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 March 1, 2005
-----------------------------------------------------
FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2005-2
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S>
<C>
ARTICLE I
DEFINITIONS.............................................................................................6
ARTICLE II CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND
WARRANTIES.........................................38
SECTION 2.1 Conveyance of
Mortgage
Loans......................................................................38
SECTION 2.2 Acceptance by
Trustee of the Mortgage
Loans.......................................................42
SECTION 2.3 Representations
and Warranties of the Master Servicer; Covenants of the
Seller...................44
SECTION 2.4 Representations
and Warranties of the Depositor as to the Mortgage
Loans..........................46
SECTION 2.5 Delivery of
Opinion of Counsel in Connection with
Substitutions...................................46
SECTION 2.6 Execution and
Delivery of
Certificates............................................................47
SECTION 2.7 REMIC
Matters.....................................................................................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..........62
SECTION 3.14 Master
Servicing
Compensation....................................................................63
SECTION 3.15 Access to
Certain
Documentation..................................................................63
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
</TABLE>
i
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<TABLE>
<S>
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ARTICLE IV DISTRIBUTIONS AND ADVANCES BY
THE MASTER
SERVICER.....................................................65
SECTION 4.1
Advances..........................................................................................65
SECTION 4.2 Priorities of
Distribution........................................................................65
SECTION 4.3 Method of
Distribution............................................................................72
SECTION 4.4 Allocation of
Losses..............................................................................73
SECTION 4.5
Reserved..........................................................................................75
SECTION 4.6 Monthly
Statements to
Certificateholders..........................................................75
SECTION 4.7
[RESERVED]........................................................................................77
SECTION 4.8
[RESERVED]........................................................................................77
SECTION 4.9 Determination of
Pass-Through Rates for LIBOR
Certificates........................................77
ARTICLE V THE
CERTIFICATES.......................................................................................79
SECTION 5.1 The
Certificates..................................................................................79
SECTION 5.2 Certificate
Register; Registration of Transfer and Exchange of
Certificates.......................79
SECTION 5.3 Mutilated,
Destroyed, Lost or Stolen
Certificates.................................................85
SECTION 5.4 Persons Deemed
Owners.............................................................................85
SECTION 5.5 Access to List
of Certificateholders' Names and
Addresses.........................................85
SECTION 5.6 Maintenance of
Office or
Agency...................................................................86
ARTICLE VI THE DEPOSITOR AND THE MASTER
SERVICER.................................................................86
SECTION 6.1 Respective
Liabilities of the Depositor and the Master
Servicer...................................86
SECTION 6.2 Merger or
Consolidation of the Depositor or the Master
Servicer...................................86
SECTION 6.3 Limitation on
Liability of the Depositor, the Master Servicer and
Others..........................86
SECTION 6.4 Limitation on
Resignation of Master
Servicer......................................................87
ARTICLE VII
DEFAULT..............................................................................................87
SECTION 7.1 Events of
Default.................................................................................87
SECTION 7.2 Trustee to Act;
Appointment of
Successor..........................................................89
SECTION 7.3 Notification to
Certificateholders................................................................91
ARTICLE VIII CONCERNING THE
TRUSTEE..............................................................................91
SECTION 8.1 Duties of
Trustee.................................................................................91
SECTION 8.2 Certain Matters
Affecting the
Trustee.............................................................92
SECTION 8.3 Trustee Not
Liable for Certificates or Mortgage
Loans.............................................94
SECTION 8.4 Trustee May Own
Certificates......................................................................94
SECTION 8.5 Trustee's Fees
and
Expenses.......................................................................94
SECTION 8.6 Eligibility
Requirements for
Trustee..............................................................95
SECTION 8.7 Resignation and
Removal of
Trustee................................................................95
SECTION 8.8 Successor
Trustee.................................................................................96
SECTION 8.9 Merger or
Consolidation of
Trustee................................................................97
SECTION 8.10 Appointment of
Co-Trustee or Separate
Trustee....................................................97
SECTION 8.11 Tax
Matters......................................................................................98
SECTION 8.12 Periodic
Filings................................................................................100
ARTICLE IX
TERMINATION..........................................................................................101
SECTION 9.1 Termination upon
Liquidation or Purchase of all Mortgage
Loans...................................101
SECTION 9.2 Final
Distribution on the
Certificates...........................................................101
SECTION 9.3 Additional
Termination
Requirements..............................................................102
ARTICLE X
[RESERVED]............................................................................................103
</TABLE>
ii
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<TABLE>
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ARTICLE XI MISCELLANEOUS
PROVISIONS.............................................................................103
SECTION 11.1
Amendment.......................................................................................103
SECTION 11.2 Recordation of
Agreement;
Counterparts..........................................................105
SECTION 11.3 Governing
Law...................................................................................105
SECTION 11.4 Intention of
Parties............................................................................105
SECTION 11.5
Notices.........................................................................................106
SECTION 11.6 Severability of
Provisions......................................................................107
SECTION 11.7
Assignment......................................................................................107
SECTION 11.8 Limitation on
Rights of
Certificateholders......................................................107
SECTION 11.9 Inspection and
Audit
Rights.....................................................................108
SECTION 11.10 Certificates
Nonassessable and Fully
Paid......................................................108
SECTION 11.11 Limitations on
Actions; No
Proceedings.........................................................108
SECTION 11.12 Acknowledgment
of
Seller.......................................................................109
SCHEDULES
Schedule I:
Mortgage Loan Schedule
S-I-1
Schedule II:
Representations and Warranties of the Master Servicer
S-II-1
Schedule III:
Form of Monthly Master Servicer Report
S-III-1
Schedule IV:
Principal Balance Schedules
S-IV-1
EXHIBITS
Exhibit A-1:
Form of Senior Certificate
A-1
Exhibit B:
Form of Subordinated Certificate
B-1
Exhibit C:
Form of Residual Certificate
C-1
Exhibit D:
Form of Reverse of Certificates
D-1
Exhibit E:
Form of Initial Certification
E-1
Exhibit F:
Form of Delay Delivery Certification
F-1
Exhibit G:
Form of Subsequent Certification of Custodian
G-1
Exhibit H:
Transfer Affidavit
H-1
Exhibit I:
Form of Transferor Certificate
I-1
Exhibit J:
Form of Investment Letter [Non-Rule 144A]
J-1
Exhibit K:
Form of Rule 144A Letter
K-1
Exhibit L:
Request for Release (for Trustee)
L-1
Exhibit M:
Request for Release (Mortgage Loan)
M-1
</TABLE>
iii
<PAGE>
THIS POOLING AND SERVICING AGREEMENT, dated as of March 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 Middle REMIC. The
Class I-A-R Certificates will represent the
residual interests in the Lower
REMIC, Middle REMIC and Upper REMIC, as
described in Section 2.7. The "latest
possible maturity date" for federal income
tax purposes of all REMIC regular
interests created hereby will be the Latest
Possible Maturity Date.
The following table sets forth characteristics of the
Certificates,
together with the minimum denominations and
integral multiples in excess thereof
in which such Classes shall be issuable
(except that one Certificate of each
Class of Certificates may be issued in a
different amount and, in addition, one
Residual Certificate representing the Tax
Matters Person Certificate may be
issued in a different amount):
[Remainder of Page Intentionally Left Blank]
1
<PAGE>
<TABLE>
<CAPTION>
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Initial Class
Minimum
Integral Multiples
Class Designation
Certificate Balance
Pass-Through Rate
Denominations in Excess
of Minimum
--------------------------------------------------------------------------------------------------------------------
<S>
<C>
<C>
<C>
<C>
Class
I-A-1
$
67,153,000.00
5.500%
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class
I-A-2
$
26,771,000.00
5.500%
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class
I-A-3
$
44,695,000.00
5.500%
$
25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class
I-A-4
$
22,645,000.00
5.500%
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class
I-A-5
$
41,739,000.00
variable(1)
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class
I-A-6
$
10,482,238.00
variable(2)
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class
I-A-7
$
4,695,762.00
variable(3)
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class
I-A-8
$
8,986,000.00
5.500%
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class I-A-PO
$
1,816,672.00
(6)
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class
I-A-R
$
100.00
5.500%
$
100
N/A
--------------------------------------------------------------------------------------------------------------------
Class II-A-1
$
21,000,000.00
5.000%
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-2
$
1,252,000.00
5.000%
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class II-A-PO
$
217,697.00
(6)
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class III-A-1
$
22,879,730.00
variable(4)
$ 25,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class III-A-2
$
2,296,270.00
variable(5)
$
500,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-1
$
3,691,000.00
variable(7)
$
100,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-2
$
1,419,000.00
variable(7)
$
100,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-3
$
710,000.00
variable(7)
$
100,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-4
$
567,000.00
variable(7)
$
100,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-5
$
426,000.00
variable(7)
$
100,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
Class B-6
$
426,570.09
variable(7)
$
100,000
$
1,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Pass-Through Rate with respect to
any Distribution Date for the Class
I-A-5 Certificates is the per annum rate
equal to (a) 3.30% with respect to the
first Distribution Date, and (b)
thereafter, the lesser of (i) LIBOR plus 0.60%
and (ii) 7.50%, subject to a minimum rate
of 0.60%.
(2) The Pass-Through Rate with respect to
any Distribution Date for the Class
I-A-6 Certificates is the per annum rate
equal to (a) 13.1402% with respect to
the first Distribution Date, and (b)
thereafter, the lesser of (i) 23.89127245%
minus (3.98187874 x LIBOR) and (ii)
23.89127245%, subject to a minimum rate of
0.00%.
2
<PAGE>
(3) The Pass-Through Rate with respect to
any Distribution Date for the Class
I-A-7 Certificates is the per annum rate
equal to (a) 8.00% with respect to the
first Distribution Date, and (b)
thereafter, the lesser of (i) 61.33191401%
minus (8.88865234 x LIBOR) and (ii) 8.00%,
subject to a minimum rate of 0.00%.
(4) The Pass-Through Rate with respect to
any Distribution Date for the Class
III-A-1 Certificates is the per annum rate
equal to (a) 3.20% with respect to
the first Distribution Date, and (b)
thereafter, the lesser of (i) LIBOR plus
0.50% and (ii) 7.00%, subject to a minimum
rate of 0.50%.
(5) The Pass-Through Rate with respect to
any Distribution Date for the Class
III-A-2 Certificates is the per annum rate
equal to (a) 38.18005% with respect
to the first Distribution Date, and (b)
thereafter, the lesser of (i) Group III
Inverse Floater Cap Percentage minus (Group
III Inverse Floater Leverage
Percentage x LIBOR) and (ii) Group III
Inverse Floater Cap Percentage subject to
a minimum rate of 0.00%.
(6) The Class I-A-PO and Class II-A-PO are
principal only certificates and will
not accrue interest.
(7) The Pass-Through Rate on each Class of
Subordinated Certificates is variable
and will be equal to the weighted average
of the Designated Mortgage Pool Rates,
weighted on the basis of the Group
Subordinate Amount for each Mortgage Pool.
The initial Pass-Through Rate on each Class
of Subordinated Certificates for the
first Interest Accrual Period will be
5.538%.
3
<PAGE>
<TABLE>
<S>
<C>
Accretion Directed Certificates.......
The
Class I-A-5, Class I-A-6 and Class I-A-7 Certificates.
Accrual Certificates..................
The
Class I-A-8 Certificates.
Accrual Components....................
None.
Book-Entry Certificates...............
All
Classes of Certificates other than the Physical Certificates.
Certificate Group.....................
With
respect to Pool I, the Group I Senior Certificates, with
respect
to Pool II, the Group II Senior Certificates and with respect to
Pool
III, the Group III Senior Certificates. The Subordinated
Certificates
correspond to all of 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............
The
Class I-A-5 and Class III-A-1 Certificates.
Group I Senior Certificates...........
The
Class I-A-1, Class I-A-2, Class I-A-3, Class I-A-4, Class
I-A-5,
Class I-A-6, Class I-A-7, Class I-A-8, Class I-A-PO and Class
I-A-R
Certificates.
Group II Senior Certificates..........
The
Class II-A-1, Class II-A-2 and Class II-A-PO Certificates.
Group III Senior Certificates.........
The
Class III-A-1 and Class III-A-2 Certificates.
Inverse Floating Rate Certificates....
The
Class I-A-6, Class I-A-7 and Class III-A-2 Certificates.
LIBOR Certificates....................
The
Class I-A-5, Class I-A-6, Class I-A-7, Class III-A-1 and Class
III-A-2 Certificates.
NAS Certificates......................
None.
Non-Delay Certificates................
The
LIBOR Certificates.
Notional Certificates.................
None.
Offered Certificates..................
All
Classes of Certificates other than the Principal Only
Certificates
and the Private Certificates.
Physical Certificates.................
The
Residual Certificates, the Principal Only Certificates and the
Private Certificates.
Planned Principal Classes.............
The
Class I-A-1, Class I-A-2, Class I-A-3 and Class I-A-4
Certificates.
Principal Only Certificates...........
The
Class I-A-PO and Class II-A-PO Certificates.
Private Certificates..................
The
Class B-4, Class B-5 and Class B-6 Certificates.
Rating Agencies.......................
Fitch and Moody's; except that, for purposes of the Class B-1, B-2,
Class
B-3, Class B-4 and Class B-5 Certificates, Fitch shall be the
sole
Rating Agency.
</TABLE>
4
<PAGE>
<TABLE>
<S>
<C>
Regular Certificates..................
All
Classes of Certificates, other than the Residual Certificates.
Residual Certificates............
The Class I-A-R Certificates.
Retail/Lottery Certificates...........
None.
Scheduled Certificates................
None.
Senior Certificates...................
The
Group I Senior Certificates, Group II Senior Certificates and
Group
III 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............
The
Class I-A-5, Class I-A-6 and Class I-A-7 Certificates.
Underwriters..........................
UBS
Securities LLC and Credit Suisse First Boston LLC.
</TABLE>
With respect to any of the foregoing designations as to which
the
corresponding reference is "None," all
defined terms and provisions herein
relating solely to such designations shall
be of no force or effect, and any
calculations herein incorporating
references to such designations shall be
interpreted without reference to such
designations and amounts. Defined terms
and provisions herein relating to
statistical rating agencies not designated
above as Rating Agencies shall be of no
force or effect.
5
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and
phrases,
unless the context otherwise requires,
shall have the following meanings:
Accretion Termination Date: For the Accrual Certificates, the
earlier
of (x) the Cross-over Date and (y) the
Distribution Date on which the Class
Certificate Balance of the Accretion
Directed Certificates has been reduced to
zero.
Accrual Amount: For each Distribution Date through the
Accretion
Termination Date and the Accrual
Certificates, an amount equal to the sum of (a)
Accrued Certificate Interest in respect of
the Accrual Certificates in
accordance with clause (i) of Section
4.2(a), and (b) amounts allocable to the
Accrual Certificates in accordance with
clause (ii) of Section 4.2(a), in each
case on such Distribution Date.
Accrued Certificate Interest: For any Class of Certificates
entitled to
distributions of interest for any
Distribution Date, the interest accrued during
the related Interest Accrual Period at the
applicable Pass-Through Rate on the
Class Certificate Balance of such Class of
Certificates immediately prior to
such Distribution Date, less such Class'
share of any Net Interest Shortfall,
allocable among the outstanding Classes of
Senior Certificates of the related
Certificate Group based on the Accrued
Certificate Interest otherwise
distributable thereto, and allocable to the
Subordinated Certificates based on
interest accrued on their related
Apportioned Principal Balances.
Adjusted Mortgage Rate: As to each Mortgage Loan, and at any time,
the
per annum rate equal to the Mortgage Rate
less the Master Servicing Fee Rate.
Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at any
time,
the per annum rate equal to the Mortgage
Rate less the related Expense Fee Rate.
Advance: The payment required to be made by the Master Servicer
with
respect to any Distribution Date pursuant
to Section 4.1, the amount of any such
payment being equal to the aggregate of
payments of principal and interest (net
of the Master Servicing Fee and net of any
net income in the case of any REO
Property) on the Mortgage Loans that were
due on the related Due Date and not
received as of the close of business on the
related Determination Date, less the
aggregate amount of any such delinquent
payments that the Master Servicer has
determined would constitute a
Nonrecoverable Advance if advanced.
Agreement: This
Pooling and Servicing Agreement and all amendments or
supplements hereto.
Allocable Share: With respect to any Class of Subordinated
Certificates
on any Distribution Date, such Class' pro
rata share (based on the Class
Certificate Balance of each Class entitled
thereto) of the Subordinated Optimal
Principal Amount for all of the Mortgage
Pools; provided that solely for
purposes of this definition, the applicable
Subordinated Optimal Principal
Amount for each Mortgage Pool will be
reduced by the amounts required to be
distributed to the related Class PO
Certificates in respect of the applicable
Class PO Deferred Amount on such
Distribution Date, and any such reduction in
the applicable Subordinate Optimal
Principal Amount for Pool I, Pool II or Pool
III shall reduce the amounts calculated
pursuant to clauses (1), (4), (2), (3)
and (5) of the definition thereof, in that
order, and the Class Certificate
Balances of each class of Subordinated
Certificates will be reduced by such
amounts in reverse order of priority until
the respective Class Certificate
Balances of each class of Subordinated
Certificates has been reduced to zero;
provided further that, except as provided
in this Agreement, no Subordinated
Certificates (other than the Class of
Subordinated Certificates with the highest
priority of distribution) shall be entitled
on any Distribution Date to receive
distributions pursuant to clauses (2), (3)
and (5) of the definition of
Subordinated Optimal Principal Amount
unless the Class Prepayment Distribution
Trigger for such Class is satisfied for
such Distribution Date.
6
<PAGE>
Amount Held for Future Distribution: As to any Distribution Date,
the
aggregate amount held in the applicable
subaccount of the Certificate Account at
the close of business on the related
Determination Date on account of (i)
Principal Prepayments on the related
Mortgage Pool received after the related
Prepayment Period and Liquidation Proceeds
in the related Mortgage Pool received
in the month of such Distribution Date and
(ii) all Scheduled Payments in the
related Mortgage Pool due after the related
Due Date.
Apportioned Principal Balance: For any Class of Subordinated
Certificates and any Distribution Date, an
amount equal to the Class Certificate
Balance of such Class immediately prior to
that Distribution Date multiplied by
a fraction, the numerator of which is the
applicable Group Subordinate Amount
for such Distribution Date and the
denominator of which is the sum of the Group
Subordinate Amounts for such Distribution
Date.
Appraised Value: With respect to any Mortgage Loan, the Appraised
Value
of the related Mortgaged Property shall be:
(i) with respect to a Mortgage Loan
other than a Refinancing Mortgage Loan, the
lesser of (a) the value of the
Mortgaged Property based upon the appraisal
made at the time of the origination
of such Mortgage Loan and (b) the sales
price of the Mortgaged Property at the
time of the origination of such Mortgage
Loan; (ii) with respect to a
Refinancing Mortgage Loan other than a
Streamlined Documentation Mortgage Loan,
the value of the Mortgaged Property based
upon the appraisal made at the time of
the origination of such Refinancing
Mortgage Loan; and (iii) with respect to a
Streamlined Documentation Mortgage Loan,
(a) if the loan-to-value ratio with
respect to the Original Mortgage Loan at
the time of the origination thereof was
90% or less, the value of the Mortgaged
Property based upon the appraisal made
at the time of the origination of the
Original Mortgage Loan and (b) if the
loan-to-value ratio with respect to the
Original Mortgage Loan at the time of
the origination thereof was greater than
90%, the value of the Mortgaged
Property based upon the appraisal (which
may be a drive-by appraisal) made at
the time of the origination of such
Streamlined Documentation Mortgage Loan.
Available Funds: For each Mortgage Pool, with respect to any
Distribution Date, an amount equal to the
sum of:
(a) all scheduled
installments of interest, net of the Master
Servicing Fee, the Trustee Fee and any amounts due to First
Horizon in respect of the Retained Yield on such Distribution
Date, and all scheduled installments of principal due in
respect
of the Mortgage Loans 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;
7
<PAGE>
(b) all Insurance
Proceeds, all Liquidation Proceeds and all
Unanticipated Recoveries received in respect of the Mortgage
Loans
in such Mortgage Pool during the calendar month before the
Distribution Date, which in each case is net of unreimbursed
expenses incurred in connection with a liquidation or
foreclosure
and unreimbursed Advances, if any;
(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
(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 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.
8
<PAGE>
Blanket Mortgage: The
mortgage or mortgages encumbering the
Cooperative Property.
Book-Entry Certificates: As specified in the Preliminary
Statement.
Business Day: Any day other than (i) a Saturday or a Sunday, or
(ii) a
day on which banking institutions in the
City of Dallas, or the State of Texas
or the city in which the Corporate Trust
Office of the Trustee is located are
authorized or obligated by law or executive
order to be closed.
Certificate: Any one of the Certificates executed by the Trustee
in
substantially the forms attached hereto as
exhibits.
Certificate Account: The separate Eligible Account or Accounts
created
and maintained by the Master Servicer
pursuant to Section 3.5 with a depository
institution in the name of the 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
2005-2."
Certificate Group: As
specified in the Preliminary Statement.
Certificate Owner: With respect to a Book-Entry Certificate, the
Person
who is the beneficial owner of such
Book-Entry Certificate.
Certificate Principal Balance: With respect to any Certificate and
as
of any Distribution Date, the Certificate
Principal Balance on the date of the
initial issuance of such Certificate, as
reduced by:
(a) all amounts
distributed on previous Distribution Dates on such
Certificate on account of principal,
(b) the principal
portion of all Realized Losses previously allocated
to such Certificate, and
(c) in the case of a
Subordinated Certificate, such Certificate's pro
rata share, if any, of the Subordinated Certificate Writedown
Amount for previous Distribution Dates.
Certificate Register: The register maintained pursuant to Section
5.2
hereof.
Certificateholder or Holder: The person in whose name a Certificate
is
registered in the Certificate Register,
except that, solely for the purpose of
giving any consent pursuant to this
Agreement, any Certificate registered in the
name of the Depositor or the Seller or any
affiliate or agent of the Depositor
or the Seller shall be deemed not to be
Outstanding and the Percentage Interest
evidenced thereby shall not be taken into
account in determining whether the
requisite amount of Percentage Interests
necessary to effect such consent has
been obtained; provided, however, that if
any such Person (including the
Depositor) owns 100% of the Percentage
Interests evidenced by a Class of
Certificates, such Certificates shall be
deemed to be Outstanding for purposes
of any provision hereof that requires the
consent of the Holders of Certificates
of a particular Class as a condition to the
taking of any action hereunder. The
Trustee is entitled to rely conclusively on
a certification of the Depositor or
any affiliate of the Depositor in
determining which Certificates are registered
in the name of an affiliate of the
Depositor.
9
<PAGE>
Class: All Certificates bearing the same class designation as set
forth
in the Preliminary Statement.
Class Certificate Balance: With respect to any Class of
Certificates
and as of any Distribution Date the
aggregate of the Class Certificate Balances
of all Certificates of such Class as of
such date, plus the amount of any
Unanticipated Recoveries added to the Class
Certificate Balance of such Class of
Certificate pursuant to Section 4.2(j).
Class I-A PO Deferred Amount: With respect to the Class I-A-PO
Certificates and any Distribution Date
through the Cross-over Date, the sum of
(1) the Class I-A-PO Percentage of the
principal portion of Non-Excess Losses on
a Discount Mortgage Loan in Pool I
allocated to the Class I-A-PO Certificates on
such date, and (2) all amounts previously
allocated to the Class I-A-PO
Certificates in respect of such losses and
not distributed to the Class I-A-PO
Certificates on prior Distribution
Dates.
Class I-A-PO Percentage: (a) With respect to any Discount Mortgage
Loan
in Pool I, the fraction, expressed as a
percentage, equal to (5.50% - NMR of the
Mortgage Loans in Pool I) divided by 5.50%,
and (b) with respect to any
Non-Discount Mortgage Loan in Pool I,
0%.
Class II-A PO Deferred Amount: With respect to the Class
II-A-PO
Certificates and any Distribution Date
through the Cross-over Date, the sum of
(1) the Class II-A-PO Percentage of the
principal portion of Non-Excess Losses
on a Discount Mortgage Loan in Pool II
allocated to the Class II-A-PO
Certificates on such date, and (2) all
amounts previously allocated to the Class
II-A-PO Certificates in respect of such
losses and not distributed to the Class
II-A-PO Certificates on prior Distribution
Dates.
Class II-A-PO Percentage: (a) With respect to any Discount
Mortgage
Loan in Pool II, the fraction, expressed as
a percentage, equal to (5.00% - NMR
of the Mortgage Loans in Pool II) divided
by 5.00%, and (b) with respect to any
Non-Discount Mortgage Loan in Pool II,
0%.
Class III-A-1 Percentage -- (a) With respect to any Mortgage Loan
in
Pool III with a Net Mortgage Rate less than
7.00%, the fraction, expressed as a
percentage, equal to the Net Mortgage Rate
divided by 7.00%, and (b) with
respect to any Mortgage Loan in Pool III
with a Net Mortgage Rate equal to or
greater than 7.00%, 100%.
Class III-A-1 Principal Distribution Amount: For any Distribution
Date, the sum of:
(a) The Class III-A-1
Percentage of all scheduled payments of
principal due on each Mortgage Loan in Pool III multiplied by
the
related Senior Percentage, and
10
<PAGE>
(b) the applicable
Class III-A-1 Percentage of (i) all full and
partial prepayments of principal due on each Mortgage Loan in
Pool
III multiplied by the related Senior Prepayment Percentage and
(ii) all Unanticipated Recoveries in respect of each Mortgage
Loan
in such Mortgage Poan received during the calendar month
preceding
such Distribution Date;
(c) the lesser of:
(i) the related Senior
Prepayment Percentage of the sum of (x)
the Class III-A-1 Percentage of the net liquidation proceeds
allocable to principal on each Mortgage Loan in such Mortgage
Poan which became a Liquidated Mortgage Loan during the
related Prepayment Period, other than Mortgage Loans
described in clause (y), and (y) the Class III-A-1 Percentage
of the Stated Principal Balance of each Mortgage Loan in such
Mortgage Poan that was purchased by a private mortgage
insurer during the related Prepayment Period as an
alternative to paying a claim under the related mortgage
insurance policy; and
(ii) (i) the related Senior Percentage of the sum of (x) the
Class
III-A-1 Percentage of the Stated Principal Balance of each
Mortgage Loan in such Mortgage Poan which became a Liquidated
Mortgage Loan during the related Prepayment Period, other
than Mortgage Loans described in clause (y), and (y) the
Class III-A-1 Percentage of the Stated Principal Balance of
each Mortgage Loan in such Mortgage Poan that was purchased
by a private mortgage insurer during the related Prepayment
Period as an alternative to paying a claim under the related
mortgage insurance policy minus (ii) the Class III-A-1
Percentage of the related Senior Percentage of the principal
portion of Excess Losses (other than Debt Service Reductions)
for such Mortgage Poan during the related Prepayment Period;
and
(d)
the related Senior
Prepayment Percentage of the sum of (a) the
Class III-A-1 Percentage of the Stated Principal Balance of
each
Mortgage Loan in such Mortgage Poan which was repurchased by
the
seller in connection with such Distribution Date and (b) the
difference, if any, between the Class III-A-1 Percentage of the
Stated Principal Balance of a Mortgage Loan in such Mortgage
Poan
that has been replaced by the seller with a substitute Mortgage
Loan pursuant to the pooling and servicing agreement in
connection
with such Distribution Date and the Stated Principal Balance of
such substitute Mortgage Loan.
Class III-A-2 Percentage: (a) With respect to any Mortgage Loan in
Pool
III with a Net Mortgage Rate less than
7.00%, the fraction, expressed as a
percentage, equal to (7.00% - Net Mortgage
Rate) divided by 7.00%, and (b) with
respect to any Mortgage Loan in Pool III
with a Net Mortgage Rate equal to or
greater than 7.00%, 0%.
Class III-A-2 Principal Distribution Amount: For any Distribution
Date, the sum of:
11
<PAGE>
(a) The Class III-A-2
Percentage of all scheduled payments of
principal due on each Mortgage Loan in Pool III multiplied by
the
related Senior Percentage, and
(b) the applicable
Class III-A-2 Percentage of all full and partial
prepayments of principal due on each Mortgage Loan in Pool III
multiplied by the related Senior Prepayment Percentage.
(c) the lesser of:
(i) the related Senior
Prepayment Percentage of the sum of (x)
the Class III-A-2 Percentage of the net liquidation proceeds
allocable to principal on each Mortgage Loan in such Mortgage
Poan which became a Liquidated Mortgage Loan during the
related Prepayment Period, other than Mortgage Loans
described in clause (y), and (y) the Class III-A-2 Percentage
of the Stated Principal Balance of each Mortgage Loan in such
Mortgage Poan that was purchased by a private mortgage
insurer during the related Prepayment Period as an
alternative to paying a claim under the related mortgage
insurance policy; and
(ii) (i) the related Senior Percentage of the sum of (x) the
Class
III-A-2 Percentage of the Stated Principal Balance of each
Mortgage Loan in such Mortgage Poan which became a Liquidated
Mortgage Loan during the related Prepayment Period, other
than Mortgage Loans described in clause (y), and (y) the
Class III-A-2 Percentage of the Stated Principal Balance of
each Mortgage Loan in such Mortgage Poan that was purchased
by a private mortgage insurer during the related Prepayment
Period as an alternative to paying a claim under the related
mortgage insurance policy minus (ii) the Class III-A-2
Percentage of the related Senior Percentage of the principal
portion of Excess Losses (other than Debt Service Reductions)
for such Mortgage Poan during the related Prepayment Period;
and
(d) the related Senior
Prepayment Percentage of the sum of (a) the
Class III-A-2 Percentage of the Stated Principal Balance of
each
Mortgage Loan in such Mortgage Poan which was repurchased by
the
seller in connection with such Distribution Date and (b) the
difference, if any, between the Class III-A-2 Percentage of the
Stated Principal Balance of a Mortgage Loan in such Mortgage
Poan
that has been replaced by the seller with a substitute Mortgage
Loan pursuant to the pooling and servicing agreement in
connection
with such Distribution Date and the Stated Principal Balance of
such substitute Mortgage Loan.
Class PO Certificates:
The Principal Only Certificates.
Class PO Deferred Amount: (a) With respect to the Class I-A-PO
Certificates, the Class I-A-PO Deferred
Amount; and (b) with respect to the
Class II-A-PO Certificates, the Class
II-A-PO Deferred Amount.
12
<PAGE>
Class PO Deferred Payment Writedown Amount: For any Distribution
Date
and any class of Class PO Certificates, the
amount, if any, distributed on such
date in respect of the related Class PO
Deferred Amount pursuant to Section
4.2(a). The Subordinated Certificate
Writedown Amount and the Class PO Deferred
Payment Writedown Amount will be allocated
to the classes of Subordinated
Certificates in inverse order of priority,
until the Class Certificate Balance
of each such class has been reduced to
zero.
Class PO Principal Distribution Amount: With respect to each
Distribution Date and any class of Class PO
Certificates, an amount equal to the
sum of:
(1) the applicable PO Percentage of all scheduled payments of
principal due on each Mortgage Loan in the related Mortgage
Pool
on the first day of the month in which the Distribution Date
occurs, as specified in the amortization schedule at the time
applicable thereto, after adjustment for previous principal
prepayments and the principal portion of Debt Service
Reductions
after the Bankruptcy Loss Coverage Amount has been reduced to
zero, but before any adjustment to such amortization schedule
by
reason of any other bankruptcy or similar proceeding or any
moratorium or similar waiver or grace period;
(2) the applicable PO Percentage of the Stated Principal
Balance of each Mortgage Loan in the related Mortgage Pool
which
was the subject of a prepayment in full received by the Master
Servicer during the related Prepayment Period;
(3) the applicable Class PO Percentage of (i) all partial
prepayments of principal for each Mortgage Loan in the related
Mortgage Pool received by the Master Servicer during the
related
Prepayment Period and (ii) all Unanticipated Recoveries in
respect
of each Mortgage Loan in the related Mortgage Pool received
during
the calendar month preceding such Distribution Date;
(4) the applicable PO Percentage of the sum of (a) the net
liquidation proceeds allocable to principal on each Mortgage
Loan
in the related Mortgage Pool which became a Liquidated Mortgage
Loan during the related Prepayment Period, other than Mortgage
Loans described in clause (b), and (b) the principal balance of
each Mortgage Loan in the related Mortgage Pool that was
purchased
by a private mortgage insurer during the related Prepayment
Period
as an alternative to paying a claim under the related mortgage
insurance policy; and
(5) the applicable PO Percentage of the sum of (a) the Stated
Principal Balance of each Mortgage Loan in the related Mortgage
Pool which has repurchased by the seller in connection with
such
Distribution Date, and (b) the difference, if any, between the
Stated Principal Balance of a Mortgage Loan in the related
Mortgage Pool that has been replaced by the seller with a
Substitute Mortgage Loan pursuant to this Agreement in
connection
with such Distribution Date and the Stated Principal Balance of
such Substitute Mortgage Loan.
13
<PAGE>
For purposes of clauses (2) and (5) above, the Stated Principal
Balance
of a Mortgage Loan will be reduced by the
amount of any Deficient Valuation that
occurred prior to the reduction of the
Bankruptcy Loss Coverage Amount to zero.
Class Prepayment Distribution Trigger: For a Class of
Subordinated
Certificates (other than the Class of
Subordinated Certificates with the highest
priority of distribution), a trigger that
is satisfied on any Distribution Date
on which a fraction (expressed as a
percentage), the numerator of which is the
aggregate Class Certificate Balance of such
Class and each Class subordinate
thereto, if any, and the denominator of
which is the aggregate Pool Principal
Balance for all of the Mortgage Pools with
respect to such Distribution Date,
equals or exceeds such percentage
calculated as of the Closing Date.
Closing Date: March
30, 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.
14
<PAGE>
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
2005-2), facsimile no. (212) 815-3986, and
which is the address to which notices
to and correspondence with the Trustee
should be directed.
Corresponding Classes: As to any Middle REMIC Interest identified
in
Section 2.7, the Class or Classes that are
identified in Section 2.7 as
corresponding to such Middle REMIC
Interest.
Corresponding Classes of Middle REMIC Interests: As to any Lower
REMIC
Interest identified in Section 2.7, the
Middle REMIC Interest or Middle REMIC
Interests that are identified in Section
2.7 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 March 30, 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: March 1,
2005.
Cut-off Date Pool Principal Balance: With respect to Pool I,
$234,976,316.25, with respect to Pool II,
$23,058,108.19 and with respect to
Pool III, $25,834,614.93.
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.
15
<PAGE>
Deficient Valuation: With respect to any Mortgage Loan, a valuation
by
a court of competent jurisdiction of the
Mortgaged Property in an amount less
than the then-outstanding indebtedness
under the Mortgage Loan, or any reduction
in the amount of principal to be paid in
connection with any Scheduled Payment
that results in a permanent forgiveness of
principal, which valuation or
reduction results from an order of such
court which is final and non-appealable
in a proceeding under the Bankruptcy
Code.
Definitive Certificates: Any Certificate evidenced by a
Physical
Certificate and any Certificate issued in
lieu of a Book-Entry Certificate
pursuant to Section 5.2(e).
Delay Certificates: As
specified in the Preliminary Statement.
Delay Delivery Mortgage Loans: The Mortgage Loans for which all or
a
portion of a related Mortgage File is not
delivered to Trustee on the Closing
Date. The number of Delay Delivery Mortgage
Loans shall not exceed 25% of the
aggregate number of Mortgage Loans as of
the Closing Date.
Deleted Mortgage Loan:
As defined in Section 2.3(b) hereof.
Denomination: With respect to each Certificate, the amount set
forth on
the face thereof as the "Initial
Certificate Balance of this Certificate" or the
Percentage Interest appearing on the face
thereof.
Depositor: First
Horizon Asset Securities Inc., a Delaware
corporation, or its successor in
interest.
Depository: The initial Depository shall be The Depository
Trust
Company, the nominee of which is CEDE &
Co., as the registered Holder of the
Book-Entry Certificates. The Depository
shall at all times be a "clearing
corporation" as defined in Section
8-102(a)(5) of the Uniform Commercial Code of
the State of New York.
Depository Participant: A broker, dealer, bank or other
financial
institution or other Person for whom from
time to time a Depository effects
book-entry transfers and pledges of
securities deposited with the Depository.
Designated Mortgage Pool Rates: With respect to Pool I, 5.500%,
with
respect to Pool II, 5.000% and with respect
to Pool III, the Group III Net WAC.
Determination Date: As to any Distribution Date, the earlier of (i)
the
third Business Day after the 15th day of
each month, and (ii) the second
Business Day prior to the related
Distribution Date.
Discount Mortgage Loan: Any Mortgage Loan in Pool I with a Net
Mortgage
Rate below 5.50% and any Mortgage Loan in
Pool II with a Net Mortgage Rate below
5.00%.
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 2005-2."
Funds in the Distribution Account
shall be held in trust for the
Certificateholders for the uses and purposes set
forth in this Agreement.
16
<PAGE>
Distribution Account Deposit Date: As to any Distribution Date,
1:30
p.m. Central time on the Business Day
immediately preceding such Distribution
Date.
Distribution Date: The 25th day of each calendar month after
the
initial issuance of the Certificates, or if
such 25th day is not a Business Day,
the next succeeding Business Day,
commencing in April 2005.
Due Date: With respect to any Distribution Date, the first day of
the
month in which the related Distribution
Date occurs.
Eligible Account: Any of (i) an account or accounts maintained with
a
federal or state chartered depository
institution or trust company the
short-term unsecured debt obligations of
which (or, in the case of a depository
institution or trust company that is the
principal subsidiary of a holding
company, the debt obligations of such
holding company) have the highest
short-term ratings of each Rating Agency at
the time any amounts are held on
deposit therein, or (ii) an account or
accounts in a depository institution or
trust company in which such accounts are
insured by the FDIC or the SAIF (to the
limits established by the FDIC or the SAIF,
as applicable) and the uninsured
deposits in which accounts are otherwise
secured such that, as evidenced by an
Opinion of Counsel delivered to the Trustee
and to each Rating Agency, the
Certificateholders have a claim with
respect to the funds in such account or a
perfected first priority security interest
against any collateral (which shall
be limited to Permitted Investments)
securing such funds that is superior to
claims of any other depositors or creditors
of the depository institution or
trust company in which such account is
maintained, or (iii) a trust account or
accounts maintained with (a) the trust
department of a federal or state
chartered depository institution or (b) a
trust company, acting in its fiduciary
capacity or (iv) any other account
acceptable to each Rating Agency. Eligible
Accounts may bear interest, and may
include, if otherwise qualified under this
definition, accounts maintained with the
Trustee.
ERISA: The Employee
Retirement Income Security Act of 1974, as
amended.
ERISA-Qualifying Underwriting: With respect to any
ERISA-Restricted
Certificate, a best efforts or firm
commitment underwriting or private placement
that meets the requirements of the
Underwriters' Exemption.
ERISA-Restricted Certificate: As specified in the
Preliminary
Statement.
Escrow Account: The
Eligible Account or
Accounts established
and
maintained pursuant to Section 3.6(a)
hereof.
Event of Default: As
defined in Section 7.1 hereof.
Excess Loss: 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.
17
<PAGE>
Excess Proceeds: With respect to any Liquidated Mortgage Loan,
the
amount, if any, by which the sum of any
Liquidation Proceeds, Insurance Proceeds
and/or Unanticipated Recoveries in respect
of such Mortgage Loan received in the
calendar month in which such Mortgage Loan
became a Liquidated Mortgage Loan,
net of any amounts previously reimbursed to
the Master Servicer as
Nonrecoverable Advance(s) with respect to
such Mortgage Loan pursuant to Section
3.8(a)(iii), exceeds (i) the unpaid
principal balance of such Liquidated
Mortgage Loan as of the Due Date in the
month in which such Mortgage Loan became
a Liquidated Mortgage Loan plus (ii)
accrued interest at the Mortgage Rate from
the Due Date as to which interest was last
paid or advanced (and not reimbursed)
to Certificateholders up to the Due Date
applicable to the Distribution Date
immediately following the calendar month
during which such liquidation occurred.
Expense Fee Rate: As to each Mortgage Loan, the sum of the
related
Master Servicing Fee Rate and the Trustee
Fee Rate.
FDIC: The Federal
Deposit Insurance Corporation, or any successor
thereto.
FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States
created and existing under Title III of the
Emergency Home Finance Act of 1970, as
amended, or any successor thereto.
FIRREA: The Financial
Institutions Reform, Recovery, and Enforcement
Act of 1989.
First Horizon: First Horizon Home Loan Corporation, a Kansas
corporation and an indirect wholly owned
subsidiary of First Horizon National
Corporation, a Tennessee corporation.
Fitch: Fitch Ratings or any successor thereto. If Fitch is
designated
as a Rating Agency in the Preliminary
Statement, for purposes of Section 11.5(b)
the address for notices to Fitch shall be
Fitch, Inc., One State Street Plaza,
New York, New York 10004, Attention:
Residential Mortgage Surveillance Group, or
such other address as Fitch may hereafter
furnish to the Depositor and the
Master Servicer.
FNMA: The Federal National Mortgage Association, a federally
chartered
and privately owned corporation organized
and existing under the Federal
National Mortgage Association Charter Act,
or any successor thereto.
Fraud Loan: A
Liquidated Mortgage Loan as to which a Fraud Loss has
occurred.
Fraud Losses: Realized Losses on Mortgage Loans as to which a loss
is
sustained by reason of a default arising
from fraud, dishonesty or
misrepresentation in connection with the
related Mortgage Loan, including a loss
by reason of the denial of coverage under
any related Primary Insurance Policy
because of such fraud, dishonesty or
misrepresentation.
18
<PAGE>
Fraud Loss Coverage Amount: As of the Closing Date, $5,677,381. As
of
any Distribution Date from the first
anniversary of the Cut-off Date and prior
to the third anniversary of the Cut-off
Date, the Fraud Loss Coverage Amount
will equal $2,838,690 minus the aggregate
amount of Fraud Losses that would have
been allocated to the Subordinated
Certificates in the absence of the Loss
Allocation Limitation since the Cut-off
Date. As of any Distribution Date from
the third to the fifth anniversary of the
Cut-off Date, the Fraud Loss Coverage
Amount will equal (1) the lesser of (a) the
Fraud Loss Coverage Amount as of the
most recent anniversary of the Cut-off Date
and (b) 1.0% of the aggregate
outstanding principal balance of all of the
Mortgage Loans as of the most recent
anniversary of the Cut-off Date minus (2)
the Fraud Losses that would have been
allocated to the Subordinated Certificates
in the absence of the Loss Allocation
Limitations since the most recent
anniversary of the Cut-off Date. As of any
Distribution Date on or after the earlier
of the Cross-over Date or the fifth
anniversary of the Cut-off Date, the Fraud
Loss Coverage Amount shall be zero.
Fraud Loss Coverage Termination Date: The date on which the Fraud
Loss
Coverage Amount is reduced to zero.
Group I Senior Certificates: As specified in the Preliminary
Statement.
Group II Senior Certificates: As specified in the Preliminary
Statement.
Group III Inverse Floater Cap Percentage: With respect to each
Distribution Date and Pool III, the product
of (x) the Group III Inverse Floater
Leverage Percentage, and (y) 6.50%.
Group III Inverse Floater Leverage Percentage: With respect to
each
Distribution Date and Pool III, the Group
III NMR divided by the excess of 7.00%
over the Group III NMR.
Group III
Net WAC: For each Interest Accrual Period, the weighted
average Adjusted Net Mortgage Rate of the
Mortgage Loans in Pool III.
Group III NMR: With respect to each Distribution Date and Pool III,
the
weighted average of the Net Mortgage Rates
of the Mortgage Loans in Pool III
(computed by subjecting the Net Mortgage
Rate of each Mortgage Loan in Pool III
to a cap of 7.00%), based on the Pool
Principal Balance of Pool III for such
Distribution Date.
Group III Senior Certificates: As specified in the
Preliminary
Statement.
Group Subordinate Amount: For a Mortgage Pool and any
Distribution
Date, the excess of (a) the Pool Principal
Balance of such Mortgage Pool for the
immediately preceding Distribution Date,
over (b) the aggregate Class
Certificate Balance of the Senior
Certificates of the related Certificate Group
immediately prior to that Distribution
Date.
Index: Not
applicable.
Indirect Participant: A broker, dealer, bank or other financial
institution or other Person that clears
through or maintains a custodial
relationship with a Depository
Participant.
Initial Bankruptcy Coverage Amount: $150,000.
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Initial Component Balance: Not applicable.
Insurance Policy: With respect to any Mortgage Loan included in
the
Trust Fund, any insurance policy, including
all riders and endorsements thereto
in effect, including any replacement policy
or policies for any Insurance
Policies.
Insurance Proceeds: Proceeds paid by an insurer pursuant to any
Insurance Policy, in each case other than
any amount included in such Insurance
Proceeds in respect of Insured
Expenses.
Insured Expenses: Expenses covered by an Insurance Policy or any
other
insurance policy with respect to the
Mortgage Loans.
Interest Accrual Period: With respect to each Class of Delay
Certificates and any Distribution Date, the
calendar month prior to the month of
such Distribution Date. With respect to any
Non-Delay Certificates and any
Distribution Date, the one month period
commencing on the 25th day of the month
preceding the month in which such
Distribution Date occurs and ending on the
24th day of the month in which such
Distribution Date occurs.
Latest Possible Maturity Date: As to the Group I Senior
Certificates,
each Class of Subordinated Certificates,
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 I having the latest
scheduled maturity date as of the Cut-off
Date. As to the Group II Senior
Certificates, 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. As to the Group III Senior
Certificates, the Distribution Date
following the third anniversary of the
scheduled maturity date of the Mortgage
Loan in Pool III having the latest
scheduled maturity date as of the Cut-off
Date.
Lender PMI Mortgage Loan: Not applicable.
LIBOR: The London
interbank offered rate for one month United
States
dollar deposits calculated in the manner described
in Section 4.9.
LIBOR Business Day: Any day on which banks in London, England and
The
City of New York are open and conducting
transactions in foreign currency and
exchange.
LIBOR Certificates: As
specified in the Preliminary Statement.
LIBOR Determination Date: For the LIBOR Certificates, the second
LIBOR
Business Day immediately preceding the
commencement of each Interest Accrual
Period for such Certificates.
Liquidated Mortgage Loan: With respect to any Distribution Date,
a
defaulted Mortgage Loan (including any REO
Property) which was liquidated in the
calendar month preceding the month of such
Distribution Date and as to which the
Master Servicer has determined (in
accordance with this Agreement) that it has
received all amounts it expects to receive
in connection with the liquidation of
such Mortgage Loan, including the final
disposition of an REO Property.
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<PAGE>
Liquidation Proceeds: All cash amounts, other than Insurance
Proceeds
and Unanticipated Recoveries, received in
connection with the partial or
complete liquidation of defaulted Mortgage
Loans, whether through trustee's
sale, foreclosure sale or otherwise or
amounts received in connection with any
condemnation or partial release of a
Mortgaged Property and any other proceeds
received in connection with an REO
Property, less the sum of related
unreimbursed Master Servicing Fees,
Servicing Advances and Advances.
Loan-to-Value Ratio: With respect to any Mortgage Loan and as to
any
date of determination, the fraction
(expressed as a percentage) the numerator of
which is the principal balance of the
related Mortgage Loan at such date of
determination and the denominator of which
is the Appraised Value of the related
Mortgaged Property.
Loss Allocation Limitation: As defined in Section 4.4(g).
Lost Mortgage Note: Any Mortgage Note, the original of which
was
permanently lost or destroyed and has not
been replaced.
Lower REMIC: The segregated pool of assets consisting of the Trust
Fund
but excluding the 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.
Master Servicing Fee Rate: For each Mortgage Loan a per annum
rate
equal to 0.244%.
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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: The Mortgage Loan Purchase Agreement dated as of March 30,
2005,
by and between First Horizon Home Loan
Corporation, as seller, and First Horizon
Asset Securities Inc., as purchaser, as
related to the transfer, sale and
conveyance of the Mortgage Loans.
MOM Loan: Any Mortgage Loan as to which MERS is acting as
mortgagee,
solely as nominee for the originator of
such Mortgage Loan and its successors
and assigns.
Monthly Statement: The statement delivered to the
Certificateholders
pursuant to Section 4.6.
Moody's: Moody's Investors Service, Inc., or any successor thereto.
If
Moody's is designated as a Rating Agency in
the Preliminary Statement, for
purposes of Section 11.5(b) the address for
notices to Moody's shall be Moody's
Investors Service, Inc., 99 Church Street,
New York, New York 10007, Attention:
Residential Pass-Through Monitoring, or
such other address as Moody's may
hereafter furnish to the Depositor or the
Master Servicer.
Mortgage: The mortgage, deed of trust or other instrument creating
a
first lien on an estate in fee simple or
leasehold interest in real property
securing a Mortgage Note.
Mortgage File: The mortgage documents listed in Section 2.1
hereof
pertaining to a particular Mortgage Loan
and any additional documents delivered
to the Trustee to be added to the Mortgage
File pursuant to this Agreement.
Mortgage Loan Schedule: The list of mortgage loans (as from time
to
time amended by the Master Servicer to
reflect the addition of Substitute
mortgage loans and the deletion of Deleted
Mortgage Loans pursuant to the
provisions of this Agreement) transferred
to the Trustee as part of the Trust
Fund and from time to time subject to this
Agreement, attached hereto as
Schedule I, setting forth the following
information with respect to each
Mortgage Loan:
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<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.
Mortgage Note: The original executed note or other evidence of
indebtedness evidencing the indebtedness of
a Mortgagor under a Mortgage Loan.
Mortgage Pool: Any of
Pool I, Pool II or Pool III.
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<PAGE>
Mortgage Rate: The annual rate of interest borne by a Mortgage
Note
from time to time, net of any insurance
premium charged by the mortgagee to
obtain or maintain any Primary Insurance
Policy.
Mortgaged Property: The underlying property securing a Mortgage
Loan,
which, with respect to a Cooperative Loan,
is the related Coop Shares and
Proprietary Lease.
Mortgagor: The
obligor(s) on a Mortgage Note.
Net Mortgage Rate or "NMR": With respect to a Mortgage Loan,
the
Mortgage Rate thereof, less the Master
Servicing Fee and the Trustee Fee with
respect to the Mortgage Loan, expressed as
a per annum percentage of its Stated
Principal Balance.
Net Interest Shortfall: For any Distribution Date 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-Class I-A-PO Percentage: (a) With respect to a Discount
Mortgage
Loan in Pool I, the fraction, expressed as
a percentage, equal to the NMR
divided by 5.50%, and (b) with respect to
each Non-Discount Mortgage Loan in
Pool I, 100%.
Non-Class II-A-PO Percentage: (a) With respect to a Discount
Mortgage
Loan in Pool II, the fraction, expressed as
a percentage, equal to the NMR
divided by 5.00%, and (b) with respect to
each Non-Discount Mortgage Loan in
Pool II, 100%.
Non-Delay Certificates: As specified in the Preliminary
Statement.
Non-Discount Mortgage Loan: Any Mortgage Loan in Pool I with a
Net
Mortgage Rate that is equal to or greater
than 5.50%, any Mortgage Loan in Pool
II with a Net Mortgage Rate that is equal
to or greater than 5.00% and all the
Mortgage Loans in Pool III.
Non-Excess Loss: Any
Realized Loss other than an Excess Loss.
Non-PO Percentage: (a) With respect to Pool I, the Non-Class
I-A-PO
Percentage, (b) with respect to Pool II,
the Non-Class II-A-PO Percentage.
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.
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<PAGE>
Notice of Final Distribution: The notice to be provided pursuant
to
Section 9.2 to the effect that final
distribution on any of the Certificates
shall be made only upon presentation and
surrender thereof.
Notional Amount: Not
applicable.
Notional Amount Component: Not applicable.
Notional Certificates:
Not applicable.
Offered Certificates:
As specified in the Preliminary Statement.
Officer's Certificate: A Certificate (i) signed by the Chairman of
the
Board, the Vice Chairman of the Board, the
President, a Managing Director, a
Vice President (however denominated), an
Assistant Vice President, the
Treasurer, the Secretary, or one of the
Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master
Servicer, or (ii), if provided for in
this Agreement, signed by a Servicing
Officer, as the case may be, and delivered
to the Depositor and the Trustee, as the
case may be, as required by this
Agreement.
Opinion of Counsel: A written opinion of counsel, who may be
counsel
for the Depositor or the Master Servicer,
including, in-house counsel,
reasonably acceptable to the Trustee;
provided, however, that with respect to
the interpretation or application of the
REMIC Provisions, such counsel must (i)
in fact be independent of the Depositor and
the Master Servicer, (ii) not have
any direct financial interest in the
Depositor or the Master Servicer or in any
affiliate of either, and (iii) not be
connected with the Depositor or the Master
Servicer as an officer, employee, promoter,
underwriter, trustee, partner,
director or person performing similar
functions.
Optional Termination: The termination of the trust created
hereunder in
connection with the purchase of the
Mortgage Loans pursuant to Section 9.1(a)
hereof.
Original 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.
Original Subordinated Principal Balance: The aggregate of the
Class
Certificate Balances of the Subordinated
Certificates as of the Closing Date.
OTS: The Office of
Thrift Supervision.
Outside Reference Date: Not applicable.
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<PAGE>
Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore
executed and authenticated under
this Agreement except:
(a) Certificates
theretofore canceled by the Trustee or delivered to
the Trustee for cancellation; and
(b) Certificates in
exchange for which or in lieu of which other
Certificates have been executed and delivered by the Trustee
pursuant to this Agreement.
Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan with
a
Stated Principal Balance greater than zero
which was not the subject of a
Principal Prepayment in Full prior to such
Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due
Date.
Ownership Interest: As to any Residual Certificate, any
ownership
interest in such Certificate including any
interest in such Certificate as the
Holder thereof and any other interest
therein, whether direct or indirect, legal
or beneficial.
Pass-Through Rate: For any interest bearing Class of Certificates,
the
per annum rate set forth or calculated in
the manner described in the
Preliminary Statement.
Percentage Interest: As to any Certificate, the percentage
interest
evidenced thereby in distributions required
to be made on the related Class,
such percentage interest being set forth on
the face thereof or equal to the
percentage obtained by dividing the
Denomination of such Certificate by the
aggregate of the Denominations of all
Certificates of the same Class.
Permitted Investments: At any time, any one or more of the
following
obligations and securities:
(i)
obligations of the United States or any agency thereof,
provided such obligations are backed by the full faith and
credit of the United States;
(ii) general
obligations of or obligations guaranteed by any
state of the United States or the District of Columbia
receiving the highest long-term debt rating of each Rating
Agency;
(iii) commercial or
finance company paper which is then receiving
the highest commercial or finance company paper rating of
each Rating Agency;
(iv)
certificates of deposit, demand or time deposits, or
bankers' acceptances issued by any depository institution
or trust company incorporated under the laws of the United
States or of any state thereof and subject to supervision
and examination by federal and/or state banking
authorities, provided that the commercial paper and/or long
term unsecured debt obligations of such depository
institution or trust company (or in the case of the
principal depository institution in a holding company
system, the commercial paper or long-term unsecured debt
obligations of such holding company, but only if Moody's is
not a Rating Agency) are then rated one of the two highest
long-term and/or the highest short-term ratings of each
Rating Agency for such securities;
26
<PAGE>
(v) demand
or time deposits or certificates of deposit issued
by any bank or trust company or savings institution to the
extent that such deposits are fully insured by the FDIC and
receiving the highest short-term debt rating of each Rating
Agency;
(vi) guaranteed
reinvestment agreements issued by any bank,
insurance company or other corporation and receiving the
highest short-term debt rating of each Rating Agency and
containing, at the time of the issuance of such agreements,
such terms and conditions as will not result in the
downgrading or withdrawal of the rating then assigned to
the Certificates by either Rating Agency;
(vii) repurchase
obligations with respect to any security
described in clauses (i) and (ii) above, in either case
entered into with a depository institution or trust company
(acting as principal) described in clause (iv) above;
(viii)
securities (other than stripped bonds, stripped coupons or
instruments sold at a purchase price in excess of 115% of
the face amount thereof) bearing interest or sold at a
discount issued by any corporation incorporated under the
laws of the United States or any state thereof which, at
the time of such investment, have one of the two highest
ratings of each Rating Agency (except if the Rating Agency
is Moody's or S&P, such rating shall be the highest
commercial paper rating of Moody's or S&P, as applicable,
for any such securities);
(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.
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<PAGE>
Permitted Transferee: Any person other than (i) the United States,
any
State or political subdivision thereof, or
any agency or instrumentality of any
of the foregoing, (ii) a foreign
government, International Organization or any
agency or instrumentality of either of the
foregoing, (iii) an organization
(except certain farmers' cooperatives
described in section 521 of the Code)
which is exempt from tax imposed by Chapter
1 of the Code (including the tax
imposed by section 511 of the Code on
unrelated business taxable income) on any
excess inclusions (as defined in section
860E(c)(l) of the Code) with respect to
any Residual Certificate, (iv) rural
electric and telephone cooperatives
described in section 1381(a)(2)(C) of the
Code, (v) an "electing large
partnership" as defined in section 775 of
the Code, (vi) a Person that is not
(a) a citizen or resident of the United
States, (b) a corporation, partnership,
or other entity created or organized in or
under the laws of the United States,
any state thereof or the District of
Columbia, (c) an estate whose income from
sources without the United States is
includible in gross income for United
States federal income tax purposes
regardless of its connection with the conduct
of a trade or business within the United
States or (d) a trust if a court within
the United States is able to exercise
primary supervision over the
administration of the trust and one or more
United States persons have the
authority to control all substantial
decisions of the trust, unless such Person
has furnished the transferor and the
Trustee with a duly completed Internal
Revenue Service Form W-8ECI or any
applicable successor form, and (vii) any
other Person so designated by the Depositor
based upon an Opinion of Counsel
that the Transfer of an Ownership Interest
in a Residual Certificate to such
Person may cause any REMIC created
hereunder to fail to qualify as a REMIC at
any time that the Certificates are
outstanding; provided, however, that if a
person is classified as a partnership under
the Code, such person shall only be
a Permitted Transferee if all of its
beneficial owners are described in
subclauses (a), (b), (c) or (d) of clause
(vi) and the governing documents of
such person prohibits a transfer of any
interest in such person to any person
described in clause (vi). The terms "United
States," "State" and "International
Organization" shall have the meanings set
forth in section 7701 of the Code or
successor provisions. A corporation will
not be treated as an instrumentality of
the United States or of any State or
political subdivision thereof for these
purposes if all of its activities are
subject to tax and, with the exception of
the Federal Home Loan Mortgage Corporation,
a majority of its board of directors
is not selected by such government
unit.
Person: Any individual, corporation, partnership, joint
venture,
association, joint-stock company, trust,
unincorporated organization or
government, or any agency or political
subdivision thereof.
Physical Certificates:
As specified in the Preliminary Statement.
Planned Balance: With respect to a class of the Planned
Principal
Classes and a Distribution Date, the
balance for such Distribution Date and such
class as reflected in the Principal Balance
Schedules on Schedule IV.
Planned Principal Classes: As specified in the Preliminary
Statement.
PO Percentage: (a) With respect to Pool I, the Class I-A-PO
Percentage,
and (b) with respect to Pool II, the Class
II-A-PO Percentage.
Pool I: The aggregate
of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool
I.
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<PAGE>
Pool II: The aggregate of the Mortgage Loans identified on the
Mortgage
Loan Schedule as being included in Pool
II.
Pool III: The aggregate of the Mortgage Loans identified on the
Mortgage Loan Schedule as being included in
Pool III.
Pool Principal Balance: For each Mortgage Pool, with respect to
any
Distribution Date, the aggregate of the
Stated Principal Balances of the
Mortgage Loans which were Outstanding
Mortgage Loans on the Due Date in the
month preceding the month of such
Distribution Date, and for the first
Distribution Date, as of the Closing Date,
less any Principal Prepayments
received on or after such Due Date and
distributed to Certificateholders on the
prior Distribution Date.
Prepayment Interest Excess: As to any Principal Prepayment received
by
the Master Servicer from the first day
through the fifteenth day of any calendar
month (other than the calendar month in
which the Cut-off Date occurs), all
amounts paid by the related Mortgagor in
respect of interest on such Principal
Prepayment. All Prepayment Interest Excess
shall be paid to the Master Servicer
as additional master servicing
compensation.
Prepayment Interest Shortfall: As to any Distribution Date,
Mortgage
Loan and Principal Prepayment received (a)
during the period from the sixteenth
day of the month preceding the month of
such Distribution Date (or, in the case
of the first Distribution Date, from the
Cut-off Date) through the last day of
such month, in the case of a Principal
Prepayment in Full, or (b) during the
month preceding the month of such
Distribution Date, in the case of a partial
Principal Prepayment, the amount, if any,
by which one month's interest at the
related Adjusted Mortgage Rate on such
Principal Prepayment exceeds the amount
of interest actually paid by the Mortgagor
in connection with such Principal
Prepayment.
Prepayment Period: (a) With respect to any Principal Prepayments
in
Full and any Distribution Date, the period
from the sixteenth day of the month
preceding the month of such Distribution
Date (or, in the case of the first
Distribution Date, from the Cut-off Date)
through the fifteenth day of the month
of such Distribution Date, and (b) with
respect to any other Principal
Prepayments and any Distribution Date, the
month preceding the month of such
Distribution Date.
Primary Insurance Policy: Each policy of primary mortgage
guaranty
insurance or any replacement policy
therefor with respect to any Mortgage Loan.
Principal Balance Schedules: As specified in the Preliminary
Statement.
Principal Only Certificates: As specified in the Preliminary
Statement.
Principal Prepayment: Any payment of principal by a Mortgagor on
a
Mortgage Loan that is received in advance
of its scheduled Due Date and is not
accompanied by an amount representing
scheduled interest due on any date or
dates in any month or months subsequent to
the month of prepayment. Partial
Principal Prepayments shall be applied by
the Master Servicer in accordance with
the terms of the related Mortgage Note.
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<PAGE>
Principal Prepayment in Full: Any Principal Prepayment made by
a
Mortgagor of the entire principal balance
of a Mortgage Loan.
Private Certificates:
As specified in the Preliminary Statement.
Proprietary Lease: With respect to any Cooperative Unit, a lease
or
occupancy agreement between a Cooperative
Corporation and a holder of related
Coop Shares.
PUD: Planned Unit
Development.
Purchase Price: With respect to any Mortgage Loan required to
be
purchased by the Seller pursuant to Section
2.2 or 2.3 hereof or purchased at
the option of the Master Servicer pursuant
to Section 3.11, an amount equal to
the sum of (i) 100% of the unpaid principal
balance of the Mortgage Loan on the
date of such purchase, (ii) accrued
interest thereon at the applicable Mortgage
Rate (or at the applicable Adjusted
Mortgage Rate if the purchaser is the Master
Servicer) from the date through which
interest was last paid by the Mortgagor to
the Due Date in the month in which the
Purchase Price is to be distributed to
Certificateholders, and (iii) any costs and
damages incurred by the Trust in
connection with the noncompliance of such
Mortgage Loan with any specifically
applicable predatory or abusive lending
law.
Qualified Insurer: A mortgage guaranty insurance company duly
qualified
as such under the laws of the state of its
principal place of business and each
state having jurisdiction over such insurer
in connection with the insurance
policy issued by such insurer, duly
authorized and licensed in such states to
transact a mortgage guaranty insurance
business in such states and to write the
insurance provided by the insurance policy
issued by it, approved as a
FNMA-approved mortgage insurer and having a
claims paying ability rating of at
least "AA" or equivalent rating by a
nationally recognized statistical rating
organization. Any replacement insurer with
respect to a Mortgage Loan must have
at least as high a claims paying ability
rating as the insurer it replaces had
on the Closing Date.
Rating Agency: Each of the Rating Agencies specified in the
Preliminary
Statement. If any such organization or a
successor is no longer in existence,
"Rating Agency" shall be such nationally
recognized statistical rating
organization, or other comparable Person,
as is designated by the Depositor,
notice of which designation shall be given
to the Trustee. References herein to
a given rating category of a Rating Agency
shall mean such rating category
without giving effect to any modifiers.
Realized Loss: With respect to each Liquidated Mortgage Loan, an
amount
(not less than zero or more than the Stated
Principal Balance of the Mortgage
Loan) as of the date of such liquidation,
equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as
of the date of such liquidation, plus
(ii) interest at the Adjusted Net Mortgage
Rate from the Due Date as to which
interest was last paid or advanced (and not
reimbursed) to Certificateholders up
to the Due Date in the month in which
Liquidation Proceeds are required to be
distributed on the Stated Principal Balance
of such Liquidated Mortgage Loan
from time to time, minus (iii) any
Liquidation Proceeds, Insurance Proceeds
and/or Unanticipated Recoveries received
during the month in which such
liquidation occurred (or during the
calendar month preceding the related
Distribution Date, as applicable), to the
extent applied as recoveries of
interest at the Adjusted Net Mortgage Rate
and to principal of the Liquidated
Mortgage Loan. With respect to each
Mortgage Loan which has become the subject
of a Deficient Valuation, if the principal
amount due under the related Mortgage
Note has been reduced, the difference
between the principal balance of the
Mortgage Loan outstanding immediately prior
to such Deficient Valuation and the
principal balance of the Mortgage Loan as
reduced by the Deficient Valuation.
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Recognition Agreement: With respect to any Cooperative Loan, an
agreement between the Cooperative
Corporation and the originator of such
Mortgage Loan which establishes the rights
of such originator in the Cooperative
Property.
Record Date: With respect to any Distribution Date, the close
of
business on the last Business Day of the
month preceding the month in which such
Distribution Date occurs.
Reference Bank: A leading bank with an established place of
business in
London engaged in transactions in
Eurodollar deposits in the international
Eurocurrency market, not controlled by, or
under the common control with, the
Trustee.
Refinancing Mortgage Loan: Any Mortgage Loan originated in
connection
with the refinancing of an existing
mortgage loan.
Regular Certificates:
As specified in the Preliminary Statement.
Relief Act: The Servicemembers Civil Relief Act or any similar
state or
local legislation or regulations.
Relief Act Reductions: With respect to any Distribution Date and
any
Mortgage Loan as to which there has been a
reduction in the amount of interest
collectible thereon for the most recently
ended calendar month as a result of
the application of the Relief Act, the
amount, if any, by which interest
collectible on such Mortgage Loan for the
most recently ended calendar month is
less than interest accrued thereon for such
month pursuant to the Mortgage Note.
REMIC: A "real estate mortgage investment conduit" within the
meaning
of section 860D of the Code.
REMIC Change of Law: Any proposed, temporary or final
regulation,
revenue ruling, revenue procedure or other
official announcement or
interpretation relating to REMICs and the
REMIC Provisions issued after the
Closing Date.
REMIC Pool: Either of the Lower REMIC, 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.
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<PAGE>
Request for Release: The Request for Release submitted by the
Master
Servicer to the Trustee, substantially in
the form of Exhibits L and M, as
appropriate.
Required Coupon: With respect to Pool I, 5.250% per annum and
with
respect to Pool II, 4.750% per annum.
Required Insurance Policy: With respect to any Mortgage Loan,
any
insurance policy that is required to be
maintained from time to time under this
Agreement.
Required Recordation States: The states of Florida, Maryland
and
Mississippi.
Residual Certificates:
As specified in the Preliminary Statement.
Responsible Officer: When used with respect to the Trustee, any
Vice
President, any Assistant Vice President,
the Secretary, any Assistant Secretary,
any Trust Officer or any other officer of
the Trustee customarily performing
functions similar to those performed by any
of the above designated officers and
having direct responsibility for the
administration of this Agreement and also
to whom, with respect to a particular
matter, such matter is referred because of
such officer's knowledge of and familiarity
with the particular subject.
Retail/Lottery Certificates: Not applicable.
Retained Yield: As to each Mortgage Loan and any Distribution Date,
an
amount payable to First Horizon Home Loan
Corporation out of each full payment
of interest received on such Mortgage Loan
and equal to one-twelfth of the
Retained Yield Rate multiplied by the
Stated Principal Balance of such Mortgage
Loan as of the Due Date in the month of
such Distribution Date (prior to giving
effect to any Scheduled Payments due on
such Mortgage Loan on such Due Date).
Retained Yield Rate: For any Mortgage Loan, a per annum rate equal
to
the excess of (a) the applicable Mortgage
Rate over (b) the Required Coupon.
RL Interest: The REMIC residual interest, within the meaning of
the
REMIC Provisions, issued by the Lower
REMIC, which shall be represented by the
Class I-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 I-A-R Certificate.
RU Interest: The REMIC residual interest, within the meaning of
the
REMIC Provisions, issued by the Upper
REMIC, which shall be represented by the
Class I-A-R Certificate.
Scheduled Balances:
Not applicable.
Scheduled Certificates: Not applicable.
Scheduled Payment: The scheduled monthly payment on a Mortgage Loan
due
on any Due Date allocable to principal
and/or interest on such Mortgage Loan
which, unless otherwise specified herein,
shall give effect to any related Debt
Service Reduction and any Deficient
Valuation that affects the amount of the
monthly payment due on such Mortgage
Loan.
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Securities Act: The Securities Act of 1933, as amended.
Security
Agreement: The security agreement with respect to a
Cooperative Loan.
Seller: First Horizon Home Loan Corporation, a Kansas corporation,
and
its successors and assigns, in its capacity
as seller of the Mortgage Loans
pursuant to the MLPA.
Senior Certificates:
As specified in the Preliminary Statement.
Senior Final Distribution Date: For each Certificate Group, the
Distribution Date on which the Class
Certificate Balance of each Class of
related Senior Certificates has been
reduced to zero.
Senior Optimal Principal Amount: As to a Mortgage Pool and with
respect
to each Distribution Date, an amount equal
to the sum of:
(1) the related Senior Percentage of the applicable Non-PO
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 applicable
Non-PO 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 the applicable
Non-PO Percentage of (i) all partial
Principal Prepayments in respect of each
Mortgage Loan in such Mortgage Pool
received during the applicable Prepayment
Period and (ii) all Unanticipated
Recoveries received in respect of each
Mortgage Loan in the related Mortgage Pool
during the calendar month prior to
such Distribution Date;
(4) the lesser of:
(a) the related Senior
Prepayment Percentage of the sum of (x)
the applicable Non-PO Percentage of 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 applicable Non-PO
Percentage of 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
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<PAGE>
(b) (i) the related
Senior Percentage of the sum of (x) the
applicable Non-PO Percentage of 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 applicable
Non-PO Percentage of 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 applicable
Non-PO Percentage of 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
applicable Non-PO Percentage of 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
applicable Non-PO Percentage of 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 (other than the Class PO
Certificates) immediately preceding such
Distribution Date by the Pool Principal
Balance of the related Mortgage Pool
(excluding the aggregate of the applicable
PO Percentage of the principal balance of
each Discount Mortgage Loan in the
related Mortgage Pool included therein) 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:
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--------------------------------------------------------------------------------
Period (Dates Inclusive)
Senior Prepayment Percentage
--------------------------------------------------------------------------------
April 2005 - March 2010
100%
--------------------------------------------------------------------------------
April 2010 - March 2011
the related Senior Percentage plus 70% of the
related Subordinated Percentage
--------------------------------------------------------------------------------
April 2011 - March 2012
the related Senior Percentage plus 60% of the
related
Subordinated Percentage
--------------------------------------------------------------------------------
April 2012 - March 2013
the related Senior Percentage plus 40% of the
related Subordinated Percentage
--------------------------------------------------------------------------------
April 2013 - March 2014
the related Senior Percentage plus 20% of the
related Subordinated Percentage
--------------------------------------------------------------------------------
April 2014 and thereafter the
related Senior Percentage
--------------------------------------------------------------------------------
Notwithstanding the foregoing, if the Senior Percentage for a
Certificate Group on any Distribution Date
exceeds the initial Senior Percentage
for that Certificate Group, the Senior
Prepayment Percentage for the Certificate
Groups for that Distribution Date will
equal 100%.
In addition, no reduction of the Senior Prepayment Percentage for
any
Certificate Group below the level in effect
for the most recent prior period
specified in the table above shall be
effective on any Distribution Date unless
both of the following step down conditions
are satisfied with respect to each
Mortgage Pool, as of the last day of the
month preceding such Distribution Date:
(1) the aggregate Stated Principal Balance of Mortgage Loans in
a
Mortgage Pool delinquent 60 days or more
(including for this purpose any
Mortgage Loans in foreclosure or subject to
bankruptcy proceedings and Mortgage
Loans with respect to which the related
Mortgaged Property, including REO
Property, has been acquired by the Trust)
does not exceed 50% of the related
Group Subordinate Amount as of such date;
and
(2) cumulative aggregate Realized Losses in each Mortgage Pool
do
not exceed:
(a) 30% of the
related Original Group Subordinate Amount
with respect to such Mortgage Pool if such Distribution
Date occurs between and including April 2010 and March
2011;
(b) 35% of the
related Original Group Subordinate Amount
with respect to such Mortgage Pool if such Distribution
Date occurs between and including April 2011 and March
2012;
(c) 40% of the
related Original Group Subordinate Amount
with respect to such Mortgage Pool if such Distribution
Date occurs between and including April 2012 and March
2013;
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<PAGE>
(d) 45% of the
related Original Group Subordinate Amount
with respect to such Mortgage Pool if such Distribution
Date occurs between and including April 2013 and March
2014; and
(e) 50% of the
related Original Group Subordinate Amount
with respect to such Mortgage Pool if such Distribution
Date occurs during or after April 2014.
Servicing Advances: All customary, reasonable and necessary "out
of
pocket" costs and expenses incurred in the
performance by the Master Servicer of
its servicing obligations, including, but
not limited to, the cost of (i) the
preservation, restoration and protection of
a Mortgaged Property, (ii) any
expenses reimbursable to the Master
Servicer pursuant to Section 3.11 and any
enforcement or judicial proceedings,
including foreclosures, (iii) the
management and liquidation of any REO
Property and (iv) compliance with the
obligations under Section 3.9.
Servicing Agreement: The servicing agreement, dated as of November
26,
2002 by and between First Horizon Asset
Securities Inc. and its assigns, as
owner, and First Tennessee Mortgage
Services, Inc., as servicer.
Servicing Officer: Any officer of the Master Servicer involved in,
or
responsible for, the administration and
servicing of the Mortgage Loans whose
name and facsimile signature appear on a
list of servicing officers furnished to
the Trustee by the Master Servicer on the
Closing Date pursuant to this
Agreement, as such list may from time to
time be amended.
Servicing Rights Transfer and Subservicing Agreement: The
servicing
rights transfer and subservicing agreement,
dated as of November 26, 2002, by
and between First Horizon Home Loan
Corporation, as transferor and subservicer,
and First Tennessee Mortgage Services,
Inc., as transferee and servicer.
Special Hazard Coverage Termination Date: The date on which the
Special
Hazard Loss Coverage Amount is reduced to
zero.
Special Hazard Loss: Any Realized Loss suffered by a Mortgaged
Property
on account of direct physical loss but not
including (i) any loss of a type
covered by a hazard insurance policy or a
flood insurance policy required to be
maintained with respect to such Mortgaged
Property pursuant to Section 3.9 to
the extent of the amount of such loss
covered thereby, or (ii) any loss caused
by or resulting from:
(1) normal wear and tear;
(2) fraud, conversion or other dishonest act on the part of the
Trustee, the Master Servicer or any of
their agents or employees (without regard
to any portion of the loss not covered by
any errors and omissions policy);
(3) errors in design, faulty workmanship or faulty materials,
unless the collapse of the property or a
part thereof ensues and then only for
the ensuing loss;
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<PAGE>
(4) nuclear or
chemical reaction or nuclear radiation or
radioactive or chemical contamination, all
whether controlled or uncontrolled,
and whether such loss be direct or
indirect, proximate or remote or be in whole
or in part caused by, contributed to or
aggravated by a peril covered by the
definition of the term "Special Hazard
Loss";
(5) hostile or
warlike action in time of peace and war,
including action in hindering, combating or
defending against an actual,
impending or expected attack:
(i) by any
government or sovereign power, de jure or de facto,
or
by any authority maintaining or using military, naval or
air forces;
(ii) by military,
naval or air forces; or
(iii) by an agent of any such government, power, authority or
forces;
(6) any weapon of war
employing nuclear fission, fusion or other
radioactive force, whether in time of peace
or war; or
(7) insurrection,
rebellion, revolution, civil war, usurped power
or action taken by governmental authority
in hindering, combating or defending
against such an occurrence, seizure or
destruction under quarantine or customs
regulations, confiscation by order of any
government or public authority or
risks of contraband or illegal
transportation or trade.
Special Hazard Loss Coverage Amount: Upon the initial issuance of
the
Certificates, $3,288,286. 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.
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<PAGE>
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 all of the
Mortgage Pools on the first day of the
month of such Distribution Date less any
Deficient Valuations occurring before
the Bankruptcy Loss Coverage Amount has
been reduced to zero.
Subordinated Optimal Principal Amount: With respect to each
Mortgage
Pool and each Distribution Date, an amount
equal to the sum of the following
(but in no event greater than the aggregate
Class Certificate Balances of the
Subordinated Certificates immediately prior
to such Distribution Date):
(1) the related Subordinated Percentage of the applicable
Non-PO
Percentage of all Scheduled Payments of
principal due on each outstanding
Mortgage Loan in the related Mortgage Pool
on the first day of the month in
which the Distribution Date occurs, as
specified in the amortization schedule at
the time applicable thereto, after
adjustment for previous principal prepayments
and the principal portion of Debt Service
Reductions after the Bankruptcy Loss
Coverage Amount has been reduced to zero,
but before any adjustment to such
amortization schedule by reason of any
other bankruptcy or similar proceeding or
any moratorium or similar waiver or grace
period;
(2) the related Subordinated Prepayment Percentage of the
applicable Non-PO Percentage of the Stated
Principal Balance of each Mortgage
Loan in the related Mortgage Pool which was
the subject of a Principal
Prepayment in Full received by the Master
Servicer during the related Prepayment
Period;
(3) the related Subordinated Prepayment Percentage of (i) all
partial Principal Prepayments received in
respect of each Mortgage Loan in the
related Mortgage Pool during the related
Prepayment Period, plus,(ii) all
Unanticipated Recoveries received in
respect of each Mortgage Loan in the
related Mortgage Pool during the calendar
month prior to such Distribution Date,
and (iii) on the Senior Final Distribution
Date, 100% of any related Senior
Optimal Principal Amount remaining
undistributed on such date;
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<PAGE>
(4) the amount, if any, by which the sum of (a) the applicable
Non-PO Percentage of the net Liquidation
Proceeds allocable to principal
received during the related Prepayment
Period in respect of each Liquidated
Mortgage Loan in the related Mortgage Pool,
other than Mortgage Loans described
in clause (b), and (b) the applicable
Non-PO Percentage of the principal balance
of each Mortgage Loan in the related
Mortgage Pool that was purchased by a
private mortgage insurer during the related
Prepayment Period as an alternative
to paying a claim under the related
Insurance Policy exceeds (c) the sum of the
amounts distributable to the Senior
Certificateholders (other than the holders
of the Class PO Certificates) under clause
(4) of the definition of applicable
Senior Optimal Principal Amount on such
Distribution Date; and
(5) the related Subordinated Prepayment Percentage of the sum
of
(a) the applicable Non-PO Percentage of the
Stated Principal Balance of each
Mortgage Loan in the related Mortgage Pool
which was repurchased by the seller
in connection with such Distribution Date
and (b) the difference, if any,
between the applicable Non-PO Percentage of
the Stated Principal Balance of a
Mortgage Loan in the related Mortgage Pool
that has been replaced by the seller
with a Substitute Mortgage Loan pursuant to
the Agreement in connection with
such Distribution Date and the Stated
Principal Balance of each such Substitute
Mortgage Loan.
Subordinated Percentage: For any Distribution Date and each
Certificate
Group, 100% minus the related Senior
Percentage.
Subordinated Prepayment Percentage: For any Distribution Date,
100%
minus the Senior Prepayment Percentage.
Subservicer: Any person to whom the Master Servicer has contracted
for
the servicing of all or a portion of the
Mortgage Loans pursuant to Section 3.2
hereof.
Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller
for
a Deleted Mortgage Loan which must, on the
date of such substitution, as
confirmed in a Request for Release,
substantially in the form of Exhibit L, (i)
have a Stated Principal Balance, after
deduction of the principal portion of the
Scheduled Payment due in the month of
substitution, not in excess of, and not
more than 10% less than the Stated
Principal Balance of the Deleted Mortgage
Loan; (ii) have an Adjusted Net Mortgage
Rate not lower than the applicable
Required Coupon; (iii) be accruing interest
at a rate no lower than and not more
than 1% per annum higher than, that of the
Deleted Mortgage Loan; (iv) have a
Loan-to-Value Ratio no higher than that of
the Deleted Mortgage Loan; (v) have a
remaining term to maturity no greater than
(and not more than one year less than
that of) the Deleted Mortgage Loan; (vi)
not be a Cooperative Loan unless the
Deleted Mortgage Loan was a Cooperative
Loan and (vii) comply with each
representation and warranty set forth in
Section 2.3 hereof.
Substitution Adjustment Amount: The meaning ascribed to such
term
pursuant to Section 2.3.
Super Senior Certificates: As specified in the Preliminary
Statement.
Super Senior Support Certificates: As specified in the
Preliminary
Statement.
Support Classes: Not Applicable.
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<PAGE>
Targeted Balances: With respect to a class of TAC Certificates and
any
Distribution Date, the balance for such
Distribution Date as reflected in the
Principal Balance Schedules on Schedule
IV.
Targeted Principal Classes: As specified in the Preliminary
Statement.
Tax Matters Person: The person designated as "tax matters person"
in
the manner provided under Treasury
regulation ss. 1.860F-4(d) and Treasury
regulation ss. 301.6231(a)(7)-1. Initially,
the Tax Matters Person shall be the
Trustee.
Tax Matters Person Certificate: The Class I-A-R Certificates with
a
Denomination of $0.01.
Transfer: Any direct or indirect transfer or sale of any
Ownership
Interest in a Residual Certificate.
Trust Fund: The corpus of the trust created hereunder consisting of
(i)
the Mortgage Loans and all interest and
principal received on or with respect
thereto after the Cut-off Date to the
extent not applied in computing the
Cut-off Date Principal Balance thereof;
(ii) all of the Depositor's rights as
purchaser under the MLPA; (iii) the
Certificate Account and the Distribution
Account and all amounts deposited therein
pursuant to the applicable provisions
of this Agreement; (iv) property that
secured a Mortgage Loan and has been
acquired by foreclosure, deed-in-lieu of
foreclosure or otherwise; and (v) all
proceeds of the conversion, voluntary or
involuntary, of any of the foregoing;
provided that the Trust Fund shall exclude
the Retained Yield.
Trustee: The Bank of New York and its successors and, if a
successor
trustee is appointed hereunder, such
successor.
Trustee Fee: As to any Distribution Date and a Mortgage Pool, an
amount
equal to one-twelfth of the Trustee Fee
Rate multiplied by the applicable Pool
Principal Balance with respect to such
Distribution Date.
Trustee Fee Rate: With respect to each Mortgage Loan, the per
annum
rate agreed upon in writing on or prior to
the Closing Date by the Trustee and
the Depositor.
Unanticipated Recovery: As defined in Section 4.2(j).
Undercollateralization Distribution: As defined in Section 4.2(k).
Undercollateralized Group: With respect to any Distribution Date,
the
Senior Certificates of any Certificate
Group as to which the aggregate
Certificate Principal Balance thereof,
after giving effect to distributions
pursuant to Section 4.2(a) on such date, is
greater than the Pool Principal
Balance of the related Mortgage Pool for
such Distribution Date.
Underwriters: As
specified in the Preliminary Statement.
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<PAGE>
Underwriters' Exemption: Prohibited Transaction Exemption 90-36
or
89-40, each as amended (or any successor
thereto), or any substantially similar
administrative exemption granted by the
U.S. Department of Labor.
Upper REMIC: The segregated pool of assets consisting of the
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) 99% of all Voting Rights
will be allocated among all Holders
of the Certificates, other than the Class
I-A-R Certificates, in proportion to
their then outstanding Class Certificate
Balance; and (b) 1.0% of all Voting
Rights will be allocated to the Class I-A-R
Certificates (such Voting Rights to
be allocated among the Holders of
Certificates of such Class in accordance with
their respective Percentage Interests).
ARTICLE II
CONVEYANCE OF MORTGAGE LOANS;
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Conveyance of Mortgage Loans.
(a) The Depositor,
concurrently with the execution and delivery
hereof, hereby sells, transfers, assigns, sets over and
otherwise
conveys to the Trustee for the benefit of the
Certificateholders,
without recourse, all the right, title and interest of the
Depositor in and to the Trust Fund together with (i) the
Depositor's right to (A) require the Seller to cure any breach
of
a representation or warranty made by the Seller pursuant to the
MLPA, or (B) repurchase or substitute for any affected Mortgage
Loan in accordance herewith, and (ii) all right, title and
interest of the Depositor in, to and under the Servicing
Agreement, which right has been assigned to the Depositor
pursuant
to the MLPA.
(b) In connection with
the transfer and assignment set forth in clause
(a) above, the Depositor has delivered or caused to be
delivered
to the Trustee or the Custodian on its behalf (or, in the case
of
the Delay Delivery Mortgage Loans, will deliver or cause to be
delivered to the Trustee or the Custodian on its behalf within
thirty (30) days following the Closing Date) for the benefit of
the Certificateholders the following documents or instruments
with
respect to each Mortgage Loan so assigned:
(i) (A) the original
Mortgage Note endorsed by manual or
facsimile signature in blank in the following form: "Pay to
the order of ________________, without recourse," with all
intervening endorsements showing a complete chain of
endorsement from the originator to the Person endorsing the
Mortgage Note (each such endorsement being sufficient to
transfer all right, title and interest of the party so
endorsing, as noteholder or assignee thereof, in and to that
Mortgage Note); or
(B) with respect to any Lost Mortgage Note, a lost note
affidavit from the Seller stating that the original Mortgage
Note was lost or destroyed, together with a copy of such
Mortgage Note;
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(ii) except as
provided below and for each Mortgage Loan that is
not a MERS Mortgage Loan, the original recorded Mortgage or
a copy of such Mortgage certified by the Seller as being a
true and complete copy of the Mortgage and in the case of
each MERS Mortgage Loan, the original Mortgage, noting the
presence of the MIN of the Mortgage Loans and either
language indicating that the Mortgage Loan is a MOM Loan if
the
Mortgage Loan is a MOM Loan or if the Mortgage Loan was
not a MOM Loan at origination, the original Mortgage and
the assignment thereof to MERS, with evidence of recording
indicated thereon, or a copy of the Mortgage certified by
the public recording office in which such Mortgage has been
recorded;
(iii) in the case of a
Mortgage Loan that is not a MERS Mortgage
Loan, a
duly executed assignment of the Mortgage in blank
(which may be included in a blanket assignment or
assignments), together with, except as provided below, all
interim recorded assignments of such mortgage (each such
assignment, when duly and validly completed, to be in
recordable form and sufficient to effect the assignment of
and transfer to the assignee thereof, under the Mortgage to
which the assignment relates); provided that, if the
related 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
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<PAGE>
(F) Executed UCC-3
financing statements or other
appropriate UCC financing statements required by state
law, evidencing a complete and unbroken line from the
mortgagee to the Trustee with evidence of recording
thereon (or in a form suitable for recordation).
In the event that in connection with any Mortgage Loan that is not
a
MERS Mortgage Loan the Depositor cannot
deliver (a) the original recorded
Mortgage or (b) all interim recorded
assignments satisfying the requirements of
clause (ii) or (iii) above, respectively,
concurrently with the execution and
delivery hereof because such document or
documents have not been returned from
the applicable public recording office, the
Depositor shall promptly deliver or
cause to be delivered to the Trustee or the
Custodian on its behalf such
original Mortgage or such interim
assignment, as the case may be, with evidence
of recording indicated thereon upon receipt
thereof from the public recording
office, or a copy thereof, certified, if
appropriate, by the relevant recording
office, but in no event shall any such
delivery of the original Mortgage and
each such interim assignment or a copy
thereof, certified, if appropriate, by
the relevant recording office, be made
later than one year following the Closing
Date; provided, however, in the event the
Depositor is unable to deliver or
cause to be delivered by such date each
Mortgage and each such interim
assignment by reason of the fact that any
such documents have not been returned
by the appropriate recording office, or, in
the case of each such interim
assignment, because the related Mortgage
has not been returned by the
appropriate recording office, the Depositor
shall deliver or cause to be
delivered such documents to the Trustee or
the Custodian on its behalf as
promptly as possible upon receipt thereof
and, in any event, within 720 days
following the Closing Date. The Depositor
shall forward or cause to be forwarded
to the Trustee or the Custodian on its
behalf (a) from time to time additional
original documents evidencing an assumption
or modification of a Mortgage Loan
and (b) any other documents required to be
delivered by the Depositor or the
Master Servicer to the Trustee. In the
event that the original Mortgage is not
delivered and in connection with the
payment in full of the related Mortgage
Loan and the public recording office
requires the presentation of a "lost
instruments affidavit and indemnity" or any
equivalent document, because only a
copy of the Mortgage can be delivered with
the instrument of satisfaction or
reconveyance, the Master Servicer shall
execute and deliver or cause to be
executed and delivered such a document to
the public recording office. In the
case where a public recording office
retains the original recorded Mortgage or
in the case where a Mortgage is lost after
recordation in a public recording
office, the Depositor shall deliver or
cause to be delivered to the Trustee or
the Custodian on its behalf a copy of such
Mortgage certified by such public
recording office to be a true and complete
copy of the original recorded
Mortgage.
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.
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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 2005-2, 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.
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<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.
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<PAGE>
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.
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.
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<PAGE>
It is understood and agreed that the obligation of the Seller
to
substitute for or to purchase any Mortgage
Loan which does not meet the
requirements of Section 2.1 above shall
constitute the sole remedy respecting
such defect available to the Trustee, the
Depositor and any Certificateholder
against the Seller.
The mortgage loans permitted by the terms of this Agreement to
be
included in the Trust Fund are limited to
(i) the Mortgage Loans (which the
Depositor acquired pursuant to the MLPA,
and which refers to, among other
representations and warranties in the MLPA,
a representation and warranty of the
Seller that no Mortgage Loan is a "high
cost loan" as defined by the specific
applicable local, state or federal
predatory and abusive lending laws, and (ii)
Substitute Mortgage Loans (which, by
definition as set forth in this Agreement
and referred to in the MLPA, are required
to conform to, among other
representations and warranties, a
representation and warranty of the Seller set
forth in the MLPA that no Substitute
Mortgage Loan is a "high cost loan" as
defined by the specific applicable local,
state or federal predatory and abusive
lending laws). It is therefore understood
and agreed by the parties hereto that
it is not intended that any Mortgage Loan
be included in the Trust Fund that is
a "high cost loan" as defined in the by the
specific applicable local, state or
federal predatory and abusive lending
laws.
SECTION 2.3 Representations and Warranties of the Master
Servicer; Covenants of the Seller.
(a) The Master
Servicer hereby makes the representations and
warranties set forth in Schedule II hereto and by this
reference
incorporated herein, to the Depositor and the Trustee, as of
the
Closing Date, or if so specified therein, as of the Cut-off
Date.
(b) Upon discovery by
any of the parties hereto of a breach of a
representation or warranty made pursuant to Schedule B to the
MLPA
that materially and adversely affects the interests of the
Certificateholders in any Mortgage Loan, the party discovering
such breach shall give prompt notice thereof to the other
parties.
The Seller hereby covenants that within 90 days of the earlier
of
its discovery or its receipt of written notice from any party of
a
breach of any representation or warranty made pursuant to
Schedule
B to the MLPA which materially and adversely affects the
interests
of the Certificateholders in any Mortgage Loan, it shall cure
such
breach in all material respects, and if such breach is not so
cured, shall, (i) if such 90-day period expires prior to the
second anniversary of the Closing Date, remove such Mortgage
Loan
(a "Deleted Mortgage Loan") from the Trust Fund and substitute
in
its place a Substitute Mortgage Loan, in the manner and subject
to
the conditions set forth in this Section; or (ii) repurchase
the
affected Mortgage Loan or Mortgage Loans from the Trustee at
the
Purchase Price in the manner set forth below; provided,
however,
that any such substitution pursuant to (i) above shall not be
effected prior to the delivery to the Trustee of the Opinion of
Counsel required by Section 2.5 hereof, if any, and any such
substitution pursuant to (i) above shall not be effected prior
to
the additional delivery to the Trustee or the Custodian on its
behalf of a Request for Release substantially in the form of
Exhibit M and the Mortgage File for any such Substitute
Mortgage
Loan. The Seller shall promptly reimburse the Master Servicer
and
the Trustee for any expenses reasonably incurred by the Master
Servicer or the Trustee in respect of enforcing the remedies
for
such breach. With respect to the representations and warranties
described in this Section which are made to the best of the
Seller's knowledge, if it is discovered by either the
Depositor,
the Seller or the Trustee that the substance of such
representation and warranty is inaccurate and such inaccuracy
materially and adversely affects the value of the related
Mortgage
Loan or the interests of the Certificateholders therein,
notwithstanding the Seller's lack of knowledge with respect to
the
substance of such representation or warranty, such inaccuracy
shall be deemed a breach of the applicable representation or
warranty.
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With respect to any Substitute Mortgage Loan or Loans, the Seller
shall
deliver to the Trustee or the Custodian on
its behalf for the benefit of the
Certificateholders the Mortgage Note, the
Mortgage, the related assignment of
the Mortgage, and such other documents and
agreements as are required by Section
2.1, with the Mortgage Note endorsed and
the Mortgage assigned as required by
Section 2.1. No substitution is permitted
to be made in any calendar month after
the Determination Date for such month.
Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of
substitution shall not be part of the
Trust Fund and will be retained by the
Seller on the next succeeding
Distribution Date. For the month of
substitution, distributions to
Certificateholders will include the monthly
payment due on any Deleted Mortgage
Loan for such month and thereafter the
Seller shall be entitled to retain all
amounts received in respect of such Deleted
Mortgage Loan. The Master Servicer
shall amend the Mortgage Loan Schedule for
the benefit of the Certificateholders
to reflect the removal of such Deleted
Mortgage Loan and the substitution of the
Substitute Mortgage Loan or Loans and the
Master Servicer shall deliver the
amended Mortgage Loan Schedule to the
Trustee. Upon such substitution, the
Substitute Mortgage Loan or Loans shall be
subject to the terms of this
Agreement in all respects, and the Seller
shall be deemed to have made with
respect to such Substitute Mortgage Loan or
Loans, as of the date of
substitution, the representations and
warranties made pursuant to Schedule B to
the MLPA with respect to such Mortgage
Loan. Upon any such substitution and the
deposit to the Certificate Account of the
amount required to be deposited
therein in connection with such
substitution as described in the following
paragraph, the Trustee shall release or
shall cause the Custodian to release the
Mortgage File held for the benefit of the
Certificateholders relating to such
Deleted Mortgage Loan to the Seller and
shall execute and deliver at the
Seller's direction such instruments of
transfer or assignment prepared by the
Seller, in each case without recourse, as
shall be necessary to vest title in
the Seller, or its designee, the Trustee's
interest in any Deleted Mortgage Loan
substituted for pursuant to this Section
2.3.
For any month in which the Seller substitutes one or more
Substitute
Mortgage Loans for one or more Deleted
Mortgage Loans, the Master Servicer will
determine the amount (if any) by which the
aggregate principal balance of all
such Substitute Mortgage Loans as of the
date of substitution is less than the
aggregate Stated Principal Balance of all
such Deleted Mortgage Loans (after
application of the scheduled principal
portion of the monthly payments due in
the month of substitution). The amount of
such shortage (the "Substitution
Adjustment Amount") plus an amount equal to
the aggregate of any unreimbursed
Advances with respect to such Deleted
Mortgage Loans shall be deposited in the
Certificate Account by the Seller on or
before the Distribution Account Deposit
Date for the Distribution Date in the month
succeeding the calendar month during
which the related Mortgage Loan became
required to be purchased or replaced
hereunder.
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<PAGE>
In the event that the Seller shall have repurchased a Mortgage
Loan,
the Purchase Price therefor shall be
deposited in the Certificate Account
pursuant to Section 3.5 on or before the
Distribution Account Deposit Date for
the Distribution Date in the month
following the month during which the Seller
became obligated hereunder to repurchase or
replace such Mortgage Loan and upon
such deposit of the Purchase Price, the
delivery of the Opinion of Counsel
required by Section 2.5 and receipt of a
Request for Release in the form of
Exhibit M hereto, the Trustee shall release
or shall cause the Custodian to
release the related Mortgage File held for
the benefit of the Certificateholders
to such Person, and the Trustee shall
execute and deliver or shall cause the
Custodian to execute and deliver at such
Person's direction such instruments of
transfer or assignment prepared by such
Person, in each case without recourse,
as shall be necessary to transfer title
from the Trustee. It is understood and
agreed that the obligation under this
Agreement of the Seller to cure,
repurchase or replace any Mortgage Loan as
to which a breach has occurred and is
continuing shall constitute the sole remedy
against the Seller respecting such
breach available to Certificateholders, the
Depositor or the Trustee on their
behalf.
After giving effect to the sale of the Certificates by the
Depositor to
the Underwriter, and thereafter, so long as
any Certificates remain outstanding,
the Seller, its affiliates and agents,
collectively, shall not beneficially own
Certificates the aggregate fair value of
which would represent 90% or more of
the beneficial interests in the Trust
Fund.
The representations and warranties made pursuant to this Section
2.3
shall survive delivery of the respective
Mortgage Files to the Trustee or the
Custodian for the benefit of the
Certificateholders.
SECTION
2.4 Representations and Warranties of the Depositor as
to the Mortgage Loans.
The Depositor hereby represents and warrants to the Trustee
with
respect to each Mortgage Loan as of the
date hereof or such other date set forth
herein that as of the Closing Date, and
following the transfer of the Mortgage
Loans to it pursuant to the MLPA and
immediately prior to the conveyance of the
Mortgage Loans by it to the Trustee
pursuant to Section 2.1(a) hereof, the
Depositor had good title to the Mortgage
Loans and the Mortgage Notes were
subject to no offsets, defenses or
counterclaims.
It is understood and agreed that the representations and warranties
set
forth in this Section 2.4 shall survive
delivery of the Mortgage Files to the
Trustee. Upon discovery by the Depositor or
the Trustee of a breach of any of
the foregoing representations and
warranties set forth in this Section 2.4
(referred to herein as a "breach"), which
breach materially and adversely
affects the interest of the
Certificateholders, the party discovering such
breach shall give prompt written notice to
the others and to each Rating Agency.
SECTION 2.5 Delivery of Opinion of Counsel in Connection with
Substitutions.
(a) Notwithstanding
any contrary provision of this Agreement, no
substitution pursuant to Section 2.2 or Section 2.3 shall be
made
more than 90 days after the Closing Date unless the Depositor
delivers to the Trustee an Opinion of Counsel, which Opinion of
Counsel shall not be at the expense of either the Trustee or
the
Trust Fund, addressed to the Trustee, to the effect that such
substitution will not (i) result in the imposition of the tax
on
"prohibited transactions" on the Trust Fund or contributions
after
the Startup Date, as defined in Sections 860F(a)(2) and 860G(d)
of
the Code, respectively, or (ii) cause any REMIC created
hereunder
to fail to qualify as a REMIC at any time that any Certificates
are outstanding.
49
<PAGE>
(b) Upon discovery by
the Depositor, the Master Servicer or the
Trustee that any Mortgage Loan does not constitute a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code,
the party discovering such fact shall promptly (and in any
event
within five (5) Business Days of discovery) give written notice
thereof to the other parties. In connection therewith, the
Trustee
shall require the Depositor to cause the Seller, pursuant to
the
MLPA and at the Seller's option, to either (i) substitute, if
the
conditions in Section 2.3(b) with respect to substitutions are
satisfied, a Substitute Mortgage Loan for the affected Mortgage
Loan, or (ii) repurchase the affected Mortgage Loan within 90
days
of such discovery in the same manner as it would a Mortgage
Loan
for a breach of representation or warranty made pursuant to
Section 2.3. The Trustee shall reconvey or shall cause the
Custodian to reconvey to the Seller the Mortgage Loan to be
released pursuant hereto in the same manner, and on the same
terms
and conditions, as it would a Mortgage Loan repurchased for
breach
of a representation or warranty contained in Section 2.3.
SECTION 2.6 Execution and Delivery of Certificates.
The Trustee acknowledges the transfer and assignment to it of the
Trust
Fund and, concurrently with such transfer
and assignment, has executed and
delivered to or upon the order of the
Depositor, the Certificates in authorized
denominations evidencing directly or
indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the
Trust Fund and exercise the rights
referred to above for the benefit of all
present and future Holders of the
Certificates and to perform the duties set
forth in this Agreement to the best
of its ability, to the end that the
interests of the Holders of the Certificates
may be adequately and effectively
protected.
SECTION 2.7 REMIC Matters.
The Preliminary Statement sets forth the "latest possible
maturity
date" for federal income tax purposes of
all REMIC regular interests created
hereby.
The assets of the Lower REMIC shall be as set forth in the
definition
thereof. Each interest identified in the
first table below by a designation
beginning with "L" shall be a "regular
interest" in the Lower REMIC and a Lower
REMIC Interest, and the RL Interests shall
be the sole class of residual
interest in the Lower REMIC. The Lower
REMIC Interests shall be uncertificated
and shall be held by the Trustee as assets
of the 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.
50
<PAGE>
The assets of the Upper REMIC shall be as set forth in the
definition
thereof. The Regular Certificates shall
represent "regular interests" in the
Upper REMIC. The RU Interest shall be the
sole class of residual interest in the
Upper REMIC. The Class I-A-R Certificate
shall represent ownership of the RL
Interest, 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.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Lower REMIC
Interest or Lower REMIC
Interest
Corresponding Class of Middle REMIC
Residual
Balance
Lower REMIC Interest Rate
Interests
--------------------------------------
Interest
Principal
-------------------------------------------------------------------------------------------------------------
<S>
<C>
<C>
<C>
<C>
L-I-A-1
$
53,932.90
5.50%
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-I-A-2
$
5,992.54
5.50%
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-I-PO
$
1,816,672.22
0%
N/A
M-I-PO
-------------------------------------------------------------------------------------------------------------
L-I-A-ZZZ
$ 233,099,718.59
5.50%
(1)
(1)
-------------------------------------------------------------------------------------------------------------
RL
$
0.00
N/A
N/A
N/A
-------------------------------------------------------------------------------------------------------------
L-II-A-1
$
5,295.70
5.00%
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-II-A-2
$
588.41
5.00%
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-II-PO
$
217,697.06
0%
N/A
M-II-PO
-------------------------------------------------------------------------------------------------------------
L-II-A-ZZZ
$
22,834,527.02
5.00%
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-III-A-1
$
5,927.53
Group III Net WAC
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-III-A-2
$
658.61
Group III Net WAC
(1)
(1)
-------------------------------------------------------------------------------------------------------------
L-III-A-ZZZ
$
25,828,028.79
Group III Net WAC
(1)
(1)
-------------------------------------------------------------------------------------------------------------
</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-I-A-2,
M-I-A-3, M-I-A-4, M-I-A-5, M-I-A-6,
M-I-A-7, M-I-A-8, M-I-A-RU, 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).
Lower REMIC Interest L-I-PO shall be a
Corresponding Class to M-I-PO. 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-2, 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). Lower REMIC Interest L-II-PO shall be
a Corresponding Class to M-II-PO. The
Lower REMIC Interest L-III-A-1, Lower REMIC
L-III-A-2 and Lower REMIC Interest
L-III-A-ZZZ shall be Corresponding Classes
to these classes of Middle REMIC
Interests: M-III-A-1, M-II-A-2, 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
III). Any excess cashflow shall be payable
to the RL Interest.
51
<PAGE>
"L1 Interests" refers to the L-I-A-1 Lower REMIC Interest,
L-II-A-1
Lower REMIC Interest and the L-III-A-1
Lower REMIC Interests. "L2 Interests"
refers to the L-I-A-2 Lower REMIC Interest,
L-II-A-2 Lower REMIC Interest and
the L-III-A-2 Lower REMIC Interest. "LZZZ
Interests" refers to L-I-A-ZZZ Lower
REMIC Interest, L-II-A-ZZZ Lower REMIC
Interest and L-III-A-ZZZ Lower REMIC
Interest. "LPO Interests" refer to the
L-I-PO Lower REMIC Interest and the
L-II-PO 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 (i)
the initial principal balances of the L1
Interests and L2 Interests
corresponding to such Mortgage Pool, and
(ii) the portion of the LPO Interest
attributable to the Discount Mortgage Loans
in the Mortgage Pool corresponding
to such LZZZ Interest.
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.
A "Cross-over Situation" exists if on any Distribution Date
(after
taking into account distributions of
principal and allocations of Realized
Losses on such Distribution Date) the L1
and L2 Interests corresponding to any
Mortgage Pool are in the aggregate less
than 1% of the Group Subordinate Amount
of the corresponding Mortgage Pool. If a
Cross-over Situation exists on any
Distribution Date, and the weighted average
interest rate of the outstanding L1
and L2 Interests is less than the
Pass-Through Rate for any Class of Subordinate
Certificates for the following Distribution
Date, a Principal Reallocation
Payment (as defined below) shall be made
proportionately to the outstanding L1
Interests prior to any other distributions
of principal from each such Mortgage
Pool so that the Calculation Rate equals
the Pass-Through Rate for each Class of
Subordinate Certificates. If a Cross-over
Situation exists on any Distribution
Date, and the weighted average rate of the
outstanding L1 and L2 Interests is
greater than the Pass-Through Rate for any
Class of Subordinate Certificates for
the following Distribution Date, a
Principal Reallocation Payment shall be made
proportionately to the outstanding L2
Interests prior to any other distributions
of principal from each such Mortgage Pool
so that the Calculation Rate equals
the Pass-Through Rate for each Class of
Subordinate Certificates. A "Principal
Reallocation Payment" is a distribution of
the minimum amount of principal that
causes the Calculation Rate (as defined
below) with respect to the outstanding
L1 and L2 Interests to equal the
Pass-Through Rate for each Class of Subordinate
Certificates. The "Calculation Rate" shall
equal the product of (i) 10 and (ii)
the weighted average interest rate of the
outstanding L1 and L2 Interests,
treating each L1 Interest as capped at zero
or reduced by a fixed percentage of
100% of the interest accruing on such
class. Principal Reallocation Payments
shall be made from principal received on
the Mortgage Loans from a Mortgage Pool
and shall also consist of a proportionate
allocation of Realized Losses from the
Mortgage Loans of a Mortgage Pool. For
purposes of making Principal Reallocation
Payments, to the extent that the principal
received during the applicable
collection period from the related Mortgage
Pool and related Realized Losses are
insufficient to make the necessary
reduction of principal, then interest shall
accrue on the LZZZ Interest (and be added
to its principal balance) of the
related Mortgage Pool to allow the
necessary Principal Reallocation Payment to
be made. The Calculation Rate is designed
to always equal the Pass-Through Rate
of each Class of Subordinated
Certificates.
52
<PAGE>
If a Cross-over Situation exists, the aggregate principal balances
of
the outstanding L1 and L2 Interests of all
of the Mortgage Pools shall not be
reduced below one percent of the aggregate
Pool Principal Balance of all of the
Mortgage Pools for the following
Distribution Date in excess of the Senior
Certificates as of the related Distribution
Date (after taking into account
distributions of principal and allocations
of Realized Losses on such
Distribution Date). To the extent this
limitation prevents the distribution of
principal to the L1 and L2 Interests of a
Mortgage Pool and the related LZZZ
Interest has already been reduced to zero,
such excess principal from such
Mortgage Pool shall be paid proportionately
to the LZZZ Interests of the
Mortgage Pool whose aggregate L1 and L2
Interests are less than one percent of
the Group Subordinate Amount. Any such
shortfall as a result of the Mortgage
Pool receiving the extra payment having a
Designated Mortgage Pool Rate (as
defined below) lower than the Designated
Mortgage Pool Rate of the Mortgage Pool
from which the payment was reallocated
shall be treated as a Realized Loss and
if excess arises as result of the Mortgage
Pool receiving the extra payment
having a Designated Mortgage Pool Rate
higher than the Mortgage Pool from which
the payment was reallocated it shall
reimburse the Middle REMIC for prior
Realized Losses.
The Class L-I-PO Interest shall be entitled
to receive the Class PO Principal
Distribution Amount for Pool I.
The Class L-II-PO Interest shall be
entitled to receive the Class PO Principal
Distribution Amount for Pool II.
53
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Middle
Corresponding Class or Interest
REMIC Interest
Middle REMIC
Middle REMIC Interest
------------------------------------
or Residual
Interest Balance
Rate
Interest
Principal
-------------------------------------------------------------------------------------------------------------
<S>
<C>
<C>
<C>
<C>
M-I-A-1
$
67,153,000.00
5.50%
I-A-1
I-A-1
-------------------------------------------------------------------------------------------------------------
M-I-A-2
$
26,771,000.00
5.50%
I-A-2
I-A-2
-------------------------------------------------------------------------------------------------------------
M-I-A-3
$
44,645,000.00
5.50%
I-A-3
I-A-4
-------------------------------------------------------------------------------------------------------------
M-I-A-4
$
22,695,000.00
5.50%
I-A-4
I-A-4
-------------------------------------------------------------------------------------------------------------
M-I-A-5
$
41,739,000.00
5.50%
I-A-5, I-A-6, I-A-7
I-A-5
-------------------------------------------------------------------------------------------------------------
M-I-A-6
$
10,482,238.00
5.50%
I-A-5, I-A-6, I-A-7
I-A-6
-------------------------------------------------------------------------------------------------------------
M-I-A-7
$
4,695,762.00
5.50%
I-A-5, I-A-6, I-A-7
I-A-7
-------------------------------------------------------------------------------------------------------------
M-I-A-8
$
8,986,000.00
5.50%
I-A-8
I-A-8
-------------------------------------------------------------------------------------------------------------
M-I-PO
$
1,816,672.22
0%
N/A
I-A-PO
-------------------------------------------------------------------------------------------------------------
M-I-A-RU
$
100.00
5.50%
RU Interest
RU Interest
-------------------------------------------------------------------------------------------------------------
M-II-A-1
$
21,000,000.00
5.00%
II-A-1
II-A-1
-------------------------------------------------------------------------------------------------------------
M-II-A-2
$
1,252,000.00
5.00%
II-A-2
II-A-2
-------------------------------------------------------------------------------------------------------------
M-II-A-PO
$
217,697.06
0%
N/A
II-A-PO
-------------------------------------------------------------------------------------------------------------
M-III-A-1
$
22,879,729.35
7.00%
III-A-1, III-A-2
III-A-1
-------------------------------------------------------------------------------------------------------------
M-III-A-2
$
2,296,270.65
0%
N/A
III-A-2
-------------------------------------------------------------------------------------------------------------
M-B-1
$
3,691,000.00
(1)
B-1
B-1
-------------------------------------------------------------------------------------------------------------
M-B-2
$
1,419,000.00
(1)
B-2
B-2
-------------------------------------------------------------------------------------------------------------
M-B-3
$ 710,000.00
(1)
B-3
B-3
-------------------------------------------------------------------------------------------------------------
M-B-4
$
567,000.00
(1)
B-4
B-4
-------------------------------------------------------------------------------------------------------------
M-B-5
$
426,000.00
(1)
B-5
B-5
-------------------------------------------------------------------------------------------------------------
M-B-6
$
426,570.09
(1)
B-6
B-6
-------------------------------------------------------------------------------------------------------------
RM
$
0.00
N/A
N/A
N/A
-------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Middle REMIC Interest Rate for the
Middle REMIC Interest M-B-1, Middle
REMIC Interest M-B-2, Middle REMIC Interest
M-B-3, Middle REMIC Interest M-B-4,
Middle REMIC Interest M-B-5, Middle REMIC
Interest M-B-6 shall equal the
Calculation Rate as defined in this Section
2.7. The Pass-Through Rate on each
Class of Subordinated Certificates is
variable and will be equal to the weighted
average of the Middle REMIC Interest Rates
on Middle REMIC Interest M-B-1,
Middle REMIC Interest M-B-2, Middle REMIC
Interest M-B-3, Middle REMIC Interest
M-B-4, Middle REMIC Interest M-B-5, Middle
REMIC Interest M-B-6, weighted on the
basis of the principal balance of each such
Middle REMIC Interest. Any excess
cashflow shall be payable to the RM
Interest.
On each Distribution Date Available Funds shall be distributed
with
respect to the Middle REMIC Interests in a
manner such that:
54
<PAGE>
(a) interest accrued,
if any, on each Middle REMIC Interest is
distributed with respect to each such Middle REMIC Interest in
the
same manner that Accrued Certificate Interest is distributed
with
respect to the Corresponding Class or Classes of Certificates
pursuant to Section 4.2; and
(b) principal is
distributed (and Realized Losses shall be allocated)
with respect to each such Middle REMIC Interest in the same
manner
that principal is distributed (and Realized Losses is
allocated)
with respect to the Corresponding Classes or Classes of
Certificate pursuant to Section 4.2 and Section 4.4.
The foregoing REMIC structure is intended to cause all of the cash
from
the Mortgage Loans to flow through to the
Upper REMIC as cash flow on a REMIC
regular interest, without creating any
shortfall-actual or potential (other than
for credit losses) to any REMIC regular
interest. To the extent that the
structure is believed to diverge from such
intention the Trustee shall resolve
ambiguities to accomplish such result and
shall to the extent necessary rectify
any drafting errors or seek clarification
to the structure without
Certificateholder approval (but with
guidance of counsel) to accomplish such
intention.
ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
SECTION 3.1 Master Servicer to Service Mortgage Loans.
For and on behalf of the Certificateholders, the Master Servicer
shall
service and administer the Mortgage Loans
in accordance with the terms of (i)
the Servicing Rights Transfer and
Subservicing Agreement, pursuant to which
First Tennessee Mortgage Services, Inc.
engaged the Master Servicer to
subservice the Mortgage Loans, (ii) this
Agreement and (iii) the customary and
usual standards of practice of prudent
mortgage loan servicers; provided that if
there is a conflict between the terms of
the Servicing Agreement and the
Servicing Rights Transfer and Subservicing
Agreement, on the one hand, and this
Agreement, on the other hand, the terms of
this Agreement shall prevail. In
connection with such servicing and
administration, the Master Servicer shall
have full power and authority, acting alone
and/or through Subservicers as
provided in Section 3.2 hereof, to do or
cause to be done any and all things
that it may deem necessary or desirable in
connection with such servicing and
administration, including but not limited
to, the power and authority, subject
to the terms hereof (i) to execute and
deliver, on behalf of the
Certificateholders and the Trustee,
customary consents or waivers and other
instruments and documents, (ii) to consent
to transfers of any Mortgaged
Property and assumptions of the Mortgage
Notes and related Mortgages (but only
in the manner provided in this Agreement),
(iii) to collect any Insurance
Proceeds and other Liquidation Proceeds,
and (iv) to effectuate foreclosure or
other conversion of the ownership of the
Mortgaged Property securing any
Mortgage Loan; provided that the Master
Servicer shall not take any action that
is inconsistent with or prejudices the
interests of the Trust Fund or the
Certificateholders in any Mortgage Loan or
the rights and interests of the
Depositor, the Trustee and the
Certificateholders under this Agreement. The
Master Servicer shall represent and protect
the interests of the Trust Fund in
the same manner as it protects its own
interests in mortgage loans in its own
portfolio in any claim, proceeding or
litigation regarding a Mortgage Loan, and
shall not make or permit any modification,
waiver or amendment of any Mortgage
Loan which would cause any REMIC created
hereunder to fail to qualify as a REMIC
or result in the imposition of any tax
under Section 860F(a) or Section 860G(d)
of the Code. Without limiting the
generality of the foregoing, the Master
Servicer, in its own name or in the name of
the Depositor and the Trustee, is
hereby authorized and empowered by the
Depositor and the Trustee, when the
Master Servicer believes it appropriate in
its reasonable judgment, to execute
and deliver, on behalf of the Trustee, the
Depositor, the Certificateholders or
any of them, any and all instruments of
satisfaction or cancellation, or of
partial or full release or discharge and
all other comparable instruments, with
respect to the Mortgage Loans, and with
respect to the Mortgaged Properties held
for the benefit of the Certificateholders.
The Master Servicer shall prepare and
deliver to the Depositor and/or the Trustee
such documents requiring execution
and delivery by either or both of them as
are necessary or appropriate to enable
the Master Servicer to service and
administer the Mortgage Loans to the extent
that the Master Servicer is not permitted
to execute and deliver such documents
pursuant to the preceding sentence. Upon
receipt of such documents, the
Depositor and/or the Trustee shall execute
such documents and deliver them to
the Master Servicer. The Master Servicer
further is authorized and empowered by
the Trustee, on behalf of the
Certificateholders and the Trustee, in its own
name or in the name of the Subservicer,
when the Master Servicer or the
Subservicer as the case may be, believes it
appropriate in its best judgment to
register any Mortgage Loan on the MERS(R)
System, or cause the removal from the
registration of any Mortgage Loan on the
MERS(R) System, to execute and deliver,
on behalf of the Trustee and the
Certificateholders or any of them, any and all
instruments of assignment and other
comparable instruments with respect to such
assignment or re-recording of a Mortgage in
the name of MERS, solely as nominee
for the Trustee and its successors and
assigns.
55
<PAGE>
In accordance with the standards of the preceding paragraph, the
Master
Servicer shall advance or cause to be
advanced funds as necessary for the
purpose of effecting the payment of taxes
and assessments on the Mortgaged
Properties, which advances shall be
reimbursable in the first instance from
related collections from the Mortgagors
pursuant to Section 3.6, and further as
provided in Section 3.8. The costs incurred
by the Master Servicer, if any, in
effecting the timely payments of taxes and
assessments on the Mortgaged
Properties and related insurance premiums
shall not, for the purpose of
calculating monthly distributions to the
Certificateholders, be added to the
Stated Principal Balances of the related
Mortgage Loans, notwithstanding that
the terms of such Mortgage Loans so
permit.
SECTION 3.2 Subservicing; Enforcement of the Obligations of
Servicers.
(a) The Master
Servicer may arrange for the subservicing of any
Mortgage Loan by a Subservicer pursuant to a subservicing
agreement; provided, however, that such subservicing
arrangement
and the terms of the related subservicing agreement must
provide
for the servicing of such Mortgage Loans in a manner consistent
with the servicing arrangements contemplated hereunder. Unless
the
context otherwise requires, references in this Agreement to
actions taken or to be taken by the Master Servicer in
servicing
the Mortgage Loans include actions taken or to be taken by a
Subservicer on behalf of the Master Servicer. Notwithstanding
the
provisions of any subservicing agreement, any of the provisions
of
this Agreement relating to agreements or arrangements between
the
Master Servicer and a Subservicer or reference to actions taken
through a Subservicer or otherwise, the Master Servicer shall
remain obligated and liable to the Depositor, the Trustee and
the
Certificateholders for the servicing and administration of the
Mortgage Loans in accordance with the provisions of this
Agreement
without diminution of such obligation or liability by virtue of
such subservicing agreements or arrangements or by virtue of
indemnification from the Subservicer and to the same extent and
under the same terms and conditions as if the Master Servicer
alone were servicing and administering the Mortgage Loans. All
actions of each Subservicer performed pursuant to the related
subservicing agreement shall be performed as an agent of the
Master Servicer with the same force and effect as if performed
directly by the Master Servicer.
(b) For purposes of
this Agreement, the Master Servicer shall be
deemed to have received any collections, recoveries or payments
with respect to the Mortgage Loans that are received by a
Subservicer regardless of whether such payments are remitted by
the Subservicer to the Master Servicer.
SECTION 3.3 Rights of the Depositor and the Trustee in
Respect of the Master Servicer.
The Depositor may, but is not obligated to, enforce the obligations
of
the Master Servicer hereunder and may, but
is not obligated to, perform, or
cause a designee to perform, any defaulted
obligation of the Master Servicer
hereunder and in connection with any such
defaulted obligation to exercise the
related rights of the Master Servicer
hereunder; provided that the Master
Servicer shall not be relieved of any of
its obligations hereunder by virtue of
such performance by the Depositor or its
designee. Neither the Trustee nor the
Depositor shall have any responsibility or
liability for any action or failure
to act by the Master Servicer nor shall the
Trustee or the Depositor be
obligated to supervise the performance of
the Master Servicer hereunder or
otherwise.
SECTION 3.4 Trustee to Act as Master Servicer.
In the event that the Master Servicer shall for any reason no
longer be
the Master Servicer hereunder (including by
reason of an Event of Default), the
Trustee or its successor shall thereupon
assume all of the rights and
obligations of the Master Servicer
hereunder arising thereafter (except that the
Trustee shall not be (i) liable for losses
of the Master Servicer pursuant to
Section 3.9 hereof or any acts or omissions
of the predecessor Master Servicer
hereunder), (ii) obligated to make Advances
if it is prohibited from doing so by
applicable law, (iii) obligated to
effectuate repurchases or substitutions of
Mortgage Loans hereunder including, but not
limited to, repurchases or
substitutions of Mortgage Loans pursuant to
Section 2.2 or 2.3 hereof, (iv)
responsible for expenses of the Master
Servicer pursuant to Section 2.3 or (v)
deemed to have made any representations and
warranties of the Master Servicer
hereunder). Any such assumption shall be
subject to Section 7.2 hereof. If the
Master Servicer shall for any reason no
longer be the Master Servicer (including
by reason of any Event of Default), the
Trustee or its successor shall succeed
to any rights and obligations of the Master
Servicer under each subservicing
agreement.
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The Master Servicer shall, upon request of the Trustee, but at
the
expense of the Master Servicer, deliver to
the assuming party all documents and
records relating to each subservicing
agreement or substitute subservicing
agreement and the Mortgage Loans then being
serviced thereunder and an
accounting of amounts collected or held by
it and otherwise use its best efforts
to effect the orderly and efficient
transfer of the substitute subservicing
agreement to the assuming party.
SECTION 3.5 Collection of Mortgage Loan Payments; Certificate
Account; Distribution Account.
(a) The Master
Servicer shall make reasonable efforts in accordance
with the customary and usual standards of practice of prudent
mortgage servicers to collect all payments called for under the
terms and provisions of the Mortgage Loans to the extent such
procedures shall be consistent with this Agreement and the
terms
and provisions of any related Required Insurance Policy.
Consistent with the foregoing, the Master Servicer may in its
discretion (i)
waive any late payment charge or any prepayment
charge or penalty interest in connection with the prepayment of
a
Mortgage Loan and (ii) extend the due dates for payments due on
a
Mortgage Note for a period not greater than 180 days; provided,
however, that the Master Servicer cannot extend the maturity of
any such Mortgage Loan past the date on which the final payment
is
due on the latest maturing Mortgage Loan as of the Cut-off
Date.
In the event of any such arrangement, the Master Servicer shall
make Advances on the related Mortgage Loan in accordance with
the
provisions of Section 4.1 during the scheduled period in
accordance with the amortization schedule of such Mortgage Loan
without modification thereof by reason of such arrangements.
The
Master Servicer shall not be required to institute or join in
litigation with respect to collection of any payment (whether
under a Mortgage, Mortgage Note or otherwise or against any
public
or governmental authority with respect to a taking or
condemnation) if it reasonably believes that enforcing the
provision of the Mortgage or other instrument pursuant to which
such payment is required is prohibited by applicable law.
(b) The Master
Servicer shall establish and maintain the Certificate
Account. The Certificate Account shall consist of three
separate
subaccounts, each of which shall relate to a particular
Mortgage
Pool. The Master Servicer shall deposit or cause to be
deposited
into the appropriate subaccount of the Certificate Account no
later than two Business Days after receipt, except as otherwise
specifically provided herein, the following payments and
collections remitted by Subservicers or received by it in
respect
of the Mortgage Loans subsequent to the Cut-off Date (other
than
in respect of principal and interest due on the Mortgage Loans
on
or before the Cut-off Date) and the following amounts required
to
be deposited hereunder:
(i) all
payments on account of principal on the Mortgage Loans
in the related Mortgage Pool, including Principal
Prepayments;
(ii) all
payments on account of interest on the Mortgage Loans
in the related Mortgage Pool, net of the related Master
Servicing Fee, any Prepayment Interest Excess and, for so
long as First Horizon is the Master Servicer, any Retained
Yield;
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(iii) all Insurance
Proceeds and Liquidation Proceeds in respect
of the related Mortgage Loans in the related Mortgage Pool,
other than proceeds to be applied to the restoration or
repair of the Mortgaged Property or released to the
Mortgagor in accordance with the Master Servicer's normal
servicing procedures;
(iv) any amount
required to be deposited by the Master Servicer
in respect of the related Mortgage Pool pursuant to Section
3.5(c) in connection with any losses on Permitted
Investments;
(v) any
amounts required to be deposited by the Master Servicer
in respect of the related Mortgage Pool pursuant to Section
3.9(b) and 3.9(d);
(vi) all
Substitution Adjustment Amounts in respect of the
related Mortgage Pool;
(vii) all Advances in
respect of the related Mortgage Pool made
by the Master Servicer pursuant to Section 4.1; and
(viii) any other amounts required to be deposited hereunder in
respect of the related Mortgage Pool.
In addition, with respect to any Mortgage Loan that is subject
to a buydown agreement, on each Due Date for such Mortgage Loan,
in
addition to the monthly payment remitted by the Mortgagor, the
Master
Servicer shall cause funds to be deposited into the applicable
subaccount of the Certificate Account in an amount required to
cause an
amount of interest to be paid with respect to such Mortgage Loan
equal
to the amount of interest that has accrued on such Mortgage Loan
from
the preceding Due Date at the related Adjusted Mortgage Rate on
such
date.
The foregoing requirements for remittance by the Master
Servicer shall be exclusive, it being understood and agreed
that,
without limiting the generality of the foregoing, payments in
the
nature of
prepayment penalties, late payment charges, assumption fees
or amounts attributable to reimbursements of Advances, if
collected,
need not be remitted by the Master Servicer. In the event that
the
Master Servicer shall remit any amount not required to be remitted,
it
may at any time withdraw or direct the institution maintaining
the
Certificate Account to withdraw such amount from the
Certificate
Account, any provision herein to the contrary notwithstanding.
Such
withdrawal or direction may be accomplished by delivering
written
notice thereof to the Trustee or such other institution maintaining
the
Certificate Account which describes the amounts deposited in error
in
the Certificate Account. The Master Servicer shall maintain
adequate
records with respect to all withdrawals made pursuant to this
Section.
All funds deposited in the Certificate Account shall be held in
trust
for the Certificateholders until withdrawn in accordance with
Section
3.8.
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(c) The Trustee shall
establish and maintain, on behalf of the
Certificateholders, the Distribution Account. The Distribution
Account shall consist of three separate subaccounts, each of
which
shall relate to a particular Mortgage Pool. The Trustee shall,
promptly upon receipt, deposit in the Distribution Account and
retain therein the following:
(i) the
aggregate amount remitted by the Master Servicer to the
Trustee in respect of a Mortgage Pool pursuant to Section
3.8(a)(ix);
(ii) any amount
deposited by the Master Servicer pursuant to
this Section 3.5(c) in connection with any losses on
Permitted Investments; and
(iii) any other
amounts deposited hereunder which are required to
be deposited in the Distribution Account.
In the event that the Master Servicer shall remit any amount
not required to be remitted, it may at any time direct the Trustee
to
withdraw such amount from the applicable subaccount of the
Distribution
Account, any provision herein to the contrary notwithstanding.
Such
direction may be accomplished by delivering an Officer's
Certificate to
the Trustee which describes the amounts deposited in error in
the
Distribution Account. All funds deposited in the Distribution
Account
shall be held by the Trustee in trust for the related
Certificateholders until disbursed in
