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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 April 1, 2005
-----------------------------------------------------
FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2005-3
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-3
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
ARTICLE I
DEFINITIONS.............................................................................................5
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
WARRANTIES.........................................35
SECTION 2.1 Conveyance of Mortgage
Loans......................................................................35
SECTION 2.2 Acceptance by Trustee of the Mortgage
Loans.......................................................39
SECTION 2.3 Representations and Warranties of the Master
Servicer; Covenants of the Seller...................41
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
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE
LOANS.......................................................46
SECTION 3.1 Master Servicer to Service Mortgage
Loans.........................................................46
SECTION 3.2 Subservicing; Enforcement of the Obligations of
Servicers.........................................47
SECTION 3.3 Rights of the Depositor and the Trustee in Respect
of the Master Servicer.........................48
SECTION 3.4 Trustee to Act as Master
Servicer.................................................................48
SECTION 3.5 Collection of Mortgage Loan Payments; Certificate
Account; Distribution Account...................48
SECTION 3.6 Collection of Taxes, Assessments and Similar Items;
Escrow Accounts...............................51
SECTION 3.7 Access to Certain Documentation and Information
Regarding the Mortgage Loans......................52
SECTION 3.8 Permitted Withdrawals from the Certificate Account
and Distribution Account.......................52
SECTION 3.9 Maintenance of Hazard Insurance; Maintenance of
Primary Insurance Policies........................54
SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption
Agreements........................................56
SECTION 3.11 Realization Upon Defaulted Mortgage Loans;
Repurchase of Certain Mortgage Loans..................57
SECTION 3.12 Trustee to Cooperate; Release of Mortgage
Files..................................................60
SECTION 3.13 Documents Records and Funds in Possession of Master
Servicer to be Held for the Trustee..........60
SECTION 3.14 Master Servicing
Compensation....................................................................61
SECTION 3.15 Access to Certain
Documentation..................................................................61
SECTION 3.16 Annual Statement as to
Compliance................................................................62
SECTION 3.17 Annual Independent Public Accountants' Servicing
Statement; Financial Statements.................62
SECTION 3.18 Errors and Omissions Insurance; Fidelity
Bonds...................................................62
ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE MASTER
SERVICER.....................................................63
SECTION 4.1
Advances..........................................................................................63
SECTION 4.2 Priorities of
Distribution........................................................................63
SECTION 4.3 Method of
Distribution............................................................................68
SECTION 4.4 Allocation of
Losses..............................................................................69
SECTION 4.5
Reserved..........................................................................................70
SECTION 4.6 Monthly Statements to
Certificateholders..........................................................70
SECTION 4.7
[RESERVED]........................................................................................72
SECTION 4.8
[RESERVED]........................................................................................72
SECTION 4.9 Determination of Pass-Through Rates for LIBOR
Certificates........................................72
</TABLE>
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<TABLE>
<S> <C>
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.................................................80
SECTION 5.4 Persons Deemed
Owners.............................................................................81
SECTION 5.5 Access to List of Certificateholders' Names and
Addresses.........................................81
SECTION 5.6 Maintenance of Office or
Agency...................................................................81
ARTICLE VI THE DEPOSITOR AND THE MASTER
SERVICER.................................................................81
SECTION 6.1 Respective Liabilities of the Depositor and the
Master Servicer...................................81
SECTION 6.2 Merger or Consolidation of the Depositor or the
Master Servicer...................................82
SECTION 6.3 Limitation on Liability of the Depositor, the Master
Servicer and Others..........................82
SECTION 6.4 Limitation on Resignation of Master
Servicer......................................................83
ARTICLE VII
DEFAULT..............................................................................................83
SECTION 7.1 Events of
Default.................................................................................83
SECTION 7.2 Trustee to Act; Appointment of
Successor..........................................................85
SECTION 7.3 Notification to
Certificateholders................................................................86
ARTICLE VIII CONCERNING THE
TRUSTEE..............................................................................86
SECTION 8.1 Duties of
Trustee.................................................................................86
SECTION 8.2 Certain Matters Affecting the
Trustee.............................................................88
SECTION 8.3 Trustee Not Liable for Certificates or Mortgage
Loans.............................................90
SECTION 8.4 Trustee May Own
Certificates......................................................................90
SECTION 8.5 Trustee's Fees and
Expenses.......................................................................90
SECTION 8.6 Eligibility Requirements for
Trustee..............................................................91
SECTION 8.7 Resignation and Removal of
Trustee................................................................91
SECTION 8.8 Successor
Trustee.................................................................................92
SECTION 8.9 Merger or Consolidation of
Trustee................................................................92
SECTION 8.10 Appointment of Co-Trustee or Separate
Trustee....................................................93
SECTION 8.11 Tax
Matters......................................................................................94
SECTION 8.12 Periodic
Filings.................................................................................96
ARTICLE IX
TERMINATION...........................................................................................96
SECTION 9.1 Termination upon Liquidation or Purchase of all
Mortgage Loans....................................96
SECTION 9.2 Final Distribution on the
Certificates............................................................97
SECTION 9.3 Additional Termination
Requirements...............................................................98
ARTICLE X
[RESERVED].............................................................................................99
ARTICLE XI MISCELLANEOUS
PROVISIONS..............................................................................99
SECTION 11.1
Amendment........................................................................................99
SECTION 11.2 Recordation of Agreement;
Counterparts..........................................................100
SECTION 11.3 Governing
Law...................................................................................100
SECTION 11.4 Intention of
Parties............................................................................101
SECTION 11.5
Notices.........................................................................................101
SECTION 11.6 Severability of
Provisions......................................................................102
SECTION 11.7
Assignment......................................................................................102
SECTION 11.8 Limitation on Rights of
Certificateholders......................................................103
SECTION 11.9 Inspection and Audit
Rights.....................................................................103
SECTION 11.10 Certificates Nonassessable and Fully
Paid......................................................104
SECTION 11.11 Limitations on Actions; No
Proceedings.........................................................104
SECTION 11.12 Acknowledgment of
Seller.......................................................................104
</TABLE>
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<PAGE>
SCHEDULES
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
Schedule IV: Principal Balance Schedule S-IV-1
EXHIBITS
Exhibit A-1: 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
iii
<PAGE>
THIS POOLING AND SERVICING AGREEMENT, dated as of April 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 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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<TABLE>
<CAPTION>
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Initial Class Minimum Denominations Integral Multiples in
Class Designation Certificate Balance Pass-Through Rate Excess
of Minimum
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<S> <C> <C> <C> <C>
Class A-1 $97,075,000.00 5.250% $25,000 $1,000
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Class A-2 $33,452,000.00 5.250% $25,000 $1,000
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Class A-3 $600,000.00 5.250% $25,000 $1,000
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Class A-4 $25,147,500.00 variable(1) $25,000 $1,000
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Class A-5 $10,777,500.00 variable(2) $25,000 $1,000
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Class A-6 $18,001,000.00 5.250% $25,000 $1,000
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Class A-7 $15,287,000.00 5.250% $25,000 $1,000
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Class A-8 $20,034,000.00 variable(3) $25,000 $1,000
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Class A-9 (4) variable(5) $500,000 $1,000
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Class A-PO $3,432,110.00 (6) $25,000 $1,000
--------------------------------------------------------------------------------------------------------------------
Class A-R $100.00 5.500% $100 N/A
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Class B-1 $3,106,000.00 5.500% $100,000 $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-2 $1,265,000.00 5.500% $100,000 $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-3 $690,000.00 5.500% $100,000 $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-4 $460,000.00 5.500% $100,000 $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-5 $345,000.00 5.500% $100,000 $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-6 $345,428.81 5.500% $100,000 $1,000
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</TABLE>
(1) The Pass-Through Rate with respect to any Distribution Date
for the Class
A-4 Certificates is the per annum rate equal to (a) 3.834% with
respect to
the first Distribution Date, and (b) thereafter, the lesser of
(i) LIBOR
plus 1.00% and (ii) 7.50%, subject to a minimum rate of
1.00%.
(2) The Pass-Through Rate with respect to any Distribution Date
for the Class
A-5 Certificates is the per annum rate equal to (a) 8.555% with
respect to
the first Distribution Date, and (b) thereafter, the lesser of
(i) 15.167%
minus (2.33 x LIBOR) and (ii) 15.167%, subject to a minimum rate
of 0.00%.
(3) The Pass-Through Rate with respect to any Distribution Date
for the Class
A-8 Certificates is the per annum rate equal to (a) 3.184% with
respect to
the first Distribution Date, and (b) thereafter, the lesser of
(i) LIBOR
plus 0.35% and (ii) 8.00%, subject to a minimum rate of
0.35%.
(4) The Class A-9 Certificates are Notional Certificates and
will not have a
principal balance. The Notional Amount of the Class A-9
Certificates will
equal the Class Certificate Balance of the Class A-8
Certificates.
(5) The Pass-Through Rate with respect to any Distribution Date
for the Class
A-9 Certificates is the per annum rate equal to (a) 4.816% with
respect to
the first Distribution Date, and (b) thereafter, the lesser of
(i) 7.65%
minus LIBOR and (ii) 7.65%, subject to a minimum rate of
0.00%.
(6) The Class A-PO Certificates are principal only certificates
and will not
accrue interest.
2
<PAGE>
Accretion Directed Certificates ............ The Class A-6
Certificates.
Accrual Certificates ....................... The Class A-7
Certificates.
Accrual Components ......................... None.
Book-Entry Certificates .................... All Classes of
Certificates
other than the Physical
Certificates.
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 ................. The Class A-4 and
Class A-8
Certificates.
Inverse Floating Rate Certificates ......... The Class A-5 and
Class A-9
Certificates.
LIBOR Certificates ......................... The Class A-4,
Class A-5, Class
A-8 and Class A-9 Certificates.
NAS Certificates ........................... None.
Non-Delay Certificates ..................... The LIBOR
Certificates.
Notional Amount ............................ As of any date
of
determination, an amount equal
to the Class Certificate
Balance of the Class A-8
Certificates.
Notional Amount Component .................. None.
Notional Certificates ...................... The Class A-9
Certificates.
Offered Certificates ....................... All Classes of
Certificates
other than the Principal Only
Certificates and the Private
Certificates.
Physical Certificates ...................... The Residual
Certificates, the
Principal Only Certificates and
the Private Certificates.
Planned Principal Classes .................. The Class A-1,
Class A-2 and
Class A-3 Certificates.
Principal Only Certificates ................ The Class A-PO
Certificates.
Private Certificates ....................... The Class B-4,
Class B-5 and
Class B-6 Certificates.
Rating Agencies ............................ Fitch and Moody's;
except that,
for purposes of the Class B-1,
B-2, Class B-3, Class B-4 and
Class B-5 Certificates, Fitch
shall be the sole Rating Agency.
Regular Certificates ....................... All Classes of
Certificates,
other than the Residual
Certificates.
Residual Certificates ...................... The Class A-R
Certificates.
Retail/Lottery Certificates ................ None.
Scheduled Balance Certificates ............. None.
3
<PAGE>
Senior Certificates ........................ The Class A-1,
Class A-2, Class
A-3, Class A-4, Class A-5,
Class A-6, Class A-7, Class
A-8, Class A-9, Class A-PO and
Class A-R Certificates,
collectively.
Senior Support Certificates ................ None.
Subordinated Certificates .................. The Class B-1,
Class B-2, Class
B-3, Class B-4, Class B-5 and
Class B-6 Certificates,
collectively.
Super Senior Certificates .................. None.
Super Senior Support Certificates .......... None.
Support Classes ............................ The Class A-4,
Class A-5, Class
A-6 and Class A-7 Certificates,
collectively.
Targeted Principal Classes ................. None.
Underwriters ............................... Bear, Stearns &
Co. Inc. and
Credit Suisse First Boston LLC.
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:
Accretion Termination Date: For the Accrual Certificates, the
earlier of
(x) the Cross-over Date and (y) the Distribution Date on which
the Class
Certificate Balance of the Accretion Directed Certificates has
been reduced to
zero.
Accrual Amount: For each Distribution Date through the
Accretion
Termination Date and the Accrual Certificates, an amount equal
to the sum of (a)
Accrued Certificate Interest in respect of the Accrual
Certificates in
accordance with clause (i) of Section 4.2(a), and (b) amounts
allocable to the
Accrual Certificates in accordance with clause (ii) of Section
4.2(a), in each
case on such Distribution Date.
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.
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.
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 the
Subordinated Optimal
Principal Amount; provided that solely for purposes of this
definition, the
applicable Subordinated Optimal Principal Amount will be reduced
by the amounts
required to be distributed to the Class A-PO Certificates in
respect of the
applicable Class PO Deferred Amount on such Distribution Date,
and any such
reduction in the Subordinate Optimal Principal Amount 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.
5
<PAGE>
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 Certificate Account at the close of
business on the
related Determination Date on account of (i) Principal
Prepayments received
after the related Prepayment Period and Liquidation Proceeds
received in the
month of such Distribution Date and (ii) all Scheduled Payments
due after the
related Due 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: With respect to any Distribution Date, an
amount equal to
the sum of:
(a) all scheduled installments of interest, net of the Master
Servicing
Fee, the Trustee Fee and any amounts due to First Horizon in
respect
of the Retained Yield on such Distribution Date, and all
scheduled
installments of principal due in respect of the Mortgage Loans
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;
(b) all Insurance Proceeds, all Liquidation Proceeds and all
Unanticipated Recoveries received in respect of the Mortgage
Loans
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;
6
<PAGE>
(c) all Principal Prepayments received in respect of the
Mortgage Loans
during the related Prepayment Period, plus interest received
thereon, net of any Prepayment Interest Excess;
(d) any Compensating Interest in respect of Principal
Prepayments in
Full received in respect of the Mortgage Loans during the
related
Prepayment Period (or, in the case of the first Distribution
Date,
from the Cut-off Date); and
(e) any Substitution Adjustment Amount or the Purchase Price for
any
Deleted Mortgage Loan or a Mortgage Loan 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.
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.
7
<PAGE>
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 2005-3."
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
the Notional Certificates) 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.
Class: All Certificates bearing the same class designation as
set forth in
the Preliminary Statement.
8
<PAGE>
Class Certificate Balance: With respect to any Class of
Certificates
(other than the Notional 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(j).
Class PO Deferred Amount: With respect to the Principal Only
Certificates
and any Distribution Date through the Cross-over Date, the sum
of (1) the Class
PO Percentage of the principal portion of Non-Excess Losses on a
Discount
Mortgage Loan allocated to the Principal Only Certificates on
such date, and (2)
all amounts previously allocated to the Principal Only
Certificates in respect
of such losses and not distributed to the Principal Only
Certificates on prior
Distribution Dates.
Class PO Deferred Payment Writedown Amount: For any Distribution
Date and
the Principal Only Certificates, the amount, if any, distributed
on such date in
respect of the Class PO Deferred Amount pursuant to Section
4.2(a). 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 Percentage: (a) With respect to any Discount Mortgage
Loan, the
fraction, expressed as a percentage, equal to (5.50% - NMR of
the Mortgage
Loans) divided by 5.50%, and (b) with respect to any
Non-Discount Mortgage Loan,
0%.
Class PO Principal Distribution Amount: With respect to each
Distribution
Date and the Principal Only Certificates, an amount equal to the
sum of:
(1) the applicable Class PO Percentage of all scheduled payments
of
principal due on each Mortgage Loan 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 Class PO Percentage of the Stated
Principal
Balance of each Mortgage Loan which was the subject of a
prepayment in
full received by the Master Servicer during the related
Prepayment Period;
(3) the applicable Class PO Percentage of (i) all partial
prepayments of principal for each Mortgage Loan received by the
Master
Servicer during the related Prepayment Period and (ii) all
Unanticipated
Recoveries in respect of each Mortgage Loan received during the
calendar
month preceding such Distribution Date;
(4) the applicable Class PO Percentage of the sum of (a) the
net
liquidation proceeds allocable to principal on each Mortgage
Loan 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 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
9
<PAGE>
(5) the applicable Class PO Percentage of the sum of (a) the
Stated
Principal Balance of each Mortgage Loan which has 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
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 Class Certificate Balance of such Class and each Class
subordinate
thereto, if any, and the denominator of which is the Pool
Principal Balance with
respect to such Distribution Date, equals or exceeds such
percentage calculated
as of the Closing Date.
Closing Date: April 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 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
shall not
exceed 0.0083% of the Pool Principal Balance 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.
10
<PAGE>
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
2005-3), 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 April
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: April 1, 2005.
Cut-off Date Pool Principal Balance: $230,017,638.81.
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.
11
<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.
Discount Mortgage Loan: Any Mortgage Loan with a Net Mortgage
Rate below
5.50%.
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 2005-3." Funds in the
Distribution Account
shall be held in trust for the Certificateholders for the uses
and purposes set
forth in this Agreement.
12
<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 May 2005.
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.
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<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 or any successor thereto. 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 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.
Fraud Loss Coverage Amount: As of the Closing Date, $4,600,353.
As of any
Distribution Date from the first anniversary of the Cut-off Date
and prior to
the third anniversary of the Cut-off Date, the Fraud Loss
Coverage Amount will
equal $2,300,176 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
from the third to
the fifth anniversary of the Cut-off Date, the Fraud Loss
Coverage Amount will
equal (1) the lesser of (a) the Fraud Loss Coverage Amount as of
the most recent
anniversary of the Cut-off Date and (b) 1.0% of the aggregate
outstanding
principal balance of all of the Mortgage Loans as of the most
recent anniversary
of the Cut-off Date minus (2) the Fraud Losses that would have
been allocated to
the Subordinated Certificates in the absence of the Loss
Allocation Limitations
since the most recent anniversary of 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.
14
<PAGE>
Fraud Loss Coverage Termination Date: The date on which the
Fraud Loss
Coverage Amount is reduced to zero.
Index: LIBOR.
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.
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.
Latest Possible Maturity Date: As to each Class of Certificates,
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: The London interbank offered rate for one month United
States
dollar deposits calculated in the manner described in Section
4.9.
15
<PAGE>
LIBOR Business Day: Any day on which banks in London, England
and The City
of New York are open and conducting transactions in foreign
currency and
exchange.
LIBOR Certificates: As specified in the Preliminary
Statement.
LIBOR Determination Date: For the LIBOR Certificates, the second
LIBOR
Business Day immediately preceding the commencement of each
Interest Accrual
Period for such Certificates.
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(h).
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 Retained Yield, the Lower REMIC Interests, the
RU Interest and
the RL 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.
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.
16
<PAGE>
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: For each Mortgage Loan a per annum
rate equal
to 0.244%.
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 April 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., or any successor
thereto. 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.
Mortgage File: The mortgage documents listed in Section 2.1
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:
17
<PAGE>
(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.
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.
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<PAGE>
Mortgage Note: The original executed note or other evidence
of
indebtedness evidencing the indebtedness of a Mortgagor under a
Mortgage Loan.
Mortgage Pool: The aggregate of the Mortgage Loans identified in
the
Mortgage Loan Schedule.
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.
Net Mortgage Rate or "NMR": With respect to a Mortgage Loan, the
Mortgage
Rate thereof, less the Master Servicing Fee and the Trustee Fee
with respect to
the Mortgage Loan, expressed as a per annum percentage of its
Stated Principal
Balance.
Net Interest Shortfall: For any Distribution Date, the sum of
(a) the
amount of interest which would otherwise have been received for
any Mortgage
Loan 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.
Net Prepayment Interest Shortfalls: As to any Distribution Date,
the
amount by which the aggregate of Prepayment Interest Shortfalls
in respect of
the Mortgage Loans during the related Prepayment Period exceeds
an amount equal
to the Compensating Interest paid in respect of the Mortgage
Loans, if any, for
such Distribution Date.
Non-Delay Certificates: As specified in the Preliminary
Statement.
Non-Discount Mortgage Loan: Any Mortgage Loan with a Net
Mortgage Rate
that is equal to or greater than 5.50%.
Non-Excess Loss: Any Realized Loss other than an Excess
Loss.
Non-Class PO Percentage: (a) With respect to a Discount Mortgage
Loan, the
fraction, expressed as a percentage, equal to the NMR divided by
5.50%, and (b)
with respect to each Non-Discount Mortgage Loan, 100%.
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.
19
<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: As specified in the Preliminary Statement.
Notional Amount Component: As specified in the Preliminary
Statement.
Notional Certificates: As specified in the Preliminary
Statement.
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 Mortgage Loan: The Mortgage Loan refinanced in
connection with
the origination of a Refinancing Mortgage Loan.
Original Subordinated Principal Balance: The aggregate of the
Class
Certificate Balances of the Subordinated Certificates as of the
Closing Date.
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:
(a) Certificates theretofore canceled by the Trustee or
delivered to the
Trustee for cancellation; and
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<PAGE>
(b) 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 interest bearing 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;
21
<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.
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.
22
<PAGE>
Person: Any individual, corporation, partnership, joint
venture,
association, joint-stock company, trust, unincorporated
organization or
government, or any agency or political subdivision thereof.
Physical Certificates: As specified in the Preliminary
Statement.
Planned Balance: With respect to a class of the Planned
Principal Classes
and a Distribution Date, the balance for such Distribution Date
and such class
as reflected in the Principal Balance Schedules on Schedule
IV.
Planned Principal Classes: As specified in the Preliminary
Statement.
Pool Principal Balance: With respect to any Distribution Date,
the
aggregate of the Stated Principal Balances of the Mortgage Loans
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.
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<PAGE>
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: As specified in the Preliminary
Statement.
Principal Only Certificates: As specified in the Preliminary
Statement.
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 Certificates: 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.
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.
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<PAGE>
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: A leading bank with an established place of
business in
London engaged in transactions in Eurodollar deposits in the
international
Eurocurrency market, not controlled by, or under the common
control with, the
Trustee.
Refinancing Mortgage Loan: Any Mortgage Loan originated in
connection with
the refinancing of an existing mortgage loan.
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<PAGE>
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 of 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 Coupon: 5.250% per annum.
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.
Retail/Lottery Certificates: Not applicable.
26
<PAGE>
Retained Yield: As to each Mortgage Loan and any Distribution
Date, an
amount payable to First Horizon Home Loan Corporation out of
each full payment
of interest received on such Mortgage Loan and equal to
one-twelfth of the
Retained Yield 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).
Retained Yield Rate: For any Mortgage Loan, a per annum rate
equal to the
excess of (a) the applicable Mortgage Rate over (b) the Required
Coupon.
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
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
A-R Certificate.
Scheduled Balances: Not applicable.
Scheduled Balance 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.
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: The Distribution Date on which
the Class
Certificate Balance of each Class of related Senior Certificates
has been
reduced to zero.
Senior Optimal Principal Amount: With respect to each
Distribution Date,
an amount equal to the sum of:
(1) the related Senior Percentage of the applicable Non-Class
PO
Percentage of all Scheduled Payments of principal due on each
Mortgage Loan 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;
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<PAGE>
(2) the related Senior Prepayment Percentage of the
applicable
Non-Class PO Percentage of the Stated Principal Balance of each
Mortgage Loan
which was the subject of a Principal Prepayment in Full received
by the Master
Servicer during the applicable Prepayment Period;
(3) the related Senior Prepayment Percentage of the
applicable
Non-Class PO Percentage of the sum of (a) all partial Principal
Prepayments in
respect of each Mortgage Loan received during the applicable
Prepayment Period
and (b) all Unanticipated Recoveries received in respect of each
Mortgage Loan
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
applicable Non-Class PO Percentage of the Liquidation
Proceeds
allocable to principal on each Mortgage Loan which became a
Liquidated Mortgage Loan during the related Prepayment
Period,
other than Mortgage Loans described in clause (y), and (y)
the
applicable Non-Class PO Percentage of the principal balance
of
each Mortgage Loan 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
applicable Non-Class PO Percentage of the Stated Principal
Balance of each Mortgage Loan which became a Liquidated
Mortgage Loan during the related Prepayment Period, other
than
Mortgage Loans described in clause (y), and (y) the
applicable
Non-Class PO Percentage of the Stated Principal Balance of
each Mortgage Loan 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 applicable Non-Class PO Percentage of the related
Senior Percentage of the principal portion of Excess Losses
(other than Debt Service Reductions) during the related
Prepayment Period; and
(5) the related Senior Prepayment Percentage of the sum of (a)
the
applicable Non-Class PO Percentage of the Stated Principal
Balance of each
Mortgage Loan which was repurchased by the seller in connection
with such
Distribution Date and (b) the difference, if any, between the
applicable
Non-Class PO Percentage of the Stated Principal Balance of a
Mortgage Loan 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, 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
(other than the
Class A-PO Certificates) immediately preceding such Distribution
Date by the
Pool Principal Balance (excluding the aggregate of the
applicable Class PO
Percentage of the principal balance of each Discount Mortgage
Loan) for the
immediately preceding Distribution Date.
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<PAGE>
Senior Prepayment Percentage: On any Distribution Date occurring
during
the periods set forth below, the Senior Prepayment Percentages,
described below:
--------------------------------------------------------------------------------
Period (Dates Inclusive) Senior Prepayment Percentage
--------------------------------------------------------------------------------
May 2005 - April 2010 100%
--------------------------------------------------------------------------------
May 2010 - April 2011 the related Senior Percentage plus 70% of
the
related Subordinated Percentage
--------------------------------------------------------------------------------
May 2011 - April 2012 the related Senior Percentage plus 60% of
the
related Subordinated Percentage
--------------------------------------------------------------------------------
May 2012 - April 2013 the related Senior Percentage plus 40% of
the
related Subordinated Percentage
--------------------------------------------------------------------------------
May 2013 - April 2014 the related Senior Percentage plus 20% of
the
related Subordinated Percentage
--------------------------------------------------------------------------------
May 2014 and thereafter the related Senior Percentage
--------------------------------------------------------------------------------
Notwithstanding the foregoing, if the Senior Percentage on
any
Distribution Date exceeds the initial Senior Percentage, the
Senior Prepayment
Percentage for that Distribution Date will equal 100%.
In addition, no reduction of the Senior Prepayment Percentage
below the
level in effect for the most recent prior period specified in
the table above
shall be effective on any Distribution Date unless both of the
following step
down conditions are satisfied as of the last day of the month
preceding such
Distribution Date:
(1) the aggregate Stated Principal Balance of Mortgage Loans
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 such date;
and
(2) cumulative aggregate Realized Losses do not exceed:
(a) 30% of the related Original Subordinated Principal
Balance if such Distribution Date occurs between and
including May 2010 and April 2011;
(b) 35% of the related Original Subordinated Principal
Balance if such Distribution Date occurs between and
including May 2011 and April 2012;
(c) 40% of the related Original Subordinated Principal
Balance if such Distribution Date occurs between and
including May 2012 and April 2013;
29
<PAGE>
(d) 45% of the related Original Subordinated Principal
Balance if such Distribution Date occurs between and
including May 2013 and April 2014; and
(e) 50% of the related Original Subordinated Principal
Balance if such Distribution Date occurs during or after
May 2014.
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";
30
<PAGE>
(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:
(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, $3,189,800. 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 Corporation, a division of The
McGraw-Hill
Companies, Inc. 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.
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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.
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 Pool
Principal Balance 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
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-Class
PO Percentage of all Scheduled Payments of principal due on each
outstanding
Mortgage Loan 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-Class PO Percentage of the Stated Principal Balance of each
Mortgage Loan
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
during the related Prepayment Period, plus,(b) all Unanticipated
Recoveries
received in respect of each Mortgage Loan 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-Class PO Percentage of the net Liquidation Proceeds
allocable to principal
received during the related Prepayment Period in respect of each
Liquidated
Mortgage Loan, other than Mortgage Loans described in clause
(b), and (b) the
applicable Non-Class PO Percentage of the principal balance of
each Mortgage
Loan 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 A-PO
Certificates) under
clause (4) of the definition of 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 applicable Non-Class PO Percentage of the Stated Principal
Balance of each
Mortgage Loan which was repurchased by the seller in connection
with such
Distribution Date and (b) the difference, if any, between the
applicable
Non-Class PO Percentage of the Stated Principal Balance of a
Mortgage Loan that
has been replaced by the seller with a Substitute Mortgage Loan
pursuant to the
Agreement in connection with such Distribution Date and the
Stated Principal
Balance of each such Substitute Mortgage Loan.
Subordinated Percentage: For any Distribution Date, 100% minus
the 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
Required
Coupon; (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.
Super Senior Support Certificates: As specified in the
Preliminary
Statement.
Support Classes: Not Applicable.
Targeted Balances: Not Applicable.
Targeted Principal Classes: Not Applicable.
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<PAGE>
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 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, an amount equal to
one-twelfth
of the Trustee Fee Rate multiplied by the 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).
Underwriters: As specified in the Preliminary Statement.
Underwriters' Exemption: Prohibited Transaction Exemption 90-36
or 89-40,
each 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%
of all Voting Rights will be allocated among all Holders of the
Certificates,
other than the Class 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 Class A-R Certificates (such Voting Rights to be
allocated among the
Holders of Certificates of such Class in accordance with their
respective
Percentage Interests).
34
<PAGE>
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
(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 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 public recording
office
in which such Mortgage has been recorded;
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<PAGE>
(iii) in the case of a Mortgage Loan that is not a MERS
Mortgage
Loan, a duly executed assignment of the Mortgage in blank
(which may be included in a blanket assignment or
assignments), together with, except as provided below, all
interim recorded 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
(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, and
(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).
36
<PAGE>
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.
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.
37
<PAGE>
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
2005-3, 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.
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.
38
<PAGE>
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.
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 Final 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 Final
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
39
<PAGE>
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.
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, and which refers to, among other
representations
and warranties in the MLPA, 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 in the by the specific applicable local,
state or federal
predatory and abusive lending laws.
40
<PAGE>
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.
(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.
41
<PAGE>
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.
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.
42
<PAGE>
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.
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.
43
<PAGE>
(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.
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 A-R Certificate shall represent ownership
of the RL
Interest and the 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.
44
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Lower REMIC Corresponding Class or Interest
Interest or Lower REMIC Interest
-------------------------------
Residual Balance Lower REMIC Interest Rate Interest
Principal
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
L-A-1 $ 97,075,000.00 5.2500% A1 A1
------------------------------------------------------------------------------------------------------------
L-A-2 $ 33,452,000.00 5.2500% A2 A2
------------------------------------------------------------------------------------------------------------
L-A-3 $ 600,000.00 5.2500% A3 A3
------------------------------------------------------------------------------------------------------------
L-A-4 $ 25,147,500.00 Same as Class A-4 A4 A4
------------------------------------------------------------------------------------------------------------
L-A-5 $ 10,777,500.00 Same as Class A-5 A5 A5
------------------------------------------------------------------------------------------------------------
L-A-6 $ 18,001,000.00 5.2500% A6 A6
------------------------------------------------------------------------------------------------------------
L-A-7 $ 15,287,000.00 5.2500% A7 A7
------------------------------------------------------------------------------------------------------------
L-A-8 $ 20,034,000.00 8.0000% A8, A9 A8
------------------------------------------------------------------------------------------------------------
L-A-PO $ 3,432,110.00 N/A N/A APO
------------------------------------------------------------------------------------------------------------
RL $ 0.00 N/A N/A N/A
------------------------------------------------------------------------------------------------------------
L-A-RU $ 100.00 5.500% RU Interest RU Interest
------------------------------------------------------------------------------------------------------------
L-B-1 $ 3,106,000.00 5.500% B1 B1
------------------------------------------------------------------------------------------------------------
L-B-2 $ 1,265,000.00 5.500% B2 B2
------------------------------------------------------------------------------------------------------------
L-B-3 $ 690,000.00 5.500% B3 B3
------------------------------------------------------------------------------------------------------------
L-B-4 $ 460,000.00 5.500% B4 B4
------------------------------------------------------------------------------------------------------------
L-B-5 $ 345,000.00 5.500% B5 B5
------------------------------------------------------------------------------------------------------------
L-B-6 $ 345,428.81 5.500% B6 B6
------------------------------------------------------------------------------------------------------------
$ 230,017,638.81
------------------------------------------------------------------------------------------------------------
</TABLE>
On each Distribution Date Available Funds shall be distributed
with
respect to the Lower REMIC Interests in a manner such that:
(a) interest accrued, if any, on each Lower REMIC Interest
is
distributed with respect to each such Lower REMIC Interest in
the
same manner that Accrued Certificate Interest is distributed
with
respect to the Corresponding Class or Classes of
Certificates
pursuant to Section 4.2; and
(b) principal is distributed (and Realized Losses shall be
allocated)
with respect to each such Lower REMIC Interest in the same
manner
that principal is distributed (and Realized Losses is
allocated)
with respect to the Corresponding Classes or Classes of
Certificate
pursuant to Section 4.2 and Section 4.4.
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.
45
<PAGE>
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.
46
<PAGE>
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.
(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.
47
<PAGE>
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.
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.
48
<PAGE>
(b) The Master Servicer shall establish and maintain the
Certificate
Account into which the Master Servicer shall deposit or cause to
be
deposited 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:
(i) all payments on account of principal on the Mortgage
Loans,
including Principal Prepayments;
(ii) all payments on account of interest on the Mortgage Loans,
net
of the related Master Servicing Fee, any Prepayment Interest
Excess and, for so long as First Horizon is the Master
Servicer, any Retained Yield;
(iii) all Insurance Proceeds and Liquidation Proceeds in respect
of
the related Mortgage Loans, 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
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
pursuant to Section 3.9(b) and 3.9(d);
(vi) all Substitution Adjustment Amounts;
(vii) all Advances made by the Master Servicer pursuant to
Section
4.1; and
(viii) any other amounts required to be deposited hereunder.
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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 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.
(c) The Trustee shall establish and maintain, on behalf of
the
Certificateholders, the Distribution Account, into which the
Trustee
shall, promptly upon receipt, deposit and retain therein the
following:
(i) the aggregate amount remitted by the Master Servicer to
the
Trustee 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 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
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.
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<PAGE>
(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. 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.
(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.
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<PAGE>
(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.
(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 and
loan association, bank or insurance company certain reports and
reasonable
access to information and documentation regarding the Mortgage
Loans sufficient
to permit such Certificateholder or Certificate Owner to comply
with applicable
regulations of the OTS or other regulatory authorities with
respect to
investment in the Certificates; provided that the Master
Servicer shall be
entitled to be reimbursed by each such Certificateholder or
Certificate Owner
for actual expenses incurred by the Master Servicer in providing
such reports
and access.
SECTION 3.8 Permitted Withdrawals from the Certificate Account
and
Distribution Account.
(a) The Master Servicer may from time to time make withdrawals
from the
Certificate Account for the following purposes:
(i) to the extent not previously retained by the Master
Servicer,
to pay to First Horizon the Retained Yield and to pay to the
Master Servicer the master servicing compensation to which
it
is entitled pursuant to Section 3.14, and earnings on or
investment income with respect to funds in or credited to
the
Certificate Account as additional master servicing
compensation;
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<PAGE>
(ii) to the extent not previously retained by the Master
Servicer,
to reimburse the Master Servicer for unreimbursed Advances
made by it, such right of reimbursement pursuant to this
subclause (ii) being limited to amounts received on the
Mortgage Loan(s) in respect of which any such Advance was
made;
(iii) to reimburse the Master Servicer for any
Nonrecoverable
Advance previously made;
(iv) to reimburse the Master Servicer for Insured Expenses from
the
related Insurance Proceeds;
(v) to reimburse the Master Servicer for (a) unreimbursed
Servicing Advances, the Master Servicer's right to
reimbursement pursuant to this clause (a) with respect to
any
Mortgage Loan being limited to amounts received on such
Mortgage Loan(s) which represent late recoveries of the
payments for which such advances were made pursuant to
Section
3.1 or Section 3.6 and (b) for unpaid Master Servicing Fees
as
provided in Section 3.11 hereof;
(vi) to pay to the Seller or Master Servicer, as applicable,
with
respect to each Mortgage Loan or property acquired in
respect
thereof that has been purchased pursuant to Section 2.2, 2.3
or 3.11, all amounts received thereon after the date of such
purchase;
(vii) to reimburse the Seller, the Master Servicer or the
Depositor
for expenses incurred by any of them and reimbursable
pursuant
to Section 6.3 hereof;
(viii) to withdraw any amount deposited in the Certificate
Account
and not required to be deposited therein;
(ix) on or prior to the Distribution Account Deposit Date,
to
withdraw an amount equal to the related Available Funds and
the Trustee Fee for such Distribution Date and remit such
amount to the Trustee for deposit in the Distribution
Account;
and
(x) to clear and terminate the Certificate Account upon
termination of this Agreement pursuant to Section 9.1
hereof.
The Master Servicer shall keep and maintain separate accounting,
on
a Mortgage Loan-by-Mortgage Loan basis, for the purpose of
justifying any
withdrawal from the Certificate Account pursuant to such
subclauses (i),
(ii), (iv), (v) and (vi). Prior to making any withdrawal from
the
Certificate Account pursuant to subclause (iii), the Master
Servicer shall
deliver to the Trustee an Officer's Certificate of a Servicing
Officer
indicating the amount of any previous Advance determined by the
Master
Servicer to be a Nonrecoverable Advance and identifying the
related
Mortgage Loans(s), and their respective portions of such
Nonrecoverable
Advance.
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<PAGE>
The Master Servicer shall distribute the Retained Yield, if any,
to
First Horizon on each Distribution Account Deposit Date during
the term of
this Agreement.
(b) The Trustee shall withdraw funds from the Distribution
Account for
distributions to the Certificateholders in the manner specified
in
this Agreement (and to withhold from the amounts so withdrawn,
the
amount of any taxes that it is authorized to withhold pursuant
to
the last paragraph of Section 8.11). In addition, the Trustee
may
(and with respect to clauses (i) and (ii) below, shall), prior
to
making the distribution pursuant to Section 4.2 from time to
time
make withdrawals from the Distribution Account for the
following
purposes:
(i) to pay to itself the Trustee Fee for the related
Distribution
Date;
(ii) to pay to itself earnings on or investment income with
respect
to funds in the Distribution Account;
(iii) to withdraw and return to the Master Servicer any
amount
deposited in the Distribution Account and not required to be
deposited therein; and
(iv) to clear and terminate the Distribution Account upon
termination of the Agreement pursuant to Section 9.1 hereof.
SECTION 3.9 Maintenance of Hazard Insurance; Maintenance of
Primary
Insurance Policies.
(a) The Master Servicer shall cause to be maintained, for each
Mortgage
Loan, hazard insurance with extended coverage in an amount that
is
at least equal to the lesser of (i) the maximum insurable value
of
the improvements securing such Mortgage Loan or (ii) the greater
of
(y) the outstanding principal balance of the Mortgage Loan and
(z)
an amount such that the proceeds of such policy shall be
sufficient
to prevent the Mortgagor and/or the mortgagee from becoming
a
co-insurer. Each such policy of standard hazard insurance
shall
contain, or have an accompanying endorsement that contains,
a
standard mortgagee clause. Any amounts collected by the
Master
Servicer under any such policies (other than the amounts to
be
applied to the restoration or repair of the related
Mortgaged
Property or amounts released to the Mortgagor in accordance with
the
Master Servicer's normal servicing procedures) shall be
deposited in
the Certificate Account. Any cost incurred by the Master
Servicer in
maintaining any such insurance shall not, for the purpose of
calculating monthly distributions to the Certificateholders
or
remittances to the Trustee for their benefit, be added to
the
principal balance of the Mortgage Loan, notwithstanding that
the
terms of the Mortgage Loan so permit. Such costs shall be
recoverable by the Master Servicer out of late payments by
the
related Mortgagor or out of Liquidation Proceeds to the
extent
permitted by Section 3.8 hereof. It is understood and agreed
that no
earthquake or other additional insurance is to be required of
any
Mortgagor or maintained on property acquired in respect of a
Mortgage other than pursuant to such applicable laws and
regulations
as shall at any time be in force and as shall require such
additional insurance. If the Mortgaged Property is located at
the
time of origination of the Mortgage Loan in a federally
designated
special flood hazard area and such area is participating in
the
national flood insurance program, the Master Servicer shall
cause
flood insurance to be maintained with respect to such Mortgage
Loan.
Such flood insurance shall be in an amount equal to the least of
(i)
the original principal balance of the related Mortgage Loan,
(ii)
the replacement value of the improvements which are part of
such
Mortgaged Property, and (iii) the maximum amount of such
insurance
available for the related Mortgaged Property under the
national
flood insurance program.
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<PAGE>
(b) In the event that the Master Servicer shall obtain and
maintain a
blanket policy insuring against hazard losses on all of the
Mortgage
Loans, it shall conclusively be deemed to have satisfied its
obligations as set forth in the first sentence of this Section,
it
being understood and agreed that such policy may contain a
deductible clause on terms substantially equivalent to those
commercially available and maintained by comparable servicers.
If
such policy contains a deductible clause, the Master Servicer
shall,
in the event that there shall not have been maintained on
the
related Mortgaged Property a policy complying with the first
sentence of this Section, and there shall have been a loss
that
would have been covered by such policy, deposit in the
Certificate
Account the amount not otherwise payable under the blanket
policy
because of such deductible clause. In connection with its
activities
as Master Servicer of the Mortgage Loans, the Master Servicer
agrees
to present, on behalf of itself, the Depositor, and the Trustee
for
the benefit of the Certificateholders, claims under any such
blanket
policy.
(c) The Master Servicer shall not take any action which would
result in
non-coverage under any applicable Primary Insurance Policy of
any
loss which, but for the actions of the Master Servicer, would
have
been covered thereunder. The Master Servicer shall not cancel
or
refuse to renew any such Primary Insurance Policy that is in
effect
at the date of the initial issuance of the Certificates and
is
required to be kept in force hereunder unless the
replacement
Primary Insurance Policy for such canceled or non-renewed policy
is
maintained with a Qualified Insurer.
The Master Servicer shall not be required to maintain any
Primary
Insurance Policy (i) with respect to any Mortgage Loan with a
Loan-to-Value
Ratio less than or equal to 80% as of any date of determination
or, based on a
new appraisal, the principal balance of such Mortgage Loan
represents 80% or
less of the new appraised value or (ii) if maintaining such
Primary Insurance
Policy is prohibited by applicable law.
The Master Servicer agrees to effect the timely payment of the
premiums on
each Primary Insurance Policy, and such costs not otherwise
recoverable shall be
recoverable by the Master Servicer from the related liquidation
proceeds.
55
<PAGE>
(d) In connection with its activities as Master Servicer of the
Mortgage
Loans, the Master Servicer agrees to present on behalf of
itself,
the Trustee and Certificateholders, claims to the insurer under
any
Primary Insurance Policies and, in this regard, to take such
reasonable action as shall be necessary to permit recovery under
any
Primary Insurance Policies respecting defaulted Mortgage Loans.
Any
amounts collected by the Master Servicer under any Primary
Insurance
Policies shall be deposited in the Certificate Account.
SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption
Agreements.
(a) Except as otherwise provided in this Section, when any
property
subject to a Mortgage has been conveyed by the Mortgagor, the
Master
Servicer shall to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any
Mortgage
Note or Mortgage, to the extent permitted under applicable law
and
governmental regulations, but only to the extent that such
enforcement will not adversely affect or jeopardize coverage
under
any Required Insurance Policy. Notwithstanding the foregoing,
the
Master Servicer is not required to exercise such rights with
respect
to a Mortgage Loan if the Person to whom the related
Mortgaged
Property has been conveyed or is proposed to be conveyed
satisfies
the terms and conditions contained in the Mortgage Note and
Mortgage
related thereto and the consent of the mortgagee under such
Mortgage
Note or Mortgage is not otherwise so required under such
Mortgage
Note or Mortgage as a condition to such transfer. In the event
that
the Master Servicer is prohibited by law from enforcing any
such
due-on-sale clause, or if coverage under any Required
Insurance
Policy would be adversely affected, or if nonenforcement is
otherwise permitted hereunder, the Master Servicer is
authorized,
subject to Section 3.10(b), to take or enter into an assumption
and
modification agreement from or with the person to whom such
property
has been or is about to be conveyed, pursuant to which such
person
becomes liable under the Mortgage Note and, unless prohibited
by
applicable state law, the Mortgagor remains liable thereon,
provided
that the Mortgage Loan shall continue to be covered (if so
covered
before the Master Servicer enters such agreement) by the
applicable
Required Insurance Policies. The Master Servicer, subject to
Section
3.10(b), is also authorized with the prior approval of the
insurers
under any Required Insurance Policies to enter into a
substitution
of liability agreement with such Person, pursuant to which
the
original Mortgagor is released from liability and such Person
is
substituted as Mortgagor and becomes liable under the Mortgage
Note.
Notwithstanding the foregoing, the Master Servicer shall not
be
deemed to be in default under this Section by reason of any
transfer
or assumption which the Master Servicer reasonably believes it
is
restricted by law from preventing, for any reason
whatsoever.
(b) Subject to the Master Servicer's duty to enforce any
due-on-sale
clause to the extent set forth in Section 3.10(a) hereof, in
any
case in which a Mortgaged Property has been conveyed to a Person
by
a Mortgagor, and such Person is to enter into an assumption
agreement or modification agreement or supplement to the
Mortgage
Note or Mortgage that requires the signature of the Trustee, or
if
an instrument of release signed by the Trustee is required
releasing
the Mortgagor from liability on the Mortgage Loan, the
Master
Servicer shall prepare and deliver or cause to be prepared
and
delivered to the Trustee for signature and shall direct, in
writing,
the Trustee to execute the assumption agreement with the Person
to
whom the Mortgaged Property is to be conveyed and such
modification
agreement or supplement to the Mortgage Note or Mortgage or
other
instruments as are reasonable or necessary to carry out the
terms of
the Mortgage Note or Mortgage or otherwise to comply with
any
applicable laws regarding assumptions or the transfer of the
Mortgaged Property to such Person. In connection with any
such
assumption, no material term of the Mortgage Note may be
changed. In
addition, the su
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