UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION

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1 0 Barry J. Dichter (BD-000) Matthew M. Weber (MW-) Cadwalader, Wickersham & Taft LLP One World Financial Center New York, New York 0 Telephone: () Facsimile: () 0- Marc J. Winthrop State Bar No. Paul J. Couchot State Bar No. WINTHROP COUCHOT PROFESSIONAL CORPORATION 0 Newport Center Drive, Suite 00 Newport Beach, California 0 Telephone: () 0-00 Facsimile: () 0- Counsel for Bear Stearns & Co. and EMC Mortgage Company, Parties in Interest UNITED STATES BANKRUPTCY COURT CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION 0 In re: PEOPLE S CHOICE HOME LOAN, INC., et al. Debtors and Debtors in Possession. Fed. Tax I.D. No.: - Case No.: SA 0-0-RK Chapter (Jointly Administered with Case Nos. SA 0-0-RK and SA 0-0-RK) DECLARATION OF MATTHEW PERKINS IN SUPPORT OF BEAR STEARNS & CO., BEAR STEARNS MORTGAGE CAPITAL CORPORATION AND EMC MORTGAGE COMPANY S OBJECTION TO THE MOTION TO ASSUME AND ASSIGN SUBSERVICING AGREEMENTS Sale Approval Hearing: DATE: April, 00 TIME: :00 A.M. PLACE: Courtroom D JUDGE: Honorable Robert N. Kwan The Debtors are People s Choice Home Loan, Inc.; a Wyoming corporation; People s Choice Funding, Inc., a Delaware corporation; and People s Choice Financial Corporation, a Maryland corporation. #0 v - PC/Bear Dec Perkins Opp Assignment

2 0 0. I am a Senior Managing Director of Bear, Stearns & Co. Inc. ( Bear Stearns ). I submit this declaration in support of Bear Stearns, Bear Stearns Mortgage Capital Corporation and EMC Mortgage Company s ( EMC, and together with the other Bear Stearns entities listed above, Bear Stearns ) objection to the Debtors motion authorizing the sale of subservicing agreements.. The April, 00 Letter Agreement between People s Choice Home Loan Inc. ( PCHL ) and Bear Stearns (the April Agreement ) obligated PCHL to engage Bear Stearns as sole lead underwriter for three securitizations other than the 00- securitization of mortgage loans originated by PCHL that would have an aggregate bond issuance of at least $ billion by no later than October, 00.. Other than the 00- securitization, Bear Stearns was engaged as sole lead underwriter for only one securitization between April, 00 and October, 00. In that securitization (the 00-), Bear Stearns underwrote $. billion of securities. PCHL breached the April Letter Agreement by not awarding Bear Stearns sole lead underwriter status for two additional securitizations aggregating at least $. billion by October, 00. Based on the fee schedule set forth in the April Agreement, Bear Stearns was damaged in the amount of $. million due to PCHL s failure to award Bear Stearns the sole lead underwriter position for two additional securitizations of not less than $. billion in securities.. PCHL s agreement to engage Bear Stearns as sole lead underwriter for three securitizations was the quid pro quo for EMC s agreement to act as the named servicer for four securitization trusts, while PCHL performed the servicing function for the securitization trusts. PCHL s agreement in the April --

3 0 0 Letter Agreement to provide Bear Stearns with sole lead underwriting roles was the consideration for EMC s agreement to act as the named servicer for the deals.. Further, absent a rated servicer like EMC being the named servicer, the rating agencies that rate the securities issued in those securitizations would not have rated the securities issued by the related securitization trusts.. The servicing of sub-prime mortgage loans requires specialized expertise because delinquency rates on such loans are usually higher than on prime loans and collections of principal and interest can be more difficult than with respect to prime loans. Unless the collection process is actively managed by experienced personnel, delinquency and default rates on the underlying loans can easily reach unacceptable levels. All other things being equal, the quality and competence of a servicer is directly related to delinquency and default rates.. Bear Stearns expects that even if current servicing quality levels were maintained, the requirement for servicer advances with respect to the four trusts at issue will grow due to an expected increase in delinquencies and length of delinquencies in sub prime pools of loans. To the extent that the quality of servicing declines, the requirement for servicer advances will likely grow to an even greater extent.. Without knowing the identity of the proposed assignee it is impossible for Bear Stearns to make any meaningful assessment of a potential assignee s competence and ability to perform the obligations under the assumed agreements. --

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5 0 CERTIFICATE OF SERVICE I, Nadine Lorenzo, declare as follows: I am employed in the County of Orange, State of California; I am over the age of eighteen years and am not a party to this action; my business address is 0 Newport Center Drive, Fourth Floor, Newport Beach, California 0, in said County and State. On April, 00, I served the following document: DECLARATION OF MATTHEW PERKINS IN SUPPORT OF BEAR STEARNS & CO., BEAR STEARNS MORTGAGE CAPITAL CORPORATION AND EMC MORTGAGE COMPANY S OBJECTION TO THE MOTION TO ASSUME AND ASSIGN SUBSERVICING AGREEMENTS on each of the interested parties stated below, as follows: Oscar Garza, Esq. Samuel A. Newman, Esq. Gibson Dunn & Crutcher LLP S. Grand Ave. Los Angeles, CA 00 ogarza@gibsondunn.com snewman@gibsondunn.com U.S. Trustee s Office West Fourth Street Suite 0 Santa Ana, CA 0 Ustpregion.sa.ecf@usdoj.gov Debtor s Counsel Pachulski Stang, Ziehl etc. J. Rudy Freeman, Esq. 000 Santa Monica Blvd.,, #00 Los Angeles, CA rfreeman@pszyjw.com Wells Fargo Bank, N.A. David R. Weinstein, Esq. Weinstein Weiss & Ordubegian LLP Century Park East, #0 Los Angeles, CA 00 dweinstein@wwolawyers.com Proposed Committee Counsel Winston & Strawn LLP Eric E. Sagerman, Esq. South Grand Ave., th Fl. Los Angeles, CA 00- esagerman@winston.com 0 by the following means of service: BY ELECTRONIC MAIL: On the above-mentioned date, from Newport Beach, California, I caused each such document to be transmitted electronically to the parties at the address indicated above. To the best of my knowledge, the transmission was reported as complete, and no error was reported that the electronic transmission was not completed. A return receipt was requested at the time of the transmission of each such document and I did not receive a notice of failure of receipt of each such document. I am employed in the office of Winthrop Couchot Professional Corporation; Paul J. Couchot is a member of the bar of this court. (FEDERAL) I declare under penalty of perjury that the foregoing is true and correct. Executed on April, 00 at Newport Beach, California. /s/ Nadine Lorenzo --