10-K 1 bst07003_10k-2008.txt 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, 2008 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: 333-132232-35 Bear Stearns ARM Trust 2007-3 (exact name of issuing entity as specified in its charter) Structured Asset Mortgage Investments II Inc. (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 54-2199593 (State or other jurisdiction of 54-2199594 incorporation or organization) 54-2199595 (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). See Item 15 (Part IV). 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 Registrant's 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 10% or more of the pool assets held by the issuing entity. Item 1114(b)(2) of Regulation AB, Significant Enhancement Provider 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). No entity or group of affiliated entities provides any derivative instruments or other support for the certificates within this transaction as described under Item 1115 of Regulation AB. Item 1117 of Regulation AB, Legal Proceedings. Countrywide Home Loans hereby notifies you of the following: Certain state and local government officials have filed proceedings against Countrywide Financial Corporation, Countrywide Home Loans, Inc. ("Countrywide") and Countrywide Home Loans Servicing LP ("Countrywide Servicing"), including, among others, lawsuits brought by the state attorneys general of California, Connecticut, Florida, Illinois, Indiana and West Virginia. The lawsuits allege, among other things, that Countrywide Financial Corporation, Countrywide and Countrywide Servicing violated state consumer protection laws by engaging in deceptive marketing practices designed to increase the volume of loans they originated and then sold into the secondary market and (according to certain of the complaints) by improperly servicing loans. The lawsuits seek various remedies, including among other things, restitution, other monetary relief, penalties and rescission or reformation of mortgage loans made to consumers. In addition, the Director of the Washington State Department of Financial Institutions has commenced an administrative proceeding against Countrywide alleging, among other things, that Countrywide did not provide borrowers with certain required disclosures and that the loan products made available to Washington borrowers of protected races or ethnicities were less favorable than those made available to other similarly situated borrowers. On October 6, 2008, Bank of America Corporation ("Bank of America") announced settlements in relation to allegations of unfair and deceptive marketing practices with the states attorneys general of several states, including Arizona, California, Connecticut, Florida, Illinois, Iowa, Michigan, North Carolina, Ohio, Texas and Washington (such states, together with such additional states that enter into settlements, the "Settling States"). The settlement with the Attorney General of Washington does not address the pending administrative action. Following its settlement announcement on October 6, 2008, Bank of America entered into settlements with the states attorneys general of Delaware, Kansas, Nevada and Pennsylvania, and has engaged in negotiations, and may have entered into other settlements, with additional states attorneys general. The cornerstone of the settlements is a loan modification program for subprime borrowers and pay option ARM borrowers designed to avoid foreclosures, along with a nationwide fund of up to $150 million for payments to borrowers who have already experienced foreclosure. While the loan modifications to be made pursuant to the settlements with the Settling States are intended to both avoid unnecessary foreclosures and increase recoveries relative to foreclosing on defaulted borrowers, the ultimate effectiveness of these modifications in mitigating losses on Countrywide mortgage loans cannot be predicted with certainty. This loan modification program could result in more modifications of the original terms of Countrywide mortgage loans, more delinquent and defaulted Countrywide mortgage loans, delays in foreclosures and liquidations with respect to defaulted Countrywide mortgage loans and/or permanent forgiveness of a portion of the amounts owing in respect of the related Countrywide mortgage loans, which could result in delays and reductions in distribution to be made to certificateholders or an increase in realized losses allocated to the certificateholders. While the outcome of the proceedings described above that are not subject to settlements with Settling States is unknown, the relief sought by the government officials in one or more of the matters could, if granted, result in delays in the foreclosure process, reduced payments by borrowers, modification of the original terms of the Countrywide mortgage loans, permanent forgiveness of all or a portion of the amounts owing in respect of the related Countrywide mortgage loans and/or increased reimbursable servicing expenses, which could result in delays and reductions in distributions to be made to certificateholders or an increase in realized losses allocated to the certificateholders. Item 1119 of Regulation AB, Affiliations and Certain Relationships and Related Transactions. The information regarding this Item has been previously filed in a 424(b)(5) filing dated April 30, 2007. Item 1122 of Regulation AB, Compliance with Applicable Servicing Criteria. The reports on assessment of compliance with the servicing criteria for asset-backed securities and the related attestation reports on such assessments of compliance are attached hereto under Item 15. Countrywide Home Loans Servicing LP has identified certain instances of noncompliance with the following servicing criteria during the Reporting Period of the Platform: 1122(d)(4)(vi): Countrywide Home Loans Servicing LP notes that in some instances changes with respect to the terms or status of an obligor's loan were made without the clear consent of the trustee. With respect to the noted material instances of noncompliance with criterion 1122(d)(4)(vi), Countrywide Home Loans Servicing LP has advised the Depositor that it believes that it received consent from the trustee in relation to changes to the terms or status of an obligor's loan and that Countrywide Home Loans Servicing LP disagrees with the findings of its auditors in this regard. 1122(d)(4)(vii): Countrywide Home Loans Servicing LP notes that certain loss mitigation or recovery actions were not initiated, conducted or concluded in accordance with the required timeframes established under the transaction agreements. 1122(d)(4)(vii): Countrywide Home Loans Servicing LP is implementing more objective review criteria for delinquent loans to ensure appropriate contact, loss mitigation efforts and timely referral for foreclosure, second level reviews by its internal audit group and additional reporting to management to ensure that loss mitigation efforts and referral for foreclosure are performed within objectively defined deadlines. Item 1123 of Regulation AB, Servicer Compliance Statement. The servicer compliance statements are attached hereto under Item 15. Part IV Item 15. Exhibits, Financial Statement Schedules. (a) Exhibits. (4.1) Pooling and Servicing Agreement, dated April 1, 2007, among Structured Asset Mortgage Investments II Inc., as depositor, EMC Mortgage Corporation, as seller and master servicer, Wells Fargo Bank, N.A. as securities administrator, and Citibank, N.A., as trustee (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.1) Terms Agreement, dated April 26, 2007, between Bear, Stearns & Co. Inc., as underwriter and Structured Asset Mortgage Investments II Inc., as depositor, relating to the Underwriting Agreement, dated February 26, 2007, between Bear, Stearns & Co. Inc., as underwriter Structured Asset Mortgage Investments II Inc., as depositor (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.2) Custodial Agreement dated April 30, 2007, by and among Wells Fargo Bank, N.A., as trustee, Structured Asset Mortgage Investments II Inc., as depositor, EMC Mortgage Corporation, as seller and master servicer, and Treasury Bank, a Division of Countrywide Bank, FSB, as custodian (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.3) Seller's Warranties and Servicing Agreement dated September 1, 2002 between EMC Mortgage Corporation, as purchaser, and Countrywide Home Loans, Inc., as seller and servicer (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.4) Amendment Number One is made this 1st day of January, 2003 by and between Countrywide Home Loans, Inc. and EMC Mortgage Corporation, to the Seller's Warranties and Servicing Agreement, dated September 1, 2002, by and between the Company and the purchaser (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.5) Amendment Reg AB, dated January 1, 2006, by and between EMC Mortgage Corporation, and Countrywide Home Loans, Inc. to that certain Seller's Warranties and Servicing Agreement dated September 1, 2002 by and between the Company and the purchaser (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.6) Assignment, Assumption and Recognition Agreement is made and entered into as of April 30, 2007 among EMC Mortgage Corporation, Wells Fargo Bank, N.A., as trustee Bear Stearns ARM Trust, Mortgage Pass-Through Certificates, Series 2007-3, and Countrywide Home Loans Servicing LP, (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.7) Mortgage Loan Purchase Agreement, dated April 30, 2007 by and between EMC Mortgage Corporation (the "Mortgage Loan Seller") and Structured Asset Mortgage Investments II Inc. (the "Purchaser") (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (31) Rule 13a-14(d)/15d-14(d) Certification. (33) Reports on assessment of compliance with servicing criteria for asset-backed securities. 33.1 Countrywide Home Loans Servicing LP as Servicer 33.2 EMC Mortgage Corporation as Master Servicer 33.3 Treasury Bank, a division of Countrywide Bank, N.A. as Custodian 33.4 Wells Fargo Bank, N.A. as Trustee

(34) Attestation reports on assessment of compliance with servicing criteria for asset-backed securities. 34.1 Countrywide Home Loans Servicing LP as Servicer 34.2 EMC Mortgage Corporation as Master Servicer 34.3 Treasury Bank, a division of Countrywide Bank, N.A. as Custodian 34.4 Wells Fargo Bank, N.A. as Trustee

(35) Servicer compliance statement. ~~35.1 Countrywide Home Loans Servicing LP as Servicer 35.2 EMC Mortgage Corporation as Master Servicer 35.3 Wells Fargo Bank, N.A. as Trustee~~

(b) Not applicable. (c) Omitted. 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 ARM Trust 2007-3 (Issuing Entity) EMC Mortgage Corporation (Master Servicer) /s/ Michelle D. Viner Michelle D. Viner, Vice President (senior officer in charge of the servicing function of the master servicer) Date: March 30, 2009 Exhibit Index Exhibit No. (4.1) Pooling and Servicing Agreement, dated April 1, 2007, among Structured Asset Mortgage Investments II Inc., as depositor, EMC Mortgage Corporation, as seller and master servicer, Wells Fargo Bank, N.A. as securities administrator, and Citibank, N.A., as trustee (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.1) Terms Agreement, dated April 26, 2007, between Bear, Stearns & Co. Inc., as underwriter and Structured Asset Mortgage Investments II Inc., as depositor, relating to the Underwriting Agreement, dated February 26, 2007, between Bear, Stearns & Co. Inc., as underwriter Structured Asset Mortgage Investments II Inc., as depositor (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.2) Custodial Agreement dated April 30, 2007, by and among Wells Fargo Bank, N.A., as trustee, Structured Asset Mortgage Investments II Inc., as depositor, EMC Mortgage Corporation, as seller and master servicer, and Treasury Bank, a Division of Countrywide Bank, FSB, as custodian (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.3) Seller's Warranties and Servicing Agreement dated September 1, 2002 between EMC Mortgage Corporation, as purchaser, and Countrywide Home Loans, Inc., as seller and servicer (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.4) Amendment Number One is made this 1st day of January, 2003 by and between Countrywide Home Loans, Inc. and EMC Mortgage Corporation, to the Seller's Warranties and Servicing Agreement, dated September 1, 2002, by and between the Company and the purchaser (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.5) Amendment Reg AB, dated January 1, 2006, by and between EMC Mortgage Corporation, and Countrywide Home Loans, Inc. to that certain Seller's Warranties and Servicing Agreement dated September 1, 2002 by and between the Company and the purchaser (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.6) Assignment, Assumption and Recognition Agreement is made and entered into as of April 30, 2007 among EMC Mortgage Corporation, Wells Fargo Bank, N.A., as trustee Bear Stearns ARM Trust, Mortgage Pass-Through Certificates, Series 2007-3, and Countrywide Home Loans Servicing LP, (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (10.7) Mortgage Loan Purchase Agreement, dated April 30, 2007 by and between EMC Mortgage Corporation (the "Mortgage Loan Seller") and Structured Asset Mortgage Investments II Inc. (the "Purchaser") (As previously filed on Form 8-K filed on May 24, 2007 and hereby incorporated by reference into this report on Form 10-K) (31) Rule 13a-14(d)/15d-14(d) Certification. (33) Reports on assessment of compliance with servicing criteria for asset-backed securities. 33.1 Countrywide Home Loans Servicing LP as Servicer 33.2 EMC Mortgage Corporation as Master Servicer 33.3 Treasury Bank, a division of Countrywide Bank, N.A. as Custodian 33.4 Wells Fargo Bank, N.A. as Trustee

(35) Servicer compliance statement. ~~35.1 Countrywide Home Loans Servicing LP as Servicer 35.2 EMC Mortgage Corporation as Master Servicer 35.3 Wells Fargo Bank, N.A. as Trustee~~

Bear Stearns ARM Trust 2007-3 10-K