POOLING AND SERVICING AGREEMENT

THIS POOLING AND SERVICING AGREEMENT, dated as of December 1, 2006, 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”).

In consideration of the mutual agreements herein contained, the parties hereto agree as follows:

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 three separate REMICs, each having assets as provided herein. 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, Middle REMIC and Upper REMIC, as described in Section 2.7. The “latest possible maturity date” for federal income tax purposes of each REMIC regular interest 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):

⁽¹⁾ The actual final payment on the Certificates could occur earlier or later than the Final Scheduled Distribution Date.

⁽²⁾ For any Distribution Date on or prior to the Distribution Date in September 2013, any payments on the Class I-A-1 Certificates in excess of the maximum pass-through rate of 6.00% per annum will be payable solely from the Corridor Contract. For any Distribution Date after the Distribution Date in September 2013, interest will accrue on the Class I-A-1 Certificates at a per annum rate equal to 6.00% per annum. There will be no extra payments from the Corridor Contract after the Distribution Date in September 2013. As of the first Distribution Date, the holders of the Class I-A-1 Certificates will receive the per annum initial annual pass-through rate of 6.00% plus payments payable from the Corridor Contract, to the extent that LIBOR is greater than 5.50%. In addition, for any Distribution Date on or prior to the Distribution Date in September 2013, interest will accrue on the Class I-A-1 Certificates at a per annum rate equal to (i) LIBOR plus (ii) 0.50%, subject to a maximum and minimum rate of 6.00% per annum.

⁽³⁾ The Class I-A-4 Certificates are Notional Amount Certificates. The Notional Amount of the Class I-A-4 Certificates on any Distribution Date will be equal to the sum of (x) the Class Certificate Balance of the Class I-A-5 Certificates times a fraction of which the numerator is 0.50% and the denominator is 6.00% and (y) the sum of the Class Certificate Balances of the Class I-A-6, Class I-A-8, Class I-A-9 and Class I-A-10 Certificates times a fraction of which the numerator is 0.25% and the denominator is 6.00%.

⁽⁴⁾ The Class I-A-14 Certificates are Notional Amount Certificates. The Notional Amount of the Class I-A-14 Certificates on any Distribution Date will be equal to the Class Certificate Balance of the Class I-A-2 Certificates times a fraction of which the numerator is 0.25% and the denominator is 6.00%.

⁽⁵⁾ The Class I-A-PO and Class II-A-PO Certificates are Principal Only Certificates and will not accrue interest.

⁽⁶⁾ The Pass-Through Rate on each Class of Subordinated Certificates is variable and will be equal to the weighted average of the Designated Mortgage Pool Rates, weighted on the basis of the Group Subordinate Amount for each Mortgage Pool. The initial Pass-Through Rate on each Class of Subordinated Certificates for the first Interest Accrual Period will be 5.973% per annum.

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.

Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:

Accretion Directed Certificates: As specified in the Preliminary Statement.

Accretion Termination Date: For the classes of Accrual Certificates, the earlier of (x) the Cross-over Date and (y) the Distribution Date on which (i) the Class Certificate Balances of the Class I-A-1 and Class I-A-11 Certificates have each been reduced to zero (in the case of the Class I-A-12 Certificates) or (ii) the Class Certificate Balances of the Class I-A-1, Class I-A-11 and Class I-A-12 Certificates have each been reduced to zero (in the case of the Class I-A-13 Certificates).

Accrual Amount: For each Distribution Date through the applicable Accretion Termination Date and each class of Accrual Certificates, an amount equal to the sum of (a) Accrued Certificate Interest in respect of such class of Accrual Certificates in accordance with clause (i) of Section 4.2(a) and (b) amounts allocable to such class of Accrual Certificates in accordance with clause (ii) of Section 4.2(a), in each case on such Distribution Date.

Accrual Certificates: As specified in the Preliminary Statement.

Accrued Certificate Interest: For any Class of Certificates entitled to distributions of interest for any Distribution Date, the interest accrued during the related Interest Accrual Period at the applicable Pass-Through Rate on the Class Certificate Balance (or Notional Amount, in the case of the Notional Amount Certificates) of such Class of Certificates immediately prior to such Distribution Date, less such Class’ share of any Net Interest Shortfall allocable between the outstanding Classes of Certificates based on the Accrued Certificate Interest otherwise distributable thereto.

Additional Designated Information: As defined in Section 10.2. 

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.

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 all Certificate Groups (other than the Class PO Certificates and the Notional Amount Certificates) immediately prior to such Distribution Date, divided by (y) the aggregate Pool Principal Balance for both Mortgage Pools (excluding the aggregate of the applicable PO Percentage of the Pool Principal Balances of the Discount Mortgage Loans) 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 immediately prior to such Distribution Date, divided by (y) the aggregate Pool Principal Balance for both Mortgage Pools (excluding the aggregate of the applicable PO Percentage of the Pool Principal Balances of the Discount Mortgage Loans) on such Distribution Date.

Agreement: This Pooling and Servicing Agreement and all amendments or supplements hereto.

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 each of the components of the Subordinated Optimal Principal Amount for each Mortgage Pool; provided that, solely for purposes of this definition, the applicable Subordinated Optimal Principal Amount for each Mortgage Pool will be reduced by the amounts required to be distributed to the related Class PO Certificates in respect of the applicable Class PO Deferred Amount on such Distribution Date, and any such reduction in the applicable Subordinate Optimal Principal Amount for a Mortgage Pool shall reduce the amounts calculated pursuant to clauses (1), (4), (2), (3) and (5) of the definition thereof, in that order, and the Class Certificate Balances of each Class of Subordinated Certificates will be reduced by such amounts in reverse order of priority until the respective Class Certificate Balances of each Class of Subordinated Certificates has been reduced to zero; provided further, 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 respect of 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:

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.

Basis Risk Shortfall: With respect to any Distribution Date and the Class I-A-1 Certificates, the excess, if any, of (a) the amount of interest that such Class of Certificates would have been entitled to receive if the Pass-Through Rate for such Class was calculated without regard to the maximum per annum Pass-Through Rate for such Class as described in the Preliminary Statement, over (b) the actual amount of interest such Class of Certificates is entitled to receive for such Distribution Date.

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 Master Servicer 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 2006-4.”

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 (other than a Notional Amount Certificate) and as of any Distribution Date, the principal balance of such Certificate on the date of the initial issuance of such Certificate, as reduced by:

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.

Certification Party: As defined in Section 10.5.

Certifying Person: As defined in Section 10.5.

Class: All Certificates bearing the same class designation as set forth in the Preliminary Statement.

Class I-A-12 Accrual Amount: The Accrual Amount related to the Class I-A-12 Certificates in their capacity as Accrual Certificates.

Class I-A-13 Accrual Amount: The Accrual Amount related to the Class I-A-13 Certificates in their capacity as Accrual Certificates

Class I-A-PO Deferred Amount: With respect to the Class I-A-PO Certificates and any Distribution Date through the Cross-over Date, the sum of (1) the Class I-A-PO Percentage of the principal portion of Non-Excess Losses on a Discount Mortgage Loan in Pool I allocated to the Class I-A-PO Certificates on such date, and (2) all amounts previously allocated to the Class I-A-PO Certificates in respect of such losses and not distributed to the Class I-A-PO Certificates on prior Distribution Dates.

Class I-A-PO Percentage: (a) With respect to any Discount Mortgage Loan in Pool I, the fraction, expressed as a percentage, equal to (6.00% - Adjusted Net Mortgage Rate) divided by 6.00%, and (b) with respect to any Non-Discount Mortgage Loan in Pool I, 0%.

Class II-A-PO Deferred Amount: With respect to the Class II-A-PO Certificates and any Distribution Date through the Cross-over Date, the sum of (1) the Class II-A-PO Percentage of the principal portion of Non-Excess Losses on a Discount Mortgage Loan in Pool II allocated to the Class II-A-PO Certificates on such date, and (2) all amounts previously allocated to the Class II-A-PO Certificates in respect of such losses and not distributed to the Class II-A-PO Certificates on prior Distribution Dates.

Class II-A-PO Percentage: (a) With respect to any Discount Mortgage Loan in Pool II, the fraction, expressed as a percentage, equal to (5.50% - Adjusted Net Mortgage Rate) divided by 5.50%, and (b) with respect to any Non-Discount Mortgage Loan in Pool II, 0%.

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 Certificates pursuant to Section 4.2(l).

Class PO Certificates: The Class I-A-PO and Class II-A-PO Certificates.

Class PO Deferred Amount: (a) With respect to the Class I-A-PO Certificates, the Class I-A-PO Deferred Amount; and (b) with respect to the Class II-A-PO Certificates, the Class II-A-PO Deferred Amount.

Class PO Deferred Payment Writedown Amount: For any Distribution Date and any Class of Principal Only Certificates, the amount, if any, distributed on such date in respect of the related Class PO Deferred Amount pursuant to Section 4.2(a)(iv) herein. The Subordinated Certificate Writedown Amount and the Class PO Deferred Payment Writedown Amount will be allocated to the Classes of Subordinated Certificates in inverse order of priority, until the Class Certificate Balance of each such Class has been reduced to zero.

Class PO Principal Distribution Amount: With respect to each Distribution Date and any Class of Principal Only Certificates, an amount equal to the sum of:

(1)   the applicable PO Percentage of all Scheduled Payments of principal due on each 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 applicable PO 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 applicable PO Percentage of the sum of (a) all partial Principal Prepayments for each Mortgage Loan in the related Mortgage Pool received by the Master Servicer during the related Prepayment Period and (b) all Unanticipated Recoveries in respect of each Mortgage Loan in the related Mortgage Pool received by the Master Servicer during the calendar month preceding such Distribution Date;

(4)   the applicable PO Percentage of the sum of (a) the net Liquidation Proceeds allocable to principal on each Mortgage Loan in the related Mortgage Pool which became a Liquidated Mortgage Loan during the related Prepayment Period, 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 mortgage insurance policy; and

(5)   the applicable PO 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 a 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 such Substitute Mortgage Loan.

For purposes of clauses (2) and (5) above, the Stated Principal Balance of a Mortgage Loan will be reduced by the amount of any Deficient Valuation that occurred prior to the reduction of the Bankruptcy Loss Coverage Amount to zero.

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 of the 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 both Mortgage Pools with respect to such Distribution Date, equals or exceeds such percentage calculated as of the Closing Date.

Closing Date: December 28, 2006.

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.

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, 4W, New York, New York 10286 (Attn: Corporate Trust Administration—First Horizon Asset Securities Inc. Series 2006-4), 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 Middle REMIC Interest identified in Section 2.7, the Class or Classes that are identified in Section 2.7 as corresponding to such Middle REMIC Interest.

Corresponding Classes of Middle REMIC Interests: As to any Lower REMIC Interest identified in Section 2.7, the Middle REMIC Interest or Middle REMIC Interests that are identified in Section 2.7 corresponding to such Lower REMIC Interest.

Corridor Contract: The transaction evidenced by that certain Confirmation between the Separate Interest Trust and the Corridor Contract Counterparty with a Trade Date of November 29, 2006 and a reference number of 4917759/4917767.

Corridor Contract Counterparty: Bank of America, N.A.

Corridor Contract Notional Amount: With respect to the Corridor Contract, the “Notional Amount” specified therein.

Corridor Contract Termination Date: The Distribution Date in September 2013.

Corridor Residual Owner: Banc of America Securities LLC.

Cross-over Date: The Distribution Date on which the Class Certificate Balance of each Class of Subordinated Certificates has been reduced to zero.

Custodial Agreement: The Custodial Agreement dated as of December 28, 2006 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, 2006.

Cut-off Date Pool Principal Balance: With respect to Pool I, $365,014,797.72, and with respect to Pool II, $21,042,400.21.

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.

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 the 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.

Designated Mortgage Pool Rates: With respect to Pool I, 6.00%, and with respect to Pool II, 5.50%.

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.

provided, however , if on any Distribution Date, the Aggregate Senior Percentage exceeds such percentage calculated as of the Closing Date, then the Senior Prepayment Percentage for both Certificate Groups for such Distribution Date will equal 100%.

The reductions in the Senior Prepayment Percentage for each Certificate Group described above will not occur and will remain at the level in effect for the most recent prior period specified in the table 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 both 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) does not exceed 50% of the aggregate Class Certificate Balances of the Subordinated Certificates as of that date; and

(2)   cumulative Realized Losses in both Mortgage Pools do not exceed:

Separate Interest Trust: A trust created pursuant to Section 4.8(a) of this Agreement which is not an asset of any REMIC created hereunder.

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, as the same may be amended from time to time in accordance with its terms.

Servicing Criteria: The “servicing criteria” set forth in Item 1122(d) of Regulation AB.

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, as the same may be amended from time to time in accordance with its terms.

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, (ii) any shortfall in Insurance Proceeds for partial damage due to the application of the co-insurance clauses contained in a hazard insurance policy, or (iii) 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:

(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, $5,323,690. As of any Distribution Date, the Special Hazard Loss Coverage Amount will 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 will 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.

Streamlined Documentation Mortgage Loan: Any Mortgage Loan originated pursuant to the Seller’s Streamlined Loan Documentation Program then in effect.

Subcontractor: Any vendor, subcontractor or other Person that is not responsible for the overall servicing (as “servicing” is commonly understood by participants in the mortgage-backed securities market) of Mortgage Loans but performs one or more discrete functions identified in Item 1122(d) of Regulation AB with respect to the Mortgage Loans under the direction or authority of the Master Servicer, a Subservicer or the Trustee, as the case may be.

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 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 of both Mortgage Pools 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 the applicable Non-PO 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 applicable Non-PO 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 applicable Non-PO 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 applicable Non-PO Percentage of 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 applicable Non-PO Percentage of the Stated 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 (other than the holders of the Class PO Certificates) under clause (4) of the definition of applicable Senior Optimal Principal Amount on such Distribution Date; and

(5)   the related Subordinated Prepayment Percentage of the sum of (a) the applicable Non-PO Percentage of 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 applicable Non-PO Percentage of 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 and each Certificate Group, 100% minus the related 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 lower of (a) the Adjusted Net Mortgage Rate of the Deleted Mortgage Loan or (b) 6.25% in the case of a Deleted Mortgage Loan from Pool I, or 5.75% in the case of a Deleted Mortgage Loan from Pool II, 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) 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; (v) have a remaining term to maturity no greater than (and not more than one year less than that of) the Deleted Mortgage Loan; (vi) not be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative Loan and (vii) 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.

Support Classes: As specified in the Preliminary Statement.

TAC Certificates: As specified in the Preliminary Statement.

TAC Schedule: The schedule designated as such in Exhibit R.

Targeted Balance: With respect to the Class of TAC Certificates and any Distribution Date, the balance for such Distribution Date as reflected in the Principal Balance Schedules annexed hereto as Exhibit R.

Tax Matters Person: The person designated as “tax matters person” in the manner provided under Treasury regulation § 1.860F-4(d) and Treasury regulation § 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; provided that the Trust Fund shall exclude the Retained Yield.

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(j).

Undercollateralization Distribution: As defined in Section 4.2(k).

Undercollateralized Group: With respect to any Distribution Date, the Senior Certificates of any Certificate Group (other than the Principal Only Certificates) 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 applicable Non-PO Percentage of the Pool Principal Balance of the related Mortgage Pool for such Distribution Date.

Underwriter: As specified in the Preliminary Statement.

Underwriter’s 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 Middle 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) 97% of all Voting Rights will be allocated among all Holders of the Certificates, other than the Notional Amount Certificates and the Class I-A-R Certificates, in proportion to their then outstanding Class Certificate Balance; and (b) 2.0% of all voting rights will be allocated among the Holders of the Notional Amount Certificates, in proportion to their Notional Amount; and (c) 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 such Class in accordance with their respective Percentage Interests).