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 February 1, 2005
-----------------------------------------------------
FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2005-AR1
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-AR1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>
<C>
<C>
ARTICLE I
DEFINITIONS.............................................................................................5
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
WARRANTIES.........................................34
SECTION 2.1
Conveyance of Mortgage
Loans......................................................................34
SECTION 2.2
Acceptance by Trustee of the Mortgage
Loans.......................................................38
SECTION 2.3
Representations and Warranties of the Master Servicer; Covenants of the
Seller...................40
SECTION 2.4
Representations and Warranties of the Depositor as to the Mortgage
Loans..........................42
SECTION 2.5
Delivery of Opinion of Counsel in Connection with
Substitutions...................................42
SECTION 2.6
Execution and Delivery of
Certificates............................................................43
SECTION 2.7
REMIC
Matters.....................................................................................43
SECTION 2.8
Covenants of the Master
Servicer..................................................................46
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE
LOANS.......................................................47
SECTION 3.1
Master Servicer to Service Mortgage
Loans.........................................................47
SECTION 3.2
Subservicing; Enforcement of the Obligations of
Servicers.........................................48
SECTION 3.3
Rights of the Depositor and the Trustee in Respect of the Master
Servicer.........................49
SECTION 3.4
Trustee to Act as Master
Servicer.................................................................49
SECTION 3.5
Collection of Mortgage Loan Payments; Certificate Account;
Distribution Account...................49
SECTION 3.6
Collection of Taxes, Assessments and Similar Items; Escrow
Accounts...............................53
SECTION 3.7
Access to Certain Documentation and Information Regarding the
Mortgage Loans......................53
SECTION 3.8
Permitted Withdrawals from the Certificate Account and
Distribution
Account....................................................................................54
SECTION 3.9
Maintenance of Hazard Insurance; Maintenance of Primary
Insurance
Policies......................................................................................55
SECTION 3.10
Enforcement of Due-on-Sale Clauses; Assumption
Agreements........................................57
SECTION 3.11
Realization Upon Defaulted Mortgage Loans; Repurchase of Certain
Mortgage Loans..................58
SECTION 3.12
Trustee to Cooperate; Release of Mortgage
Files..................................................61
SECTION 3.13
Documents Records and Funds in Possession of Master Servicer to be
Held for the Trustee..........62
SECTION 3.14
Master Servicing
Compensation....................................................................62
SECTION 3.15
Access to Certain
Documentation..................................................................63
SECTION 3.16
Annual Statement as to
Compliance................................................................63
SECTION 3.17
Annual Independent Public Accountants' Servicing Statement;
Financial Statements.................63
SECTION 3.18
Errors and Omissions Insurance; Fidelity
Bonds...................................................64
SECTION 3.19
Notification of
Adjustments......................................................................64
ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE MASTER
SERVICER.....................................................64
SECTION 4.1
Advances..........................................................................................64
SECTION 4.2
Priorities of
Distribution........................................................................65
i
<PAGE>
SECTION 4.3
Method of
Distribution............................................................................69
SECTION 4.4
Allocation of
Losses..............................................................................70
SECTION 4.5
[RESERVED]........................................................................................72
SECTION 4.6
Monthly Statements to
Certificateholders..........................................................72
ARTICLE V THE
CERTIFICATES.......................................................................................74
SECTION 5.1 The
Certificates..................................................................................74
SECTION 5.2
Certificate Register; Registration of Transfer and Exchange of
Certificates.......................75
SECTION 5.3
Mutilated, Destroyed, Lost or Stolen
Certificates.................................................80
SECTION 5.4
Persons Deemed
Owners.............................................................................80
SECTION 5.5
Access to List of Certificateholders' Names and
Addresses.........................................80
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...................................81
SECTION 6.3
Limitation on Liability of the Depositor, the Master Servicer and
Others..........................81
SECTION 6.4
Limitation on Resignation of Master
Servicer......................................................82
ARTICLE VII
DEFAULT..............................................................................................82
SECTION 7.1
Events of
Default.................................................................................82
SECTION 7.2
Trustee to Act; Appointment of
Successor..........................................................84
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.............................................89
SECTION 8.4
Trustee May Own
Certificates......................................................................90
SECTION 8.5
Trustee's Fees and
Expenses.......................................................................90
SECTION 8.6
Eligibility Requirements for
Trustee..............................................................90
SECTION 8.7
Resignation and Removal of
Trustee................................................................91
SECTION 8.8
Successor
Trustee.................................................................................91
SECTION 8.9
Merger or Consolidation of
Trustee................................................................92
SECTION 8.10
Appointment of Co-Trustee or Separate
Trustee....................................................92
SECTION 8.11 Tax
Matters......................................................................................94
SECTION 8.12
Periodic
Filings.................................................................................95
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............................................................96
SECTION 9.3
Additional Termination
Requirements...............................................................97
ARTICLE X
[RESERVED].............................................................................................98
ARTICLE XI MISCELLANEOUS
PROVISIONS..............................................................................98
SECTION 11.1
Amendment........................................................................................98
ii
<PAGE>
SECTION 11.2
Recordation of Agreement;
Counterparts..........................................................100
SECTION 11.3
Governing
Law...................................................................................100
SECTION 11.4
Intention of
Parties............................................................................100
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......................................................102
SECTION 11.9
Inspection and Audit
Rights.....................................................................103
SECTION 11.10
Certificates Nonassessable and Fully
Paid......................................................103
SECTION 11.11
Limitations on Actions; No
Proceedings.........................................................103
SECTION 11.12
Acknowledgment of
Seller.......................................................................104
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
EXHIBITS
Exhibit A:
Form of Senior Certificate
A-1
Exhibit B:
Form of Subordinated Certificate
B-1
Exhibit C:
Form of Residual Certificate
C-1
Exhibit D:
Form of Reverse of Certificates
D-1
Exhibit E:
Form of Initial Certification
E-1
Exhibit F:
Form of Delay Delivery Certification
F-1
Exhibit G:
Form of Subsequent Certification of Custodian
G-1
Exhibit H:
Transfer Affidavit
H-1
Exhibit I:
Form of Transferor Certificate
I-1
Exhibit J:
Form of Investment Letter [Non-Rule 144A]
J-1
Exhibit K:
Form of Rule 144A Letter
K-1
Exhibit L:
Request for Release (for Trustee)
L-1
Exhibit M:
Request
for Release (Mortgage Loan)
M-1
</TABLE>
iii
<PAGE>
THIS
POOLING AND SERVICING AGREEMENT, dated as of February 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 II-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
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Initial Class
Initial
Integral Multiples
Class
Designation
Certificate Balance Pass Through
Rate
Minimum Denomination in Excess Minimum
------------------------- -----------------------
--------------------- ----------------------
---------------------
<S>
<C>
<C>
<C>
<C>
Class I-A-1
$
53,624,000.00
4.6483%(1) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-R
$
100.00
5.0405% (2) $
100 $
N/A
--------------------------------------------------------------------------------------------------------------------
Class II-A-1
$
19,850,000.00
5.0405% (2) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-2
$
53,720,000.00
5.0405% (2) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-3
$
20,000,000.00
5.0405% (2) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-4
$
6,670,000.00
5.0405% (2) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-5
$
5,135,000.00
5.0405% (2) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class III-A-1
$
22,040,000.00
5.2807% (3) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class IV-A-1
$
61,313,000.00
5.3362%(4) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-1
$
5,821,000.00
5.0504%(5) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-2
$
1,772,000.00
5.0504%(5) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-3
$
1,139,000.00
5.0504%(5) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-4
$
886,000.00
5.0504%(5) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-5
$
633,000.00
5.0504%(5) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-6
$
506,583.54
5.0504%(5) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Pass-Through Rate for the Class I-A-1 Certificates for each
subsequent
Distribution Date will equal the Weighted Average Adjusted Net
Mortgage Rate for
Pool I.
(2) The Pass-Through Rate for the Class II-A-R, Class II-A-1, Class
II-A-2,
Class II-A-3, Class II-A-4 and Class II-A-5 Certificates for each
subsequent
Distribution Date will equal the Weighted Average Adjusted Net
Mortgage Rate for
Pool II.
(3) The Pass-Through Rate for the Class III-A-1 Certificates for
each subsequent
Distribution Date will equal the Weighted Average Adjusted Net
Mortgage Rate for
Pool III.
(4) The Pass-Through Rate for the Class IV-A-1 Certificates for
each subsequent
Distribution Date will equal the Weighted Average Adjusted Net
Mortgage Rate for
Pool IV.
(5) The Pass-Through Rates for the Subordinated Certificates for
each subsequent
Distribution Date will equal the weighted average of the Weighted
Average
Adjusted Net Mortgage Rates for each Mortgage Pool, weighted on the
basis of the
Group Subordinate Amount for each Mortgage Pool, as of the first
day of the
month immediately prior to the month in which the relevant
Distribution Date
occurs, after taking into account scheduled payments of principal
on that date
and any Principal Prepayments received on or after such date and
distributed to
Certificateholders on the prior Distribution Date.
2
<PAGE>
Accretion Directed Certificates None.
Accrual Certificates........... None.
Accrual Components............. None.
Book-Entry Certificates........ All Classes of
Certificates other than the
Physical Certificates.
Certificate Group.............. With respect to
Pool I, the Group I Senior
Certificates, with respect to Pool II, the
Group II Senior Certificates, with respect
to Pool III, the Group III Senior
Certificates, and with respect to Pool IV,
the Group IV Senior Certificates. The
Subordinated Certificates correspond to all
ofthe Mortgage Pools.
COFI Certificates.............. None.
Component Certificates......... None.
Components..................... None.
Delay Certificates............. All
interest-bearing Classes of Certificates
other than the Non-Delay Certificates, if
any.
ERISA-Restricted Certificates.. The Residual
Certificates, Private
Certificates and Certificates of any Class
that no longer satisfy the applicable rating
requirement of the Underwriters' Exemption.
Floating Rate Certificates..... None.
Group I Senior Certificates.... The Class I-A-1
Certificates.
Group II Senior Certificates... The Class
II-A-1, Class II-A-2, Class
II-A-3, Class II-A-4, Class II-A-5 and Class
II-A-R
Certificates.
Group III Senior Certificates.. The Class
III-A-1 Certificates.
Group IV Senior Certificates... The Class IV-A-1
Certificates.
Insured Retail Certificates.... None.
Inverse Floating Rate
Certificates................... None.
LIBOR Certificates............. None.
Non-Delay Certificates......... None.
Notional Amount Components..... None.
Notional Certificates.......... None.
Offered Certificates........... All Classes of
the Certificates other than
the Private Certificates.
Physical Certificates.......... The Private
Certificates and the Residual
Planned Principal Classes......
Certificates.
None.
Principal Only Certificates.... None.
Private Certificates........... The Class B-4,
Class B-5 and Class B-6
Certificates.
3
<PAGE>
Rating Agencies................ Moody's and S
& P; except that, for the
purposes of the Class B-1, Class B-2, Class
B-3, Class B-4 and Class B-5 Certificates,
S&P shall be the sole Rating Agency.
Regular Certificates........... All Classes of
Certificates, other than the
Residual Certificates.
Residual Certificates.......... The Class II-A-R
Certificates.
Scheduled Principal Classes.... None.
Senior Certificates............ The Group I
Senior Certificates, the Group
II Senior Certificates, the Group III Senior
Certificates and the Group IV Senior
Certificates, collectively.
Senior Support Certificates.... The Class II-A-5
Certificates.
Subordinated Certificates...... The Class B-1,
Class B-2, Class B-3, Class
B-4, Class B-5 and Class B-6 Certificates.
Super Senior Certificates...... The Class
II-A-2, Class II-A-3 Certificates
and Class II-A-4 Certificates.
Support Classes................ The Class II-A-5
Certificates.
Targeted Principal Classes..... None.
Underwriters................... Credit Suisse
First Boston LLC and Goldman,
Sachs & Co.
With
respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions
herein
relating solely to such designations shall be of no force or
effect, and any
calculations herein incorporating references to such designations
shall be
interpreted without reference to such designations and amounts.
Defined terms
and provisions herein relating to statistical rating agencies not
designated
above as Rating Agencies shall be of no force or effect.
4
<PAGE>
ARTICLE I
DEFINITIONS
Whenever
used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following
meanings:
Accrued
Certificate Interest: For any Class of Certificates for any
Distribution Date, the interest accrued during the related Interest
Accrual
Period at the applicable Pass-Through Rate on the Class Certificate
Balance of
such Class of Certificates immediately prior to such Distribution
Date, less
such Class' share of any Net Interest Shortfall, allocable among
the outstanding
Classes of Senior Certificates of the related Certificate Group
based on the
Accrued Certificate Interest otherwise distributable thereto, and
allocable to
the Subordinated Certificates based on interest accrued on their
related
Apportioned Principal Balances.
Adjusted
Mortgage Rate: As to each Mortgage Loan, and at any time, the
per
annum rate equal to the Mortgage Rate less the Master Servicing Fee
Rate.
Adjusted
Net Mortgage Rate: As to each Mortgage Loan, and at any time,
the
per annum rate equal to the Mortgage Rate less the related Expense
Fee Rate.
Adjustment
Date: A date specified in each Mortgage Note as a date on which
the Mortgage Rate on the related Mortgage Loan will be
adjusted.
Advance:
The payment required to be made by the Master Servicer with
respect to any Distribution Date pursuant to Section 4.1, the
amount of any such
payment being equal to the aggregate of payments of principal and
interest (net
of the Master Servicing Fee and net of any net income in the case
of any REO
Property) on the Mortgage Loans that were due on the related Due
Date and not
received as of the close of business on the related Determination
Date, less the
aggregate amount of any such delinquent payments that the Master
Servicer has
determined would constitute a Nonrecoverable Advance if
advanced.
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 for all the Mortgage Pools; provided, that, except
as provided
in this Agreement, no Subordinated Certificates (other than the
Class of
Subordinated Certificates with the highest priority of
distribution) shall be
entitled on any Distribution Date to receive distributions pursuant
to clauses
(2), (3) and (5) of the definition of Subordinated Optimal
Principal Amount
unless the Class Prepayment Distribution Trigger for such Class is
satisfied for
such Distribution Date.
Amount
Held for Future Distribution: As to any Distribution Date, the
aggregate amount held in the applicable subaccount of the
Certificate Account at
the close of business on the related Determination Date on account
of (i)
Principal Prepayments on the related Mortgage Pool received after
the related
5
<PAGE>
Prepayment Period and Liquidation Proceeds in the related Mortgage
Pool received
in the month of such Distribution Date and (ii) all Scheduled
Payments in the
related Mortgage Pool due after the related Due Date.
Apportioned Principal Balance: For any Class of Subordinated
Certificates
and any Distribution Date, an amount equal to the Class Certificate
Balance of
such Class immediately prior to that Distribution Date multiplied
by a fraction,
the numerator of which is the applicable Group Subordinate Amount
for such
Distribution Date and the denominator of which is the sum of the
Group
Subordinate Amounts for such Distribution Date.
Appraised
Value: With respect to any Mortgage Loan, the Appraised Value
of
the related Mortgaged Property shall be: (i) with respect to a
Mortgage Loan
other than a Refinancing Mortgage Loan, the lesser of (a) the value
of the
Mortgaged Property based upon the appraisal made at the time of the
origination
of such Mortgage Loan and (b) the sales price of the Mortgaged
Property at the
time of the origination of such Mortgage Loan; (ii) with respect to
a
Refinancing Mortgage Loan other than a Streamlined Documentation
Mortgage Loan,
the value of the Mortgaged Property based upon the appraisal made
at the time of
the origination of such Refinancing Mortgage Loan; and (iii) with
respect to a
Streamlined Documentation Mortgage Loan, (a) if the loan-to-value
ratio with
respect to the Original Mortgage Loan at the time of the
origination thereof was
90% or less, the value of the Mortgaged Property based upon the
appraisal made
at the time of the origination of the Original Mortgage Loan and
(b) if the
loan-to-value ratio with respect to the Original Mortgage Loan at
the time of
the origination thereof was greater than 90%, the value of the
Mortgaged
Property based upon the appraisal (which may be a drive-by
appraisal) made at
the time of the origination of such Streamlined Documentation
Mortgage Loan.
Available
Funds: For each Mortgage Pool, with respect to any Distribution
Date, an amount equal to the sum of:
o
all
scheduled installments of interest, net of the Master Servicing
Fee and the Trustee Fee, and all scheduled installments of
principal
due in respect of the Mortgage Loans in such Mortgage Pool on
the
Due Date in the month in which the Distribution Date occurs and
received before the related Determination Date, together with
any
Advances in respect thereof;
o
all
Insurance Proceeds and all Liquidation Proceeds received in
respect of the Mortgage Loans in such Mortgage Pool during the
calendar month before the Distribution Date, which in each case
is
net of unreimbursed expenses incurred in connection with a
liquidation or foreclosure and unreimbursed Advances, if any;
o
all
Principal Prepayments received in respect of the Mortgage Loans
in such Mortgage Pool during the related Prepayment Period,
plus
interest received thereon, net of any Prepayment Interest
Excess;
o
any
Compensating Interest in respect of Principal Prepayments in
Full received in respect of the Mortgage Loans in such Mortgage
Pool
during the related Prepayment Period (or, in the case of the
first
Distribution Date, from the Cut-off Date); and
6
<PAGE>
o
any
Substitution Adjustment Amount or the Purchase Price for any
Deleted Mortgage Loan in the related Mortgage Pool or a
Mortgage
Loan in the related Mortgage Pool repurchased by the Seller or
the
Master Servicer as of such Distribution Date, reduced by amounts
in
reimbursement for Advances previously made and other amounts
that
the Master Servicer is entitled to be reimbursed for out of the
Certificate Account pursuant to this Agreement.
Bankruptcy
Code: The United States Bankruptcy Reform Act of 1978, as
amended.
Bankruptcy
Coverage Termination Date: The date on which the Bankruptcy
Loss Coverage Amount is reduced to zero.
Bankruptcy
Loss: With respect to any Mortgage Loan, a Deficient Valuation
or Debt Service Reduction; provided, however, that a Bankruptcy
Loss shall not
be deemed a Bankruptcy Loss hereunder so long as the Master
Servicer has
notified the Trustee in writing that the Master Servicer is
diligently pursuing
any remedies that may exist in connection with the related Mortgage
Loan and
either (A) the related Mortgage Loan is not in default with regard
to payments
due thereunder or (B) delinquent payments of principal and interest
under the
related Mortgage Loan and any related escrow payments in respect of
such
Mortgage Loan are being advanced on a current basis by the Master
Servicer, in
either case without giving effect to any Debt Service Reduction or
Deficient
Valuation.
Bankruptcy
Loss Coverage Amount: As of any Determination Date, the
Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy
Coverage
Amount as reduced by (i) the aggregate amount of Bankruptcy Losses
allocated to
the Certificates since the Cut-off Date and (ii) any permissible
reductions in
the Bankruptcy Loss Coverage Amount as evidenced by a letter of
each Rating
Agency to the Trustee to the effect that any such reduction will
not result in a
downgrading of the then current ratings assigned to the Classes of
Certificates
rated by it. As of any Distribution Date on or after the Cross-over
Date, the
Bankruptcy Loss Coverage Amount will be zero.
Blanket
Mortgage: The mortgage or mortgages encumbering the Cooperative
Property.
Book-Entry
Certificates: As specified in the Preliminary Statement.
Business
Day: Any day other than (i) a Saturday or a Sunday, or (ii) a
day
on which banking institutions in the City of Dallas, or the State
of Texas or
the city in which the Corporate Trust Office of the Trustee is
located are
authorized or obligated by law or executive order to be closed.
Certificate: Any one of the Certificates executed by the Trustee
in
substantially the forms attached hereto as exhibits.
Certificate Account: The separate Eligible Account or Accounts
created and
maintained by the Master Servicer pursuant to Section 3.5 with a
depository
institution in the name of the Master Servicer for the benefit of
the Trustee on
behalf of Certificateholders and designated "First Horizon Home
Loan Corporation
in trust for the registered holders of First Horizon Asset
Securities Inc.
Mortgage Pass-Through Certificates, Series 2005-AR1."
7
<PAGE>
Certificate Group: As specified in the Preliminary Statement.
Certificate Owner: With respect to a Book-Entry Certificate, the
Person
who is the beneficial owner of such Book-Entry Certificate.
Certificate Principal Balance: With respect to any Certificate and
as of
any Distribution Date, the Certificate Principal Balance on the
date of the
initial issuance of such Certificate, as reduced by:
(a)
all amounts
distributed on previous Distribution Dates on such
Certificate on account of principal,
(b)
the principal
portion of all Realized Losses previously allocated to
such Certificate, and
(c)
in the case of a
Subordinated Certificate, such Certificate's pro
rata share, if any, of the Subordinated Certificate Writedown
Amount
for previous Distribution Dates.
Certificate Register: The register maintained pursuant to Section
5.2
hereof.
Certificateholder or Holder: The person in whose name a Certificate
is
registered in the Certificate Register, except that, solely for the
purpose of
giving any consent pursuant to this Agreement, any Certificate
registered in the
name of the Depositor or the Seller or any affiliate or agent of
the Depositor
or the Seller shall be deemed not to be Outstanding and the
Percentage Interest
evidenced thereby shall not be taken into account in determining
whether the
requisite amount of Percentage Interests necessary to effect such
consent has
been obtained; provided, however, that if any such Person
(including the
Depositor) owns 100% of the Percentage Interests evidenced by a
Class of
Certificates, such Certificates shall be deemed to be Outstanding
for purposes
of any provision hereof that requires the consent of the Holders of
Certificates
of a particular Class as a condition to the taking of any action
hereunder. The
Trustee is entitled to rely conclusively on a certification of the
Depositor or
any affiliate of the Depositor in determining which Certificates
are registered
in the name of an affiliate of the Depositor.
Class: All
Certificates bearing the same class designation as set forth in
the Preliminary Statement.
Class
Certificate Balance: With respect to any Class of Certificates
and
as of any Distribution Date the aggregate of the Certificate
Principal Balances
of all Certificates of such Class as of such date.
Class
Prepayment Distribution Trigger: For a Class of Subordinated
Certificates (other than the Class of Subordinated Certificates
with the highest
priority of distribution), a trigger that is satisfied on any
Distribution Date
on which a fraction (expressed as a percentage), the numerator of
which is the
aggregate Class Certificate Balance of such Class and each Class
subordinate
thereto, if any, and the denominator of which is the aggregate Pool
Principal
Balance for all of the Mortgage Pools with respect to such
Distribution Date,
equals or exceeds such percentage calculated as of the Closing
Date.
8
<PAGE>
Closing
Date: February 28, 2005.
Code: The
Internal Revenue Code of 1986, including any successor or
amendatory provisions.
COFI: Not
applicable.
COFI
Certificates: Not applicable.
Compensating Interest: As to any Distribution Date and any
Principal
Prepayment in respect of a Mortgage Loan that is received during
the period from
the sixteenth day of the month (or, in the case of the first
Distribution Date,
from the Cut-off Date) prior to the month of such Distribution Date
through the
last day of such month, an additional payment to the related
Mortgage Pool made
by the Master Servicer, to the extent funds are available from the
Master
Servicing Fee, equal to the amount of interest at the Adjusted Net
Mortgage Rate
for that Mortgage Loan from the date of the prepayment to the
related Due Date;
provided that the aggregate of all such payments as to the Mortgage
Loans in a
Mortgage Pool shall not exceed 0.0083% of the Pool Principal
Balance of such
Mortgage Pool as of the related Determination Date, and provided
further that if
a partial Principal Prepayment is applied on or after the first day
of the month
following the month of receipt, no additional payment is required
for such
Principal Prepayment.
Component:
Not applicable.
Component
Balance: Not applicable.
Component
Certificates: Not applicable.
Cooperative Corporation: The entity that holds title (fee or an
acceptable
leasehold estate) to the real property and improvements
constituting the
Cooperative Property and which governs the Cooperative Property,
which
Cooperative Corporation must qualify as a Cooperative Housing
Corporation under
Section 216 of the Code.
Coop
Shares: Shares issued by a Cooperative Corporation. Cooperative
Loan:
Any Mortgage Loan secured by Coop Shares and a Proprietary
Lease.
Cooperative Property: The real property and improvements owned by
the
Cooperative Corporation, including the allocation of individual
dwelling units
to the holders of the Coop Shares of the Cooperative
Corporation.
Cooperative Unit: A single family dwelling located in a
Cooperative
Property.
Corporate
Trust Office: The designated office of the Trustee in the State
of New York at which at any particular time its corporate trust
business with
respect to this Agreement shall be administered, which office at
the date of the
execution of this Agreement is located at The Bank of New York, 101
Barclay
Street, 8W, New York, New York 10286 (Attn: Corporate Trust
Mortgage-Backed
9
<PAGE>
Securities Group, First Horizon Asset Securities Inc. Series
2005-AR1),
facsimile no. (212) 815-3986, and which is the address to which
notices to and
correspondence with the Trustee should be directed.
Corresponding Class of Certificates: 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.
t 6 0
Custodial Agreement: The Custodial Agreement dated as of
February
28, 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: February 1, 2005.
Cut-off
Date Pool Principal Balance: With respect to Pool I,
$56,003,898.44; with respect to Pool II, $110,051,591.63; with
respect to Pool
III, $23,019,258.93; and with respect to Pool IV,
$64,034,934.54.
Cut-off
Date Principal Balance: As to any Mortgage Loan, the Stated
Principal Balance thereof as of the close of business on the
Cut-off Date.
Debt
Service Reduction: With respect to any Mortgage Loan, a reduction
by
a court of competent jurisdiction in a proceeding under the
Bankruptcy Code in
the Scheduled Payment for such Mortgage Loan which became final
and
non-appealable, except such a reduction resulting from a Deficient
Valuation or
any reduction that results in a permanent forgiveness of
principal.
Defective
Mortgage Loan: Any Mortgage Loan which is required to be
repurchased pursuant to Section 2.2 or 2.3.
Deficient
Valuation: With respect to any Mortgage Loan, a valuation by a
court of competent jurisdiction of the Mortgaged Property in an
amount less than
the then-outstanding indebtedness under the Mortgage Loan, or any
reduction in
the amount of principal to be paid in connection with any Scheduled
Payment that
results in a permanent forgiveness of principal, which valuation or
reduction
results from an order of such court which is final and
non-appealable in a
proceeding under the Bankruptcy Code.
Definitive
Certificates: Any Certificate evidenced by a Physical
Certificate and any Certificate issued in lieu of a Book-Entry
Certificate
pursuant to Section 5.2(e).
Delay
Certificates: Not applicable.
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
10
<PAGE>
Date. The number of Delay Delivery Mortgage Loans shall not exceed
25% of the
aggregate number of Mortgage Loans as of the Closing Date.
Deleted
Mortgage Loan: As defined in Section 2.3(b) hereof.
Denomination: With respect to each Certificate, the amount set
forth on
the face thereof as the "Initial Certificate Balance of this
Certificate" or the
Percentage Interest appearing on the face thereof.
Depositor:
First Horizon Asset Securities Inc., a Delaware corporation, or
its successor in interest.
Depository: The initial Depository shall be The Depository Trust
Company,
the nominee of which is CEDE & Co., as the registered Holder of
the Book-Entry
Certificates. The Depository shall at all times be a "clearing
corporation" as
defined in Section 8-102(a)(5) of the Uniform Commercial Code of
the State of
New York.
Depository
Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository
effects
book-entry transfers and pledges of securities deposited with the
Depository.
Determination Date: As to any Distribution Date, the earlier of (i)
the
third Business Day after the 15th day of each month, and (ii) the
second
Business Day prior to the related Distribution Date.
Distribution Account: The separate Eligible Account created and
maintained
by the Trustee pursuant to Section 3.5 in the name of the Trustee
for the
benefit of the Certificateholders and designated "The Bank of New
York, in trust
for registered Holders of First Horizon Asset Securities Inc.
Mortgage
Pass-Through Certificates, Series 2005-AR1." Funds in the
Distribution Account
shall be held in trust for the Certificateholders for the uses and
purposes set
forth in this Agreement.
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 March 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
11
<PAGE>
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.
t 6 0
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: With respect to a Mortgage Pool, 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.
Excess Proceeds: With
respect to any Liquidated Mortgage Loan, the amount,
if any, by which the sum of any Liquidation Proceeds 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.
12
<PAGE>
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 Loss
Coverage Amount: As of the Closing Date, $5,062,194. As of any
Distribution Date from the first anniversary of the Cut-off Date
and prior to
the fifth anniversary of the Cut-off Date, the Fraud Loss Coverage
Amount will
equal $2,531,097 minus the aggregate amount of Fraud Losses that
would have been
allocated to the Subordinated Certificates in the absence of the
Loss Allocation
Limitation since the Cut-off Date. As of any Distribution Date on
or after the
earlier of the Cross-over Date or the fifth anniversary of the
Cut-off Date, the
Fraud Loss Coverage Amount shall be zero.
Fraud Loss
Coverage Termination Date: The date on which the Fraud Loss
Coverage Amount is reduced to zero.
Fraud
Losses: Realized Losses on Mortgage Loans as to which a loss is
sustained by reason of a default arising from fraud, dishonesty
or
misrepresentation in connection with the related Mortgage Loan,
including a loss
by reason of the denial of coverage under any related Primary
Insurance Policy
because of such fraud, dishonesty or misrepresentation.
Group I
Senior Certificates: As specified in the Preliminary Statement.
Group II
Senior Certificates: As specified in the Preliminary Statement.
Group III
Senior Certificates: As specified in the Preliminary Statement.
Group IV
Senior Certificates: As specified in the Preliminary Statement.
Group
Subordinate Amount: For a Mortgage Pool and any Distribution
Date;
the excess of (a) the Pool Principal Balance of such Mortgage Pool
for the
13
<PAGE>
immediately preceding Distribution Date, over (b) the aggregate
Class
Certificate Balance of the Senior Certificates of the related
Certificate Group
immediately prior to that Distribution Date.
Index: Not
applicable.
Indirect
Participant: A broker, dealer, bank or other financial
institution or other Person that clears through or maintains a
custodial
relationship with a Depository Participant.
Initial
Bankruptcy Coverage Amount: $150,000.
Initial
Component Balance: Not applicable.
Insurance
Policy: With respect to any Mortgage Loan included in the Trust
Fund, any insurance policy, including all riders and endorsements
thereto in
effect, including any replacement policy or policies for any
Insurance Policies.
Insurance
Proceeds: Proceeds paid by an insurer pursuant to any Insurance
Policy, in each case other than any amount included in such
Insurance Proceeds
in respect of Insured Expenses.
Insured
Expenses: Expenses covered by an Insurance Policy or any other
insurance policy with respect to the Mortgage Loans.
Insured
Retail Certificates: Not applicable.
Interest
Accrual Period: With respect to each Class of Delay
Certificates
and any Distribution Date, the calendar month prior to the month of
such
Distribution Date. With respect to any Non-Delay Certificates and
any
Distribution Date, the one month period commencing on the 25th day
of the month
preceding the month in which such Distribution Date occurs and
ending on the
24th day of the month in which such Distribution Date occurs.
Interest
Determination Date: Not applicable.
Latest
Possible Maturity Date: As to each Class of Subordinated
Certificates, each Class of Senior Certificates and each Lower
REMIC Interest,
the Distribution Date following the third anniversary of the
scheduled maturity
date of the Mortgage Loan having the latest scheduled maturity date
as of the
Cut-off Date.
Lender PMI
Mortgage Loan: Not applicable.
LIBOR: Not
applicable.
LIBOR
Certificates: Not applicable.
Liquidated
Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was
liquidated in the
calendar month preceding the month of such Distribution Date and as
to which the
Master Servicer has determined (in accordance with this Agreement)
that it has
14
<PAGE>
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: Amounts, including Insurance Proceeds and
any
Unanticipated Recoveries, received in connection with the partial
or complete
liquidation of defaulted Mortgage Loans, whether through trustee's
sale,
foreclosure sale or otherwise or amounts received in connection
with any
condemnation or partial release of a Mortgaged Property and any
other proceeds
received in connection with an REO Property, less the sum of
related
unreimbursed Master Servicing Fees, Servicing Advances and
Advances.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to
any date
of determination, the fraction (expressed as a percentage) the
numerator of
which is the principal balance of the related Mortgage Loan at such
date of
determination and the denominator of which is the Appraised Value
of the related
Mortgaged Property.
Loss
Allocation Limitation: As defined in Section 4.4(g).
Lost
Mortgage Note: Any Mortgage Note the original of which was
permanently lost or destroyed and has not been replaced.
Lower
REMIC: The segregated pool of assets consisting of the Trust
Fund
but excluding the Lower REMIC Interests, the RL Interest and the RU
Interest.
Lower
REMIC Interests: The REMIC regular interests, within the meaning
of
the REMIC Provisions, issued by the Lower REMIC as set forth in
Section 2.7.
Maintenance: With respect to any Cooperative Unit, the rent paid by
the
Mortgagor to the Cooperative Corporation pursuant to the
Proprietary Lease.
Majority
in Interest: As to any Class of Regular Certificates, the
Holders
of Certificates of such Class evidencing, in the aggregate, at
least 51% of the
Percentage Interests evidenced by all Certificates of such
Class.
Master
Servicer: First Horizon Home Loan Corporation, a Kansas
corporation, and its successors and assigns, in its capacity as
master servicer
hereunder.
Master
Servicer Advance Date: As to any Distribution Date, 1:30 p.m.
Central time on the Business Day immediately preceding such
Distribution Date.
Master
Servicing Fee: As to each Mortgage Loan and any Distribution
Date,
an amount payable out of each full payment of interest received on
such Mortgage
Loan and equal to one-twelfth of the Master Servicing Fee Rate
multiplied by the
Stated Principal Balance of such Mortgage Loan as of the Due Date
in the month
of such Distribution Date (prior to giving effect to any Scheduled
Payments due
on such Mortgage Loan on such Due Date), subject to reduction as
provided in
Section 3.14.
Master
Servicing Fee Rate: For each Mortgage Loan, a per annum rate
equal
to 0.244%.
15
<PAGE>
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 February 28, 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:
(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;
16
<PAGE>
(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.
Mortgage
Note: The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a
Mortgage Loan.
Mortgage
Pool: Any of Pool I, Pool II, Pool III or Pool IV.
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.
17
<PAGE>
Mortgagor:
The obligor(s) on a Mortgage Note.
National
Cost of Funds Index: The National Monthly Median Cost of Funds
Ratio to SAIF-Insured Institutions published by the Office of
Thrift
Supervision.
Net
Interest Shortfall: For any Distribution Date and each Mortgage
Pool,
the sum of (a) the amount of interest which would otherwise have
been received
for any Mortgage Loan in such Mortgage Pool that was the subject of
(x) a Relief
Act Reduction or (y) a Special Hazard Loss, Fraud Loss, or
Deficient Valuation,
after the exhaustion of the respective amounts of coverage for
those types of
losses provided by the Subordinated Certificates; and (b) any Net
Prepayment
Interest Shortfalls in respect of such Mortgage Pool.
Net
Prepayment Interest Shortfalls: As to any Distribution Date and
each
Mortgage Pool, the amount by which the aggregate of Prepayment
Interest
Shortfalls in respect of the Mortgage Loans or such Mortgage Pool
during the
related Prepayment Period exceeds an amount equal to the
Compensating Interest
paid in respect of such Mortgage Loans, if any, for such
Distribution Date.
Non-Delay
Certificates: As specified in the Preliminary Statement.
Non-Excess
Loss: Any Realized Loss other than an Excess Loss.
Nonrecoverable Advance: Any portion of an Advance previously made
or
proposed to be made by the Master Servicer that, in the good faith
judgment of
the Master Servicer, will not be ultimately recoverable by the
Master Servicer
from the related Mortgagor, related Liquidation Proceeds or
otherwise.
Notice of
Final Distribution: The notice to be provided pursuant to
Section 9.2 to the effect that final distribution on any of the
Certificates
shall be made only upon presentation and surrender thereof.
Notional
Amount: Not applicable.
Notional
Amount Components: Not applicable.
Notional
Certificates: Not applicable.
Offered
Certificates: As specified in the Preliminary Statement.
Officer's
Certificate: A Certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing
Director, a
Vice President (however denominated), an Assistant Vice President,
the
Treasurer, the Secretary, or one of the Assistant Treasurers or
Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if
provided for in
this Agreement, signed by a Servicing Officer, as the case may be,
and delivered
to the Depositor and the Trustee, as the case may be, as required
by this
Agreement.
Opinion of
Counsel: A written opinion of counsel, who may be counsel for
the Depositor or the Master Servicer, including, in-house counsel,
reasonably
18
<PAGE>
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
Group Subordinate Amount: With respect to a Mortgage Pool, the
related Group Subordinate Amount as of the Cut-off Date.
Original
Mortgage Loan: The Mortgage Loan refinanced in connection with
the origination of a Refinancing Mortgage Loan.
OTS: The
Office of Thrift Supervision.
Outside
Reference Date: Not applicable.
Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and
authenticated under
this Agreement except:
(i) Certificates theretofore canceled by the Trustee or
delivered to the Trustee for cancellation; and
(ii) Certificates in exchange for which or in lieu of which
other Certificates have been executed and delivered by the
Trustee
pursuant to this Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan with
a
Stated Principal Balance greater than zero which was not the
subject of a
Principal Prepayment in Full prior to such Due Date and which did
not become a
Liquidated Mortgage Loan prior to such Due Date.
Ownership
Interest: As to any Residual Certificate, any ownership
interest
in such Certificate including any interest in such Certificate as
the Holder
thereof and any other interest therein, whether direct or indirect,
legal or
beneficial.
Pass-Through
Rate: For any Class of Certificates, the per annum rate set
forth or calculated in the manner described in the Preliminary
Statement.
Percentage
Interest: As to any Certificate, the percentage interest
evidenced thereby in distributions required to be made on the
related Class,
such percentage interest being set forth on the face thereof or
equal to the
percentage obtained by dividing the Denomination of such
Certificate by the
aggregate of the Denominations of all Certificates of the same
Class.
19
<PAGE>
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;
(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);
20
<PAGE>
(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.
21
<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
Certificate: As specified in the Preliminary Statement.
Planned
Balance: Not applicable.
Planned
Principal Classes: Not applicable.
Pool I:
The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool I.
Pool II:
The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool II.
Pool III:
The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool III.
Pool IV:
The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool IV.
Pool
Principal Balance: For each Mortgage Pool, 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.
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
22
<PAGE>
of such Distribution Date, and (b) with respect to any other
Principal
Prepayments and any Distribution Date, the month preceding the
month of such
Distribution Date.
Primary
Insurance Policy: Each policy of primary mortgage guaranty
insurance or any replacement policy therefor with respect to any
Mortgage Loan.
Principal
Balance Schedules: Not applicable.
Principal
Only Certificates: Not applicable.
Principal
Prepayment: Any payment of principal by a Mortgagor on a
Mortgage Loan that is received in advance of its scheduled Due Date
and is not
accompanied by an amount representing scheduled interest due on any
date or
dates in any month or months subsequent to the month of prepayment.
Partial
Principal Prepayments shall be applied by the Master Servicer in
accordance with
the terms of the related Mortgage Note.
Principal
Prepayment in Full: Any Principal Prepayment made by a
Mortgagor
of the entire principal balance of a Mortgage Loan.
Private
Certificate: As specified in the Preliminary Statement.
Proprietary Lease: With respect to any Cooperative Unit, a lease
or
occupancy agreement between a Cooperative Corporation and a holder
of related
Coop Shares.
PUD:
Planned Unit Development.
Purchase
Price: With respect to any Mortgage Loan required to be
purchased
by the Seller pursuant to Section 2.2 or 2.3 hereof or purchased at
the option
of the Master Servicer pursuant to Section 3.11, an amount equal to
the sum of
(i) 100% of the unpaid principal balance of the Mortgage Loan on
the date of
such purchase, (ii) accrued interest thereon at the applicable
Mortgage Rate (or
at the applicable Adjusted Mortgage Rate if the purchaser is the
Master
Servicer) from the date through which interest was last paid by the
Mortgagor to
the Due Date in the month in which the Purchase Price is to be
distributed to
Certificateholders, and (iii) any costs and damages incurred by the
Trust in
connection with the noncompliance of such Mortgage Loan with any
specifically
applicable predatory or abusive lending law.
Qualified
Insurer: A mortgage guaranty insurance company duly qualified
as
such under the laws of the state of its principal place of business
and each
state having jurisdiction over such insurer in connection with the
insurance
policy issued by such insurer, duly authorized and licensed in such
states to
transact a mortgage guaranty insurance business in such states and
to write the
insurance provided by the insurance policy issued by it, approved
as a
FNMA-approved mortgage insurer and having a claims paying ability
rating of at
least "AA" or equivalent rating by a nationally recognized
statistical rating
organization. Any replacement insurer with respect to a Mortgage
Loan must have
at least as high a claims paying ability rating as the insurer it
replaces had
on the Closing Date.
Rating
Agency: Each of the Rating Agencies specified in the
Preliminary
Statement. If any such organization or a successor is no longer in
existence,
23
<PAGE>
"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) the Liquidation Proceeds, if any,
received during
the month in which such liquidation occurred, to the extent applied
as
recoveries of interest at the Adjusted Net Mortgage Rate and to
principal of the
Liquidated Mortgage Loan. With respect to each Mortgage Loan which
has become
the subject of a Deficient Valuation, if the principal amount due
under the
related Mortgage Note has been reduced, the difference between the
principal
balance of the Mortgage Loan outstanding immediately prior to such
Deficient
Valuation and the principal balance of the Mortgage Loan as reduced
by the
Deficient Valuation.
Recognition Agreement: With respect to any Cooperative Loan, an
agreement
between the Cooperative Corporation and the originator of such
Mortgage Loan
which establishes the rights of such originator in the Cooperative
Property.
Record
Date: With respect to any Distribution Date, the close of
business
on the last Business Day of the month preceding the month in which
such
Distribution Date occurs.
Reference
Bank: Not applicable.
Refinancing Mortgage Loan: Any Mortgage Loan originated in
connection with
the refinancing of an existing mortgage loan.
Regular
Certificates: As specified in the Preliminary Statement.
Relief
Act: The Servicemembers Civil Relief Act, or any similar state
or
local legislation or regulations.
Relief Act
Reductions: With respect to any Distribution Date and any
Mortgage Loan as to which there has been a reduction in the amount
of interest
collectible thereon for the most recently ended calendar month as a
result of
the application of the Relief Act, the amount, if any, by which
interest
collectible on such Mortgage Loan for the most recently ended
calendar month is
less than interest accrued thereon for such month pursuant to the
Mortgage Note.
REMIC: A
"real estate mortgage investment conduit" within the meaning of
section 860D of the Code.
24
<PAGE>
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: Any of the Lower REMIC or Upper REMIC.
REMIC
Provisions: Provisions of the federal income tax law relating
to
real estate mortgage investment conduits, which appear at sections
860A through
860G of Subchapter M of Chapter 1 of the Code, and related
provisions, and
regulations promulgated thereunder, as the foregoing may be in
effect from time
to time as well as provisions of applicable state laws.
REO
Property: A Mortgaged Property acquired by the Trust Fund
through
foreclosure or deed-in-lieu of foreclosure in connection with a
defaulted
Mortgage Loan.
Request
for Release: The Request for Release submitted by the Master
Servicer to the Trustee, substantially in the form of Exhibits L
and M, as
appropriate.
Required
Insurance Policy: With respect to any Mortgage Loan, any
insurance policy that is required to be maintained from time to
time under this
Agreement.
Required
Recordation States: The states of Florida, Maryland and
Mississippi.
Residual
Certificates: As specified in the Preliminary Statement.
Responsible Officer: When used with respect to the Trustee, any
Vice
President, any Assistant Vice President, the Secretary, any
Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily
performing
functions similar to those performed by any of the above designated
officers and
having direct responsibility for the administration of this
Agreement and also
to whom, with respect to a particular matter, such matter is
referred because of
such officer's knowledge of and familiarity with the particular
subject.
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
II-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
II-A-R Certificate.
Scheduled
Balances: Not applicable.
Scheduled
Certificates: Not applicable.
Scheduled
Payment: The scheduled monthly payment on a Mortgage Loan due
on
any Due Date allocable to principal and/or interest on such
Mortgage Loan which,
unless otherwise specified herein, shall give effect to any related
Debt Service
Reduction and any Deficient Valuation that affects the amount of
the monthly
payment due on such Mortgage Loan.
Scheduled
Principal Classes: Not applicable.
25
<PAGE>
Securities
Act: The Securities Act of 1933, as amended.
Security
Agreement: The security agreement with respect to a Cooperative
Loan.
Seller:
First Horizon Home Loan Corporation, a Kansas corporation, and
its
successors and assigns, in its capacity as seller of the Mortgage
Loans pursuant
to the MLPA.
Senior
Certificates: As specified in the Preliminary Statement.
Senior
Final Distribution Date: For each Certificate Group, the
Distribution Date on which the Class Certificate Balance of each
Class of
related Senior Certificates has been reduced to zero.
Senior
Optimal Principal Amount: As to a Mortgage Pool and with respect
to
each Distribution Date, an amount equal to the sum of:
(1) the related Senior Percentage of all Scheduled Payments of
principal due on each Mortgage Loan in such Mortgage Pool on the
first day of
the month in which the Distribution Date occurs, as specified in
the
amortization schedule at the time applicable thereto after
adjustment for
previous principal prepayments and the principal portion of Debt
Service
Reductions after the Bankruptcy Loss Coverage Amount has been
reduced to zero,
but before any adjustment to such amortization schedule by reason
of any other
bankruptcy or similar proceeding or any moratorium or similar
waiver or grace
period;
(2) the related Senior Prepayment Percentage of the Stated
Principal
Balance of each Mortgage Loan in such Mortgage Pool which was the
subject of a
Principal Prepayment in Full received by the Master Servicer during
the
applicable Prepayment Period;
(3) the related Senior Prepayment Percentage of all partial
Principal Prepayments in respect of each Mortgage Loan in such
Mortgage Pool
received during the applicable Prepayment Period;
(4)
the lesser of:
(a) the related Senior Prepayment Percentage of the sum of (x)
the Liquidation Proceeds allocable to principal on each
Mortgage
Loan in such Mortgage Pool which became a Liquidated Mortgage
Loan
during the related Prepayment Period, other than Mortgage Loans
described in clause (y), and (y) the principal balance of each
Mortgage Loan in such Mortgage Pool that was purchased by a
private
mortgage insurer during the related Prepayment Period as an
alternative to paying a claim under the related Insurance
Policy;
and
(b)(i) the related Senior Percentage of the sum of (x) the
Stated Principal Balance of each Mortgage Loan in such Mortgage
Pool
which became a Liquidated Mortgage Loan during the related
Prepayment Period, other than Mortgage Loans described in
clause
(y), and (y) the Stated Principal Balance of each Mortgage Loan
in
such Mortgage Pool that was purchased by a private mortgage
insurer
during the related Prepayment Period as an alternative to paying
a
26
<PAGE>
claim under the related Insurance Policy minus (ii) the related
Senior Percentage of the principal portion of Excess Losses
(other
than Debt Service Reductions) for such Mortgage Pool during the
related Prepayment Period; and
(5) the related Senior Prepayment Percentage of the sum of (a)
the
Stated Principal Balance of each Mortgage Loan in such Mortgage
Pool which was
repurchased by the seller in connection with such Distribution Date
and (b) the
difference, if any, between the Stated Principal Balance of a
Mortgage Loan in
such Mortgage Pool that has been replaced by the seller with a
Substitute
Mortgage Loan pursuant to this Agreement in connection with such
Distribution
Date and the Stated Principal Balance of such Substitute Mortgage
Loan.
Senior
Percentage: On any Distribution Date for a Certificate Group,
the
lesser of 100% and the percentage (carried to six places rounded
up) obtained by
dividing the aggregate Class Certificate Balances of all Classes of
Senior
Certificates of such Certificate Group immediately preceding such
Distribution
Date by the Pool Principal Balance of the related Mortgage Pool for
the
immediately preceding Distribution Date.
Senior
Prepayment Percentage: On any Distribution Date occurring
during
the periods set forth below, and as to each Certificate Group, the
Senior
Prepayment Percentages, described below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
Period (Dates Inclusive)
Senior Prepayment Percentage
--------------------------------------------------------------------------------------------------------------
<S>
<C>
March 2005 - February 2012
100%
--------------------------------------------------------------------------------------------------------------
The related Senior Percentage plus 70% of the related
Subordinated
March 2012 - February 2013
Percentage
--------------------------------------------------------------------------------------------------------------
The related Senior Percentage plus 60% of the related
Subordinated
March 2013 - February 2014
Percentage
--------------------------------------------------------------------------------------------------------------
The related Senior Percentage plus 40% of the related
Subordinated
March 2014 - February 2015
Percentage
--------------------------------------------------------------------------------------------------------------
The related Senior Percentage plus 20% of the related
Subordinated
March 2015 - February 2016
Percentage
--------------------------------------------------------------------------------------------------------------
March 2016 and thereafter
The related Senior Percentage
--------------------------------------------------------------------------------------------------------------
</TABLE>
provided however, (i) if on any Distribution Date the Senior
Percentage for a
Certificate Group exceeds the initial Senior Percentage for such
Certificate
Group, the Senior Prepayment Percentage for each Certificate Croup
for such
Distribution Date will equal 100%, (ii) if on any Distribution Date
before the
Distribution Date in March 2008, prior to giving effect to any
distributions on
such Distribution Date, the Subordinated Percentage for such
Certificate Group
for such Distribution Date is equal to or greater than twice the
initial
Subordinated Percentage for such Certificate Group, then the Senior
Prepayment
Percentage for such Certificate Group for such Distribution Date
will equal the
Senior Percentage for such Certificate Group plus 50% of the
Subordinated
Percentage for such Certificate Group and (iii) if on any
Distribution Date on
27
<PAGE>
or after the Distribution Date in March 2008, prior to giving
effect to any
distributions on such Distribution Date, the Subordinated
Percentage for such
Certificate Group for such Distribution Date is equal to or greater
than twice
the initial Subordinated Percentage for such Certificate Group,
then the Senior
Prepayment Percentage for such Certificate Group for such
Distribution Date will
equal the Senior Percentage for such Certificate Group.
The
reductions in the Senior Prepayment Percentage for each
Certificate
Group described above will not occur, and the Senior Prepayment
Percentage or
each Certificate Group for such prior period will be calculated
without regard
to clause (ii) or (iii) of the paragraph above, unless, as of the
last day of
the month preceding the Distribution Date:
(1)
the aggregate
Stated Principal Balance of Mortgage Loans in all of
the Mortgage Pools delinquent 60 days or more (including for
this
purpose any Mortgage Loans in foreclosure or subject to
bankruptcy
proceedings and Mortgage Loans with respect to which the
related
Mortgaged Property, including REO Property, has been acquired by
the
Trust Fund) does not exceed 50% of the aggregate Certificate
Principal Balances of the Subordinated Certificates as of that
date;
and
(2)
cumulative
aggregate Realized Losses in all of the Mortgage Pools do
not exceed:
(a) 20% of the aggregate Original Group Subordinate Amount of
the
Mortgage Pools if such Distribution Date occurs between and
including March 2005 and February 2008; and
(b) 30% of the aggregate Original Group Subordinate Amount of
the
Mortgage Pools if such Distribution Date occurs on or after
March
2008.
Senior
Support Certificates: As specified in the Preliminary
Statement.
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.
28
<PAGE>
Special
Hazard Loss: Any Realized Loss suffered by a Mortgaged Property
on
account of direct physical loss but not including (i) any loss of a
type covered
by a hazard insurance policy or a flood insurance policy required
to be
maintained with respect to such Mortgaged Property pursuant to
Section 3.9 to
the extent of the amount of such loss covered thereby, or (ii) any
loss caused
by or resulting from:
(1) normal wear and tear;
(2) fraud, conversion or other dishonest act on the part of the
Trustee, the Master Servicer or any of their agents or employees
(without regard
to any portion of the loss not covered by any errors and omissions
policy);
(3) errors in design, faulty workmanship or faulty materials,
unless
the collapse of the property or a part thereof ensues and then only
for the
ensuing loss;
(4) nuclear or chemical reaction or nuclear radiation or
radioactive
or chemical contamination, all whether controlled or uncontrolled,
and whether
such loss be direct or indirect, proximate or remote or be in whole
or in part
caused by, contributed to or aggravated by a peril covered by the
definition of
the term "Special Hazard Loss";
(5) hostile or warlike action in time of peace and war,
including
action in hindering, combating or defending against an actual,
impending or
expected attack:
(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, $6,008,309. 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
29
<PAGE>
(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.
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
aggregate
Pool Principal Balance for each Mortgage Pool on the first day of
the month of
such Distribution Date less any Deficient Valuations occurring
before the
Bankruptcy Loss Coverage Amount has been reduced to zero.
Subordinated Optimal Principal Amount: With respect to each
Mortgage Pool
and each Distribution Date, an amount equal to the sum of the
following (but in
no event greater than the aggregate Class Certificate Balances of
the
Subordinated Certificates immediately prior to such Distribution
Date):
(1) the related Subordinated Percentage of all Scheduled Payments
of
principal due on each outstanding Mortgage Loan in the related
Mortgage Pool on
the first day of the month in which the Distribution Date occurs,
as specified
30
<PAGE>
in the amortization schedule at the time applicable thereto, after
adjustment
for previous principal prepayments and the principal portion of
Debt Service
Reductions after the Bankruptcy Loss Coverage Amount has been
reduced to zero,
but before any adjustment to such amortization schedule by reason
of any other
bankruptcy or similar proceeding or any moratorium or similar
waiver or grace
period;
(2) the related Subordinated Prepayment Percentage of the
Stated
Principal Balance of each Mortgage Loan in the related Mortgage
Pool which was
the subject of a Principal Prepayment in Full received by the
Master Servicer
during the related Prepayment Period;
(3) the related Subordinated Prepayment Percentage of all
partial
Principal Prepayments received in respect of each Mortgage Loan in
the related
Mortgage Pool during the related Prepayment Period, plus, on the
Senior Final
Distribution Date, 100% of any related Senior Optimal Principal
Amount remaining
undistributed on such date;
(4) the amount, if any, by which the sum of (a) the net
Liquidation
Proceeds allocable to principal received during the related
Prepayment Period in
respect of each Liquidated Mortgage Loan in the related Mortgage
Pool, other
than Mortgage Loans described in clause (b), and (b) the principal
balance of
each Mortgage Loan in the related Mortgage Pool that was purchased
by a private
mortgage insurer during the related Prepayment Period as an
alternative to
paying a claim under the related Insurance Policy exceeds (c) the
sum of the
amounts distributable to the Senior Certificateholders under clause
(4) of the
definition of applicable Senior Optimal Principal Amount on such
Distribution
Date; and
(5) the related Subordinated Prepayment Percentage of the sum of
(a)
the Stated Principal Balance of each Mortgage Loan in the related
Mortgage Pool
which was repurchased by the seller in connection with such
Distribution Date
and (b) the difference, if any, between the Stated Principal
Balance of a
Mortgage Loan in the related Mortgage Pool 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 and each
Certificate
Group, 100% minus the related Senior Percentage.
Subordinated Prepayment Percentage: For any Distribution Date, 100%
minus
the Senior Prepayment Percentage.
Subservicer: Any person to whom the Master Servicer has contracted
for the
servicing of all or a portion of the Mortgage Loans pursuant to
Section 3.2
hereof.
Substitute
Mortgage Loan: A Mortgage Loan substituted by the Seller for a
Deleted Mortgage Loan which must, on the date of such substitution,
as confirmed
in a Request for Release, substantially in the form of Exhibit L,
(i) have a
Stated Principal Balance, after deduction of the principal portion
of the
Scheduled Payment due in the month of substitution, not in excess
of, and not
more than 10% less than the Stated Principal Balance of the Deleted
Mortgage
Loan; (ii) have an Adjusted Net Mortgage Rate not lower than the
Adjusted Net
31
<PAGE>
Mortgage Rate of the Deleted Mortgage Loan, provided that the
Master Servicing
Fee for the Substitute Mortgage Loan shall be equal to or greater
than that of
the Deleted Mortgage Loan; (iii) have a maximum mortgage rate not
more than 1%
per annum higher or lower than the maximum mortgage rate of the
Deleted Mortgage
Loan; (iv) have a minimum mortgage rate specified in its related
Mortgage Note
not more than 1% per annum higher or lower than the minimum
mortgage rate of the
Deleted Mortgage Loan; (v) have the same mortgage index, reset
period and
periodic rate as the Deleted Mortgage Loan and a gross margin not
more than 1%
per annum higher or lower than that of the Deleted Mortgage Loan
(vi) be
accruing interest at a rate no lower than and not more than 1% per
annum higher
than, that of the Deleted Mortgage Loan; (iv) have a Loan-to-Value
Ratio no
higher than that of the Deleted Mortgage Loan; (vii) have a
remaining term to
maturity no greater than (and not more than one year less than that
of) the
Deleted Mortgage Loan; (viii) not be a Cooperative Loan unless the
Deleted
Mortgage Loan was a Cooperative Loan and (ix) comply with each
representation
and warranty set forth in Section 2.3 hereof. Substitution
Adjustment Amount:
The meaning ascribed to such term pursuant to Section 2.3.
Super
Senior Certificates: As specified in the Preliminary Statement.
Support
Classes: As specified in the Preliminary Statement.
Targeted
Balances: Not applicable.
Targeted
Principal Classes: Not applicable.
Tax
Matters Person: The person designated as "tax matters person" in
the
manner provided under Treasury regulation ss. 1.860F-4(d) and
Treasury
regulation ss. 301.6231(a)(7)-1. Initially, the Tax Matters Person
shall be the
Trustee.
Tax
Matters Person Certificate: The Class II-A-R Certificates with
a
Denomination of $0.01.
Transfer:
Any direct or indirect transfer or sale of any Ownership
Interest in a Residual Certificate.
Trust
Fund: The corpus of the trust created hereunder consisting of
(i)
the Mortgage Loans and all interest and principal received on or
with respect
thereto after the Cut-off Date to the extent not applied in
computing the
Cut-off Date Principal Balance thereof; (ii) all of the Depositor's
rights as
purchaser under the MLPA; (iii) the Certificate Account and the
Distribution
Account and all amounts deposited therein pursuant to the
applicable provisions
of this Agreement; (iv) property that secured a Mortgage Loan and
has been
acquired by foreclosure, deed-in-lieu of foreclosure or otherwise;
and (v) all
proceeds of the conversion, voluntary or involuntary, of any of the
foregoing.
Trustee:
The Bank of New York and its successors and, if a successor
trustee is appointed hereunder, such successor.
32
<PAGE>
Trustee
Fee: As to any Distribution Date and a Mortgage Pool, an amount
equal to one-twelfth of the Trustee Fee Rate multiplied by the
applicable Pool
Principal Balance with respect to such Distribution Date.
Trustee
Fee Rate: With respect to each Mortgage Loan, the per annum
rate
agreed upon in writing on or prior to the Closing Date by the
Trustee and the
Depositor.
Two Times
Test: A test that is satisfied with respect to a Certificate
Group and any Distribution Date if the related Senior Prepayment
Percentage for
such Distribution Date is determined in accordance with clause (ii)
and (iii) of
the proviso in the definition of "Senior Prepayment
Percentage."
Unanticipated Recovery: As defined in Section 4.2(f).
Undercollateralization Distribution: As defined in Section
4.2(g).
Undercollateralized Group: With respect to any Distribution Date,
the
Senior Certificates of any Certificate Group as to which the
aggregate
Certificate Principal Balance thereof, after giving effect to
distributions
pursuant to Section 4.2(a) on such date, is greater than the Pool
Principal
Balance of the related Mortgage Pool for such Distribution
Date.
Underwriters: As specified in the Preliminary Statement.
Underwriters' Exemption: Prohibited Transaction Exemption 89-40
or
Prohibited Transaction Exemption 89-88, 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 II-A-R Certificates, in proportion to their
then
outstanding Class Certificate Balances; and (b) 1.0% of all Voting
Rights will
be allocated to the Class II-A-R Certificates (such Voting Rights
to be
allocated among the Holders of Certificates of such Class in
accordance with
their respective Percentage Interests).
Weighted
Average Adjusted Net Mortgage Rate: For a Mortgage Pool, the
average of the Adjusted Net Mortgage Rates of the Mortgage Loans in
the related
Loan Group, weighted on the basis of the Stated Principal Balances
thereof.
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Conveyance of Mortgage Loans.
(a)
The Depositor,
concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys
to
33
<PAGE>
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;
(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
34
<PAGE>
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, 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).
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
35
<PAGE>
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. Notwithstanding the preceding,
in
connection with any Mortgage Loan for which either the original or
duplicate
original title policy has not been delivered to the Trust, if at
any time during
the term of this Agreement the parent company of the Seller does
not have a long
term senior debt rating of A- or higher from S&P and A- or
higher from Fitch (if
rated by Fitch), then the Depositor shall within 30 days deliver or
cause to be
delivered to the Trustee or the Custodian on its behalf (if it has
not
previously done so) a written commitment or interim binder or
preliminary report
of the title issued by the title insurance or escrow company with
respect to the
Mortgaged Property.
Subject to
the immediately following sentence, as promptly as practicable
subsequent to such transfer and assignment, and in any event,
within thirty (30)
days thereafter, the Master Servicer shall (i) complete each
assignment of
Mortgage, as follows: "First Horizon Mortgage Pass-Through
Certificates, Series
36
<PAGE>
2005-AR1, 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.
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.
37
<PAGE>
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 Subsequent Certification in the form annexed hereto as Exhibit G,
with any
applicable exceptions noted thereon.
If, in the
course of such review, the Trustee or the Custodian, on behalf
of the Trustee, finds any document constituting a part of a
Mortgage File which
does not meet the requirements of Section 2.1, the Trustee shall
list or shall
cause the Custodian to list such as an exception in the
Subsequent
Certification; provided, however that neither the Trustee nor the
Custodian
shall make any determination as to whether (i) any endorsement is
sufficient to
transfer all right, title and interest of the party so endorsing,
as noteholder
or assignee thereof, in and to that Mortgage Note or (ii) any
assignment is in
recordable form or is sufficient to effect the assignment of and
transfer to the
assignee thereof under the mortgage to which the assignment
relates. The Seller
shall promptly correct or cure such defect within 90 days from the
date it was
so notified of such defect and, if the Seller does not correct or
cure such
defect within such period, the Seller shall either (a) substitute
for the
related Mortgage Loan a Substitute Mortgage Loan, which
substitution shall be
accomplished in the manner and subject to the conditions set forth
in Section
2.3, or (b) purchase such Mortgage Loan from the Trustee within 90
days from the
date the Seller was notified of such defect in writing at the
Purchase Price of
such Mortgage Loan; provided, however, that in no event shall such
substitution
or purchase occur more than 540 days from the Closing Date, except
that if the
substitution or purchase of a Mortgage Loan pursuant to this
provision is
required by reason of a delay in delivery of any documents by the
appropriate
recording office, and there is a dispute between either the Master
Servicer or
the Seller and the Trustee over the location or status of the
recorded document,
then such substitution or purchase shall occur within 720 days from
the Closing
Date. The Trustee shall deliver or shall cause the Custodian to
deliver written
notice to each Rating Agency within 270 days from the Closing Date
indicating
each Mortgage Loan (a) which has not been returned by the
appropriate recording
office or (b) as to which there is a dispute as to location or
status of such
Mortgage Loan. Such notice shall be delivered every 90 days
thereafter until the
related Mortgage Loan is returned to the Trustee or the Custodian
on its behalf.
Any such substitution pursuant to (a) above or purchase pursuant to
(b) above
shall not be effected prior to the delivery to the Trustee of the
Opinion of
38
<PAGE>
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, which contains, among other
representations and
warranties, a representation and warranty of the Seller that no
Mortgage Loan is
a "high cost loan" as defined by the specific applicable local,
state or federal
predatory and abusive lending laws, and (ii) Substitute Mortgage
Loans (which,
by definition as set forth in this Agreement and referred to in the
MLPA, are
required to conform to, among other representations and warranties,
a
representation and warranty of the Seller set forth in the MLPA
that no
Substitute Mortgage Loan is a "high cost loan" as defined by the
specific
applicable local, state or federal predatory and abusive lending
laws). It is
therefore understood and agreed by the parties hereto that it is
not intended
that any Mortgage Loan be included in the Trust Fund that is a
"high cost loan"
as defined in the by the specific applicable local, state or
federal predatory
and abusive lending laws.
SECTION 2.3 Representations and Warranties of the Master
Servicer;
Covenants
of the Seller.
(a)
The Master
Servicer hereby makes the representations and warranties
set forth in Schedule II hereto and by this reference
incorporated
39
<PAGE>
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.
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
40
<PAGE>
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.
After
giving effect to the sale of the Certificates by the Depositor
to
the Underwriters, 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.
41
<PAGE>
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.
(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
42
<PAGE>
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 II-A-R Certificate shall represent ownership
of the RL
Interest and RU Interest.
The
"Startup Day" for purposes of the REMIC Provisions for each
REMIC
hereunder shall be the Closing Date. The Tax Matters Person with
respect to each
REMIC hereunder shall be the Trustee and the Trustee shall hold the
Tax Matters
Person Certificate. Each REMIC's taxable year shall be the calendar
year and its
accounts shall be maintained using the accrual method.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Corresponding Class of Upper REMIC
Lower REMIC
Interests
Interest or
Lower REMIC
Lower REMIC Interest
----------------------------------------
Residual
Interest Balance
Rate
Interest
Principal
-------------------------------------------------------------------------------------------------------------
<S>
<C>
<C>
<C>
<C>
L-I-A-1
$
21,419.09
(2)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-I-A-2
$
2,379.90
(2)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-I-A-ZZZ
$
55,980,099.45
(2)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
RL
$
0.00
N/A
N/A
N/A
-------------------------------------------------------------------------------------------------------------
L-II-A-1
$
42,088.42
(3)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-II-A-2
$
4,676.49
(3)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-II-A-ZZZ
$ 110,004,826.72
(3)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-III-A-1
$
8,813.33
(4)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-III-A-2
$
979.26
(4)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-III-A-ZZZ
$
23,009,466.34
(4)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
43
<PAGE>
-------------------------------------------------------------------------------------------------------------
L-IV-A-1
$
24,497.41
(5)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-IV-A-2
$
2,721.93
(5)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-IV-A-ZZZ
$
64,007,715.20
(5)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
Total
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Lower REMIC Interest L-I-A-1, Lower REMIC Interest L-I-A-2
and Lower
REMIC Interest L-I-A-ZZZ shall be Corresponding Classes to these
Classes of
Certificates: I-A-1, B-1, B-2, B-3, B-4, B-5 and B-6 (provided that
with respect
to B-1, B-2, B-3, B-4, B-5 and B-6, such Lower REMIC Interests
shall only
correspond to the portion supported by Pool I). The Lower REMIC
Interest
L-II-A-1, Lower REMIC L-II-A-2 and Lower REMIC Interest L-II-A-ZZZ
shall be
Corresponding Classes to these Classes of Certificates: II-A-R,
II-A-1, II-A-2,
II-A-3, II-A-4, II-A-5, B-1, B-2, B-3, B-4, B-5 and B-6 (provided
that with
respect to B-1, B-2, B-3, B-4, B-5 and B-6, such Lower REMIC
Interests shall
only correspond to the portion supported by Pool II). The Lower
REMIC Interest
L-III-A-1, Lower REMIC Interest L-III-A-2 and Lower REMIC Interest
L-III-A-ZZZ
shall be Corresponding Classes to these Classes of Certificates:
III-A-1, B-1,
B-2, B-3, B-4, B-5 and B-6 (provided that with respect to B-1, B-2,
B-3, B-4,
B-5 and B-6, such Lower REMIC Interests shall only correspond to
the portion
supported by Pool III). The Lower REMIC Interest L-IV-A-1, Lower
REMIC L-IV-A-2
and Lower REMIC Interest L-IV-A-ZZZ shall be Corresponding Classes
to these
Classes of Certificates: IV-A-1, B-1, B-2, B-3, B-4, B-5 and B-6
(provided that
with respect to B-1, B-2, B-3, B-4, B-5 and B-6, such Lower REMIC
Interests
shall only correspond to the portion supported by Pool IV).
(2) The Lower REMIC Interest Rate for the Lower REMIC Interest
L-I-A-1, L-I-A-2
and L-I-A-ZZZ will equal the Weighted Average Adjusted Net Mortgage
Rate for
Pool I.
(3) The Lower REMIC Interest Rate for the Lower REMIC Interest
L-II-A-1,
L-II-A-2 and L-II-A-ZZZ will equal the Weighted Average Adjusted
Net Mortgage
Rate for Pool II.
(4) The Lower REMIC Interest Rate for the Lower REMIC Interest
L-III-A-1,
L-III-A-2 and L-III-A-ZZZ will equal the Weighted Average Adjusted
Net Mortgage
Rate for Pool III.
(4) The Lower REMIC Interest Rate for the Lower REMIC Interest
L-IV-A-1,
L-IV-A-2 and L-IV-A-ZZZ will equal the Weighted Average Adjusted
Net Mortgage
Rate for Pool IV.
"L1
Interests" refers to the L-I-A-1 Lower REMIC Interest, the
L-II-A-1
Lower REMIC Interests, L-III-A-1 Lower REMIC Interest, and the
L-IV-A-1 Lower
REMIC Interests. "L2 Interests" refers to the L-I-A-2 Lower REMIC
Interest,
L-II-A-2 Lower REMIC Interest, L-III-A-2 Lower REMIC Interest and
the L-IV-A-2
Lower REMIC Interest. "LZZZ Interests" refers to L-I-A-ZZZ Lower
REMIC Interest,
L-II-A-ZZZ Lower REMIC Interest, L-III-A-ZZZ Lower REMIC Interest
and L-IV-A-ZZZ
Lower REMIC Interest. Each L1 Interest shall have a principal
balance initially
equal to 0.9% of the Group Subordinate Amount of its corresponding
Mortgage
Pool. Each L2 Interest shall have a principal balance initially
equal to 0.1% of
the Group Subordinate Amount of its corresponding Mortgage Pool.
The initial
principal balance of each LZZZ Interest shall equal the excess of
the Pool
Principal Balance of its corresponding Mortgage Pool over the sum
of the initial
principal balances of the L1 Interests and L2 Interests
corresponding to such
Mortgage Pool.
Unless a
Cross-over Situation (as defined below) exists, principal and
Realized Losses arising with respect to each Mortgage Pool shall be
allocated
44
<PAGE>
first to cause the L1 and L2 Interests corresponding to such
Mortgage Pool to
equal 0.9% and 0.1% of the Group Subordinate Amount of such
Mortgage Pool as of
such Distribution Date (after distributions of principal and
allocation of
Realized Losses are made) and all excess principal and Realized
Losses shall be
allocated to the LZZZ Interest corresponding to such Mortgage Pool.
A L1, L2 or
LZZZ Interest that is allocated principal on any Distribution Date
shall receive
such principal, and have its principal balance reduced by the
amount of such
principal, on such Distribution Date. Similarly, a L1, L2 or LZZZ
Interest that
is allocated a Realized Loss on any Distribution Date shall have
its principal
balance reduced by the amount of such Realized Loss on such
Distribution Date.
A
"Cross-over Situation" exists if on any Distribution Date (after
taking
into account distributions of principal and allocations of Realized
Losses on
such Distribution Date) the L1 and L2 Interests corresponding to
any Mortgage
Pool are in the aggregate less than 1% of the Group Subordinate
Amount of the
corresponding Mortgage Pool. If a Cross-over Situation exists on
any
Distribution Date, and the weighted average interest rate of the
outstanding L1
and L2 Interests is less than the Pass-Through Rate for any Class
of Subordinate
Certificates for the following Distribution Date, a Principal
Reallocation
Payment (as defined below) shall be made proportionately to the
outstanding L1
Interests prior to any other distributions of principal from each
such Mortgage
Pool so that the Calculation Rate equals the Pass-Through Rate for
each Class of
Subordinate Certificates. If a Cross-over Situation exists on any
Distribution
Date, and the weighted average rate of the outstanding L1 and L2
Interests is
greater than the Pass-Through Rate for any Class of Subordinate
Certificates for
the following Distribution Date, a Principal Reallocation Payment
shall be made
proportionately to the outstanding L2 Interests prior to any other
distributions
of principal from each such Mortgage Pool so that the Calculation
Rate equals
the Pass-Through Rate for each Class of Subordinate Certificates. A
"Principal
Reallocation Payment" is a distribution of the minimum amount of
principal that
causes the Calculation Rate (as defined below) with respect to the
outstanding
L1 and L2 Interests to equal the Pass-Through Rate for each Class
of Subordinate
Certificates. The "Calculation Rate" shall equal the product of (i)
10 and (ii)
the weighted average interest rate of the outstanding L1 and L2
Interests,
treating each L1 Interest as capped at zero or reduced by a fixed
percentage of
100% of the interest accruing on such class. Principal Reallocation
Payments
shall be made from principal received on the Mortgage Loans from a
Mortgage Pool
and shall also consist of a proportionate allocation of Realized
Losses from the
Mortgage Loans of a Mortgage Pool. For purposes of making Principal
Reallocation
Payments, to the extent that the principal received during the
applicable
collection period from the related Mortgage Pool and related
Realized Losses are
insufficient to make the necessary reduction of principal, then
interest shall
accrue on the LZZZ Interest (and be added to its principal balance)
of the
related Mortgage Pool to allow the necessary Principal Reallocation
Payment to
be made. The Calculation Rate is designed to always equal the
Pass-Through Rate
of each Class of Subordinated Certificates.
If a
Cross-over Situation exists, the aggregate principal balances of
the
outstanding L1 and L2 Interests of all of the Mortgage Pools shall
not be
reduced below one percent of the aggregate Pool Principal Balance
of all of the
Mortgage Pools for the following Distribution Date in excess of the
Senior
Certificates as of the related Distribution Date (after taking into
account
distributions of principal and allocations of Realized Losses on
such
Distribution Date). To the extent this limitation prevents the
distribution of
principal to the L1 and L2 Interests of a Mortgage Pool and the
related LZZZ
Interest has already been reduced to zero, such excess principal
from such
45
<PAGE>
Mortgage Pool shall be paid proportionately to the LZZZ Interests
of the
Mortgage Pool or Pools whose aggregate L1 and L2 Interests are less
than one
percent of the Group Subordinate Amount. Any such shortfall as a
result of the
Mortgage Pool receiving the extra payment having a Weighted Average
Adjusted Net
Mortgage Rate lower than the Weighted Average Adjusted Net Mortgage
Rate of the
Mortgage Pool from which the payment was reallocated shall be
treated as a
Realized Loss and if excess arises as result of the Mortgage Pool
receiving the
extra payment having a Weighted Average Adjusted Net Mortgage Rate
higher than
the Mortgage Pool from which the payment was reallocated it shall
reimburse the
Upper REMIC for prior Realized Losses. If on any Distribution Date,
the L1
Interest or L2 Interest remains outstanding after the related Pool
Principal
Balance is at zero as of the beginning of the Accrual Period
corresponding to
such Distribution Date, their Lower REMIC Interest Rate shall be
the Weighted
Average Adjusted Net Mortgage Rate of the Mortgage Pool with the
lowest Weighted
Average Adjusted Net Mortgage Rate that remains outstanding and the
excess of
interest at the Pass-Through Rate for the Subordinated Certificates
over
interest at such Weighted Average Adjusted Net Mortgage Rate shall
be treated as
paid from Lower REMIC to the Upper REMIC as reimbursement for prior
Realized
Losses.
The
foregoing REMIC structure is intended to cause all of the cash
from
the Mortgage Loans to flow through to the Upper REMIC as cash flow
on a REMIC
regular interest, without creating any shortfall-actual or
potential (other than
for credit losses) to any REMIC regular interest. To the extent
that the
structure is believed to diverge from such intention the Trustee
shall resolve
ambiguities to accomplish such result and shall to the extent
necessary rectify
any drafting errors or seek clarification to the structure
without
Certificateholder approval (but with guidance of counsel) to
accomplish such
intention.
SECTION 2.8 Covenants of the Master Servicer.
The Master
Servicer hereby covenants to the Depositor and the Trustee as
follows:
(a)
the Master
Servicer shall comply in the performance of its
obligations under this Agreement with all reasonable rules and
requirements of the insurer under each Required Insurance
Policy;
and
(b)
no written
information, certificate of an officer, statement
furnished in writing or written report delivered to the
Depositor,
any affiliate of the Depositor or the Trustee and prepared by
the
Master Servicer pursuant to this Agreement will contain any
untrue
statement of a material fact or omit to state a material fact
necessary to make such information, certificate, statement or
report
not misleading.
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 3.1 Master Servicer to Service Mortgage Loans.
For and on
behalf of the Certificateholders, the Master Servicer shall
service and administer the Mortgage Loans in accordance with the
terms of (i)
the Servicing Rights Transfer and Subservicing Agreement, pursuant
to which
First Tennessee Mortgage Services, Inc. engaged the Master Servicer
to
subservice the Mortgage Loans, (ii) this Agreement and (iii) the
customary and
usual standards of practice of prudent mortgage loan servicers;
provided that if
there is a conflict between the terms of the Servicing Agreement
and the
46
<PAGE>
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 a Subservicer, when the Master Servicer or a
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.
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
47
<PAGE>
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.
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.
48
<PAGE>
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
49
<PAGE>
(whether under a Mortgage, Mortgage Note or otherwise or against
any
public or governmental authority with respect to a taking or
condemnation) if it reasonably believes that enforcing the
provision
of the Mortgage or other instrument pursuant to which such
payment
is required is prohibited by applicable law.
(b)
The Master
Servicer shall establish and maintain the Certificate
Account. The Certificate Account shall consist of four separate
subaccounts, each of which shall relate to a particular
Mortgage
Pool. The Master Servicer shall deposit or cause to be
deposited
into the appropriate subaccount of the Certificate Account no
later
than two Business Days after receipt, except as otherwise
specifically provided herein, the following payments and
collections
remitted by Subservicers or received by it in respect of the
Mortgage Loans subsequent to the Cut-off Date (other than in
respect
of principal and interest due on the Mortgage Loans on or before
the
Cut-off Date) and the following amounts required to be
deposited
hereunder:
(i) all payments
on account of principal on the Mortgage Loans in
the related Mortgage Pool, including Principal Prepayments;
(ii) all payments on
account of interest on the Mortgage Loans in
the related Mortgage Pool, net of the related Master Servicing
Fee and any Prepayment Interest Excess;
(iii) all Insurance Proceeds and Liquidation Proceeds in respect
of
the related Mortgage Loans in the related Mortgage Pool, other
than proceeds to be applied to the restoration or repair of
the Mortgaged Property or released to the Mortgagor in
accordance with the Master Servicer's normal servicing
procedures;
(iv) any amount
required to be deposited by the Master Servicer in
respect of the related Mortgage Pool pursuant to Section
3.5(c) in connection with any losses on Permitted Investments;
(v) any amounts
required to be deposited by the Master Servicer in
respect of the related Mortgage Pool pursuant to Section
3.9(b), 3.9(d), and in respect of net monthly rental income
from any related REO Property pursuant to Section 3.11 hereof;
(vi) all Substitution
Adjustment Amounts in respect of the related
Mortgage Pool;
(vii) all Advances in respect of the related Mortgage Pool made
by
the Master Servicer pursuant to Section 4.1; and
(viii) any other amounts required to be deposited hereunder in
respect of the related Mortgage Pool.
In addition, with respect to any Mortgage Loan that is subject to
a
buydown
agreement, on each Due Date for such Mortgage Loan, in addition
to
the
monthly payment remitted by the Mortgagor, the Master Servicer
shall
50
<PAGE>
cause
funds to be deposited into the applicable subaccount of the
Certificate Account in an amount required to cause an amount of
interest
to be paid
with respect to such Mortgage Loan equal to the amount of
interest
that has accrued on such Mortgage Loan from the preceding Due
Date at
the related Adjusted Mortgage Rate on such date.
The foregoing requirements for remittance by the Master
Servicer
shall be
exclusive, it being understood and agreed that, without
limiting
the
generality of the foregoing, payments in the nature of
prepayment
penalties,
late payment charges, assumption fees or amounts attributable
to
reimbursements of Advances, if collected, need not be remitted by
the
Master
Servicer. In the event that the Master Servicer shall remit any
amount not
required to be remitted, it may at any time withdraw or direct
the
institution maintaining the Certificate Account to withdraw
such
amount
from the Certificate Account, any provision herein to the
contrary
notwithstanding. Such withdrawal or direction may be accomplished
by
delivering
written notice thereof to the Trustee or such other institution
maintaining the Certificate Account which describes the amounts
deposited
in error
in the Certificate Account. The Master Servicer shall maintain
adequate
records with respect to all withdrawals made pursuant to this
Section.
All funds deposited in the Certificate Account shall be held in
trust for
the Certificateholders until withdrawn in accordance with
Section
3.8.
(c)
The Trustee
shall establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Distribution
Account shall consist of four separate subaccounts, each of
which
shall relate to a particular Mortgage Pool. The Trustee shall,
promptly upon receipt, deposit in the Distribution Account and
retain therein the following:
(i) the
aggregate amount remitted by the Master Servicer to the
Trustee in respect of a Mortgage Pool pursuant to Section
3.8(a)(ix);
(ii) any amount
deposited by the Master Servicer pursuant to this
Section 3.5(c) in connection with any losses on Permitted
Investments; and
(iii) any other amounts deposited hereunder which are required to
be
deposited in the Distribution Account.
In the event that the Master Servicer shall remit any amount
not
required
to be remitted, it may at any time direct the Trustee to
withdraw
such
amount from the applicable subaccount of the Distribution
Account,
any provision herein
to the contrary notwithstanding. Such direction may
be
accomplished by delivering an Officer's Certificate to the
Trustee
which
describes the amounts deposited in error in the Distribution
Account.
All funds deposited in the Distribution Account shall be held
by
the
Trustee in trust for the related Certificateholders until disbursed
in
accordance
with this Agreement or withdrawn in accordance with Section
3.8. In no
event shall the Trustee incur liability for withdrawals from
the
Distribution Account at the direction of the Master Servicer.
51
<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
52
<PAGE>
account of the Mortgagors. Nothing herein shall require the
Master
Servicer to compel a Mortgagor to establish an Escrow Account
in
violation of applicable law.
(b)
Withdrawals of
amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments,
hazard
insurance premiums, condominium or PUD association dues, or
comparable items, to reimburse the Master Servicer out of
related
