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 January 1, 2005
-----------------------------------------------------
FIRST HORIZON ALTERNATIVE MORTGAGE SECURITIES TRUST 2005-AA1
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-AA1
<PAGE>
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS.............................................................................................5
ARTICLE II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
WARRANTIES.........................................34
SECTION 2.1
Conveyance of Mortgage
Loans......................................................................34
SECTION 2.2
Acceptance by Trustee of the Mortgage
Loans.......................................................38
SECTION 2.3
Representations and Warranties of the Master Servicer; Covenants of the
Seller...................40
SECTION 2.4
Representations and Warranties of the Depositor as to the Mortgage
Loans..........................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..................................................................47
ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE
LOANS.......................................................47
SECTION 3.1
Master Servicer to Service Mortgage
Loans.........................................................47
SECTION 3.2
Subservicing; Enforcement of the Obligations of
Servicers.........................................49
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.................................................................50
SECTION 3.5
Collection of Mortgage Loan Payments; Certificate Account;
Distribution Account...................50
SECTION 3.6
Collection of Taxes, Assessments and Similar Items; Escrow
Accounts...............................53
SECTION 3.7
Access to Certain Documentation and Information Regarding the
Mortgage Loans......................54
SECTION 3.8
Permitted Withdrawals from the Certificate Account and
Distribution
Account.................................................................................................54
SECTION 3.9
Maintenance of Hazard Insurance; Maintenance of Primary
Insurance
Policies................................................................................................56
SECTION 3.10
Enforcement of Due-on-Sale Clauses; Assumption
Agreements........................................58
SECTION 3.11
Realization Upon Defaulted Mortgage Loans; Repurchase of Certain
Mortgage Loans..................59
SECTION 3.12
Trustee to Cooperate; Release of Mortgage
Files..................................................62
SECTION 3.13
Documents Records and Funds in Possession of Master Servicer to be
Held for the Trustee..........63
SECTION 3.14
Master Servicing
Compensation....................................................................63
SECTION 3.15
Access to Certain
Documentation..................................................................64
SECTION 3.16
Annual Statement as to
Compliance................................................................64
SECTION 3.17
Annual Independent Public Accountants' Servicing Statement;
Financial Statements.................64
SECTION 3.18 Errors and Omissions
Insurance; Fidelity
Bonds...................................................65
SECTION 3.19
Notification of
Adjustments......................................................................65
ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE MASTER
SERVICER.....................................................65
SECTION 4.1
Advances..........................................................................................65
SECTION 4.2
Priorities of
Distribution........................................................................66
SECTION 4.3
Method of
Distribution............................................................................70
SECTION 4.4
Allocation of
Losses..............................................................................71
SECTION 4.5
[RESERVED]........................................................................................72
SECTION 4.6
Monthly Statements to
Certificateholders..........................................................72
</TABLE>
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<TABLE>
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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.........................................81
SECTION 5.6
Maintenance of Office or
Agency...................................................................81
ARTICLE VI THE DEPOSITOR AND THE MASTER
SERVICER.................................................................81
SECTION 6.1
Respective Liabilities of the Depositor and the Master
Servicer...................................81
SECTION 6.2
Merger or Consolidation of the Depositor or the Master
Servicer...................................81
SECTION 6.3
Limitation on Liability of the Depositor, the Master Servicer and
Others..........................82
SECTION 6.4
Limitation on Resignation of Master
Servicer......................................................82
ARTICLE VII
DEFAULT..............................................................................................83
SECTION 7.1
Events of
Default.................................................................................83
SECTION 7.2
Trustee to Act; Appointment of
Successor..........................................................85
SECTION 7.3
Notification to
Certificateholders................................................................86
ARTICLE VIII CONCERNING THE
TRUSTEE..............................................................................86
SECTION 8.1
Duties of
Trustee.................................................................................86
SECTION 8.2
Certain Matters Affecting the
Trustee.............................................................88
SECTION 8.3
Trustee Not Liable for Certificates or Mortgage
Loans.............................................90
SECTION 8.4
Trustee May Own
Certificates......................................................................90
SECTION 8.5
Trustee's Fees and
Expenses.......................................................................90
SECTION 8.6
Eligibility Requirements for
Trustee..............................................................91
SECTION 8.7
Resignation and Removal of
Trustee................................................................91
SECTION 8.8
Successor
Trustee.................................................................................92
SECTION 8.9
Merger or Consolidation of
Trustee................................................................92
SECTION 8.10
Appointment of Co-Trustee or Separate
Trustee....................................................92
SECTION 8.11 Tax
Matters......................................................................................94
SECTION 8.12
Periodic
Filings.................................................................................96
ARTICLE IX
TERMINATION...........................................................................................96
SECTION 9.1
Termination upon Liquidation or Purchase of all Mortgage
Loans....................................96
SECTION 9.2
Final Distribution on the
Certificates............................................................97
SECTION 9.3
Additional Termination
Requirements...............................................................98
ARTICLE X
[RESERVED].............................................................................................99
ARTICLE XI MISCELLANEOUS
PROVISIONS..............................................................................99
SECTION 11.1
Amendment........................................................................................99
SECTION 11.2
Recordation of Agreement;
Counterparts..........................................................100
SECTION 11.3
Governing
Law...................................................................................100
SECTION 11.4
Intention of
Parties............................................................................101
SECTION 11.5
Notices.........................................................................................101
SECTION 11.6
Severability of
Provisions......................................................................102
SECTION 11.7
Assignment......................................................................................102
SECTION 11.8
Limitation on Rights of
Certificateholders......................................................103
SECTION 11.9
Inspection and Audit
Rights.....................................................................103
SECTION 11.10
Certificates Nonassessable and Fully
Paid......................................................104
SECTION 11.11
Limitations on Actions; No
Proceedings.........................................................104
SECTION 11.12
Acknowledgment of
Seller.......................................................................104
</TABLE>
ii
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SCHEDULES
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Schedule I:
Mortgage Loan Schedule
S-I-1
Schedule II:
Representations and Warranties of the Master Servicer
S-II-1
Schedule III:
Form of Monthly Master Servicer Report
S-III-1
</TABLE>
EXHIBITS
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Exhibit A:
Form of Senior Certificate
A-1
Exhibit B:
Form of Subordinated Certificate
B-1
Exhibit C:
Form of Residual Certificate
C-1
Exhibit D:
Form of Reverse of Certificates
D-1
Exhibit E:
Form of Initial Certification
E-1
Exhibit F:
Form of Delay Delivery Certification
F-1
Exhibit G:
Form of Final 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
January 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 three
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, Middle REMIC
and Upper REMIC,
as described in
Section 2.7. The "latest
possible maturity
date" for federal
income tax purposes of
all REMIC regular
interests created hereby will be the Latest Possible Maturity
Date.
The
following table sets forth characteristics of the Certificates,
together with the minimum denominations and integral multiples in
excess thereof
in which such Classes
shall be issuable
(except that one
Certificate of
each
Class of Certificates may be issued in a different amount and, in
addition, one
Residual Certificate
representing
the Tax Matters Person
Certificate
may be
issued in a different amount):
[Remainder of Page Intentionally Left Blank]
1
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<TABLE>
<CAPTION>
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Initial Class
Initial
Integral Multiples
Class
Designation
Certificate Balance Pass Through
Rate
Minimum Denomination in Excess Minimum
--------------------------------------------------------------------------------------------------------------------
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<C>
Class I-A-1
$
93,729,000.00
4.550% (1) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class I-A-IO
$
(2)
0.519% (3) $
500,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-1
$
188,799,000.00
4.810% (4) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-2
$
12,687,000.00
4.810% (4) $
25,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-IO
$
(5)
0.548% (6) $
500,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-R
$
100.00
5.358%(7)
$
100
N/A
--------------------------------------------------------------------------------------------------------------------
Class B-1
$
9,767,000.00
5.266% (8) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-2
$
3,466,000.00
5.266% (8) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-3
$
2,205,000.00
5.266% (8) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-4
$
1,891,000.00
5.266% (8) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-5
$
1,418,000.00
5.266% (8) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-6
$
1,102,818.46
5.266% (8) $
100,000 $
1,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) On or prior to the Distribution Date in January 2008, the
Pass-Through Rate
for the Class I-A-1
Certificates will equal the excess, if any, of the Weighted
Average Adjusted Net
Mortgage Rate for Pool I over 0.519% per annum. After the
Distribution Date in
January 2008, the
Pass-Through
Rate for the Class
I-A-1
Certificates will equal the Weighted Average Adjusted Net Mortgage
Rate for Pool
I.
(2) The Notional
Amount of the Class
I-A-IO Certificates
with respect to
any
Distribution Date will
equal the Class
Certificate Balance of
the Class I-A-1
Certificates for such Distribution Date.
(3) On or prior to the Distribution Date in January 2008, the
Pass-Through Rate
for the Class I-A-IO
Certificates
will equal 0.519% per annum. After the
Distribution Date in
January 2008, the
Pass-Through Rate for
the Class I-A-IO
Certificates will be zero.
(4) On or prior to the Distribution Date in January 2010, the
Pass-Through Rate
for the Class II-A-1 and Class II-A-2 Certificates will equal the excess,
if
any, of the Weighted
Average Adjusted Net Mortgage Rate for Pool II over 0.548%
per annum. After the
Distribution Date in
January 2010, the Pass-Through Rate
for the Class II-A-1
and Class II-A-2
Certificates
will equal the Weighted
Average Adjusted Net Mortgage Rate for Pool II.
(5) The Notional
Amount of the Class II-A-IO Certificates with respect to any
Distribution Date will
equal the sum of the Class Certificate Balances of the
Class II-A-1 and Class II-A-2 Certificates for such Distribution
Date.
(6) On or prior to the Distribution Date in January 2010, the
Pass-Through Rate
for the Class II-A-IO
Certificates
will equal
0.548% per annum. After the
Distribution Date in
January 2010, the Pass-Through Rate for the Class II-A-IO
Certificates will be zero.
(7) The Pass-Through
Rate for the Class
II-A-R Certificates will equal the
Weighted Average Adjusted Net Mortgage Rate for Pool II.
(8) 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, and with
respect to Pool
II, the Group II
Senior
Certificates.
The
Subordinated Certificates correspond
to all the 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 and Class I-A-IO
Certificates.
Group II Senior Certificates.......... The Class II-A-1, Class II-A-2,
Class II-A-IO
and Class II-A-R
Certificates.
Insured Retail Certificates........... None.
Inverse Floating Rate Certificates....
None.
LIBOR Certificates.................... None.
Non-Delay Certificates................ None.
Notional Amount Components............ None.
Notional Certificates................. The Class I-A-IO and Class II-A-IO
Certificates.
Offered Certificates.................. All Classes of the Certificates
other than the Private Certificates.
Physical Certificates................. The Private Certificates and the
Residual Certificates.
Planned Principal Classes............. None.
Principal Only Certificates........... None.
Private Certificates.................. The Class
B-4, Class B-5 and Class
B-6 Certificates.
Rating Agencies....................... S&P and
Moody's; except
that, for
the purposes of the Class B-1, Class
B-2, Class B-3, Class
B-4 and Class
B-5 Certificates,
S&P shall be
the
sole Rating Agency.
Regular Certificates.................. All Classes of
Certificates,
other
than the Residual Certificates.
Residual Certificates................. The Class II-A-R
Certificates.
3
<PAGE>
Scheduled Principal Classes........... None.
Senior Certificates................... The Group I
Senior Certificates
and
the Group II
Senior Certificates,
collectively.
Senior Support Certificates........... None
Subordinated Certificates............. The Class B-1,
Class B-2, Class B-3,
Class B-4,
Class B-5 and Class
B-6
Certificates.
Super Senior Certificates............. The Class II-A-1
Certificates.
Super Senior Support Certificates..... The Class II-A-2
Certificates.
Support Classes....................... None.
Targeted Principal Classes............ None.
Underwriters.......................... Bear,
Stearns & Co. Inc. and FTN
Financial
Capital Markets,
a
division of
First Tennessee Bank
National Association
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 (or
Notional Amount, in the case of the Notional
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 each of the
components of
the Subordinated
Optimal Principal Amount for each Mortgage Pool;
provided,
that, except as provided in this Agreement, no Subordinated
Certificates
(other
than the Class
of Subordinated Certificates with the highest priority of
distribution)
shall be entitled on any Distribution Date to receive
distributions pursuant
to clauses (2), (3) and (5) of the definition of
Subordinated Optimal
Principal Amount unless the Class Prepayment Distribution
Trigger for such Class is satisfied for such Distribution Date.
Amount
Held for Future
Distribution: As to
any Distribution
Date, the
aggregate amount held in the applicable subaccount of the
Certificate Account at
the close of business
on the related Determination Date on account of (i)
Principal Prepayments
on the related
Mortgage Pool received
after the related
Prepayment Period and Liquidation Proceeds in the related Mortgage
Pool received
in the month of such
Distribution Date and
(ii) all Scheduled
Payments in the
related Mortgage Pool due after the related Due Date.
5
<PAGE>
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:
(a)
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;
(b)
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;
(c)
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;
(d)
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>
(e)
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
Loss 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-AA1."
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
(other than
the Notional
Certificates) and as
of any Distribution
Date, the Certificate
Principal Balance on
the date of the initial issuance of such Certificate, as
reduced by:
(a)
all amounts distributed on previous Distribution Dates on such
Certificate on account of principal,
(b)
the principal
portion of all Realized Losses previously allocated to
such Certificate, and
(c)
in the case of a
Subordinated
Certificate, such
Certificate's pro
rata share, if any, of the Subordinated Certificate Writedown
Amount
for previous Distribution Dates.
Certificate Register:
The register maintained pursuant to Section 5.2
hereof.
Certificateholder or
Holder: The person in
whose name a
Certificate is
registered in the Certificate Register, except that, solely for the
purpose of
giving any consent pursuant to this Agreement, any Certificate
registered in the
name of the Depositor
or the Seller or any
affiliate or agent of the Depositor
or the Seller shall be deemed not to be Outstanding and the
Percentage
Interest
evidenced thereby
shall not be taken
into account in
determining whether
the
requisite amount of
Percentage Interests
necessary to effect
such consent has
been obtained;
provided, however, that if any such Person (including the
Depositor) owns
100% of the
Percentage
Interests evidenced by a Class of
Certificates, such
Certificates shall be
deemed to be Outstanding for purposes
of any provision hereof that requires the consent of the Holders of
Certificates
of a particular Class as a condition to the taking of any action
hereunder. The
Trustee is entitled to rely conclusively on a certification of
the Depositor or
any affiliate of the Depositor in determining which Certificates are registered
in the name of an affiliate of the Depositor.
Class: All
Certificates bearing the same class designation as set forth in
the Preliminary Statement.
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 both Mortgage Pools with respect to such Distribution Date, equals
or exceeds such percentage calculated as of the Closing Date.
8
<PAGE>
Closing
Date: January 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
Securities Group,
First
Horizon Asset Securities Inc. Series 2005-AA1),
facsimile no. (212)
815-3986, and which is
the address to which notices to and
correspondence with the Trustee should be directed.
9
<PAGE>
Corresponding Class of
Certificates:
As to any Middle REMIC Interest
identified in Section
2.7, the Class or Classes that are identified in Section
2.7 as corresponding to such Middle REMIC Interest.
Corresponding Classes
of Middle REMIC
Interests:
As to any Lower
REMIC
Interest identified
in Section 2.7, the
Middle REMIC Interest
or Middle REMIC
Interests that are
identified
in Section 2.7 as
corresponding
to such Lower
REMIC Interest.
Cross-over
Date: The Distribution Date on which the respective Class
Certificate Balances
of each Class of Subordinated Certificates have been
reduced to zero.
Custodial
Agreement: The
Custodial Agreement dated as of January 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: January 1, 2005.
Cut-off
Date
Pool Principal Balance: With respect to Pool I,
$100,030,923.27; and with respect to Pool II, $215,033,995.19.
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.
10
<PAGE>
Delay
Delivery Mortgage Loans: The Mortgage Loans for which all or a
portion of a related
Mortgage File is not
delivered to Trustee
on the Closing
Date. The number of
Delay Delivery
Mortgage Loans shall
not exceed 25% of the
aggregate number of Mortgage Loans as of the Closing Date.
Deleted
Mortgage Loan: As defined in Section 2.3(b) hereof.
Denomination: With
respect to each
Certificate, the
amount set forth on
the face thereof as the "Initial Certificate Balance of this
Certificate" or the
Percentage Interest appearing on the face thereof.
Depositor:
First Horizon Asset Securities Inc., a Delaware corporation, or
its successor in interest.
Depository: The
initial Depository shall be The Depository Trust Company,
the nominee of which is CEDE & Co., as the registered Holder of the Book-Entry
Certificates. The
Depository shall at all times be a "clearing corporation" as
defined in Section
8-102(a)(5) of the Uniform Commercial Code of the State of
New York.
Depository
Participant:
A broker, dealer, bank or other financial
institution or other
Person for whom from time to time a
Depository
effects
book-entry transfers and pledges of securities deposited with the
Depository.
Determination Date: As
to any Distribution
Date, the earlier of
(i) the
third Business
Day after the 15th day of each month, and (ii) the second
Business Day prior to the related Distribution Date.
Distribution Account: The separate Eligible Account created and
maintained
by the Trustee
pursuant to Section 3.5 in the name of the
Trustee for the
benefit of the Certificateholders and designated "The Bank of New
York, in trust
for registered
Holders
of First Horizon Asset Securities Inc. Mortgage
Pass-Through
Certificates, Series
2005-AA1." 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 February 2005.
Due Date:
With respect to any Distribution Date, the first day of the
month in which the related Distribution Date occurs.
Eligible
Account: Any of (i) an account or
accounts maintained with a
federal or
state chartered depository institution or trust company the
short-term unsecured
debt obligations of which (or, in the case of a depository
institution or trust
company that is the principal subsidiary of a holding
company, the
debt obligations of such holding company) have the highest
short-term ratings of
each Rating
Agency at the time any
amounts are held
on
deposit therein, or
(ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC or the
SAIF (to the
limits established
by the FDIC or the
SAIF, as applicable)
and the uninsured
deposits in which
accounts are otherwise
secured such that, as evidenced by an
Opinion of Counsel
delivered to the
Trustee and to each
Rating Agency, the
Certificateholders
have a claim with
respect to the funds in such account or a
perfected first priority security interest against any collateral
(which shall
be limited to
Permitted Investments)
securing such funds that is superior to
claims of any other
depositors or creditors of the depository institution or
trust company in which such account is maintained, or (iii) a trust account or
accounts maintained
with (a) the trust department of a federal or state
chartered depository institution or (b) a trust company, acting in
its fiduciary
capacity or (iv) any other account acceptable to each Rating
Agency. Eligible
Accounts may bear interest, and may include, if otherwise qualified under
this
definition, accounts maintained with the Trustee.
11
<PAGE>
ERISA: The
Employee Retirement Income Security Act of 1974, as amended.
ERISA-Qualifying
Underwriting:
With respect
to any ERISA-Restricted
Certificate, a best efforts or firm commitment underwriting or
private placement
that meets the requirements of the Underwriters' Exemption.
ERISA-Restricted Certificate: As specified in the Preliminary
Statement.
Escrow
Account: The Eligible Account or Accounts established and
maintained pursuant to Section 3.6(a) hereof.
Event of
Default: As defined in Section 7.1 hereof.
Excess
Loss: 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, $6,301,298. 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 $3,150,649 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.
FTBNA:
First Tennessee Bank National Association, a national banking
association.
Group I
Senior Certificates: As specified in the Preliminary Statement.
Group II
Senior Certificates: As specified in the Preliminary Statement.
Group
Subordinate Amount:
For a Mortgage Pool
and any Distribution Date;
the excess of (a) the
Pool Principal
Balance of such Mortgage Pool for the
immediately
preceding
Distribution
Date, over
(b) the aggregate Class
Certificate Balance of
the Senior Certificates of the related Certificate Group
immediately prior to that Distribution Date.
13
<PAGE>
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 Loss 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 Senior Certificates in
the Certificate Group
corresponding to Pool
I, the Distribution Date following
the third anniversary
of the scheduled maturity date of the Mortgage Loan
in
Pool I having the latest scheduled maturity date as of the Cut-off
Date. As to
each Class of Subordinated Certificates, each Class of Senior Certificates in
the Certificate Group
corresponding to Pool II, each Lower REMIC Interest, and
each Middle
REMIC Interest, the Distribution Date following the third
anniversary of the
scheduled maturity date of the Mortgage Loan in Pool II
having the latest scheduled maturity date as of the Cut-off
Date.
Lender PMI
Mortgage Loan: Not applicable.
LIBOR: Not
applicable.
LIBOR
Certificates: Not applicable.
Liquidated
Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was
liquidated in the
calendar month preceding the month of such Distribution Date and as
to which the
Master Servicer has
determined (in accordance with this Agreement) that it
has
received all amounts it expects to receive in connection with the
liquidation of
such Mortgage Loan, including the final disposition of an REO
Property.
14
<PAGE>
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 Retained Yield, the Middle REMIC Interests, the Lower REMIC
Interests, the RL Interest, the RM 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.
15
<PAGE>
Master
Servicing Fee Rate: A per annum rate equal to 0.369%.
MERS:
Mortgage Electronic Registration Systems, Inc., a corporation
organized and existing under the laws of the State of Delaware, or
any successor
thereto.
MERS
Mortgage Loan:
Any Mortgage Loan
registered
with MERS on the
MERS
System.
MERS(R)
System:
The system of recording transfers of mortgages
electronically maintained by MERS.
Middle
REMIC: The segregated pool of assets consisting of the Lower REMIC
Interests.
Middle
REMIC Interests: The REMIC regular interests, within the meaning
of
the REMIC Provisions, issued by the Middle REMIC as set forth in
Section 2.7.
MIN: The
Mortgage Identification Number for any MERS Mortgage Loan.
MLPA I:
The Mortgage Loan Purchase Agreement dated as of January 28,
2005,
by and between
First Horizon Home Loan Corporation, as seller, and First
Tennessee Bank National Association, as purchaser, as related to the transfer,
sale and conveyance of the Mortgage Loans.
MLPA II:
The Mortgage
Loan Purchase Agreement dated as of January 28,
2005, by and between First Tennessee Bank National Association, 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:
16
<PAGE>
(1) the loan
number;
(2) the
Mortgagor's
name and the street
address of the Mortgaged
Property, including the zip code;
(3) the maturity
date;
(4) the original
principal balance;
(5) the Cut-off
Date Principal Balance;
(6) the first
payment date of the Mortgage Loan;
(7) the
Scheduled Payment in effect as of the Cut-off Date;
(8) the
Loan-to-Value Ratio at origination;
(9) a code
indicating whether the residential dwelling at the time
of origination was represented to be owner-occupied;
(10) a code indicating
whether the
residential dwelling
is either
(a) a detached single
family dwelling (b) a
dwelling in a de
minimis PUD, (c) a
condominium
unit or PUD (other
than a de
minimis PUD), (d) a two-to-four unit residential property or
(e) a Cooperative Unit;
(11) the Mortgage
Rate;
(12) the purpose for
the Mortgage Loan;
(13)
the type of documentation program pursuant to which the
Mortgage Loan was originated;
(14) the Master
Servicing Fee for the Mortgage Loan; and
(15) a code indicating
whether the Mortgage Loan is a MERS Mortgage
Loan.
Such
schedule shall also set forth the total of the
amounts described
under (4) and (5) above for all of the Mortgage Loans.
Mortgage
Loans: Such of the mortgage loans transferred and assigned to
the
Trustee pursuant
to the provisions hereof as from time to time are
held as a
part of the Trust Fund (including any REO Property), the mortgage loans so held
being identified in the Mortgage Loan Schedule, notwithstanding foreclosure or
other acquisition of title of the related Mortgaged Property.
17
<PAGE>
Mortgage
Note:
The original executed note or other evidence of
indebtedness evidencing the indebtedness of a Mortgagor under a
Mortgage Loan.
Mortgage
Pool: Either Pool I or Pool II.
Mortgage
Rate: The annual rate of interest borne
by a Mortgage Note from
time to time, net of any insurance premium charged by the mortgagee
to obtain or
maintain any Primary Insurance Policy.
Mortgaged
Property: The underlying property securing a Mortgage Loan,
which, with
respect to a
Cooperative
Loan, is the related Coop Shares and
Proprietary Lease.
Mortgagor:
The obligor(s) on a Mortgage Note.
National
Cost of Funds Index:
The National Monthly
Median Cost of
Funds
Ratio to SAIF-Insured Institutions published by the Office of Thrift
Supervision.
Net
Interest Shortfall:
For any Distribution Date and each Mortgage Pool,
the sum of (a) the amount of interest which would otherwise have been received
for any Mortgage Loan in such Mortgage Pool that was the subject of
(x) a Relief
Act Reduction or (y) a Special Hazard Loss, Fraud Loss, or
Deficient
Valuation,
after the exhaustion
of the respective
amounts of coverage
for those types of
losses provided by the
Subordinated
Certificates;
and (b) any Net
Prepayment
Interest Shortfalls in respect of such Mortgage Pool.
Net
Prepayment Interest
Shortfalls: As to any
Distribution Date and each
Mortgage Pool,
the amount by which the aggregate of Prepayment Interest
Shortfalls in respect
of the Mortgage Loans
or such Mortgage
Pool during the
related Prepayment
Period exceeds an amount equal to the Compensating Interest
paid in respect of such Mortgage Loans, if any, for such
Distribution Date.
Non-Delay
Certificates: As specified in the Preliminary Statement.
Non-Excess
Loss: Any Realized Loss other than an Excess Loss.
Nonrecoverable
Advance: Any
portion of an Advance previously made or
proposed to be made by the Master Servicer that, in the good faith judgment
of
the Master Servicer,
will not be ultimately
recoverable by the Master Servicer
from the related Mortgagor, related Liquidation Proceeds or
otherwise.
Notice of
Final Distribution:
The notice to be provided pursuant to
Section 9.2 to the effect that final distribution on any of the Certificates
shall be made only upon presentation and surrender thereof.
Notional
Amount: As specified in the Preliminary Statement.
Notional
Amount Component: Not applicable.
Notional
Certificates: As specified in the Preliminary Statement.
18
<PAGE>
Offered
Certificates: As specified in the Preliminary Statement.
Officer's
Certificate:
A Certificate (i) signed by the Chairman of
the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President
(however denominated), an Assistant Vice President, the
Treasurer, the
Secretary,
or one of the
Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if
provided for in
this Agreement, signed by a Servicing Officer, as the case may be,
and delivered
to the Depositor
and the Trustee, as the case may be, as required by this
Agreement.
Opinion of
Counsel: A written
opinion of counsel,
who may be counsel for
the Depositor or the Master Servicer, including, in-house counsel, reasonably
acceptable to
the Trustee; provided, however, that with respect to the
interpretation or application of the REMIC Provisions, such counsel must (i) in
fact be independent of the Depositor and the Master Servicer,
(ii) not have any
direct financial
interest in the
Depositor or the Master Servicer or in any
affiliate of either, and (iii) not be connected with the Depositor
or the Master
Servicer as an
officer, employee,
promoter, underwriter, trustee, partner,
director or person performing similar functions.
Optional
Termination:
The termination of the
trust created
hereunder in
connection with the
purchase of the Mortgage Loans pursuant to Section 9.1(a)
hereof.
Original
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.
19
<PAGE>
Ownership
Interest: As to any Residual Certificate, any ownership
interest
in such Certificate
including any interest
in such Certificate
as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial.
Pass-Through Rate: For
any Class of Certificates, the per annum rate set
forth or calculated in the manner described in the Preliminary
Statement.
Percentage
Interest: As to any Certificate, the percentage interest
evidenced thereby in
distributions
required to be made on
the related Class,
such percentage
interest being set forth on the face
thereof or equal to
the
percentage obtained by
dividing the
Denomination of such
Certificate
by the
aggregate of the Denominations of all Certificates of the same
Class.
Permitted
Investments:
At any time, any one or more of the following
obligations and securities:
(i) obligations
of the United States
or any agency
thereof,
provided such obligations are backed by the full faith and credit
of
the United States;
(ii) general
obligations of or obligations guaranteed by any
state of the United States or the District of Columbia receiving
the
highest long-term debt rating of each Rating Agency;
(iii) commercial
or finance company paper which is then
receiving the highest
commercial or finance company paper rating of
each Rating Agency;
(iv) certificates
of deposit,
demand or time
deposits, or
bankers' acceptances
issued by any depository institution or trust
company incorporated
under the laws of the
United States or of any
state thereof and subject to supervision and examination by federal
and/or state banking authorities, provided that the commercial
paper
and/or long term
unsecured debt obligations of such depository
institution or
trust company (or in the case of the principal
depository institution
in a holding company system, the commercial
paper or long-term unsecured debt obligations of such holding
company, but only if
Moody's is not a Rating Agency) are then rated
one of the two highest
long-term and/or the highest short-term
ratings of each Rating Agency for such securities;
(v) demand or time deposits or certificates of deposit issued
by any bank or trust
company or savings
institution to the
extent
that such deposits are
fully insured by the
FDIC and receiving the
highest short-term debt rating of each Rating Agency;
(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;
20
<PAGE>
(vii) repurchase
obligations
with respect to any security
described in clauses (i) and (ii) above, in either case entered
into
with a depository institution or trust company (acting as
principal)
described in clause (iv) above;
(viii) securities (other than stripped bonds, stripped coupons
or instruments
sold at a purchase price in excess of 115% of the
face amount thereof)
bearing interest or
sold at a discount issued
by any corporation
incorporated under the laws of the United States
or any state thereof which, at the time of such investment, have
one
of the two highest
ratings of each
Rating Agency (except if the
Rating Agency is
Moody's or S&P,
such rating shall be
the highest
commercial paper
rating of Moody's or S&P, as applicable, for any
such securities);
(ix) units of a
taxable money-market
portfolio having the
highest rating
assigned by each Rating Agency (except if Fitch is a
Rating Agency and has not rated the portfolio, the highest rating
assigned by
Moody's) and restricted to obligations issued or
guaranteed by the
United States of America or entities whose
obligations are
backed by the full
faith and credit of
the United
States of America and repurchase agreements collateralized by such
obligations; and
(x) such other investments bearing interest or sold at a
discount acceptable to
each Rating Agency as will not result in the
downgrading or
withdrawal
of the rating then assigned to the
Certificates by either
Rating Agency, as evidenced by a signed
writing delivered by each Rating Agency;
provided that
no such instrument shall be a Permitted Investment if such
instrument evidences the right to receive interest only payments
with respect to
the obligations underlying such instrument.
Permitted
Transferee:
Any person other than
(i) the United States,
any
State or political
subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or
instrumentality of
either of the
foregoing, (iii) an
organization
(except certain
farmers' cooperatives described in section 521 of the Code)
which is exempt from
tax imposed by Chapter
1 of the Code
(including the tax
imposed by section 511 of the Code on unrelated business taxable income) on
any
excess inclusions (as defined in section 860E(c)(l) of the Code)
with respect to
any Residual
Certificate,
(iv) rural electric and telephone cooperatives
described in
section 1381(a)(2)(C) of the Code, (v) an "electing large
partnership" as
defined in section 775
of the Code, (vi) a
Person that is not
(a) a citizen or resident of the United States, (b) a corporation,
partnership,
or other entity
created or organized in or under the laws of the United States,
any state thereof or
the District of Columbia, (c) an estate whose income
from
sources without
the United
States is includible in gross income for United
States federal income tax purposes regardless of its connection
with the conduct
of a trade or business within the United States or (d) a trust if a
court within
the United
States
is able to exercise primary supervision over the
administration of the
trust and one or more
United States persons have the
authority to control all substantial decisions of the trust, unless
such Person
has furnished the
transferor
and the Trustee with a
duly completed
Internal
Revenue Service Form
W-8ECI or any
applicable successor
form, and (vii) any
other Person so
designated by the
Depositor based upon an Opinion of
Counsel
that the Transfer of an Ownership Interest in a Residual
Certificate
to such
Person may cause any REMIC created hereunder to fail to qualify as a REMIC
at
any time that the
Certificates are outstanding; provided, however, that if a
person is classified as a partnership under the Code, such person shall
only be
a Permitted
Transferee
if all of its beneficial owners are described in
subclauses (a), (b),
(c) or (d) of clause (vi) and the governing documents of
such person prohibits
a transfer of any
interest in such
person to any person
described in clause (vi). The terms "United States," "State" and
"International
Organization" shall
have the meanings set
forth in section 7701 of the Code or
successor provisions. A corporation will not be treated as an
instrumentality of
the United States or
of any State or
political subdivision
thereof for these
purposes if all of its
activities are subject to tax and, with the exception of
the Federal Home Loan Mortgage Corporation, a majority of its board
of directors
is not selected by such government unit.
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
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.
22
<PAGE>
Prepayment
Period: (a) With
respect to any Principal Prepayments in Full
and any Distribution
Date, the period from the sixteenth day of the month
preceding the month of
such Distribution
Date (or, in the case of the first
Distribution Date, from the Cut-off Date) through the fifteenth day
of the month
of such Distribution Date, and (b) with respect to any other Principal
Prepayments and any
Distribution
Date, the month
preceding the month of
such
Distribution Date.
Primary
Insurance Policy: Each policy of primary mortgage guaranty
insurance or any replacement policy therefor with respect to any
Mortgage Loan.
Principal
Balance Schedules: Not applicable.
Principal Prepayment: Any payment of principal by a Mortgagor on a
Mortgage Loan that is
received in advance of its scheduled Due Date and is not
accompanied by an
amount representing
scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in
accordance with
the terms of the related Mortgage Note.
Principal
Prepayment in Full: Any Principal Prepayment made by a
Mortgagor
of the entire principal balance of a Mortgage Loan.
Private
Certificate: As specified in the Preliminary Statement.
Proprietary Lease:
With respect to any Cooperative Unit, a lease or
occupancy agreement
between a Cooperative
Corporation and a
holder of related
Coop Shares.
PUD:
Planned Unit Development.
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.
23
<PAGE>
Rating
Agency: Each of the
Rating Agencies
specified in the
Preliminary
Statement. If any such
organization
or a successor is no
longer in existence,
"Rating Agency"
shall be such nationally recognized statistical rating
organization, or other
comparable
Person, as is designated by the
Depositor,
notice of which designation shall be given to the Trustee.
References herein
to
a given rating
category of a Rating
Agency shall mean such rating category
without giving effect to any modifiers.
Realized
Loss: With respect to
each Liquidated
Mortgage Loan, an
amount
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as of the date of such
liquidation, plus
(ii) interest at the
Adjusted Net Mortgage
Rate from the Due Date
as to which
interest was last paid or advanced (and not reimbursed) to
Certificateholders up
to the Due Date in the month in which Liquidation Proceeds are required to be
distributed on the Stated Principal Balance of such Liquidated Mortgage Loan
from time to time, minus (iii) 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.
24
<PAGE>
REMIC: A
"real estate mortgage
investment conduit"
within the meaning of
section 860D of the Code.
REMIC
Change of Law: Any proposed, temporary or final regulation,
revenue
ruling, revenue
procedure or other
official announcement or interpretation
relating to REMICs and the REMIC Provisions issued after the
Closing Date.
REMIC
Pool: Any of the Lower REMIC, Middle 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.
RM
Interest: The REMIC residual interest, within the meaning of the
REMIC
Provisions, issued by
the Middle 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.
25
<PAGE>
Scheduled
Payment: The scheduled monthly payment on a Mortgage Loan due
on
any Due Date allocable to principal and/or interest on such
Mortgage Loan which,
unless otherwise specified herein, shall give effect to any related
Debt Service
Reduction and any
Deficient Valuation that affects the amount of the
monthly
payment due on such Mortgage Loan.
Scheduled
Principal Classes: Not applicable.
Securities
Act: The Securities Act of 1933, as amended.
Security
Agreement:
The security agreement
with respect to a Cooperative
Loan.
Seller:
First Horizon Home Loan Corporation, a Kansas corporation, and
its
successors and assigns, in its capacity as seller of the Mortgage
Loans pursuant
to MLPA I.
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
26
<PAGE>
(b)(i) the related
Senior Percentage of the sum of (x) the
Stated Principal Balance of each Mortgage Loan in such Mortgage
Pool
which became
a Liquidated Mortgage Loan during the related
Prepayment Period,
other than Mortgage
Loans described in clause
(y), and (y) the Stated Principal Balance of each Mortgage Loan
in
such Mortgage Pool that was purchased by a private mortgage insurer
during the related
Prepayment Period as
an alternative to paying a
claim under the
related Insurance Policy minus (ii) the related
Senior Percentage of
the principal portion
of Excess Losses (other
than Debt Service
Reductions)
for such Mortgage Pool during the
related Prepayment Period; and
(5) the related Senior
Prepayment Percentage
of the sum of (a) the
Stated Principal
Balance of each
Mortgage Loan in such Mortgage Pool which was
repurchased by the seller in connection with such Distribution Date and (b) the
difference, if any,
between the Stated Principal Balance of a Mortgage Loan in
such Mortgage
Pool that has been
replaced by the seller with a Substitute
Mortgage Loan pursuant to this Agreement in connection
with such Distribution
Date and the Stated Principal Balance of such Substitute Mortgage
Loan.
Senior
Percentage:
On any Distribution
Date for a Certificate Group, the
lesser of 100% and the percentage (carried to six places rounded
up) obtained by
dividing the
aggregate Class Certificate Balances of all Classes of Senior
Certificates of such Certificate Group immediately preceding such Distribution
Date by the
Pool Principal Balance of the related Mortgage Pool for the
immediately preceding Distribution Date.
Senior
Prepayment
Percentage:
On any Distribution
Date occurring during
the periods
set forth below, and as to each Certificate Group, the Senior
Prepayment Percentages, described below:
--------------------------------------------------------------------------------
PERIOD (DATES INCLUSIVE)
SENIOR PREPAYMENT PERCENTAGE
--------------------------------------------------------------------------------
February 2005 - January 2012
100%
--------------------------------------------------------------------------------
February 2012 - January 2013
The related Senior Percentage plus 70%
of the related Subordinated Percentage
--------------------------------------------------------------------------------
February 2013 - January 2014
The related Senior Percentage plus 60%
of the related Subordinated Percentage
--------------------------------------------------------------------------------
February 2014 - January 2015
The related Senior Percentage plus 40%
of the related Subordinated Percentage
--------------------------------------------------------------------------------
February 2015 - January 2016
The related Senior Percentage plus 20%
of the related Subordinated Percentage
--------------------------------------------------------------------------------
February 2016 and thereafter
The related Senior Percentage
--------------------------------------------------------------------------------
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
February 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
or after the
Distribution Date in
February 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.
27
<PAGE>
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 both 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 both of the
Mortgage Pools
do not exceed:
(a) 20% of the aggregate Original Group Subordinate
Amount of both
Mortgage Pools
if such Distribution Date occurs between and
including February 2005 and January 2008; and
(b) 30% of the aggregate Original Group Subordinate
Amount of both
Mortgage Pools if such Distribution Date occurs on or after
February
2008.
Senior
Support Certificates: Not Applicable.
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.
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<PAGE>
Servicing
Rights Transfer and Subservicing Agreement: The servicing
rights
transfer and
subservicing
agreement, dated as of
November 26,
2002, by and
between First Horizon Home Loan Corporation, as transferor and
subservicer, and
First Tennessee Mortgage Services, Inc., as transferee and
servicer.
Special
Hazard Coverage
Termination
Date: The date on
which the Special
Hazard Loss Coverage Amount is reduced to zero.
Special
Hazard Loss: Any Realized Loss suffered by a Mortgaged Property
on
account of direct physical loss but not including (i) any loss of a
type covered
by a hazard
insurance policy or a flood insurance policy required to be
maintained with
respect to such Mortgaged Property pursuant to Section 3.9 to
the extent of the amount of such loss covered thereby, or (ii) any loss caused
by or resulting from:
(1) normal wear and tear;
(2) fraud,
conversion
or other dishonest act on the part of the
Trustee, the Master Servicer or any of their agents or employees
(without regard
to any portion of the loss not covered by any errors and omissions
policy);
(3) errors in design, faulty workmanship or faulty materials,
unless
the collapse
of the property or a part thereof ensues and then only for the
ensuing loss;
(4) nuclear or chemical reaction or nuclear radiation or
radioactive
or chemical contamination, all whether controlled or
uncontrolled, and
whether
such loss be direct or
indirect, proximate or
remote or be in whole or in part
caused by, contributed
to or aggravated by a peril covered by the definition of
the term "Special Hazard Loss";
(5) hostile or warlike
action in time of
peace and war,
including
action in hindering,
combating or defending against an actual, impending or
expected attack:
(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.
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<PAGE>
Special
Hazard Loss
Coverage Amount: Upon the initial issuance of the
Certificates,
$3,150,649. As of any
Distribution Date, the Special Hazard Loss
Coverage Amount will equal the greater of
(a)
1.00% (or if
greater than 1.00%, the highest percentage of Mortgage
Loans by principal
balance secured by
Mortgaged Properties
in any
single California zip code) of the outstanding principal balance of
all the Mortgage Loans as of the related Determination Date;
and
(b)
twice the
outstanding principal
balance of the
Mortgage Loan which
has the largest
outstanding
principal balance as of the related
Determination Date,
less, in each case,
the aggregate
amount of Special
Hazard Losses that
would
have been previously
allocated to the Subordinated Certificates in the absence
of the Loss Allocation
Limitation. As of any
Distribution Date on or after the
Cross-over Date, the Special Hazard Loss Coverage Amount will be
zero.
Special
Hazard Mortgage Loan: A Liquidated Mortgage Loan as to which a
Special Hazard Loss has occurred.
S&P:
Standard & Poor's Corporation, a division of The McGraw-Hill
Companies, Inc.
If S&P is
designated
as a Rating
Agency in the
Preliminary
Statement, for
purposes of Section 11.5(b) the address for notices to S&P
shall
be Standard & Poor's, 55 Water Street, 41st Floor, New York, New York 10041,
Attention: Mortgage
Surveillance
Monitoring, or such
other address as S&P may
hereafter furnish to the Depositor and the Master Servicer.
Startup
Day: The Closing Date.
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 both Mortgage Pools on the first day of the month of
such Distribution
Date less any
Deficient Valuations occurring before the
Bankruptcy Loss Coverage Amount has been reduced to zero.
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<PAGE>
Subordinated Optimal
Principal Amount: With respect to each Mortgage Pool
and each Distribution
Date, an amount equal to the sum of the following (but in
no event greater than the aggregate Class Certificate Balances of the
Subordinated Certificates immediately prior to such Distribution
Date):
(1) the related Subordinated Percentage of all Scheduled Payments
of
principal due on each outstanding Mortgage Loan in the related
Mortgage Pool on
the first day of the month in which the Distribution Date occurs, as specified
in the amortization
schedule at the time applicable thereto, after adjustment
for previous principal
prepayments
and the principal
portion of Debt
Service
Reductions after the
Bankruptcy Loss
Coverage Amount has been reduced to zero,
but before any adjustment to such amortization schedule by reason of any
other
bankruptcy or similar
proceeding or any
moratorium or similar
waiver or grace
period;
(2) the related
Subordinated
Prepayment Percentage
of the Stated
Principal Balance of
each Mortgage Loan in the related Mortgage Pool which was
the subject of a Principal Prepayment in Full received by the Master
Servicer
during the related Prepayment Period;
(3) the related
Subordinated
Prepayment Percentage
of 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.
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<PAGE>
Substitute
Mortgage Loan: A
Mortgage Loan substituted by the Seller for a
Deleted Mortgage Loan which must, on the date of such substitution,
as confirmed
in a Request for
Release, substantially in the form of Exhibit L, (i) have
a
Stated Principal
Balance, after deduction of the principal portion of the
Scheduled Payment due
in the month of
substitution, not in
excess of, and not
more than 10% less than the Stated Principal Balance of the Deleted Mortgage
Loan; (ii) have an
Adjusted Net Mortgage
Rate not lower than
the Adjusted Net
Mortgage Rate of the Deleted Mortgage Loan, provided that the Master
Servicing
Fee for the Substitute
Mortgage Loan shall be
equal to or greater than that of
the Deleted Mortgage
Loan; (iii) have a
maximum mortgage rate not more than 1%
per annum higher or lower than the maximum mortgage rate of the
Deleted Mortgage
Loan; (iv) have a minimum mortgage rate specified in its
related Mortgage
Note
not more than 1% per annum higher or lower than the minimum
mortgage rate of the
Deleted Mortgage
Loan; (v) have the same mortgage index, reset period and
periodic rate as the
Deleted Mortgage Loan
and a gross margin not more than 1%
per annum higher or lower than that of the Deleted Mortgage Loan (vi) be
accruing interest at a
rate no lower than and not more than 1% per annum higher
than, that of the
Deleted Mortgage Loan;
(iv) have a
Loan-to-Value
Ratio no
higher than that of the Deleted Mortgage Loan; (vii) have a remaining term to
maturity no
greater than (and not more than one year less than that of)
the
Deleted Mortgage
Loan; (viii) not be a Cooperative Loan unless the Deleted
Mortgage Loan was a
Cooperative Loan and
(ix) comply with each
representation
and warranty set forth in Section 2.3 hereof. Substitution Adjustment Amount:
The meaning ascribed to such term pursuant to Section 2.3.
Super
Senior Certificates: As specified in the Preliminary Statement.
Super
Senior Support Certificates: As specified in the Preliminary
Statement.
Support
Classes: Not Applicable.
Targeted
Balances: Not applicable.
Targeted
Principal Classes: Not applicable.
Tax
Matters Person: The
person designated as
"tax matters person" in the
manner provided
under Treasury regulation ss. 1.860F-4(d) and Treasury
regulation ss. 301.6231(a)(7)-1. Initially, the Tax Matters Person
shall be the
Trustee.
Tax
Matters Person
Certificate:
The Class 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 MLPA
II; (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.
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<PAGE>
Trustee:
The Bank of New
York and its
successors
and, if a successor
trustee is appointed hereunder, such successor.
Trustee
Fee: As to any
Distribution Date and
a Mortgage Pool, an
amount
equal to one-twelfth of the Trustee Fee Rate multiplied by the applicable
Pool
Principal Balance with respect to such Distribution Date.
Trustee
Fee Rate: With respect
to each Mortgage Loan,
the per annum rate
agreed upon in writing
on or prior to the
Closing Date by the
Trustee and the
Depositor.
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.
Underwriter: As specified in the Preliminary Statement.
Underwriters' Exemption: Prohibited Transaction Exemption 2002-41,
67 Fed.
Reg. 54487 (2002), as amended (or any successor thereto), or any substantially
similar administrative exemption granted by the U.S. Department of
Labor.
Upper
REMIC: The segregated pool of assets consisting of the Middle REMIC
Interests.
Voting
Rights: The portion of the voting rights of all of the
Certificates
which is allocated to any Certificate. As of any date of
determination, (a)
98%
of all Voting Rights
will be allocated
among all Holders of the Certificates,
other than the Class
I-A-IO, Class II-A-IO
and Class II-A-R
Certificates, in
proportion to their then outstanding Class Certificate Balances;
(b) 1.0% of all
Voting Rights will be allocated to the Class I-A-IO Certificates and the Class
II-A-IO Certificates
(such Voting Rights to
be allocated among the
Holders of
Certificates of each
such Class in accordance with their respective Notional
Amounts); and (c) 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 each such Class in accordance with their
respective
Percentage
Interests).
33
<PAGE>
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 Mortgaget Loans.
(a)
The Depositor,
concurrently with the
execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys
to
the Trustee
for the benefit of the Certificateholders, without
recourse, all the
right, title and interest of the Depositor in and
to the Trust Fund
together with (i) the
Depositor's
right to (A)
require the
Seller to cure any breach of a representation or
warranty made by the Seller pursuant to MLPA I, 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 MLPA II.
(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;
34
<PAGE>
(iii) in the case of a
Mortgage Loan
that is not a MERS
Mortgage
Loan, a duly
executed assignment of the Mortgage in blank
(which may
be included in a blanket assignment or
assignments), together
with, except as
provided below,
all
interim recorded
assignments
of such mortgage (each such
assignment, when
duly and validly completed, to be in
recordable form and sufficient to effect the assignment of and
transfer to the assignee thereof, under the Mortgage to which
the assignment
relates); provided that, if the related
Mortgage has not been
returned from the applicable public
recording office, such
assignment of the Mortgage may exclude
the information to be provided by the recording office;
(iv) the original or copies of each assumption, modification,
written assurance or substitution agreement, if any;
(v) either
the original or duplicate original title policy
(including all riders
thereto) with respect to the related
Mortgaged Property,
if available, provided that the title
policy (including
all riders
thereto) will be delivered as
soon as it becomes
available, and if the
title policy is not
available, and to the
extent required
pursuant to the second
paragraph below or
otherwise in connection with the rating of
the Certificates,
a written commitment or interim binder
or
preliminary report of
the title issued by the title insurance
or escrow company with respect to the Mortgaged Property, 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).
35
<PAGE>
In the
event that in connection with any Mortgage Loan that is not
a MERS
Mortgage Loan the Depositor cannot deliver (a) the original
recorded Mortgage or
(b) all interim recorded assignments satisfying the requirements of
clause (ii)
or (iii) above,
respectively,
concurrently
with the execution and delivery
hereof because
such document or documents have not been returned from the
applicable public
recording office, the Depositor shall promptly
deliver or
cause to be delivered
to the Trustee or the Custodian on its behalf such
original Mortgage or such interim assignment, as the case may be, with
evidence
of recording indicated
thereon upon receipt
thereof from the public recording
office, or a copy thereof, certified, if appropriate, by the
relevant recording
office, but in no
event shall any such
delivery of the
original Mortgage
and
each such interim assignment or a copy thereof, certified, if appropriate, by
the relevant recording office, be made later than one year
following the Closing
Date; provided,
however, in the event the Depositor is unable to deliver or
cause to be
delivered by such date each Mortgage and each such interim
assignment by reason of the fact that any such documents have not been
returned
by the appropriate
recording office, or, in the case of each such interim
assignment,
because the
related Mortgage has not been returned by the
appropriate recording
office, the Depositor shall deliver or cause to be
delivered such
documents to the Trustee or the Custodian on its behalf as
promptly as possible
upon receipt thereof
and, in any event,
within 720 days
following the Closing Date. The Depositor shall forward or cause to
be forwarded
to the Trustee or the
Custodian on its behalf (a) from time to time additional
original documents
evidencing an
assumption or modification of a Mortgage Loan
and (b) any other
documents required to
be delivered by the
Depositor or the
Master Servicer to the Trustee. In the event that the original
Mortgage is not
delivered and in
connection
with the payment in
full of the related
Mortgage
Loan and the public
recording office requires the presentation of a "lost
instruments affidavit and indemnity" or any equivalent document,
because only a
copy of the Mortgage can be delivered with the instrument of satisfaction or
reconveyance, the
Master Servicer
shall execute and deliver or cause to be
executed and delivered such a document to the public recording office. In the
case where a public recording office retains the original
recorded Mortgage or
in the case where a Mortgage is lost after recordation in a public recording
office, the Depositor
shall deliver or cause
to be delivered to the Trustee or
the Custodian
on its behalf a copy
of such Mortgage
certified by such
public
recording office
to be a true
and complete copy of the original recorded
Mortgage.
In
addition, in the event
that in connection
with any Mortgage Loan
the
Depositor cannot
deliver or cause to be
delivered the original or duplicate
original lender's
title policy (together with all riders thereto), satisfying
the requirements
of clause (v) above, concurrently with the execution and
delivery hereof
because the related
Mortgage has not been
returned from the
applicable public
recording office, the Depositor shall promptly
deliver or
cause to be delivered
to the Trustee or the Custodian on its behalf such
original or duplicate
original lender's
title policy (together with all riders
thereto) upon receipt thereof from the applicable title insurer,
but in no event
shall any such
delivery of the original or duplicate original lender's title
policy be made
later than one year following the Closing Date; provided,
however, in the
event the Depositor is unable to deliver or cause to be
delivered by such date the original or duplicate original lender's title policy
(together with all
riders thereto)
because the related
Mortgage has not
been
returned by the
appropriate recording
office, the Depositor shall deliver or
cause to be delivered
such documents to the Trustee or the Custodian on its
behalf as promptly as possible upon receipt thereof and, in any event,
within
720 days following the Closing Date. 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.
36
<PAGE>
Subject to
the immediately
following sentence, as promptly as practicable
subsequent to such transfer and assignment, and in any event,
within thirty (30)
days thereafter,
the Master
Servicer shall (i) complete each assignment of
Mortgage, as follows: "First Horizon Mortgage Pass-Through
Certificates,
Series
2005-AA1, 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.
37
<PAGE>
SECTION 2.2 Acceptance by Trustee of the Mortgage Loans.
The
Trustee or the Custodian, on behalf of the Trustee, acknowledges
receipt of the
documents identified
in the Initial
Certification in the
form
annexed hereto as Exhibit E and declares that it or the Custodian
holds and will
hold such documents and the other documents delivered to it or the
Custodian, as
applicable,
constituting the Mortgage Files, and that it or the Custodian,
as
applicable, holds or
will hold such other
assets as are included
in the Trust
Fund, in trust for the
exclusive use and benefit of all present and future
Certificateholders.
The Trustee
acknowledges that the
Custodian will maintain
possession of the
Mortgage Notes in the State of Texas, unless otherwise
permitted by the Rating Agencies.
The
Trustee agrees to
execute and deliver or
to cause the Custodian
to
execute and deliver on the Closing Date to the Depositor and the
Master Servicer
an Initial
Certification in the
form annexed hereto as Exhibit E. Based on its
or the Custodian's
review and examination, and only as to the documents
identified in such
Initial Certification, the Custodian, on behalf of the
Trustee, acknowledges
that such documents appear regular on their face and
relate to such Mortgage Loan. Neither the Trustee nor the
Custodian shall be
under any duty or
obligation to
inspect, review or examine said documents,
instruments,
certificates or
other papers to determine that the same are
genuine, enforceable
or appropriate for the
represented
purpose or that
they
have actually been
recorded in the real
estate records or that
they are other
than what they purport to be on their face.
On or
about the thirtieth
(30th) day after the Closing Date, the Trustee
shall deliver or shall
cause the Custodian to
deliver to the Depositor and the
Master Servicer a
Delay Delivery
Certification
in the form annexed
hereto as
Exhibit F,
with any applicable exceptions noted thereon. Notwithstanding
anything to the contrary contained in this Agreement, none of the
Mortgage Loans
in the Trust Fund is or will be Delay Delivery Mortgage Loans.
Not later
than 90 days after the Closing Date, the Trustee shall deliver
or shall cause the Custodian to deliver to the Depositor and the
Master Servicer
a Final Certification
in the form annexed hereto as Exhibit G, with any
applicable exceptions noted thereon.
If, in the
course of such review, the Trustee or the Custodian, on behalf
of the Trustee, finds
any document constituting a part of a Mortgage File which
does not meet the
requirements of
Section 2.1, the Trustee shall list or shall
cause the Custodian to
list such as an
exception in the Final
Certification;
provided, however
that neither the Trustee nor the
Custodian shall make any
determination as to
whether (i) any
endorsement is
sufficient to transfer all
right, title and
interest of the party so endorsing, as noteholder or assignee
thereof, in and to
that Mortgage Note or
(ii) any assignment is
in recordable
form or is sufficient
to effect the
assignment of and transfer to the assignee
thereof under the
mortgage to which the
assignment relates.
The Seller shall
promptly correct
or cure such defect within 90 days from the date it
was so
notified of such
defect and, if the Seller does not correct or cure such defect
within such period,
the Seller
shall either (a) substitute for the related
Mortgage Loan
a Substitute Mortgage Loan, which substitution shall be
accomplished in the
manner and subject to the conditions set forth in Section
2.3, or (b) purchase such Mortgage Loan from the Trustee within 90
days from the
date the Seller was notified of such defect in writing at the
Purchase Price of
such Mortgage Loan; provided, however, that in no event shall
such substitution
or purchase occur more
than 540 days from the Closing Date, except that if the
substitution or
purchase of a Mortgage
Loan pursuant to this provision is
required by reason of a delay in delivery of any documents by the appropriate
recording office,
and there is a dispute
between either the Master Servicer or
the Seller and the Trustee over the location or status of the
recorded document,
then such substitution
or purchase shall occur within 720 days from the Closing
Date. The Trustee shall deliver or shall cause the Custodian to
deliver written
notice to each Rating
Agency within 270 days
from the Closing Date
indicating
each Mortgage Loan (a) which has not been returned by the
appropriate
recording
office or (b) as to which there is a dispute as to
location or status of such
Mortgage Loan. Such notice shall be delivered every 90 days
thereafter until the
related Mortgage Loan is returned to the Trustee or the Custodian
on its behalf.
Any such substitution
pursuant to (a) above
or purchase pursuant
to (b) above
shall not be effected
prior to the
delivery to the Trustee of the Opinion
of
Counsel required by Section 2.5 hereof, if any, and any
substitution pursuant to
(a) above shall not be effected prior to the additional
delivery to the
Trustee
of a Request for Release substantially in the form of Exhibit L. No
substitution
is permitted to be made in any calendar month after the
Determination
Date for
such month. The
Purchase Price for any such Mortgage Loan shall be deposited by
the Seller in the Certificate Account on or prior to the
Distribution
Account
Deposit Date for the
Distribution
Date in the
month following the month of
repurchase and,
upon receipt of such deposit and
certification
with respect
thereto in the form of Exhibit M hereto, the Trustee shall cause the Custodian
to release the related Mortgage File to the Seller and shall
execute and deliver
at the Seller's request such instruments of transfer or
assignment prepared
by
the Seller, in each case without recourse, as shall be necessary to vest in
the
Seller, or a designee,
the Trustee's interest in any Mortgage
Loan released
pursuant hereto. If pursuant to the foregoing provisions the Seller
repurchases
a Mortgage Loan that is a MERS Mortgage Loan, the Master Servicer shall either
(i) cause MERS to execute and deliver an assignment of the Mortgage in
recordable form to transfer the Mortgage from MERS to the Seller
and shall cause
such Mortgage
to be removed from registration on the MERS(R) System in
accordance with MERS'
rules and regulations
or (ii) cause MERS to designate on
the MERS(R) System the Seller as the beneficial holder of such
Mortgage Loan.
38
<PAGE>
The
Trustee shall retain or shall cause the Custodian to retain
possession
and custody of each Mortgage File in accordance with and subject to the terms
and conditions set forth herein. The Master Servicer shall promptly
deliver to
the Trustee or the
Custodian on its behalf, upon the execution or receipt
thereof, the originals
of such other documents or instruments constituting the
Mortgage File as come into the possession of the Master Servicer from time to
time.
It is
understood
and agreed that the obligation of the Seller to
substitute for or to
purchase any Mortgage Loan which does not meet the
requirements of
Section 2.1 above shall constitute the sole remedy
respecting
such defect available
to the Trustee, the
Depositor and any
Certificateholder
against the Seller.
The
mortgage loans permitted by the terms of this Agreement to be
included
in the Trust Fund are limited to (i) the Mortgage Loans (with respect to which
the Seller has made in MLPA I, among other representations and warranties, a
representation and
warranty 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 MLPA I, are required to conform to,
among other representations and warranties, a representation and
warranty of the
Seller set forth in
MLPA I that no
Substitute Mortgage
Loan is a "high
cost
loan" as defined by the specific applicable local, state or federal predatory
and abusive lending laws). It is therefore understood and agreed by the
parties
hereto that it is not intended that any Mortgage Loan be included in the Trust
Fund that is a
"high-cost loan" as
defined by the specific applicable local,
state or federal predatory and abusive lending laws.
39
<PAGE>
SECTION 2.3
Representations and
Warranties of the Master Servicer;
Covenants of the Seller.
(a)
The Master
Servicer hereby makes the representations and warranties
set forth in Schedule II hereto and by this reference incorporated
herein, to the Depositor and the Trustee, as of the Closing Date,
or
if
so specified therein, as of the Cut-off Date.
(b)
Upon
discovery by any of the parties hereto of a breach of a
representation or
warranty made pursuant to Schedule B to MLPA
I
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 MLPA I 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.
40
<PAGE>
With
respect to any
Substitute Mortgage
Loan or Loans, the
Seller shall
deliver to the Trustee
or the Custodian
on its behalf for the
benefit of the
Certificateholders the
Mortgage Note, the Mortgage, the related assignment of
the Mortgage, and such other documents and agreements as are
required by Section
2.1, with the Mortgage
Note endorsed and the
Mortgage assigned as
required by
Section 2.1. No substitution is permitted to be made in any
calendar month after
the Determination Date
for such month.
Scheduled Payments due
with respect to
Substitute Mortgage
Loans in the month of substitution shall not be part of the
Trust Fund
and will be retained by the Seller on the next succeeding
Distribution
Date. For
the month of substitution, distributions to
Certificateholders
will include the monthly payment due on any Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain
all
amounts received in
respect of such Deleted Mortgage Loan. The Master
Servicer
shall amend the Mortgage Loan Schedule for the benefit of the
Certificateholders
to reflect the removal of such Deleted Mortgage Loan and the
substitution of the
Substitute Mortgage
Loan or Loans and the
Master Servicer
shall deliver the
amended Mortgage
Loan Schedule to the Trustee.
Upon such substitution, the
Substitute Mortgage
Loan or Loans shall be subject to the terms of this
Agreement in all
respects, and the Seller shall be deemed to have made
with
respect to
such Substitute Mortgage Loan or Loans, as of the date of
substitution, the
representations and warranties made pursuant to Schedule B to
MLPA I 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.
41
<PAGE>
After
giving effect to the
sale of the
Certificates by the
Depositor to
the Underwriter, and thereafter, so long as any Certificates remain
outstanding,
the Seller, its affiliates and agents, collectively, shall not beneficially own
Certificates the
aggregate fair value
of which would
represent 90% or more of
the beneficial interests in the Trust Fund.
The
representations and warranties made pursuant to this Section 2.3
shall
survive delivery
of the respective Mortgage Files to the Trustee or the
Custodian for the benefit of the Certificateholders.
SECTION 2.4
Representations and
Warranties of the
Depositor as to
the Mortgage Loans.
The
Depositor hereby
represents and
warrants to the Trustee with respect
to each Mortgage Loan
as of the date hereof or such other date set forth herein
that as of the Closing Date, and following the transfer of the
Mortgage Loans to
it pursuant to MLPA II 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 MLPA I and at the Seller's option, to either (i) substitute,
if the
conditions
in Section
2.3(b) with respect to
substitutions
are
satisfied,
a Substitute
Mortgage Loan for the
affected Mortgage Loan, or
(ii)
repurchase
the affected Mortgage Loan within 90 days of such
discovery
in the same manner as
it would a Mortgage
Loan for a breach of
representation or warranty made pursuant to Section 2.3. The
Trustee shall
reconvey
or shall cause the Custodian to reconvey to the Seller the
Mortgage
Loan to be released
pursuant hereto in the
same manner, and
on
the same
terms and conditions, as it would a Mortgage Loan repurchased
for
breach of
a representation or warranty contained in Section 2.3.
42
<PAGE>
SECTION 2.6 Execution and Delivery of Certificates.
The
Trustee acknowledges
the transfer and
assignment to it of
the Trust
Fund and, concurrently
with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations
evidencing directly or
indirectly
the entire
ownership of the
Trust Fund. The
Trustee agrees to hold
the Trust Fund and
exercise the rights
referred to above for
the benefit of all
present and future Holders of the
Certificates and to
perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the Holders of the
Certificates
may be adequately and effectively protected.
SECTION 2.7 REMIC Matters.
The
Preliminary Statement
sets forth the "latest possible maturity date"
for federal income tax purposes of all REMIC regular interests
created hereby.
The
assets of the
Lower REMIC shall be as set forth in the
definition
thereof. Each
interest identified in the first table below by a
designation
beginning with "L" shall be a "regular interest" in the Lower REMIC and a
Lower
REMIC Interest,
and the RL
Interests shall be the sole class of residual
interest in the Lower REMIC. The Lower REMIC Interests shall be
uncertificated
and shall be held by the Trustee as assets of the Middle REMIC.
The assets
of the Middle
REMIC shall be as set forth in the
definition
thereof. Each
interest identified in the second table below by a
designation
beginning with "M"
shall be a "regular
interest" in the Middle REMIC and a
Middle REMIC Interest,
and the RM Interests shall be the sole class of residual
interest in the Middle REMIC. The Middle 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, RM 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.
43
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Lower REMIC
Interest or
Lower REMIC Interest Lower
REMIC Interest Corresponding
Class of Middle REMIC
Residual
Balance
Rate
Interests
-------------------------------------------------------------------------------------------------------------
Interest
Principal
-------------------------------------------------------------------------------------------------------------
<S>
<C>
<C>
<C>
<C>
L-I-A-1
$
56,717.31
(2)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-I-A-2
$
6,301.92
(2)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-I-A-ZZZ
$
99,967,904.04
(2)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
RL
$
0.00
N/A
N/A
N/A
-------------------------------------------------------------------------------------------------------------
L-II-A-1
$
121,931.06
(3)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-II-A-2
$
13,547.90
(3)
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-II-A-ZZZ
$ 214,898,516.23
(3)
(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
Middle REMIC Interests: M-I-A-1, M-B-1, M-B-2, M-B-3, M-B-4, M-B-5 and M-B-6
(provided that with respect to M-B-1, M-B-2, M-B-3, M-B-4, M-B-5
and M-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 Middle REMIC
Interests: M-II-A-1,
M-II-A-R, M-B-1, M-B-2, M-B-3, M-B-4, M-B-5 and M-B-6
(provided that with respect to M-B-1, M-B-2, M-B-3, M-B-4, M-B-5
and M-B-6, such
Lower REMIC Interests
shall only
correspond to the
portion supported by
Pool
II).
(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.
"L1
Interests" refers to the L-I-A-1 Lower REMIC Interest and the
L-II-A-1
Lower REMIC Interests. "L2 Interests" refers to the L-I-A-2 Lower
REMIC Interest
and L-II-A-2 Lower REMIC Interest. "LZZZ Interests" refers to L-I-A-ZZZ Lower
REMIC Interest and L-II-A-ZZZ Lower REMIC Interest. Each L1 Interest shall have
a principal balance
initially equal to 0.9% of the Group Subordinate Amount of
its corresponding Mortgage Pool. Each L2 Interest shall have a
principal balance
initially equal to
0.1% of the Group
Subordinate Amount of
its corresponding
Mortgage Pool. The initial principal balance of each LZZZ Interest
shall equal
the excess of the Pool Principal Balance of its corresponding
Mortgage Pool over
the sum of the initial
principal balances of
the L1 Interests and L2 Interests
corresponding to such Mortgage Pool.
Unless a
Cross-over Situation
(as defined below)
exists, principal and
Realized Losses
arising with respect
to each Mortgage Pool
shall be allocated
first to cause the L1 and L2 Interests corresponding to such Mortgage Pool to
equal 0.9% and 0.1% of the Group Subordinate Amount of such Mortgage Pool as
of
such Distribution
Date (after
distributions
of principal
and allocation of
Realized Losses are made) and all excess principal and Realized Losses
shall be
allocated to the LZZZ Interest corresponding to such Mortgage
Pool. A L1, L2 or
LZZZ Interest that is allocated principal on any Distribution Date
shall receive
such principal,
and have its principal
balance reduced by the amount of such
principal, on such
Distribution Date. Similarly, a L1, L2 or LZZZ Interest that
is allocated a Realized Loss on any Distribution Date shall have its principal
balance reduced by the amount of such Realized Loss on such
Distribution Date.
44
<PAGE>
A
"Cross-over Situation"
exists if on any Distribution Date (after taking
into account
distributions of
principal and
allocations of Realized Losses on
such Distribution
Date) the L1 and L2
Interests
corresponding to any Mortgage
Pool are in the aggregate less than 1% of the Group
Subordinate
Amount of the
corresponding
Mortgage Pool.
If a Cross-over Situation exists on any
Distribution Date, and
the weighted average interest rate of the outstanding L1
and L2 Interests is less than the Pass-Through Rate for any Class
of Subordinate
Certificates for the
following Distribution Date, a Principal Reallocation
Payment (as defined below) shall be made proportionately to the outstanding L1
Interests prior to any other distributions of principal from
each such Mortgage
Pool so that the Calculation Rate equals the Pass-Through Rate for
each Class of
Subordinate
Certificates. If a
Cross-over Situation exists on any Distribution
Date, and the weighted
average rate of the
outstanding L1 and L2
Interests is
greater than the Pass-Through Rate for any Class of Subordinate
Certificates for
the following
Distribution Date, a Principal Reallocation Payment shall be
made
proportionately to the outstanding L2 Interests prior to any other
distributions
of principal from each
such Mortgage Pool so that the Calculation Rate equals
the Pass-Through Rate for each Class of Subordinate Certificates. A "Principal
Reallocation Payment"
is a distribution of the minimum amount of principal that
causes the Calculation
Rate (as defined
below) with respect to the outstanding
L1 and L2 Interests to equal the Pass-Through Rate for each Class
of Subordinate
Certificates. The
"Calculation Rate" shall equal the product of (i) 10 and (ii)
the weighted average
interest rate of the outstanding L1 and L2 Interests,
treating each L1 Interest as capped at zero or reduced by a fixed
percentage of
100% of the interest
accruing on such class. Principal Reallocation Payments
shall be made from principal received on the Mortgage Loans from a
Mortgage Pool
and shall also consist of a proportionate allocation of Realized
Losses from the
Mortgage Loans of a Mortgage Pool. For purposes of making Principal
Reallocation
Payments, to the
extent that the
principal received during the applicable
collection period from the related Mortgage Pool and related
Realized Losses are
insufficient to make the necessary reduction of principal,
then interest
shall
accrue on the LZZZ
Interest (and be added to its
