture Trustee, will be brought in its own name as trustee of an express trust, and any recovery of judgment will, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its respective agents and counsel, be for the ratable benefit of the Noteholders of the Notes of such Series or Class in respect of which such judgment has been recovered.

Section 8.6. Application of Money Collected. Any money or other property collected by the Indenture Trustee pursuant to this Article VIII will be applied in accordance with Section 4.5(a)(2), at the Final Payment Date fixed by the Indenture Trustee and, in case of the payment of such money on account of principal, interest or fees, upon presentation of the Notes of the related Series or Class and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid.

Section 8.7. Sale of Collateral Requires Consent of Noteholders. Subject to the Acknowledgment Agreement and the Fannie Mae Requirements, the Indenture Trustee shall not sell Collateral or cause the Issuer Trusts to sell Collateral following any Event of Default, except with the written consent, or at the direction of, the Noteholders as set forth in Section 8.13; provided, that the Indenture Trustee shall, subject to the consent of Fannie Mae, sell Collateral or cause the Issuer Trusts to sell Collateral without prior consent of any of the Noteholders if an Event of Default under clauses (b), (c) or (q) of Section 8.1 occurs. Notwithstanding the foregoing, the consent of 100% of the Noteholders of the Outstanding Notes of each Series shall be required for any sale that does not generate sufficient proceeds to pay the Note Balance of all such Notes plus all accrued and unpaid interest and other amounts owed in respect of such Notes and the Transaction Documents. If such direction has been given by the Noteholders of the requisite percentage of all Outstanding Notes, the Indenture Trustee shall, subject to the Acknowledgment Agreement and the Fannie Mae Requirements and the terms of the Acknowledgment Agreement, cause the Issuer Trusts to sell Collateral pursuant to Section 8.15, and shall provide notice of this to each Note Rating Agency of then Outstanding Notes.

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Section 8.8. Limitation on Suits. No Noteholder will have any right to institute any proceeding, judicial or otherwise, with respect to this Base Indenture or any Note, or for the appointment of a receiver or trustee or similar official, or for any other remedy hereunder, unless:

(a) such Noteholder has previously given written notice to the Indenture Trustee of a continuing Event of Default with respect to Notes of such Noteholder’s Notes’ Series or Class;

(b) the Noteholders of more than 50% of the Note Balance of the Outstanding Notes of each Series, measured by Voting Interests, have made written request to the Indenture Trustee to institute proceedings in respect of such Event of Default in the name of the Indenture Trustee hereunder;

(c) such Noteholder or Noteholders have offered to the Indenture Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in compliance with such request; and

(d) the Indenture Trustee, for sixty (60) days after the Indenture Trustee has received such notice, request and offer of indemnity, has failed to institute any such proceeding; it being understood and intended that no one or more Noteholders of Notes of such Series or Class will have any right in any manner whatsoever by virtue of, or by availing of, any provision of this Base Indenture or any Note to affect, disturb or prejudice the rights of any other Noteholders of Notes, or to obtain or to seek to obtain priority or preference over any other such Noteholders or to enforce any right under this Base Indenture or any Note, except in the manner herein provided and for the equal and proportionate benefit of all the Noteholders of all Notes.

The rights set out in this Section 8.8 are further subject to Section 7.4(a).

Section 8.9. Limited Recourse. Notwithstanding any other terms of this Base Indenture, the Notes, any other Transaction Documents or otherwise, the obligations of the Issuer Trusts under the Notes, this Base Indenture and each other Transaction Document to which it is a party are limited recourse obligations of the Issuer Trusts, payable solely from the Trust Estate, and following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms of this Base Indenture, none of the Noteholders, the Indenture Trustee or any of the other parties to the Transaction Documents shall be entitled to take any further steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall not thereafter revive. Subject to the foregoing and to the terms of the applicable Indenture Supplement, each Noteholder will, however, have the absolute and unconditional right to receive payment of all amounts due with respect to the Notes pursuant and respect to the terms of the Indenture, which right shall not be impaired without the consent of each Noteholder and to initiate suit for the enforcement of any such payment, which right shall not be impaired without the consent of such Noteholder. No recourse shall be had for the payment of any amount owing in respect of the Notes or this Base Indenture or for any action or inaction of the Issuer Trusts against any officer, director, employee, equity holder or organizer of the Issuer Trusts or any of their successors or assigns for any amounts payable under the Notes or this Base Indenture.

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It is understood that the foregoing provisions of this Section 8.9 shall not (i) prevent recourse to the Trust Estate for the sums due or to become due under any security, instrument or agreement which is part of the Trust Estate, (ii) prevent recourse to the Guarantor under the PC Repo Guaranty or (iii) save as specifically provided therein, constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Notes or secured by this Base Indenture. It is further understood that the foregoing provisions of this Section 8.9 shall not limit the right of any Person, to name the Issuer or the Co-Issuer as a party defendant in any proceeding or in the exercise of any other remedy under the Notes or this Base Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

Section 8.10. Restoration of Rights and Remedies. If the Indenture Trustee or any Noteholder has instituted any proceeding to enforce any right or remedy under this Base Indenture and such proceeding has been discontinued or abandoned for any reason, then and in every such case the Issuer, the Co-Issuer, the Indenture Trustee and the Noteholders will, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders will continue as though no such proceeding had been instituted.

Section 8.11. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy will, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 8.12. Delay or Omission Not Waiver. No delay or omission of the Indenture Trustee or of any Noteholder to exercise any right or remedy accruing upon any Event of Default will impair any such right or remedy or constitute a waiver of any such Event of Default or acquiescence therein. Every right and remedy given by this Article or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be.

Section 8.13. Control by Noteholders. Either 100% of the VFN Noteholders or the Majority Noteholders of all Outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred on the Indenture Trustee with respect to such Notes; provided that:

(a) the Indenture Trustee will have the right to decline to follow any such direction if the Indenture Trustee, being advised by counsel, determines that the action so directed may violate applicable law or would conflict with this Base Indenture or if the Indenture Trustee in good faith determines that the proceedings so directed would have a substantial likelihood of involving it in personal liability or be unjustly prejudicial to the Noteholders not taking part in such direction, unless the Indenture Trustee has received indemnity satisfactory to it from the Noteholders;

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(b) the Indenture Trustee may take any other action permitted hereunder deemed proper by the Indenture Trustee which is not inconsistent with such direction; and

(c) to the extent there are conflicting directions between 100% of the VFN Noteholders and the Majority Noteholders, the Indenture Trustee will take its direction from 100% of the VFN Noteholders (excluding any Retained Notes).

The rights of the Noteholders set out in this Section 8.13 are further subject to Section 7.4(a).

Section 8.14. Waiver of Past Defaults. Together, the Majority Noteholders of all Outstanding Notes that are not Variable Funding Notes, the Majority Noteholders for any Series of Variable Funding Notes Outstanding and the Administrative Agent may on behalf of the Noteholders of all such Notes waive any past default hereunder and its consequences, except a default not theretofore cured:

(a) in the payment of the principal of or interest on any Note, or

(b) in respect of a covenant or provision hereof which under Article XII cannot be modified or amended without the consent of the Noteholder of each Outstanding Note.

Upon any such waiver, such default will cease to exist, and any Event of Default arising therefrom will be deemed to have been cured, for every purpose of this Base Indenture; but no such waiver will extend to any subsequent or other default or impair any right consequent thereon.

Section 8.15. Sale of Trust Estate. (a) The power to effect any Sale of any portion of the Trust Estate shall not be exhausted by any one or more Sales as to any portion of the Trust Estate remaining unsold, but shall continue unimpaired until the entire Trust Estate shall have been sold or all amounts payable on the Notes and under this Base Indenture with respect thereto shall have been paid. The Indenture Trustee may from time to time postpone any public Sale by public announcement made at the time and place of such Sale.

(b) Unless the Majority Noteholders of all Outstanding Series have otherwise provided its written consent to the Indenture Trustee, at any public Sale of all or any portion of the Trust Estate at which a minimum bid equal to or greater than all amounts due to the Indenture Trustee hereunder and the entire amount which would be payable to the Noteholders in full payment thereof in accordance with Section 8.6, on the Payment Date next succeeding the date of such sale, has not been received, the Indenture Trustee shall prevent such sale by bidding an amount at least $1.00 more than the highest other bid in order to preserve the Trust Estate.

(c) In connection with a Sale of all or any portion of the Trust Estate:

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(i) any of the Noteholders may bid for and purchase the property offered for Sale, and upon compliance with the terms of sale may hold, retain and possess and dispose of such property, without further accountability;

(ii) the Indenture Trustee may bid for and acquire the property offered for Sale in connection with any Sale thereof;

(iii) the Indenture Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Trust Estate in connection with a Sale thereof;

(iv) the Indenture Trustee is hereby irrevocably appointed the agent and attorney-in-fact of the Issuer Trusts to transfer and convey its interest in any portion of the Trust Estate in connection with a Sale thereof, and to take all action necessary to effect such Sale; and

(v) no purchaser or transferee at such a Sale shall be bound to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any monies.

(d) Notwithstanding anything to the contrary in this Base Indenture, and subject to the Acknowledgment Agreement and the Fannie Mae Requirements, if an Event of Default has occurred and is continuing and the Notes have become due and payable or have been declared due and payable and such declaration and its consequences have not been rescinded and annulled, any proceeds received by the Indenture Trustee with respect to a foreclosure, sale or other realization resulting from a transfer of the assets of the Trust Estate shall be allocated in accordance with Section 4.5(a)(2) hereof. The amount, if any, so allocated to the Issuer Trusts shall be paid by the Indenture Trustee to or to the order of the Issuer Trusts free and clear of the Adverse Claim of this Base Indenture and the Noteholders shall have no claim or rights to the amount so allocated.

Section 8.16. Undertaking for Costs. All parties to this Base Indenture agree, and each Noteholder by its acceptance thereof will be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Base Indenture, or in any suit against the Indenture Trustee for any action taken or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section will not apply to any suit instituted by the Indenture Trustee, to any suit instituted by any Noteholder or group of Noteholders holding in the aggregate more than 25% of the Note Balance of the Outstanding Notes of each Series (measured by Voting Interests) to which the suit relates, or to any suit instituted by any Noteholders for the enforcement of the payment of the principal of or interest on any Note on or after the applicable Stated Maturity Date expressed in such Note.

Section 8.17. Waiver of Stay or Extension Laws.

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Each of the Issuer Trusts covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Base Indenture; and each of the Issuer Trusts (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 8.18. Notice of Waivers. Promptly (and in no event later than two (2) Business Days following the occurrence thereof), after any waiver of an Event of Default pursuant to Section 4.12, or any rescission or annulment of a declaration of acceleration pursuant to Section 8.2(b), or any waiver of past default pursuant to Section 8.14, the Issuer Trusts will notify all related Note Rating Agencies and the Disposition Manager in writing.

Article IX

The Issuer

Section 9.1. Representations and Warranties of Issuer Trusts. Each of the Issuer Trusts hereby makes the following representations and warranties for the benefit of the Servicer, the Indenture Trustee, the Disposition Manager and the Noteholders. The representations shall be made as of the execution and delivery of this Base Indenture and of each Indenture Supplement, and as of each Funding Date and as of each date of Grant and shall survive the Grant of a Security Interest in the Participation Certificates to the Indenture Trustee. For the avoidance of doubt, the representations and warranties provided by each of the Issuer Trusts below is made solely by that entity on its own behalf.

(a) Organization and Good Standing. The Issuer Trust is duly organized and validly existing as a statutory trust and is in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted. The Issuer has appointed the Administrator as the Issuer’s agent where notices and demands to or upon the Issuer in respect of the Notes of this Base Indenture may be served. The Co-Issuer has appointed the Co-Issuer Administrator as the Co-Issuer’s agent where notices and demands to or upon the Issuer in respect of the Notes of this Base Indenture may be served.

(b) Power and Authority. The Issuer Trust has and will continue to have the power and authority to execute and deliver this Base Indenture and the other Transaction Documents to which it is or will be a party, and to carry out their respective terms; the related Issuer Trust had and has had at all relevant times and now has full power, authority and legal right to acquire, own, hold and Grant a Security Interest in the Trust Estate and has duly authorized such Grant to the Indenture Trustee by all necessary action; and the execution, delivery and performance by the Issuer Trust of this Base Indenture and each of the other Transaction Documents to which it is a party has been duly authorized by all necessary action of the Co-Issuer.

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(c) Valid Transfers; Binding Obligations. This Base Indenture creates a valid Grant of a Security Interest in the Participation Certificates which has been validly perfected and is a first priority Security Interest under the UCC, and in such other portion of the Collateral as to which a Security Interest may be granted under the UCC, which security interest is enforceable against creditors of and purchasers from the Issuer Trust, subject to applicable law. Each of the Transaction Documents to which the Issuer Trust is a party constitutes a legal, valid and binding obligation of the Issuer Trust enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally or by general equity principles.

(d) No Violation. The execution and delivery by the Issuer Trust of this Base Indenture and each other Transaction Document to which it is a party and the consummation of the transactions contemplated by this Base Indenture and the other Transaction Documents and the fulfillment of the terms of this Base Indenture and the other Transaction Documents do not conflict with, result in any breach of any of the terms or provisions of, or constitute (with or without notice or lapse of time or both) a default under the Organizational Documents of the Issuer Trust or any indenture, agreement or other material instrument to which the Issuer Trust is a party or by which it is bound, or result in the creation or imposition of any Adverse Claim upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than this Base Indenture), or violate any law, order, judgment, decree, writ, injunction, award, determination, rule or regulation applicable to the Issuer Trust of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Issuer Trust or its properties, which breach, default, conflict, Adverse Claim or violation could reasonably be expected to have a material Adverse Effect.

(e) No Proceedings. There is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or to such Issuer Trust’s knowledge, threatened, against or affecting the Issuer Trust: (i) asserting the invalidity of this Base Indenture, the Notes or any of the other Transaction Documents to which the Issuer Trust is a party, (ii) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Base Indenture, or any of the other Transaction Documents, (iii) seeking any determination or ruling which could reasonably be expected to have a material Adverse Effect or could reasonably be expected to materially and adversely affect the condition (financial or otherwise), business or operations of the Issuer Trust, or (iv) relating to the Issuer Trust and which could reasonably be expected to adversely affect the United States federal income tax attributes of the Notes.

(f) No Subsidiaries. The Issuer Trust has no subsidiaries.

(g) All Tax Returns True, Correct and Timely Filed. All tax returns required to be filed by the Issuer Trust in any jurisdiction have in fact been filed and all taxes, assessments, fees and other governmental charges upon the Issuer Trust or upon any of its properties, and all income of franchises, shown to be due and payable on such returns have been paid except for any such taxes, assessments, fees and charges the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Issuer Trust had established adequate reserves in accordance with GAAP. All such tax returns were true and correct in all material respects and the Issuer Trust knows of no proposed additional tax assessment against it that could reasonably be expected to have a material adverse effect upon the ability of the Issuer Trust to perform its obligations hereunder nor of any basis therefor. The provisions for taxes on the books of the Issuer Trust are in accordance with GAAP.

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(h) No Restriction on Issuer Trusts Affecting their Respective Businesses. The Issuer Trust is not a party to any contract or agreement, or subject to any charter or other restriction, which materially and adversely affects its business, and the Issuer Trust has not agreed or consented to cause any of its assets or properties to become subject to any Adverse Claim other than the Security Interest or any Permitted Liens.

(i) Title to Participation Certificates. As represented by PMC and PMH in the PC Repurchase Agreement, immediately prior to the Grant thereof to the Indenture Trustee as contemplated by this Base Indenture, subject to the Acknowledgment Agreement and the Fannie Mae Requirements with respect thereto, the Issuer Trust had good and marketable title to each respective Participation Certificate, free and clear of all Adverse Claims other than any Permitted Liens and rights of others.

(j) Perfection of Security Interest. All filings and recordings that are necessary to perfect the interest of the Issuer Trust in the related Participation Certificates and such other portion of the Trust Estate as to which a sale or security interest may be perfected by filing under the UCC, have been accomplished and are in full force and effect. All filings and recordings against the Issuer Trust required to perfect the Security Interest of the Indenture Trustee in such Participation Certificates and such other portion of the Trust Estate as to which a Security Interest may be perfected by filing under the UCC, have been accomplished and are in full force and effect, and all such filings and recordings against the Issuer Trust include the legends set forth as clauses (i) through (iii) of the fourth full paragraph of the Granting Clause. Subject to the rights of Fannie Mae with respect thereto, other than the Security Interest granted to the Indenture Trustee pursuant to this Base Indenture, the Issuer Trust has not pledged, assigned, sold, granted a Security Interest in, or otherwise conveyed any of the Participation Certificates or any other Collateral. Neither the Issuer nor Co-Issuer has authorized the filing of and is not aware of any financing statement filed against the Issuer Trust that includes a description of collateral covering the Participation Certificates other than (1) any financing statement related to the Security Interest granted to the Indenture Trustee hereunder or (2) that has been terminated.

(k) Notes Authorized, Executed, Authenticated, Validly Issued and Outstanding. The Notes have been duly and validly authorized and, when duly and validly executed and authenticated by the Indenture Trustee in accordance with the terms of this Base Indenture and delivered to and paid for by each purchaser as provided herein, will be validly issued and outstanding and entitled to the benefits hereof.

(l) Location of Chief Executive Office and Records. The chief executive office of each of the Issuer Trusts and the office where each of the Issuer Trusts maintains copies of its corporate records, is located at the offices of the Administrator at 3043 Townsgate Road, Suite 310, Westlake Village, CA, 91361; provided that, at any time after the date hereof, upon thirty (30) days’ prior written notice to the Indenture Trustee and the Noteholders, either the Issuer or the Co-Issuer may relocate its jurisdiction of formation, and/or its principal place of business and chief executive office, and/or the office where it maintains all of its records, to another location or jurisdiction, as the case may be, within the United States to the extent that the Issuer Trust shall have taken all actions necessary or reasonably requested by the Indenture Trustee or the Majority Noteholders of all Outstanding Notes to amend its existing financing statements and continuation statements, and file additional financing statements and to take any other steps reasonably requested by the Indenture Trustee or the Majority Noteholders of all Outstanding Notes to further perfect or evidence the rights, claims or security interests of the Indenture Trustee and the Noteholders under any of the Transaction Documents.

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(m) Solvency. Each of the Issuer and the Co-Issuer: (i) is not “insolvent” (as such term is defined in § 101(32)(A) of the Bankruptcy Code); (ii) is able to pay its debts as they become due; and (iii) does not have unreasonably small capital for the business in which it is engaged or for any business or transaction in which it is about to engage. Neither the Issuer nor the Co-Issuer is Granting the Trust Estate to the Indenture Trustee with the intent to defraud, delay or hinder any of its creditors.

(n) Separate Identity. Each of the Issuer and the Co-Issuer is operated as an entity separate from the Servicer, the Administrator and the Co-Issuer Administrator. Each of the Issuer and the Co-Issuer has complied with all covenants set forth in its Organizational Documents.

(o) Name. The legal name of the Issuer Trust is as set forth in this Base Indenture and the Issuer Trust does not use and has not used any other trade names, fictitious names, assumed names or “doing business as” names.

(p) Governmental Authorization. Other than the filing of the financing statements (or financing statement amendments) required hereunder or under any other Transaction Document, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for (i) the due execution and delivery by the Issuer Trust of this Base Indenture and each other Transaction Document to which it is a party and (ii) the performance of its obligations hereunder and thereunder.

(q) Accuracy of Information. All information heretofore furnished by the Issuer Trust or any of its Affiliates to the Indenture Trustee or the Noteholders for purposes of or in connection with this Base Indenture, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by the Issuer Trust or any of its Affiliates to the Indenture Trustee or the Noteholders will be, true and accurate in every material respect on the date such information is stated or certified.

(r) Use of Proceeds. No proceeds of any issuance of Notes or funding under a VFN hereunder will be used for a purpose that violates, or would be inconsistent with, Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time.

(s) Investment Company. The Issuer Trust is not required to be registered as an “investment company” within the meaning of the Investment Company Act, or any successor statute.

(t) Compliance with Law. The Issuer Trust has complied in all material respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject.

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(u) Investments. The Issuer Trust does not own or hold, directly or indirectly (i) any capital stock or equity security of, or any equity interest in, any Person or (ii) any debt security or other evidence of indebtedness of any Person.

(v) Transaction Documents. The PC Repurchase Agreement is the only agreement pursuant to which the Issuer directly or indirectly purchases and receives contributions of Participation Certificates from PMC and the PC Repurchase Agreement represents the only agreement between PMC and the Issuer relating to the transfer of the Participation Certificates from PMC to the Issuer. The PC Repurchase Agreement is the only agreement pursuant to which the Co-Issuer directly or indirectly purchases and receives contributions of Participation Certificates from PMH and the PC Repurchase Agreement represents the only agreement between PMH and the Co-Issuer relating to the transfer of the Participation Certificates from PMH to the Co-Issuer.

(w) Limited Business. Since its formation, the Issuer Trust has conducted no business other than entering into and performing its obligations under the Transaction Documents to which it is a party, and such other activities as are incidental to the foregoing. The Transaction Documents to which it is a party, and any agreements entered into in connection with the transactions that are permitted thereby, are the only agreements to which the Issuer Trust is a party.

Section 9.2. Liability of Issuer Trusts; Indemnities.

(a) Obligations. Each of the Issuer and the Co-Issuer shall be jointly and severally liable in accordance with this Base Indenture only to the extent of the obligations in this Base Indenture specifically undertaken by the Issuer Trusts in such capacity under this Base Indenture and shall have no other obligations or liabilities hereunder. Each of the Issuer and the Co-Issuer shall indemnify, defend and hold harmless the Indenture Trustee (in all its capacities), the Calculation Agent, the Paying Agent, the Securities Intermediary, the Note Registrar, the Disposition Manager, the Noteholders (as applicable, with respect to the related Series of Notes) and the Trust Estate (each an “Issuer Indemnified Party”) from and against any taxes that may at any time be asserted against the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Note Registrar, the Disposition Manager or the Trust Estate with respect to the transactions contemplated in this Base Indenture or any of the other Transaction Documents, including any sales, gross receipts, general corporation, tangible or intangible personal property, privilege or license taxes (but not including any taxes asserted with respect to, and as of the date of, the transfer of the Participation Certificates to the Trust Estate, the issuance and original sale of the Notes of any Class, or asserted with respect to ownership of the Participation Certificates, or federal, state or local income or franchise taxes or any other tax, or other income taxes arising out of payments on the Notes of any Class, or any interest or penalties with respect thereto or arising from a failure to comply therewith) and costs and expenses in defending against the same and in connection with the Issuer Indemnified Parties’ enforcement of any rights hereunder or under any Transaction Document, except that in no event shall the Issuer Trusts be required to indemnify any Issuer Indemnified Party if the indemnification obligation under this Section 9.2(a) to such Issuer Indemnified Party is the result of a violation of law, gross negligence or willful misconduct by such Issuer Indemnified Party.

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(b) Notification and Defense. Promptly after any Issuer Indemnified Party shall have been served with the summons or other first legal process or shall have received written notice of the threat of a claim in respect of which a claim for indemnity may be made against either the Issuer or the Co-Issuer under this Section 9.2, the Issuer Indemnified Party shall notify the Issuer Trusts, the Administrator and the Co-Issuer Administrator in writing of the service of such summons, other legal process or written notice, giving information therein as to the nature and basis of the claim, but failure so to notify the related Issuer Trust shall not relieve the Issuer Trusts from any liability which such Person may have hereunder or otherwise, except to the extent that the related Issuer Trust is prejudiced by such failure so to notify the Issuer Trust. The related Issuer Trust will be entitled, at its own expense, to participate in the defense of any such claim or action and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Issuer Indemnified Party, and, after notice from the Issuer Trust to such Issuer Indemnified Party that the Issuer Trust wishes to assume the defense of any such action, the Issuer Trust will not be liable to such Issuer Indemnified Party under this Section 9.2 for any legal or other expenses subsequently incurred by such Issuer Indemnified Party in connection with the defense of any such action unless (i) the defendants in any such action include both the Issuer Indemnified Party and the Issuer Trust, and the Issuer Indemnified Party (upon the advice of counsel) shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Issuer Trust, or one or more Issuer Indemnified Parties, and which in the reasonable judgment of such counsel are sufficient to create a conflict of interest for the same counsel to represent both the Issuer Trust and such Issuer Indemnified Party, (ii) the Issuer Trust shall not have employed counsel reasonably satisfactory to the Issuer Indemnified Party to represent the Issuer Indemnified Party within a reasonable time after notice of commencement of the action, or (iii) the Issuer Trust has authorized the employment of counsel for the Issuer Indemnified Party at the expense of the Issuer; then, in any such event, such Issuer Indemnified Party shall have the right to employ its own counsel in such action, and the reasonable fees and expenses of such counsel shall be borne by the Issuer Trust; provided, however, that the Issuer Trust shall not in connection with any such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for any fees and expenses of more than one firm of attorneys at any time for all Issuer Indemnified Parties. Each Issuer Indemnified Party, as a condition of the indemnity agreement contained herein, shall use its commercially reasonable efforts to cooperate with the Issuer Trust in the defense of any such action or claim. The Issuer Trusts shall not, without the prior written consent of any Issuer Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which such Issuer Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Issuer Indemnified Party, unless such settlement includes an unconditional release of such Issuer Indemnified Party from all liability on claims that are the subject matter of such proceeding or threatened proceeding.

(c) Expenses. Indemnification under this Section shall include, without limitation, reasonable and customary out-of-pocket fees and expenses of counsel and expenses of litigation. If either the Issuer or the Co-Issuer has made any indemnity payments pursuant to this Section and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts collected to the Issuer Trust, without interest.

(d) Survival. The provisions of this Section 9.2 shall survive the termination of this Base Indenture.

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Section 9.3. Merger or Consolidation, or Assumption of the Obligations, of the Issuer Trusts. Any Person (a) into which either the Issuer or the Co-Issuer may be merged or consolidated, (b) which may result from any merger, conversion or consolidation to which either Co-Issuer shall be a party, or (c) which may succeed to all or substantially all of the business or assets of either Co-Issuer, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Issuer Trust under this Base Indenture, shall be the successor to the related Issuer Trust under this Base Indenture without the execution or filing of any document or any further act on the part of any of the parties to this Base Indenture, except that if the related Issuer Trust in any of the foregoing cases is not the surviving entity, then the surviving entity shall execute an agreement of assumption to perform every obligation of the Issuer Trust under the Transaction Documents, and the surviving entity shall have taken all actions necessary or reasonably requested by the Issuer Trust, the Majority Noteholders of all Outstanding Notes or the Indenture Trustee to amend its existing financing statements and continuation statements, and file additional financing statements and to take any other steps reasonably requested by the Issuer Trust, the Majority Noteholders of all Outstanding Notes or the Indenture Trustee to further perfect or evidence the rights, claims or security interests of the Issuer, the Noteholders or the Indenture Trustee under any of the Transaction Documents. The Issuer (i) shall provide notice of any merger, consolidation or succession pursuant to this Section 9.3 to each Note Rating Agency that has rated any then-Outstanding Notes, the Indenture Trustee and the Noteholders, (ii) for so long as the Notes are Outstanding, (1) shall receive from each Note Rating Agency rating Outstanding Notes a letter to the effect that such merger, consolidation or succession will not result in a qualification, downgrading or withdrawal of the then current ratings assigned by such Note Rating Agency to any Outstanding Notes or (2) if the Administrator and the Administrative Agents determine in their reasonable judgment that an applicable Note Rating Agency no longer provides such letters as described in the foregoing clause (1), (a) the Administrator shall provide notice of such new merger, consolidation or succession to the related Note Rating Agency and (b) each Administrative Agent shall have provided its prior written consent to such merger, consolidation or succession; provided, that the Issuer Trusts provide an Issuer and Co-Issuer Certificate, to the effect that any such merger, consolidation or succession will not have a material Adverse Effect on the Outstanding Notes, (iii) shall obtain an Opinion of Counsel addressed to the Indenture Trustee and reasonably satisfactory to the Indenture Trustee, that such merger, consolidation or succession complies with the terms hereof and one or more Opinions of Counsel updating or restating all opinions delivered on the date of this Base Indenture with respect to corporate matters, enforceability of Transaction Documents against the Issuer Trusts, and the grant by the Issuer Trusts of a valid security interest in the Participation Certificates to the Indenture Trustee and the perfection of such security interest and related matters, (iv) shall receive from the Majority Noteholders of all Outstanding Notes their prior written consent to such merger, consolidation or succession, absent which consent, which may not be unreasonably withheld or delayed, the Issuer Trusts shall not become a party to such merger, consolidation or succession and (v) shall obtain an Issuer Trusts’ Tax Opinion.

Section 9.4. Issuer Trusts May Not Own Notes. Neither the Issuer nor the Co-Issuer may become the owner or pledgee of one or more of the Notes (other than any Retained Note). Any Person Controlling, Controlled by or under common Control with either the Issuer or the Co-Issuer may, in its individual or any other capacity, become the owner or pledgee of one or more Notes with the same rights as it would have if it were not an Affiliate of the related Issuer Trust, except as otherwise specifically provided in the definition of the term “Noteholder.” The Notes so owned by or pledged to such Controlling, Controlled or commonly Controlled Person shall have an equal and proportionate benefit under the provisions of this Base Indenture, without preference, priority or distinction as among any of the Notes, except as set forth herein with respect to, among other things, rights to vote, consent or give directions to the Indenture Trustee as a Noteholder.

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Section 9.5. Covenants of Issuer.

(a) Organizational Documents; Unanimous Consent. Each of the Issuer Trusts hereby covenants that its Organizational Documents provide that they may not be amended or modified without (i) notice to the Indenture Trustee and each Note Rating Agency that is at that time rating any Outstanding Notes, and (ii) the prior written consent of the Administrative Agent, unless and until this Base Indenture shall have been satisfied, discharged and terminated. Each of the Issuer Trusts will at all times comply with the terms of its Organizational Documents. In addition, notwithstanding any other provision of this Section 9.5 and any provision of law, neither Co-Issuer shall take any action described in Section 4.1 of its Organizational Documents or do any of the following unless the Owners (as such term is defined in the applicable Organizational Documents), the Administrative Agent and the applicable Majority Noteholders as set forth in the Transaction Documents consent to such action: (A) dissolve or liquidate, in whole or in part, or institute proceedings to be adjudicated bankrupt or insolvent, (B) consent to the institution of bankruptcy or insolvency proceedings against it, (C) file a petition seeking, or consent to, reorganization or relief under any applicable federal, state or foreign law relating to bankruptcy or similar matters, (D) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuer or a substantial part of its property, (E) make any assignment for the benefit of creditors, (F) admit in writing its inability to pay its debts generally as they become due, or (G) take any action in furtherance of the actions set forth in clauses (A) through (F) above; or (1) merge or consolidate with or into any other person or entity or sell or lease its property or all or substantially all of its assets to any person or entity; or (2) modify any provision of its Organizational Documents.

(b) Preservation of Existence. Each of the Issuer Trusts hereby covenants to do or cause to be done all things necessary on its part to preserve and keep in full force and effect its rights and franchises as a statutory trust under the laws of the State of Delaware, and to maintain each of its licenses, approvals, permits, registrations or qualifications in all jurisdictions in which its ownership or lease of property or the conduct of its business requires such licenses, approvals, registrations or qualifications, except for failures to maintain any such licenses, approvals, registrations or qualifications which, individually or in the aggregate, would not have a material Adverse Effect.

(c) Compliance with Laws. Each of the Issuer Trusts hereby covenants to comply in all material respects with all applicable laws, rules and regulations and orders of any governmental authority, the noncompliance with which would have a material Adverse Effect or a material adverse effect on the business, financial condition or results of operations of the Co-Issuer.

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(d) Payment of Taxes. Each of the Issuer Trusts hereby covenants to pay and discharge promptly or cause to be paid and discharged promptly all taxes, assessments and governmental charges or levies imposed upon the Issuer or upon its income and profits, or upon any of its property or any part thereof, before the same shall become in default, provided that the Issuer shall not be required to pay and discharge any such tax, assessment, charge or levy so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the Issuer shall have set aside on its books adequate reserves with respect to any such tax, assessment, charge or levy so contested.

(e) Investments. Each of the Issuer Trusts hereby covenants that it will not, without the prior written consent of the Majority Noteholders of all Outstanding Notes, acquire or hold any indebtedness for borrowed money of another person, or any capital stock, debentures, partnership interests or other ownership interests or other securities of any Person, other than Permitted Investments as provided hereunder and the Participation Certificates acquired under the PC Repurchase Agreement.

(f) Keeping Records and Books of Account. Each of the Issuer Trusts hereby covenants and agrees to maintain and implement administrative and operating procedures (including an ability to recreate records evidencing the Participation Certificates in the event of the destruction or loss of the originals thereof) and keep and maintain, all documents, books, records and other information reasonably necessary or advisable for the collection of all Participation Certificates (including records adequate to permit the daily identification of all collections with respect to, and adjustments of amounts payable under, each Participation Certificate). The Administrator or the Co-Issuer Administrator, as applicable, shall ensure compliance with this Section 9.5(f).

(g) Employee Benefit Plans. Each of the Issuer Trusts hereby covenants and agrees to comply in all material respects with the provisions of ERISA, the Code, and all other applicable laws, and the regulations and interpretations thereunder to the extent applicable, with respect to each Plan and Multiemployer Plan.

(h) No Release. Each of the Issuer Trusts shall not take any action and shall use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person’s covenants or obligations under any Transaction Document, Fannie Mae Lender Contract or other document, instrument or agreement included in the Trust Estate, or which would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such document, instrument or agreement.

(i) Separate Identity. Each of the Issuer Trusts acknowledges that the Secured Parties are entering into the transactions contemplated by this Base Indenture in reliance upon each of the Issuer's and the Co-Issuer’s identity as a legal entity that is separate from the Administrator, Co-Issuer Administrator, or the Servicer (each, an “Issuer or Co-Issuer Facility Entity”). Therefore, from and after the date of execution and delivery of this Base Indenture, each of the Issuer Trusts shall take all reasonable steps to maintain each of the Issuer’s and Co-Issuer’s identity as a separate legal entity and to make it manifest to third parties that each of the Issuer and Co-Issuer is an entity with assets and liabilities distinct from those of any Issuer or Co-Issuer Facility Entity and not a division of an Issuer or Co-Issuer Facility Entity.

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(j) Compliance with and Enforcement of Transaction Documents. Each of the Issuer Trusts hereby covenants and agrees to comply in all respects with the terms of, employ the procedures outlined in and enforce the obligations of the parties to all of the Transaction Documents to which such Issuer Trust is a party, and take all such action to such end as may be from time to time reasonably requested by the Indenture Trustee, and/or the Majority Noteholders of all Outstanding Notes, maintain all such Transaction Documents in full force and effect and make to the parties thereto such reasonable demands and requests for information and reports or for action as such Issuer Trust is entitled to make thereunder and as may be from time to time reasonably requested by the Indenture Trustee.

(k) No Sales, Liens, etc. Against Participation Certificates and Trust Property. Each of the Issuer Trusts hereby covenants and agrees, except for releases specifically permitted hereunder, not to sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist, any Adverse Claim (other than the Security Interest created hereby or any Permitted Liens) upon or with respect to, any Participation Certificate or Trust Property, or any interest in either thereof, or upon or with respect to any Trust Account, or assign any right to receive income in respect thereof. Such Issuer Trust shall promptly, but in no event later than two (2) Business Days after a Responsible Officer has obtained actual knowledge thereof, notify the Indenture Trustee of the existence of any Adverse Claim on any Participation Certificate or Trust Estate, and such Issuer Trust shall defend the right, title and interest of the Issuer Trust and the Indenture Trustee in, to and under the Participation Certificates and Trust Estate, against all claims of third parties.

(l) No Change in Business. Each of the Issuer Trusts covenants that it shall not make any change in the character of its business.

(m) No Change in Name, etc.; Preservation of Security Interests. Each of the Issuer Trusts covenants that it shall not make any change to its company name, or use any trade names, fictitious names, assumed names or “doing business as” names. Each of the Issuer Trusts will from time to time, at its own expense, execute and file such additional financing statements (including continuation statements) as may be necessary to ensure that at any time, the interest of the related Issuer Trust in all of the Participation Certificates and such other portion of the Trust Estate as to which a sale or Security Interest may be perfected by filing under the UCC, and the Security Interest of the Indenture Trustee in all of the Participation Certificates and such other portion of the Trust Estate as to which a Security Interest may be perfected by filing under the UCC, are fully protected.

(n) No Institution of Insolvency Proceedings. Each of the Issuer Trusts covenants that it shall not institute Insolvency Proceedings with respect to the Issuer Trusts or any Affiliate thereof or consent to the institution of Insolvency Proceedings against the Issuer Trusts or any Affiliate thereof or take any action in furtherance of any such action, or seek dissolution or liquidation in whole or in part of the Issuer Trusts or any Affiliate thereof.

(o) Money for Note Payments To Be Held in Trust. Each of the Issuer Trusts shall cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee, subject to the provisions of this Section, that such Paying Agent shall:

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(i) hold all sums held by it in respect of payments on Notes in trust for the benefit of the Noteholders entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

(ii) give the Indenture Trustee notice of any default by the Issuer (or any other obligor upon the Notes) in the making of any payment; and

(iii) at any time during the continuance of any such default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent.

The Issuer Trusts may at any time, for the purpose of obtaining the satisfaction and discharge of this Base Indenture or for any other purpose, pay, or direct any Paying Agent to pay, to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which such sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money.

(p) Protection of Trust Estate. Each of the Issuer Trusts shall from time to time execute and deliver to the Indenture Trustee and the Administrative Agent all such supplements and amendments hereto (a copy of which shall be provided to the Noteholders) and all such financing statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action as is necessary or advisable to:

(i) Grant more effectively all or any portion of the Trust Estate;

(ii) maintain or preserve the Security Interest or carry out more effectively the purposes hereof;

(iii) perfect, publish notice of, or protect the validity of any Grant made or to be made by this Base Indenture;

(iv) enforce any of the Participation Certificates or, where appropriate, any Security Interest in the Trust Estate and the proceeds thereof;

(v) promptly to amend, or to cause to be amended, as necessary, any filings or recordings against the Issuer and the Co-Issuer relating to the Grant necessary to conform to the requirements of Fannie Mae, including any legend required by Fannie Mae to be included in such filings or recordings; or

(vi) preserve and defend title to the Trust Estate and the rights of the Indenture Trustee and the Noteholders therein against the claims of all persons and parties.

(q) Investment Company Act. Each of the Issuer Trusts shall conduct its operations in a manner which shall not subject it to registration as an “investment company” under the Investment Company Act.

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(r) Payment of Review and Renewal Fees. Each of the Issuer Trusts shall pay or cause to be paid to each Note Rating Agency that has rated Outstanding Notes, its pro rata portion of the annual rating review and renewal fee in respect of such Notes, if any.

(s) No Subsidiaries. Neither the Issuer nor the Co-Issuer shall form or hold interests in any subsidiaries.

(t) No Indebtedness. The Issuer Trusts shall not incur any indebtedness other than the Notes, and shall not guarantee any other Person’s indebtedness or incur any capital expenditures.

(u) Cooperation with Effectuating a Release. If any filing or recordings against either Issuer Trust have been made relating to the Grant, within five (5) Business Days after the earliest of any of the following dates or events that occur: (i) the effective date of any transfer of the Issuer Trust responsibility pursuant to the Acknowledgment Agreement; (ii) the date on which the Secured Party receives notice from Fannie Mae of any termination of Secured Party’s or Servicer’s rights under the Acknowledgment Agreement, or otherwise; or (iii) the date on which Secured Party receives notice of the termination by Fannie Mae of Servicer’s redemption, equitable, legal or other right, title or interest in the Subject Mortgages, then the Issuer Trust shall, or shall cause to be filed for recording, in the appropriate recording office, a fully and complete release of such security interest, and of any other right, title or interest of Secured Party in the Subject Mortgages, and shall deliver to Fannie Mae written confirmation of such filing. Notwithstanding the foregoing, if the Issuer Trust believes the Secured Party’s Security Interest is being challenged or is likely to be challenged by anyone other than Fannie Mae, then the Issuer Trust may request that Fannie Mae agree to a deferral of the filings required by this subsection, which deferral shall be granted at the sole discretion of Fannie Mae.

(v) Issuer Trusts’ Tax Opinion. No undertaking that would cause a Retained Note to become issued and outstanding for United States federal income tax purposes will be permitted without the delivery of an Issuer Trusts’ Tax Opinion.

(w) Delivery of the Asset File. The Issuer Trusts shall deliver the items set forth in Section 2.2(a) to the Indenture Trustee within two (2) Business Days of the execution and delivery of this Base Indenture.

Article X

The Administrator and Servicer; the Co-Issuer Administrator

Section 10.1. Representations and Warranties of PMC, as Administrator and as Servicer. PMC, as Administrator and as Servicer, hereby makes the following representations and warranties for the benefit of the Indenture Trustee, as of the date hereof, and as of the date of each Grant of Participation Certificates to the Indenture Trustee pursuant to this Base Indenture.

(a) Organization and Good Standing. PMC is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware. PMC, as Servicer, is duly qualified to do business and is in good standing (or is exempt from such requirements) and has obtained all necessary licenses and approvals in each jurisdiction in which the failure so to qualify, or to obtain such licenses or approvals, would have a material Adverse Effect.

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(b) Power and Authority; Binding Obligation. PMC has the power and authority to make, execute, deliver and perform its obligations under this Base Indenture and any related Indenture Supplement and each other Transaction Document to which it is a party and all of the transactions contemplated hereunder and thereunder, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Base Indenture and each Indenture Supplement and each other Transaction Document to which it is a party; this Base Indenture and each Indenture Supplement and each other Transaction Document to which it is a party constitutes a legal, valid and binding obligation of PMC, enforceable against PMC in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity) or by public policy with respect to indemnification under applicable securities laws.

(c) No Violation. The execution and delivery of this Base Indenture and each Indenture Supplement and each other Transaction Document to which it is a party by PMC and its performance of its obligations under this Base Indenture and each Indenture Supplement and each other Transaction Document to which it is a party will not (i) violate PMC’s certificate of incorporation, bylaws or other organizational documents or (ii) constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which PMC is a party or which may be applicable to PMC or any of its assets, or any and all instruments, agreements, invoices or other writings which give rise to or otherwise evidence any of the MSRs, or (iii) violate any statute, ordinance or law or any rule, regulation, order, writ, injunction or decree of any court or of any public, governmental or regulatory body, agency or authority applicable to PMC or its properties except, with respect to clauses (ii) and (iii), for such defaults, breaches or violations that would not reasonably be expected to have a material Adverse Effect.

(d) No Proceedings. No proceedings, investigations or litigation before any court, tribunal or governmental body is currently pending, nor to the knowledge of PMC is threatened against PMC, nor is there any such proceeding, investigation or litigation currently pending, nor, to the knowledge of PMC, is any such proceeding, investigation or litigation threatened against PMC with respect to this Base Indenture, any Indenture Supplement or any other Transaction Document or the transactions contemplated hereby or thereby that could reasonably be expected to have a material Adverse Effect.

(e) No Consents Required; Fannie Mae Approvals. Except with respect to the Acknowledgment Agreement, no authorization, consent, approval, or other action by, and no notice to or filing with, any court, governmental authority or regulatory body or other Person domestic or foreign, including HUD or Fannie Mae, is required for the execution, delivery and performance by PMC of or compliance by PMC with this Base Indenture, any Indenture Supplement or the consummation of the transactions contemplated by this Base Indenture, any Indenture Supplement except for (i) consents, approvals, authorizations and orders which have obtained in connection with transactions contemplated by the Transaction Documents (including

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the Acknowledgment Agreement), (ii) filings to perfect the security interest created by this Base Indenture, and (iii) authorizations, consents, approvals, filings, notices, or other actions the failure to obtain such consents, approvals, authorizations and orders would not reasonably be expected to have a material Adverse Effect.

(f) Information. No written statement, report or other document furnished or to be furnished pursuant to this Base Indenture or any other Transaction Document to which it is a party by PMC contains or will contain any statement that is or will be inaccurate or misleading in any material respect.

(g) Default. The Administrator is not in default with respect to any material contract under which a default should reasonably be expected to have a material adverse effect on the ability of the Administrator or the Servicer to perform its duties under this Base Indenture or any Indenture Supplement, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such contract or order of any court, administrative agency, arbitrator or governmental body.

(h) Foreign Corrupt Practices Act. To the extent applicable, neither PMC nor any subsidiary thereof (collectively, the “PMC FCPA Entities” and individually a “PMC FCPA Entity”), or any employees, directors, or officers of any PMC FCPA Entity, or to the knowledge of any PMC FCPA Entity, any of its agents or representatives or any subsidiary of any PMC FCPA Entity, is aware of, has taken, or will take any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”); and PMC and its subsidiaries and Affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintained policies and procedures designed to ensure continued compliance therewith.

(i) Anti-Money Laundering. The operations of PMC are conducted and, to its knowledge, have been conducted in all material respects in compliance with the applicable anti-money laundering statutes of all jurisdictions to which PMC is subject and the rules and regulations thereunder, including the Bank Secrecy Act, as amended by Title III of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act) (collectively, the “U.S. Anti-Money Laundering Laws”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving PMC with respect to the U.S. Anti-Money Laundering Laws is pending or, to the knowledge of PMC, threatened.

(j) Sanctions. Neither PMC nor its Subsidiaries, nor, to its knowledge, any of its or its Subsidiaries’ directors, officers, agents, Subsidiaries or employees, is a Person that is, or is owned or controlled by Persons that are (1) the subject of any sanctions administered or enforced by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council, the European Union or Her Majesty’s Treasury (collectively, “Sanctions”) or (2) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions; including the Crimea region of Ukraine, Cuba, Iran, North Korea and Syria.

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(k) No Adverse Actions. PMC has not received a notice from Fannie Mae indicating any adverse fact or circumstance in respect of PMC which adverse fact or circumstance may reasonably be expected to entitle Fannie Mae to terminate PMC with cause or with respect to which such adverse fact or circumstance has caused Fannie Mae to threaten to terminate, or consider the termination of, PMC in such notice.

(l) Fannie Mae Set Off Rights. PMC has no actual notice, including any notice received from Fannie Mae, or any reason to believe, that, other than in the normal course of PMC’s business, any circumstances exist that would result in PMC being liable to Fannie Mae for any amount due by reason of: (i) any breach of its obligations to Fannie Mae under the Fannie Mae Lender Contract or any other similar contracts relating to any of the Portfolio Mortgage Loans, (ii) any unperformed obligation with respect to any of the Portfolio Mortgage Loans, and (iii) any other unmet obligations to Fannie Mae under the Fannie Mae Lender Contract or any other similar contracts relating to the Portfolio Mortgage Loans.

(m) Fannie Mae. PMC is a seller/servicer approved by Fannie Mae and a lender approved by HUD. PMC is in good standing to service mortgages for Fannie Mae and HUD, as applicable. PMC has not been suspended as a seller/servicer by Fannie Mae or HUD on and after the date on which PMC first obtained such approval from Fannie Mae or HUD, as applicable. PMC is not under review or investigation outside of due course and does not have knowledge of imminent or future investigation outside of due course, by Fannie Mae or HUD on and after the date on which PMC became a Fannie Mae or HUD approved seller/servicer or lender, as the context may require. The requirements of this Section 10.1(m) shall only be applicable to PMC with respect to HUD if and to the extent that any FHA Loans, USDA Loans or VA Loans are Subject Mortgages.

(n) Fannie Mae Remittance and Reporting. With respect to each Portfolio Mortgage Loan, PMC has remitted to Fannie Mae and applicable investors in the securities representing interests in the Portfolio Mortgage Loans and all other applicable Persons (i) all principal and interest payments received to which an investor or such other Person is entitled under the Fannie Mae Lender Contract, including any guaranty fees, and (ii) all advances of principal and interest required by such Fannie Mae Lender Contract. In accordance with the Fannie Mae Lender Contract, PMC has prepared and submitted all reports in connection with such payments required by the Fannie Mae Lender Contract.

Section 10.2. Covenants of PMC, as Administrator and as Servicer.

(a) Amendments to PC Documents. The Servicer hereby covenants and agrees not to amend any PC Documents without the prior written consent of the Majority Noteholders of all Outstanding Notes, except for the following purposes and with (i) the consent of the Issuer (evidenced by its execution of such amendment), the Indenture Trustee and the Administrative Agent, (ii) upon delivery of an Issuer Trusts’ Tax Opinion (unless such Issuer Trusts’ Tax Opinion is waived by either 100% of the VFN Noteholders or the Majority Noteholders of all Outstanding Notes) and (iii) upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer reasonably believes that such amendment could not have a material Adverse Effect and is not reasonably expected to have a material Adverse Effect on the Noteholders of the Notes at any time in the future:

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(A) to evidence the succession of another Person to the Issuer or the Co-Issuer, and the assumption by any such successor of the covenants of the Issuer or the Co-Issuer in the PC Documents;

(B) to add to the covenants of the Issuer or the Co-Issuer, or to surrender any right or power under the PC Documents conferred upon the Issuer or the Co-Issuer, for the benefit of the Noteholders;

(C) to cure any ambiguity, to correct or supplement any provision under the PC Documents which may be inconsistent with any other provision therein, or to make any other provisions with respect to matters or questions arising under the PC Repurchase Agreement;

(D) to prevent the Issuer or the Co-Issuer from being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for United States federal income tax purposes;

(E) determined by the Administrator to be reasonably necessary to maintain the rating currently assigned by the applicable Note Rating Agency and/or to avoid such Class of Notes being placed on negative watch by such Note Rating Agency; or

(F) as otherwise provided in the related PC Documents.

In addition to the foregoing, the Servicer may effect amendments to the PC Documents without the prior written consent of the Majority Noteholders of each Series of Outstanding Term Notes to cure any inconsistency between any PC Document and any provision of the Acknowledgment Agreement (i) upon delivery of a certification relating to the purpose of such amendment by the Servicer to the Indenture Trustee, to which the Indenture Trustee may conclusively rely, (ii) with the consent of the Issuer (evidenced by its execution of such amendment), the Indenture Trustee and the Administrative Agent, and (iii) with the consent of the VFN Noteholders.

(b) Maintenance of Security Interest. The Administrator shall from time to time, at its own expense, file such additional financing statements (including continuation statements) as may be necessary to ensure that at any time, the Security Interest of the Indenture Trustee (on behalf of itself and the Noteholders) in all of the Participation Certificates and the other Collateral is fully protected in accordance with the UCC and that the Security Interest of the Indenture Trustee in the Participation Certificates and the rest of the Trust Estate remains perfected and of first priority. The Administrator shall take all steps necessary to ensure compliance with Section 9.5(m).

(c) Regulatory Reporting Compliance. The Servicer shall, on or before the last Business Day of the fifth (5th) month following the end of each of the Servicer’s fiscal years (December 31), beginning with the fiscal year ending in 2017, deliver to the Indenture Trustee and the Interested Noteholders, as applicable, a copy of the results of any Uniform Single Attestation Program for Mortgage Bankers or an Officer’s Certificate that satisfies the requirements of Item 1122(a) of Regulation AB, an independent public accountant’s report that satisfies the requirements of Item 1123 of Regulation AB, or similar review conducted on the Servicer by its accountants, and such other reports as the Servicer may prepare relating to its servicing functions as the Servicer.

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(d) Compliance with PC Documents. PMC shall not fail to comply with any obligation as administrator and servicer under each of the PC Documents, if such failure would have a material Adverse Effect. PMC shall immediately notify the Indenture Trustee, the Disposition Manager and the Administrative Agent of its receipt of a notice of termination under the Fannie Mae Lender Contract. The Indenture Trustee shall forward any such notification to each Noteholder.

(e) Compliance with Obligations. PMC shall comply with all of its other obligations and duties set forth in this Base Indenture and any other Transaction Document. PMC shall not permit the Issuer to engage in activities that could violate its covenants in this Base Indenture.

(f) No Transfer of Servicing. Servicer shall not voluntarily transfer servicing under the Fannie Mae Lender Contract, except with prior written consent of the Administrative Agent, in its sole discretion.

(g) Notice of Servicer Termination Event. The Servicer shall provide written notice to the Indenture Trustee, the Disposition Manager and each VFN Noteholder of any Servicer Termination Event, within one (1) Business Day of receipt by the Servicer of notice of such Servicer Termination Event.

(h) Administrator Instructions and Functions Performed by Issuer. The Administrator shall perform the administrative or ministerial functions specifically required of the Issuer pursuant to this Base Indenture and any other Transaction Document.

(i) Adherence to Servicing Standards. Unless otherwise consented to by the Administrative Agent and the Administrator (the following collectively, the “Servicing Standards”):

(i) the Servicer shall cooperate with the Indenture Trustee acting as Calculation Agent in its duties set forth in the Transaction Documents;

(ii) the Servicer shall cooperate with the MSR Valuation Agent and the Disposition Manager with respect to its duties set forth in the Transaction Documents; and

(iii) the Servicer shall service all Portfolio Mortgage Loans without regard to ownership by PMC or its Affiliates of such Portfolio Mortgage Loans.

(j) Performance and Compliance with the Fannie Mae Lender Contract and Transaction Documents. PMC will comply with all terms, provisions, covenants and other promises required to be observed by it under the Fannie Mae Lender Contract and the Transaction Documents to which it is a party, maintain the Transaction Documents to which it is a party in full force and effect in all material respects.

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(k) Due Diligence. PMC acknowledges that the Indenture Trustee or the Administrative Agent, at PMC’s expense, has the right to perform and/or appoint a third party to perform, continuing due diligence reviews with respect to the Collateral, for purposes of verifying compliance with the representations, warranties, and specifications made hereunder and under the other Transaction Documents, or otherwise. PMC agrees that the Indenture Trustee or the Administrative Agent and their Authorized Representatives will be permitted during normal business hours, upon not less than three (3) Business Days advance written notice, to examine, inspect, make copies of, and make extracts of, any and all documents, records, agreements (including any subservicing contracts), instruments or information relating to the Collateral or Fannie Mae in the possession of PMC; provided, however, that the foregoing shall not apply with respect to any information that PMC is required by Fannie Mae to keep confidential. Notwithstanding anything to the contrary herein, PMC shall reimburse the Indenture Trustee and the Administrative Agent for any and all reasonable and out-of-pocket costs and expenses reasonably incurred by the such party and its respective designees and appointees in connection with the ongoing due diligence and auditing activities; provided, that PMC shall not be required to permit more than one due diligence trip or audit during any twelve month period unless an Event of Default is continuing.

(l) Changes in the Fannie Mae Lender Contract. PMC shall provide written notice to the Indenture Trustee and the Administrative Agent of any changes in the Fannie Mae Lender Contract that may materially affect the Collateral within three (3) Business Days after PMC receives notice thereof.

(m) Fannie Mae Approval. PMC shall at all times maintain copies of relevant portions of all final written HUD and Fannie Mae audits, examinations, evaluations, monitoring reviews and reports of its origination and servicing and subservicing operations (including those prepared on a contract basis for any such agency) in which there are material adverse findings, including notices of defaults, notices of termination of approved status, notices of imposition of supervisory agreements or interim servicing agreements, and notices of probation, suspension, or non-renewal, and all necessary approvals from each of HUD and Fannie Mae. PMC shall not take any action, or fail to take any action, that would permit HUD or Fannie Mae to terminate or threaten to terminate its right to issue MBS or service loans for HUD or Fannie Mae with cause. The requirements of this Section 10.2(m) shall only be applicable to PMC with respect to HUD if and to the extent that any FHA Loans, USDA Loans or VA Loans are Subject Mortgages.

(n) Quality Control. PMC shall conduct quality control reviews of its servicing operations in accordance with industry standards and Fannie Mae Requirements. Upon the reasonable request of the Indenture Trustee or the Administrative Agent, PMC shall report its quality control findings as such final reports are produced, excluding internal audit reports or information subject to the attorney-client work product or attorney-client privilege or other applicable privilege.

(o) Special Affirmative Covenants Concerning Collateral.

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Trustee, on behalf of the Noteholders, in and to the Collateral to the Indenture Trustee against the claims and demands of all Persons whomsoever.

(i) Subject to the Acknowledgment Agreement and the Fannie Mae Requirements, PMC warrants and shall defend the right, title and interest of the Indenture (ii) PMC shall preserve the security interests granted hereunder and upon request by the Indenture Trustee or the Administrative Agent undertake all actions which are necessary or appropriate, in the reasonable judgment of the Indenture Trustee or the Administrative Agent, as applicable, to (x) maintain the security interest of the Indenture Trustee on behalf of the Noteholders (including the priority thereof) in the Collateral in full force and effect at all times prior to the satisfaction of all obligations under this Base Indenture and the release of the Noteholders’ lien in accordance with the terms and provisions of this Base Indenture, and (y) preserve and protect the Collateral and protect and enforce the rights of the Indenture Trustee to the Collateral, including the making or delivery of all filings and recordings (of financing or continuation statements), or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate, cause to be marked conspicuously its master data processing records with a legend, acceptable to the Indenture Trustee, evidencing that such security interest has been granted in accordance with this Base Indenture.

(iii) PMC shall diligently fulfill its duties and obligations under the Fannie Mae Lender Contract in all material respects and shall not default in any material respect under any of the Fannie Mae Lender Contract or the Acknowledgment Agreement.

(p) Maintenance of Property; Insurance. PMC shall keep all property useful and necessary in its business in good working order and condition except to the extent that the failure to do so could not reasonably be expected to result in a material Adverse Effect. PMC shall maintain a fidelity bond and be covered by insurance of the kinds and in the amounts customarily maintained by such similarly situated entities in the same jurisdiction and industry as PMC, in amounts acceptable to Fannie Mae except to the extent that the failure to do so could not reasonably be expected to result in a material Adverse Effect.

(q) Use of Proceeds. PMC shall not use the proceeds of the Notes in contravention of the requirements, if any, of Fannie Mae or Applicable Law.

(r) Reimbursement of Advance Reimbursement Amounts. With respect to any Portfolio Mortgage Loan and collections received with respect thereto, PMC shall reimburse itself for any unreimbursed advances made in its capacity as Servicer with respect to Fannie Mae MBS, and shall ensure that any Interim Servicers reimburse themselves for any unreimbursed advances made in their capacity as Interim Servicer with respect to Fannie Mae MBS or seek reimbursement from Fannie Mae only as provided by the Fannie Mae Lender Contract.

(s) Portfolio Mortgage Loan Information. PMC shall deliver to the to the Administrative Agent within seven (7) Business Days after the end of each month, the information relating to the Portfolio Mortgage Loans required pursuant to Schedule 4 hereto.

(t) Agency Notices. PMC shall promptly furnish the Administrative Agent copies of all notices it receives from HUD or Fannie Mae indicating any adverse fact or circumstance in respect of PMC which adverse fact or circumstance may entitle HUD or Fannie Mae, respectively, to terminate or to threaten to terminate PMC with cause or that may entitle HUD or Fannie Mae to conduct any inspection or investigation of PMC, PMC’s files or PMC’s facilities. The requirements of this Section 10.2(t) shall only be applicable to PMC with respect to HUD if and to the extent that any FHA Loans, USDA Loans or VA Loans are Subject Mortgages.

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(u) Fannie Mae Notices. PMC shall promptly furnish the Administrative Agent copies of all notices it receives from Fannie Mae that materially affect the Servicing Fees, including any notice received with respect to the events set forth in Section 10.1(l). Within forty-five (45) days after each calendar month, PMC will provide a schedule of repurchases, indemnifications and early payment defaults to Administrative Agent in a format similar to such schedule in PMC’s standard lender certification package.

(v) Fannie Mae Requirements. PMC shall furnish the Administrative Agent notice of any change in Fannie Mae Eligibility Requirements on the twenty-fourth (24th) day of each month, or such later date as PMC receives reconciled delinquency ratio information from Fannie Mae.

(w) Legal Existence, etc. PMC shall (i) preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises; and (ii) keep adequate records and books of account.

(x) Interim Borrowing Base Determination Date Reporting. PMC shall report the occurrence of an Interim Borrowing Base Determination Date promptly after a Responsible Officer of the Administrator shall have obtained actual knowledge of such occurrence, and in any event within one (1) Business Day of obtaining such knowledge.

(y) Subservicer Administration. If PMC at any time uses or intends to use, as applicable, an independent third party subservicer (other than any Interim Servicers and as provided in the PLS Subservicing Agreement or another Eligible Subservicing Agreement in accordance with this Section 10.2(y)) to fulfill its obligations as Servicer hereunder, PMC shall, prior to the related servicing transfer date, (i) provide the Administrative Agent and the Indenture Trustee with the related Eligible Subservicing Agreement pursuant to which such subservicer shall service such Mortgage Loans, which Eligible Subservicing Agreement shall be acceptable to Administrative Agent in all respects, (ii) obtain Administrative Agent’s prior written consent to the use of such subservicer in the performance of such servicing duties and obligations, which consent may not be unreasonably withheld by the Administrative Agent and (iii) provide the Administrative Agent with a fully executed Eligible Subservicing Agreement with respect to such subservicer. In no event shall PMC’s use of a subservicer relieve PMC of its obligations hereunder, and PMC shall remain liable under this Base Indenture as if PMC were servicing such Mortgage Loans directly.

(z) Separateness. PMC shall make appropriate notation in its consolidated financial statements to indicate the separateness of the Issuer from PMC and to indicate that the Issuer’s assets and credit are separate from those of PMC and its other consolidated subsidiaries.

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Section 10.3. Negative Covenants of PMC. PMC covenants and agrees with the Indenture Trustee, the Administrative Agent and each Noteholder that, so long as any Note is Outstanding and until all obligations have been paid in full, PMC shall not:

(a) other than in accordance with Section 10.3(c), take any action that would directly or indirectly materially impair or materially adversely affect PMC’s title to, or the value of, the Collateral;

(b) create, incur or permit or allow Subservicer to create, incur or permit to exist any Lien in or on the Collateral except (i) the security interest granted hereunder in favor of the Indenture Trustee on behalf of the Noteholders, (ii) the rights of Fannie Mae under the Fannie Mae Lender Contract, (iii) the Owner Trustee Lien or (iv) any Permitted Lien, or assign any right to receive income in respect thereof;

(c) sell, lease or otherwise dispose of any Collateral (other than sales or dispositions of MSRs (i) resulting from the payoff of the related Mortgages or the purchase of the related Mortgage by PMC, (ii) as required by Fannie Mae or (iii) in the ordinary course of PMC’s servicing business) except as expressly permitted by this Base Indenture;

(d) engage to any substantial extent in any line or lines of business activity other than the businesses related to mortgage origination and servicing carried on by it as of the Closing Date;

(e) (i) cancel or terminate any Transaction Documents to which it is a party or consent to or accept any cancellation or termination thereof, (ii) amend, amend and restate, supplement or otherwise modify any Transaction Document, other than an amendment of the Fannie Mae Lender Contract done unilaterally by Fannie Mae, (iii) consent to any amendment, modification or waiver of any term or condition of any Transaction Document, without the prior written consent of the Administrative Agent, provided that if the amendment of the Fannie Mae Lender Contract is done unilaterally by Fannie Mae, the prior written consent of the Administrative Agent is not required, (iv) waive any material default under or breach of the Fannie Mae Lender Contract, or (v) take any other action in connection with any such Transaction Documents that would impair in any material respect the value of the interests or rights of PMC thereunder or that would impair in any material respect the interests or rights of the Indenture Trustee, the Administrative Agent or any Noteholder;

(f) change the state of its organization unless PMC shall have given the Administrative Agent at least thirty (30) days’ prior written notice thereof and unless, prior to any such change, PMC shall have filed, or caused to be filed, such financing statements or amendments as the Indenture Trustee determines may be reasonably necessary to continue the perfection of the Indenture Trustee’s interest in the Collateral;

(g) appoint any subservicers (other than as provided in any Eligible Subservicing Agreement and other than an Interim Servicer) with respect to any MSRs pledged to the Indenture Trustee pursuant to this Base Indenture; provided, however, that PMC’s use of an Interim Servicer shall not relieve PMC of its obligations hereunder with respect to the related Mortgage Loans, and PMC shall remain liable under this Indenture as if PMC was servicing such Mortgage Loans directly;

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(h) amend the PLS Subservicing Agreement or any other Eligible Subservicing Agreement after the Closing Date in any way that could reasonably be expected to have a material adverse effect on the rights of the Noteholders without the prior written consent of the Administrative Agent;

(i) take any action that would directly or indirectly materially impair or materially adversely affect PMC’s title to, or the value, of the Servicing Fees or materially increase the duties, responsibilities or obligations of PMC in respect of the Collateral;

(j) make any Restricted Payments at any time while an Event of Default has occurred and is continuing; and

(k) not enter into any transaction, including any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (i) in the ordinary course of PMC’s business and (ii) upon fair and reasonable terms no less favorable to PMC than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate.

Section 10.4. Liability of PMC, as Administrator and as Servicer; Indemnities.

(a) Obligations. Each of the Administrator and the Servicer (each an “Indemnifying Party”), severally and not jointly, shall indemnify, defend and hold harmless the Indenture Trustee (in all its capacities), the Securities Intermediary, the Note Registrar, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Disposition Manager, the Trust Estate, the Owner Trustee and the Noteholders (as applicable, with respect to the related Series of Notes) (each an “Indemnified Party”) from and against any and all costs, expenses, losses, claims, damages and liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, and was imposed upon, the Indenture Trustee, the Securities Intermediary, the Note Registrar, the Disposition Manager, the Owner Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Trust Estate or any Noteholder (i) in the case of indemnification by the Administrator, by reason of a violation of law, gross negligence or willful misconduct of the Administrator (or of the Issuer as a result of a direction, act or omission by the Administrator), in the performance of its obligations under this Base Indenture and the other Transaction Documents or (ii) in the case of indemnification by the Servicer, by reason of a violation of law, gross negligence or willful misconduct of the Servicer, in the performance of its respective obligations under this Base Indenture and the other Transaction Documents or as servicer or subservicer under the Fannie Mae Lender Contracts, or by reason of the breach by the Servicer of any of its representations, warranties or covenants hereunder or under the Fannie Mae Lender Contracts; provided, that any indemnification amounts payable by the Administrator or the Servicer, as the case may be, to the Owner Trustee hereunder shall not be duplicative of any indemnification amount paid by the Administrator to the Owner Trustee in accordance with the Trust Agreements or under the Administration Agreement.

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(b) Notification and Defense. Promptly after any Indemnified Party shall have been served with the summons or other first legal process or shall have received written notice of the threat of a claim in respect of which a claim for indemnity may be made against PMC under this Section 10.4, the Indemnified Party shall notify the Indemnifying Party in writing of the service of such summons, other legal process or written notice, giving information therein as to the nature and basis of the claim, but failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which it may have hereunder or otherwise, except to the extent that the Indemnifying Party is prejudiced by such failure so to notify the Indemnifying Party. The Indemnifying Party will be entitled, at its own expense, to participate in the defense of any such claim or action and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, and, after notice from the Indemnifying Party to such Indemnified Party that the Indemnifying Party wishes to assume the defense of any such action, the Indemnifying Party will not be liable to such Indemnified Party under this Section 10.4 for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense of any such action unless (i) the defendants in any such action include both the Indemnified Party and the Indemnifying Party, and the Indemnified Party (upon the advice of counsel) shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Indemnifying Party, or one or more Indemnified Parties, and which in the reasonable judgment of such counsel are sufficient to create a conflict of interest for the same counsel to represent both the Indemnifying Party and such Indemnified Party, (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action, or (iii) the Indemnifying Party has authorized the employment of counsel for the Indemnified Party at the expense of the Indemnifying Party; then, in any such event, such Indemnified Party shall have the right to employ its own counsel in such action, and the reasonable fees and expenses of such counsel shall be borne by the Indemnifying Party; provided, however, that the Indemnifying Party shall not in connection with any such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for any fees and expenses of more than one firm of attorneys at any time for all Indemnified Parties. Each Indemnified Party, as a condition of the indemnity agreement contained herein, shall use its commercially reasonable efforts to cooperate with the Indemnifying Party in the defense of any such action or claim. The Indemnifying Party shall not, without the prior written consent of any Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which such Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding or threatened proceeding.

(c) Expenses. Indemnification under this Section shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation (including such fees and expenses incurred in enforcing the Indemnifying Party’s right to indemnification). If the Indemnifying Party has made any indemnity payments pursuant to this Section and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts collected to the Indemnifying Party, without interest.

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(d) Survival. The provisions of this Section 10.4 shall survive the resignation or removal of the Indenture Trustee, the Calculation Agent and the Paying Agent and the termination of this Base Indenture.

Section 10.5. Merger or Consolidation, or Assumption of the Obligations, of PMC. Any Person (a) into which PMC may be merged or consolidated, (b) which may result from any merger, conversion or consolidation to which PMC shall be a party, or (c) which may succeed to all or substantially all of the business or assets of PMC which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of PMC under this Base Indenture, shall be the successor to PMC under this Base Indenture without the execution or filing of any paper or any further act on the part of any of the parties to this Base Indenture; provided, however, that (i) if any of the Notes are then rated by a Note Rating Agency, then prior to any such merger, consolidation or conversion (1) PMC shall have provided to the Indenture Trustee and the Noteholders a letter from each Note Rating Agency that rated Outstanding Notes indicating that such merger, consolidation or conversion will not result in the qualification, reduction or withdrawal of the then current ratings of the Outstanding Notes or (2) if the Administrator and the Administrative Agents determine in their reasonable judgment that an applicable Note Rating Agency no longer provides such letters as described in the foregoing clause (1), (a) the Administrator shall provide notice of such merger, consolidation or conversion to the related Note Rating Agency and (b) each Administrative Agent shall have provided its prior written consent to merger, consolidation or conversion; provided, that the Issuer and Co-Issuer provide an Issuer and Co-Issuer Certificate to the effect that any such merger, consolidation or conversion will not have a material Adverse Effect on the Outstanding Notes, and (ii) prior to any such merger, consolidation or conversion the Administrator shall have delivered to the Indenture Trustee an Opinion of Counsel to the effect that such merger, consolidation or conversion complies with the terms of this Base Indenture and one or more Opinions of Counsel updating or restating all opinions delivered on the date of this Base Indenture with respect to corporate matters and the enforceability of Transaction Documents against PMC true sale as to the transfers of the Participation Certificates from the Servicer to the Issuer and non-consolidation of the Servicer with the Issuer and security interest and tax and any additional opinions required under any related Indenture Supplement; provided, further, that the conditions specified in clauses (i) and (ii) above shall not apply to any transaction (i) in which an Affiliate of PMC assumes the obligations of PMC and otherwise satisfies the eligibility criteria applicable to the Servicer under the Fannie Mae Lender Contracts or (ii) in which an Affiliate of PMC is merged into or is otherwise combined with PMC and PMC is the sole survivor of such merger or other combination. PMC shall provide notice of any merger, consolidation or succession pursuant to this Section to the Indenture Trustee, the Noteholders and each Note Rating Agency.

Except as described in the preceding paragraph, PMC may not assign or delegate any of its rights or obligations under this Base Indenture or any other Transaction Document.

 

Section 10.6. Representations and Warranties of PMH, as Co-Issuer Administrator. PMH, as Co-Issuer Administrator, hereby makes the following representations and warranties for the benefit of the Indenture Trustee, as of the date hereof, and as of the date of each Grant of Participation Certificates to the Indenture Trustee pursuant to this Base Indenture.

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(a) Organization and Good Standing. PMH is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware.

(b) Power and Authority; Binding Obligation. PMH has the power and authority to make, execute, deliver and perform its obligations under this Base Indenture and any related Indenture Supplement and each other Transaction Document to which it is a party and all of the transactions contemplated hereunder and thereunder, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Base Indenture and each Indenture Supplement and each other Transaction Document to which it is a party; this Base Indenture and each Indenture Supplement and each other Transaction Document to which it is a party constitutes a legal, valid and binding obligation of PMH, enforceable against PMH in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity) or by public policy with respect to indemnification under applicable securities laws.

(c) No Violation. The execution and delivery of this Base Indenture and each Indenture Supplement and each other Transaction Document to which it is a party by PMH and its performance of its obligations under this Base Indenture and each Indenture Supplement and each other Transaction Document to which it is a party will not (i) violate PMH’s certificate of incorporation, bylaws or other organizational documents or (ii) constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which PMH is a party or which may be applicable to PMH or any of its assets, or any and all instruments, agreements, invoices or other writings which give rise to or otherwise evidence any of the MSRs, or (iii) violate any statute, ordinance or law or any rule, regulation, order, writ, injunction or decree of any court or of any public, governmental or regulatory body, agency or authority applicable to PMH or its properties except, with respect to clauses (ii) and (iii), for such defaults, breaches or violations that would not reasonably be expected to have a material Adverse Effect.

(d) No Proceedings. No proceedings, investigations or litigation before any court, tribunal or governmental body is currently pending, nor to the knowledge of PMH is threatened against PMH, nor is there any such proceeding, investigation or litigation currently pending, nor, to the knowledge of PMH, is any such proceeding, investigation or litigation threatened against PMH with respect to this Base Indenture, any Indenture Supplement or any other Transaction Document or the transactions contemplated hereby or thereby that could reasonably be expected to have a material Adverse Effect.

(e) No Consents Required; Fannie Mae Approvals. Except with respect to the Acknowledgment Agreement, no authorization, consent, approval, or other action by, and no notice to or filing with, any court, governmental authority or regulatory body or other Person domestic or foreign, including HUD or Fannie Mae, is required for the execution, delivery and performance by PMH of or compliance by PMH with this Base Indenture, any Indenture Supplement or the consummation of the transactions contemplated by this Base Indenture, any Indenture Supplement except for (i) consents, approvals, authorizations and orders which have obtained in connection with transactions contemplated by the Transaction Documents (including

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the Acknowledgment Agreement), (ii) filings to perfect the security interest created by this Base Indenture, and (iii) authorizations, consents, approvals, filings, notices, or other actions the failure to obtain such consents, approvals, authorizations and orders would not reasonably be expected to have a material Adverse Effect.

(f) Information. No written statement, report or other document furnished or to be furnished pursuant to this Base Indenture or any other Transaction Document to which it is a party by PMH contains or will contain any statement that is or will be inaccurate or misleading in any material respect.

(g) Default. The Co-Issuer Administrator is not in default with respect to any material contract under which a default should reasonably be expected to have a material adverse effect on the ability of the Co-Issuer Administrator to perform its duties under this Base Indenture or any Indenture Supplement, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such contract or order of any court, administrative agency, arbitrator or governmental body.

(h) Foreign Corrupt Practices Act. To the extent applicable, neither PMH nor any subsidiary thereof (collectively, the “PMH FCPA Entities” and individually a “PMH FCPA Entity”), or any employees, directors, or officers of any PMH FCPA Entity, or to the knowledge of any PMH FCPA Entity, any of its agents or representatives or any subsidiary of any PMH FCPA Entity, is aware of, has taken, or will take any action, directly or indirectly, that would result in a violation by such persons of the FCPA; and PMH and its subsidiaries and Affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintained policies and procedures designed to ensure continued compliance therewith.

(i) Anti-Money Laundering. The operations of PMH are conducted and, to its knowledge, have been conducted in all material respects in compliance with the applicable anti-money laundering statutes of all jurisdictions to which PMH is subject and the rules and regulations thereunder, including the U.S. Anti-Money Laundering Laws and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving PMH with respect to the U.S. Anti-Money Laundering Laws is pending or, to the knowledge of PMH, threatened.

(j) Sanctions. Neither PMH nor its Subsidiaries, nor, to its knowledge, any of its or its Subsidiaries’ directors, officers, agents, Subsidiaries or employees, is a Person that is, or is owned or controlled by Persons that are (1) the subject of any Sanctions or (2) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions; including the Crimea region of Ukraine, Cuba, Iran, North Korea and Syria.

Section 10.7. Covenants of PMH, as Co-Issuer Administrator.

(a) Amendments to PC Documents. The Co-Issuer Administrator hereby covenants and agrees not to amend any PC Documents without the prior written consent of the Majority Noteholders of all Outstanding Notes, except for the following purposes and with (i) the

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consent of the Issuer (evidenced by its execution of such amendment), the Indenture Trustee and the Administrative Agent, (ii) upon delivery of an Issuer Trusts’ Tax Opinion (unless such Issuer Trusts’ Tax Opinion is waived by either 100% of the VFN Noteholders or the Majority Noteholders of all Outstanding Notes) and (iii) upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer reasonably believes that such amendment could not have a material Adverse Effect and is not reasonably expected to have a material Adverse Effect on the Noteholders of the Notes at any time in the future:

(A) to evidence the succession of another Person to the Issuer or the Co-Issuer, and the assumption by any such successor of the covenants of the Issuer or the Co-Issuer in the PC Documents;

(B) to add to the covenants of the Issuer or the Co-Issuer, or to surrender any right or power under the PC Documents conferred upon the Issuer or the Co-Issuer, for the benefit of the Noteholders;

(C) to cure any ambiguity, to correct or supplement any provision under the PC Documents which may be inconsistent with any other provision therein, or to make any other provisions with respect to matters or questions arising under the PC Repurchase Agreement;

(D) to prevent the Issuer or the Co-Issuer from being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for United States federal income tax purposes;

(E) determined by the Co-Issuer Administrator to be reasonably necessary to maintain the rating currently assigned by the applicable Note Rating Agency and/or to avoid such Class of Notes being placed on negative watch by such Note Rating Agency; or

(F) as otherwise provided in the related PC Documents.

In addition to the foregoing, the Co-Issuer Administrator may effect amendments to the PC Documents without the prior written consent of the Majority Noteholders of each Series of Outstanding Term Notes to cure any inconsistency between any PC Document and any provision of the Acknowledgment Agreement (i) upon delivery of a certification relating to the purpose of such amendment by the Co-Issuer Administrator to the Indenture Trustee, to which the Indenture Trustee may conclusively rely, (ii) with the consent of the Issuer (evidenced by its execution of such amendment), the Indenture Trustee and the Administrative Agent, and (iii) with the consent of the VFN Noteholders.

(b) Maintenance of Security Interest. The Co-Issuer Administrator shall from time to time, at its own expense, file such additional financing statements (including continuation statements) as may be necessary to ensure that at any time, the Security Interest of the Indenture Trustee (on behalf of itself and the Noteholders) in all of the Participation Certificates and the other Collateral is fully protected in accordance with the UCC and that the Security Interest of the Indenture Trustee in the Participation Certificates and the rest of the Trust Estate remains perfected and of first priority. The Co-Issuer Administrator shall take all steps necessary to ensure compliance with Section 9.5(m).

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(c) Compliance with PC Documents. PMH shall not fail to comply with any obligation as administrator under each of the PC Documents, if such failure would have a material Adverse Effect. PMH shall immediately notify the Indenture Trustee, the Disposition Manager and the Administrative Agent of its receipt of a notice of termination under the Fannie Mae Lender Contract. The Indenture Trustee shall forward any such notification to each Noteholder.

(d) Compliance with Obligations. PMH shall comply with all of its other obligations and duties set forth in this Base Indenture and any other Transaction Document. PMH shall not permit the Issuer to engage in activities that could violate its covenants in this Base Indenture.

(e) [Reserved].

(f) Co-Issuer Administrator Instructions and Functions Performed by Issuer. The Co-Issuer Administrator shall perform the administrative or ministerial functions specifically required of the Co-Issuer pursuant to this Base Indenture and any other Transaction Document.

(g) Performance and Compliance with the Transaction Documents. PMH will comply with all terms, provisions, covenants and other promises required to be observed by it under the Transaction Documents to which it is a party, maintain the Transaction Documents to which it is a party in full force and effect in all material respects.

(h) Due Diligence. PMH acknowledges that the Indenture Trustee or the Administrative Agent, at PMH’s expense, has the right to perform and/or appoint a third party to perform, continuing due diligence reviews with respect to the Collateral, for purposes of verifying compliance with the representations, warranties, and specifications made hereunder and under the other Transaction Documents, or otherwise. PMH agrees that the Indenture Trustee or the Administrative Agent and their Authorized Representatives will be permitted during normal business hours, upon not less than three (3) Business Days advance written notice, to examine, inspect, make copies of, and make extracts of, any and all documents, records, agreements (including any subservicing contracts), instruments or information relating to the Collateral or Fannie Mae in the possession of PMH; provided, however, that the foregoing shall not apply with respect to any information that PMH is required by Fannie Mae to keep confidential. Notwithstanding anything to the contrary herein, PMH shall reimburse the Indenture Trustee and the Administrative Agent for any and all reasonable and out-of-pocket costs and expenses reasonably incurred by the such party and its respective designees and appointees in connection with the ongoing due diligence and auditing activities; provided, that PMH shall not be required to permit more than one due diligence trip or audit during any twelve month period unless an Event of Default is continuing.

(i) Special Affirmative Covenants Concerning Collateral.

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Trustee, on behalf of the Noteholders, in and to the Collateral to the Indenture Trustee against the claims and demands of all Persons whomsoever.

(i) Subject to the Acknowledgment Agreement and the Fannie Mae Requirements, PMH warrants and shall defend the right, title and interest of the Indenture (ii) PMH shall preserve the security interests granted hereunder and upon request by the Indenture Trustee or the Administrative Agent undertake all actions which are necessary or appropriate, in the reasonable judgment of the Indenture Trustee or the Administrative Agent, as applicable, to (x) maintain the security interest of the Indenture Trustee on behalf of the Noteholders (including the priority thereof) in the Collateral in full force and effect at all times prior to the satisfaction of all obligations under this Base Indenture and the release of the Noteholders’ lien in accordance with the terms and provisions of this Base Indenture, and (y) preserve and protect the Collateral and protect and enforce the rights of the Indenture Trustee to the Collateral, including the making or delivery of all filings and recordings (of financing or continuation statements), or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate, cause to be marked conspicuously its master data processing records with a legend, acceptable to the Indenture Trustee, evidencing that such security interest has been granted in accordance with this Base Indenture.

(j) Use of Proceeds. PMH shall not use the proceeds of the Notes in contravention of the requirements, if any, of Fannie Mae or Applicable Law.

(k) Portfolio Mortgage Loan Information. PMH shall deliver to the to the Administrative Agent within seven (7) Business Days after the end of each month, the information relating to the Portfolio Mortgage Loans required pursuant to Schedule 4 hereto.

(l) Fannie Mae Notices. To the extent PMH receives it, PMH shall promptly furnish the Administrative Agent copies of all notices it receives from Fannie Mae that materially affect the Servicing Fees, including any notice received with respect to the events set forth in Section 12.1(l).

(m) Legal Existence, etc. PMH shall (i) preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises; and (ii) keep adequate records and books of account.

(n) Interim Borrowing Base Determination Date Reporting. PMH shall report the occurrence of an Interim Borrowing Base Determination Date promptly after a Responsible Officer of the Co-Issuer Administrator shall have obtained actual knowledge of such occurrence, and in any event within one (1) Business Day of obtaining such knowledge.

(o) Separateness. PMH shall make appropriate notation in its consolidated financial statements to indicate the separateness of the Issuer from PMH and to indicate that the Issuer’s assets and credit are separate from those of PMH and its other consolidated subsidiaries.

Section 10.8. Negative Covenants of PMH. PMH covenants and agrees with the Indenture Trustee, the Administrative Agent and each Noteholder that, so long as any Note is Outstanding and until all obligations have been paid in full, PMH shall not:

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(a) take any action that would directly or indirectly materially impair or materially adversely affect PMH’s title to, or the value of, the Collateral;

(b) sell, lease or otherwise dispose of any Collateral (other than sales or dispositions of MSRs (i) resulting from the payoff of the related Mortgages or the purchase of the related Mortgage by PMH, (ii) as required by Fannie Mae or (iii) in the ordinary course of PMH’s servicing business) except as expressly permitted by this Base Indenture;

(c) engage to any substantial extent in any line or lines of business activity other than the businesses related to mortgage origination and servicing carried on by it as of the date hereof;

(d) (i) cancel or terminate any Transaction Documents to which it is a party or consent to or accept any cancellation or termination thereof, (ii) amend, amend and restate, supplement or otherwise modify any Transaction Document, (iii) consent to any amendment, modification or waiver of any term or condition of any Transaction Document, without the prior written consent of the Administrative Agent, or (iv) take any other action in connection with any such Transaction Documents that would impair in any material respect the value of the interests or rights of PMH thereunder or that would impair in any material respect the interests or rights of the Indenture Trustee, the Administrative Agent or any Noteholder;

(e) change the state of its organization unless PMH shall have given the Administrative Agent at least thirty (30) days’ prior written notice thereof and unless, prior to any such change, PMH shall have filed, or caused to be filed, such financing statements or amendments as the Indenture Trustee determines may be reasonably necessary to continue the perfection of the Indenture Trustee’s interest in the Collateral;

(f) make any Restricted Payments at any time while an Event of Default has occurred and is continuing; and

(g) not enter into any transaction, including any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (i) in the ordinary course of PMH’s business and (ii) upon fair and reasonable terms no less favorable to PMH than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate.

Section 10.9. Liability of PMH, as Co-Issuer Administrator; Indemnities.

(a) Obligations. The Co-Issuer Administrator shall indemnify, defend and hold harmless the Indemnified Parties from and against any and all costs, expenses, losses, claims, damages and liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, and was imposed upon, the Indenture Trustee, the Securities Intermediary, the Note Registrar, the Disposition Manager, the Owner Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Trust Estate or any Noteholder (i) in the case of indemnification by the Co-Issuer Administrator, by reason of a violation of law, gross negligence or willful misconduct of the Co-Issuer Administrator (or of the Co-Issuer as a result of a direction, act or omission by the Co-Issuer Administrator), in the performance of its obligations under this Base Indenture and the other Transaction Documents or by reason of the breach by the Co-Issuer Administrator of any of its representations, warranties or covenants hereunder; provided, that any indemnification amounts payable by the Co-Issuer Administrator, as the case may be, to the Owner Trustee hereunder shall not be duplicative of any indemnification amount paid by the Co-Issuer Administrator to the Owner Trustee in accordance with the Trust Agreements or under the Administration Agreement.

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(b) Notification and Defense. Promptly after any Indemnified Party shall have been served with the summons or other first legal process or shall have received written notice of the threat of a claim in respect of which a claim for indemnity may be made against PMH under this Section 10.4, the Indemnified Party shall notify the Indemnifying Party in writing of the service of such summons, other legal process or written notice, giving information therein as to the nature and basis of the claim, but failure so to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which it may have hereunder or otherwise, except to the extent that the Indemnifying Party is prejudiced by such failure so to notify the Indemnifying Party. The Indemnifying Party will be entitled, at its own expense, to participate in the defense of any such claim or action and, to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party, and, after notice from the Indemnifying Party to such Indemnified Party that the Indemnifying Party wishes to assume the defense of any such action, the Indemnifying Party will not be liable to such Indemnified Party under this Section 10.4 for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense of any such action unless (i) the defendants in any such action include both the Indemnified Party and the Indemnifying Party, and the Indemnified Party (upon the advice of counsel) shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Indemnifying Party, or one or more Indemnified Parties, and which in the reasonable judgment of such counsel are sufficient to create a conflict of interest for the same counsel to represent both the Indemnifying Party and such Indemnified Party, (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of commencement of the action, or (iii) the Indemnifying Party has authorized the employment of counsel for the Indemnified Party at the expense of the Indemnifying Party; then, in any such event, such Indemnified Party shall have the right to employ its own counsel in such action, and the reasonable fees and expenses of such counsel shall be borne by the Indemnifying Party; provided, however, that the Indemnifying Party shall not in connection with any such action or separate but substantially similar or related actions arising out of the same general allegations or circumstances, be liable for any fees and expenses of more than one firm of attorneys at any time for all Indemnified Parties. Each Indemnified Party, as a condition of the indemnity agreement contained herein, shall use its commercially reasonable efforts to cooperate with the Indemnifying Party in the defense of any such action or claim. The Indemnifying Party shall not, without the prior written consent of any Indemnified Party, effect any settlement of any pending or threatened proceeding in respect of which such Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such proceeding or threatened proceeding.

(c) Expenses. Indemnification under this Section shall include, without limitation, reasonable fees and expenses of counsel and expenses of litigation (including such fees and expenses incurred in enforcing the Indemnifying Party’s right to indemnification). If the Indemnifying Party has made any indemnity payments pursuant to this Section and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts collected to the Indemnifying Party, without interest.

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(d) Survival. The provisions of this Section 10.4 shall survive the resignation or removal of the Indenture Trustee, the Calculation Agent and the Paying Agent and the termination of this Base Indenture.

Section 10.10. Merger or Consolidation, or Assumption of the Obligations, of PMH. Any Person (a) into which PMH may be merged or consolidated, (b) which may result from any merger, conversion or consolidation to which PMH shall be a party, or (c) which may succeed to all or substantially all of the business or assets of PMH which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of PMH under this Base Indenture, shall be the successor to PMH under this Base Indenture without the execution or filing of any paper or any further act on the part of any of the parties to this Base Indenture; provided, however, that (i) if any of the Notes are then rated by a Note Rating Agency, then prior to any such merger, consolidation or conversion (1) PMH shall have provided to the Indenture Trustee and the Noteholders a letter from each Note Rating Agency that rated Outstanding Notes indicating that such merger, consolidation or conversion will not result in the qualification, reduction or withdrawal of the then current ratings of the Outstanding Notes or (2) if the Co-Issuer Administrator and the Administrative Agents determine in their reasonable judgment that an applicable Note Rating Agency no longer provides such letters as described in the foregoing clause (1), (a) the Co-Issuer Administrator shall provide notice of such merger, consolidation or conversion to the related Note Rating Agency and (b) each Administrative Agent shall have provided its prior written consent to merger, consolidation or conversion; provided, that the Co-Issuer provides an Issuer and Co-Issuer Certificate to the effect that any such merger, consolidation or conversion will not have a material Adverse Effect on the Outstanding Notes, and (ii) prior to any such merger, consolidation or conversion the Co-Issuer Administrator shall have delivered to the Indenture Trustee an Opinion of Counsel to the effect that such merger, consolidation or conversion complies with the terms of this Base Indenture and one or more Opinions of Counsel updating or restating all opinions delivered on the date of this Base Indenture with respect to corporate matters and the enforceability of Transaction Documents against PMH true sale as to the transfers of the Participation Certificates from the Co-Issuer Administrator to the Issuer and non-consolidation of the Co-Issuer Administrator with the Issuer and security interest and tax and any additional opinions required under any related Indenture Supplement; provided, further, that the conditions specified in clauses (i) and (ii) above shall not apply to any transaction in which an Affiliate of PMH is merged into or is otherwise combined with PMH and PMH is the sole survivor of such merger or other combination. PMH shall provide notice of any merger, consolidation or succession pursuant to this Section to the Indenture Trustee, the Noteholders and each Note Rating Agency.

Except as described in the preceding paragraph, PMH may not assign or delegate any of its rights or obligations under this Base Indenture or any other Transaction Document.

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Article XI

The Indenture Trustee Section

Section 11.1. Certain Duties and Responsibilities. (a) The Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Base Indenture with respect to the Notes, and no implied covenants, duties (including fiduciary duties) or obligations will be read into this Base Indenture against the Indenture Trustee.

(b) In the absence of bad faith on its part, the Indenture Trustee may, with respect to Notes, conclusively rely upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Base Indenture, as to the truth of the statements and the correctness of the opinions expressed therein; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee will be under a duty to examine the same to determine whether or not they conform on their face to the requirements of this Base Indenture but need not confirm or investigate the accuracy of any mathematical calculations or other facts stated therein.

(c) If an Event of Default has occurred and is continuing, with respect to the Notes of which a Responsible Officer of the Indenture Trustee has been given written notice in the manner set forth in this Indenture or of which a Responsible Officer of the Indenture Trustee has actual knowledge, the Indenture Trustee will exercise such of the rights and powers vested in it by this Base Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs; provided that the foregoing shall not be deemed to require the Indenture Trustee to take any action, or have any liability for the failure to take any action, where the terms of this Base Indenture or any Indenture Supplement provide that the Indenture Trustee only takes action at the direction of a certain percentage of the Noteholders or other Person or if the Indenture Trustee is permitted to refrain from taking action unless it has been provided with adequate indemnity.

(d) No provision of this Base Indenture will be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) this subsection (d) will not be construed to limit the effect of subsection (a) of this Section 11.1;

(ii) the Indenture Trustee will not be liable for any error of judgment made in good faith by an Indenture Trustee Authorized Officer, unless it will be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts;

(iii) the Indenture Trustee will not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Majority Noteholders or the Administrative Agent relating to the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee, or exercising any trust or power conferred upon the Indenture Trustee, under this Base Indenture with respect to the Notes of any Class, to the extent consistent with Sections 8.7 and 8.8; (iv) no provision of this Base Indenture will require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it has reasonable grounds for believing that repayment of such funds or indemnity satisfactory to the Indenture Trustee against such risk or liability is not reasonably assured to it;

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(v) whether or not therein expressly so provided, every provision of this Base Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee will be subject to the provisions of this Section; and

(vi) the Indenture Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Issuer, the Co-Issuer or of Noteholders, as applicable, in accordance with the terms of this Indenture, relating to the time, method or place of conducting any proceeding for any remedy available to the Indenture Trustee or with respect to the exercise of any trust or power conferred upon such party under this Indenture or with respect to the Notes.

(e) Upon the occurrence of an Event of Default under the PC Repurchase Agreement, the Indenture Trustee may (and at the direction of the Administrative Agent or the Series Required Noteholders) send an Activation Notice to the Account Bank pursuant to which the Indenture Trustee shall exercise its control over the Dedicated Account, as applicable.

Section 11.2. Notice of Defaults. Except as otherwise provided in Section 3.3(b), within ninety (90) days after the occurrence of any Event of Default hereunder,

(a) the Indenture Trustee will transmit by mail to all registered Noteholders, as their names and addresses appear in the Note Register, notice of such default hereunder known to the Indenture Trustee, and

(b) the Indenture Trustee will give prompt written notification thereof to each Note Rating Agency, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of or interest on any Note of any Series or Class, the Indenture Trustee will be protected in withholding such notice if and so long as an Indenture Trustee Responsible Officer in good faith determines that the withholding of such notice is in the interests of the Noteholders of such Series or Class. For the purpose of this Section, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default.

Section 11.3. Certain Rights of Indenture Trustee. Except as otherwise provided in Section 11.1:

(a) the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary may conclusively rely and will be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document (whether in its original or facsimile form) believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Issuer Trusts mentioned herein shall be sufficiently evidenced by an Issuer and Co-Issuer Certificate;

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(c) whenever in the administration of this Base Indenture the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary deems it desirable that a matter be proved or established before taking, suffering or omitting any action hereunder, the Indenture Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer’s Certificate;

(d) each of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary may consult with counsel of its own selection, at the expense of the Issuer Trusts, and the advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(e) none of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary shall be under obligation to exercise any of the rights or powers vested in it by this Base Indenture at the request or direction of any of the Noteholders pursuant to this Base Indenture, unless such Noteholders shall have offered to the Indenture Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

(f) none of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary shall be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other paper or document; but such party in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if any of the Indenture Trustee, the Paying Agent, the Note Registrar or the Securities Intermediary shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer Trusts, personally or by agent or attorney, upon reasonable notice of not less than three (3) Business Days;

(g) each of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and none of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary shall be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder;

(h) none of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary shall be required to provide any surety or bond of any kind in connection with the execution or performance of its duties hereunder;

(i) none of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary shall be deemed to make any representations as to the validity or sufficiency of this Indenture;

(j) none of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary shall at any time have any responsibility or liability other than as may be expressly set forth in this Indenture for or with respect to the legality, validity or enforceability of any of the Notes;

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(k) in order to comply with their respective duties under the USA Patriot Act of 2001, the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary shall obtain and verify certain information and documentation from the other parties to this Indenture including such party’s name, address, and other identifying information;

(l) the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary shall not be under any obligation to (i) institute, conduct, defend or otherwise participate in any litigation or other legal proceeding hereunder or in relation hereto at the request, order or direction of any of the Noteholders pursuant to the provisions of this Indenture, or (ii) undertake an investigation of any party to any transaction agreement, unless, in each case, such Noteholders shall have offered to the Indenture, Calculation Agent, Paying Agent and Securities Intermediary security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby;

(m) the Indenture Trustee shall not have any duty or responsibility in respect to (i) any recording, filing or depositing of this Indenture or any other agreement or instrument, monitoring or filing any financing statement or continuation statement evidencing a security interest, the maintenance of any such recording, filing or depositing or any re-recording, re-filing or re-depositing of any thereof, or otherwise monitoring the perfection, continuation of perfection or the sufficiency or validity of any security interest in or related to the Collateral, (ii) the acquisition or maintenance of any insurance or (iii) the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Collateral. The Indenture Trustee shall be authorized to, but shall in no event have any duty or responsibility to, file any financing or continuation statements or record any documents or instruments in any public office at any time or times or otherwise perfect or maintain any security interest in the Collateral;

(n) the Indenture Trustee shall not be deemed to have notice of any default, Event of Default, Funding Interruption Event or Servicer Termination Event unless an Indenture Trustee Responsible Officer has actual knowledge thereof or unless written notice of any event which is in fact such a default, Event of Default, Funding Interruption Event or Servicer Termination Event is received by the Indenture Trustee at the Corporate Trust Office of the Indenture Trustee, and such notice references the Notes and this Base Indenture; in the absence of receipt of such notice or actual knowledge, the Indenture Trustee may conclusively assume that there is no default, Event of Default, Funding Interruption Event or Servicer Termination Event;

(o) the rights, privileges, protections, immunities and benefits given to the Indenture Trustee hereunder and under each Transaction Document, including its right to be indemnified, are extended to, and shall be enforceable (without duplication) by, the Indenture Trustee or the bank serving as Indenture Trustee, as applicable, in each of its capacities hereunder and thereunder (including Calculation Agent, Custodian, Paying Agent, Securities Intermediary and Note Registrar), and each agent and other person employed to act hereunder and thereunder; (p) none of the provisions contained in this Base Indenture shall in any event require the Indenture Trustee to perform, or be responsible for the manner of performance of, any of the obligations of the Servicer or any other Person under this Base Indenture;

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(q) the Indenture Trustee shall have no duty (A) to see to any recording, filing, or depositing of this Base Indenture or any agreement referred to herein or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any rerecording, refiling or redepositing of any thereof, (B) to see to any insurance, (C) to see to the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Trust Estate other than from funds available in the Trust Accounts or (D) to confirm or verify the contents of any reports or certificates of the Servicer, the Administrator or the Co-Issuer Administrator delivered to the Indenture Trustee pursuant to this Base Indenture believed by the Indenture Trustee to be genuine and to have been signed or presented by the proper party or parties;

(r) the Indenture Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Base Indenture;

(s) the right of the Indenture Trustee to perform any discretionary act enumerated in this Base Indenture or the other Transaction Documents shall not be construed as a duty, and the Indenture Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of such act;

(t) the Indenture Trustee shall not be required to give any bond or surety in respect of the execution of the Trust Estate created hereby or the powers granted hereunder;

(u) in making or disposing of any investment permitted by this Base Indenture, the Indenture Trustee is authorized to deal with itself (in its individual capacity) or with any one or more of its Affiliates, in each case on an arm’s-length basis and on standard market terms, whether it or such Affiliate is acting as a subagent of the Indenture Trustee or for any third Person or dealing as principal for its own account;

(v) the Indenture Trustee shall not be responsible for delays or failures in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts or God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; and

(w) None of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary (i) shall be responsible for and make any representation as to the validity, legality, enforceability, sufficiency or adequacy of this Indenture, the Notes or any other Transaction Document or as to the correctness of any statement thereof, (ii) shall be accountable for the Issuer Trusts’s use of the proceeds from the Notes, or (iii) shall be responsible for any statement of the Issuer Trusts in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes. The recitals contained herein and in the Notes shall be construed as the statements of the Issuer Trusts.

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The Indenture Trustee shall not be responsible for any statement of the Issuer Trusts in this Indenture or any statement in any document, including any offering memorandum, issued in connection with the sale of any Notes or in the Notes other than information provided by the Indenture Trustee and the Indenture Trustee’s certificate of authentication or for the use or application of any funds received by any Paying Agent other than the Indenture Trustee.

(x) In no event will the Indenture Trustee have any responsibility to monitor compliance with or enforce compliance with the credit risk retention rules under Regulation RR or other rules or regulations relating to risk retention. The Indenture Trustee will not be charged with knowledge of such rules, nor will it be liable to any Noteholder, Certificateholder, the Servicer or any other Person for violation of such rules now or hereinafter in effect. The Indenture Trustee will not be required to monitor, initiate or conduct any proceedings to enforce the obligations of the Servicer or any other Person with respect to any breach of representation or warranty under any Transaction Document, and the Indenture Trustee will not have any duty to conduct any investigation as to the occurrence of any condition requiring the repurchase or substitution of any security by any Person pursuant to any Transaction Document.

(y) The Indenture Trustee is hereby authorized and directed to enter into the Transaction Documents to which it is a party.

(z) The Indenture Trustee (in any capacity in which it acts) shall have no duty, obligation or responsibility to determine whether a Benchmark Transition Event has occurred or to select an alternative index, and shall have no liability for the Designated Transaction Representative’s selection of such alternative index.

Section 11.4. Not Responsible for Recitals or Issuance of Notes. The recitals contained herein and in the Notes, except the certificates of authentication, will be taken as the statements of the Issuer Trusts, and the Indenture Trustee assumes no responsibility for their correctness. The Indenture Trustee makes no representations as to the validity or sufficiency of this Base Indenture or of the Notes. The Indenture Trustee will not be accountable for the use or application by the Issuer Trusts of Notes or the proceeds thereof, or for the use or application of any funds paid to the Servicer in respect of any amounts deposited in or withdrawn from the Trust Accounts or the custodial accounts by the Servicer. The Indenture Trustee shall not be responsible for the legality or validity of this Base Indenture or the validity, priority, perfection or sufficiency of the security for the Notes issued or intended to be issued hereunder.

Section 11.5. Indenture Trustee’s Appointment as Attorney-In-Fact. (a) The Servicer hereby irrevocably constitutes and appoints the Indenture Trustee and any officer or agent thereof, during the continuation of an Event of Default, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Servicer and in the name of the Servicer, for the purpose of carrying out the terms of this Base Indenture and each Indenture Supplement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Base Indenture, each Indenture Supplement, the PC Repo Guaranty, the Fannie Mae Lender Contract, the Acknowledgment Agreement, and, without limiting the generality of the foregoing, Each of the Issuer Trusts hereby gives the Indenture Trustee the power and right:

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(1) to take possession of and endorse and collect any wired funds, checks, drafts, notes, acceptances or other instruments for the payment of monies due under any Participation Certificates Granted by the Issuer Trusts to the Indenture Trustee from the Obligors on underlying Mortgage Loans or the Servicer, as the case may be;

(2) to file any claim or proceeding in any court of law or equity or take any other action otherwise deemed appropriate by the Indenture Trustee for the purpose of collecting any and all such monies due from the Obligors on underlying Mortgage Loans or the Servicer under such Participation Certificate whenever payable and to enforce any other right in respect of any Participation Certificate Granted by the Issuer Trusts or related to the Trust Estate;

(3) to direct the related Servicer to make payment of any and all monies due or to become due under the Participation Certificate Granted by the Issuer Trusts directly to the Indenture Trustee or as the Indenture Trustee shall direct;

(4) to ask or demand for, collect, receive payment of and receipt for, any and all monies, claims and other amounts due or to become due from the Servicer at any time in respect of or arising out of any Participation Certificate Granted by the Issuer Trusts;

(5) to sign and endorse any assignments, notices and other documents in connection with the Participation Certificates Granted by the Issuer Trusts or the Trust Estate;

(6) to sell, transfer, pledge and make any agreement with respect to or otherwise deal with the Participation Certificates Granted by the Issuer, the Co-Issuer and the Trust Estate as fully and completely as though the Indenture Trustee were the absolute owner thereof for all purposes, and do, at the Indenture Trustee’s option and at the expense of the Issuer Trusts, at any time, or from time to time, all acts and things which the Indenture Trustee deems necessary to protect, preserve or realize upon the Participation Certificate Granted by the Issuer Trusts or the Trust Estate and the Indenture Trustee’s and the Issuer Trusts’s respective security interests and ownership interests therein and to effect the intent of this Base Indenture, all as fully and effectively as the Issuer Trusts might do;

(7) to perform or cause to be performed, the Servicer’s obligations under the Fannie Mae Lender Contract to the extent permitted by the Acknowledgment Agreement;

(8) upon and after the occurrence of a default by the Servicer under the Fannie Mae Lender Contract, the Servicer also authorizes the Indenture Trustee, or other party appointed by the Indenture Trustee, to have on site access to the Servicer’s operation sites, sufficient for the Administrative Agent or other party appointed by it, to begin the process of transferring the portfolio to a successor servicer as contemplated pursuant to the Acknowledgment Agreement;

(9) the Servicer also authorizes the Administrative Agent, at any time and from time to time, to execute, in connection with the sale provided for in Section 8.15 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; provided that the exercise of such powers are in accordance with the Acknowledgment Agreement; and

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(10) the powers conferred on the Indenture Trustee are solely to protect the Noteholders’ interest in the Collateral and shall not impose any duty upon the Indenture Trustee to exercise any such powers.

(b) The Indenture Trustee shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Indenture Trustee nor any of its officers, directors, or employees shall be responsible to the Issuer Trusts for any act or failure to act hereunder; provided, that the Indenture Trustee shall exercise such powers only in accordance with the Acknowledgment Agreement. Nothing contained herein shall in any way be deemed to be a grant of power or authority to the Indenture Trustee or any officer or agent thereof to take any of the actions described in this paragraph with respect to any underlying Obligor under any Portfolio Mortgage Loan.

Section 11.6. Money Held in Trust. The Indenture Trustee will be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Issuer Trusts.

Section 11.7. Compensation and Reimbursement Limit on Compensation, Reimbursement and Indemnity. Except as otherwise provided in this Base Indenture:

(a) The Indenture Trustee (including in all of its capacities) will be paid the Indenture Trustee Fee on each Payment Date pursuant to Section 4.5 as compensation for its services (in all capacities hereunder).

(b) The Indenture Trustee (including in all of its capacities) shall be indemnified and held harmless by the Trust Estate as set forth in Section 4.5 and Section 8.6, and shall be secondarily indemnified and held harmless by the Administrator and Co-Issuer Administrator for, from and against, as the case may be, any loss, liability or expense incurred without negligence or willful misconduct on its part, arising out of, or in connection with, the acceptance and administration of the Trust Estate, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against any claim in connection with the exercise or performance of any of its powers or duties under this Base Indenture, provided that:

(i) with respect to any such claim, the Indenture Trustee shall have given the Administrator and Co-Issuer Administrator written notice thereof promptly after a Responsible Officer of the Indenture Trustee shall have actual knowledge thereof; provided, however that failure to give such written notice shall not affect the Trust Estate’s, the Administrator’s or the Co-Issuer Administrator’s obligation to indemnify the Indenture Trustee, unless such failure materially prejudices the Trust Estate’s, the Administrator’s or the Co-Issuer Administrator’s rights;

(ii) each of the Administrator and the Co-Issuer Administrator may, at its option, assume the defense of any such claim using counsel reasonably satisfactory to the Indenture Trustee; and (iii) notwithstanding anything in this Base Indenture to the contrary, neither the Administrator nor the Co-Issuer Administrator shall be liable for settlement of any claim by the Indenture Trustee, as the case may be, entered into without the prior consent of the Administrator and the Co-Issuer Administrator, which consent shall not be unreasonably withheld.

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Notwithstanding the foregoing, in no event shall the Trust Estate, the Administrator or the Co-Issuer Administrator be required to indemnify the Indenture Trustee if the indemnification obligation under this Section 11.7 is the result of gross negligence or willful misconduct by the Indenture Trustee.

No termination of this Base Indenture, or the resignation or removal of the Indenture Trustee, shall affect the obligations created by this Section 11.7(b) of the Administrator and the Co-Issuer Administrator to indemnify the Indenture Trustee under the conditions and to the extent set forth herein.

Notwithstanding the foregoing, the indemnification provided in this Section 11.7(b) with respect to the Administrator and the Co-Issuer Administrator shall not pertain to any loss, liability or expense of the Indenture Trustee, including the costs and expenses of defending itself against any claim, incurred in connection with any actions taken by the Indenture Trustee at the direction of the Noteholders pursuant to the terms of this Base Indenture.

The Indenture Trustee agrees fully to perform its duties under this Base Indenture notwithstanding its failure to receive any payments of Indenture Trustee Fees pursuant to this Section 11.7(b) subject to its rights to resign in accordance with the terms of this Base Indenture.

Anything in this Base Indenture to the contrary notwithstanding, in no event shall the Indenture Trustee (in any of its capacities) be liable for special, indirect or consequential loss or damage of any kind whatsoever (including lost profits), even if the Indenture Trustee has been advised of the likelihood of such a loss or damage and regardless of the form of action.

The Securities Intermediary, the Paying Agent, the Custodian and the Calculation Agent shall be indemnified by the Trust Estate pursuant to Section 4.5 and Section 8.6, and secondarily by the Administrator and the Co-Issuer Administrator, in respect of the matters described in Section 4.9 to the same extent as the Indenture Trustee.

Neither of the Indenture Trustee nor the Securities Intermediary will have any recourse to any asset of the Issuer, the Co-Issuer or the Trust Estate other than funds available pursuant to Section 4.5 and Section 8.6 or to any Person other than the Issuer Trusts (or the Administrator and Co-Issuer Administrator pursuant to this Section 11.7). Except as specified in Section 4.5 and Section 8.6, any such payment to the Indenture Trustee shall be subordinate to payments to be made to Noteholders.

The Indenture Trustee is not responsible for any action or inaction of the Administrative Agent.

Section 11.8. Corporate Indenture Trustee Required; Eligibility.

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There will at all times be an Indenture Trustee hereunder with respect to all Classes of Notes, which will be either a bank or a corporation organized and doing business under the laws of the United States of America or of any state, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, subject to supervision or examination by a federal or state authority of the United States, and the long-term unsecured debt obligation of which are rated at least BBB from each Note Rating Agency then rating Outstanding Notes if such institution is rated by the Note Rating Agency, as applicable, or if such Note Rating Agency downgrades the Indenture Trustee below such minimum rating, the Indenture Trustee may obtain, at its own expense, a confirmation from such Note Rating Agency that downgraded the Indenture Trustee below such rating category that there is no Ratings Effect by reason of such downgrade to a lower rating. If such bank or corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such bank or corporation will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Issuer and Co-Issuer may not, nor may any Person directly or indirectly Controlling, Controlled by, or under common Control with the Issuer Trusts, serve as Indenture Trustee. If at any time the Indenture Trustee ceases to be eligible in accordance with the provisions of this Section 11.8, it shall resign upon failure to obtain such confirmation within a reasonable time (not to exceed thirty (30) Business Days) after such ineligibility in the manner and with the effect hereinafter specified in this Article.

Section 11.9. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Indenture Trustee and no appointment of a successor Indenture Trustee pursuant to this Article will become effective until the acceptance of appointment by the successor Indenture Trustee under Section 11.10.

(b) The Indenture Trustee and the bank serving as Indenture Trustee (in all capacities) may resign with respect to all, but not less than all, such capacities and all, but not less than all of the Outstanding Notes at any time by giving written notice thereof to the Issuer and Co-Issuer. If an instrument of acceptance by a successor Indenture Trustee, Calculation Agent, Paying Agent or Securities Intermediary shall not have been delivered to the Indenture Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Indenture Trustee, Calculation Agent, Paying Agent or Securities Intermediary may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary. Written notice of resignation by the Indenture Trustee under this Base Indenture shall also constitute notice of resignation as Calculation Agent, Securities Intermediary, Paying Agent, and Note Registrar hereunder, to the extent the Indenture Trustee serves in such a capacity at the time of such resignation.

(c) The Indenture Trustee or Calculation Agent may be removed with respect to all Outstanding Notes at any time by Action of the Majority Noteholders of all Outstanding Notes, delivered to the Indenture Trustee, to the Issuer and to the Co-Issuer. Removal of the Indenture Trustee shall also constitute removal of the Calculation Agent, Securities Intermediary, Note Registrar and Paying Agent hereunder, to the extent the Indenture Trustee serves in such a capacity at the time of such resignation. If an instrument of acceptance by a successor Indenture Trustee or Calculation Agent shall not have been delivered to the Indenture Trustee within thirty (30) days after the giving of such notice of removal, the Indenture Trustee or Calculation Agent being removed may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee or Calculation Agent.

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(d) If at any time:

(i) the Indenture Trustee ceases to be eligible under Section 11.8 and fails to resign after written request therefore by the Issuer, the Co-Issuer or by any Noteholder; or

(ii) the Indenture Trustee becomes incapable of acting with respect to any Series or Class of Notes; or

(iii) the Indenture Trustee is adjudged bankrupt or insolvent or a receiver of the Indenture Trustee or of its property is appointed or any public officer takes charge or Control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,

then, in any such case, (A) the Issuer Trusts may remove the Indenture Trustee, or (B) subject to Section 8.8, any Noteholder who has been a bona fide Noteholder of a Note for at least six (6) months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.

(e) If the Indenture Trustee or Calculation Agent resigns, is removed or becomes incapable of acting with respect to any Notes, or if a vacancy shall occur in the office of the Indenture Trustee or Calculation Agent for any cause, the Issuer Trusts, subject to the Administrative Agent’s consent, will promptly appoint a successor Indenture Trustee or Calculation Agent. If, within one year after such resignation, removal or incapacity, or the occurrence of such vacancy, a successor Indenture Trustee or Calculation Agent is appointed by Act of the Majority Noteholders of all Outstanding Notes, delivered to the Issuer, the Co-Issuer and the retiring Indenture Trustee or Calculation Agent, the successor Indenture Trustee or Calculation Agent so appointed will, forthwith upon its acceptance of such appointment, become the successor Indenture Trustee or Calculation Agent and supersede the successor Indenture Trustee or Calculation Agent appointed by the Issuer Trusts. If no successor Indenture Trustee or Calculation Agent shall have been so appointed by the Issuer, the Co-Issuer or the Noteholders and accepted appointment in the manner hereinafter provided, any Noteholder who has been a bona fide Noteholder of a Note for at least six (6) months may, on behalf of itself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee or Calculation Agent.

(f) The Issuer Trusts will give written notice of each resignation and each removal of the Indenture Trustee and each appointment of a successor Indenture Trustee to each Noteholder as provided in Section 1.7 and to each Note Rating Agency that is then rating Outstanding Notes. To facilitate delivery of such notice, upon request by the Issuer Trusts, the Note Registrar shall provide to the Issuer and Co-Issuer a list of the relevant registered Noteholders. Each notice will include the name of the successor Indenture Trustee and the address of its principal Corporate Trust Office.

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Section 11.10. Acceptance of Appointment by Successor. Every successor Indenture Trustee appointed hereunder will execute, acknowledge and deliver to the Issuer, the Co-Issuer and to the predecessor Indenture Trustee an instrument accepting such appointment, with a copy to each Note Rating Agency then rating any Outstanding Notes, and thereupon the resignation or removal of the predecessor Indenture Trustee will become effective, and such successor Indenture Trustee, without any further act, deed or conveyance, will become vested with all the rights, powers, trusts and duties of the predecessor Indenture Trustee, Calculation Agent, Securities Intermediary, Note Registrar and Paying Agent; but, on request of the Issuer, the Co-Issuer or the successor Indenture Trustee, such predecessor Indenture Trustee will, upon payment of its reasonable charges, if any, execute and deliver an instrument transferring to such successor Indenture Trustee all the rights, powers and trusts of the predecessor Indenture Trustee, Calculation Agent, Securities Intermediary, Note Registrar and Paying Agent, and will duly assign, transfer and deliver to such successor Indenture Trustee all property and money held by such predecessor Indenture Trustee hereunder, subject nevertheless to its rights to payment pursuant to Section 11.7. Upon request of any such successor Indenture Trustee, the Issuer and Co-Issuer will execute any and all instruments for more fully and certainly vesting in and confirming to such successor Indenture Trustee all such rights, powers and trusts.

No successor Indenture Trustee will accept its appointment unless at the time of such acceptance such successor Indenture Trustee will be qualified and eligible under this Article XI.

Section 11.11. Merger, Conversion, Consolidation or Succession to Business. Any Person into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Indenture Trustee, will be the successor of the Indenture Trustee hereunder, provided that such Person shall be otherwise qualified and eligible under this Article XI, without the execution or filing of any paper or any further act on the part of any of the parties hereto. The Indenture Trustee will give prompt written notice of such merger, conversion, consolidation or succession to the Issuer and to the Co-Issuer and each Note Rating Agency that is then rating Outstanding Notes. If any Notes shall have been authenticated, but not delivered, by the Indenture Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Indenture Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Indenture Trustee had itself authenticated such Notes.

Section 11.12. Appointment of Authenticating Agent. At any time when any of the Notes remain Outstanding the Indenture Trustee, with the approval of the Issuer Trusts, may appoint an Authenticating Agent with respect to one or more Series or Classes of Notes which will be authorized to act on behalf of the Indenture Trustee to authenticate Notes of such Series or Classes issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 6.5, and Notes so authenticated will be entitled to the benefits of this Base Indenture and will be valid and obligatory for all purposes as if authenticated by the Indenture Trustee hereunder. Wherever reference is made in this Base Indenture to the authentication and delivery of Notes by the Indenture Trustee or an Indenture Trustee Authorized Signatory or to the Indenture Trustee’s Certificate of Authentication, such reference will be deemed to include authentication and delivery on behalf of the Indenture Trustee by an Authenticating Agent and a Certificate of Authentication executed on behalf of the Indenture Trustee by an Authenticating Agent.

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Each Authenticating Agent will be acceptable to the Issuer Trusts and will at all times be a Person organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as an Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and, if other than each of the Issuer Trusts itself, subject to supervision or examination by a federal or state authority of the United States. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent will cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent will resign immediately in the manner and with the effect specified in this Section.

Any Person into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Authenticating Agent will be a party, or any Person succeeding to the corporate agency or corporate trust business of an Authenticating Agent, will continue to be an Authenticating Agent, provided that such Person will be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Indenture Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written notice thereof to the Indenture Trustee and to the Issuer Trusts. The Indenture Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Issuer Trusts. Upon receiving such a notice of resignation or upon such a termination, or if at any time such Authenticating Agent ceases to be eligible in accordance with the provisions of this Section, the Indenture Trustee, with the approval of the Issuer Trusts, may appoint a successor Authenticating Agent which will be acceptable to the Issuer Trusts and will give notice to each Noteholder as provided in Section 1.7. Any successor Authenticating Agent upon acceptance of its appointment hereunder will become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent will be appointed unless eligible under the provisions of this Section.

The Indenture Trustee agrees to pay to each Authenticating Agent (other than an Authenticating Agent appointed at the request of the Issuer Trusts, the Noteholders or the Administrator and the Co-Issuer Administrator from time to time or appointed due to a change in law or other circumstance beyond the Indenture Trustee’s control) reasonable compensation for its services under this Section, out of the Indenture Trustee’s own funds without reimbursement pursuant to this Base Indenture. The Indenture Trustee shall be the initial Authenticating Agent.

Section 11.13. Direction to Indenture Trustee under the PC Repo Guaranty. In the event the Administrative Agent, on behalf of the Noteholders, determines that the Indenture Trustee, as a beneficiary under the PC Repo Guaranty should take certain action to preserve any interests of, or release any lien or security interest of, the Noteholders under the terms of the PC Repo Guaranty with respect to the Collateral, the Noteholders acknowledge and agree that the Indenture Trustee shall only take such action as may be directed by the Administrative Agent in writing.

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Section 11.14. Representations and Covenants of the Indenture Trustee. The Indenture Trustee, in its individual capacity and not as Indenture Trustee, represents, warrants and covenants that:

(a) Citibank is a national banking association duly organized and validly existing under the laws of the United States;

(b) Citibank has full power and authority to deliver and perform this Base Indenture and has taken all necessary action to authorize the execution, delivery and performance by it of this Base Indenture and other documents to which it is a party;

(c) each of this Base Indenture and the other Transaction Documents to which Citibank is a party has been duly executed and delivered by Citibank and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms; and

(d) Citibank has a minimum aggregate capital, surplus and undivided profits of at least $500,000.

Section 11.15. Indenture Trustee’s Application for Instructions from the Issuer and Co-Issuer. Any application by the Indenture Trustee for written instructions from the Issuer Trusts may, at the option of the Indenture Trustee, set forth in writing any action proposed to be taken or omitted by the Indenture Trustee under and in accordance with this Base Indenture and the date on and/or after which such action shall be taken or such omission shall be effective, provided that such application shall make specific reference to this Section 11.15. The Indenture Trustee shall not be liable for any action taken by, or omission of, the Indenture Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than five (5) Business Days after the date the Issuer Trusts actually receives such application, unless the Issuer Trusts shall have consented in writing to any earlier date) unless prior to taking any such action (or the Closing Date in the case of an omission), the Indenture Trustee shall have received written instructions in response to such application specifying the action be taken or omitted.

Article XII

Amendments and Indenture Supplements

Section 12.1. Supplemental Indentures and Amendments Without Consent of Noteholders. (a) Unless otherwise provided in the related Indenture Supplement with respect to any amendment to this Base Indenture or such Indenture Supplement, without the consent of the Noteholders of any Notes or any other Person but with the consent of the Issuer Trusts (evidenced by its execution of such amendment), the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent, and with prior notice to each Note Rating Agency that is then rating any Outstanding Notes, at any time and from time to time, upon delivery of an Issuer Trusts’ Tax Opinion, unless such Issuer Trusts’ Tax Opinion is waived by (i) in the case of an amendment to such Indenture Supplement the Series Required Noteholders of such Series or (ii) in the case of an amendment to this Base Indenture, the Series Required Noteholders of each Outstanding Series and upon delivery by the Issuer Trusts to the Indenture Trustee of an Officer’s Certificate to the effect that each of the Issuer Trusts reasonably believes that such amendment could not have a material Adverse Effect and is not reasonably expected to have a material Adverse Effect on the Noteholders of the Notes at any time in the future, may amend this Base Indenture or an Indenture Supplement for any of the following purposes:

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(i) to evidence the succession of another Person to the Issuer Trusts, and the assumption by any such successor of the covenants of the Issuer Trusts herein and in the Notes;

(ii) to add to the covenants of the Issuer Trusts, or to surrender any right or power herein conferred upon the Issuer Trusts, for the benefit of the Noteholders of the Notes of any or all Series or Classes (and if such covenants or the surrender of such right or power are to be for the benefit of less than all Series or Classes of Notes, stating that such covenants are expressly being included or such surrenders are expressly being made solely for the benefit of one or more specified Series or Classes);

(iii) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Base Indenture;

(iv) to establish any form of Note as provided in Article V, and to provide for the issuance of any Series or Class of Notes as provided in Article VI and to set forth the terms thereof, and/or to add to the rights of the Noteholders of the Notes of any Series or Class;

(v) to evidence and provide for the acceptance of appointment by another corporation as a successor Indenture Trustee hereunder;

(vi) to provide for additional or alternative forms of credit enhancement for any Series or Class of Notes;

(vii) to comply with any regulatory, accounting or tax laws;

(viii) to prevent the Issuer Trusts, separately or collectively, from being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for United States federal income tax purposes;

(ix) determined by the Administrator to be reasonably necessary to maintain the rating currently assigned by the applicable Note Rating Agency and/or to avoid such Class of Notes being placed on negative watch by such Note Rating Agency; or

(x) as otherwise provided in the related Indenture Supplement.

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(b) Additionally, subject to the terms and conditions of Section 12.2, unless otherwise provided in the related Indenture Supplement with respect to any amendment of this Base Indenture or an Indenture Supplement, and in addition to clauses (i) through (x) above, this Base Indenture or an Indenture Supplement may also be amended by the Issuer, the Co-Issuer, the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer and the Administrative Agent (in its sole and absolute discretion) without the consent of any of the Noteholders or any other Person, upon delivery of an Issuer Trusts’ Tax Opinion, unless such Issuer Trusts’ Tax Opinion is waived by (i) in the case of an amendment to such Indenture Supplement the Series Required Noteholders of such Series or (ii) in the case of an amendment to this Base Indenture, the Series Required Noteholders of each Outstanding Series, for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Base Indenture or modifying in any manner the rights of the Noteholders of the Notes under this Base Indenture or any other Transaction Document; provided, however, that (i) the Issuer Trusts shall deliver to the Indenture Trustee an Officer’s Certificate to the effect that the Issuer Trusts reasonably believes that such amendment could not have a material Adverse Effect on any Outstanding Notes and is not reasonably expected to have a material Adverse Effect at any time in the future, and (ii) if any Outstanding Notes are then rated by a Note Rating Agency, (1) each such Note Rating Agency confirms in writing to the Indenture Trustee that such amendment will not cause a Ratings Effect on any Outstanding Notes or (2) if the Administrator and the Administrative Agents determine in their reasonable judgment that an applicable Note Rating Agency no longer provides such written confirmation described in the foregoing clause (1), (a) the Administrator shall provide notice of such amendment to the related Note Rating Agency and (b) each Administrative Agent shall have provided their prior written consent to such amendment.

(c) Any amendment of this Base Indenture which affects the rights, duties, immunities, obligations or liabilities of the Owner Trustee in its capacity as owner trustee under the Trust Agreements shall require the written consent of the Owner Trustee.

(d) Any amendment of this Base Indenture which affects the rights, duties, immunities, obligations or liabilities of the Disposition Manager hereunder shall require the written consent of the Disposition Manager.

Section 12.2. Supplemental Indentures and Amendments with Consent of Noteholders. In addition to any amendment permitted pursuant to Section 12.1, and subject to the terms and provisions of each Indenture Supplement with respect to any amendment to this Base Indenture or such Indenture Supplement, with prior notice to each Note Rating Agency and the consent of the Majority Noteholders of each Series materially and adversely affected by such amendment of this Base Indenture, including any Indenture Supplement, by Act of said Noteholders delivered to the Issuer, the Co-Issuer and the Indenture Trustee, the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer, the Administrative Agent and the Indenture Trustee upon delivery of an Issuer Trusts’ Tax Opinion (unless the Noteholders unanimously consent to waive such opinion), may enter into an amendment of this Base Indenture for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Base Indenture of modifying in any manner the rights of the Noteholders of the Notes of each such Series or Class under this Base Indenture or any Indenture Supplement; provided, however, that no such amendment will, without the consent of the Noteholder of each Outstanding Note materially and adversely affected thereby:

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(a) change the scheduled payment date of any payment of interest on any Note held by such Noteholder, or change a Payment Date or Stated Maturity Date (other than the exercise of an optional extension as set forth in the related Indenture Supplement) of any Note held by such Noteholder;

(b) reduce the Note Balance of, or the Note Interest Rate, the Step-Up Fee Rate or the Default Supplemental Fee Rate on any Note held by such Noteholder, or change the method of computing the Note Balance or Note Interest Rate in a manner that is adverse to such Noteholder;

(c) impair the right to institute suit for the enforcement of any payment on any Note held by such Noteholder;

(d) reduce the percentage of Noteholders of the Outstanding Notes (or of the Outstanding Notes of any Series or Class), whose consent is required for any such amendment, or whose consent is required for any waiver of compliance with the provisions of this Base Indenture or any Indenture Supplement or of defaults hereunder or thereunder and their consequences, provided for in this Base Indenture or any Indenture Supplement;

(e) modify any of the provisions of this Section or Section 8.14, except to increase any percentage of Noteholders required to consent to any such amendment or to provide that other provisions of this Base Indenture or any Indenture Supplement cannot be modified or waived without the consent of the Noteholder of each Outstanding Note adversely affected thereby;

(f) permit the creation of any lien or other encumbrance on the Collateral that is prior to the lien in favor of the Indenture Trustee for the benefit of the Noteholders of the Notes;

(g) change the method of computing the amount of principal of, or interest on, any Note held by such Noteholder on any date;

(h) increase any Advance Rates in respect of Notes held by such Noteholder in respect of Notes held by such Noteholder; or

(i) change, modify or waive any Scheduled Principal Payment Amount.

In addition, any Indenture Supplement may be amended, supplemented or otherwise modified with the consent of each of the Noteholders of the Notes of the related Series upon delivery of all opinions and certificates and notice to each Note Rating Agency required pursuant to the first paragraph of this Section 12.2 or as otherwise specified in the applicable Indenture Supplement. The consent of a Person that is an Administrative Agent for one or more Series but is not an Administrative Agent for any other Series is not required for any amendment, supplement or modification to any such other Series.

An amendment of this Base Indenture which changes or eliminates any covenant or other provision of this Base Indenture which has expressly been included solely for the benefit of one or more particular Series or Class of Notes, or which modifies the rights of the Noteholders of Notes of such Series or Class with respect to such covenant or other provision, will be deemed not to affect the rights under this Base Indenture of the Noteholders of Notes of any other Series or Class.

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It will not be necessary for any Act of Noteholders under this Section to approve the particular form of any proposed amendment, but it will be sufficient if such Act will approve the substance thereof.

In addition to the foregoing, each Noteholder of a Term Note, and any transferee thereto, by accepting such Term Note shall be deemed to have consented to, and the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer, the Administrative Agent and the Indenture Trustee upon prior notice to each Note Rating Agency may enter into, any amendment, restatement, modification or supplement to this Base Indenture, an Indenture Supplement or any other Transaction Document for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Base Indenture or modifying in any manner the rights of the such Noteholders of Term Notes under this Base Indenture, any related Indenture Supplement or any other Transaction Document as may be necessary or advisable, upon certification relating to the purpose of such amendment by the Administrator (upon which the Indenture Trustee shall be entitled to conclusively rely without liability therefore), to cure any inconsistency between this Base Indenture, any Indenture Supplement or any other Transaction Document and any provision of the Acknowledgment Agreement or the Fannie Mae Guide, as each may be amended, restated, supplemented or otherwise modified from time to time. For the avoidance of doubt, the consent of the VFN Noteholders shall be required to effect the amendments described in this paragraph.

Section 12.3. Execution of Amendments. In executing or accepting the additional trusts created by any amendment or Indenture Supplement of this Base Indenture permitted by this Article XII or the modifications thereby of the trusts created by this Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1) will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment or Indenture Supplement is authorized and permitted by this Base Indenture and that all conditions precedent thereto have been satisfied. No such Opinion of Counsel shall be required in connection with any amendment or Indenture Supplement consented to by all Noteholders if all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or Indenture Supplement. The Indenture Trustee may, but will not be obligated to, enter into any such amendment or Indenture Supplement which affects the Indenture Trustee’s own rights, duties or immunities under this Base Indenture or otherwise.

Section 12.4. Effect of Amendments. Upon the execution of any amendment of this Base Indenture or any Indenture Supplement, or any supplemental indentures under this Article XII, this Base Indenture and the related Indenture Supplement will be modified in accordance therewith with respect to each Series and Class of Notes affected thereby, or all Notes, as the case may be, and such amendment will form a part of this Base Indenture and the related Indenture Supplement for all purposes; and every Noteholder of Notes theretofore or thereafter authenticated and delivered hereunder will be bound thereby to the extent provided therein.

Section 12.5. Reference in Notes to Indenture Supplements. Notes authenticated and delivered after the execution of any amendment of this Base Indenture or any Indenture Supplement or any supplemental indenture pursuant to this Article may, and will if required by the Indenture Trustee, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such amendment or supplemental indenture.

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If the Issuer Trusts so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee, the Issuer Trusts, to any such amendment or supplemental indenture may be prepared and executed by the Issuer Trusts and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes.

Section 12.6. Amendments to Appendix A. Any amendment of Appendix A to this Base Indenture which affects the rights, duties, immunities, obligations or liabilities of any party to this Base Indenture or to any other Transaction Document shall require the written consent of such party.

Article XIII

Early Redemption of Notes

Section 13.1. Optional Redemption. (a) Unless otherwise provided in the applicable Indenture Supplement for a Series or Class of Notes, the Issuer Trusts have the right, but not the obligation, to: (i) redeem a Series or Class of Term Notes in whole or in part (so long as, in the case of any partial redemption, such redemption is funded using the proceeds of the issuance and sale of one or more new Classes of Notes as further specified in the related Indenture Supplement or from any other cash or funds of PMC and not Collections on MSRs) on a date specified in the applicable Indenture Supplement or on any Payment Date (a “Redemption Payment Date”) on or after the Payment Date on which the aggregate Note Balance (after giving effect to all payments, if any, on that day) of such Series or Class is reduced to less than the Redemption Percentage of the Initial Note Balance and (ii) redeem a Series or Class of Variable Funding Notes in whole or in part on a date specified in the applicable Indenture Supplement.

If both the Issuer, at the direction of the Administrator, and the Co-Issuer, at the direction of the Co-Issuer Administrator, jointly elect to redeem a Series or Class of Notes pursuant to this Section 13.1, it will cause the Issuer Trusts to notify the Indenture Trustee and the Noteholders of such redemption at least five (5) days (or other times specified in the related Indenture Supplement) prior to the Redemption Payment Date. Unless otherwise specified in the Indenture Supplement applicable to the Notes to be so redeemed, the redemption price of a Series or Class so redeemed will equal the Redemption Amount, the payment of which will be subject to the allocations, deposits and payments sections of the related Indenture Supplement, if any.

If the Issuer Trusts are unable to pay the Redemption Amount in full on the Redemption Payment Date, such redemption shall be cancelled, notice of such cancelled redemption shall be sent to all Secured Parties and payments on such Series or Class of Notes will thereafter continue to be made in accordance with this Base Indenture and the related Indenture Supplement, and the Noteholders of such Series or Class of Notes and the related Administrative Agent shall continue to hold all rights, powers and options as set forth under this Base Indenture, until the Outstanding Note Balance of such Series or Class, plus all accrued and unpaid interest and other amounts due in respect of the Notes, is paid in full or the Stated Maturity Date occurs, whichever is earlier, subject to Article VII, Article VIII and the allocations, deposits and payments sections of this Base Indenture and the related Indenture Supplement.

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(b) Unless otherwise specified in the related Indenture Supplement, if the VFN Principal Balance of any Class of VFNs has been reduced to zero, then, upon five (5) Business Days’ prior written notice to the Noteholder thereof, the Issuer Trusts may declare such Class no longer Outstanding, in which case the Noteholder thereof shall submit such Class of Notes to the Indenture Trustee for cancellation.

(c) The Notes of any Series or Class of Notes shall be subject to optional redemption under this Article XIII, in whole but not in part, by the Issuer Trusts, through (i) the use of the proceeds of issuance and sale of a new Series of Notes issued hereunder, or (ii) the use of the proceeds received of any amounts funded under any Variable Funding Notes on any Business Day after the date on which the related Revolving Period ends, and on any Business Day within five (5) days prior to the end of such Revolving Period or at other times specified in the related Indenture Supplement upon five (5) days’ prior notice to the Indenture Trustee and the Noteholders. Following issuance of the Redemption Notice by the Issuer Trusts pursuant to Section 13.2 below, the Issuer Trusts shall be required to purchase the entire aggregate Note Balance of such Series or Class of Term Notes for the applicable Redemption Amount on the date set for such redemption (the “Redemption Date”).

(d) The Issuer Trusts may redeem any Series or Class of Notes through (i) the use of proceeds from the issuance and sale of a new Series or Class of Notes issued hereunder, or (ii) the use of proceeds received following a VFN Note Balance Adjustment Request, on any other Business Day specified in the related Indenture Supplement.

(e) If necessary to avoid a Borrowing Base Deficiency, the Notes of any Series or Class of Variable Funding Notes shall be subject to repayment by the Issuer Trusts, in whole or in part, up to the amount necessary to avoid a Borrowing Base Deficiency, using any other cash or funds of the Issuer Trusts other than Collections on the Participation Certificates, upon one (1) Business Day’s prior notice from the Issuer Trusts to the Indenture Trustee and the related VFN Noteholders. Any such repayment pursuant to this Section 13.1(e) shall reduce the principal balance of such Variable Funding Notes but shall not result in a reduction of any funding commitments related thereto or the Maximum VFN Principal Balance thereof (unless otherwise agreed between the Noteholders of such Variable Funding Notes and the Issuer Trusts) and (ii) may be made on a non-pro rata basis with other Series of Variable Funding Notes.

(f) Notwithstanding any other provision of this Base Indenture, the early redemption rights of the Issuer Trusts set forth in this Section 13.1 are in addition to, the Issuer’s and the Co-Issuer’s rights set forth in Section 2.01(b)(ii) to remove as Collateral the Participation Certificates and Mortgage Loans.

Section 13.2. Notice. (a) Promptly after the election to exercise any optional redemption pursuant to Section 13.1, the Issuer Trusts will notify the Indenture Trustee and each related Note Rating Agency in writing of the identity and Note Balance of the affected Series or Class of Notes to be redeemed.

(b) Notice of redemption (each a “Redemption Notice”) will promptly be given as provided in Section 1.7. All notices of redemption will state (i) the Series or Class of Notes to be redeemed pursuant to this Article XIII, (ii) the date on which the redemption of the Series or Class of Notes to be redeemed pursuant to this Article will begin, which will be the Redemption Payment Date, and (iii) the redemption price for such Series or Class of Notes.

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Article XIV

Miscellaneous

Section 14.1. No Petition. Each of the Indenture Trustee, the Administrative Agent, the Servicer and the Administrator, by entering into this Base Indenture, each Noteholder, by accepting a Note and each Note Owner by accepting a Note or a beneficial interest in a Note agrees that it will not at any time prior to the date which is one year and one day, or, if longer, the applicable preference period then in effect, after the payment in full of all the Notes, institute against the Issuer Trusts, or join in any institution against the Issuer Trusts of, any receivership, insolvency, bankruptcy or other similar proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes and this Base Indenture; provided, however, that nothing contained herein shall prohibit or otherwise prevent the Indenture Trustee from filing proofs of claim in any such proceeding.

Section 14.2. No Recourse. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer Trusts or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or Owner Trustee in their individual capacities, (ii) any owner of a beneficial ownership interest in the Issuer Trusts or (iii) any partner, owner, beneficiary, agent, officer, director, employee or “control person” within the meaning of the 1933 Act and the 1934 Act of the Indenture Trustee or Owner Trustee in its individual capacity, any holder of a beneficial ownership interest in the Issuer Trusts or the Indenture Trustee or Owner Trustee or of any successor or assign of the Indenture Trustee or Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.

Section 14.3. Tax Treatment. Notwithstanding anything to the contrary set forth herein, each of the Issuer Trusts has entered into this Base Indenture with the intention that for United States federal, state and local income and franchise tax purposes the Notes will qualify as indebtedness secured by the Participation Certificates and the MSRs, unless retained by the Issuer Trusts or beneficially owned by one or more affiliates of the Issuer Trusts subject to such terms and conditions that the Notes are not treated as outstanding for U.S. federal income tax purposes (each, a “Retained Note”). The Issuer Trusts, by entering into this Base Indenture, each Noteholder, by its acceptance of a Note and each purchaser of a beneficial interest therein, by accepting such beneficial interest, agree to treat such Notes (other than any Retained Note) as debt for United States federal, state and local income and franchise tax purposes, unless otherwise required by applicable law in a proceeding of final determination. The Indenture Trustee shall treat the Trust Estate as a security device only. The provisions of this Base Indenture shall be construed in furtherance of the foregoing intended tax treatment.

Section 14.4. Alternate Payment Provisions. Notwithstanding any provision of this Base Indenture or any of the Notes to the contrary, the Issuer Trusts, with the written consent of the Indenture Trustee and the Paying Agent, may enter into any agreement with any Noteholder of a Note providing for a method of payment or notice that is different from the methods provided for in this Base Indenture for such payments or notices.

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The Issuer Trusts will furnish to the Indenture Trustee and the Paying Agent a copy of each such agreement and the Indenture Trustee and the Paying Agent will cause payments or notices, as applicable, to be made in accordance with such agreements.

Section 14.5. Termination of Obligations. The respective obligations and responsibilities of the Indenture Trustee created hereby (other than the obligation of the Indenture Trustee to make payments to Noteholders as hereinafter set forth) shall terminate upon satisfaction and discharge of this Base Indenture as set forth in Article VII, except with respect to the payment obligations described in Section 14.6(b). Upon this event, the Indenture Trustee shall release, assign and convey to the Issuer Trusts or any of their designees, without recourse, representation or warranty, all of its right, title and interest in the Collateral, whether then existing or thereafter created, all monies due or to become due and all amounts received or receivable with respect thereto (including all monies then held in any Trust Account) and all proceeds thereof, except for amounts held by the Indenture Trustee pursuant to Section 14.6(b). The Indenture Trustee shall execute and deliver such instruments of transfer and assignment as shall be provided to it, in each case without recourse, as shall be reasonably requested by the Issuer Trusts to vest in the Issuer Trusts or any of their designees all right, title and interest which the Indenture Trustee had in the Collateral.

Section 14.6. Final Payment. (a) The Issuer Trusts shall give the Indenture Trustee at least ten (10) days’ prior written notice of the Payment Date on which the Noteholders of any Series or Class may surrender their Notes for payment of the final payment on and cancellation of such Notes. Not later than the fifth (5th) day prior to the Payment Date on which the final payment in respect of such Series or Class is payable to Noteholders, the Indenture Trustee or the Paying Agent shall provide notice to Noteholders of such Series or Class specifying (i) the date upon which final payment of such Series or Class will be made upon presentation and surrender of Notes of such Series or Class at the office or offices therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such payment date is not applicable, payments being made only upon presentation and surrender of such Notes at the office or offices therein specified. The Indenture Trustee shall give such notice to the Note Registrar and the Paying Agent at the time such notice is given to Noteholders.

(b) Notwithstanding a final payment to the Noteholders of any Series or Class (or the termination of the Issuer Trusts), except as otherwise provided in this paragraph, all funds then on deposit in any account allocated to such Noteholders shall continue to be held in trust for the benefit of such Noteholders, and the Paying Agent or the Indenture Trustee shall pay such funds to such Noteholders upon surrender of their Notes, if such Notes are Definitive Notes. In the event that all such Noteholders shall not surrender their Notes for cancellation within six (6) months after the date specified in the notice from the Indenture Trustee described in clause (a) above, the Indenture Trustee shall give a second (2nd) notice to the remaining such Noteholders to surrender their Notes for cancellation and receive the final payment with respect thereto. If within one year after the second (2nd) notice all such Notes shall not have been surrendered for cancellation, the Indenture Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining such Noteholders concerning surrender of their Notes, and the cost thereof (including costs related to giving the second (2nd) notice) shall be paid out of the funds in the Collection and Funding Account.

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The Indenture Trustee and the Paying Agent shall pay to the Issuer Trusts any monies held by them for the payment of principal or interest that remains unclaimed for two (2) years. After payment to the Issuer Trusts, Noteholders entitled to the money must look to the Issuer Trusts for payment as general creditors unless an applicable abandoned property law designates another Person.

Section 14.7. Base Servicing Fee. The parties hereto acknowledge that PMC has the right to withdraw the Base Servicing Fee with respect to any Portfolio Mortgage Loan out of collections it receives with respect to such Portfolio Mortgage Loan.

Section 14.8. Owner Trustee Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Base Indenture is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely as trustee of the Issuer Trusts, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, warranties, undertakings and agreements herein made on the part of the Issuer Trusts is made and intended not as personal representations, warranties, undertakings and agreements by WSFS but is made and intended for the purpose of binding only the Issuer Trusts, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has made no investigation as to the accuracy or completeness of any representations or warranties made by the Issuer Trusts in this Base Indenture and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness or expenses of the Issuer Trusts or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer Trusts under this Base Indenture or any other related documents.

Section 14.9. Communications with Rating Agencies. If the Servicer, the Administrative Agent or the Indenture Trustee shall receive any written or oral communication from any Note Rating Agency (or any of the respective officers, directors or employees of any Note Rating Agency) with respect to the transactions contemplated hereby or under the Transaction Documents or in any way relating to the Notes, the Servicer, the Administrative Agent and the Indenture Trustee agree to refrain from communicating with such Note Rating Agency and to promptly notify the Administrator of such communication; provided, however, that if the Servicer, the Administrative Agent or the Indenture Trustee receives an oral communication from a Note Rating Agency, the Servicer, the Administrative Agent or the Indenture Trustee, as the case may be, is authorized to refer such Note Rating Agency to the Administrator, who will respond to such oral communication. At the written request of the Administrator, the Servicer, the Administrative Agent and the Indenture Trustee agree to cooperate with the Administrator to provide certain information to the Administrator that may be reasonably required by a Note Rating Agency to rate or to perform ratings surveillance on the Notes, and acknowledge and agree that the Administrator shall be permitted, in turn, to provide such information to the Note Rating Agencies via the internet address identified therefor by the Administrator; provided, that the Servicer, the Administrative Agent and the Indenture Trustee shall only be required to provide such information that is reasonably available to such party at the time of request.

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Notwithstanding any other provision of this Base Indenture or the other Transaction Documents, under no circumstances shall the Servicer, the Administrative Agent or the Indenture Trustee be required to participate in telephone conversations or other oral communications with a Note Rating Agency, nor shall the Servicer, the Administrative Agent or the Indenture Trustee be prohibited from communicating with any nationally recognized statistical rating organization about matters other than the Notes or the transactions contemplated hereby or by the Transaction Documents. Furthermore, the Indenture Trustee may make statements to Noteholders available on its website (as contemplated by Section 3.5(a) hereof), and such action is not prohibited by this Section 14.9.

Section 14.10. Authorized Representatives. Each individual designated as an authorized representative of the Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, PMC, the Administrative Agents and the Issuer Trusts (each, an “Authorized Representative”), is authorized to give and receive notices, requests and instructions and to deliver certificates and documents in connection with this Base Indenture on behalf of each of the Indenture Trustee, Calculation Agent, Paying Agent, Securities Intermediary, PMC, PLS, the Administrative Agents, the Issuer Trusts, respectively, and the specimen signature for each such Authorized Representative of the Indenture Trustee, Calculation Agent, Paying Agent, Securities Intermediary, PMC, the Administrative Agents, the Issuer Trusts initially authorized hereunder is set forth on Exhibits C-1, C-2, C-3, C-4, C-5 and C-6 respectively. From time to time, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, PMC, PLS, the Administrative Agents, the Issuer Trusts may, by delivering to the others a revised exhibit, change the information previously given pursuant to this Section 14.10, but each of the parties hereto shall be entitled to rely conclusively on the then current exhibit until receipt of a superseding exhibit.

Section 14.11. Performance of the Issuer’s and the Co-Issuer’s Duties by the Owner Trustee, the Administrator and the Co-Issuer Administrator. (a) The parties hereto hereby acknowledge and agree (i) that certain duties of the Issuer Trusts will be performed on behalf of the Issuer Trusts by the Administrator and Co-Issuer Administrator, respectively, pursuant to the Administration Agreement and hereby acknowledge and accept the terms of such agreement as of the date hereof and (ii) except as expressly set forth herein, the Owner Trustee shall have no duty or obligation to perform the obligations of the Issuer Trusts hereunder or to monitor the compliance of the Issuer Trusts with the terms hereof.

(b) Any successor to the Owner Trustee appointed pursuant to the terms of the Trust Agreements (or any corporation into which the Owner Trustee may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Owner Trustee shall be a party) shall be the successor Owner Trustee under the Trust Agreements for purposes of this Base Indenture without the execution or filing of any paper, instrument or further act to be done on the part of the parties hereto.

Section 14.12. Noteholder or Note Owner Communications with the Indenture Trustee. A Noteholder (if the Notes are represented by Definitive Notes) or a Note Owner (if the Notes are represented by Book-Entry Notes) may communicate with the Indenture Trustee and give notices and make requests and demands and give directions to the Indenture Trustee through the procedures of the Depository and by notifying the Indenture Trustee and providing to the Indenture Trustee a copy of the communication such Noteholder or Note Owner, as applicable, proposes to send. Any Note Owner must provide written certification stating that the Note Owner is a beneficial owner of a Note, together with supporting documentation such as a trade confirmation, an account statement, a letter from a broker or dealer verifying ownership or another similar document evidencing ownership of a Note.

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The Indenture Trustee will not be required to take action in response to requests, demands or directions of a Noteholder or a Note Owner, unless the Noteholder or Note Owner has offered reasonable security or indemnity reasonably satisfactory to the Indenture Trustee to protect it against the fees and expenses that it may incur in complying with the request, demand or direction.

Section 14.13. Third-Party Beneficiaries. The parties hereto hereby acknowledge and agree that the Disposition Manager shall be an express third party beneficiary of this Indenture.

Section 14.14. Consent, Authorization and Acknowledgment of Amended and Restated Indenture. As of the date hereof, the terms and conditions of the Original Base Indenture shall be amended and restated as set forth herein and the Original Base Indenture shall be superseded by this Base Indenture. The rights and obligations of the parties evidenced by the Original Base Indenture shall be evidenced by this Base Indenture and shall continue to be in full force and effect as set forth in this Base Indenture. Each of the Issuer, Servicer, the Administrator, the Indenture Trustee and the Administrative Agent, hereby consents to this Base Indenture and acknowledges and agrees that the amendments effected by this Base Indenture shall become effective on the date hereof.

Section 14.15. Joint and Several Liability of Issuer Trusts. Except as otherwise provided in Section 14 of the Series 2017-VF1 Indenture Supplement, notwithstanding any other terms of this Base Indenture, the Notes, any other Transaction Documents or otherwise, the obligations of the Issuer Trusts under the Notes, this Base Indenture and each other Transaction Document to which it is a party shall be joint and several obligations of the Issuer Trusts.

 


[Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have caused this Base Indenture to be duly executed as of the day and year first above written.

PMT ISSUER TRUST - FMSR, as Issuer

By: Wilmington Savings Fund Society FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

 

Signature Page to Amended and Restated Base Indenture

 

PMT CO-ISSUER TRUST I – FMSR,
as Co-Issuer

By: Wilmington Savings Fund Society FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

 

 

Signature Page to Amended and Restated Base Indenture

 

CITIBANK, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary and not in its individual capacity

By: /s/ Valerie Delgado
Name: Valerie Delgado
Title: Senior Trust Officer

 

 

Signature Page to Amended and Restated Base Indenture

 

PENNYMAC CORP.,
as Servicer and as Administrator

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

 

 

Signature Page to Amended and Restated Base Indenture

 

PENNYMAC HOLDINGS, LLC
as Co-Issuer Administrator

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

 

 

Signature Page to Amended and Restated Base Indenture

 

ATLAS SECURITIZED PRODUCTS, L.P.,
as Administrative Agent

By: Atlas Securitized Products GP, LLC, its general partner

By: /s/ Dominic Obaditch
Name: Dominic Obaditch
Title: Authorized Signatory

 

 

Signature Page to Amended and Restated Base Indenture

 

Schedule 1

Participation Certificates Schedule

Amended and Restated Participation Certificate, dated as of October 10, 2023, evidencing a participation interest granted to the Indenture Trustee in the Retained MSR Excess Spread, as more particularly described in the Retained Excess Spread Participation Agreement (the “Retained MSR Excess Spread PC”).

Amended and Restated Participation Certificate, dated as of October 10, 2023, evidencing a participation interest granted to the Indenture Trustee in the Sold MSR Excess Spread, as more particularly described in the Excess Spread Participation Agreement (the “Sold MSR Excess Spread PC”).

 

Schedule 1

 

Schedule 2

Participation Agreements Schedule

Fourth Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of October 10, 2023 between PennyMac Corp., as seller, and PennyMac Holdings, LLC, as purchaser (the “Excess Spread Participation Agreement”).

Amended and Restated Retained MSR Excess Spread Participation Agreement, dated as of October 10, 2023 between PennyMac Corp., as company, and PennyMac Corp., as the Initial Participant (the “Retained Excess Spread Participation Agreement”).

 

Schedule 2

 

Schedule 3

Eligible Securities Schedule


[To be provided electronically, if any]

 

 

Schedule 3

 

Schedule 4

Required Information Regarding Mortgage Loans


[On file with the Administrative Agent]

 

Schedule 4

 

Schedule 5

Wire Instructions

TRANSACTION PARTIES:

If to PennyMac Corp.:
Name of Bank: City National Bank
ABA Number of Bank: 122016066
Name of Account: PennyMac Corp. Operating Account
Account Number at Bank: [*********]

If to PennyMac Holdings, LLC:
Name of Bank: Bank of America
ABA Number of Bank: 026009593
Name of Account: PennyMac Holdings, LLC Operating Account
Account Number at Bank: [*********]

If to the Atlas Securitized Products, L.P., as Administrative Agent:
Name of Bank: Citibank, N.A.
ABA Number of Bank: 021000089
Name of Account: Atlas Sec Prod Funding 2 LP – Resi

Ref: Residential
Account Number: [*********]

If to the Owner Trustee:
Name of Bank: Wells Fargo Bank, N.A.
ABA Number of Bank: 121000248
Account Number at Bank: [*********]
FFC: CH129352-0 PMT Issuer Trust

TRUST ACCOUNTS:

If to the Collection and Funding Account:
Name of Bank: Citibank, N.A.
ABA Number of Bank: 021-000-089
Account Number at Bank: [*********]
Account Name: SF Incoming Wire Account
Ref: A/C 119463 PMAC17FMSR COLLECTION AND
FUNDING AC

If to the Note Payment Account: Name of Bank: Citibank, N.A. ABA Number of Bank: 021-000-089 Account Number at Bank: [*********] Account Name: SF Incoming Wire Account Ref: A/C 119464 PMAC17FMSR NOTE PAYMENT AC If to the Expense Reserve Account: Name of Bank: Citibank, N.A. ABA Number of Bank: 021-000-089 Account Number at Bank: [*********] Account Name: SF Incoming Wire Account Ref: A/C 119466 PMAC17FMSR EXPENSE RESERVE AC

Schedule 5

 

If to the Eligible Securities Account: Name of Bank: Citibank, N.A. ABA Number of Bank: 021-000-089 Account Number at Bank: [*********] Account Name: SF Incoming Wire Account Ref: A/C 119471 PMAC17FMSR Eligible Securities Account “1933 Act” means the Securities Act of 1933.

 

Schedule 5

 

APPENDIX A

DEFINED TERMS

“1934 Act” means the Securities Exchange Act of 1934.

“Accepted Servicing Practices” means, with respect to any Mortgage Loan, (i) those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, and (ii) those practices required from time to time by Fannie Mae.

“Account Bank” means Bank of America, N.A., and any successor thereto in such capacity.

“Acknowledgment Agreement” means collectively, (i) the Fifth Amended and Restated Acknowledgment Agreement, dated as of October 10, 2023, by and among Fannie Mae, PMC, PMH, PMT and the Indenture Trustee, and (ii) the Subordination of Interest Agreement.

“Acquired MSRs” means MSRs related to previously issued Fannie Mae MBS that the Servicer acquired, provided that Fannie Mae has provided its approval of the related Request for Approval of Transfer.

“Act” when used with respect to any Noteholder, has the meaning set forth in Section 1.5 of the Base Indenture.

“Act of Insolvency” means, with respect to any Person or its Affiliates, (i) the filing of a petition, commencing, or authorizing the commencement of any case or proceeding, or the voluntary joining of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering any such petition or proceeding to be commenced by another which is consented to, not timely contested or results in entry of an order for relief; (ii) the seeking of the appointment of a receiver, trustee, custodian or similar official for such party or an Affiliate or any substantial part of the property of either; (iii) the appointment of a receiver, conservator, or manager for such party or an Affiliate by any governmental agency or authority having the jurisdiction to do so; (iv) the making or offering by such party or an Affiliate of a composition with its creditors or a general assignment for the benefit of creditors; (v) the admission by such party or an Affiliate of such party of its inability to pay its debts or discharge its obligations as they become due or mature; or (vi) that any governmental authority or agency or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such party or of any of its Affiliates, or shall have taken any action to displace the management of such party or of any of its Affiliates or to curtail its authority in the conduct of the business of such party or of any of its Affiliates.

“Action” when used with respect to any Noteholder, has the meaning set forth in Section 1.5 of the Base Indenture.

DOCPROPERTY DOCXDOCID DMS=InterwovenIManage Format=<<LIB>>:<<NUM>>.<<VER>> CURSOR \* MERGEFORMAT AmericasActive:18422596.11 “Activation Notice” has the meaning set forth in the Dedicated Account Control Agreement.

 

“Additional Note Payment” means, for each Series of Notes, the meaning as specified in the related Indenture Supplement, if specified therein.

“Adjusted Termination Fee” means, if Fannie Mae terminates the Servicer’s contractual right to service without cause, the positive difference (if any) of (i) the termination fee calculated in accordance with the Fannie Mae Servicing Guide minus (ii)(A) the Gross Proceeds, or (B) the Appraised Market Value, whichever is applicable.

“Administration Agreement” means, as the context requires, (i) the Administration Agreement, dated as of the Closing Date, by and between the Issuer and the Administrator, and (ii) the Co-Issuer Administration Agreement dated as of October 10, 2023, by and between the Co-Issuer and the Co-Issuer Administrator.

“Administrative Agent” means (a) initially, Atlas or any Affiliate of the foregoing or any successor thereto in respect of the Series of Notes for which it is designated as an Administrative Agent therefor in the related Indenture Supplement, and (b) in respect of any Series, the Person(s) specified in the related Indenture Supplement. Unless the context indicates otherwise in any Indenture Supplement for such Indenture Supplement, each reference to the “Administrative Agent” herein or in any other Transaction Document shall be deemed to constitute a collective reference to each Person that is an Administrative Agent. If (x) any Person that is an Administrative Agent resigns as an Administrative Agent in respect of all Series for which it was designated as the Administrative Agent or (y) all of the Notes in respect of each Series for which any Person was designated as the Administrative Agent are repaid or redeemed in full, such Person shall cease to be an “Administrative Agent” for purposes hereof and each other Transaction Document.

“Administrative Expenses” means any amounts due from or accrued for the account of the Issuer Trusts with respect to any period for any administrative expenses incurred by the Issuer Trusts, including (i) to any accountants, agents, counsel and other advisors of the Issuer Trusts (other than the Owner Trustee) for reasonable and customary fees and expenses; (ii) to any other person in respect of any governmental fee, charge or tax; (iii) to any other Person (other than the Owner Trustee) in respect of any other fees or expenses permitted under this Base Indenture (including indemnities) and the documents delivered pursuant to or in connection with this Base Indenture and the Notes; (iv) any and all fees and expenses of the Issuer Trusts incurred in connection with its entry into and the performance of its obligations under any of the agreements contemplated by this Base Indenture; (v) the orderly winding up of the Issuer Trusts following the cessation of the transactions contemplated by this Base Indenture; and (vi) any and all other reasonable and customary fees and expenses incurred by the Issuer Trusts in connection with the transactions contemplated by this Base Indenture, but not in duplication of any amounts specifically provided for in respect of the Indenture Trustee, the Owner Trustee, the Administrator, the Co-Issuer Administrator or any VFN Noteholder.

“Administrator” means PMC, in its capacity as the Administrator on behalf of the Issuer, and any successor to PMC in such capacity.

Exhibit A-1-2

 

“Administrators’ Calculation Report” has the meaning set forth in Section 3.1(a) of the Base Indenture.

“Advance Rate” means, with respect to any Series of Notes, and for any Class within such Series, if applicable, the percentage specified as its “Advance Rate” in the Indenture Supplement for such Series.

“Advance Rate Trigger Event” means the occurrence of an Advance Rate Trigger 1 Event or an Advance Rate Trigger 2 Event.

“Advance Rate Trigger 1 Event” means the occurrence of any of the following:

(a) the Servicer SDQ Rate exceeds [****]% over three (3) consecutive months in a quarter;

(b) Net Earnings are negative for two (2) consecutive calendar quarters; or

(c) a decline in the Lender Adjusted Net Worth of 25% over a single quarter.

“Advance Rate Trigger 2 Event” means the occurrence of any of the following:

(a) the Servicer SDQ Rate exceeds [****]% over three (3) consecutive months in a quarter;

(b) Net Earnings are negative for four (4) consecutive quarters and there is a decline in the Lender Adjusted Net Worth of 30% or more during the same period;

(c) Fannie Mae issues a PIP and the PIP is not remedied within six (6) months; or

(d) a decline in the Lender Adjusted Net Worth of 40% over two (2) consecutive quarters.

“Advance Reimbursement Amount” means any amount which the Servicer collects on a Mortgage Loan, withdraws from a custodial account or receives from any successor servicer or Fannie Mae pursuant to the Fannie Mae Guide, as reimbursement for advances in its capacity as Servicer with respect to Fannie Mae MBS.

“Adverse Claim” means a lien, security interest, charge, encumbrance or other right or claim of any Person (other than (A) the liens created in favor of the Secured Parties or assigned to the Secured Parties by (i) this Base Indenture, (ii) the PC Repurchase Agreement or (iii) any other Transaction Document, (B) the rights of Fannie Mae under the Fannie Mae Lender Contract) or (C) the Owner Trustee Lien.

“Adverse Effect” when used in this Base Indenture with respect to any Series or Class of Notes and any event, means that such event is reasonably likely, at the time of its occurrence, to (i) result in the occurrence of an Event of Default relating to such Series or Class of Notes, (ii) materially adversely affect (A) the amount of funds available to be paid to the Noteholders of such Series or Class of Notes pursuant to this Base Indenture, (B) the timing of such payments or (C) the rights or interests of the Noteholders of such Series or Class, (iii) materially adversely affect the Security Interest of the Indenture Trustee for the benefit of the Secured Parties in the Collateral unless otherwise permitted by this Base Indenture, or (iv) materially adversely affect the collectability of the Collateral.

Exhibit A-1-3

 

“Affiliate” means, with respect to any specified Person, any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person; provided, however, that in respect of PMC, PMH or Guarantor, the term “Affiliate” shall include only Guarantor and its wholly owned subsidiaries, and in respect of PLS, the term “Affiliate” shall include only Private National Mortgage Acceptance Company, LLC and its wholly owned subsidiaries.

“Ancillary Income” means all income derived from a Mortgage Loan (other than payments or other collections in respect of principal, interest, escrow payments and prepayment penalties attributable to such Mortgage Loan) and to which the Servicer or any Subservicer, as the servicer or subservicer of the Mortgage Loan, is entitled in accordance with the Fannie Mae Lender Contract, including, (i) all late charges, fees received with respect to checks or bank drafts returned by the related bank for insufficient funds, assumption fees, optional insurance administrative fees, all interest, income, or credit on funds deposited in the escrow accounts and custodial accounts or other receipts on or with respect to such Mortgage Loan (subject to applicable law and the Fannie Mae Lender Contract), (ii) reconveyance fees, subordination fees, speedpay fees, mortgage pay on the web fees, automatic clearing house fees, demand statement fees, modification fees, if any, and other similar types of fees arising from or in connection with any Mortgage Loan to the extent not otherwise payable by the mortgagor under applicable law or pursuant to the terms of the related Mortgage Note, and (iii) if and to the extent that any FHA Loans, USDA Loans or VA Loans are Subject Mortgages, any incentive fees payable by FHA under the applicable FHA Mortgage Insurance Contract, by USDA under the USDA Loan Guarantee Document, or by VA under the applicable VA Loan Guaranty Agreement, as applicable, to the Servicer or any Subservicer, as servicer or subservicer of the Mortgage Loans, including incentive amounts payable in connection with Mortgage Loan modifications and other loss mitigation activities.

“Applicable Law” has the meaning set forth in Section 4.1 of the Base Indenture.

“Applicable Rating” means, for each Class of Notes, the rating(s) specified as such for such Class in the related Indenture Supplement, if applicable. Only those rating(s) specified for any Class of Notes that are made at the request of Issuer shall be applicable for purposes of this Base Indenture.

“Appraised Market Value” means, for any MSR, the appraised market value established in accordance with the Fannie Mae Servicing Guide.

“Asset” means (a) the Participation Certificates and (b) the related MSRs, in each case, sold or pledged to secure the Obligations under the PC Repurchase Agreement.

“Asset Base” means for any date of determination, the product of (1) the Purchase Price Percentage and (2) the then-current Market Value.

Exhibit A-1-4

 

“Asset File” means the documents described in Section 2.2 of the Base Indenture pertaining to a particular Participation Certificate.

“Asset Schedule” means a schedule, in the form attached to the PC Repurchase Agreement, listing as of the date of such schedule the applicable Participation Certificate and the applicable Participation Agreement, as such schedule shall be updated from time to time in accordance with Section 2.02 of the PC Repurchase Agreement.

“Atlas” has the meaning set forth in the Preamble.

“Authenticating Agent” means any Person authorized by the Indenture Trustee to authenticate Notes under Section 11.12 of the Base Indenture.

“Authorized Signatory” means, with respect to any entity, each Person duly authorized to act as a signatory of such entity at the time such Person signs on behalf of such entity.

“Available Amount” means the sum of: (a) either (i) if Fannie Mae chooses to market the New Servicing Rights, the Gross Proceeds, or (ii) if Fannie Mae chooses to keep the Servicing Rights, the Appraised Market Value, plus, if applicable, (b) the Adjusted Termination Fee (if any).

“Available Funds” means, with respect to:

(i) any Interim Payment Date, (A) all Collections on the Participation Certificates or the Eligible Securities received during the related Collection Period and on deposit in the Collection and Funding Account, plus (B) any other funds of the Issuer Trusts that the Issuer Trusts (or the Administrator and the Co-Issuer Administrator on behalf of the Issuer and Co-Issuer, respectively) identifies to the Indenture Trustee to be treated as “Available Funds” for such Interim Payment Date (including any cash amounts that are on deposit in the Collection and Funding Account which the Administrator has instructed the Indenture Trustee to apply in accordance with Section 4.4.(a)(iii) of the Base Indenture); and

(ii) any Payment Date, (A) all Collections on the Participation Certificates or the Eligible Securities received during the related Collection Period and on deposit in the Collection and Funding Account, plus (B) any income from Permitted Investments in Trust Accounts that have been established for the benefit of all Series of Notes, plus (C) any other funds of the Issuer Trusts that the Issuer Trusts (or the Administrator and the Co-Issuer Administrator on behalf of the Issuer and Co-Issuer, respectively) identifies to the Indenture Trustee to be treated as “Available Funds” for such Payment Date (including any cash amounts that are on deposit in the Collection and Funding Account which the Administrator has instructed the Indenture Trustee to apply in accordance with Section 4.5(a)(1)(ix) of the Base Indenture) plus (D) any amounts released from the Series Reserve Account under the Amended and Restated Series 2017-VF1 Indenture Supplement.

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, 11 U.S.C. §§ 101 et seq.

Exhibit A-1-5

 

“Base Indenture” means the Amended and Restated Base Indenture, dated October 10, 2023, among the Issuer, the Co-Issuer, Citibank, N.A., as indenture trustee, as calculation agent, as paying agent and as securities intermediary, PMC, as Administrator and as Servicer, PMH, as Co-Issuer Administrator and the Administrative Agent, including the schedules and exhibits thereto.

“Base Servicing Fee” means, for any Mortgage Loan, a monthly fee not greater than 12.5 basis points of the unpaid principal balance of the Mortgage Loans.

“Base Servicing Fee Rate” means, for the Sold MSR Excess Spread PC, the “Base Servicing Fee Rate” set forth as such in the Excess Spread Participation Agreement. For the Retained MSR Excess Spread PC, the “Base Servicing Fee Rate” set forth as such in the Retained Excess Spread Participation Agreement. For any other Participation Certificate, as set forth in the related Participation Agreement.

“Benchmark Transition Event” has the meaning set forth in the related Indenture Supplement, if applicable.

“Book-Entry Notes” means a note registered in the name of the Depository or its nominee, ownership of which is reflected on the books of the Depository or on the books of a Person maintaining an account with such Depository (directly or as an indirect participant in accordance with the rules of such Depository); provided, that after the occurrence of a condition whereupon Definitive Notes are to be issued to Note Owners, such Book-Entry Notes shall no longer be “Book-Entry Notes”.

“Borrowing Base” means, as of any date of determination, an amount equal to the aggregate Collateral Value (as calculated using clause (b) of the definition of Market Value Percentage) of the Portfolio.

“Borrowing Base Deficiency” means the positive difference, if any, of:

(i) the aggregate VFN Principal Balances of all Outstanding Series of VFNs; and

(ii) the sum of:

(a) the product of: (1) (A) the more recent of the Borrowing Base on the Borrowing Base Determination Date preceding such date of determination, or the Interim Borrowing Base on the Interim Borrowing Base Determination Date preceding such date of determination minus (B) the aggregate of the Term Note Series Invested Amounts, and (2) the Weighted Average Advance Rate in respect of all Outstanding Series of VFNs; and

(b) the Market Value of any Eligible Securities that have been transferred and delivered to the Issuer pursuant to the PC Repurchase Agreement prior to the Payment Date or Interim Borrowing Base Payment Date, as applicable; provided, however, that aggregate Market Value of all Eligible Securities and all Pledged Margin Securities, together, cannot exceed an amount equal to 15% of the Borrowing Base as of such date of determination; provided, further, that any Eligible Security shall only be included for purposes of determining the Borrowing Base Deficiency for a maximum of three (3) consecutive months;

Exhibit A-1-6

 

(c) any cash amounts that are on deposit in the Collection and Funding Account that were deposited by the Administrator prior to the Payment Date or Interim Borrowing Base Payment Date, as applicable, which the Administrator has instructed the Indenture Trustee to reserve in the Collection and Funding Account pursuant to Sections 4.4(a)(iii) and Section 4.5(a)(1)(vii) of the Base Indenture; and

(d) the Market Value of any Pledged Margin Securities that have been pledged to the Issuer pursuant to the PC Repurchase Agreement prior to the Payment Date or Interim Borrowing Base Payment Date, as applicable; provided, however, that aggregate Market Value of all Pledged Margin Securities and all Eligible Securities, together, cannot exceed an amount equal to 15% of the Borrowing Base as of such date of determination; provided, further, that any Pledged Margin Securities shall only be included for purposes of determining the Borrowing Base Deficiency for a maximum of three (3) consecutive months.

“Borrowing Base Determination Date” means, with respect to any Payment Date, the Business Day of the month of such Payment Date on which the MSR Valuation Agent performs its Market Value Report based on the information contained in the MSR Monthly Report.

“Borrowing Capacities” means, for any Outstanding Series of VFNs on any date, the difference between (i) the related Maximum VFN Principal Balance on such date and (ii) the related VFN Principal Balance on such date.

“Business Day” means, for any Class of Notes, any day other than (i) a Saturday or Sunday or (ii) any other day on which (x) national banking associations or state banking institutions in New York, New York, the State of California, the State of Texas or the city and state where the Corporate Trust Office is located or (y) the Federal Reserve Bank of New York are authorized or obligated by law, executive order or governmental decree to be closed.

“Buyer Parties” means any or all of the VFN Repo Buyers, the Administrative Agent, the Indenture Trustee, the Owner Trustee and any other parties acting on behalf of the Issuer.

“Calculation Agent” means the same Person who serves at any time as the Indenture Trustee, or an Affiliate of such Person, as calculation agent pursuant to the terms of this Base Indenture.

“Capital Lease Obligations” means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of the PC Repurchase Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.

Exhibit A-1-7

 

“CARES Act” means the Coronavirus Aid, Relief, and Economic Security Act of 2020.

“Certificate of Authentication” means the certificate of the Indenture Trustee or the alternative certificate of the Authenticating Agent, substantially in the form attached to the Base Indenture in Exhibit D.

“Certificate of Trust” means the Certificate of Trust filed for the Trust on November 22, 2017, pursuant to the Original Trust Agreement and Section 3810(a) of the Statutory Trust Statute.

“Certificateholder” has the meaning set forth in the Trust Agreement.

“Change in Control” means:

(A) any transaction or event as a result of which Guarantor ceases to own, beneficially or of record, through one of its wholly-owned Subsidiaries, more than 50% of the stock of PMC or PMH, except with respect to an initial public offering of PMC’s or PMH’s common stock on a U.S. national securities exchange;

(B) the sale, transfer, or other disposition of all or substantially all of PMC’s or PMH’s assets (excluding any such action taken in connection with any securitization transaction); or

(C) the consummation of a merger or consolidation of PMC or PMH with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entity’s stock outstanding immediately after such merger, consolidation or such other reorganization is owned by Persons who were not stockholders of PMC or PMH immediately prior to such merger, consolidation or other reorganization.

“Citibank” means Citibank, N.A. and any successor or assign thereto.

“Class” means, with respect to any Notes, the class designation assigned to such Note in the related Indenture Supplement. A Series issued in one class, with no class designation in the related Indenture Supplement, may be referred to herein as a “Class”.

“Class Invested Amount” means, as of any date of determination:

(i) for any Class of a Series of Variable Funding Notes, an amount equal to: (i) the sum of (A) the outstanding Note Balance of such Class (as reduced by (1) the Scheduled Principal Payment Amount actually paid on such Class on such Payment Date, if applicable, and (2) the Early Amortization Event Payment Amount actually paid on such Class on such Payment Date, if applicable), plus (B) the aggregate outstanding Note Balances of all Classes of Variable Funding Notes within the same Series of Variable Funding Notes that are senior to or pari passu with such Class on such date (as reduced by (1) the Scheduled Principal Payment Amounts actually paid on such Classes on such Payment Date, if applicable, and (2) the Early Amortization Event Payment Amounts actually paid on such Classes on such Payment Date, if applicable) and not otherwise captured in clause (A), divided by (ii) the Advance Rate in respect of such Class of Variable Funding Notes; and

Exhibit A-1-8

 

(ii) for any Class of a Series of Term Notes, an amount equal to: (i) the sum of (A) the outstanding the Note Balance of such Class (as reduced by (1) the Scheduled Principal Payment Amount actually paid on such Class on such Payment Date, if applicable, and (2) the Early Amortization Event Payment Amount actually paid on such Class on such Payment Date, if applicable), plus (B) the aggregate outstanding Note Balances of all Classes of Term Notes within the same Series of Term Notes that are senior to or pari passu with such Class on such date (as reduced by (1) the Scheduled Principal Payment Amounts actually paid on such Classes on such Payment Date, if applicable, and (2) the Early Amortization Event Payment Amounts actually paid on such Classes on such Payment Date, if applicable) and not otherwise captured in clause (A), divided by (ii) the highest Advance Rate in respect of such Class of Term Notes.

“Clearing Corporation” has the meaning set forth in Section 8-102(a)(5) of the UCC.

“Clearstream” means Clearstream Banking, S.A., and any successor thereto.

“Closing Date” means December 20, 2017.

“Co-Issuer Administrator” means PMH, in its capacity as the Co-Issuer Administrator on behalf of the Co-Issuer, and any successor to PMH in such capacity.

“Co-Issuer Authorized Officer” means any director or any authorized officer of the Owner Trustee or the Administrator who may also be an officer or employee of PMH, its managing member or an Affiliate of PMH or its managing member.

“Co-Issuer Facility Entity” has the meaning set forth in Section 9.5(i) of the Base Indenture.

“Co-Issuer Trust Agreement” means the trust agreement dated as of December 28 2022, as amended and restated by the Amended and Restated Trust Agreement, dated as of the date hereof, by and between PMC and the Owner Trustee.

“Code” means the Internal Revenue Code of 1986.

“Collateral” has the meaning set forth in the Granting Clause of the Base Indenture.

“Collateral Value” means, as of the applicable Determination Date, the difference between (i) the product of (A) the related Market Value Percentage and (B) the aggregate unpaid principal balance of the Mortgage Loans and (ii) the Stop-Loss Cap; provided, however, that the unpaid principal balance of any Mortgage Loans being serviced by an Interim Servicer shall be eligible to be included in the calculation of “Collateral Value” (i) for a period of time no longer than one hundred and twenty (120) days, and (ii) the aggregate unpaid principal balance of the Mortgage Loans serviced by an Interim Servicer may not exceed 10% of the Collateral Value of all MSRs, unless, in either case, consented to by the Administrative Agent.

Exhibit A-1-9

 

“Collection and Funding Account” means the non-interest bearing trust account or accounts, each of which shall be an Eligible Account, established and maintained pursuant to Sections 4.1 and 4.7 of the Base Indenture and entitled “Citibank, N.A., as Indenture Trustee for the PMT ISSUER TRUST - FMSR Collateralized Notes, Collection and Funding Account” or such of the foregoing that can be reflected on the account systems of the institution maintaining such account.

“Collection Period” means, (i) for the first Interim Payment Date or Payment Date, the period beginning on the Cut-off Date and ending at the end of the day before the Determination Date for such Interim Payment Date or Payment Date, and (ii) for each subsequent Interim Payment Date or Payment Date, the period beginning at the opening of business on the most recent preceding Determination Date and ending as of the close of business on the day before the Determination Date for such Interim Payment Date or Payment Date.

“Collection Policy” means PMC’s policies regarding Collections and remittance in accordance with the provisions of the PC Repurchase Agreement and the Servicing Contracts and shall include the charging and collection of fees for servicing functions, including, without limitation, the charging of late fees, assumption fees, modification fees and other clerical or administrative fees in the ordinary course of servicing.

“Collections” means (i) any amounts received by PMC and PMH relating to the Participation Certificates, including, any amounts received by PMC and PMH and payable to the Issuer and the Co-Issuer under the PC Repurchase Agreement or the PC Repo Guaranty and (ii) any amounts received by the Indenture Trustee relating to the Eligible Securities; provided, however, that Collections shall not include amounts related to the Base Servicing Fee, Ancillary Income or the Advance Reimbursement Amounts.

“Commitment Period” means the period from and including the Closing Date to but not including the Termination Date or such earlier date on which the obligations of the Issuer, as a Repo Buyer, and the Co-Issuer, as a Repo Buyer, under the PC Repurchase Agreement shall have terminated pursuant to the terms thereof.

“Consideration” means, (a) in the context of delivery thereof by the Issuer, as a Repo Buyer and the Co-Issuer, as a Repo Buyer, any or all of (i) the Owner Trust Certificates, including increases in the value thereof pursuant to Sections 4.4(b) or 4.5(e) of the Base Indenture, (ii) one or more Variable Funding Notes and (iii) cash, and (b) in the context of delivery thereof by PMC, as a Repo Seller, and PMH, as a Repo Seller, in satisfaction of a Margin Deficit, any or all of (i) a reduction in the value of the Owner Trust Certificates pursuant to the terms of the PC Repurchase Agreement and (ii) any Margin Call Payment.

“Control,” “Controlling” or “Controlled” means possession of the power to direct or cause the direction of the management or policies of a Person through the right to exercise voting power or by contract, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.

Exhibit A-1-10

 

“Corporate Trust Office” means, for each Series of Notes, as specified in the related Indenture Supplement.

“Cumulative Default Supplemental Fee Shortfall Amount” means, for each Payment Date and each Class of Notes, any portion of the Default Supplemental Fee (including the Cumulative Default Supplemental Fee Shortfall Amount for that Class for a previous Payment Date as set forth in the definition of “Default Supplemental Fee”) that has not been paid, if any, plus accrued and unpaid interest at the applicable Note Interest Rate plus the Default Supplemental Fee Rate on such shortfall from the Payment Date on which the shortfall first occurred through but excluding the current Payment Date.

“Cumulative Interest Shortfall Amount” means, for each Payment Date and each Class of Notes, equal to any portion of the Interest Payment Amount (calculated pursuant to the provisions of the Base Indenture) for that Class for all previous Payment Dates that has not been paid, if any, plus accrued and unpaid interest at the applicable Note Interest Rate plus the Cumulative Interest Shortfall Amount Rate on each such shortfall from the Payment Date on which such shortfall first occurred to but excluding the current Payment Date.

“Cumulative Interest Shortfall Amount Rate” has the meaning set forth in the related Indenture Supplement.

“Cumulative Step-Up Fee Shortfall Amount” means, for each Payment Date and each Class of Notes, any portion of the Step-Up Fee (including the Cumulative Step-Up Fee Shortfall Amount for that Class for a previous Payment Date as set forth in the definition of “Step-Up Fee”) that has not been paid, plus accrued and unpaid interest at the applicable Note Interest Rate and plus the Step-Up Fee Rate on such shortfall from the Payment Date on which the shortfall first occurred through the current Payment Date.

“Current Amounts Due” means the sum of: (A) all reasonable internal costs and actual expenses related to the following actions (if taken): (1) the determination of the Appraised Market Value; (2) stabilizing the servicing of the Subject Mortgages; (3) the sale and transfer of the Servicing Rights; and (4) any action brought by Fannie Mae before a court of its choice for leave to interplead any Distributable Funds; and (B) all actual amounts due under the Fannie Mae Lender Contract to Fannie Mae on the Servicer’s Fannie Mae Portfolio because of any of the following up to and including the date Fannie Mae terminates the Servicing Rights: (1) any breach of selling representations, warranties or covenants made or assumed by the Servicer; (2) any breach of any servicing obligations by the Servicer; (3) any actual unperformed obligations under the regular servicing option or other recourse agreements; and (4) any other obligations the Servicer currently owes to Fannie Mae. If the Subject Mortgages make up less than the Servicer’s Fannie Mae Portfolio, the costs and expenses referred to in clause (A) above include all sums related to the Servicer’s Fannie Mae Portfolio through the end of the 24-month period following the date, if any, Fannie Mae terminates the Servicing Rights.

“Custodian” has the meaning set forth in Section 2.3 of the Base Indenture.

“Cut-off Date” means the Closing Date.

Exhibit A-1-11

 

“Dedicated Account” means the demand deposit account PennyMac Loan Services, LLC on behalf of PennyMac Corp., in trust for PMT ISSUER TRUST - FMSR –Dedicated Account, which account has been established by PLS, PMC, the Indenture Trustee, as secured party, the Issuer, the Guarantor and the Account Bank for the benefit of the Indenture Trustee at the Account Bank.

“Dedicated Account Control Agreement” means, the Deposit Account Control Agreement, dated as of December 20, 2017, among PMC, the Issuer, the Indenture Trustee, PLS, the Guarantor and the Account Bank, pursuant to which to the Dedicated Account is established.

“Dedicated Account Pledge Agreement” means, the Amended and Restated Dedicated Account Pledge Agreement, dated as of October 10, 2023, by PLS in favor of Issuer for the benefit of itself and the Co-Issuer.

“Default” means an event, condition or default that, with the giving of notice, the passage of time, or both, would constitute an Event of Default.

“Default Period” means the period of time that begins upon the occurrence of an Event of Default and ends on the earlier to occur of (i) the date on which the Event of Default has been waived or cured pursuant to the terms of the Base Indenture or (ii) the date on which all Classes or Series of Notes not waiving such Event of Default are paid or redeemed in full in accordance with the terms of the Base Indenture.

“Default Supplemental Fee” has the meaning set forth in the related Indenture Supplement, if applicable.

“Default Supplemental Fee Rate” has the meaning set forth in the related Indenture Supplement, if applicable.

“Definitive Note” means a Note issued in definitive, fully registered form evidenced by a physical Note, substantially in the form of one or more of the Definitive Notes attached as Exhibit A-2 and Exhibit A-4 to the Base Indenture.

“Depository” means initially, The Depository Trust Company, the nominee of which is Cede & Co., and any permitted successor depository. The Depository shall at all times be a Clearing Corporation.

“Depository Agreement” means, for any Series or Class of Book-Entry Notes, the agreement among the Issuer, the Indenture Trustee and the Depository, dated as of the related Issuance Date, relating to such Notes.

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

“Designated Transaction Representative” has the meaning set forth in the related Indenture Supplement, if applicable.

Exhibit A-1-12

 

“Determination Date” means, in respect of any Payment Date or Interim Payment Date, three (3) Business Days before such Payment Date or Interim Payment Date.

“Determination Date Report” means a report delivered by the Administrator as described in Section 3.2(a) of the Base Indenture, which shall be delivered in the form of one or more electronic files.

“Disposition Management Agreement” means the Amended and Restated Disposition Management Agreement, dated as of October 10, 2023, by and among the Disposition Manager, the Indenture Trustee, PMC and the Administrative Agent, as amended, restated or supplemented from time to time.

“Disposition Manager” means Pentalpha Surveillance LLC.

“Disposition Manager Fee” shall have the meaning set forth in the Disposition Management Agreement.

“Distributable Funds” means with respect to the Notes, an amount equal to the Available Amount less the Minimum Reserve Amount.

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

“DTC” has the meaning set forth in Section 5.4(a) of the Base Indenture.

“Early Amortization Event” means the occurrence of any of the following events:

(i) the unpaid principal balance of the Portfolio is less than $20,000,000,000;

(ii) the Servicer SDQ Rate exceeds [****]%;

(iii) the Market Value of a base fee equal to 12.5 basis points, inclusive of Ancillary Income and servicing costs, is less than $45,000,000;

(iv) claims by Fannie Mae relating to breaches of representations and warranties for the underlying Mortgage Loans that remain unresolved following sixty (60) days from the date the related cure and rebuttal periods permitted under the Fannie Mae Guide have been exhausted, and the related compensatory fees and principal balance of mortgage loans for such unresolved claims exceed 0.025% of the unpaid principal balance of the underlying Mortgage Loans as of the end of any calendar month; provided, however that once PMC and Fannie Mae have agreed to an indemnification such indemnification shall be deemed to be a resolved claim and therefore not part of the foregoing calculation; or

(v) notice by Fannie Mae of a material breach by the Servicer of the Fannie Mae Lender Contract which remains uncured for ninety (90) days.

“Early Amortization Event Payment Amount” has the meaning set forth in the related Indenture Supplement.

Exhibit A-1-13

 

“Early Amortization Period” means, for all Series of Notes, the period that begins upon the occurrence of an Early Amortization Event and ends on the date when the Early Amortization Event is no longer in effect, pursuant to the requirements set forth in Section 4.12 of the Base Indenture.

“Eligible Account” means an account or accounts maintained with an insured depository institution that meets the rating requirements adopted by Fannie Mae and set forth in the Fannie Mae Lender Contract.

“Eligible Asset” means any Asset:

(a) which relates to a Servicing Contract for Mortgage Loans in an Eligible Securitization Transaction in which the PMC is acting in the capacity of servicer;

(b) which complies with all Applicable Laws and other legal requirements, whether federal, state or local;

(c) which provides for payment in Dollars;

(d) which was not originated in or subject to the Laws of a jurisdiction whose Laws would make such Asset, or the financing thereof contemplated by the PC Repurchase Agreement unlawful, invalid or unenforceable and is not subject to any legal limitation on transfer;

(e) which is owned solely by PMC (or with respect to the Sold MSR Excess Spread, PMH) subject to the relevant Servicing Contract free and clear of all Liens other than Liens in favor of the Issuer, as a Repo Buyer, and the Co-Issuer, as a Repo Buyer, (and in the case of Sold MSR Excess Spread, Liens in favor of PMH) and has not been sold, conveyed, pledged or assigned to any other lender, purchaser or Person;

(f) in respect of which PMC has complied in all material respects with the Collection Policy and the related Servicing Contract or Participation Agreement, as applicable;

(g) which is not an obligation of the United States of America, any State or any agency or instrumentality or political subdivision thereof (other than Fannie Mae);

(h) in respect of which the information set forth in the Asset Schedule and the related Servicing Contract and, with respect to the Participation Certificates, the Participation Agreement, is true and correct in all material respects;

(i) in respect of which each of PMC and PMH has obtained from each Person that may have an interest in such Asset all acknowledgments or approvals, if any, that are necessary to pledge such Asset as contemplated by the PC Repurchase Agreement;

(j) (i) which complies with the representations and warranties set forth on Schedules 1-A and 1-B of the PC Repurchase Agreement, (ii) with respect to Eligible Securities complies with the representations and warranties to be agreed upon by the Repo Buyers, the Administrative Agent and the Repo Sellers and to be set forth on Schedule 1‑C to the PC Repurchase Agreement and (iii) with respect to Pledged Margin Securities, complies with the representations and warranties to be agreed upon by the Repo Buyers, the Administrative Agent and the Repo Sellers and to be set forth on Schedule 1-D to the PC Repurchase Agreement;

Exhibit A-1-14

 

(k) which with respect to any Asset that constitutes MSRs:

(i) constitutes an “account” or a “general intangible” as defined in the Uniform Commercial Code and is not evidenced by an “instrument,” as defined in the Uniform Commercial Code as so in effect;

(ii) relates to an Eligible Securitization Transaction, where the related Participation Certificate is sold to the Issuer, as a Repo Buyer, or the Co-Issuer, as a Repo Buyer, under the PC Repurchase Agreement;

(iii) arose pursuant to a Servicing Contract that is in full force and effect and under which the Servicer has not been terminated; and

(iv) the related Participation Certificate is an Eligible Asset the PC Repurchase Agreement; and

(l) which with respect to any Asset that constitutes a Participation Certificate:

(i) is intended to constitute a “security” as defined in the Uniform Commercial Code and is evidenced by a certificate;

(ii) for which the related MSRs relate to an Eligible Securitization Transaction and have been pledged to the Issuer, as a Repo Buyer, and the Co-Issuer, as a Repo Buyer, under the PC Repurchase Agreement;

(iii) for which the Participation Certificate arose pursuant to a Participation Agreement that is in full force and effect; and

(iv) for which the related MSRs are an Eligible Asset under the PC Repurchase Agreement;

in each case as of the related Purchase Date and as of each day that such Asset shall be subject to a Transaction under the PC Repurchase Agreement.

“Eligible Securities Account” means the non-interest bearing trust account or accounts, each of which shall be an Eligible Account, established and maintained pursuant to Sections 4.1 and 4.7 of the Base Indenture and entitled “Citibank, N.A., as Indenture Trustee for the PMT ISSUER TRUST - FMSR Collateralized Notes, Eligible Securities Account” or such of the foregoing that can be reflected on the account systems of the institution maintaining such account.

Exhibit A-1-15

 

“Eligible Security” means any of the following obligations and securities: (i) (a) direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or (b) direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, any agency or instrumentality of the United States, provided that such obligations are backed by the full faith and credit of the United States; or (ii) mortgage backed securities issued or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae, each of which shall be listed on Schedule 3 of the Base Indenture, which schedule may be maintained in electronic form.

“Eligible Securitization Transaction” means any Fannie Mae MBS which, as of the date of the related Transaction and as of each day that any Asset shall be subject to a Transaction under the PC Repurchase Agreement (unless expressly agreed upon in writing by the Issuer, as a Repo Buyer, and the Co-Issuer, as a Repo Buyer, to the contrary) with respect to which the related Servicing Contract is in full force and effect at any time any Asset related to such Servicing Contract is subject to a Transaction, and under which the servicer has not been terminated, resigned or become subject to a right of termination or other “trigger event.”

“Eligible Servicer” means an approved Fannie Mae servicer that Fannie Mae determines in Fannie Mae’s reasonable discretion, (a) is able to service the Subject Mortgages in light of the needs and characteristics of the Subject Mortgages, (b) is able to perform all of its existing servicing obligations, and (c) is in compliance with the Fannie Mae Lender Contract.

“Eligible Subservicer” means an established mortgage servicer that (A) (i) has been a Fannie Mae approved issuer for at least two (2) years, (ii) services mortgage loans with an aggregate unpaid principal balance greater than or equal to $30,000,000,000 and (iii) has a servicer rating of at least “Average” by S&P, “SQ3” by Moody’s or “RPS3” by Fitch, and (B) is party to an Eligible Subservicing Agreement. PLS is initially approved by the Issuer, as Repo Buyer, as an Eligible Subservicer, assuming continuing compliance with the requirements of clause (A) above.

“Eligible Subservicing Agreement” means a subservicing agreement (i) that has been approved in writing by Repo Buyers under the PC Repurchase Agreement, (ii) the subservicer of which is an Eligible Subservicer, and (iii) that has not been assigned or amended in any respect that is materially adverse to Noteholders with respect to the remittance of servicing fees or advance reimbursements without the prior written consent of Repo Buyers under the PC Repurchase Agreement. The PLS Subservicing Agreement and the Subservicer Side Letter Agreement, together, are initially approved by the Repo Buyers under the PC Repurchase Agreement as an Eligible Subservicing Agreement, assuming continuing compliance with the requirements of clauses (ii) and (iii) above.

“Entitlement Order” has the meaning set forth in Section 8-102(a)(8) of the UCC.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“ERISA Affiliate” means any corporation or trade or business that, together with PMC, PMH or the Guarantor is treated as a single employer under section 414(b) or (c) of the Code or solely for purposes of section 302 of ERISA and section 412 of the Code is treated as single employer within the meaning of section 414 of the Code.

Exhibit A-1-16

 

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

“Event of Default” means (i) with respect to the Base Indenture, the meaning set forth in Section 8.1 of the Base Indenture and (ii) with respect to the PC Repurchase Agreement, the meaning set forth in Section 7.01 of the PC Repurchase Agreement.

“Excess Spread” means, for the Sold MSR Excess Spread PC, “Sold MSR Excess Spread” as defined in the Excess Spread Participation Agreement. For the Retained MSR Excess Spread PC, “Retained MSR Excess Spread” as set forth in the Retained Excess Spread Participation Agreement. For any other Participation Certificate, as set forth in the related Participation Agreement.

“Excess Spread Participation Agreement” means the Fourth Amended and Restated Master Spread Acquisition and MSR Servicing Agreement, dated as of October 10, 2023, between PMC, as seller, and PMH, as purchaser.

“Expense Limit” means, with respect to: (i) expenses and indemnification amounts (A) in any year, for the Owner Trustee, the Indenture Trustee (in all its capacities) and the MSR Valuation Agent, $200,000 (with $150,000 being reserved for the Indenture Trustee), and (B) for any single Payment Date, for the Indenture Trustee only (in all its capacities) $50,000; and (ii) Administrative Expenses, in any year, $50,000; provided, that the Expense Limit shall only apply to payments made pursuant to Sections 4.5(a)(1)(i) and (ii) of the Base Indenture; and provided, further, that any amounts in excess of the Expense Limit that have not been paid pursuant to Section 4.5 of the Base Indenture may be applied toward and subject to the Expense Limit for the subsequent year and may be paid in a subsequent year.

“Expense Reserve Account” means the segregated non-interest bearing trust account or accounts, each of which shall be an Eligible Account, established and maintained pursuant to Sections 4.1 and 4.6 of the Base Indenture, and entitled “Citibank, N.A., as Indenture Trustee for the PMT ISSUER TRUST - FMSR Collateralized Notes, Expense Reserve Account”.

“Expense Reserve Required Amount” means, with respect to any date of determination, $200,000 (with $150,000 being reserved for the Indenture Trustee).

“Expenses” means all present and future expenses reasonably incurred by or on behalf of the Issuer, as Repo Buyer, in connection with the negotiation, execution or enforcement or the ongoing operations relating to the PC Repurchase Agreement, the Indenture, any of the other Program Agreements, the Participation Agreements, and any amendment, supplement or other modification or waiver related thereto, whether incurred prior to or after the Closing Date, which expenses shall include any trustee or other service provider fees, indemnification payments, MSR transfer costs, the cost of title, lien, judgment and other record searches, reasonable attorneys’ fees, any ongoing audits or due diligence costs in connection with valuation, entering into Transactions or determining whether a Margin Deficit (as defined in the PC Repurchase Agreement) may exist, and costs of preparing and recording any UCC financing statements or other filings necessary to perfect the security interest created by the PC Repurchase Agreement.

Exhibit A-1-17

 

“Fannie Mae” means the Federal National Mortgage Association and any successor thereto.

“Fannie Mae Approvals” shall have the meaning set forth in Section 6.10 of the PC Repurchase Agreement.

“Fannie Mae Eligibility Requirements” has the meaning set forth in Section 3.2(b)(xii) of the Base Indenture.

“Fannie Mae Guide” means the Fannie Mae Selling Guide and the Fannie Mae Servicing Guide.

“Fannie Mae Lender Contract” means collectively, the Mortgage Selling and Servicing Contract and all applicable Pool Purchase Contracts between Fannie Mae and the Servicer, the Fannie Mae Selling Guide, the Fannie Mae Servicing Guide and all supplemental servicing instructions or directives provided by Fannie Mae, all applicable master agreements, recourse agreements, repurchase agreements, indemnification agreements, loss-sharing agreements, and any other agreements between Fannie Mae and the Servicer.

“Fannie Mae MBS” means an MBS issued by Fannie Mae, the issuance of which, and the servicing of such Fannie Mae eligible mortgage loans by PMC, being governed in all respects by the Fannie Mae Lender Contract, including such Fannie Mae eligible mortgage loans for which (i) PMC has submitted a fully completed Request for Approval for Transfer and consummated a purchase and sale transaction with an eligible Fannie Mae approved issuer to acquire MSRs, (ii) Fannie Mae has approved and consented to such acquisition of MSRs by PMC by delivering a consent notice to PMC in accordance with Chapter A2-7-3 of the Fannie Mae Servicing Guide, and (iii) PMC has started servicing the related MSRs and either directly or through an Eligible Subservicer or an Interim Servicer is collecting payments from the borrowers.

“Fannie Mae Requirements” includes the Fannie Mae Lender Contract (whether specific to PMC or of general application), in addition to the contracts (including any related guaranty agreement, master servicing agreement, master agreement for servicer’s principal and interest custodial account, master agreement for servicer’s escrow custodial account, master custodial agreement, schedule of subscribers and any other agreement or arrangement), and all applicable rules, regulations, communications, memoranda and other written directives, procedures, manuals, guidelines, including the Fannie Mae Eligibility Requirements, and any other information or material incorporated therein, defining the rights and obligations of Fannie Mae and Servicer, with respect to the Mortgage Loans.

“Fannie Mae Selling Guide” means the Fannie Mae Single Family Selling Guide.

“Fannie Mae Servicing Guide” means, the Fannie Mae Single Family Servicing Guide.

Exhibit A-1-18

 

“FATCA” means sections 1471 through 1474 of the Code, any current or future regulations or official interpretations thereof, any agreement entered into pursuant to section 1471(b) of the Code, or any U.S. or non-U.S. fiscal or regulatory legislation, guidance notes, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Code.

“FCPA” has the meaning set forth in Sections 10.1(h) of the Base Indenture.

“Fee Letter” means, for any Series, as defined in the related Indenture Supplement, if applicable.

“Fees” means, collectively, with respect to any Interest Accrual Period, the Indenture Trustee Fee, the Owner Trustee Fee, the Disposition Manager Fee and the MSR Valuation Agent Fee.

“FHA” means the Federal Housing Administration, an agency within HUD, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of HUD where appropriate under the FHA Regulations.

“FHA Loan” means a Mortgage Loan which is the subject of an FHA Mortgage Insurance Contract.

“FHA Mortgage Insurance Contract” means the contractual obligation of the FHA respecting the insurance of a Mortgage Loan.

“FHA Regulations” means the regulations promulgated by the Department of HUD under the National Housing Act, as amended from time to time and codified in 24 Code of Federal Regulations, and other HUD issuances relating to FHA Loans, including the related handbooks, circulars, notices and mortgagee letters.

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

“Final Payment Date” means, for any Class of Notes, the earliest of (i) the Stated Maturity Date for such Class, (ii) after the end of the related Revolving Period, the Payment Date on which the Note Balance of the Notes of such Class has been reduced to zero, and (iii) the Payment Date which follows the Payment Date on which all proceeds of the sale of the Trust Estate are distributed pursuant to Section 8.6 of the Base Indenture.

“Financial Asset” has the meaning set forth in Section 8-102(a)(9) of the UCC.

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

“Forbearance Loan” means any Mortgage Loan (i) for which the borrower has requested forbearance pursuant to §4022 of the CARES Act, (ii) for which one or more regular monthly payments have not been made, and (iii) which is still in the Forbearance Period (i.e., the Mortgage Loan has not been reinstated or resolved).

Exhibit A-1-19

 

“Forbearance Period” means the period of time during which the Forbearance Loan has not been reinstated as a result of (i) Servicer receiving the borrower’s full monthly contractual payments previously past due, (ii) Servicer confirming that the borrower (a) has resolved the hardship, (b) is able to continue making the full monthly contractual payment, and (c) is able to reinstate such Forbearance Loan; (iii) the borrower completing a trial period plan related to the Forbearance Loan or otherwise resolving the Forbearance Loan in accordance with the Fannie Mae Guide; (iv) the borrower completing a permitted workout option (i.e., flex modification, short sale, or deed-in-lieu of foreclosure), or (v) the borrower paying in full the Forbearance Loan.

“Full Amortization Period” means, for all Series of Notes, the period that begins upon the commencement of the Full Amortization Period pursuant to Section 4.12 of the Base Indenture and ends on the date on which the Notes of all Series are paid or redeemed in full.

“Funding Amount” means the amount of a funding proposed to be released or drawn on a VFN on any Funding Date, that does not cause a Borrowing Base Deficiency.

“Funding Certification” means a report delivered by the Administrator in respect of each Funding Date pursuant to Section 4.3(a) of the Base Indenture.

“Funding Conditions” means, with respect to any proposed Funding Date, the following conditions:

(i) no Borrowing Base Deficiency shall exist following the proposed funding (without giving effect to the Market Value of any Eligible Securities or cash amounts on deposit in the Collection and Funding Account), and the Administrative Agent shall be satisfied in its sole discretion that it has a current accurate valuation of the Portfolio to support such determination;

(ii) no breach of representation, warranty or covenant of the Servicer, the Administrator or the Issuer, or with respect to the Participation Certificates, under the Base Indenture or under any Transaction Document, which could reasonably be expected to have a material Adverse Effect, shall exist;

(iii) solely with respect to any Funding Date which will be a VFN Draw Date, (A) (unless (and to the extent) each related VFN Noteholder and VFN Funding Source has agreed to waive this condition for purposes of fundings under its related Variable Funding Note), no Funding Interruption Event shall be continuing and (B) (unless (and to the extent) each related VFN Noteholder and VFN Funding Source have agreed to waive this condition for purposes of fundings under its related Variable Funding Note), no Event of Default shall have occurred and be continuing;

(iv) the Administrator shall have provided the Indenture Trustee, no later than 10:00 a.m.

Exhibit A-1-20

 

New York City time on the Business Day preceding such Funding Date (or such other time as may be agreed to from time to time by the Administrator, the Indenture Trustee and the Administrative Agent), a Determination Date Report reporting information with respect to the Participation Certificates in the Trust Estate and demonstrating the satisfaction of the Borrowing Base, and no later than 10:00 a.m. New York City time on such Funding Date, a Funding Certification certifying that all Funding Conditions have been satisfied; provided, however, that no Variable Funding Note Noteholder shall have any liability for failing to fund a requested draw of a Variable Funding Note unless it has received a Funding Certification by 1:00 p.m. New York City time on the Business Day preceding such Funding Date;

(v) the full amount of the Required Available Funds shall be on deposit in the Collection and Funding Account, before and after the release of cash from such account to fund the purchase price of Participation Certificates (if any Participation Certificate is being purchased on such Funding Date);

(vi) the payment of the Funding Amount or the drawing on any VFNs shall not result in a material adverse United States federal income tax consequence to the Trust Estate or any Noteholders; and

(vii) the Full Amortization Period shall not be in effect.

“Funding Date” means any Payment Date or any Interim Payment Date with respect to which the Administrator shall have delivered (i) a Funding Certification in accordance with Section 4.3(a) of the Base Indenture or (ii) a VFN Note Balance Adjustment Request in accordance with Section 4.3(b) of the Base Indenture; provided, no Full Amortization Period shall have occurred and shall be continuing on such Payment Date or Interim Payment Date.

“Funding Interruption Event” means the occurrence of an event which with the giving of notice or the passage of time, or both, would constitute an Event of Default, whether or not the Indenture Trustee, the Administrative Agent and/or any Noteholders have provided notice sufficient to cause the Full Amortization Period to commence as a result of such event.

“GAAP” means U.S. generally accepted accounting principles that are (i) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its successors, as in effect from time to time, and (ii) applied consistently with principles applied to past financial statements of PMC and its subsidiaries; provided, that a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) that such principles have been properly applied in preparing such financial statements.

“Ginnie Mae” means the Government National Mortgage Association and any successor thereto.

“Global Note” means a Note issued in global form and deposited with or on behalf of the Depository, substantially in the form of one or more of the Global Notes attached as Exhibit A-1 and Exhibit A-3 to the Base Indenture.

Exhibit A-1-21

 

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions over PMC, PMH, the Guarantor, the Co-Issuer or the Issuer, as applicable.

“Grant,” “Granting” or “Granted” means pledge, bargain, sell, warrant, alienate, remise, release, convey, assign, transfer, create and grant a lien upon and a security interest in and right of set-off against, deposit, set over and confirm pursuant to this Base Indenture. A Grant of collateral or of any other agreement or instrument shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for principal and interest payments in respect of such collateral or other agreement or instrument and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring proceedings in the name of the granting party or otherwise, and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.

“Gross Proceeds” means the amount accepted by Fannie Mae for the New Servicing Rights.

“Guarantee” means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term “Guarantee” shall not include (i) endorsements for collection or deposit in the ordinary course of business, or (ii) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of a mortgaged property. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms “Guarantee” and “Guaranteed” used as verbs shall have correlative meanings.

“Guarantor” means PennyMac Mortgage Investment Trust, in its capacity as guarantor under the PC Repo Guaranty.

“Hague Securities Convention” means Hague “Convention on the Law Applicable to Certain Rights in Respect of Securities held with an Intermediary (Concluded 5 July 2006)”.

“Hedging Instrument” means, for each Series of Notes, as specified in the related Indenture Supplement.

“HUD” means the United States Department of Housing and Urban Development or any successor thereto.

Exhibit A-1-22

 

“Indebtedness” means, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business, so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness (as defined in clauses (a) or (b)) of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements, including, without limitation, any Indebtedness arising under the PC Repurchase Agreement; (g) Indebtedness (as defined in clauses (a) or (b)) of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) Indebtedness (as defined in clauses (a) or (b)) of general partnerships of which such Person is a general partner and (j) with respect to clauses (a)-(i) above both on and off balance sheet.

“Indemnified Party” means, for purposes of the Base Indenture, as set forth in Section 10.4 thereof, and for purposes of the Trust Agreements, as set forth in Section 8.2 thereof.

“Indenture” has the meaning set forth in the preamble of the Base Indenture.

“Indenture Supplement” means each supplement to the Base Indenture, executed and delivered in conjunction with the issuance of the related Series of Notes, including the schedules and exhibits thereto.

“Indenture Trustee” means the Person named as the Indenture Trustee in the Preamble to the Base Indenture until a successor Indenture Trustee shall have become such pursuant to the applicable provisions of this Base Indenture, and thereafter “Indenture Trustee” means and includes each Person who is then an Indenture Trustee thereunder.

“Indenture Trustee Authorized Officer” means, with respect to the Indenture Trustee, Calculation Agent, Paying Agent, Note Registrar or Securities Intermediary, any officer of the Indenture Trustee, Calculation Agent, Paying Agent, Note Registrar or Securities Intermediary assigned to its corporate trust services, including any vice president, assistant vice president, assistant treasurer or trust officer, who is customarily performing functions with respect to corporate trust matters and, with respect to a particular corporate trust matter under this Base Indenture, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject, in each case, having direct responsibility for the administration of this Base Indenture.

“Indenture Trustee Fee” means the fee payable to the Indenture Trustee pursuant to the terms of the Base Indenture on each Payment Date in a monthly amount as agreed in the Indenture Trustee Fee Letter, which includes the fees to Citibank, and its successors and assigns in its capacities as Calculation Agent, Paying Agent, Securities Intermediary and Note Registrar; provided, that the Indenture Trustee shall also be entitled to receive payment of (i) separate fees and expenses pursuant to Section 11.7 of the Base Indenture in connection with tax filings made by the Indenture Trustee and (ii) any additional expenses permitted pursuant to the terms of the Indenture Trustee Fee Letter.

Exhibit A-1-23

 

“Indenture Trustee Fee Letter” means the fee letter agreement between Citibank and PMC, dated October 10, 2017, setting forth the fees to be paid to Citibank for the performance of its duties as Indenture Trustee and in all other capacities under the Indenture.

“Initial Note Balance” means, for any Note or for any Class of Notes, the Note Balance of such Note upon the related Issuance Date as specified in the related Indenture Supplement.

“Insolvency Event” means, with respect to a specified Person, (i) an involuntary case or other proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced against any Person or any substantial part of its property, or a petition shall be filed against such Person in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, seeking the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the winding-up or liquidation of such Person’s business and (A) such case or proceeding shall continue undismissed and unstayed and in effect for a period of sixty (60) days or (B) an order for relief in respect of such Person shall be entered in such case or proceeding under such laws or a decree or order granting such other requested relief shall be granted; or (ii) the commencement by such Person of a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due or the admission by such Person of its inability to pay its debts generally as they become due.

“Insolvency Proceeding” means any proceeding of the sort described in the definition of Insolvency Event.

“Interest Accrual Period” means, for any Class of Notes and any Payment Date, the period specified in the related Indenture Supplement.

“Interest Amount” means, for each Interest Accrual Period and each Class of Notes, interest accrued on such Class during such period, in an amount equal to interest on such Class’s Note Balance at the applicable Note Interest Rate.

“Interest Day Count Convention” means, for any Series or Class of Notes, the fraction specified in the related Indenture Supplement to indicate the number of days counted in an Interest Accrual Period divided by the number of days assumed in a year, for purposes of calculating the Interest Payment Amount for each Interest Accrual Period in respect of such Series or Class.

“Interest Payment Amount” means, for any Series or Class of Notes, as applicable and with respect to any Payment Date:

Exhibit A-1-24

 

(i) for any Series or Class of Term Notes, the related Cumulative Interest Shortfall Amount plus the product of:

(A) the Note Balance as of the close of business on the preceding Payment Date;

(B) the related Note Interest Rate for such Series or Class and for the related Interest Accrual Period; and

(C) the Interest Day Count Convention specified in the related Indenture Supplement; and

(ii) for any Series or Class of Variable Funding Notes, the lesser of:

(1) the related Cumulative Interest Shortfall Amount plus the product of:

(A) the average daily aggregate VFN Principal Balance during the related Interest Accrual Period (calculated based on the average of the aggregate VFN Principal Balances on each day during the related Interest Accrual Period);

(B) the related Note Interest Rate for such Class during the related Interest Accrual Period; and

(C) the Interest Day Count Convention specified in the related Indenture Supplement; or

(2) such other amount as determined by the Administrative Agent and reported to the Indenture Trustee at least one (1) Business Day prior to such Payment Date.

“Interested Noteholders” means, for any Class, any Noteholder or group of Noteholders holding Notes evidencing not less than 25% of the aggregate Voting Interests of such Class.

“Interim Borrowing Base” means, as of any Interim Borrowing Base Determination Date, an amount equal to the aggregate Collateral Value (as calculated using clause (c) of the definition of Market Value Percentage) of the Portfolio.

“Interim Borrowing Base Determination Date” means the Business Day following the day in which a Modified Valuation Trigger has occurred and is at least five (5) Business Days prior to or after the next succeeding Borrowing Base Determination Date or (ii) any other Business Day agreed to among the Issuer, the Administrator, the Indenture Trustee and the Administrative Agent, following one (1) Business Day’s written notice to the Indenture Trustee.

“Interim Borrowing Base Payment Date” means the fifth (5th) Business Day following an Interim Borrowing Base Determination Date.

Exhibit A-1-25

 

“Interim Payment Date” means, with respect to any Series of Notes, (i) each Interim Borrowing Base Payment Date or (ii) for each calendar week, the second (2nd) Business Day of such week following one (1) Business Day’s written notice from the Issuer to the related VFN Noteholders, the Administrative Agent and the Indenture Trustee, or (iii) for any other Business Day, such date agreed to among the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Indenture Trustee and the Administrative Agent, following one (1) Business Day’s written notice to the Indenture Trustee. If an Interim Payment Date falls on the same date as a Payment Date, the Interim Payment Date shall be disregarded. No Interim Payment Dates shall occur during the Full Amortization Period.

“Interim Payment Date Report” has the meaning set forth in Section 3.2(c) of the Base Indenture.

“Interim Servicer” means the transferor of an Acquired MSR acting in its capacity as subservicer for the benefit of the Servicer in connection with the purchase thereof.

“Investment Company Act” means the Investment Company Act of 1940.

“IRS” means the United States Internal Revenue Service.

“Issuance Date” means, for any Series of Notes, the date of issuance of such Series, as set forth in the related Indenture Supplement.

“Issuer” has the meaning set forth in the Preamble to the Base Indenture.

“Issuer and Co-Issuer Certificate” means a certificate (including an Officer’s Certificate) signed in the name of an Issuer Authorized Officer and a Co-Issuer Authorized Officer, or signed in the name of the Issuer and Co-Issuer by an Issuer Authorized Officer and a Co-Issuer Authorized Officer. Wherever this Base Indenture requires that an Issuer and Co-Issuer Certificate be signed also by an accountant or other expert, such accountant or other expert (except as otherwise expressly provided in this Base Indenture) may be an employee of PMC, PMH or an Affiliate.

“Issuer Affiliate” means any person involved in the organization or operation of the Issuer or an Affiliate of such a person which is also an affiliate within the meaning of Rule 3a-7 promulgated under the Investment Company Act.

“Issuer Authorized Officer” means any director or any authorized officer of the Owner Trustee or the Administrator who may also be an officer or employee of PMC, its managing member or an Affiliate of PMC or its managing member.

“Issuer Indemnified Party” has the meaning set forth in Section 9.2(a) of the Base Indenture.

“Issuer Trust” has the meaning set forth in the Preamble.

Exhibit A-1-26

 

“Issuer Trust Agreement” means the trust agreement dated as of November 22, 2017 (the “Original Trust Agreement”), as amended and restated by the Amended and Restated Trust Agreement, dated the Closing Date, by and between PMC and the Owner Trustee.

“Issuer Trusts’ Tax Opinion” means, with respect to any undertaking, an Opinion of Counsel to the effect that, for United States federal income tax purposes, (i) such undertaking will not result in either the Issuer or the Co-Issuer or any portion of the Issuer Trusts, whether taken separately or collectively, being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, (ii) if any Notes are issued or deemed issued as a result of such undertaking, any Notes issued or deemed issued on such date that are not Retained Notes will be debt, and (iii) if requested by the Administrative Agent, such undertaking will not cause the Noteholders or beneficial owners of Notes that are not Retained Notes to have been sold or exchanged under section 1001 of the Code (excluding, for this purpose, sales or exchanges of the Notes that result in gain or loss of zero for federal income tax purposes). For any Series of VFNs that is a Retained Note, clauses (ii) and (iii) shall apply to the repurchase agreement financing of such Series of VFNs, if any (rather than to the VFNs subject to such financing).

“Laws” means any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority.

“Lender Adjusted Net Worth” has the meaning set forth in the Fannie Mae Contract.

“Level” means any of the six (6) tiers of Servicer SDQ Rate set forth in the definition of Stop-Loss Cap.

“Lien” means, with respect to any property or asset of any Person (a) any mortgage, lien, pledge, charge or other security interest or encumbrance of any kind in respect of such property or asset or (b) the interest of a vendor or lessor arising out of the acquisition of or agreement to acquire such property or asset under any conditional sale agreement, lease purchase agreement or other title retention agreement.

“Liquidity” has the meaning set forth in the Fannie Mae Lender Contract.

“Majority Noteholders” means, with respect to any Series or Class of Notes or all Outstanding Notes, the Noteholders of greater than 50% of the Note Balance of the Outstanding Notes of such Series or Class or of Outstanding Notes, as the case may be, measured by Voting Interests in any case.

“Margin Call Payment” means (i) the sale and delivery of Eligible Securities, or (ii) the transfer of cash to the Issuer Trusts, as Repo Buyers, under the PC Repurchase Agreement.

Exhibit A-1-27

 

“Margin Excess Notice” means, in connection with a funding of Margin Excess pursuant to Section 2.05(d) of the PC Repurchase Agreement, an irrevocable notice delivered by PMC and PMH, as Repo Sellers, to the Issuer, as a Repo Buyer, and the Co-Issuer, as a Repo Buyer, with a copy to the Administrative Agent and the Indenture Trustee, which notice (i) shall be substantially in the form of Exhibit C to the PC Repurchase Agreement, (ii) and shall be signed by a Responsible Officer of PMC and PMH and be received by the Issuer, as a Repo Buyer, and to the Co-Issuer, as a Repo Buyer, prior to 1:00 p.m. (New York time) one (1) Business Day prior to the related Interim Payment Date, (iii) shall specify (A) the Dollar amount of the requested Margin Excess, (B) the requested Interim Payment Date, and (C) shall include a copy of the related “Funding Certification” being delivered pursuant to the Indenture in connection with such funding of Margin Excess, if applicable, and (iv) shall have attached to it a revised Asset Schedule dated the date of such notice.

“Market Value” means, as of any date of determination, (a) with respect to any Participation Certificate, as of any date of determination, the product of (1) the Market Value Percentage as of the most recent Market Value Report and (2) the aggregate unpaid principal balance of the Mortgage Loans related to the MSRs evidenced by such Participation Certificate as of the last day for which such information is available; (b) with respect to any Eligible Security, the fair market value thereof as of the close of business on the immediately preceding Business Day, as determined by an independent third party appointed by the Administrator and subject to procedures mutually agreed to between the Administrator and the Administrative Agent; and (c) with respect to any Pledged Margin Security, the positive mark to market gain, if any, as determined by using the bid side pricing of either Tradeweb Markets, LLC, Thomson Reuters or such other pricing service mutually agreeable to the Administrator and the Administrative Agent or the exchange upon which such contract is traded, as applicable.

“Market Value Information” means any Market Value Report prepared by the MSR Valuation Agent, or the Market Value Percentage and Collateral Value determined in accordance with the Transaction Documents.

“Market Value Percentage” means:

(a) for funding purposes (and for the purpose of calculating the Collateral Value used in connection with such determination of a funding) from time to time, as of any date of determination, the lesser of (i) the fair value percentage of the MSR determined by the Servicer as of the most recent date of determination or (ii) the middle of the range of the fair value percentage, including any Modified Valuation as applicable, of the MSR from the most recently delivered Market Value Report;

(b) for purposes of determining the Borrowing Base (and for the purpose of calculating the Collateral Value used in connection with such determination of the Borrowing Base) from time to time, as of any date of determination, the greater of (i) the Market Value Percentage calculated for funding purposes pursuant to clause (a) above, and (ii) the lower of (x) the product of (1) the middle of the range of the fair value percentage of the MSR from the most recently delivered Market Value Report and (2) 105.5% or (y) the product of (1) the average of the middle of the range of the fair value percentage of the MSR from the three (3) most recently delivered Market Value Reports and (2) 104%; or

Exhibit A-1-28

 

(c) for purposes of determining the Interim Borrowing Base (and for the purpose of calculating the Collateral Value used in connection with such determination of the Interim Borrowing Base) from time to time, as of any date of determination, the greater of (i) the Market Value Percentage calculated for funding purposes pursuant to clause (a) above which shall represent the Modified Valuation applicable to the Interim Borrowing Base Determination Date, and (ii) the lower of (x) the product of (1) the middle of the range of the fair value percentage, which shall represent the applicable Modified Valuation, of the MSR from the most recently delivered Market Value Report and (2) 105.5% or (y) the product of (1) the average of the middle of the range of the fair value percentage, based on the applicable Modified Valuation, of the MSR from the three (3) most recently delivered Market Value Reports and (2) 104%.

“Market Value Report” has the meaning set forth in Section 3.3(g) of the Base Indenture.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of PMC, PMH, the Guarantor or any Affiliate thereof that is a party to any Program Agreement taken as a whole; (b) a material impairment of the ability of PMC, PMH, the Guarantor or any Affiliate thereof that is a party to any Program Agreement to perform under any Program Agreement and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Agreement against PMC, PMH, the Guarantor or any Affiliate thereof that is a party to any Program Agreement.

“Maximum VFN Principal Balance” means, for any VFN Class, the amount specified in the related Indenture Supplement.

“MBS” means a mortgage backed security guaranteed by Fannie Mae pursuant to the Fannie Mae Lender Contract.

“Minimum Reserve Amount” means the lesser of: (i) the Stop-Loss Cap and (ii) the sum of: (A) the Current Amounts Due, plus (B) all projected amounts (calculated using Fannie Mae’s proprietary modeling system and Fannie Mae’s historical data) that may be due to Fannie Mae related to the items described in clauses B(1)-B(3) of the definition of Current Amounts Due. If the amounts determined in clauses (i) and (ii) above are equal, then the “Minimum Reserve Amount” is the amount determined in clause (ii) above.

“Modified Valuation” means the fair market values and the valuation percentages of the Portfolio provided by the MSR Valuation Agent in the Market Value Report assuming that the 10-year U.S. Treasury rate (mid mark) as compared to the 10-year U.S. Treasury rate (mid mark) used by the MSR Valuation Agent as of the Borrowing Base Determination Date (i) declines by more than 0.375% or (ii) increases by more than 0.375%.

“Modified Valuation Trigger” occurs when the 10-year U.S. Treasury rate (mid mark) as compared to the 10-year U.S. Treasury rate (mid mark) used by the MSR Valuation Agent as of the most recent Borrowing Base Determination Date (i) declines by more than 0.375% or (ii) increases by more than 0.375%.

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

Exhibit A-1-29

 

“Mortgage” means, with respect to a Mortgage Loan, a mortgage, deed of trust or other instrument encumbering a fee simple interest in real property securing a Mortgage Note.

“Mortgage Loan” means all loans serviced or to be serviced on an ongoing basis by the Servicer for Fannie Mae.

“Mortgage Note” means the note or other evidence of the indebtedness of a mortgagor secured by a Mortgage under a Mortgage Loan and all amendments, modifications and attachments thereto.

“Mortgage Selling and Servicing Contract” means the Mortgage Selling and Servicing Contract, dated as of October 15, 2010, as amended by the Addendum to Mortgage Selling and Servicing Contract, dated as of January 14, 2013, between the Servicer and Fannie Mae, pursuant to which the Servicer is selling mortgage loans to Fannie Mae or servicing Mortgage Loans on Fannie Mae’s behalf, and any related addenda.

“Mortgaged Property” means the real property (including all improvements, buildings, fixtures and building equipment thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and all other collateral securing repayment of the related Mortgage Loan.

“MRA Payment Date” means the Business Day immediately preceding a “Payment Date” as defined in the Base Indenture.

“MSR Monthly Report” has the meaning set forth in Section 3.3(f) of the Base Indenture.

“MSR Valuation Agent” means Incenter Mortgage Advisors, LLC, or any successor third party mortgage servicing rights valuation agent appointed by PMC in accordance with the terms of this Base Indenture.

“MSR Valuation Agent Agreement” means the MSR Valuation Agent Agreement, dated as of December 20, 2017, among the MSR Valuation Agent, PMC and the Issuer, as amended, restated or supplemented from time to time.

“MSR Valuation Agent Fee” means the fees and expenses payable to the MSR Valuation Agent pursuant to the terms of the MSR Valuation Agent Agreement.

“MSRs” means, with respect to the Mortgage Loans, the mortgage servicing rights, including any and all of the following: (a) any and all rights to service the Mortgage Loans; (b) any payments to or monies received by the Servicer for servicing the Mortgage Loans; (c) any late fees, penalties or similar payments with respect to the Mortgage Loans; (d) all agreements or documents creating, defining or evidencing any such servicing rights to the extent they relate to such servicing rights and all rights of the Servicer thereunder; (e) escrow or other similar payments with respect to the Mortgage Loans and any amounts actually collected by the Servicer with respect thereto; (f) all accounts and other rights to payment related to any of the property described in this definition; and (g) any and all documents, files, records, servicing files, servicing documents, servicing records, data tapes, computer records, or other information pertaining to the Mortgage Loans or pertaining to the past, present or prospective servicing of the Mortgage Loans; provided, however, MSRs shall not include any Advance Reimbursement Amounts.

Exhibit A-1-30

 

“Multiemployer Plan” means a “multiemployer plan” as defined in Section 3(37) of ERISA to which contributions are required to be made by PMC or any ERISA Affiliate thereof and that is covered by Title IV of ERISA.

“Net Earnings” means reported Total Gross Income (Loss)(as calculated based on the values assigned to such terms and reported in the Mortgage Bankers’ Financial Reporting Form) from servicing, less: (x) changes in MSR value; (y) gains (losses) on derivatives used to hedge Servicing Rights; and (z) gains (losses) on other derivatives or other financial instruments, calculated based on data reported in the servicing column of Schedule C (Income) of its Mortgage Bankers’ Financial Reporting Form.

“Net Excess Cash Amount” means, on any Payment Date or Interim Payment Date, the amount of funds available to be distributed to the holders of the Owner Trust Certificates pursuant to Sections 4.4(a)(iv), 4.5(a)(1)(x) or 4.5(a)(2)(vi) of the Base Indenture, as applicable.

“Net Payment Amount” means with respect to any MRA Payment Date or Interim Payment Date, an amount equal to the sum of (i) the amounts payable by PMC pursuant to Sections 2.03, 2.04 or 2.05 of the PC Repurchase Agreement, as applicable, minus (ii) the amounts, if any, that will be distributable under Sections 4.4(a)(iv) or 4.5(a)(1)(x) of the Base Indenture to the holders of the Owner Trust Certificates.

“New Servicing Rights” means the new servicing rights created when Fannie Mae engages a new interim servicer or subservicer to service the Subject Mortgages after Fannie Mae terminates the Servicing Rights.

“Non-SDQ Factor” means, for a Level, the number of basis points set out in the definition of Stop-Loss Cap as the Non-SDQ Factor for such Level.

“Non-SDQ Loans” means Mortgage Loans which are not SDQ Loans.

“Nonpublic Personal Information” means any consumer’s nonpublic personal information as defined in the Gramm-Leach-Bliley Act.

“Note” or “Notes” means any note or notes of any Class authenticated and delivered from time to time under this Base Indenture and the related Indenture Supplement including any Variable Funding Note.

“Note Balance” means, on any date (i) for any Term Note, or for any Series or Class of Term Notes, as the context requires, the Initial Note Balance of such Term Note or the aggregate of the Initial Note Balances of the Term Notes of such Series or Class, as applicable, less all amounts paid to the Noteholder of such Term Note or Noteholders of such Term Notes with respect to principal, and (ii) for any Variable Funding Note, its VFN Principal Balance on such date.

Exhibit A-1-31

 

“Note Interest Rate” means, for any Note, or for any Series or Class of Notes as the context requires, the interest rate specified, or calculated as provided in, the related Indenture Supplement.

“Note Owner” means, with respect to a Book-Entry Note, the Person who is the owner of such Book-Entry Note, as reflected on the books of the Depository, or on the books of a Person maintaining an account with such Depository (directly as a Depository Participant or as an indirect participant, in each case in accordance with the rules of such Depository) and with respect to any Definitive Notes, the Noteholder of such Note.

“Note Payment Account” means the segregated non-interest bearing trust account or accounts, each of which shall be an Eligible Account, established and maintained pursuant to Sections 4.1 and 4.8 of the Base Indenture and entitled “Citibank, N.A., as Indenture Trustee in trust for the Noteholders of the PMT ISSUER TRUST - FMSR Collateralized Notes, Note Payment Account”.

“Note Purchase Agreement” means an agreement with one or more initial purchasers or placement agents under which the Issuer will sell the Notes to such initial purchaser(s), or contract with such placement agent(s) for the initial private placement of the Notes, in each case as further defined in the related Indenture Supplement.

“Note Rating Agency” means any nationally recognized rating agency, and, with respect to any Outstanding Class of Notes, each rating agency, if any, specified in the related Indenture Supplement. References to Note Rating Agencies or “each” or “any” Note Rating Agency in this Base Indenture refer to Note Rating Agencies that were engaged to rate any Notes issued under this Base Indenture, which Notes are still Outstanding.

“Note Register” has the meaning set forth in Section 6.5 of the Base Indenture.

“Note Registrar” means the Person who keeps the Note Register specified in Section 6.5 of the Base Indenture.

“Noteholder” means the Person in whose name a Note is registered in the Note Register, except that, solely for the purposes of giving certain consents, waivers, requests or demands as may be specified in this Base Indenture, the interests evidenced by any Note registered in the name of, or in the name of a Person or entity holding for the benefit of, the Issuer Trusts, PMH, PMC or any Person that is an Affiliate of the Issuer, the Co-Issuer, PMC or PMH, shall not be taken into account in determining whether the requisite percentage necessary to effect any such consent, waiver, request or demand shall have been obtained (unless such Person is the sole holder of the Notes). The Indenture Trustee shall have no responsibility to count any Person as a Noteholder who is not permitted to be so counted under the Base Indenture pursuant to the definition of “Outstanding” unless a Responsible Officer of the Indenture Trustee has actual knowledge that such Person is an Affiliate of the Issuer, the Co-Issuer or PMC or PMH.

“Notice” or “Notices” means all requests, demands and other communications, in writing (including facsimile transmissions and e-mails), sent by overnight delivery service, facsimile transmission, electronic transmission or hand-delivery to the intended recipient at the address specified in Section 11.04 and Section 12.04 of the PC Repurchase Agreement or, as to any party, at such other address as shall be designated by such party in a written notice to the other party.

Exhibit A-1-32

 

“NRSRO” means a nationally recognized statistical rating organization that is a credit rating agency that issues credit ratings that the U.S. Securities and Exchange Commission permits other financial firms to use for certain regulatory purposes.

“Obligations” means (a) all of PMC’s and PMH’s indebtedness, obligations to pay the outstanding principal balance of the Purchase Price, together with interest thereon on the Termination Date, outstanding interest due on each MRA Payment Date, and other obligations and liabilities, to the Issuer, as a Repo Buyer and the Co-Issuer, as a Repo Buyer, arising under, or in connection with, the Program Agreements, whether now existing or hereafter arising; (b) any and all sums reasonably incurred and paid by the Issuer, as a Repo Buyer, the Co-Issuer, as a Repo Buyer, or on behalf of the Issuer or Co-Issuer, as Repo Buyers, in order to preserve any Repurchase Asset or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of PMC’s and PMH’s indebtedness, obligations or liabilities referred to in this definition, the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Repurchase Asset, or of any exercise by the Issuer, as a Repo Buyer, and the Co-Issuer, as a Repo Buyer, of its rights under the Program Agreements, including, without limitation, reasonable attorneys’ fees and disbursements and court costs; and (d) all of PMC’s and PMH’s indemnity obligations to the Issuer, as a Repo Buyer, and the Co-Issuer, as a Repo Buyer, pursuant to the Program Agreements.

“Obligor” means any Person who owes or may be liable for payments under a Mortgage Loan.

“OFAC” has the meaning set forth in Section 10.1(j) of the Base Indenture.

“Officer’s Certificate” means a certificate signed by an Issuer Authorized Officer and a Co-Issuer Authorized Officer and delivered to the Indenture Trustee. Wherever this Base Indenture requires that an Officer’s Certificate be signed also by an accountant or other expert, such accountant or other expert (except as otherwise expressly provided in this Base Indenture) may be an employee of the Servicer.

“Opinion of Counsel” means a written opinion of counsel reasonably acceptable to the Indenture Trustee, which counsel may, without limitation, and except as otherwise expressly provided in this Base Indenture and except for any opinions related to tax matters or material adverse effects on Noteholders, be an employee of the Issuer, Co-Issuer, PMC, PMH or any of their Affiliates.

“Optional Payment” has the meaning set forth in Section 2.03(c) of the PC Repurchase Agreement.

“Organizational Documents” means the Issuer’s Trust Agreement and the Co-Issuer’s Trust Agreement (including each related Owner Trust Certificate).

“Original Base Indenture” means Base Indenture, dated the Closing Date, among the Issuer, Citibank, N.A., as indenture trustee, as calculation agent, as paying agent and as securities intermediary, PMC, as Administrator and as Servicer and the Administrative Agent, including the schedules and exhibits thereto.

Exhibit A-1-33

 

“Outstanding” means, with respect to all Notes and, with respect to a Note or with respect to Notes of any Series or Class means, as of the date of determination, all such Notes theretofore authenticated and delivered under this Base Indenture, except:

(i) any Notes theretofore canceled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation, or canceled by the Issuer and delivered to the Indenture Trustee pursuant to Section 6.9 of the Base Indenture;

(ii) any Notes to be redeemed for whose full payment (including principal and interest) redemption money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Noteholders of such Notes; provided that, if such Notes are to be redeemed, notice of such redemption has been duly given if required pursuant to this Base Indenture, or provision therefore satisfactory to the Indenture Trustee has been made;

(iii) any Notes which are canceled pursuant to Section 7.3 of the Base Indenture; and

(iv) any Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Base Indenture (except with respect to any such Note as to which proof satisfactory to the Indenture Trustee is presented that such Note is held by a person in whose hands such Note is a legal, valid and binding obligation of the Issuer Trusts).

For purposes of determining the amounts of deposits, allocations, reallocations or payments to be made, unless the context clearly requires otherwise, references to “Notes” will be deemed to be references to “Outstanding Notes”. In determining whether the Noteholders of the requisite principal amount of such Outstanding Notes have taken any Action under the Base Indenture, Notes owned by the Issuer, Co-Issuer, PMC, PMH, or any Affiliate of the Issuer, Co-Issuer, PMC or PMH (except with respect to the Series 2017-VF1 Notes which have been sold by PMC to the VFN Repo Buyers under the Series 2017-VF1 Repurchase Agreement and any Action to be given or taken by a Noteholder under the Base Indenture shall be taken by the Repo Buyer under the Series 2017-VF1 Repurchase Agreement) shall be disregarded. In determining whether the Indenture Trustee will be protected in relying upon any such Action, only Notes which an Indenture Trustee Authorized Officer has actual knowledge are owned by the Issuer, Co-Issuer, PMC or PMH, or any Affiliate of the Issuer, Co-Issuer, PMC or PMH, will be so disregarded. Notes so owned which have been sold pursuant to a repurchase transaction or pledged in good faith may be regarded as Outstanding if the pledgee proves to the satisfaction of the Indenture Trustee the pledgee’s right to act as owner with respect to such Notes and that the Repo Buyer or pledgee is not the Issuer, the Co-Issuer, PMC or PMH or any Affiliate of the Issuer, the Co-Issuer, PMC or PMH. Retained Notes shall not constitute Notes “Outstanding” to the extent contemplated by the applicable Indenture Supplement.

“Owner” means, when used with respect to a Note, any related Note Owner.

Exhibit A-1-34

 

“Owner Trust Certificate” means, as the context requires, (i) a certificate evidencing a 100% undivided beneficial interest in the Issuer, or (ii) a certificate evidencing a 100% undivided beneficial interest in the Co-Issuer. Notwithstanding the foregoing, for purposes of provisions in any Note Purchase Agreement addressing Regulation RR and the interests held in the Issuer (as may be defined in the applicable Note Purchase Agreement), the Owner Trust Certificate relating to the Issuer shall mean collectively (i) and (ii), to the extent held by the sponsor or securitizer directly or through a majority-owned affiliate, in each case to the extent in accordance with Regulation RR.

“Owner Trustee” means WSFS, not in its individual capacity but solely as owner trustee under the Trust Agreement and the Co-Issuer Trust Agreement, and any successor Owner Trustee thereunder.

“Owner Trustee Fee” means the annual fee of $7,000, to be paid annually on the Payment Date occurring in December of each year.

“Owner Trustee Lien” means the lien in favor of the Owner Trustee granted pursuant to Section 8.3 of the Issuer Trust Agreement and pursuant to Section 8.3 of the Co-Issuer Trust Agreement, which lien is subordinated to the lien of the Indenture Trustee as provided in such Section 8.3 and is subject and subordinate to any and all rights of Fannie Mae under the Fannie Mae Lender Contract or the Acknowledgment Agreement.

“Participation Agreement” means, (i) with respect to the Sold MSR Excess Spread PC, the Excess Spread Participation Agreement, (ii) with respect to the Retained MSR Excess Spread PC, the Retained Excess Spread Participation Agreement, and (iii) with respect to any other Participation Certificate, as set forth in the related Participation Agreement.

“Participation Certificate” has the meaning, (i) with respect to the Excess Spread Participation Agreement, the Sold MSR Excess Spread PC, (ii) with respect to the Retained Excess Spread Participation Agreement, the Retained MSR Excess Spread PC, and (iii) with respect to any other Participation Agreement, as set forth therein.

“Participation Certificate Schedule” means, as of any date, the list attached as Schedule 1 to the Base Indenture, as it may be amended from time to time in accordance with Section 2.1(b) of the Base Indenture.

“Participation Interest” has the meaning set forth in the Excess Spread Participation Agreement or the Retained Excess Spread Participation Agreement, as applicable.

“Paying Agent” means the same Person who serves at any time as the Indenture Trustee, or an Affiliate of such Person, as paying agent pursuant to the terms of this Base Indenture.

“Payment Date” means, in any month beginning in January 2018, the 25th day of such month or, if such 25th day is not a Business Day, the next Business Day following such 25th day.

“Payment Date Report” has the meaning set forth in Section 3.2(b) of the Base Indenture.

Exhibit A-1-35

 

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

“PC Documents” means, collectively, the Participation Certificates and the PC Repurchase Agreement.

“PC Repo Guaranty” means that certain amended and restated guaranty, made by the Guarantor in favor of the Issuer Trusts, guaranteeing payment to the Issuer Trusts of all amounts owing to the Issuer and Co-Issuer from PMC and PMH pursuant to the PC Repurchase Agreement, as amended, restated or supplemented from time to time.

“PC Repo Pricing Side Letter” means the amended and restated pricing side letter agreement to the PC Repurchase Agreement, dated as of October 10, 2023, among the Issuer, as a Repo Buyer, the Co-Issuer, as a Repo Buyer, PMC, as a Repo Seller, PMH, as a Repo Seller and the Guarantor, as amended, restated or supplemented from time to time.

“PC Repurchase Agreement” means the Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023, among PMC, as a Repo Seller, PMH, as a Repo Seller, the Issuer, as a Repo Buyer, the Co-Issuer, as a Repo Buyer and the Guarantor, pursuant to which PMC and PMH have sold to the Issuer Trusts, all of its right, title and interest in, to and under (i) the Retained MSR Excess Spread PC (including all rights to the Retained MSR Excess Spread related thereto), and (ii) the Sold MSR Excess Spread PC (including all rights to the Sold MSR Excess Spread related thereto), as amended, restated or supplemented from time to time.

“Permitted Investments” means, at any time, any one or more of the following obligations and securities:

(i) (a) direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, the United States or (b) direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by, any agency or instrumentality of the United States, provided that such obligations are backed by the full faith and credit of the United States; and provided further that the short-term debt obligations of such agency or instrumentality at the date of acquisition thereof have been rated (x) “A-1” or the equivalent by any NRSRO if such obligations have a maturity of less than sixty (60) days after the date of acquisition or (y) “A-1+” or the equivalent by any NRSRO if such obligations have a maturity greater than sixty (60) days after the date of acquisition;

(ii) repurchase agreements on obligations specified in clause (a) maturing not more than three months from the date of acquisition thereof; provided that the short-term unsecured debt obligations of the party agreeing to repurchase such obligations are at the time rated “A-1+” or the equivalent by any NRSRO;

(iii) certificates of deposit, time deposits and bankers’ acceptances of any U.S. depository institution or trust company incorporated under the laws of the United States or any state thereof and subject to supervision and examination by a federal and/or state banking authority of the United States; provided that the unsecured short-term debt obligations of such depository institution or trust company at the date of acquisition thereof have been rated “A-1+” or the equivalent by any NRSRO;

Exhibit A-1-36

 

(iv) commercial paper of any entity organized under the laws of the United States or any state thereof which on the date of acquisition has been rated “A-1+” or the equivalent by any NRSRO;

(v) interests in any U.S. money market fund which, at the date of acquisition of the interests in such fund (including any such fund that is managed by the Indenture Trustee or an Affiliate of the Indenture Trustee or for which the Indenture Trustee or an Affiliate acts as advisor) and throughout the time as the interest is held in such fund, has a rating of “AAAm” or the equivalent by any NRSRO; or

(vi) other obligations or securities that are acceptable to the NRSRO as Permitted Investments under the Base Indenture and if the investment of account funds therein will not result in a reduction in the then current rating of the Notes, as evidenced by a letter to such effect from the NRSRO;

provided, that each of the foregoing investments shall mature no later than the Business Day prior to the Payment Date immediately following the date of purchase thereof (other than in the case of the investment of monies in instruments of which the Indenture Trustee is the obligor, which may mature on the related Payment Date), and shall be required to be held to such maturity; and provided further, that each of the Permitted Investments may be purchased by the Indenture Trustee through an Affiliate of the Indenture Trustee.

“Permitted Lien” means any liens for taxes, assessments, or similar charges incurred in the ordinary course of business and which are not yet due or as to which the period of grace, if any, related thereto has not expired or which are being contested in good faith and by appropriate proceedings if adequate reserves are maintained to the extent required by GAAP.

“Person” means any individual, corporation, estate, partnership, limited liability company, limited liability partnership, joint venture, association, joint-stock company, business trust, trust, unincorporated organization, government or any agency or political subdivision thereof, or other entity of a similar nature.

“PIP” means any performance improvement plan entered into between the Servicer and Fannie Mae from time to time.

“Place of Payment” means, with respect to any Class of Notes issued under the Indenture, the city or political subdivision so designated with respect to such Class of Notes by the Indenture Trustee.

“Plan” means an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is established or maintained by PMC or any ERISA Affiliate thereof and covered by Title IV of ERISA, other than a Multiemployer Plan.

“Plan Asset Regulations” has the meaning set forth in Section 6.5(k) of the Base Indenture.

Exhibit A-1-37

 

“Pledged Margin Securities Account” means a securities account which shall be established for the benefit of the Indenture Trustee.

“Pledged Margin Securities Account Control Agreement” means, a securities account control agreement which shall be entered into by and among PMC, the Issuer, the Indenture Trustee, PLS and the Guarantor for the purpose of holding the Pledged Margin Securities.

“Pledged Margin Security” means any exchange traded futures and options or any “to be announced” long forward contract on a mortgage-backed security. For the avoidance of doubt, put contracts, short forward contracts and shorting will not be permitted with respect to Pledged Margin Securities.

“PLS” means PennyMac Loan Services, LLC, a limited liability company organized under the laws of the State of Delaware, or its permitted successors and assigns.

“PLS Subservicing Agreement” means the Flow Servicing Agreement, dated as of June 1, 2022, between PennyMac Corp., as owner, and PLS, as servicer.

“PMC” means PennyMac Corp., a corporation organized under the laws of the State of Delaware, or its permitted successors and assigns.

“PMC FCPA Entity” or “PMC FCPA Entities” has the meaning set forth in Section 10.1(h) of the Base Indenture.

“PMC Repurchase Price” means the price for which PMC is entitled to repurchase a Participation Certificate from the Issuer, under the PC Repurchase Agreement.

“PMH” means PennyMac Holdings, LLC, a limited liability company organized under the laws of the State of Delaware, or its permitted successors and assigns.

“PMH FCPA Entity” or “PMH FCPA Entities” has the meaning set forth in Section 10.6(h) of the Base Indenture.

“PMH Repurchase Price” means the price for which PMH is entitled to repurchase a Participation Certificate from the Co-Issuer, under the PC Repurchase Agreement.

“PMT” means PennyMac Mortgage Investment Trust, a real estate investment trust organized under the laws of the State of Maryland, or its permitted successors and assigns.

“Pool Purchase Contract” means an agreement between Fannie Mae and the Servicer to buy and sell mortgage loans or Participation Interests for inclusion in an MBS pool.

“Portfolio” means each of (i) The Retained MSR Portfolio, and (ii) the Sold MSR Portfolio, as applicable.

“Portfolio Collections” shall have the meaning set forth in the Excess Spread Participation Agreement.

Exhibit A-1-38

 

“Portfolio Excess Spread” means, collectively, the Retained MSR Excess Spread and the Sold MSR Excess Spread and with respect to any other Participation Certificate, the Excess Spread related thereto.

“Portfolio Mortgage Loan” means a Retained MSR Portfolio Mortgage Loan or a Sold MSR Portfolio Mortgage Loan, as applicable.

“Predecessor Notes” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 6.6 of the Base Indenture in lieu of a mutilated, lost, destroyed or stolen Note will be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Note.

“Price Differential” means with respect to any Transaction as of any date of determination, an amount equal to the sum of (i) the product of (A) the Pricing Rate for such Transaction, (B) the Purchase Price for such Transaction and (C) a fraction, the numerator of which is the number of days elapsed from and including the preceding MRA Payment Date to and excluding such date of determination and the denominator of which equals 360, and (ii) the aggregate expected related fees (including Default Supplemental Fees, and Step-Up Fees), costs and expenses (including any Fees, Expenses, reasonable out-of-pocket expenses and indemnification amounts owed for Administrative Expenses of the Issuer described in Section 4.5(a)(1)(ii) of the Base Indenture, and Specified Call Premium Amounts) as of such date of determination (as determined by the Administrative Agent).

“Pricing Rate” has the meaning set forth in Section 1 of the PC Repo Pricing Side Letter.

“Proceeds” means “proceeds” as defined in Section 9-102(a)(64) of the UCC.

“Program Agreements” means the PC Repurchase Agreement, the PC Repo Pricing Side Letter, the Dedicated Account Control Agreement, the Pledged Margin Securities Account Control Agreement, if any, the Dedicated Account Pledge Agreement, the Indenture and the Participation Agreements.

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

“PTCE” has the meaning set forth in Section 6.5(k) of the Base Indenture.

“Purchase Date” means, subject to the satisfaction of the conditions precedent set forth in Article IV of the PC Repurchase Agreement, (i) the 25th day of such month (or, if such 25th day is not a Business Day, the next Business Day following such 25th day) or (ii) each calendar week, the second (2nd) Business Day of each such week (or if any such date is not a Business Day, the next succeeding Business Day) following one (1) Business Day’s written notice from PMC and PMH, as Repo Sellers, to the Issuer and the Co-Issuer, as Repo Buyers, and the Administrative Agent, in each case on which a Transaction is entered into by the Issuer and the Co-Issuer, as Repo Buyers, pursuant to the PC Repurchase Agreement or such other mutually agreed upon date as more particularly set forth in the PC Repurchase Agreement.

Exhibit A-1-39

 

“Purchase Price” means the price at which each Purchased Asset (or portion thereof) is transferred by PMC, as a Repo Seller, or PMH, as a Repo Seller, to the Issuer, as a Repo Buyer or to the Co-Issuer, as a Repo Buyer, which shall equal:

(a) on the Purchase Date, the product of (1) the Purchase Price Percentage and (2) the applicable Market Value; and

(b) on any day after the Purchase Date, the amount determined under the immediately preceding clause (a) increased by the amount of any Margin Excess pursuant to Section 2.05(d) of the PC Repurchase Agreement and decreased by the sum of (i) any Repurchase Price or Required Payments paid pursuant to Section 2.03 of the PC Repurchase Agreement, and (ii) the amount of Consideration transferred by PMC, as a Repo Seller, PMH, as a Repo Seller, to the Issuer, as a Repo Buyer and to the Co-Issuer, as a Repo Buyer, pursuant to Section 2.05(a) of the PC Repurchase Agreement equal to the sum of (x) any cash, (y) the principal amount of any Additional Note Payment with respect to the Variable Funding Note and (z) the amount of any reduction in the Owner Trust Certificates, to the extent provided in Section 2.05 the PC Repurchase Agreement.

“Purchase Price Percentage” has the meaning set forth in Section 1 of the PC Repo Pricing Side Letter.

“Purchased Assets” means the collective reference to Participation Certificates together with the Repurchase Assets related to such Participation Certificates. For the sake of clarity, notwithstanding that related MSRs are pledged, and not sold, to the Issuer, as a Repo Buyer and to the Co-Issuer, as a Repo Buyer, under the PC Repurchase Agreement, such MSRs will nevertheless be included herein as Purchased Assets.

“Ratings Effect” means a reduction, qualification with negative implications or withdrawal of any then current rating of any Outstanding Notes by an applicable Note Rating Agency (other than as a result of the termination of such Note Rating Agency).

“Record Date” means, for the interest or principal payable on any Note on any applicable Payment Date or Interim Payment Date, (i) for a Book-Entry Note, the last Business Day before such Payment Date or Interim Payment Date, as applicable, and (ii) for a Definitive Note, the last day of the month preceding such Payment Date or Interim Payment Date, as applicable, unless otherwise specified in the related Indenture Supplement.

“Records” means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by PMC and PMH, or any other person or entity with respect to the Purchased Assets or any other Repurchase Assets.

“Redemption Amount” means, with respect to a redemption of any Series or Class of Notes by the Issuer pursuant to Section 13.1 of the Base Indenture or pursuant to the related Indenture Supplement, an amount, which when applied together with other Available Funds pursuant to Section 4.5 of the Base Indenture, shall be sufficient to pay an amount equal to the sum of (i) the Note Balance of all Outstanding Notes of such Series or Class as of the applicable Redemption Payment Date or Redemption Date, (ii) all accrued and unpaid interest on the Notes of such Series or Class through the day prior to such Redemption Payment Date or Redemption Date, (iii) any and all amounts allocable to such Series or Class and then owing or owing in connection with such redemption to the Indenture Trustee or the Securities Intermediary, from the Issuer pursuant to the terms hereof, and (iv) any and all other amounts allocable to such Series or Class then due and payable under the Indenture (including all accrued and unpaid Default Supplemental Fees or Step-Up Fees on the Notes of such Series or Class through the day prior to such Redemption Payment Date or Redemption Date and any Specified Call Premium Amount, if any) and, in the case of redemption of all Outstanding Notes, sufficient to authorize the satisfaction and discharge of this Base Indenture pursuant to Section 7.1 of the Base Indenture.

Exhibit A-1-40

 

“Redemption Date” has the meaning set forth in Section 13.1 of the Base Indenture.

“Redemption Notice” has the meaning set forth in Section 13.2 of the Base Indenture.

“Redemption Payment Date” has the meaning set forth in Section 13.1 of the Base Indenture.

“Redemption Percentage” means, for any Class, 10% or such other percentage set forth in the related Indenture Supplement.

“Regulation AB” means Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§ 229.1100 229.1125, as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the U.S. Securities and Exchange Commission or by the staff of the U.S. Securities and Exchange Commission, or as may be provided by the U.S. Securities and Exchange Commission or its staff from time to time.

“Regulation RR” means regulations required under Section 15G of the 1934 Act, added pursuant to Section 941(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

“Regulation S” means Regulation S promulgated under the 1933 Act or any successor provision thereto, in each case as the same may be amended from time to time; and all references to any rule, section or subsection of, or definition contained in, Regulation S means such rule, section, subsection, definition or term, as the case may be, or any successor thereto.

“Regulation S Definitive Note” has the meaning set forth in in Section 5.2(c)(ii) of the Base Indenture.

“Regulation S Global Note” has the meaning set forth in Section 5.2(c)(ii) of the Base Indenture.

“Regulation S Note” has the meaning set forth in Section 5.2(c)(ii) of the Base Indenture.

“Regulation S Note Transfer Certificate” has the meaning set forth in Section 6.5(i)(ii) of the Base Indenture.

Exhibit A-1-41

 

“Related Security” means with respect to any Asset, (a) all security interests or Liens and property subject thereto from time to time, if any, purporting to secure payment of such Asset, whether pursuant to the related Servicing Contract related to such Asset or otherwise, together with all financing statements covering any collateral securing such Asset; (b) all guarantees, indemnities, letters of credit, insurance or other agreements or arrangements of any kind from time to time supporting or securing payment of such Asset whether pursuant to the related Servicing Contract related to such Asset or otherwise; and (c) any and all Proceeds of the foregoing.

“Repo Buyer” means the purchaser under a repurchase agreement. With respect to the PC Repurchase Agreement, each of the Issuer Trusts is a Repo Buyer. With respect to the Series 2017-VF1 Repurchase Agreement, each VFN Repo Buyer is a Repo Buyer.

“Repo Seller” means the seller under a repurchase agreement. With respect to the PC Repurchase Agreement, PMC and PMH are the Repo Sellers. With respect to the Series 2017-VF1 Repurchase Agreement, PMC is the Repo Seller.

“Repurchase Assets” has the meaning set forth in Section 4.02(a) of the PC Repurchase Agreement.

“Repurchase Price” means the price at which Purchased Assets are to be transferred from the Issuer, as a Repo Buyer, the Co-Issuer, as a Repo Buyer, to PMC, as a Repo Seller and to PMH, as a Repo Seller (other than the MSRs, which are pledged, and not sold, to the Issuer, as a Repo Buyer and to the Co-Issuer, as a Repo Buyer), upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price for such Purchased Assets and the accrued but unpaid Price Differential as of the date of such determination.

“Request for Approval for Transfer” means Form 629 to the Fannie Mae Guide (Request for Approval for Servicing or Subservicing Transfer) as required by Chapter A2-7-3 of the Fannie Mae Guide for one Fannie Mae approved servicer to transfer its responsibility for servicing or subservicing any mortgage loans and/or acquired properties to another servicer.

“Required Available Funds” means an amount that, in connection with each Funding Date, shall remain on deposit in the Collection and Funding Account, which amount shall equal (i) the amounts payable in respect of Fees and invoiced or regularly occurring expenses payable from Available Funds on the next Payment Date, plus (ii) all accrued and unpaid interest due on the Notes on the next Payment Date following such Funding Date, plus (iii) all amounts required to be deposited into each Series Reserve Account on the next Payment Date, plus (iv) all amounts required to be deposited into the Expense Reserve Account on the next Payment Date, plus (v) all accrued and unpaid Default Supplemental Fees, if any, due on the Notes on the next Payment Date following such Funding Date, plus (vi) all accrued and unpaid Step-Up Fees, if any, due on the Notes on the next Payment Date following such Funding Date.

“Required Payment” means, with respect to any Purchased Asset, the amounts required to be paid by PMC, as a Repo Seller, or PMH, as a Repo Seller, to the Issuer, as a Repo Buyer, or to the Co-Issuer, as a Repo Buyer, on an MRA Payment Date, equal to any Scheduled Principal Payment Amounts due on such MRA Payment Date under the Indenture.

Exhibit A-1-42

 

“Required Reserve Amount” means, with respect to any MRA Payment Date, the amounts estimated to be due and owing by PMC and PMH, as Repo Sellers, pursuant Sections 2.03, 2.04 or 2.05 of the PC Repurchase Agreement.

“Requirement of Law” means, with respect to any Person, any law, treaty, rule or regulation or determination of an arbitrator, a court or other Governmental Authority, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“Responsible Officer” means,

(i) When used with respect to the Indenture Trustee, the Calculation Agent, the Note Registrar, the Securities Intermediary or the Paying Agent, an Indenture Trustee Authorized Officer;

(ii) when used with respect to the Issuer Trusts, any Issuer and Co-Issuer Authorized Officer who is an officer of the Issuer or Co-Issuer or is an officer of the Administrator or the Co-Issuer Administrator of the type referred to in clause (iii) below; and

(iii) when used with respect to the Servicer, the Administrator or the Co-Issuer Administrator, the chief executive officer, the chief financial officer, any vice president or any managing director of the Servicer, the Administrator or the Co-Issuer Administrator, as the case may be.

“Restricted Payment” means, with respect to any Person, collectively, all dividends or other distributions of any nature (cash, securities, assets or otherwise), and all payments, by virtue of redemption or otherwise, on any class of equity securities (including, warrants, options or rights therefor) issued by such Person, which may hereafter be authorized or outstanding and any distribution in respect of any of the foregoing, whether directly or indirectly.

“Retained Excess Spread Participation Agreement” means the Amended and Restated Retained Spread Participation Agreement, dated as of October 10, 2023, between PMC, as company, and PMC, as initial participant.

“Retained MSR Excess Spread” has the meaning set forth in the Retained Excess Spread Participation Agreement.

“Retained MSR Excess Spread Collections” shall have the meaning set forth in the Retained Excess Spread Participation Agreement.

“Retained MSR Excess Spread PC” means the Participation Certificate issued pursuant to the Retained Excess Spread Participation Agreement which evidences the Participation Interest in the Retained MSR Excess Spread.

Exhibit A-1-43

 

“Retained MSR Portfolio” has the meaning set forth in the Retained Excess Spread Participation Agreement.

“Retained MSR Portfolio Mortgage Loan” means a Mortgage Loan that is included in the Retained MSR Portfolio.

“Retained Note” has the meaning set forth in Section 14.3 of the Base Indenture.

“Revolving Period” means, for any Series or Class of Notes, the period of time beginning on, and including, the related Issuance Date and ending on, but excluding, commencement of the Early Amortization Period or the Full Amortization Period. For the avoidance of doubt, the occurrence of an Advance Rate Trigger Event shall not cause the termination of the Revolving Period.

“Rule 144A” means Rule 144A promulgated under the 1933 Act.

“Rule 144A Definitive Note” has the meaning set forth in Section 5.2(c)(i) of the Base Indenture.

“Rule 144A Global Note” has the meaning set forth in Section 5.2(c)(i) of the Base Indenture.

“Rule 144A Note” has the meaning set forth in Section 5.2(c)(i) of the Base Indenture.

“Rule 144A Note Transfer Certificate” has the meaning set forth in Section 6.5(i)(iii) of the Base Indenture.

“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, or any successor thereto.

“Sale” means any sale of any portion of the Trust Estate pursuant to Section 8.15 of the Base Indenture.

“Sanctions” has the meaning set forth in Section 10.1(j) of the Base Indenture.

“Scheduled Principal Payment Amount” means, for each Series of Notes and each Payment Date, as and to the extent specified in the related Indenture Supplement.

“Schedules of Mortgages” means each Form 2005 (Guaranteed Mortgage-Backed Securities Program Schedule of Mortgages) for PMC delivered to Fannie Mae or its designee from time to time as provided in the Fannie Mae Guide.

“SDQ Event” means the Servicer SDQ Rate for two (2) consecutive months is greater than 90% of the upper threshold of the related Level.

“SDQ Factor” means, for a Level, the number of basis points set out in the definition of Stop-Loss Cap as the SDQ Factor for such Level.

Exhibit A-1-44

 

“SDQ Loans” means loans for which Servicer owns the Fannie Mae servicing rights that are 90 days or more delinquent or in foreclosure.

“SEC” means the United States Securities and Exchange Commission, or any successor thereto.

“Secured Party” has the meaning set forth in the Granting Clause of the Base Indenture.

“Securities Account” has the meaning set forth in Section 8-501(a) of the UCC.

“Securities Intermediary” has the meaning set forth in Section 8-102(a)(14) of the UCC, and where appropriate, shall mean Citibank or its successor, in its capacity as securities intermediary pursuant to Section 4.9 of the Base Indenture.

“Security Entitlement” or “Securities Entitlements” has the meaning set forth in Section 8-102(a)(17) of the UCC.

“Security Interest” means the security interest in the Collateral Granted to the Indenture Trustee pursuant to the Granting Clause.

“Seller Termination Option” means (a) (i) the Issuer, as a Repo Buyer and the Co-Issuer, as a Repo Buyer, have or shall incur costs in connection with those matters provided for in Section 2.09 or 2.10 of the PC Repurchase Agreement and (ii) the Issuer, as a Repo Buyer and the Co-Issuer, as a Repo Buyer, request that PMC, as a Repo Seller and PMH, as a Repo Seller, pay to the Issuer, as a Repo Buyer, and Co-Issuer, as a Repo Buyer, those costs in connection therewith or (b) the Issuer, as a Repo Buyer, and the Co-Issuer, as a Repo Buyer, have declared in writing that an event described in Section 5.02(h)(A) of the PC Repurchase Agreement has occurred.

“Series” means one or more Class or Classes of Notes assigned a series designation, as specified in the related Indenture Supplement.

“Series 2017-VF1 Indenture Supplement” means the Amended and Restated Indenture Supplement, dated as of October 10, 2023, by and among the Issuer, the Co-Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, PMC, as Administrator and as Servicer, PMH, as Co-Issuer Administrator, and Atlas, as Administrative Agent.

“Series 2017-VF1 Notes” means the Notes issued pursuant to the Series 2017-VF1 Indenture Supplement.

“Series 2017-VF1 Repurchase Agreement” means the Second Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023, among PMC, as a Repo Seller, PMH, as a Repo Seller, the VFN Repo Buyers, as Repo Buyers, the Guarantor and Atlas, as Administrative Agent, related to the Series 2017-VF1 Notes.

“Series Allocation Percentage” means, for any Series as of any date of determination:

Exhibit A-1-45

 

(i) as of any date prior to the Full Amortization Period, the percentage obtained by dividing (a) the Series Invested Amount for such Series by (b) the aggregate of the Series Invested Amounts for all Outstanding Series; and

(ii) as of any date during the Full Amortization Period, the percentage obtained by dividing (a) the Series Invested Amount for such Series as of the first day of the Full Amortization Period by (b) the aggregate of the Series Invested Amounts as of the first day of the Full Amortization Period for all Outstanding Series.

“Series Available Funds” means, for any Series as of any Payment Date occurring during the Full Amortization Period, after paying any amounts owed under Sections 4.5(a)(2)(i), (ii) and (iii) of the Base Indenture, the sum of the following:

(i) such Series’ Series Allocation Percentage of any income from Permitted Investments in the Collection and Funding Account;

(ii) such Series’ Series Allocation Percentage of all Collections on deposit in the Trust Accounts that are not Series Reserve Accounts (prior to giving effect to any payments on such Payment Date);

(iii) such Series’ Series Allocation Percentage of any other funds of the Issuer that the Issuer (or the Administrator on behalf of the Issuer) identifies to the Indenture Trustee in writing to be treated as “Available Funds” as of such Payment Date; and

(iv) such other amounts designated as Series Available Funds for the benefit of such Series of Notes in the related Indenture Supplement.

“Series Invested Amount” means, the VFN Series Invested Amount or the Term Note Series Invested Amount, as applicable.

“Series Required Noteholders” means, for any Series (a) if not specified in the related Indenture Supplement, Noteholders of any Series constituting the Majority Noteholders of such Series and (b) if specified in the related Indenture Supplement, as set forth in the related Indenture Supplement.

“Series Reserve Account” means an account established for each Series which shall be a non-interest bearing trust account which is an Eligible Account, established and maintained pursuant to Sections 4.1 and 4.6 of the Base Indenture, and in the name of the Indenture Trustee and identified by each relevant Series.

“Series Reserve Required Amount” means with respect to any Series of Notes, if applicable, the “Series Reserve Required Amount” set forth in the Indenture Supplement for such Series.

“Servicer” means PMC in all its capacities as a Fannie Mae approved seller/servicer under the Fannie Mae Lender Contract and as servicer under the Fannie Mae Lender Contract of the related Mortgage Loans, and any successor servicer approved by Fannie Mae under the Fannie Mae Lender Contract.

Exhibit A-1-46

 

“Servicer SDQ Rate” means (i) the result of (x) the unpaid principal balance of SDQ Loans, divided by (y) the total unpaid principal balance of Mortgage Loans, in each case, determined as of the end of the most recently ended calendar month, multiplied by (ii) 100, expressed as a percentage; provided, however, that in conformance with the calculation of the Servicer SDQ Rate in the Acknowledgment Agreement, only 30% of the unpaid principal balance of Forbearance Loans will count in the calculation of “SDQ Loans” for purposes of calculating the “Servicer SDQ Rate.”

“Servicer Termination Event” means, with respect to the Fannie Mae Lender Contract, the occurrence of any events or conditions, and the passage of any cure periods and giving to and receipt by the Servicer of any required notices, as a result of which any Person has the current right to terminate the Servicer as servicer or issuer, as applicable, under the Fannie Mae Lender Contract.

“Servicer’s Fannie Mae Portfolio” means all mortgage loans delivered, and all mortgage loans and properties serviced, by the Servicer for Fannie Mae through the date, if any, Fannie Mae terminates the Servicing Rights.

“Servicing Contract” means, the Mortgage Selling and Servicing Contract, the applicable Master Agreements between Purchaser and Fannie Mae, and the applicable Schedules of Mortgages (Form 2005), and any and all instruments, agreements, invoices or other writings, which give rise to or otherwise evidence any of the MSRs. Without limiting the generality of the foregoing, any reference herein to a “Servicing Contract” shall be deemed to include the Acknowledgment Agreement.

“Servicing Fee” means, with respect to any Mortgage Loan, the aggregate monthly fee payable to the Servicer in servicing such Mortgage Loan pursuant to the Fannie Mae Lender Contract, not including any Ancillary Income or Advance Reimbursement Amounts.

“Servicing Rights” means the Servicer’s rights under the Fannie Mae Lender Contract.

“Servicing Standards” has the meaning set forth in Section 10.2(i) of the Base Indenture.

“Shortfall Amount” has the meaning set forth in Section 4.5 of the Base Indenture.

“Similar Law” has the meaning set forth in Section 6.5(k) of the Base Indenture.

“Sold MSR Excess Spread” has the meaning set forth in the Excess Spread Participation Agreement.

“Sold MSR Excess Spread PC” has the meaning set forth in the Excess Spread Participation Agreement.

“Sold MSR Portfolio” has the meaning set forth in the Excess Spread Participation Agreement.

Exhibit A-1-47

 

“Sold MSR Portfolio Mortgage Loan” means a Mortgage Loan that is included in the Sold MSR Portfolio.

“Specified Call Premium Amount” has the meaning set forth in the related Indenture Supplement, if applicable.

“STAMP” has the meaning set forth in Section 6.5(d) of the Base Indenture.

“Stated Maturity Date” means, for each Class of Notes, the date specified in the Indenture Supplement for such Note as the fixed date on which the outstanding principal and all accrued interest for such Series or Class of Notes is due and payable.

“Statutory Trust Statute” means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. § 3801 et seq.

“Step-Up Fee” has the meaning set forth in the related Indenture Supplement, if applicable.

“Step-Up Fee Rate” has the meaning set forth in the related Indenture Supplement.

 

“Stop-Loss Cap” means, as of any date of determination during the Stop-Loss Cap Period, and subject to the provisions below, the greater of: (i) $250,000, and (ii) the sum of (a) the result of (x) the unpaid principal balance of Non-SDQ Loans as of such date multiplied by (y) the applicable Non-SDQ Factor shown in the chart below (as adjusted from time to time pursuant to Section 12.2 of this Base Indenture to conform with the Acknowledgment Agreement), plus (b) the result of (x) the unpaid principal balance of SDQ Loans as of such date multiplied by (y) the applicable SDQ Factor shown in the chart below (as adjusted from time to time pursuant to Section 12.2 of this Base Indenture to conform with the Acknowledgment Agreement). For purposes of calculating the Stop-Loss Cap, the Servicer SDQ Rate and the unpaid principal balance of SDQ Loans with respect to Mortgage Loans in the Servicer’s Fannie Mae portfolio, only 30% of the unpaid principal balance of Forbearance Loans will be multiplied by the applicable “SDQ Factor”, while the remaining 70% of the unpaid principal balance of Forbearance Loans will be considered Non-SDQ Loans and multiplied by the applicable “Non-SDQ Factor”. For the avoidance of doubt, if a borrower reinstates or resolves any Forbearance Loan and such loan subsequently becomes ninety (90) days or more delinquent, the full unpaid principal balance of such SDQ Loan will be multiplied by the applicable “SDQ Factor” and the 30% factor shall not be applicable unless additional forbearance of such loan under the CARES ACT or any replacement thereof is permitted by Fannie Mae.

“Level”

If the Servicer SDQ Rate is:

Then, the “Non-SDQ Factor” is:

And the “SDQ Factor” is:

1

0% - 2.0%

[***] bps

[***] bps

2

2.01% - 4.0%

[***] bps

[***] bps

Exhibit A-1-48

 

3

4.01% - 6.0%

[***] bps

[***] bps

4

6.01% - 10.0%

[***] bps

[***] bps

5

10.01% - 15.0%

[***] bps

[***] bps

6

15.01% and over

[***] bps

[***] bps

“Stop-Loss Cap Period” means the period beginning on the effective date of the Acknowledgment Agreement and terminating on the fifth (5th) anniversary of the effective date of the Acknowledgment Agreement, subject to any extension of such period pursuant to the terms of the Acknowledgment Agreement as agreed by Fannie Mae in its sole and absolute discretion.

“Stop-Loss Cap Required Amount” means with respect to any Series of Notes, if applicable, the “Stop-Loss Cap Required Amount” set forth in the Indenture Supplement for such Series.

“Subject Mortgages” means all loans which are now being serviced or which may later be serviced by the Servicer pursuant to the Fannie Mae Lender Contract.

“Subservicer” means, with respect to any MSR, any subservicer engaged by the Servicer to subservice the Mortgage Loans related to such MSR so long as such subservicing arrangement with respect to such MSR is subject to an Eligible Subservicing Agreement.

“Subservicer Side Letter Agreement” the Subservicer Acknowledgment Agreement, dated as of December 20, 2017, among PMC, PLS, the Administrative Agent and the Indenture Trustee.

“Subordination of Interest Agreement” means the Fourth Amended and Restated Subordination of Interest Agreement, dated as of October 10, 2023, among Fannie Mae, PMC, PMH and the Indenture Trustee.

“Subservicer Termination Event” occurs when:

(i) the Servicer has terminated the Person acting as Subservicer and has not either (a) taken over the servicing of such Mortgage Loans itself in conformity with Section 10.2(y) of the Base Indenture or (b) (i) identified a replacement within thirty (30) days that meets the criteria of an Eligible Subservicer and (ii) replaced the Subservicer with such Eligible Subservicer within sixty (60) days under an Eligible Subservicing Agreement and an agreement in form and substance similar to the Subservicer Side Letter Agreement; or

(ii) in the case of PLS, if (a) PLS ceases to be a seller/servicer approved by Fannie Mae or a lender approved by HUD, (b) PLS has been suspended as a seller/servicer by Fannie Mae or HUD on and after the date on which PLS first obtained such approval from Fannie Mae or HUD, as applicable or (c) PLS is under review or investigation outside of due course and has knowledge of imminent or future investigation outside of due course, by Fannie Mae or HUD on and after the date on which PLS became a Fannie Mae or HUD approved seller/servicer or lender, as the context may require, and the Servicer has not either (x) taken over the servicing of such Mortgage Loans itself in conformity with Section 10.2(y) of the Base Indenture or (y) (i) identified a replacement within thirty (30) days that meets the criteria of an Eligible Subservicer and (ii) replaced PLS with such Eligible Subservicer within sixty (60) days under an Eligible Subservicing Agreement and an agreement in form and substance similar to the Subservicer Side Letter Agreement.

Exhibit A-1-49

 

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

“Taxes” has the meaning assigned to such term in Section 2.09(a) of the PC Repurchase Agreement.

“Term Note” means notes of any Series or Class designated as “Term Notes” in the related Indenture Supplement.

“Term Note Series Available Funds” means, for each Series of Term Notes as of any Payment Date occurring during the Full Amortization Period, after paying any amounts owed under Sections 4.5(a)(2)(i) and 4.5(a)(2)(ii) of the Base Indenture, the sum of the following:

(i) such Series’ Series Allocation Percentage of any income from Permitted Investments in the Collection and Funding Account;

(ii) such Series’ Series Allocation Percentage of all Collections on deposit in the Trust Accounts that are not Series Reserve Accounts (prior to giving effect to any payments on such Payment Date);

(iii) such Series’ Series Allocation Percentage of any other funds of the Issuer that the Issuer (or the Administrator on behalf of the Issuer) identifies to the Indenture Trustee in writing to be treated as “Available Funds” as of such Payment Date; and

(iv) such other amounts designated as Term Note Series Available Funds for the benefit of such Series of Term Notes in the related Indenture Supplement.

“Term Note Series Invested Amount” means, as of any date of determination, for any Series of Term Notes, the highest Class Invested Amount for any Class of Term Notes included in such Series of Term Notes.

“Termination Date” has the meaning set forth in Section 1 of the PC Repo Pricing Side Letter.

Exhibit A-1-50

 

“Total Assets” means PMC’s “Total Assets” as reported in field A240 of the Mortgage Banker’s Financial Reporting Form in accordance with the requirements set forth in the Fannie Mae Lender Contract.

“Total Collections” means,

(i) With respect to any Interim Payment Date, all Collections on the Participation Certificates or Eligible Securities received during the related Collection Period and any other funds of the Issuer that the Issuer (or the Administrator on behalf of the Issuer) identifies to the Indenture Trustee to be treated as “Total Collections” for such Interim Payment Date; and

(ii) with respect to any Payment Date, (A) all Collections on the Participation Certificates or Eligible Securities received during the related Collection Period, plus (B) any income from Permitted Investments in Trust Accounts that have been established for the benefit of all Series of Notes, plus (C) any other funds of the Issuer that the Issuer (or the Administrator on behalf of the Issuer) identifies to the Indenture Trustee to be treated as “Total Collections” for such Payment Date.

“Transaction” has the meaning assigned to such term in the recitals to the PC Repurchase Agreement.

“Transaction Documents” means, collectively, the Indenture, each Note Purchase Agreement, the PC Repurchase Agreement, the Series 2017-VF1 Repurchase Agreement, the Participation Agreements, the PC Repo Guaranty, the VFN Repo Guaranty, the Acknowledgment Agreement, the Fee Letter, the Participation Certificate Schedule, all Notes, the Trust Agreements, the Administration Agreement, each Indenture Supplement, the MSR Valuation Agent Agreement, the Disposition Management Agreement, if any, the Dedicated Account Control Agreement and each of the other documents, instruments and agreements entered into on the date hereof and thereafter in connection with any of the foregoing or the transactions contemplated thereby. Any document or agreement between the Issuer Trusts, PMC, PMH, the Guarantor or any of its affiliates relating to the allocation of Collections or the other proceeds relating to the MSRs or proceeds under the Transaction Documents between the Issuer Trusts, PMC, PMC, the Guarantor or any of its affiliates shall not be a Transaction Document.

“Transfer” has the meaning set forth in Section 6.5(h) of the Base Indenture. It is expressly provided that the term “Transfer” in the context of the Notes includes, without limitation, any distribution of the Notes by (i) a corporation to its shareholders, (ii) a partnership to its partners, (iii) a limited liability company to its members, (iv) a trust to its beneficiaries or (v) any other business entity to the owners of the beneficial interests in such entity.

“Transfer/Engagement Request” means a request that Fannie Mae transfer the Servicing Rights or New Servicing Rights, as applicable, to the Indenture Trustee or a proposed new servicer.

“Transferee” has the meaning set forth in Section 9.02(a) of the PC Repurchase Agreement.

Exhibit A-1-51

 

“Treasury Regulations” means regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.

“Trust” shall mean either of the (i) PMT ISSUER TRUST - FMSR, the Delaware statutory trust established pursuant to the Original Trust Agreement and the Certificate of Trust and continued hereby which shall carry on its business operations under the name of “PMT ISSUER TRUST - FMSR” or (ii) PMT CO-ISSUER TRUST I - FMSR, the Delaware statutory trust established pursuant to the Original Trust Agreement and the Certificate of Trust and continued hereby which shall carry on its business operations under the name of “PMT CO-ISSUER TRUST I - FMSR”.

“Trust Account” or “Trust Accounts” means, individually, any of the Collection and Funding Account, the Note Payment Account, the Expense Reserve Account or the Series Reserve Account and any other account required under any Indenture Supplement, if any, and collectively, all of the foregoing.

“Trust Agreements” means, together, the Issuer Trust Agreement and the Co-Issuer Trust Agreement.

“Trust Estate” means the trust estate established under this Base Indenture for the benefit of the Noteholders, which consists of the property described in the Granting Clause, to the extent not released pursuant to Section 7.1 of the Base Indenture.

“Trust Property” means the property, or interests in property, constituting the Trust Estate from time to time.

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code, as in effect in the relevant jurisdiction.

“United States” and “U.S.” means the United States of America.

“United States Person” means (i) A citizen or resident of the United States, (ii) a corporation or partnership (or entity treated as a corporation or partnership for United States federal income tax purposes) created or organized in or under the laws of the United States, any one of the states thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of such trust, and one or more such United States Persons have the authority to control all substantial decisions of such trust (or, to the extent provided in applicable Treasury regulations, certain trusts in existence on August 20, 1996 which are eligible to elect to be treated as United States Persons).

“U.S. Anti-Money Laundering Laws” has the meaning set forth in Section 10.1(i) of the Base Indenture.

“USDA” means the Rural Housing Service of the Rural Development Agency of the United States Department of Agriculture, or any successor.

Exhibit A-1-52

 

“USDA Loan” means a Mortgage Loan which is guaranteed by USDA, as evidenced by a USDA Loan Guarantee Document.

“USDA Loan Guarantee Document” means a loan guarantee document issued by USDA in accordance with 7 CFR § 3555.107.

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

“VA Loan” means a Mortgage Loan which is subject of a VA Loan Guaranty Agreement as evidenced by a loan guaranty certificate, or a Mortgage Loan which is a vendor loan sold by the VA.

“VA Loan Guaranty Agreement” means the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the mortgagor pursuant to the Servicemen’s Readjustment Act.

“Variable Funding Note” or “VFN” means any Note of a Series or Class designated as “Variable Funding Notes” in the related Indenture Supplement.

“VFN Draw” means, for any Funding Date, the amount to be borrowed on such date in relation to any VFNs pursuant to Section 4.3(b) of the Base Indenture.

“VFN Draw Date” means any Funding Date on which a VFN Draw is to be made pursuant to Section 4.3(b) of the Base Indenture.

“VFN Funding Source” means, with respect to a VFN that is not subject to a repurchase agreement, the VFN Noteholder; with respect to a VFN that is subject to a repurchase agreement, the party that is the Repo Seller under such repurchase agreement.

“VFN Note Balance Adjustment Request” has the meaning set forth in Section 4.3(b)(i) of the Base Indenture.

“VFN Noteholder” means the Noteholder of a VFN.

“VFN Principal Balance” means, any date, for any VFN or for any Series or Class of VFNs, as the context requires, the Note Balance thereof as of the opening of business on the first day of the then-current Interest Accrual Period for such Series or Class minus all amounts previously paid during such Interest Accrual Period on such Note with respect to principal (including any Additional Note Payments paid (or deemed paid) by the holders of the Owner Trust Certificates pursuant to Sections 4.4(b) or 4.5(e) of the Base Indenture plus the amount of any increase in the Note Balance of such Note during such Interest Accrual Period prior to such date, which amount shall not exceed the Maximum VFN Principal Balance.

“VFN Repo Buyer” has the meaning set forth in Section 2 of the Series 2017-VF1 Indenture Supplement.

Exhibit A-1-53

 

“VFN Repo Guaranty” means that certain second amended and restated guaranty dated as of October 10, 2023, made by the Guarantor in favor of the Repo Buyers, guaranteeing payment to the Repo Buyers of all amounts owing to the Repo Buyers from the Repo Sellers pursuant to the Series 2017-VF1 Repurchase Agreement.

“VFN Series Available Funds” means, for each Series of VFNs as of any Payment Date occurring during the Full Amortization Period, after paying any amounts owed under Sections 4.5(a)(2)(i) and 4.5(a)(2)(ii) of the Base Indenture, the sum of the following:

(i) such Series’ Series Allocation Percentage of any income from Permitted Investments in the Collection and Funding Account;

(ii) such Series’ Series Allocation Percentage of all Collections on deposit in the Trust Accounts that are not Series Reserve Accounts (prior to giving effect to any payments on such Payment Date);

(iii) such Series’ Series Allocation Percentage of any other funds of the Issuer that the Issuer (or the Administrator on behalf of the Issuer) identifies to the Indenture Trustee in writing to be treated as “Available Funds” as of such Payment Date; and

(iv) such other amounts designated as VFN Series Available Funds for the benefit of such Series of VFNs in the related Indenture Supplement.

“VFN Series Invested Amount” means, as of any date of determination, for any Series of VFNs, the highest Class Invested Amount for any Class of VFNs included in such Series of VFNs.

“Voting Interests” means the aggregate voting power evidenced by the Notes, and each Outstanding Note’s Voting Interest within its Series equals the percentage equivalent of the fraction obtained by dividing that Note’s Note Balance by the aggregate Note Balance of all Outstanding Notes within such Series; provided, however, that where the Voting Interests are relevant in determining whether the vote of the requisite percentage of Noteholders necessary to effect any consent, waiver, request or demand shall have been obtained, the Voting Interests shall be deemed to be reduced by the amount equal to the Voting Interests (without giving effect to this provision) represented by the interests evidenced by any Note registered in the name of, or in the name of a Person or entity holding for the benefit of, the Issuer, the Co-Issuer, PMC, PMH or any Person that is an Affiliate of any of the Issuer, the Co-Issuer, PMH or PMC (except with respect to the Series 2017-VF1 Notes which have been sold by PMC and PMH to the VFN Repo Buyers under the Series 2017-VF1 Repurchase Agreement). The Indenture Trustee shall have no liability for counting a Voting Interest of any Person that is not permitted to be so counted under the Indenture pursuant to the definition of “Outstanding” unless a Responsible Officer of the Indenture Trustee has actual knowledge that such Person is the Issuer, the Co-Issuer, PMH or PMC or an Affiliate of the Issuer, the Co-Issuer, PMH and PMC (except with respect to the Series 2017-VF1 Notes which have been sold by PMC and PMH to the VFN Repo Buyers under the Series 2017-VF1 Repurchase Agreement).

Exhibit A-1-54

 

All actions, consents and votes under the terms and provisions of the Indenture (other than under any Indenture Supplement related to a specific Series) that require a certain percentage of Voting Interests of all Series or any specified Series of Notes, such as the Series Required Noteholders of Series of Notes that are Variable Funding Notes or the Series Required Noteholders of each Series, as opposed to the Majority Noteholders of all Outstanding Notes shall be deemed by each of the Issuer, the Co-Issuer Administrator, the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer, the Administrative Agent and the Noteholders to require such designated percentage of Voting Interests of each Outstanding Series and, in the event any one specified Series fails to provide the required percentage of Voting Interests with respect to any such action, consent or vote, then such action, consent or vote shall be deemed by the Issuer, the Co-Issuer, the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer, the Administrative Agent and the Noteholders to be not approved.

“Weighted Average Advance Rate” means, on any date of determination, with respect to all Outstanding Series of Variable Funding Notes, a percentage equal to the weighted average of the Advance Rates for each Series of Variable Funding Notes then Outstanding (weighted based on the VFN Series Invested Amount of each Series of Variable Funding Notes on such date). With respect to a specific Series of Variable Funding Notes, the “Weighted Average Advance Rate” shall equal the Advance Rate with respect to the Class within such Series of Variable Funding Notes with the highest Advance Rates.

“WSFS” means Wilmington Savings Fund Society, FSB.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit A-1-55

 

Exhibit A-1

FORM OF GLOBAL RULE 144A NOTE

 

Class [___] Note

Initial Note Balance: $[___]

Note Number: [_____]

[Maximum VFN Principal Balance: $[____] ] [or such lesser amount as contemplated by the definition of Maximum VFN Principal Balance as set forth in the [Insert Series Name] Indenture Supplement]

[CUSIP No.:]

 

[ISIN No.:]

 

THE OUTSTANDING NOTE BALANCE OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE [MAXIMUM VFN PRINCIPAL BALANCE] [INITIAL NOTE BALANCE] SHOWN ON THE FACE HEREOF.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS. THE ISSUER TRUSTS HAVE NOT AGREED TO REGISTER THE NOTES UNDER THE 1933 ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY NOTEHOLDER.

THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) FOR SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE 1933 ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (C) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.

EACH HOLDER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE DEEMED TO REPRESENT THAT EITHER (I) IT IS NOT AND IS NOT ACQUIRING, HOLDING OR TRANSFERRING THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN ON BEHALF OF, OR USING THE “PLAN ASSETS” (WITHIN THE MEANING OF 29 CFR §2510.3-101, AS MODIFIED BY SECTION 3(42) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED

Exhibit A-1-56

 

(“ERISA”)) OF, ANY “EMPLOYEE BENEFIT PLAN” AS DEFINED IN SECTION 3(3) OF ERISA OR ANY PLAN AS DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY THAT IS DEEMED TO HOLD THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN PURSUANT TO 29 CFR SECTION 2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA (THE “PLAN ASSET REGULATIONS”), WHICH EMPLOYEE BENEFIT PLAN, PLAN OR ENTITY IS SUBJECT TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (EACH, A “PLAN”), OR A GOVERNMENTAL, NON-U.S., NON-ELECTING CHURCH OR OTHER PLAN THAT IS SUBJECT TO ANY U.S. FEDERAL, STATE, LOCAL OR OTHER LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”) OR (II)(A) IT BELIEVES THAT THIS NOTE IS PROPERLY TREATED AS INDEBTEDNESS WITHOUT SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF THE PLAN ASSET REGULATIONS AND AGREES TO SO TREAT THIS NOTE AND (B) THE TRANSFEREE’S ACQUISITION, HOLDING AND SUBSEQUENT DISPOSITION OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN WILL SATISFY THE REQUIREMENTS OF PROHIBITED TRANSACTION CLASS EXEMPTION (“PTCE”) 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 OR THE STATUTORY PROHIBITED TRANSACTION EXEMPTION FOR SERVICE PROVIDERS SET FORTH IN SECTION 408(b)(17) OF ERISA AND SECTION 4975(d)(20) OF THE CODE OR ANY SIMILAR CLASS OR STATUTORY EXEMPTION AND WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR, IN THE CASE OF A GOVERNMENTAL, NON-U.S., NON-ELECTING CHURCH OR OTHER PLAN SUBJECT TO SIMILAR LAW, WILL NOT VIOLATE ANY SIMILAR LAW.

THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN SECTION 6.5 OF THE BASE INDENTURE AND SECTION [ ] OF THE RELATED INDENTURE SUPPLEMENT UNDER WHICH THIS NOTE IS ISSUED (A COPY OF WHICH IS AVAILABLE FROM THE ISSUER TRUSTS UPON REQUEST). EACH TRANSFEREE OF THIS NOTE SHALL PROVIDE THE NOTE REGISTRAR AND THE ISSUER TRUSTS THE CERTIFICATION REQUIRED BY SECTION 6.5(i) OF THE BASE INDENTURE AND THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED IN AN OFF-SHORE TRANSACTION AS DEFINED IN REGULATION S OF THE 1933 ACT TO A PERSON WHO IS NOT ANY TIME A U.S. PERSON AS DEFINED BY REGULATION S OF THE 1933 ACT AND WHO TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S NOTE OR (IN CERTAIN LIMITED CIRCUMSTANCES) A DEFINITIVE NOTE ONLY (IN THE CASE OF AN INTEREST IN A REGULATION S GLOBAL NOTE) IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN SECTION 6.5 OF THE BASE INDENTURE AND (IN THE CASE OF A DEFINITIVE NOTE) UPON RECEIPT BY THE NOTE REGISTRAR AND INDENTURE TRUSTEE OF SUCH CERTIFICATION. PRIOR TO PURCHASING THIS NOTE, PROSPECTIVE PURCHASERS SHOULD CONSULT WITH COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTIONS FROM THE RESTRICTIONS ON RESALE OR TRANSFER.

Exhibit A-1-57

 

THIS NOTE IS A LIMITED RECOURSE OBLIGATION OF THE ISSUER TRUSTS, AND IS LIMITED TO RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE. THE ISSUER TRUSTS ARE NOT PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE. THIS NOTE DOES NOT EVIDENCE AN OBLIGATION OF OR AN INTEREST IN, AND IS NOT GUARANTEED BY, THE SERVICER, THE INDENTURE TRUSTEE (IN ALL ITS CAPACITIES), THE ADMINISTRATOR, THE CO-ISSUER ADMINISTRATOR OR ANY AFFILIATE OF ANY OF THEM AND IS NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”) TO THE NOTE REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

Exhibit A-1-58

 

 

PMT ISSUER TRUST - FMSR

PMT CO-ISSUER TRUST I – FMSR

MSR COLLATERALIZED NOTES,SERIES [ ]

CLASS [___] NOTE

Each of PMT ISSUER TRUST - FMSR, a Delaware statutory trust (the “Issuer”) and PMT CO-ISSUER TRUST I – FMSR, a Delaware statutory trust, (the “Co-Issuer” and, together with the Issuer, the “Issuer Trusts”), for value received, hereby promises to pay to [______________], or its registered assigns (the “Noteholder”), [interest, fees and principal as provided in the Indenture] [the principal sum of [__________] $[________], or such part thereof as may be advanced and outstanding hereunder and to pay interest on such principal sum or such part thereof as shall remain unpaid from time to time, at the rate and at the times provided in the Indenture].

Principal of this Note is payable on each applicable [Interim Payment Date and] Payment Date as set forth in Section[s] [4.4] and 4.5 of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement. The Outstanding Note Balance of this Note bears interest at the applicable Note Interest Rate as set forth in the Indenture. On each applicable [Interim Payment Date and] Payment Date, in accordance with the terms and provisions of the Indenture, interest on this Note will be paid as set forth in Section[s] [4.4] and 4.5 of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement.

 

Capitalized terms used but not defined herein have the meanings set forth in the Amended and Restated Base Indenture (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), dated as of October 10, 2023, among the Issuer Trusts, Citibank, N.A. (“Citibank”), as Indenture Trustee (the “Indenture Trustee”), Calculation Agent (the “Calculation Agent”), Paying Agent (the “Paying Agent”) and Securities Intermediary (the “Securities Intermediary”), PennyMac Corp. (“PMC”), as Administrator (the “Administrator”) and as Servicer (the “Servicer”), PennyMac Holdings, LLC (“PMH”), as Co-Issuer Administrator (the “Co-Issuer Administrator”) and Atlas Securitized Products, L.P. (“ASP”), as Administrative Agent (the “Administrative Agent”), and the Indenture Supplement (as may be amended, restated, supplemented or otherwise modified from time to time, the “[Insert Series Name] Indenture Supplement” and together with the Base Indenture, the “Indenture”), dated as of [_____], 20[__], by and among [insert parties to Indenture Supplement].

[In the event of a VFN Principal Balance increase funded by the Noteholders, the Noteholder of this Note shall, and is hereby authorized to, record on the schedule attached to this Note the date and amount of any VFN Principal Balance increase funded by it, and each repayment thereof; provided, that failure to make any such recordation on such schedule or any error in such schedule shall not adversely affect any Noteholder’s rights with respect to the VFN Principal Balance and its right to receive interest payments in respect thereof.]

Exhibit A-1-59

 

[By its acceptance of this Note, each Noteholder covenants and agrees, until the termination of the Revolving Period, on each Funding Date or each Limited Funding Date to advance amounts in respect of any VFN Principal Balance increase hereunder to the Issuer Trusts, subject to and in accordance with the terms of the Indenture.]

[In the event of a payment of all or a portion of the Note Balance of this Note, in accordance with the terms and provisions of the Indenture, the Noteholder thereof shall, and is hereby authorized to, record on the schedule attached to this Note the date and amount of the Outstanding Note Balance of this Note following such payment.]

Absent manifest error, the [Note] [VFN Principal] Balance of each Note as set forth in the notations made by the related Noteholder on such Note shall be binding upon the Indenture Trustee, the Note Registrar and the Issuer Trusts; provided, that failure by a Noteholder to make such recordation on its Note or any error in such notation shall not adversely affect any Noteholder’s rights with respect to the [Note] [VFN Principal] Balance of its Note and such Noteholder’s right to receive payments in respect of principal and interest in respect thereof.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

The statements in the legend set forth above are an integral part of the terms of this Note and by acceptance hereof each Holder of this Note agrees to be subject to and bound by the terms and provisions set forth in such legend.

This Note is a Rule 144A Global Note deposited with DTC acting as Depository, and registered in the name of Cede & Co., a nominee of DTC, and Cede & Co., as holder of record of this Note, shall be entitled to receive payments of principal and interest, other than principal and interest due at the maturity date, by wire transfer of immediately available funds.

The statements in the legend relating to DTC set forth above are an integral part of the terms of this Note and by acceptance thereof each holder of this Note agrees to be subject to and bound by the terms and provisions set forth in such legend, if any.

Unless the certificate of authentication hereon shall have been executed by an Authorized Signatory of the Indenture Trustee and, if an Authenticating Agent has been appointed by the Indenture Trustee pursuant to Section 11.12 of the Base Indenture, by manual signature of such Authenticating Agent, this Note shall not entitle the Noteholder hereof to any benefit under the Indenture and/or be valid for any purpose.

THIS NOTE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS NOTE, THE RELATIONSHIP OF THE PARTIES HEREUNDER, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE

Exhibit A-1-60

 

OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

Exhibit A-1-61

 

 

IN WITNESS WHEREOF, the Issuer Trusts have caused this instrument to be signed, manually or in facsimile, by an Issuer Authorized Officer and Co-Issuer Authorized Officer, respectively, as of the date set forth below.

Date: [_____], 20[__]

PMT ISSUER TRUST - FMSR, as Issuer


By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: ______________________________
Issuer Authorized Officer

PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer


By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: ______________________________
Co-Issuer Authorized Officer

Exhibit A-1-62

 

INDENTURE TRUSTEE’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Class designated herein and referred to in the within-mentioned Indenture.

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Indenture Trustee

 


By:
Title: Authorized Signatory of Indenture Trustee

 

 

 

AUTHENTICATING AGENT’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Class designated herein and referred to in the within-mentioned Indenture.

 

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Authenticating Agent

 

 

By:

Title: Authorized Signatory of Authenticating Agent

 

 

 

Exhibit A-1-63

 

[REVERSE OF NOTE]

This Note is one of the duly authorized Class [__] Notes of the Issuer Trusts, designated as its PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes, Series [___], Class [__] (herein called the “Class [__] Notes”), all issued under the Indenture. Reference is hereby made to the Indenture for a statement of the respective rights and obligations thereunder of the Issuer Trusts, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary and the Holders of the Notes. To the extent that any provision of this Note contradicts or is inconsistent with the provisions of the Indenture, the provisions of the Indenture shall control and supersede such contradictory or inconsistent provision herein. The Notes are subject to all terms of the Indenture.

The payments on the Class [__] Notes are [senior to the Class [__] Notes, the Class [__] Notes and the Class [__] Notes][, and subordinate to the Class [__] Notes, the Class [__] Notes and the Class [__] Notes], as and to the extent provided in the Indenture.

The principal of and interest and fees on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer Trusts with respect to this Note shall be applied in accordance with the Indenture.

The entire unpaid principal amount and all accrued and unpaid interest and fees of this Note shall be due and payable on the earlier of (i) any Redemption Payment Date as set forth in Section 13.1 of the Base Indenture [or in Section [ ] of the [Series Name] Indenture Supplement] and (ii) the Stated Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount and all accrued and unpaid interest of the Notes shall be immediately due and payable on the date on which an Event of Default of the kind specified in clauses (b), (c) or (q) of Section 8.1 of the Base Indenture occurs, and, if any other Event of Default occurs and is continuing, then and in each and every such case, either the Indenture Trustee or the requisite percentage of Noteholders of each Series, by notice in writing to the Issuer Trusts (and to the Indenture Trustee if given by the Holders), may declare all Notes to be immediately due and payable in the manner provided in the Indenture. All applicable principal payments on the Notes shall be made to the Holders of the Notes entitled thereto in accordance with the terms of the Indenture.

The Trust Estate secures this Class [__] Note and all other Class [__] Notes equally and ratably without prejudice, priority or distinction between any Class [__] Note and any other Class [__] Note. The Notes are limited recourse obligations of the Issuer Trusts and are limited in right of payment to amounts available from the Trust Estate, as provided in the Indenture. The Issuer Trusts shall not otherwise be liable for payments on the Notes, and none of the owners, agents, officers, directors, employees, or successors or assigns of the Issuer Trusts shall be personally liable for any amounts payable, or performance due, under the Notes or the Indenture.

Any payment of interest or principal on this Note shall be paid on the applicable [Interim Payment Date and] Payment Date as set forth in the Indenture to the Person in whose name this Note (or one or more predecessor Notes) is registered in the Note Register as of the close of business on the related Record Date by wire transfer in immediately available funds to the

Exhibit A-1-64

 

account specified in writing by the related Noteholder to the extent provided by the Indenture and otherwise by check mailed to the Noteholder.

[Any reduction in the Note Balance of this Note (or any one or more predecessor Notes) effected by any payments made on any applicable [Interim Payment Date and] Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon.]

[Any reduction in the Maximum VFN Principal Balance or the VFN Principal Balance, as the case may be, of this Class [ ] Note (or any one or more predecessor Notes) effected by any payments made with respect thereto or otherwise pursuant to the terms of the Indenture shall be binding upon all future Holders of this Class [ ] Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. Any VFN Principal Balance increase of this Class [ ] Note (or any one or more predecessor Notes) effected by payments to the Issuer Trusts shall be binding upon the Issuer Trusts and shall inure to the benefit of all future Holders of this Class [ ] Note and of any Note issued upon the registration of transfer hereof or exchange hereof or in lieu hereof, whether or not noted hereon.]

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer Trusts pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in the form attached hereto duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Securities Transfer Agent’s Medallion Program (“STAMP”), and thereupon one or more new Notes of authorized denominations and in the same [aggregate principal amount] [VFN Principal Balance] will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the Issuer Trusts may require the Noteholder to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.

Each Noteholder, by acceptance of a Note or a beneficial ownership interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer Trusts or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or Owner Trustee in their individual capacities, (ii) any owner of a beneficial ownership interest in the Issuer Trusts or (iii) any partner, owner, beneficiary, agent, officer, director, employee or “control person” within the meaning of the 1933 Act and the Securities Exchange Act of 1934, as amended, of the Indenture Trustee or Owner Trustee in its individual capacity, any holder of a beneficial ownership interest in the Issuer Trusts or the Indenture Trustee or Owner Trustee or of any successor or assign of the Indenture Trustee or Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.

Exhibit A-1-65

 

Each Noteholder, by accepting a Note and each Note Owner by accepting a Note or a beneficial interest in a Note agrees that it will not at any time prior to the date which is one year and one day, or, if longer, the applicable preference period then in effect, after the payment in full of all the Notes, institute against the Issuer Trusts, or join in any institution against the Issuer Trusts of, any receivership, insolvency, bankruptcy or other similar proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes and this Indenture.

The Issuer Trusts have entered into the Indenture and this Note is issued with the intention that, for United States federal, state and local income and franchise tax purposes, the Notes will qualify as indebtedness secured by the Collateral. Each Noteholder, by its acceptance of a Note, and each purchaser of a beneficial interest therein, by accepting such beneficial interest, agrees to treat such Notes as debt for United States federal, state and local income and franchise tax purposes, unless otherwise required by Applicable Law in a proceeding of final determination.

Prior to the due presentment for registration of transfer of this Note, the Issuer Trusts, the Indenture Trustee, the Note Registrar, the Paying Agent and any agent of the Issuer Trusts, the Note Registrar, the Paying Agent or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer Trusts, the Indenture Trustee, the Note Registrar, the Paying Agent or any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer Trusts or other parties thereto and the rights of the Holders of the Notes under the Indenture at any time pursuant to the terms and provisions of Article XII of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Notes or a particular Class of Notes, on behalf of all of the Noteholders, or the Administrative Agent, as applicable, to waive compliance by the Issuer Trusts with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of any Noteholder.

The term “Issuer Trusts” as used in this Note includes any successor to the Issuer Trusts under the Indenture.

Notwithstanding any other provisions herein or in the Indenture, a Holder of this Note will have the right, which is absolute and unconditional, to receive payment of the principal of and interest on this Note on the Stated Maturity Date and to institute suit for the enforcement of any such payment, and such right will not be impaired without the consent of the Holder; provided, however, that notwithstanding any other provision of the Indenture to the contrary, the obligation to pay principal of or interest on this Note or any other amount payable to the Holder will be without recourse to the Administrator, the Co-Issuer Administrator, the Servicer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary or any Affiliate

Exhibit A-1-66

 

(other than the Issuer Trusts), officer, employee or director of any of them, and the obligation of the Issuer Trusts to pay principal of or interest on this Note or any other amount payable to the Holder will be limited to amounts available from the Trust Estate and subject to the priority of payment set forth in the Indenture.

Notwithstanding any other terms of the Indenture or this Note, the obligations of the Issuer Trusts hereunder are limited recourse obligations of the Issuer Trusts, payable solely from the Trust Estate, and following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms of the Indenture, the Holder hereof shall not be entitled to take any further steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall not thereafter revive. No Holder of this Note shall have recourse for the payment of any amount owing in respect of this Note or the Indenture or for any action or inaction of the Issuer Trusts against any officer, director, employee, shareholder, stockholder or incorporator of the Issuer Trusts or any of their successors or assigns for any amounts payable under this Note or the Indenture. The foregoing provisions of this Note shall not (i) prevent recourse to the Trust Estate for the sums due or to become due under any security, instrument or agreement which is part of the Trust Estate, (ii) save as specifically provided therein, constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture, or (iii) limit the right of any Person, to name any of the Issuer Trusts as a party defendant in any proceeding or in the exercise of any other remedy under this Note or the Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

 

Exhibit A-1-67

 

ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee: ___________________

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
(name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints, ___________________ attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

Dated: _________________

 

Signature Guaranteed:

_________________*/

*/NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of STAMP.

 

Exhibit A-1-68

 

Schedule to Series [ ], Class [__] Note

dated as of [_____], 20[__]

of PMT ISSUER TRUST – FMSR AND PMT CO-ISSUER TRUST I – FMSR

 

[Interim Payment Date]

[Payment Date]

[Payment Date of Additional Note Balance/Decrease Note Balance

Aggregate Amount of [principal payment] [Funding of VFN Principal Balance Increase] on Class [__] Notes

[Percentage Interest in] Aggregate Note Balance of the Class [__] Notes following [advance/] payment

[Percentage of Interest in] Aggregate Note Balance of this Class [__] Note following [advance/] payment

Note Balance of Note following [advance/] payment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit A-1-69

 

Exhibit A-2

FORM OF DEFINITIVE NOTE RULE 144A

 

Class [___] Note

Initial Note Balance: $[___]

Note Number: [_____]

[Maximum VFN Principal Balance: $[____] ] [or such lesser amount as contemplated by the definition of Maximum VFN Principal Balance as set forth in the [Insert Series Name] Indenture Supplement]

[CUSIP No.:]

 

[ISIN No.:]

 

THE OUTSTANDING NOTE BALANCE OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE [MAXIMUM VFN PRINCIPAL BALANCE] [INITIAL NOTE BALANCE] SHOWN ON THE FACE HEREOF.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS. THE ISSUER TRUSTS HAVE NOT AGREED TO REGISTER THE NOTES UNDER THE 1933 ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY NOTEHOLDER.

THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) FOR SO LONG AS THIS NOTE IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE 1933 ACT, TO A PERSON THAT IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE 1933 ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (C) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.

EACH HOLDER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE DEEMED TO REPRESENT THAT EITHER (I) IT IS NOT AND IS NOT ACQUIRING, HOLDING OR TRANSFERRING THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN ON BEHALF OF, OR USING THE “PLAN ASSETS” (WITHIN THE MEANING OF 29 CFR §2510.3-101, AS MODIFIED BY SECTION 3(42) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED

Exhibit A-2-1

 

(“ERISA”)) OF, ANY “EMPLOYEE BENEFIT PLAN” AS DEFINED IN SECTION 3(3) OF ERISA OR ANY PLAN AS DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY THAT IS DEEMED TO HOLD THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN PURSUANT TO 29 CFR SECTION 2510.3-101 AS MODIFIED BY SECTION 3(42) OF ERISA (THE “PLAN ASSET REGULATIONS”), WHICH EMPLOYEE BENEFIT PLAN, PLAN OR ENTITY IS SUBJECT TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (EACH, A “PLAN”), OR A GOVERNMENTAL, NON-U.S., NON-ELECTING CHURCH OR OTHER PLAN THAT IS SUBJECT TO ANY U.S. FEDERAL, STATE, LOCAL OR OTHER LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”) OR (II)(A) IT BELIEVES THAT THIS NOTE IS PROPERLY TREATED AS INDEBTEDNESS WITHOUT SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF THE PLAN ASSET REGULATIONS AND AGREES TO SO TREAT THIS NOTE AND (B) THE TRANSFEREE’S ACQUISITION, HOLDING AND SUBSEQUENT DISPOSITION OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN WILL SATISFY THE REQUIREMENTS OF PROHIBITED TRANSACTION CLASS EXEMPTION (“PTCE”) 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 OR THE STATUTORY PROHIBITED TRANSACTION EXEMPTION FOR SERVICE PROVIDERS SET FORTH IN SECTION 408(b)(17) OF ERISA AND SECTION 4975(d)(20) OF THE CODE OR ANY SIMILAR CLASS OR STATUTORY EXEMPTION AND WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR, IN THE CASE OF A GOVERNMENTAL, NON-U.S., NON-ELECTING CHURCH OR OTHER PLAN SUBJECT TO SIMILAR LAW, WILL NOT VIOLATE ANY SIMILAR LAW.

THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN SECTION 6.5 OF THE BASE INDENTURE AND SECTION [ ] OF THE RELATED INDENTURE SUPPLEMENT UNDER WHICH THIS NOTE IS ISSUED (A COPY OF WHICH IS AVAILABLE FROM THE ISSUER TRUSTS UPON REQUEST). EACH TRANSFEREE OF THIS NOTE SHALL PROVIDE THE NOTE REGISTRAR AND THE ISSUER TRUSTS THE CERTIFICATION[S] REQUIRED BY SECTION 6.5(j) OF THE BASE INDENTURE AND THIS NOTE MAY BE TRANSFERRED ONLY UPON RECEIPT BY THE NOTE REGISTRAR AND INDENTURE TRUSTEE OF SUCH CERTIFICATION. PRIOR TO PURCHASING THIS NOTE, PROSPECTIVE PURCHASERS SHOULD CONSULT WITH COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTIONS FROM THE RESTRICTIONS ON RESALE OR TRANSFER.

THIS NOTE IS A LIMITED RECOURSE OBLIGATION OF THE ISSUER TRUSTS, AND IS LIMITED TO RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE. THE ISSUER TRUSTS ARE NOT PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE. THIS NOTE DOES NOT EVIDENCE AN OBLIGATION OF OR AN INTEREST IN, AND IS NOT GUARANTEED BY, THE SERVICER, THE INDENTURE TRUSTEE (IN ALL ITS CAPACITIES), THE ADMINISTRATOR, THE CO-ISSUER ADMINISTRATOR OR

Exhibit A-2-2

 

ANY AFFILIATE OF ANY OF THEM AND IS NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER.

 

 

 

 

Exhibit A-2-3

 

PMT ISSUER TRUST – FMSR

PMT CO-ISSUER TRUST I – FMSR

MSR COLLATERALIZED NOTES,SERIES [ ]

CLASS [___] NOTE

Each of PMT ISSUER TRUST - FMSR, a Delaware statutory trust (the “Issuer”) and PMT CO-ISSUER TRUST I – FMSR, a Delaware statutory trust, (the “Co-Issuer” and, together with the Issuer, the “Issuer Trusts”), for value received, hereby promises to pay to [______________], or its registered assigns (the “Noteholder”), [interest, fees and principal as provided in the Indenture] [the principal sum of [__________] $[________], or such part thereof as may be advanced and outstanding hereunder and to pay interest on such principal sum or such part thereof as shall remain unpaid from time to time, at the rate and at the times provided in the Indenture].

Principal of this Note is payable on each applicable [Interim Payment Date and] Payment Date as set forth in Section[s] [4.4] and 4.5 of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement. The Outstanding Note Balance of this Note bears interest at the applicable Note Interest Rate as set forth in the Indenture. On each applicable [Interim Payment Date and] Payment Date, in accordance with the terms and provisions of the Indenture, interest on this Note will be paid as set forth in Section[s] [4.4] and 4.5 of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement.

Capitalized terms used but not defined herein have the meanings set forth in the Amended and Restated Base Indenture (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), dated as of October 10, 2023, among the Issuer Trusts, Citibank, N.A. (“Citibank”), as Indenture Trustee (the “Indenture Trustee”), Calculation Agent (the “Calculation Agent”), Paying Agent (the “Paying Agent”) and Securities Intermediary (the “Securities Intermediary”), PennyMac Corp. (“PMC”), as Administrator (the “Administrator”) and as Servicer (the “Servicer”), PennyMac Holdings, LLC (“PMH”), as Co-Issuer Administrator (the “Co-Issuer Administrator”) and Atlas Securitized Products, L.P. (“ASP”), as Administrative Agent (the “Administrative Agent”), and the Indenture Supplement (as may be amended, restated, supplemented or otherwise modified from time to time, the “[Insert Series Name] Indenture Supplement” and together with the Base Indenture, the “Indenture”), dated as of [_____], 20[__], by and among [insert parties to Indenture Supplement].

[In the event of a VFN Principal Balance increase funded by the Noteholders, the Noteholder of this Note shall, and is hereby authorized to, record on the schedule attached to this Note the date and amount of any VFN Principal Balance increase funded by it, and each repayment thereof; provided, that failure to make any such recordation on such schedule or any error in such schedule shall not adversely affect any Noteholder’s rights with respect to the VFN Principal Balance and its right to receive interest payments in respect thereof.]

[By its acceptance of this Note, each Noteholder covenants and agrees, until the termination of the Revolving Period, on each Funding Date or each Limited Funding Date to

Exhibit A-2-4

 

advance amounts in respect of any VFN Principal Balance increase hereunder to the Issuer Trusts, subject to and in accordance with the terms of the Indenture.]

[In the event of a payment of all or a portion of the Note Balance of this Note, in accordance with the terms and provisions of the Indenture, the Noteholder thereof shall, and is hereby authorized to, record on the schedule attached to this Note the date and amount of the Outstanding Note Balance of this Note following such payment.]

Absent manifest error, the [Note] [VFN Principal] Balance of each Note as set forth in the notations made by the related Noteholder on such Note shall be binding upon the Indenture Trustee, the Note Registrar and the Issuer Trusts; provided, that failure by a Noteholder to make such recordation on its Note or any error in such notation shall not adversely affect any Noteholder’s rights with respect to the [Note] [VFN Principal] Balance of its Note and such Noteholder’s right to receive payments in respect of principal and interest in respect thereof.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

The statements in the legend set forth above are an integral part of the terms of this Note and by acceptance hereof each Holder of this Note agrees to be subject to and bound by the terms and provisions set forth in such legend.

Unless the certificate of authentication hereon shall have been executed by an Authorized Signatory of the Indenture Trustee and, if an Authenticating Agent has been appointed by the Indenture Trustee pursuant to Section 11.12 of the Base Indenture, by manual signature of such Authenticating Agent, this Note shall not entitle the Noteholder hereof to any benefit under the Indenture and/or be valid for any purpose.

THIS NOTE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS NOTE, THE RELATIONSHIP OF THE PARTIES HEREUNDER, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

 

Exhibit A-2-5

 

IN WITNESS WHEREOF, the Issuer Trusts have caused this instrument to be signed, manually or in facsimile, by an Issuer Authorized Officer and Co-Issuer Authorized Officer, respectively, as of the date set forth below.

Date: [_____], 20[__]

PMT ISSUER TRUST - FMSR, as Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: ______________________________
Issuer Authorized Officer

 

PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: ______________________________
Co-Issuer Authorized Officer

Exhibit A-2-6

 

INDENTURE TRUSTEE’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Class designated herein and referred to in the within-mentioned Indenture.

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Indenture Trustee

 


By:
Title: Authorized Signatory of Indenture Trustee

 

 

 

AUTHENTICATING AGENT’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Class designated herein and referred to in the within-mentioned Indenture.

 

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Authenticating Agent

 

 

By:

Title: Authorized Signatory of Authenticating Agent

 

 

 

Exhibit A-2-7

 

[REVERSE OF NOTE]

This Note is one of the duly authorized Class [__] Notes of the Issuer Trusts, designated as its PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes, Series [__], Class [__] (herein called the “Class [__] Notes”), all issued under the Indenture. Reference is hereby made to the Indenture for a statement of the respective rights and obligations thereunder of the Issuer Trusts, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary and the Holders of the Notes. To the extent that any provision of this Note contradicts or is inconsistent with the provisions of the Indenture, the provisions of the Indenture shall control and supersede such contradictory or inconsistent provision herein. The Notes are subject to all terms of the Indenture.

The payments on the Class [__] Notes are [senior to the Class [__] Notes, the Class [__] Notes and the Class [__] Notes][, and subordinate to the Class [__] Notes, the Class [__] Notes and the Class [__] Notes], as and to the extent provided in the Indenture.

The principal of and interest and fees on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer Trusts with respect to this Note shall be applied in accordance with the Indenture.

The entire unpaid principal amount and all accrued and unpaid interest and fees of this Note shall be due and payable on the earlier of (i) any Redemption Payment Date as set forth in Section 13.1 of the Base Indenture [or in Section [ ] of the [Series Name] Indenture Supplement] and (ii) the Stated Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount and all accrued and unpaid interest of the Notes shall be immediately due and payable on the date on which an Event of Default of the kind specified in clauses (b), (c) or (q) of Section 8.1 of the Base Indenture occurs, and, if any other Event of Default occurs and is continuing, then and in each and every such case, either the Indenture Trustee or the requisite percentage of Noteholders of each Series, by notice in writing to the Issuer Trusts (and to the Indenture Trustee if given by the Holders), may declare all Notes to be immediately due and payable in the manner provided in the Indenture. All applicable principal payments on the Notes shall be made to the Holders of the Notes entitled thereto in accordance with the terms of the Indenture.

The Trust Estate secures this Class [__] Note and all other Class [__] Notes equally and ratably without prejudice, priority or distinction between any Class [__] Note and any other Class [__] Note. The Notes are limited recourse obligations of the Issuer Trusts and are limited in right of payment to amounts available from the Trust Estate, as provided in the Indenture. The Issuer Trusts shall not otherwise be liable for payments on the Notes, and none of the owners, agents, officers, directors, employees, or successors or assigns of the Issuer Trusts shall be personally liable for any amounts payable, or performance due, under the Notes or the Indenture.

Any payment of interest or principal on this Note shall be paid on the applicable [Interim Payment Date and] Payment Date as set forth in the Indenture to the Person in whose name this Note (or one or more predecessor Notes) is registered in the Note Register as of the close of business on the related Record Date by wire transfer in immediately available funds to the

Exhibit A-2-8

 

account specified in writing by the related Noteholder to the extent provided by the Indenture and otherwise by check mailed to the Noteholder.

[Any reduction in the Note Balance of this Note (or any one or more predecessor Notes) effected by any payments made on any applicable [Interim Payment Date and] Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon.]

[Any reduction in the Maximum VFN Principal Balance or the VFN Principal Balance, as the case may be, of this Class [ ] Note (or any one or more predecessor Notes) effected by any payments made with respect thereto or otherwise pursuant to the terms of the Indenture shall be binding upon all future Holders of this Class [ ] Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. Any VFN Principal Balance increase of this Class [ ] Note (or any one or more predecessor Notes) effected by payments to the Issuer Trusts shall be binding upon the Issuer Trusts and shall inure to the benefit of all future Holders of this Class [ ] Note and of any Note issued upon the registration of transfer hereof or exchange hereof or in lieu hereof, whether or not noted hereon.]

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer Trusts pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in the form attached hereto duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Securities Transfer Agent’s Medallion Program (“STAMP”), and thereupon one or more new Notes of authorized denominations and in the same [aggregate principal amount] [VFN Principal Balance] will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the Issuer Trusts may require the Noteholder to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.

Each Noteholder, by acceptance of a Note or a beneficial ownership interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer Trusts or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or Owner Trustee in their individual capacities, (ii) any owner of a beneficial ownership interest in the Issuer Trusts or (iii) any partner, owner, beneficiary, agent, officer, director, employee or “control person” within the meaning of the 1933 Act and the Securities Exchange Act of 1934, as amended, of the Indenture Trustee or Owner Trustee in its individual capacity, any holder of a beneficial ownership interest in the Issuer Trusts or the Indenture Trustee or Owner Trustee or of any successor or assign of the Indenture Trustee or Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.

Exhibit A-2-9

 

Each Noteholder, by accepting a Note and each Note Owner by accepting a Note or a beneficial interest in a Note agrees that it will not at any time prior to the date which is one year and one day, or, if longer, the applicable preference period then in effect, after the payment in full of all the Notes, institute against the Issuer Trusts, or join in any institution against the Issuer Trusts of, any receivership, insolvency, bankruptcy or other similar proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes and this Indenture

 

The Issuer Trusts have entered into the Indenture and this Note is issued with the intention that, for United States federal, state and local income and franchise tax purposes, the Notes will qualify as indebtedness secured by the Collateral. Each Noteholder, by its acceptance of a Note, and each purchaser of a beneficial interest therein, by accepting such beneficial interest, agrees to treat such Notes as debt for United States federal, state and local income and franchise tax purposes, unless otherwise required by Applicable Law in a proceeding of final determination.

Prior to the due presentment for registration of transfer of this Note, the Issuer Trusts, the Indenture Trustee, the Note Registrar, the Paying Agent and any agent of the Issuer Trusts, the Note Registrar, the Paying Agent or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer Trusts, the Indenture Trustee, the Note Registrar, the Paying Agent or any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer Trusts or other parties thereto and the rights of the Holders of the Notes under the Indenture at any time pursuant to the terms and provisions of Article XII of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Notes or a particular Class of Notes, on behalf of all of the Noteholders, or the Administrative Agent, as applicable, to waive compliance by the Issuer Trusts with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of any Noteholder.

The term “Issuer Trusts” as used in this Note includes any successor to the Issuer Trusts under the Indenture.

This Note is issuable only in definitive form in denominations as provided in the [Series Name] Indenture Supplement, subject to certain limitations therein set forth.

Exhibit A-2-10

 

Notwithstanding any other provisions herein or in the Indenture, a Holder of this Note will have the right, which is absolute and unconditional, to receive payment of the principal of and interest on this Note on the Stated Maturity Date and to institute suit for the enforcement of any such payment, and such right will not be impaired without the consent of the Holder; provided, however, that notwithstanding any other provision of the Indenture to the contrary, the obligation to pay principal of or interest on this Note or any other amount payable to the Holder will be without recourse to the Administrator, the Co-Issuer Administrator, the Servicer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary or any Affiliate (other than the Issuer Trusts), officer, employee or director of any of them, and the obligation of the Issuer Trusts to pay principal of or interest on this Note or any other amount payable to the Holder will be limited to amounts available from the Trust Estate and subject to the priority of payment set forth in the Indenture.

Notwithstanding any other terms of the Indenture or this Note, the obligations of the Issuer Trusts hereunder are limited recourse obligations of the Issuer Trusts, payable solely from the Trust Estate, and following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms of the Indenture, the Holder hereof shall not be entitled to take any further steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall not thereafter revive. No Holder of this Note shall have recourse for the payment of any amount owing in respect of this Note or the Indenture or for any action or inaction of the Issuer Trusts against any officer, director, employee, shareholder, stockholder or incorporator of the Issuer Trusts or any of their successors or assigns for any amounts payable under this Note or the Indenture. The foregoing provisions of this Note shall not (i) prevent recourse to the Trust Estate for the sums due or to become due under any security, instrument or agreement which is part of the Trust Estate, (ii) save as specifically provided therein, constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture, or (iii) limit the right of any Person, to name any of the Issuer Trusts as a party defendant in any proceeding or in the exercise of any other remedy under this Note or the Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

 

Exhibit A-2-11

 

ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee: ___________________

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
(name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints, ___________________ attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

Dated: _________________

 

Signature Guaranteed:

_________________*/

*/NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of STAMP.

 

Exhibit A-2-12

 

Schedule to Series [ ], Class [__] Note

dated as of [_____], 20[__]

of PMT ISSUER TRUST - FMSRAND PMT CO-ISSUER TRUST I – FMSR

 

[Interim Payment Date]

[Payment Date]

[Payment Date of Additional Note Balance/Decrease Note Balance

Aggregate Amount of [principal payment] [Funding of VFN Principal Balance Increase] on Class [__] Notes

[Percentage Interest in] Aggregate Note Balance of the Class [__] Notes following [advance/] payment

[Percentage of Interest in] Aggregate Note Balance of this Class [__] Note following [advance/] payment

Note Balance of Note following [advance/] payment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit A-2-13

 

Exhibit A-3

 

FORM OF GLOBAL REGULATION S NOTE

 

Class [___] Note

Initial Note Balance: $[___]

Note Number: [_____]

[Maximum VFN Principal Balance: $[____] ] [or such lesser amount as contemplated by the definition of Maximum VFN Principal Balance as set forth in the [Insert Series Name] Indenture Supplement]

[CUSIP No.:]

 

[ISIN No.:]

 

THE OUTSTANDING NOTE BALANCE OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE INITIAL NOTE BALANCE SHOWN ON THE FACE HEREOF.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS. THE ISSUER TRUSTS HAVE NOT AGREED TO REGISTER THE NOTES UNDER THE 1933 ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY NOTEHOLDER.

THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) PURSUANT TO REGULATION S OF THE 1933 ACT IN AN OFF-SHORE TRANSACTION AS DEFINED IN REGULATION S OF THE 1933 ACT TO A PERSON THAT IS NOT A U.S. PERSON AS DEFINED IN REGULATION S OF THE 1933 ACT OR (C) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.

Exhibit A-3-1

 

EACH HOLDER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE DEEMED TO REPRESENT THAT EITHER (I) IT IS NOT AND IS NOT ACQUIRING, HOLDING OR TRANSFERRING THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN ON BEHALF OF, OR USING THE “PLAN ASSETS” (WITHIN THE MEANING OF 29 CFR §2510.3-101, AS MODIFIED BY SECTION 3(42) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) OF, ANY “EMPLOYEE BENEFIT PLAN” AS DEFINED IN SECTION 3(3) OF ERISA OR ANY PLAN AS DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY THAT IS DEEMED TO HOLD THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN PURSUANT TO 29 CFR SECTION 2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA (THE “PLAN ASSET REGULATIONS”), WHICH EMPLOYEE BENEFIT PLAN, PLAN OR ENTITY IS SUBJECT TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (EACH, A “PLAN”), OR A GOVERNMENTAL, NON-U.S., NON-ELECTING CHURCH OR OTHER PLAN THAT IS SUBJECT TO ANY U.S. FEDERAL, STATE, LOCAL OR OTHER LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”) OR (II)(A) IT BELIEVES THAT THIS NOTE IS PROPERLY TREATED AS INDEBTEDNESS WITHOUT SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF THE PLAN ASSET REGULATIONS AND AGREES TO SO TREAT THIS NOTE AND (B) THE TRANSFEREE’S ACQUISITION, HOLDING AND SUBSEQUENT DISPOSITION OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN WILL SATISFY THE REQUIREMENTS OF PROHIBITED TRANSACTION CLASS EXEMPTION (“PTCE”) 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 OR THE STATUTORY PROHIBITED TRANSACTION EXEMPTION FOR SERVICE PROVIDERS SET FORTH IN SECTION 408(b)(17) OF ERISA AND SECTION 4975(d)(20) OF THE CODE OR ANY SIMILAR CLASS OR STATUTORY EXEMPTION AND WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR, IN THE CASE OF A GOVERNMENTAL, NON-U.S., NON-ELECTING CHURCH OR OTHER PLAN SUBJECT TO SIMILAR LAW, WILL NOT VIOLATE ANY SIMILAR LAW.

THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN SECTION 6.5 OF THE BASE INDENTURE AND SECTION [ ] OF THE RELATED INDENTURE SUPPLEMENT UNDER WHICH THIS NOTE IS ISSUED (A COPY OF WHICH IS AVAILABLE FROM THE ISSUER TRUSTS UPON REQUEST). EACH TRANSFEREE OF THIS NOTE SHALL PROVIDE THE NOTE REGISTRAR AND THE ISSUER TRUSTS THE CERTIFICATION REQUIRED BY SECTION 6.5(i) OF THE BASE INDENTURE AND THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN MAY BE TRANSFERRED IN AN OFF-SHORE TRANSACTION AS DEFINED IN THE 1933 ACT TO A PERSON WHO TAKES DELIVERY IN THE FORM OF AN INTEREST IN A RULE 144A NOTE OR (IN CERTAIN LIMITED CIRCUMSTANCES) A DEFINITIVE NOTE ONLY (IN THE CASE OF AN INTEREST IN A RULE 144A GLOBAL NOTE) IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN SECTION 6.5 OF THE BASE INDENTURE AND (IN THE CASE OF A DEFINITIVE NOTE) UPON RECEIPT BY THE NOTE REGISTRAR AND INDENTURE TRUSTEE OF SUCH CERTIFICATION. PRIOR TO PURCHASING THIS NOTE, PROSPECTIVE PURCHASERS SHOULD CONSULT WITH COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTIONS FROM THE RESTRICTIONS ON RESALE OR TRANSFER.

THIS NOTE IS A LIMITED RECOURSE OBLIGATION OF THE ISSUER TRUSTS, AND IS LIMITED TO RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM

Exhibit A-3-2

 

THE TRUST ESTATE AS PROVIDED IN THE INDENTURE. THE ISSUER TRUSTS ARE NOT PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE. THIS NOTE DOES NOT EVIDENCE AN OBLIGATION OF OR AN INTEREST IN, AND IS NOT GUARANTEED BY, THE SERVICER, THE INDENTURE TRUSTEE, THE CALCULATION AGENT, THE PAYING AGENT, THE SECURITIES INTERMEDIARY, THE ADMINISTRATOR, THE CO-ISSUER ADMINISTRATOR OR ANY AFFILIATE OF ANY OF THEM AND IS NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER.

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”) TO THE NOTE REGISTRAR FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

 

 

 

Exhibit A-3-3

 


PMT ISSUER TRUST – FMSR

PMT CO-ISSUER TRUST I – FMSR

MSR COLLATERALIZED NOTES,SERIES [ ]

CLASS [___] NOTE

Each of PMT ISSUER TRUST - FMSR, a Delaware statutory trust (the “Issuer”) and PMT CO-ISSUER TRUST I – FMSR, a Delaware statutory trust, (the “Co-Issuer” and, together with the Issuer, the “Issuer Trusts”), for value received, hereby promises to pay to [______________], or its registered assigns (the “Noteholder”), [interest, fees and principal as provided in the Indenture] [the principal sum of [__________] $[________], or such part thereof as may be advanced and outstanding hereunder and to pay interest on such principal sum or such part thereof as shall remain unpaid from time to time, at the rate and at the times provided in the Indenture].

Principal of this Note is payable on each applicable Payment Date as set forth in Section[s] [4.4] and 4.5 of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement. The Outstanding Note Balance of this Note bears interest at the applicable Note Interest Rate as set forth in the Indenture. On each applicable [Interim Payment Date and] Payment Date, in accordance with the terms and provisions of the Indenture, interest on this Note will be paid as set forth in Section[s] [4.4] and 4.5 of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement.

 

Capitalized terms used but not defined herein have the meanings set forth in the Amended and Restated Base Indenture (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), dated as of October 10, 2023, among the Issuer Trusts, Citibank, N.A. (“Citibank”), as Indenture Trustee (the “Indenture Trustee”), Calculation Agent (the “Calculation Agent”), Paying Agent (the “Paying Agent”) and Securities Intermediary (the “Securities Intermediary”), PennyMac Corp. (“PMC”), as Administrator (the “Administrator”) and as Servicer (the “Servicer”), PennyMac Holdings, LLC (“PMH”), as Co-Issuer Administrator (the “Co-Issuer Administrator”) and Atlas Securitized Products, L.P. (“ASP”), as Administrative Agent (the “Administrative Agent”), and the Indenture Supplement (as may be amended, restated, supplemented or otherwise modified from time to time, the “[Insert Series Name] Indenture Supplement” and together with the Base Indenture, the “Indenture”), dated as of [_____], 20[__], by and among [insert parties to Indenture Supplement].

[In the event of a VFN Principal Balance increase funded by the Noteholders, the Noteholder of this Note shall, and is hereby authorized to, record on the schedule attached to this Note the date and amount of any VFN Principal Balance increase funded by it, and each repayment thereof; provided, that failure to make any such recordation on such schedule or any error in such schedule shall not adversely affect any Noteholder’s rights with respect to the VFN Principal Balance and its right to receive interest payments in respect thereof.]

Exhibit A-3-4

 

[By its acceptance of this Note, each Noteholder covenants and agrees, until the termination of the Revolving Period, on each Funding Date or each Limited Funding Date to advance amounts in respect of any VFN Principal Balance increase hereunder to the Issuer Trusts, subject to and in accordance with the terms of the Indenture.]

[In the event of a payment of all or a portion of the Note Balance of this Note, in accordance with the terms and provisions of the Indenture, the Noteholder thereof shall, and is hereby authorized to, record on the schedule attached to this Note the date and amount of the Outstanding Note Balance of this Note following such payment.]

Absent manifest error, the [Note] [VFN Principal] Balance of each Note as set forth in the notations made by the related Noteholder on such Note shall be binding upon the Indenture Trustee, the Note Registrar and the Issuer Trusts; provided, that failure by a Noteholder to make such recordation on its Note or any error in such notation shall not adversely affect any Noteholder’s rights with respect to the [Note] [VFN Principal] Balance of its Note and such Noteholder’s right to receive payments in respect of principal and interest in respect thereof.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

The statements in the legend set forth above are an integral part of the terms of this Note and by acceptance hereof each Holder of this Note agrees to be subject to and bound by the terms and provisions set forth in such legend.

This Note is a Regulation S Global Note deposited with DTC acting as Depository, and registered in the name of Cede & Co., a nominee of DTC, and Cede & Co., as holder of record of this Note, shall be entitled to receive payments of principal and interest, other than principal and interest due at the maturity date, by wire transfer of immediately available funds.

The statements in the legend relating to DTC set forth above are an integral part of the terms of this Note and by acceptance thereof each holder of this Note agrees to be subject to and bound by the terms and provisions set forth in such legend, if any.

Unless the certificate of authentication hereon shall have been executed by an Authorized Signatory of the Indenture Trustee and, if an Authenticating Agent has been appointed by the Indenture Trustee pursuant to Section 11.12 of the Base Indenture, by manual signature of such Authenticating Agent, this Note shall not entitle the Noteholder hereof to any benefit under the Indenture and/or be valid for any purpose.

THIS NOTE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS NOTE, THE RELATIONSHIP OF THE PARTIES HEREUNDER, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE

Exhibit A-3-5

 

OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

 

Exhibit A-3-6

 

IN WITNESS WHEREOF, the Issuer Trusts have caused this instrument to be signed, manually or in facsimile, by an Issuer Authorized Officer and Co-Issuer Authorized Officer, respectively, as of the date set forth below.

Date: [_____], 20[__]

PMT ISSUER TRUST - FMSR, as Issuer


By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: ______________________________
Issuer Authorized Officer

 

PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer


By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: ______________________________
Co-Issuer Authorized Officer

Exhibit A-3-7

 

INDENTURE TRUSTEE’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Class designated herein and referred to in the within-mentioned Indenture.

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Indenture Trustee

 


By:
Title: Authorized Signatory of Indenture Trustee

 

 

 

AUTHENTICATING AGENT’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Class designated herein and referred to in the within-mentioned Indenture.

 

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Authenticating Agent

 

By:

Title: Authorized Signatory of Authenticating Agent

 

 

 

Exhibit A-3-8

 

[REVERSE OF NOTE]

This Note is one of the duly authorized Class [__] Notes of the Issuer Trusts, designated as its PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes, Series [__], Class [__] (herein called the “Class [__] Notes”), all issued under the Indenture. Reference is hereby made to the Indenture for a statement of the respective rights and obligations thereunder of the Issuer Trusts, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary and the Holders of the Notes. To the extent that any provision of this Note contradicts or is inconsistent with the provisions of the Indenture, the provisions of the Indenture shall control and supersede such contradictory or inconsistent provision herein. The Notes are subject to all terms of the Indenture.

The payments on the Class [__] Notes are [senior to the Class [__] Notes, the Class [__] Notes and the Class [__] Notes][, and subordinate to the Class [__] Notes, the Class [__] Notes and the Class [__] Notes], as and to the extent provided in the Indenture.

The principal of and interest and fees on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer Trusts with respect to this Note shall be applied in accordance with the Indenture.

The entire unpaid principal amount and all accrued and unpaid interest and fees of this Note shall be due and payable on the earlier of (i) any Redemption Payment Date as set forth in Section 13.1 of the Base Indenture [or in Section [ ] of the [Series Name] Indenture Supplement] and (ii) the Stated Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount and all accrued and unpaid interest of the Notes shall be immediately due and payable on the date on which an Event of Default of the kind specified in clauses (b), (c) or (q) of Section 8.1 of the Base Indenture occurs, and, if any other Event of Default occurs and is continuing, then and in each and every such case, either the Indenture Trustee or the requisite percentage of Noteholders of each Series, by notice in writing to the Issuer Trusts (and to the Indenture Trustee if given by the Holders), may declare all Notes to be immediately due and payable in the manner provided in the Indenture. All applicable principal payments on the Notes shall be made to the Holders of the Notes entitled thereto in accordance with the terms of the Indenture.

The Trust Estate secures this Class [__] Note and all other Class [__] Notes equally and ratably without prejudice, priority or distinction between any Class [__] Note and any other Class [__] Note. The Notes are limited recourse obligations of the Issuer Trusts and are limited in right of payment to amounts available from the Trust Estate, as provided in the Indenture. The Issuer Trusts shall not otherwise be liable for payments on the Notes, and none of the owners, agents, officers, directors, employees, or successors or assigns of the Issuer Trusts shall be personally liable for any amounts payable, or performance due, under the Notes or the Indenture.

Any payment of interest or principal on this Note shall be paid on the applicable [Interim Payment Date and] Payment Date as set forth in the Indenture to the Person in whose name this Note (or one or more predecessor Notes) is registered in the Note Register as of the close of business on the related Record Date by wire transfer in immediately available funds to the

Exhibit A-3-9

 

account specified in writing by the related Noteholder to the extent provided by the Indenture and otherwise by check mailed to the Noteholder.

[Any reduction in the Note Balance of this Note (or any one or more predecessor Notes) effected by any payments made on any applicable [Interim Payment Date and] Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon.]

[Any reduction in the Maximum VFN Principal Balance or the VFN Principal Balance, as the case may be, of this Class [ ] Note (or any one or more predecessor Notes) effected by any payments made with respect thereto or otherwise pursuant to the terms of the Indenture shall be binding upon all future Holders of this Class [ ] Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. Any VFN Principal Balance increase of this Class [ ] Note (or any one or more predecessor Notes) effected by payments to the Issuer Trusts shall be binding upon the Issuer Trusts and shall inure to the benefit of all future Holders of this Class [ ] Note and of any Note issued upon the registration of transfer hereof or exchange hereof or in lieu hereof, whether or not noted hereon.]

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer Trusts pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in the form attached hereto duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Securities Transfer Agent’s Medallion Program (“STAMP”), and thereupon one or more new Notes of authorized denominations and in the same [aggregate principal amount] [VFN Principal Balance] will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the Issuer Trusts may require the Noteholder to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.

Each Noteholder, by acceptance of a Note or a beneficial ownership interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer Trusts or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or Owner Trustee in their individual capacities, (ii) any owner of a beneficial ownership interest in the Issuer Trusts or (iii) any partner, owner, beneficiary, agent, officer, director, employee or “control person” within the meaning of the 1933 Act and the Securities Exchange Act of 1934, as amended, of the Indenture Trustee or Owner Trustee in its individual capacity, any holder of a beneficial ownership interest in the Issuer Trusts or the Indenture Trustee or Owner Trustee or of any successor or assign of the Indenture Trustee or Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.

Exhibit A-3-10

 

Each Noteholder, by accepting a Note and each Note Owner by accepting a Note or a beneficial interest in a Note agrees that it will not at any time prior to the date which is one year and one day, or, if longer, the applicable preference period then in effect, after the payment in full of all the Notes, institute against the Issuer Trusts, or join in any institution against the Issuer Trusts of, any receivership, insolvency, bankruptcy or other similar proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes and this Indenture.

The Issuer Trusts have entered into the Indenture and this Note is issued with the intention that, for United States federal, state and local income and franchise tax purposes, the Notes will qualify as indebtedness secured by the Collateral. Each Noteholder, by its acceptance of a Note, and each purchaser of a beneficial interest therein, by accepting such beneficial interest, agrees to treat such Notes as debt for United States federal, state and local income and franchise tax purposes, unless otherwise required by Applicable Law in a proceeding of final determination.

Prior to the due presentment for registration of transfer of this Note, the Issuer Trusts, the Indenture Trustee, the Note Registrar, the Paying Agent and any agent of the Issuer Trusts, the Note Registrar, the Paying Agent or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer Trusts, the Indenture Trustee, the Note Registrar, the Paying Agent or any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer Trusts or other parties thereto and the rights of the Holders of the Notes under the Indenture at any time pursuant to the terms and provisions of Article XII of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Notes or a particular Class of Notes, on behalf of all of the Noteholders, or the Administrative Agent, as applicable, to waive compliance by the Issuer Trusts with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of any Noteholder.

The term “Issuer Trusts” as used in this Note includes any successor to the Issuer Trusts under the Indenture.

Notwithstanding any other provisions herein or in the Indenture, a Holder of this Note will have the right, which is absolute and unconditional, to receive payment of the principal of and interest on this Note on the Stated Maturity Date and to institute suit for the enforcement of any such payment, and such right will not be impaired without the consent of the Holder; provided, however, that notwithstanding any other provision of the Indenture to the contrary, the obligation to pay principal of or interest on this Note or any other amount payable to the Holder will be without recourse to the Administrator, the Co-Issuer Administrator, the Servicer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary or any Affiliate

Exhibit A-3-11

 

(other than the Issuer Trusts), officer, employee or director of any of them, and the obligation of the Issuer Trusts to pay principal of or interest on this Note or any other amount payable to the Holder will be limited to amounts available from the Trust Estate and subject to the priority of payment set forth in the Indenture.

Notwithstanding any other terms of the Indenture or this Note, the obligations of the Issuer Trusts hereunder are limited recourse obligations of the Issuer Trusts, payable solely from the Trust Estate, and following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms of the Indenture, the Holder hereof shall not be entitled to take any further steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall not thereafter revive. No Holder of this Note shall have recourse for the payment of any amount owing in respect of this Note or the Indenture or for any action or inaction of the Issuer Trusts against any officer, director, employee, shareholder, stockholder or incorporator of the Issuer Trusts or any of their successors or assigns for any amounts payable under this Note or the Indenture. The foregoing provisions of this Note shall not (i) prevent recourse to the Trust Estate for the sums due or to become due under any security, instrument or agreement which is part of the Trust Estate, (ii) save as specifically provided therein, constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture, or (iii) limit the right of any Person, to name any of the Issuer Trusts as a party defendant in any proceeding or in the exercise of any other remedy under this Note or the Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

 

Exhibit A-3-12

 

ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee: ___________________

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
(name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints, ___________________ attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

Dated: _________________

 

Signature Guaranteed:

_________________*/

*/NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of STAMP.

 

Exhibit A-3-13

 

Schedule to Series [ ], Class [__] Note

dated as of [ ], 20[__]

of PMT ISSUER TRUST - FMSRAND PMT CO-ISSUER TRUST I – FMSR

 

[Interim Payment Date]

[Payment Date]

[Payment Date of Additional Note Balance/Decrease Note Balance

Aggregate Amount of [principal payment] [Funding of VFN Principal Balance Increase] on Class [__] Notes

[Percentage Interest in] Aggregate Note Balance of the Class [__] Notes following [advance/] payment

[Percentage of Interest in] Aggregate Note Balance of this Class [__] Note following [advance/] payment

Note Balance of Note following [advance/] payment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit A-3-14

 

Exhibit A-4

 

FORM OF DEFINITIVE REGULATION S NOTE

 

Class [___] Note

Initial Note Balance: $[___]

Note Number: [_____]

[Maximum VFN Principal Balance: $[____] ] [or such lesser amount as contemplated by the definition of Maximum VFN Principal Balance as set forth in the [Insert Series Name] Indenture Supplement]

[CUSIP No.:]

 

[ISIN No.:]

 

THE OUTSTANDING NOTE BALANCE OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE INITIAL NOTE BALANCE SHOWN ON THE FACE HEREOF.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY STATE SECURITIES LAWS. THE ISSUER TRUSTS HAVE NOT AGREED TO REGISTER THE NOTES UNDER THE 1933 ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY NOTEHOLDER.

THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS NOTE ONLY (A) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE 1933 ACT, (B) PURSUANT TO REGULATION S OF THE 1933 ACT IN AN OFF-SHORE TRANSACTION AS DEFINED IN THE 1933 ACT TO A PERSON THAT IS NOT A U.S. PERSON AS DEFINED IN REGULATION S OF THE 1933 ACT OR (C) PURSUANT TO ANOTHER EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, IN EACH CASE IN COMPLIANCE WITH THE REQUIREMENTS OF THE INDENTURE AND APPLICABLE STATE SECURITIES LAWS.

Exhibit A-4-1

 

EACH HOLDER OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE DEEMED TO REPRESENT THAT EITHER (I) IT IS NOT AND IS NOT ACQUIRING, HOLDING OR TRANSFERRING THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN ON BEHALF OF, OR USING THE “ PLAN ASSETS’ (WITHIN THE MEANING OF 29 CFR §2510.3-101, AS MODIFIED BY SECTION 3(42) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) OF, ANY “EMPLOYEE BENEFIT PLAN” AS DEFINED IN SECTION 3(3) OF ERISA OR ANY PLAN AS DESCRIBED IN SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR AN ENTITY THAT IS DEEMED TO HOLD THE “PLAN ASSETS” OF ANY SUCH EMPLOYEE BENEFIT PLAN OR PLAN PURSUANT TO 29 CFR SECTION 2510.3-101 AS MODIFIED BY SECTION 3(42) OF ERISA (THE “PLAN ASSET REGULATIONS”), WHICH EMPLOYEE BENEFIT PLAN, PLAN OR ENTITY IS SUBJECT TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (EACH, A “PLAN”), OR A GOVERNMENTAL, NON-U.S., NON-ELECTING CHURCH OR OTHER PLAN THAT IS SUBJECT TO ANY U.S. FEDERAL, STATE, LOCAL OR OTHER LAW THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”) OR (II)(A) IT BELIEVES THAT THIS NOTE IS PROPERLY TREATED AS INDEBTEDNESS WITHOUT SUBSTANTIAL EQUITY FEATURES FOR PURPOSES OF THE PLAN ASSET REGULATIONS AND AGREES TO SO TREAT THIS NOTE AND (B) THE TRANSFEREE’S ACQUISITION, HOLDING AND SUBSEQUENT DISPOSITION OF THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN WILL SATISFY THE REQUIREMENTS OF PROHIBITED TRANSACTION CLASS EXEMPTION (“PTCE”) 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 OR THE STATUTORY PROHIBITED TRANSACTION EXEMPTION FOR SERVICE PROVIDERS SET FORTH IN SECTION 408(b)(17) OF ERISA AND SECTION 4975(d)(20) OF THE CODE OR ANY SIMILAR CLASS OR STATUTORY EXEMPTION AND WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR, IN THE CASE OF A GOVERNMENTAL, NON-U.S., NON-ELECTING CHURCH OR OTHER PLAN SUBJECT TO SIMILAR LAW, WILL NOT VIOLATE ANY SIMILAR LAW.

 

THE TRANSFER OF THIS NOTE IS SUBJECT TO CERTAIN RESTRICTIONS AND CONDITIONS SET FORTH IN SECTION 6.5 OF THE BASE INDENTURE AND SECTION [ ] OF THE RELATED INDENTURE SUPPLEMENT UNDER WHICH THIS NOTE IS ISSUED (A COPY OF WHICH IS AVAILABLE FROM THE ISSUER TRUSTS UPON REQUEST). EACH TRANSFEREE OF THIS NOTE SHALL PROVIDE THE NOTE REGISTRAR AND THE ISSUER TRUSTS THE CERTIFICATION[S] REQUIRED BY SECTION 6.5(j) OF THE BASE INDENTURE AND THIS NOTE MAY BE TRANSFERRED ONLY UPON RECEIPT BY THE NOTE REGISTRAR AND INDENTURE TRUSTEE OF SUCH CERTIFICATION. PRIOR TO PURCHASING THIS NOTE, PROSPECTIVE PURCHASERS SHOULD CONSULT WITH COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTIONS FROM THE RESTRICTIONS ON RESALE OR TRANSFER.

THIS NOTE IS A LIMITED RECOURSE OBLIGATION OF THE ISSUER TRUSTS, AND IS LIMITED TO RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE. THE ISSUER ARE NOT PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE. THIS NOTE DOES NOT EVIDENCE AN OBLIGATION OF OR AN INTEREST IN, AND IS NOT GUARANTEED BY, THE SERVICER, THE INDENTURE TRUSTEE, THE CALCULATION AGENT, THE PAYING AGENT, THE SECURITIES INTERMEDIARY, THE ADMINISTRATOR, THE CO-ISSUER ADMINISTRATOR OR

Exhibit A-4-2

 

ANY AFFILIATE OF ANY OF THEM AND IS NOT INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER.

 


 

 

Exhibit A-4-3

 

PMT ISSUER TRUST – FMSR

PMT CO-ISSUER TRUST I – FMSR

MSR COLLATERALIZED NOTES, SERIES[ ]

CLASS [___] NOTE

Each of PMT ISSUER TRUST - FMSR, a Delaware statutory trust (the “Issuer”) and PMT CO-ISSUER TRUST I – FMSR, a Delaware statutory trust, (the “Co-Issuer” and, together with the Issuer, the “Issuer Trusts”), for value received, hereby promises to pay to [______________], or its registered assigns (the “Noteholder”), [interest, fees and principal as provided in the Indenture] [the principal sum of [__________] $[________], or such part thereof as may be advanced and outstanding hereunder and to pay interest on such principal sum or such part thereof as shall remain unpaid from time to time, at the rate and at the times provided in the Indenture].

Principal of this Note is payable on each applicable [Interim Payment Date and] Payment Date as set forth in Section[s] [4.4] and 4.5 of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement. The Outstanding Note Balance of this Note bears interest at the applicable Note Interest Rate as set forth in the Indenture. On each applicable [Interim Payment Date and] Payment Date, in accordance with the terms and provisions of the Indenture, interest on this Note will be paid as set forth in Section[s] [4.4] and 4.5 of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement.

Capitalized terms used but not defined herein have the meanings set forth in the Amended and Restated Base Indenture (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), dated as of October 10, 2023, among the Issuer Trusts, Citibank, N.A. (“Citibank”), as Indenture Trustee (the “Indenture Trustee”), Calculation Agent (the “Calculation Agent”), Paying Agent (the “Paying Agent”) and Securities Intermediary (the “Securities Intermediary”), PennyMac Corp. (“PMC”), as Administrator (the “Administrator”) and as Servicer (the “Servicer”), PennyMac Holdings, LLC (“PMH”), as Co-Issuer Administrator (the “Co-Issuer Administrator”) and Atlas Securitized Products, L.P. (“ASP”), as Administrative Agent (the “Administrative Agent”), and the Indenture Supplement (as may be amended, restated, supplemented or otherwise modified from time to time, the “[Insert Series Name] Indenture Supplement” and together with the Base Indenture, the “Indenture”), dated as of [_____], 20[__], by and among [insert parties to Indenture Supplement].

[In the event of a VFN Principal Balance increase funded by the Noteholders, the Noteholder of this Note shall, and is hereby authorized to, record on the schedule attached to this Note the date and amount of any VFN Principal Balance increase funded by it, and each repayment thereof; provided, that failure to make any such recordation on such schedule or any error in such schedule shall not adversely affect any Noteholder’s rights with respect to the VFN Principal Balance and its right to receive interest payments in respect thereof.]

[By its acceptance of this Note, each Noteholder covenants and agrees, until the termination of the Revolving Period, on each Funding Date or each Limited Funding Date to

Exhibit A-4-4

 

advance amounts in respect of any VFN Principal Balance increase hereunder to the Issuer Trusts, subject to and in accordance with the terms of the Indenture.]

[In the event of a payment of all or a portion of the Note Balance of this Note, in accordance with the terms and provisions of the Indenture, the Noteholder thereof shall, and is hereby authorized to, record on the schedule attached to this Note the date and amount of the Outstanding Note Balance of this Note following such payment.]

Absent manifest error, the [Note] [VFN Principal] Balance of each Note as set forth in the notations made by the related Noteholder on such Note shall be binding upon the Indenture Trustee, the Note Registrar and the Issuer Trusts; provided, that failure by a Noteholder to make such recordation on its Note or any error in such notation shall not adversely affect any Noteholder’s rights with respect to the [Note] [VFN Principal] Balance of its Note and such Noteholder’s right to receive payments in respect of principal and interest in respect thereof.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

The statements in the legend set forth above are an integral part of the terms of this Note and by acceptance hereof each Holder of this Note agrees to be subject to and bound by the terms and provisions set forth in such legend.

Unless the certificate of authentication hereon shall have been executed by an Authorized Signatory of the Indenture Trustee and, if an Authenticating Agent has been appointed by the Indenture Trustee pursuant to Section 11.12 of the Base Indenture, by manual signature of such Authenticating Agent, this Note shall not entitle the Noteholder hereof to any benefit under the Indenture and/or be valid for any purpose.

THIS NOTE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS NOTE, THE RELATIONSHIP OF THE PARTIES HEREUNDER, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

 

Exhibit A-4-5

 

IN WITNESS WHEREOF, the Issuer Trusts have caused this instrument to be signed, manually or in facsimile, by an Issuer Authorized Officer and Co-Issuer Authorized Officer, respectively, as of the date set forth below.

Date: [_____], 20[__]

PMT ISSUER TRUST - FMSR, as Issuer


By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: ______________________________
Issuer Authorized Officer

 

PMT CO-ISSUER TRUST I - FMSR, as Co-Issuer


By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: ______________________________
Co-Issuer Authorized Officer

Exhibit A-4-6

 

INDENTURE TRUSTEE’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Class designated herein and referred to in the within-mentioned Indenture.

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Indenture Trustee

 


By:
Title: Authorized Signatory of Indenture Trustee

 

 

 

AUTHENTICATING AGENT’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Class designated herein and referred to in the within-mentioned Indenture.

 

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Authenticating Agent

 

 

By:

Title: Authorized Signatory of Authenticating Agent

 

 

 

Exhibit A-4-7

 

[REVERSE OF NOTE]

This Note is one of the duly authorized Class [__] Notes of the Issuer Trusts, designated as its PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes, Series [__], Class [__] (herein called the “Class [__] Notes”), all issued under the Indenture. Reference is hereby made to the Indenture for a statement of the respective rights and obligations thereunder of the Issuer Trusts, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary and the Holders of the Notes. To the extent that any provision of this Note contradicts or is inconsistent with the provisions of the Indenture, the provisions of the Indenture shall control and supersede such contradictory or inconsistent provision herein. The Notes are subject to all terms of the Indenture.

The payments on the Class [__] Notes are [senior to the Class [__] Notes, the Class [__] Notes and the Class [__] Notes][, and subordinate to the Class [__] Notes, the Class [__] Notes and the Class [__] Notes], as and to the extent provided in the Indenture.

The principal of and interest and fees on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer Trusts with respect to this Note shall be applied in accordance with the Indenture.

The entire unpaid principal amount and all accrued and unpaid interest and fees of this Note shall be due and payable on the earlier of (i) any Redemption Payment Date as set forth in Section 13.1 of the Base Indenture [or in Section [ ] of the [Series Name] Indenture Supplement] and (ii) the Stated Maturity Date. Notwithstanding the foregoing, the entire unpaid principal amount and all accrued and unpaid interest of the Notes shall be immediately due and payable on the date on which an Event of Default of the kind specified in clauses (b), (c) or (q) of Section 8.1 of the Base Indenture occurs, and, if any other Event of Default occurs and is continuing, then and in each and every such case, either the Indenture Trustee or the requisite percentage of Noteholders of each Series, by notice in writing to the Issuer Trusts (and to the Indenture Trustee if given by the Holders), may declare all Notes to be immediately due and payable in the manner provided in the Indenture. All applicable principal payments on the Notes shall be made to the Holders of the Notes entitled thereto in accordance with the terms of the Indenture.

The Trust Estate secures this Class [__] Note and all other Class [__] Notes equally and ratably without prejudice, priority or distinction between any Class [__] Note and any other Class [__] Note. The Notes are limited recourse obligations of the Issuer Trusts and are limited in right of payment to amounts available from the Trust Estate, as provided in the Indenture. The Issuer Trusts shall not otherwise be liable for payments on the Notes, and none of the owners, agents, officers, directors, employees, or successors or assigns of the Issuer Trusts shall be personally liable for any amounts payable, or performance due, under the Notes or the Indenture.

Any payment of interest or principal on this Note shall be paid on the applicable [Interim Payment Date and] Payment Date as set forth in the Indenture to the Person in whose name this Note (or one or more predecessor Notes) is registered in the Note Register as of the close of business on the related Record Date by wire transfer in immediately available funds to the

Exhibit A-4-8

 

account specified in writing by the related Noteholder to the extent provided by the Indenture and otherwise by check mailed to the Noteholder.

[Any reduction in the Note Balance of this Note (or any one or more predecessor Notes) effected by any payments made on any applicable [Interim Payment Date and] Payment Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon.]

[Any reduction in the Maximum VFN Principal Balance or the VFN Principal Balance, as the case may be, of this Class [ ] Note (or any one or more predecessor Notes) effected by any payments made with respect thereto or otherwise pursuant to the terms of the Indenture shall be binding upon all future Holders of this Class [ ] Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. Any VFN Principal Balance increase of this Class [ ] Note (or any one or more predecessor Notes) effected by payments to the Issuer Trusts shall be binding upon the Issuer Trusts and shall inure to the benefit of all future Holders of this Class [ ] Note and of any Note issued upon the registration of transfer hereof or exchange hereof or in lieu hereof, whether or not noted hereon.]

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer Trusts pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in the form attached hereto duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Securities Transfer Agent’s Medallion Program (“STAMP”), and thereupon one or more new Notes of authorized denominations and in the same [aggregate principal amount] [VFN Principal Balance] will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the Issuer Trusts may require the Noteholder to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.

Each Noteholder, by acceptance of a Note or a beneficial ownership interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer Trusts or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or Owner Trustee in their individual capacities, (ii) any owner of a beneficial ownership interest in the Issuer Trusts or (iii) any partner, owner, beneficiary, agent, officer, director, employee or “control person” within the meaning of the 1933 Act and the Securities Exchange Act of 1934, as amended, of the Indenture Trustee or Owner Trustee in its individual capacity, any holder of a beneficial ownership interest in the Issuer Trusts or the Indenture Trustee or Owner Trustee or of any successor or assign of the Indenture Trustee or Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.

Exhibit A-4-9

 

Each Noteholder, by accepting a Note and each Note Owner by accepting a Note or a beneficial interest in a Note agrees that it will not at any time prior to the date which is one year and one day, or, if longer, the applicable preference period then in effect, after the payment in full of all the Notes, institute against the Issuer Trusts, or join in any institution against the Issuer Trusts of, any receivership, insolvency, bankruptcy or other similar proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes and this Indenture.

The Issuer Trusts have entered into the Indenture and this Note is issued with the intention that, for United States federal, state and local income and franchise tax purposes, the Notes will qualify as indebtedness secured by the Collateral. Each Noteholder, by its acceptance of a Note, and each purchaser of a beneficial interest therein, by accepting such beneficial interest, agrees to treat such Notes as debt for United States federal, state and local income and franchise tax purposes, unless otherwise required by Applicable Law in a proceeding of final determination.

Prior to the due presentment for registration of transfer of this Note, the Issuer Trusts, the Indenture Trustee, the Note Registrar, the Paying Agent and any agent of the Issuer Trusts, the Note Registrar, the Paying Agent or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuer Trusts, the Indenture Trustee, the Note Registrar, the Paying Agent or any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer Trusts or other parties thereto and the rights of the Holders of the Notes under the Indenture at any time pursuant to the terms and provisions of Article XII of the Base Indenture and Section [ ] of the [Series Name] Indenture Supplement. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Outstanding Notes or a particular Class of Notes, on behalf of all of the Noteholders, or the Administrative Agent, as applicable, to waive compliance by the Issuer Trusts with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of any Noteholder.

The term “Issuer Trusts” as used in this Note includes any successor to the Issuer Trusts under the Indenture.

This Note is issuable only in definitive form in denominations as provided in the [Series Name] Indenture Supplement, subject to certain limitations therein set forth.

Notwithstanding any other provisions herein or in the Indenture, a Holder of this Note will have the right, which is absolute and unconditional, to receive payment of the principal of and interest on this Note on the Stated Maturity Date and to institute suit for the enforcement of any such payment, and such right will not be impaired without the consent of the Holder; provided, however, that notwithstanding any other provision of the Indenture to the contrary, the obligation to pay principal of or interest on this Note or any other amount payable to the Holder will be without recourse to the Administrator, the Co-Issuer Administrator, the Servicer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary or any Affiliate (other than the Issuer Trusts), officer, employee or director of any of them, and the obligation of the Issuer Trusts to pay principal of or interest on this Note or any other amount payable to the Holder will be limited to amounts available from the Trust Estate and subject to the priority of payment set forth in the Indenture.

Exhibit A-4-10

 

Notwithstanding any other terms of the Indenture or this Note, the obligations of the Issuer Trusts hereunder are limited recourse obligations of the Issuer Trusts, payable solely from the Trust Estate, and following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms of the Indenture, the Holder hereof shall not be entitled to take any further steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall not thereafter revive. No Holder of this Note shall have recourse for the payment of any amount owing in respect of this Note or the Indenture or for any action or inaction of the Issuer Trusts against any officer, director, employee, shareholder, stockholder or incorporator of the Issuer Trusts or any of their successors or assigns for any amounts payable under this Note or the Indenture. The foregoing provisions of this Note shall not (i) prevent recourse to the Trust Estate for the sums due or to become due under any security, instrument or agreement which is part of the Trust Estate, (ii) save as specifically provided therein, constitute a waiver, release or discharge of any indebtedness or obligation evidenced by this Note or secured by the Indenture, or (iii) limit the right of any Person, to name any of the Issuer Trusts as a party defendant in any proceeding or in the exercise of any other remedy under this Note or the Indenture, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

 

Exhibit A-4-11

 

ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee: ___________________

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:
(name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints, ___________________ attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

Dated: _________________

 

Signature Guaranteed:

_________________*/

*/NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of STAMP.

 

Exhibit A-4-12

 

Schedule to Series [ ], Class [__] Note

dated as of [_____], 20[__]

of PMT ISSUER TRUST - FMSRAND PMT CO-ISSUER TRUST I – FMSR

 

[Interim Payment Date]

[Payment Date]

[Payment Date of Additional Note Balance/Decrease Note Balance

Aggregate Amount of [principal payment] [Funding of VFN Principal Balance Increase] on Class [__] Notes

[Percentage Interest in] Aggregate Note Balance of the Class [__] Notes following [advance/] payment

[Percentage of Interest in] Aggregate Note Balance of this Class [__] Note following [advance/] payment

Note Balance of Note following [advance/] payment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit A-4-13

 

Exhibit B-1

 

FORM OF TRANSFEREE CERTIFICATE FOR TRANSFERS OF NOTES PURSUANT TO RULE 144A

 

 

Issuer PMT ISSUER TRUST – FMSR

3043 Townsgate Road

Westlake Village, CA 91361

Attention: PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I - FMSR Collateralized Notes

 

with a copy to:

 

Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington

DE 19801

Attention: Corporate Trust Administration

 

Co-Issuer PMT CO-ISSUER TRUST I – FMSR

3043 Townsgate Road

Westlake Village, CA 91361

Attention: PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I - FMSR Collateralized Notes

 

with a copy to:

 

Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington

DE 19801

Attention: Corporate Trust Administration

 

Administrator PennyMac Corp.

3043 Townsgate Road, Suite 300

Westlake Village

CA 91361

Attention: Treasurer

 

Co-Issuer

Administrator PennyMac Holdings, LLC

3043 Townsgate Road, Suite 310

Westlake Village

Exhibit B-1-1

 

CA 91361

Attention: Treasurer

 

Indenture Trustee Citibank, N.A.

480 Washington Boulevard, 30th Floor

Jersey City, New Jersey 07310

Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and

PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes

 

Re: $[ ] PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I - FMSR, MSR Collateralized Notes, Series 20__-__, Class ____

Reference is hereby made to the Amended and Restated Base Indenture, dated as of October 10, 2023 (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Indenture”), among PMT ISSUER TRUST - FMSR, as Issuer, PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer, PennyMac Corp., as Administrator and as Servicer, PennyMac Holdings, LLC, as Co-Issuer Administrator, Citibank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Atlas Securitized Products, L.P., as Administrative Agent, and the “Administrative Agents” from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

[NOTE: COMPLETE [A] FOR A TRANSFER OF AN INTEREST IN A REGULATION S GLOBAL NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A RULE 144A GLOBAL NOTE DURING THE DISTRIBUTION COMPLIANCE PERIOD. COMPLETE [B] FOR A TRANSFER OF AN INTEREST IN A REGULATION S GLOBAL NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A RULE 144A DEFINITIVE NOTE. COMPLETE [C] FOR A TRANSFER OF AN INTEREST IN A REGULATION S DEFINITIVE NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A RULE 144A GLOBAL NOTE. COMPLETE [D] FOR A TRANSFER OF AN INTEREST IN A REGULATION S DEFINITIVE NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF A RULE 144A DEFINITIVE NOTE. COMPLETE [E] FOR A TRANSFER OF AN INTEREST IN A RULE 144A GLOBAL NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A RULE 144A DEFINITIVE NOTE. COMPLETE [F] FOR A TRANSFER OF AN INTEREST IN RULE 144A DEFINITIVE NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A RULE 144A GLOBAL NOTE. COMPLETE [G] FOR A TRANSFER OF AN INTEREST IN A RULE 144A DEFINITIVE NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF A RULE 144A DEFINITIVE NOTE.]

[A] This letter relates to _____________ principal amount of Notes that are held in the form of a beneficial interest in a Regulation S Global Note (ISIN No. _________) (CUSIP No. ___________) in the name of _____________ (the “Transferor”) through [Euroclear] [Clearstream], which in turn holds through the Depository. The Transferor has requested a transfer of such beneficial interest in the Notes for a beneficial interest in a Rule 144A Global Note (CUSIP No.

Exhibit B-1-2

 

____________) in the name of _______________ (the “Transferee”), to be held through the Depository. Delivered herewith is a Transferee Certification completed by the Transferee.

[B] This letter relates to _____________ principal amount of Notes that are held in the form of a beneficial interest in a Regulation S Global Note (ISIN No. _________) (CUSIP No. ___________) in the name of _____________ (the “Transferor”) through [Euroclear] [Clearstream], which in turn holds through the Depository. The Transferor has requested a transfer of such beneficial interest in the Notes for a Rule 144A Definitive Note (CUSIP No. ____________) in the name of _______________ (the “Transferee”), pursuant to Section 6.5 of the Indenture. Delivered herewith is a Transferee Certification completed by the Transferee.

[C] This letter relates to a Regulation S Definitive Note (ISIN No. _________) (CUSIP No. ______________) in the principal amount of _________________ in the name of ____________ (the “Transferor”). The Transferor has requested a transfer of such Note for a beneficial interest in a Rule 144A Global Note (CUSIP No. ____________) in the name of ____________________ (the “Transferee”), to be held through the Depository. Delivered herewith is a Transferee Certification completed by the Transferee.

[D] This letter relates to a Regulation S Definitive Note (ISIN No. _________) (CUSIP No. _____________) in the principal amount of __________________ in the name of _______________ (the “Transferor”). The Transferor has requested a transfer of such Note for a Rule 144A Definitive Note (CUSIP No. ______________) in the name of _____________ (the “Transferee”) pursuant to Section 6.5 of the Indenture. Delivered herewith is a Transferee Certification completed by the Transferee.

[E] This letter relates to _____________ principal amount of Notes that are held in the form of a beneficial interest in a Rule 144A Global Note (CUSIP No. ___________) in the name of __________________(the “Transferor”) through the Depository. The Transferor has requested a transfer of such beneficial interest in the Notes for a Rule 144A Definitive Note (CUSIP No. ___________) in the name of _________________ (the “Transferee”) pursuant to Section 6.5 of the Indenture. Delivered herewith in a Transferee Certification completed by the Transferee.

[F] This letter relates to a Rule 144A Definitive Note (CUSIP No. __________) in the principal amount of _____________ in the name of _______________ (the “Transferor”). The Transferor has requested a transfer of such Note for a beneficial interest in a Rule 144A Global Note (CUSIP No. ____________) in the name of ____________________ (the “Transferee”), to be held through the Depository. Delivered herewith is a Transferee Certification completed by the Transferee.

[G] This letter relates to a Rule 144A Definitive Note (CUSIP No._________) in the principal amount of ____________ in the name of _______________ (the “Transferor”). The Transferor has requested a transfer of such Notes for another Rule 144A Definitive Note (CUSIP No. _____________) in the name of __________________ (the “Transferee”) pursuant to Section 6.5 of the Indenture.

Exhibit B-1-3

 

Delivered herewith is a Transferee Certification completed by the Transferee.

In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such Notes are being transferred in accordance with (i) the transfer restrictions set forth in the Indenture and the Notes and (ii) Rule 144A under the Securities Act to a Transferee that the Transferor reasonably believes is purchasing the Notes for its own account and the Transferor reasonably believes that the Transferee is a “qualified institutional buyer” within the meaning of Rule 144A, and such Transferee is aware that the sale to it is being made in reliance upon Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States or any other jurisdiction.

If the Transferor is the Noteholder of a Regulation S Note (or an interest therein) and intends to transfer such Note (or such interest) to the Transferee taking delivery of such Note (or such interest) in the form of a Restricted Note (or interest therein), the Transferor hereby certifies that the transfer is being made after the end of the Distribution Compliance Period.

 

 

Exhibit B-1-4

 

The certificate and the statements contained herein are made for your benefit.

[INSERT NAME OF TRANSFEROR]

 

By: ________________________

Name:

Title:

 

Dated:

 

Exhibit B-1-5

 

TRANSFEREE CERTIFICATION

 

Issuer PMT ISSUER TRUST – FMSR

3043 Townsgate Road

Westlake Village, CA 91361

Attention: PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I - FMSR Collateralized Notes

 

with a copy to:

 

Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington

DE 19801

Attention: Corporate Trust Administration

 

Co-Issuer PMT CO-ISSUER TRUST I – FMSR

3043 Townsgate Road

Westlake Village, CA 91361

Attention: PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I - FMSR Collateralized Notes

 

with a copy to:

 

Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington

DE 19801

Attention: Corporate Trust Administration

 

Administrator PennyMac Corp.

3043 Townsgate Road, Suite 300

Westlake Village

CA 91361

Attention: Treasurer

 

Co-Issuer

Administrator PennyMac Holdings, LLC

3043 Townsgate Road, Suite 310

Westlake Village

CA 91361

Attention: Treasurer

 

Indenture Trustee Citibank, N.A.

480 Washington Boulevard, 30th Floor

Jersey City, New Jersey 07310

Exhibit B-1-6

 

Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and

PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes

 

Re: $[ ] PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR, MSR Collateralized Notes, Series 20__-__, Class ____

Reference is hereby made to the Amended and Restated Base Indenture, dated as of October 10, 2023 (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Indenture”), among PMT ISSUER TRUST - FMSR, as Issuer, PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer, PennyMac Corp., as Administrator and as Servicer, PennyMac Holdings, LLC, as Co-Issuer Administrator, Citibank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Atlas Securitized Products, L.P., as Administrative Agent, and the “Administrative Agents” from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

The undersigned (the “Transferee”) intends to purchase $________ Note Balance of Class __Notes (the “Notes”) from the Transferor named in the Transfer Certificate to which this Transferee Certification is attached. In connection with the registration of the transfer of such Notes, the Transferee hereby executes and delivers to each of you this “Transferee Certification” in which the Transferee certifies to each of you the information set forth herein.

1. The Transferee is a “qualified institutional buyer” as that term is defined in Rule 144A (“Rule 144A”) promulgated under the Securities Act of 1933, as amended (the “1933 Act”) and has completed the form of certification to that effect attached hereto as Annex A1 (if the Transferee is not a registered investment company) or Annex A2 (if the Transferee is a registered investment company). The Transferee is aware that the sale to it is being made in reliance on Rule 144A.

2. The Transferee understands that the Notes have not been registered under the 1933 Act or registered or qualified under any state securities laws and that no transfer may be made unless the Notes are registered under the 1933 Act and under applicable state law or unless the transfer complies with Section 6.5 of the Indenture and any provision in any applicable Indenture Supplement. The Transferee further understands that neither the Transferor, the Administrator, the Co-Issuer Administrator, the Servicer, the Indenture Trustee nor the Note Registrar is under any obligation to register the Notes or make an exemption from such registration available.

3. The Transferee is acquiring the Notes for its own account or for the account of a “qualified institutional buyer” (as defined in Rule 144A, a “QIB”), and understands that such Notes may be resold, pledged or transferred only (a) to a person reasonably believed to be such a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A or (b) to a transferee that is a person that is not a U.S. person acquiring such interest in an “offshore transaction” (as defined in Regulation S) in compliance with the provisions of Regulation S, if the transfer is otherwise made in accordance with any applicable securities laws of any state of the United States or any other relevant jurisdiction. In addition, such transfer may be subject to additional restrictions and is subject to compliance with certain procedures, as set forth in Section 6.5 of the Indenture referred to below and any provision in any applicable Indenture Supplement.

Exhibit B-1-7

 

By its execution of this agreement, the Transferee agrees that it will not resell, pledge or transfer any of the Notes to anyone otherwise than in strict compliance with Rule 144A, or pursuant to another exemption from registration under the 1933 Act and all applicable state securities laws, and in strict compliance with the transfer restrictions set forth in Section 6.5 of the Indenture. The Transferee will not attempt to transfer any or all of the Notes pursuant to Rule 144A unless the Transferee offers and sells such Certificates only to QIBs or to offerees or purchasers that the Transferee and any person acting on behalf of the Transferee reasonably believe (as described in paragraph (d)(l) of Rule 144A) is a QIB.

4. The Transferee has been furnished with all information that it requested regarding (a) the Notes and distributions thereon and (b) the Indenture.

5. The Transferee has knowledge in financial and business matters and is capable of evaluating the merits and risks of an investment in the Notes; the Transferee has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision; and the Transferee (or any account or which it is pursuing) is able to bear the economic risk of an investment in the Notes and can afford a complete loss of such investment.

6. The Transferee is an “accredited investor” as defined in paragraph (1), (2), (3) or (7) of Rule 501(a) under the 1933 Act.

7. Either (i) for so long as it holds such Note or an interest therein, the Transferee is not, and is not acquiring, holding or transferring the Notes on behalf of or using “plan assets” (within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA) of, an “employee benefit plan” as defined in section 3(3) of ERISA that is subject to Title I of ERISA, a plan described in section 4975(e)(1) of the Code that is subject to Section 4975 of the Code, or an entity which is deemed to hold the “plan assets” of any such employee benefit plan or plan pursuant to 29 C.F.R. section 2510.3‑101, as modified by section 3(42) of ERISA (the “Plan Asset Regulations”), or a governmental, non-U.S., non-electing church or other plan which is subject to any U.S. federal, state, local or other law that is substantially similar to Title I of ERISA or section 4975 of the Code (“Similar Law”), or (ii) (A) the Transferee is acquiring a Note, (B) as of the date of the transfer or purchase, it believes that such Note is properly treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulations and agrees to so treat such Note and (C) the Transferee’s acquisition, holding and disposition of the Notes will satisfy the requirements of Prohibited Transaction Class Exemption (“PTCE”) 84‑14 (relating to transactions affected by a qualified professional asset manager), PTCE 90‑1 (relating to investments by insurance company pooled separate accounts), PTCE 91‑38 (relating to investments in bank collective investment funds), PTCE 95‑60 (relating to transactions involving insurance company general accounts), PTCE 96‑23 (relating to transactions directed by an in‑house professional asset manager) or the statutory prohibited transaction exemption for service providers set forth in section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code or a similar class or statutory exemption and will not result in a non‑exempt prohibited transaction under section 406 of ERISA or section 4975 of the Code (or, in the case of a governmental, non-U.S. or non-electing church plan subject to Similar Law, will not violate any such substantially Similar Law).

Exhibit B-1-8

 

8. If the Transferee is acquiring the Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgments, representations, warranties and agreements on behalf of each such account.

9. The Transferee hereby further acknowledges that:

 

(i) the rights of any Transferee will be subject and subordinate in all respects to all rights, powers, and prerogatives of Fannie Mae under the Fannie Mae Lender Contract, and no Noteholder enjoys privity of contract with Fannie Mae or is entitled to any benefit under the Acknowledgment Agreement except to the extent that the Indenture Trustee is entering into and shall perform under the Acknowledgment Agreement in its capacity as Indenture Trustee for the benefit of the Noteholders;

 

(ii) Fannie Mae has the right to terminate the Servicer with or without cause and controls the process for the disposition of assets under the Acknowledgment Agreement in the event of a termination of the Servicer or other transfer of MSRs; and

(iii) pursuant to the Fannie Mae Lender Contract, Fannie Mae has the right to offset liabilities owed to it subject to the Acknowledgment Agreement against fees and compensation paid to the Servicer prior to any distribution of excess servicing to any Noteholder.

All capitalized terms used but not otherwise defined herein have the respective meanings assigned thereto in the Indenture, pursuant to which the Notes were issued.

IN WITNESS WHEREOF, the undersigned has caused this Transferee Certification to be executed by its duly authorized representative as of the day and year first above written.

[TRANSFEREE]

 

By:

 

Name:

 

Title:

 

Exhibit B-1-9

 

Annex A1 to Exhibit B-1

TRANSFEREES OTHER THAN REGISTERED INVESTMENT COMPANIES

1. As indicated below, the undersigned is the President, Chief Financial Officer, Senior Vice President or other executive officer of the Transferee.

2. The Transferee is a “qualified institutional buyer” as that term is defined in Rule 144A (“Rule 144A”) promulgated under the Securities Act of 1933, as amended (the “1933 Act”), because (a) the Transferee owned and/or invested on a discretionary basis at least $____________ in securities [Note to reviewer - the amount in the previous blank must be at least $100,000,000 unless the Transferee is a dealer, in which case the amount filled in the previous blank must be at least $10,000,000.] (except for the excluded securities referred to in paragraph 3 below) as of _______________ [specify a date on or since the end of the Transferee’s most recently ended fiscal year] (such amount being calculated in accordance with Rule 144A) and (b) the Transferee meets the criteria listed in the category marked below.

_____ Corporation, etc. The Transferee is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, a corporation (other than a bank as defined in Section 3(a)(2) of the 1933 Act or a savings and loan association or other similar institution referenced in Section 3(a)(5)(A) of the Act), a partnership, or a Massachusetts or similar business trust.

_____ Bank. The Transferee (a) is a national bank or banking institution as defined in Section 3(a)(2) of the 1933 Act and is organized under the laws of a state, territory or the District of Columbia; the business of the Transferee is substantially confined to banking and is supervised by the appropriate state or territorial banking commission or similar official or is a foreign bank or equivalent institution, and (b) has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements as of a date not more than 16 months preceding the date of this certification in the case of a U.S. bank, and not more than 18 months preceding the date of this certification in the case of a foreign bank or equivalent institution, a copy of which financial statements is attached hereto.

_____ Savings and Loan. The Transferee is a savings and loan association, building and loan association, cooperative bank, homestead association or similar institution referenced in Section 3(a)(5)(A) of the 1933 Act. The Transferee is supervised and examined by a state or federal authority having supervisory authority over any such institutions or is a foreign savings and loan association or equivalent institution and has an audited net worth of at least $25,000,000 as demonstrated in its latest annual financial statements as of a date not more than 16 months preceding the date of this certification in the case of a U.S. savings and loan association or similar institution, and not more than 18 months preceding the date of this certification in the case of a foreign savings and loan association or equivalent institution, a copy of which financial statements is attached hereto.

Exhibit B-1-10

 

_____ Broker-dealer. The Transferee is a dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “1934 Act”).

_____ Insurance Company. The Transferee is an insurance company as defined in Section 2(13) of the 1933 Act, whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies and which is subject to supervision by the insurance commissioner or a similar official or agency of a state, territory or the District of Columbia.

_____ State or Local Plan. The Transferee is a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees.

_____ ERISA Plan. The Transferee is an “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended.

_____ Investment Adviser. The Transferee is an investment adviser registered under the Investment Advisers Act of 1940, as amended.

_____ Other. The Transferee qualifies as a “qualified institutional buyer” as defined in Rule 144A on the basis of facts other than those listed in any of the entries above. If this response is marked, the Transferee must certify on additional pages, to be attached to this certification, to facts that satisfy the Servicer that the Transferee is a “qualified institutional buyer” as defined in Rule 144A.

3. The term “securities” as used herein does not include (a) securities of issuers that are affiliated with the Transferee, (b) securities constituting the whole or part of an unsold allotment to or subscription by the Transferee, if the Transferee is a dealer, (c) bank deposit notes and certificates of deposit, (d) loan participations, (e) repurchase agreements, (f) securities owned but subject to a repurchase agreement and (g) currency, interest rate and commodity swaps.

4. For purposes of determining the aggregate amount of securities owned and/or invested on a discretionary basis by the Transferee, the Transferee used the cost of such securities to the Transferee and did not include any of the securities referred to in the preceding paragraph. Further, in determining such aggregate amount, the Transferee may have included securities owned by subsidiaries of the Transferee, but only if such subsidiaries are consolidated with the Transferee in its financial statements prepared in accordance with generally accepted accounting principles and if the investments of such subsidiaries are managed under the Transferee’s direction. However, such securities were not included if the Transferee is a majority-owned, consolidated subsidiary of another enterprise and the Transferee is not itself a reporting company under the 1934 Act.

5. The Transferee acknowledges that it is familiar with Rule 144A and understands that the Transferor and other parties related to the Notes are relying and will continue to rely on the statements made herein because one or more sales to the Transferee may be made in reliance on Rule 144A.

Exhibit B-1-11

 

6. Will the Transferee be purchasing _____ _____
the Notes only for the Transferee’s YES NO
own account?

If the answer to the foregoing question is “NO”, the Transferee agrees that, in connection with any purchase of securities sold to the Transferee for the account of a third party (including any separate account) in reliance on Rule 144A, the Transferee will only purchase for the account of a third party that at the time is a “qualified institutional buyer” within the meaning of Rule 144A. In addition, the Transferee agrees that the Transferee will not purchase securities for a third party unless the Transferee has obtained a current representation letter from such third party or taken other appropriate steps contemplated by Rule 144A to conclude that such third party independently meets the definition of “qualified institutional buyer” set forth in Rule 144A.

The Transferee will notify each of the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice is given, the Transferee’s purchase of the Notes will constitute a reaffirmation of this certification as of the date of such purchase. In addition, if the Transferee is a bank or savings and loan as provided above, the Transferee agrees that it will furnish to such parties updated annual financial statements promptly after they become available.

IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed by its duly authorized representative this ____ day of ___________, ______.

Print Name of Transferee

By:

Name:

Title:

Date:

 

Exhibit B-1-12

 

Annex A2 to Exhibit B-1

REGISTERED INVESTMENT COMPANIES

1. As indicated below, the undersigned is the President, Chief Financial Officer or Senior Vice President of the entity purchasing the Notes (the “Transferee”) or, if the Transferee is part of a Family of Investment Companies (as defined in paragraph 3 below), is an officer of the related investment adviser (the “Adviser”).

2. The Transferee is a “qualified institutional buyer” as that term is defined in Rule 144A (“Rule 144A”) promulgated under the Securities Act of 1933, as amended (the “1933 Act”), because (a) the Transferee is an investment company (a “Registered Investment Company”) registered under the Investment Company Act of 1940, as amended (the “1940 Act”) and (b) as marked below, the Transferee alone, or the Transferee’s Family of Investment Companies, owned at least $___________ [Note to reviewer - the amount in the previous blank must be at least $100,000,000] in securities (other than the excluded securities referred to in paragraph 4 below) as of ________________ [specify a date on or since the end of the Transferee’s most recently ended fiscal year]. For purposes of determining the amount of securities owned by the Transferee or the Transferee’s Family of Investment Companies, the cost of such securities to the Transferee or the Transferee’s Family of Investment Companies was used.

_____ The Transferee owned $____________ in securities (other than the excluded securities referred to in paragraph 4 below) as of the end of the Transferee’s most recent fiscal year (such amount being calculated in accordance with Rule 144A).

_____ The Transferee is part of a Family of Investment Companies which owned in the aggregate $____________ in securities (other than the excluded securities referred to in paragraph 4 below) as of the end of the Transferee’s most recent fiscal year (such amount being calculated in accordance with Rule 144A).

3. The term “Family of Investment Companies” as used herein means two or more Registered Investment Companies except for a unit investment trust whose assets consist solely of shares of one or more Registered Investment Companies (provided that each series of a “series company,” as defined in Rule 18f-2 under the 1940 Act, shall be deemed to be a separate investment company) that have the same investment adviser (or, in the case of a unit investment trust, the same depositor) or investment advisers (or depositors) that are affiliated (by virtue of being majority-owned subsidiaries of the same parent or because one investment adviser is a majority-owned subsidiary of the other).

4. The term “securities” as used herein does not include (a) securities of issuers that are affiliated with the Transferee or are part of the Transferee’s Family of Investment Companies, (b) bank deposit notes and certificates of deposit, (c) loan participations, (d) repurchase agreements, (e) securities owned but subject to a repurchase agreement and (f) currency, interest rate and commodity swaps.

5. The Transferee is familiar with Rule 144A and understands that the parties to which this certification is being made are relying and will continue to rely on the statements made herein because one or more sales to the Transferee will be in reliance on Rule 144A.

Exhibit B-1-13

 

In addition, the Transferee will only purchase for the Transferee’s own account.

6. The undersigned will notify the parties to which this certification is made of any changes in the information and conclusions herein. Until such notice, the Transferee’s purchase of the Purchased Certificates will constitute a reaffirmation of this certification by the undersigned as of the date of such purchase.

IN WITNESS WHEREOF, the undersigned has caused this certificate to be executed by its duly authorized representative this ____ of ____________, ______.

 

[Print Name of Transferee or Adviser]

 

By:

 

Name:

 

Title:

 

 

IF AN ADVISER:

 

[Print Name of Transferee]

Date:____________________________

Exhibit B-1-14

 

ExhibitB-2

 

 

FORM OF TRANSFEREE CERTIFICATE FOR TRANSFER OF NOTES PURSUANT TO REGULATION S

[Transferee to Receive Regulation S Note]

 

Issuer PMT ISSUER TRUST – FMSR

3043 Townsgate Road

Westlake Village, CA 91361

Attention: PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR Collateralized Notes

 

with a copy to:

 

Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington

DE 19801

Attention: Corporate Trust Administration

 

Co-Issuer PMT CO-ISSUER TRUST I – FMSR

3043 Townsgate Road

Westlake Village, CA 91361

Attention: PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR Collateralized Notes

 

with a copy to:

 

Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington

DE 19801

Attention: Corporate Trust Administration

 

Administrator PennyMac Corp.

3043 Townsgate Road, Suite 300

Westlake Village

CA 91361

Attention: Treasurer

 

Co-Issuer

Administrator PennyMac Holdings, LLC

3043 Townsgate Road, Suite 310

Westlake Village

CA 91361

Exhibit B-2-1

 

 

Attention: Treasurer

 

Indenture Trustee Citibank, N.A.

480 Washington Boulevard, 30th Floor

Jersey City, New Jersey 07310

Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and

PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes

 

Re: $[ ] PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR, MSR Collateralized Notes, Series 20__-__, Class ____

Reference is hereby made to the Amended and Restated Base Indenture, dated as of October 10, 2023 (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Indenture”), among PMT ISSUER TRUST - FMSR, as Issuer, PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer, PennyMac Corp., as Administrator and as Servicer, PennyMac Holdings, LLC, as Co-Issuer Administrator, Citibank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Atlas Securitized Products, L.P., as Administrative Agent, and the “Administrative Agents” from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

[NOTE: COMPLETE [A] FOR A TRANSFER OF AN INTEREST IN A RULE 144A GLOBAL NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S GLOBAL NOTE DURING THE DISTRIBUTION COMPLIANCE PERIOD. COMPLETE [B] FOR A TRANSFER OF AN INTEREST IN A RULE 144A GLOBAL NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S DEFINITIVE NOTE. COMPLETE [C] FOR A TRANSFER OF AN INTEREST IN A RULE 144A DEFINITIVE NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S GLOBAL NOTE. COMPLETE [D] FOR A TRANSFER OF AN INTEREST IN A RULE 144A DEFINITIVE NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF A REGULATION S DEFINITIVE NOTE. COMPLETE [E] FOR A TRANSFER OF AN INTEREST IN A REGULATION S GLOBAL NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S DEFINITIVE NOTE. COMPLETE [F] FOR A TRANSFER OF AN INTEREST IN REGULATION S DEFINITIVE NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF AN INTEREST IN A REGULATION S GLOBAL NOTE. COMPLETE [G] FOR A TRANSFER OF AN INTEREST IN A REGULATION S DEFINITIVE NOTE TO A TRANSFEREE THAT TAKES DELIVERY IN THE FORM OF A REGULATION S DEFINITIVE NOTE.]

[A] This letter relates to ________ principal amount of Notes that are held in the form of a beneficial interest in a Rule 144A Global Note (CUSIP No. ________) in the name of ________ (the “Transferor”) through the Depository. The Transferor has requested a transfer of such beneficial interest in the Notes for a beneficial interest in a Regulation S Global Note (ISIN No.

Exhibit B-2-2

 

________) (CUSIP No. ________ ) in the name of ________ (the “Transferee”) through [Euroclear] [Clearstream], which in turn holds through the Depository. Delivered herewith is a Transferee Certification completed by the Transferee.

[B] This letter relates to ________ principal amount of Notes that are held in the form of a beneficial interest in a Rule 144A Global Note (CUSIP No. ________ ) in the name of ________ (the “Transferor”) through the Depository. The Transferor has requested a transfer of such beneficial interest in the Notes for a Regulation S Definitive Note (ISIN No. ________) (CUSIP No. _______) in the name of ________ (the “Transferee”) pursuant to Section 6.5 of the Indenture. Delivered herewith is a Transferee Certification completed by the Transferee.

[C] This letter relates to a Rule 144A Definitive Note (CUSIP No. ________) in the principal amount of ________ in the name of ________(the “Transferor”). The Transferor has requested a transfer of such beneficial interest in the Notes for a beneficial interest in a Regulation S Global Note (ISIN No. ________) (CUSIP No. ________) in the name of ________ (the “Transferee”) through [Euroclear] [Clearstream], which in turn holds through the Depository. Delivered herewith is a Transferee Certification completed by the Transferee.

[D] This letter relates to a Rule 144A Definitive Note (CUSIP No._______________) in the principal amount of _______________ in the name of _______________ (the “Transferor”). The Transferor has requested a transfer of such Note for a Regulation S Definitive Note (ISIN No. ________) (CUSIP No._______________) in the name of _______________ (the “Transferee”) pursuant to Section 6.5 of the Indenture. Delivered herewith is a Transferee Certification completed by the Transferee.

[E] This letter relates to _______________ principal amount of Notes that are held in the form of a beneficial interest in a Regulation S Global Note (ISIN No. ________) (CUSIP No._______________) in the name of _______________ (the “Transferor”) through the Depository. The Transferor has requested a transfer of such beneficial interest in the Notes for a Regulation S Definitive Note (ISIN No. ________) (CUSIP No. _______________) in the name of _______________ (the “Transferee”) pursuant to Section 6.5 of the Indenture. Delivered herewith is a Transferee Certification completed by the Transferee.

[F] This letter relates to a Regulation S Definitive Note (ISIN No. ________) (CUSIP No. _______________) in the principal amount of _______________ in the name of _______________ (the “Transferor”). The Transferor has requested a transfer of such Note for a beneficial interest in a Regulation S Global Note (ISIN No. ________) (CUSIP No. _____________) in the name of _______________ (the “Transferee”) through [Euroclear] [Clearstream], which in turn holds through the Depository. Delivered herewith is a Transferee Certification completed by the Transferee.

[G] This letter relates to a Regulation S Definitive Note (ISIN No. ________) (CUSIP No. ________) in the principal amount of ________ in the name of _______________ (the “Transferor”). The Transferor has requested of such beneficial interest in the Notes for Regulation S Definitive Note (ISIN No. ________) (CUSIP No. ________) in the name of ________ (the “Transferee”) pursuant to Section 6.5 of the Indenture. Delivered herewith is a Transferee Certification completed by the Transferee.

Exhibit B-2-3

 

In connection with such request, and in respect of such Notes, the Transferor does hereby certify that such Notes are being transferred in accordance with (i) the transfer restrictions set forth in the Indenture and the Notes, and that:

(i) the offer of the Notes was not made to a person in the United States;

(ii) at the time the buy order was originated, the Transferee was outside the United States or the Transfer and any person acting on its behalf reasonably believed that the Transferee was outside the United States

(iii) no directed selling efforts have been made in contravention of the requirements of Rule 903 or 904 of Regulation S, as applicable;

(iv) the transaction is not part of a plan or scheme to evade the registration requirements of the United States Securities Act of 1933, as amended (the “Securities Act”); and

(v) the Transferee is not a U.S. person.

If the Transferor is the Noteholder of a Regulation S Note (or an interest therein) and intends to transfer such Note (or such interest) to the Transferee taking delivery of such Note (or such interest) in the form of a Restricted Note (or interest therein), the Transferor hereby certifies that the transfer is being made after the end of the Distribution Compliance Period.

 

Exhibit B-2-4

 

The certificate and the statements contained herein are made for your benefit.

[INSERT NAME OF TRANSFEROR]

By: ________________________

Name:

Title:

Dated:

 

 

 

Exhibit B-2-5

 

TRANSFEREE CERTIFICATION

 

 

Issuer PMT ISSUER TRUST – FMSR

3043 Townsgate Road

Westlake Village, CA 91361

Attention: PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR Collateralized Notes

 

with a copy to:

 

Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington

DE 19801

Attention: Corporate Trust Administration

 

Co-Issuer PMT CO-ISSUER TRUST I – FMSR

3043 Townsgate Road

Westlake Village, CA 91361

Attention: PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR Collateralized Notes

 

with a copy to:

 

Wilmington Savings Fund Society, FSB, as Owner Trustee

500 Delaware Avenue, 11th Floor

Wilmington

DE 19801

Attention: Corporate Trust Administration

 

Administrator PennyMac Corp.

3043 Townsgate Road, Suite 300

Westlake Village

CA 91361

Attention: Treasurer

 

Co-Issuer

Administrator PennyMac Holdings, LLC

3043 Townsgate Road, Suite 310

Westlake Village

CA 91361

Attention: Treasurer

 

Indenture Trustee Citibank, N.A.

480 Washington Boulevard, 30th Floor

Exhibit B-2-6

 

Jersey City, New Jersey 07310

Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and

PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes

 

Re: $[ ] PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR, MSR Collateralized Notes, Series 20__-__, Class ____

 

Reference is hereby made to the Amended and Restated Base Indenture, dated as of October 10, 2023 (as may be further amended, restated, supplemented or otherwise modified from time to time, the “Indenture”), among PMT ISSUER TRUST - FMSR, as Issuer, PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer, PennyMac Corp., as Administrator and as Servicer, PennyMac Holdings, LLC, as Co-Issuer Administrator, Citibank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, Atlas Securitized Products, L.P., as Administrative Agent, and the “Administrative Agents” from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

The undersigned (the “Transferee”) intends to purchase $________ Note Balance of Class __Notes (the “Notes”) from the Transferor named in the Transfer Certificate to which this Transferee Certification is attached. In connection with the registration of the transfer of such Notes, the Transferee hereby executes and delivers to each of you this “Transferee Certification” in which the Transferee certifies to each of you the information set forth herein.

1. The Transferee (i) is acquiring such Notes in an offshore transaction in accordance with Rule 904 of Regulation S, (ii) is acquiring such Notes for its own account, (iii) is not acquiring, and has not entered into any discussions regarding its acquisition of, such Notes while it is in the United States of America or any of its territories or possessions, (iv) understands that such Notes are being sold without registration under the Securities Act by reason of an exemption that depends, in part, on the accuracy of these representations, (v) understands that such Notes may not, absent an applicable exemption, be transferred without registration and/or qualification under the Securities Act and applicable state securities laws and the laws of any other applicable jurisdiction and (vi) understands that prior to the end of the Distribution Compliance Period, interests in a Regulation S Note may only be held through Euroclear or Clearstream.

2. The Transferee understands that the Notes have not been registered under the Securities Act and, therefore, cannot be offered or sold in the United States or to U.S. persons (as defined in Rule 902(k) promulgated under the Securities Act) unless they are registered under the Securities Act or unless an exemption from registration is available. Accordingly, the certificates representing the Notes will bear a legend stating that the Notes have not been registered under the Securities Act and setting forth certain of the restrictions on transfer of the Notes. The Transferee understands that the Issuer Trusts have no obligation to register the Notes under the Securities Act or to comply with the requirements for any exemption from the registration requirements of the Securities Act.

Exhibit B-2-7

 

3. The Transferee understands that the Notes (or any interest therein) may be resold, pledged or transferred only (a) to a person whom the Transferee reasonably believes after due inquiry is, and who has certified that it is, a “qualified institutional buyer” (a “QIB”) that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A or (b) to a transferee that is a non-U.S. person acquiring such interest in an “offshore transaction” (as defined in Regulation S) in compliance with the provisions of Regulation S, if the transfer is otherwise made in accordance with any applicable securities laws of any state of the United States or any other relevant jurisdiction. In addition, such transfer may be subject to additional restrictions and is subject to compliance with certain procedures, as set forth in Section 6.5 of the Indenture referred to above.

4. The Transferee has been furnished with all information that it requested regarding (a) the Notes and distributions thereon and (b) the Indenture.

5. The Transferee has knowledge in financial and business matters and is capable of evaluating the merits and risks of an investment in the Notes; the Transferee has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision; and the Transferee (or any account or which it is pursuing) is able to bear the economic risk of an investment in the Notes and can afford a complete loss of such investment.

6. Either (i) for so long as it holds such Note or an interest therein, the Transferee is not, and is not acquiring, holding or transferring the Notes on behalf of or using “plan assets” (within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA) of, an “employee benefit plan” as defined in section 3(3) of ERISA that is subject to Title I of ERISA, a plan described in section 4975(e)(1) of the Code that is subject to Section 4975 of the Code, or an entity which is deemed to hold the “plan assets” of any such employee benefit plan or plan pursuant to 29 C.F.R. section 2510.3‑101, as modified by section 3(42) of ERISA (the “Plan Asset Regulations”), or a governmental, non-U.S., non-electing church or other plan which is subject to any U.S. federal, state, local or other law that is substantially similar to Title I of ERISA or section 4975 of the Code (“Similar Law”), or (ii) (A) the Transferee is acquiring a Note, (B) as of the date of the transfer or purchase, it believes that such Note is properly treated as indebtedness without substantial equity features for purposes of the Plan Asset Regulations and agrees to so treat such Note and (C) the Transferee’s acquisition, holding and disposition of the Notes will satisfy the requirements of Prohibited Transaction Class Exemption (“PTCE”) 84‑14 (relating to transactions affected by a qualified professional asset manager), PTCE 90‑1 (relating to investments by insurance company pooled separate accounts), PTCE 91‑38 (relating to investments in bank collective investment funds), PTCE 95‑60 (relating to transactions involving insurance company general accounts), PTCE 96‑23 (relating to transactions directed by an in‑house professional asset manager) or the statutory prohibited transaction exemption for service providers set forth in section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code or a similar class or statutory exemption and will not result in a non‑exempt prohibited transaction under section 406 of ERISA or section 4975 of the Code (or, in the case of a governmental, non-U.S. or non-electing church plan subject to Similar Law, will not violate any such substantially Similar Law).

7. The Transferee hereby further acknowledges that:

Exhibit B-2-8

 

(i) the rights of any Transferee will be subject and subordinate in all respects to all rights, powers, and prerogatives of Fannie Mae under the Fannie Mae Lender Contract, and no Noteholder enjoys privity of contract with Fannie Mae or is entitled to any benefit under the Acknowledgment Agreement except to the extent that the Indenture Trustee is entering into and shall perform under the Acknowledgment Agreement in its capacity as Indenture Trustee for the benefit of the Noteholders;

(ii) Fannie Mae has the right to terminate the Servicer with or without cause and controls the process for the disposition of assets under the Acknowledgment Agreement in the event of a termination of the Servicer or other transfer of MSRs; and

(iii) pursuant to the Fannie Mae Lender Contract, Fannie Mae has the right to offset liabilities owed to it subject to the Acknowledgment Agreement against fees and compensation paid to the Servicer prior to any distribution of excess servicing to any Noteholder.

 

All capitalized terms used but not otherwise defined herein have the respective meanings assigned thereto in the Indenture, pursuant to which the Notes were issued.

 

Exhibit B-2-9

 

IN WITNESS WHEREOF, the undersigned has caused this Transferee Certification to be executed by its duly authorized representative as of the day and year first above written.

[TRANSFEREE]

By:

Name:

Title:

Exhibit B-2-10

 

Exhibit C-1

 

AUTHORIZED REPRESENTATIVES OF THE INDENTURE TRUSTEE, CALCULATION AGENT, PAYING AGENT AND

SECURITIES INTERMEDIARY

 

[See Attached]

 

 

Exhibit C-1-1

 

Exhibit C-2

 

AUTHORIZED REPRESENTATIVES OF PENNYMAC CORP., AS SERVICER AND AS ADMINISTRATOR

 

 

Name:

Title:

Signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit C-2-1

 

Exhibit C-3

 

AUTHORIZED REPRESENTATIVES OF PENNYMAC HOLDINGS, LLC, AS CO-ISSUER ADMINISTRATOR

 

 

Name:

Title:

Signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit C-3-1

 

Exhibit C-4

 

AUTHORIZED REPRESENTATIVES OF THE ADMINISTRATIVE AGENT

 

 

Name:

Title:

Signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit C-4-1

 

Exhibit C-5

 

AUTHORIZED REPRESENTATIVES OF THE ISSUER

 

 

[See attached]

 

 

Exhibit C-5-1

 

Exhibit C-6

 

AUTHORIZED REPRESENTATIVES OF THE CO-ISSUER

 

 

[See attached]

Exhibit C-6-1

 

Exhibit D

FORM OF CERTIFICATE OF AUTHENTICATION OF INDENTURE TRUSTEE AND AUTHENTICATING AGENT

 

[See attached]

 

Exhibit D-1

 

INDENTURE TRUSTEE’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Series or Class designated herein and referred to in the within-mentioned Indenture and Indenture Supplement.

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Indenture Trustee

 


By:
Title: Authorized Signatory of Indenture Trustee

 

 

 

AUTHENTICATING AGENT’S

CERTIFICATE OF AUTHENTICATION

 

This is one of the Notes of the Class designated herein and referred to in the within-mentioned Indenture and Indenture Supplement.

 

 

Date: [_____], 20[__] CITIBANK, N.A., not in its individual capacity but solely as Authenticating Agent

 

By:

Title: Authorized Signatory of Authenticating Agent

 

Exhibit D-2

 

Exhibit E

FORM OF RISK RETENTION CERTIFICATION

 

[______], 20[__]

 

Citibank, N.A.

Agency & Trust

388 Greenwich Street Trading

New York, NY 10013

Attention: PMT ISSUER TRUST – FMSR and PMT CO-ISSUER I TRUST – FMSR MSR Collateralized Notes

RE: Risk Retention Certification

Ladies and Gentlemen:

Reference is made to (i) the Amended and Restated Base Indenture, dated as of October 10, 2023 (as further amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), among PMT ISSUER TRUST - FMSR (the “Issuer”), PMT CO-ISSUER TRUST I – FMSR (the “Co-Issuer”) Citibank, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary (the “Indenture Trustee”), PennyMac Corp. (“PMC”), as Servicer and Administrator, PennyMac Holdings, LLC (“PMH”), as Co-Administrator, and Atlas Securitized Products, L.P., as Administrative Agent (the “Administrative Agent”), (ii) the Series [_____] Indenture supplement, dated as of [____], 20[__] (the “Series [___] Indenture Supplement,” and together with the Base Indenture, the “Indenture”), among the Issuer, the Co-Issuer, the Indenture Trustee, PMC, as Servicer and as Administrator, PMH, as Co-Issuer Administrator, and the Administrative Agent, and (iii) the Risk Retention Side Letter, dated as of [____], 20[__] (the “Risk Retention Side Letter”), between PMC, PMH, the Issuer and the Co-Issuer. Capitalized terms not otherwise defined in this letter agreement shall have the same meanings as specified therefor in the Indenture or the Risk Retention Side Letter, as applicable.

In connection with, and in consideration of the agreements contained in the Indenture, as of the date first above written:

(a) PennyMac Mortgage Investment Trust (the “Guarantor”) certifies to the Issuer Trusts on behalf of each holder of a Series [___] Note that as an originator for the purposes of the Securitization Regulations, it has held on an on-going basis, a material net economic interest in the form specified in Article 6(3)(d) of the Securitization Regulations (retention of the first loss tranche and, where such retention does not amount to 5% of the nominal value of the securitised exposures, if necessary, other tranches having the same or a more severe risk profile than those transferred or sold to investors and not maturing any earlier than those transferred or sold to investors, so that the retention equals in total not less than 5% of the nominal value of the securitised exposures) in the securitization transaction contemplated by the Note Purchase Agreement by retaining, directly or indirectly, a 100% ownership interest in PMC and in PMH, and PMC and/or PMH retaining the membership interest in the Owner Trust Certificates and the associated rights to residual cash flow under the Indenture (the “Retained Interest”);

Appendix A-1

 

 

(b) each of the Guarantor, PMC, and PMH certifies that it has not sold or entered into any credit risk mitigation, short positions or any other hedges or otherwise sought to mitigate its credit risk with respect to its ownership interests in the Issuer Trusts or the Participation Certificates (except as permitted by the Securitization Laws); and

 

(c) the Issuer Trusts certify to each holder of a Series [___] Note for purposes of the Securitization Laws that they have not sold or entered into any credit risk mitigation, short positions or any other hedges or otherwise sought to mitigate their credit risk with respect to Retained Interest or the Participation Certificates (except as permitted by the Securitization Laws).

 

IN WITNESS WHEREOF, the undersigned have caused this certification to be executed by its duly authorized representative as of the date first above written.

 

PENNYMAC MORTGAGE INVESTMENT TRUST,as Guarantor

 

 

By:

Name:

Title:

 

 

PENNYMAC CORP.

 

 

By:

Name:

Title:

 

 

 

PMT ISSUER TRUST - FMSR

 

By: PENNYMAC CORP., as Administrator By: PENNYMAC HOLDINGS, LLC, as Co-Issuer Administrator

 

 

Appendix A-2

 

By:

Name:

Title:

 

PENNYMAC HOLDINGS, LLC

 

 

By:

Name:

Title:

 

 

 

PMT CO-ISSUER TRUST I – FMSR

 

 

 

By:

Name:

Title:

 

 

 

 

 

 

 

Appendix A-3

EX-10.14 7 pmt-ex10_14.htm EX-10.14 EX-10.14

EXHIBIT 10.14

[INFORMATION INDICATED WITH BRACKETS HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

PMT ISSUER TRUST – FMSR,
as Issuer

and

PMT CO-ISSUER TRUST I – FMSR,
as Co-Issuer

and

CITIBANK, N.A.,
as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary

and

PENNYMAC CORP.,
as Administrator and as Servicer

and

PENNYMAC HOLDINGS, LLC,
as Co-Issuer Administrator

and

ATLAS SECURITIZED PRODUCTS, L.P.,
as Administrative Agent

__________

AMENDED AND RESTATED SERIES 2017-VF1 INDENTURE SUPPLEMENT MSR COLLATERALIZED NOTES, SERIES 2017-VF1

 

 

Dated as of October 10, 2023

To

AMENDED AND RESTATED BASE INDENTURE

Dated as of October 10, 2023

(as amended from time to time)

 

 

TABLE OF CONTENTS

Page

Section 1.

Replacement of the Series 2017-VF1 Notes

3

Section 2.

Defined Terms

4

Section 3.

Form of the Series 2017-VF1 Notes; Transfer Restrictions; Considerations

9

Section 4.

Series Reserve Account; Stop-Loss Cap Required Amount

9

Section 5.

Interest Payment Amounts

9

Section 6.

Payments; Note Balance Increases; Early Maturity

10

Section 7.

Optional Redemption

11

Section 8.

Determination of Note Interest Rate and Benchmark

11

Section 9.

Conditions Precedent Satisfied

11

Section 10.

Representations and Warranties

12

Section 11.

Amendments

12

Section 12.

Counterparts

13

Section 13.

Entire Agreement

14

Section 14.

Limited Recourse

14

Section 15.

Owner Trustee Limitation of Liability

14

Section 16.

Note Rating Agency

15

Section 17.

Consent, Acknowledgment and Waivers

15

Section 18.

Conditions to Effectiveness of this Indenture Supplement

15

Section 19.

Effect of Amendment

16

 

- PAGE i

 

This AMENDED AND RESTATED SERIES 2017-VF1 INDENTURE SUPPLEMENT (this “Indenture Supplement”), dated as of October 10, 2023, is made by and among PMT ISSUER TRUST – FMSR, a statutory trust organized under the laws of the State of Delaware, as issuer (the “Issuer”), PMT CO-ISSUER TRUST I – FMSR, a statutory trust organized under the laws of the State of Delaware, as co-issuer (“Co-Issuer” and together with the Issuer, each, an “Issuer Trust” and collectively, the “Issuer Trusts”), CITIBANK, N.A., a national banking association, as indenture trustee (in such capacity, the “Indenture Trustee”), as calculation agent (in such capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), PENNYMAC CORP., a Delaware corporation (“PMC”), as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), PENNYMAC HOLDINGS, LLC, a Delaware limited liability company (“PMH”), as co-issuer administrator (the “Co-Issuer Administrator”), and ATLAS SECURITIZED PRODUCTS, L.P. (“ASP”), a Delaware limited partnership, as Administrative Agent (as defined herein), and is consented to by NEXERA HOLDING LLC (“Nexera”) and Citibank, N.A. (“Citibank”), together, the Series Required Noteholders (as defined herein). This Indenture Supplement relates to and is executed pursuant to that certain Amended and Restated Base Indenture supplemented hereby, dated as of the date hereof, including the schedules and exhibits thereto (as may be amended, restated, supplemented, or otherwise modified from time to time, the “Base Indenture”), among the Issuer, Co-Issuer, PMC, PMH, the Servicer, the Administrator, the Co-Issuer Administrator, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, and ASP, as Administrative Agent, and the “Administrative Agents” from time to time parties thereto, all the provisions of which are incorporated herein as modified hereby and shall be a part of this Indenture Supplement as if set forth herein in full (the Base Indenture as so supplemented by this Indenture Supplement, collectively referred to as the “Indenture”).

Capitalized terms used and not otherwise defined herein shall have the respective meanings given them in the Base Indenture, and the rules of interpretation set forth in Section 1.2 of the Base Indenture shall apply equally herein.

RECITALS OF THE ISSUER TRUSTS

WHEREAS, the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and the Administrative Agent entered into that certain Series 2017-VF1 Indenture Supplement, dated as of December 20, 2017 (as amended by Amendment No. 1, dated as of June 29, 2018, Amendment No. 2, dated as of August 4, 2020, Amendment No. 3, dated as of October August 9, 2021, Amendment No. 4, dated as of February 8, 2022, and Amendment No. 5, dated as of June 27, 2023, collectively, the “Original Series 2017-VF1 Indenture Supplement);

- 1 -

 

WHEREAS, pursuant to the Base Indenture and the Original Series 2017-VF1 Indenture Supplement, the Issuer duly authorized the issuance of a Series of Variable Funding Notes known as the “PMT ISSUER TRUST – FMSR MSR Collateralized Notes, Series 2017-VF1 Notes” (the “Outstanding Series 2017-VF1 Notes”); WHEREAS, pursuant to Section 12.2 of the Base Indenture, the Issuer, the Co-Issuer, the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer and the Administrative Agent, with prior notice to each Note Rating Agency and the consent of the Majority Noteholders of each Series materially and adversely affected by such amendment, by Act of said Noteholders delivered to the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer, the Administrative Agent and the Indenture Trustee, upon delivery of an Issuer Trusts’ Tax Opinion (unless the Noteholders unanimously consent to waive such opinion), for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, any Indenture Supplement;

WHEREAS, pursuant to Section 12.3 of the Base Indenture, in executing or accepting the additional trusts created by any amendment or Indenture Supplement of the Base Indenture permitted by Article XII or the modifications thereby of the trusts created by the Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1 of the Base Indenture) will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment or Indenture Supplement is authorized and permitted by the Base Indenture and that all conditions precedent thereto have been satisfied (the “Authorization Opinion”); provided, that no such Authorization Opinion shall be required in connection with any amendment or Indenture Supplement consented to by all Noteholders if all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or Indenture Supplement;

WHEREAS, pursuant to Section 1.3 of the Base Indenture, the Issuer Trusts shall deliver an Officer’s Certificate stating that all conditions precedent, if any, provided for in the Base Indenture relating to a proposed action have been complied with and that the Issuer reasonably believes that this Amendment will not have a material Adverse Effect, and shall also furnish to the Indenture Trustee an opinion of counsel stating that in the opinion of such counsel all conditions precedent to a proposed action, if any, have been complied with (unless 100% of the Noteholders have consented to the related amendment, modification or action and all of the Noteholders have directed the Indenture Trustee in writing to execute such amendment or supplement, or with respect or with respect to any other modification or action, directed the Indenture Trustee in writing to permit such modification or action without receiving such certificate or opinion);

WHEREAS, pursuant to Section 11.1 of the Trust Agreements, prior to the execution of any amendment to any Transaction Documents to which the related Issuer Trust is a party, the Owner Trustee under the related Trust Agreement shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the related Trust Agreement and that all conditions precedent have been met;

WHEREAS, pursuant to Section 4.1(a)(iii) of each Trust Agreement, the consent of each of the Owners (as defined in the Trust Agreements) (unless an Event of Default has occurred and is continuing), the Administrative Agent and the Series Required Noteholders of all Variable Funding Notes is required for the amendment or other change to any Transaction Document in circumstances where the consent of any Noteholder or the Administrative Agent is required (other than an amendment or supplement to the Base Indenture pursuant to Section 13.1 thereof); WHEREAS, there is currently one Outstanding Series of Variable Funding Notes, the Outstanding Series 2017-VF1 Note, which was issued to PMC pursuant to the terms of the Original Series 2017-VF1 Indenture Supplement, and which was purchased by Nexera and Citibank under the Amended and Restated Master Repurchase Agreement, dated as of June 29, 2018, by and among the Administrative Agent, Nexera, as a buyer, Citibank, as a buyer, and PMC, as seller (as amended, restated, supplement, or otherwise modified from time to time, the “Original Series 2017-VF1 Repurchase Agreement”), pursuant to which PMC sold all of rights, title and interest in the Series 2017-VF1 Note to Nexera and Citibank;

- 2 -

 

WHEREAS, (i) pursuant to the Issuer Trust Agreement, PMC is the sole Owner of the Issuer and pursuant to the Co-Issuer Trust Agreement, PMH is the sole Owner of the Co-Issuer, and (ii) pursuant to the Original Series 2017-VF1 Indenture Supplement, with respect to the Outstanding Series 2017-VF1 Notes, any Action provided by the Base Indenture or the Original Series 2017-VF1 Indenture Supplement to be given or taken by a Noteholder shall be taken by Nexera, as a buyer, and Citibank, as a buyer, of the Series 2017-VF1 Notes under the Original Series 2017-VF1 Repurchase Agreement, and therefore, Nexera and Citibank are the Series Required Noteholders;

WHEREAS, as of the date hereof, the Series 2017-VF1 Notes are rated by the Note Rating Agency;

WHEREAS, pursuant to Section 11 of the Original Series 2017-VF1 Indenture Supplement, the parties hereto may enter into an amendment to supplement, amend or revise any term or provision of the Original Series 2017-VF1 Indenture Supplement pursuant to the terms and provisions of Section 12.2 of the Base Indenture with the consent of the Noteholders of 100% of the Outstanding Notes; and

WHEREAS, on the Effective Date, the parties are amending and restating the Original Indenture Supplement, pursuant to this Indenture Supplement.

NOW, THEREFORE, the Issuer Trusts, Indenture Trustee, the Administrator, the Servicer and the Administrative Agent hereby agree, in consideration of the amendments, agreements and other provisions herein contained and of certain other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties hereto, that the Original 2017-VF1 Indenture Supplement is hereby amended as follows:

PRELIMINARY STATEMENT

Each of the Issuer and Co-Issuer have duly authorized the cancellation and replacement of the Outstanding Series 2017-VF1 Note, with the Series 2017‑VF1 Notes (as defined below). The parties are entering into this Indenture Supplement to document the terms of the issuance of the Series 2017‑VF1 Notes pursuant to the Base Indenture, which provides for the issuance of Notes in multiple series from time to time.

Section 1. Replacement of the Series 2017-VF1 Notes. (a) The parties hereto acknowledge and agree that the Outstanding Series 2017-VF1 Note No. 3, with a Maximum VFN Principal Balance of $1,000,000,000 is (1) hereby deemed cancelled and for all purpose no longer outstanding under the Base Indenture and applicable law and (2) replaced by the Series 2017-VF1 Note No.

- 3 -

 

4, to be dated as of the date hereof with a Maximum VFN Principal Balance of $1,000,000,000 and known as the “PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST MSR Collateralized Notes, Series 2017-VF1 Notes” (the “Series 2017-VF1 Notes”). The Series 2017‑VF1 Notes are rated and are not subordinate to any other Series of Notes. The Series 2017‑VF1 Notes are issued in one (1) Class of Variable Funding Notes (Class A-VF1) with the Maximum VFN Principal Balance, Stated Maturity Date, Note Interest Rate and other terms as specified in this Indenture Supplement. The Series 2017‑VF1 Notes shall be secured by the Trust Estate Granted to the Indenture Trustee pursuant to the Base Indenture. The Indenture Trustee shall hold the Trust Estate as collateral security for the benefit of the Noteholders of the Series 2017‑VF1 Notes and all other Series of Notes issued under the Base Indenture as described therein.

(b) The Noteholders shall promptly deliver the Outstanding Series 2017-VF1 Note No. 3 to the Indenture Trustee for cancellation and hereby consents to the replacement of such Note with the Series 2017-VF1 Note No. 4.

(c) In the event that any term or provision contained herein with respect to the Series 2017‑VF1 Notes shall conflict with or be inconsistent with any term or provision contained in the Base Indenture, the terms and provisions of this Indenture Supplement shall govern to the extent of such conflict.

Section 2. Defined Terms. With respect to the Series 2017‑VF1 Notes and in addition to or in replacement of the definitions set forth in Section 1.1 of the Base Indenture, the following definitions shall be assigned to the defined terms set forth below:

“Additional Note Payment” means a payment made by the Issuer Trusts to the Noteholder of the Series 2017-VF1 Notes, using proceeds of an Optional Payment or a Margin Call Payment under the PC Repurchase Agreement to reduce the unpaid principal balance of the Series 2017‑VF1 Notes.

“Additional Term Note Offering” means the issuance of at least $200,000,000 in Term Notes on or after the date hereof to third party investors in accordance with the Base Indenture.

“Adjusted Daily Simple SOFR” means an interest rate per annum equal to (i) the Daily Simple SOFR, plus (ii) the applicable Benchmark Adjustment. The Calculation Agent shall not be responsible for calculating the Adjusted Daily Simple SOFR.

“Administrative Agent” means, for so long as the Series 2017‑VF1 Notes are Outstanding, pursuant to the provisions of this Indenture Supplement, ASP, or an Affiliate or successor by merger thereto.

“Advance Rate” means, with respect to the Series 2017‑VF1 Notes, on any date of determination, [**]%, subject to amendment by mutual agreement of the Administrative Agent, the Administrator and the Co-Issuer Administrator; provided, that, upon the occurrence of an Advance Rate Trigger 1 Event, the Advance Rate will decrease by [****]% until the Advance Rate Trigger 1 Event has been cured in all respects subject to the satisfaction of the Administrative Agent for two (2) consecutive months, at which point the Advance Rate, as applicable, will revert to [**]%; provided, further, that, upon the occurrence of an Advance Rate Trigger 2 Event, the Advance Rate will decrease by an additional [****]%, such that the cumulative decrease of the Advance Rate upon the occurrence of an Advance Rate Trigger 2 Event will be [****]% until the Advance Rate Trigger 2 Event has been cured in all respects subject to the satisfaction of the Administrative Agent for two (2) consecutive months, at which point the Advance Rate, as applicable, will be (x) if an Advance Rate Trigger 1 Event is then in effect, [**]%, and (y) if no Advance Rate Trigger 1 Event is then in effect, [**]%.

- 4 -

 

“Advisers Act” has the meaning assigned to such term in Section 3 of this Indenture Supplement.

“Base Indenture” has the meaning assigned to such term in the Preamble.

“Benchmark” means, with respect to any date of determination, the Adjusted Daily Simple SOFR or, if applicable, a Benchmark Replacement Rate. It is understood that the Benchmark shall be adjusted on a daily basis; provided, that, Benchmark for the three (3) Business Days prior to the related Payment Date shall be fixed at Benchmark for the third (3rd) Business Day prior to the related Payment Date.

“Benchmark Adjustment” means, for any day, the spread adjustment for such Interest Accrual Period that has been selected or recommended by the Relevant Governmental Body for the tenor of 1 month. For the avoidance of doubt, the “Benchmark Adjustment” means, for any day, the value as reported on the display designated as “YUS0001M” on Bloomberg, or such other display as may replace “YUS0001M.”

“Benchmark Administration Changes” means, with respect to the Benchmark (including any Benchmark Replacement Rate), any technical, administrative or operational changes (including without limitation changes to the timing and frequency of determining rates and making payments of interest, length of lookback periods, and other administrative matters as may be appropriate, in the sole and good faith discretion of Administrative Agent, to reflect the adoption and implementation of such Benchmark and to permit the administration thereof by Administrative Agent in a manner substantially consistent with market practice (or, if Administrative Agent determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such Benchmark exists, in such other manner of administration as Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement).

“Benchmark Replacement Rate” means with respect to any Benchmark Transition Event, the sum of: (i) the alternate benchmark rate that has been selected in the sole and good faith discretion of Administrative Agent, giving due consideration to (A) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (B) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated repurchase facilities and (ii) the related Benchmark Administration Changes; provided that, no such Benchmark Replacement Rate as so determined would be less than 0%.

“Benchmark Transition Event” means a determination by Administrative Agent in its sole and good faith discretion that, by reason of circumstances affecting the relevant market, (i)

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adequate and reasonable means do not exist for ascertaining the Benchmark, (ii) the applicable Benchmark is permanently or indefinitely no longer in existence, (iii) continued implementation of the Benchmark is no longer administratively feasible or no significant market practice for the administration of the Benchmark exists, (iv) the Benchmark will not adequately and fairly reflect the cost to Noteholder of purchasing or maintaining Note (including increases in the balance thereof) going forward or (v) the administrator of the applicable Benchmark or a Relevant Governmental Body having jurisdiction over Noteholder or Administrative Agent has made a public statement identifying a specific date after which the Benchmark shall no longer be made available or used for determining the interest rate of loans or other extensions of credit.

“Benefit Plan Investor” has the meaning assigned to such term in Section 3 of this Indenture Supplement.

“Class A-VF1 Notes” means, the Variable Funding Notes, Class A‑VF1 Variable Funding Notes, issued hereunder by the Issuer Trusts, having an aggregate VFN Principal Balance of no greater than the applicable Maximum VFN Principal Balance.

“Corporate Trust Office” means the corporate trust offices of the Indenture Trustee at which at any particular time its corporate trust business with respect to the Issuer Trusts shall be administered, which offices at the date of this Indenture Supplement are located at Citibank, N.A., 388 Greenwich Street Trading, New York, NY 10013, Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes and solely for purposes of the transfer, surrender or exchanges of Notes, at 480 Washington Boulevard, 30th Floor, Jersey City, New Jersey 07310, Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes.

“Cumulative Interest Shortfall Amount Rate” means, with respect to the Series 2017-VF1 Notes, [****]% per annum.

“Daily Simple SOFR” means, for any day, SOFR, with conventions (including, without limitation, a lookback) established by the Administrative Agent in its sole and good faith discretion; provided that, if the Administrative Agent determines that any such convention is not administratively, operationally, or technically feasible for the Administrative Agent, then the Administrative Agent may establish another convention in its sole and good faith discretion.

“Default Supplemental Fee” means for the Series 2017‑VF1 Notes and each Payment Date during the Full Amortization Period and on the date of final payment of such Notes (if the Full Amortization Period is continuing on such final payment date), a fee equal to the product of

(i) the Default Supplemental Fee Rate multiplied by

(ii) the average daily Note Balance since the prior Payment Date of the Series 2017-VF1 Notes multiplied by

(iii) a fraction, the numerator of which is the number of days elapsed from and including the prior Payment Date (or, if later, the commencement of the Full Amortization Period) to but excluding such Payment Date and the denominator of which equals 360.

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“Default Supplemental Fee Rate” means, with respect to the Series 2017-VF1 Notes, [****]% per annum.

“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.

“Fiduciary Rule” has the meaning assigned to such term in Section 3 of this Indenture Supplement.

“Indenture” has the meaning assigned to such term in the Preamble.

“Indenture Supplement” has the meaning assigned to such term in the Preamble.

“Initial Note Balance” means, in the case of the Series 2017‑VF1 Notes, an amount determined by the Administrative Agent, the Issuer, the Co-Issuer, the Administrator and the Co-Issuer Administrator on the Issuance Date, which amount is set forth in an Issuer and Co-Issuer Certificate delivered to the Indenture Trustee. For the avoidance of doubt, the requirement for minimum bond denominations in Section 6.2 of the Base Indenture shall not apply in the case of the Series 2017‑VF1 Notes.

“Interest Accrual Period” means, for the Series 2017‑VF1 Notes and any Payment Date, the period beginning on the immediately preceding Payment Date (or, in the case of the first Payment Date, the Issuance Date) and ending on the day immediately preceding the current Payment Date. The Interest Payment Amount for the Series 2017‑VF1 Notes on any Payment Date shall be determined based on the Interest Day Count Convention.

“Interest Day Count Convention” means with respect to the Series 2017‑VF1 Notes, the actual number of days in the related Interest Accrual Period divided by 360.

“Issuance Date” means December 20, 2017.

“Margin” means, for the Series 2017-VF1 Notes, (i) [****]% per annum or (ii) upon the occurrence of an Additional Term Note Offering, the related “Margin” in effect for the Term Notes subject to such Additional Term Note Offering plus [****]%; provided, however, any Margin calculated pursuant to clause (ii) hereof shall not be less than [****]% or greater than [****]%.

“Maximum VFN Principal Balance” means, for the Series 2017-VF1 Notes, (i)$1,000,000,000, (ii) such other amount, calculated pursuant to a written agreement among the Administrator, the Co-Issuer Administrator and the Administrative Agent or (iii) such lesser amount designated by the Administrator and the Co-Issuer Administrator in accordance with the terms of the Base Indenture.

“Note Interest Rate” means, for the Series 2017‑VF1 Notes, with respect to any Interest Accrual Period, the sum of (a) the greater of (i) the Benchmark (as determined by the Administrative Agent) and (ii) [****]% plus (b) the Margin.

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“Outstanding Series 2017-VF1 Notes” has the meaning assigned to such term in the Recitals.

“Plan Fiduciary” has the meaning assigned such term in Section 3 of this Indenture Supplement.

“PMC” has the meaning assigned to such term in the Preamble.

“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

“Series 2017-VF1 Notes” has the meaning assigned to such term in Section 1(a) of this Indenture Supplement.

“Series 2017-VF1 Repurchase Agreement” means the Second Amended and Restated Master Repurchase Agreement, dated as of October 10, 2023, among PMC, as a seller, PMH, as a seller, the buyers from time to time party thereto, ASP, as administrative agent and PennyMac Mortgage Investment Trust, as guarantor (the “VFN Guarantor”), as amended, restated, supplemented or otherwise modified from time to time.

“Series Required Noteholders” means, for so long as the Series 2017‑VF1 Notes are Outstanding, 100% of the Noteholders of the Series 2017‑VF1 Notes. With respect to the Series 2017‑VF1 Notes, any Action provided by the Base Indenture or this Indenture Supplement to be given or taken by a Noteholder shall be taken by the VFN Repo Buyers, as the buyers of the Series 2017‑VF1 Notes under the Series 2017‑VF1 Repurchase Agreement.

“Series Reserve Required Amount” means, the Stop-Loss Cap Required Amount.

“SOFR” means, with respect to any day, the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark (or a successor administrator) on the Federal Reserve Bank of New York’s Website.

“Stated Maturity Date” means, for the Series 2017‑VF1 Notes, the date on which the Termination Date (as defined in the Series 2017‑VF1 Repurchase Agreement) occurs, which is subject to extension in accordance with the Series 2017‑VF1 Repurchase Agreement.

“Stop-Loss Cap Reserve Percentage” means the difference between (i) one (1) and (ii) a fraction, (A) the numerator of which is equal to the difference between (1) the maximum Servicer SDQ Rate of the related Level and (2) the actual Servicer SDQ Rate and (B) the denominator of which is equal to 10% of the maximum Servicer SDQ Rate of the related Level.

“Stop-Loss Cap Required Amount” means, an amount equal to the difference between (1) the product of (x) the projected Stop-Loss Cap calculated at the lower threshold of the subsequent Level and (y) the Stop-Loss Cap Reserve Percentage and (2) the current Stop-Loss Cap.

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“Transaction Parties” has the meaning assigned to such term in Section 3 of this Indenture Supplement.

“VFN Repo Buyers” means each of Nexera, Citibank and the buyers named under the Series 2017-VF1 Repurchase Agreement from time to time, and each of their permitted successors and assigns.

“WSFS” means Wilmington Savings Fund Society, FSB.

Section 3. Form of the Series 2017-VF1 Notes; Transfer Restrictions; Considerations. (a) The Series 2017-VF1 Notes shall only be issued in definitive, fully registered form and the form of the Rule 144A Definitive Note that may be used to evidence the Series 2017-VF1 Notes in the circumstances described in Section 5.2(c) of the Base Indenture is attached to the Base Indenture as Exhibit A-2. None of the Series 2017‑VF1 Notes shall be issued as Regulation S Notes nor shall any Series 2017‑VF1 Notes be sold in offshore transactions in reliance on Regulation S.

(b) [Reserved].

Section 4. Series Reserve Account; Stop-Loss Cap Required Amount. In accordance with the terms and provisions of this Section 4 and Section 4.6 of the Base Indenture, the Indenture Trustee shall establish and maintain a Series Reserve Account with respect to the Series 2017‑VF1 Notes (the “Series 2017‑VF1 Reserve Account”), which shall be an Eligible Account, for the benefit of the Series 2017-VF1 Noteholders.

For each Payment Date, if an SDQ Event is in effect, the Issuer Trusts shall deposit into the Series 2017-VF1 Reserve Account, any amount required to be deposited therein so that, after giving effect to such deposit, the amount on deposit in Series 2017‑VF1 Reserve Account on such day equals the Stop-Loss Cap Required Amount in accordance with Sections 4.4(a)(i) and 4.5(a)(1)(iv) of the Base Indenture. In addition, on any Payment Date where the amounts on deposit in the Series 2017‑VF1 Reserve Account exceeds the Stop-Loss Cap Required Amount, such excess amounts shall be released from the Series 2017‑VF1 Reserve Account and shall be considered part of Available Funds under the Base Indenture.

Section 5. Interest Payment Amounts. Prior to the occurrence and continuation of an Event of Default (as defined under the Series 2017-VF1 Repurchase Agreement) under the Series 2017‑VF1 Repurchase Agreement, and in accordance with Section 6.12(b) of the PC Repurchase Agreement, (i) PMC and PMH shall be permitted to offset, net, withdraw, or direct the withdrawal of the Interest Payment Amount on the Series 2017-VF1 Notes; and (ii) the estimated Price Differential owed under the Series 2017-VF1 Repurchase Agreement on the next Payment Date shall be subject to a true up of the amount determined by the Administrative Agent and delivered to the Indenture Trustee one (1) day prior to the related Payment Date. The Administrator and the Co-Issuer Administrator shall report the calculation of the Interest Payment Amount for the Interest Accrual Period preceding a Payment Date for inclusion in the report set forth in Section 3.1 of the Base Indenture two (2) Business Days prior to each Payment Date.

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Section 6. Payments; Note Balance Increases; Early Maturity. (a) Except as otherwise expressly set forth herein, the Paying Agent shall make payments on the Series 2017‑VF1 Notes on each Payment Date in accordance with Section 4.5 of the Base Indenture.

(b) The Paying Agent shall make payments of principal on the Series 2017‑VF1 Notes on each Interim Payment Date and each Payment Date in accordance with Sections 4.4 and 4.5 of the Base Indenture (at the option of the Issuer Trusts in the case of requests during the Revolving Period for the Series 2017‑VF1 Notes). The Note Balance of the Series 2017‑VF1 Notes may be increased from time to time on certain Funding Dates in accordance with the terms and provisions of Section 4.3 of the Base Indenture, but not in excess of the related Maximum VFN Principal Balance.

(c) Any payments of principal allocated to the Series 2017‑VF1 Notes during a Full Amortization Period shall be applied to the Class A‑VF1 Notes until their VFN Principal Balance has been reduced to zero.

(d) The parties hereto acknowledge that the Series 2017‑VF1 Note will be financed by the VFN Repo Buyers under the Series 2017‑VF1 Repurchase Agreement, pursuant to which PMC and PMH will sell all their related rights, title and interest in the Series 2017‑VF1 Note to the VFN Repo Buyers. The parties hereto acknowledge that with respect to the Series 2017-VF1 Note, any Action provided by the Base Indenture or this Indenture Supplement to be given or taken by a Noteholder shall be taken by the VFN Repo Buyers, as the buyers of the Series 2017‑VF1 Note under the Series 2017‑VF1 Repurchase Agreement. Subject to the foregoing, the Administrative Agent, the Issuer Trusts further confirm that the Series 2017‑VF1 Note issued on the date of this Indenture Supplement pursuant to this Indenture Supplement shall be issued in the name of “Atlas Securitized Products, L.P., solely in its capacity as Administrative Agent on behalf of Nexera Holding LLC, as a VFN Repo Buyer, and Citibank, N.A., as a VFN Repo Buyer”. The Issuer Trusts and the Administrative Agent hereby direct the Indenture Trustee to issue the Series 2017‑VF1 Note in the name of “Atlas Securitized Products, L.P., solely in its capacity as Administrative Agent on behalf of Nexera Holding LLC, as VFN Repo Buyer, and Citibank, N.A., as VFN Repo Buyer”.

(e) During the Revolving Period, on each Interim Payment Date and each Payment Date, in accordance with Sections 4.4 and 4.5, respectively, of the Base Indenture, the owners of the Owner Trust Certificates may make Additional Note Payments to the Noteholder of the Series 2017‑VF1 Notes. Such Additional Note Payments shall be applied to reduce the unpaid principal balance of the Series 2017‑VF1 Notes.

(f) Notwithstanding anything to the contrary herein or in Section 4.3(b)(i) of the Base Indenture, the VFN Principal Balance of the Series 2017-VF1 Notes may be adjusted to reduce the VFN Principal Balance thereof by the Administrator or the Co-Issuer Administrator in accordance with a VFN Note Balance Adjustment Request, on behalf of the Issuer or the Co-Issuer, without making any payment on the Series 2017-VF1 Notes with the written consent of the Administrative Agent (which may be provided electronically).

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Section 7. Optional Redemption. The Issuer Trusts may, at any time, subject to Section 13.1 of the Base Indenture, upon at least five (5) Business Days’ prior written notice to the Administrative Agent, the Indenture Trustee and the Noteholders of the Series 2017‑VF1 Notes redeem in whole or in part (so long as, in the case of any partial redemption, the Series 2017‑VF1 Notes are redeemed on a pro rata basis based on their related Note Balances) and/or terminate and cause the retirement of the Series 2017‑VF1 Notes. In anticipation of a redemption of the Series 2017‑VF1 Notes at the end of their Revolving Period, the Issuer Trusts may issue a new Series or one or more Classes of Notes within the ninety (90) day period prior to the end of such Revolving Period and reserve all or a portion of the cash proceeds of the issuance for the sole purpose of paying the principal balance and all accrued and unpaid interest on the Series 2017‑VF1 Notes, on the last day of their Revolving Period. Any supplement to this Indenture Supplement executed to effect an optional redemption may be entered into without consent of the Noteholders of any of the Series 2017‑VF1 Notes or of any other Notes issued under the Base Indenture (but with satisfaction of other requirements for amendments entered into without Noteholder consent). Any Notes issued in replacement for the Series 2017‑VF1 Notes will have the same rights and privileges as the Class of Series 2017‑VF1 Notes that were refinanced with the related proceeds thereof; provided, such replacement Notes may have different Stated Maturity Dates and different Note Interest Rates.

Section 8. Determination of Note Interest Rate and Benchmark. (a) Two (2) Business Days immediately preceding the related Payment Date, the Administrative Agent will provide to the Calculation Agent the Benchmark for each day of the related Interest Accrual Period for the Series 2017‑VF1 Notes on the basis of the procedures specified in the definition of Benchmark.

(b) The Calculation Agent shall calculate the Note Interest Rate for the related Interest Accrual Period and the Interest Payment Amount for the Series 2017‑VF1 Notes on each Payment Date, and include a report of such amount in the related Payment Date Report.

(c) The establishment of the Benchmark by the Administrative Agent and the Calculation Agent’s subsequent calculation of the Note Interest Rate and the Interest Payment Amount on the Series 2017‑VF1 Notes for the relevant Interest Accrual Period, in the absence of manifest error, will be final and binding.

(d) For purposes of calculating the Required Reserve Amount under the PC Repurchase Agreement, the “Pricing Rate” with respect to any “MRA Payment Date” thereunder will be calculated using the Benchmark as reported by the Administrative Agent for the immediately preceding Payment Date.

Section 9. Conditions Precedent Satisfied. The Issuer Trusts hereby represent and warrant to the Noteholders of the Series 2017‑VF1 Notes and the Indenture Trustee that, as of the date of this Indenture Supplement, each of the conditions precedent set forth in the Base Indenture, including those conditions precedent set forth in Section 6.10(b) of the Base Indenture and Article XII thereof, as applicable, to the issuance of the Series 2017‑VF1 Notes have been satisfied or waived in accordance with the terms thereof.

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Section 10. Representations and Warranties. The Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer and the Indenture Trustee hereby restate as of the date of this Indenture Supplement, or as of such other date as is specifically referenced in the body of such representation and warranty, all of the representations and warranties set forth in Sections 9.1, 10.1 and 11.14, respectively, of the Base Indenture.

Each of the Administrator and the Co-Issuer Administrator hereby represents and warrants that it is not in default with respect to any material contract under which a default should reasonably be expected to have a material adverse effect on the ability of the Administrator and the Co-Issuer Administrator to perform its duties under this Indenture or any Indenture Supplement, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such contract or order of any court, administrative agency, arbitrator or governmental body.

Each of PMC and PMH hereby represents and warrants that it is not in default with respect to any material contract under which a default should reasonably be expected to have a material adverse effect on the ability of each of PMC and PMH to perform its duties under this Indenture, any Indenture Supplement or any Transaction Document to which it is a party, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such contract or order of any court, administrative agency, arbitrator or governmental body.

Section 11. Amendments. (a) Notwithstanding any provisions to the contrary in Article XII of the Base Indenture but subject to the provisions set forth in Sections 12.1 and 12.3 of the Base Indenture, without the consent of the Noteholders of the Series 2017‑VF1 Notes but with the consent of the Issuer Trusts (evidenced by their execution of such amendment), the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer (solely in the case of any amendment that adversely affects the rights or obligations of the Servicer or adds new obligations or increases existing obligations of the Servicer), and the Administrative Agent, at any time and from time to time, upon delivery of an Issuer Trusts’ Tax Opinion (unless delivery of such Issuer Trusts’ Tax Opinion is waived by the Series Required Noteholders) and upon delivery by the Issuer and the Co-Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that each of the Issuer and the Co-Issuer reasonably believes that such amendment will not have a material Adverse Effect, may amend any Transaction Document for any of the following purposes: (i) to correct any mistake or typographical error or cure any ambiguity, or to cure, correct or supplement any defective or inconsistent provision therein or in any other Transaction Document; or (ii) to amend any other provision of this Indenture Supplement. For the avoidance of doubt, the consent of the Servicer is not required for (i) the waiver of any Event of Default or (ii) any other modification or amendment to any Event of Default except those related to the actions and omissions of the Servicer. This Indenture Supplement may be otherwise amended or otherwise modified from time to time in a written agreement among (i) 100% of the Noteholders of the Series 2017‑VF1 Notes, the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Administrative Agent, the Indenture Trustee and subject to the immediately preceding sentence, the Servicer.

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(b) Notwithstanding any provisions to the contrary in Section 6.10 or Article XII of the Base Indenture, except for amendments otherwise permitted as described in Sections 12.1 and 12.2 of the Base Indenture and in the immediately preceding paragraph, no supplement, amendment or indenture supplement entered into with respect to the issuance of a new Series of Notes or pursuant to the terms and provisions of Section 12.2 of the Base Indenture may, without the consent of the Series Required Noteholders in respect of the Series 2017‑VF1 Notes, supplement, amend or revise any term or provision of this Indenture Supplement.

(c) For the avoidance of doubt, the Issuer, the Co-Issuer, the Administrator and the Co-Issuer Administrator, respectively, hereby covenant that the Issuer Trusts shall not issue any future Series of Notes without designating an entity to act as “Administrative Agent” under the related Indenture Supplement with respect to such Series of Notes.

(d) Any amendment of this Indenture Supplement which affects the rights, duties, immunities, obligations or liabilities of the Owner Trustee in its capacity as owner trustee under the Trust Agreements shall require the written consent of the Owner Trustee.

Section 12. Counterparts. This Indenture Supplement may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. The words “executed,” “signed,” “signature,” and words of like import as used above and elsewhere in this Indenture Supplement or in any other certificate, agreement or document related to this transaction shall include, in addition to manually executed signatures, images of manually executed signatures transmitted by facsimile or other electronic format (including, without limitation, “pdf,” “tif” or “jpg”) and other electronic signatures (including, without limitation, any electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record). The use of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent, communicated, received, or stored by electronic means) shall be of the same legal effect, validity, enforceability and admissibility as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code. Each party to this Indenture Supplement hereby consents to the use of any secure third party electronic signature capture service providers (including, without limitation, DocuSign), as long as such service providers use system logs and audit trails that establish a temporal and process link between the presentation of identity documents and the electronic signing, together with identifying information that can be used to verify the electronic signature and its attribution to the signer’s identity and evidence of the signer’s agreement to conduct the transaction electronically and of the signer’s execution of each electronic signature. Delivery of an executed counterpart of a signature page to this Indenture Supplement by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Indenture Supplement.

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Section 13. Entire Agreement. This Indenture Supplement, together with the Base Indenture incorporated herein by reference and the related Transaction Documents, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.

Section 14. Limited Recourse. Notwithstanding any other terms of this Indenture Supplement, the Series 2017‑VF1 Notes, any other Transaction Documents or otherwise, the obligations of the Issuer and Co-Issuer under the Series 2017‑VF1 Notes, this Indenture Supplement and each other Transaction Document to which it is a party are limited recourse obligations of the Issuer and Co-Issuer, payable solely from the Trust Estate, and following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms of this Indenture Supplement, none of the Noteholders of Series 2017‑VF1 Notes, the Indenture Trustee or any of the other parties to the Transaction Documents shall be entitled to take any further steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall not thereafter revive. No recourse shall be had for the payment of any amount owing in respect of the Series 2017‑VF1 Notes or this Indenture Supplement or for any action or inaction of the Issuer and Co-Issuer against any officer, director, employee, shareholder, stockholder or incorporator of the Issuer Trusts or any of their successors or assigns for any amounts payable under the Series 2017‑VF1 Notes or this Indenture Supplement. It is understood that the foregoing provisions of this Section 14 shall not (a) prevent recourse to the Trust Estate for the sums due or to become due under any security, instrument or agreement which is part of the Trust Estate, including, without limitation, the PC Repo Guaranty and the VFN Repo Guaranty or (b) save as specifically provided therein, constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Series 2017‑VF1 Notes or secured by this Indenture Supplement. It is further understood that the foregoing provisions of this Section 14 shall not limit the right of any Person to name the Issuer or the Co-Issuer as a party defendant in any proceeding or in the exercise of any other remedy under the Series 2017-VF1 Notes or this Indenture Supplement, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

Notwithstanding the foregoing, the parties hereto hereby acknowledge and agree that to the extent and so long as the outstanding Series 2017-VF1 Notes are Retained Notes, such Series 2017-VF1 Notes shall be disregarded for U.S. federal income tax purposes. In furtherance of such intent, for so long as the outstanding Series 2017-VF1 Notes are Retained Notes that are treated as disregarded for U.S. federal income tax purposes from PMC or PMH, PMC shall not have the right to enforce payment under any provision in such Series 2017-VF1 Notes providing for liability of the Co-Issuer, and PMH shall not have the right to enforce payment under any provision in such Series 2017-VF1 Notes providing for liability of the Issuer.

Section 15. Owner Trustee Limitation of Liability.

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It is expressly understood and agreed by the parties hereto that (a) this Indenture Supplement is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely in its capacity as Owner Trustee under the Trust Agreements, in the exercise of the powers and authority conferred and vested in it thereunder, (b) each of the representations, warranties, undertakings, obligations and agreements herein made on the part of the Issuer Trusts is made and intended not as personal representations, warranties, undertakings, obligations and agreements by WSFS but is made and intended for the purpose of binding only, and is binding only on, the Issuer Trusts, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant or obligation of the Issuer Trusts, either expressed or implied, contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has not made and will not make any investigation as to the accuracy or completeness of any representations or warranties made by the Issuer Trusts in this Indenture Supplement or any related document delivered pursuant hereto and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness, indemnities or expenses of the Issuer Trusts, or be liable for the performance, breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer Trusts or by WSFS as Owner Trustee on behalf of the Issuer Trusts under this Indenture Supplement or any other related documents, as to all of which recourse shall be had solely to the assets of the Issuer Trusts.

Section 16. Note Rating Agency.

As of the date hereof, the Series 2017-VF1 Notes are rated BBB- (sf) by the Note Rating Agency.

Section 17. Consent, Acknowledgment and Waivers.

By execution of this Indenture Supplement, Nexera and Citibank, in its capacity as Series Required Noteholders hereby consents to this Indenture Supplement. The Series Required Noteholders certify together, they are the sole Noteholders of the Series 2017-VF1 Note with the right to instruct the Indenture Trustee. In addition, each Noteholder certifies as to itself that (i) it is authorized to execute and deliver this consent and such power has not been granted or assigned to any other person, (ii) the Person executing this Indenture Supplement on behalf of such Noteholder is duly authorized to do so, (iii) the Indenture Trustee may conclusively rely upon such consent and certifications, (iv) the execution by each Noteholder of this Indenture Supplement should be considered an “Act” by Noteholders pursuant to Section 1.5 of the Base Indenture, and (v) it acknowledges and agrees that the amendments effected by this Indenture Supplement shall become effective on the date hereof. The Noteholders further hereby instruct the Indenture Trustee to execute this Indenture Supplement.

Section 18. Conditions to Effectiveness of this Indenture Supplement.

This Indenture Supplement shall become effective upon (i) execution and delivery of this Indenture Supplement by all parties hereto, and (ii) upon delivery of the Issuer Trusts’ Tax Opinion, the Authorization Opinion, the Opinion of Counsel required pursuant to Section 11.1 of the Trust Agreements and the Officer’s Certificate (the “Effective Date”).

Section 19. Effect of Amendment.

This Indenture Supplement shall be effective as of the Effective Date and shall not be effective for any period prior to the Effective Date.

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After this Indenture Supplement becomes effective, all references in the Indenture Supplement or the Base Indenture to “this Indenture Supplement,” “this Indenture,” “hereof,” “herein” or words of similar effect referring to such Indenture Supplement and Base Indenture shall be deemed to be references to the Indenture Supplement or the Base Indenture, as applicable, as amended by this Indenture Supplement. This Indenture Supplement shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Base Indenture other than as set forth herein.

The parties hereto have entered into this Indenture Supplement solely to amend the terms of the Original Series 2017-VF1 Indenture Supplement and do not intend this Indenture Supplement or the transactions contemplated hereby to be, and this Indenture Supplement and the transactions contemplated hereby shall not be construed to be, a novation of any of the obligations owed by the parties hereto or any other party to the Indenture Supplement or Base Indenture under or in connection with the Indenture Supplement or Base Indenture or any of the other Transaction Documents. It is the intention and agreement of each of the parties hereto that (i) (i) the perfection and priority of all security interests securing the payment of the Notes, all other sums payable by the Issuer Trusts under the Indenture and the compliance by the Issuer Trusts with the provisions of the Indenture are preserved, (ii) the liens and security interests granted under the Indenture continue in full force and effect, and (iii) any reference to the Original Series 2017-VF1 Indenture Supplement in any such Transaction Document shall be deemed to reference to this Indenture Supplement.

 

 

- 16 -

 

IN WITNESS WHEREOF, the undersigned have caused this Indenture Supplement to be duly executed by their respective signatories thereunto all as of the day and year first above written.

PMT ISSUER TRUST – FMSR, as Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

 

 

PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

[Signature Page to PMT Issuer Trust – FMSR
Series 2017-VF1 Amended and Restated Indenture Supplement]

 

CITIBANK, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary and not in its individual capacity

By: /s/ Valerie Delgado
Name: Valerie Delgado
Title: Senior Trust Officer

[Signature Page to PMT Issuer Trust – FMSR
Series 2017-VF1 Amended and Restated Indenture Supplement]

 

PENNYMAC CORP., as Administrator and as Servicer

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

 

PENNYMAC HOLDINGS, LLC, as Co-Issuer Administrator

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

[Signature Page to PMT Issuer Trust – FMSR
Series 2017-VF1 Amended and Restated Indenture Supplement]

 

ATLAS SECURITIZED PRODUCTS, L.P., as Administrative Agent

By: Atlas Securitized Products GP, LLC, its general partner

By: /s/ Dominic Obaditch
Name: Dominic Obaditch
Title: Authorized Signatory

 

[Signature Page to PMT Issuer Trust – FMSR
Series 2017-VF1 Amended and Restated Indenture Supplement]

 

NEXERA HOLDING LLC, as a Series Required Noteholder

By: /s/ Steve Abreu
Name: Steve Abreu
Title: CEO

 

[Signature Page to PMT Issuer Trust – FMSR
Series 2017-VF1 Amended and Restated Indenture Supplement]

 

 

CITIBANK, N.A., as a Series Required Noteholder

By: /s/ Arunthathi Theivakumaran
Name: Arunthathi Theivakumaran
Title: Vice President

[Signature Page to PMT Issuer Trust – FMSR
Series 2017-VF1 Amended and Restated Indenture Supplement]

EX-10.15 8 pmt-ex10_15.htm EX-10.15 EX-10.15

EXHIBIT 10.15

[INFORMATION INDICATED WITH BRACKETS HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS NOT MATERIAL AND WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED]

 

PMT ISSUER TRUST – FMSR,


as Issuer

 

and

 

PMT CO-ISSUER TRUST I – FMSR,

as Co-Issuer

 

and

 

CITIBANK, N.A.,


as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary

 

and

 

PENNYMAC CORP.,


as Administrator and as Servicer

 

and

 

PENNYMAC HOLDINGS, LLC,

as Co-Issuer Administrator

 

and

 

 

ATLAS SECURITIZED PRODUCTS, L.P.,

 

as Administrative Agent

 

__________

 

AMENDED AND RESTATED SERIES 2021-FT1 INDENTURE SUPPLEMENT AMENDED AND RESTATED MSR COLLATERALIZED NOTES, SERIES 2021-FT1

 

Dated as of October 10, 2023

 

To

 

AMENDED AND RESTATED BASE INDENTURE

 

 

 

Dated as of October 10, 2023

(as amended from time to time)

 

 

TABLE OF CONTENTS

Page

Section 1. Creation of the Series 2021-FT1 Term Notes 1

Section 2. Defined Terms 2

Section 3. Form of the Series 2021-FT1 Term Notes; Transfer Restrictions 11

Section 4. Payments and Allocation of Funds on Payment Dates; No Series Reserve Account 12

Section 5. Optional Redemption and Refinancing 12

Section 6. Optional Extension of Stated Maturity Date 13

Section 7. Determination of Note Interest Rate and Benchmark 13

Section 8. Conditions Precedent Satisfied 17

Section 9. Representations and Warranties 17

Section 10. Amendments 18

Section 11. Counterparts 20

Section 12. Entire Agreement 20

Section 13. Limited Recourse 20

Section 14. Owner Trustee Limitation of Liability 21

Section 15. Credit Risk Retention 21

Section 16. Note Rating Agency. 22

Section 17. Conditions of Effectiveness of this Indenture Supplement 22

Section 18. Effect of Amendment. 22

 

 

 

 

-i-

 

EXHIBITS

-ii-

 

Exhibit A - Form of Amended and Restated Series 2021-FT1 Term Note This AMENDED AND RESTATED SERIES 2021-FT1 INDENTURE SUPPLEMENT (this “Indenture Supplement”), dated as of October 10, 2023, is made by and among PMT ISSUER TRUST – FMSR, a statutory trust organized under the laws of the State of Delaware, as issuer (the “Issuer”), PMT CO-ISSUER TRUST I – FMSR, a statutory trust organized under the laws of the State of Delaware, as co-issuer (the “Co-Issuer” and together with the Issuer, each, an “Issuer Trust” and collectively, the “Issuer Trusts”), CITIBANK, N.A., a national banking association, as indenture trustee (in such capacity, the “Indenture Trustee”), as calculation agent (in such capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), PENNYMAC CORP., a Delaware corporation (“PMC”), as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), PENNYMAC HOLDINGS, LLC, a Delaware limited liability company (“PMH”), as co-issuer administrator (the “Co-Issuer Administrator”), and ATLAS SECURITIZED PRODUCTS, L.P. (“ASP”), a Delaware limited partnership, as Administrative Agent (as defined herein) and is consented to by NEXERA HOLDING LLC (“Nexera”) and Citibank, N.A. (“Citibank”, and, together with Nexera, the “VFN Noteholders”). This Indenture Supplement relates to and is executed pursuant to that certain Amended and Restated Base Indenture, dated as of the date hereof, including the schedules and exhibits thereto (as may be amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), among the Issuer, Co-Issuer, the Servicer, the Administrator, the Co-Issuer Administrator, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, and ASP, as Administrative Agent, and the “Administrative Agents” from time to time parties thereto, all the provisions of which are incorporated herein as modified hereby and shall be a part of this Indenture Supplement as if set forth herein in full (the Base Indenture as so supplemented by this Indenture Supplement, collectively referred to as the “Indenture”).

Capitalized terms used and not otherwise defined herein shall have the respective meanings given them in the Base Indenture, and the rules of interpretation set forth in Section 1.2 of the Base Indenture shall apply equally herein.

RECITALS OF THE ISSUER TRUSTS

WHEREAS, the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and the Administrative Agent entered into that certain Series 2021-FT1 Indenture Supplement, dated as of March 30, 2021 (the “Original Series 2021-FT1 Indenture Supplement”);

WHEREAS, under the Original Series 2021-FT1 Indenture Supplement, the Issuer duly authorized the issuance of a Series of Term Notes, the “PMT ISSUER TRUST – FMSR MSR Collateralized Notes, Series 2021-FT1 Term Notes” (the “Outstanding Series 2021-FT1 Term Notes”);

WHEREAS, pursuant to Section 12.2 of the Base Indenture, the Issuer, the Co-Issuer, the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer and the Administrative Agent, with prior notice to each Note Rating Agency and the consent of the Majority Noteholders of each Series materially and adversely affected by such amendment, by Act of said Noteholders delivered to the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer, the Administrative Agent and the Indenture Trustee, upon delivery of an Issuer Trusts’ Tax Opinion, for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, any Indenture Supplement;

1

 

WHEREAS, pursuant to Section 12.3 of the Base Indenture, in executing or accepting the additional trusts created by any amendment or Indenture Supplement of the Base Indenture permitted by Article XII or the modifications thereby of the trusts created by the Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1 of the Base Indenture) will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment or Indenture Supplement is authorized and permitted by the Base Indenture and that all conditions precedent thereto have been satisfied (the “Authorization Opinion”);

WHEREAS, pursuant to Section 1.3 of the Base Indenture, the Issuer Trusts shall deliver an Officer’s Certificate stating that all conditions precedent, if any, provided for in the Base Indenture relating to a proposed action have been complied with and that the Issuer reasonably believes that this Amendment will not have a material Adverse Effect, and shall also furnish to the Indenture Trustee an opinion of counsel stating that in the opinion of such counsel all conditions precedent to a proposed action, if any, have been complied with;

WHEREAS, pursuant to Section 11.1 of the Trust Agreements, prior to the execution of any amendment to any Transaction Documents to which each Issuer Trust is a party, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Trust Agreements and that all conditions precedent have been met;

WHEREAS, as of the date hereof, the Series 2021-FT1 Term Notes are rated BBB- (sf) by the Note Rating Agency;

WHEREAS, pursuant to Section 10(f) of the Original Series 2021-FT1 Indenture Supplement, with the consent of Issuer, the Indenture Trustee, the Servicer, the Administrative Agent, the VFN Noteholders, and Fannie Mae and upon delivery to the Indenture Trustee of an Issuer Tax Opinion and upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer reasonably believes such amendment will not have a material Adverse Effect and is not reasonably expected to have a material Adverse Effect, the Administrator may amend any Transaction Document for purposes of effecting the Anticipated Amendments, and the Noteholders of the Series 2021-FT1 Term Notes will be deemed to have consented to the Anticipated Amendments by their acquisition of the Series 2021-FT1 Term Notes; and

WHEREAS, on the Effective Date, the parties are amending and restating the Original Indenture Supplement, pursuant to this Indenture Supplement.

NOW, THEREFORE, the Issuer Trusts, Indenture Trustee, the Administrator, the Servicer and the Administrative Agent hereby agree, in consideration of the amendments, agreements and other provisions herein contained and of certain other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties hereto, that the Original 2021-FT1 Indenture Supplement is hereby amended as follows:

PRELIMINARY STATEMENT

2

 

Each of the Issuer and Co-Issuer have duly authorized the amendment and restatement of the Outstanding Series 2021-FT1 Term Notes with the Series 2021-FT1 Term Notes (as defined below). The parties are entering into this Indenture Supplement to document the terms of the issuance of the Series 2021-FT1 Term Notes pursuant to the Base Indenture.

Section 1.
Series 2021-FT1 Term Notes; Amendment and Restatement. The parties hereto acknowledge and agree that the Outstanding Series 2021-FT1, Class A Note, Note No. 1, will be amended and restated on the date hereof in the form attached as Exhibit A to this Indenture Supplement. Upon the Effective Date, (i) the amended and restated Series 2021-FT1 Term Notes are to be known as “PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes, Series 2021-FT1” (the “Series 2021-FT1 Term Notes”) and (ii) and the Outstanding Series 2021-FT1, Class A Note, Note No. 1 will be cancelled by the Indenture Trustee and replaced with the Series 2021-FT1 Term Notes, Class A Note, Amended and Restated Note No. 1. The Series 2021-FT1 Term Notes are rated and are not subordinate to any other Series of Notes. The Series 2021-FT1 Term Notes are being amended and restated in one (1) Class of Term Notes with the Initial Note Balance, Stated Maturity Date, Note Interest Rate and other terms as specified in this Indenture Supplement. The Series 2021-FT1 Term Notes shall be secured by the Trust Estate Granted to the Indenture Trustee pursuant to the Base Indenture. The Indenture Trustee shall hold the Trust Estate as collateral security for the benefit of the Noteholders of the Series 2021-FT1 Term Notes and all other Series of Notes issued under the Base Indenture as described therein. In the event that any term or provision contained herein with respect to the Series 2021-FT1 Term Notes shall conflict with or be inconsistent with any term or provision contained in the Base Indenture, the terms and provisions of this Indenture Supplement shall govern to the extent of such conflict.

 

Section 2.
Defined Terms. With respect to the Series 2021-FT1 Term Notes and in addition to or in replacement of the definitions set forth in Section 1.1 of the Base Indenture, the following definitions shall be assigned to the defined terms set forth below:

“Administrative Agent” means, for so long as the Series 2021-FT1 Term Notes are Outstanding: (i) with respect to the provisions of this Indenture Supplement, ASP, or an Affiliate or successor thereto; and (ii) with respect to the provisions of the Base Indenture, together ASP and such other parties as set forth in any other Indenture Supplement, or a respective Affiliate or any respective successor thereto. For the avoidance of doubt, reference to “it” or “its” with respect to the Administrative Agent in this Indenture Supplement or in the Base Indenture shall mean “them” and “their,” and reference to the singular herein and therein in relation to the Administrative Agent will be construed as if plural.

“Advance Rate” means, with respect to the Series 2021-FT1 Term Notes, on any date of determination, [**]%; provided, that, upon the occurrence of an Advance Rate Trigger 1 Event, the Advance Rate will be decreased by [****]% until the Advance Rate Trigger 1 Event has been cured in all respects subject to the satisfaction of the Administrative Agent for two (2) consecutive months, at which point the Advance Rate, as applicable, will revert to [88]%; provided, further, that, upon the occurrence of an Advance Rate Trigger 2 Event, the Advance Rate will decrease by either (x) an additional [****]% if an Advance Rate Trigger 1 Event is in effect or (y) [****]% if an Advance Rate Trigger 1 Event is not in effect, such that the cumulative decrease of the Advance Rate upon the occurrence of an Advance Rate Trigger 2 Event will be [****]% until the Advance Rate Trigger 2 Event has been cured in all respects subject to the satisfaction of the Administrative Agent for two (2) consecutive months, at which point the Advance Rate, as applicable, will be (x) if an Advance Rate Trigger 1 Event is then in effect, [**]%, and (y) if no Advance Rate Trigger 1 Event is then in effect, [**]%.

3

 

“Anticipated Amendments” means any future amendments made by the Administrator and Co-Issuer Administrator, with the consent of the Issuer, the Co-Issuer, the Indenture Trustee, the Servicer, the Administrative Agent, the VFN Noteholders, the Holders of the Series 2018-FT1 Term Notes (to the extent such Notes remain Outstanding), and Fannie Mae (solely to the extent required under the Transaction Documents, including the Acknowledgment Agreement), which amend the Base Indenture, the Participation Agreements, and any other Transaction Documents as reasonably necessary to support the tax treatment of the Guarantor, including adding PMH as a repo seller to the PC Repurchase Agreement and restructuring the Base Indenture so that PMH may leverage the Sold MSR Excess Spread PC; provided such amendments do not affect (i) the Indenture Trustee’s security interest in the Collateral or (ii) the guarantee from the Guarantor as to the Participation Certificates.

“Applicable Ratings” means, with respect to the Series 2021-FT1 Term Notes, “BBB- (sf)”.

“Base Indenture” has the meaning assigned to such term in the Preamble.

“Benchmark” means, with respect to any Interest Accrual Period, initially, the Benchmark Rate for a one-month period, if such rate is available; provided, that if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the Benchmark Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement.

“Benchmark Determination Date” means for each Payment Date and the related Interest Accrual Period following the first Payment Date, means (1) if the Benchmark is LIBOR, the second (2nd) London Banking Day prior to the commencement of such Interest Accrual Period, and (2) if the Benchmark is not LIBOR, the date determined by the Designated Transaction Representative in accordance with the Benchmark Replacement Conforming Changes for each Payment Date and the related Interest Accrual Period.

“Benchmark Rate” means, with respect to any Interest Accrual Period with respect to which interest is to be calculated by reference to the “Benchmark Rate,” (a) the LIBOR Index Rate for a one-month period, if such rate is available, (b) in the event that LIBOR and LIBOR Index Rate are phased out, and a new benchmark intended as a replacement for LIBOR and LIBOR Index Rate is established or administered by the Financial Conduct Authority or ICE Benchmark Administration or other comparable authority, and such new benchmark with a one-month maturity is readily available through Bloomberg or a comparable medium, then the Designated Transaction Representative, with the Administrative Agent’s written consent, shall direct the Indenture Trustee to utilize such new benchmark with a one-month maturity for all purposes hereof in place of the LIBOR Index Rate, and (c) if the LIBOR Index Rate cannot be determined or has been phased out and no new benchmark under clause (b) has been established, the arithmetic average of the rates of interest per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) at which deposits in U.S. Dollars in immediately available funds are offered to the Administrative Agent at 11:00 a.m. (London, England time) two (2) London Banking Days before the beginning of such one-month period by three (3) or more major banks in the interbank Eurodollar market selected by the Administrative Agent for delivery on the first day of and for a period equal to such one-month period and in an amount equal or comparable to the principal amount of the portion of the Note Balance on which the “Benchmark Rate” is being calculated.

4

 

“Benchmark Reference Agreement” means the first applicable alternative set forth in the order below that can be determined by the Designated Transaction Representative:
(1)
the Series 2017-VF1 Repurchase Agreement;
(2)
any other repurchase or financing facility entered into with respect to a Series of Variable Funding Notes that are Outstanding;
(3)
any other repurchase or financing facility entered into by the Servicer with respect to MSRs or mortgage loans; or
(4)
any other financing facility identified by the Designated Transaction Representative.

“Benchmark Reference Time” means, with respect to any determination of the Benchmark, (i) if the Benchmark is the Benchmark Rate, 11:00 a.m. (London time) on the second (2nd) London Banking Day prior to the commencement of such Interest Accrual Period and (ii) if the Benchmark is not the Benchmark Rate, the time determined by the Designated Transaction Representative in accordance with the Benchmark Replacement Conforming Changes for each Payment Date and the related Interest Accrual Period.

“Benchmark Replacement” means the first applicable alternative set forth in the order below that can be determined by the Calculation Agent as of the applicable Benchmark Replacement Date:
(5)
the sum of: (a) Term SOFR and (b) the Benchmark Replacement Adjustment;
(6)
the sum of: (a) Compounded SOFR and (b) the Benchmark Replacement Adjustment;
(7)
the sum of: (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor and (b) the Benchmark Replacement Adjustment;
(8)
the sum of: (a) the ISDA Fallback Rate and (b) the Benchmark Replacement Adjustment; or
(9)
the sum of: (a) the alternate rate of interest that has been selected by the Designated Transaction Representative as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar denominated securitizations at such time and (b) the Benchmark Replacement Adjustment.

5

 

“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by the Designated Transaction Representative as of the applicable Benchmark Replacement Date:
(10)
the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected, endorsed or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;
(11)
if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment; or
(12)
the spread adjustment (which may be a positive or negative value or zero) that has been selected by the Designated Transaction Representative giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar denominated securitization transactions at such time, and as reasonably necessary such that the parties are similarly situated to the period prior to the replacement of the LIBOR Index Rate.

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Interest Accrual Period,” timing and frequency of determining rates and making payments of interest, changes to the definition of “Corresponding Tenor” solely when such tenor is longer than the Interest Accrual Period and other administrative matters) that the Designated Transaction Representative decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with the practices adopted with respect to the applicable Benchmark Reference Agreement, in each case as notified to the VFN Administrative Agent, the Indenture Trustee, the Calculation Agent and the Administrative Agent prior to the inclusion of such Benchmark Replacement Conforming Changes in the Payment Date Report notifying Noteholders of such changes and such Benchmark Replacement Conforming Changes taking effect, which such changes shall automatically become effective without further action on behalf of any party (upon inclusion in such Payment Date Report) to the extent that the Administrative Agent has not provided a written objection (in its reasonable discretion) to such Benchmark Replacement Conforming Changes to each of the Designated Transaction Representative and the Indenture Trustee prior to the inclusion in the Payment Date Report. The Benchmark Replacement Conforming Changes will be prepared by the Designated Transaction Representative and delivered to the Indenture Trustee and Calculation Agent for inclusion in the Payment Date Report together with an acknowledgement thereto by the VFN Administrative Agent.

6

 

“Benchmark Replacement Date” means:
(13)
in the case of clause (1) or (2) of the definition of “Benchmark Transition Event” either (a) the date of the public statement or publication of information referenced therein or (b) if later, and the Benchmark is the LIBOR Index Rate, then the date on which the administrator of the relevant Benchmark permanently or indefinitely ceases to provide such Benchmark; or
(14)
with respect to clause (3) of the definition of “Benchmark Transition Event” the first date of the public statement or publication of information.

Note that if the Designated Transaction Representative determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to the Benchmark Reference Time in respect of any determination of the Benchmark on any date, the Benchmark Replacement shall replace the then-current Benchmark for all purposes with respect to the Notes in respect of such determination on such date and all determinations on all subsequent dates. However, if the initial Benchmark Replacement is any rate other than Term SOFR and the Designated Transaction Representative later determines that Term SOFR can be determined, then a Benchmark Transition Event shall be deemed to have occurred and Term SOFR shall become the new Unadjusted Benchmark Replacement and shall, together with a new Benchmark Replacement Adjustment for Term SOFR, replace the then-current Benchmark on the next Benchmark Determination Date for Term SOFR.

For the avoidance of doubt, if the event giving rise to the applicable Benchmark Replacement Date occurs on the same day as, but earlier than, the Benchmark Reference Time in respect of any determination, the Benchmark Replacement Date shall be deemed to have occurred prior to the Benchmark Reference Time for such determination.

“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(15)
a public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that the administrator has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;
(16)
a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark; or a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative.

7

 

(17)

“Co-Issuer Administrator” has the meaning assigned to such term in the Preamble.

“Collection Period” means, (i) for the first Interim Payment Date or Payment Date, the period beginning on March 22, 2021 and ending at the end of the day before the Determination Date for such Interim Payment Date or Payment Date, and (ii) for each subsequent Interim Payment Date or Payment Date, the period beginning at the opening of business on the most recent preceding Determination Date and ending as of the close of business on the day before the Determination Date for such Interim Payment Date or Payment Date.

“Compounded SOFR” means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate (which, for example, may be compounded in arrears with a lookback and/or suspension period as a mechanism to determine the interest amount payable prior to the end of each Interest Accrual Period or compounded in advance) being established by the Designated Transaction Representative in accordance with:
(18)
the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining compounded SOFR; provided that:
(19)
if, and to the extent that, the Designated Transaction Representative determines that Compounded SOFR cannot be determined in accordance with clause (1) above, then the rate, or methodology for this rate, and conventions for this rate that have been selected by the Designated Transaction Representative giving due consideration to any industry-accepted market practice for similar U.S. dollar denominated securitization transactions at such time.

“Corporate Trust Office” means the corporate trust offices of the Indenture Trustee at which at any particular time its corporate trust business with respect to the Issuer Trusts shall be administered, which offices at the date of this Indenture Supplement are located at Citibank, N.A., 388 Greenwich Street Trading, New York, NY 10013, Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes and solely for purposes of the transfer, surrender or exchanges of Notes, at 480 Washington Boulevard, 30th Floor, Jersey City, New Jersey 07310, Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes.

“Corresponding Tenor” means one month.

“Cumulative Interest Shortfall Amount Rate” means, with respect to the Series 2021-FT1 Term Notes, [****]% per annum.

8

 

“Default Supplemental Fee” means, for the Series 2021-FT1 Term Notes and each Payment Date during the Full Amortization Period and on the date of final payment of such Notes (if the Full Amortization Period is continuing on such final payment date), a fee equal to (i) the related Cumulative Default Supplemental Fee Shortfall Amount plus (ii) the product of (a) the Default Supplemental Fee Rate multiplied by (b) the average daily Note Balance from and including the prior Payment Date to but excluding such Payment Date or the date of final payment of the Series 2021-FT1 Term Notes, as applicable, multiplied by (c) a fraction, the numerator of which is the number of days elapsed from and including the prior Payment Date (or, if the Full Amortization Period commenced after the prior Payment Date, the number of days elapsed from and including the date on which such Full Amortization Period commenced) to but excluding the current Payment Date and the denominator of which equals 360.

“Default Supplemental Fee Rate” means, with respect to the Series 2021-FT1 Term Notes, [****]% per annum.

“Designated Transaction Representative” means the Administrator or the Co-Issuer Administrator.

“Early Amortization Event Payment Amount” means, with respect to the Series 2021-FT1 Term Notes, one-thirty-sixth (1/36) of the Note Balance of the Series 2021-FT1 Term Notes as of the date on which an Early Amortization Event occurs.

“Effective Date” has the meaning assigned to such term in Section 17 of this Indenture Supplement.

“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.

“Indenture” has the meaning assigned to such term in the Preamble.

“Indenture Supplement” has the meaning assigned to such term in the Preamble.

“Initial Note Balance” means, for the Series 2021-FT1 Term Notes, $350,000,000.

“Initial Purchasers” means Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. LLC, as applicable.

“Interest Accrual Period” means, for the Series 2021-FT1 Term Notes, (i) with respect to the first Payment Date, the period that will commence on the Issuance Date and will end on the day immediately preceding the Payment Date in April 2021, and (ii) with respect to any subsequent Payment Dates, the period that will commence on the immediately preceding Payment Date and end on the day immediately preceding the current Payment Date. The Interest Payment Amount for the Series 2021-FT1 Term Notes for each Payment Date will be calculated based on the Interest Day Count Convention. The first Payment Date with respect to the Series 2021-FT1 Term Notes will be April 26, 2021.

“Interest Day Count Convention” means, with respect to the Series 2021-FT1 Term Notes, the actual number of days in the related Interest Accrual Period, divided by 360.

“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.

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“ISDA Fallback Adjustment” means the spread adjustment, (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor.

“ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.

“Issuance Date” means March 30, 2021.

“LIBOR” means the London Interbank Offered Rate.

“LIBOR Index Rate” means for a one-month period, LIBOR per annum (rounded upward, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a one-month period, which appears on the LIBOR01 Page as of 11:00 a.m. (London, England time) on the Benchmark Determination Date.

“LIBOR01 Page” means the display designated as “LIBOR01 Page” on the Reuters Service (or such other page as may replace the LIBOR01 Page on that service or such other service as may be nominated by the ICE Benchmark Administration as an information vendor for the purpose of displaying ICE Benchmark Administration interest settlement rates for U.S. Dollar deposits).

“London Banking Day” means any day on which commercial banks and foreign exchange markets settle payment in both London and New York City.

“Margin” means, for the Series 2021-FT1 Term Notes, [****]% per annum.

“Note Interest Rate” means, for the Series 2021-FT1 Term Notes, with respect to any Interest Accrual Period, the sum of (a) Benchmark plus (b) the Margin.

“Note Maximum Principal Balance” means, with respect to the Series 2021-FT1 Term Notes, the Initial Note Balance or, a lesser amount if the Series 2021-FT1 Term Notes are redeemed in part.

“Note Purchase Agreement” means that certain Series 2021-FT1 Term Note Purchase Agreement, dated as of March 24, 2021, by and among the Issuer, ASP, as Administrative Agent on behalf of the Initial Purchasers, PMC, as Administrator and Servicer, and the Initial Purchasers, that relates to the purchase of the Outstanding Series 2021-FT1 Term Notes, as amended, restated, supplemented or otherwise modified from time to time.

“Note Rating Agency” means Kroll Bond Rating Agency, LLC.

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“Optional Extension” has the meaning assigned to such term in Section 6 of this Indenture Supplement.

“Optional Extension Date” means March 25, 2026.

“Outstanding Series 2021-FT1 Term Note” has the meaning assigned to such term in Recitals.

“PMC” has the meaning assigned to such term in the Preamble.

“PMH” has the meaning assigned to such term in the Preamble.

“Regulation RR” has the meaning assigned to such term in Section 15 of this Indenture Supplement.

“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

“Scheduled Principal Payment Amount” means, with respect to any Payment Date following a Scheduled Principal Payment Event, an amount equal to the sum of the Series Principal Payment Amounts due and payable on each Series of Terms Notes then outstanding.

“Scheduled Principal Payment Events” means, for any Payment Date with respect to the Series 2021-FT1 Term Notes, a Series Principal Payment Amount will be due on a one-time basis on any Payment Date following the occurrence of any of the following events (each, a “Scheduled Principal Payment Event”):
(i)
the unpaid principal balance of the Portfolio is less than $30 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date;
(ii)
the unpaid principal balance of the Portfolio is less than $28 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date;
(iii)
the unpaid principal balance of the Portfolio is less than $26 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date;
(iv)
the unpaid principal balance of the Portfolio is less than $24 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date; or the unpaid principal balance of the Portfolio is less than $22 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date.

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(v)

“Series 2021-FT1 Term Notes” has the meaning assigned to such term in Section 1 of this Indenture Supplement.

“Series Principal Payment Amount” means, with respect to the Series 2021-FT1 Term Notes, upon the occurrence of a Scheduled Principal Payment Event, an amount equal to the product of (i) the Series Allocation Percentage of the Series 2021-FT1 Term Notes and (ii) the product of (a) $2,000,000,000, (b) the Market Value Percentage (as calculated using clause (b)(ii) of the definition thereof) and (c) the Advance Rate of the Series 2021-FT1 Term Notes.

“Series Required Noteholders” means, for so long as the Series 2021-FT1 Term Notes are Outstanding, Noteholders of the Series 2021-FT1 Term Notes constituting the Majority Noteholders of such Series.

“SOFR” means, with respect to any day, the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark (or a successor administrator) on the Federal Reserve Bank of New York’s Website.

“Specified Call Premium Amount” means, as of any date of determination in respect of the Series 2021-FT1 Term Notes, the greater of (i) $0 and (ii) (a) the quotient of: (1) the product of: (x) the Note Interest Rate multiplied by (y) the outstanding Note Balance divided by (2) 360 multiplied by (b) the positive excess, if any, of 360 over the number of days from and including the date the Series 2021-FT1 Term Notes were issued through and including the date on which the Series 2021-FT1 Term Notes are redeemed.

“Stated Maturity Date” means, for Series 2021-FT1 Term Notes, March 25, 2026, or if extended pursuant to Section 6 hereof, March 27, 2028.

“Step-Up Fee” means, with respect to the Series 2021-FT1 Term Notes, for each Payment Date during the Step-Up Fee Period and on the date of final payment of the Series 2021-FT1 Term Notes (if the Step-Up Fee Period is continuing on such final payment date), a fee equal to (1) the related Cumulative Step-Up Fee Shortfall Amount plus (2) the product of (i) the Step-Up Fee Rate multiplied by (ii) the average daily Note Balance from and including the prior Payment Date to but excluding such Payment Date or date of final payment of the Series 2021-FT1 Term Notes multiplied by (iii) a fraction, (A) the numerator of which is the number of days elapsed from and including the prior Payment Date to, but excluding, the current Payment Date or date of final payment and (B) the denominator of which equals 360.

“Step-Up Fee Period” means the period that begins on the Optional Extension Date and ends on the date on which the Series 2021-FT1 Term Notes are no longer outstanding.

“Step-Up Fee Rate” means, with respect to the Series 2021-FT1 Term Notes, [****]% per annum.

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“Term SOFR” means the forward-looking term rate for the applicable Corresponding Tenor based on SOFR that has been selected or recommended by the Relevant Governmental Body.

“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the applicable Benchmark Replacement Adjustment.

“VFN Administrative Agent” means the administrative agent or a similar person specified in the related Benchmark Reference Agreement.

“WSFS” has the meaning assigned to such term in Section 14 hereof.

Section 3.
Form of the Series 2021-FT1 Term Notes; Transfer Restrictions. (a) Subject to the terms and provisions of Section 5.4 of the Base Indenture, the Series 2021-FT1 Term Notes shall only be issued as a Book-Entry Note, and the form of Global Rule 144A Note that may be used to evidence the Series 2021-FT1 Term Notes in the circumstances described in Section 5.2(c) of the Base Indenture is attached to the Base Indenture as Exhibit A-1. The Series 2021-FT1 Term Notes shall not be issued as Regulation S Notes nor shall any Series 2021-FT1 Term Notes be sold in offshore transactions in reliance on Regulation S.

The Series 2021-FT1 Term Notes were issued in minimum denominations of $100,000 and integral multiples of $1,000 in excess thereof.

(b)
The Series 2021-FT1 Term Notes are not registered under the 1933 Act, or the securities laws of any other jurisdiction. The sale, pledge or other transfer of any Series 2021-FT1 Term Note or any interest therein will be subject to the restrictions described below. The Series 2021-FT1 Term Notes will bear a legend referring to the transfer restrictions thereof. None of the Issuer, the Co-Issuer, or the Initial Purchasers will register the Series 2021-FT1 Term Notes under the 1933 Act, register or qualify the Series 2021-FT1 Term Notes under the securities laws of any state or other jurisdiction or provide registration rights to any purchaser.
(c)
The Issuer confirms that the Outstanding Series 2021-FT1 Term Notes issued on the Issuance Date pursuant to the Original Series 2021-FT1 Indenture Supplement were issued in the name of “Cede & Co.”, as nominee of DTC, pursuant to a letter agreement between the Issuer and DTC, dated as of the Issuance Date.
(d)
The Issuer Trusts further confirm that the Series 2021-FT1 Term Notes effective on the Effective Date pursuant to this Indenture Supplement will be issued in the name of “Cede & Co.”, as nominee of DTC, pursuant to a letter agreement between the Issuer Trusts and DTC, dated as of the Effective Date.

In addition to any provisions set forth in Section 6.5 of the Base Indenture, any Noteholder of the Series 2021-FT1 Term Notes may only resell, pledge or transfer its beneficial interest in a Series 2021-FT1 Term Note to a person that the transferor reasonably believes is, and who has certified (or, in the case of Book-Entry Notes, is deemed to have certified) that it is a Qualified Institutional Buyer that purchases for its own account or for the account of a Qualified Institutional Buyer and to whom notice is given that the resale, pledge or transfer is made in reliance on Rule 144A.

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The Series 2021-FT1 Term Notes may not be resold, pledged or transferred pursuant to Regulation S.

Section 4.
Payments and Allocation of Funds on Payment Dates; No Series Reserve Account. (a) Except as otherwise expressly set forth herein, the Paying Agent shall make payments on the Series 2021-FT1 Term Notes on each Payment Date in accordance with Section 4.5 of the Base Indenture.
(b)
There will be no Series Reserve Account for the Series 2021-FT1 Term Notes, and the Noteholders of the Series 2021-FT1 Term Notes will not be entitled to receive payments made pursuant to any Series Reserve Account in place in respect of any other Series of Notes, except as otherwise set forth in the Base Indenture.
Section 5.
Optional Redemption and Refinancing. (a) The Issuer Trusts may, at any time, subject to Section 13.1 of the Base Indenture, upon at least five (5) Business Days’ prior written notice to the Administrative Agent, the Indenture Trustee and the Noteholders of the Series 2021-FT1 Term Notes, redeem in whole or in part (so long as, in the case of any partial redemption, (i) such redemption is funded using the proceeds of the issuance and sale of one or more new Classes of Notes or from any other cash or funds of PMC and PMH and not Collections on the MSRs, and (ii) the Series 2021-FT1 Term Notes are redeemed on a pro rata basis based on their related Note Balances), and/or terminate and cause retirement of the Series 2021-FT1 Term Notes. In anticipation of a redemption of the Series 2021-FT1 Term Notes at the end of their Revolving Period, the Issuer Trusts may issue a new Series or one or more Classes of Notes within the ninety (90) day period prior to the end of such Revolving Period and reserve the cash proceeds of the issuance for the sole purpose of paying the principal balance and all accrued and unpaid interest on the Series 2021-FT1 Term Notes, on the last day of their Revolving Period. Any amendment to this Indenture Supplement executed to effect an optional redemption may be entered into without consent of the Noteholders of the Series 2021-FT1 Term Notes or of any other Notes issued under the Base Indenture (but with satisfaction of other requirements for amendments entered into without Noteholder consent). Any Notes issued in replacement for the Series 2021-FT1 Term Notes will have the same rights and privileges as the Class of Series 2021-FT1 Term Notes that was refinanced with the related proceeds thereof; provided, such replacement Notes may have different Stated Maturity Dates and different Note Interest Rates.
(b)
If the Issuer Trusts redeem the Series 2021-FT1 Term Notes prior to the Payment Date occurring within twelve (12) months following the Issuance Date, the Issuer Trusts shall pay to the Noteholders of the Series 2021-FT1 Term Notes as part of the Redemption Amount an amount equal to the Specified Call Premium Amount.
Section 6.
Optional Extension of Stated Maturity Date. The Administrator and the Co-Issuer Administrator, on behalf of the Issuer and Co-Issuer, respectively, may by written notice to the Administrative Agent and the Indenture Trustee, request a single extension of the Stated Maturity Date for the Series 2021-FT1 Term Notes at least fifteen (15) days prior to the Optional Extension Date (the “Optional Extension”); provided that the Acknowledgment Agreement is amended to extend the Stop-Loss Cap Period through March 30, 2028. To the extent the Administrator or the Co-Issuer Administrator has exercised the Optional Extension and the Stop-Loss Cap Period of the Acknowledgment Agreement has been extended through March 30 2028, the Stated Maturity Date will be extended on the Optional Extension Date such that, after giving effect to such extension, the Stated Maturity Date will be two (2) years after the Stated Maturity Date in effect immediately prior to exercise of the Optional Extension.

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The Stated Maturity Date of the Series 2021-FT1 Term Notes cannot be extended past the date which is two (2) years following the initial Stated Maturity Date in effect immediately prior to exercise of the Optional Extension and the last day of the Stop-Loss Cap Period. Upon exercise of the Optional Extension, during the Step-Up Fee Period, the Step-Up Fee will apply to the Series 2021-FT1 Term Notes.
Section 7.
Determination of Note Interest Rate and Benchmark. (a) At least one (1) Business Day prior to each Determination Date, the Calculation Agent shall calculate the Note Interest Rate for the related Interest Accrual Period and the Interest Payment Amount for the Series 2021-FT1 Term Notes for the upcoming Payment Date, and include a report of such amount in the related Payment Date Report.
(b)
On each Benchmark Determination Date, the Calculation Agent will calculate the Benchmark for the succeeding Interest Accrual Period for the related Series 2021-FT1 Term Notes on the basis of the procedures specified in the definition of “Benchmark.”
(c)
In connection with the implementation of a Benchmark Replacement, the Designated Transaction Representative will have the right from time to time to make Benchmark Replacement Conforming Changes as described in the definition thereof.
(d)
Notwithstanding the foregoing, if prior to the occurrence of a Benchmark Transition Event and its related Benchmark Replacement Date a published LIBOR Index Rate is unavailable, the Benchmark will be determined on the basis of the rates at which deposits in dollars are offered by major banks selected by the Designated Transaction Representative. If the banks selected by the Designated Transaction Representative are not quoting rates at the time the LIBOR Index Rate is to be determined for such Interest Accrual Period, the LIBOR Index Rate for the related Interest Accrual Period will be the same as the LIBOR Index Rate for the immediately preceding Interest Accrual Period until the occurrence of a Benchmark Transition Event and its related Benchmark Replacement Date. The Calculation Agent will calculate the Benchmark for each Interest Accrual Period on the related Benchmark Determination Date. The Indenture Trustee (in any capacity in which it acts) shall have no duty, obligation or responsibility to determine whether a Benchmark Transition Event has occurred or to select an alternative index, and shall have no liability for the Designated Transaction Representative’s selection of such alternative index.
(e)
A Benchmark Transition Event occurred on March 5, 2021. Notice or materials relating to the occurrence of any additional Benchmark Transition Event, any Benchmark Replacement Date, the determination of a Benchmark Replacement and the making of any Benchmark Replacement Conforming Changes shall be made available with the relevant Payment Date Report. Notwithstanding anything in the Base Indenture, any Indenture Supplement or any other Transaction Document to the contrary, upon the inclusion of such information in the Payment Date Report, the Base Indenture, any Indenture Supplement or any other relevant Transaction Document, as applicable, shall be deemed to have been amended to reflect the new Unadjusted Benchmark Replacement, Benchmark Replacement Adjustment and/or Benchmark Replacement Conforming Changes without further compliance with the amendment provisions of the Base Indenture, any Indenture Supplement or any other relevant Transaction Document.

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(f)
Any determination, decision or election that may be made by the Designated Transaction Representative in connection with a Benchmark Transition Event or a Benchmark Replacement as described above, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, shall be conclusive and binding absent manifest error, may be made in the Designated Transaction Representative’s sole discretion, and, notwithstanding anything to the contrary in the Transaction Documents, shall become effective without consent from any other party, except for the Administrative Agent, which will have the right to provide its written objection to the Calculation Agent and the Designated Transaction Representative with respect to any such actions in its reasonable discretion within thirty (30) days of notice of such changes from the Designated Transaction Representative, in which case such proposed changes will not come into effect and the Calculation Agent shall continue to use the most recent Benchmark until resolved. In the event that the Administrative Agent provides such written objection, the Administrative Agent and the Designated Transaction Representative shall work in good faith to resolve the issues related to the Unadjusted Benchmark Replacement, Benchmark Replacement Adjustment and/or Benchmark Replacement Conforming Changes such that the parties are similarly situated to the period prior to the replacement of the LIBOR Index Rate. The Designated Transaction Representative shall provide notice of any determination, decision or election made by the Designated Transaction Representative in connection with a Benchmark Transition Event or a Benchmark Replacement as described above at least thirty (30) days prior to the proposed inclusion of such changes in the related Payment Date Report. None of the Issuer, the Co-Issuer, Owner Trustee, the Indenture Trustee, the Calculation Agent, the Administrator, Co-Issuer Administrator, the Designated Transaction Representative, the Administrative Agent, the Servicer or any other transaction party will have any liability for any determination made by or on behalf of the Issuer Trusts by any party, including the Designated Transaction Representative or any action or inaction by the Administrative Agent, in connection with a Benchmark Transition Event or a Benchmark Replacement as described above, and each Noteholder, by its acceptance of a Note or a beneficial interest in a Note, shall be deemed to waive and release any and all claims against any of the Issuer, the Co-Issuer, Owner Trustee, the Indenture Trustee, the Calculation Agent, the Administrator, Co-Issuer Administrator, the Designated Transaction Representative, the Administrative Agent or the Servicer relating to any such determinations.
(g)
The establishment of the Benchmark Rate by the Calculation Agent and the Designated Transaction Representative, as applicable, and the Calculation Agent’s subsequent calculation of the Note Interest Rate and the Interest Payment Amount on the Series 2021-FT1 Term Notes for the relevant Interest Accrual Period based on the determination made by the Designated Transaction Representative, in the absence of manifest error, will be final and binding.
(h)
The Designated Transaction Representative and its directors, officers, agents or employees shall not be liable for any action taken or omitted to be taken by it under or in connection with this Indenture Supplement or the other Transaction Documents in its capacity as Designated Transaction Representative, other than action or inaction undertaken with gross negligence, willful misconduct or bad faith.

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Without limiting the foregoing and notwithstanding any understanding to the contrary, no Noteholder shall have any right of action whatsoever against the Designated Transaction Representative as a result of the Designated Transaction Representative acting or refraining from acting under this Indenture Supplement, the Notes or any of the other Transaction Documents in its own interests or otherwise, other than as a result of gross negligence, willful misconduct or bad faith by the Designated Transaction Representative.
Section 8.
Conditions Precedent Satisfied. The Issuer Trusts hereby represent and warrant to the Noteholders of the Series 2021-FT1 Term Notes and the Indenture Trustee that, as of the Effective Date (a) the Series 2021-FT1 Term Notes are rated “BBB- (sf)” by the Note Rating Agency and (b) each of the conditions precedent set forth in the Base Indenture, including but not limited to those conditions precedent set forth in Section 6.10(b) of the Base Indenture and Article XII thereof, as applicable, to the issuance of the Series 2021-FT1 Term Notes has been satisfied or waived in accordance with the terms thereof.
Section 9.
Representations and Warranties. The Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer and the Indenture Trustee hereby restate as of the related Effective Date, or as of such other date as is specifically referenced in the body of such representation and warranty, all of the representations and warranties set forth in Sections 9.1, 10.1 and 11.14, respectively, of the Base Indenture.

Each of the Administrator and the Co-Issuer Administrator hereby represents and warrants that it is not in default with respect to any material contract under which a default should reasonably be expected to have a material adverse effect on the ability of the Administrator and the Co-Issuer Administrator to perform their duties under this Indenture or any Indenture Supplement, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such contract or order of any court, administrative agency, arbitrator or governmental body.

Each of PMC and PMH hereby represents and warrants that it is not in default with respect to any material contract under which a default should reasonably be expected to have a material adverse effect on the ability of each of PMC and PMH to perform its duties under this Indenture, any Indenture Supplement or any Transaction Document to which it is a party, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such contract or order of any court, administrative agency, arbitrator or governmental body.

Section 10.
Amendments. (a) Notwithstanding any provisions to the contrary in Article XII of the Base Indenture but subject to the provisions set forth in Sections 12.1 and 12.3 of the Base Indenture, without the consent of the Noteholders of any Notes but with the consent of the Issuer Trusts (evidenced by their execution of such amendment), the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer (solely in the case of any amendment that adversely affects the rights or obligations of the Servicer or adds new obligations or increases existing obligations of the Servicer), and the Administrative Agent, at any time and from time to time, upon delivery of an Issuer Trusts’ Tax Opinion and upon delivery by the Issuer and the Co-Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that each of the Issuer and the Co-Issuer reasonably believes that such amendment will not have a material Adverse Effect, may amend any Transaction Document for any of the following purposes: (i) to correct any mistake or typographical error or cure any ambiguity, or to cure, correct or supplement any defective or inconsistent provision therein or in any other Transaction Document; or (ii) to amend any other provision of this Indenture Supplement.

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(b)
Notwithstanding any provisions to the contrary in Section 6.10 or Article XII of the Base Indenture except for amendments otherwise permitted as described in Sections 12.1 and 12.2 of the Base Indenture and in the immediately preceding paragraph, no supplement, amendment or indenture supplement entered into with respect to the issuance of a new Series of Notes or pursuant to the terms and provisions of Section 12.2 of the Base Indenture may, without the consent of the Series Required Noteholders in respect of the Series 2021-FT1 Term Notes, supplement, amend or revise any term or provision of this Indenture Supplement; provided, that with respect to the following amendments, the consent of each Noteholder of each Outstanding Series 2021-FT1 Term Notes materially and adversely affected thereby shall be required:
(i)
any change to the scheduled payment date of any payment of interest on any Note held by such Noteholder, or change a Payment Date or Stated Maturity Date of any Note held by such Noteholder;
(ii)
any reduction of the Note Balance of, or the Note Interest Rate, the Step-Up Fee Rate or the Default Supplemental Fee Rate on any Notes held by such Noteholder, or change the method of computing the Note Balance or Note Interest Rate in a manner that is adverse to such Noteholder;
(iii)
any impairment of the right to institute suit for the enforcement of any payment on any Note held by such Noteholder;
(iv)
any reduction of the percentage of Noteholders of the Outstanding Notes (or of the Outstanding Notes of any Series or Class), for which consent is required for any such amendment, or the consent of whose Noteholders is required for any waiver of compliance with the provisions of the Indenture or any Indenture Supplement or of defaults thereunder and their consequences, provided for in the Base Indenture or any Indenture Supplement;
(v)
any modification of any amendment of the Indenture, except to increase any percentage of Noteholders required to consent to any such amendment or to provide that other provisions of the Indenture or any Indenture Supplement cannot be modified or waived without the consent of the Noteholder of each outstanding Note adversely affected thereby;
(vi)
any modification to permit the creation of any lien or other encumbrance on the collateral that is prior to the lien in favor of the Indenture Trustee for the benefit of the Noteholders of the Notes;
(vii)
any modification to change the method of computing the amount of principal of, or interest on, any Note held by such Noteholder on any date; any modification to increase any Advance Rates in respect of Notes held by such Noteholder or eliminate or decrease any collateral value exclusions in respect of Notes held by such Noteholder; or

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(viii)
(ix)
any change, modification or waiver of any Scheduled Principal Payment Amount.
(c)
For the avoidance of doubt, the consent of the Servicer is not required for (i) the waiver of any Event of Default or (ii) any other modification or amendment to any Event of Default except those related to the actions and omissions of the Servicer.
(d)
For the avoidance of doubt, the Issuer, the Co-Issuer, the Administrator and the Co-Issuer Administrator, respectively, hereby covenant that the Issuer Trusts shall not issue any future Series of Notes without designating an entity to act as “Administrative Agent” under the related Indenture Supplement with respect to such Series of Notes.
(e)
Any amendment of this Indenture Supplement which affects the rights, duties, immunities, obligations or liabilities of the Owner Trustee in its capacity as owner trustee under the Trust Agreements shall require the written consent of the Owner Trustee.
(f)
Notwithstanding any provisions to the contrary in Article XII of the Base Indenture but subject to the provisions set forth in Sections 12.2 and 12.3 of the Base Indenture, with the consent of the Issuer, the Co-Issuer, the Indenture Trustee, the Servicer, the Administrative Agent, the VFN Noteholders, the Holders of the Series 2018-FT1 Term Notes (to the extent such Notes remain Outstanding), and Fannie Mae (solely to the extent required under the Transaction Documents, including the Acknowledgment Agreement), at any time and from time to time, upon delivery to the Indenture Trustee of an Issuer Trusts’ Tax Opinion and upon delivery by the Issuer and the Co-Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that each of the Issuer and the Co-Issuer reasonably believes that such amendment will not have a material Adverse Effect, the Administrator and the Co-Issuer Administrator may amend any Transaction Document for purposes of effecting the Anticipated Amendments. Noteholders of the Series 2021-FT1 Term Notes will be deemed to consent to the Anticipated Amendments by their acquisition of the Series 2021-FT1 Term Notes.
Section 11.
Counterparts. This Indenture Supplement may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. The words “executed,” “signed,” “signature,” and words of like import as used above and elsewhere in this Indenture Supplement or in any other certificate, agreement or document related to this transaction shall include, in addition to manually executed signatures, images of manually executed signatures transmitted by facsimile or other electronic format (including, without limitation, “pdf,” “tif” or “jpg”) and other electronic signatures (including, without limitation, any electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record). The use of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent, communicated, received, or stored by electronic means) shall be of the same legal effect, validity, enforceability and admissibility as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code.

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Each party to this Indenture Supplement hereby consents to the use of any secure third party electronic signature capture service providers (including, without limitation, DocuSign), as long as such service providers use system logs and audit trails that establish a temporal and process link between the presentation of identity documents and the electronic signing, together with identifying information that can be used to verify the electronic signature and its attribution to the signer’s identity and evidence of the signer’s agreement to conduct the transaction electronically and of the signer’s execution of each electronic signature. Delivery of an executed counterpart of a signature page to this Indenture Supplement by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Indenture Supplement.
Section 12.
Entire Agreement. This Indenture Supplement, together with the Base Indenture incorporated herein by reference and the related Transaction Documents, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.
Section 13.
Limited Recourse. Notwithstanding any other terms of this Indenture Supplement, the Series 2021-FT1 Term Notes, any other Transaction Documents or otherwise, the obligations of the Issuer Trusts under the Series 2021-FT1 Term Notes, this Indenture Supplement and each other Transaction Document to which it is a party are limited recourse obligations of the Issuer Trusts, payable solely from the Trust Estate, and following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms of this Indenture Supplement, none of the Noteholders of Series 2021-FT1 Term Notes, the Indenture Trustee or any of the other parties to the Transaction Documents shall be entitled to take any further steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall not thereafter revive. No recourse shall be had for the payment of any amount owing in respect of the Series 2021-FT1 Term Notes or this Indenture Supplement or for any action or inaction of the Issuer Trusts against any officer, director, employee, shareholder, stockholder or incorporator of the Issuer Trusts or any of their successors or assigns for any amounts payable under the Series 2021-FT1 Term Notes or this Indenture Supplement. It is understood that the foregoing provisions of this Section 13 shall not (a) prevent recourse to the Issuer Trusts’ Trust Estate for the sums due or to become due under any security, instrument or agreement which is part of the Trust Estate, including, without limitation, the PC Repo Guaranty or (b) save as specifically provided therein, constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Series 2021-FT1 Term Notes or secured by this Indenture Supplement. It is further understood that the foregoing provisions of this Section 13 shall not limit the right of any Person to name the Issuer or the Co-Issuer as a party defendant in any proceeding or in the exercise of any other remedy under the Series 2021-FT1 Term Notes or this Indenture Supplement, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.
Section 14.
Owner Trustee Limitation of Liability.

20

 

It is expressly understood and agreed by the parties hereto that (a) this Indenture Supplement is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely in its capacity as Owner Trustee under the Trust Agreements, in the exercise of the powers and authority conferred and vested in it thereunder, (b) each of the representations, warranties, undertakings, obligations and agreements herein made on the part of the Issuer Trusts is made and intended not as personal representations, warranties, undertakings, obligations and agreements by WSFS but is made and intended for the purpose of binding only, and is binding only on, the Issuer Trusts, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant or obligation of the Issuer Trusts, either expressed or implied, contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has not made and will not make any investigation as to the accuracy or completeness of any representations or warranties made by the Issuer Trusts in this Indenture Supplement or any related document delivered pursuant hereto and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness, indemnities or expenses of the Issuer Trusts, or be liable for the performance, breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer Trusts or by WSFS as Owner Trustee on behalf of the Issuer Trusts under this Indenture Supplement or any other related documents, as to all of which recourse shall be had solely to the assets of the Issuer Trusts.
Section 15.
Credit Risk Retention. While it is not clear that Section 15G of the 1934 Act, added pursuant to Section 941(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Regulation RR”), applies to the issuance of the Series 2021-FT1 Term Notes and that PennyMac Mortgage Investment Trust (“PMIT”) will be deemed a securitizer for the purposes of Regulation RR, PMIT will maintain a subordinated seller’s interest in the Issuer and the Co-Issuer, by retaining, directly or indirectly, a 100% ownership interest in each of PMC and PMH, and PMC and/or PMH retaining their ownership interest in the applicable Owner Trust Certificate and the associated rights to residual cash flow under the Indenture, that equals not less than 5% of the aggregate unpaid principal balance of any Outstanding Notes (other than Notes held to maturity by PMIT, or their wholly-owned affiliates), calculated and held for the period of time required in accordance with Regulation RR. Neither PMIT nor any wholly owned affiliates will engage in activities that constitute impermissible hedging, transfer or financing of the Owner Trust Certificates.

The seller’s interest expected to be retained by PMIT in connection with Regulation RR (to the extent applicable), will equal approximately [****]% or $[***********] (in each case, as calculated in accordance with Regulation RR), as of the Effective Date. The Series 2017-VF1 Notes have been issued and are held by PMC and PMH and financed by Nexera and Citibank, however the Note Balance of the Series 2017-VF1 Notes is not included in the denominator of the calculation that produced the percentage described above in accordance with Regulation RR.

Section 16.
Note Rating Agency.

As of the date hereof, the Series 2021-FT1 Term Notes are rated BBB- (sf) by the Note Rating Agency.

Section 17.
Conditions to Effectiveness of this Indenture Supplement.

21

 

This Indenture Supplement shall become effective upon (i) execution and delivery of this Indenture Supplement by all parties hereto and (ii) upon delivery of the Issuer Trusts’ Tax Opinion, the Authorization Opinion, the Opinion of Counsel and the Officer’s Certificate (the “Effective Date”).

Section 18.
Effect of Amendment.

This Indenture Supplement shall be effective as of the Effective Date and shall not be effective for any period prior to the Effective Date. After this Indenture Supplement becomes effective, all references in the Indenture Supplement or the Base Indenture to “this Indenture Supplement,” “this Indenture,” “hereof,” “herein” or words of similar effect referring to such Indenture Supplement and Base Indenture shall be deemed to be references to the Indenture Supplement or the Base Indenture, as applicable, as amended by this Indenture Supplement. This Indenture Supplement shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Base Indenture other than as set forth herein.

The parties hereto have entered into this Indenture Supplement solely to amend the terms of the Original Series 2021-FT1 Indenture Supplement and do not intend this Indenture Supplement or the transactions contemplated hereby to be, and this Indenture Supplement and the transactions contemplated hereby shall not be construed to be, a novation of any of the obligations owed by the parties hereto or any other party to the Indenture Supplement or Base Indenture under or in connection with the Indenture Supplement or Base Indenture or any of the other Transaction Documents. It is the intention and agreement of each of the parties hereto that (i) the perfection and priority of all security interests securing the payment of the Notes, all other sums payable by the Issuer under the Indenture and the compliance by the Issuer with the provisions of the Indenture are preserved, (ii) the liens and security interests granted under the Indenture continue in full force and effect, and (iii) any reference to the Original Series 2021-FT1 Indenture Supplement in any such Transaction Document shall be deemed to reference to this Indenture Supplement.

 

 

[Signatures follow]

22

 

IN WITNESS WHEREOF, the undersigned have caused this Indenture Supplement to be duly executed by their respective signatories thereunto all as of the day and year first above written.

PMT ISSUER TRUST – FMSR, as Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

 

[Signature Page to
Series 2021-FT1 Amended and Restated Indenture Supplement]

 

PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

 

[Signature Page to
Series 2021-FT1 Amended and Restated Indenture Supplement]

 

CITIBANK, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, and not in its individual capacity PENNYMAC CORP., as Administrator and Servicer

By: /s/ Valerie Delgado
Name: Valerie Delgado
Title: Senior Trust Officer

 

[Signature Page to
Series 2021-FT1 Amended and Restated Indenture Supplement]

 

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

 

[Signature Page to
Series 2021-FT1 Amended and Restated Indenture Supplement]

 

PENNYMAC HOLDINGS, LLC, as Co-Issuer Administrator

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

 

[Signature Page to
Series 2021-FT1 Amended and Restated Indenture Supplement]

 

ATLAS SECURITIZED PRODUCTS, L.P.,
as Administrative Agent

By: Atlas Securitized Products GP, LLC, its general partner

By: /s/ Dominic Obaditch
Name: Dominic Obaditch
Title: Authorized Signatory

 

[Signature Page to
Series 2021-FT1 Amended and Restated Indenture Supplement]

 

 

NEXERA HOLDING LLC, as a Series Required Noteholder

By: /s/ Steve Abreu
Name: Steve Abreu
Title: CEO

[Signature Page to
Series 2021-FT1 Amended and Restated Indenture Supplement]

 

CITIBANK, N.A., as a Series Required Noteholder

By: /s/ Arunthathi Theivakumaran
Name: Arunthathi Theivakumaran
Title: Vice President

[Signature Page to
Series 2021-FT1 Amended and Restated Indenture Supplement]

 

EXHIBIT A

 

FORM OF AMENDED AND RESTATED SERIES 2021-FT1 TERM NOTE

Exhibit A-1

EX-10.16 9 pmt-ex10_16.htm EX-10.16 EX-10.16

EXHIBIT 10.16

PMT ISSUER TRUST – FMSR,


as Issuer

 

and

 

PMT CO-ISSUER TRUST I – FMSR,

as Co-Issuer

 

and

 

CITIBANK, N.A.,


as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary

 

and

 

PENNYMAC CORP.,


as Administrator and as Servicer

 

and

 

PENNYMAC HOLDINGS, LLC,

as Co-Issuer Administrator

 

and

 

 

ATLAS SECURITIZED PRODUCTS, L.P.,

 

as Administrative Agent

 

__________

 

AMENDED AND RESTATED SERIES 2022-FT1 INDENTURE SUPPLEMENT AMENDED AND RESTATED MSR COLLATERALIZED NOTES, SERIES 2022-FT1

 

Dated as of October 10, 2023

 

To

 

AMENDED AND RESTATED BASE INDENTURE

 

Dated as of October 10, 2023

(as amended from time to time)

 

 

 

 

 

Table of Contents

Page

Section 1.

Series 2022-FT1 Term Notes; Amendment and Restatement.

3

Section 2.

Defined Terms.

3

Section 3.

Form of the Series 2022-FT1 Term Notes; Transfer Restrictions.

13

Section 4.

Payments and Allocation of Funds on Payment Dates; No Series Reserve Account.

14

Section 5.

Optional Redemption and Refinancing.

14

Section 6.

Optional Extension of Stated Maturity Date.

14

Section 7.

Determination of Note Interest Rate and Benchmark.

15

Section 8.

Conditions Precedent Satisfied.

17

Section 9.

Representations and Warranties.

17

Section 10.

Amendments.

17

Section 11.

Counterparts.

20

Section 12.

Entire Agreement.

20

Section 13.

Limited Recourse.

20

Section 14.

Owner Trustee Limitation of Liability.

21

Section 15.

Credit Risk Retention.

21

Section 16.

Note Rating Agency.

22

Section 17.

Conditions to Effectiveness of this Indenture Supplement.

22

Section 18.

Effect of Amendment.

22

 

 

- i -

 

EXHIBITS

 

 

- ii -

 

Exhibit A - Form of Amended and Restated Series 2022-FT1 Term Note This AMENDED AND RESTATED SERIES 2022-FT1 INDENTURE SUPPLEMENT (this “Indenture Supplement”), dated as of October 10, 2023, is made by and among PMT ISSUER TRUST – FMSR, a statutory trust organized under the laws of the State of Delaware, as issuer (the “Issuer”), PMT CO-ISSUER TRUST I – FMSR, a statutory trust organized under the laws of the State of Delaware, as co-issuer (the “Co-Issuer” and together with the Issuer, each, an “Issuer Trust” and collectively, the “Issuer Trusts”), CITIBANK, N.A., a national banking association, as indenture trustee (in such capacity, the “Indenture Trustee”), as calculation agent (in such capacity, the “Calculation Agent”), as paying agent (in such capacity, the “Paying Agent”) and as securities intermediary (in such capacity, the “Securities Intermediary”), PENNYMAC CORP., a Delaware corporation (“PMC”), as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), PENNYMAC HOLDINGS, LLC, a Delaware limited liability company (“PMH”), as co-issuer administrator (the “Co-Issuer Administrator”), and ATLAS SECURITIZED PRODUCTS, L.P. (“ASP”), a Delaware limited partnership, as Administrative Agent (as defined herein) and is consented to by NEXERA HOLDING LLC (“Nexera”) and Citibank, N.A. (“Citibank”, and, together with Nexera, the “VFN Noteholders”). This Indenture Supplement relates to and is executed pursuant to that certain Amended and Restated Base Indenture, dated as of the date hereof, including the schedules and exhibits thereto (as may be amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), among the Issuer, Co-Issuer, the Servicer, the Administrator, the Co-Issuer Administrator, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, and ASP, as Administrative Agent, and the “Administrative Agents” from time to time parties thereto, all the provisions of which are incorporated herein as modified hereby and shall be a part of this Indenture Supplement as if set forth herein in full (the Base Indenture as so supplemented by this Indenture Supplement, collectively referred to as the “Indenture”).

Capitalized terms used and not otherwise defined herein shall have the respective meanings given them in the Base Indenture, and the rules of interpretation set forth in Section 1.2 of the Base Indenture shall apply equally herein.

RECITALS OF THE ISSUER TRUSTS

WHEREAS, the Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Servicer and the Administrative Agent entered into that certain Series 2022-FT1 Indenture Supplement, dated as of June 28, 2022 (the “Original Series 2022-FT1 Indenture Supplement”);

WHEREAS, under the Original Series 2022-FT1 Indenture Supplement, the Issuer duly authorized the issuance of a Series of Term Notes, the “PMT ISSUER TRUST – FMSR MSR Collateralized Notes, Series 2022-FT1 Term Notes” (the “Outstanding Series 2022-FT1 Term Notes”);

WHEREAS, pursuant to Section 12.2 of the Base Indenture, the Issuer, the Co-Issuer, the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer and the Administrative Agent, with prior notice to each Note Rating Agency and the consent of the Majority Noteholders of each Series materially and adversely affected by such amendment, by Act of said Noteholders delivered to the Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer, the Administrative Agent and the Indenture Trustee, upon delivery of an Issuer Trusts’ Tax Opinion, for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, any Indenture Supplement;

- 1 -

 

WHEREAS, pursuant to Section 12.3 of the Base Indenture, in executing or accepting the additional trusts created by any amendment or Indenture Supplement of the Base Indenture permitted by Article XII or the modifications thereby of the trusts created by the Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1 of the Base Indenture) will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment or Indenture Supplement is authorized and permitted by the Base Indenture and that all conditions precedent thereto have been satisfied (the “Authorization Opinion”);

WHEREAS, pursuant to Section 1.3 of the Base Indenture, the Issuer Trusts shall deliver an Officer’s Certificate stating that all conditions precedent, if any, provided for in the Base Indenture relating to a proposed action have been complied with and that the Issuer reasonably believes that this Amendment will not have a material Adverse Effect, and shall also furnish to the Indenture Trustee an opinion of counsel stating that in the opinion of such counsel all conditions precedent to a proposed action, if any, have been complied with;

WHEREAS, pursuant to Section 11.1 of the Trust Agreements, prior to the execution of any amendment to any Transaction Documents to which the relevant Issuer Trust is a party, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Trust Agreements and that all conditions precedent have been met;

WHEREAS, as of the date hereof, the Series 2022-FT1 Term Notes are rated BBB- (sf) by the Note Rating Agency;

WHEREAS, pursuant to Section 10(f) of the Original Series 2022-FT1 Indenture Supplement, with the consent of Issuer, the Indenture Trustee, the Servicer, the Administrative Agent, the VFN Noteholders, and Fannie Mae and upon delivery to the Indenture Trustee of an Issuer Tax Opinion and upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer reasonably believes such amendment will not have a material Adverse Effect and is not reasonably expected to have a material Adverse Effect, the Administrator may amend any Transaction Document for purposes of effecting the Anticipated Amendments, and the Noteholders of the Series 2022-FT1 Term Notes will be deemed to have consented to the Anticipated Amendments by their acquisition of the Series 2022-FT1 Term Notes; and

WHEREAS, on the Effective Date, the parties are amending and restating the Original Indenture Supplement, pursuant to this Indenture Supplement.

NOW, THEREFORE, the Issuer Trusts, Indenture Trustee, the Administrator, the Servicer and the Administrative Agent hereby agree, in consideration of the amendments, agreements and other provisions herein contained and of certain other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties hereto, that the Original 2022-FT1 Indenture Supplement is hereby amended as follows:

- 2 -

 

PRELIMINARY STATEMENT

Each of the Issuer and Co-Issuer have duly authorized the amendment and restatement of the Outstanding Series 2022-FT1 Term Notes, with the Series 2022-FT1 Term Notes (as defined below). The parties are entering into this Indenture Supplement to document the terms of the issuance of the Series 2022-FT1 Term Notes pursuant to the Base Indenture.

Section 1. Series 2022-FT1 Term Notes; Amendment and Restatement.

The parties hereto acknowledge and agree that the Outstanding Series 2022-FT1, Class A Note, Note No. 1, will be amended and restated on the date hereof in the form attached as Exhibit A to this Indenture Supplement. Upon the Effective Date, (i) the amended and restated Series 2022-FT1 Term Notes are to be known as “PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes, Series 2022-FT1” (the “Series 2022-FT1 Term Notes”) and (ii) the Outstanding Series 2022-FT1, Class A Note, Note No. 1 will be cancelled by the Indenture Trustee and replaced with the Series 2022-FT1 Term Notes, Class A Note, Note No. 1. The Series 2022-FT1 Term Notes are rated and are not subordinate to any other Series of Notes. The Series 2022-FT1 Term Notes are being amended and restated in one (1) Class of Term Notes with the Initial Note Balance, Stated Maturity Date, Note Interest Rate and other terms as specified in this Indenture Supplement. The Series 2022-FT1 Term Notes shall be secured by the Trust Estate Granted to the Indenture Trustee pursuant to the Base Indenture. The Indenture Trustee shall hold the Trust Estate as collateral security for the benefit of the Noteholders of the Series 2022-FT1 Term Notes and all other Series of Notes issued under the Base Indenture as described therein. In the event that any term or provision contained herein with respect to the Series 2022-FT1 Term Notes shall conflict with or be inconsistent with any term or provision contained in the Base Indenture, the terms and provisions of this Indenture Supplement shall govern to the extent of such conflict.

Section 2. Defined Terms.

With respect to the Series 2022-FT1 Term Notes and in addition to or in replacement of the definitions set forth in Section 1.1 of the Base Indenture, the following definitions shall be assigned to the defined terms set forth below:

“Administrative Agent” means, for so long as the Series 2022-FT1 Term Notes are Outstanding: (i) with respect to the provisions of this Indenture Supplement, ASP, or an Affiliate or successor thereto; and (ii) with respect to the provisions of the Base Indenture, together ASP and such other parties as set forth in any other Indenture Supplement, or a respective Affiliate or any respective successor thereto. For the avoidance of doubt, reference to “it” or “its” with respect to the Administrative Agent in this Indenture Supplement or in the Base Indenture shall mean “them” and “their,” and reference to the singular herein and therein in relation to the Administrative Agent will be construed as if plural.

- 3 -

 

“Advance Rate” means, with respect to the Series 2022-FT1 Term Notes, on any date of determination, [**]%; provided, that, upon the occurrence of an Advance Rate Trigger 1 Event, the Advance Rate will be decreased by [****]% until the Advance Rate Trigger 1 Event has been cured in all respects subject to the satisfaction of the Administrative Agent for two (2) consecutive months, at which point the Advance Rate, as applicable, will revert to [**]%; provided, further, that, upon the occurrence of an Advance Rate Trigger 2 Event, the Advance Rate will decrease by either (x) an additional [****]% if an Advance Rate Trigger 1 Event is in effect or (y) [****]% if an Advance Rate Trigger 1 Event is not in effect, such that the cumulative decrease of the Advance Rate upon the occurrence of an Advance Rate Trigger 2 Event will be [****]% until the Advance Rate Trigger 2 Event has been cured in all respects subject to the satisfaction of the Administrative Agent for two (2) consecutive months, at which point the Advance Rate, as applicable, will be (x) if an Advance Rate Trigger 1 Event is then in effect, [**]%, and (y) if no Advance Rate Trigger 1 Event is then in effect, [**]%.

“Anticipated Amendments” means any future amendments made by the Administrator and Co-Issuer Administrator, with the consent of the Issuer, the Co-Issuer, the Indenture Trustee, the Servicer, the Administrative Agent, the VFN Noteholders, the Holders of the Series 2018-FT1 Term Notes (to the extent such Notes remain Outstanding), and Fannie Mae (solely to the extent required under the Transaction Documents, including the Acknowledgment Agreement), which amend the Base Indenture, the Participation Agreements, and any other Transaction Documents as reasonably necessary to support the tax treatment of the Guarantor, including adding PMH as a repo seller to the PC Repurchase Agreement and restructuring the Base Indenture so that PMH may leverage the Sold MSR Excess Spread PC; provided such amendments do not affect (i) the Indenture Trustee’s security interest in the Collateral or (ii) the guarantee from the Guarantor as to the Participation Certificates.

“Base Indenture” has the meaning assigned to such term in the Preamble.

“Benchmark” means, with respect to any Interest Accrual Period, initially, the SOFR Rate; provided, that, if the Designated Transaction Representative determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the SOFR Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement as of the related Benchmark Reference Time on the Benchmark Determination Date.

“Benchmark Determination Date” means for each Payment Date and the related Interest Accrual Period following the first Payment Date, means (1) if the Benchmark is the SOFR Rate, the SOFR Determination Date, and (2) if the Benchmark is not the SOFR Rate, the date determined by the Designated Transaction Representative in accordance with the Benchmark Replacement Conforming Changes for each Payment Date and the related Interest Accrual Period.

“Benchmark Reference Agreement” means the first applicable alternative set forth in the order below that can be determined by the Designated Transaction Representative:

(1) the Series 2017-VF1 Repurchase Agreement;

(2) any other repurchase or financing facility entered into with respect to a Series of Variable Funding Notes that are Outstanding;

(3) any other repurchase or financing facility entered into by the Servicer with respect to MSRs or mortgage loans; or

(4) any other financing facility identified by the Designated Transaction Representative.

- 4 -

 

“Benchmark Reference Time” means, with respect to any determination of the Benchmark, (i) if the Benchmark is the SOFR Rate, the SOFR Determination Time and (ii) if the Benchmark is not the SOFR Rate, the time determined by the Designated Transaction Representative in accordance with the Benchmark Replacement Conforming Changes for each Payment Date and the related Interest Accrual Period.

“Benchmark Replacement” means the first applicable alternative set forth in the order below that can be determined by the Calculation Agent as of the applicable Benchmark Replacement Date:

(1) the sum of: (a) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor and (b) the Benchmark Replacement Adjustment;

(2) the sum of: (a) the ISDA Fallback Rate and (b) the Benchmark Replacement Adjustment; or

(3) the sum of: (a) the alternate rate of interest that has been selected by the Designated Transaction Representative as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar denominated floating rate securities at such time and (b) the Benchmark Replacement Adjustment.

“Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by the Designated Transaction Representative as of the applicable Benchmark Replacement Date:

(1) the spread adjustment (which may be a positive or negative value or zero), or method for calculating or determining such spread adjustment, that has been selected, endorsed or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;

(2) if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment; or

(3) the spread adjustment (which may be a positive or negative value or zero) that has been selected by the Designated Transaction Representative giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar denominated floating rate securities transactions at such time.

- 5 -

 

“Benchmark Replacement Conforming Changes” means, in connection with the determination of any Benchmark Transition Event or Benchmark Replacement Date or the adoption of any Benchmark Replacement, Unadjusted Benchmark Replacement or Benchmark Replacement Adjustment, any technical, administrative or operational changes (including changes to timing and frequency of determining rates and making payments of interest, changes to the definition of “Corresponding Tenor” and other administrative matters) that the Designated Transaction Representative, in its sole discretion, decides may be appropriate to reflect such determination or adoption in a manner substantially consistent with the practices adopted with respect to the applicable Benchmark Reference Agreement or market practice (or, if the Designated Transaction Representative decides that adoption of any portion of such market practice is not administratively feasible or if the Designated Transaction Representative determines that no such market practice exists), in such other manner as the Designated Transaction Representative determines is reasonably necessary, in each case as notified to the Indenture Trustee, the Calculation Agent and the Administrative Agent at least twenty (20) calendar days prior to the posting of such Benchmark Replacement Conforming Changes with the Payment Date Report notifying Noteholders of such changes and such Benchmark Replacement Conforming Changes taking effect, which such changes shall automatically become effective without further action on behalf of any party (upon being provided with such Payment Date Report). The Benchmark Replacement Conforming Changes will be prepared by the Designated Transaction Representative and delivered to the Indenture Trustee and Calculation Agent for posting with the Payment Date Report.

“Benchmark Replacement Date” means the earliest to occur of the following events with respect to then current Benchmark (including the daily published component used in the calculation thereof):

(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the relevant Benchmark permanently or indefinitely ceases to provide the Benchmark (or such component); or

(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.

If the Designated Transaction Representative determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to the Benchmark Reference Time in respect of any determination of the Benchmark on any date, the Benchmark Replacement shall replace the then-current Benchmark for all purposes with respect to the Notes in respect of such determination on such date and all determinations on all subsequent dates.

For the avoidance of doubt, if the event that gives rise to the applicable Benchmark Replacement Date occurs on the same day as, but earlier than, the Benchmark Reference Time in respect of any determination, the Benchmark Replacement Date shall be deemed to have occurred prior to such Benchmark Determination Date.

“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark (including the daily published component used in the calculation thereof):

(1) a public statement or publication of information by or on behalf of the administrator of the Benchmark (or such component) announcing that the administrator has ceased or will cease to provide the Benchmark (or such component), permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such component); or

- 6 -

 

(2) a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark (or such component), the central bank for the currency of the Benchmark (or such component), an insolvency official with jurisdiction over the administrator for the Benchmark (or such component), a resolution authority with jurisdiction over the administrator for the Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark (or such component), which states that the administrator of the Benchmark (or such component) has ceased or will cease to provide the Benchmark (or such component) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark (or such component); or

(3) a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative.

“Co-Issuer Administrator” has the meaning assigned to such term in the Preamble.

“Compounded SOFR” with respect to any U.S. Government Securities Business Day, means: (1) the applicable compounded average of SOFR for the Corresponding Tenor of 30 days as published on such U.S. Government Securities Business Day; or (2) if the rate specified in (1) above does not so appear, the applicable compounded average of SOFR for the Corresponding Tenor as published in respect of the first preceding U.S. Government Securities Business Day for which such rate appeared on the Federal Reserve Bank of New York’s Website. Compounded SOFR rate is generally referred to by its tenor. For example, “30-day Average SOFR” refers to the compounded average SOFR over a rolling 30-calendar day period as published on the Federal Reserve Bank of New York’s Website.

“Corporate Trust Office” means the corporate trust offices of the Indenture Trustee at which at any particular time its corporate trust business with respect to the Issuer Trusts shall be administered, which offices at the date of this Indenture Supplement are located at Citibank, N.A., 388 Greenwich Street Trading, New York, NY 10013, Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes and solely for purposes of the transfer, surrender or exchanges of Notes, at 480 Washington Boulevard, 30th Floor, Jersey City, New Jersey 07310, Attention: Agency & Trust - PMT ISSUER TRUST – FMSR and PMT CO-ISSUER TRUST I – FMSR MSR Collateralized Notes.

“Corresponding Tenor” means a tenor (including overnight) having the length (disregarding any business day adjustment) of 30 days or one month, and with respect to a Benchmark Replacement, a tenor (including overnight) having approximately the same length (disregarding any business day adjustment) as the applicable tenor for the then-current Benchmark.

“Cumulative Interest Shortfall Amount Rate” means, with respect to the Series 2022-FT1 Term Notes, [****]% per annum.

“Default Supplemental Fee” means, for the Series 2022-FT1 Term Notes and each Payment Date during the Full Amortization Period and on the date of final payment of such Notes (if the Full Amortization Period is continuing on such final payment date), a fee equal to (1) the related Cumulative Default Supplemental Fee Shortfall Amount, plus (2) the product of:

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(i) the Default Supplemental Fee Rate multiplied by

(ii) the average daily Note Balance from and including the prior Payment Date to but excluding such Payment Date or the date of final payment of the Series 2022-FT1 Term Notes, as applicable, multiplied by

(iii) a fraction, the numerator of which is the number of days elapsed from and including the prior Payment Date (or, if the Full Amortization Period commenced after the prior Payment Date, the number of days elapsed from and including the date on which such Full Amortization Period commenced) to but excluding the current Payment Date and the denominator of which equals 360.

“Default Supplemental Fee Rate” means, with respect to the Series 2022-FT1 Term Notes, [****]% per annum.

“Designated Transaction Representative” means the Administrator or the Co-Issuer Administrator.

“Early Amortization Event Payment Amount” means, with respect to the Series 2022-FT1 Term Notes, one-thirty-sixth (1/36) of the Note Balance of the Series 2022-FT1 Term Notes as of the date on which an Early Amortization Event occurs.

“Effective Date” has the meaning assigned to such term in Section 17 of this Indenture Supplement.

“Federal Reserve Bank of New York’s Website” means the website of the Federal Reserve Bank of New York, at https://apps.newyorkfed.org/markets/autorates/sofr-avg-ind or at such other page as may replace such page on the Federal Reserve Bank of New York’s Website .

“First Optional Extension Date” means June 25, 2027.

“First Optional Extension Term” has the meaning assigned to such term in Section 6.

“Indenture” has the meaning assigned to such term in the Preamble.

“Indenture Supplement” has the meaning assigned to such term in the Preamble.

“Initial Note Balance” means, for the Series 2022-FT1 Term Notes, $305,000,000.

“Initial Purchasers” means, collectively, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Goldman Sachs & Co. LLC.

“Interest Accrual Period” means, for the Series 2022-FT1 Term Notes, (i) with respect to the first Payment Date, the period that will commence on the Issuance Date and will end on the day immediately preceding the Payment Date in July 2022, and (ii) with respect to any subsequent Payment Dates, the period that will commence on the immediately preceding Payment Date and end on the day immediately preceding the current Payment Date.

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The Interest Payment Amount for the Series 2022-FT1 Term Notes for each Payment Date will be calculated based on the Interest Day Count Convention. The first Payment Date with respect to the Series 2022-FT1 Term Notes will be July 25, 2022.

“Interest Day Count Convention” means, with respect to the Series 2022-FT1 Term Notes, the actual number of days in the related Interest Accrual Period, divided by 360.

“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.

“ISDA Fallback Adjustment” means the spread adjustment, (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor.

“ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.

“Issuance Date” means June 28, 2022.

“Margin” means, for the Series 2022-FT1 Term Notes, [****]% per annum.

“Note Interest Rate” means, for the Series 2022-FT1 Term Notes, with respect to any Interest Accrual Period, the sum of (a) the Benchmark and (b) the applicable Margin.

“Note Purchase Agreement” means that certain Series 2022-FT1 Term Note Purchase Agreement, dated as of June 15, 2022, by and among the Issuer, ASP, as Administrative Agent on behalf of the Initial Purchasers, PMC, as Administrator and Servicer, and the Initial Purchasers, that relates to the purchase of the Outstanding Series 2022-FT1 Term Notes, as amended, restated, supplemented or otherwise modified from time to time.

“Note Rating Agency” means Kroll Bond Rating Agency, LLC.

“Outstanding Series 2022-FT1 Term Note” has the meaning assigned to such term in Recitals.

“PMC” has the meaning assigned to such term in the Preamble.

“PMH” has the meaning assigned to such term in the Preamble.

“Regulation RR” has the meaning assigned to such term in Section 15 of this Indenture Supplement.

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“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.

“Scheduled Principal Payment Amount” means, with respect to any Payment Date following a Scheduled Principal Payment Event, an amount equal to the sum of the Series Principal Payment Amounts due and payable on each Series of Terms Notes then outstanding.

“Scheduled Principal Payment Events” means, for any Payment Date with respect to the Series 2022-FT1 Term Notes, a Series Principal Payment Amount will be due on a one-time basis on any Payment Date following the occurrence of any of the following events (each, a “Scheduled Principal Payment Event”):

(i) the unpaid principal balance of the Portfolio is less than $30 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date;

(ii) the unpaid principal balance of the Portfolio is less than $28 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date;

(iii) the unpaid principal balance of the Portfolio is less than $26 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date;

(iv) the unpaid principal balance of the Portfolio is less than $24 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date; or

(v) the unpaid principal balance of the Portfolio is less than $22 billion and a Borrowing Base Deficiency exists as of the close of business on the last day of the related Collection Period, prior to the paydown of the VFN Principal Balance of any Outstanding Class of VFNs from the preceding Payment Date.

“Second Optional Extension Date” means June 25, 2028.

“Second Optional Extension Term” has the meaning assigned to such term in Section 6.

“Series 2022-FT1 Term Notes” has the meaning assigned to such term in Section 1 of this Indenture Supplement.

“Series Principal Payment Amount” means, with respect to the Series 2022-FT1 Term Notes, upon the occurrence of a Scheduled Principal Payment Event, an amount equal to the product of (i) the Series Allocation Percentage of the Series 2022-FT1 Term Notes and (ii) the product of (a) $2,000,000,000, (b) the Market Value Percentage (as calculated using clause (b)(ii) of the definition thereof) and (c) the Advance Rate of the Series 2022-FT1 Term Notes.

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“Series Required Noteholders” means, for so long as the Series 2022-FT1 Term Notes are Outstanding, Noteholders of the Series 2022-FT1 Term Notes constituting the Majority Noteholders of such Series.

“SOFR” means, with respect to any day, the greater of (i) the secured overnight financing rate published for such day by the Federal Reserve Bank of New York (or a successor administrator), as the administrator of the benchmark on the Federal Reserve Bank of New York’s Website (or such successor administrator’s website) and (ii) 0%.

“SOFR Adjustment Conforming Changes” means, with respect to any SOFR Rate, any technical, administrative or operational changes (including changes to the Interest Accrual Period, timing and frequency of determining rates and making payments of interest, rounding of amounts or tenors, and other administrative matters) that the Designated Transaction Representative decides, from time to time, may be appropriate to adjust such SOFR Rate in a manner substantially consistent with or conforming to market practice (or, if the Designated Transaction Representative decides that adoption of any portion of such market practice is not administratively feasible or if the Designated Transaction Representative determines that no market practice exists, in such other manner as the Designated Transaction Representative determines is reasonably necessary), in each case as notified to the Indenture Trustee, the Calculation Agent and the Administrative Agent at least twenty (20) calendar days prior to the posting of such SOFR Adjustment Conforming Changes with the Payment Date Report notifying Noteholders of such changes and such SOFR Adjustment Conforming Changes taking effect, which such changes shall automatically become effective without further action on behalf of any party (upon being provided with such Payment Date Report). The SOFR Adjustment Conforming Changes will be prepared by the Designated Transaction Representative and delivered to the Indenture Trustee and Calculation Agent for posting with the Payment Date Report.

“SOFR Determination Date” means the second (2nd) U.S. Government Securities Business Day before each Interest Accrual Period begins.

“SOFR Determination Time” means 3:00 p.m. (New York time) on a U.S. Government Securities Business Day, at which time Compounded SOFR or Term SOFR, as applicable, is published on the Federal Reserve Bank of New York’s Website.

“SOFR Rate” means, with respect to the Note Interest Rate, based on SOFR: (1) initially a rate equal to Compounded SOFR for the Corresponding Tenor of 30 days; and (2) subsequently, a rate equal to Term SOFR for the Corresponding Tenor of such Note, commencing at a date determined by the Designated Transaction Representative, in its sole discretion, to be operationally, administratively and technically feasible, provided that such change will not adversely affect the tax status of the Series 2022-FT1 Term Notes, and that the Designated Transaction Representative will have the right, in its sole discretion, to make applicable SOFR Adjustment Conforming Changes; provided, that if Compounded SOFR is still available, but Term SOFR ceases to be available, then the rate in clause (1) above will apply; provided, however, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred, the Designated Transaction Representative will determine an alternative Benchmark in accordance with the definition of Benchmark Replacement and references to SOFR Rate herein will be deemed to reference such Benchmark Replacement.

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“Specified Call Premium Amount” means, as of any date of determination in respect of the Series 2022-FT1 Term Notes, the greater of (i) $0 and (ii) (a) the quotient of: (1) the product of: (x) the Note Interest Rate multiplied by (y) the outstanding Note Balance divided by (2) 360 multiplied by (b) the difference between (1) 360 and (2) the number of days from and including the date the Series 2022-FT1 Term Notes were issued through and including the date on which the Series 2022-FT1 Term Notes are redeemed.

“Stated Maturity Date” means, for Series 2022-FT1 Term Notes, the Payment Date in June 2027, or if extended pursuant to the First Optional Extension, the Payment Date in June 2028, or if extended pursuant to the Second Optional Extension, the Payment Date in June 2029, as further described in Section 6 hereof.

“Step-Up Fee” means, for the Series 2022-FT1 Term Notes and each Payment Date during the Step-Up Fee Period and on the date of final payment of such Notes (if the Step-Up Fee Period is continuing on such final payment date), a fee equal to (1) the related Cumulative Step-Up Fee Shortfall Amount plus (2) the product of (i) the applicable Step-Up Fee Rate, (ii) the average daily Note Balance since the prior Payment Date of the Series 2022-FT1 Term Notes and (iii) a fraction, (A) the numerator of which is the number of days elapsed from and including the prior Payment Date (or, if later, the commencement of the Step-Up Fee Period) to but excluding such Payment Date and (B) the denominator of which equals 360.

“Step-Up Fee Period” means, upon exercise of the First Optional Extension, the period that begins on the First Optional Extension Date and ends on the date on which the Series 2022-FT1 Term Notes are no longer outstanding.

“Step-Up Fee Rate” means, with respect to the Series 2022-FT1 Term Notes, [****% per annum during the First Optional Extension Term and [****]% per annum during the Second Optional Extension Term.

“Term SOFR” means the forward-looking term rate for the applicable Corresponding Tenor based on SOFR that has been selected or recommended by the Relevant Governmental Body as may initially be increased or decreased by a spread adjustment value that is either (i) set or recommended by the Relevant Governmental Body for such term rate or (ii) determined in accordance with the methodology endorsed by the Relevant Governmental Body for such term rate.

“Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the applicable Benchmark Replacement Adjustment.

“U.S. Government Securities Business Day” means any day except for a Saturday, a Sunday or a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in U.S. government securities.

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“WSFS” has the meaning assigned to such term in Section 14 hereof.

Section 3. Form of the Series 2022-FT1 Term Notes; Transfer Restrictions.

(a) Subject to the terms and provisions of Section 5.4 of the Base Indenture, the Series 2022-FT1 Term Notes shall only be issued as a Book-Entry Note, and the form of Global Rule 144A Note that may be used to evidence the Series 2022-FT1 Term Notes in the circumstances described in Section 5.2(c) of the Base Indenture is attached to the Base Indenture as Exhibit A-1. The Series 2022-FT1 Term Notes shall not be issued as Regulation S Notes nor shall any Series 2022-FT1 Term Notes be sold in offshore transactions in reliance on Regulation S.

The Series 2022-FT1 Term Notes were issued in minimum denominations of $100,000 and integral multiples of $1 in excess thereof.

(b) The Series 2022-FT1 Term Notes are not registered under the 1933 Act, or the securities laws of any other jurisdiction. The sale, pledge or other transfer of any Series 2022-FT1 Term Note or any interest therein will be subject to the restrictions described below. The Series 2022-FT1 Term Notes will bear a legend referring to the transfer restrictions thereof. None of the Issuer, the Co-Issuer, or the Initial Purchasers will register the Series 2022-FT1 Term Notes under the 1933 Act, register or qualify the Series 2022-FT1 Term Notes under the securities laws of any state or other jurisdiction or provide registration rights to any purchaser.

(c) The Issuer confirms that the Outstanding Series 2022-FT1 Term Notes issued on the Issuance Date pursuant to the Original Series 2022-FT1 Indenture Supplement were issued in the name of “Cede & Co.”, as nominee of DTC, pursuant to a letter agreement between the Issuer and DTC, dated as of the Issuance Date.

(d) The Issuer Trusts further confirm that the Series 2022-FT1 Term Notes effective on the Effective Date pursuant to this Indenture Supplement will be issued in the name of “Cede & Co.”, as nominee of DTC, pursuant to a letter agreement between the Issuer Trusts and DTC, dated as of the Effective Date.

In addition to any provisions set forth in Section 6.5 of the Base Indenture, any Noteholder of the Series 2022-FT1 Term Notes may only resell, pledge or transfer its beneficial interest in a Series 2022-FT1 Term Note to a person that the transferor reasonably believes is, and who has certified (or, in the case of Book-Entry Notes, is deemed to have certified) that it is a Qualified Institutional Buyer that purchases for its own account or for the account of a Qualified Institutional Buyer and to whom notice is given that the resale, pledge or transfer is made in reliance on Rule 144A. The Series 2022-FT1 Term Notes may not be resold, pledged or transferred pursuant to Regulation S.

Section 4. Payments and Allocation of Funds on Payment Dates; No Series Reserve Account.

(a) Except as otherwise expressly set forth herein, the Paying Agent shall make payments on the Series 2022-FT1 Term Notes on each Payment Date in accordance with Section 4.5 of the Base Indenture.

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(b) There will be no Series Reserve Account for the Series 2022-FT1 Term Notes, and the Noteholders of the Series 2022-FT1 Term Notes will not be entitled to receive payments made pursuant to any Series Reserve Account in place in respect of any other Series of Notes, except as otherwise set forth in the Base Indenture.

Section 5. Optional Redemption and Refinancing.

(a) The Issuer Trusts may, at any time, subject to Section 13.1 of the Base Indenture, upon at least five (5) Business Days’ prior written notice to the Administrative Agent, the Indenture Trustee and the Noteholders of the Series 2022-FT1 Term Notes, redeem in whole or in part and/or terminate and cause retirement of the Series 2022-FT1 Term Notes (so long as, in the case of any partial redemption, (i) such redemption is funded using the proceeds of the issuance and sale of one or more new Classes of Notes or from any other cash or funds of PMC and PMH and not Collections on the MSRs, and (ii) the Series 2022-FT1 Term Notes are redeemed on a pro rata basis based on their related Note Balances). In anticipation of a redemption of the Series 2022-FT1 Term Notes at the end of their Revolving Period, the Issuer Trusts may issue a new Series or one or more Classes of Notes within the ninety (90) day period prior to the end of such Revolving Period and reserve the cash proceeds of the issuance for the sole purpose of paying the principal balance and all accrued and unpaid interest on the Series 2022-FT1 Term Notes, on the last day of their Revolving Period. Any amendment to this Indenture Supplement executed to effect an optional redemption may be entered into without consent of the Noteholders of the Series 2022-FT1 Term Notes or of any other Notes issued under the Base Indenture (but with satisfaction of other requirements for amendments entered into without Noteholder consent). Any Notes issued in replacement for the Series 2022-FT1 Term Notes will have the same rights and privileges as the Class of Series 2022-FT1 Term Notes that was refinanced with the related proceeds thereof; provided, such replacement Notes may have different Stated Maturity Dates and different Note Interest Rates.

(b) If the Issuer Trusts redeem the Series 2022-FT1 Term Notes prior to the Payment Date occurring within twelve (12) months following the Issuance Date, the Issuer Trusts shall pay to the Noteholders of the Series 2022-FT1 Term Notes as part of the Redemption Amount an amount equal to the Specified Call Premium Amount.

Section 6. Optional Extension of Stated Maturity Date.

The Administrator and the Co-Issuer Administrator, on behalf of the Issuer and the Co-Issuer, respectively, may, by written notice to the Administrative Agent and the Indenture Trustee, request two one-year extensions of the Stated Maturity Date for the Series 2022-FT1 Term Notes. The first optional extension (the “First Optional Extension”) request must be made at least fifteen (15) days prior to the First Optional Extension Date and the second optional extension (the “Second Optional Extension” and together with the First Optional Extension, “Optional Extensions”) request must be made at least fifteen (15) days prior to the Second Optional Extension Date. To the extent the Administrator or the Co-Issuer Administrator has exercised the First Optional Extension and the term of the Acknowledgment Agreement has been extended through at least June 25, 2028, the Stated Maturity Date will be extended on the First Optional Extension Date such that, after giving effect to such extension, the Stated Maturity Date will be one (1) year after the Stated Maturity Date in effect immediately prior to exercise of the First Optional Extension (the “First Optional Extension Term”).

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To the extent the Administrator or the Co-Issuer Administrator have exercised the Second Optional Extension and the term of the Acknowledgment Agreement has been extended through at least June 25, 2029, the Stated Maturity Date will be extended on the Second Optional Extension Date such that, after giving effect to such extension, the Stated Maturity Date will be one (1) year after the Stated Maturity Date in effect immediately prior to exercise of the Second Optional Extension (“Second Optional Extension Term”). The Stated Maturity Date of the Series 2022-FT1 Term Notes cannot be extended past the date which is two (2) years following the initial Stated Maturity Date in effect immediately prior to exercise of the First Optional Extension. Upon exercise of an Optional Extension, during the Step-Up Fee Period, the applicable Step-Up Fee will apply to the Series 2022-FT1 Term Notes.

Section 7. Determination of Note Interest Rate and Benchmark.

(a) At least one (1) Business Day prior to each Determination Date, the Calculation Agent shall calculate the Note Interest Rate for the related Interest Accrual Period and the Interest Payment Amount for the Series 2022-FT1 Term Notes for the upcoming Payment Date, and include a report of such amount in the related Payment Date Report.

(b) On each Benchmark Determination Date, the Calculation Agent will calculate the Benchmark for a one-month period for the succeeding Interest Accrual Period for the related Series 2022-FT1 Term Notes on the basis of the procedures specified in the definition of “Benchmark.”

(c) In connection with the implementation of a Benchmark Replacement, the Designated Transaction Representative will have the right from time to time to make Benchmark Replacement Conforming Changes as described in the definition thereof.

(d) Written notice or materials relating to the occurrence of a Benchmark Transition Event, and its related Benchmark Replacement Date, the determination of a Benchmark Replacement and the making of any Benchmark Replacement Conforming Changes or SOFR Adjustment Conforming Changes received by the Paying Agent in a format suitable for posting shall be posted with the relevant Payment Date Report. Notwithstanding anything in the Base Indenture, any Indenture Supplement or any other Transaction Document to the contrary, upon such information being provided with the Payment Date Report, the Base Indenture, any Indenture Supplement or any other relevant Transaction Document, as applicable, shall be deemed to have been amended to reflect the new Unadjusted Benchmark Replacement, Benchmark Replacement Adjustment, Benchmark Replacement Conforming Changes and/or SOFR Adjustment Conforming Changes without further compliance with the amendment provisions of the Base Indenture, any Indenture Supplement or any other relevant Transaction Document.

(e) Any determination, decision or election that may be made by the Designated Transaction Representative in connection with a Benchmark Transition Event or a Benchmark Replacement as described above, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, shall be conclusive and binding absent manifest error, may be made in the Designated Transaction Representative’s sole discretion, and, notwithstanding anything to the contrary in the Transaction Documents, shall become effective without consent from any other party.

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The Designated Transaction Representative shall provide notice of any determination, decision or election made by the Designated Transaction Representative in connection with a Benchmark Transition Event or a Benchmark Replacement as described above at least twenty (20) days prior to the proposed posting of such changes with the related Payment Date Report.

(f) The establishment of the Benchmark by the Calculation Agent and the Designated Transaction Representative, as applicable, and the Calculation Agent’s subsequent calculation of the Benchmark, the Note Interest Rate and the Interest Payment Amount on the Series 2022-FT1 Term Notes for the relevant Interest Accrual Period based on the determination made by the Designated Transaction Representative, in the absence of manifest error, will be final and binding.

(g) The Designated Transaction Representative and its directors, officers, agents or employees shall not be liable for any action taken or omitted to be taken by it under or in connection with this Indenture Supplement or the other Transaction Documents in its capacity as Designated Transaction Representative, other than action or inaction undertaken with gross negligence, willful misconduct or bad faith. Without limiting the foregoing and notwithstanding any understanding to the contrary, no Noteholder shall have any right of action whatsoever against the Designated Transaction Representative as a result of the Designated Transaction Representative acting or refraining from acting under this Indenture Supplement, the Notes or any of the other Transaction Documents in its own interests or otherwise, other than as a result of gross negligence, willful misconduct or bad faith by the Designated Transaction Representative.

(h) None of the Issuer, Co-Issuer, Owner Trustee, the Indenture Trustee, the Paying Agent, the Calculation Agent, the Administrator, the Co-Issuer Administrator the Designated Transaction Representative, the Administrative Agent, the Servicer or any other transaction party will have any liability for any determination made by or on behalf of the Issuer and the Co-Issuer by any party, including the Designated Transaction Representative or any action or inaction by the Administrative Agent, in connection with a Benchmark Transition Event, any Benchmark Replacement Date, the determination of or a Benchmark Replacement and the making of any Benchmark Replacement Conforming Changes or SOFR Adjustment Conforming Changes as described above, and each Noteholder, by its acceptance of a Note or a beneficial interest in a Note, shall be deemed to waive and release any and all claims against any of the Issuer, the Co-Issuer, Owner Trustee, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Administrator, the Co-Issuer Administrator, the Designated Transaction Representative, the Administrative Agent or any other transaction party relating to any such determinations.

 

Section 8. Conditions Precedent Satisfied.

The Issuer Trusts hereby represent and warrant to the Noteholders of the Series 2022-FT1 Term Notes and the Indenture Trustee that, as of the Effective Date (a) the Series 2022-FT1 Term Notes are rated “BBB- (sf)” by the Note Rating Agency and (b) each of the conditions precedent set forth in the Base Indenture, including but not limited to those conditions precedent set forth in Section 6.10(b) of the Base Indenture and Article XII thereof, as applicable, to the issuance of the Series 2022-FT1 Term Notes has been satisfied or waived in accordance with the terms thereof.

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Section 9. Representations and Warranties.

The Issuer, the Co-Issuer, the Administrator, the Co-Issuer Administrator, the Servicer and the Indenture Trustee hereby restate as of the related Effective Date, or as of such other date as is specifically referenced in the body of such representation and warranty, all of the representations and warranties set forth in Sections 9.1, 10.1 and 11.14, respectively, of the Base Indenture.

Each of the Administrator and the Co-Issuer Administrator hereby represents and warrants that it is not in default with respect to any material contract under which a default should reasonably be expected to have a material adverse effect on the ability of the Administrator and the Co-Issuer Administrator to perform their duties under this Indenture or any Indenture Supplement, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such contract or order of any court, administrative agency, arbitrator or governmental body.

Each of PMC and PMH hereby represents and warrants that it is not in default with respect to any material contract under which a default should reasonably be expected to have a material adverse effect on the ability of each of PMC and PMH to perform its duties under this Indenture, any Indenture Supplement or any Transaction Document to which it is a party, or with respect to any order of any court, administrative agency, arbitrator or governmental body which would have a material adverse effect on the transactions contemplated hereunder, and no event has occurred which with notice or lapse of time or both would constitute such a default with respect to any such contract or order of any court, administrative agency, arbitrator or governmental body.

Section 10. Amendments.

(a) Notwithstanding any provisions to the contrary in Article XII of the Base Indenture but subject to the provisions set forth in Sections 12.1 and 12.3 of the Base Indenture, without the consent of the Noteholders of any Notes but with the consent of the Issuer Trusts (evidenced by their execution of such amendment), the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer (solely in the case of any amendment that adversely affects the rights or obligations of the Servicer or adds new obligations or increases existing obligations of the Servicer), and the Administrative Agent, at any time and from time to time, upon delivery of an Issuer Trusts’ Tax Opinion and upon delivery by the Issuer and the Co-Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that each of the Issuer and Co-Issuer reasonably believes that such amendment will not have a material Adverse Effect, may amend any Transaction Document for any of the following purposes: (i) to correct any mistake or typographical error or cure any ambiguity, or to cure, correct or supplement any defective or inconsistent provision therein or in any other Transaction Document; or (ii) to amend any other provision of this Indenture Supplement.

(b) Notwithstanding any provisions to the contrary in Section 6.10 or Article XII of the Base Indenture except for amendments otherwise permitted as described in Sections 12.1 and 12.2 of the Base Indenture and in the immediately preceding paragraph, no supplement, amendment or indenture supplement entered into with respect to the issuance of a new Series of Notes or pursuant to the terms and provisions of Section 12.2 of the Base Indenture may, without the consent of the Series Required Noteholders in respect of the Series 2022-FT1 Term Notes, supplement, amend or revise any term or provision of this Indenture Supplement; provided, that with respect to the following amendments, the consent of each Noteholder of each Outstanding Series 2022-FT1 Term Notes materially and adversely affected thereby shall be required:

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(i) any change to the scheduled payment date of any payment of interest on any Note held by such Noteholder, or change a Payment Date or Stated Maturity Date of any Note held by such Noteholder;

(ii) any reduction of the Note Balance of, or the Note Interest Rate, the Step-Up Fee Rate or the Default Supplemental Fee Rate on any Notes held by such Noteholder, or change the method of computing the Note Balance or Note Interest Rate in a manner that is adverse to such Noteholder;

(iii) any impairment of the right to institute suit for the enforcement of any payment on any Note held by such Noteholder;

(iv) any reduction of the percentage of Noteholders of the Outstanding Notes (or of the Outstanding Notes of any Series or Class), for which consent is required for any such amendment, or the consent of whose Noteholders is required for any waiver of compliance with the provisions of the Indenture or any Indenture Supplement or of defaults thereunder and their consequences, provided for in the Base Indenture or any Indenture Supplement;

(v) any modification of any amendment of the Indenture, except to increase any percentage of Noteholders required to consent to any such amendment or to provide that other provisions of the Indenture or any Indenture Supplement cannot be modified or waived without the consent of the Noteholder of each outstanding Note adversely affected thereby;

(vi) any modification to permit the creation of any lien or other encumbrance on the collateral that is prior to the lien in favor of the Indenture Trustee for the benefit of the Noteholders of the Notes;

(vii) any modification to change the method of computing the amount of principal of, or interest on, any Note held by such Noteholder on any date;

(viii) any modification to increase any Advance Rates in respect of Notes held by such Noteholder or eliminate or decrease any collateral value exclusions in respect of Notes held by such Noteholder; or

(ix) any change, modification or waiver of any Scheduled Principal Payment Amount;

- 18 -

 

provided, that written notice of the occurrence of a Benchmark Transition Event and its related Benchmark Replacement Date, the determination of a Benchmark Replacement and the making of any Benchmark Replacement Conforming Changes or SOFR Adjustment Conforming Changes received by the Paying Agent in a format suitable for posting shall be posted with the relevant Payment Date Report, and notwithstanding anything in the Base Indenture, any Indenture Supplement or any other Transaction Document to the contrary, upon the posting of such information with such Payment Date Report, the Base Indenture, any Indenture Supplement or any other relevant Transaction Document, as applicable, shall be deemed to have been amended to reflect the new Unadjusted Benchmark Replacement, Benchmark Replacement Adjustment, Benchmark Replacement Conforming Changes and/or SOFR Adjustment Conforming Changes without further compliance with the amendment provisions of the Base Indenture, any Indenture Supplement or any other relevant Transaction Document.

(c) For the avoidance of doubt, the consent of the Servicer is not required for (i) the waiver of any Event of Default under the Base Indenture or (ii) any other modification or amendment to any Event of Default under the Base Indenture except those related to the actions and omissions of the Servicer.

(d) For the avoidance of doubt, the Issuer, the Co-Issuer, the Administrator, and the Co-Issuer Administrator, respectively, hereby covenant that the Issuer Trusts shall not issue any future Series of Notes without designating an entity to act as “Administrative Agent” under the related Indenture Supplement with respect to such Series of Notes.

(e) Any amendment of this Indenture Supplement which affects the rights, duties, immunities, obligations or liabilities of the Owner Trustee in its capacity as owner trustee under the Trust Agreements shall require the written consent of the Owner Trustee.

(f) Notwithstanding any provisions to the contrary in Article XII of the Base Indenture but subject to the provisions set forth in Sections 12.2 and 12.3 of the Base Indenture, with the consent of the Issuer, the Co-Issuer, the Indenture Trustee, the Servicer, the Administrative Agent, the VFN Noteholders, the Holders of the Series 2018-FT1 Term Notes (to the extent such Notes remain Outstanding), and Fannie Mae (solely to the extent required under the Transaction Documents, including the Acknowledgment Agreement), at any time and from time to time, upon delivery to the Indenture Trustee of an Issuer Trusts’ Tax Opinion (unless such Issuer Trusts’ Tax Opinion is waived by the Series Required Noteholders) and upon delivery by the Issuer and the Co-Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that each of the Issuer and the Co-Issuer reasonably believes that such amendment will not have a material Adverse Effect, the Administrator and the Co-Issuer Administrator may amend any Transaction Document for purposes of effecting the Anticipated Amendments. Noteholders of the Series 2022-FT1 Term Notes will be deemed to consent to the Anticipated Amendments by their acquisition of the Series 2022-FT1 Term Notes.

 

Section 11. Counterparts.

This Indenture Supplement may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same instrument. The words “executed,” “signed,” “signature,” and words of like import as used above and elsewhere in this Indenture Supplement or in any other certificate, agreement or document related to this transaction shall include, in addition to manually executed signatures, images of manually executed signatures transmitted by facsimile or other electronic format (including, without limitation, “pdf,” “tif” or “jpg”) and other electronic signatures (including, without limitation, any electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record).

- 19 -

 

The use of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent, communicated, received, or stored by electronic means) shall be of the same legal effect, validity, enforceability and admissibility as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code. Each party to this Indenture Supplement hereby consents to the use of any secure third party electronic signature capture service providers (including, without limitation, DocuSign), as long as such service providers use system logs and audit trails that establish a temporal and process link between the presentation of identity documents and the electronic signing, together with identifying information that can be used to verify the electronic signature and its attribution to the signer’s identity and evidence of the signer’s agreement to conduct the transaction electronically and of the signer’s execution of each electronic signature. Delivery of an executed counterpart of a signature page to this Indenture Supplement by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Indenture Supplement.

Section 12. Entire Agreement.

This Indenture Supplement, together with the Base Indenture incorporated herein by reference and the related Transaction Documents, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.

Section 13. Limited Recourse.

Notwithstanding any other terms of this Indenture Supplement, the Series 2022-FT1 Term Notes, any other Transaction Documents or otherwise, the obligations of the Issuer Trusts under the Series 2022-FT1 Term Notes, this Indenture Supplement and each other Transaction Document to which it is a party are limited recourse obligations of the Issuer Trusts, payable solely from the Trust Estate, and following realization of the Trust Estate and application of the proceeds thereof in accordance with the terms of this Indenture Supplement, none of the Noteholders of Series 2022-FT1 Term Notes, the Indenture Trustee or any of the other parties to the Transaction Documents shall be entitled to take any further steps to recover any sums due but still unpaid hereunder or thereunder, all claims in respect of which shall be extinguished and shall not thereafter revive. No recourse shall be had for the payment of any amount owing in respect of the Series 2022-FT1 Term Notes or this Indenture Supplement or for any action or inaction of the Issuer Trusts against any officer, director, employee, shareholder, stockholder or incorporator of the Issuer Trusts or any of their successors or assigns for any amounts payable under the Series 2022-FT1 Term Notes or this Indenture Supplement. It is understood that the foregoing provisions of this Section 13 shall not (a) prevent recourse to the Issuer Trusts’ Trust Estate for the sums due or to become due under any security, instrument or agreement which is part of the Trust Estate, including, without limitation, the PC Repo Guaranty or (b) save as specifically provided therein, constitute a waiver, release or discharge of any indebtedness or obligation evidenced by the Series 2022-FT1 Term Notes or secured by this Indenture Supplement.

- 20 -

 

It is further understood that the foregoing provisions of this Section 13 shall not limit the right of any Person to name the Issuer or the Co-Issuer as a party defendant in any proceeding or in the exercise of any other remedy under the Series 2022-FT1 Term Notes or this Indenture Supplement, so long as no judgment in the nature of a deficiency judgment or seeking personal liability shall be asked for or (if obtained) enforced against any such Person or entity.

Section 14. Owner Trustee Limitation of Liability.

It is expressly understood and agreed by the parties hereto that (a) this Indenture Supplement is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally but solely in its capacity as Owner Trustee under the Trust Agreements, in the exercise of the powers and authority conferred and vested in it thereunder, (b) each of the representations, warranties, undertakings, obligations and agreements herein made on the part of the Issuer Trusts is made and intended not as personal representations, warranties, undertakings, obligations and agreements by WSFS but is made and intended for the purpose of binding only, and is binding only on, the Issuer Trusts, (c) nothing herein contained shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant or obligation of the Issuer Trusts, either expressed or implied, contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto, (d) WSFS has not made and will not make any investigation as to the accuracy or completeness of any representations or warranties made by the Issuer Trusts in this Indenture Supplement or any related document delivered pursuant hereto and (e) under no circumstances shall WSFS be personally liable for the payment of any indebtedness, indemnities or expenses of the Issuer Trusts, or be liable for the performance, breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer Trusts or by WSFS as Owner Trustee on behalf of the Issuer Trusts under this Indenture Supplement or any other related documents, as to all of which recourse shall be had solely to the assets of the Issuer Trusts.

Section 15. Credit Risk Retention.

While it is not clear that Section 15G of the 1934 Act, added pursuant to Section 941(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Regulation RR”), applies to the issuance of the Series 2022-FT1 Term Notes and that PennyMac Mortgage Investment Trust (“PMIT”) will be deemed a securitizer for the purposes of Regulation RR, PMIT will maintain a subordinated seller’s interest in the Issuer and the Co-Issuer, by retaining, directly or indirectly, a 100% ownership interest in each of PMC and PMH, and PMC and/or PMH retaining their ownership interest in the applicable Owner Trust Certificate and the associated rights to residual cash flow under the Indenture, that equals not less than 5% of the aggregate unpaid principal balance of any Outstanding Notes (other than Notes held to maturity by PMIT, or their wholly-owned affiliates), calculated and held for the period of time required in accordance with Regulation RR. Neither PMIT nor any wholly owned affiliates will engage in activities that constitute impermissible hedging, transfer or financing of the Owner Trust Certificates.

- 21 -

 

The seller’s interest expected to be retained by PMIT in connection with Regulation RR (to the extent applicable), will equal approximately [****]% or $[***********] (in each case, as calculated in accordance with Regulation RR), as of the Effective Date. The Series 2017-VF1 Notes have been issued and are held by PMC and PMH and financed by Nexera and Citibank, however the Note Balance of the Series 2017-VF1 Notes is not included in the denominator of the calculation that produced the percentage described above in accordance with Regulation RR.

Section 16. Note Rating Agency.

As of the date hereof, the Series 2022-FT1 Term Notes are rated BBB- (sf) by the Note Rating Agency.

Section 17. Conditions to Effectiveness of this Indenture Supplement.

This Indenture Supplement shall become effective upon (i) execution and delivery of this Indenture Supplement by all parties hereto and (ii) upon delivery of the Issuer Trusts’ Tax Opinion, the Authorization Opinion, the Opinion of Counsel and the Officer’s Certificate (the “Effective Date”).

Section 18. Effect of Amendment.

This Indenture Supplement shall be effective as of the Effective Date and shall not be effective for any period prior to the Effective Date. After this Indenture Supplement becomes effective, all references in the Indenture Supplement or the Base Indenture to “this Indenture Supplement,” “this Indenture,” “hereof,” “herein” or words of similar effect referring to such Indenture Supplement and Base Indenture shall be deemed to be references to the Indenture Supplement or the Base Indenture, as applicable, as amended by this Indenture Supplement. This Indenture Supplement shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Base Indenture other than as set forth herein.

The parties hereto have entered into this Indenture Supplement solely to amend the terms of the Original Series 2022-FT1 Indenture Supplement and do not intend this Indenture Supplement or the transactions contemplated hereby to be, and this Indenture Supplement and the transactions contemplated hereby shall not be construed to be, a novation of any of the obligations owed by the parties hereto or any other party to the Indenture Supplement or Base Indenture under or in connection with the Indenture Supplement or Base Indenture or any of the other Transaction Documents. It is the intention and agreement of each of the parties hereto that (i) the perfection and priority of all security interests securing the payment of the Notes, all other sums payable by the Issuer under the Indenture and the compliance by the Issuer with the provisions of the Indenture are preserved, (ii) the liens and security interests granted under the Indenture continue in full force and effect, and (iii) any reference to the Original Series 2022-FT1 Indenture Supplement in any such Transaction Document shall be deemed to reference to this Indenture Supplement.

 

 

[Signatures follow]

- 22 -

 

IN WITNESS WHEREOF, the undersigned have caused this Indenture Supplement to be duly executed by their respective signatories thereunto all as of the day and year first above written.

 

PMT ISSUER TRUST – FMSR, as Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

 

By:  /s/ Mark H. Brzoska

Name:  Mark H. Brzoska

Title:  Vice President

 

[Signature Page to
Series 2022-FT1 Amended and Restated Indenture Supplement]

 

 

PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

 

By:  /s/ Mark H. Brzoska

Name:  Mark H. Brzoska

Title:  Vice President

 

[Signature Page to
Series 2022-FT1 Amended and Restated Indenture Supplement]

 

 

CITIBANK, N.A., as Indenture Trustee, Calculation Agent, Paying Agent and Securities Intermediary, and not in its individual capacity

 

By:  /s/ Valerie Delgado

Name:  Valerie Delgado

Title:  Senior Trust Officer

 

 

 

 

[Signature Page to
Series 2022-FT1 Amended and Restated Indenture Supplement]

 

 

 

PENNYMAC CORP., as Administrator and Servicer

 

By:  /s/ Pamela Marsh

Name: Pamela Marsh

Title: Senior Managing Director and Treasurer

 

 

[Signature Page to
Series 2022-FT1 Amended and Restated Indenture Supplement]

 

 

PENNYMAC HOLDINGS, LLC., as Co-Issuer Administrator

 

By:  /s/ Pamela Marsh

Name: Pamela Marsh

Title: Senior Managing Director and Treasurer

 

[Signature Page to
Series 2022-FT1 Amended and Restated Indenture Supplement]

 

 

ATLAS SECURITIZED PRODUCTS, L.P.,
as Administrative Agent

By: Atlas Securitized Products GP, LLC, its general partner

 

 

By:  /s/ Dominic Obaditch

Name:  Dominic Obaditch

Title:  Authorized Signatory

 

 

 

[Signature Page to
Series 2022-FT1 Amended and Restated Indenture Supplement]

 

 

NEXERA HOLDING LLC, as a Series Required Noteholder

By: /s/ Steve Abreu
Name: Steve Abreu
Title: CEO

[Signature Page to
Series 2022-FT1 Amended and Restated Indenture Supplement]

 

CITIBANK, N.A., as a Series Required Noteholder

By: /s/ Arunthathi Theivakumaran
Name: Arunthathi Theivakumaran
Title: Vice President

[Signature Page to
Series 2022-FT1 Amended and Restated Indenture Supplement]

 

EXHIBIT A

 

FORM OF AMENDED AND RESTATED SERIES 2022-FT1 TERM NOTE

Exhibit A-1

EX-10.17 10 pmt-ex10_17.htm EX-10.17 EX-10.17

EXHIBIT 10.17

 

AMENDMENT NO. 2 TO

SERIES 2023-FTL1 INDENTURE SUPPLEMENT AND LOAN AGREEMENT

This Amendment No. 2 to Series 2023-FTL1 Indenture Supplement and Loan Agreement, is entered into as of October 10, 2023 (the “Effective Date”) (this “Amendment”), among PMT ISSUER TRUST - FMSR, as issuer (the “Issuer”), PMT CO-ISSUER TRUST I – FMSR, as co-issuer (the “Co-Issuer” and, together with the Issuer, the “Issuer Trusts”), CITIBANK, N.A. (“Citibank”), as indenture trustee (in such capacity, the “Indenture Trustee”), calculation agent (in such capacity, the “Calculation Agent”), paying agent (in such capacity, the “Paying Agent”) and securities intermediary (in such capacity, the “Securities Intermediary”), PENNYMAC CORP. (“PMC”), as administrator (in such capacity, the “Administrator”) and as servicer (in such capacity, the “Servicer”), PENNYMAC HOLDINGS, LLC (“PMH”), as co-issuer administrator (in such capacity, the “Co-Issuer Administrator”) and ATLAS SECURITIZED PRODUCTS, L.P., as administrative agent (the “Administrative Agent”). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Indenture (as defined below).

RECITALS

WHEREAS, the Issuer, the Co-Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, Securities Intermediary, the Administrator, the Co-Issuer Administrator, the Servicer and the Administrative Agent are parties to that certain Amended and Restated Base Indenture, dated as of October 10, 2023 (as supplemented hereby and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Base Indenture”), the provisions of which are incorporated, as modified by that certain Series 2023-FTL1 Indenture Supplement and Loan Agreement, dated as of May 25, 2023, as amended by Amendment No. 1 and Joinder thereto, dated as of August 16, 2023 (the “Existing Series 2023-FTL1 Indenture Supplement,” as amended by this Amendment, the “Series 2023-FTL1 Indenture Supplement,” and together with the Base Indenture, the “Indenture”), by and among the Issuer, the Co-Issuer, the Indenture Trustee, the Calculation Agent, the Paying Agent, the Securities Intermediary, the Administrator, the Co-Issuer Administrator, the Servicer, the Administrative Agent and the Lenders;

WHEREAS, the Issuer, the Co-Issuer, the Indenture Trustee, the Administrator, the Co-Issuer Administrator, the Servicer and the Administrative Agent have agreed, subject to the terms and conditions of this Amendment, that the Existing Series 2023-FTL1 Indenture Supplement be amended to reflect certain agreed upon revisions to the terms of the Existing Series 2023-FTL1 Indenture Supplement in order to support the tax treatment of the Guarantor;

WHEREAS, pursuant to Section 11(f) of the Existing Series 2023-FTL1 Indenture Supplement, with the consent of the Issuer, the Indenture Trustee, the Servicer, the Administrative Agent, the VFN Noteholders and Fannie Mae and upon delivery to the Indenture Trustee of an Issuer Tax Opinion and upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer reasonably believes such amendment will not have a material Adverse Effect and is not reasonably expected to have a material Adverse Effect, the Administrator may amend any Transaction Document for purposes of effecting the Anticipated Amendments, and the Noteholders of the Series 2023-FTL1 Promissory Term Notes will be deemed to consent to the Anticipated Amendments by their acquisition of the Series 2023-FTL1 Promissory Term Notes.

-1-

 

WHEREAS, pursuant to Section 12.1 of the Base Indenture and Section 11 of the Existing Series 2023-FTL1 Indenture Supplement, without the consent of the Lenders, but with the consent of the Issuer, the Indenture Trustee, the Administrator, the Servicer and the Administrative Agent, at any time and from time to time upon delivery of an Issuer Tax Opinion and upon delivery by the Issuer to the Indenture Trustee of an Officer’s Certificate to the effect that the Issuer reasonably believes such amendment will not have a material Adverse Effect and is not reasonably expected to have a material Adverse Effect, may amend any Transaction Document with prior notice to each Note Rating Agency that is then rating any Outstanding Notes;

WHEREAS, pursuant to Section 12.3 of the Base Indenture, in executing or accepting the additional trusts created by any amendment or Indenture Supplement of the Base Indenture permitted by Article XII or the modifications thereby of the trusts created by the Base Indenture, the Indenture Trustee will be entitled to receive, and (subject to Section 11.1 of the Base Indenture) will be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment or Indenture Supplement is authorized and permitted by the Base Indenture and that all conditions precedent thereto have been satisfied;

WHEREAS, pursuant to Section 1.3 of the Base Indenture and Section 11 of the Existing Series 2023-FTL1 Indenture Supplement, the Issuer shall deliver an Officer’s Certificate stating that all conditions precedent, if any, provided for in the Base Indenture relating to a proposed action have been complied with and that the Issuer reasonably believes that this Amendment will not have a material Adverse Effect, and shall also furnish to the Indenture Trustee an opinion of counsel stating that in the opinion of such counsel all conditions precedent to a proposed action, if any, have been complied with;

WHEREAS, pursuant to Section 11.1 of the Trust Agreement, prior to the execution of any amendment to any Transaction Documents to which the Trust is a party, the Owner Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by the Trust Agreement and that all conditions precedent have been met;

WHEREAS, the Existing Series 2023-FTL1 Indenture Supplement is a Transaction Document; and

WHEREAS, as of the date hereof, the Series 2023-FTL1 Promissory Term Notes are not rated by any Note Rating Agency.

NOW, THEREFORE, the Issuer, the Co-Issuer, Indenture Trustee, the Co-Issuer Administrator, the Administrator, the Servicer and the Administrative Agent hereby agree, in consideration of the amendments, agreements and other provisions herein contained and of certain other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties hereto, that the Existing Series 2023-FTL1 Indenture Supplement is hereby amended as follows:

‑2‑

 

SECTION 1.
Amendment to Existing Series 2023-FTL1 Indenture Supplement and Loan Agreement. Effective as of the date hereof, the Existing Series 2023-FTL1 Indenture Supplement and Loan Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: ) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in Exhibit A hereto. The parties hereto further acknowledge and agree that Exhibit A constitutes the Series 2023-FTL1 Indenture Supplement and Loan Agreement as amended and modified by the terms set forth herein.
SECTION 2.
No Note Rating Agency. As of the date hereof and prior to the execution of this Amendment, the Series 2023-FTL1 Promissory Term Notes are not rated by any Note Rating Agency.
SECTION 3.
Conditions Precedent. This Amendment shall become effective upon satisfaction of conditions precedent set forth in Schedule I hereto.
SECTION 4.
Representations and Warranties. Each of the Issuer and Co-Issuer hereby represents and warrants to the Indenture Trustee and the Administrative Agent that as of the date hereof it is in compliance with all the terms and provisions set forth in the Indenture on its part to be observed or performed remains bound by the terms thereof, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 9.1 of the Base Indenture.
SECTION 5.
Limited Effect. Except as expressly amended and modified by this Amendment, the Indenture shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 6.
No Recourse. It is expressly understood and agreed by the parties hereto that (a) each of this Amendment and the Series 2023-FTL1 Promissory Term Notes is executed and delivered by Wilmington Savings Fund Society, FSB (“WSFS”), not individually or personally, but solely in its capacity as Owner Trustee of each of the Issuer and Co-Issuer under each of the Trust Agreements, in the exercise of the powers and authority conferred and vested in it thereunder, (b) each of the representations, warranties, undertakings, obligations and agreements herein or in the Series 2023-FTL1 Promissory Term Notes made on the part of either the Issuer or the Co-Issuer is made and intended not as personal representations, warranties, undertakings, obligations and agreements by WSFS, but is made and intended for the purpose of binding only, and is binding only on, the Issuer and the Co-Issuer, (c) nothing contained herein or in the Series 2023-FTL1 Promissory Term Notes shall be construed as creating any liability on WSFS, individually or personally, to perform any covenant or obligation of the Issuer or the Co-Issuer, either expressed or implied, contained herein or therein, all such liability, if any, being expressly waived by the parties hereto or thereto and by any Person claiming by, through or under the parties hereto or thereto, (d) WSFS has not made and will not make any investigation as to the accuracy or completeness of any representations or warranties made by the Issuer or the Co-Issuer in this Amendment, the Series 2023-FTL1 Promissory Term Notes or any related document delivered pursuant hereto and (e) under no circumstances shall WSFS, be personally liable for the payment of any indebtedness, indemnities or expenses of the Issuer or the Co-Issuer or be liable for the performance, breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuer or the Co-Issuer or by WSFS, as Owner Trustee on behalf of the Issuer or the Co-Issuer under this Amendment, the Series 2023-FTL1 Promissory Term Notes or any other related documents, as to all of which recourse shall be had solely to the assets of the Issuer and the Co-Issuer.

‑3‑

 

SECTION 7.
Successors and Assigns. This Amendment shall be binding upon the parties hereto and their respective successors and assigns.
SECTION 8.
GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY, DISPUTE OR CAUSE OF ACTION (WHETHER IN CONTRACT, TORT OR OTHERWISE) BASED UPON, ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, INCLUDING THE STATUTES OF LIMITATIONS AND OTHER PROCEDURAL LAWS THEREOF (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH SHALL APPLY) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 9.
Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. The parties agree that this Amendment may be accepted, executed or agreed to through the use of an electronic signature in accordance with the Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 et seq, Official Text of the Uniform Electronic Transactions Act as approved by the National Conference of Commissioners on Uniform State Laws at its Annual Conference on July 29, 1999 and any applicable state law. Any document accepted, executed or agreed to in conformity with such laws will be binding on all parties hereto to the same extent as if it were physically executed and each party hereby consents to the use of any secure third party electronic signature capture service with appropriate document access tracking, electronic signature tracking and document retention.
SECTION 10.
Entire Agreement. The Indenture, as amended by this Amendment, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and fully supersedes any prior or contemporaneous agreements relating to such subject matter.
SECTION 11.
Recitals. The recitals and statements contained in this Amendment shall be taken as the statements of the Issuer, and the Indenture Trustee does not assume any responsibility for their correctness. The Indenture Trustee does not make any representation as to the validity or sufficiency of this Amendment (except as may be made with respect to the validity of its own obligations hereunder). In entering into this Amendment, the Indenture Trustee shall be entitled to the benefit of every provision of the Indenture relating to the conduct of, or affecting the liability of or affording protection to it.

‑4‑

 

SECTION 12.
Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.

[Signature Pages Follow]

‑5‑

 

IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.

 

PMT ISSUER TRUST – FMSR, as Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

 

PMT CO-ISSUER TRUST I – FMSR, as Co-Issuer

By: Wilmington Savings Fund Society, FSB, not in its individual capacity but solely as Owner Trustee

By: /s/ Mark H. Brzoska
Name: Mark H. Brzoska
Title: Vice President

 

[PMT FMSR - Amendment No. 2 to Series 2023-FTL1 Indenture Supplement and Loan Agreement]

 

PENNYMAC CORP., as Servicer and as Administrator

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

 

 

PENNYMAC HOLDINGS, LLC, as Co-Issuer Administrator

By: /s/ Pamela Marsh
Name: Pamela Marsh
Title: Senior Managing Director and Treasurer

 

 

 

[PMT FMSR - Amendment No. 2 to Series 2023-FTL1 Indenture Supplement and Loan Agreement]

 

 

CITIBANK, N.A., as Indenture Trustee, and not in its individual capacity

By: /s/ Valerie Delgado
Name: Valerie Delgado
Title: Senior Trust Officer

 

[PMT FMSR - Amendment No. 2 to Series 2023-FTL1 Indenture Supplement and Loan Agreement]

 

ATLAS SECURITIZED PRODUCTS, L.P., as Administrative Agent

 

By: Atlas Securitized Products GP, LLC, its general partner

 

By: /s/ Dominic Obaditch
Name: Dominic Obaditch
Title: Authorized Signatory

 

[PMT FMSR - Amendment No. 2 to Series 2023-FTL1 Indenture Supplement and Loan Agreement]

 

SCHEDULE I

CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS AMENDMENT

1.
The execution and delivery of:
a.
this Amendment by all parties hereto
b.
the Series 2023-FTL1 Promissory Term Note No. 6
c.
the Series 2023-FTL1 Promissory Term Note No. 7
d.
the Series 2023-FTL1 Promissory Term Note No. 8
e.
the Series 2023-FTL1 Promissory Term Note No. 9
f.
the Series 2023-FTL1 Promissory Term Note No. 10
g.
the Officer’s Certificate required to be delivered pursuant to Sections 1.3 and 12.1 of the Base Indenture and Section 11 of the Existing Series 2023-FTL1 Indenture Supplement
h.
the Opinion of Counsel of Winston & Strawn LLP, as legal counsel to PMC and the Issuer and the Co-Issuer, with respect to authorization required to be delivered pursuant to Sections 1.3 and 12.3 of the Base Indenture, Section 11 of the Series 2023-FTL1 Indenture Supplement and Section 11.1 of the Trust Agreements
i.
the Issuer Tax Opinion of Winston & Strawn LLP, as legal counsel to PMC, the Issuer and the Co-Issuer, with respect to certain tax matters required to be delivered pursuant to Sections 12.1 and 12.3 of the Base Indenture and Section 11 of the Existing Series 2023-FTL1 Indenture Supplement
2.
Prior notice to the Rating Agency pursuant to Section 12.1 of the Base Indenture and Section 11 of the Existing Series 2023-FTL1 Indenture Supplement

Schedule I

 

EXHIBIT A

 

[See Attached]

Exhibit A

EX-22 11 pmt-ex22.htm EX-22 EX-22

EXHIBIT 22

LIST OF GUARANTOR SUBSIDIARIES

The following subsidiary of PennyMac Mortgage Investment Trust (the “Company”) was a guarantor of the Company’s 8.50% Senior Note Due 2028:

 

NAME OF GUARANTOR SUBSIDIARY

JURISDICTION OF INCORPORATION

PennyMac Corp.

Delaware

 

EX-31.1 12 pmt-ex31_1.htm EX-31.1 EX-31.1

 

Exhibit 31.1

CERTIFICATION

I, David A. Spector, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of PennyMac Mortgage Investment Trust;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 1, 2023

 

/s/ David A. Spector

David A. Spector

Chairman and Chief Executive Officer

 

A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

EX-31.2 13 pmt-ex31_2.htm EX-31.2 EX-31.2

 

Exhibit 31.2

CERTIFICATION

I, Daniel S. Perotti, certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of PennyMac Mortgage Investment Trust;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 1, 2023

 

/s/ Daniel S. Perotti

Daniel S. Perotti

Senior Managing Director and Chief Financial Officer

 

A signed original of this written statement required by Section 302 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

EX-32.1 14 pmt-ex32_1.htm EX-32.1 EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of PennyMac Mortgage Investment Trust (the “Company”) for the quarter ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David A. Spector, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David A. Spector

David A. Spector

Chairman and Chief Executive Officer

November 1, 2023

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to PennyMac Mortgage Investment Trust and will be retained by PennyMac Mortgage Investment Trust and furnished to the Securities and Exchange Commission or its staff upon request.

 

EX-32.2 15 pmt-ex32_2.htm EX-32.2 EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of PennyMac Mortgage Investment Trust (the “Company”) for the quarter ended September 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel S. Perotti, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Daniel S. Perotti

Daniel S. Perotti

Senior Managing Director and Chief Financial Officer

November 1, 2023

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to PennyMac Mortgage Investment Trust and will be retained by PennyMac Mortgage Investment Trust and furnished to the Securities and Exchange Commission or its staff upon request.