10-K/A 1 bsa06ac1_10ka-2006.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A Amendment No. 2 to (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, 2006 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 333-125422-42 Bear Stearns Asset Backed Securities I Trust 2006-AC1 (exact name of issuing entity as specified in its charter) Bear Stearns Asset Backed Securities I LLC. (exact name of the depositor as specified in its charter) EMC Mortgage Corporation (exact name of the sponsor as specified in its charter) New York 54-2193466 (State or other jurisdiction of 54-2193467 incorporation or organization) 54-2193468 (I.R.S. Employer Identification No.) c/o Wells Fargo Bank, N.A. 9062 Old Annapolis Road Columbia, MD 21045 (Address of principal executive offices) (Zip Code) Registrant's 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 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 ( 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, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ___ Accelerated filer ___ Non-accelerated filer X 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. 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). See Item 15 (Part IV). EXPLANATORY NOTE This Amendment No. 2 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 2, 2007 (Accession No. 0001056404-07-001583) and the amended Form 10K filed April 19, 2007 (Accession No. 0001056404-07-001799) by Bear Stearns Asset Backed Securities I Trust 2006-AC1 (the "Initial 10-K"), for the fiscal year ended December 31, 2006, is being filed for the sole purpose of restating the assessment of American Security Insurance Company, Standard Guaranty Insurance Company and TrackSure Insurance Agency, Inc. (the "Asserting Party") for the reporting period of January 1, 2006 through December 31, 2006. The restated assessment, provided to the registrant in February 2008, identifies a material instance of noncompliance with the servicing criteria set forth in Item 1122(d)(4)(xii) under Regulation AB. Specifically, the Asserting Party did not have, during the applicable reporting period, sufficient policies and procedures to capture the information with respect to the Platform Transactions necessary to determine compliance with Item 1122(d)(4)(xii). In response to a Securities and Exchange Commission comment, as of January 1, 2008, the Asserting Party has implemented practices and procedures to capture the information necessary to assess compliance with Item 1122(d)(4) (xii). PART I Item 1. Business. Omitted. Item 1A. Risk Factors. Omitted. Item 1B. Unresolved Staff Comments. None. Item 2. Properties. Omitted. Item 3. Legal Proceedings. Omitted. Item 4. Submission of Matters to a Vote of Security Holders. Omitted. PART II Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Omitted. Item 6. Selected Financial Data. Omitted. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Omitted. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Omitted. Item 8. Financial Statements and Supplementary Data. Omitted. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. Omitted. Item 9A. Controls and Procedures. Omitted. Item 9A(T). Controls and Procedures. Omitted. Item 9B. Other Information. None. PART III Item 10. Directors, Executive Officers and Corporate Governance. Omitted. Item 11. Executive Compensation. Omitted. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Omitted. Item 13. Certain Relationships and Related Transactions, and Director Independence. Omitted. Item 14. Principal Accounting Fees and Services. Omitted. ADDITIONAL DISCLOSURE ITEMS FOR REGULATION AB Item 1112(b) of Regulation AB, Significant Obligor Financial Information. No single obligor represents more than 10% of the pool assets held by this transaction. Item 1114(b)(2) and 1115(b) of Regulation AB, Significant Enhancement Provider Financial Information. The consolidated audited financial statements of Financial Guaranty Insurance Company and subsidiaries, as of December 31, 2006 and 2005, and for each of the years in the three-year period ended December 31, 2006 are being attached hereto as an exhibit to this 10-K. Item 1117 of Regulation AB, Legal Proceedings. The registrant knows of no material pending legal proceedings involving the Trust and all parties related to such Trust, other than routine litigation incidental to the duties of those respective parties. Item 1119 of Regulation AB, Affiliations and Certain Relationships and Related Transactions. On February 9, 2007, Bear Stearns Residential Mortgage Corporation, a wholly owned subsidiary of The Bear Stearns Companies Inc. and an affiliate of the Registrant, acquired certain assets used in the subprime wholesale mortgage banking division of Performance Credit Corporation (formerly known as Encore Credit Corp.) ("PCC"), a California corporation that, until February 9, 2007, originated and purchased one-to four-family residential mortgage loans offered to borrowers with a particular emphasis on "nonconforming" borrowers who generally do not satisfy the credit, collateral, documentation or other standards required by conventional mortgage lenders and loan buyers. Item 1122 of Regulation AB, Compliance with Applicable Servicing Criteria. This report on Form 10-K omits the Item 1122 assessment of compliance and attestation report required by Regulation AB for Waterfield Mortgage Company Incorporated ("Waterfield"), a subservicer for EMC Mortgage Corporation ("EMC") for approximately 5.68% (as calculated in accordance with Regulation AB Telephone Interpretation 17.02) of the pool assets in the Bear Stearns Asset Backed Securities I Trust 2006-AC1, Asset-Backed Certificates, Series 2006-AC1 transaction ("BSABS 2006-AC1"), issued on January 31, 2006. Waterfield effectively ceased to operate as ongoing concern on October 16, 2006. Waterfield's portion of the servicing in the BSABS 2006-AC1 transaction transferred to Wells Fargo on April 1, 2006, pursuant to an agreement between EMC and Wells Fargo Bank, N.A. ("Wells Fargo"). Waterfield executed an agreement, dated January 31, 2006 with EMC under which Waterfield is contractually obligated to provide the assessment of compliance and attestation for the period of time prior to the servicing transfer. Waterfield did not deliver the required assessment of compliance and attestation report, and the Registrant has not been successful in obtaining them through any other steps reasonably available to it without unreasonable effort or expense. The following is a time line of the steps taken by the Registrant to obtain the Waterfield assessment and attestation: 01/09/2007 - Call with Registrant's counsel to discuss missing Waterfield assessment; Reviewed side letter agreement regarding provision of Item 1122 information by Waterfield. 01/11/2007 - Call with a representative of American Home Mortgage Corp., a purchaser of some of Waterfield's assets. The representative said Waterfield had been sold in pieces and that American Home had only bought mortgage loans - not servicing - from Waterfield. Sky Bank acquired the banking business of Waterfield and, as far as the representative knew, all servicing was transferred with respect to Waterfield loans. 01/16/2007 - Call to a representative of Sky Bank who was formerly with Union Federal's banking division, which became a part of Sky Bank, but learned he is no longer with company. 01/16/2007 - Call to another representative of Sky Bank and the Registrant was referred to a third person at Sky Bank. 01/19/2007 - 01/22/2007 - Multiple calls to the representative indicated on the 1/16/2007 call with Sky Bank that were not returned; received word from a representative of Wells Fargo, the Registrant's Master Servicer, that he too was leaving messages but had not heard back from Sky Bank. 01/23/2007 - Another representative of Wells Fargo heard from Sky Bank. According to Sky Bank's representative, Sky Financial bought everything from Waterfield except the mortgage loan operation, which was purchased by American Home, but she agreed to follow up with another former employee of Waterfield Mortgage to ask about the 2006 Attestations. 01/29/2007 - Wells Fargo attempted follow up with Sky Bank but learned the contact they had been given was out of the office until 01/31/2007. 02/14/2007 - Call to the former Waterfield employee identified on the 1/23/2007 call with Sky Bank; left a message. 02/15/2007 - Call with the former Waterfield employee identified on the 1/23/2007 call with Sky Bank. The former Waterfield employee said that he had checked with all the former "Waterfielders" he could reach and that they all had the same recollection: Wells Fargo was to give the attestation without relying on anything from Waterfield. No steps were ever taken to deliver an attestation as required by the agreement dated January 31, 2006. 02/16/2007 - Call with Registrant's contact at Wells Fargo regarding the 2/15/2007 conversation with the former Waterfield employee. Registrant was told that Wells Fargo would not have agreed to provide an attestation for work it had not performed and did not at any time indicate or agree that an attestation from Waterfield was not required; indeed, that was one reason why Wells Fargo had pushed for the agreement dated January 31, 2006 in the first place. Registrant was then provided with another contact that was formerly at Waterfield. 02/19/2007 - Call with Wells Fargo's contact person from Waterfield, who confirmed what the American Home representative had said in her conversation with Registrant. On 2/19/2007, Registrant consulted with outside counsel about next steps. The restated assessment of American Security Insurance Company, Standard Guaranty Insurance Company and TrackSure Insurance Agency, Inc. (the "Asserting Party") for the reporting period of January 1, 2006 through December 31, 2006, provided to the registrant in February 2008, identifies a material instance of noncompliance with the servicing criteria set forth in Item 1122(d)(4)(xii) under Regulation AB. Specifically, the Asserting Party did not have, during the applicable reporting period, sufficient policies and procedures to capture the information with respect to the Platform Transactions necessary to determine compliance with Item 1122(d)(4) (xii). In response to a Securities and Exchange Commission comment, as of January 1, 2008, the Asserting Party has implemented practices and procedures to capture the information necessary to assess compliance with Item 1122(d)(4)(xii). The 1122 statements for Wells Fargo Bank, N.A. (servicer) has disclosed the following instances of material noncompliance with certain servicing criteria applicable to the Company during the year ended December 31, 2006: 1. 1122(d)(3)(i) - Delinquency Reporting - The Company provided incomplete data to some third parties who use such data to calculate delinquency ratios and determine the status of loans with respect to bankruptcy, foreclosure or real estate owned. Instead of the actual due date being provided for use in calculating delinquencies, the date of the first payment due to the security was provided. 2. 1122(d)(4)(vii) - Notification of Intent to Foreclose - The Company, as required by certain servicing agreements, did not provide investors with prior notification of intent to foreclose. Item 1123 of Regulation AB, Servicer Compliance Statement. The servicer compliance statements have been completed within the manner stated in the governing documents and are attached hereto under Item 15. PART IV Item 15. Exhibits, Financial Statement Schedules. (a) Exhibits (4.1)Pooling and Servicing Agreement, dated as of January 1, 2006, among Bear Stearns Asset Backed Securities I LLC, a Delaware limited liability company, as depositor, EMC Mortgage Corporation, a Delaware corporation, as seller and as company, Wells Fargo Bank, National Association, a national banking association, as master servicer and securities administrator and U.S. Bank National Association, as trustee (As previously filed on Form 8-K filed on February 15, 2006 and is hereby incorporated by reference into this report on Form 10-K) (4.2)Amended and Restated Pooling and Servicing Agreement, dated as of July 24, 2006, among Bear Stearns Asset Backed Securities I LLC, a Delaware limited liability company, as depositor, EMC Mortgage Corporation, a Delaware corporation, as sponsor and as company, Wells Fargo Bank, National Association, a national banking association, as master servicer and securities administrator and U.S. Bank National Association, as trustee (As previously filed on Form 8-K filed on November 6, 2006 and is hereby incorporated by reference into this report on Form 10-K) (10.1)Terms Agreement dated as of January 31, 2006 to the Underwriting Agreement, dated as of January 10, 2006 between Bear, Stearns & Co., Inc. and Bear Stearns Asset Backed Securities I LLC (As previously filed on Form 8-K filed on March 3, 2006 and is hereby incorporated by reference into this report on Form 10-K) (10.2)Purchase, Warranties and Servicing Agreement, dated as of April 1, 2005 and is executed between EMC MORTGAGE CORPORATION, as Purchaser (the "Purchaser"), and Savannah Bank, NA dba Harbourside Mortgage Corporation, (the "Company") (10.3)Amendment No. 1 is made and entered into January 1, 2006, by and between EMC Mortgage Corporation, a Delaware corporation, as purchaser (the "Purchaser") and Savannah Bank, NA dba Harbourside Mortgage Corporation, as company (the "Company") in connection with the Purchase, Warranties and Servicing Agreement, dated as of April 1, 2005, between the above mentioned parties (the "Agreement") (10.4)Purchase, Warranties and Servicing Agreement, dated as of September 1, 2003 and is executed between EMC Mortgage Corporation, as Purchaser, (the "Purchaser"), and GreenPoint Mortgage Funding, Inc.., (the "Company") (10.5)Amended and Restated Purchase, Warranties and Servicing Agreement, dated as of September 1, 2005, which amends and restates the Purchase, Warranties and Servicing Agreement, originally dated May 1, 2002, each between EMC MORTGAGE CORPORATION, as Purchaser, (the "Purchaser") and HSBC Mortgage Corporation (USA), (the "Company") (10.6)Amendment Reg AB, dated as of November 7, 2005, by and between EMC Mortgage Corporation (the "Purchaser"), and HSBC Mortgage Corporation (USA) (the "Company") to that certain Amended and Restated Purchase, Warranties and Servicing Agreement, dated as of September 1, 2005 by and between the Company and the Purchaser. (10.7)Purchase, Warranties and Servicing Agreement, dated as of October 23, 2001 and is executed between EMC MORTGAGE CORPORATION, as Purchaser (the "Purchaser"), and Cendant Mortgage Corporation ("Cendant Mortgage") and Bishop's Gate Residential Mortgage Trust (formerly known as Cendant Residential Mortgage Trust) (the "Trust," together with Cendant Mortgage, the "Company" and individually, each a "Company"), as the Company. (10.8)Assignment, Assumption and Recognition Agreement made as of January 31, 2006, among EMC Mortgage Corporation (the "Assignor"), U.S. Bank National Association, not individually but solely as trustee for the holders of the Bear Stearns Asset Backed Securities I Trust 2006-AC1, Asset Backed Certificates, Series 2006-AC1 (the "Assignee") and GreenPoint Mortgage Funding, Inc. (the "Company") (10.9)Assignment, Assumption and Recognition Agreement made as of January 31, 2006, among EMC Mortgage Corporation (the "Assignor"), U.S. Bank National Association, not individually but solely as trustee for the holders of the Bear Stearns Asset Backed Securities I Trust 2006-AC1, Asset-Backed Certificates, Series 2006-AC1 (the "Assignee") and HSBC Mortgage Corporation (USA) (the "Company"). (10.10)Assignment, Assumption and Recognition Agreement, dated as of January 31, 2006, by EMC Mortgage Corporation, a Delaware corporation (the "Assignor"), U.S. Bank National Association, not individually but solely as trustee for the holders of Bear Stearns Asset Backed Securities I Trust 2006-AC1, Asset-Backed Certificates, Series 2006-AC1 (the "Assignee") and Wells Fargo Bank, N.A. (the "Company") (10.11)Assignment, Assumption and Recognition Agreement made as of January 31, 2006, among EMC Mortgage Corporation (the "Assignor"), U.S. Bank National Association, not individually but solely as trustee for the holders of Bear Stearns Asset Backed Securities I Trust 2006-AC1, Asset-Backed Certificates, Series 2006-AC1 (the "Assignee") and Savannah Bank, NA dba Harbourside Mortgage Corporation (the "Company") (10.12)Assignment, Assumption and Recognition Agreement is made and entered into as of January 31, 2006, among EMC Mortgage Corporation (the "Assignor"), U.S. Bank National Association, not individually but solely as trustee for the holders of Bear Stearns Asset Backed Securities I Trust 2006-AC1, Asset-Backed Certificates, Series 2006-AC1 (the "Assignee"), PHH Mortgage Corporation (formerly known as Cendant Mortgage Corporation) ("PHH"), and Bishop's Gate Residential Mortgage Trust ("Bishop's Gate")." (31) Rule 13a-14(d)/15d-14(d) Certifications. (33) Reports on assessment of compliance with servicing criteria for asset-backed securities. a) Restated report on assessment of compliance with servicing criteria for Assurant Inc. as Sub-Contractor for EMC Mortgage Corporation b) Restated report on assessment of compliance with servicing criteria for Assurant Inc. as Sub-Contractor for GreenPoint Mortgage Funding, Inc. c) EMC Mortgage Corporation, as Servicer d) First American Real Estate Solutions of Texas, L.P. as Sub-Contractor for HSBC Mortgage Corporation, USA e) GreenPoint Mortgage Funding, Inc., as Servicer f) Harborside Mortgage Corporation, as Servicer g) HSBC Mortgage Corporation, USA, as Servicer h) Impac Funding Corporation, as Servicer i) LandAmerica Tax and Flood Services as Sub-Contractor for EMC Mortgage Corporation j) LandAmerica Tax and Flood Services as Sub-Contractor for GreenPoint Mortgage Funding, Inc. k) PHH Mortgage Corporation, as Servicer l) Regulus Group LLC as Sub-Contractor for Wells Fargo Bank, N.A. m) Wells Fargo Bank, N.A., as Servicer n) Wells Fargo Bank, N.A., as Master Servicer o) Wells Fargo Bank, N.A., as Securities Administrator p) Wells Fargo Bank, N.A., as Custodian q) ZC Sterling Insurance Agency, Inc. as Sub-Contractor for Wells Fargo Bank, N.A.
(34) Attestation reports on assessment of compliance with servicing criteria for asset-backed securities. a) Restated report on assessment of compliance with servicing criteria for Assurant Inc. as Sub-Contractor for EMC Mortgage Corporation b) Restated report on assessment of compliance with servicing criteria for Assurant Inc. as Sub-Contractor for GreenPoint Mortgage Funding, Inc. c) EMC Mortgage Corporation, as Servicer d) First American Real Estate Solutions of Texas, L.P. as Sub-Contractor for HSBC Mortgage Corporation, USA e) GreenPoint Mortgage Funding, Inc., as Servicer f) Harborside Mortgage Corporation, as Servicer g) HSBC Mortgage Corporation, USA, as Servicer h) Impac Funding Corporation, as Servicer i) LandAmerica Tax and Flood Services as Sub-Contractor for EMC Mortgage Corporation j) LandAmerica Tax and Flood Services as Sub-Contractor for GreenPoint Mortgage Funding, Inc. k) PHH Mortgage Corporation, as Servicer l) Regulus Group LLC as Sub-Contractor for Wells Fargo Bank, N.A. m) Wells Fargo Bank, N.A., as Servicer n) Wells Fargo Bank, N.A., as Master Servicer o) Wells Fargo Bank, N.A., as Securities Administrator p) Wells Fargo Bank, N.A., as Custodian q) ZC Sterling Insurance Agency, Inc. as Sub-Contractor for Wells Fargo Bank, N.A.
(35) Servicer compliance statement. a) Assurant Inc. as Sub-Contractor for EMC Mortgage Corporation b) Assurant Inc. as Sub-Contractor for GreenPoint Mortgage Funding, Inc. c) EMC Mortgage Corporation, as Servicer d) First American Real Estate Solutions of Texas, L.P. as Sub-Contractor for HSBC Mortgage Corporation, USA e) GreenPoint Mortgage Funding, Inc., as Servicer f) Harborside Mortgage Corporation, as Servicer g) HSBC Mortgage Corporation, USA, as Servicer h) Impac Funding Corporation, as Servicer i) LandAmerica Tax and Flood Services as Sub-Contractor for EMC Mortgage Corporation j) LandAmerica Tax and Flood Services as Sub-Contractor for GreenPoint Mortgage Funding, Inc. k) PHH Mortgage Corporation, as Servicer l) Regulus Group LLC as Sub-Contractor for Wells Fargo Bank, N.A. m) Wells Fargo Bank, N.A., as Servicer n) Wells Fargo Bank, N.A., as Master Servicer o) Wells Fargo Bank, N.A., as Securities Administrator p) Wells Fargo Bank, N.A., as Custodian q) ZC Sterling Insurance Agency, Inc. as Sub-Contractor for Wells Fargo Bank, N.A. EX. 99.1 Financial Guaranty Insurance Company and Subsidiaries
(b) Not applicable. (c) Omitted. Filed with the Inital 10-K. Filed with this report. The Servicing Participant serviced less than 5% of the deal and is not required under Regulation AB to provide such documentation. The Servicing Participant serviced less than 10% of the deal and is not required under Regulation AB to provide such documentation. The Servicing Participant of the deal is not required under Regulation AB to provide such documentation. 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. Bear Stearns Asset Backed Securities I Trust 2006-AC1 (Issuing Entity) Wells Fargo Bank, N.A. (Master Servicer) /s/ Dawn Hammond Dawn Hammond, Vice President (senior officer in charge of the servicing function of the master servicer) Date: July 10, 2008 Exhibit Index Exhibit No. (31) Rule 13a-14(d)/15d-14(d) Certifications. (33) Reports on assessment of compliance with servicing criteria for asset-backed securities. a) Restated report on assessment of compliance with servicing criteria for Assurant Inc. as Sub-Contractor for EMC Mortgage Corporation
(34) Attestation reports on assessment of compliance with servicing criteria for asset-backed securities. a) Restated report on assessment of compliance with servicing criteria for Assurant Inc. as Sub-Contractor for EMC Mortgage Corporation