sample securitization audit

Paladin Associates – Forensic Mortgage Experts

LOAN AUDIT AND

MORTGAGE BACKED SECURITY ANALYSIS

Homeowner/Mortgagor:

Confidential

Securitized Property:

Confidential Torrance, CA 90501


MORTGAGOR

BORROWER CO-BORROWER

Confidential

CURRENT ADDRESS PROPERTY ADDRESS

Confidential, Torrance, CA 90501

Confidential, Torrance, CA 90501

TRANSACTION PARTICIPANTS

MORTGAGE BROKER

MORTGAGE SERVICER MORTGAGE

NOMINEE/BENEFICIARY

Allstate Home Loans, Inc. dba Allstate Funding

5 Corporat5e Park, Suite 100 Irvine, CA 92606

BAC Home Loans Servicing, LP

400 Countrywide Way Simi Valley,

CA 93065

Mortgage Electronic Registration Systems, Inc.

ORIGINAL MORTGAGE LENDER

MORTGAGE TRUSTEE

TITLE COMPANY

Shearson Home Loans

8 Hughes Suite 250 Irvine, CA 92618

Progressive Title Co. 425 W. Broadway

Glendale, CA 91206

Progressive Title Co. 425 W. Broadway

Glendale, CA 91206


TRUE LENDER

SPONSOR/SELLER

DEPOSITOR

WMC MORTGAGE CORP. P.O. BOX 4308

LOS ANGELES, CA 90054

DB STRUCTURED PRODUCTS, INC. ACE SECURITIES CORP.

ISSUING ENTITY

TRUSTEE MASTER SERVICER/

SECURITIES ADMINISTRATOR

ACE SECURITIES CORP. HOME EQUITY LOAN TRUST,

SERIES2007-HE2

HSBC BANK USA, NATIONAL ASSOCIATION

WELLS FARGO BANK, NATIONAL ASSOCIATION

SERVICER(S)

CUT – OFF DATE

CLOSING DATE

OCWEN LOAN SERVICING, LLC

COUNTRYWIDE HOME LOANS SERVICING LP

FEBRUARY 1, 2007 ON OR ABOUT MARCH 8, 2007

SECURITIZATION PARTIES


CHAIN OF TITLE

DEED DATE NOTE DATE

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.

P.O. BOX 2026 FLINT, MI 48501-2026

MAY 25, 2006

ALLSTATE HOME LOANS, INC.

5 CORPORATE PARK IRVINE, CA 92606

MAY 25, 2006

ASSET BACKED PASS- THROUGH CERTIFICATES,

SERIES 2007-HE2

ACE SECURITIES CORP.

HOME EQUITY LOAN TRUST

SERIES 2007-HE2

FEBRUARY 1, 2007

The Deed of Trust and the Note have taken two distinctly different paths. The Deed of Trust was never transferred. The Note was however pooled, sold and transferred- the borrower‟s loan of $701,250.00 was combined with other loans and mortgages and this pool of loans and mortgages is valued at approximately $1,167,178,000 (approximate). The links are:


Prospectus Supplement dated March 8, 2007 (to Prospectus dated April 18, 2006)

$749,664,000 (Approximate)

ACE SECURITIES CORP. Home Equity Loan Trust, Series 2007-HE2

Asset Backed Pass-Through Certificates

ACE Securities Corp. Home Equity Loan Trust, Series 2007-HE2 Issuing Entity

DB Structured Products, Inc.

Sponsor

ACE Securities Corp. Depositor

Ocwen Loan Servicing, LLC

Countrywide Home Loans Servicing LP

Servicers

Wells Fargo Bank, National Association Master Servicer

You should consider carefully the risk factors beginning on page S-12 in this prospectus supplement. This prospectus supplement may be used to offer and sell the Offered Certificates only if accompanied by the prospectus. The Offered Certificates represent an interest solely in the Issuing Entity and do not represent interests in or obligations of the Sponsor, the Depositor, or any of their affiliates. Distributions on the Offered Certificates will be made on the 25th day of each month, or, if such day is not a business day, on the next succeeding business day, beginning in March 2007.


Offered Certificates The trust created for the Series 2007-HE2 certificates will hold a pool of first and second lien fixed-rate and adjustable-rate, one- to four-family, residential mortgage loans. The trust will issue fourteen classes of Offered Certificates. You can find a list of these classes, together with their initial certificate principal balances and pass-through rates, in the table below. Credit enhancement for all of the Offered Certificates will be provided in the form of excess interest, overcollateralization and subordination. In addition, the Offered Certificates may benefit from a series of net swap payments pursuant to an interest rate swap agreement and interest rate cap payments pursuant to two separate cap agreements, in each case, which are intended partially to mitigate interest rate risk.

Class Initial Certificate Principal Balance(1) Pass-Through Rate Assumed Final Distribution Date

A-1 $ 283,073,000 One-Month LIBOR + 0.14%(2)(3) December 25, 2036 A-2A $ 188,076,000 One-Month LIBOR + 0.12% (2)(3) December 25, 2036 A-2B $ 34,813,000 One-Month LIBOR + 0.14% (2)(3) December 25, 2036 A-2C $ 48,689,000 One-Month LIBOR + 0.24% (2)(3) December 25, 2036 A-2D $ 33,243,000 One-Month LIBOR + 0.30% (2)(3) December 25, 2036 M-1 $ 32,354,000 One-Month LIBOR + 0.32% (2)(3) December 25, 2036 M-2 $ 30,381,000 One-Month LIBOR + 0.40% (2)(3) December 25, 2036 M-3 $ 18,939,000 One-Month LIBOR + 0.40% (2)(3) December 25, 2036 M-4 $ 16,177,000 One-Month LIBOR + 0.65% (2)(3) December 25, 2036 M-5 $ 14,599,000 One-Month LIBOR + 0.75% (2)(3) December 25, 2036 M-6 $ 13,810,000 One-Month LIBOR + 1.00% (2)(3) December 25, 2036 M-7 $ 12,626,000 One-Month LIBOR + 2.50% (2)(3) December 25, 2036 M-8 $ 11,442,000 One-Month LIBOR + 2.50% (2)(3) December 25, 2036 M-9 $ 11,442,000 One-Month LIBOR + 2.50% (2)(3) December 25, 2036 ______________________ (1) Approximate. (2) The pass-through rate for each class of Offered Certificates will be subject to the applicable Net WAC Pass-Through Rate as described in this prospectus

supplement under “Description of the Certificates-Pass-Through Rates.” (3) After the first possible optional termination date, the margins applicable to the Class A-1, Class A-2A, Class A-2B, Class A-2C and Class A-2D Certificates

will increase by 100% and the margins applicable to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8 and Class M-9 Certificates will increase by the lesser of (i) the product of the applicable margin and 50% and (ii) 0.50%.

The certificates offered by this prospectus supplement will be purchased by Deutsche Bank Securities Inc. from the Depositor, and are being offered by Deutsche Bank Securities Inc. from time to time for sale to the public in negotiated transactions or otherwise at varying prices to be determined at the time of sale. Proceeds to the Depositor from the sale of the Offered Certificates will be approximately 98.98% of their initial Certificate Principal Balance before deducting expenses. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the Offered Certificates or determined that this prospectus supplement or the prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The Attorney General of the State of New York has not passed on or endorsed the merits of this offering. Any representation to the contrary is unlawful.

Deutsche Bank Securities


The Trust The Depositor will establish a trust with respect to the certificates under the pooling and servicing agreement dated as of the Cut-off Date among the Depositor, the Servicers, the Master Servicer, the Securities Administrator and the Trustee. There are seventeen classes of certificates representing the trust. See “Description of the Certificates” in this prospectus supplement. The certificates represent in the aggregate the entire beneficial ownership interest in the trust. In general, distributions of interest and principal, if applicable, on the Offered Certificates will be made only from payments received or advanced in respect of the mortgage loans, payments made by the Swap Provider under the interest rate swap agreement and payments made by the cap provider under the cap agreements. The Mortgage Loans References to percentages of the mortgage loans under this section are calculated based on the aggregate principal balance of the mortgage loans as of the Cut-off Date. The trust will contain 4,937 conventional, one- to four-family, first and second lien, fixed-rate and adjustable-rate mortgage loans on residential real properties (the “Mortgage Loans”). For purposes of calculating interest and principal distributions on the Class A-1 Certificates and the Class A-2A, Class A-2B, Class A-2C and Class A-2D Certificates (collectively, the “Class A-2 Certificates”; and together with the Class A-1 Certificates, the “Class A Certificates”), the Mortgage Loans have been divided into two loan groups, designated as the “Group I Mortgage Loans” and the “Group II Mortgage Loans.” The Group I Mortgage Loans consist of first and second lien, fixed-rate and adjustable-rate mortgage loans with principal balances at origination that conformed to Freddie Mac loan limits. The Group II Mortgage Loans consist of first and second lien, fixed-rate and adjustable-rate mortgage loans with principal balances at origination that may or may not have conformed to Freddie Mac loan limits.

THE MORTGAGE POOL General

The pool of mortgage loans (the “Mortgage Pool”) will consist of 4,937 conventional, one- to four-family, first and second lien, fixed-rate and adjustable-rate mortgage loans (the “Mortgage Loans”) on residential real properties (the “Mortgaged Properties”) having an aggregate principal balance as of the Cut-off Date of approximately $796,434,542 after application of scheduled payments due on or before the Cut-off Date whether or not received, and subject to a permitted variance of plus or minus 5%. The Mortgage Loans have original terms to maturity of not greater than 30 years. For purposes of calculating interest and principal distributions on the Class A Certificates, the Mortgage Loans have been divided into two loan groups, designated as the “Group I Mortgage Loans” and the “Group II Mortgage Loans.” The Group I Mortgage Loans consist of 2,607 fixed-rate and adjustable-rate mortgage loans having an aggregate principal balance as of the Cut-off Date of approximately $382,909,543 after application of scheduled payments due on or before the Cut-off Date whether or not received, and subject to a permitted variance of plus or minus 5%. The principal balances of the Group I Mortgage Loans at origination conformed to Freddie Mac loan limits. The Group II Mortgage Loans consist of 2,330 fixed-rate and adjustable-rate mortgage loans having an aggregate principal balance as of the Cut-off Date of approximately $413,524,999 after application of scheduled payments due on or before the Cut-off Date whether or not received, and subject to a permitted variance of plus or minus 5%. The principal balances of the Group II Mortgage Loans at origination may or may not have conformed to Freddie Mac loan limits.


Approximately 48.62% of the Mortgage Loans, by aggregate principal balance as of the Cut-off Date, provide for level monthly payments in an amount sufficient fully to amortize the Mortgage Loans over their terms or, in the case of adjustable rate Mortgage Loans, monthly payments that will be adjusted to an amount that will amortize such Mortgage Loans fully over their terms. Approximately 41.98% of the Mortgage Loans, by aggregate principal balance as of the Cut-off Date, are balloon loans (the “Balloon Loans”), which require the related mortgagors to make balloon payments on the maturity date of such Balloon Loans that are larger than the monthly payments made by such mortgagors on prior due dates in order to amortize such Balloon Loans fully over their terms. Approximately 8.98% of the Mortgage Loans, by aggregate principal balance as of the Cut-off Date, are interest only loans (the “Interest Only Loans”) which require the related mortgagors to make monthly payments of only accrued interest for the first five, seven or ten years following origination. After such interest-only period, the mortgagor’s monthly payment will be recalculated to cover both interest and principal so that such Mortgage Loan will amortize fully on or prior to its final payment date.

Approximately 95.08% of the Mortgage Loans, by aggregate principal balance as of the Cut-off Date, are secured by first mortgages or deeds of trust or other similar security instruments creating first liens on residential properties (“First Lien Mortgage Loans”). Approximately 4.92% of the Mortgage Loans, by aggregate principal balance as of the Cut-off Date, are secured by second mortgages or deeds of trust or other similar security instruments creating second liens on residential properties (“Second Lien Mortgage Loans”). The Mortgaged Properties generally consist of attached, detached or semi detached, one to four family dwelling units, individual condominium units, individual units in planned unit developments, townhouses and rowhouses.

References to percentages of the Mortgage Loans, unless otherwise noted, are calculated based on the aggregate principal balance of the Mortgage Loans as of the Cut-off Date.

The mortgage rate (the “Mortgage Rate”) on each Mortgage Loan is the per annum rate of interest specified in the related

mortgage note as reduced by application of the Relief Act or similar state or local laws and bankruptcy adjustments. Approximately 27.18% of the Mortgage Loans are fixed-rate mortgage loans and approximately 72.82% of the Mortgage Loans are adjustable-rate mortgage loans, in each case, by aggregate principal balance as of the Cut-off Date. The adjustable-rate mortgage loans are referred to in this prospectus supplement as “ARM Loans”. All of the ARM Loans provide for semi-annual adjustment to the Mortgage Rates applicable thereto based on Six-Month LIBOR (as described below). The first adjustment with respect to each ARM Loan will not occur until after an initial period of one, two, three, five or ten years from the date of origination thereof (each, a “Delayed First Adjustment Mortgage Loan”). In connection with each Mortgage Rate adjustment, the ARM Loans have corresponding adjustments to their monthly payment amount, in each case on each applicable adjustment date (each such date, an “Adjustment Date”). As to each Mortgage Loan, the Servicer will be responsible for calculating and implementing Mortgage Rate adjustments. On each Adjustment Date, the Mortgage Rate on each ARM Loan will be adjusted generally to equal the sum of the related Index, as applicable and a fixed percentage amount (the “Gross Margin”) for that ARM Loan specified in the related mortgage note. The Mortgage Rate on each ARM Loan, however, including each Delayed First Adjustment Mortgage Loan, will not increase or decrease by more than the initial periodic rate cap (the “Initial Periodic Rate Cap”) specified in the related mortgage note on the initial Adjustment Date or increase or decrease by more than the subsequent periodic rate cap (the “Subsequent Periodic Rate Cap”) specified in the related mortgage note on any subsequent Adjustment Date and will not exceed a specified maximum mortgage rate (the “Maximum Mortgage Rate”) over the life of the ARM Loan or be less than a specified minimum mortgage rate (the “Minimum Mortgage Rate”) over the life of the ARM Loan. The weighted average Initial Periodic Rate Cap and Subsequent Periodic Rate Cap for the ARM Loans is approximately 2.977% per annum and approximately 1.095% per annum, respectively. Effective with the first monthly payment due on each ARM Loan after each related Adjustment Date, the monthly payment amount on each ARM Loan (other than any ARM Loan which is a Balloon Loan) will be adjusted to an amount that will fully amortize the outstanding principal balance of the related ARM Loan over its remaining term and pay interest at the Mortgage Rate as so adjusted. Due to the application of the Periodic Rate Caps and the Maximum Mortgage Rates, the Mortgage Rate on each ARM Loan, as adjusted on any related Adjustment Date, may be less than the sum of the related Index, calculated as described in this prospectus supplement, and the related Gross Margin. See “—The Indices of the Mortgage Loans” in this prospectus supplement. None of the ARM Loans permit the related mortgagor to convert the adjustable Mortgage Rate thereon to a fixed Mortgage Rate.

S-24


Substantially all of the Mortgage Loans have scheduled monthly payments due on the first day of the month (with respect to

each Mortgage Loan, the “Due Date”). Each Mortgage Loan will contain a customary “due-on-sale” clause which provides that the Mortgage Loan must be repaid at the time of a sale of the related Mortgaged Property or assumed by a creditworthy purchaser of the related Mortgaged Property.

Approximately 68.98% of the Mortgage Loans, by aggregate principal balance as of the Cut-off Date, provide for payment

by the mortgagor of a prepayment charge (a “Prepayment Charge”) in limited circumstances on certain prepayments as provided in the related mortgage note. Each such Mortgage Loan provides for payment of a Prepayment Charge on certain partial prepayments and all prepayments in full made within a certain period of time from the date of origination of the Mortgage Loan, as provided in the related mortgage note. The amount of the Prepayment Charge is as provided in the related mortgage note. The holders of the Class P Certificates will be entitled to all Prepayment Charges received on the Mortgage Loans, and these amounts will not be available for distribution on the other classes of certificates. Under the limited instances described under the terms of the pooling and servicing agreement, the Servicers may waive the payment of any otherwise applicable Prepayment Charge with respect to the related Mortgage Loans. As of July 1, 2003, the Alternative Mortgage Parity Act of 1982 (the “Parity Act”), which regulates the ability of Originators to impose prepayment charges, was amended, and as a result, the Originators will be required to comply with state and local laws in originating mortgage loans with prepayment charge provisions with respect to loans originated on or after July 1, 2003. The Depositor makes no representations as to the effect that the Prepayment Charges and the amendment of the Parity Act may have on the prepayment performance of the Mortgage Loans. However, the amendment of the Parity Act does not retroactively affect loans originated before July 1, 2003. Investors should conduct their own analysis of the effect, if any, that the Prepayment Charges, decisions by the Servicers with respect to the waiver of the Prepayment Charges and the amendment to the Parity Act, may have on the prepayment performance of the Mortgage Loans. The Depositor makes no representation as to the effect that the Prepayment Charges, decisions by the Servicers with respect to the waiver of the Prepayment Charges and the amendment to the Parity Act, may have on the prepayment performance of the Mortgage Loans. See “Certain Legal Aspects of the Mortgage Loans- Prepayment Charges and Late Fees; Debt-Acceleration Clauses” in the prospectus.

S-25

The Pooling and Servicing Agreement will require that, prior to the Closing Date, the Depositor will deliver or cause to be delivered to the Trustee (or the applicable Custodian, as the Trustee’s agent for such purpose) the mortgage notes endorsed in blank and the Related Documents. In lieu of delivery of original mortgages or mortgage notes, if such original is not available or lost, the Depositor may deliver or cause to be delivered true and correct copies thereof, or, with respect to a lost mortgage note, a lost note affidavit. The assignments of mortgage are generally required to be recorded by or on behalf of the Depositor in the appropriate offices for real property records, except (i) in states as to which an opinion of counsel is delivered to the effect that such recording is not required to protect the Trustee’s interest in the Mortgage Loan against the claim of any subsequent transferee or any successor to or creditor of the Depositor or the Sponsor, or (ii) with respect to any Mortgage Loan electronically registered through the Mortgage Electronic Registration Systems, Inc.

On or prior to the Closing Date, the Trustee or the applicable Custodian on its behalf will review the Mortgage Loans and the Related Documents pursuant to the related Custodial Agreement and, if any Mortgage Loan or Related Document is found to be defective in any material respect and such defect is not cured within 90 days following notification thereof to the Sponsor by the Trustee or the related Servicer, the Sponsor will be obligated either to (i) substitute for such Mortgage Loan a Qualified Substitute Mortgage Loan; however, such substitution is permitted only within two years of the Closing Date and may not be made unless an opinion of counsel is provided to the effect that such substitution will not disqualify any of the REMICs (as defined in the Pooling and Servicing Agreement) as a REMIC or result in a prohibited transaction tax under the Code; or (ii) purchase such Mortgage Loan at a price (the “Purchase Price”) equal to the outstanding principal balance of such Mortgage Loan as of the date of purchase, plus all accrued and unpaid interest thereon, computed at the Mortgage Rate through the end of the calendar month in which the purchase is effected, plus the amount of any unpaid Servicing Fees or unreimbursed P&I Advances and servicing advances made by the related Servicer plus all unreimbursed costs and damages incurred by the trust and the Trustee in connection with any violation by any such Mortgage Loan of any predatory or abusive lending law. The Purchase Price will be required to be remitted to the related Servicer for deposit in the related Collection Account (as defined in this prospectus supplement) for remittance to the Securities Administrator prior to the next succeeding Distribution Date after such obligation arises. The obligation of the Sponsor to repurchase or substitute for a Deleted Mortgage Loan (as defined in this prospectus supplement) is the sole remedy regarding any defects in the Mortgage Loans and Related Documents available to the certificateholders.


S-167

In connection with the substitution of a Qualified Substitute Mortgage Loan, the Sponsor will be required to remit to the

related Servicer for deposit in the related Collection Account for remittance to the Securities Administrator prior to the next succeeding Distribution Date after such obligation arises an amount (the “Substitution Shortfall Amount”) equal to the excess of the principal balance of the related Deleted Mortgage Loan over the principal balance of such Qualified Substitute Mortgage Loan.

A “Qualified Substitute Mortgage Loan” is a mortgage loan substituted for a Deleted Mortgage Loan which must, on the date of such substitution, (i) have an outstanding principal balance (or in the case of a substitution of more than one Mortgage Loan for a Deleted Mortgage Loan, an aggregate principal balance), not in excess of the principal balance of the Deleted Mortgage Loan; (ii) have a Mortgage Rate not less than the Mortgage Rate of the Deleted Mortgage Loan and not more than 1% in excess of the Mortgage Rate of such Deleted Mortgage Loan; (iii) if such mortgage loan is an adjustable-rate mortgage loan, have a Maximum Mortgage Rate and Minimum Mortgage Rate not less than the respective rate for the Deleted Mortgage Loan and have a Gross Margin equal to or greater than the Deleted Mortgage Loan; (iv) have the same Due Date as the Deleted Mortgage Loan; (v) have a remaining term to maturity not more than one year earlier and not later than the remaining term to maturity of the Deleted Mortgage Loan; (vi) comply with each representation and warranty as to the Mortgage Loans set forth in the Mortgage Loan Purchase Agreement (deemed to be made as of the date of substitution); (vii) be of the same or better credit quality as the Mortgage Loan being replaced; (viii) have the same lien priority on the related mortgaged property as the Mortgage Loan being replaced and (ix) satisfy certain other conditions specified in the Pooling and Servicing Agreement.

The Sponsor will make certain representations and warranties as to the accuracy in all material respects of certain information furnished to the Trustee with respect to each Mortgage Loan. In addition, the Sponsor will represent and warrant, as of the Closing Date, that, among other things: (i) at the time of transfer to the Depositor, the Sponsor has transferred or assigned all of its right, title and interest in each Mortgage Loan and the Related Documents, free of any lien; (ii) each Mortgage Loan complied, at the time of origination, in all material respects with applicable state and federal laws including, but not limited to, predatory lending laws; (iii) the Mortgage Loans are not subject to the requirements of the Home Ownership and Equity Protection Act of 1994 and no Mortgage Loan is classified and/or defined as a “high cost”, “covered” or “predatory” loan under any other federal, state or local law or ordinance or regulation including, but not limited to, the States of Georgia, Arkansas, Kentucky, New Jersey, New Mexico, Indiana or Illinois; and (iv) no proceeds from any Mortgage Loan were used to purchase single premium credit insurance policies as part of the origination of, or as a condition to closing, such Mortgage Loan. Upon discovery of a breach of any such representation and warranty which materially and adversely affects the interests of the certificateholders in the related Mortgage Loan and Related Documents, the Sponsor will have a period of 90 days after the earlier of discovery or receipt of written notice of the breach to effect a cure; provided, however that any breach of the representations and warranties set forth in clauses (ii), (iii) or (iv) above (or certain other representations and warranties made by the Sponsor with respect to any Group I Mortgage Loan), shall be deemed to materially and adversely affect the interests of the certificateholders in the related Group I Mortgage Loan. If the breach cannot be cured within the 90-day period, the Sponsor will be obligated to (i) substitute for such Deleted Mortgage Loan a Qualified Substitute Mortgage Loan or (ii) purchase such Deleted Mortgage Loan from the trust. The same procedure and limitations that are set forth above for the substitution or purchase of Deleted Mortgage Loans as a result of deficient documentation relating thereto will apply to the substitution or purchase of a Deleted Mortgage Loan as a result of a breach of a representation or warranty in the Mortgage Loan Purchase Agreement that materially and adversely affects the interests of the certificateholders. The Depositor will file the mortgage loan purchase agreement as an exhibit to the Pooling and Servicing Agreement with the Securities and Exchange Commission in a Current Report on Form 8-K.

Mortgage Loans required to be transferred to the Sponsor as described in the preceding paragraphs are referred to as “Deleted Mortgage Loans.”


ACE SECURITIES CORP. Depositor

OCWEN LOAN SERVICING, LLC

a Servicer

COUNTRYWIDE HOME LOANS SERVICING LP a Servicer

WELLS FARGO BANK, NATIONAL ASSOCIATION

Master Servicer and Securities Administrator

HSBC BANK USA, NATIONAL ASSOCIATION

Trustee

POOLING AND SERVICING AGREEMENT

Dated as of February 1, 2007

ACE Securities Corp. Home Equity Loan Trust, Series 2007-HE2

Asset Backed Pass-Through Certificates

ARTICLE II

CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES

SECTION 2.01. Conveyance of the Mortgage Loans.

The Depositor, concurrently with the execution and delivery hereof, does hereby transfer, assign, set over and

otherwise convey to the Trustee, on behalf of the Trust, without recourse, for the benefit of the Certificateholders, all the right, title and interest of the Depositor, including any security interest therein for the benefit of the Depositor, in and to the Mortgage Loans identified on the Mortgage Loan Schedule, the rights of the Depositor under the Mortgage Loan Purchase Agreement (including, without limitation the right to enforce the obligations of the other parties thereto thereunder), the rights of the Depositor under the Cap Contracts, the right to any payments made by the Cap Counterparty under the Cap Contracts, the right to any Net Swap Payment and any Swap Termination Payment made by the Swap Provider and all other assets included or to be included in REMIC I. Such


assignment includes all interest and principal received by the Depositor and the Servicer on or with respect to the Mortgage Loans (other than payments of principal and interest due on such Mortgage Loans on or before the Cut-off Date). A copy of the Mortgage Loan Purchase Agreement is attached hereto as Exhibit F.

In connection with such transfer and assignment, the Depositor does hereby deliver to, and deposit with the Custodian pursuant to the Custodial Agreement the documents with respect to each Mortgage Loan as described under Section 2 of the Custodial Agreement (the “Mortgage Loan Documents”). In connection with such delivery and as further described in the Custodial Agreement, the Custodian will be required to review such Mortgage Loan Documents and deliver to the Trustee, the Depositor, the Servicers and the Sponsor certifications (in the forms attached to the Custodial Agreement) with respect to such review with exceptions noted thereon. In addition, under the Custodial Agreement the Depositor will be required to cure certain defects with respect to the Mortgage Loan Documents for the related Mortgage Loans after the delivery thereof by the Depositor to the Custodian as more particularly set forth therein.

Notwithstanding anything to the contrary contained herein, the parties hereto acknowledge that the functions of the Trustee with respect to the custody, acceptance, inspection and release of the Mortgage Files, including, but not limited to certain insurance policies and documents contemplated by Section 4.11 of this Agreement, and preparation and delivery of the certifications shall be performed by the Custodian pursuant to the terms and conditions of the Custodial Agreement.

The Depositor shall deliver or cause the related originator to deliver to the related Servicer copies of all trailing documents relating to Mortgage Loans serviced by such Servicer and required to be included in the related Mortgage File at the same time the originals or certified copies thereof are delivered to the Trustee or Custodian, such documents including the mortgagee policy of title insurance and any Mortgage Loan Documents upon return from the recording office. Neither Servicer shall be responsible for any custodian fees or other costs incurred in obtaining such documents and the Depositor shall cause each Servicer to be reimbursed for any such costs it may incur in connection with performing its obligations under this Agreement. 89

The Mortgage Loans permitted by the terms of this Agreement to be included in the Trust are limited to (i) Mortgage Loans (which the Depositor acquired pursuant to the Mortgage Loan Purchase Agreement, which contains, among other representations and warranties, a representation and warranty of the Sponsor that no Mortgage Loan is a “High-Cost Home Loan” as defined in the New Jersey Home Ownership Act effective November 27, 2003 or as defined in the New Mexico Home Loan Protection Act effective January 1, 2004, as defined in the Massachusetts Predatory Home Loan Practices Act, effective November 7, 2004 (Mass. Ann. Laws Ch. 183C) or as defined in the Indiana Home Loan Practices Act, effective January 1, 2005 (Ind. Code Ann. Sections 24-9-1 through 24-9-9) or a “high risk home loan” under the Illinois High Risk Home Loan Act, effective as of January 1, 2004), and (ii) Qualified Substitute Mortgage Loans (which, by definition as set forth herein and referred to in the Mortgage Loan Purchase Agreement, are required to conform to, among other representations and warranties, the representation and warranty of the Sponsor that no Qualified Substitute Mortgage Loan is a “High-Cost Home Loan” as defined in the New Jersey Home Ownership Act effective November 27, 2003 or as defined in the New Mexico Home Loan Protection Act effective January 1, 2004, as defined in the Massachusetts Predatory Home Loan Practices Act, effective November 7, 2004 (Mass. Ann. Laws Ch. 183C) or as defined in the Indiana Home Loan Practices Act, effective January 1, 2005 (Ind. Code Ann. Sections 24-9-1 through 24-9-9) or a “high risk home loan” under the Illinois High Risk Home Loan Act, effective as of January 1, 2004). The Depositor and the Trustee on behalf of the Trust understand and agree that it is not intended that any Mortgage Loan be included in the Trust that is a “High-Cost Home Loan” as defined in the New Jersey Home Ownership Act effective November 27, 2003, as defined in the New Mexico Home Loan Protection Act effective January 1, 2004, as defined in the Massachusetts Predatory Home Loan Practices Act, effective November 7, 2004 (Mass. Ann. Laws Ch. 183C) or as defined in the Indiana Home Loan Practices Act, effective January 1, 2005 (Ind. Code Ann. Sections 24-9-1 through 24-9-9) or a “high risk home loan” under the Illinois High Risk Home Loan Act, effective as of January 1, 2004.

SECTION 2.02. Acceptance of REMIC I by Trustee.


The Trustee acknowledges receipt, subject to the provisions of Section 2.01 hereof and Section 2 of the Custodial

Agreement, of the Mortgage Loan Documents and all other assets included in the definition of “REMIC I” under clauses (i), (iii), (iv) and (v) (to the extent of amounts deposited into the Distribution Account) and declares that it holds (or the Custodian on its behalf holds) and will hold such documents and the other documents delivered to it constituting a Mortgage Loan Document, and that it holds (or the Custodian on its behalf holds) or will hold all such assets and such other assets included in the definition of “REMIC I” in trust for the exclusive use and benefit of all present and future Certificateholders.

THE CORRECT PROCESS OF SECURITIZATION

PARTY A ORIGINATOR/LENDER

WMC MORTGAGE CORP.

PARTY D TRUST/ISSUING ENTITY

MORGAN STANLEY

CAPITAL I INC. TRUST 2006- HE1

TRUE SALE 1) LEGAL OPINIONS 2) ASSET PURCHASE / SALE

AGREEMENTS 3) DELIVERY &

ACCEPTANCE RECEIPTS 4) COMPENSATION /

MONEY 5) CAPACITY OF PARTIES

TO BUY AND SELL

PARTY B SPONSOR

MORGAN STANLEY

MORTGAGE CAPITAL INC.

PARTY C DEPOSITOR

MORGAN STANLEY

CAPITAL I INC.

HOW LENDERS “SIDE-STEPPED” THE PROCESS

PARTY A ORIGINATOR/LENDER

WMC MORTGAGE CORP.

TRUE SALE

PARTY B SPONSOR

MORGAN STANLEY

MORTGAGE CAPITAL INC.

PARTY D TRUST/ISSUING ENTITY

MORGAN STANLEY CAPITAL

I INC. TRUST 2006- HE1

1) LEGAL OPINIONS 2) ASSET PURCHASE /

SALE AGREEMENTS 3) DELIVERY &

ACCEPTANCE RECEIPTS

4) COMPENSATION / MONEY 5) CAPACITY OF


PARTIES TO BUY AND SELL

PARTY C DEPOSITOR

MORGAN STANLEY

CAPITAL I INC.


SECTION 3: FORECLOSURE

Chain of Title and Chain of Note Recorded Events on the Loan Including Foreclosure Issues and Securitization

Recorded Chain of Deed Possession Chain of Note Possession

Date Original Deed of Trust Date Note Holder

DATE Instrument # 2005-190356

Official Records, San Mateo County

California

(Borrowers) WMC MORTGAGE CORP.

(Lender) MIN 10013630011356

OCTOBER 10, 2005

WMC MORTGAGE CORP. P.O.

BOX 4308 LOS ANGELES, CA 90054

Principal Amount $701,250.00

MIN:100136300113560154

DATE Sept 24, 2009 Instrument # 2009-128856


California

Notice of Default

NDEx WEST, LLC 15000 SURVEYOR BLVD., SUITE 500

ADDISON, TEXAS 75001

FEBRUARY 1, 2006

MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2006-HE1 MORGAN STANLEY CAPITAL I

INC. TRUST 2006-HE1

DATE February 21, 2008 Instrument # 2008-017857


California

Assignment of Deed of Trust #1

CHASE HOME FINANCE (SAN DIEGO)

10790 RANCHO BERNARDO RD. SAN DIEGO, CA 92127

DATE October 21, 2009 Instrument # 2009-138866


California

Assignment of Deed of Trust #2

NDEx WEST, LLC 15000 SURVEYOR BLVD., SUITE 500

ADDISON, TEXAS 75001

DATE January 18, 2008

Instrument # 2008-006029


California

Substitution of Trustee #1

CAL WESTERN RECONVEYANCE CORPORATION

525 EAST MAIN STREET P.O. BOX 22004

EL CAJON, CA 92022

DATE January 24, 2008



California


CAL WESTERN RECONVEYANCE CORPORATION

525 EAST MAIN STREET P.O. BOX 22004

EL CAJON, CA 92022


DATE December 7, 2009



California


NDEx WEST, LLC

15000 SURVEYOR BLVD., SUITE 500 ADDISON, TEXAS 75001

DATE March 29, 2010



California

Notice of Trustee‟s Sale

NDEx WEST, LLC

15000 SURVEYOR BLVD., SUITE 500 ADDISON, TEXAS 75001

DATE November 3, 2010



California

Trustee‟s Deed Upon Sale

WELLS FARGO BANK, N.A., ET AL C/O CHASE HOME FINANCE, LLC

3415 VISION DRIVE COLUMBUS, OH 43219

MIN:1002143-0000001992-1 Note Date:05/25/2006 MIN Status:Active

Servicer: Ocwen Loan Servicing, LLC Phone:(800) 746-2936 West Palm Beach, FL

Investor: HSBC Bank USA, National Association. Phone:(212) 525-1592 New York City, NY MIN:1002143-0000001991-3 Note Date:05/25/2006 MIN Status:Active

Need to correct MERS record to show 1st TD


REPORT SUMMARY

Deed of Trust:

On October 11, 2005 Debtors Audit Recipient, executed a negotiable promissory note and a

security interest in the form of a Deed of Trust in the amount of $701,250.00.This document was filed as document number 2005-190358 in the Official Records San Mateo County, CA. The original lender of the promissory note is WMC Mortgage Corp. Mortgage Electronic Registration Systems, Inc. (hereafter “MERS”) is not named as the payee of the note, but is named as acting solely as a “nominee” for lender as the beneficiary of the security interest Deed of Trust. The original trustee under this Deed of Trust is Westwood Associates, a California Corp. Paragraph R of the Deed of Trust provides in part “This Security Instrument secures to Lender: (i) the repayment of the Loan…” Paragraph 20 of the Deed of Trust provides “The Note or a partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower. A True Copy of the Deed of Trust is hereto attached as Exhibit “A”.

Notice of Default:

On September 28, 2009 Document number 2009-128856 (Notice of Default and Election to

Sell under Deed of Trust) was filed in the Official Records, San Mateo County, CA. This Document properly identifies the amount of the mortgage loan that debtors obtained on October 10, 2005, recorded October 31, 2005, Exhibit “B.”


Assignment of Deed of Trust #1:

An Assignment of deed of Trust was filed as document number 2008-017857 in the Official Records, San Mateo County, CA on February 21, 2008. This document purports to be executed by MERS; a true copy is hereto attached as Exhibit “C‟.

• Assignment of Deed of Trust #2:

An Assignment of deed of Trust was filed as document number 2009-138866 in the Official

Records, (Not Known) County, CA on October 21, 2009. This document purports to be executed by JP Morgan Chase Bank N.A., as Attorney In Fact for Deutsche Bank National Trust Company; a true copy is hereto attached as Exhibit “D‟.

Substitution of Trustee #1:

On January 18, 2008, a Substitution of Trustee was filed as document number 2008-006029 in the Recorder‟s Office, San Mateo County, CA. This document, like the Deed of Trust, states that MERS was the beneficiary under the Deed of Trust – it does not state that MERS was the beneficiary under the promissory note. This document properly identifies the amount of the mortgage loan that debtor obtained on October 31, 2005. Exhibit „E.”

Substitution of Trustee 2: On January 24, 2008, a Substitution of Trustee was filed as document number 2008-007627 in

the Recorder‟s Office, San Mateo County, CA. This document, like the Deed of Trust, states that MERS was the beneficiary under the Deed of Trust – it does not state that MERS was the beneficiary under the promissory note. This document properly identifies the amount of the mortgage loan that debtor obtained on October 31, 2005. Exhibit „F”

Substitution of Trustee #3:

On December 7, 2009, a Substitution of Trustee was filed as document number 2009-159152 in the Recorder‟s Office, Unknown County, CA. This document, like the Deed of Trust, states that MERS was the beneficiary under the Deed of Trust – it does not state that MERS was the beneficiary under the promissory note. This document properly identifies the amount of the mortgage loan that debtor obtained on October 31, 2005. Exhibit „G.”

Notice of Trustee’s Sale:

On March 29, 2010, a Notice of Trustee‟s Sale was filed as document number 2010-033869 in the Official Records, San Mateo County, CA, Exhibit “H”.


MERS: The Deed of Trust shows MIN:100136300113560154 and MERS SERVICER ID website

https://www.mers-servicerid.org/sis/search indicates that Chase Home Finance LLC is the Servicer and Investor , Exhibit “I.”

The California Secretary of State Business Entity websites shows that MERS has a

SUSPENDED status for agent of process.

Securitization: The NOTE was sold, transferred and securitized to MORTGAGE PASS-THROUGH

CERTIFICATES, SERIES 2006-HE1 MORGAN STANLEY CAPITAL I INC. TRUST 2006- HE1; with a Closing Date of on or about February 28, 2006, Exhibit “J.”

NOTE: S ecti on 22 par a graph 2 of the o ri ginal De ed of Trust stated as “ If Lend er invokes th e powe r of sale, Lender shall execute or cause Trustee to execute a written notice of the occurrence of an event of default and of Lender‟s election to cause the Property to be sold, Trustee shall cause this notice to be recorded in each county in which any part of the Property is located. Lender or Trustee shall mail copies of the notice as prescribed by Applicable Law to Borrower and to the other persons prescribed by Applicable Law. After the time required by Applicable Law, Trustee, without demand on the Borrower, shall sell the Property at public auction to the highest bidder at the time and place and under the terms designated in the notice of sale in one or more parcels and in any order Trustee determines. This “Power of Sale” belongs to the original Lender and original Trustee. If a subject property is being foreclosed and there is no recorded Assignment of Deed and Trust and Substitution of Trustee, the power of sale can only be invoked by the original lender and trustee no matter if the servicing rights have been sold or transfer to another party.


MORTGAGE ELECTRONIC REGISTRATION SYSTEM ORIGINAL NOMINEE

FORECLOSING AGENT

REPRESENTED ASSIST SECRETARY OF “MERS” ASSIGNMENT #1 WORKS FOR ORIGINAL FORECLOSING AGENT

Certified Forensic Loan Auditors


SUBSTITUTED FORECLOSING TRUSTEE

AVIS R. THOMS – SIGNING AS ASSISTANT SECRETARY OF “MERS” IN FACT IS VICE PRESIDENT OF PROMMIS SOLUTIONS PARENT COMPANY OF CALWESTERN RECONVEYANCE CORP. ORIGINAL FORECLOSING AGENT.

National Mortgage Servicing Conference and Expo Avis R. Thomas, Vice President Prommis Solutions.

Default Super Session Moderators:

Avis R. Thomas, Vice President

Prommis Solutions


SECTION 4: CONCLUSION Securitization and MERS required many changes in established practices. These practices were

not and have not codified, so they are major points of contention today.

When a lender, title company, foreclosure company or other firm signed up to become a member of MERS, one of more of their people were designated as “Corporate Officers” of MERS and given the title of either Assistant Secretary or Vice President. These personnel were not employed by MERS, nor received income from MERS. They were named “Certified Officers” solely for the purpose of signing foreclosure and other legal documents in the name of MERS. (Apparently, there are some agreements which “authorize” these people to act in an Agency manner for MERS).

This “solved” the issue of not having enough personnel to conduct necessary actions. It would be the Servicers, Trustees and Title Companies conducting the day-to-day operations needed for MERS to function.

As well, it was thought that this would provide MERS and their “Corporate Officers” with the “legal standing” to foreclose.

However, this brought up another issue that now needed addressing:

When the Note is transferred, it must be endorsed and signed, in the manner of a person

signing his paycheck over to another party. Customary procedure was to endorse it as “Pay to the Order of” and the name of the party taking the Note and then signed by the endorsing party. With a new party holding the note, there would now need to be an Assignment of the Deed. This could not work if MERS was to be the foreclosing party.

MERS has recognized the Note endorsement problem and on their website, stated that they could be the foreclosing party only if the Note was endorsed in blank. If it was endorsed to another party, then that party would be the foreclosing party.

As a result, most Notes are endorsed in blank, which purportedly allow MERS to be the foreclosing party. However, CA CIVIL CODE 2932.5 has a completely different say in the matter. It requires that the Assignment of the Deed to the Beneficial Interest Holder of the note.

CA CIVIL CODE 2932.5 – ASSIGNMENT

Where a power to sell real property is given to a mortgagee, or other encumbrance, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitle to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is duly acknowledged and recorded.

As is readily apparent, the above statute would suggest that Assignment of the Deed to the Note Holder is a requirement for enforcing foreclosure.


The first Assignment purports to be executed by MERS, signed by Wendy Perry holding the

position of Asst. Secretary. Wendy Perry is an employee of Cal-Western Reconveyance Corp, original foreclosing company.

The second Assignment purports to be executed by Deutsche Bank National Trust Company, signed by Starlene L. Starling, who is in fact Vice President and Asst. Secretary of JP Morgan Chase Bank.

The Substitution of Trustee was purportedly executed by MERS signed by Avis R. Thomas, who is in fact, Vice President of Prommis Solutions.

There is a potentially serious conflict with the same person, as an “employee” of MERS – with duties owed to the entity selling a mortgage – assigns that mortgage to a bank at presumably market value, and then the same person, as the bank’s employee, swears an affidavit in the foreclosure case, and the same person is also an employee of the foreclosing company.

It is deemed imperative that the two-hat-wearing signer provides employment histories for all the

companies they represent.

The debtors, AUDIT RECIPIENT were conducted the title owner of the subject property until NDEX WEST, LLC did an invalid non-judicial foreclosure proceeding on November 3, 2010. Prior to the execution of Trustee‟s Deed upon Sale against the subject property, NDEX WEST, LLC did not maintain a secured interest in the subject property.

The mortgage securing the note, while naming WMC Mortgage Corp. as “Lender,” separately

names the Mortgage Electronic Registration Systems, Inc (MERS) as the “Mortgagee.” The conveyancing language granted the mortgage to MERS “solely as nominee for Lender and Lender‟s successor‟s and assigns.”

WMC Mortgage Corp. was a “correspondent lender” that originated mortgage loans which in turn, was sold and transferred into a “federally-approved securitization” trust named Morgan Stanley Capital I Inc. Trust 2006-HE1

The Note and Deed have taken two distinctly different paths. The Note was securitized into Morgan

Stanley Capital I Inc. Trust 2006-HE1. The written agreement that created the Morgan Stanley Capital I Inc. Trust 2006 HE1 is a “Pooling

and Servicing Agreement” (PSA), and is a matter of public record, available on the website of the Securities Exchange Commission. The Trust is also described in a “Prospectus Supplement,” also available on the SEC website. The Trust by its terms set a “CLOSING DATE” of February 28, 2006. The promissory note in this case became trust property in compliance with the requirement set forth in the PSA. The Trust agreement is filed under oath with the Securities and Exchange Commission. The acquisition of the assets of the subject Trust and the PSA are governed under the law.


In view of the foregoing, all assignments executed filed three years after the Trust‟s Closing Date would be a void act for the reason that it violated the express terms of the Trust instrument.

The loan was originally made WMC Mortgage Corp and was sold and transferred to Morgan

Stanley Capital I Inc. Trust 2006 HE1. There is no record of Assignments to either the Sponsor or Depositor as required by the Pooling and Servicing Agreement.

In Carpenter v. Longan 16 Wall. 271,83 U.S. 271, 274, 21 L.Ed. 313 (1872), the U.S. Supreme Court stated “The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while assignment of the latter alone is a nullity.”

An obligation can exist with or without security. With no security, the obligation is

unsecured but still valid. A security interest, however, cannot exist without an underlying existing obligation. It is impossible to define security apart from its relationship to the promise or obligation it secures. (Civil Code §§ 2872, 2909, 2920; California Mortgages and Deeds of Trust, and Foreclosure Litigation, by Roger Bernhardt, Fourth Edition, § 1.11) The obligation and the security are commonly drafted as separate documents – typically a promissory note and a deed of trust. If the creditor transfers the note but not the deed of trust, the transferee receives a secured note; the security follows the note, legally if not physically. If the transferee is given the deed of trust without the note accompanying it, the transferee has no meaningful rights except the possibility of legal action to compel the transferor to transfer the note as well, if such was the agreement. (Kelley v. Upshaw 91952) 39 C.2d 179, 246 P.2d 23; Polhemus v. Trainer (1866) 30C 685)

“Where the mortgagee has “transferred” only the mortgage, the transaction is a

nullity and his “assignee” having received no interest in the underlying debt or obligation, has a worthless piece of paper (4 Richard R. Powell), Powell on Real Property, § 37.27 [2] (2000)

By statute, assignment of the mortgage carries with it the assignment of the debt. . . Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable. The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.”

ANY ATTEMPT TO TRANSFER THE BENEFICIAL INTEREST OF A TRUST DEED WITHOUT OWNERSHIP OF THE UNDERLYING NOTE IS VOID UNDER CALIFORNIA LAW

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