FIRST HORIZON ASSET SECURITIES INC.
Depositor
FIRST HORIZON HOME LOAN CORPORATION
Master Servicer
and
THE BANK OF NEW YORK,
Trustee
-----------------------------------------------------
POOLING AND SERVICING AGREEMENT
Dated as of December
1, 2005
-----------------------------------------------------
FIRST HORIZON ALTERNATIVE MORTGAGE SECURITIES TRUST 2005-AA12
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-AA12
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ARTICLE I
DEFINITIONS.............................................................................................5
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
WARRANTIES.........................................34
SECTION 2.1
Conveyance of Mortgage
Loans......................................................................34
SECTION 2.2
Acceptance by Trustee of the Mortgage
Loans.......................................................38
SECTION 2.3
Representations and Warranties of the Master Servicer; Covenants of the
Seller...................40
SECTION 2.4
Representations and Warranties of the Depositor as to the Mortgage
Loans..........................43
SECTION 2.5
Delivery of Opinion of Counsel in Connection with
Substitutions...................................43
SECTION 2.6
Execution and Delivery of
Certificates............................................................44
SECTION 2.7
REMIC
Matters.....................................................................................44
SECTION 2.8
Covenants of the Master
Servicer..................................................................47
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE
LOANS.......................................................47
SECTION 3.1
Master Servicer to Service Mortgage
Loans.........................................................47
SECTION 3.2
Subservicing; Enforcement of the Obligations of
Servicers.........................................48
SECTION 3.3
Rights of the Depositor and the Trustee in Respect of the Master
Servicer.........................49
SECTION 3.4
Trustee to Act as Master
Servicer.................................................................49
SECTION 3.5
Collection of Mortgage Loan Payments; Certificate Account;
Distribution Account...................50
SECTION 3.6
Collection of Taxes, Assessments and Similar Items; Escrow
Accounts...............................53
SECTION 3.7
Access to Certain Documentation and Information Regarding the
Mortgage Loans......................54
SECTION 3.8
Permitted Withdrawals from the Certificate Account and Distribution
Account.......................54
SECTION 3.9
Maintenance of Hazard Insurance; Maintenance of Primary Insurance
Policies........................56
SECTION 3.10
Enforcement of Due-on-Sale Clauses; Assumption
Agreements........................................57
SECTION 3.11
Realization Upon Defaulted Mortgage Loans; Repurchase of Certain
Mortgage Loans..................59
SECTION 3.12
Trustee to Cooperate; Release of Mortgage
Files..................................................61
SECTION 3.13
Documents Records and Funds in Possession of Master Servicer to be
Held for the Trustee..........62
SECTION 3.14
Master Servicing
Compensation....................................................................62
SECTION 3.15
Access to Certain
Documentation..................................................................63
SECTION 3.16
Annual Statement as to
Compliance................................................................63
SECTION 3.17
Annual Independent Public Accountants'Servicing Statement;
Financial Statements..................63
SECTION 3.18
Errors and Omissions Insurance; Fidelity
Bonds...................................................64
SECTION 3.19
Notification of
Adjustments......................................................................64
ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE MASTER
SERVICER.....................................................65
SECTION 4.1
Advances..........................................................................................65
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SECTION 4.2
Priorities of
Distribution........................................................................65
SECTION 4.3
Method of
Distribution............................................................................70
SECTION 4.4
Allocation of
Losses..............................................................................71
SECTION 4.5
[RESERVED]........................................................................................72
SECTION 4.6
Monthly Statements to
Certificateholders..........................................................72
ARTICLE V THE
CERTIFICATES.......................................................................................74
SECTION 5.1 The
Certificates..................................................................................74
SECTION 5.2
Certificate Register; Registration of Transfer and Exchange of
Certificates.......................75
SECTION 5.3
Mutilated, Destroyed, Lost or Stolen
Certificates.................................................81
SECTION 5.4
Persons Deemed
Owners.............................................................................82
SECTION 5.5
Access to List of Certificateholders'Names and
Addresses..........................................82
SECTION 5.6
Maintenance of Office or
Agency...................................................................82
ARTICLE VI THE DEPOSITOR AND THE MASTER
SERVICER.................................................................82
SECTION 6.1
Respective Liabilities of the Depositor and the Master
Servicer...................................82
SECTION 6.2
Merger or Consolidation of the Depositor or the Master
Servicer...................................83
SECTION 6.3
Limitation on Liability of the Depositor, the Master Servicer and
Others..........................83
SECTION 6.4
Limitation on Resignation of Master
Servicer......................................................84
ARTICLE VII
DEFAULT..............................................................................................84
SECTION 7.1
Events of
Default.................................................................................84
SECTION 7.2
Trustee to Act; Appointment of
Successor..........................................................86
SECTION 7.3
Notification to
Certificateholders................................................................87
ARTICLE VIII CONCERNING THE
TRUSTEE..............................................................................88
SECTION 8.1
Duties of
Trustee.................................................................................88
SECTION 8.2
Certain Matters Affecting the
Trustee.............................................................89
SECTION 8.3
Trustee Not Liable for Certificates or Mortgage
Loans.............................................91
SECTION 8.4
Trustee May Own
Certificates......................................................................91
SECTION 8.5
Trustee's Fees and
Expenses.......................................................................91
SECTION 8.6
Eligibility Requirements for
Trustee..............................................................92
SECTION 8.7
Resignation and Removal of
Trustee................................................................92
SECTION 8.8
Successor
Trustee.................................................................................93
SECTION 8.9
Merger or Consolidation of
Trustee................................................................94
SECTION 8.10
Appointment of Co-Trustee or Separate
Trustee....................................................94
SECTION 8.11 Tax
Matters......................................................................................95
SECTION 8.12
Periodic
Filings.................................................................................97
ARTICLE IX
TERMINATION...........................................................................................97
SECTION 9.1
Termination upon Liquidation or Purchase of all Mortgage
Loans....................................97
SECTION 9.2
Final Distribution on the
Certificates............................................................98
SECTION 9.3
Additional Termination
Requirements...............................................................99
ARTICLE X
[RESERVED]............................................................................................100
ARTICLE XI MISCELLANEOUS
PROVISIONS.............................................................................100
SECTION 11.1
Amendment.......................................................................................100
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SECTION 11.2
Recordation of Agreement;
Counterparts..........................................................101
SECTION 11.3
Governing
Law...................................................................................102
SECTION 11.4
Intention of
Parties............................................................................102
SECTION 11.5
Notices.........................................................................................103
SECTION 11.6
Severability of
Provisions......................................................................104
SECTION 11.7
Assignment......................................................................................104
SECTION 11.8
Limitation on Rights of
Certificateholders......................................................104
SECTION 11.9
Inspection and Audit
Rights.....................................................................105
SECTION 11.10
Certificates Nonassessable and Fully
Paid......................................................105
SECTION 11.11
Limitations on Actions; No
Proceedings.........................................................105
SECTION 11.12
Acknowledgment of
Seller.......................................................................106
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SCHEDULES
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Schedule I:
Mortgage Loan Schedule
S-I-1
Schedule II:
Representations and Warranties of the Master Servicer
S-II-1
Schedule III:
Form of Monthly Master Servicer Report
S-III-1
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EXHIBITS
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Exhibit A:
Form of Senior Certificate
A-1
Exhibit B:
Form of Subordinated Certificate
B-1
Exhibit C:
Form of Residual Certificate
C-1
Exhibit D:
Form of Reverse of Certificates
D-1
Exhibit E:
Form of Initial Certification
E-1
Exhibit F:
Form of Delay Delivery Certification
F-1
Exhibit G:
Form of Subsequent Certification of Custodian
G-1
Exhibit H:
Transfer Affidavit
H-1
Exhibit I:
Form of Transferor Certificate
I-1
Exhibit J:
Form of Investment Letter [Non-Rule 144A]
J-1
Exhibit K:
Form of Rule 144A Letter
K-1
Exhibit L:
Request for Release (for Trustee)
L-1
Exhibit M:
Request for Release (Mortgage Loan)
M-1
</TABLE>
iii
<PAGE>
THIS POOLING AND SERVICING AGREEMENT, dated as of December 1,
2005,
among FIRST HORIZON ASSET SECURITIES INC., a Delaware corporation,
as depositor
(the "Depositor"), FIRST HORIZON HOME LOAN CORPORATION, a Kansas
corporation, as
master servicer (the "Master Servicer"), and THE BANK OF NEW YORK,
a banking
corporation organized under the laws of the State of New York, as
trustee (the
"Trustee").
WITNESSETH THAT
In consideration of the mutual agreements herein contained, the
parties
hereto agree as follows:
PRELIMINARY STATEMENT
The Depositor is the owner of the Trust Fund that is hereby
conveyed to
the Trustee in return for the Certificates. The Trust Fund for
federal income
tax purposes will consist of two separate REMICs. The Certificates
will
represent the entire beneficial ownership interest in the Trust
Fund. The
Regular Certificates will represent "regular interests" in the
Upper REMIC. The
Class I-A-R Certificates will represent the residual interests in
the Lower
REMIC and Upper REMIC, as described in Section 2.7. The "latest
possible
maturity date" for federal income tax purposes of all REMIC regular
interests
created hereby will be the Latest Possible Maturity Date.
The following table sets forth characteristics of the
Certificates,
together with the minimum denominations and integral multiples in
excess thereof
in which such Classes shall be issuable (except that one
Certificate of each
Class of Certificates may be issued in a different amount and, in
addition, one
Residual Certificate representing the Tax Matters Person
Certificate may be
issued in a different amount):
[Remainder of Page Intentionally Left Blank]
1
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--------------------- ----------------------
---------------------
Initial Class
Initial
Integral Multiples
Class
Designation
Certificate Balance Pass Through
Rate
Minimum Denomination in Excess Minimum
------------------------- -----------------------
--------------------- ----------------------
---------------------
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Class I-A-1
$
22,782,000.00
6.0280% (1) $
25,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class I-A-2
$
1,672,000.00
6.0280% (1) $
25,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class I-A-R
$
100.00
6.0280% (1) $
100 $
N/A
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class II-A-1
$
213,133,000.00
6.0314% (2) $
25,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class III-A-1
$
67,436,000.00
6.4079% (3) $
25,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class III-A-2
$
4,950,000.00
6.4079% (3) $
25,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class B-1
$
11,319,000.00
6.1190% (4) $
100,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class B-2
$
6,199,000.00
6.1190% (4) $
100,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class B-3
$
4,852,000.00
6.1190% (4) $
100,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class B-4
$
2,484,000.00
6.1190% (4) $
100,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class B-5
$
1,822,000.00
6.1190% (4) $
100,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
Class B-6
$
1,324,764.87
6.1190% (4) $
100,000 $
1,000
------------------------- -----------------------
--------------------- ----------------------
---------------------
</TABLE>
(1) The Pass-Through Rates for the Class I-A-1, Class I-A-2 and
Class I-A-R
Certificates for each subsequent Distribution Date will equal the
Weighted
Average Adjusted Net Mortgage Rate for Pool I, as of the first day
of the month
immediately prior to the month in which the relevant Distribution
Date occurs,
after taking into account scheduled payments of principal on that
date and any
Principal Prepayments received on or after such date and
distributed to
Certificateholders on the prior Distribution Date.
(2) The Pass-Through Rates for the Class II-A-1 Certificates for
each subsequent
Distribution Date will equal the Weighted Average Adjusted Net
Mortgage Rate for
Pool II, as of the first day of the month immediately prior to the
month in
which the relevant Distribution Date occurs, after taking into
account scheduled
payments of principal on that date and any Principal Prepayments
received on or
after such date and distributed to Certificateholders on the prior
Distribution
Date.
(3) The Pass-Through Rate for the Class III-A-1 and Class III-A-2
Certificates
for each subsequent Distribution Date will equal the Weighted
Average Adjusted
Net Mortgage Rate for Pool III, as of the first day of the month
immediately
prior to the month in which the relevant Distribution Date occurs,
after taking
into account scheduled payments of principal on that date and any
Principal
Prepayments received on or after such date and distributed to
Certificateholders
on the prior Distribution Date.
(4) The Pass-Through Rates for the Subordinated Certificates for
each subsequent
Distribution Date will equal the weighted average of the Weighted
Average
Adjusted Net Mortgage Rates for each Mortgage Pool, weighted on the
basis of the
Group Subordinate Amount for each Mortgage Pool, as of the first
day of the
month immediately prior to the month in which the relevant
Distribution Date
occurs, after taking into account scheduled payments of principal
on that date
and any Principal Prepayments received on or after such date and
distributed to
Certificateholders on the prior Distribution Date.
2
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Accretion Directed Certificates....... None.
Accrual Certificates.................. None.
Accrual Components.................... None.
Book-Entry Certificates............... All Classes of
Certificates other than the Physical Certificates.
Certificate Group..................... With respect to
Pool I, the Group I Senior Certificates; with respect to
Pool II, the Group II Senior
Certificates; and with respect to
Pool III, the Group III Senior
Certificates. The Subordinated
Certificates correspond to each
Mortgage Pool.
COFI Certificates..................... None.
Component Certificates................ None.
Components............................ None.
Delay Certificates.................... All
interest-bearing Classes of Certificates other than the
Non-Delay
Certificates, if any.
ERISA-Restricted
Certificates......... The Residual
Certificates, Private Certificates
and Certificates of any Class that no
longer satisfy the applicable rating
requirement of the Underwriters'
Exemption.
Floating Rate Certificates............ None.
Group I Senior Certificates........... The Class I-A-1,
Class I-A-2 and Class I-A-R Certificates.
Group II Senior Certificates.......... The Class II-A-1
Certificates.
Group III Senior Certificates.....
The Class III-A-1 and Class III-A-2 Certificates.
Insured Retail Certificates........... None.
Inverse Floating Rate Certificates....
None.
LIBOR Certificates.................... None.
Non-Delay Certificates................ None.
Notional Amount Components............ None.
Notional Amount Certificates.......... None.
Offered Certificates.................. All Classes of
the Certificates other than the Private Certificates.
Physical Certificates................. The Residual
Certificates and the Private Certificates.
Planned Principal Classes............. None.
Principal Only Certificates........... None.
Private Certificates.................. The Class B-4,
Class B-5 and Class B-6 Certificates.
Rating Agencies....................... S&P and
Moody's; except that, for the purposes of the Class B-1, Class
B-2, Class B-3, Class B-4 and Class
B-5 Certificates, S&P shall be the
sole Rating Agency. The Class B-6
Certificates will not be rated.
Regular Certificates.................. All Classes of
Certificates, other than the Residual Certificates.
</TABLE>
3
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Residual Certificates................. The Class I-A-R
Certificates.
Scheduled Principal Classes........... None.
Senior Certificates................... The Group I
Senior Certificates, the Group II Senior Certificates and the
Group III Senior Certificates, collectively.
Senior Mezzanine Certificates......... The Class I-A-2
and Class III-A-2 Certificates.
Subordinated Certificates............. The Class B-1,
Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6
Certificates.
Super Senior Certificates............. The Class I-A-1
and Class III-A-1 Certificates.
Support Classes....................... None.
Targeted Principal Classes............ None.
Underwriter........................... Bear, Stearns
& Co. Inc.
</TABLE>
With respect to any of the foregoing designations as to which
the
corresponding reference is "None," all defined terms and provisions
herein
relating solely to such designations shall be of no force or
effect, and any
calculations herein incorporating references to such designations
shall be
interpreted without reference to such designations and amounts.
Defined terms
and provisions herein relating to statistical rating agencies not
designated
above as Rating Agencies shall be of no force or effect.
4
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases,
unless the context otherwise requires, shall have the following
meanings:
Accrued Certificate Interest: For any Class of Certificates for
any
Distribution Date, the interest accrued during the related Interest
Accrual
Period at the applicable Pass-Through Rate on the Class Certificate
Balance of
such Class of Certificates immediately prior to such Distribution
Date, less
such Class' share of any Net Interest Shortfall, allocable among
the outstanding
Classes of Senior Certificates of the related Certificate Group
based on the
Accrued Certificate Interest otherwise distributable thereto, and
allocable to
the Subordinated Certificates based on interest accrued on their
related
Apportioned Principal Balances.
Adjusted Mortgage Rate: As to each Mortgage Loan, and at any time,
the
per annum rate equal to the Mortgage Rate less the Master Servicing
Fee Rate.
Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at any
time,
the per annum rate equal to the Mortgage Rate less the related
Expense Fee Rate.
Adjustment Date: A date specified in each Mortgage Note as a date
on
which the Mortgage Rate on the related Mortgage Loan will be
adjusted.
Advance: The payment required to be made by the Master Servicer
with
respect to any Distribution Date pursuant to Section 4.1, the
amount of any such
payment being equal to the aggregate of payments of principal and
interest (net
of the Master Servicing Fee and net of any net income in the case
of any REO
Property) on the Mortgage Loans that were due on the related Due
Date and not
received as of the close of business on the related Determination
Date, less the
aggregate amount of any such delinquent payments that the Master
Servicer has
determined would constitute a Nonrecoverable Advance if
advanced.
Aggregate Senior Percentage: For any Distribution Date, the
percentage
equal to (x) the sum of the Class Certificate Balances of the
Senior
Certificates of both Certificate Groups, divided by (y) the
aggregate Pool
Principal Balance for both Mortgage Pools on such Distribution
Date, in each
case prior to giving effect to any distributions on such
Distribution Date.
Aggregate Subordinated Percentage: For any Distribution Date,
the
percentage equal to (x) the sum of the Class Certificate Balances
of the
Subordinated Certificates on such Distribution Date, divided by (y)
the
aggregate Pool Principal Balance for both Mortgage Pools on such
Distribution
Date, in each case prior to giving effect to any distributions on
such
Distribution Date.
Agreement: This Pooling and Servicing Agreement and all amendments
or
supplements hereto.
5
<PAGE>
Allocable Share: With respect to any Class of Subordinated
Certificates
on any Distribution Date, such Class' pro rata share (based on the
Class
Certificate Balance of each Class entitled thereto) of the
Subordinated Optimal
Principal Amount for each Mortgage Pool; provided, that, except as
provided in
this Agreement, no Subordinated Certificates (other than the Class
of
Subordinated Certificates with the highest priority of
distribution) shall be
entitled on any Distribution Date to receive distributions pursuant
to clauses
(2), (3) and (5) of the definition of Subordinated Optimal
Principal Amount
unless the Class Prepayment Distribution Trigger for such Class is
satisfied for
such Distribution Date.
Alternative Title Product: Any one of the following: (i) Lien
Protection Insurance issued by Integrated Loan Services or ATM
Corporation of
America, (ii) a Mortgage Lien Report issued by EPN
Solutions/ACRAnet, (iii) a
Property Plus Report issued by Rapid Refinance Service through
SharperLending.com, or (iv) such other alternative title insurance
product that
the Seller utilizes in connection with its then current
underwriting criteria.
Amount Held for Future Distribution: As to any Distribution Date,
the
aggregate amount held in the applicable subaccount of the
Certificate Account at
the close of business on the related Determination Date on account
of (i)
Principal Prepayments on the related Mortgage Pool received after
the related
Prepayment Period and Liquidation Proceeds in the related Mortgage
Pool received
in the month of such Distribution Date and (ii) all Scheduled
Payments in the
related Mortgage Pool due after the related Due Date.
Apportioned Principal Balance: For any Class of Subordinated
Certificates and any Distribution Date, an amount equal to the
Class Certificate
Balance of such Class immediately prior to that Distribution Date
multiplied by
a fraction, the numerator of which is the applicable Group
Subordinate Amount
for such Distribution Date and the denominator of which is the sum
of the Group
Subordinate Amounts for such Distribution Date.
Appraised Value: With respect to any Mortgage Loan, the Appraised
Value
of the related Mortgaged Property shall be: (i) with respect to a
Mortgage Loan
other than a Refinancing Mortgage Loan, the lesser of (a) the value
of the
Mortgaged Property based upon the appraisal made at the time of the
origination
of such Mortgage Loan and (b) the sales price of the Mortgaged
Property at the
time of the origination of such Mortgage Loan; (ii) with respect to
a
Refinancing Mortgage Loan other than a Streamlined Documentation
Mortgage Loan,
the value of the Mortgaged Property based upon the appraisal made
at the time of
the origination of such Refinancing Mortgage Loan; and (iii) with
respect to a
Streamlined Documentation Mortgage Loan, (a) if the loan-to-value
ratio with
respect to the Original Mortgage Loan at the time of the
origination thereof was
90% or less, the value of the Mortgaged Property based upon the
appraisal made
at the time of the origination of the Original Mortgage Loan and
(b) if the
loan-to-value ratio with respect to the Original Mortgage Loan at
the time of
the origination thereof was greater than 90%, the value of the
Mortgaged
Property based upon the appraisal (which may be a drive-by
appraisal) made at
the time of the origination of such Streamlined Documentation
Mortgage Loan.
Available Funds: For each Mortgage Pool, with respect to any
Distribution Date, an amount equal to the sum of:
o
all
scheduled installments of interest, net of the Master Servicing
Fee and the Trustee Fee, and all scheduled installments of
principal
due in respect of the Mortgage Loans in such Mortgage Pool on
the
Due Date in the month in which the Distribution Date occurs and
received before the related Determination Date, together with
any
Advances in respect thereof;
6
<PAGE>
o
all
Insurance Proceeds, Liquidation Proceeds and Unanticipated
Recoveries received in respect of the Mortgage Loans in such
Mortgage Pool during the calendar month before the Distribution
Date, which in each case is net of unreimbursed expenses incurred
in
connection with a liquidation or foreclosure and unreimbursed
Advances, if any;
o
all
Principal Prepayments received in respect of the Mortgage Loans
in such Mortgage Pool during the related Prepayment Period,
plus
interest received thereon, net of any Prepayment Interest
Excess;
o
any
Compensating Interest in respect of Principal Prepayments in
Full received in respect of the Mortgage Loans in such Mortgage
Pool
during the related Prepayment Period (or, in the case of the
first
Distribution Date, from the Cut-off Date); and
o
any
Substitution Adjustment Amount or the Purchase Price for any
Deleted Mortgage Loan in the related Mortgage Pool or a
Mortgage
Loan in the related Mortgage Pool repurchased by the Seller or
the
Master Servicer as of such Distribution Date, reduced by amounts
in
reimbursement for Advances previously made and other amounts
that
the Master Servicer is entitled to be reimbursed for out of the
Certificate Account pursuant to this Agreement.
Bankruptcy Code: The United States Bankruptcy Reform Act of 1978,
as
amended.
Bankruptcy Coverage Termination Date: The date on which the
Bankruptcy
Loss Coverage Amount is reduced to zero.
Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient
Valuation or Debt Service Reduction; provided, however, that a
Bankruptcy Loss
shall not be deemed a Bankruptcy Loss hereunder so long as the
Master Servicer
has notified the Trustee in writing that the Master Servicer is
diligently
pursuing any remedies that may exist in connection with the related
Mortgage
Loan and either (A) the related Mortgage Loan is not in default
with regard to
payments due thereunder or (B) delinquent payments of principal and
interest
under the related Mortgage Loan and any related escrow payments in
respect of
such Mortgage Loan are being advanced on a current basis by the
Master Servicer,
in either case without giving effect to any Debt Service Reduction
or Deficient
Valuation.
Bankruptcy Loss Coverage Amount: As of any Determination Date,
the
Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy
Coverage
Amount as reduced by (i) the aggregate amount of Bankruptcy Losses
allocated to
the Certificates since the Cut-off Date and (ii) any permissible
reductions in
the Bankruptcy Loss Coverage Amount as evidenced by a letter of
each Rating
Agency to the Trustee to the effect that any such reduction will
not result in a
downgrading of the then current ratings assigned to the Classes of
Certificates
rated by it. As of any Distribution Date on or after the Cross-over
Date, the
Bankruptcy Loss Coverage Amount will be zero.
7
<PAGE>
Blanket Mortgage: The mortgage or mortgages encumbering the
Cooperative
Property.
Book-Entry Certificates: As specified in the Preliminary
Statement.
Business Day: Any day other than (i) a Saturday or a Sunday, or
(ii) a
day on which banking institutions in the City of Dallas, or the
State of Texas
or the city in which the Corporate Trust Office of the Trustee is
located are
authorized or obligated by law or executive order to be closed.
Certificate: Any
one of the Certificates executed by the Trustee in
substantially the forms attached hereto as exhibits.
Certificate Account: The separate Eligible Account or Accounts
created
and maintained by the Master Servicer pursuant to Section 3.5 with
a depository
institution in the name of the Trustee for the benefit of the
Trustee on behalf
of Certificateholders and designated "First Horizon Home Loan
Corporation in
trust for the registered holders of First Horizon Asset Securities
Inc. Mortgage
Pass-Through Certificates, Series 2005-AA12."
Certificate Group: As
specified in the Preliminary Statement.
Certificate Owner: With respect to a Book-Entry Certificate, the
Person
who is the beneficial owner of such Book-Entry Certificate.
Certificate Principal Balance: With respect to any Certificate and
as
of any Distribution Date, the Certificate Principal Balance on the
date of the
initial issuance of such Certificate, as reduced by:
(a)
all amounts
distributed on previous Distribution Dates on such
Certificate on account of principal,
(b)
the principal
portion of all Realized Losses previously allocated to
such Certificate, and
(c)
in the case of a
Subordinated Certificate, such Certificate's pro
rata share, if any, of the Subordinated Certificate Writedown
Amount
for previous Distribution Dates.
Certificate Register: The register maintained pursuant to Section
5.2
hereof.
Certificateholder or Holder: The person in whose name a Certificate
is
registered in the Certificate Register, except that, solely for the
purpose of
giving any consent pursuant to this Agreement, any Certificate
registered in the
name of the Depositor or the Seller or any affiliate or agent of
the Depositor
or the Seller shall be deemed not to be Outstanding and the
Percentage Interest
evidenced thereby shall not be taken into account in determining
whether the
requisite amount of Percentage Interests necessary to effect such
consent has
been obtained; provided, however, that if any such Person
(including the
Depositor) owns 100% of the Percentage Interests evidenced by a
Class of
Certificates, such Certificates shall be deemed to be Outstanding
for purposes
of any provision hereof that requires the consent of the Holders of
Certificates
of a particular Class as a condition to the taking of any action
hereunder. The
Trustee is entitled to rely conclusively on a certification of the
Depositor or
any affiliate of the Depositor in determining which Certificates
are registered
in the name of an affiliate of the Depositor.
8
<PAGE>
Class: All Certificates bearing the same class designation as set
forth
in the Preliminary Statement.
Class Certificate Balance: With respect to any Class of
Certificates
and as of any Distribution Date the aggregate of the Certificate
Principal
Balances of all Certificates of such Class as of such date, plus
the amount of
any Unanticipated Recoveries added to the Class Certificate Balance
of such
Class of Certificate pursuant to Section 4.2(h).
Class Prepayment Distribution Trigger: For a Class of
Subordinated
Certificates (other than the Class of Subordinated Certificates
with the highest
priority of distribution), a trigger that is satisfied on any
Distribution Date
on which a fraction (expressed as a percentage), the numerator of
which is the
aggregate Class Certificate Balance of such Class and each Class
subordinate
thereto, if any, and the denominator of which is the aggregate Pool
Principal
Balance for all the Mortgage Pools with respect to such
Distribution Date,
equals or exceeds such percentage calculated as of the Closing
Date.
Closing Date: December
29, 2005.
Code: The Internal Revenue Code of 1986, including any successor
or
amendatory provisions.
COFI: Not
applicable.
COFI Certificates: Not
applicable.
Compensating Interest: As to any Distribution Date and any
Principal
Prepayment in respect of a Mortgage Loan that is received during
the period from
the sixteenth day of the month (or, in the case of the first
Distribution Date,
from the Cut-off Date) prior to the month of such Distribution Date
through the
last day of such month, an additional payment to the related
Mortgage Pool made
by the Master Servicer, to the extent funds are available from the
Master
Servicing Fee, equal to the amount of interest at the Adjusted Net
Mortgage Rate
for that Mortgage Loan from the date of the prepayment to the
related Due Date;
provided that the aggregate of all such payments as to the Mortgage
Loans in a
Mortgage Pool shall not exceed 0.0083% of the Pool Principal
Balance of such
Mortgage Pool as of the related Determination Date, and provided
further that if
a partial Principal Prepayment is applied on or after the first day
of the month
following the month of receipt, no additional payment is required
for such
Principal Prepayment.
Component: Not
applicable.
Component Balance: Not
applicable.
9
<PAGE>
Component Certificates: Not applicable.
Cooperative Corporation: The entity that holds title (fee or an
acceptable leasehold estate) to the real property and improvements
constituting
the Cooperative Property and which governs the Cooperative
Property, which
Cooperative Corporation must qualify as a Cooperative Housing
Corporation under
Section 216 of the Code.
Coop Shares: Shares
issued by a Cooperative Corporation.
Cooperative Loan: Any Mortgage Loan secured by Coop Shares and
a
Proprietary Lease.
Cooperative Property: The real property and improvements owned by
the
Cooperative Corporation, including the allocation of individual
dwelling units
to the holders of the Coop Shares of the Cooperative
Corporation.
Cooperative Unit: A single family dwelling located in a
Cooperative
Property.
Corporate Trust Office: The designated office of the Trustee in
the
State of New York at which at any particular time its corporate
trust business
with respect to this Agreement shall be administered, which office
at the date
of the execution of this Agreement is located at The Bank of New
York, 101
Barclay Street, 8W, New York, New York 10286 (Attn: Corporate
Trust
Mortgage-Backed Securities Group, First Horizon Asset Securities
Inc. Series
2005-AA12), facsimile no. (212) 815-3986, and which is the address
to which
notices to and correspondence with the Trustee should be
directed.
Corresponding Classes: As to any Lower REMIC Interest identified
in
Section 2.7, the Class or Classes that are identified in Section
2.7 as
corresponding to such Lower REMIC Interest.
Cross-over Date: The Distribution Date on which the respective
Class
Certificate Balances of each Class of Subordinated Certificates
have been
reduced to zero.
Custodial Agreement: The Custodial Agreement dated as of December
29,
2005 by and among the Trustee, the Master Servicer and the
Custodian.
Custodian: First Tennessee Bank National Association, a
national
banking association, and its successors and assigns, as custodian
under the
Custodial Agreement.
Cut-off Date: December
1, 2005.
Cut-off Date Pool Principal Balance: With respect to Pool I,
$26,126,394.93; with respect to Pool II, $227,705,694.14; and with
respect to
Pool III, $77,335,775.80.
Cut-off Date Principal Balance: As to any Mortgage Loan, the
Stated
Principal Balance thereof as of the close of business on the
Cut-off Date.
Debt Service Reduction: With respect to any Mortgage Loan, a
reduction
by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code
in the Scheduled Payment for such Mortgage Loan which became final
and
non-appealable, except such a reduction resulting from a Deficient
Valuation or
any reduction that results in a permanent forgiveness of
principal.
10
<PAGE>
Defective Mortgage Loan: Any Mortgage Loan which is required to
be
repurchased pursuant to Section 2.2 or 2.3.
Deficient Valuation: With respect to any Mortgage Loan, a valuation
by
a court of competent jurisdiction of the Mortgaged Property in an
amount less
than the then-outstanding indebtedness under the Mortgage Loan, or
any reduction
in the amount of principal to be paid in connection with any
Scheduled Payment
that results in a permanent forgiveness of principal, which
valuation or
reduction results from an order of such court which is final and
non-appealable
in a proceeding under the Bankruptcy Code.
Definitive Certificates: Any Certificate evidenced by a
Physical
Certificate and any Certificate issued in lieu of a Book-Entry
Certificate
pursuant to Section 5.2(e).
Delay Certificates: As
specified in the Preliminary Statement.
Delay Delivery Mortgage Loans: The Mortgage Loans for which all or
a
portion of a related Mortgage File is not delivered to Trustee on
the Closing
Date. The number of Delay Delivery Mortgage Loans shall not exceed
25% of the
aggregate number of Mortgage Loans as of the Closing Date.
Deleted Mortgage Loan:
As defined in Section 2.3(b) hereof.
Denomination: With respect to each Certificate, the amount set
forth on
the face thereof as the "Initial Certificate Balance of this
Certificate" or the
Percentage Interest appearing on the face thereof.
Depositor: First Horizon Asset Securities Inc., a Delaware
corporation,
or its successor in interest.
Depository: The initial Depository shall be The Depository
Trust
Company, the nominee of which is CEDE & Co., as the registered
Holder of the
Book-Entry Certificates. The Depository shall at all times be a
"clearing
corporation" as defined in Section 8-102(a)(5) of the Uniform
Commercial Code of
the State of New York.
Depository Participant: A broker, dealer, bank or other
financial
institution or other Person for whom from time to time a Depository
effects
book-entry transfers and pledges of securities deposited with the
Depository.
Determination Date: As to any Distribution Date, the earlier of (i)
the
third Business Day after the 15th day of each month, and (ii) the
second
Business Day prior to the related Distribution Date.
Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.5 in the name of
the Trustee for
the benefit of the Certificateholders and designated "The Bank of
New York, in
trust for registered Holders of First Horizon Asset Securities Inc.
Mortgage
Pass-Through Certificates, Series 2005-AA12." Funds in the
Distribution Account
shall be held in trust for the Certificateholders for the uses and
purposes set
forth in this Agreement.
11
<PAGE>
Distribution Account Deposit Date: As to any Distribution Date,
1:30
p.m. Central time on the Business Day immediately preceding such
Distribution
Date.
Distribution Date: The 25th day of each calendar month after
the
initial issuance of the Certificates, or if such 25th day is not a
Business Day,
the next succeeding Business Day, commencing in January 2006.
Due Date: With respect to any Distribution Date, the first day of
the
month in which the related Distribution Date occurs.
Eligible Account: Any of (i) an account or accounts maintained with
a
federal or state chartered depository institution or trust company
the
short-term unsecured debt obligations of which (or, in the case of
a depository
institution or trust company that is the principal subsidiary of a
holding
company, the debt obligations of such holding company) have the
highest
short-term ratings of each Rating Agency at the time any amounts
are held on
deposit therein, or (ii) an account or accounts in a depository
institution or
trust company in which such accounts are insured by the FDIC or the
SAIF (to the
limits established by the FDIC or the SAIF, as applicable) and the
uninsured
deposits in which accounts are otherwise secured such that, as
evidenced by an
Opinion of Counsel delivered to the Trustee and to each Rating
Agency, the
Certificateholders have a claim with respect to the funds in such
account or a
perfected first priority security interest against any collateral
(which shall
be limited to Permitted Investments) securing such funds that is
superior to
claims of any other depositors or creditors of the depository
institution or
trust company in which such account is maintained, or (iii) a trust
account or
accounts maintained with (a) the trust department of a federal or
state
chartered depository institution or (b) a trust company, acting in
its fiduciary
capacity or (iv) any other account acceptable to each Rating
Agency. Eligible
Accounts may bear interest, and may include, if otherwise qualified
under this
definition, accounts maintained with the Trustee.
ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
ERISA-Qualifying Underwriting: With respect to any
ERISA-Restricted
Certificate, a best efforts or firm commitment underwriting or
private placement
that meets the requirements of the Underwriters' Exemption.
ERISA-Restricted Certificate: As specified in the Preliminary
Statement.
Escrow Account: The Eligible Account or Accounts established
and
maintained pursuant to Section 3.6(a) hereof.
Event of Default: As
defined in Section 7.1 hereof.
Excess Loss: The amount of any (i) Fraud Loss realized after the
Fraud
Loss Coverage Termination Date, (ii) Special Hazard Loss realized
after the
Special Hazard Coverage Termination Date or (iii) Deficient
Valuation realized
after the Bankruptcy Coverage Termination Date.
12
<PAGE>
Excess Proceeds: With respect to any Liquidated Mortgage Loan,
the
amount, if any, by which the sum of any Liquidation Proceeds,
Insurance Proceeds
and/or Unanticipated Recoveries in respect of such Mortgage Loan
received in the
calendar month in which such Mortgage Loan became a Liquidated
Mortgage Loan,
net of any amounts previously reimbursed to the Master Servicer
as
Nonrecoverable Advance(s) with respect to such Mortgage Loan
pursuant to Section
3.8(a)(iii), exceeds (i) the unpaid principal balance of such
Liquidated
Mortgage Loan as of the Due Date in the month in which such
Mortgage Loan became
a Liquidated Mortgage Loan plus (ii) accrued interest at the
Mortgage Rate from
the Due Date as to which interest was last paid or advanced (and
not reimbursed)
to Certificateholders up to the Due Date applicable to the
Distribution Date
immediately following the calendar month during which such
liquidation occurred.
Expense Fee Rate: As to each Mortgage Loan, the sum of the
related
Master Servicing Fee Rate and the Trustee Fee Rate.
FDIC: The Federal Deposit Insurance Corporation, or any
successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under
Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor
thereto.
FIRREA: The Financial Institutions Reform, Recovery, and
Enforcement
Act of 1989.
First Horizon: First Horizon Home Loan Corporation, a Kansas
corporation and an indirect wholly owned subsidiary of First
Horizon National
Corporation, a Tennessee corporation.
Fitch: Fitch Ratings and its successors and/or assigns. If Fitch
is
designated as a Rating Agency in the Preliminary Statement, for
purposes of
Section 11.5(b) the address for notices to Fitch shall be Fitch,
Inc., One State
Street Plaza, New York, New York 10004, Attention: Residential
Mortgage
Surveillance Group, or such other address as Fitch may hereafter
furnish to the
Depositor and the Master Servicer.
FNMA: The Federal National Mortgage Association, a federally
chartered
and privately owned corporation organized and existing under the
Federal
National Mortgage Association Charter Act, or any successor
thereto.
Fraud Loan: A Liquidated Mortgage Loan as to which a Fraud Loss
has
occurred.
Fraud Loss Coverage Amount: As of the Closing Date, $6,623,357. As
of
any Distribution Date from the first anniversary of the Cut-off
Date and prior
to the fifth anniversary of the Cut-off Date, the Fraud Loss
Coverage Amount
shall equal $3,311,678 minus the aggregate amount of Fraud Losses
that would
have been allocated to the Subordinated Certificates in the absence
of the Loss
Allocation Limitation since the Cut-off Date. As of any
Distribution Date on or
after the earlier of the Cross-over Date or the fifth anniversary
of the Cut-off
Date, the Fraud Loss Coverage Amount shall be zero.
13
<PAGE>
Fraud Loss Coverage Termination Date: The date on which the Fraud
Loss
Coverage Amount is reduced to zero.
Fraud Losses: Realized Losses on Mortgage Loans as to which a loss
is
sustained by reason of a default arising from fraud, dishonesty
or
misrepresentation in connection with the related Mortgage Loan,
including a loss
by reason of the denial of coverage under any related Primary
Insurance Policy
because of such fraud, dishonesty or misrepresentation.
Group I Senior Certificates: As specified in the Preliminary
Statement.
Group II Senior Certificates: As specified in the Preliminary
Statement.
Group III Senior Certificates: As specified in the Preliminary
Statement
Group Subordinate Amount: For a Mortgage Pool and any
Distribution
Date; the excess of (a) the Pool Principal Balance of such Mortgage
Pool for the
immediately preceding Distribution Date, over (b) the aggregate
Class
Certificate Balance of the Senior Certificates of the related
Certificate Group
immediately prior to that Distribution Date.
Index: Not
applicable.
Indirect Participant: A broker, dealer, bank or other financial
institution or other Person that clears through or maintains a
custodial
relationship with a Depository Participant.
Initial Bankruptcy
Coverage Amount:
$150,000.
Initial Component Balance: Not applicable.
Insurance Policy: With respect to any Mortgage Loan included in
the
Trust Fund, any insurance policy, including all riders and
endorsements thereto
in effect, including any replacement policy or policies for any
Insurance
Policies.
Insurance Proceeds: Proceeds paid by an insurer pursuant to any
Insurance Policy, in each case other than any amount included in
such Insurance
Proceeds in respect of Insured Expenses.
Insured Expenses: Expenses covered by an Insurance Policy or any
other
insurance policy with respect to the Mortgage Loans.
Insured Retail Certificates: Not applicable.
Interest Accrual Period: With respect to each Class of Delay
Certificates and any Distribution Date, the calendar month prior to
the month of
such Distribution Date. With respect to any Non-Delay Certificates
and any
Distribution Date, the one month period commencing on the 25th day
of the month
preceding the month in which such Distribution Date occurs and
ending on the
24th day of the month in which such Distribution Date occurs.
14
<PAGE>
Interest Determination Date: Not applicable.
Latest Possible Maturity Date: As to each Class of Subordinated
Certificates, each Class of Senior Certificates and each Lower
REMIC Interest,
the Distribution Date following the third anniversary of the
scheduled maturity
date of the Mortgage Loan having the latest scheduled maturity date
as of the
Cut-off Date.
Lender PMI Mortgage Loan: Not applicable.
LIBOR: Not
applicable.
LIBOR Certificates:
Not applicable.
Liquidated Mortgage Loan: With respect to any Distribution Date,
a
defaulted Mortgage Loan (including any REO Property) which was
liquidated in the
calendar month preceding the month of such Distribution Date and as
to which the
Master Servicer has determined (in accordance with this Agreement)
that it has
received all amounts it expects to receive in connection with the
liquidation of
such Mortgage Loan, including the final disposition of an REO
Property.
Liquidation Proceeds: All cash amounts, other than Insurance
Proceeds
and Unanticipated Recoveries, received in connection with the
partial or
complete liquidation of defaulted Mortgage Loans, whether through
trustee's
sale, foreclosure sale or otherwise or amounts received in
connection with any
condemnation or partial release of a Mortgaged Property and any
other proceeds
received in connection with an REO Property, less the sum of
related
unreimbursed Master Servicing Fees, Servicing Advances and
Advances.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to
any
date of determination, the fraction (expressed as a percentage) the
numerator of
which is the principal balance of the related Mortgage Loan at such
date of
determination and the denominator of which is the Appraised Value
of the related
Mortgaged Property.
Loss Allocation Limitation: As defined in Section 4.4(g).
Lost Mortgage Note: Any Mortgage Note the original of which was
permanently lost or destroyed and has not been replaced.
Lower REMIC: The segregated pool of assets consisting of the Trust
Fund
but excluding the Lower REMIC Interests, the RL Interest and the RU
Interest.
Lower REMIC Interests: The REMIC regular interests, within the
meaning
of the REMIC Provisions, issued by the Lower REMIC as set forth in
Section 2.7.
Maintenance: With respect to any Cooperative Unit, the rent paid by
the
Mortgagor to the Cooperative Corporation pursuant to the
Proprietary Lease.
15
<PAGE>
Majority in Interest: As to any Class of Regular Certificates,
the
Holders of Certificates of such Class evidencing, in the aggregate,
at least 51%
of the Percentage Interests evidenced by all Certificates of such
Class.
Master Servicer: First Horizon Home Loan Corporation, a Kansas
corporation, and its successors and assigns, in its capacity as
master servicer
hereunder.
Master Servicer Advance Date: As to any Distribution Date, 1:30
p.m.
Central time on the Business Day immediately preceding such
Distribution Date.
Master Servicing Fee: As to each Mortgage Loan and any
Distribution
Date, an amount payable out of each full payment of interest
received on such
Mortgage Loan and equal to one-twelfth of the Master Servicing Fee
Rate
multiplied by the Stated Principal Balance of such Mortgage Loan as
of the Due
Date in the month of such Distribution Date (prior to giving effect
to any
Scheduled Payments due on such Mortgage Loan on such Due Date),
subject to
reduction as provided in Section 3.14.
Master Servicing Fee Rate: A per annum rate equal to 0.369%.
MERS: Mortgage Electronic Registration Systems, Inc., a
corporation
organized and existing under the laws of the State of Delaware, or
any successor
thereto.
MERS Mortgage Loan: Any Mortgage Loan registered with MERS on the
MERS
System.
MERS(R) System: The system of recording transfers of mortgages
electronically maintained by MERS.
MIN: The Mortgage Identification Number for any MERS Mortgage
Loan.
MLPA: The Mortgage Loan Purchase Agreement dated as of December
29,
2005, by and between First Horizon Home Loan Corporation, as
seller, and First
Horizon Asset Securities Inc., as purchaser, as related to the
transfer, sale
and conveyance of the Mortgage Loans.
MOM Loan: Any Mortgage Loan as to which MERS is acting as
mortgagee,
solely as nominee for the originator of such Mortgage Loan and its
successors
and assigns.
Monthly Statement: The statement delivered to the
Certificateholders
pursuant to Section 4.6.
Moody's: Moody's Investors Service, Inc., and its successors
and/or
assigns. If Moody's is designated as a Rating Agency in the
Preliminary
Statement, for purposes of Section 11.5(b) the address for notices
to Moody's
shall be Moody's Investors Service, Inc., 99 Church Street, New
York, New York
10007, Attention: Residential Pass-Through Monitoring, or such
other address as
Moody's may hereafter furnish to the Depositor or the Master
Servicer.
Mortgage: The mortgage, deed of trust or other instrument creating
a
first lien on an estate in fee simple or leasehold interest in real
property
securing a Mortgage Note.
16
<PAGE>
Mortgage File: The mortgage documents listed in Section 2.1(b)
hereof
pertaining to a particular Mortgage Loan and any additional
documents delivered
to the Trustee to be added to the Mortgage File pursuant to this
Agreement.
Mortgage Loan Schedule: The list of Mortgage Loans (as from time
to
time amended by the Master Servicer to reflect the addition of
Substitute
Mortgage Loans and the deletion of Deleted Mortgage Loans pursuant
to the
provisions of this Agreement) transferred to the Trustee as part of
the Trust
Fund and from time to time subject to this Agreement, attached
hereto as
Schedule I, setting forth the following information with respect to
each
Mortgage Loan:
(1) the loan
number;
(2) the
Mortgagor's name and the street address of the Mortgaged
Property, including the zip code;
(3) the maturity
date;
(4) the original
principal balance;
(5) the Cut-off
Date Principal Balance;
(6) the first
payment date of the Mortgage Loan;
(7) the
Scheduled Payment in effect as of the Cut-off Date;
(8) the
Loan-to-Value Ratio at origination;
(9) a code
indicating whether the residential dwelling at the time
of origination was represented to be owner-occupied;
(10) a code indicating
whether the residential dwelling is either
(a) a detached single family dwelling (b) a dwelling in a de
minimis PUD, (c) a condominium unit or PUD (other than a de
minimis PUD), (d) a two-to-four unit residential property or
(e) a Cooperative Unit;
(11) the Mortgage
Rate;
(12) the purpose for
the Mortgage Loan;
(13) the type of
documentation program pursuant to which the
Mortgage Loan was originated;
(14) the Master
Servicing Fee for the Mortgage Loan; and
(15) a code indicating
whether the Mortgage Loan is a MERS Mortgage
Loan.
17
<PAGE>
Such schedule shall also set forth the total of the amounts
described
under (4) and (5) above for all of the Mortgage Loans.
Mortgage Loans: Such of the mortgage loans transferred and assigned
to
the Trustee pursuant to the provisions hereof as from time to time
are held as a
part of the Trust Fund (including any REO Property), the mortgage
loans so held
being identified in the Mortgage Loan Schedule, notwithstanding
foreclosure or
other acquisition of title of the related Mortgaged Property.
Mortgage Note: The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a
Mortgage Loan.
Mortgage Pool: Either
Pool I, Pool II or Pool III.
Mortgage Rate: The annual rate of interest borne by a Mortgage
Note
from time to time, net of any insurance premium charged by the
mortgagee to
obtain or maintain any Primary Insurance Policy.
Mortgaged Property: The underlying property securing a Mortgage
Loan,
which, with respect to a Cooperative Loan, is the related Coop
Shares and
Proprietary Lease.
Mortgagor: The
obligor(s) on a Mortgage Note.
National Cost of Funds Index: The National Monthly Median Cost of
Funds
Ratio to SAIF-Insured Institutions published by the Office of
Thrift
Supervision.
Net Interest Shortfall: For any Distribution Date and each
Mortgage
Pool, the sum of (a) the amount of interest which would otherwise
have been
received for any Mortgage Loan in such Mortgage Pool that was the
subject of (x)
a Relief Act Reduction or (y) a Special Hazard Loss, Fraud Loss, or
Deficient
Valuation, after the exhaustion of the respective amounts of
coverage for those
types of losses provided by the Subordinated Certificates; and (b)
any Net
Prepayment Interest Shortfalls in respect of such Mortgage
Pool.
Net Prepayment Interest Shortfalls: As to any Distribution Date
and
each Mortgage Pool, the amount by which the aggregate of Prepayment
Interest
Shortfalls in respect of the Mortgage Loans or such Mortgage Pool
during the
related Prepayment Period exceeds an amount equal to the
Compensating Interest
paid in respect of such Mortgage Loans, if any, for such
Distribution Date.
Non-Delay Certificates: As specified in the Preliminary
Statement.
Non-Excess Loss: Any
Realized Loss other than an Excess Loss.
Nonrecoverable Advance: Any portion of an Advance previously made
or
proposed to be made by the Master Servicer that, in the good faith
judgment of
the Master Servicer, will not be ultimately recoverable by the
Master Servicer
from the related Mortgagor, related Liquidation Proceeds or
otherwise.
18
<PAGE>
Notice of Final Distribution: The notice to be provided pursuant
to
Section 9.2 to the effect that final distribution on any of the
Certificates
shall be made only upon presentation and surrender thereof.
Notional Amount: Not
applicable.
Notional Amount Component: Not applicable.
Notional Amount Certificates: Not applicable.
Offered Certificates:
As specified in the Preliminary Statement.
Officer's Certificate: A Certificate (i) signed by the Chairman of
the
Board, the Vice Chairman of the Board, the President, a Managing
Director, a
Vice President (however denominated), an Assistant Vice President,
the
Treasurer, the Secretary, or one of the Assistant Treasurers or
Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if
provided for in
this Agreement, signed by a Servicing Officer, as the case may be,
and delivered
to the Depositor and the Trustee, as the case may be, as required
by this
Agreement.
Opinion of Counsel: A written opinion of counsel, who may be
counsel
for the Depositor or the Master Servicer, including, in-house
counsel,
reasonably acceptable to the Trustee; provided, however, that with
respect to
the interpretation or application of the REMIC Provisions, such
counsel must (i)
in fact be independent of the Depositor and the Master Servicer,
(ii) not have
any direct financial interest in the Depositor or the Master
Servicer or in any
affiliate of either, and (iii) not be connected with the Depositor
or the Master
Servicer as an officer, employee, promoter, underwriter, trustee,
partner,
director or person performing similar functions.
Optional Termination: The termination of the trust created
hereunder in
connection with the purchase of the Mortgage Loans pursuant to
Section 9.1(a)
hereof.
Original Subordinated Principal Balance: The aggregate Class
Certificate Balance of the Subordinated Certificates as of the
Closing Date.
Original Mortgage Loan: The Mortgage Loan refinanced in connection
with
the origination of a Refinancing Mortgage Loan.
OTS: The Office of
Thrift Supervision.
Outside Reference Date: Not applicable.
Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and
authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee
or delivered to the Trustee for cancellation; and
19
<PAGE>
(ii) Certificates in exchange for which or in lieu of
which other Certificates have been executed and delivered by
the Trustee pursuant to this Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan with
a
Stated Principal Balance greater than zero which was not the
subject of a
Principal Prepayment in Full prior to such Due Date and which did
not become a
Liquidated Mortgage Loan prior to such Due Date.
Ownership Interest: As to any Residual Certificate, any
ownership
interest in such Certificate including any interest in such
Certificate as the
Holder thereof and any other interest therein, whether direct or
indirect, legal
or beneficial.
Pass-Through Rate: For any Class of Certificates, the per annum
rate
set forth or calculated in the manner described in the Preliminary
Statement.
Percentage Interest: As to any Certificate, the percentage
interest
evidenced thereby in distributions required to be made on the
related Class,
such percentage interest being set forth on the face thereof or
equal to the
percentage obtained by dividing the Denomination of such
Certificate by the
aggregate of the Denominations of all Certificates of the same
Class.
Permitted Investments: At any time, any one or more of the
following
obligations and securities:
(i) obligations of the United States or any agency
thereof, provided such obligations are backed by the full
faith and credit of the United States;
(ii) general obligations of or obligations guaranteed
by any state of the United States or the District of Columbia
receiving the highest long-term debt rating of each Rating
Agency;
(iii) commercial or finance company paper which is
then receiving the highest commercial or finance company paper
rating of each Rating Agency;
(iv) certificates of deposit, demand or time
deposits, or bankers' acceptances issued by any depository
institution or trust company incorporated under the laws of
the United States or of any state thereof and subject to
supervision and examination by federal and/or state banking
authorities, provided that the commercial paper and/or long
term unsecured debt obligations of such depository institution
or trust company (or in the case of the principal depository
institution in a holding company system, the commercial paper
or long-term unsecured debt obligations of such holding
company, but only if Moody's is not a Rating Agency) are then
rated one of the two highest long-term and/or the highest
short-term ratings of each Rating Agency for such securities;
(v) demand or time deposits or certificates of
deposit issued by any bank or trust company or savings
institution to the extent that such deposits are fully insured
by the FDIC and receiving the highest short-term debt rating
of each Rating Agency;
20
<PAGE>
(vi) guaranteed reinvestment agreements issued by any
bank, insurance company or other corporation and receiving the
highest short-term debt rating of each Rating Agency and
containing, at the time of the issuance of such agreements,
such terms and conditions as will not result in the
downgrading or withdrawal of the rating then assigned to the
Certificates by either Rating Agency;
(vii) repurchase obligations with respect to any
security described in clauses (i) and (ii) above, in either
case entered into with a depository institution or trust
company (acting as principal) described in clause (iv) above;
(viii) securities (other than stripped bonds,
stripped coupons or instruments sold at a purchase price in
excess of 115% of the face amount thereof) bearing interest or
sold at a discount issued by any corporation incorporated
under the laws of the United States or any state thereof
which, at the time of such investment, have one of the two
highest ratings of each Rating Agency (except if the Rating
Agency is Moody's or S&P, such rating shall be the highest
commercial paper rating of Moody's or S&P, as applicable,
for
any such securities);
(ix) units of a taxable money-market portfolio having
the highest rating assigned by each Rating Agency (except if
Fitch is a Rating Agency and has not rated the portfolio, the
highest rating assigned by Moody's) and restricted to
obligations issued or guaranteed by the United States of
America or entities whose obligations are backed by the full
faith and credit of the United States of America and
repurchase agreements collateralized by such obligations; and
(x) such other investments bearing interest or sold
at a discount acceptable to each Rating Agency as will not
result in the downgrading or withdrawal of the rating then
assigned to the Certificates by either Rating Agency, as
evidenced by a signed writing delivered by each Rating Agency;
provided that no such instrument shall be a Permitted Investment if
such
instrument evidences the right to receive interest only payments
with respect to
the obligations underlying such instrument.
21
<PAGE>
Permitted Transferee: Any person other than (i) the United States,
any
State or political subdivision thereof, or any agency or
instrumentality of any
of the foregoing, (ii) a foreign government, International
Organization or any
agency or instrumentality of either of the foregoing, (iii) an
organization
(except certain farmers' cooperatives described in section 521 of
the Code)
which is exempt from tax imposed by Chapter 1 of the Code
(including the tax
imposed by section 511 of the Code on unrelated business taxable
income) on any
excess inclusions (as defined in section 860E(c)(l) of the Code)
with respect to
any Residual Certificate, (iv) rural electric and telephone
cooperatives
described in section 1381(a)(2)(C) of the Code, (v) an "electing
large
partnership" as defined in section 775 of the Code, (vi) a Person
that is not
(a) a citizen or resident of the United States, (b) a corporation,
partnership,
or other entity created or organized in or under the laws of the
United States,
any state thereof or the District of Columbia, (c) an estate whose
income from
sources without the United States is includible in gross income for
United
States federal income tax purposes regardless of its connection
with the conduct
of a trade or business within the United States or (d) a trust if a
court within
the United States is able to exercise primary supervision over
the
administration of the trust and one or more United States persons
have the
authority to control all substantial decisions of the trust, unless
such Person
has furnished the transferor and the Trustee with a duly completed
Internal
Revenue Service Form W-8ECI or any applicable successor form, and
(vii) any
other Person so designated by the Depositor based upon an Opinion
of Counsel
that the Transfer of an Ownership Interest in a Residual
Certificate to such
Person may cause any REMIC created hereunder to fail to qualify as
a REMIC at
any time that the Certificates are outstanding; provided, however,
that if a
person is classified as a partnership under the Code, such person
shall only be
a Permitted Transferee if all of its beneficial owners are
described in
subclauses (a), (b), (c) or (d) of clause (vi) and the governing
documents of
such person prohibits a transfer of any interest in such person to
any person
described in clause (vi). The terms "United States," "State" and
"International
Organization" shall have the meanings set forth in section 7701 of
the Code or
successor provisions. A corporation will not be treated as an
instrumentality of
the United States or of any State or political subdivision thereof
for these
purposes if all of its activities are subject to tax and, with the
exception of
the Federal Home Loan Mortgage Corporation, a majority of its board
of directors
is not selected by such government unit.
Person: Any individual, corporation, partnership, joint
venture,
association, joint-stock company, trust, unincorporated
organization or
government, or any agency or political subdivision thereof.
Physical Certificate:
As specified in the Preliminary Statement.
Planned
Balance: Not
applicable.
Planned Principal Classes: Not applicable.
Pool I: The aggregate of the Mortgage Loans identified on the
Mortgage
Loan Schedule as being included in Pool I.
Pool II: The aggregate of the Mortgage Loans identified on the
Mortgage
Loan Schedule as being included in Pool II.
Pool III: The aggregate of the Mortgage Loans identified on the
Mortgage Loan Schedule as being included in Pool III.
22
<PAGE>
Pool Principal Balance: For a Mortgage Pool, with respect to
any
Distribution Date, the aggregate of the Stated Principal Balances
of the
Mortgage Loans in such Mortgage Pool which were Outstanding
Mortgage Loans on
the Due Date in the month preceding the month of such Distribution
Date, and for
the first Distribution Date, as of the Closing Date, less any
Principal
Prepayments received on or after such Due Date and distributed
to
Certificateholders on the prior Distribution Date.
Prepayment Interest
Excess: As to any Principal Prepayment received by
the Master Servicer from the first day through the fifteenth day of
any calendar
month (other than the calendar month in which the Cut-off Date
occurs), all
amounts paid by the related Mortgagor in respect of interest on
such Principal
Prepayment. All Prepayment Interest Excess shall be paid to the
Master Servicer
as additional master servicing compensation.
Prepayment Interest Shortfall: As to any Distribution Date,
Mortgage
Loan and Principal Prepayment received (a) during the period from
the sixteenth
day of the month preceding the month of such Distribution Date (or,
in the case
of the first Distribution Date, from the Cut-off Date) through the
last day of
such month, in the case of a Principal Prepayment in Full, or (b)
during the
month preceding the month of such Distribution Date, in the case of
a partial
Principal Prepayment, the amount, if any, by which one month's
interest at the
related Adjusted Mortgage Rate on such Principal Prepayment exceeds
the amount
of interest actually paid by the Mortgagor in connection with such
Principal
Prepayment.
Prepayment Period: (a) With respect to any Principal Prepayments
in
Full and any Distribution Date, the period from the sixteenth day
of the month
preceding the month of such Distribution Date (or, in the case of
the first
Distribution Date, from the Cut-off Date) through the fifteenth day
of the month
of such Distribution Date, and (b) with respect to any other
Principal
Prepayments and any Distribution Date, the month preceding the
month of such
Distribution Date.
Primary Insurance Policy: Each policy of primary mortgage
guaranty
insurance or any replacement policy therefor with respect to any
Mortgage Loan.
Principal Balance Schedules: Not applicable.
Principal Prepayment: Any payment of principal by a Mortgagor on
a
Mortgage Loan that is received in advance of its scheduled Due Date
and is not
accompanied by an amount representing scheduled interest due on any
date or
dates in any month or months subsequent to the month of prepayment.
Partial
Principal Prepayments shall be applied by the Master Servicer in
accordance with
the terms of the related Mortgage Note.
Principal Prepayment in Full: Any Principal Prepayment made by
a
Mortgagor of the entire principal balance of a Mortgage Loan.
Private Certificate:
As specified in the Preliminary Statement.
Proprietary Lease: With respect to any Cooperative Unit, a lease
or
occupancy agreement between a Cooperative Corporation and a holder
of related
Coop Shares.
PUD: Planned Unit
Development.
23
<PAGE>
Purchase Price: With respect to any Mortgage Loan required to
be
purchased by the Seller pursuant to Section 2.2 or 2.3 hereof or
purchased at
the option of the Master Servicer pursuant to Section 3.11, an
amount equal to
the sum of (i) 100% of the unpaid principal balance of the Mortgage
Loan on the
date of such purchase, (ii) accrued interest thereon at the
applicable Mortgage
Rate (or at the applicable Adjusted Mortgage Rate if the purchaser
is the Master
Servicer) from the date through which interest was last paid by the
Mortgagor to
the Due Date in the month in which the Purchase Price is to be
distributed to
Certificateholders, and (iii) any costs and damages incurred by the
Trust in
connection with the noncompliance of such Mortgage Loan with any
specifically
applicable predatory or abusive lending law.
Qualified Insurer: A mortgage guaranty insurance company duly
qualified
as such under the laws of the state of its principal place of
business and each
state having jurisdiction over such insurer in connection with the
insurance
policy issued by such insurer, duly authorized and licensed in such
states to
transact a mortgage guaranty insurance business in such states and
to write the
insurance provided by the insurance policy issued by it, approved
as a
FNMA-approved mortgage insurer and having a claims paying ability
rating of at
least "AA" or equivalent rating by a nationally recognized
statistical rating
organization. Any replacement insurer with respect to a Mortgage
Loan must have
at least as high a claims paying ability rating as the insurer it
replaces had
on the Closing Date.
Rating Agency: Each of the Rating Agencies specified in the
Preliminary
Statement. If any such organization or a successor is no longer in
existence,
"Rating Agency" shall be such nationally recognized statistical
rating
organization, or other comparable Person, as is designated by the
Depositor,
notice of which designation shall be given to the Trustee.
References herein to
a given rating category of a Rating Agency shall mean such rating
category
without giving effect to any modifiers.
Realized Loss: With respect to each Liquidated Mortgage Loan, an
amount
(not less than zero or more than the Stated Principal Balance of
the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated
Principal
Balance of the Liquidated Mortgage Loan as of the date of such
liquidation, plus
(ii) interest at the Adjusted Net Mortgage Rate from the Due Date
as to which
interest was last paid or advanced (and not reimbursed) to
Certificateholders up
to the Due Date in the month in which Liquidation Proceeds are
required to be
distributed on the Stated Principal Balance of such Liquidated
Mortgage Loan
from time to time, minus (iii) any Liquidation Proceeds, Insurance
Proceeds
and/or Unanticipated Recoveries received during the month in which
such
liquidation occurred (or during the calendar month preceding the
related
Distribution Date, as applicable), to the extent applied as
recoveries of
interest at the Adjusted Net Mortgage Rate and to principal of the
Liquidated
Mortgage Loan. With respect to each Mortgage Loan which has become
the subject
of a Deficient Valuation, if the principal amount due under the
related Mortgage
Note has been reduced, the difference between the principal balance
of the
Mortgage Loan outstanding immediately prior to such Deficient
Valuation and the
principal balance of the Mortgage Loan as reduced by the Deficient
Valuation.
Recognition Agreement: With respect to any Cooperative Loan, an
agreement between the Cooperative Corporation and the originator of
such
Mortgage Loan which establishes the rights of such originator in
the Cooperative
Property.
Record Date: With respect to any Distribution Date, the close
of
business on the last Business Day of the month preceding the month
in which such
Distribution Date occurs.
Reference Bank: Not
applicable.
24
<PAGE>
Refinancing Mortgage Loan: Any Mortgage Loan originated in
connection
with the refinancing of an existing mortgage loan.
Regular Certificates: As specified in the Preliminary
Statement.
Relief Act: The Servicemembers Civil Relief Act, or any similar
state
or local legislation or regulations.
Relief Act Reductions: With respect to any Distribution Date and
any
Mortgage Loan as to which there has been a reduction in the amount
of interest
collectible thereon for the most recently ended calendar month as a
result of
the application of the Relief Act, the amount, if any, by which
interest
collectible on such Mortgage Loan for the most recently ended
calendar month is
less than interest accrued thereon for such month pursuant to the
Mortgage Note.
REMIC: A "real estate mortgage investment conduit" within the
meaning
of section 860D of the Code.
REMIC Change of Law: Any proposed, temporary or final
regulation,
revenue ruling, revenue procedure or other official announcement
or
interpretation relating to REMICs and the REMIC Provisions issued
after the
Closing Date.
REMIC Pool: Either the
Lower REMIC or the Upper REMIC.
REMIC Provisions: Provisions of the federal income tax law relating
to
real estate mortgage investment conduits, which appear at sections
860A through
860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and
regulations promulgated thereunder, as the foregoing may be in
effect from time
to time as well as provisions of applicable state laws.
REO Property: A Mortgaged Property acquired by the Trust Fund
through
foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted
Mortgage Loan.
Request for Release: The Request for Release submitted by the
Master
Servicer to the Trustee, substantially in the form of Exhibits L
and M, as
appropriate.
Required Insurance Policy: With respect to any Mortgage Loan,
any
insurance policy that is required to be maintained from time to
time under this
Agreement.
Required Recordation States: The states of Florida, Maryland
and
Mississippi.
Residual Certificates: As specified in the Preliminary
Statement.
Responsible Officer: When used with respect to the Trustee, any
Vice
President, any Assistant Vice President, the Secretary, any
Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily
performing
functions similar to those performed by any of the above designated
officers and
having direct responsibility for the administration of this
Agreement and also
to whom, with respect to a particular matter, such matter is
referred because of
such officer's knowledge of and familiarity with the particular
subject.
25
<PAGE>
RL Interest: The REMIC residual interest, within the meaning of
the
REMIC Provisions, issued by the Lower REMIC, which shall be
represented by the
Class I-A-R Certificate.
RU Interest: The REMIC residual interest, within the meaning of
the
REMIC Provisions, issued by the Upper REMIC, which shall be
represented by the
Class I-A-R Certificate.
Scheduled Balances:
Not applicable.
Scheduled Certificates: Not applicable.
Scheduled Payment: The scheduled monthly payment on a Mortgage Loan
due
on any Due Date allocable to principal and/or interest on such
Mortgage Loan
which, unless otherwise specified herein, shall give effect to any
related Debt
Service Reduction and any Deficient Valuation that affects the
amount of the
monthly payment due on such Mortgage Loan.
Scheduled Principal Classes: Not applicable.
Securities Act: The
Securities Act of 1933, as amended.
Security Agreement: The security agreement with respect to a
Cooperative Loan.
Seller: First Horizon Home Loan Corporation, a Kansas corporation,
and
its successors and assigns, in its capacity as seller of the
Mortgage Loans
pursuant to the MLPA.
Senior Certificates:
As specified in the Preliminary Statement.
Senior Final Distribution Date: For each Certificate Group, the
Distribution Date on which the Class Certificate Balance of each
Class of
related Senior Certificates has been reduced to zero.
Senior Mezzanine Certificates: As specified in the Preliminary
Statement.
Senior Optimal Principal Amount: As to a Mortgage Pool and with
respect
to each Distribution Date, an amount equal to the sum of:
(1) the related Senior Percentage of all Scheduled Payments of
principal due on each Mortgage Loan in such Mortgage Pool on the
first day of
the month in which the Distribution Date occurs, as specified in
the
amortization schedule at the time applicable thereto after
adjustment for
previous principal prepayments and the principal portion of Debt
Service
Reductions after the Bankruptcy Loss Coverage Amount has been
reduced to zero,
but before any adjustment to such amortization schedule by reason
of any other
bankruptcy or similar proceeding or any moratorium or similar
waiver or grace
period;
(2) the related Senior Prepayment Percentage of the Stated
Principal Balance of each Mortgage Loan in such Mortgage Pool which
was the
subject of a Principal Prepayment in Full received by the Master
Servicer during
the applicable Prepayment Period;
26
<PAGE>
(3) the related Senior Prepayment Percentage of the sum of (a)
all partial Principal Prepayments in respect of each Mortgage Loan
in such
Mortgage Pool received during the applicable Prepayment Period and
(b) all
Unanticipated Recoveries received in respect of each Mortgage Loan
in the
related Mortgage Pool during the calendar month prior to such
Distribution Date;
(4) the lesser of:
(a) the related Senior Prepayment Percentage of the
sum of (x) the Liquidation Proceeds allocable to principal on
each Mortgage Loan in such Mortgage Pool which became a
Liquidated Mortgage Loan during the related Prepayment Period,
other than Mortgage Loans described in clause (y), and (y) the
principal balance of each Mortgage Loan in such Mortgage Pool
that was purchased by a private mortgage insurer during the
related Prepayment Period as an alternative to paying a claim
under the related Insurance Policy; and
(b)(i) the related Senior Percentage of the sum of
(x) the Stated Principal Balance of each Mortgage Loan in such
Mortgage Pool which became a Liquidated Mortgage Loan during
the related Prepayment Period, other than Mortgage Loans
described in clause (y), and (y) the Stated Principal Balance
of each Mortgage Loan in such Mortgage Pool that was purchased
by a private mortgage insurer during the related Prepayment
Period as an alternative to paying a claim under the related
Insurance Policy minus (ii) the related Senior Percentage of
the principal portion of Excess Losses (other than Debt
Service Reductions) for such Mortgage Pool during the related
Prepayment Period; and
(5) the related Senior Prepayment Percentage of the sum of (a)
the Stated Principal Balance of each Mortgage Loan in such Mortgage
Pool which
was repurchased by the seller in connection with such Distribution
Date and (b)
the difference, if any, between the Stated Principal Balance of a
Mortgage Loan
in such Mortgage Pool that has been replaced by the seller with a
Substitute
Mortgage Loan pursuant to this Agreement in connection with such
Distribution
Date and the Stated Principal Balance of such Substitute Mortgage
Loan.
Senior Percentage: On any Distribution Date for a Certificate
Group,
the lesser of 100% and the percentage (carried to six places
rounded up)
obtained by dividing the aggregate Class Certificate Balances of
all Classes of
Senior Certificates of such Certificate Group immediately preceding
such
Distribution Date by the Pool Principal Balance of the related
Mortgage Pool for
the immediately preceding Distribution Date.
Senior Prepayment Percentage: On any Distribution Date occurring
during
the periods set forth below, and as to each Certificate Group, the
Senior
Prepayment Percentages, described below:
27
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------
----------------------------------------------------------------------
Period (Dates Inclusive)
Senior Prepayment Percentage
---------------------------------------
----------------------------------------------------------------------
Period (Dates Inclusive)
Senior Prepayment Percentage
---------------------------------------
----------------------------------------------------------------------
<S>
<C>
January 2006 - December 2012
100%
---------------------------------------
----------------------------------------------------------------------
The related Senior Percentage plus 70% of the related
Subordinated
January 2013 - December 2013
Percentage
---------------------------------------
----------------------------------------------------------------------
The related Senior Percentage plus 60% of the related
Subordinated
January 2014 - December 2014
Percentage
---------------------------------------
----------------------------------------------------------------------
The related Senior Percentage plus 40% of the related
Subordinated
January 2015 - December 2015
Percentage
---------------------------------------
----------------------------------------------------------------------
The related Senior Percentage plus 20% of the related
Subordinated
January 2016 - December 2016
Percentage
---------------------------------------
----------------------------------------------------------------------
January 2017 and thereafter
The related Senior Percentage
---------------------------------------
----------------------------------------------------------------------
</TABLE>
provided however, (i) if on any Distribution Date, the Aggregate
Senior
Percentage exceeds such percentage calculated as of the Closing
Date, then the
Senior Prepayment Percentage for all Certificate Groups for such
Distribution
Date will equal 100%, (ii) if on any Distribution Date prior to the
January 2009
Distribution Date, the Aggregate Subordinated Percentage is greater
than or
equal to twice such percentage calculated as of the Closing Date,
then the
Senior Prepayment Percentage for each Certificate Group for such
Distribution
Date will equal the Senior Percentage for such Certificate Group
plus 50% of the
Subordinated Percentage for such Certificate Group and (iii) if on
or after the
January 2009 Distribution Date, the Aggregate Subordinated
Percentage is greater
than or equal to twice such percentage calculated as of the Closing
Date, then
the Senior Prepayment Percentage for each Certificate Group for
such
Distribution Date will equal the Senior Percentage for such
Certificate Group.
The reductions in the Senior Prepayment Percentage for each
Certificate
Group described above will not occur, and the Senior Prepayment
Percentage or
each Certificate Group for such prior period will be calculated
without regard
to clause (ii) or (iii) of the paragraph above, unless both of the
following
step-down conditions are satisfied with respect to each Mortgage
Pool as of the
last day of the month preceding the Distribution Date:
(1) the
aggregate Stated Principal Balance of Mortgage Loans in
all the Mortgage Pools delinquent 60 days or more (including
for this purpose any Mortgage Loans in foreclosure or subject
to bankruptcy proceedings and Mortgage Loans with respect to
which the related Mortgaged Property, including REO Property,
has been acquired by the Trust Fund) does not exceed 50% of
the aggregate Class Certificate Balances of the Subordinated
Certificates as of that date; and
(2) cumulative
Realized Losses on the Mortgage Loans in all the
Mortgage Pools do not exceed:
(a) 20% of the Original Subordinated Principal Balance if such
Distribution Date occurs between and including January 2006
and December 2008; and
(b) 30% of the Original Subordinated Principal Balance if such
Distribution Date occurs on or after January 2009.
28
<PAGE>
Servicing Advances: All customary, reasonable and necessary "out
of
pocket" costs and expenses incurred in the performance by the
Master Servicer of
its servicing obligations, including, but not limited to, the cost
of (i) the
preservation, restoration and protection of a Mortgaged Property,
(ii) any
expenses reimbursable to the Master Servicer pursuant to Section
3.11 and any
enforcement or judicial proceedings, including foreclosures, (iii)
the
management and liquidation of any REO Property and (iv) compliance
with the
obligations under Section 3.9.
Servicing Agreement: The servicing agreement, dated as of November
26,
2002 by and between First Horizon Asset Securities Inc. and its
assigns, as
owner, and First Tennessee Mortgage Services, Inc., as
servicer.
Servicing Officer: Any officer of the Master Servicer involved in,
or
responsible for, the administration and servicing of the Mortgage
Loans whose
name and facsimile signature appear on a list of servicing officers
furnished to
the Trustee by the Master Servicer on the Closing Date pursuant to
this
Agreement, as such list may from time to time be amended.
Servicing Rights Transfer and Subservicing Agreement: The
servicing
rights transfer and subservicing agreement, dated as of November
26, 2002, by
and between First Horizon Home Loan Corporation, as transferor and
subservicer,
and First Tennessee Mortgage Services, Inc., as transferee and
servicer.
Special Hazard Coverage Termination Date: The date on which the
Special
Hazard Loss Coverage Amount is reduced to zero.
Special Hazard Loss: Any Realized Loss suffered by a Mortgaged
Property
on account of direct physical loss but not including (i) any loss
of a type
covered by a hazard insurance policy or a flood insurance policy
required to be
maintained with respect to such Mortgaged Property pursuant to
Section 3.9 to
the extent of the amount of such loss covered thereby, or (ii) any
loss caused
by or resulting from:
(1) normal wear and tear;
(2) fraud, conversion or other dishonest act on the part of
the Trustee, the Master Servicer or any of their agents or
employees (without
regard to any portion of the loss not covered by any errors and
omissions
policy);
(3) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a part thereof ensues and
then only for
the ensuing loss;
(4) nuclear or chemical reaction or nuclear radiation or
radioactive or chemical contamination, all whether controlled or
uncontrolled,
and whether such loss be direct or indirect, proximate or remote or
be in whole
or in part caused by, contributed to or aggravated by a peril
covered by the
definition of the term "Special Hazard Loss";
(5) hostile or warlike action in time of peace and war,
including action in hindering, combating or defending against an
actual,
impending or expected attack:
29
<PAGE>
(i) by any government or sovereign power, de jure or
de facto, or by any authority maintaining or using military,
naval or air forces;
(ii) by military, naval or air forces; or
(iii) by an agent of any such government, power,
authority or forces;
(6) any weapon of war employing nuclear fission, fusion or
other radioactive force, whether in time of peace or war; or
(7) insurrection, rebellion, revolution, civil war, usurped
power or action taken by governmental authority in hindering,
combating or
defending against such an occurrence, seizure or destruction under
quarantine or
customs regulations, confiscation by order of any government or
public authority
or risks of contraband or illegal transportation or trade.
Special Hazard Loss Coverage Amount: Upon the initial issuance of
the
Certificates, $3,640,000. As of any Distribution Date, the Special
Hazard Loss
Coverage Amount shall equal the greater of
(a) 1.00% (or if greater than 1.00%, the highest percentage of
Mortgage Loans by principal balance secured by Mortgaged Properties
in any
single California zip code) of the outstanding principal balance of
all the
Mortgage Loans as of the related Determination Date; and
(b) twice the outstanding principal balance of the Mortgage
Loan which has the largest outstanding principal balance as of the
related
Determination Date,
less, in each case, the aggregate amount of Special Hazard Losses
that would
have been previously allocated to the Subordinated Certificates in
the absence
of the Loss Allocation Limitation. As of any Distribution Date on
or after the
Cross-over Date, the Special Hazard Loss Coverage Amount shall be
zero.
Special Hazard Mortgage Loan: A Liquidated Mortgage Loan as to
which a
Special Hazard Loss has occurred.
S&P: Standard & Poor's, a division of The McGraw-Hill
Companies, Inc.,
and its successors and/or assigns. If S&P is designated as a
Rating Agency in
the Preliminary Statement, for purposes of Section 11.5(b) the
address for
notices to S&P shall be Standard & Poor's, 55 Water Street,
41st Floor, New
York, New York 10041, Attention: Mortgage Surveillance Monitoring,
or such other
address as S&P may hereafter furnish to the Depositor and the
Master Servicer.
Startup Day: The
Closing Date.
Stated Principal Balance: As to any Mortgage Loan and Due Date,
the
unpaid principal balance of such Mortgage Loan as of such Due Date
as specified
in the amortization schedule at the time relating thereto (before
any adjustment
to such amortization schedule by reason of any moratorium or
similar waiver or
grace period) after giving effect to any previous partial Principal
Prepayments
and Liquidation Proceeds allocable to principal (other than with
respect to any
Liquidated Mortgage Loan) and to the payment of principal due on
such Due Date
and irrespective of any delinquency in payment by the related
Mortgagor.
30
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Streamlined Documentation Mortgage Loan: Any Mortgage Loan
originated
pursuant to the Seller's Streamlined Loan Documentation Program
then in effect.
Subordinated Certificates: As specified in the Preliminary
Statement.
Subordinated Certificate Writedown Amount: As of any Distribution
Date,
the amount by which (a) the sum of the Class Certificate Balances
of all of the
Certificates, after giving effect to the distribution of principal
and the
allocation of Realized Losses in reduction of the Class Certificate
Balances of
all of the Certificates on such Distribution Date, exceeds (b) the
aggregate of
the Pool Principal Balances for each Mortgage Pool on the first day
of the month
of such Distribution Date, less any Deficient Valuations occurring
before the
Bankruptcy Loss Coverage Amount has been reduced to zero.
Subordinated Optimal Principal Amount: With respect to each
Mortgage
Pool and each Distribution Date, an amount equal to the sum of the
following
(but in no event greater than the aggregate Class Certificate
Balances of the
Subordinated Certificates immediately prior to such Distribution
Date):
(1) the related Subordinated Percentage of all Scheduled
Payments of principal due on each outstanding Mortgage Loan in the
related
Mortgage Pool on the first day of the month in which the
Distribution Date
occurs, as specified in the amortization schedule at the time
applicable
thereto, after adjustment for previous principal prepayments and
the principal
portion of Debt Service Reductions after the Bankruptcy Loss
Coverage Amount has
been reduced to zero, but before any adjustment to such
amortization schedule by
reason of any other bankruptcy or similar proceeding or any
moratorium or
similar waiver or grace period;
(2) the related Subordinated Prepayment Percentage of the
Stated Principal Balance of each Mortgage Loan in the related
Mortgage Pool
which was the subject of a Principal Prepayment in Full received by
the Master
Servicer during the related Prepayment Period;
(3) the related Subordinated Prepayment Percentage of the sum
of (a) all partial Principal Prepayments received in respect of
each Mortgage
Loan in the related Mortgage Pool during the related Prepayment
Period, (b) all
Unanticipated Recoveries received in respect of each Mortgage Loan
in the
related Mortgage Pool during the calendar month prior to such
Distribution Date,
and (c) on the Senior Final Distribution Date, 100% of any related
Senior
Optimal Principal Amount remaining undistributed on such date;
(4) the amount, if any, by which the sum of (a) the net
Liquidation Proceeds allocable to principal received during the
related
Prepayment Period in respect of each Liquidated Mortgage Loan in
the related
Mortgage Pool, other than Mortgage Loans described in clause (b),
and (b) the
principal balance of each Mortgage Loan in the related Mortgage
Pool that was
purchased by a private mortgage insurer during the related
Prepayment Period as
an alternative to paying a claim under the related Insurance Policy
exceeds (c)
the sum of the amounts distributable to the Senior
Certificateholders under
clause (4) of the definition of applicable Senior Optimal Principal
Amount on
such Distribution Date; and
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(5) the related Subordinated Prepayment Percentage of the sum
of (a) the Stated Principal Balance of each Mortgage Loan in the
related
Mortgage Pool which was repurchased by the seller in connection
with such
Distribution Date and (b) the difference, if any, between the
Stated Principal
Balance of each Mortgage Loan in the related Mortgage Pool that has
been
replaced by the seller with a Substitute Mortgage Loan pursuant to
this
Agreement in connection with such Distribution Date and the Stated
Principal
Balance of each such Substitute Mortgage Loan.
Subordinated Percentage: For any Distribution Date and each
Certificate
Group, 100% minus the related Senior Percentage.
Subordinated Prepayment Percentage: For any Distribution Date,
100%
minus the Senior Prepayment Percentage.
Subservicer: Any person to whom the Master Servicer has contracted
for
the servicing of all or a portion of the Mortgage Loans pursuant to
Section 3.2
hereof.
Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller
for
a Deleted Mortgage Loan which must, on the date of such
substitution, as
confirmed in a Request for Release, substantially in the form of
Exhibit L, (i)
have a Stated Principal Balance, after deduction of the principal
portion of the
Scheduled Payment due in the month of substitution, not in excess
of, and not
more than 10% less than the Stated Principal Balance of the Deleted
Mortgage
Loan; (ii) have an Adjusted Net Mortgage Rate not lower than the
Adjusted Net
Mortgage Rate of the Deleted Mortgage Loan, provided that the
Master Servicing
Fee for the Substitute Mortgage Loan shall be equal to or greater
than that of
the Deleted Mortgage Loan; (iii) have a maximum mortgage rate not
more than 1%
per annum higher or lower than the maximum mortgage rate of the
Deleted Mortgage
Loan; (iv) have a minimum mortgage rate specified in its related
Mortgage Note
not more than 1% per annum higher or lower than the minimum
mortgage rate of the
Deleted Mortgage Loan; (v) have the same mortgage index, reset
period and
periodic rate as the Deleted Mortgage Loan and a gross margin not
more than 1%
per annum higher or lower than that of the Deleted Mortgage Loan
(vi) be
accruing interest at a rate no lower than and not more than 1% per
annum higher
than, that of the Deleted Mortgage Loan; (iv) have a Loan-to-Value
Ratio no
higher than that of the Deleted Mortgage Loan; (vii) have a
remaining term to
maturity no greater than (and not more than one year less than that
of) the
Deleted Mortgage Loan; (viii) not be a Cooperative Loan unless the
Deleted
Mortgage Loan was a Cooperative Loan and (ix) comply with each
representation
and warranty set forth in Section 2.3 hereof.
Substitution Adjustment Amount: The meaning ascribed to such
term
pursuant to Section 2.3.
Super Senior Certificates: As specified in the Preliminary
Statement.
Super Senior Support Certificates: Not applicable.
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Support Classes: Not
applicable.
Targeted Balances: Not
applicable.
Targeted Principal Classes: Not applicable.
Tax Matters Person: The person designated as "tax matters person"
in
the manner provided under Treasury regulation ss. 1.860F-4(d) and
Treasury
regulation ss. 301.6231(a)(7)-1. Initially, the Tax Matters Person
shall be the
Trustee.
Tax Matters Person Certificate: The Class I-A-R Certificates with
a
Denomination of $0.01.
Transfer: Any direct or indirect transfer or sale of any
Ownership
Interest in a Residual Certificate.
Trust Fund: The corpus of the trust created hereunder consisting of
(i)
the Mortgage Loans and all interest and principal received on or
with respect
thereto after the Cut-off Date to the extent not applied in
computing the
Cut-off Date Principal Balance thereof; (ii) all of the Depositor's
rights as
purchaser under the MLPA; (iii) the Certificate Account and the
Distribution
Account and all amounts deposited therein pursuant to the
applicable provisions
of this Agreement; (iv) property that secured a Mortgage Loan and
has been
acquired by foreclosure, deed-in-lieu of foreclosure or otherwise;
and (v) all
proceeds of the conversion, voluntary or involuntary, of any of the
foregoing.
Trustee: The Bank of New York and its successors and, if a
successor
trustee is appointed hereunder, such successor.
Trustee Fee: As to any Distribution Date and a Mortgage Pool, an
amount
equal to one-twelfth of the Trustee Fee Rate multiplied by the
applicable Pool
Principal Balance with respect to such Distribution Date.
Trustee Fee Rate: With respect to each Mortgage Loan, the per
annum
rate agreed upon in writing on or prior to the Closing Date by the
Trustee and
the Depositor.
Unanticipated Recovery: As defined in Section 4.2(h).
Undercollateralization Distribution: As defined in Section 4.2(i).
Undercollateralized Group: With respect to any Distribution Date,
the
Senior Certificates of any Certificate Group as to which the
aggregate
Certificate Principal Balance thereof, after giving effect to
distributions
pursuant to Section 4.2(a) on such date, is greater than the Pool
Principal
Balance of the related Mortgage Pool for such Distribution
Date.
Underwriter: As specified in the Preliminary Statement.
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Underwriters' Exemption: An individual administrative exemption
granted
by the U.S. Department of Labor to the Underwriter providing
exceptions from
some of the prohibited transaction rules of ERISA with respect to
the initial
purchase, the holding and the subsequent resale by employee benefit
plans in
certificates in pass-through trusts having assets and meeting
conditions
described therein, as amended by Prohibited Transaction Exemption
2000-58 (65
Fed. Reg. 67765, November 13, 2000), as amended, and Prohibited
Transaction
Exemption 2002-41 (67 Fed. Reg. 54487, August 22, 2002), as amended
(or any
successor thereto), or any substantially similar administrative
exemption
granted by the U.S. Department of Labor.
Upper REMIC: The segregated pool of assets consisting of the
Lower
REMIC Interests.
Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. As of any date
of
determination, (a) 99.0% of all Voting Rights will be allocated
among all
Holders of the Certificates, other than the Class I-A-R
Certificates, in
proportion to their then outstanding Class Certificate Balance; and
(b) 1.0% of
all Voting Rights will be allocated to the Holders of the Class
I-A-R
Certificates (such Voting Rights to be allocated among the Holders
of
Certificates of each such Class in accordance with their respective
Percentage
Interests).
Weighted Average Adjusted Net Mortgage Rate: For a Mortgage Pool,
the
average of the Adjusted Net Mortgage Rates of the Mortgage Loans in
the related
Loan Group, weighted on the basis of the Stated Principal Balances
thereof.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Conveyance of Mortgage Loans.
(a)
The Depositor,
concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys
to
the Trustee for the benefit of the Certificateholders, without
recourse, all the right, title and interest of the Depositor in
and
to the Trust Fund together with (i) the Depositor's right to
(A)
require the Seller to cure any breach of a representation or
warranty made by the Seller pursuant to the MLPA, or (B)
repurchase
or substitute for any affected Mortgage Loan in accordance
herewith,
and (ii) all right, title and interest of the Depositor in, to
and
under the Servicing Agreement, which right has been assigned to
the
Depositor pursuant to the MLPA.
(b)
In connection
with the transfer and assignment set forth in clause
(a) above, the Depositor has delivered or caused to be delivered
to
the Trustee or the Custodian on its behalf (or, in the case of
the
Delay Delivery Mortgage Loans, will deliver or cause to be
delivered
to the Trustee or the Custodian on its behalf within thirty
(30)
days following the Closing Date) for the benefit of the
Certificateholders the following documents or instruments with
respect to each Mortgage Loan so assigned:
(i)
(A) the original
Mortgage Note endorsed by manual or facsimile
signature in blank in the following form: "Pay to the order of
________________, without recourse," with all intervening
endorsements showing a complete chain of endorsement from the
originator to the Person endorsing the Mortgage Note (each such
endorsement
being sufficient to transfer all right, title and
interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note); or
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<PAGE>
(B) with respect to any Lost Mortgage Note, a lost note
affidavit
from the Seller stating that the original Mortgage Note was lost
or
destroyed, together with a copy of such Mortgage Note;
(ii)
except as provided
below and for each Mortgage Loan that is not a
MERS Mortgage Loan, the original recorded Mortgage or a copy of
such
Mortgage certified by the Seller as being a true and complete
copy
of the Mortgage, and in the case of each MERS Mortgage Loan,
the
original recorded Mortgage, noting the presence of the MIN of
the
Mortgage Loans and either language indicating that the Mortgage
Loan
is a MOM Loan if the Mortgage Loan is a MOM Loan or if the
Mortgage
Loan was not a MOM Loan at origination, the original Mortgage
and
the assignment thereof to MERS, with evidence of recording
indicated
thereon, or a copy of the Mortgage certified by the Seller as
being
a true and complete copy of the Mortgage;
(iii) in
the case of a Mortgage Loan that is not a MERS Mortgage Loan, a
duly executed assignment of the Mortgage, or a copy of such
assignment certified by the Seller as being a true and complete
copy
of the assignment, in blank (which may be included in a blanket
assignment or assignments), together with, except as provided
below,
all interim recorded assignments, or copies of such interim
assignments certified by the Seller as being true and complete
copies of the interim assignments, of such Mortgage (each such
assignment, when duly and validly completed, to be in
recordable
form and sufficient to effect the assignment of and transfer to
the
assignee thereof, under the Mortgage to which the assignment
relates); provided that, if the related Mortgage has not been
returned from the applicable public recording office, such
assignment of the Mortgage may exclude the information to be
provided by the recording office;
(iv)
the original or copies
of each assumption, modification, written
assurance or substitution agreement, if any;
(v) either the original or
duplicate original title policy, or a copy of
such title policy certified by the Seller as being a true and
complete copy of the title policy (including all riders
thereto),
with respect to the related Mortgaged Property, if available,
provided that the title policy (including all riders thereto)
will
be delivered as soon as it becomes available, and if the title
policy is not available, and to the extent required pursuant to
the
second paragraph below or otherwise in connection with the rating
of
the Certificates, a written commitment or interim binder or
preliminary report of the title issued by the title insurance
or
escrow company with respect to the Mortgaged Property, or in
lieu
thereof, an Alternative Title Product or a copy of such
Alternative
Title Product certified by the Seller as being a true and
complete
copy of the Alternative Title Product; and
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<PAGE>
(vi)
in the case of a
Cooperative Loan, the originals of the following
documents or instruments:
(A) The Coop
Shares, together with a stock power in blank;
(B) The executed
Security Agreement;
(C) The executed
Proprietary Lease;
(D) The executed
Recognition Agreement;
(E) The executed
UCC-1 financing statement with evidence of
recording thereon which have been filed in all places required
to perfect the Seller's interest in the Coop Shares and the
Proprietary Lease; and
(F) Executed
UCC-3 financing statements or other appropriate UCC
financing statements required by state law, evidencing a
complete and unbroken line from the mortgagee to the Trustee
with evidence of recording thereon (or in a form suitable for
recordation).
In the event that in connection with any Mortgage Loan that is not
a
MERS Mortgage Loan the Depositor cannot deliver (a) the original
recorded
Mortgage or (b) all interim recorded assignments satisfying the
requirements of
clause (ii) or (iii) above, respectively, concurrently with the
execution and
delivery hereof because such document or documents have not been
returned from
the applicable public recording office, the Depositor shall
promptly deliver or
cause to be delivered to the Trustee or the Custodian on its behalf
such
original Mortgage or such interim assignment, as the case may be,
with evidence
of recording indicated thereon upon receipt thereof from the public
recording
office, or a copy thereof, certified, if appropriate, by the
relevant recording
office, but in no event shall any such delivery of the original
Mortgage and
each such interim assignment or a copy thereof, certified, if
appropriate, by
the relevant recording office, be made later than one year
following the Closing
Date; provided, however, in the event the Depositor is unable to
deliver or
cause to be delivered by such date each Mortgage and each such
interim
assignment by reason of the fact that any such documents have not
been returned
by the appropriate recording office, or, in the case of each such
interim
assignment, because the related Mortgage has not been returned by
the
appropriate recording office, the Depositor shall deliver or cause
to be
delivered such documents to the Trustee or the Custodian on its
behalf as
promptly as possible upon receipt thereof and, in any event, within
720 days
following the Closing Date. The Depositor shall forward or cause to
be forwarded
to the Trustee or the Custodian on its behalf (a) from time to time
additional
original documents evidencing an assumption or modification of a
Mortgage Loan
and (b) any other documents required to be delivered by the
Depositor or the
Master Servicer to the Trustee. In the event that the original
Mortgage is not
delivered and in connection with the payment in full of the related
Mortgage
Loan and the public recording office requires the presentation of a
"lost
instruments affidavit and indemnity" or any equivalent document,
because only a
copy of the Mortgage can be delivered with the instrument of
satisfaction or
reconveyance, the Master Servicer shall execute and deliver or
cause to be
executed and delivered such a document to the public recording
office. In the
case where a public recording office retains the original recorded
Mortgage or
in the case where a Mortgage is lost after recordation in a public
recording
office, the Depositor shall deliver or cause to be delivered to the
Trustee or
the Custodian on its behalf a copy of such Mortgage certified by
such public
recording office to be a true and complete copy of the original
recorded
Mortgage.
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<PAGE>
In addition, in the event that in connection with any Mortgage Loan
the
Depositor cannot deliver or cause to be delivered the original or
duplicate
original lender's title policy (together with all riders thereto),
satisfying
the requirements of clause (v) above, concurrently with the
execution and
delivery hereof because the related Mortgage has not been returned
from the
applicable public recording office, the Depositor shall promptly
deliver or
cause to be delivered to the Trustee or the Custodian on its behalf
such
original or duplicate original lender's title policy (together with
all riders
thereto) upon receipt thereof from the applicable title insurer,
but in no event
shall any such delivery of the original or duplicate original
lender's title
policy be made later than one year following the Closing Date;
provided,
however, in the event the Depositor is unable to deliver or cause
to be
delivered by such date the original or duplicate original lender's
title policy
(together with all riders thereto) because the related Mortgage has
not been
returned by the appropriate recording office, the Depositor shall
deliver or
cause to be delivered such documents to the Trustee or the
Custodian on its
behalf as promptly as possible upon receipt thereof and, in any
event, within
720 days following the Closing Date; provided further, however,
that the
Depositor shall not be required to deliver an original or duplicate
lender's
title policy (together with all riders thereto) if the Depositor
delivers an
Alternative Title Product in lieu thereof. Notwithstanding the
preceding, in
connection with any Mortgage Loan for which either the original or
duplicate
original title policy has not been delivered to the Trust, if at
any time during
the term of this Agreement the parent company of the Seller does
not have a long
term senior debt rating of A- or higher from S&P and A- or
higher from Fitch (if
rated by Fitch), then the Depositor shall within 30 days deliver or
cause to be
delivered to the Trustee or the Custodian on its behalf (if it has
not
previously done so) a written commitment or interim binder or
preliminary report
of the title issued by the title insurance or escrow company with
respect to the
Mortgaged Property.
Subject to the immediately following sentence, as promptly as
practicable subsequent to such transfer and assignment, and in any
event, within
thirty (30) days thereafter, the Master Servicer shall (i) complete
each
assignment of Mortgage, as follows: "First Horizon Mortgage
Pass-Through
Certificates, Series 2005-AA12, The Bank of New York, as trustee
for the holders
of the Certificates", (ii) cause such assignment to be in proper
form for
recording in the appropriate public office for real property
records and (iii)
cause to be delivered for recording in the appropriate public
office for real
property records the assignments of the Mortgages to the Trustee,
except that,
with respect to any assignments of Mortgage as to which the Master
Servicer has
not received the information required to prepare such assignment in
recordable
form, the Master Servicer's obligation to do so and to deliver the
same for such
recording shall be as soon as practicable after receipt of such
information and
in any event within thirty (30) days after receipt thereof.
Notwithstanding the
foregoing, the Master Servicer need not cause to be recorded any
assignment
which relates to a Mortgage Loan in any state other than the
Required
Recordation States.
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<PAGE>
In the case of Mortgage Loans that have been prepaid in full as of
the
Closing Date, the Depositor, in lieu of delivering the above
documents to the
Trustee or the Custodian on its behalf, will deposit in the
Certificate Account
the portion of such payment that is required to be deposited in the
Certificate
Account pursuant to Section 3.8 hereof.
Notwithstanding anything to the contrary in this Agreement,
within
thirty days after the Closing Date, the Depositor shall either (i)
deliver or
cause to be delivered to the Trustee or the Custodian on its behalf
the Mortgage
File as required pursuant to this Section 2.1 for each Delay
Delivery Mortgage
Loan or (ii) (A) substitute or cause to be substituted a Substitute
Mortgage
Loan for the Delay Delivery Mortgage Loan or (B) repurchase or
cause to be
repurchased the Delay Delivery Mortgage Loan, which substitution or
repurchase
shall be accomplished in the manner and subject to the conditions
set forth in
Section 2.3 (treating each Delay Delivery Mortgage Loan as a
Deleted Mortgage
Loan for purposes of such Section 2.3), provided, however, that if
the Depositor
fails to deliver a Mortgage File for any Delay Delivery Mortgage
Loan within the
thirty-day period provided in the prior sentence, the Depositor
shall use its
best reasonable efforts to effect or cause to be effected a
substitution, rather
than a repurchase of, such Deleted Mortgage Loan and provided
further that the
cure period provided for in Section 2.2 or in Section 2.3 shall not
apply to the
initial delivery of the Mortgage File for such Delay Delivery
Mortgage Loan, but
rather the Depositor shall have five (5) Business Days to cure or
cause to be
cured such failure to deliver. At the end of such thirty-day
period, the Trustee
or the Custodian, on its behalf shall send a Delay Delivery
Certification for
the Delay Delivery Mortgage Loans delivered during such thirty-day
period in
accordance with the provisions of Section 2.2. Notwithstanding
anything to the
contrary contained in this Agreement, none of the Mortgage Loans in
the Trust
Fund is or will be Delay Delivery Mortgage Loans.
SECTION 2.2 Acceptance by Trustee of the Mortgage Loans.
The Trustee or the Custodian, on behalf of the Trustee,
acknowledges
receipt of the documents identified in the Initial Certification in
the form
annexed hereto as Exhibit E and declares that it or the Custodian
holds and will
hold such documents and the other documents delivered to it or the
Custodian, as
applicable, constituting the Mortgage Files, and that it or the
Custodian, as
applicable, holds or will hold such other assets as are included in
the Trust
Fund, in trust for the exclusive use and benefit of all present and
future
Certificateholders. The Trustee acknowledges that the Custodian
will maintain
possession of the Mortgage Notes in the State of Texas, unless
otherwise
permitted by the Rating Agencies.
The Trustee
agrees to execute and deliver or to cause the Custodian to
execute and deliver on the Closing Date to the Depositor and the
Master Servicer
an Initial Certification in the form annexed hereto as Exhibit E.
Based on its
or the Custodian's review and examination, and only as to the
documents
identified in such Initial Certification, the Custodian, on behalf
of the
Trustee, acknowledges that such documents appear regular on their
face and
relate to such Mortgage Loan. Neither the Trustee nor the Custodian
shall be
under any duty or obligation to inspect, review or examine said
documents,
instruments, certificates or other papers to determine that the
same are
genuine, enforceable or appropriate for the represented purpose or
that they
have actually been recorded in the real estate records or that they
are other
than what they purport to be on their face.
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<PAGE>
On or about the thirtieth (30th) day after the Closing Date,
the
Trustee shall deliver or shall cause the Custodian to deliver to
the Depositor
and the Master Servicer a Delay Delivery Certification in the form
annexed
hereto as Exhibit F, with any applicable exceptions noted
thereon.
Notwithstanding anything to the contrary contained in this
Agreement, none of
the Mortgage Loans in the Trust Fund is or will be Delay Delivery
Mortgage
Loans.
Not later than 90 days after the Closing Date, the Trustee
shall
deliver or shall cause the Custodian to deliver to the Depositor
and the Master
Servicer a Subsequent Certification in the form annexed hereto as
Exhibit G,
with any applicable exceptions noted thereon.
If, in the course of such review, the Trustee or the Custodian,
on
behalf of the Trustee, finds any document constituting a part of a
Mortgage File
which does not meet the requirements of Section 2.1, the Trustee
shall list or
shall cause the Custodian to list such as an exception in the
Subsequent
Certification; provided, however that neither the Trustee nor the
Custodian
shall make any determination as to whether (i) any endorsement is
sufficient to
transfer all right, title and interest of the party so endorsing,
as noteholder
or assignee thereof, in and to that Mortgage Note or (ii) any
assignment is in
recordable form or is sufficient to effect the assignment of and
transfer to the
assignee thereof under the mortgage to which the assignment
relates. The Seller
shall promptly correct or cure such defect within 90 days from the
date it was
so notified of such defect and, if the Seller does not correct or
cure such
defect within such period, the Seller shall either (a) substitute
for the
related Mortgage Loan a Substitute Mortgage Loan, which
substitution shall be
accomplished in the manner and subject to the conditions set forth
in Section
2.3, or (b) purchase such Mortgage Loan from the Trustee within 90
days from the
date the Seller was notified of such defect in writing at the
Purchase Price of
such Mortgage Loan; provided, however, that in no event shall such
substitution
or purchase occur more than 540 days from the Closing Date, except
that if the
substitution or purchase of a Mortgage Loan pursuant to this
provision is
required by reason of a delay in delivery of any documents by the
appropriate
recording office, and there is a dispute between either the Master
Servicer or
the Seller and the Trustee over the location or status of the
recorded document,
then such substitution or purchase shall occur within 720 days from
the Closing
Date. The Trustee shall deliver or shall cause the Custodian to
deliver written
notice to each Rating Agency within 270 days from the Closing Date
indicating
each Mortgage Loan (a) which has not been returned by the
appropriate recording
office or (b) as to which there is a dispute as to location or
status of such
Mortgage Loan. Such notice shall be delivered every 90 days
thereafter until the
related Mortgage Loan is returned to the Trustee or the Custodian
on its behalf.
Any such substitution pursuant to (a) above or purchase pursuant to
(b) above
shall not be effected prior to the delivery to the Trustee of the
Opinion of
Counsel required by Section 2.5 hereof, if any, and any
substitution pursuant to
(a) above shall not be effected prior to the additional delivery to
the Trustee
of a Request for Release substantially in the form of Exhibit L. No
substitution
is permitted to be made in any calendar month after the
Determination Date for
such month. The Purchase Price for any such Mortgage Loan shall be
deposited by
the Seller in the Certificate Account on or prior to the
Distribution Account
Deposit Date for the Distribution Date in the month following the
month of
repurchase and, upon receipt of such deposit and certification with
respect
thereto in the form of Exhibit M hereto, the Trustee shall cause
the Custodian
to release the related Mortgage File to the Seller and shall
execute and deliver
at the Seller's request such instruments of transfer or assignment
prepared by
the Seller, in each case without recourse, as shall be necessary to
vest in the
Seller, or a designee, the Trustee's interest in any Mortgage Loan
released
pursuant hereto. If pursuant to the foregoing provisions the Seller
repurchases
a Mortgage Loan that is a MERS Mortgage Loan, the Master Servicer
shall either
(i) cause MERS to execute and deliver an assignment of the Mortgage
in
recordable form to transfer the Mortgage from MERS to the Seller
and shall cause
such Mortgage to be removed from registration on the MERS(R) System
in
accordance with MERS' rules and regulations or (ii) cause MERS to
designate on
the MERS(R) System the Seller as the beneficial holder of such
Mortgage Loan.
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<PAGE>
The Trustee shall retain or shall cause the Custodian to retain
possession and custody of each Mortgage File in accordance with and
subject to
the terms and conditions set forth herein. The Master Servicer
shall promptly
deliver to the Trustee or the Custodian on its behalf, upon the
execution or
receipt thereof, the originals of such other documents or
instruments
constituting the Mortgage File as come into the possession of the
Master
Servicer from time to time.
It is understood and agreed that the obligation of the Seller
to
substitute for or to purchase any Mortgage Loan which does not meet
the
requirements of Section 2.1 above shall constitute the sole remedy
respecting
such defect available to the Trustee, the Depositor and any
Certificateholder
against the Seller.
The mortgage loans permitted by the terms of this Agreement to
be
included in the Trust Fund are limited to (i) the Mortgage Loans
(which the
Depositor acquired pursuant to the MLPA, which contains, among
other
representations and warranties, a representation and warranty of
the Seller that
no Mortgage Loan is a "high cost loan" as defined by the specific
applicable
local, state or federal predatory and abusive lending laws, and
(ii) Substitute
Mortgage Loans (which, by definition as set forth in this Agreement
and referred
to in the MLPA, are required to conform to, among other
representations and
warranties, a representation and warranty of the Seller set forth
in the MLPA
that no Substitute Mortgage Loan is a "high cost loan" as defined
by the
specific applicable local, state or federal predatory and abusive
lending laws).
It is therefore understood and agreed by the parties hereto that it
is not
intended that any Mortgage Loan be included in the Trust Fund that
is a "high
cost loan" as defined by the specific applicable local, state or
federal
predatory and abusive lending laws.
SECTION 2.3 Representations and Warranties of the Master
Servicer;
Covenants of the Seller.
(a)
The Master
Servicer hereby makes the representations and warranties
set forth in Schedule II hereto and by this reference
incorporated
herein, to the Depositor and the Trustee, as of the Closing Date,
or
if so specified therein, as of the Cut-off Date.
40
<PAGE>
(b)
Upon discovery
by any of the parties hereto of a breach of a
representation or warranty made pursuant to Schedule B to the
MLPA
that materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, the party discovering
such
breach shall give prompt notice thereof to the other parties.
The
Seller hereby covenants that within 90 days of the earlier of
its
discovery or its receipt of written notice from any party of a
breach of any representation or warranty made pursuant to Schedule
B
to the MLPA which materially and adversely affects the interests
of
the Certificateholders in any Mortgage Loan, it shall cure such
breach in all material respects, and if such breach is not so
cured,
shall, (i) if such 90-day period expires prior to the second
anniversary of the Closing Date, remove such Mortgage Loan (a
"Deleted Mortgage Loan") from the Trust Fund and substitute in
its
place a Substitute Mortgage Loan, in the manner and subject to
the
conditions set forth in this Section; or (ii) repurchase the
affected Mortgage Loan or Mortgage Loans from the Trustee at
the
Purchase Price in the manner set forth below; provided,
however,
that any such substitution pursuant to (i) above shall not be
effected prior to the delivery to the Trustee of the Opinion of
Counsel required by Section 2.5 hereof, if any, and any such
substitution pursuant to (i) above shall not be effected prior
to
the additional delivery to the Trustee or the Custodian on its
behalf of a Request for Release substantially in the form of
Exhibit
M and the Mortgage File for any such Substitute Mortgage Loan.
The
Seller shall promptly reimburse the Master Servicer and the
Trustee
for any expenses reasonably incurred by the Master Servicer or
the
Trustee in respect of enforcing the remedies for such breach.
With
respect to the representations and warranties described in this
Section which are made to the best of the Seller's knowledge, if
it
is discovered by either the Depositor, the Seller or the
Trustee
that the substance of such representation and warranty is
inaccurate
and such inaccuracy materially and adversely affects the value
of
the related Mortgage Loan or the interests of the
Certificateholders
therein, notwithstanding the Seller's lack of knowledge with
respect
to the substance of such representation or warranty, such
inaccuracy
shall be deemed a breach of the applicable representation or
warranty.
With respect to any Substitute Mortgage Loan or Loans, the Seller
shall
deliver to the Trustee or the Custodian on its behalf for the
benefit of the
Certificateholders the Mortgage Note, the Mortgage, the related
assignment of
the Mortgage, and such other documents and agreements as are
required by Section
2.1, with the Mortgage Note endorsed and the Mortgage assigned as
required by
Section 2.1. No substitution is permitted to be made in any
calendar month after
the Determination Date for such month. Scheduled Payments due with
respect to
Substitute Mortgage Loans in the month of substitution shall not be
part of the
Trust Fund and will be retained by the Seller on the next
succeeding
Distribution Date. For the month of substitution, distributions
to
Certificateholders will include the monthly payment due on any
Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to
retain all
amounts received in respect of such Deleted Mortgage Loan. The
Master Servicer
shall amend the Mortgage Loan Schedule for the benefit of the
Certificateholders
to reflect the removal of such Deleted Mortgage Loan and the
substitution of the
Substitute Mortgage Loan or Loans and the Master Servicer shall
deliver the
amended Mortgage Loan Schedule to the Trustee. Upon such
substitution, the
Substitute Mortgage Loan or Loans shall be subject to the terms of
this
Agreement in all respects, and the Seller shall be deemed to have
made with
respect to such Substitute Mortgage Loan or Loans, as of the date
of
substitution, the representations and warranties made pursuant to
Schedule B to
the MLPA with respect to such Mortgage Loan. Upon any such
substitution and the
deposit to the Certificate Account of the amount required to be
deposited
therein in connection with such substitution as described in the
following
paragraph, the Trustee shall release or shall cause the Custodian
to release the
Mortgage File held for the benefit of the Certificateholders
relating to such
Deleted Mortgage Loan to the Seller and shall execute and deliver
at the
Seller's direction such instruments of transfer or assignment
prepared by the
Seller, in each case without recourse, as shall be necessary to
vest title in
the Seller, or its designee, the Trustee's interest in any Deleted
Mortgage Loan
substituted for pursuant to this Section 2.3.
41
<PAGE>
For any month in which the Seller substitutes one or more
Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master
Servicer will
determine the amount (if any) by which the aggregate principal
balance of all
such Substitute Mortgage Loans as of the date of substitution is
less than the
aggregate Stated Principal Balance of all such Deleted Mortgage
Loans (after
application of the scheduled principal portion of the monthly
payments due in
the month of substitution). The amount of such shortage (the
"Substitution
Adjustment Amount") plus an amount equal to the aggregate of any
unreimbursed
Advances with respect to such Deleted Mortgage Loans shall be
deposited in the
Certificate Account by the Seller on or before the Distribution
Account Deposit
Date for the Distribution Date in the month succeeding the calendar
month during
which the related Mortgage Loan became required to be purchased or
replaced
hereunder.
In the event that the Seller shall have repurchased a Mortgage
Loan,
the Purchase Price therefor shall be deposited in the Certificate
Account
pursuant to Section 3.5 on or before the Distribution Account
Deposit Date for
the Distribution Date in the month following the month during which
the Seller
became obligated hereunder to repurchase or replace such Mortgage
Loan and upon
such deposit of the Purchase Price, the delivery of the Opinion of
Counsel
required by Section 2.5 and receipt of a Request for Release in the
form of
Exhibit M hereto, the Trustee shall release or shall cause the
Custodian to
release the related Mortgage File held for the benefit of the
Certificateholders
to such Person, and the Trustee shall execute and deliver or shall
cause the
Custodian to execute and deliver at such Person's direction such
instruments of
transfer or assignment prepared by such Person, in each case
without recourse,
as shall be necessary to transfer title from the Trustee. It is
understood and
agreed that the obligation under this Agreement of the Seller to
cure,
repurchase or replace any Mortgage Loan as to which a breach has
occurred and is
continuing shall constitute the sole remedy against the Seller
respecting such
breach available to Certificateholders, the Depositor or the
Trustee on their
behalf.
After giving effect to the sale of the Certificates by the
Depositor to
the Underwriter, and thereafter, so long as any Certificates remain
outstanding,
the Seller, its affiliates and agents, collectively, shall not
beneficially own
Certificates the aggregate fair value of which would represent 90%
or more of
the beneficial interests in the Trust Fund.
The representations and warranties made pursuant to this Section
2.3
shall survive delivery of the respective Mortgage Files to the
Trustee or the
Custodian for the benefit of the Certificateholders.
42
<PAGE>
SECTION 2.4 Representations and Warranties of the Depositor as
to
the Mortgage Loans.
The Depositor hereby represents and warrants to the Trustee
with
respect to each Mortgage Loan as of the date hereof or such other
date set forth
herein that as of the Closing Date, and following the transfer of
the Mortgage
Loans to it pursuant to the MLPA and immediately prior to the
conveyance of the
Mortgage Loans by it to the Trustee pursuant to Section 2.1(a)
hereof, the
Depositor had good title to the Mortgage Loans and the Mortgage
Notes were
subject to no offsets, defenses or counterclaims.
It is understood and agreed that the representations and warranties
set
forth in this Section 2.4 shall survive delivery of the Mortgage
Files to the
Trustee. Upon discovery by the Depositor or the Trustee of a breach
of any of
the foregoing representations and warranties set forth in this
Section 2.4
(referred to herein as a "breach"), which breach materially and
adversely
affects the interest of the Certificateholders, the party
discovering such
breach shall give prompt written notice to the others and to each
Rating Agency.
SECTION 2.5 Delivery of Opinion of Counsel in Connection with
Substitutions.
(a)
Notwithstanding
any contrary provision of this Agreement, no
substitution pursuant to Section 2.2 or Section 2.3 shall be
made
more than 90 days after the Closing Date unless the Depositor
delivers to the Trustee an Opinion of Counsel, which Opinion of
Counsel shall not be at the expense of either the Trustee or
the
Trust Fund, addressed to the Trustee, to the effect that such
substitution will not (i) result in the imposition of the tax
on
"prohibited transactions" on the Trust Fund or contributions
after
the Startup Date, as defined in Sections 860F(a)(2) and 860G(d)
of
the Code, respectively, or (ii) cause any REMIC created hereunder
to
fail to qualify as a REMIC at any time that any Certificates
are
outstanding.
(b)
Upon discovery
by the Depositor, the Master Servicer or the Trustee
that any Mortgage Loan does not constitute a "qualified
mortgage"
within the meaning of Section 860G(a)(3) of the Code, the party
discovering such fact shall promptly (and in any event within
five
(5) Business Days of discovery) give written notice thereof to
the
other parties. In connection therewith, the Trustee shall
require
the Depositor to cause the Seller, pursuant to the MLPA and at
the
Seller's option, to either (i) substitute, if the conditions in
Section 2.3(b) with respect to substitutions are satisfied, a
Substitute Mortgage Loan for the affected Mortgage Loan, or
(ii)
repurchase the affected Mortgage Loan within 90 days of such
discovery in the same manner as it would a Mortgage Loan for a
breach of representation or warranty made pursuant to Section
2.3.
The Trustee shall reconvey or shall cause the Custodian to
reconvey
to the Seller the Mortgage Loan to be released pursuant hereto
in
the same manner, and on the same terms and conditions, as it would
a
Mortgage Loan repurchased for breach of a representation or
warranty
contained in Section 2.3.
43
<PAGE>
SECTION 2.6 Execution and Delivery of Certificates.
The Trustee acknowledges the transfer and assignment to it of the
Trust
Fund and, concurrently with such transfer and assignment, has
executed and
delivered to or upon the order of the Depositor, the Certificates
in authorized
denominations evidencing directly or indirectly the entire
ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise
the rights
referred to above for the benefit of all present and future Holders
of the
Certificates and to perform the duties set forth in this Agreement
to the best
of its ability, to the end that the interests of the Holders of the
Certificates
may be adequately and effectively protected.
SECTION 2.7 REMIC Matters.
The Preliminary Statement sets forth the "latest possible
maturity
date" for federal income tax purposes of all REMIC regular
interests created
hereby.
The assets of the Lower REMIC shall be as set forth in the
definition
thereof. Each interest identified in the first table below by a
designation
beginning with "L" shall be a "regular interest" in the Lower REMIC
and a Lower
REMIC Interest, and the RL Interests shall be the sole class of
residual
interest in the Lower REMIC. The Lower REMIC Interests shall be
uncertificated
and shall be held by the Trustee as assets of the Upper REMIC.
The assets of the Upper REMIC shall be as set forth in the
definition
thereof. The Regular Certificates shall represent "regular
interests" in the
Upper REMIC. The RU Interest shall be the sole class of residual
interest in the
Upper REMIC. The Class I-A-R Certificate shall represent ownership
of the RL
Interest and RU Interest.
The "Startup Day" for purposes of the REMIC Provisions for each
REMIC
hereunder shall be the Closing Date. The Tax Matters Person with
respect to each
REMIC hereunder shall be the Trustee and the Trustee shall hold the
Tax Matters
Person Certificate. Each REMIC's taxable year shall be the calendar
year and its
accounts shall be maintained using the accrual method.
<TABLE>
<CAPTION>
------------------ ----------------------
--------------------------
----------------------------------------
Lower REMIC
Corresponding Class of Upper REMIC
Interest or
Lower REMIC
Lower REMIC
Interests
Residual
Interest Balance
Interest Rate
------------------ ----------------------
--------------------------
----------------------------------------
Interest
Principal
------------------ ----------------------
-------------------------- ------------------------
---------------
<S>
<C>
<C>
<C>
<C>
L-I-A-1
$
15,050.65
(2)
(1)
(1)
------------------ ----------------------
-------------------------- ------------------------
---------------
L-I-A-2
$
1,672.29
(2)
(1)
(1)
------------------ ----------------------
-------------------------- ------------------------
---------------
L-I-A-ZZZ
$
26,109,671.99
(2)
(1)
(1)
------------------ ----------------------
-------------------------- ------------------------
---------------
RL
$
0.00
N/A
N/A
N/A
------------------ ----------------------
-------------------------- ------------------------
---------------
L-II-A-1
$
131,154.25
(3)
(1)
(1)
------------------ ----------------------
-------------------------- ------------------------
---------------
L-II-A-2
$
14,572.69
(3)
(1)
(1)
------------------ ----------------------
-------------------------- ------------------------
---------------
L-II-A-ZZZ
$ 227,559,967.20
(3)
(1)
(1)
------------------ ----------------------
-------------------------- ------------------------
---------------
L-III-A-1
$
44,547.98
(4)
(1)
(1)
------------------ ----------------------
-------------------------- ------------------------
---------------
L-III-A-2
$
4,949.78
(4)
(1)
(1)
------------------ ----------------------
-------------------------- ------------------------
---------------
L-III-A-ZZZ
$
77,286,278.04
(4)
(1)
(1)
------------------ ----------------------
-------------------------- ------------------------
---------------
$ 331,167,864.87
Total
------------------ ----------------------
-------------------------- ------------------------
---------------
</TABLE>
44
<PAGE>
(1) The Lower REMIC Interest L-I-A-1, Lower REMIC Interest L-I-A-2
and Lower
REMIC Interest L-I-A-ZZZ shall be Corresponding Classes to these
Classes of
Certificates: I-A-1, I-A-2, I-A-R, B-1, B-2, B-3, B-4, B-5 and B-6
(provided
that with respect to B-1, B-2, B-3, B-4, B-5 and B-6, such Lower
REMIC Interests
shall only correspond to the portion supported by Pool I). The
Lower REMIC
Interest L-II-A-1, Lower REMIC L-II-A-2 and Lower REMIC Interest
L-II-A-ZZZ
shall be Corresponding Classes to these Classes of Certificates:
II-A-1, B-1,
B-2, B-3, B-4, B-5 and B-6 (provided that with respect to B-1, B-2,
B-3, B-4,
B-5 and B-6, such Lower REMIC Interests shall only correspond to
the portion
supported by Pool II). The Lower REMIC Interest L-III-A-1, Lower
REMIC L-III-A-2
and Lower REMIC Interest L-III-A-ZZZ shall be Corresponding Classes
to these
Classes of Certificates: III-A-1, III-A-2, B-1, B-2, B-3, B-4, B-5
and B-6
(provided that with respect to B-1, B-2, B-3, B-4, B-5 and B-6,
such Lower REMIC
Interests shall only correspond to the portion supported by Pool
III).
(2) The Lower REMIC Interest Rate for the Lower REMIC Interest
L-I-A-1, L-I-A-2
and L-I-A-ZZZ will equal the Weighted Average Adjusted Net Mortgage
Rate for
Pool I.
(3) The Lower REMIC Interest Rate for the Lower REMIC Interest
L-II-A-1,
L-II-A-2 and L-II-A-ZZZ will equal the Weighted Average Adjusted
Net Mortgage
Rate for Pool II.
(3) The Lower REMIC Interest Rate for the Lower REMIC Interest
L-III-A-1,
L-III-A-2 and L-III-A-ZZZ will equal the Weighted Average Adjusted
Net Mortgage
Rate for Pool III.
"L1 Interests" refers to the L-I-A-1 Lower REMIC Interest, the
L-II-A-1
Lower REMIC Interests and L-III-A-1 Lower REMIC Interests. "L2
Interests" refers
to the L-I-A-2 Lower REMIC Interest, L-II-A-2 Lower REMIC Interest
and L-III-A-2
Lower REMIC Interest. "LZZZ Interests" refers to L-I-A-ZZZ Lower
REMIC Interest,
L-II-A-ZZZ Lower REMIC Interest and L-III-A-ZZZ Lower REMIC
Interest. Each L1
Interest shall have a principal balance initially equal to 0.9% of
the Group
Subordinate Amount of its corresponding Mortgage Pool. Each L2
Interest shall
have a principal balance initially equal to 0.1% of the Group
Subordinate Amount
of its corresponding Mortgage Pool. The initial principal balance
of each LZZZ
Interest shall equal the excess of the Pool Principal Balance of
its
corresponding Mortgage Pool over the sum of the initial principal
balances of
the L1 Interests and L2 Interests corresponding to such Mortgage
Pool.
Unless a Cross-over Situation (as defined below) exists, principal
and
Realized Losses arising with respect to each Mortgage Pool shall be
allocated
first to cause the L1 and L2 Interests corresponding to such
Mortgage Pool to
equal 0.9% and 0.1% of the Group Subordinate Amount of such
Mortgage Pool as of
such Distribution Date (after distributions of principal and
allocation of
Realized Losses are made) and all excess principal and Realized
Losses shall be
allocated to the LZZZ Interest corresponding to such Mortgage Pool.
A L1, L2 or
LZZZ Interest that is allocated principal on any Distribution Date
shall receive
such principal, and have its principal balance reduced by the
amount of such
principal, on such Distribution Date. Similarly, a L1, L2 or LZZZ
Interest that
is allocated a Realized Loss on any Distribution Date shall have
its principal
balance reduced by the amount of such Realized Loss on such
Distribution Date.
45
<PAGE>
A "Cross-over Situation" exists if on any Distribution Date
(after
taking into account distributions of principal and allocations of
Realized
Losses on such Distribution Date) the L1 and L2 Interests
corresponding to any
Mortgage Pool are in the aggregate less than 1% of the Group
Subordinate Amount
of the corresponding Mortgage Pool. If a Cross-over Situation
exists on any
Distribution Date, and the weighted average interest rate of the
outstanding L1
and L2 Interests is less than the Pass-Through Rate for any Class
of Subordinate
Certificates for the following Distribution Date, a Principal
Reallocation
Payment (as defined below) shall be made proportionately to the
outstanding L1
Interests prior to any other distributions of principal from each
such Mortgage
Pool so that the Calculation Rate equals the Pass-Through Rate for
each Class of
Subordinate Certificates. If a Cross-over Situation exists on any
Distribution
Date, and the weighted average rate of the outstanding L1 and L2
Interests is
greater than the Pass-Through Rate for any Class of Subordinate
Certificates for
the following Distribution Date, a Principal Reallocation Payment
shall be made
proportionately to the outstanding L2 Interests prior to any other
distributions
of principal from each such Mortgage Pool so that the Calculation
Rate equals
the Pass-Through Rate for each Class of Subordinate Certificates. A
"Principal
Reallocation Payment" is a distribution of the minimum amount of
principal that
causes the Calculation Rate (as defined below) with respect to the
outstanding
L1 and L2 Interests to equal the Pass-Through Rate for each Class
of Subordinate
Certificates. The "Calculation Rate" shall equal the product of (i)
10 and (ii)
the weighted average interest rate of the outstanding L1 and L2
Interests,
treating each L1 Interest as capped at zero or reduced by a fixed
percentage of
100% of the interest accruing on such class. Principal Reallocation
Payments
shall be made from principal received on the Mortgage Loans from a
Mortgage Pool
and shall also consist of a proportionate allocation of Realized
Losses from the
Mortgage Loans of a Mortgage Pool. For purposes of making Principal
Reallocation
Payments, to the extent that the principal received during the
applicable
collection period from the related Mortgage Pool and related
Realized Losses are
insufficient to make the necessary reduction of principal, then
interest shall
accrue on the LZZZ Interest (and be added to its principal balance)
of the
related Mortgage Pool to allow the necessary Principal Reallocation
Payment to
be made. The Calculation Rate is designed to always equal the
Pass-Through Rate
of each Class of Subordinated Certificates.
If a Cross-over Situation exists, the aggregate principal balances
of
the outstanding L1 and L2 Interests of all of the Mortgage Pools
shall not be
reduced below one percent of the aggregate Pool Principal Balance
of all of the
Mortgage Pools for the following Distribution Date in excess of the
Senior
Certificates as of the related Distribution Date (after taking into
account
distributions of principal and allocations of Realized Losses on
such
Distribution Date). To the extent this limitation prevents the
distribution of
principal to the L1 and L2 Interests of a Mortgage Pool and the
related LZZZ
Interest has already been reduced to zero, such excess principal
from such
Mortgage Pool shall be paid proportionately to the LZZZ Interests
of the
Mortgage Pool or Pools whose aggregate L1 and L2 Interests are less
than one
percent of the Group Subordinate Amount. Any such shortfall as a
result of the
Mortgage Pool receiving the extra payment having a Weighted Average
Adjusted Net
Mortgage Rate lower than the Weighted Average Adjusted Net Mortgage
Rate of the
Mortgage Pool from which the payment was reallocated shall be
treated as a
Realized Loss and if excess arises as result of the Mortgage Pool
receiving the
extra payment having a Weighted Average Adjusted Net Mortgage Rate
higher than
the Mortgage Pool from which the payment was reallocated it shall
reimburse the
Upper REMIC for prior Realized Losses. If on any Distribution Date,
the L1
Interest or L2 Interest remains outstanding after the related Pool
Principal
Balance is at zero as of the beginning of the Accrual Period
corresponding to
such Distribution Date, their Lower REMIC Interest Rate shall be
the Weighted
Average Adjusted Net Mortgage Rate of the Mortgage Pool with the
lowest Weighted
Average Adjusted Net Mortgage Rate that remains outstanding and the
excess of
interest at the Pass-Through Rate for the Subordinated Certificates
over
interest at such Weighted Average Adjusted Net Mortgage Rate shall
be treated as
paid from Lower REMIC to the Upper REMIC as reimbursement for prior
Realized
Losses.
46
<PAGE>
The foregoing REMIC structure is intended to cause all of the cash
from
the Mortgage Loans to flow through to the Upper REMIC as cash flow
on a REMIC
regular interest, without creating any shortfall-actual or
potential (other than
for credit losses) to any REMIC regular interest. To the extent
that the
structure is believed to diverge from such intention the Trustee
shall resolve
ambiguities to accomplish such result and shall to the extent
necessary rectify
any drafting errors or seek clarification to the structure
without
Certificateholder approval (but with guidance of counsel) to
accomplish such
intention.
SECTION 2.8 Covenants of the Master Servicer.
The Master Servicer hereby covenants to the Depositor and the
Trustee
as follows:
(a)
the Master
Servicer shall comply in the performance of its
obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance
Policy;
and
(b)
no written
information, certificate of an officer, statement
furnished in writing or written report delivered to the
Depositor,
any
affiliate of the Depositor or the Trustee and prepared by the
Master Servicer pursuant to this Agreement will contain any
untrue
statement of a material fact or omit to state a material fact
necessary to make such information, certificate, statement or
report
not misleading.
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 3.1 Master Servicer to Service Mortgage Loans.
For and on behalf of the Certificateholders, the Master Servicer
shall
service and administer the Mortgage Loans in accordance with the
terms of (i)
the Servicing Rights Transfer and Subservicing Agreement, pursuant
to which
First Tennessee Mortgage Services, Inc. engaged the Master Servicer
to
subservice the Mortgage Loans, (ii) this Agreement and (iii) the
customary and
usual standards of practice of prudent mortgage loan servicers;
provided that if
there is a conflict between the terms of the Servicing Agreement
and the
Servicing Rights Transfer and Subservicing Agreement, on the one
hand, and this
Agreement, on the other hand, the terms of this Agreement shall
prevail. In
connection with such servicing and administration, the Master
Servicer shall
have full power and authority, acting alone and/or through
Subservicers as
provided in Section 3.2 hereof, to do or cause to be done any and
all things
that it may deem necessary or desirable in connection with such
servicing and
administration, including but not limited to, the power and
authority, subject
to the terms hereof (i) to execute and deliver, on behalf of
the
Certificateholders and the Trustee, customary consents or waivers
and other
instruments and documents, (ii) to consent to transfers of any
Mortgaged
Property and assumptions of the Mortgage Notes and related
Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any
Insurance
Proceeds and other Liquidation Proceeds, and (iv) to effectuate
foreclosure or
other conversion of the ownership of the Mortgaged Property
securing any
Mortgage Loan; provided that the Master Servicer shall not take any
action that
is inconsistent with or prejudices the interests of the Trust Fund
or the
Certificateholders in any Mortgage Loan or the rights and interests
of the
Depositor, the Trustee and the Certificateholders under this
Agreement. The
Master Servicer shall represent and protect the interests of the
Trust Fund in
the same manner as it protects its own interests in mortgage loans
in its own
portfolio in any claim, proceeding or litigation regarding a
Mortgage Loan, and
shall not make or permit any modification, waiver or amendment of
any Mortgage
Loan which would cause any REMIC created hereunder to fail to
qualify as a REMIC
or result in the imposition of any tax under Section 860F(a) or
Section 860G(d)
of the Code. Without limiting the generality of the foregoing, the
Master
Servicer, in its own name or in the name of the Depositor and the
Trustee, is
hereby authorized and empowered by the Depositor and the Trustee,
when the
Master Servicer believes it appropriate in its reasonable judgment,
to execute
and deliver, on behalf of the Trustee, the Depositor, the
Certificateholders or
any of them, any and all instruments of satisfaction or
cancellation, or of
partial or full release or discharge and all other comparable
instruments, with
respect to the Mortgage Loans, and with respect to the Mortgaged
Properties held
for the benefit of the Certificateholders. The Master Servicer
shall prepare and
deliver to the Depositor and/or the Trustee such documents
requiring execution
and delivery by either or both of them as are necessary or
appropriate to enable
the Master Servicer to service and administer the Mortgage Loans to
the extent
that the Master Servicer is not permitted to execute and deliver
such documents
pursuant to the preceding sentence. Upon receipt of such documents,
the
Depositor and/or the Trustee shall execute such documents and
deliver them to
the Master Servicer. The Master Servicer further is authorized and
empowered by
the Trustee, on behalf of the Certificateholders and the Trustee,
in its own
name or in the name of the Subservicer, when the Master Servicer or
the
Subservicer as the case may be, believes it appropriate in its best
judgment to
register any Mortgage Loan on the MERS(R) System, or cause the
removal from the
registration of any Mortgage Loan on the MERS(R) System, to execute
and deliver,
on behalf of the Trustee and the Certificateholders or any of them,
any and all
instruments of assignment and other comparable instruments with
respect to such
assignment or re-recording of a Mortgage in the name of MERS,
solely as nominee
for the Trustee and its successors and assigns.
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In accordance with the standards of the preceding paragraph, the
Master
Servicer shall advance or cause to be advanced funds as necessary
for the
purpose of effecting the payment of taxes and assessments on the
Mortgaged
Properties, which advances shall be reimbursable in the first
instance from
related collections from the Mortgagors pursuant to Section 3.6,
and further as
provided in Section 3.8. The costs incurred by the Master Servicer,
if any, in
effecting the timely payments of taxes and assessments on the
Mortgaged
Properties and related insurance premiums shall not, for the
purpose of
calculating monthly distributions to the Certificateholders, be
added to the
Stated Principal Balances of the related Mortgage Loans,
notwithstanding that
the terms of such Mortgage Loans so permit.
SECTION 3.2 Subservicing; Enforcement of the Obligations of
Servicers.
(a)
The Master
Servicer may arrange for the subservicing of any Mortgage
Loan by a Subservicer pursuant to a subservicing agreement;
provided, however, that such subservicing arrangement and the
terms
of the related subservicing agreement must provide for the
servicing
of such Mortgage Loans in a manner consistent with the
servicing
arrangements contemplated hereunder. Unless the context
otherwise
requires, references in this Agreement to actions taken or to
be
taken by the Master Servicer in servicing the Mortgage Loans
include
actions taken or to be taken by a Subservicer on behalf of the
Master Servicer. Notwithstanding the provisions of any
subservicing
agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer and a
Subservicer or reference to actions taken through a Subservicer
or
otherwise, the Master Servicer shall remain obligated and liable
to
the Depositor, the Trustee and the Certificateholders for the
servicing and administration of the Mortgage Loans in
accordance
with the provisions of this Agreement without diminution of
such
obligation or liability by virtue of such subservicing agreements
or
arrangements or by virtue of indemnification from the
Subservicer
and to the same extent and under the same terms and conditions as
if
the Master Servicer alone were servicing and administering the
Mortgage Loans. All actions of each Subservicer performed
pursuant
to the related subservicing agreement shall be performed as an
agent
of the Master Servicer with the same force and effect as if
performed directly by the Master Servicer.
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(b)
For purposes of
this Agreement, the Master Servicer shall be deemed
to have received any collections, recoveries or payments with
respect to the Mortgage Loans that are received by a
Subservicer
regardless of whether such payments are remitted by the
Subservicer
to the Master Servicer.
SECTION 3.3 Rights of the Depositor and the Trustee in Respect
of
the Master Servicer.
The
Depositor may, but is not obligated to, enforce the obligations
of
the Master Servicer hereunder and may, but is not obligated to,
perform, or
cause a designee to perform, any defaulted obligation of the Master
Servicer
hereunder and in connection with any such defaulted obligation to
exercise the
related rights of the Master Servicer hereunder; provided that the
Master
Servicer shall not be relieved of any of its obligations hereunder
by virtue of
such performance by the Depositor or its designee. Neither the
Trustee nor the
Depositor shall have any responsibility or liability for any action
or failure
to act by the Master Servicer nor shall the Trustee or the
Depositor be
obligated to supervise the performance of the Master Servicer
hereunder or
otherwise.
SECTION 3.4 Trustee to Act as Master Servicer.
In the event that the Master Servicer shall for any reason no
longer be
the Master Servicer hereunder (including by reason of an Event of
Default), the
Trustee or its successor shall thereupon assume all of the rights
and
obligations of the Master Servicer hereunder arising thereafter
(except that the
Trustee shall not be (i) liable for losses of the Master Servicer
pursuant to
Section 3.9 hereof or any acts or omissions of the predecessor
Master Servicer
hereunder), (ii) obligated to make Advances if it is prohibited
from doing so by
applicable law, (iii) obligated to effectuate repurchases or
substitutions of
Mortgage Loans hereunder including, but not limited to, repurchases
or
substitutions of Mortgage Loans pursuant to Section 2.2 or 2.3
hereof, (iv)
responsible for expenses of the Master Servicer pursuant to Section
2.3 or (v)
deemed to have made any representations and warranties of the
Master Servicer
hereunder). Any such assumption shall be subject to Section 7.2
hereof. If the
Master Servicer shall for any reason no longer be the Master
Servicer (including
by reason of any Event of Default), the Trustee or its successor
shall succeed
to any rights and obligations of the Master Servicer under each
subservicing
agreement.
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The Master Servicer shall, upon request of the Trustee, but at
the
expense of the Master Servicer, deliver to the assuming party all
documents and
records relating to each subservicing agreement or substitute
subservicing
agreement and the Mortgage Loans then being serviced thereunder and
an
accounting of amounts collected or held by it and otherwise use its
best efforts
to effect the orderly and efficient transfer of the substitute
subservicing
agreement to the assuming party.
SECTION 3.5 Collection of Mortgage Loan Payments; Certificate
Account; Distribution Account.
(a)
The Master
Servicer shall make reasonable efforts in accordance with
the customary and usual standards of practice of prudent
mortgage
servicers to collect all payments called for under the terms
and
provisions of the Mortgage Loans to the extent such procedures
shall
be
consistent with this Agreement and the terms and provisions of
any related Required Insurance Policy. Consistent with the
foregoing, the Master Servicer may in its discretion (i) waive
any
late payment charge or any prepayment charge or penalty interest
in
connection with the prepayment of a Mortgage Loan and (ii)
extend
the due dates for payments due on a Mortgage Note for a period
not
greater than 180 days; provided, however, that the Master
Servicer
cannot extend the maturity of any such Mortgage Loan past the
date
on which the final payment is due on the latest maturing
Mortgage
Loan as of the Cut-off Date. In the event of any such
arrangement,
the Master Servicer shall make Advances on the related Mortgage
Loan
in accordance with the provisions of Section 4.1 during the
scheduled period in accordance with the amortization schedule
of
such Mortgage Loan without modification thereof by reason of
such
arrangements. The Master Servicer shall not be required to
institute
or join in litigation with respect to collection of any payment
(whether under a Mortgage, Mortgage Note or otherwise or against
any
public or governmental authority with respect to a taking or
condemnation) if it reasonably believes that enforcing the
provision
of the Mortgage or other instrument pursuant to which such
payment
is required is prohibited by applicable law.
(b)
The Master
Servicer shall establish and maintain the Certificate
Account. The Certificate Account shall consist of three
separate
subaccounts, each of which shall relate to a particular
Mortgage
Pool. The Master Servicer shall deposit or cause to be
deposited
into the appropriate subaccount of the Certificate Account no
later
than two Business Days after receipt, except as otherwise
specifically provided herein, the following payments and
collections
remitted by Subservicers or received by it in respect of the
Mortgage Loans subsequent to the Cut-off Date (other than in
respect
of principal and interest due on the Mortgage Loans on or before
the
Cut-off Date) and the following amounts required to be
deposited
hereunder:
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(i) all payments
on account of principal on the Mortgage Loans in
the related Mortgage Pool, including Principal Prepayments;
(ii) all payments on
account of interest on the Mortgage Loans in
the related Mortgage Pool, net of the related Master Servicing
Fee and any Prepayment Interest Excess;
(iii) all Insurance Proceeds and Liquidation Proceeds in respect
of
the related Mortgage Loans in the related Mortgage Pool, other
than proceeds to be applied to the restoration or repair of
the Mortgaged Property or released to the Mortgagor in
accordance with the Master Servicer's normal servicing
procedures;
(iv) any amount
required to be deposited by the Master Servicer in
respect of the related Mortgage Pool pursuant to Section
3.5(c) in connection with any losses on Permitted Investments;
(v) any amounts
required to be deposited by the Master Servicer in
respect of the related Mortgage Pool pursuant to Section
3.9(b) and 3.9(d);
(vi) all Substitution
Adjustment Amounts in respect of the related
Mortgage Pool;
(vii) all Advances in respect of the related Mortgage Pool made
by
the Master Servicer pursuant to Section 4.1; and
(viii) any other amounts required to be deposited hereunder in
respect of the related Mortgage Pool.
In addition, with respect to any Mortgage Loan that is subject
to a buydown agreement, on each Due Date for such Mortgage Loan,
in
addition to the monthly payment remitted by the Mortgagor, the
Master
Servicer shall cause funds to be deposited into the applicable
subaccount of the Certificate Account in an amount required to
cause an
amount of interest to be paid with respect to such Mortgage Loan
equal
to the amount of interest that has accrued on such Mortgage Loan
from
the preceding Due Date at the related Adjusted Mortgage Rate on
such
date.
The foregoing requirements for remittance by the Master
Servicer shall be exclusive, it being understood and agreed
that,
without limiting the generality of the foregoing, payments in
the
nature of prepayment penalties, late payment charges, assumption
fees
or amounts attributable to reimbursements of Advances, if
collected,
need not be remitted by the Master Servicer. In the event that
the
Master Servicer shall remit any amount not required to be remitted,
it
may at any time withdraw or direct the institution maintaining
the
Certificate Account to withdraw such amount from the
Certificate
Account, any provision herein to the contrary notwithstanding.
Such
withdrawal or direction may be accomplished by delivering
written
notice thereof to the Trustee or such other institution maintaining
the
Certificate Account which describes the amounts deposited in error
in
the Certificate Account. The Master Servicer shall maintain
adequate
records with respect to all withdrawals made pursuant to this
Section.
All funds deposited in the Certificate Account shall be held in
trust
for the Certificateholders until withdrawn in accordance with
Section
3.8.
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(c)
The Trustee
shall establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Distribution
Account shall consist of three separate subaccounts, each of
which
shall relate to a particular Mortgage Pool. The Trustee shall,
promptly upon receipt, deposit in the Distribution Account and
retain therein the following:
(i) the
aggregate amount remitted by the Master Servicer to the
Trustee in respect of a Mortgage Pool pursuant to Section
3.8(a)(ix);
(ii) any amount
deposited by the Master Servicer pursuant to this
Section 3.5(c) in connection with any losses on Permitted
Investments; and
(iii) any other amounts deposited hereunder which are required to
be
deposited in the Distribution Account.
In the event that the Master Servicer shall remit any amount
not required to be remitted, it may at any time direct the Trustee
to
withdraw such amount from the applicable subaccount of the
Distribution
Account, any provision herein to the contrary notwithstanding.
Such
direction may be accomplished by delivering an Officer's
Certificate to
the Trustee which describes the amounts deposited in error in
the
Distribution Account. All funds deposited in the Distribution
Account
shall be held by the Trustee in trust for the related
Certificateholders until disbursed in accordance with this
Agreement or
withdrawn in accordance with Section 3.8. In no event shall the
Trustee
incur liability for withdrawals from the Distribution Account at
the
direction of the Master Servicer.
(iv) The institutions
at which the Certificate Account and the
Distribution Account are maintained shall invest funds as
directed by the Master Servicer in Permitted Investments which
in both cases shall mature not later than (i) in the case of
the Certificate Account, the second Business Day next
preceding the related Distribution Account Deposit Date
(except that if such Permitted Investment is an obligation of
the institution that maintains such account, then such
Permitted Investment shall mature not later than the Business
Day next preceding such Distribution Account Deposit Date) and
(ii) in the case of the Distribution Account, the Business Day
next preceding the Distribution Date (except that if such
Permitted Investment is an obligation of the institution that
maintains such fund or account, then such Permitted Investment
shall mature not later than such Distribution Date) and, in
each case, shall not be sold or disposed of prior to its
maturity. If the Master Servicer does not provide such prior
written investment direction, the funds in such accounts will
be held uninvested. All such Permitted Investments shall be
made in the name of the Trustee, for the benefit of the
Certificateholders. All income and gain net of any losses
realized from any such investment of funds on deposit in the
Certificate Account shall be for the benefit of the Master
Servicer as servicing compensation and all income and gain net
of any losses realized from any such investment of funds on
deposit in the Distribution Account shall be for the benefit
of the Trustee. The amount of any Realized Losses in the
Certificate Account in respect of any such investments shall
promptly be deposited by the Master Servicer in the
Certificate Account and the amount of any Realized Losses in
the Distribution Account in respect of any such investments
shall promptly be deposited by the Trustee into the
Distribution
Account. All reinvestment income earned on
amounts on deposit in the Distribution Account shall be for
the benefit of the Trustee. The Trustee in its fiduciary
capacity shall not be liable for the amount of any loss
incurred in respect of any investment or lack of investment of
funds held in the Certificate Account and made in accordance
with this Section 3.5.
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(v) The Master
Servicer shall give notice to the Trustee, the
Seller, each Rating Agency and the Depositor of any proposed
change of the location of the Certificate Account prior to any
change thereof. The Trustee shall give notice to the Master
Servicer, the Seller, each Rating Agency and the Depositor of
any proposed change of the location of the Distribution
Account prior to any change thereof.
SECTION 3.6 Collection of Taxes, Assessments and Similar Items;
Escrow Accounts.
(a)
To the extent
required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish
and
maintain one or more accounts (each, an "Escrow Account") and
deposit and retain therein all collections from the Mortgagors
(or
advances by the Master Servicer) for the payment of taxes,
assessments, hazard insurance premiums or comparable items for
the
account of the Mortgagors. Nothing herein shall require the
Master
Servicer to compel a Mortgagor to establish an Escrow Account
in
violation of applicable law.
(b)
Withdrawals of
amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments,
hazard
insurance premiums, condominium or PUD association dues, or
comparable items, to reimburse the Master Servicer out of
related
collections for any payments made pursuant to Sections 3.1
hereof
(with respect to taxes and assessments and insurance premiums)
and
3.9 hereof (with respect to hazard insurance), to refund to any
Mortgagors any sums determined to be overages, to pay interest,
if
required by law or the terms of the related Mortgage or
Mortgage
Note, to Mortgagors on balances in the Escrow Account or to
clear
and terminate the Escrow Account at the termination of this
Agreement in accordance with Section 9.1 hereof. The Escrow
Accounts
shall not be a part of the Trust Fund.
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(c)
The Master
Servicer shall advance any payments referred to in
Section 3.6(a) that are not timely paid by the Mortgagors on
the
date when the tax, premium or other cost for which such payment
is
intended
is due, but the Master Servicer shall be required so to
advance only to the extent that such advances, in the good
faith
judgment of the Master Servicer, will be recoverable by the
Master
Servicer out of Insurance Proceeds, Liquidation Proceeds or
otherwise.
SECTION 3.7 Access to Certain Documentation and Information
Regarding the Mortgage Loans.
The Master Servicer shall afford the Depositor and the Trustee
reasonable access to all records and documentation regarding the
Mortgage Loans
and all accounts, insurance information and other matters relating
to this
Agreement, such access being afforded without charge, but only upon
reasonable
request and during normal business hours at the office designated
by the Master
Servicer.
Upon reasonable advance notice in writing, the Master Servicer
will
provide to each Certificateholder or Certificate Owner which is a
savings
