FILED: NEW YORK COUNTY CLERK 01/29/ :04 PM INDEX NO /2017 NYSCEF DOC. NO. 89 RECEIVED NYSCEF: 01/29/2018

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1 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK x In the matter of the application of : : WELLS FARGO BANK, NATIONAL ASSOCIATION, U.S. BANK NATIONAL. ASSOCIATION, THE BANK OF NEW YORK. MELLON, THE BANK OF NEW YORK. MELLON TRUST COMPANY, N.A.,. WILMINGTON TRUST, NATIONAL. Index No /2017 ASSOCIATION, HSBC BANK USA, N.A., AND. : Hon. Marcy S. Friedman DEUTSCHE BANK NATIONAL TRUST. COMPANY (as Trustees, Indenture Trustees,. Securities Administrators, Paying Agents, and/or. Calculation Agents of Certain Residential. RESPONSE OF OLIFANT FUND, Mortgage-Backed Securitization Trusts),. Petitioners, LTD., FFI FUND LTD. AND FYI. LTD. TO THE PETITION For Judicial Instructions under CPLR Article 77 on the Administration and Distribution of a Settlement Payment, ' '. 1 of 20

2 TABLE OF CONTENTS Introduction...1 II. The Petitioners Should Distribute the Settlement Payment Paid to the Olifant Fund Trusts Using the Write-Up First Method...3 A. The Language of the Governing Documents for the Olifant Fund Trusts Is Unambiguous and Requires the Write-Up First Method...3 B. The Pay First Method Would Lead To Results Not Intended By the Parties...6 C. Precedent Supports the Write-Up First Method...6 III. The Other Issues Have Clear and Simple Resolutions As Applied to the Olifant F und Trusts A. Trusts with write-up instructions applicable only to subordinate classes ~ ~ Petition Ex. E)...11 B. Trusts with realized loss allocation methods that differ from subsequent recovery write-up methods (Petition Ex. F)...11 C. Trusts with zero-balance classes (Petition Ex. G)...12 D. Trusts where Petitioners allege the governing agreements specify that subsequent recoveries should be treated as interest not principal (Petition E x. H) I V. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 2 of 20

3 TABLE OF AUTHORITIES Page(s) Cases Matter of Bank of N.Y. Mellon, 51 N.Y.S.3d 356 (Sup. Ct. N.Y. Cnty. Mar. 31, 2017)...7, 8, 9 Cole v. Macklowe, 953 N.Y.S.2d 21 (1st Dep't 2012)...6 Schron v. Troutman Sanders LLP, 986 N.E.2d ~ ~ 430 (N.Y.~ ~ 2013)...3 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ of 20

4 L Introduction Funds" Olifant Fund, Ltd., FFI Fund Ltd. and FYI Ltd. (collectively, the "Olifant Funds"), as holders of more than $120 million in current Certificate Principal Balance of Class A and Class M certificates in 18 trusts (the "Olifant Fund Trusts")¹ (" out of the 330 trusts ("Settlement Trusts" Trusts") that are included in the J.P. Morgan Global RMBS Settlement, respectfully submit this response to the Petition dated December 15, 2017 (the "Petition")2 filed by the Petitioners seeking this Court's instruction as to the distribution of settlement payments under the Settlement Agreement.3 The Olifant Funds set forth their position on the issues raised in the Petition pertinent to the Olifant Fund Trusts, including that the Write-Up First Method for distributing the Settlement Payment must be applied in order to comply with the Governing Documents of the Olifant Fund Trusts and further, that the use of any other method leads to absurd outcomes. The Olifant Funds take the additional position that for any of their Trusts where no party files an opposing view by the January 29, 2018 submission deadline for any of the relevant issues identified in the Petition, the Court should order the Petitioners to immediately distribute the Settlement Payment as set forth herein without further delay, as there is no triable issue of fact. The Write-Up First Method should be used for the following reasons. First, the text of the Olifant Fund Trusts' Governing Documents,4 which govern the distribution of funds to 1 The Olifant Fund Trusts are identified on Annex A. The Olifant Funds have provided the Petitioners with certificates of beneficial ownership identifying their holdings in the Olifant Fund Trusts. It should be noted that with respect to 3 of the Olifant Fund Trusts, the Olifant Funds hold 100% of the outstanding Certificate Principal Balance. Annex A also specifies which of the issues raised in the Petition pertain to which Olifant Fund Trust and the position taken by the Olifant Funds regarding each issue. 2 Capitalized terms not defined herein have the meanings given to such terms in the Petition. 3 Because each Trust's Governing Documents control the issues raised by the Petition-and the Governing Documents for different trusts may differ-issues or arguments made for other Trusts do not necessarily apply to the Olifant Fund Trusts. 4 For most Olifant Fund Trusts, the Governing Document is a Pooling and Servicing Agreement ("PSA"). For one Olifant Fund Trust (SACO ), the Governing Document is an Indenture. All Governing Documents have been provided to the Court on a compact disc. (Petition, NYSCEF Doc. No. 1, at 3 n.8). 4 of 20

5 certificateholders, unambiguously requires that the Certificate Principal Balance be written up by the amount of the Settlement Payment before distributions are made to certificateholders. Second, use of the Pay First method would lead to commercially unreasonable results that could not have been intended by the parties. Third, other courts and the Petitioners themselves have interpreted materially identical Governing Documents to require the Write-Up First Method. The Olifant Funds also explain that, with regard to their holdings: As pertains to Exhibit E to the Petition, BSABS has been miscategorized because the identified issue has no practical consequence to that trust and the Allocable Share should be distributed immediately; As pertains to Exhibit F, for two applicable trusts (MSST and BSSLT SV1A) the identified issue has no practical consequence and the Allocable Shares should be distributed immediately. In one trust (BALTA ), the PSA clearly requires both loss allocation and write-ups to be done sequentially. In another trust (BSABS 2006-IM1), the Olifant Funds take the position of accepting what the Trustee is currently doing: writing up pro rata by balance with no portion of the Allocable Share flowing to retired tranches; As pertains to Exhibit G, for four Trusts (BSMF 2006-SL5; BSMF 2006-SL6; BSMF Trusts" 2007-SL1; BSMF 2007-SL2) (collectively, the "Contested Retired Provision Trusts"), the Olifant Funds take the position that redirection and the permanent retirement of certificates are dictated by the Governing Documents and therefore appropriate; As pertains to Exhibit G, for ten Trusts (BSABS 2006-IM1; BSSLT 2007-SV1A; MSST ; SACO ; SACO ; SACO ; SACO ; SACO ; SACO 2005-WM1; SACO 2005-WM3) (collectively, the "Non-Contested Trusts" Retired Provision Trusts"), the Olifant Funds take no position and seek immediate distribution of the Allocable Shares to their seniormost, non-retired certificates; As pertains to Exhibit H (SACO ), whether Subsequent Recoveries are applied as interest or principal has no practical consequence for either Loan Group and the Allocable Share should be distributed immediately. 5 of 20

6 H. The Petitioners Should Distribute the Settlement Payment Paid to the Olifant Fund Trusts Using the Write-Up First Method A. The Language of the Governing Documents for the Olifant Fund Trusts Is Unambiguous and Requires the Write-Up First Method In the Petition, the Petitioners seek the court's direction on whether the distribution of the Settlement Payment to certificateholders should be done via the Write-Up First Method or the Pay First Method. (Petition 21-40). While the Petitioners state that the Settlement Agreement and the Governing Documents are ambiguous about the order of operations, they highlight several commercially unreasonable and unintended results that would follow from the Pay First Method. (Id ). There is no ambiguity and the Court should instruct the Petitioners to use the Write-Up First Method for the Olifant Fund Trusts. Both the Governing Documents and the Settlement Agreement are governed by New York Law, wherein it is established that in the absence of ambiguity, the plain meaning of the contract must be enforced.5 enforced. (SACO 2005-WM3 PSA (Ex. 1) [11.03]6; Settlement Agreement 7.19).7 Trusts' 1. The Olifant Fund Governing Documents are unambiguous and require Write-Up First The Governing Documents provide instructions for how payments are to be distributed to certificateholders. Indeed, the Settlement Agreement cannot amend the Governing Documents; in the Settlement Agreement, the parties expressly agreed "that this Settlement Agreement 5 "Under New York law, written agreements are construed in accordance with the [contracting] parties' the best evidence of what parties to a written agreement intend is what they say in their writing. As such, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms." Schron v. Troutman Sanders LLP, 986 N.E.2d 430, 433 (N.Y. 2013) (quotations and citations omitted). 6 This Response uses as an example the PSA from SACO I Trust 2005-WM3. For the Court's convenience, relevant excerpts from this PSA are attached as Exhibit 1. The Governing Documents for each of the Olifant Fund Trusts are materially identical with respect to the provisions relevant to the issue of whether the Write-Up First method is appropriate, unless otherwise noted. The Settlement Agreement is available at Ex. B to the Petition, NYSCEF Doc. No. 3. intent and 6 of 20

7 reflects a compromise of disputed claims and is not intended to, and shall not be argued or deemed to constitute, an amendment of any term of any Governing Agreement." (Settlement Agreement 7.05). In the Settlement Agreement, the parties agreed that the Allocable Shares are to be treated as though they were Subsequent Recoveries under the Governing Documents. (Settlement Agreement 3.06(a)) (providing that the Allocable Shares are made "for further distribution to Investors in accordance with the distribution provisions of the Governing Agreements... as though such Allocable Share was a 'subsequent recovery' relating to principal proceeds available for distribution on the immediately following distribution date...").). Subsequent Recoveries serve the dual role of increasing distributions of principal to certificateholders and reversing applied Realized Losses, and it is the definition of Certificate Principal Balance in the Governing Documents that coordinates the two related elements. Because the amount of all distributions of principal under the Olifant Fund Trusts' Governing Documents depends on the Certificate Principal Balance as of the applicable Distribution Date, the Governing Documents' definition of "Certificate Principal Balance" is critical. Importantly, that definition requires that amounts received as Subsequent Recoveries be added to increase the Certificate Principal Balance before they are paid out to certificateholders. The Governing Documents of the Olifant Fund Trusts define Certificate Principal Balance, as of any Distribution Date, as comprising four components: 1. "the Initial Certificate Principal Closing Date of each Trust; plus Balance," which is the Principal Balance as of the 2. "any Subsequent Recoveries added to the Certificate Principal Balance of such 5.04(b)," Certificate pursuant to Section which is the all-important "write-up"; minus 3. "all amounts distributed with respect to such Certificate in reduction of the Certificate Dates," Principal Balance thereof on previous Distribution which, crucially, do not include those related to the current Distribution Date; minus 7 of 20

8 4. "any Applied Realized Loss Amounts allocated to such Certificate on previous Dates," Distribution which, again, do not relate to the current Distribution Date. (SACO 2005-WM3 PSA 1.01). The timing of the subtraction or addition of each component is therefore clearly specified in the text of this central definition. While the definition of Certificate Principal Balance makes clear that the last two components are subtracted only to the extent that amounts were distributed or allocated "on previous Distribution Dates," there is no such temporal reference with respect to Subsequent Recoveries. Accordingly, the definition makes clear that, with respect to any given Distribution Date, all Subsequent Recoveries are to be included in the calculation of Certificate Principal Balance. Therefore, since Certificate Principal Balance must be calculated before any distribution can occur with respect to a Distribution Date, the write-up must occur before distribution of the Settlement Payment. This order of operations is further supported by the section of the Olifant Fund Trusts' Governing Documents that deals with the allocation of Realized Losses. That section states "[a]ll Realized Losses to be allocated to the Certificate Principal Balances... of all Classes on any Distribution Date shall be so allocated after the actual distributions to be made on such date as provided above." (SACO 2005-WM3 PSA 5.05(a)) (emphasis added). Unlike this provision governing the writing down of Certificate Principal Balances, no such statement as to the order of operations is included in Section 5.04(b), which addresses the writing up of Certificate Principal Balances for Subsequent Recoveries. If the drafters of the Governing Documents had intended that write-up for Subsequent Recoveries occur after the distribution, they would have similarly so specified in Section 5.04(b) (or its equivalent for other Olifant Fund Trusts). To the contrary, Section 5.04(b) further supports the Write-Up First Method because it states that certificateholders "will not be entitled to any payment in respect of Current Interest on 8 of 20

9 the amount of such increases for any Interest Accrual Period preceding the Distribution Date on which such increase occurs." If Subsequent Recoveries were to be applied after distributions (including the distribution of interest), this provision would be entirely unnecessary. When the Write-Up First method is used, the Settlement Payment is properly distributed to the most senior classes of outstanding Certificates that had previously been allocated Realized Losses, as part of the Principal Distribution Amount, pursuant to PSA 5.04(a)(2)(A)(i) (or its equivalent for other Olifant Fund Trusts). B. The Pay First Method Would Lead To Results Not Intended By the Parties Besides being unsupported by the express terms of the Olifant Fund Trusts' Governing Documents, the Pay First Method would lead to commercially unreasonable results that, as Petitioners highlight in the Petition, could not have been intended by the parties to those documents.8 (Petition 28-34). C. Precedent Supports the Write-Up First Method 1. All courts to consider materially identical Governing Documents and settlement agreements have directed use of Write-Up First Each of the other courts to have considered materially identical Governing Documents and settlement agreements have ordered the applicable Trustees to distribute settlement payments using the Write-Up First Method. See In the matter of Loan Group I of the Bear Stearns Mortgage Funding Trust 2007-SL1 et al., No. 27-TR-CV (Minn. Dist. Hennepin Cnty. Sept. 11, 2017), Order 8 (instructing and authorizing trustee to "apply the 'write-up first method'") (attached as Ex. 2); In the matter of Bear Stearns Asset Backed Securities I LLC relating to the issuance of certificates by SACO I Trust , No. 27-TR-CV (Minn. See Cole v. Macklowe, 953 N.Y.S.2d 21, 23 (1st Dep't 2012) ("[A] contract should not be interpreted to produce an absurd result, one that is commercially unreasonable, or one that is contrary to the intent of the parties."). 9 of 20

10 Dist. Hennepin County May 30, 2017), Order 6 (same) (attached as Ex. 3); In the matter of The trusteeship created by Bear Stearns Asset Backed Securities I LLC relating to the issuance of certificates by SACO I Trust , No. 27-TR-CV (Minn. Dist. Hennepin Cnty. May 30, 2017), Order 6 (same) (attached as Ex. 4). While these three prior orders are not binding precedent, they are persuasive authority because they apply to trusts with PSAs containing substantively identical applicable language to that contained in the Governing Documents for the Olifant Fund Trusts and demonstrate that the Write-Up First Method is reasonable and supported by the text of the Olifant Fund Trusts' Governing Documents and the Settlement Agreement. 2. The only court to order the Pay First Method was interpreting materially different documents In contrast, to the Olifant Funds' Funds knowledge no court has interpreted materially similar Governing Documents or settlement agreements to authorize the Pay First Method. In the Petition, the Petitioners state that other judicial instruction proceedings "have yielded conflicting results." results. (Petition 68). This statement is misleading. The lone prior proceeding that approved the Pay First Method involved materially different Governing Documents and a materially different settlement agreement. Matter of Bank of N.Y. Mellon, 51 N.Y.S.3d 356 (Sup. Ct. N.Y. (" Countrywide" Cnty. Mar. 31, 2017) ("Countrywide"). Because the functioning of RMBS trusts is governed by their unique operative documents, that court's interpretation of those documents provides no reason to use the Pay First Method in this case. It merely confirms that a court must look to the governing documents, which here require the use of the Write-Up First Method. First, and most crucially, the governing documents at issue in Countrywide were very different from the Olifant Fund Trusts' Governing Documents. The key provision for purposes of adjudicating that dispute was the definition of "Principal Distribution Amount," which begins: 10 of 20

11 the excess, if any of (1) the aggregate Class Certificate Balance of the Certificates related to such Loan Group immediately prior to such Distribution Date.... Id. at 363 (emphasis added). The court determined that this express language required the calculation of certificate balances as they were "immediately prior" to the distribution date, which did not yet include subsequent recoveries, namely the settlement payment. Id. at The applicable defined terms in the Olifant Fund Trusts' Governing Documents require a calculation of the Certificate Principal Balance on the applicable Distribution Date, not immediately prior to it. (See SACO 2005-WM3 PSA 1.01, definitions of Certificate Principal Balance, Principal Distribution Amount and Overcollateralization Amount), supra at 4-5. Second, unlike the Settlement Agreement here, the settlement agreement in Countrywide unambiguously required write up to occur after distribution of the settlement proceeds to certificateholders. (Compare Ex. 5 (Countrywide Settlement Agreement) at 12) (directing write Investors" up "after the distribution of the Allocable Share to Investors") (emphasis added), with JP Morgan Settlement Agreement 3.06(b) (directing write up "after the distribution of the Trust" Allocable Share to a Settlement Trust") (emphasis added). The objectors who advocated for the write-up first method in Countrywide were therefore arguing against clear and contrary language (" in that settlement agreement. Matter of Bank of N.Y. Mellon, 51 N.Y.S.3d at 362 ("The parties do not dispute that the distribution provisions in the Settlement Agreement direct the Trustee to pay out the Allocable Share first, and then to write up the certificates in the amount of the Allocable Share....")). Even though, like here, the Countrywide settlement agreement could not amend the Governing Documents, the objectors in Countrywide who favored the write-up first method were arguing for an interpretation of the Governing Documents that would negate the settlement agreement; the court instead chose an interpretation that harmonized the Governing Documents and the settlement agreement. 11 of 20

12 Here, the Write-Up First Method is fully consistent with the Settlement Agreement, whose language regarding timing of the write up is different than in Countrywide. If the parties to the Settlement Agreement intended to require the Pay First Method, they would have directed the write up to occur "after the distribution of the Allocable Share to investors"; they did not.9 3. The Petitioners have subsequently favored Write-Up First The Petitioners' own conduct since the Settlement Agreement was executed confirms that they interpret the Settlement Agreement to require the Settlement Payment to be distributed via the Write-Up First Method. Since the alleged ambiguities in the Settlement Agreement have arisen, the Petitioners have accepted and executed other RMBS settlement agreements. In these subsequent agreements, the Petitioners have even more clearly specified that the Write-Up First Method is to be used to distribute settlement payments. These subsequent clarifications are probative evidence of the Petitioners' intent that the Allocable Shares here also should be distributed via the Write-Up First Method. For example, U.S. Bank, the Trustee for BSMF 2006-SL1 rejected the Global RMBS Settlement Offer on August 1, (BSMF 2006-SL1 petition 14 (Ex. 6)). Later, on July 27, 2016, U.S. Bank accepted a separate, trust-specific Settlement Offer for that trust, whose Subsequent Recovery application provisions mirrored the Global Settlement Agreement. (Id. 22). The BSMF 2006-SL1 Settlement Agreement incorporated amended language, making perfectly explicit that the Write-Up First Method is to be used to distribute the Settlement Payment and confirming that the definition of Certificate Principal Balance mandates this order of operations: 9 Further, in Countrywide, the trustee took the position that the settlement agreement required it to use the Pay First Method. Matter of Bank of N.Y. Mellon, 51 N.Y.S.3d at 360. Here, the Petitioners do not contend that the documents require the Pay First Method and, in fact, themselves readily point out numerous thorny issues that would arise from the use of that method. (Petition 31-40). 12 of 20

13 On the Distribution Date immediately following [the deposit of the Settlement Payment in the Trust], the amount of the Subsequent Recoveries represented by the Settlement Payment [will] be applied to increase the Certificate Principal Balance of the Class of Certificates with highest payment priority to which Realized Losses have been allocated... in accordance with Section 5.04(b) of the PSA and as contemplated by the definition of 'Certificate Principal Balance' Balance' [The] Trustee [will] next distribute the Settlement Payment on that Distribution Date... (Id. 20) (emphasis added). The relevant provisions of the BSMF 2006-SL1 PSA are materially identical to the Olifant Funds Trusts' Governing Documents at issue here. The Second Judicial District Court in Ramsey County, Minnesota subsequently approved the settlement, including use of the Write-Up First Method. (BSMF 2006-SL1 Order (Ex. 7)). At least four other settlement agreements for trusts that rejected the Global Settlement and later accepted standalone settlements (where the accepting trustees were U.S. Bank or Wilmington Trust) included the same clarifying language.10 While the clarifying language was not necessary, its inclusion in these subsequent settlement agreements confirms that the Petitioners have always interpreted the Settlement Agreement and the Olifant Fund Trust Governing Documents to require the Write-Up First Method. III. The Other Issues Have Clear and Simple Resolutions As Applied to the Olifant Fund Trusts The Olifant Funds also set forth below their position on each of the other issues raised by the Petition that apply to any of the Olifant Fund Trusts. 1 See In the matter of the SACO I Trust , No. 62-TR-CV (Minn. Dist. Ramsey Cnty.), Petition 22 (Ex. 8) and Order (Ex. 9); In the Matter of the trusteeship created by Bear Stearns Asset Backed Securities LLC relating to the issuance of certificates by SACO I Trust , No. 62-TR-CV (Minn. Dist. Ramsey Cnty.), Petition 32 (Ex. 10) and Order (Ex. 11); In the Matter of the trusteeship created by Bear Stearns Asset Backed Securities I LLC relating to the issuance of certificates by SACO I Trust , No. 62-TR-CV (Minn. Dist. Ramsey Cnty.), Petition 33 (Ex. 12) and Order (Ex. 13); In the Matter of the trusteeship created by Bear Stearns Asset Backed Securities I LLC relating to the issuance of certificates by SACO I Trust , No. 62-TR-CV (Minn. Dist. Ramsey Cnty.), Petition 33 (Ex. 14) and Order (Ex. 15) of 20

14 A. Trusts with write-up instructions applicable only to subordinate classes (Petition Ex. E) The Olifant Funds own subordinate certificates in a single Trust (BSABS ) that Petitioners highlight as having "subsequent recovery write-up instructions that apply only to" subordinate classes of certificates. (Petition 45-48; Ex. E). However, this is a non-issue and does not impact the distribution of the Allocable Share for BSABS as there are only subordinate certificates left in the trust and the senior certificates have been paid off in full with no applied Realized Losses. Accordingly, distribution should occur on BSABS without further delay. B. Trusts with realized loss allocation methods that differ from subsequent recovery write-up methods (Petition Ex. F) The Olifant Funds own certificates in a trust (MSST ) that the Petitioners have highlighted as having divergent methods for writing down and writing up principal. In fact, the section of the PSA that addresses Subsequent Recovery write ups (the definition of "Certificate Principal Balance" Balance") references another section that does not exist (5.04(b)). (MSST PSA 1 "Definitions" "Definitions"). This trust is an "implied writedown trust" that creates undercollateralization rather than writing down the senior certificates; it is therefore unsurprising that the PSA is silent regarding the method of writing up the senior certificates. Importantly, however, given that the Allocable Share is $27 million and the level of undercollateralization is $54 million, there is no issue to decide. The Allocable Share should be distributed sequentially and the level of undercollateralization will thereby decrease commensurately. The issue of whether to re-animate the M1 certificate is also a non-issue, as there will be yet another $27 million of undercollateralization remaining at the senior certificate level of 20

15 In another Olifant Fund Trust (BALTA ), while there is an errant reference in the "Certificate Principal Balance" definition, the PSA clearly requires both loss allocation and write-ups to be done sequentially. (BALTA PSA 6.02(b). In another Olifant Fund Trust (BSABS 2006-IM1) the PSA speaks to the method of applying Realized Losses (pro rata writedowns) but makes no mention of the method of writing up principal from Subsequent Recoveries (as with the MSST , the reference to 5.04(b) is likely an error because 5.04(b) does not pertain to subsequent recoveries). The Olifant Funds do not take a position on this issue with respect to BSABS 2006-IM1 and do not object to the immediate distribution of the Allocable Share pursuant to the Trustee's model of writing up pro rata. Finally, the Olifant Funds have positions in a trust (BSSLT 2007-SV1A) wherein it simply does not matter whether the write-up and writedown language matches at the senior certificate level because no Realized Losses have been applied above the M2 Certificate.¹¹ C. Trusts with zero-balance classes (Petition Ex. G) The Olifant Funds own Class IA certificates in the Contested Retired Provision Trusts, which Petitioners identify as having Governing Documents containing a "Class A Redirection Provision." (Petition 58-61). The Court should order the Petitioners to follow the unambiguous language of the Governing Documents and distribute any Allocable Share apportioned to a class of certificates that is no longer outstanding to Class A certificates that are still outstanding and relate to the other Loan Group. The Class A Redirection Provision is consistent with these Trusts' Trusts credit enhancement structure, which provides for cross- The only true issue to adjudicate for this Trust is whether the retired M3 Certificate should be written up if the Allocation is greater than the applied Realized Loss on the M2 Certificate. As discussed, infra at 13-14, the Olifant Funds take no position on this issue and simply request that the Trustee be instructed to pay the seniormost certificateholders who are due to receive the settlement immediately and adjudicate the retirement issue among the relevant investor groups of 20

16 collateralization between loan groups. (See BSMF 2006-SL5 Prospectus Supplement (Ex. 16)). Given the manifest losses that have been borne by Class IA certificates from Group II loans, giving effect to the Class A Redirection Provision is entirely appropriate. The Petitioners' expert calculated Allocable Shares for Loan Group II of BSMF SL5, BSMF 2006-SL6, BSMF 2007-SL1, and BSMF 2007-SL2. However, for each of these trusts, "the Class A Certificates related to... Loan Group [II] are no longer outstanding." (See BSMF 2006-SL5 PSA 5.04(a)(3)).12 According to the Governing Documents for these four trusts, because the Class IIA certificates have a zero balance, the portion of the distribution amount earmarked for the Class IIA certificates "will be allocated to the remaining Classes of rata..." Class A Certificates pro rata...." Id. This mandatory language does not depend on the reason the bonds are no longer outstanding. Further, the Governing Documents for these four trusts contain a provision that where the "Certificate Principal Balance of... Certificates has been reduced to zero, that Class of Certificates will be retired and will no longer be entitled to distributions." Id. 5.04(a)). The Allocable Share therefore must be paid to the only "remaining Class[] of Class A Certificates": the Class IA certificates. This distribution also conforms to the precedent the Petitioners have set; since the Certificate Principal Balance of the IIA certificates were reduced to zero, the Petitioners have diverted all collections, including subsequent recoveries, from Loan Group II to the IA certificates with respect to all four trusts. As pertains to Exhibit G's Retired Class Provision (Petition 54-57), the Olifant Funds note that this provision is linked to the Redirection Provision, and the plain language of the Governing Documents forbids distributions to any classes (even within a class) of certificates whose Certificate Principal Balances have been reduced to zero. However, this language has no 2 The PSAs for BSMF 2006-SL6, BSMF 2007-SL1, and BSMF 2007-SL2 have materially identical provisions of 20

17 impact on the distributions to the classes of certificates held by the Olifant Funds that have nonzero Certificate Principal Balances. Accordingly, the portion of the Allocable Shares due to the Olifant Funds in the Non-Contested Retired Provision Trusts should be paid immediately without waiting for this issue to be adjudicated. Any remaining portion of the Allocable Shares for the Non-Contested Retired Provision Trusts whose distribution requires adjudication of this issue can remain in escrow pending a judicial determination. D. Trusts where Petitioners allege the governing agreements specify that subsequent recoveries should be treated as interest not principal (Petition Ex. H).. The Olifant Funds hold certificates in one trust (SACO , Loan Group I) where the Petitioners assert that the PSA "appears to specify that subsequent recoveries should be treated as interest instead of principal." (Petition 8, and Ex. H). This Trust has two loan groups and a bifurcated "waterfall" of payments, wherein the distribution of payments to Group I is governed by 6.04(a) and distribution to Group II is governed by 6.04(b). As far as Group I is concerned, the paragraph referencing the distribution of Subsequent Recoveries has an obvious typographical error, as it references an unrelated section of the Loan Group II waterfall. Because the write-up component is clearly principal ( 6.05(a)) and the Settlement Agreement states that Subsequent Recoveries "relate to principal proceeds," it should be treated as principal. Id. 3.06(a). However, economically, it does not matter, as by definition the "Available Distribution Amount," used in the Group I waterfall, contains Subsequent Recoveries. IV. CONCLUSION For these reasons, the Court should instruct and authorize the Petitioners to distribute the Settlement Payment to the Olifant Trusts using the Write-Up First Method and as otherwise set forth in this response as soon as possible of 20

18 Date: January 29, 2018 By: /s/ Peter W. Tomlinson PATTERSON BELKNAP WEBB 4 TYLER LLP Peter W. Tomlinson Daniel A. Friedman 1133 Avenue of the Americas New York, NY Tel: (212) Fax: (212) pwtomlinson@pbwt.com dfriedman@pbwt.com Attorneys for Olifant Fund, Ltd., FFI Fund Ltd. and FYI Ltd of 20

19 Annex A Petition Trusts Appearing on Exhibit Position Taken Exhibit Ex. D BALTA ; BSABS ; BSABS Per plain language of documents, Write-Up First applies ; BSABS 2006-IM1; BSMF 2006-SL5; BSMF 2006-SL6; BSMF 2007-SL1; BSMF 2007-SL2; BSSLT 2007-SV1A; MSST ; SACO ; SACO ; SACO ; SACO ; SACO ; SACO WM1; SACO 2005-WM3; SACO Ex. E BSABS Has no bearing here as senior tranches have not taken any losses. Ex. F BSSLT 2007-SV1A Has no bearing here as senior tranches have not taken any losses. Ex. F BSABS 2006-IM1 Trustee should follow its own precedent and write up pro vata by balance. Ex. F BALTA The Certificate Principal Balance contains an erroneous citation; otherwise the PSA is clear: loss allocation is reverse sequential between 1Al and 1A2 tranches and write-ups are sequential between 1Al and 1A2 tranche. Ex. F MSST Has no bearing on this trust. Because principal is distributed sequentially and senior tranches do not take losses, no writeups can occur. Ex. G BSMF 2006-SL5; BSMF 2006-SL6; BSMF Per plain language of Governing Documents, Subsequent Recoveries (" 2007-SL1; BSMF 2007-SL2 ("Contested on Loan Group II should be redirected to Group I Certificates. Trusts" Retired Provision Trusts") Ex. G BSABS 2006-IM1; BSSLT 2007-SV1A; No position taken except to request immediate distributions of MSST ; SACO ; SACO ; Allocable Share to certificates with non-zero balances without SACO ; SACO ; SACO ; waiting for this issue to be adjudicated. SACO 2005-WM1; SACO 2005-WM3 ("Non- Contested Retired Provision Trusts" Trusts") x. H Has no carin on rou I istri utions. 19 of 20

20 CERTIFICATE OF SERVICE I certify that on January 29, 2018, I caused this Response, the Affirmation of Peter Tomlinson in Support of the Response; and associated exhibits to be served on all parties who have appeared in this action via NYSCEF. I also caused service to be effectuated on all parties who have appeared by overnight mail. /s/ Daniel A Friedman Daniel A. Friedman 20 of 20