Cfla Audit Alles Loan 4-22-2013 for Hearing 4 29 2013

7/30/2019 Cfla Audit Alles Loan 4-22-2013 for Hearing 4 29 2013

1/136

CERTIFIED FORENSIC LOAN AUDIT

Prepared by:

NANCY DUFFY MCCARRONCertif ied Forensic Loan Auditor

Law Off ice of Nancy Duf fy McCarr on

950 Roble Lane

Santa Barbara, CA 93103

[email protected]

805-965-3492 cell 805-450-0450

On behalf of:

CAROLE S. ALLES

For Property Address

43060 Ill inois Avenue

Palm Dessert, CA 92111

Prepared on:

April 22, 2013
mailto:[email protected]:[email protected]:[email protected]


2/1362

SECTION 1: TRANSACTION DETAILS

BORROWER & CO-BORROWER:

BORROWER CO-BORROWER

Carole S. Alles None

CURRENT ADDRESS SUBJECT ADDRESS

43060 Illinois Avenue, Palm Desert, CA 92111 43060 Illinois Avenue, Palm Desert, CA 92111

TRANSACTION PARTICIPANTS

AMOUNT MORTGAGE SERVICERMORTGAGE

NOMINEE/BENEFICIARY

$230,000.00Wells Fargo Bank, NA

none

ORIGINAL MORTGAGE

LENDERMORTGAGE TRUSTEE TITLE COMPANY

Wells Fargo Bank, NAPO Box 5137

Des Moines, IA 50306-5137

Fidelity National Title

Insurance Company

First American Title Insurance

Company (Riverside Resale)


3/136

3

SECTION 2: SECURITIZATION

SECURITIZATION PARTICIPANTS:

ORIGINATOR/LENDER SPONSOR/SELLER DEPOSITOR

WELLS FARGO BANK, NA

[Servicer under PC agreement] WELLS FARGO BANK, NA

FREDDIE MAC in its

CorporateCapacity to buy

and deposit Mortgages intoGrantor Trusts [PC Pools]

ISSUING ENTITY TRUSTEEMASTER SERVICER/

SERVICER

FREDDIE MAC in its

CorporateCapacity to Issue

Participation Certif icatesto

Investors [PC Holders]

FREDDIE MAC in its

TrusteeCapacity to act as

Administrator and Trusteeof

Grantor Trusts [PC Pools]

ADMINISTRATOR

[FREDDIE MAC]

as the Master Servicer for PC

Pools [Wells Fargo Bank, NA

as servicer]

CUSTODIAN GUARANTORADMINISTRATOR of

Participation Certificate Pools

ADMINISTRATOR or agent

acting on its behalf, or Trust

Department of Seller/Servicer

[Wells Fargo Bank, NA]

FREDDIE MAC in its

CorporateCapacity as the

guarantorof principal and

interest payments to Holders

of Participation Certificates

FREDDIE MAC in trustee

capacity to administer PC

Pools created in PC Agreement


4/1364

EXCERPTS FROM PROSPECTUS

[Offering Circular dated October 14, 2005]

PC Offering Circular, page 1 of 68

PC Pool is Grantor Trust under IRS with Freddie Mac Acting as Trustee:

PC Offering Circular, p.6 of 68



5/1365

SUMMARY OF TRANSACTION AND TRANSACTION PARTIES

Freddie Mac Corporateis Buyer & Seller of Mortgages; Issuer & Guarantor of ParticipationCertificates

MPCA 10/14/05 page 1 of 16PC Holders Own Undivided Beneficial Interests In PC Pool Mortgages:

MPCA 10/14/05 page 15 of PC Pools Governed by New York Trust Law

MPCA 10/14/05 page 15 of

PC Pools are Trusts with Freddie Mac acting as Trustee

MPCA 10/14/05 page 15 of


6/1366

ISSUING ENTITY

FREDDIE MAC, in its corporate capacity, issued Certificates of Participation to Investors at $1,000 or more

MCPA 10/14/05 page 3 of 16


THE TRUSTEE

FREDDIE MAC, in its trustee capacity, was/is trustee of the grantor trusts to which assets were deposite

THE ORIGINATOR

WELLS FARGO BANK, NA originated and sold mortgages to FREDDIE MAC to deposit into the PC pool

THE SPONSOR AND SELLER

FREDDIE MAC corporate bought mortgages from Wells Fargo Bank, NA to deposit into the PC pools.

THE DEPOSITORAt the September 13, 2006 closing FREDDIE MAC corporate deposited all of its interest in the mortgage

loan to FREDDIE MAC as trustee for the benefit of the Participation Certificate holders in the PC pool.

THE CUSTODIANWells Fargo Bank, NA maintained custody of mortgage loan files on behalf of the grantor trusts trustee.

THE MASTER SERVICER AND SECURITIES ADMINISTRATOR

FREDDIE MAC, in its trustee capacity, was/is master servicer and administrator of the PC securities.

THE SERVICERWells Fargo Bank, NA was/is the loan servicer under the PC Agreement


7/1367

Monthly Pass-Through Principal and Interest Paid to PC Holders:

MCPA 10/14/05, page 7 of 16

Amounts Retained by Seller/Servicers and FREDDIE MAC

MCPA 10/14/05, page 7 of 16


8/136

8

HISTORY OF FREDDIE MACS SECURITIZATION WITHOUT SEC OVERSIGHT

Traditionally, a lender originated home loans by having buyers execute tangible notes [promises to repay

principal and interest by amortization]. The lender could sue a debtor to collect unpaid balances upon defaul

In addition to a breach of contract remedy, lenders negotiated an alternative method of repayment; i.e. lenders

required borrowers to pledge their real property as collateral. The borrower was required to execute a mortga

(or deed of trust) when he executed the tangible note, granting the lender a power of sale to foreclose the realproperty upon default and use sale proceeds to collect the loan balance. The lender held the borrowers tangib

note in a loan portfolio and recorded its security interest as a lien against the real property. Under the traditio

model the lender had a financial incentive to ensure the borrower could repay the promissory note and that the

underlying property offered as collateral had sufficient value to repay the loan balance after a foreclosure sale

In 1986, to stimulate the economy, Congress passed the Tax Reform Act of 1986. Congress created Rea

Estate Mortgage Investment Conduits [REMICs] to expand loan originations in a process called securitizatio

Lenders could pre-sell loans in escrows and then convey the intangible debt obligations created by the tangibl

notes into securitized loan pools [REMIC trusts]. Thousands of intangible electronic copies of debt obligation

were split off from their corresponding tangible notes and were conveyed into REMIC trusts to create specialtax credits for investors. Investors purchased fractional beneficial interests in all debt obligations in the trust.

Wall Street brokers marketed these fractional beneficial interests as Collateralized Debt Obligation Certificat

[CDO certificates] selling for $1000 or more. These Mortgage Backed Securities [MBS] were given special

REMIC tax credits to stimulate housing and construction markets. Billions in profits and commissions were

generated for lenders, REMIC trustees and Wall Street brokers as they transmuted intangible debt obligations

into CDO Certificates,which were traded and resold in a worldwide market. This securitization of individua

debt obligations into loan pools altered the traditional lending model by severing the direct link between a

borrower and its lender, as well as the concomitant risks associated with traditional portfolio mortgages.

After a loan originator issues a mortgage to a borrower, the originator sells the mortgage in secondary

markets to a third-party financial institution. The originator collects loan origination fees at closing from the

borrower as well as the full loan balance from the financial institution it pre-sold the loan to during escrow.

This creates new capital to originate more loans, as intended by Congress to stimulate the economy in 1986.

The risk of a borrower default is transferred with the mortgages to investors who purchase CDO certificates.

As borrowers make monthly payments [principal and interest] the cash-flow is distributed to investors.

Participants in the securitization lending model are (1) a Loan Servicer [the Sponsor] (2) a Depositor of loans

into a Special Purpose Vehicle (SPV) for securitization, (3) an Underwriter of the MBST (4) an Issuing Trust

[the Issuer of Participating Certificates] and (5) Investors in the MBST [Participation Certificate Holders].Freddie Macs REMIC Trust [MBST] trust agreement required strict compliance with New York Trust law.

Freddie Mac sold fractional beneficial interests in loan pools entitled, Participation Certificates via a pre-sa

prospectus entitled, Participation Certificate Offering Circular. Freddie Mac guaranteed participants monthl

yields on investments regardless of borrower defaults, making such defaults irrelevant to payments.


9/136

9

Freddie Mac was not required to register investments with Securities & Exchange Commission [SEC].

Freddie Macs principal endeavor was to buy mortgages, establish Mortgage Backed Securities Trusts [MBST

and then deposit the mortgages into the MBST upon issuing securities [Participation Certificates] to investors

Freddie Mac often paid originating lenders[sellers]with Participation Certificates in lieu of cash. The most lik

destination of a mortgage Freddie Mac purchased was into an organized MBST, as most mortgages it purchas

were securitized.

Freddie Mac MBSTs differed from private MBSTs in that Freddie Mac guaranteed monthly payments to

investors regardless of borrower default events. The Freddie Mac PC Trust investor buys a security, a

Participation Certificate" [PC] much like a coupon bond for its fractional, beneficial interest in intangible deb

obligations created by tangible notes, and the resulting cash. The investor receives a fixed monthly payment

from mortgage pool monthly proceeds. In the national and international markets, Freddie Mac guaranteed

mortgages were perceived as valid debts secured by the full faith and credit of the United States. The 2008

housing calamity and bank failures obligated the Federal Government to treat the Freddie Mac guarantee as a

federal obligation. Freddie Mac must guarantee that all investors receive monthly payments. Many

conservative investors bought Freddie Macs Participation Certificates because they were guaranteed.

Freddie Mac created MBSTs to provide Tax Benefits to investors, which would increase liquidity in the

secondary mortgage market. To qualify for pass-through treatment to investors and Freddie Mac corporate,

to provide a passive investment vehicle, Freddie Mac had to qualify its MBSTs as valid REMIC Trusts by

following strict IRS regulations on formation and maintenance. The REMIC trusts were formed using New Y

Trust Law, which have strict compliance requirements satisfying IRS regulations.

During the mortgage boom private and Freddie Mac MBSTs [$5 trillion in 15 million mortgages] simplif

the formation process by cutting corners. Freddie Mac could cut corners because 1) it did not have to register

participating certificates [PCs] with the SEC; 2) it controlled every step without SEC oversight by acting asBuyer, Issuer, Depositor, Trustee, and Master Servicer; 3) it created, supervised, controlled, and audited its ow

financial records; 4) it disclosed nothing to sellers, servicers, investors, or the SEC. Freddie Mac was essentia

autonomous, free of government oversight, flush with cash, and was backed up with the full faith and credit o

the federal government. Managers believed Freddie Mac was insulated from failure.

Freddie Mac operated a blind investment as MBST Trustee rather than as MBST owner of the securities.

As Master Servicer, Freddie Mac took a cut of all monthly cash flows collected by sub-servicers, who also

charged service fees for collecting principal and interest from borrowers. In the subject loan Wells Fargo Ban

NA was Freddie Macs contracted sub-servicer. Freddie Mac Trust transactions among the Sponsor, Deposito

and Issuing Trusts were not arms-length transactions as Freddie Mac controlled all three entities.

Under the standard securitization lending model, the promissory notes weresupposedto be sold and

transferred into a trust pool [Mortgage Backed Securities Trust (MBST)] that holds the tangible promissory n

as collateral for the Participation Certificates sold to investors. These "true sales" allowed originating lenders

take the intangible debt obligations created by the tangible notes off their accounting books, thus eliminating

need to maintain capital adequacy reserves against default.


10/136

10

Securities issued by Freddie Mac are exempt from SEC registration statement requirements. In March 20

Freddie Mac voluntarily started to register its common stock with SEC under Section 12(g) of the Exchange A

triggering a requirement to file periodic reports with SEC, including annual reports on Form 10-K, quarterly

reports on Form 10-Q, and current reports on Form 8-K.

Typically Freddie Mac purchased mortgages in a bilateral or tripartite contract consisting of Freddie Mac

as purchaser, seller into the trust, trustee of the trust, and master servicer. The originating lender was usually

the sub-servicer. Freddie Mac was Trustee for the MBSTs it formed, the Issuer of Participation Certificates,

the Master Custodian and the Master Servicer. By controlling every aspect of its securitization Freddie Mac

had little regulatory oversight. It held all the cards and could do whatever it wanted to do. Concurrently,

Freddie Mac raised an iron curtain of inscrutability.

The mortgage notes were to be endorsed in blank by the seller [Wells Fargo Bank, NA] and delivered to

Freddie Mac. The originating lender was required to assign its beneficial interest in the mortgage or trust de

along with the promissory note in blank and recordable form, so that if necessary Freddie Mac could ask theservicer to record an assignment at a time unilaterally chosen by Freddie Mac.

see Freddie Mac Seller/Servicer Agreement, Section 22.14:

A Fabricated Assignment of a Mortgage is a Fraudulent Recording Conveying No Interest at all.

Wells Fargo Bank, NA, the party who is seeking to foreclose on the subject property, is not the owner

or legal holder in due course of the defaulted note and lacks legal authority to foreclose on a debt obligation.

Wells Fargo is a sub-servicer of Freddie Mac who is Master Servicer of all loans in the Freddie Mac Trusts.

The sub-servicer of the loan has neither an equitable nor legal interest in the loan.

Freddie Mac is trying to use a straw party [Wells Fargo] to foreclose a loan on its behalf. Freddie Mac,

as trustee of the MBST does not own the loan. Each Certificate Holder owns a fractional beneficial interest

in each mortgage held in the Trust.


11/136

11

Freddie Mac's Undisclosed Contract required Wells Fargo To Assign a Security Interest to Freddie Ma

Wells Fargo Bank, NA Had Already Assigned Its Interest to Freddie Mac in 2006

The Freddie Mac Seller/Servicer Agreement requires Sellers/Servicers to assign the mortgage in Blank tFreddie Mac but not to record the assignment. Freddie Mac is acting as Trustee and not Corporate Freddie MaTo make a deed effective in California, the grantor is divested of, and the grantee is vested with, the title, and

the words "convey," "transfer," and similar words used in conveying property, signify the passing of titlefrom one person to another. Under the Freddie Mac Seller/Servicing Agreement whenever Freddie Mactransfers possession and the servicer becomes the holder of the note the following applies:

If a note is held at Freddie Macs DDC, Freddie Mac has possession of the note on behalf of the servicer

so that the servicer has constructive possession of the note and the servicer shall be the holder of the note

and is authorized and entitled to enforce the note in the name of the servicer for Freddie Mac s benefit.This temporary transfer of possession occurs automatically and immediately upon the commencement of

the servicers representation, in its name, of Freddie Macs interests in the foreclosure, bankruptcy,

probate, or other legal proceeding, acting in its own name, represents the interests of Freddie Mac in

foreclosure actions, bankruptcy cases, probate proceedings, or other legal proceedings. In order to ensure

that a servicer is able to perform the services and duties incident to the servicing of the mortgage loan,Freddie Mac temporarily gives the servicer possession of the mortgage note. If the note is held by a

document custodian on Freddie Macs behalf, the custodian also has possession of the note on behalf of theservicer so that the servicer has constructive possession of the note and the servicer shall be the holder of

the note is authorized and entitled to enforce the note in the name of the servicer for Freddie Macs benefit.

The sub-servicer is ordered to act as if the sub-servicer owns the mortgage. The sub-servicer forecloses

under its own name. Freddie Mac and the sub-servicer understand the proper ownership requirements, but yet

follow the marching orders of Freddie Mac Corporate, who requires the seller/servicer to deliver an assignmen

to Freddie Mac in its corporate capacity, rather than Freddie Mac as Trustee for the MBST. Wells Fargo and

Freddie Mac conspire to defraud courts, plaintiff and others to enrich themselves at the expense and detrimenof those defrauded. Wells Fargo never disclosed Freddie Macs role in any of its pleadings, and concealed th

was under FHFA conservatorship. Freddie Mac expressly directed the sub-servicer not to disclose the true fa

Defendants, including the filing attorneys, work in concert to continue this charade upon the court and Plainti

Wells Fargos counsel files pleadings without ever disclosing to the court or plaintiff that the loan had b

sold to an MBST back in 2006 and that Freddie Mac acted as issuer, servicer, trustee and custodian for the M

Wells Fargos pleadings are a charade and obfuscation of the many roles of Freddie Mac and identity of the tr

owner of the secured loan in dispute. Freddie Mac directs servicers to perpetrate fraud on the court and debt

Freddie Mac blackmails seller/servicers by denying them an opportunity to participate in future originations u

they fully participate in the charade upon the court and debtor.

A trust can be organized without a transfer of property to the trust. It can only come into existence when

property actually is transferred to the trust. The issuance of a certificate does not constitute a transfer of prop

to the trust. Accordingly, there is no evidence from which a court can infer such a transfer was actually made.

The fact that MBST Participation Certificates were sold to investors who paid for them does not show that the

specific mortgage being foreclosed upon was ever transferred to the MBST.


12/136

12

LACK OF DELIVERY OF THE MORTGAGE AND NOTE FROM FREDDIE MAC CORPORATE T

FREDDIE MAC AS TRUSTEE VOIDS THE INSTRUMENT UNDER NEW YORK TRUST LAW.

The seller [Wells Fargo Bank, NA] was supposed to assign the note and trust deed on the subject loan to

Freddie Mac. However, Freddie Mac failed to transfer the note and trust deed to the Freddie Mac MBST.

The assignment was never performed because Freddie Mac Corporate retained the loan it purported to assign,

and failed to record its interest in contravention to New York Trust Law and IRS REMIC regulations.

Mortgages were supposed to be transferred into the REMIC Trust with Freddie Mac holding mortgage papers

PC Offering Circular 10/14/05 p.38

Freddie Mac corporate continues to hold the loans in its own name but it cannot even assure CertificateHolders that in the event of a Freddie Mac liquidation the loans will be inaccessible from Freddie Macs

corporate creditors because the mortgages were never properly assigned into the REMIC trust at its creation.

Under the Mortgage Certificates Participation Agreement Freddie Mac was to maintain custody of documents

MCPA 10/14/05 page 5 of 16

MCPA 10/14/05 page 2 of 16

Either the note endorsed in blank was delivered to the MBST by Freddie Mac or it was not delivered.

Freddie Mac in its corporate capacity does not own the loan as it was required to convey the loan into the MB

Wells Fargo concealed the true beneficiary from the court and plaintiff, continuing intentional fraud on the co

Neither Freddie Mac nor Wells Fargo will disclose the name of the MBS Trust to which the subject loan was

conveyed on the Freddie Mac settlement date [September 13, 2006]. Because Wells Fargo was required to

execute an assignment to Freddie Mac under the Seller/Servicer Agreement (see 22.14 above) on or about the

September 13, 2006 Freddie Mac Settlement Date, there was no beneficial interest that Wells Fargo could hav

conveyed to Freddie Mac on December 7, 2012 as it was already assigned on September 13, 2006 at closing.

Cal-Western Reconveyance Corporation fabricated and recorded a completely fraudulent assignment reciting

Wells Fargos purported assignment of the security interest to Freddie Mac as Wells Fargosattorney-in-fa

The document shown below is a fraudulent instrument conspiring defendant CWRC fabricated to facilitate the

fraudulent foreclosure. There was no beneficial interest to convey on 12/7/12 because Wells Fargo had

already assigned its beneficial interest in the security when it sold the loan to Freddie Mac Corporate on 9/13/


13/136

13

The above document contains all the indicia of a fabricated instrument intended to defraud the court.Wells had already assigned its beneficial interest when it sold Freddie Mac the Alles loan on 9/13/2006.

Accordingly it had no beneficial interest to assign. CWRC had no attorney in fact agreement with Wells

CWRC stepped out of its role as a purported impartial third-party trustee and into a role as exclusive agent

Wells Fargo, who was not even the beneficiary. The REMIC Trust Participating Certificate Holders were

true beneficiaries. Sub-servicer Wells Fargo had no beneficial, pecuniary, or equitable interest in the security.

CWRC engaged a minimum-wage robo-signer to fabricate and record a completely fraudulent document to

evade criminal liability under Penal Code 115 for recording an instrument they knew was a complete fraud.


14/136

14

NEW YORK TRUST LAW REQUIRES MORTAGE ASSIGNMENTS TO BE RECORDED

Freddie Mac corporate sold the mortgages to the MBST. It had no right to continue to hold the mortgage

for its own account. Apparently it did not transfer the mortgages either to the MBST or Freddie Mac as trust

If so, there would have been no need for CWRC to fabricate Wells Fargos purported assignment six years lat

Freddie Mac could be holding the mortgage notes as Master Servicer. Freddie Mac also was Master Custodia

Neither the Master Custodian nor Master Servicer holds any legal orequitable interest in the Trusts mortgage

Arguably corporate holds the mortgages but a court sitting in equity would have to conclude that the mortgag

were held by FREDDIE MAC as Trustee, on behalf of the Certificate Holders under an equitable trust, subjec

an equitable lien or subject to the security interest created in the trust indenture. Freddie Mac elected to form

MBSTs under New York trust law. [see choice of law provision]

MPCA 10/14/05 page 15 of 16

The assignment Wells Fargo was required to execute on or before September 13, 2006 [Freddie Mac

closing date on the Alles loan] was ineffective under New York law because it was not recorded as required.

New York adopted the Uniform Trust Act, which is silent about the procedure required to transfer an interest

real estate to a custodial trust. The MBST created by the Trust Indenture is a custodial trust under New York

trust law. A Mortgage is an interest in real estate, in judicial and non-judicial jurisdictions. In a non-judicial

jurisdiction the deed of trust conveys title to the real property to the Trustee. California is a lien theory, non-

judicial foreclosure jurisdiction with race-notice statutes. Assignments must be recorded to ensure lien priori

The lien recorded first has priority in race-notice, lien theory, non-judicial jurisdiction such as California.

Even if the mortgage is legal and enforceable, and has been perfected against the debtor, the mortgage h

not attached to the trust or its beneficiaries. FREDDIE MAC became so accustomed to making the rules with

any oversight from SEC that it ignored thebasic legal premise those who make the rules must obey the rules

Foreclosure and securitization must occur in accordance with legal requirements. Under these circumstances,

enforcement of foreclosure on a loan claimed to be held in a FREDDIE MAC MBST requires documentation

enable a court to ascertain upon whose behalf the foreclosure is taking place. When the actual holder of the no

is unidentified, it is impossible to plead a cause of action in a federal or state court. The failure to record the

assignment of the security interest has adverse consequences in determining who holds the perfected mortgag

and properly conveyed the non-negotiable promissory note. The Holder in Due Course ("HDC") status may

exist under the case at bar.

The MPCA and Master Trust Agreement provided FREDDIE MAC with the right to select the loans for

inclusion in the REMIC trust. It authorizes FREDDIE MAC to remove loans from the mortgage pool from t

to time for various reasons. Once a mortgage is reported by the public search engine as having been allegedly

acquired by FREDDIE MAC, the actually destiny remains a complete mystery.


15/136

15

FREDDIE MAC may:

(a) Hold the note in its portfolio.(b) Sell the note.(c) Pledge or hypothecate the note.(d) Securitize the note in a MBST.(e) Securitize the note in more than one MBST.(f) Redeem or replace a note it has securitized.WELLS FARGO IS AT BEST A SECURED CREDITOR TRYING TO RECOVER ADVANCES

Wells Fargo Bank, NA---the party seeking to foreclose---is the sub-servicer who made the payments on

behalf of plaintiff to the Trust, and wrongfully withheld this information from the court and plaintiff. Payme

made by the sub-servicer were not credited to the account of the debtor under the express and explicit written

rules prescribed by FREDDIE MAC to its servicers. The sub-servicer is wrongfully and falsely attempting to

recover advances it made as an unsecuredcreditor under the false guise of being thesecuredmortgage credito

Under the Freddie Mac Seller/Servicer guide, the Servicing Agreement, and the Master Trust Agreementhe loan sub-servicer is required to make monthly payments from its own funds if debtor misses a payment.

MTA p. 13 of 26

A sub-servicer of either a portfolio or a MBST mortgage loan is required to advance scheduled P&I un

a delinquent mortgage loan is removed from Freddie Macs active accounting records or an MBS PC loan po

If the funds on deposit in the sub-servicers P&I custodial account, on the day the monthly remittance is due

Freddie Mac, are less than the amount of the required monthly remittance, the servicer must make a delinquenc

advance by depositing to the P&I custodial account enough of its own funds to make the total on deposit eq

to the full amount of the remittance owed to Freddie Mac. The sub-servicer may reimburse itself for delinque

advances from borrower collections that are subsequently deposited to the P&I custodial account.

Advances are not treated as loans to Certificate Holders. Interest payments received in the form of advan

are taxable to the Certificate Holder as interest income. Neither the MBST nor its Certificate Holders is liable

advances made by the servicer. There is no real estate statute or State/Federal Court decision holding that o

the mortgage debtor may make a required payment.


16/136

16

Any other person or entity can make the required payment on behalf of the debtor. Wells Fargo conceale

from the court that monthly payments debtor failed to pay to Certificate Holders were paid by the sub-service

Even if the sub-servicer has a claim for repayment against the debtor for the advances made, such claim is not

secured by the mortgage or real property. The sub-servicer is not a secured party but rather ageneral creditor

In short, it is a violation of law to foreclose on real property to recoup advances made by the sub-servicer. It i

no different than if the holder of the note foreclosed on a mortgage because the debtor failed to pay a plumbin

bill to the creditors brother-in-law.

The debtor is not a third party beneficiary of the Freddie Mac, Wells Fargo Seller/Servicer Agreement.

Debtor neither had knowledge of, nor agreed to the advances paid by the sub-servicer Wells Fargo. Advance

were not paid by the sub-servicer for the benefit of the debtor. Advances were part because of a Seller/Servi

Agreement between the sub-servicer and Freddie Mac, as Trustee of the MBST. Advances were a concessio

given by the sub-servicer as an inducement to persuade the Trustee to employ the sub-servicers services.

ONLY FHFA, AS CONSERVATOR FOR FREDDIE MAC, HAS STANDING TO FORECLOSE

The remedy of foreclosure is limited to the note holder. If, for purposes of this argument only, one assum

Freddie Mac, as Trustee, holds legal title and the beneficial title is in the Certificate Holders, what claim held

the Certificate Holders has gone unpaid? NONE. If the court finds that Freddie Mac has an equitable interes

Trustee of the MBST, and the right to foreclose, such foreclosure must be brought by FHFA as conservator, w

is charged with preserving Freddie Mac assets for the benefit of taxpayers who maintain enterprise solvency.

FREDDIE MAC and Wells Fargos deliberate and intentional efforts to conceal and obfuscate will not be

corrected in the future unless the court declines to provide equitable relief as the Certificate Holders were paid

FREDDIE MAC HAS UNCLEAN HANDS

FREDDIE MAC repeatedly misstated its income, failed to keep accurate financial records, operated a

defective document control system and engaged in financially imprudent transactions resulting in its insolven

This is exactly why the government seized the enterprise and placed it under a conservatorship.

Due to the many roles Freddie Mac played in securitization games, and institutionalization of inscrutabi

a court cannot ascertain who actually owns what. Under such circumstances a court lacks the ability to fashion

appropriate equitable remedy. Accordingly, the court should enjoin FHFA to effect a loan modification to av

foreclosure and let Wells Fargo and CWRC pay the price for blatant fraud upon this court. Awarding any reliethis time would be premature since the correct party has not sought foreclosure. The investors are protected b

the FREDDIE MAC payment guarantee, underwritten by the full faith and credit of the United States, having

taken the enterprises under conservatorship and infused them with $190 Billion dollars of taxpayer funds to

maintain solvency. The court should wait until FHFA is enjoined and allow plaintiff an opportunity to work o

a loan modification with the party who controls FREDDIE MAC and who is unwilling to modify the loan.


17/136

17

FREDDIE MAC/WELLS FARGO UNILATERALLY AMENDED THE MORTGAGE CONTRACT.

FREDDIE MAC and Wells Fargo unilaterally amended ALLES mortgage contract by restricting loan

modification without her prior written consent in breach of the terms and conditions of the loan contract.

A modification of a contract is a change in one or more respects, which introduces new elements into thedetails of the contract and cancels others but leaves the general purpose and effect undisturbed. It is entirely

competent for the parties to a contract to modify or waive their rights under such contract and incorporate

new terms into the contract.Hawkins v. U.S., 96 U.S. 689, 24 L. Ed. 607 (1877)

Unless there is a contrary provision any contract can be modified or amended by mutual agreement.

Wheeler v. New Brunswick & C. R. Co., 115 U.S. 29, 5 S. Ct. 1061, 29 L. Ed. 341 (1885); Two minds are

required to change the terms and conditions of a contract after it is executed. Whiteside v. U.S., 12 Ct. Cl. 10,

U.S. 247, 23 L. Ed. 882 (1876);Riverside Rancho Corp. v. Cowan, 88 CA.2d 197(2d Dist. 1948).

As executed, the mortgage is an agreement between a creditor & debtor for a loan secured by real prope

The terms and conditions of the loan can be modified or amended only with mutual consent. One party may

amend the agreement without the written consent of the other. A modification must satisfy all criteria of the

original contract. Carlson, et al v. Baldacci (1967) 257 CA.2d 212. A contract modification requires the mu

assent of both parties. Securitization imposed unilateral restrictions on loan modifications imposed by the tru

[Freddie Mac] and the sub-servicer [Wells Fargo]. These restrictions were imposed without the consent of th

debtor and constitute a breach of contract, which if proved would render the mortgage unenforceable.

Freddie Mac tortuously interfered in a contract between debtor [ALLES] and creditor [Wells Fargo].

Finally, the Freddie Mac MSBT, on whose behalf the foreclosure is purportedly being prosecuted, must qualito transact business as a foreign trust in the state where the real property is located. The Freddie Mac MBST

not qualified to do business in California. Under securities law, if Freddie Mac organized an MBST and issu

Participation Certificates to investors in the United States the MBST must qualify to do business in the state in

which it seeks to foreclose upon real property. Foreclosure law ordinarily provides that a mortgage creditor

foreclosing upon a loan is not transacting business and does not trigger qualification compliance requirements

However, offering securities for sale to investors is conducting business. This requires the MBST to pay t

fee and follow the state prescribed procedures for qualification to transact business in the state. A foreign tru

which fails to register lacks standing to foreclose and may have criminal liability for the violation.

It is undisputed that a mortgage can be sold from one creditor to another without the consent of the debt

The right of alienation for the creditor may result from an explicit term in the mortgage. However, when the

mortgage is securitized, much more is taking place then a resale of the loan. As noted specifically above, the

terms and conditions of the mortgage were altered unilaterally by the creditor without theborrowers consent

Under the original, traditional mortgage, the party holding the power of sale was the beneficiary who would

suffer a loss upon borrowers default unless he foreclosed to collect the debt from sale of the real property.


18/136

18

In securitization the mortgage is transmuted into securities, so the party authorized to foreclose does not

bear the loss resulting from foreclosure. By divesting the incidence of loss from the authority to foreclose, th

original note has been altered--- resulting in a change to the mortgage without the consent of the mortgagor.

The mortgagor was neither informed nor asked to consent to securitization of her mortgage. Such consent wa

required under basic contract law. Control of the mortgage was conveyed to a group of managers who adopte

new set of rules modifying the terms and conditions of the original mortgage. These managers were not a part

the original transaction, nor are they representing the original mortgagee or his successor in interest.

Under the traditional lending model foreclosure was a last resort to curing a default. In securitization, it

become the first resort. The sub-servicer to whom the MBST trustee delegates authority to foreclose has a

financial incentive in the fees generated by the foreclosure itself, and the delays incident to the actual foreclos

The losses resulting from foreclosure are passed back to the Certificate Holders. In short, the party who prof

from foreclosure controls the decision to foreclose, while the party bearing the loss has no say whatsoever.

FREDDIE MAC prescribed the terms and conditions for the loans it bought from sellers [Wells Fargo].

Foreclosure would provide unjust enrichment to Wells Fargo through foreclosure fees [$6,000-$10,000] and

will result in a minimal $100,000 loss to taxpayers who involuntarily infused $190 billion into Freddie Mac.

Denying foreclosure will not cause injury to the Certificate Holders who are innocent of fraud on the court an

who are guaranteed payments by sub-servicer Wells Fargo Bank, NA and FREDDIE MAC corporate.

The promissory note and security interest are interrelated and the promissory note is non-negotiable

because it was conveyed into the REMIC trust, as recited in the Master Trust Agreement, p.8 of 26:

Master Trust Agreement p.8 of

An absolute sale requires a transfer of title by a seller to a buyer without any restrictions other than paym

of an agreed-upon amount of money. There is evidence that such a transfer never took place. The mortgage w

never assigned from FREDDIE MAC to the MBST, and the mortgage note endorsed in blank is in the possess

and control of FREDDIE MAC. Absent delivery and possession of the bearer note or a written assignment fro

FREDDIE MAC to the MBST, there is no way legal title has been conveyed to the MBST to enable foreclosu


19/136

19

Plaintiff and similarly situated borrowers did not know and could not have discovered this fraud.

Plaintiff's note was not properly negotiated, endorsed, and transferred to the Freddie Mac Remic Trust.

Wells Fargo is trying to enforce a debt obligation in which it has no pecuniary, equitable or legal interest.

Plaintiff applied for a loan modification after experiencing unforeseen financial hardship. Plaintiff believed her lend

was willing to avoid foreclosure since Wells Fargo agents advised her to stop making payments to qualify for a lo

modification through Wells Fargo.

Wells Fargo knew it was not the beneficiary with the power to modify her loan based on their guidelines

Wells Fargo and Freddie Mac never told Plaintiff why she would be automatically denied a loan modification

Freddie Mac, Wells Fargo and CWRC conspired to create a pretext that Wells Fargo was the beneficiary whe

they all knew this was not true and that Wells intended to deny a loan modification before debtor even applied

Plaintiff has now discovered that her loan is actually owned by a Freddie Mac MBST and that Freddie

Mac's trusts do not fully participate in the Home Affordable Modification Program ("HAMP") and rarely issu

loan modifications. Neither Freddie Mac nor Wells Fargo are perfected, secured creditors. Neither has any r

to proceed with an unlawful foreclosure or deny the HAMP modification.

FURTHER EVIDENCE OF FRAUD

The new 15 U.S.C. 1641(g) added to Section 131 of TILA by Section 404 of The Helping Families Sav

Their Homes Act of 2009 recites:

NOTICE OF NEW CREDITOR.-(1) IN GENERAL.- In addition to other disclosures required by this title, not

later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a th

party, the creditor that is the new owner or assignee of the debt shal l noti fy the borr ower in wri ting of such

transfer, i ncluding-(A) the identity, address, telephone number of the new creditor ;(B) the date of transfer ;

(C) how to reach an agent or party having authori ty to act on behal f of the new creditor ;(D) the location of

place where transfer of ownership of the debt is recorded; and (E) any other relevant information regardin

the new creditor.

Failure to comply with the requirements of this new subsection 131(g) of TILA may result in civil liabi

for actual damages (OR) legal fees and statutory damages under Section 130(a) of TILA. Section 131(g) of TI

applies to Freddie Mac as the new owner of Plaintiffs loan. Neither Freddie Mac nor Wells Fargo ever notifi

ALLES of the new beneficiary, even as recently as 12/7/12 when CWRC recorded the purported assignment

Freddie Mac and Wells Fargo violated 15 U.S.C. Section 1641(g) by failing to notify Alles as required.

Wells Fargo is purporting to act on behalf of Freddie Mac without providing any evidence of such agency.

If Freddie Mac is a legitimate creditor it was required to comply with TILA. These violations cannot be igno

Freddie Macs failure to comply was intentional as part of the overall conspiracy to create a pretext that Wells

Fargo was the purported beneficiary entitled to foreclose. The FHFA must be joined to protect the interest of

taxpayers who involuntarily infused $190 billion into maintaining enterprise solvency.

The following chain of title shows how the note and security interest were severed and took separate paths.


20/136

20

SECTION 3: FORECLOSURE

Recorded Events on the Loan Including Foreclosure Issues and Securitization

Recorded Chain of Mortgage Possession Chain of Note Possession

Date Original Mortgage Date Note Holder

August 2, 2006Recorded as Instrument #

2006-0566295Official Records,

Riverside County, California

CAROLE S. ALLES(Borrower)

DEED OF TRUST

WELLS FARGO BANK, NA(Lender)

LOAN #0154270391

July 28, 2006(promissory note)

WELLS FARGO BANK, NA( Lender)

Principal Amount:$230,000.00

LOAN #0154270391

September 13, 2006[settlement date]

Freddie Mac securitized

Alles debt obligation intofractional beneficial

interests sold to investors

FREDDIE MAC PC Trust

[holders of the unidentifiedPC trust own fractional

beneficial interests in debt]Principal: $230,000.00LOAN #0154270391




SUBSTITUTION OF TRUSTEEexecuted by trustee Cal-Western

Reconveyance Corporation as

Attorney in Fact for Wells

Fargo Bank, NA who is not a

beneficiary; attorney in fact must

be a person--not a corporation

FHFA is conservatorforFreddie Mac controlling allassets; Wells Fargo Bankcould not have assigned anyinterest to a conservatee




NOTICE OF DEFAULTrecorded by trustee for WellsFargo Bank, NA who is not a

beneficiary; PC Holders of theunidentified PC Trust hold

fractional beneficial interests inAlles intangible debt obligation

November 30, 2012Recorded as Instrument #



NOTICE OF TRUSTEES SALE

Trustee postponed trustee sale four

times since first NOS was recorded

continuing to conceal identity of

true beneficiary [PC Holders of

fractional beneficial interests]

December 7, 2012Recorded as Instrument #



Assignment of Deed of Trustexecuted by Cal-Western

Reconveyance Corporation as

Attorney in Fact for Wells Fargo

Bank, NA who is not a beneficiary;

concealed that Freddie Mac was in

under FHFA conservatorship


21/136

21

FREDDIE MACADMINISTRATOR/MASTER SERVICERThrough Wells Fargo Bank, NA ServicerServices individual loans; Aggregates

Collection; Performs Duties underMortgage Certificates Participation Agreement

ARROW LEGEND

PURPLEMORTGAGE DOCUMENTSBLUESECURITIES CERTIFICATESRE D INVESTOR FUNDS

GREENBORROWER FUND

CHAIN OF TITLE

FREDDIE MACTRUSTEE FOR THE TRUST

RECORDED INSTRUMENTS

DATE Title of Document Document

8/2/06 DEED OF TRUST 20060566

8/1/12 Substitution of Trustee 2012-0362

8/2/12 Notice of Default 2012-0364

11/30/12 Notice of Trustees Sale 2012-0583

12/7/12 Assignment of Trust Deed 2012-0597

CERTIFICATES

OFFERING PROCEEDS

INVESTORS

Buy MBS as defined inParticipation Certificates

CAROLE S. ALLES

BORROWERTRUSTOR

MORTGAGOR/MORTGAGERGRANTOR

NOTE WAS SPLIT

FROM THE DEED

MONTHLYPAYMENTS

NOTE WAS SOLD

& TRANSFERRED

WELLS FARGO BANK,NA

LENDER/ORIGINATOR

CERTIFICATES

FREDDIE MACSELLER

Purchases loans fromoriginator; forms pool

FREDDIE MAC

AS DEPOSITORand Issuing Entity

CERTIFICATES

FREDDIE MAC, as Trustee

TRUST FUNDHolds pool of loans; issues

Participation Certificates

Goldman Sachs UNDERWRITERS

SELLS CERTIFICATES TOINVESTORS; COLLECTSOFFERING PROCEEDS

RETURN ON INVESTMENTS

Represents Investors Interests;Calculates Cash Flows; Remits Net

RevenuesWELLS FARGO BANK, NA

UNDERLYING CUSTODIANDocument Custody

DEED OF TRUST

PROMISSORY NOTE

TITLE COMPANY/ESCROW

RIVERSIDE COUNTY

CALIFORNIA

MAINTAINS ASSIGNMENTHISTORY

SPLIT FROM NOTE


22/136

22

CONCLUSION

ONLY FHFA, AS CONSERVATOR FOR FREDDIE MAC, HAS STANDING TO FORECLOSE

The remedy of foreclosure is limited to the note holder. If, for purposes of this argument only, oneassumes Freddie Mac, as Trustee, holds legal title and the Certificate Holders hold the beneficial interest,what beneficial interest held by the Certificate Holders has gone unpaid? NONE.

Wells Fargo advanced payments to the REMIC Trust pursuant to its Seller/Servicing Agreementwith Freddie Mac. If the court finds that Freddie Mac has an equitable interest as Trustee of the MBST,and a right to foreclose, such foreclosure must be brought by FHFA as its conservator, who is chargedwith preserving Freddie Mac assets for the benefit of taxpayers who maintain the enterprises solvency.

Freddie Mac and Wells Fargos deliberate and intentional efforts to conceal and obfuscate will not

be corrected in the future unless the court declines to provide equitable relief because the Certificate Holders(the true beneficiaries) were been paid each month, and continue to be paid each month, by virtue of FreddieMacs guarantee, and Wells Fargos duty as the sub-servicer to advance payments during a default event.

If the FHFA is joined it will make a reasonable decision in the best interest of the taxpayers; i.e. tomodify the ALLES loan so that ALLES can continue to make monthly payments at current interest rates andFreddie Mac can avoid a significant loss exceeding $100,000 if Wells Fargo forecloses for its sole benefit,where it has no pecuniary or equitable interest in the mortgage.

4/22/2013 Nancy Duffy McCarronCertified Forensic Loan Auditor

ATTACHMENTS REFERENCED IN AUDIT:

A. Freddie Mac Mortgage Certificates Participation Agreement 10/14/2005 (16 pages)B. Freddie Mac Participation Certificate Offering Circular 10/14/2005 (68 pages)C. Freddie Mac Master Trust Agreement (from Freddie Mac Website: 12/31/07) (26 pages)


23/136

EXHIBIT A


24/136

Freddie Mac

MORTGAGE PARTICIPATION CERTIFICATES AGREEMENT

AGREEMENT dated as of October 14, 2005, among Freddie Mac and Holders of PCs offeredpursuant to Freddie Mac's Offering Circular referred to herein.

WHEREAS:

(a) Freddie Mac is a corporation duly organized and existing under and by virtue of the Freddie MacAct and has full corporate power and authority to enter into this Agreement and to undertake theobligations undertaken by it herein; and

(b) Freddie Mac may from time to time (i) purchase Mortgages, in accordance with the provisions ofthe Freddie Mac Act, (ii) create and issue PCs representing undivided beneficial ownership interests in suchMortgages and (iii) guarantee the payment of interest and principal for the benefit of the Holders of suchPCs.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained in thisAgreement, it is hereby agreed that the following terms and conditions of this Agreement shall govern thecreation, transfer, sale and assignment of the PCs and the rights and obligations of Freddie Mac andHolders with respect to the PCs.

Definitions

The following terms used in this Agreement have the respective meanings set forth below.

Accrual Period: As to any Payment Date, (i) the calendar month preceding the month of the PaymentDate for Gold PCs or (ii) the second calendar month preceding the month of the Payment Date for ARMPCs.

ARM PC: A PC with a Payment Delay of 75 days and which is backed by adjustable rate Mortgages.ARM PCs include Deferred Interest PCs.

Book-Entry Rules: The provisions from time to time in effect, currently contained in Title 24, Part81, Subpart H of the Code of Federal Regulations, setting forth the terms and conditions under whichFreddie Mac may issue securities on the book-entry system of the Federal Reserve Banks and authorizing aFederal Reserve Bank to act as its agent in connection with such securities.

Business Day: A day other than (i) a Saturday or Sunday and (ii) a day when the Federal ReserveBank of New York (or other agent acting as Freddie Mac's fiscal agent) is closed or, as to any Holder, a daywhen the Federal Reserve Bank that maintains the Holder's account is closed.

Conventional Mortgage: A Mortgage that is not guaranteed or insured by the United States or anyagency or instrumentality of the United States.

1


25/136

Deferred Interest: The amount by which the interest due on a Mortgage exceeds the borrower'smonthly payment, which amount is added to the unpaid principal balance of the Mortgage.

Deferred Interest PC: A PC representing an undivided beneficial ownership interest in a PC Poolcontaining Mortgages that provide for negative amortization.

FHA/VA Mortgage: A Mortgage insured by the Federal Housing Administration or by the RuralHousing Service or guaranteed by the Department of Veterans Affairs.

Final Payment Date: As to any PC, the first day of the latest month in which the related Pool Factorwill be reduced to zero. Freddie Mac publishes the Final Payment Date upon formation of the related PCPool.

Freddie Mac: The Federal Home Loan Mortgage Corporation, a corporation created pursuant to theFreddie Mac Act for the purpose of establishing and supporting a secondary market in residentialmortgages.

Freddie Mac Act: Title III of the Emergency Home Finance Act of 1970, as amended, 12 U.S.C.

1451-1459.

Gold PC: A PC with a Payment Delay of 45 days and which is backed by fixed-rate Mortgages.

Guide: Freddie Mac's Single-Family Seller/Servicer Guide, as supplemented and amended from timeto time, in which Freddie Mac sets forth its mortgage purchase standards, credit, appraisal and underwritingguidelines and servicing policies.

Holder: Any entity that appears on the records of a Federal Reserve Bank as a holder of PCs.

Monthly Reporting Period: The period during which servicers report Mortgage payments to FreddieMac, generally the calendar month preceding the related Payment Date for Gold PCs and the secondcalendar month preceding the related Payment Date for ARM PCs, which period Freddie Mac has the rightto change as provided in Section 3.05(d); provided, however, that with respect to prepayments on PC Poolsformed before September 1, 1995, the Monthly Reporting Period generally is from the 16th of a monththrough the 15th of the next month.

Mortgage: A mortgage or a participation interest in a mortgage that is secured by a first or secondlien on a one-to-four family dwelling and that has been purchased by Freddie Mac and identified in therecords maintained by Freddie Mac as included in a PC Pool.

Mortgage Coupon: The per annum fixed or adjustable interest rate of a Mortgage.

MultiLender Swap Program: A program under which Freddie Mac purchases Mortgages from one ormore sellers in exchange for PCs representing undivided beneficial ownership interests in a PC Poolconsisting of Mortgages that may or may not be those delivered by the seller(s).

Negative Amortization Factor: For PC Pools containing Mortgages that provide for negativeamortization, a truncated eight-digit decimal number that reflects the amount of Deferred Interest added tothe principal balances of the related Mortgages in the preceding month.

Offering Circular: Freddie Mac's Mortgage Participation Certificates Offering Circular datedOctober 14, 2005, as amended and supplemented by any Supplements issued from time to time, or anysuccessor thereto, as it may be amended and supplemented from time to time.

2


26/136

Payment Date: The 15th of each month or, if the 15th is not a Business Day, the next Business Day.

Payment Delay: The delay between the first day of the Accrual Period for a PC and the relatedPayment Date.

PC: A Mortgage Participation Certificate issued pursuant to this Agreement, representing abeneficial ownership interest in a PC Pool. The term "PC'' includes a Gold PC or an ARM PC unless thecontext requires otherwise.

PC Coupon: The per annum fixed or adjustable rate of a PC calculated as described in the OfferingCircular or any applicable Supplement, computed on the basis of a 360-day year of twelve 30-day months.

PC Pool: A discrete pool of Mortgages formed by Freddie Mac.

Pool Factor: A truncated eight-digit decimal Freddie Mac calculates for each month for each PCPool which, when multiplied by the original principal balance of the related PCs, will equal their remainingprincipal amount. The Pool Factor for any month reflects the remaining principal amount after the payment

to be made on the Payment Date in the same month for Gold PCs or in the following month for ARM PCs.

Record Date: As to any Payment Date, the close of business on the last day of (i) the precedingmonth for Gold PCs or (ii) the second preceding month for ARM PCs.

Supplement: A document that amends or supplements the Offering Circular and/or this Agreement,including any Pool Supplement, as defined in the Offering Circular, but excluding any AdditionalSupplement, as defined in the Offering Circular. Any Supplement for a particular PC Pool shall be bindingand effective upon formation of the related PC Pool and issuance of the related PCs, whether or not suchSupplement is executed, delivered or published by Freddie Mac.

ARTICLE I

Conveyance of Undivided Beneficial Ownership Interests in Mortgages

Section 1.01. Sale of PCs. Freddie Mac's sale of a PC pursuant to this Agreement will be deemed tooccur upon the date of settlement and payment for such PC and shall constitute a sale, assignment, transferand conveyance to the Holder of a pro rata undivided beneficial ownership interest in the Mortgagesconstituting the related PC Pool. Freddie Mac will be bound by all of the terms and conditions of thisAgreement at such time as Freddie Mac sells a PC to a Holder. Upon settlement of and payment for a PC, aHolder will, by virtue thereof, acknowledge, accept and agree to be bound by all of the terms andconditions of this Agreement.

Section 1.02. Identity of the Mortgages; Substitution and Repurchase.

(a) A PC Pool will consist of those Mortgages Freddie Mac acquired (i) for cash, (ii) in exchange for

PCs and/or (iii) for such other consideration as Freddie Mac deems appropriate.

(b) Freddie Mac may determine the amount and identity of the Mortgages constituting a PC Pool atany time prior to the first Payment Date. Once the amount and identity of the Mortgages have beendetermined, Freddie Mac will establish the original unpaid principal balance of the PC Pool on its booksand records in accordance with this Agreement and its current mortgage purchase and pooling procedures.

3


27/136

(c) Except as provided in this Section 1.02 or in Section 1.03, once Freddie Mac has identified theMortgages to a particular PC Pool, such identification may not change, except that:

(i) Freddie Mac may repurchase a Mortgage in connection with a guarantee payment underSection 3.09(a)(ii).

(ii) Freddie Mac may repurchase, or require or permit a seller or servicer of a Mortgage torepurchase, any Mortgage if a repurchase is necessary or advisable (A) to maintain proper servicingof the Mortgage, or (B) to maintain the status of the PC Pool as a fixed investment trust for federalincome tax purposes.

(iii) Freddie Mac may repurchase, or require or permit a seller or servicer of a Mortgage torepurchase, any Mortgage if (A) such Mortgage is 120 or more days delinquent, (B) based on FreddieMacs current delinquency and loss model, Freddie Mac has determined that it is more likely than notthat a delinquency on such Mortgage will not be cured within 120 days of the due date of its last paidinstallment or (C) Freddie Mac determines, on the basis of information from the related borrower orservicer, that loss of ownership of the mortgaged property is likely or default is imminent due toborrower incapacity, death or hardship or other extraordinary circumstances that make future

payments on such Mortgage unlikely or impossible.

(iv) Freddie Mac may repurchase a Mortgage if a bankruptcy court approves a plan thatmaterially affects the terms of the Mortgage or authorizes a transfer or substitution of the underlyingproperty.

(v) Freddie Mac may require or permit the seller or servicer of a Mortgage to repurchase anyMortgage or (within six months of the settlement of the related PCs) substitute for any Mortgage aMortgage of comparable type, unpaid principal balance, remaining term and yield, if there is (A) amaterial breach of warranty by a seller or servicer of any Mortgage, (B) a material defect indocumentation as to any Mortgage or (C) a failure by a seller or servicer to comply with anyrequirements or terms set forth in the Guide and other Mortgage purchase documents.

(vi) Freddie Mac will repurchase any Mortgage or (within two years of the settlement of therelated PCs) substitute for any Mortgage a Mortgage of comparable type, unpaid principal balance,remaining term and yield, if (A) a court of competent jurisdiction or a federal government agencyduly authorized to oversee or regulate Freddie Mac's mortgage purchase business determines thatFreddie Mac's purchase of such Mortgage was unauthorized and Freddie Mac determines that a cureis not practicable without unreasonable effort or expense or (B) such court or government agencyrequires repurchase of such Mortgage.

(vii) Freddie Mac may repurchase or require or allow the seller or servicer to repurchase (a) aconvertible ARM (as described in the Offering Circular) when the borrower exercises its option toconvert the related interest rate from an adjustable rate to a fixed rate; (b) a Balloon/Reset Mortgage(as defined in the Offering Circular) shortly before it reaches its scheduled balloon repayment date;and (c) a Modifiable Mortgage (as defined in the Offering Circular) at the time the borrower agrees tomodify the terms of the Mortgage.

(d) Any repurchase of a Mortgage by a seller or servicer will be at its then unpaid principal balance,less any principal on such Mortgage that the seller or servicer advanced to Freddie Mac. Freddie Mac'srepurchase of any Mortgage will be at its then unpaid principal balance, less any outstanding advances ofprincipal on such Mortgage that Freddie Mac paid to Holders.

4


28/136

(e) In determining whether a Mortgage will be repurchased from a PC Pool as described in thisSection 1.02, Freddie Mac may consider such factors as it deems appropriate, including reduction of itsadministrative costs or possible exposure under its guarantees.

Section 1.03. Post-Settlement Purchase Adjustments.

(a) Freddie Mac will make any post-settlement purchase adjustments necessary to reflect the actualaggregate unpaid principal balance of the related Mortgages or other Mortgage characteristics as of the dateof their purchase by Freddie Mac or their delivery to Freddie Mac in exchange for PCs, as the case may be.

(b) Post-settlement adjustments may be made in such manner as Freddie Mac deems appropriate, butwill not adversely affect any Holder's rights to monthly payments of interest at the PC Coupon, anyHolder's pro rata share of principal or any Holder's rights under Freddie Mac's guarantees. Freddie Mac willpass through on a pro rata basis any adjustment that reduces the principal balance of a PC Pool.

Section 1.04. Custody of Mortgage Documents. Freddie Mac, a custodian acting as its agent(which may be either a third party or a trust department of the seller or servicer), or the originator or sellerof the Mortgage may hold the Mortgage documents, including Mortgage notes and participation certificates

evidencing Freddie Mac's ownership interest in the Mortgages. Freddie Mac may adopt and modify itspolicies and procedures for the custody of Mortgage documents at any time, provided such modificationsare prudent and do not materially and adversely affect the Holders' interests.

Section 1.05. Interests Held or Acquired by Freddie Mac. PCs held or acquired by Freddie Macfrom time to time and PCs held by other Holders shall have equal and proportionate benefits, withoutpreference, priority or distinction. In the event that Freddie Mac retains any interest in a Mortgage, theremaining interest in which is part of a PC Pool, Freddie Mac's interest in such Mortgage will rank equallywith that of Holders of the related PCs, without preference, priority or distinction. No Holder will have anypriority over any other Holder.

ARTICLE II

Administration and Servicing of the Mortgages

Section 2.01. Freddie Mac as Principal Servicer. Freddie Mac will service or supervise servicingof the Mortgages in accordance with the provisions of the Guide, including management of any propertyacquired through foreclosure or otherwise, for the benefit of Holders. Freddie Mac will have full power andauthority to do or cause to be done any and all things in connection with such servicing that Freddie Macdeems necessary or desirable. Freddie Mac will act as the representative of Holders in the control,management and servicing of the Mortgages in the related PC Pools.

Section 2.02. Servicing Responsibilities. Freddie Mac will service or supervise servicing of theMortgages in a manner consistent with prudent servicing standards and in substantially the same manner asFreddie Mac services or supervises the servicing of unsold mortgages of the same type in its portfolio. Inperforming its servicing responsibilities hereunder, Freddie Mac may engage servicers, subservicers and

other agents or independent contractors. Freddie Mac may discharge its responsibility to superviseservicing of the Mortgages by monitoring servicers' performance on a reporting and exception basis. Exceptas provided in Article V of this Agreement, Freddie Mac will not be subject to the control of Holders in thedischarge of its responsibilities pursuant to this Article. Except with regard to its guarantee obligationspursuant to Section 3.09, Freddie Mac will have no liability to any Holder for its actions or omissions indischarging its responsibilities under this Article II other than for any direct damage resulting from itsfailure to exercise that degree of ordinary care it exercises in the conduct and management of its ownaffairs. Freddie Mac will have no liability for consequential damages.

5


29/136

Section 2.03. Realization Upon Defaulted Mortgages. Freddie Mac (or its agent) will forecloseupon (or otherwise comparably convert the ownership of) any real property securing a Mortgage whichcomes into and continues in default and as to which no satisfactory arrangements can be made forcollection of delinquent payments. In connection with such foreclosure or conversion, Freddie Mac (or its

agent) will follow such practices or procedures as it deems necessary or advisable and consistent withgeneral mortgage servicing standards.

Section 2.04. Automatic Acceleration and Assumptions.

(a) Freddie Mac will enforce the terms of a mortgage that gives the mortgagee the right to demandfull payment of the unpaid principal balance of the Mortgage upon sale or transfer of the property securingthe Mortgage regardless of the creditworthiness of the transferee (a right of "automatic acceleration''),aspermitted by applicable state and federal law and to the extent consistent with its then-current servicingpolicies.

(b) Freddie Mac will permit the assumption by a new mortgagor of an FHA/VA Mortgage upon thesale or transfer of the underlying property, as required by applicable regulations. Any such assumption will

be in accordance with applicable regulations, policies, procedures and credit requirements and will notresult in loss or impairment of any insurance or guaranty.

Section 2.05. Fees. Unless otherwise provided in the related offering documents, Freddie Mac willnot pass through to Holders any prepayment premiums, assumption fees or other fees charged on theMortgages.

Section 2.06. Mortgage Insurance and Guarantees.

(a) If a Conventional Mortgage is insured by a mortgage insurer, the insurer will have no obligation torecognize or deal with any person other than Freddie Mac or its agent regarding the mortgagee's rights,benefits and obligations under the related insurance contract. If a mortgage insurer exercises an optionunder an insurance contract to purchase a Mortgage, the proceeds of such purchase will be considered to berepurchase proceeds for purposes of Article III.

(b) Each FHA/VA Mortgage will have in full force and effect a certificate or other satisfactoryevidence of insurance or guaranty, as the case may be, as may be issued by the applicable governmentagency from time to time. None of these agencies has any obligation to recognize or deal with any personother than Freddie Mac or its agent with regard to the rights, benefits and obligations of the mortgageeunder the contract of insurance or guaranty relating to each FHA/VA Mortgage.

ARTICLE III

Payments to Holders and Guarantees

Section 3.01. Monthly Reporting Period. For purposes of this Agreement, any payment or any

event with respect to any Mortgage reported to Freddie Mac by the related servicer as having been made orhaving occurred within a Monthly Reporting Period will be deemed to have been received by Freddie Macor to have in fact occurred within such Monthly Reporting Period used by Freddie Mac for such purposes.Payments reported by servicers include all principal and interest payments made by a borrower, insuranceproceeds, liquidation proceeds and repurchase proceeds. Events reported by servicers include foreclosuresales, payments of insurance claims and payments of guarantee claims.

6


30/136

Section 3.02. Holder's Undivided Beneficial Ownership Interest. The Holder of a PC on theRecord Date will be the owner of record of a pro rata undivided beneficial ownership interest in theremaining principal balance of the related PC Pool as of such date and will be entitled to interest at the PCCoupon on such pro rata undivided beneficial ownership interest, in each case on the related Payment Date.Such pro rata undivided beneficial ownership interest will change accordingly if any Mortgage is added to

or removed from the PC Pool in accordance with this Agreement. A Holder's pro rata undivided beneficialownership interest in the PC Pool is calculated by dividing the original unpaid principal balance of theHolder's PC by the original unpaid principal balance of the related PC Pool.

Section 3.03. Pass-Through of Principal. Freddie Mac will pass through to each Holder of a PC itspro rata share of principal payments made on the related Mortgages (including, if applicable, each Holder'spro rata share of the aggregate amount of any Deferred Interest that has been added to the principal balanceof the related Mortgages), any net income, profits or proceeds of the Mortgages and net proceeds realizedfrom any property of any kind received in substitution for or upon realization on the Mortgages. FreddieMac will pass through all such payments of principal, whether from insurance, guaranty payment,condemnation, foreclosure or otherwise;provided, however, that its obligations herein will be subject to itssubrogation rights pursuant to Section 3.10 with respect to payments made under Freddie Mac's guarantees.Freddie Mac may retain from any prepayment or delinquent principal payment on any Mortgage any

amount not previously received by Freddie Mac but paid to Holders under its guarantees. For Mortgagespurchased by Freddie Mac in exchange for PCs under its MultiLender Swap Program, Freddie Mac willretain principal payments made on such Mortgages in the amount of any difference between the aggregateunpaid principal balance of the Mortgages as of delivery by the seller and the aggregate unpaid principalbalance as of the settlement date and Freddie Mac will purchase additional Mortgages with such principalpayments; such additional Mortgages may or may not be included in the PC Pool represented by the PCsreceived by the seller. Freddie Mac will pass through insurance proceeds, liquidation proceeds (includingthose resulting from the acquisition of any property securing a Mortgage) and repurchase proceeds toHolders in the same manner as a prepayment.

Section 3.04. Pass-Through of Interest. Freddie Mac will pass through to each Holder its pro ratashare of the interest paid by borrowers with respect to each Mortgage at a rate equal to the PC Coupon(excluding, if applicable, each Holder's pro rata share of any Deferred Interest that has been added to theprincipal balance of the related Mortgages).Interest will accrue during the applicable Accrual Periods.Freddie Mac may retain from any payment of delinquent interest on any Mortgage any amount notpreviously received by Freddie Mac but paid to Holders under its guarantees. A partial month's interestretained by Freddie Mac or remitted to each Holder with respect to prepayments will constitute anadjustment to Freddie Mac's management and guarantee fee.

Section 3.05. Payments.

(a) Payments of principal and interest on PCs will begin in the month after issuance for Gold PCs andin the second month after issuance for ARM PCs.

(b) Federal Reserve Banks (at Freddie Mac's direction) will credit payments on PCs to the appropriateHolders' accounts. Freddie Mac's payment obligations will be met upon transmittal of Freddie Mac'spayment order to the Federal Reserve Banks. A Holder will receive the payment of principal, if applicable,

and interest on each Payment Date on each PC held by such Holder as of the related Record Date.

(c) Freddie Mac relies on servicers' reports of mortgage activity to prepare the Pool Factors. Theremay be delays or errors in processing mortgage information, such as a servicer's failure to file an accurateor timely report of its collections of principal or its having filed a report that cannot be processed. In thesesituations Freddie Mac's calculation of scheduled principal to be made on Gold PCs may not reflect actualpayments on the related Mortgages. Freddie Mac will account for any differences as soon as practicable.

7


31/136

(d) Freddie Mac reserves the right to change the period during which a servicer may hold funds priorto payment to Freddie Mac, as well as the period for which servicers report payments to Freddie Mac,including adjustments to the Monthly Reporting Period. Either change may change the time at whichprepayments are passed through to Holders. Any such change, however, will not impair Holders' rights topayments as otherwise provided in this Section.

(e) Pending payment to Holders of funds received by Freddie Mac from servicers, Freddie Mac willhave the right to invest and reinvest such funds for its own sole risk and benefit. Freddie Mac's guaranteeswill continue to be effective or will be reinstated in the event that any principal or interest payment made toa Holder is for any reason returned by the Holder pursuant to an order, decree or judgment of any court ofcompetent jurisdiction that the Holder was not entitled to retain such payment pursuant to this Agreement.

Section 3.06. Pool Factors.

(a) Freddie Mac will calculate and make payments to Holders on any Payment Date based on themonthly Pool Factors (including Negative Amortization Factors) until such time as it determines that amore accurate and practicable method for calculating such payments is available and implements thatmethod. Pursuant to Section 6.05(e), Freddie Mac may modify the Pool Factor methodology from time to

time, without the consent of Holders.

(i) Freddie Mac will publish or cause to be published for each month a Pool Factor with respectto each PC Pool. Beginning in the month after PC Pool formation, Pool Factors will be published onor about the fifth Business Day of the month, which Pool Factors may reflect prepayments reported toFreddie Mac after the end of the related Monthly Reporting Period and before the publication of theapplicable Pool Factors.. However, Freddie Mac may, in its own discretion, publish Pool Factors onany other Business Day. The Pool Factor for the month of PC Pool formation is 1.00000000 and neednot be published.

(ii) Freddie Mac will pay principal each month to a Holder of a Gold PC in an amount equal tosuch Holder's pro rata share of such principal, calculated by multiplying the original principal balanceof the Gold PC by the difference between its Pool Factors for the preceding and current months.

(iii) Freddie Mac will pay principal each month to a Holder of an ARM PC in an amount equalto such Holder's pro rata share of such principal, calculated by multiplying the original principalbalance of the ARM PC by the difference between its Pool Factors for the two preceding months.

(iv) Freddie Mac will pay interest each month in arrears to a Holder (assuming no DeferredInterest) in an amount equal to 1/12th of the applicable PC Coupon multiplied by such Holder's prorata share of principal, calculated by multiplying the original principal balance of such Holder's PC bythe preceding month's Pool Factor for Gold PCs or by the second preceding month's Pool Factor forARM PCs.

(v) For any month that Deferred Interest has accrued on a Deferred Interest PC, Freddie Macwill pay principal (if any is due) to a Holder in an amount equal to such Holder's pro rata share ofprincipal, calculated by (A) subtracting the preceding month's Pool Factor from the second preceding

month's Pool Factor, (B) adding to the difference the Negative Amortization Factor for the precedingmonth and (C) multiplying the resulting sum by the original PC principal balance. The interestpayment on the Deferred Interest PC in that month will be (i) 1/12th of the PC Coupon multiplied by(ii) the original principal balance of the Holder's PC multiplied by (iii) the preceding month's PoolFactor minus the preceding month's Negative Amortization Factor.

(b) Each Pool Factor will reflect prepayments reported for the applicable Monthly Reporting Period.Freddie Mac may also, in its discretion, reflect in a Pool Factor any prepayments reported after the end of

8


32/136

the applicable Monthly Reporting Period. To the extent a given Pool Factor (adjusted as necessary forpayments made pursuant to Freddie Mac's guarantee of timely payment of scheduled principal on GoldPCs) does not reflect the actual unpaid principal balance of the Mortgages, Freddie Mac will account forany difference by adjusting subsequent Pool Factors as soon as practicable.

(c) In the case of ARM PCs, each Pool Factor applicable to a PC Pool will be based upon the unpaidprincipal balance of the related Mortgages that servicers report to Freddie Mac for the Monthly ReportingPeriod that ended in the second month preceding the month in which the Pool Factor is published. FreddieMac may also, in its discretion, include as part of the aggregate principal payment in any month anyprepayments received after the Monthly Reporting Period that ended in the second month preceding themonth in which the Pool Factor is published. To the extent a given Pool Factor does not reflect the actualunpaid principal balance of the Mortgages, Freddie Mac will account for any difference by adjustingsubsequent Pool Factors as soon as practicable.

(d) The Pool Factor method may affect the timing of receipt of payments by Holders but shall notaffect Freddie Mac's guarantees as set forth in Section 3.09. Freddie Mac's guarantees will not be affectedby the implementation of any different method for calculating and paying principal and interest aspermitted by this Section 3.06.

Section 3.07. Amounts Retained by Servicers or Sellers.

(a) To the extent provided by contractual arrangement with Freddie Mac, the servicer of eachMortgage will be entitled to retain each month, as a servicing fee, any interest payable by the borrower on aMortgage that exceeds the servicer's required remittance to Freddie Mac. Each servicer is required to payall expenses incurred by it in connection with its servicing activities and will not be entitled toreimbursement for those expenses, except as provided in Section 3.08(c). If a servicer advances anyprincipal and/or interest on a Mortgage to Freddie Mac prior to the receipt of such funds from the borrower,the servicer may retain (i) from prepayments or collections of delinquent principal on such Mortgage anypayments of principal so advanced, or (ii) from collections of delinquent interest on such Mortgage anypayments of interest so advanced. To the extent permitted by its servicing agreement, the servicer isentitled to retain as additional compensation certain incidental fees related to Mortgages it services.

(b) A seller may retain each month as extra compensation a fixed amount of interest on a Mortgage.In such event, the servicer will retain each month as a servicing fee the excess of any interest payable bythe borrower on a Mortgage (less the seller's retained interest amount) over the servicer's requiredremittance to Freddie Mac.

Section 3.08. Amounts Retained by Freddie Mac.

(a) Subject to any adjustments required by Section 3.04, Freddie Mac will retain from monthlyinterest payments on each Mortgage a management and guarantee fee, which equals any interest receivedby Freddie Mac from the servicer over the amount of interest payable to Holders;provided, however, thatany such amount retained by Freddie Mac will be adjusted automatically to the extent a Pool Factor doesnot reflect the unpaid principal balance of the Mortgages. Any such adjustment will equal the differencebetween (i) interest at the applicable PC Coupon computed on the aggregate unpaid principal balance of the

Mortgages for such month based on monthly principal payments actually received by Freddie Mac and (ii)interest at the applicable PC Coupon computed on the remaining PC Pool balance derived from the PoolFactor. Freddie Mac is entitled to retain as additional compensation for services certain incidental fees onthe Mortgages as provided in Section 2.05.

(b) Freddie Mac will pay all expenses it incurs in connection with the administration of a PC Pool andthe related Mortgages, except that any amounts expended by Freddie Mac (or the servicers on FreddieMac's behalf) for the protection, preservation or maintenance of the Mortgages, or of the real property

9


33/136

securing the Mortgages, or of property received in liquidation of or realization upon the Mortgages, will beexpenses to be borne pro rata by Freddie Mac and the Holders in accordance with their interests in eachMortgage. Freddie Mac may pay such expenses borne pro rata by Holders from payments otherwise due toHolders, which may affect the timing of receipt of payments by Holders.

(c) Freddie Mac will reimburse a servicer for any amount it expends (on Freddie Mac's behalf andwith Freddie Mac's approval) for the protection, preservation or maintenance of the Mortgages, or of thereal property securing the Mortgages, or of property received in liquidation of or realization upon theMortgages. Freddie Mac will reimburse such expenses in accordance with the Guide.

(d) Any fees and expenses described above will not affect Freddie Mac's guarantees as set forth inSection 3.09.

Section 3.09. Guarantees.

(a) Freddie Mac guarantees to each Holder of a PC:

(i) the timely payment of interest at the applicable PC Coupon.

(ii) the full and final payment of principal on the underlying Mortgages on or before thePayment Date that falls (A) in the month of its Final Payment Date, for Gold PCs, or (B) in the monthafter its Final Payment Date, for ARM PCs.

(iii) for Gold PCs only, the timely payment of scheduled principal on the underlyingMortgages.

In the case of Deferred Interest PCs, Freddie Mac's guarantee of principal includes, and its guarantee ofinterest excludes, any Deferred Interest added to the principal balances of the related Mortgages.

(b) Freddie Mac will compute guaranteed scheduled monthly principal payments on any Gold PC,subject to any applicable adjustments, in accordance with procedures adopted by Freddie Mac from time totime. Any payment Freddie Mac makes to Holders on account of its guarantee of scheduled principalpayments will be considered to be a payment of principal for purposes of calculating the Pool Factor for therelated PC Pool and the Holder's pro rata share of the remaining unpaid principal balance of the Mortgages.

Section 3.10. Subrogation. Freddie Mac will be subrogated to all the rights, interests, remedies,powers and privileges of each Holder in respect of any Mortgage on which it has made guarantee paymentsof principal and/or interest to the extent of such payments.

Section 3.11. Termination Upon Final Payment. Except as provided in Sections 3.05(e) and6.01,Freddie Mac's obligations and responsibilities under this Agreement to a Holder of any PC willterminate upon (i) the full payment to the Holder of all principal and interest due the Holder of such PCbased on the Pool Factors or by reason of Freddie Mac's guarantees or (ii) the payment to the Holder of allamounts held by Freddie Mac and required to be paid hereunder.

Section 3.12. Effect of Final Payment Date. The actual final payment on a PC may occur prior tothe Payment Date specified in Section 3.09(a)(ii) due to prepayments of principal, including prepaymentsmade in connection with the repurchase of any Mortgage.

ARTICLE IV

PCs

10


34/136

Section 4.01. Form and Denominations. PCs will be issued, held and transferable only on the book-entry system of the Federal Reserve Banks in minimum original principal amounts of $1,000 and additionalincrements of $1. PCs will at all times remain on deposit with a Federal Reserve Bank in accordance withthe provisions of the Book-Entry Rules. A Federal Reserve Bank will maintain a book-entry recordkeeping

system for all transactions in PCs with respect to Holders.

Section 4.02. Transfer of PCs. PCs may be transferred only in minimum original principal amountsof $1,000 and additional increments of $1. PCs may not be transferred if, as a result of the transfer, thetransferor or the new Holder would have on deposit in its account PCs of the same issue with an originalprincipal amount of less than $1,000.The transfer, exchange or pledge of PCs will be governed by the fiscalagency agreement between Freddie Mac and a Federal Reserve Bank, the Book-Entry Rules and such otherprocedures as will be agreed upon from time to time by Freddie Mac and a Federal Reserve Bank. AFederal Reserve Bank will act only upon the instructions of the Holder in recording transfers of a PC. Acharge may be made for any transfer of a PC and will be made for any tax or other governmental chargeimposed in connection with a transfer of a PC.

Section 4.03. Record Date. The Record Date for each Payment Date will be the close of business on

the last day of the preceding month for Gold PCs and the second preceding month for ARM PCs. A Holderof a PC on the books and records of a Federal Reserve Bank on the Record Date will be entitled to paymentof principal and interest on the related Payment Date. A transfer of a PC made on or before the Record Datein a month will be recognized as effective as of the first day of such month.

11


35/136

ARTICLE V

Remedies

Section 5.01. Events of Default. "Events of Default'' means any one of the following events:

(a) Default in the payment of interest to Holders at the applicable PC Coupon when it is due andpayable as provided in this Agreement, and the continuance of such default for a period of 30 days.

(b) Default in the payment of principal to Holders when it is due and payable as provided in thisAgreement, and the continuance of such default for a period of 30 days.

(