UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 333-139507-01
Carrington Mortgage Loan Trust, Series 2007-FRE1
(exact name of issuing entity as specified in its charter)
Stanwich Asset Acceptance Company, L.L.C.
(exact name of the depositor as specified in its charter)
Carrington Securities, LP
(exact name of the sponsor as specified in its charter)
New York 54-2199607
(State or other jurisdiction of 54-2199608
incorporation or organization) (I.R.S. Employer
Identification No.)
c/o Wells Fargo Bank, N.A.
9062 Old Annapolis Road
Columbia, MD 21045
(Address of principal executive (Zip Code)
offices)
Telephone number, including area code: (410) 884-2000
Securities registered pursuant to Section 12(b) of the Act:
NONE.
Securities registered pursuant to Section 12(g) of the Act:
NONE.
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes ___ No X
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes ___ No X
Note - Checking the box above will not relieve any registrant required to
file reports pursuant to Section 13 or 15(d) of the Exchange Act from their
obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
Not applicable.
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer", "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ___
Accelerated filer ___
Non-accelerated filer X (Do not check if a smaller reporting company)
Smaller reporting company ___
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act).
Yes ___ No X
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the
common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrant's most recently
completed second fiscal quarter.
Not applicable.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Not applicable.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document
is incorporated: (1)Any annual report to security holders; (2) Any proxy or
information statement; and (3)Any prospectus filed pursuant to Rule 424(b)
or (c) under the Securities Act of 1933. The listed documents should be
clearly described for identification purposes (e.g., annual report to
security holders for fiscal year ended December 24, 1980).
Not applicable.
PART I
Item 1. Business.
Omitted in accordance with General Instruction J to Form 10-K.
Item 1A. Risk Factors.
Omitted in accordance with General Instruction J to Form 10-K.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Omitted in accordance with General Instruction J to Form 10-K.
Item 3. Legal Proceedings.
Omitted in accordance with General Instruction J to Form 10-K.
Item 4. Submission of Matters to a Vote of Security Holders.
Omitted in accordance with General Instruction J to Form 10-K.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities.
Omitted in accordance with General Instruction J to Form 10-K.
Item 6. Selected Financial Data.
Omitted in accordance with General Instruction J to Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Omitted in accordance with General Instruction J to Form 10-K.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Omitted in accordance with General Instruction J to Form 10-K.
Item 8. Financial Statements and Supplementary Data.
Omitted in accordance with General Instruction J to Form 10-K.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Omitted in accordance with General Instruction J to Form 10-K.
Item 9A. Controls and Procedures.
Omitted in accordance with General Instruction J to Form 10-K.
Item 9A(T). Controls and Procedures.
Not applicable.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Omitted in accordance with General Instruction J to Form 10-K.
Item 11. Executive Compensation.
Omitted in accordance with General Instruction J to Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.
Omitted in accordance with General Instruction J to Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director
Independence.
Omitted in accordance with General Instruction J to Form 10-K.
Item 14. Principal Accounting Fees and Services.
Omitted in accordance with General Instruction J to Form 10-K.
ADDITIONAL DISCLOSURE ITEMS FOR REGULATION AB
Item 1112(b) of Regulation AB, Significant Obligor of Pool Assets (Financial
Information).
No single obligor represents 10% or more of the pool assets held by the issuing
entity.
Item 1114(b)(2) of Regulation AB, Credit Enhancement and Other Support, Except
for Certain Derivatives Instruments (Financial Information).
No entity or group of affiliated entities provides any external credit
enhancement or other support for the certificates within this transaction as
described under Item 1114 (a) of Regulation AB.
Item 1115(b) of Regulation AB, Certain Derivatives Instruments (Financial
Information).
Based on the standards set forth in Item 1115(b) of Regulation AB, no
information is required in response to this Item.
Item 1117 of Regulation AB, Legal Proceedings.
The Registrant knows of no material pending proceedings against the Sponsor,
the Depositor, the Issuing Entity, Wells Fargo Bank, N.A., as Trustee, or of
which any property of the foregoing is the subject.
Legal Proceedings Relating to Fremont Investment & Loan
Fremont General Corporation reported that it and certain of its subsidiaries
(including Fremont Investment & Loan) entered into a voluntary agreement, to be
designated as a cease and desist order, with respect to the mortgage loan
origination and sale practices of Fremont General Corporation and such
subsidiaries. In addition, Fremont General Corporation reported that the
Massachusetts attorney general filed a lawsuit against Fremont General
Corporation alleging that Fremont General Corporation engaged in unfair or
deceptive practices in connection with origination and servicing of residential
mortgage loans. It is possible in the future that the Federal Deposit Insurance
Commission or other governmental authorities or attorneys general may take
other actions against Fremont Investment & Loan that could prohibit Fremont
Investment & Loan and any successor servicer from pursuing foreclosure actions,
or otherwise limit the ability of Fremont Investment & Loan or any successor
servicer to take actions (such as pursuing foreclosures) that may be essential
to preserve the value of the mortgage loans on behalf of the issuing entity.
Any such limitations could adversely affect the issuing entity's ability to
realize on the mortgage loans.
Pursuant to a Form 8-K filed on March 8, 2007 (the "March 8th Announcement"),
Fremont General announced that it, Fremont and Fremont General's wholly owned
subsidiary, Fremont General Credit Corporation, entered into a voluntary formal
agreement, to be designated as a cease and desist order, with the Federal
Deposit Insurance Corporation. According to the announcement, the cease and
desist order requires, among other things, Fremont to cease and desist from the
following:
* Operating with management whose policies and practices are detrimental to
Fremont;
* Operating Fremont without effective risk management policies and procedures
in place in relation to Fremont's brokered subprime mortgage lending and
commercial real estate construction lending businesses;
* Operating with inadequate underwriting criteria and excessive risk in
relation to the kind and quality of assets held by Fremont;
* Operating without an accurate, rigorous and properly documented methodology
concerning its allowance for loan and lease losses;
* Operating with a large volume of poor quality loans;
* Engaging in unsatisfactory lending practices;
* Operating without an adequate strategic plan in relation to the volatility of
Fremont's business lines and the kind and quality of assets held by Fremont;
* Operating with inadequate capital in relation to the kind and quality of
assets held by Fremont;
* Operating in such a manner as to produce low and unsustainable earnings;
* Operating with inadequate provisions for liquidity in relation to the
volatility of Fremont's business lines and the kind and quality of assets
held by Fremont;
* Marketing and extending adjustable-rate mortgage products to subprime
borrowers in an unsafe and unsound manner that greatly increases the risk
that borrowers will default on the loans or otherwise cause losses to
Fremont, including (1) adjustable-rate mortgage products that qualify
borrowers for loans with low initial payments based on an introductory rate
that will expire after an initial period, without adequate analysis of the
borrower's ability to repay at the fully indexed rate, (2) adjustable-rate
mortgage products containing features likely to require frequent refinancing
to maintain affordable monthly payment or to avoid foreclosure, and (3) loans
or loan arrangements with loan-to-value ratios approaching or exceeding 100
percent of the value of the collateral;
* Making mortgage loans without adequately considering the borrower's ability
to repay the mortgage according to its terms;
* Operating in violation of Section 23B of the Federal Reserve Act, in that
Fremont engaged in transactions with its affiliates on terms and under
circumstances that in good faith would not be offered to, or would not apply
to, nonaffiliated companies; and
* Operating inconsistently with the Federal Deposit Insurance Corporation's
Interagency Advisory on Mortgage Banking and Interagency Expanded Guidance
for Subprime Lending Programs.
According to the March 8th Announcement, Fremont General stated that the cease
and desist order also requires Fremont to take a number of steps, including
(1) having and retaining qualified management; (2) limiting Fremont General's
and Fremont General Credit Corporation's representation on Fremont's board of
directors and requiring that independent directors comprise a majority of
Fremont's board of directors; (3) revising and implementing written lending
policies to provide effective guidance and control over Fremont's residential
lending function; (4) revising and implementing policies governing
communications with consumers to ensure that borrowers are provided with
sufficient information; (5) implementing control systems to monitor whether
Fremont's actual practices are consistent with its policies and procedures; (6)
implementing a third-party mortgage broker monitoring program and plan;
(7) developing a five-year strategic plan, including policies and procedures
for diversifying Fremont's loan portfolio; (8) implementing a policy covering
Fremont's capital analysis on subprime residential loans; (9) performing
quarterly valuations and cash flow analyses on Fremont's residual interests and
mortgage servicing rights from its residential lending operation, and obtaining
annual independent valuations of such interests and rights; (10) limiting
extensions of credit to certain commercial real estate borrowers;
(11) implementing a written lending and collection policy to provide effective
guidance and control over Fremont's commercial real estate lending function,
including a planned material reduction in the volume of funded and unfunded
non-recourse lending and loans for condominium conversion and construction as a
percentage of Tier I capital; (12) submitting a capital plan that will include
a Tier I capital ratio of not less than 14% of Fremont's total assets;
(13) implementing a written profit plan; (14) limiting the payment of cash
dividends by Fremont without the prior written consent of the Federal Deposit
Insurance Corporation and the Commissioner of the California Department of
Financial Institutions; (15) implementing a written liquidity and funds
management policy to provide effective guidance and control over Fremont's
liquidity position and needs; (16) prohibiting the receipt, renewal or rollover
of brokered deposit accounts without obtaining a Brokered Deposit Waiver
approved by the Federal Deposit Insurance Corporation; (17) reducing adversely
classified assets; and (18) implementing a comprehensive plan for the
methodology for determining the adequacy of the allowance for loan and lease
losses.
Pursuant to a Form 8-K filed on October 5, 2007 (the "October 5th
Announcement"), Fremont General announced that the Massachusetts attorney
general filed a lawsuit against Fremont General Corporation alleging that
Fremont General engaged in unfair or deceptive practices in connection with
origination and servicing of residential mortgage loans. According to a press
release issued by Office of the Attorney General for Massachusetts on
October 5, 2007 (the "Massachusetts Announcement"), the Attorney General's
Office is seeking civil penalties, restitution and an injunction, which would
prohibit Fremont General from selling or transferring any Massachusetts
mortgages and from foreclosing on any Massachusetts loan without giving the
Attorney General's Office a 90-day opportunity to review the loan transaction
and object to the foreclosure.
On October 23, 2007, Morgan Stanley Mortgage Capital Holdings LLC filed a
lawsuit in the United States District Court for the Southern District of New
York against Fremont Investment & Loan alleging breaches with respect to
residential mortgage loans it sold to Morgan Stanley between May 1, 2005 and
December 28, 2006. The complaint alleges damages of at least $10 million. The
case is in its very early stages and Fremont cannot predict the outcome or
effect it will have on its financial condition. However, Fremont believes the
lawsuit is without merit and will vigorously defend against it.
Legal Proceedings Relating to EMC Mortgage Corporation
FTC Investigation
EMC Mortgage Corporation (EMC) has received a civil investigative demand (CID),
from the Federal Trade Commission (FTC), seeking documents and data relating to
the EMC's business and servicing practices. The CID was issued pursuant to a
December 8, 2005 resolution of the FTC authorizing non-public investigations of
various unnamed subprime lenders, loan servicers and loan brokers to determine
whether there have been violations of certain consumer protections laws. EMC is
cooperating with the FTC's inquiry.
On March 10, 2008, EMC received notice from the Staff of the FTC that the Staff
believed EMC and its parent, The Bear Stearns Companies, Inc. had violated a
number of Federal consumer protection statutes in connection with its servicing
activities. With the notice, the Staff delivered a draft complaint and draft
consent order seeking certain injunctive relief regarding business practices
and unspecified monetary redress. The Staff also indicated that it had been
authorized to offer an opportunity to resolve the matter though consent
negotiations before it seeks approval from the FTC to proceed with the filing
of a complaint. EMC expects to engage in such discussions with the Staff.
RODRIGUEZ v. EMC Mortgage Corporation and The Bear Stearns Companies
This purported class action is pending in U.S. District Court for the District
of Connecticut. The case was filed in December 2007. It seeks certification of
a class made up of African-American and Hispanic borrowers who had a non-prime
loan serviced by EMC Mortgage Corporation (EMC) and who were subjected to
allegedly improper servicing practices, including imposition of unwarranted
fees, pyramiding of late fees, unjustified forced-placing of insurance, failure
to properly apply payments, improper reporting of derogatory credit
information, and failure to properly administer escrow accounts. EMC and The
Bear Stearns Companies have filed motions to dismiss and to strike.
Item 1119 of Regulation AB, Affiliations and Certain Relationships and Related
Transactions.
Omitted in accordance with Instruction to Item 1119 of Regulation AB.
Item 1122 of Regulation AB, Compliance with Applicable Servicing Criteria.
Wells Fargo Bank, N.A., as Trustee and Custodian, EMC Mortgage Corporation, as
Servicer, Fremont Investment & Loan, as interim servicer, American Security
Insurance Company, Standard Guaranty Insurance Company and TrackSure Insurance
Agency, Inc. (formerly, "Safeco Financial Institution Solutions, Inc.")
(collectively, "Assurant"), as sub-contractor for EMC Mortgage Corporation, FIS
Tax Services and formerly known as LSI Tax Services, as sub-contractor for EMC
Mortgage Corporation and LandAmerica Tax and Flood Services, Inc., as
sub-contractor for EMC Mortgage Corporation (collectively, the "Servicing
Parties") have each been identified by the registrant as parties participating
in the servicing function with respect to the pool assets held by the Issuing
Entity. Each of the Servicing Parties has completed a report on an assessment
of compliance with the servicing criteria applicable to it (each, a "Report on
Assessment"), which Reports on Assessment are attached as exhibits to this Form
10-K.
In addition, each of the Servicing Parties has provided an attestation report
(an "Attestation Report") by one or more registered public accounting firms,
which reports are also attached as exhibits to this Form 10-K.
Assurant has assessed its compliance with the applicable servicing criteria for
the Reporting Period and has identified a material instance of noncompliance
with the servicing criteria. Specifically, Assurant did not have, during
the Reporting Period, sufficient policies and procedures to capture the
information with respect to the Platform Transactions necessary to determine
compliance with 1122(d)(4)(xii).
Item 1123 of Regulation AB, Servicer Compliance Statement.
EMC Mortgage Corporation, as Servicer, has been identified by the registrant as
the servicer with respect to the asset pool held by the Issuing Entity. EMC
Mortgage Corporation has completed a statement of compliance with applicable
servicing criteria (a "Compliance Statement") attached as an exhibit to this
Form 10-K.
Part IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Not applicable.
(b) Exhibits
The exhibits listed below are either included or incorporated by reference
as indicated:
Exhibit 3.1 Certificate of Formation of the Registrant (incorporated by
reference to Exhibit 3.1 of Registration Statement No. 333-124562)
Exhibit 3.2 Limited Liability Company Agreement of the Registrant
(incorporated by reference to Exhibit 3.2 of Registration Statement No.
333-124562)
Exhibit 10.1 Pooling and Servicing Agreement and exhibits thereto, dated as
of April 1, 2007, among the Registrant, EMC Mortgage Corporation, as
Servicer and Wells Fargo Bank, N.A., as Trustee (incorporated by reference
to Exhibit 10.1 to Form 8-K filed by the Registrant with the Commission on
April 19, 2007)
Exhibit 10.2 Mortgage Loan Purchase Agreement, dated as of April 5, 2007,
among the Registrant, Fremont Investment & Loan, Fremont General Corporation
and Carrington Securities, LP (incorporated by reference to Exhibit 10.2 to
Form 8-K filed by the Registrant with the Commission on April 19, 2007)
Exhibit 10.3 Confirmation to an ISDA Master Agreement, dated April 5, 2007,
between Swiss Re Financial Products Corporation and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 10.3 to Form 8-K filed by the
Registrant with the Commission on April 19, 2007)
Exhibit 10.4 Schedule to an ISDA Master Agreement, dated April 5, 2007,
between Swiss Re Financial Products Corporation and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 10.4 to Form 8-K filed by the
Registrant with the Commission on April 19, 2007)
(31) Rule 13a-14(d)/15d-14(d) Certification.
(33) Reports on assessment of compliance with servicing criteria for
asset-backed securities.
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33.1 Assurant as Sub-Contractor for EMC Mortgage
33.2 EMC Mortgage Corporation as Servicer
33.3 FIS Tax Services as Sub-Contractor for EMC Mortgage
33.4 Fremont Investment & Loan as Interim Servicer
33.5 LandAmerica Tax and Flood Services, Inc. as Sub-Contractor for EMC Mortgage
33.6 Wells Fargo Bank, N.A. as Trustee
33.7 Wells Fargo Bank, N.A. as Custodian
(34) Attestation reports on assessment of compliance with servicing criteria
for asset-backed securities.
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34.1 Assurant as Sub-Contractor for EMC Mortgage
34.2 EMC Mortgage Corporation as Servicer
34.3 FIS Tax Services as Sub-Contractor for EMC Mortgage
34.4 Fremont Investment & Loan as Interim Servicer
34.5 LandAmerica Tax and Flood Services, Inc. as Sub-Contractor for EMC Mortgage
34.6 Wells Fargo Bank, N.A. as Trustee
34.7 Wells Fargo Bank, N.A. as Custodian
(35) Servicer compliance statement.
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35.1 EMC Mortgage Corporation as Servicer
(c) Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Stanwich Asset Acceptance Company, L.L.C.
(Depositor)
/s/ Bruce M. Rose
Bruce M. Rose, President
(senior officer in charge of securitization of the depositor)
Date: March 28, 2008
Exhibit Index
Exhibit No.
Exhibit 3.1 Certificate of Formation of the Registrant (incorporated by
reference to Exhibit 3.1 of Registration Statement No. 333-124562)
Exhibit 3.2 Limited Liability Company Agreement of the Registrant
(incorporated by reference to Exhibit 3.2 of Registration Statement No.
333-124562)
Exhibit 10.1 Pooling and Servicing Agreement and exhibits thereto, dated as
of April 1, 2007, among the Registrant, EMC Mortgage Corporation, as
Servicer and Wells Fargo Bank, N.A., as Trustee (incorporated by reference
to Exhibit 10.1 to Form 8-K filed by the Registrant with the Commission on
April 19, 2007)
Exhibit 10.2 Mortgage Loan Purchase Agreement, dated as of April 5, 2007,
among the Registrant, Fremont Investment & Loan, Fremont General
Corporation and Carrington Securities, LP (incorporated by reference to
Exhibit 10.2 to Form 8-K filed by the Registrant with the Commission on
April 19, 2007)
Exhibit 10.3 Confirmation to an ISDA Master Agreement, dated April 5, 2007,
between Swiss Re Financial Products Corporation and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 10.3 to Form 8-K filed by the
Registrant with the Commission on April 19, 2007)
Exhibit 10.4 Schedule to an ISDA Master Agreement, dated April 5, 2007,
between Swiss Re Financial Products Corporation and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 10.4 to Form 8-K filed by the
Registrant with the Commission on April 19, 2007)
(31) Rule 13a-14(d)/15d-14(d) Certification.
(33) Reports on assessment of compliance with servicing criteria for
asset-backed securities.
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33.1 Assurant as Sub-Contractor for EMC Mortgage
33.2 EMC Mortgage Corporation as Servicer
33.3 FIS Tax Services as Sub-Contractor for EMC Mortgage
33.4 Fremont Investment & Loan as Interim Servicer
33.5 LandAmerica Tax and Flood Services, Inc. as Sub-Contractor for EMC Mortgage
33.6 Wells Fargo Bank, N.A. as Trustee
33.7 Wells Fargo Bank, N.A. as Custodian
(34) Attestation reports on assessment of compliance with servicing
criteria for asset-backed securities.
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34.1 Assurant as Sub-Contractor for EMC Mortgage
34.2 EMC Mortgage Corporation as Servicer
34.3 FIS Tax Services as Sub-Contractor for EMC Mortgage
34.4 Fremont Investment & Loan as Interim Servicer
34.5 LandAmerica Tax and Flood Services, Inc. as Sub-Contractor for EMC Mortgage
34.6 Wells Fargo Bank, N.A. as Trustee
34.7 Wells Fargo Bank, N.A. as Custodian
(35) Servicer compliance statement.
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35.1 EMC Mortgage Corporation as Servicer