Cashflow Interest-Only Adjustable Rate Mortgage (ARM) Disclosure

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Sovereign Bank – Wholesale Lending Division How Your Monthly Payment Can Change Cashflow Interest-Only Adjustable Rate Mortgage (ARM) Disclosure 1-Month LIBOR Index Page: 2 of 3 - Your initial full monthly payment amount will be established by calculating the amount necessary to pay off the loan in full (principal and interest) on the Maturity Date in substantially equal installments of principal and interest, based on the loan balance, term, and the initial interest rate in effect at the time of loan closing and assuming that such interest rate will remain in effect throughout the term of the loan. - Your monthly payment can increase or decrease substantially based upon changes in the interest rate. Your monthly payment amount will be established by calculating the amount necessary to pay off the loan in full (principal and interest) at the Maturity Date in substantially equal installments of principal and interest, based on the loan balance, remaining term, and the interest rate in effect during the month prior to the payment adjustment date, which occurs monthly (the "Payment Change Date"). The result of this calculation is called the "Full Monthly Payment." The new payment is based on the assumption that such interest rate will remain in effect throughout the term of the loan. Interest-Only Payment Option - Each month for the first 180 payments due, you will have the option to make an interest-only payment (i.e., a payment equal to the interest accrued on the principal balance at either the initial interest rate for the first two months or at the fully indexed rate for the next 178 months). Following the 180 th payment, this interest-only payment option will expire, and you must pay the Full Monthly Payment each month thereafter. EXAMPLE: - On a $10,000, 30 year loan with an Initial Interest Rate of 3.150% (premium of .025%), in effect on March 25, 2004, the maximum amount this interest rate can rise is 16.75 percentage points to 19.90% (Lifetime Interest Rate Cap). If the interest rate reached the Lifetime Interest Rate Cap in the third month of the loan, the monthly payment could rise from an initial interest-only payment of $26.25 available during the first two months to a maximum interest-only payment of $165.83 in the third month and, assuming interest-only payments were made during the first 180 months of the loan at the Lifetime Interest Rate Cap, a maximum principal and interest-only payment of $174.89 in the 181 st Month. - To see what your payment amount is, divide your mortgage amount by $10,000; then multiply the monthly payment by that amount. For example, the initial interest-only monthly payment for a mortgage amount of $200,000 would be: $200,000 divided by $10,000 = 20; 20 x $26.25 = $525.00. Payment Change Notification - You will be notified in writing at least 25 days before the payment adjustment becomes effective. This notice will contain information about your new and prior interest rates, the index values upon which the new and old interest rates were based, the new monthly payment necessary to fully amortize the loan, and the current loan balance. Doc. #: WDS811 Last Revised: 08/02/04
Sovereign Bank – Wholesale Lending Division Prepayment Penalty Cashflow Interest-Only Adjustable Rate Mortgage (ARM) Disclosure 1-Month LIBOR Index Page: 3 of 3 IF YOUR LOAN HAS A 1-YEAR PREPAYMENT PENALTY: - In the case of a full or partial (defined as payment of 20% or more of the original principal loan balance) prepayment during the first twelve (12) months of the term of the Note, you will be charged a prepayment fee in an amount equal to two percent (2%) of the prepayment amount. The prepayment fee will be waived by the Note Holder if full prepayment is due to the sale of the subject property and you obtain financing for your new property from the Note Holder at an amount at least 90% of the payoff amount of your current loan within 90 days of prepayment. IF YOUR LOAN HAS A 3-YEAR PREPAYMENT PENALTY: - In the case of a full or partial (defined as payment of 20% or more of the original principal loan balance during any 12 month period) prepayment of the subject mortgage, you will be charged a prepayment fee in an amount equal to a percentage of the prepayment amount as follows: (i) a sum equal to three percent (3%) if prepayment is made during the first 12 months of the term of the Note; (ii) a sum equal to two percent (2%) if prepayment is made during the 13th through 24th months of the term of the Note; and (iii) a sum equal to one percent (1%) if prepayment is made during the 25th through 36th months of the term of the Note. The prepayment fee will be waived by the Note Holder if full prepayment is due to the sale of the subject property and you obtain financing for your new property from the Note Holder at an amount at least 90% of the payoff amount of your current loan within 90 days of prepayment. IMPORTANT – SIGNATURE I/We each hereby acknowledge that I/We have read and received a copy of this Loan Program Disclosure describing the Cashflow Interest-Only One-Month LIBOR Index ARM Program and the Consumer Handbook on Adjustable Rate Mortgages. I/We also understand that this disclosure is not a commitment to make a loan. Print Name Property Address Signature Date Print Name Property Address Signature Date Doc. #: WDS811 Last Revised: 08/02/04
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Cashflow Interest-Only Adjustable Rate Mortgage (ARM) Disclosure

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