<PAGE>

                       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 May 1, 2003

              -----------------------------------------------------

               FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2003-AR2

               MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2003-AR2

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                                TABLE OF CONTENTS

ARTICLE I    DEFINITIONS.......................................................5

ARTICLE II   CONVEYANCE OF MORTGAGE LOANS;  REPRESENTATIONS AND WARRANTIES....32
   SECTION 2.1   Conveyance of Mortgage Loans.................................32
   SECTION 2.2   Acceptance by Trustee of the Mortgage Loans..................36
   SECTION 2.3   Representations and Warranties of the Master Servicer;
                 Covenants of the Seller......................................38
   SECTION 2.4   Representations and Warranties of the Depositor as to the
                 Mortgage Loans...............................................40
   SECTION 2.5   Delivery of Opinion of Counsel in Connection with
                 Substitutions................................................40
   SECTION 2.6   Execution and Delivery of Certificates.......................41
   SECTION 2.7   REMIC Matters................................................41
   SECTION 2.8   Covenants of the Master Servicer.............................41

ARTICLE III  ADMINISTRATION AND SERVICING OF MORTGAGE LOANS...................42
   SECTION 3.1   Master Servicer to Service Mortgage Loans....................42
   SECTION 3.2   Subservicing; Enforcement of the Obligations of Servicers....43
   SECTION 3.3   Rights of the Depositor and the Trustee in Respect of the
                 Master Servicer..............................................43
   SECTION 3.4   Trustee to Act as Master Servicer............................44
   SECTION 3.5   Collection of Mortgage Loan Payments; Certificate Account;
                 Distribution Account.........................................44
   SECTION 3.6   Collection of Taxes, Assessments and Similar Items;
                 Escrow Accounts..............................................47
   SECTION 3.7   Access to Certain Documentation and Information Regarding
                 the Mortgage Loans...........................................48
   SECTION 3.8   Permitted Withdrawals from the Certificate Account and
                 Distribution Account.........................................48
   SECTION 3.9   Maintenance of Hazard Insurance; Maintenance of Primary
                 Insurance Policies...........................................50
   SECTION 3.10  Enforcement of Due-on-Sale Clauses; Assumption Agreements....52
   SECTION 3.11  Realization Upon Defaulted Mortgage Loans; Repurchase of
                 Certain Mortgage Loans.......................................53
   SECTION 3.12  Trustee to Cooperate; Release of Mortgage Files..............56
   SECTION 3.13  Documents Records and Funds in Possession of Master Servicer
                 to be Held for the Trustee...................................57
   SECTION 3.14  Master Servicing Compensation................................57
   SECTION 3.15  Access to Certain Documentation..............................58
   SECTION 3.16  Annual Statement as to Compliance............................58
   SECTION 3.17  Annual Independent Public Accountants' Servicing Statement;
                 Financial Statements.........................................58
   SECTION 3.18  Errors and Omissions Insurance; Fidelity Bonds...............59
   SECTION 3.19  Notification of Adjustments..................................59

ARTICLE IV   DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER................59
   SECTION 4.1   Advances.....................................................59
   SECTION 4.2   Priorities of Distribution...................................60

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   SECTION 4.3   Method of Distribution.......................................64
   SECTION 4.4   Allocation of Losses.........................................65
   SECTION 4.5   Reserved.....................................................67
   SECTION 4.6   Monthly Statements to Certificateholders.....................67
   SECTION 4.7   Reserved.....................................................69

ARTICLE V    THE CERTIFICATES.................................................69
   SECTION 5.1   The Certificates.............................................69
   SECTION 5.2   Certificate Register; Registration of Transfer and Exchange
                 of Certificates..............................................70
   SECTION 5.3   Mutilated, Destroyed, Lost or Stolen Certificates............75
   SECTION 5.4   Persons Deemed Owners........................................75
   SECTION 5.5   Access to List of Certificateholders' Names and Addresses....75
   SECTION 5.6   Maintenance of Office or Agency..............................75

ARTICLE VI   THE DEPOSITOR AND THE MASTER SERVICER............................76
   SECTION 6.1   Respective Liabilities of the Depositor and the Master
                 Servicer.....................................................76
   SECTION 6.2   Merger or Consolidation of the Depositor or the Master
                 Servicer.....................................................76
   SECTION 6.3   Limitation on Liability of the Depositor, the Master
                 Servicer and Others..........................................76
   SECTION 6.4   Limitation on Resignation of Master Servicer.................77

ARTICLE VII  DEFAULT..........................................................77
   SECTION 7.1   Events of Default............................................77
   SECTION 7.2   Trustee to Act; Appointment of Successor.....................79
   SECTION 7.3   Notification to Certificateholders...........................80

ARTICLE VIII CONCERNING THE TRUSTEE...........................................80
   SECTION 8.1   Duties of Trustee............................................80
   SECTION 8.2   Certain Matters Affecting the Trustee........................82
   SECTION 8.3   Trustee Not Liable for Certificates or Mortgage Loans........84
   SECTION 8.4   Trustee May Own Certificates.................................84
   SECTION 8.5   Trustee's Fees and Expenses..................................84
   SECTION 8.6   Eligibility Requirements for Trustee.........................85
   SECTION 8.7   Resignation and Removal of Trustee...........................85
   SECTION 8.8   Successor Trustee............................................86
   SECTION 8.9   Merger or Consolidation of Trustee...........................86
   SECTION 8.10  Appointment of Co-Trustee or Separate Trustee................86
   SECTION 8.11  Tax Matters..................................................88
   SECTION 8.12  Periodic Filings.............................................90

ARTICLE IX   TERMINATION......................................................90
   SECTION 9.1   Termination upon Liquidation or Purchase of all Mortgage
                 Loans........................................................90
   SECTION 9.2   Final Distribution on the Certificates.......................91
   SECTION 9.3   Additional Termination Requirements..........................92

ARTICLE X    [RESERVED].......................................................93

ARTICLE XI   MISCELLANEOUS PROVISIONS.........................................93

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   SECTION 11.1  Amendment....................................................93
   SECTION 11.2  Recordation of Agreement; Counterparts.......................94
   SECTION 11.3  Governing Law................................................94
   SECTION 11.4  Intention of Parties.........................................95
   SECTION 11.5  Notices......................................................95
   SECTION 11.6  Severability of Provisions...................................96
   SECTION 11.7  Assignment...................................................97
   SECTION 11.8  Limitation on Rights of Certificateholders...................97
   SECTION 11.9  Inspection and Audit Rights..................................97
   SECTION 11.10 Certificates Nonassessable and Fully Paid....................98
   SECTION 11.11 Limitations on Actions; No Proceedings.......................98
   SECTION 11.12 Acknowledgment of Seller.....................................98

                                    SCHEDULES

Schedule I:    Mortgage Loan Schedule                                      S-I-1
Schedule II:   Representations and Warranties of the Master Servicer      S-II-1
Schedule III:  Form of Monthly Master Servicer Report                    S-III-1

                                    EXHIBITS

Exhibit A:  Form of Senior Certificate                                       A-1
Exhibit B:  Form of Subordinated Certificate                                 B-1
Exhibit C:  Form of Residual Certificate                                     C-1
Exhibit D:  Form of Reverse of Certificates                                  D-1
Exhibit E:  Form of Initial Certification                                    E-1
Exhibit F:  Form of Delay Delivery Certification                             F-1
Exhibit G:  Form of Final Certification of Custodian                         G-1
Exhibit H:  Transfer Affidavit                                               H-1
Exhibit I:  Form of Transferor Certificate                                   I-1
Exhibit J:  Form of Investment Letter [Non-Rule 144A]                        J-1
Exhibit K:  Form of Rule 144A Letter                                         K-1
Exhibit L:  Request for Release (for Trustee)                                L-1
Exhibit M:  Request for Release (Mortgage Loan)                              M-1

                                      iii

<PAGE>

     THIS POOLING AND SERVICING AGREEMENT, dated as of May 1, 2003, 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 a single REMIC. The Certificates will represent the
entire beneficial ownership interest in the Trust Fund. The Regular Certificates
will represent "regular interests" in a single REMIC. The Class II-A-R
Certificates will represent the sole class of residual interests in the REMIC,
as described in Section 2.7. The "latest possible maturity date" for federal
income tax purposes of all 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]

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                                         Initial                      Integral
                         Initial          Pass                        Multiples
                    Class Certificate    Through         Minimum      in Excess
Class Designation         Balance         Rate         Denomination    Minimum
-------------------------------------------------------------------------------
Class I-A-1         $   25,574,000.00     4.550%/(1)/  $     25,000   $   1,000
-------------------------------------------------------------------------------
Class II-A-1        $  228,134,000.00     4.800%/(1)/  $     25,000   $   1,000
-------------------------------------------------------------------------------
Class II-A-R        $          100.00     4.800%/(1)/  $        100   $     N/A
-------------------------------------------------------------------------------
Class III-A-1       $   34,404,000.00     5.150%/(1)/  $     25,000   $   1,000
-------------------------------------------------------------------------------
Class B-1           $    4,444,000.00     4.819%/(2)/  $    100,000   $   1,000
-------------------------------------------------------------------------------
Class B-2           $    1,333,000.00     4.819%/(2)/  $    100,000   $   1,000
-------------------------------------------------------------------------------
Class B-3           $    1,037,000.00     4.819%/(2)/  $    100,000   $   1,000
-------------------------------------------------------------------------------
Class B-4           $      444,000.00     4.819%/(2)/  $    100,000   $   1,000
-------------------------------------------------------------------------------
Class B-5           $      444,000.00     4.819%/(2)/  $    100,000   $   1,000
-------------------------------------------------------------------------------
Class B-6           $      445,458.81     4.819%/(2)/  $    100,000   $   1,000
-------------------------------------------------------------------------------

(1)  The Pass-Through Rates for the Senior Certificates for each subsequent
Distribution Date will equal the Weighted Average Adjusted Net Mortgage Rate for
the related Mortgage Pool, as of the first day of the month immediately prior to
the month in which the relevant Distribution Date occurs, after taking into
account scheduled payments of principal on that date.

(2)  The Pass-Through Rates for the Subordinated Certificates for each
subsequent Distribution Date will equal the weighted average of the Weighted
Average Adjusted Net Mortgage Rates for each Mortgage Pool, weighted on the
basis of the Group Subordinate Amount for each Mortgage Pool, as of the first
day of the month immediately prior to the month in which the relevant
Distribution Date occurs, after taking into account scheduled payments of
principal on that date.

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Accretion Directed Certificates......   None.
Accrual Certificates.................   None.
Accrual Components...................   None.
Book-Entry Certificates..............   All Classes of Certificates other than
                                        the Physical Certificates.
COFI Certificates....................   None.
Component Certificates...............   None.
Components...........................   For purposes of calculating
                                        distributions, the Component
                                        Certificates will be comprised of
                                        multiple payment components having the
                                        designations, Initial Component Balances
                                        and Pass-Through Rates set forth below:

                                                         Initial      Pass-
                                                        Component    Through
                                         Designation     Balance      Rate
                                         -----------    ---------    -------
                                             N/A           N/A         N/A
Delay Certificates...................   All interest-bearing Classes of
                                        Certificates other than the Non-Delay
                                        Certificates, if any.
ERISA-Restricted Certificates........   The Residual Certificates and the
                                        Private Certificates.
Floating Rate Certificates...........   None.
Group I Senior Certificates..........   The Class I-A-1 Certificates.
Group II Senior Certificates.........   The Class II-A-1 and Class II-A-R
                                        Certificates.
Group III Senior Certificates........   The Class III-A-1 Certificates.
Insured Retail Certificates..........   None.
Interest Only Certificates...........   None.
Inverse Floating Rate Certificates...   None.
LIBOR Certificates...................   None.
Non-Delay Certificates...............   None.
Notional Amount Components...........   None.
Offered Certificates.................   All Classes of the Certificates other
                                        than the Private Certificates.
Physical Certificates................   The Private Certificates and the
                                        Residual Certificates.
Planned Principal Certificates.......   None.
Principal Only Certificates..........   None.
Private Certificates.................   The Class B-4, Class B-5 and Class B-6
                                        Certificates.
Rating Agencies......................   S&P and Fitch; except that, for the
                                        purposes of the Class B-1, Class B-2,
                                        Class B-3, Class B-4 and Class B-5
                                        Certificates, S&P shall be the sole
                                        Rating Agency.

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Regular Certificates.................   All Classes of Certificates, other than
                                        the Residual Certificates.
Residual Certificates................   The Class II-A-R Certificates.
Retail Certificates..................   None.
Scheduled Principal Certificates.....   None.
Senior Certificates..................   The Group I Senior Certificates, the
                                        Group II Senior Certificates and the
                                        Group III Senior Certificates,
                                        collectively.
Subordinated Certificates............   The Class B-1, Class B-2, Class B-3,
                                        Class B-4, Class B-5 and Class B-6
                                        Certificates.
Support Classes......................   None.
Targeted Principal Certificates......   None.
Underwriter..........................   FTN Financial Capital Markets, a
                                        division of First Tennessee Bank
                                        National Association

     With respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions herein
relating solely to such designations shall be of no force or effect, and any
calculations herein incorporating references to such designations shall be
interpreted without reference to such designations and amounts. Defined terms
and provisions herein relating to statistical rating agencies not designated
above as Rating Agencies shall be of no force or effect.

                                       4

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                                    ARTICLE I
                                   DEFINITIONS

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

     Accrued Certificate Interest: For any Class of Certificates for any
Distribution Date, the interest accrued during the related Interest Accrual
Period at the applicable Pass-Through Rate on the Class Certificate Balance of
such Class of Certificates immediately prior to such Distribution Date, less
such Class' share of any Net Interest Shortfall, allocable among the outstanding
Classes of Senior Certificates of the related Certificate Group based on the
Accrued Certificate Interest otherwise distributable thereto, and allocable to
the Subordinated Certificates based on interest accrued on their related
Apportioned Principal Balances.

     Adjusted Mortgage Rate: As to each Mortgage Loan, and at any time, the per
annum rate equal to the Mortgage Rate less the Master Servicing Fee Rate.

     Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at any time, the
per annum rate equal to the Mortgage Rate less the related Expense Fee Rate.

     Adjustment Date: A date specified in each Mortgage Note as a date on which
the Mortgage Rate on the related Mortgage Loan will be adjusted.

     Advance: The payment required to be made by the Master Servicer with
respect to any Distribution Date pursuant to Section 4.1, the amount of any such
payment being equal to the aggregate of payments of principal and interest (net
of the Master Servicing Fee and net of any net income in the case of any REO
Property) on the Mortgage Loans that were due on the related Due Date and not
received as of the close of business on the related Determination Date, less the
aggregate amount of any such delinquent payments that the Master Servicer has
determined would constitute a Nonrecoverable Advance if advanced.

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

     Allocable Share: With respect to any Class of Subordinated Certificates on
any Distribution Date, such Class' pro rata share (based on the Class
Certificate Balance of each Class entitled thereto) of each of the components of
the Subordinated Optimal Principal Amount for each Mortgage Pool; provided,
that, except as provided in this Agreement, no Subordinated Certificates (other
than the Class of Subordinated Certificates with the highest priority of
distribution) shall be entitled on any Distribution Date to receive
distributions pursuant to clauses (2), (3) and (5) of the definition of
Subordinated Optimal Principal Amount unless the Class Prepayment Distribution
Trigger for such Class is satisfied for such Distribution Date.

     Amount Held for Future Distribution: As to any Distribution Date, the
aggregate amount held in the applicable subaccount of the Certificate Account at
the close of business on the related Determination Date on account of (i)
Principal Prepayments on the related Mortgage Pool received after the related
Prepayment Period and Liquidation Proceeds in the related Mortgage

                                       5

<PAGE>

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 will equal the Class Certificate Balance of that Class
immediately prior to that Distribution Date multiplied by a fraction, the
numerator of which is the applicable Group Subordinate Amount for that date and
the denominator of which is the sum of the Group Subordinate Amounts for that
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:

        .  all scheduled installments of interest, net of the Master Servicing
           Fee and the Trustee Fee, and all scheduled installments of principal
           due in respect of the Mortgage Loans in such Mortgage Pool on the Due
           Date in the month in which the Distribution Date occurs and received
           before the related Determination Date, together with any Advances in
           respect thereof;

        .  all Insurance Proceeds and all Liquidation Proceeds received in
           respect of the Mortgage Loans in such Mortgage Pool during the
           calendar month before the Distribution Date, which in each case is
           net of unreimbursed expenses incurred in connection with a
           liquidation or foreclosure and unreimbursed Advances, if any;

        .  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;

        .  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; and

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<PAGE>

        .  any Substitution Adjustment Amount or the Purchase Price for any
           Deleted Mortgage Loan in the related Mortgage Pool or a Mortgage Loan
           in the related Mortgage Pool repurchased by the Seller or the Master
           Servicer as of such Distribution Date, reduced by amounts in
           reimbursement for Advances previously made and other amounts that the
           Master Servicer is entitled to be reimbursed for out of the
           Certificate Account pursuant to this Agreement.

     Bankruptcy Code: The United States Bankruptcy Reform Act of 1978, as
amended.

     Bankruptcy Coverage Termination Date: The date on which the Bankruptcy Loss
Coverage Amount is reduced to zero.

     Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient Valuation
or Debt Service Reduction; provided, however, that a Bankruptcy Loss shall not
be deemed a Bankruptcy Loss hereunder so long as the Master Servicer has
notified the Trustee in writing that the Master Servicer is diligently pursuing
any remedies that may exist in connection with the related Mortgage Loan and
either (A) the related Mortgage Loan is not in default with regard to payments
due thereunder or (B) delinquent payments of principal and interest under the
related Mortgage Loan and any related escrow payments in respect of such
Mortgage Loan are being advanced on a current basis by the Master Servicer, in
either case without giving effect to any Debt Service Reduction or Deficient
Valuation.

     Bankruptcy Loss Coverage Amount: As of any Determination Date, the
Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy Coverage
Amount as reduced by (i) the aggregate amount of Bankruptcy Losses allocated to
the Certificates since the Cut-off Date and (ii) any permissible reductions in
the Bankruptcy Loss Coverage Amount as evidenced by a letter of each Rating
Agency to the Trustee to the effect that any such reduction will not result in a
downgrading of the then current ratings assigned to the Classes of Certificates
rated by it. As of any Distribution Date on or after the Cross-over Date, the
Bankruptcy Loss Coverage Amount will be zero.

     Blanket Mortgage: The mortgage or mortgages encumbering the Cooperative
Property.

     Book-Entry Certificates: As specified in the Preliminary Statement.

     Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a day
on which banking institutions in the City of Dallas, or the State of Texas or
the city in which the Corporate Trust Office of the Trustee is located are
authorized or obligated by law or executive order to be closed.

     Certificate: Any one of the Certificates executed by the Trustee in
substantially the forms attached hereto as exhibits.

     Certificate Account: The separate Eligible Account or Accounts created and
maintained by the Master Servicer pursuant to Section 3.5 with a depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of Certificateholders and designated

                                       7

<PAGE>

"First Horizon Home Loan Corporation in trust for the registered holders of
First Horizon Asset Securities Inc. Mortgage Pass-Through Certificates, Series
2003-AR2."

     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; and

     Certificate Register: The register maintained pursuant to Section 5.2
hereof.

     Certificateholder or Holder: The person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Seller or any affiliate or agent of the Depositor
or the Seller shall be deemed not to be Outstanding and the Percentage Interest
evidenced thereby shall not be taken into account in determining whether the
requisite amount of Percentage Interests necessary to effect such consent has
been obtained; provided, however, that if any such Person (including the
Depositor) owns 100% of the Percentage Interests evidenced by a Class of
Certificates, such Certificates shall be deemed to be Outstanding for purposes
of any provision hereof that requires the consent of the Holders of Certificates
of a particular Class as a condition to the taking of any action hereunder. The
Trustee is entitled to rely conclusively on a certification of the Depositor or
any affiliate of the Depositor in determining which Certificates are registered
in the name of an affiliate of the Depositor.

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

     Class Certificate Balance: With respect to any Class of Certificates and as
of any Distribution Date the aggregate of the Certificate Principal Balances of
all Certificates of such Class as of such date.

     Class Prepayment Distribution Trigger: For a Class of Subordinated
Certificates (other than the Class of Subordinated Certificates with the highest
priority of distribution), a trigger that is satisfied on any Distribution Date
on which a fraction (expressed as a percentage), the numerator of which is the
aggregate Class Certificate Balance of such Class and each Class subordinate
thereto, if any, and the denominator of which is the aggregate of the Pool
Principal

                                       8

<PAGE>

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

     Closing Date: May 30, 2003.

     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 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 after the first of the
month following the month of receipt, no additional payment is required for such
Principal Prepayment.

     Component: Not applicable.

     Component Certificates: Not applicable.

     Cooperative Corporation: The entity that holds title (fee or an acceptable
leasehold estate) to the real property and improvements constituting the
Cooperative Property and which governs the Cooperative Property, which
Cooperative Corporation must qualify as a Cooperative Housing Corporation under
Section 216 of the Code.

     Coop Shares: Shares issued by a Cooperative Corporation.

     Cooperative Loan: Any Mortgage Loan secured by Coop Shares and a
Proprietary Lease.

     Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, including the allocation of individual dwelling units
to the holders of the Coop Shares of the Cooperative Corporation.

     Cooperative Unit: A single family dwelling located in a Cooperative
Property.

     Corporate Trust Office: The designated office of the Trustee in the State
of New York at which at any particular time its corporate trust business with
respect to this Agreement shall be administered, which office at the date of the
execution of this Agreement is located at The Bank of New York, 101 Barclay
Street, 8W, New York, New York 10286 (Attn: Corporate Trust Mortgage-Backed
Securities Group, First Horizon Asset Securities Inc. Series 2003-AR2),

                                       9

<PAGE>

facsimile no. (212) 815-3986, and which is the address to which notices to and
correspondence with the Trustee should be directed.

     Corresponding Classes of Certificates: Not applicable.

     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 May 30, 2003 by
and among the Trustee, the Master Servicer and the Custodian.

     Custodian: LaSalle Bank National Association, a national banking
association, and its successors and assigns, as custodian under the Custodial
Agreement.

     Cut-off Date: May 1, 2003.

     Cut-off Date Pool Principal Balance: With respect to Pool I,
$26,296,917.54; with respect to Pool II, $235,323,731.20; and with respect to
Pool III, $35,377,187.83.

     Cut-off Date Principal Balance: As to any Mortgage Loan, the Stated
Principal Balance thereof as of the close of business on the Cut-off Date.

     Debt Service Reduction: With respect to any Mortgage Loan, a reduction by a
court of competent jurisdiction in a proceeding under the Bankruptcy Code in the
Scheduled Payment for such Mortgage Loan which became final and non-appealable,
except such a reduction resulting from a Deficient Valuation or any reduction
that results in a permanent forgiveness of principal.

     Defective Mortgage Loan: Any Mortgage Loan which is required to be
repurchased pursuant to Section 2.2 or 2.3.

     Deficient Valuation: With respect to any Mortgage Loan, a valuation by a
court of competent jurisdiction of the Mortgaged Property in an amount less than
the then-outstanding indebtedness under the Mortgage Loan, or any reduction in
the amount of principal to be paid in connection with any Scheduled Payment that
results in a permanent forgiveness of principal, which valuation or reduction
results from an order of such court which is final and non-appealable in a
proceeding under the Bankruptcy Code.

     Definitive Certificates: Any Certificate evidenced by a Physical
Certificate and any Certificate issued in lieu of a Book-Entry Certificate
pursuant to Section 5.2(e).

     Delay Certificates: As specified in the Preliminary Statement.

     Delay Delivery Mortgage Loans: The Mortgage Loans for which all or a
portion of a related Mortgage File is not delivered to 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.

                                       10

<PAGE>

     Denomination: With respect to each Certificate, the amount set forth on the
face thereof as the "Initial Certificate Balance of this Certificate" or the
Percentage Interest appearing on the face thereof.

     Depositor: First Horizon Asset Securities Inc., a Delaware corporation, or
its successor in interest.

     Depository: The initial Depository shall be The Depository Trust Company,
the nominee of which is CEDE & Co., as the registered Holder of the Book-Entry
Certificates. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State of
New York.

     Depository Participant: A broker, dealer, bank or other financial
institution or other Person for whom from time to time a Depository effects
book-entry transfers and pledges of securities deposited with the Depository.

     Determination Date: As to any Distribution Date, the earlier of (i) the
third Business Day after the 15th day of each month, and (ii) the second
Business Day prior to the related Distribution Date.

     Distribution Account: The separate Eligible Account created and maintained
by the Trustee pursuant to Section 3.5 in the name of the Trustee for the
benefit of the Certificateholders and designated "The Bank of New York, in trust
for registered Holders of First Horizon Asset Securities Inc. Mortgage
Pass-Through Certificates, Series 2003-AR2." Funds in the Distribution Account
shall be held in trust for the Certificateholders for the uses and purposes set
forth in this Agreement.

     Distribution Account Deposit Date: As to any Distribution Date, 1:30 p.m.
Central time on the Business Day immediately preceding such Distribution Date.

     Distribution Date: The 25th day of each calendar month after the initial
issuance of the Certificates, or if such 25th day is not a Business Day, the
next succeeding Business Day, commencing in June 2003.

     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)

                                       11

<PAGE>

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-Restricted Certificate: As specified in the Preliminary Statement.

     Escrow Account: The Eligible Account or Accounts established and maintained
pursuant to Section 3.6(a) hereof.

     Event of Default: As defined in Section 7.1 hereof.

     Excess Loss: With respect to a Mortgage Pool, the amount of any (i) Fraud
Loss realized after the Fraud Loss Coverage Termination Date, (ii) Special
Hazard Loss realized after the Special Hazard Coverage Termination Date or (iii)
Deficient Valuation realized after the Bankruptcy Coverage Termination Date.

     Excess Proceeds: With respect to any Liquidated Mortgage Loan, the amount,
if any, by which the sum of any Liquidation Proceeds of such Mortgage Loan
received in the calendar month in which such Mortgage Loan became a Liquidated
Mortgage Loan, net of any amounts previously reimbursed to the Master Servicer
as Nonrecoverable Advance(s) with respect to such Mortgage Loan pursuant to
Section 3.8(a)(iii), exceeds (i) the unpaid principal balance of such Liquidated
Mortgage Loan as of the Due Date in the month in which such Mortgage Loan became
a Liquidated Mortgage Loan plus (ii) accrued interest at the Mortgage Rate from
the Due Date as to which interest was last paid or advanced (and not reimbursed)
to Certificateholders up to the Due Date applicable to the Distribution Date
immediately following the calendar month during which such liquidation occurred.

     Expense Fee Rate: As to each Mortgage Loan, the sum of the related Master
Servicing Fee Rate and the Trustee Fee Rate.

     FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.

     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 Tennessee National Corporation,
a Tennessee corporation.

                                       12

<PAGE>

     Fitch: Fitch Ratings or any successor thereto. If Fitch is designated as a
Rating Agency in the Preliminary Statement, for purposes of Section 11.5(b) the
address for notices to Fitch shall be Fitch, Inc., One State Street Plaza, New
York, New York 10004, Attention: Residential Mortgage Surveillance Group, or
such other address as Fitch may hereafter furnish to the Depositor and the
Master Servicer.

     FNMA: The Federal National Mortgage Association, a federally chartered and
privately owned corporation organized and existing under the Federal National
Mortgage Association Charter Act, or any successor thereto.

     Fraud Loan: A Liquidated Mortgage Loan as to which a Fraud Loss has
occurred.

     Fraud Loss Coverage Amount: As of the Closing Date, $2,969,978. 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 $2,969,978 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) 0.50% 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 point in time at which the Fraud
Loss Coverage Amount is reduced to zero.

     Fraud Losses: Realized Losses on Mortgage Loans as to which a loss is
sustained by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan, including a loss
by reason of the denial of coverage under any related Primary Insurance Policy
because of such fraud, dishonesty or misrepresentation.

     Group I Senior Certificates: As specified in the Preliminary Statement.

     Group II Senior Certificates: As specified in the Preliminary Statement.

     Group III Senior Certificates: As specified in the Preliminary Statement.

     Group Subordinate Amount: For each Mortgage Pool and any Distribution Date
is the excess of the Pool Principal Balance of that Mortgage Pool for such
Distribution Date over the aggregate Class Certificate Balance of the Senior
Certificates of the related Certificate Group immediately prior to that
Distribution Date.

     Index: Not applicable.

                                       13

<PAGE>

     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: $100,000.

     Insurance Policy: With respect to any Mortgage Loan included in the Trust
Fund, any insurance policy, including all riders and endorsements thereto in
effect, including any replacement policy or policies for any Insurance Policies.

     Insurance Proceeds: Proceeds paid by an insurer pursuant to any Insurance
Policy, in each case other than any amount included in such Insurance Proceeds
in respect of Insured Expenses.

     Insured Expenses: Expenses covered by an Insurance Policy or any other
insurance policy with respect to the Mortgage Loans.

     Insured Retail Certificates: Not applicable.

     Interest Accrual Period: With respect to each Class of Delay Certificates
and any Distribution Date, the calendar month prior to the month of such
Distribution Date. With respect to any Non-Delay Certificates and any
Distribution Date, the one month period commencing on the 25th day of the month
preceding the month in which such Distribution Date occurs and ending on the
24th day of the month in which such Distribution Date occurs.

     Interest Determination Date: With respect to any Interest Accrual Period
for any LIBOR Certificates, the second Business Day prior to the first day of
such Interest Accrual Period.

     Interest Only Certificates: Not applicable.

     Latest Possible Maturity Date: As to each Class of Subordinated
Certificates and each Class of Senior Certificates in the Certificate Groups
corresponding to Pool I and Pool II, the Distribution Date following the third
anniversary of the scheduled maturity date of the Mortgage Loan in Pool I and
Pool II having the latest scheduled maturity date as of the Cut-off Date; as to
each Class of Senior Certificates in the Certificate Group corresponding to Pool
III, 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: Not applicable.

     LIBOR Certificates: As specified in the Preliminary Statement.

     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

                                       14

<PAGE>

connection with the liquidation of such Mortgage Loan, including the final
disposition of an REO Property.

     Liquidation Proceeds: Amounts, including Insurance Proceeds, 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.

     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 in (i) Pool I, a per
annum rate equal to 0.246%, (ii) Pool II, a per annum rate equal to 0.277% and
(iii) Pool III, a per annum rate equal to 0.266%.

     MLPA I: The Mortgage Loan Purchase Agreement, dated as of May 30, 2003, by
and between First Horizon Home Loan Corporation, as seller, and First Tennessee
Bank National Association, as purchaser, as related to the transfer, sale and
conveyance of the Mortgage Loans.

                                       15

<PAGE>

     MLPA II: The Mortgage Loan Purchase Agreement, dated as of May 30, 2003, by
and between First Tennessee Bank National Association, as seller, and First
Horizon Asset Securities Inc., as purchaser, as related to the transfer, sale
and conveyance of the Mortgage Loans.

     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(b) hereof
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Trustee to be added to the Mortgage File pursuant to this Agreement.

     Mortgage Loan Schedule: The list of Mortgage Loans (as from time to time
amended by the Master Servicer to reflect the addition of Substitute Mortgage
Loans and the deletion of Deleted Mortgage Loans pursuant to the provisions of
this Agreement) transferred to the Trustee as part of the Trust Fund and from
time to time subject to this Agreement, attached hereto as Schedule I, setting
forth the following information with respect to each Mortgage Loan:

          (1)  the loan number;

          (2)  the Mortgagor's name and the street address of the Mortgaged
               Property, including the zip code;

          (3)  the maturity date;

          (4)  the original principal balance;

          (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

                                       16

<PAGE>

               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; and

          (14) the Master Servicing Fee for the 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.

     Mortgage Rate: The annual rate of interest borne by a Mortgage Note from
time to time, net of any insurance premium charged by the mortgagee to obtain or
maintain any Primary Insurance Policy.

     Mortgaged Property: The underlying property securing a Mortgage Loan,
which, with respect to a Cooperative Loan, is the related Coop Shares and
Proprietary Lease.

     Mortgagor: The obligor(s) on a Mortgage Note.

     National Cost of Funds Index: The National Monthly Median Cost of Funds
Ratio to SAIF-Insured Institutions published by the Office of Thrift
Supervision.

     Net Interest Shortfall: For any Distribution Date and each Mortgage Pool,
the sum of (a) the amount of interest which would otherwise have been received
for any Mortgage Loan that was the subject of (x) a Relief Act Reduction or (y)
a Special Hazard Loss, Fraud Loss, or Deficient Valuation, after the exhaustion
of the respective amounts of coverage for those types of losses provided by the
Subordinated Certificates; and (b) any Net Prepayment Interest Shortfalls.

     Net Prepayment Interest Shortfalls: As to any Distribution Date and each
Mortgage Pool, the amount by which the aggregate of Prepayment Interest
Shortfalls during the related

                                       17

<PAGE>

Prepayment Period exceeds an amount equal to the Compensating Interest, if any,
for such Distribution Date.

     Non-Delay Certificates: As specified in the Preliminary Statement.

     Non-Excess Loss: Any Realized Loss other than an Excess Loss.

     Nonrecoverable Advance: Any portion of an Advance previously made or
proposed to be made by the Master Servicer that, in the good faith judgment of
the Master Servicer, will not be ultimately recoverable by the Master Servicer
from the related Mortgagor, related Liquidation Proceeds or otherwise.

     Notice of Final Distribution: The notice to be provided pursuant to Section
9.2 to the effect that final distribution on any of the Certificates shall be
made only upon presentation and surrender thereof.

     Notional Amount: Not applicable.

     Notional Amount Components: Not applicable.

     Offered Certificates: As specified in the Preliminary Statement.

     Officer's Certificate: A Certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if provided for in
this Agreement, signed by a Servicing Officer, as the case may be, and delivered
to the Depositor and the Trustee, as the case may be, as required by this
Agreement.

     Opinion of Counsel: A written opinion of counsel, who may be counsel for
the Depositor or the Master Servicer, including, in-house counsel, reasonably
acceptable to the Trustee; provided, however, that with respect to the
interpretation or application of the REMIC Provisions, such counsel must (i) in
fact be independent of the Depositor and the Master Servicer, (ii) not have any
direct financial interest in the Depositor or the Master Servicer or in any
affiliate of either, and (iii) not be connected with the Depositor or the Master
Servicer as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.

     Optional Termination: The termination of the trust created hereunder in
connection with the purchase of the Mortgage Loans pursuant to Section 9.1(a)
hereof.

     Original Group Subordinate Amount: With respect to a Mortgage Pool, the
related Group Subordinate Amount as of the Cut-off Date.

     Original Mortgage Loan: The Mortgage Loan refinanced in connection with the
origination of a Refinancing Mortgage Loan.

     OTS: The Office of Thrift Supervision.

                                       18

<PAGE>

     Outside Reference Date: Not applicable.

     Outstanding: With respect to the Certificates as of any date of
determination, all Certificates theretofore executed and authenticated under
this Agreement except:

                  (i)    Certificates theretofore canceled by the Trustee or
          delivered to the Trustee for cancellation; and

                  (ii)   Certificates in exchange for which or in lieu of which
          other Certificates have been executed and delivered by the Trustee
          pursuant to this Agreement.

     Outstanding Mortgage Loan: As of any Due Date, a Mortgage Loan with a
Stated Principal Balance greater than zero which was not the subject of a
Principal Prepayment in Full prior to such Due Date and which did not become a
Liquidated Mortgage Loan prior to such Due Date.

     Ownership Interest: As to any Residual Certificate, any ownership interest
in such Certificate including any interest in such Certificate as the Holder
thereof and any other interest therein, whether direct or indirect, legal or
beneficial.

     Pass-Through Rate: For any 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

                                       19

<PAGE>

          institution in a holding company system, the commercial paper or
          long-term unsecured debt obligations of such holding company, but only
          if Moody's is not a Rating Agency) are then rated one of the two
          highest long-term and/or the highest short-term ratings of each Rating
          Agency for such securities;

                  (v)    demand or time deposits or certificates of deposit
          issued by any bank or trust company or savings institution to the
          extent that such deposits are fully insured by the FDIC and receiving
          the highest short-term debt rating of each Rating Agency;

                  (vi)   guaranteed reinvestment agreements issued by any bank,
          insurance company or other corporation receiving the highest
          short-term debt rating of each Rating Agency and containing, at the
          time of the issuance of such agreements, such terms and conditions as
          will not result in the downgrading or withdrawal of the rating then
          assigned to the Certificates by either Rating Agency;

                  (vii)  repurchase obligations with respect to any security
          described in clauses (i) and (ii) above, in either case entered into
          with a depository institution or trust company (acting as principal)
          described in clause (iv) above;

                  (viii) securities (other than stripped bonds, stripped coupons
          or instruments sold at a purchase price in excess of 115% of the face
          amount thereof) bearing interest or sold at a discount issued by any
          corporation incorporated under the laws of the United States or any
          state thereof which, at the time of such investment, have one of the
          two highest ratings of each Rating Agency (except if the Rating Agency
          is Moody's or S&P, such rating shall be the highest commercial paper
          rating of Moody's or S&P, as applicable, for any such securities);

                  (ix)   units of a taxable money-market portfolio having the
          highest rating assigned by each Rating Agency (except if Fitch is a
          Rating Agency and has not rated the portfolio, the highest rating
          assigned by Moody's) and restricted to obligations issued or
          guaranteed by the United States of America or entities whose
          obligations are backed by the full faith and credit of the United
          States of America and repurchase agreements collateralized by such
          obligations; and

                  (x)    such other investments bearing interest or sold at a
          discount acceptable to each Rating Agency as will not result in the
          downgrading or withdrawal of the rating then assigned to the
          Certificates by either Rating Agency, as evidenced by a signed writing
          delivered by each Rating Agency;

provided that no such instrument shall be a Permitted Investment if such
instrument evidences the right to receive interest only payments with respect to
the obligations underlying such instrument.

     Permitted Transferee: Any person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign

                                       20

<PAGE>

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 the 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 Certificate: As specified in the Preliminary Statement.

     Planned Balance: Not applicable.

     Planned Principal Certificates: Not applicable.

     Pool I: The aggregate of the Mortgage Loans identified on the Mortgage Loan
Schedule as being included in Pool I.

     Pool II: The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool II.

     Pool III: The aggregate of the Mortgage Loans identified on the Mortgage
Loan Schedule as being included in Pool III.

                                       21

<PAGE>

     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.

     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 and each
Mortgage Pool, Mortgage Loan and Principal Prepayment received (a) during the
period from the sixteenth day of the month preceding the month of such
Distribution 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 Prepayment: Any payment of principal by a Mortgagor on a Mortgage
Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in accordance with
the terms of the related Mortgage Note.

     Principal Prepayment in Full: Any Principal Prepayment made by a Mortgagor
of the entire principal balance of a Mortgage Loan.

     Private Certificate: As specified in the Preliminary Statement.

     Proprietary Lease: With respect to any Cooperative Unit, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Coop Shares.

     PUD: Planned Unit Development.

     Purchase Price: With respect to any Mortgage Loan required to be purchased
by the Seller pursuant to Section 2.2 or 2.3 hereof or purchased at the option
of the Master Servicer pursuant to Section 3.11, an amount equal to the sum of
(i) 100% of the unpaid principal balance

                                       22

<PAGE>

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) the Liquidation Proceeds, if any, received during
the month in which such liquidation occurred, to the extent applied as
recoveries of interest at the Adjusted Net Mortgage Rate and to principal of the
Liquidated Mortgage Loan. With respect to each Mortgage Loan which has become
the subject of a Deficient Valuation, if the principal amount due under the
related Mortgage Note has been reduced, the difference between the principal
balance of the Mortgage Loan outstanding immediately prior to such Deficient
Valuation and the principal balance of the Mortgage Loan as reduced by the
Deficient Valuation.

     Recognition Agreement: With respect to any Cooperative Loan, an agreement
between the Cooperative Corporation and the originator of such Mortgage Loan
which establishes the rights of such originator in the Cooperative Property.

     Record Date: With respect to any Distribution Date, the close of business
on the last Business Day of the month preceding the month in which such
Distribution Date occurs.

     Reference Bank: Not applicable.

                                       23

<PAGE>

     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 Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, 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 Provisions: Provisions of the federal income tax law relating to real
estate mortgage investment conduits, which appear at sections 860A through 860G
of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations promulgated thereunder, as the foregoing may be in effect from time
to time as well as provisions of applicable state laws.

     REO Property: A Mortgaged Property acquired by the Trust Fund through
foreclosure or deed-in-lieu of foreclosure in connection with a defaulted
Mortgage Loan.

     Request for Release: The Request for Release submitted by the Master
Servicer to the Trustee, substantially in the form of Exhibits L and M, as
appropriate.

     Required Insurance Policy: With respect to any Mortgage Loan, any insurance
policy that is required to be maintained from time to time under this Agreement.

     Required Recordation States: The states of Florida, Maryland and
Mississippi.

     Residual Certificates: As specified in the Preliminary Statement.

     Responsible Officer: When used with respect to the Trustee, any Vice
President, any Assistant Vice President, the Secretary, any Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
having direct responsibility for the administration of this Agreement and also
to whom, with respect to a particular matter, such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.

     Retail Certificates: Not applicable.

                                       24

<PAGE>

     Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due on
any Due Date allocable to principal and/or interest on such Mortgage Loan which,
unless otherwise specified herein, shall give effect to any related Debt Service
Reduction and any Deficient Valuation that affects the amount of the monthly
payment due on such Mortgage Loan.

     Scheduled Principal Certificates: Not applicable.

     Securities Act: The Securities Act of 1933, as amended.

     Security Agreement: The security agreement with respect to a Cooperative
Loan.

     Seller: First Horizon Home Loan Corporation, a Kansas corporation, and its
successors and assigns, in its capacity as seller of the Mortgage Loans pursuant
to MLPA I.

     Senior Certificates: As specified in the Preliminary Statement.

     Senior Final Distribution Date: For each Certificate Group, the
Distribution Date on which the Class Certificate Balance of the related Senior
Certificates has been reduced to zero.

     Senior Optimal Principal Amount: As to a Mortgage Pool and with respect to
each Distribution Date, an amount equal to the sum of:

          (1)  the related Senior Percentage of all Scheduled Payments of
principal due on each Mortgage Loan in such Mortgage Pool on the first day of
the month in which the Distribution Date occurs, as specified in the
amortization schedule at the time applicable thereto after adjustment for
previous principal prepayments and the principal portion of Debt Service
Reductions after the Bankruptcy Loss Coverage Amount has been reduced to zero,
but before any adjustment to such amortization schedule by reason of any other
bankruptcy or similar proceeding or any moratorium or similar waiver or grace
period;

          (2)  the related Senior Prepayment Percentage of the Stated Principal
Balance of each Mortgage Loan in such Mortgage Pool which was the subject of a
prepayment in full received by the Master Servicer during the applicable
Prepayment Period;

          (3)  the related Senior Prepayment Percentage of all partial
prepayments of principal in respect of each Mortgage Loan in such Mortgage Pool
received during the applicable Prepayment Period;

          (4)  the lesser of:

               (a)  the related Senior Prepayment Percentage of the sum of (x)
          the Liquidation Proceeds allocable to principal on each Mortgage Loan
          in such Mortgage Pool which became a Liquidated Mortgage Loan during
          the related Prepayment Period, other than Mortgage Loans described in
          clause (y), and (y) the principal balance of each Mortgage Loan in
          such Mortgage Pool that was purchased by a private mortgage insurer
          during the related Prepayment Period as an alternative to paying a
          claim under the related Insurance Policy; and

                                       25

<PAGE>

               (b)(i) the related Senior Percentage of the sum of (x) the
          Stated Principal Balance of each Mortgage Loan in such Mortgage Pool
          which became a Liquidated Mortgage Loan during the related Prepayment
          Period, other than Mortgage Loans described in clause (y), and (y) the
          Stated Principal Balance of each Mortgage Loan in such Mortgage Pool
          that was purchased by a private mortgage insurer during the related
          Prepayment Period as an alternative to paying a claim under the
          related Insurance Policy minus (ii) the related Senior Percentage of
          the principal portion of Excess Losses (other than Debt Service
          Reductions) for such Mortgage Pool during the related Prepayment
          Period; and

          (5)  the related Senior Prepayment Percentage of the sum of (a) the
Stated Principal Balance of each Mortgage Loan in such Mortgage Pool which was
repurchased by the seller in connection with such Distribution Date and (b) the
difference, if any, between the Stated Principal Balance of a Mortgage Loan in
such Mortgage Pool that has been replaced by the seller with a Substitute
Mortgage Loan pursuant to the agreement in connection with such Distribution
Date and the Stated Principal Balance of such Substitute Mortgage Loan.

     Senior Percentage: On any Distribution Date for a Certificate Group, the
lesser of 100% and the percentage (carried to six places rounded up) obtained by
dividing the aggregate Class Certificate Balances of all Classes of Senior
Certificates of such Certificate Group immediately preceding such Distribution
Date by the Pool Principal Balance of the related Mortgage Pool for such
Distribution Date.

     Senior Prepayment Percentage: On any Distribution Date occurring during the
periods set forth below, and as to each Mortgage Pool, the Senior Prepayment
Percentages, described below:

--------------------------------------------------------------------------------
Period (Dates Inclusive)    Senior Prepayment Percentage
--------------------------------------------------------------------------------
June 2003 - May 2008        100%
--------------------------------------------------------------------------------
                            The related Senior Percentage plus 70% of the
June 2008 - May 2009        related Subordinated Percentage
--------------------------------------------------------------------------------
                            The related Senior Percentage plus 60% of the
June 2009 - May 2010        related Subordinated Percentage
--------------------------------------------------------------------------------
                            The related Senior Percentage plus 40% of the
June 2010 - May 2011        related Subordinated Percentage
--------------------------------------------------------------------------------
                            The related Senior Percentage plus 20% of the
June 2011 - May 2012        related Subordinated Percentage
--------------------------------------------------------------------------------
June 2012 and thereafter    The related Senior Percentage
--------------------------------------------------------------------------------

provided however, (i) if on any Distribution Date the Senior Percentage for a
Certificate Group exceeds the initial Senior Percentage for such Certificate
Group, the Senior Prepayment Percentage for each Certificate Croup for such
Distribution Date will equal 100%, (ii) if on any Distribution Date before the
Distribution Date in June 2006, prior to giving effect to any distributions on
such Distribution Date, the Subordinated Percentage for such Certificate Group

                                       26

<PAGE>

for such Distribution Date is greater than or equal to twice the initial
Subordinated Percentage for such Certificate Group, then the Senior Prepayment
Percentage for such Certificate Group for such Distribution Date will equal the
Senior Percentage for such Certificate Group plus 50% of the Subordinated
Percentage for such Certificate Group and (iii) if on any Distribution Date on
or after the Distribution Date in June 2006, prior to giving effect to any
distributions on such Distribution Date, the Subordinated Percentage for such
Certificate Group for such Distribution Date is greater than or equal to twice
the initial Subordinated Percentage for such Certificate Group, then the Senior
Prepayment Percentage for such Certificate Group for such Distribution Date will
equal the Senior Percentage for such Certificate Group.

     The reductions in the Senior Prepayment Percentage for each Certificate
Group described above will not occur, and the Senior Prepayment Percentage or
each Certificate Group for such prior period will be calculated without regard
to clause (ii) or (iii) of the paragraph above, unless, as of the last day of
the month preceding the Distribution Date:

     (1)  the aggregate Stated Principal Balance of Mortgage Loans in any
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 Fund) does not exceed 50% of the
aggregate Certificate Principal Balances of the Subordinated Certificates as of
that date; and

     (2)  cumulative Realized Losses in any Mortgage Pool do not exceed:

          (a)  20% of the related Original Group Subordinate Amount if such
          Distribution Date occurs between and including June 2003 and May 2006;
          and

          (b)  30% of the related Original Group Subordinate Amount if such
          Distribution Date occurs on or after June 2006.

     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 Tennessee Bank National Association 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

                                       27

<PAGE>

Loan Corporation, as transferor and subservicer, and First Tennessee Mortgage
Services, Inc., as transferee and servicer.

     Special Hazard Coverage Termination Date: The point in time at which the
Special Hazard Loss Coverage Amount is reduced to zero.

     Special Hazard Loss: Any Realized Loss suffered by a Mortgaged Property on
account of direct physical loss but not including (i) any loss of a type covered
by a hazard insurance policy or a flood insurance policy required to be
maintained with respect to such Mortgaged Property pursuant to Section 3.9 to
the extent of the amount of such loss covered thereby, or (ii) any loss caused
by or resulting from:

          (1)  normal wear and tear;

          (2)  fraud, conversion or other dishonest act on the part of the
Trustee, the Master Servicer or any of their agents or employees (without regard
to any portion of the loss not covered by any errors and omissions policy);

          (3)  errors in design, faulty workmanship or faulty materials, unless
the collapse of the property or a part thereof ensues and then only for the
ensuing loss;

          (4)  nuclear or chemical reaction or nuclear radiation or radioactive
or chemical contamination, all whether controlled or uncontrolled, and whether
such loss be direct or indirect, proximate or remote or be in whole or in part
caused by, contributed to or aggravated by a peril covered by the definition of
the term "Special Hazard Loss";

          (5)  hostile or warlike action in time of peace and war, including
action in hindering, combating or defending against an actual, impending or
expected attack:

               (i)   by any government or sovereign power, de jure or de facto,
          or by any authority maintaining or using military, naval or air
          forces;

               (ii)  by military, naval or air forces; or

               (iii) by an agent of any such government, power, authority or
          forces;

          (6)  any weapon of war employing nuclear fission, fusion or other
radioactive force, whether in time of peace or war; or

          (7)  insurrection, rebellion, revolution, civil war, usurped power or
action taken by governmental authority in hindering, combating or defending
against such an occurrence, seizure or destruction under quarantine or customs
regulations, confiscation by order of any government or public authority or
risks of contraband or illegal transportation or trade.

     Special Hazard Loss Coverage Amount: Upon the initial issuance of the
Certificates, $8,147,458.81. As of any Distribution Date, the Special Hazard
Loss Coverage Amount will equal the greater of

                                       28

<PAGE>

          (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 (but in no event exceeding
the aggregate Class Certificate Balances of the Subordinated Certificates); and

          (b)  twice the outstanding principal balance of the Mortgage Loan
which has the largest outstanding principal balance as of the related
Determination Date, less, in each case, the aggregate amount of Special Hazard
Losses that would have been previously allocated to the Subordinated
Certificates in the absence of the Loss Allocation Limitation. As of any
Distribution Date on or after the Cross-over Date, the Special Hazard Loss
Coverage Amount will be zero.

     Special Hazard Mortgage Loan: A Liquidated Mortgage Loan as to which a
Special Hazard Loss has occurred.

     S&P: Standard & Poor's Corporation, a division of The McGraw-Hill
Companies, Inc. If S&P is designated as a Rating Agency in the Preliminary
Statement, for purposes of Section 11.5(b) the address for notices to S&P shall
be Standard & Poor's, 55 Water Street, 41st Floor, New York, New York 10041,
Attention: Mortgage Surveillance Monitoring, or such other address as S&P may
hereafter furnish to the Depositor and the Master Servicer.

     Startup Day: The Closing Date.

     Stated Principal Balance: As to any Mortgage Loan and Due Date, the unpaid
principal balance of such Mortgage Loan as of such Due Date as specified in the
amortization schedule at the time relating thereto (before any adjustment to
such amortization schedule by reason of any moratorium or similar waiver or
grace period) after giving effect to any previous partial Principal Prepayments
and Liquidation Proceeds allocable to principal (other than with respect to any
Liquidated Mortgage Loan) and to the payment of principal due on such Due Date
and irrespective of any delinquency in payment by the related Mortgagor.

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

     Subordinated Certificates: As specified in the Preliminary Statement.

     Subordinated Certificate Writedown Amount: As of any Distribution Date, the
amount by which (a) the sum of the Class Certificate Balances of all of the
Certificates, after giving effect to the distribution of principal and the
allocation of Realized Losses in reduction of the Class Certificate Balances of
all of the Certificates on such Distribution Date, exceeds (b) the aggregate
Pool Principal Balance for each Mortgage Pool on the first day of the month of
such Distribution Date less any Deficient Valuations occurring before the
Bankruptcy Loss Coverage Amount has been reduced to zero.

     Subordinated Optimal Principal Amount: With respect to each Mortgage Pool
and each Distribution Date, an amount equal to the sum of the following (but in
no event greater than the

                                       29

<PAGE>

aggregate Class Certificate Balances of the Subordinated Certificates
immediately prior to such Distribution Date):

          (1)  the related Subordinated Percentage of all Scheduled Payments of
principal due on each outstanding Mortgage Loan in the related Mortgage Pool on
the first day of the month in which the Distribution Date occurs, as specified
in the amortization schedule at the time applicable thereto, after adjustment
for previous principal prepayments and the principal portion of Debt Service
Reductions after the Bankruptcy Loss Coverage Amount has been reduced to zero,
but before any adjustment to such amortization schedule by reason of any other
bankruptcy or similar proceeding or any moratorium or similar waiver or grace
period;

          (2)  the related Subordinated Prepayment Percentage of the Stated
Principal Balance of each Mortgage Loan in the related Mortgage Pool which was
the subject of a prepayment in full received by the Master Servicer during the
related Prepayment Period;

          (3)  the related Subordinated Prepayment Percentage of all partial
prepayments of principal received in respect of each Mortgage Loan in the
related Mortgage Pool during the related Prepayment Period, plus, on the Senior
Final Distribution Date, 100% of any related Senior Optimal Principal Amount
remaining undistributed on such date;

          (4)  the amount, if any, by which the sum of (a) the net Liquidation
Proceeds allocable to principal received during the related Prepayment Period in
respect of each Liquidated Mortgage Loan in the related Mortgage Pool, other
than Mortgage Loans described in clause (b), and (b) the principal balance of
each Mortgage Loan in the related Mortgage Pool that was purchased by a private
mortgage insurer during the related Prepayment Period as an alternative to
paying a claim under the related Insurance Policy exceeds (c) the sum of the
amounts distributable to the Senior Certificateholders under clause (4) of the
definition of applicable Senior Optimal Principal Amount on such Distribution
Date; and

          (5)  the related Subordinated Prepayment Percentage of the sum of (a)
the Stated Principal Balance of each Mortgage Loan in the related Mortgage Pool
which was repurchased by the seller in connection with such Distribution Date
and (b) the difference, if any, between the Stated Principal Balance of a
Mortgage Loan in the related Mortgage Pool that has been replaced by the seller
with a Substitute Mortgage Loan pursuant to the Agreement in connection with
such Distribution Date and the Stated Principal Balance of each such Substitute
Mortgage Loan.

     Subordinated Percentage: For any Distribution Date and each Certificate
Group, 100% minus the related Senior Percentage.

     Subordinated Prepayment Percentage: For any Distribution Date, 100% minus
the Senior Prepayment Percentage.

     Subservicer: Any person to whom the Master Servicer has contracted for the
servicing of all or a portion of the Mortgage Loans pursuant to Section 3.2
hereof.

     Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for a
Deleted Mortgage Loan which must, on the date of such substitution, as confirmed
in a Request for

                                       30

<PAGE>

Release, substantially in the form of Exhibit L, (i) have a Stated Principal
Balance, after deduction of the principal portion of the Scheduled Payment due
in the month of substitution, not in excess of, and not more than 10% less than
the Stated Principal Balance of the Deleted Mortgage Loan; (ii) have an Adjusted
Net Mortgage Rate not lower than the Adjusted Net Mortgage Rate of the Deleted
Mortgage Loan, provided that the Master Servicing Fee for the Substitute
Mortgage Loan shall be equal to or greater than that of the Deleted Mortgage
Loan; (iii) have a maximum mortgage rate not more than 1% per annum higher or
lower than the maximum mortgage rate of the Deleted Mortgage Loan; (iv) have a
minimum mortgage rate specified in its related Mortgage Note not more than 1%
per annum higher or lower than the minimum mortgage rate of the Deleted Mortgage
Loan; (v) have the same mortgage index, reset period and periodic rate as the
Deleted Mortgage Loan and a gross margin not more than 1% per annum higher or
lower than that of the Deleted Mortgage Loan (vi) be accruing interest at a rate
no lower than and not more than 1% per annum higher than, that of the Deleted
Mortgage Loan; (iv) have a Loan-to-Value Ratio no higher than that of the
Deleted Mortgage Loan; (vii) have a remaining term to maturity no greater than
(and not more than one year less than that of) the Deleted Mortgage Loan; (viii)
not be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative
Loan and (ix) comply with each representation and warranty set forth in Section
2.3 hereof.

     Substitution Adjustment Amount: The meaning ascribed to such term pursuant
to Section 2.3.

     Targeted Principal Certificate: Not applicable.

     Tax Matters Person: The person designated as "tax matters person" in the
manner provided under Treasury regulation Section 1.860F-4(d) and Treasury
regulation Section 301.6231(a)(7)-1. Initially, the Tax Matters Person shall be
the Trustee.

     Tax Matters Person Certificate: The Class II-A-R Certificate, with a
Denomination of $0.01.

     Transfer: Any direct or indirect transfer or sale of any Ownership Interest
in a Residual Certificate.

     Trust Fund: The corpus of the trust created hereunder consisting of (i) the
Mortgage Loans and all interest and principal received on or with respect
thereto after the Cut-off Date to the extent not applied in computing the
Cut-off Date Principal Balance thereof; (ii) all of the Depositor's rights as
purchaser under MLPA II; (iii) the Certificate Account and the Distribution
Account and all amounts deposited therein pursuant to the applicable provisions
of this Agreement; (iv) property that secured a Mortgage Loan and has been
acquired by foreclosure, deed-in-lieu of foreclosure or otherwise; and (v) all
proceeds of the conversion, voluntary or involuntary, of any of the foregoing.

     Trustee: The Bank of New York and its successors and, if a successor
trustee is appointed hereunder, such successor.

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<PAGE>

     Trustee Fee: As to any Distribution Date and a Mortgage Pool, an amount
equal to one-twelfth of the Trustee Fee Rate multiplied by the applicable Pool
Principal Balance with respect to such Distribution Date.

     Trustee Fee Rate: With respect to each Mortgage Loan, the per annum rate
agreed upon in writing on or prior to the Closing Date by the Trustee and the
Depositor.

     Two Times Test: A test that is satisfied with respect to a Certificate
Group and any Distribution Date if the related Senior Prepayment Percentage for
such Distribution Date is determined in accordance with clause (ii) or (iii) of
the proviso in the definition of "Senior Prepayment Percentage."

     Unanticipated Recovery: As defined in Section 4.2(f).

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

     Undercollateralized Group: With respect to any Distribution Date, the
Senior Certificates of any Certificate Group as to which the aggregate
Certificate Principal Balance thereof, after giving effect to distributions
pursuant to Section 4.2(a) on such date, is greater than the Pool Principal
Balance of the related Mortgage Pool for such Distribution Date.

     Underwriter: As specified in the Preliminary Statement.

     Voting Rights: The portion of the voting rights of all of the Certificates
which is allocated to any Certificate. As of any date of determination, (a) 98%
of all Voting Rights will be allocated among all Holders of the Certificates,
other than the Class II-A-R Certificates, in proportion to their outstanding
balances; and (b) 2% of all Voting Rights will be allocated among the Holders of
the Class II-A-R Certificates.

     Weighted Average Adjusted Net Mortgage Rate: For a Mortgage Pool, the
average of the Adjusted Net Mortgage Rates of the Mortgage Loans in the related
Loan Group, weighted on the basis of the Stated Principal Balances thereof.

                                   ARTICLE II
                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

          SECTION 2.1 Conveyance of Mortgage Loans.

     (a)  The Depositor, concurrently with the execution and delivery
          hereof, hereby sells, transfers, assigns, sets over and otherwise
          conveys to 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 (A)
          to require the Seller to cure any breach of a representation or
          warranty made by the Seller pursuant to MLPA I, which right has been
          assigned to Depositor pursuant to MLPA II, or (B) to repurchase or
          substitute for any affected Mortgage Loan in accordance herewith and
          (ii) all right, title and interest of First Tennessee Bank

                                       32

<PAGE>

          National Association in, to and under the Servicing Agreement, which
          right has been assigned to Depositor pursuant to MLPA II.

     (b)  In connection with the transfer and assignment set forth in clause
          (a) above, the Depositor has delivered or caused to be delivered to
          the Trustee or the Custodian on its behalf (or, in the case of the
          Delay Delivery Mortgage Loans, will deliver or cause to be delivered
          to the Trustee or the Custodian on its behalf within thirty (30) days
          following the Closing Date) for the benefit of the Certificateholders
          the following documents or instruments with respect to each Mortgage
          Loan so assigned:

          (i)   (A) the original Mortgage Note endorsed by manual or facsimile
                signature in blank in the following form: "Pay to the order of
                ________________, without recourse," with all intervening
                endorsements showing a complete chain of endorsement from the
                originator to the Person endorsing the Mortgage Note (each such
                endorsement being sufficient to transfer all right, title and
                interest of the party so endorsing, as noteholder or assignee
                thereof, in and to that Mortgage Note); or

                (B) with respect to any Lost Mortgage Note, a lost note
                affidavit from the Seller stating that the original Mortgage
                Note was lost or destroyed, together with a copy of such
                Mortgage Note;

          (ii)  except as provided below, the original recorded Mortgage or
                a copy of such Mortgage certified by the Seller as being a true
                and complete copy of the Mortgage;

          (iii) 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

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<PAGE>

          (vi)  in the case of a Cooperative Loan, the originals of the
                following documents or instruments:

                (A)  The Coop Shares, together with a stock power in blank;

                (B)  The executed Security Agreement;

                (C)  The executed Proprietary Lease;

                (D)  The executed Recognition Agreement;

                (E)  The executed UCC-1 financing statement with evidence of
                     recording thereon which have been filed in all places
                     required to perfect the Seller's interest in the Coop
                     Shares and the Proprietary Lease; and

                (F)  Executed UCC-3 financing statements or other appropriate
                     UCC financing statements required by state law, evidencing
                     a complete and unbroken line from the mortgagee to the
                     Trustee with evidence of recording thereon (or in a form
                     suitable for recordation).

     In the event that in connection with any Mortgage Loan 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

                                       34

<PAGE>

public recording office retains the original recorded Mortgage or in the case
where a Mortgage is lost after recordation in a public recording office, the
Depositor shall deliver or cause to be delivered to the Trustee or the Custodian
on its behalf a copy of such Mortgage certified by such public recording office
to be a true and complete copy of the original recorded Mortgage.

     In addition, in the event that in connection with any Mortgage Loan the
Depositor cannot deliver or cause to be delivered the original or duplicate
original lender's title policy (together with all riders thereto), satisfying
the requirements of clause (v) above, concurrently with the execution and
delivery hereof because the related Mortgage has not been returned from the
applicable public recording office, the Depositor shall promptly deliver or
cause to be delivered to the Trustee or the Custodian on its behalf such
original or duplicate original lender's title policy (together with all riders
thereto) upon receipt thereof from the applicable title insurer, but in no event
shall any such delivery of the original or duplicate original lender's title
policy be made later than one year following the Closing Date; provided,
however, in the event the Depositor is unable to deliver or cause to be
delivered by such date the original or duplicate original lender's title policy
(together with all riders thereto) because the related Mortgage has not been
returned by the appropriate recording office, the Depositor shall deliver or
cause to be delivered such documents to the Trustee or the Custodian on its
behalf as promptly as possible upon receipt thereof and, in any event, within
720 days following the Closing Date. Notwithstanding the preceding, in
connection with any Mortgage Loan for which either the original or duplicate
original title policy has not been delivered to the Trust, if at any time during
the term of this Agreement the parent company of the Seller does not have a long
term senior debt rating of A- or higher from S&P and A- or higher from Fitch (if
rated by Fitch), then the Depositor shall within 30 days deliver or cause to be
delivered to the Trustee or the Custodian on its behalf (if it has not
previously done so) a written commitment or interim binder or preliminary report
of the title issued by the title insurance or escrow company with respect to the
Mortgaged Property.

     Subject to the immediately following sentence, as promptly as practicable
subsequent to such transfer and assignment, and in any event, within thirty (30)
days thereafter, the Master Servicer shall (i) complete each assignment of
Mortgage, as follows: "First Horizon Mortgage Pass-Through Certificates, Series
2003-AR2, 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.

                                       35

<PAGE>

     Notwithstanding anything to the contrary in this Agreement, within thirty
days after the Closing Date, the Depositor shall either (i) deliver or cause to
be delivered to the Trustee or the Custodian on its behalf the Mortgage File as
required pursuant to this Section 2.1 for each Delay Delivery Mortgage Loan or
(ii) (A) substitute or cause to be substituted a Substitute Mortgage Loan for
the Delay Delivery Mortgage Loan or (B) repurchase or cause to be repurchased
the Delay Delivery Mortgage Loan, which substitution or repurchase shall be
accomplished in the manner and subject to the conditions set forth in Section
2.3 (treating each Delay Delivery Mortgage Loan as a Deleted Mortgage Loan for
purposes of such Section 2.3), provided, however, that if the Depositor fails to
deliver a Mortgage File for any Delay Delivery Mortgage Loan within the
thirty-day period provided in the prior sentence, the Depositor shall use its
best reasonable efforts to effect or cause to be effected a substitution, rather
than a repurchase of, such Deleted Mortgage Loan and provided further that the
cure period provided for in Section 2.2 or in Section 2.3 shall not apply to the
initial delivery of the Mortgage File for such Delay Delivery Mortgage Loan, but
rather the Depositor shall have five (5) Business Days to cure or cause to be
cured such failure to deliver. At the end of such thirty-day period, the Trustee
or the Custodian on its behalf shall send a Delay Delivery Certification for the
Delay Delivery Mortgage Loans delivered during such thirty-day period in
accordance with the provisions of Section 2.2. Notwithstanding anything to the
contrary contained in this Agreement, none of the Mortgage Loans in the Trust
Fund is or will be Delay Delivery Mortgage Loans.

          SECTION 2.2 Acceptance by Trustee of the Mortgage Loans.

     The Trustee or the Custodian, on behalf of the Trustee, acknowledges
receipt of the documents identified in the Initial Certification in the form
annexed hereto as Exhibit E and declares that it or the Custodian holds and will
hold such documents and the other documents delivered to it or the Custodian, as
applicable, constituting the Mortgage Files, and that it or the Custodian, as
applicable, holds or will hold such other assets as are included in the Trust
Fund, in trust for the exclusive use and benefit of all present and future
Certificateholders. The Trustee acknowledges that the Custodian will maintain
possession of the Mortgage Notes in the State of Illinois, 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.

                                       36

<PAGE>

     Not later than 90 days after the Closing Date, the Trustee shall deliver or
shall cause the Custodian to deliver to the Depositor and the Master Servicer a
Final Certification in the form annexed hereto as Exhibit G, with any applicable
exceptions noted thereon.

     If, in the course of such review, the Trustee or the Custodian, on behalf
of the Trustee, finds any document constituting a part of a Mortgage File which
does not meet the requirements of Section 2.1, the Trustee shall list or shall
cause the Custodian to list such as an exception in the Final Certification;
provided, however that neither the Trustee nor the Custodian shall make any
determination as to whether (i) any endorsement is sufficient to transfer all
right, title and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note or (ii) any assignment is in recordable
form or is sufficient to effect the assignment of and transfer to the assignee
thereof under the mortgage to which the assignment relates. The Seller shall
promptly correct or cure such defect within 90 days from the date it was so
notified of such defect and, if the Seller does not correct or cure such defect
within such period, the Seller shall either (a) substitute for the related
Mortgage Loan a Substitute Mortgage Loan, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.3, or (b) purchase such Mortgage Loan from the Trustee within 90 days from the
date the Seller was notified of such defect in writing at the Purchase Price of
such Mortgage Loan; provided, however, that in no event shall such substitution
or purchase occur more than 540 days from the Closing Date, except that if the
substitution or purchase of a Mortgage Loan pursuant to this provision is
required by reason of a delay in delivery of any documents by the appropriate
recording office, and there is a dispute between either the Master Servicer or
the Seller and the Trustee over the location or status of the recorded document,
then such substitution or purchase shall occur within 720 days from the Closing
Date. The Trustee shall deliver 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.

     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.

                                       37

<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.

          SECTION 2.3 Representations and Warranties of the Master Servicer;
     Covenants of the Seller.

     (a)  The Master Servicer hereby makes the representations and warranties
          set forth in Schedule II hereto and by this reference incorporated
          herein, to the Depositor and the Trustee, as of the Closing Date, or
          if so specified therein, as of the Cut-off Date.

     (b)  Upon discovery by any of the parties hereto of a breach of a
          representation or warranty made pursuant to Schedule B to MLPA I that
          materially and adversely affects the interests of the
          Certificateholders in any Mortgage Loan, the party discovering such
          breach shall give prompt notice thereof to the other parties. The
          Seller hereby covenants that within 90 days of the earlier of its
          discovery or its receipt of written notice from any party of a breach
          of any representation or warranty made pursuant to Schedule B to MLPA
          I which materially and adversely affects the interests of the
          Certificateholders in any Mortgage Loan, it shall cure such breach in
          all material respects, and if such breach is not so cured, shall, (i)
          if such 90-day period expires prior to the second anniversary of the
          Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan")
          from the Trust Fund and substitute in its place a Substitute Mortgage
          Loan, in the manner and subject to the conditions set forth in this
          Section; or (ii) repurchase the affected Mortgage Loan or Mortgage
          Loans from the Trustee at the Purchase Price in the manner set forth
          below; provided, however, that any such substitution pursuant to (i)
          above shall not be effected prior to the delivery to the Trustee of
          the Opinion of Counsel required by Section 2.5 hereof, if any, and any
          such substitution pursuant to (i) above shall not be effected prior to
          the additional delivery to the Trustee or the Custodian on its behalf
          of a Request for Release substantially in the form of Exhibit M and
          the Mortgage File for any such Substitute Mortgage Loan. The Seller
          shall promptly reimburse the Master Servicer and the Trustee for any
          expenses reasonably incurred by the Master Servicer or the Trustee in
          respect of enforcing the remedies for such breach. With respect to the
          representations and warranties described in this Section which are
          made to the best of the Seller's knowledge, if it is discovered by
          either the Depositor, the Seller or the Trustee that the substance of
          such representation and warranty is inaccurate and such inaccuracy
          materially and adversely affects the value of the related Mortgage
          Loan or the interests of the Certificateholders therein,
          notwithstanding the Seller's lack of knowledge with respect to the
          substance of such representation or warranty, such inaccuracy shall be
          deemed a breach of the applicable representation or warranty.

     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,

                                       38

<PAGE>

the Mortgage, the related assignment of the Mortgage, and such other documents
and agreements as are required by Section 2.1, with the Mortgage Note endorsed
and the Mortgage assigned as required by Section 2.1. No substitution is
permitted to be made in any calendar month after the Determination Date for such
month. Scheduled Payments due with respect to Substitute Mortgage Loans in the
month of substitution shall not be part of the Trust Fund and will be retained
by the Seller on the next succeeding Distribution Date. For the month of
substitution, distributions to Certificateholders will include the monthly
payment due on any Deleted Mortgage Loan for such month and thereafter the
Seller shall be entitled to retain all amounts received in respect of such
Deleted Mortgage Loan. The Master Servicer shall amend the Mortgage Loan
Schedule for the benefit of the Certificateholders to reflect the removal of
such Deleted Mortgage Loan and the substitution of the Substitute Mortgage Loan
or Loans and the Master Servicer shall deliver the amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, the Substitute Mortgage Loan or
Loans shall be subject to the terms of this Agreement in all respects, and the
Seller shall be deemed to have made with respect to such Substitute Mortgage
Loan or Loans, as of the date of substitution, the representations and
warranties made pursuant to Schedule B to MLPA I with respect to such Mortgage
Loan. Upon any such substitution and the deposit to the Certificate Account of
the amount required to be deposited therein in connection with such substitution
as described in the following paragraph, the Trustee shall release or shall
cause the Custodian to release the Mortgage File held for the benefit of the
Certificateholders relating to such Deleted Mortgage Loan to the Seller and
shall execute and deliver at the Seller's direction such instruments of transfer
or assignment prepared by the Seller, in each case without recourse, as shall be
necessary to vest title in the Seller, or its designee, the Trustee's interest
in any Deleted Mortgage Loan substituted for pursuant to this Section 2.3.

     For any month in which the Seller substitutes one or more Substitute
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (if any) by which the aggregate principal balance of all
such Substitute Mortgage Loans as of the date of substitution is less than the
aggregate Stated Principal Balance of all such Deleted Mortgage Loans (after
application of the scheduled principal portion of the monthly payments due in
the month of substitution). The amount of such shortage (the "Substitution
Adjustment Amount") plus an amount equal to the aggregate of any unreimbursed
Advances with respect to such Deleted Mortgage Loans shall be deposited in the
Certificate Account by the Seller on or before the Distribution Account Deposit
Date for the Distribution Date in the month succeeding the calendar month during
which the related Mortgage Loan became required to be purchased or replaced
hereunder.

     In the event that the Seller shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Certificate Account pursuant
to Section 3.5 on or before the Distribution Account Deposit Date for the
Distribution Date in the month following the month during which the Seller
became obligated hereunder to repurchase or replace such Mortgage Loan and upon
such deposit of the Purchase Price, the delivery of the Opinion of Counsel
required by Section 2.5 and receipt of a Request for Release in the form of
Exhibit M hereto, the Trustee shall release or shall cause the Custodian to
release the related Mortgage File held for the benefit of the Certificateholders
to such Person, and the Trustee shall execute and deliver or shall cause the
Custodian to execute and deliver at such Person's direction such instruments of
transfer or assignment prepared by such Person, in each case without recourse,
as shall be necessary to

                                       39

<PAGE>

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, following the transfer of the Mortgage Loans to it
pursuant to MLPA II and immediately prior to the conveyance of the Mortgage
Loans by it to the Trustee pursuant to Section 2.1(a) hereof, the Depositor had
good title to the Mortgage Loans and the Mortgage Notes were subject to no
offsets, defenses or counterclaims.

     It is understood and agreed that the representations and warranties set
forth in this Section 2.4 shall survive delivery of the Mortgage Files to the
Trustee. Upon discovery by the Depositor or the Trustee of a breach of any of
the foregoing representations and warranties set forth in this Section 2.4
(referred to herein as a "breach"), which breach materially and adversely
affects the interest of the Certificateholders, the party discovering such
breach shall give prompt written notice to the others and to each Rating Agency.

          SECTION 2.5 Delivery of Opinion of Counsel in Connection with
     Substitutions.

     (a)  Notwithstanding any contrary provision of this Agreement, no
          substitution pursuant to Section 2.2 or Section 2.3 shall be made more
          than 90 days after the Closing Date unless the Depositor delivers to
          the Trustee an Opinion of Counsel, which Opinion of Counsel shall not
          be at the expense of either the Trustee or the Trust Fund, addressed
          to the Trustee, to the effect that such substitution will not (i)
          result in the imposition of the tax on "prohibited transactions" on
          the Trust Fund or contributions after the Startup Date, as defined in
          Sections 860F(a)(2) and 860G(d) of the Code, respectively, or (ii)
          cause the REMIC created hereunder to fail to qualify as a REMIC at any
          time that any Certificates are outstanding.

     (b)  Upon discovery by the Depositor, the Master Servicer or the
          Trustee that any Mortgage Loan does not constitute a "qualified
          mortgage" within the meaning of Section 860G(a)(3) of the Code, the
          party discovering such fact shall promptly (and in any event within
          five (5) Business Days of discovery) give written notice thereof to
          the other parties. In connection therewith, the Trustee shall require
          the

                                       40

<PAGE>

          Depositor to cause the Seller, pursuant to MLPA I and at the Seller's
          option, to either (i) substitute, if the conditions in Section 2.3(b)
          with respect to substitutions are satisfied, a Substitute Mortgage
          Loan for the affected Mortgage Loan, or (ii) repurchase the affected
          Mortgage Loan within 90 days of such discovery in the same manner as
          it would a Mortgage Loan for a breach of representation or warranty
          made pursuant to Section 2.3. The Trustee shall reconvey or shall
          cause the Custodian to reconvey to the Seller the Mortgage Loan to be
          released pursuant hereto in the same manner, and on the same terms and
          conditions, as it would a Mortgage Loan repurchased for breach of a
          representation or warranty contained in Section 2.3.

          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 designations and "latest possible
maturity date" for federal income tax purposes of all REMIC regular interests
created hereby. The Class II-A-R Certificates shall be the sole class of
residual interest in the REMIC created hereunder. The "Startup Day" for purposes
of the REMIC Provisions shall be the Closing Date. The Tax Matters Person with
respect to the REMIC hereunder shall be the Trustee and the Trustee shall hold
the Tax Matters Person Certificate. The REMIC's taxable year shall be the
calendar year and its accounts shall be maintained using the accrual method.

          SECTION 2.8 Covenants of the Master Servicer.

     The Master Servicer hereby covenants to the Depositor and the Trustee as
follows:

     (a)  the Master Servicer shall comply in the performance of its
          obligations under this Agreement with all reasonable rules and
          requirements of the insurer under each Required Insurance Policy; and

     (b)  no written information, certificate of an officer, statement
          furnished in writing or written report delivered to the Depositor, any
          affiliate of the Depositor or the Trustee and prepared by the Master
          Servicer pursuant to this Agreement will contain any untrue statement
          of a material fact or omit to state a material fact necessary to make
          such information, certificate, statement or report not misleading.

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<PAGE>

                                  ARTICLE III
                 ADMINISTRATION AND SERVICING OF MORTGAGE LOANS

          SECTION 3.1 Master Servicer to Service Mortgage Loans.

     For and on behalf of the Certificateholders, the Master Servicer shall
service and administer the Mortgage Loans in accordance with the terms of (i)
the Servicing Rights Transfer and Subservicing Agreement, pursuant to which
First Tennessee Mortgage Services, Inc. engaged the Master Servicer to
subservice the Mortgage Loans, (ii) this Agreement and (iii) the customary and
usual standards of practice of prudent mortgage loan servicers; provided that if
there is a conflict between the terms of the Servicing Agreement and the
Servicing Rights Transfer and Subservicing Agreement, on the one hand, and this
Agreement, on the other hand, the terms of this Agreement shall prevail. In
connection with such servicing and administration, the Master Servicer shall
have full power and authority, acting alone and/or through Subservicers as
provided in Section 3.2 hereof, to do or cause to be done any and all things
that it may deem necessary or desirable in connection with such servicing and
administration, including but not limited to, the power and authority, subject
to the terms hereof (i) to execute and deliver, on behalf of the
Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) to effectuate foreclosure or
other conversion of the ownership of the Mortgaged Property securing any
Mortgage Loan; provided that the Master Servicer shall not take any action that
is inconsistent with or prejudices the interests of the Trust Fund or the
Certificateholders in any Mortgage Loan or the rights and interests of the
Depositor, the Trustee and the Certificateholders under this Agreement. The
Master Servicer shall represent and protect the interests of the Trust Fund in
the same manner as it protects its own interests in mortgage loans in its own
portfolio in any claim, proceeding or litigation regarding a Mortgage Loan, and
shall not make or permit any modification, waiver or amendment of any Mortgage
Loan which would cause the 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.

     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

                                       42

<PAGE>

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

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Trustee or the Depositor be obligated to supervise the performance of the Master
Servicer hereunder or otherwise.

          SECTION 3.4 Trustee to Act as Master Servicer.

     In the event that the Master Servicer shall for any reason no longer be the
Master Servicer hereunder (including by reason of an Event of Default), the
Trustee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer hereunder arising thereafter (except that the
Trustee shall not be (i) liable for losses of the Master Servicer pursuant to
Section 3.9 hereof or any acts or omissions of the predecessor Master Servicer
hereunder), (ii) obligated to make Advances if it is prohibited from doing so by
applicable law, (iii) obligated to effectuate repurchases or substitutions of
Mortgage Loans hereunder including, but not limited to, repurchases or
substitutions of Mortgage Loans pursuant to Section 2.2 or 2.3 hereof, (iv)
responsible for expenses of the Master Servicer pursuant to Section 2.3 or (v)
deemed to have made any representations and warranties of the Master Servicer
hereunder). Any such assumption shall be subject to Section 7.2 hereof. If the
Master Servicer shall for any reason no longer be the Master Servicer (including
by reason of any Event of Default), the Trustee or its successor shall succeed
to any rights and obligations of the Master Servicer under each subservicing
agreement.

     The Master Servicer shall, upon request of the Trustee, but at the expense
of the Master Servicer, deliver to the assuming party all documents and records
relating to each subservicing agreement or substitute subservicing agreement and
the Mortgage Loans then being serviced thereunder and an accounting of amounts
collected or held by it and otherwise use its best efforts to effect the orderly
and efficient transfer of the substitute subservicing agreement to the assuming
party.

          SECTION 3.5 Collection of Mortgage Loan Payments; Certificate
     Account; Distribution Account.

     (a)  The Master Servicer shall make reasonable efforts in accordance with
          the customary and usual standards of practice of prudent mortgage
          servicers to collect all payments called for under the terms and
          provisions of the Mortgage Loans to the extent such procedures shall
          be consistent with this Agreement and the terms and provisions of any
          related Required Insurance Policy. Consistent with the foregoing, the
          Master Servicer may in its discretion (i) waive any late payment
          charge or any prepayment charge or penalty interest in connection with
          the prepayment of a Mortgage Loan and (ii) extend the due dates for
          payments due on a Mortgage Note for a period not greater than 180
          days; provided, however, that the Master Servicer cannot extend the
          maturity of any such Mortgage Loan past the date on which the final
          payment is due on the latest maturing Mortgage Loan as of the Cut-off
          Date. In the event of any such arrangement, the Master Servicer shall
          make Advances on the related Mortgage Loan in accordance with the
          provisions of Section 4.1 during the scheduled period in accordance
          with the amortization schedule of such Mortgage Loan without
          modification thereof by reason of such arrangements. The Master
          Servicer shall not be required to institute or join in litigation with
          respect to collection of any payment (whether

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          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.
          No later than two Business Days after receipt, except as otherwise
          specifically provided herein, the Master Servicer shall deposit or
          shall cause to be deposited into the applicable subaccount of the
          Certificate Account the following payments and collections remitted by
          Subservicers or received by it in respect of the Mortgage Loans in the
          related Mortgage Pool subsequent to the Cut-off Date (other than in
          respect of principal and interest due on such Mortgage Loans on or
          before the Cut-off Date) and the following amounts required to be
          deposited hereunder:

          (i)    all payments on account of principal on the Mortgage Loans in
                 the related Mortgage Pool, including Principal Prepayments;

          (ii)   all payments on account of interest on the Mortgage Loans in
                 the related Mortgage Pool, net of the related Master Servicing
                 Fee and any Prepayment Interest Excess;

          (iii)  all Insurance Proceeds and Liquidation Proceeds in respect of
                 the related Mortgage Loans in the related Mortgage Pool, other
                 than proceeds to be applied to the restoration or repair of the
                 Mortgaged Property or released to the Mortgagor in accordance
                 with the Master Servicer's normal servicing procedures;

          (iv)   any amount required to be deposited by the Master Servicer in
                 respect of the related Mortgage Pool pursuant to Section 3.5(c)
                 in connection with any losses on Permitted Investments;

          (v)    any amounts required to be deposited by the Master Servicer in
                 respect of the related Mortgage Pool pursuant to Section
                 3.9(b), 3.9(d), and in respect of net monthly rental income
                 from any related REO Property pursuant to Section 3.11 hereof;

          (vi)   all Substitution Adjustment Amounts in respect of the related
                 Mortgage Pool;

          (vii)  all Advances in respect of the related Mortgage Pool made by
                 the Master Servicer pursuant to Section 4.1; and

          (viii) any other amounts required to be deposited hereunder in respect
                 of the related Mortgage Pool.

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     In addition, with respect to any Mortgage Loan that is subject to a buydown
agreement, on each Due Date for such Mortgage Loan, in addition to the monthly
payment remitted by the Mortgagor, the Master Servicer shall cause funds to be
deposited into the applicable subaccount of the Certificate Account in an amount
required to cause an amount of interest to be paid with respect to such Mortgage
Loan equal to the amount of interest that has accrued on such Mortgage Loan from
the preceding Due Date at the related Adjusted Mortgage Rate on such date.

     The foregoing requirements for remittance by the Master Servicer shall be
exclusive, it being understood and agreed that, without limiting the generality
of the foregoing, payments in the nature of prepayment penalties, late payment
charges, assumption fees or amounts attributable to reimbursements of Advances,
if collected, need not be remitted by the Master Servicer. In the event that the
Master Servicer shall remit any amount not required to be remitted, it may at
any time withdraw or direct the institution maintaining the Certificate Account
to withdraw such amount from the Certificate Account, any provision herein to
the contrary notwithstanding. Such withdrawal or direction may be accomplished
by delivering written notice thereof to the Trustee or such other institution
maintaining the Certificate Account which describes the amounts deposited in
error in the Certificate Account. The Master Servicer shall maintain adequate
records with respect to all withdrawals made pursuant to this Section. All funds
deposited in the Certificate Account shall be held in trust for the
Certificateholders until withdrawn in accordance with Section 3.8.

     (c)  The Trustee shall establish and maintain, on behalf of the
          Certificateholders, the Distribution Account. The Distribution Account
          shall consist of 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 accordance with this Agreement or
withdrawn in accordance with Section 3.8. In no event shall the

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Trustee incur liability for withdrawals from the Distribution Account at the
direction of the Master Servicer.

          (iv)   The institutions at which the Certificate Account and the
                 Distribution Account are maintained shall invest funds as
                 directed by the Master Servicer in Permitted Investments which
                 in both cases shall mature not later than (i) in the case of
                 the Certificate Account, the second Business Day next preceding
                 the related Distribution Account Deposit Date (except that if
                 such Permitted Investment is an obligation of the institution
                 that maintains such account, then such Permitted Investment
                 shall mature not later than the Business Day next preceding
                 such Distribution Account Deposit Date) and (ii) in the case of
                 the Distribution Account, the Business Day next preceding the
                 Distribution Date (except that if such Permitted Investment is
                 an obligation of the institution that maintains such fund or
                 account, then such Permitted Investment shall mature not later
                 than such Distribution Date) and, in each case, shall not be
                 sold or disposed of prior to its maturity. All such Permitted
                 Investments shall be made in the name of the Trustee, for the
                 benefit of the Certificateholders. All income and gain net of
                 any losses realized from any such investment of funds on
                 deposit in the Certificate Account shall be for the benefit of
                 the Master Servicer as servicing compensation and all income
                 and gain net of any losses realized from any such investment of
                 funds on deposit in the Distribution Account shall be for the
                 benefit of the Trustee. The amount of any Realized Losses in
                 the Certificate Account in respect of any such investments
                 shall promptly be deposited by the Master Servicer in the
                 Certificate Account and the amount of any Realized Losses in
                 the Distribution Account in respect of any such investments
                 shall promptly be deposited by the Trustee into the
                 Distribution Account. All reinvestment income earned on amounts
                 on deposit in the Distribution Account shall be for the benefit
                 of the Trustee. The Trustee in its fiduciary capacity shall not
                 be liable for the amount of any loss incurred in respect of any
                 investment or lack of investment of funds held in the
                 Certificate Account and made in accordance with this Section
                 3.5.

          (v)    The Master Servicer shall give notice to the Trustee, the
                 Seller, each Rating Agency and the Depositor of any proposed
                 change of the location of the Certificate Account prior to any
                 change thereof. The Trustee shall give notice to the Master
                 Servicer, the Seller, each Rating Agency and the Depositor of
                 any proposed change of the location of the Distribution Account
                 prior to any change thereof.

          SECTION 3.6 Collection of Taxes, Assessments and Similar Items; Escrow
     Accounts.

     (a)  To the extent required by the related Mortgage Note and not violative
          of current law, the Master Servicer shall establish and maintain one
          or more accounts (each, an "Escrow Account") and deposit and retain
          therein all collections from the

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          Mortgagors (or advances by the Master Servicer) for the payment of
          taxes, assessments, hazard insurance premiums or comparable items for
          the account of the Mortgagors. Nothing herein shall require the Master
          Servicer to compel a Mortgagor to establish an Escrow Account in
          violation of applicable law.

     (b)  Withdrawals of amounts so collected from the Escrow Accounts may be
          made only to effect timely payment of taxes, assessments, hazard
          insurance premiums, condominium or PUD association dues, or comparable
          items, to reimburse the Master Servicer out of related collections for
          any payments made pursuant to Sections 3.1 hereof (with respect to
          taxes and assessments and insurance premiums) and 3.9 hereof (with
          respect to hazard insurance), to refund to any Mortgagors any sums
          determined to be overages, to pay interest, if required by law or the
          terms of the related Mortgage or Mortgage Note, to Mortgagors on
          balances in the Escrow Account or to clear and terminate the Escrow
          Account at the termination of this Agreement in accordance with
          Section 9.1 hereof. The Escrow Accounts shall not be a part of the
          Trust Fund.

     (c)  The Master Servicer shall advance any payments referred to in Section
          3.6(a) that are not timely paid by the Mortgagors on the date when the
          tax, premium or other cost for which such payment is intended is due,
          but the Master Servicer shall be required so to advance only to the
          extent that such advances, in the good faith judgment of the Master
          Servicer, will be recoverable by the Master Servicer out of Insurance
          Proceeds, Liquidation Proceeds or otherwise.

          SECTION 3.7 Access to Certain Documentation and Information Regarding
     the Mortgage Loans.

     The Master Servicer shall afford the Depositor and the Trustee reasonable
access to all records and documentation regarding the Mortgage Loans and all
accounts, insurance information and other matters relating to this Agreement,
such access being afforded without charge, but only upon reasonable request and
during normal business hours at the office designated by the Master Servicer.

     Upon reasonable advance notice in writing, the Master Servicer will provide
to each Certificateholder which is a savings and loan association, bank or
insurance company certain reports and reasonable access to information and
documentation regarding the Mortgage Loans sufficient to permit such
Certificateholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates; provided
that the Master Servicer shall be entitled to be reimbursed by each such
Certificateholder for actual expenses incurred by the Master Servicer in
providing such reports and access.

          SECTION 3.8 Permitted Withdrawals from the Certificate Account and
     Distribution Account.

     (a)  The Master Servicer may from time to time make withdrawals from the
          applicable subaccount of the Certificate Account for the following
          purposes:

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          (i)    to the extent not previously retained by the Master Servicer,
                 to pay to the Master Servicer the master servicing compensation
                 to which it is entitled pursuant to Section 3.14, and earnings
                 on or investment income with respect to funds in or credited to
                 the Certificate Account as additional master servicing
                 compensation;

          (ii)   to the extent not previously retained by the Master Servicer,
                 to reimburse the Master Servicer for unreimbursed Advances made
                 by it in respect of the related Mortgage Pool, such right of
                 reimbursement pursuant to this subclause (ii) being limited to
                 amounts received on the Mortgage Loan(s) in respect of which
                 any such Advance was made;

          (iii)  to reimburse the Master Servicer for any Nonrecoverable Advance
                 previously made in respect of the related Mortgage Pool;

          (iv)   to reimburse the Master Servicer for Insured Expenses from the
                 related Insurance Proceeds in respect of the related Mortgage
                 Pool;

          (v)    to reimburse the Master Servicer for (a) unreimbursed Servicing
                 Advances in respect of the related Mortgage Pool, the Master
                 Servicer's right to reimbursement pursuant to this clause (a)
                 with respect to any Mortgage Loan being limited to amounts
                 received on such Mortgage Loan(s) which represent late
                 recoveries of the payments for which such advances were made
                 pursuant to Section 3.1 or Section 3.6 and (b) for unpaid
                 Master Servicing Fees as provided in Section 3.11 hereof;

          (vi)   to pay to the Seller, with respect to each Mortgage Loan in
                 respect of the related Mortgage Pool or property acquired in
                 respect thereof that has been purchased pursuant to Section
                 2.2, 2.3 or 3.11, all amounts received thereon after the date
                 of such purchase;

          (vii)  to reimburse the Seller, the Master Servicer or the Depositor
                 for expenses incurred by any of them and reimbursable pursuant
                 to Section 6.3 hereof;

          (viii) to withdraw any amount deposited in the Certificate Account and
                 not required to be deposited therein;

          (ix)   on or prior to the Distribution Account Deposit Date, to
                 withdraw an amount equal to the related Available Funds and the
                 Trustee Fee for such Distribution Date and remit such amount to
                 the Trustee for deposit in the Distribution Account; and

          (x)    to clear and terminate the Certificate Account upon termination
                 of this Agreement pursuant to Section 9.1 hereof.

          The Master Servicer shall keep and maintain separate accounting, on a
     Mortgage Loan by Mortgage Loan basis and on a Mortgage Pool by Mortgage
     Pool basis, for the purpose of justifying any withdrawal from the
     Certificate Account pursuant to such

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     subclauses (i), (ii), (iv), (v) and (vi). Prior to making any withdrawal
     from the Certificate Account pursuant to subclause (iii), the Master
     Servicer shall deliver to the Trustee an Officer's Certificate of a
     Servicing Officer indicating the amount of any previous Advance determined
     by the Master Servicer to be a Nonrecoverable Advance and identifying the
     related Mortgage Loans(s), and their respective portions of such
     Nonrecoverable Advance.

     (b)  The Trustee shall withdraw funds from the applicable subaccount of the
          Distribution Account for distributions to the related
          Certificateholders in the manner specified in this Agreement (and to
          withhold from the amounts so withdrawn, the amount of any taxes that
          it is authorized to withhold pursuant to the last paragraph of Section
          8.11). In addition, the Trustee may prior to making the distribution
          pursuant to Section 4.2 from time to time make withdrawals from the
          Distribution Account for the following purposes:

          (i)    to pay to itself the Trustee Fee for the related Distribution
                 Date;

          (ii)   to pay to itself earnings on or investment income with respect
                 to funds in the Distribution Account;

          (iii)  to withdraw and return to the Master Servicer any amount
                 deposited in the Distribution Account and not required to be
                 deposited therein; and

          (iv)   to clear and terminate the Distribution Account upon
                 termination of the Agreement pursuant to Section 9.1 hereof.

          SECTION 3.9 Maintenance of Hazard Insurance; Maintenance of Primary
     Insurance Policies.

     (a)  The Master Servicer shall cause to be maintained, for each Mortgage
          Loan, hazard insurance with extended coverage in an amount that is at
          least equal to the lesser of (i) the maximum insurable value of the
          improvements securing such Mortgage Loan or (ii) the greater of (y)
          the outstanding principal balance of the Mortgage Loan and (z) an
          amount such that the proceeds of such policy shall be sufficient to
          prevent the Mortgagor and/or the mortgagee from becoming a co-insurer.
          Each such policy of standard hazard insurance shall contain, or have
          an accompanying endorsement that contains, a standard mortgagee
          clause. Any amounts collected by the Master Servicer under any such
          policies (other than the amounts to be applied to the restoration or
          repair of the related Mortgaged Property or amounts released to the
          Mortgagor in accordance with the Master Servicer's normal servicing
          procedures) shall be deposited in the applicable subaccount of the
          Certificate Account. Any cost incurred by the Master Servicer in
          maintaining any such insurance shall not, for the purpose of
          calculating monthly distributions to the Certificateholders or
          remittances to the Trustee for their benefit, be added to the
          principal balance of the Mortgage Loan, notwithstanding that the terms
          of the Mortgage Loan so permit. Such costs shall be recoverable by the
          Master Servicer out of late payments by the related

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          Mortgagor or out of Liquidation Proceeds to the extent permitted by
          Section 3.8 hereof. It is understood and agreed that no earthquake or
          other additional insurance is to be required of any Mortgagor or
          maintained on property acquired in respect of a Mortgage other than
          pursuant to such applicable laws and regulations as shall at any time
          be in force and as shall require such additional insurance. If the
          Mortgaged Property is located at the time of origination of the
          Mortgage Loan in a federally designated special flood hazard area and
          such area is participating in the national flood insurance program,
          the Master Servicer shall cause flood insurance to be maintained with
          respect to such Mortgage Loan. Such flood insurance shall be in an
          amount equal to the least of (i) the original principal balance of the
          related Mortgage Loan, (ii) the replacement value of the improvements
          which are part of such Mortgaged Property, and (iii) the maximum
          amount of such insurance available for the related Mortgaged Property
          under the national flood insurance program.

     (b)  In the event that the Master Servicer shall obtain and maintain a
          blanket policy insuring against hazard losses on all of the Mortgage
          Loans, it shall conclusively be deemed to have satisfied its
          obligations as set forth in the first sentence of this Section, it
          being understood and agreed that such policy may contain a deductible
          clause on terms substantially equivalent to those commercially
          available and maintained by comparable servicers. If such policy
          contains a deductible clause, the Master Servicer shall, in the event
          that there shall not have been maintained on the related Mortgaged
          Property a policy complying with the first sentence of this Section,
          and there shall have been a loss that would have been covered by such
          policy, deposit in the applicable subaccount of the Certificate
          Account the amount not otherwise payable under the blanket policy
          because of such deductible clause. In connection with its activities
          as Master Servicer of the Mortgage Loans, the Master Servicer agrees
          to present, on behalf of itself, the Depositor, and the Trustee for
          the benefit of the Certificateholders, claims under any such blanket
          policy.

     (c)  The Master Servicer shall not take any action which would result in
          non-coverage under any applicable Primary Insurance Policy of any loss
          which, but for the actions of the Master Servicer, would have been
          covered thereunder. The Master Servicer shall not cancel or refuse to
          renew any such Primary Insurance Policy that is in effect at the date
          of the initial issuance of the Certificates and is required to be kept
          in force hereunder unless the replacement Primary Insurance Policy for
          such canceled or non-renewed policy is maintained with a Qualified
          Insurer.

     The Master Servicer shall not be required to maintain any Primary Insurance
Policy (i) with respect to any Mortgage Loan with a Loan-to-Value Ratio less
than or equal to 80% as of any date of determination or, based on a new
appraisal, the principal balance of such Mortgage Loan represents 80% or less of
the new appraised value or (ii) if maintaining such Primary Insurance Policy is
prohibited by applicable law.

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     The Master Servicer agrees to effect the timely payment of the premiums on
each Primary Insurance Policy, and such costs not otherwise recoverable shall be
recoverable by the Master Servicer from the related liquidation proceeds.

     (d)  In connection with its activities as Master Servicer of the Mortgage
          Loans, the Master Servicer agrees to present on behalf of itself, the
          Trustee and Certificateholders, claims to the insurer under any
          Primary Insurance Policies and, in this regard, to take such
          reasonable action as shall be necessary to permit recovery under any
          Primary Insurance Policies respecting defaulted Mortgage Loans. Any
          amounts collected by the Master Servicer under any Primary Insurance
          Policies shall be deposited in the applicable subaccount of the
          Certificate Account.

          SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption
     Agreements.

     (a)  Except as otherwise provided in this Section, when any property
          subject to a Mortgage has been conveyed by the Mortgagor, the Master
          Servicer shall to the extent that it has knowledge of such conveyance,
          enforce any due-on-sale clause contained in any Mortgage Note or
          Mortgage, to the extent permitted under applicable law and
          governmental regulations, but only to the extent that such enforcement
          will not adversely affect or jeopardize coverage under any Required
          Insurance Policy. Notwithstanding the foregoing, the Master Servicer
          is not required to exercise such rights with respect to a Mortgage
          Loan if the Person to whom the related Mortgaged Property has been
          conveyed or is proposed to be conveyed satisfies the terms and
          conditions contained in the Mortgage Note and Mortgage related thereto
          and the consent of the mortgagee under such Mortgage Note or Mortgage
          is not otherwise so required under such Mortgage Note or Mortgage as a
          condition to such transfer. In the event that the Master Servicer is
          prohibited by law from enforcing any such due-on-sale clause, or if
          coverage under any Required Insurance Policy would be adversely
          affected, or if nonenforcement is otherwise permitted hereunder, the
          Master Servicer is authorized, subject to Section 3.10(b), to take or
          enter into an assumption and modification agreement from or with the
          person to whom such property has been or is about to be conveyed,
          pursuant to which such person becomes liable under the Mortgage Note
          and, unless prohibited by applicable state law, the Mortgagor remains
          liable thereon, provided that the Mortgage Loan shall continue to be
          covered (if so covered before the Master Servicer enters such
          agreement) by the applicable Required Insurance Policies. The Master
          Servicer, subject to Section 3.10(b), is also authorized with the
          prior approval of the insurers under any Required Insurance Policies
          to enter into a substitution of liability agreement with such Person,
          pursuant to which the original Mortgagor is released from liability
          and such Person is substituted as Mortgagor and becomes liable under
          the Mortgage Note. Notwithstanding the foregoing, the Master Servicer
          shall not be deemed to be in default under this Section by reason of
          any transfer or assumption which the Master Servicer reasonably
          believes it is restricted by law from preventing, for any reason
          whatsoever.

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     (b)  Subject to the Master Servicer's duty to enforce any due-on-sale
          clause to the extent set forth in Section 3.10(a) hereof, in any case
          in which a Mortgaged Property has been conveyed to a Person by a
          Mortgagor, and such Person is to enter into an assumption agreement or
          modification agreement or supplement to the Mortgage Note or Mortgage
          that requires the signature of the Trustee, or if an instrument of
          release signed by the Trustee is required releasing the Mortgagor from
          liability on the Mortgage Loan, the Master Servicer shall prepare and
          deliver or cause to be prepared and delivered to the Trustee for
          signature and shall direct, in writing, the Trustee to execute the
          assumption agreement with the Person to whom the Mortgaged Property is
          to be conveyed and such modification agreement or supplement to the
          Mortgage Note or Mortgage or other instruments as are reasonable or
          necessary to carry out the terms of the Mortgage Note or Mortgage or
          otherwise to comply with any applicable laws regarding assumptions or
          the transfer of the Mortgaged Property to such Person. In connection
          with any such assumption, no material term of the Mortgage Note may be
          changed. In addition, the substitute Mortgagor and the Mortgaged
          Property must be acceptable to the Master Servicer in accordance with
          its underwriting standards as then in effect. Together with each such
          substitution, assumption or other agreement or instrument delivered to
          the Trustee for execution by it, the Master Servicer shall deliver an
          Officer's Certificate signed by a Servicing Officer stating that the
          requirements of this subsection have been met in connection therewith.
          The Master Servicer shall notify the Trustee that any such
          substitution or assumption agreement has been completed by forwarding
          to the Trustee the original of such substitution or assumption
          agreement, which in the case of the original shall be added to the
          related Mortgage File and shall, for all purposes, be considered a
          part of such Mortgage File to the same extent as all other documents
          and instruments constituting a part thereof. Any fee collected by the
          Master Servicer for entering into an assumption or substitution of
          liability agreement will be retained by the Master Servicer as
          additional servicing compensation.

          SECTION 3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of
     Certain Mortgage Loans.

     The Master Servicer shall use reasonable efforts to foreclose upon or
otherwise comparably convert the ownership of properties securing such of the
Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Master Servicer shall
follow such practices and procedures as it shall deem necessary or advisable and
as shall be normal and usual in its general mortgage servicing activities and
meet the requirements of the insurer under any Required Insurance Policy;
provided, however, that the Master Servicer shall not be required to expend its
own funds in connection with any foreclosure or towards the restoration of any
property unless it shall determine (i) that such restoration and/or foreclosure
will increase the proceeds of liquidation of the Mortgage Loan after
reimbursement to itself of such expenses and (ii) that such expenses will be
recoverable to it through Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Certificate Account). The Master
Servicer shall be responsible for all other costs and expenses incurred by it in
any such proceedings; provided, however, that it shall be entitled to
reimbursement thereof

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from the liquidation proceeds with respect to the related Mortgaged Property, as
provided in the definition of Liquidation Proceeds. If the Master Servicer has
knowledge that a Mortgaged Property which the Master Servicer is contemplating
acquiring in foreclosure or by deed in lieu of foreclosure is located within a 1
mile radius of any site listed in the Expenditure Plan for the Hazardous
Substance Clean Up Bond Act of 1984 or other site with environmental or
hazardous waste risks known to the Master Servicer, the Master Servicer will,
prior to acquiring the Mortgaged Property, consider such risks and only take
action in accordance with its established environmental review procedures.

     With respect to any REO Property, the deed or certificate of sale shall be
taken in the name of the Trust Fund for the benefit of the Certificateholders,
or its nominee, on behalf of the Certificateholders. The Master Servicer shall
ensure that the title to such REO Property references the Pooling and Servicing
Agreement and the Trust Fund's capacity thereunder. Pursuant to its efforts to
sell such REO Property, the Master Servicer shall either itself or through an
agent selected by the Master Servicer protect and conserve such REO Property in
the same manner and to such extent as is customary in the locality where such
REO Property is located and may, incident to its conservation and protection of
the interests of the Certificateholders, rent the same, or any part thereof, as
the Master Servicer deems to be in the best interest of the Certificateholders
for the period prior to the sale of such REO Property. The Master Servicer shall
prepare for and deliver to the Trustee a statement with respect to each REO
Property that has been rented showing the aggregate rental income received and
all expenses incurred in connection with the management and maintenance of such
REO Property at such times as is necessary to enable the Trustee to comply with
the reporting requirements of the REMIC Provisions. The net monthly rental
income, if any, from such REO Property shall be deposited in the Certificate
Account no later than the close of business on each Determination Date. The
Master Servicer shall perform the tax reporting and withholding required by
Sections 1445 and 6050J of the Code with respect to foreclosures and
abandonments, the tax reporting required by Section 6050H of the Code with
respect to the receipt of mortgage interest from individuals and any tax
reporting required by Section 6050P of the Code with respect to the cancellation
of indebtedness by certain financial entities, by preparing such tax and
information returns as may be required, in the form required, and delivering the
same to the Trustee for filing.

     In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to the close of the third taxable year after the taxable year of its
acquisition by the Trust Fund unless the Trustee shall have been supplied with
an Opinion of Counsel to the effect that the holding by the Trust Fund of such
Mortgaged Property subsequent to such three-year period will not result in the
imposition of taxes on "prohibited transactions" of the REMIC hereunder as
defined in Section 860F of the Code or cause the REMIC created hereunder to fail
to qualify as a REMIC at any time that any Certificates are outstanding, in
which case the Trust Fund may continue to hold such Mortgaged Property (subject
to any conditions contained in such Opinion of Counsel). Notwithstanding any
other provision of this Agreement, no Mortgaged Property acquired by the Trust
Fund shall be rented (or allowed to continue to be rented) or otherwise used for
the production of income by or on behalf of the Trust Fund in such a manner or
pursuant to any terms that would (i) cause such Mortgaged Property to fail to
qualify as "foreclosure property" within the meaning of Section 860G(a)(8) of
the Code or (ii) subject the REMIC hereunder to the imposition of any federal,

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state or local income taxes on the income earned from such Mortgaged Property
under Section 860G(c) of the Code or otherwise, unless the Master Servicer has
agreed to indemnify and hold harmless the Trust Fund with respect to the
imposition of any such taxes.

     In the event of a default on a Mortgage Loan one or more of whose obligor
is not a United States Person, as that term is defined in Section 7701(a)(30) of
the Code, in connection with any foreclosure or acquisition of a deed in lieu of
foreclosure (together, "foreclosure") in respect of such Mortgage Loan, the
Master Servicer will cause compliance with the provisions of Treasury Regulation
Section 1.1445-2(d)(3) (or any successor thereto) necessary to assure that no
withholding tax obligation arises with respect to the proceeds of such
foreclosure except to the extent, if any, that proceeds of such foreclosure are
required to be remitted to the obligors on such Mortgage Loan.

     The decision of the Master Servicer to foreclose on a defaulted Mortgage
Loan shall be subject to a determination by the Master Servicer that the
proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any REO Properties,
net of reimbursement to the Master Servicer for expenses incurred (including any
property or other taxes) in connection with such management and net of
unreimbursed Master Servicing Fees, Advances and Servicing Advances, shall be
applied to the payment of principal of and interest on the related defaulted
Mortgage Loans (with interest accruing as though such Mortgage Loans were still
current) and all such income shall be deemed, for all purposes in this
Agreement, to be payments on account of principal and interest on the related
Mortgage Notes and shall be deposited into the applicable subaccount of the
Certificate Account. To the extent the net income received during any calendar
month is in excess of the amount attributable to amortizing principal and
accrued interest at the related Mortgage Rate on the related Mortgage Loan for
such calendar month, such excess shall be considered to be a partial prepayment
of principal of the related Mortgage Loan.

     The proceeds from any liquidation of a Mortgage Loan, as well as any income
from an REO Property, will be applied in the following order of priority: first,
to reimburse the Master Servicer for any related unreimbursed Servicing Advances
and Master Servicing Fees; second, to reimburse the Master Servicer for any
unreimbursed Advances; third, to reimburse the applicable subaccount of the
Certificate Account for any Nonrecoverable Advances (or portions thereof) that
were previously withdrawn by the Master Servicer pursuant to Section 3.8(a)(iii)
that related to such Mortgage Loan; fourth, to accrued and unpaid interest (to
the extent no Advance has been made for such amount or any such Advance has been
reimbursed) on the Mortgage Loan or related REO Property, at the Adjusted Net
Mortgage Rate to the Due Date occurring in the month in which such amounts are
required to be distributed; and fifth, as a recovery of principal of the
Mortgage Loan. Excess Proceeds, if any, from the liquidation of a Liquidated
Mortgage Loan will be retained by the Master Servicer as additional servicing
compensation pursuant to Section 3.14.

     The Master Servicer, with the consent of the Trustee, shall have the right
to purchase for its own account from the Trust Fund any Mortgage Loan which is
91 days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
applicable subaccount of the Certificate Account and the Trustee, upon receipt
of a certificate from the Master Servicer in the form of Exhibit M hereto,

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shall release or cause to be released to the purchaser of such Mortgage Loan the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment prepared by the purchaser of such Mortgage Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and interest
in and to such Mortgage Loan and all security and documents related thereto.
Such assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and all
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.

          SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files.

     Upon the payment in full of any Mortgage Loan, or the receipt by the Master
Servicer of a notification that payment in full will be escrowed in a manner
customary for such purposes, the Master Servicer will immediately notify the
Trustee by delivering, or causing to be delivered a "Request for Release"
substantially in the form of Exhibit M. Upon receipt of such request, the
Trustee shall or shall cause the Custodian to promptly release the related
Mortgage File to the Master Servicer, and the Trustee shall at the Master
Servicer's direction execute and deliver to the Master Servicer the request for
reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage in each case provided by the
Master Servicer, together with the Mortgage Note with written evidence of
cancellation thereon. Expenses incurred in connection with any instrument of
satisfaction or deed of reconveyance shall be chargeable to the related
Mortgagor. From time to time and as shall be appropriate for the servicing or
foreclosure of any Mortgage Loan, including for such purpose, collection under
any policy of flood insurance, any fidelity bond or errors or omissions policy,
or for the purposes of effecting a partial release of any Mortgaged Property
from the lien of the Mortgage or the making of any corrections to the Mortgage
Note or the Mortgage or any of the other documents included in the Mortgage
File, the Trustee shall, upon delivery to the Trustee of a Request for Release
in the form of Exhibit L signed by a Servicing Officer, release the Mortgage
File to the Master Servicer. Subject to the further limitations set forth below,
the Master Servicer shall cause the Mortgage File or documents so released to be
returned to the Trustee or its Custodian when the need therefor by the Master
Servicer no longer exists, unless the Mortgage Loan is liquidated and the
proceeds thereof are deposited in the applicable subaccount of the Certificate
Account, in which case the Master Servicer shall deliver to the Trustee a
Request for Release in the form of Exhibit M, signed by a Servicing Officer.

     If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this Agreement,
the Master Servicer shall deliver or cause to be delivered to the Trustee, for
signature, as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Mortgage Note or the Mortgage or otherwise available at
law or in equity.

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          SECTION 3.13 Documents Records and Funds in Possession of Master
     Servicer to be Held for the Trustee.

     Notwithstanding any other provisions of this Agreement, the Master Servicer
shall transmit to the Trustee as required by this Agreement all documents and
instruments in respect of a Mortgage Loan coming into the possession of the
Master Servicer from time to time and shall account fully to the Trustee for any
funds received by the Master Servicer or which otherwise are collected by the
Master Servicer as Liquidation Proceeds or Insurance Proceeds in respect of any
Mortgage Loan. All Mortgage Files and funds collected or held by, or under the
control of, the Master Servicer in respect of any Mortgage Loans, whether from
the collection of principal and interest payments or from Liquidation Proceeds,
including but not limited to, any funds on deposit in the Certificate Account,
shall be held by the Master Servicer for and on behalf of the Trustee and shall
be and remain the sole and exclusive property of the Trustee, subject to the
applicable provisions of this Agreement. The Master Servicer also agrees that it
shall not create, incur or subject any Mortgage File or any funds that are
deposited in the Certificate Account, Distribution Account or any Escrow
Account, or any funds that otherwise are or may become due or payable to the
Trustee for the benefit of the Certificateholders, to any claim, lien, security
interest, judgment, levy, writ of attachment or other encumbrance, or assert by
legal action or otherwise any claim or right of setoff against any Mortgage File
or any funds collected on, or in connection with, a Mortgage Loan, except,
however, that the Master Servicer shall be entitled to set off against and
deduct from any such funds any amounts that are properly due and payable to the
Master Servicer under this Agreement.

          SECTION 3.14 Master Servicing Compensation.

     As compensation for its activities as Master Servicer hereunder and as a
subservicer pursuant to the Servicing Rights Transfer and Subservicing
Agreement, the Master Servicer shall be entitled to retain or withdraw from the
Certificate Account an amount equal to the Master Servicing Fee for each
Mortgage Loan, provided that the aggregate Master Servicing Fee with respect to
any Distribution Date shall be reduced (i) by the amount of any Compensating
Interest paid by the Master Servicer with respect to such Distribution Date, and
(ii) with respect to the first Distribution Date, an amount equal to any amount
to be deposited into the Distribution Account by the Depositor pursuant to
Section 2.1(a) and not so deposited.

     Additional servicing compensation in the form of (i) Excess Proceeds,
Prepayment Interest Excess and all income and gain net of any losses realized
from Permitted Investments and (ii) prepayment penalties, assumption fees and
late payment charges in each case under the circumstances and in the manner set
forth in the applicable Mortgage Note or Mortgage shall be retained by the
Master Servicer to the extent not required to be deposited in the Certificate
Account pursuant to Section 3.5 hereof. The Master Servicer shall be required to
pay all expenses incurred by it in connection with its master servicing
activities hereunder (including payment of any premiums for hazard insurance and
any Primary Insurance Policy and maintenance of the other forms of insurance
coverage required by this Agreement) and shall not be entitled to reimbursement
therefor except as specifically provided in this Agreement.

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          SECTION 3.15 Access to Certain Documentation.

     The Master Servicer shall provide to the OTS and the FDIC and to comparable
regulatory authorities supervising Holders of Subordinated Certificates and the
examiners and supervisory agents of the OTS, the FDIC and such other
authorities, access to the documentation regarding the Mortgage Loans required
by applicable regulations of the OTS and the FDIC. Such access shall be afforded
without charge, but only upon reasonable and prior written request and during
normal business hours at the offices designated by the Master Servicer. Nothing
in this Section shall limit the obligation of the Master Servicer to observe any
applicable law prohibiting disclosure of information regarding the Mortgagors
and the failure of the Master Servicer to provide access as provided in this
Section as a result of such obligation shall not constitute a breach of this
Section.

          SECTION 3.16 Annual Statement as to Compliance.

     The Master Servicer shall deliver to the Depositor and the Trustee on or
before 120 days after the end of the Master Servicer's fiscal year, commencing
with its 2003 fiscal year, an Officer's Certificate stating, as to the signer
thereof, that (i) a review of the activities of the Master Servicer during the
preceding calendar year and of the performance of the Master Servicer under this
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, the Master Servicer has
fulfilled all its obligations under this Agreement throughout such year, or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default known to such officer and the nature and status thereof. The
Trustee shall forward a copy of each such statement to each Rating Agency.

          SECTION 3.17 Annual Independent Public Accountants' Servicing
     Statement; Financial Statements.

     On or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 2003 fiscal year, the Master Servicer at its expense shall
cause a nationally or regionally recognized firm of independent public
accountants (who may also render other services to the Master Servicer, the
Seller or any affiliate thereof) which is a member of the American Institute of
Certified Public Accountants to furnish a statement to the Trustee and the
Depositor to the effect that-such firm has examined certain documents and
records relating to the servicing of the Mortgage Loans under this Agreement or
of mortgage loans under pooling and servicing agreements substantially similar
to this Agreement (such statement to have attached thereto a schedule setting
forth the pooling and servicing agreements covered thereby) and that, on the
basis of such examination, conducted substantially in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages serviced for FNMA and FHLMC, such servicing has been conducted in
compliance with such pooling and servicing agreements except for such
significant exceptions or errors in records that, in the opinion of such firm,
the Uniform Single Attestation Program for Mortgage Bankers or the Audit Program
for Mortgages serviced for FNMA and FHLMC requires it to report. In rendering
such statement, such firm may rely, as to matters relating to direct servicing
of mortgage loans by Subservicers, upon comparable statements for examinations
conducted substantially in compliance with the Uniform Single Attestation
Program for Mortgage Bankers or the Audit

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Program for Mortgages serviced for FNMA and FHLMC (rendered within one year of
such statement) of independent public accountants with respect to the related
Subservicer. Copies of such statement shall be provided by the Trustee to any
Certificateholder upon request at the Master Servicer's expense, provided such
statement is delivered by the Master Servicer to the Trustee.

          SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds.

     The Master Servicer shall for so long as it acts as master servicer under
this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Master Servicer hereunder and (b) a fidelity bond in respect of its officers,
employees and agents. Each such policy or policies and bond shall, together,
comply with the requirements from time to time of FNMA or FHLMC for persons
performing servicing for mortgage loans purchased by FNMA or FHLMC. In the event
that any such policy or bond ceases to be in effect, the Master Servicer shall
obtain a comparable replacement policy or bond from an insurer or issuer,
meeting the requirements set forth above as of the date of such replacement.

          SECTION 3.19 Notification of Adjustments.

     On each Adjustment Date, the Master Servicer shall make interest rate
adjustments for each Mortgage Loan in compliance with the requirements of the
related Mortgage and Mortgage Note and applicable regulations. The Master
Servicer shall execute and deliver the notices required by each Mortgage and
Mortgage Note and applicable regulations regarding interest rate adjustments.
The Master Servicer also shall provide timely notification to the Trustee of all
applicable data and information regarding such interest rate adjustments and the
Master Servicer's methods of implanting such interest rate adjustments. Upon the
discovery by the Master Servicer or the Trustee that the Master Servicer has
failed to adjust or has incorrectly adjusted a Mortgage Rate or a monthly
payment pursuant to the terms of the related Mortgage Note and Mortgage, the
Master Servicer shall immediately deposit in the Certificate Account from its
own funds the amount of any interest loss caused thereby without reimbursement
therefor; provided, however, the Master Servicer shall be held harmless with
respect to any interest rate adjustments made by any servicer prior to the
Master Servicer.

                                   ARTICLE IV
                DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER

          SECTION 4.1  Advances.

     The Master Servicer shall determine on the Business Day prior to each
Master Servicer Advance Date whether it is required to make an Advance pursuant
to the definition thereof. If the Master Servicer determines it is required to
make an Advance, it shall, on or before the Master Servicer Advance Date, either
(i) deposit into the applicable subaccount of the Certificate Account an amount
equal to the Advance or (ii) make an appropriate entry in its records relating
to the applicable subaccount of the Certificate Account that any Amount Held for
Future Distribution has been used by the Master Servicer in discharge of its
obligation to make any such Advance. Any funds so applied shall be replaced by
the Master Servicer by deposit in the

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applicable subaccount of the Certificate Account no later than the close of
business on the Business Day preceding the next Master Servicer Advance Date.
The Master Servicer shall be entitled to be reimbursed from the applicable
subaccount of the Certificate Account for all Advances of its own funds made
pursuant to this Section as provided in Section 3.8. The obligation to make
Advances with respect to any Mortgage Loan shall continue until the ultimate
disposition of the REO Property or Mortgaged Property relating to such Mortgage
Loan. As to any Distribution Date, the Master Servicer shall inform the Trustee
in writing of the amount of the Advance to be made by the Master Servicer on
each Master Servicer Advance Date no later 1:30 p.m. Central time on the second
Business Day immediately preceding such Distribution Date.

     The Master Servicer shall deliver to the Trustee on the related Master
Servicer Advance Date an Officer's Certificate of a Servicing Officer indicating
the amount of any proposed Advance determined by the Master Servicer to be a
Nonrecoverable Advance.

          SECTION 4.2 Priorities of Distribution.

     (a)  On each Distribution Date, the Trustee shall withdraw the Available
          Funds for each Certificate Group from the applicable subaccount of the
          Distribution Account and apply such funds to distributions on the
          Certificates of the related Certificate Group in the following order
          and priority and, in each case, to the extent of Available Funds
          remaining:

          (i)    to the Classes of Senior Certificates of the related
                 Certificate Group, the Accrued Certificate Interest on each
                 such Class for such Distribution Date;

          (ii)   to the Classes of Senior Certificates of the related
                 Certificate Group, any Accrued Certificate Interest thereon
                 remaining undistributed from previous Distribution Dates, to
                 the extent of remaining Available Funds from the related
                 Mortgage Pool;

          (iii)  to the Classes of Senior Certificates of the related
                 Certificate Group, to the extent of remaining Available Funds
                 from the related Mortgage Pool, the related Senior Optimal
                 Principal Amount for such Distribution Date and, in the case of
                 the Group II Senior Certificates, in the order of priority set
                 forth below in Section 4.2(b), until the respective Class
                 Certificate Balances thereof have been reduced to zero;

          (iv)   to the Class B-1 Certificates, to the extent of remaining
                 Available Funds for the Mortgage Pools, but subject to the
                 prior payment of amounts described under Section 4.2(g), in the
                 following order: (1) the Accrued Certificate Interest thereon
                 for such Distribution Date, (2) any Accrued Certificate
                 Interest thereon remaining undistributed from previous
                 Distribution Dates and (3) such Class' Allocable Share for such
                 Distribution Date;

          (v)    to the Class B-2 Certificates, to the extent of remaining
                 Available Funds for the Mortgage Pools, but subject to the
                 prior payment of amounts

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                 described under Section 4.2(g), in the following order: (1)
                 the Accrued Certificate Interest thereon for such
                 Distribution Date, (2) any Accrued Certificate Interest
                 thereon remaining undistributed from previous Distribution
                 Dates and (3) such Class' Allocable Share for such
                 Distribution Date;

          (vi)   to the Class B-3 Certificates, to the extent of remaining
                 Available Funds for the Mortgage Pools, but subject to the
                 prior payment of amounts described under Section 4.2(g), in the
                 following order: (1) the Accrued Certificate Interest thereon
                 for such Distribution Date, (2) any Accrued Certificate
                 Interest thereon remaining undistributed from previous
                 Distribution Dates and (3) such Class' Allocable Share for such
                 Distribution Date;

          (vii)  to the Class B-4 Certificates, to the extent of remaining
                 Available Funds for the Mortgage Pools, but subject to the
                 prior payment of amounts described under Section 4.2(g) in the
                 following order: (1) the Accrued Certificate Interest thereon
                 for such Distribution Date, (2) any Accrued Certificate
                 Interest thereon remaining undistributed from previous
                 Distribution Dates and (3) such Class' Allocable Share for such
                 Distribution Date;

          (viii) to the Class B-5 Certificates, to the extent of remaining
                 Available Funds for the Mortgage Pools, but subject to the
                 prior payment of amounts described under Section 4.2(g) in the
                 following order: (1) the Accrued Certificate Interest thereon
                 for such Distribution Date, (2) any Accrued Certificate
                 Interest thereon remaining undistributed from previous
                 Distribution Dates and (3) such Class' Allocable Share for such
                 Distribution Date; and

          (ix)   to the Class B-6 Certificates, to the extent of remaining
                 Available Funds for each Mortgage Pool, but subject to the
                 prior payment of amounts described under Section 4.2(g) in the
                 following order: (1) the Accrued Certificate Interest thereon
                 for such Distribution Date, (2) any Accrued Certificate
                 Interest thereon remaining undistributed from previous
                 Distribution Dates and (3) such Class' Allocable Share for such
                 Distribution Date.

     (b)  Amounts allocated to the Group II Senior Certificates pursuant to
          Section 4.2(a)(iii) above will be distributed in the following order
          of priority:

          (i)    to the Class II-A-R Certificates, until the Class Certificate
                 Balance thereof has been reduced to zero; and

          (ii)   to the Class II-A-1 Certificates, until the Class Certificate
                 Balance thereof has been reduced to zero.

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     (c)  On each Distribution Date, the Trustee shall distribute to the Holders
          of the Class II-A-R Certificates any Available Funds remaining in the
          related REMIC for such Distribution Date after application of all
          amounts described in clauses (a) and (b) of this Section 4.2 on such
          Distribution Date. Any distributions pursuant to this subsection (c)
          shall not reduce the Class Certificate Balance of the Class II-A-R
          Certificates.

     (d)  On and after the Cross-Over Date, the amount distributable to the
          Group II Senior Certificates pursuant to Section 4.2(a)(iii) for the
          related Distribution Date shall be allocated among the related Classes
          of Senior Certificates, pro rata, on the basis of their respective
          Class Certificate Balances immediately prior to such Distribution
          Date, regardless of the priorities and amounts set forth in Section
          4.2.

     (e)  If (i) on any Distribution Date the Class Certificate Balance of any
          Class of Subordinated Certificates (other than the Class of
          Subordinated Certificates with the highest priority of distribution)
          for which the related Class Prepayment Distribution Trigger was
          satisfied on such Distribution Date is reduced to zero and amounts
          distributable to such Class or Classes of Subordinated Certificates
          pursuant to clauses (2), (3) and (5) of the applicable Subordinated
          Optimal Principal Amount remain undistributed on such Distribution
          Date after all amounts otherwise distributable on such date pursuant
          to clauses (iv) through (ix) of Section 4.2(a) have been distributed,
          such amounts, to the extent of such Class' remaining Allocable Share,
          shall be distributed on such Distribution Date to the remaining
          Classes of Subordinated Certificates in order of priority, such that
          no such distribution shall be made to any Class of Subordinated
          Certificates while a Class of Subordinated Certificates having a
          distribution priority higher than such Class is outstanding; and (ii)
          notwithstanding the priorities and allocations contained in Section
          4.2(a) and (b), with respect to any Certificate Group, the Two Times
          Test is not satisfied, each Class of Subordinated Certificates will be
          entitled to receive, in respect of clauses (2), (3) and (5) of the
          definition of Subordinated Optimal Principal Amount for each mortgage
          pool, an amount equal to the product of (x) their Allocable Share and
          (y) the percentages set forth in the following table:

Distribution Date occurring in                                Percentage
June 2003 through May 2008..................................           0%
June 2008 through May 2009..................................          30%
June 2009 through May 2010..................................          40%
June 2010 through May 2011..................................          60%
June 2011 through May 2012..................................          80%
June 2012 and thereafter....................................         100%

     (f)  In the event that in any calendar month the Master Servicer
          recovers an amount (an "Unanticipated Recovery") in respect of
          principal of a Mortgage Loan which had previously been allocated as a
          Realized Loss to any Class of Certificates

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          pursuant to Section 4.4, on the Distribution Date in the next
          succeeding calendar month the Trustee, shall withdraw from the
          Distribution Account and distribute to the Holders of each outstanding
          Class to which such Realized Loss had previously been allocated its
          share (determined as described in the succeeding paragraph) of such
          Unanticipated Recovery in an amount not to exceed the amount of such
          Realized Loss previously allocated to such Class. When the Class
          Certificate Balance of a Class of Certificates has been reduced to
          zero, the Holders of such Class shall not be entitled to any share of
          an Unanticipated Recovery, and such Unanticipated Recovery shall be
          allocated among all outstanding Classes of Certificates entitled
          thereto in accordance with the preceding sentence, subject to the
          remainder of this subsection (f). In the event that (i) any
          Unanticipated Recovery remains undistributed in accordance with the
          preceding sentence or (ii) the amount of an Unanticipated Recovery
          exceeds the amount of the Realized Loss previously allocated to any
          outstanding Classes with respect to the related Mortgage Loan, on the
          applicable Distribution Date the Trustee shall distribute to the
          Holders of all outstanding Classes of the related Certificates to
          which Realized Losses had previously been allocated and not reimbursed
          their pro rata share (determined as described below) of such excess in
          an amount not to exceed the aggregate amount of any Realized Loss
          previously allocated to such Class with respect to any other Mortgage
          Loan that has not been recovered in accordance with this subsection
          (f). Any distributions made pursuant to this subsection (f) shall not
          be deemed to be a distribution of principal in reduction of the Class
          Certificate Balance of the related Certificate.

               For purposes of the preceding paragraph, the share of an
          Unanticipated Recovery allocable to any Class of Certificates with
          respect to a Mortgage Loan shall be based on its pro rata share (in
          proportion to the Class Certificate Balances thereof with respect to
          such Distribution Date) of the principal portion of any such Realized
          Loss previously allocated with respect to such Mortgage Loan (or
          Loans).

     (g)  On any Distribution Date on which any Certificate Group constitutes an
          Undercollateralized Group, all amounts otherwise distributable as
          principal on the Subordinated Certificates, in reverse order of
          priority (or, following the Cross-over Date, such other amounts
          described in the immediately following sentence), will be distributed
          as principal to the Senior Certificates of such Undercollateralized
          Group in accordance with the priorities set forth in Section 4.2(b),
          until the total Class Certificate Balance of such Senior Certificates
          equals the Pool Principal Balance of the related Mortgage Pool (such
          distribution, an "Undercollateralization Distribution"). If the Senior
          Certificates of a Certificate Group constitute an Undercollateralized
          Group on any Distribution Date following the Cross-over Date,
          Undercollateralization Distributions will be made from the excess of
          the Available Funds for the Mortgage Pool not related to an
          Undercollateralized Group remaining after all required amounts for
          that Distribution Date have been distributed to the Senior
          Certificates of such other Certificate Group. In addition, the amount
          of any unpaid Net Interest Shortfalls with respect to any
          Undercollateralized Group on any Distribution Date

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          (including any Net Interest Shortfalls for the related Distribution
          Date) will be distributed to the Senior Certificates of such
          Undercollateralized Group prior to the payment of any
          Undercollateralization Distributions from amounts otherwise
          distributable as principal on the Subordinated Certificates, in
          reverse order of priority (or, following the Cross-over Date, as
          provided in the preceding sentence). Except as provided otherwise in
          this Section 4.2(g), no distribution of principal will be made to any
          Class of Subordinated Certificates until each Undercollateralized
          Group is no longer undercollateralized. If more than one
          Undercollateralized Group on any Distribution Date is entitled to an
          Undercollateralization Distribution, such Undercollateralization
          Distribution shall be allocated among the Undercollateralized Groups,
          pro rata, on the basis of the amount by which the aggregate Class
          Certificate Balance of the related Senior Certificates is greater than
          the aggregate Stated Principal Balance of the Mortgage Loans in the
          related Undercollateralized Groups. If more than one Certificate Group
          on any Distribution Date is required to make an Undercollateralization
          Distribution to an Undercollateralized Group, the payment of such
          Undercollateralization Distributions shall be allocated among such
          Certificate Groups, pro rata, on the basis of the aggregate Class
          Certificate Balance of the related Senior Certificates.

          In addition, if on any Distribution Date the total Class Certificate
          Balance of the Senior Certificates of a Certificate Group (after
          giving effect to distributions to be made on that Distribution Date)
          has been reduced to zero, all amounts otherwise distributable as
          prepayments of principal to the Subordinated Certificates, in reverse
          order of priority, will instead be distributed as principal to the
          Senior Certificates of the other Certificate Groups pro rata, on the
          basis of the aggregate Class Certificate Balance of the related Senior
          Certificates, unless (a) the weighted average of the Subordinated
          Percentages for the Mortgage Pools, weighted on the basis of the
          Stated Principal Balance of the Mortgage Loans in the related Mortgage
          Pool, is at least two times the weighted average of the initial
          Subordinate Percentage for the Mortgage Pools (calculated on such
          basis) and (b) the aggregate Stated Principal Balance of all of the
          Mortgage Loans in the Mortgage Pools delinquent 60 days or more
          (including for this purpose any such Mortgage Loans in foreclosure or
          subject to bankruptcy proceedings and Mortgage Loans with respect to
          which the related Mortgaged Property has been acquired by the Trust
          Fund), averaged over the preceding six month period, as a percentage
          of the then current aggregate Class Certificate Balance of the
          Subordinated Certificates, is less than 50%. Except as provided
          otherwise in this Section 4.2(g), all distributions described above
          will be made in accordance with the priorities set forth in Section
          4.2(a) and 4.2(b).

          SECTION 4.3 Method of Distribution.

     (a)  All distributions with respect to each Class of Certificates on each
          Distribution Date shall be made pro rata among the outstanding
          Certificates of such Class, based on the Percentage Interest in such
          Class represented by each Certificate. Payments to the
          Certificateholders on each Distribution Date will be made by the

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          Trustee to the Certificateholders of record on the related Record Date
          by check or money order mailed to a Certificateholder at the address
          appearing in the Certificate Register, or upon written request by such
          Certificateholder to the Trustee made not later than the applicable
          Record Date, by wire transfer to a U.S. depository institution
          acceptable to the Trustee, or by such other means of payment as such
          Certificateholder and the Trustee shall agree.

     (b)  Each distribution with respect to a Book-Entry Certificate shall be
          paid to the Depository, which shall credit the amount of such
          distribution to the accounts of its Depository Participants in
          accordance with its normal procedures. Each Depository Participant
          shall be responsible for disbursing such distribution to the
          Certificate Owners that it represents and to each financial
          intermediary for which it acts as agent. Each such financial
          intermediary shall be responsible for disbursing funds to the
          Certificate Owners that it represents. All such credits and
          disbursements with respect to a Book-Entry Certificate are to be made
          by the Depository and the Depository Participants in accordance with
          the provisions of the applicable Certificates. Neither the Trustee nor
          the Master Servicer shall have any responsibility therefor except as
          otherwise provided by applicable law.

     (c)  The Trustee shall withhold or cause to be withheld such amounts as it
          reasonably determines are required by the Code (giving full effect to
          any exemptions from withholding and related certifications required to
          be furnished by Certificateholders or Certificate Owners and any
          reductions to withholding by virtue of any bilateral tax treaties and
          any applicable certification required to be furnished by
          Certificateholders or Certificate Owners with respect thereto) from
          distributions to be made to Non-U.S. Persons. If the Trustee
          reasonably determines that a more accurate determination of the amount
          required to be withheld for a distribution can be made within a
          reasonable period after the scheduled date for such distribution, it
          may hold such distribution in trust for a Holder of a Residual
          Certificate until such determination can be made. For the purposes of
          this paragraph, a "Non-U.S. Person" is (i) an individual other than a
          citizen or resident of the United States, (ii) a partnership,
          corporation or entity treated as a partnership or corporation for U.S.
          federal income tax purposes not formed under the laws of the United
          States, any state thereof or the District of Columbia (unless, in the
          case of a partnership, Treasury regulations provide otherwise), (iii)
          any estate, the income of which is not subject to U.S. federal income
          taxation, regardless of source, and (iv) any trust, other than a trust
          that a court within the United States is able to exercise primary
          supervision over the administration of the trust and one or more U.S.
          Persons have the authority to control all substantial decisions of the
          trust.

          SECTION 4.4 Allocation of Losses.

     (a)  On or prior to each Determination Date, the Master Servicer shall
          determine the amount of any Realized Loss in respect of each Mortgage
          Loan that occurred during the immediately preceding calendar month.

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     (b)  With respect to any Distribution Date, the principal portion of each
          Realized Loss (other than any Excess Loss) shall be allocated in the
          following order of priority:

          (i)    to the Class B-6 Certificates until the Class Certificate
                 Balance thereof has been reduced to zero;

          (ii)   to the Class B-5 Certificates until the Class Certificate
                 Balance thereof has been reduced to zero;

          (iii)  to the Class B-4 Certificates until the Class Certificate
                 Balance thereof has been reduced to zero;

          (iv)   to the Class B-3 Certificates until the Class Certificate
                 Balance thereof has been reduced to zero;

          (v)    to the Class B-2 Certificates until the Class Certificate
                 Balance thereof has been reduced to zero;

          (vi)   to the Class B-1 Certificates until the Class Certificate
                 Balance thereof has been reduced to zero;

          (vii)  to the Classes of Senior Certificates of the related
                 Certificate Group, pro rata, in accordance with their Class
                 Certificate Balances.

     (c)  With respect to any Distribution Date, the principal portion of any
          Excess Loss with respect to a Mortgage Pool (other than Excess
          Bankruptcy Losses attributable to Debt Service Reductions) shall be
          allocated pro rata to each Class of Certificates of the related
          Certificate Group based on their respective Class Certificate Balances
          (in the case of the Senior Certificates) or Apportioned Principal
          Balances (in the case of the Subordinated Certificates).

     (d)  Any Realized Losses allocated to a Class of Certificates pursuant to
          Section 4.4(b) or (c) shall be allocated among the Certificates of
          such Class in proportion to their respective Certificate Principal
          Balances. Any allocation of Realized Losses pursuant to this paragraph
          (d) shall be accomplished by reducing the Certificate Principal
          Balances of the related Certificates on the related Distribution Date
          in accordance with Section 4.4(e).

     (e)  Realized Losses allocated in accordance with this Section 4.4 shall be
          allocated on the Distribution Date in the month following the month in
          which such loss was incurred and, in the case of the principal portion
          thereof, after giving effect to the distributions made on such
          Distribution Date.

     (f)  On each Distribution Date, the Master Servicer shall determine the
          Subordinated Certificate Writedown Amount, if any. Any such
          Subordinated Certificate Writedown Amount shall effect, without
          duplication of any other provision in this Section 4.4 that provides
          for a reduction in the Class Certificate

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          Balance of the Subordinated Certificates, a corresponding reduction in
          the Class Certificate Balance of the Subordinated Certificates, which
          reduction shall occur on such Distribution Date after giving effect to
          distributions made on such Distribution Date.

     (g)  Notwithstanding the foregoing, no such allocation of any Realized Loss
          shall be made on a Distribution Date to a Class of Certificates to the
          extent that such allocation would result in the reduction of the
          aggregate Certificate Principal Balances of all the Senior
          Certificates of a related Certificate Group as of such Distribution
          Date plus the Apportioned Principal Balances of the Subordinated
          Certificates of such Certificate Group as of such Distribution Date,
          after giving effect to all distributions and prior allocations of
          Realized Losses on such date, to an amount less than the aggregate
          Stated Principal Balance of the Mortgage Loans in the related Mortgage
          Pool as of the first day of the month of such Distribution Date, less
          any Deficient Valuations occurring on or prior to the Bankruptcy
          Coverage Termination Date (such limitation, the "Loss Allocation
          Limitation").

          SECTION 4.5 Reserved.

          SECTION 4.6 Monthly Statements to Certificateholders.

     (a)  Not later than each Distribution Date, the Trustee shall prepare and
          cause to be forwarded by first class mail to each Certificateholder,
          the Master Servicer, the Depositor and each Rating Agency a statement
          setting forth with respect to the related distribution and/or may post
          such statement on its website located at www.mbsreporting.com:

          (i)    the amount thereof allocable to principal, separately
                 identifying the aggregate amount of any Principal Prepayments
                 and Liquidation Proceeds included therein;

          (ii)   the amount thereof allocable to interest, the amount of any
                 Compensating Interest included in such distribution and any
                 remaining Net Interest Shortfalls after giving effect to such
                 distribution;

          (iii)  if the distribution to the Holders of such Class of
                 Certificates is less than the full amount that would be
                 distributable to such Holders if there were sufficient funds
                 available therefor, the amount of the shortfall and the
                 allocation thereof as between principal and interest;

          (iv)   the Class Certificate Balance of each Class of Certificates
                 after giving effect to the distribution of principal on such
                 Distribution Date;

          (v)    the Pool Principal Balance for each Mortgage Pool for the
                 following Distribution Date;

          (vi)   the Senior Percentage and Subordinated Percentage for each
                 Certificate Group for the following Distribution Date;

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          (vii)  the amount of the Master Servicing Fees paid to or retained by
                 the Master Servicer with respect to such Distribution Date;

          (viii) the Pass-Through Rate for each such Class of Certificates with
                 respect to such Distribution Date;

          (ix)   the amount of Advances for each Mortgage Pool included in the
                 distribution on such Distribution Date and the aggregate amount
                 of Advances for each Mortgage Pool outstanding as of the close
                 of business on such Distribution Date;

          (x)    the number and aggregate principal amounts of Mortgage Loans
                 (A) delinquent (exclusive of Mortgage Loans in foreclosure) (1)
                 1 to 30 days (2) 31 to 60 days (3) 61 to 90 days and (4) 91 or
                 more days and (B) in foreclosure and delinquent (1) 1 to 30
                 days (2) 31 to 60 days (3) 61 to 90 days and (4) 91 or more
                 days, as of the close of business on the last day of the
                 calendar month preceding such Distribution Date;

          (xi)   with respect to any Mortgage Loan in a Mortgage Pool that
                 became an REO Property during the preceding calendar month, the
                 loan number and Stated Principal Balance of such Mortgage Loan
                 as of the close of business on the Determination Date preceding
                 such Distribution Date and the date of acquisition thereof;

          (xii)  the total number and principal balance of any REO Properties
                 (and market value, if available) in each Mortgage Pool as of
                 the close of business on the Determination Date preceding such
                 Distribution Date;

          (xiii) the Senior Prepayment Percentage for each Certificate Group for
                 the following Distribution Date;

          (xiv)  the aggregate amount of Realized Losses incurred in respect of
                 each Mortgage Pool during the preceding calendar month;

          (xv)   the cumulative amount of Realized Losses applied in reduction
                 of the principal balance of each class of Certificates since
                 the Closing Date;

          (xvi)  the Special Hazard Loss Coverage Amount, the Fraud Loss
                 Coverage Amount and the Bankruptcy Loss Coverage Amount, in
                 each case as of the related Determination Date; and

          (xvii) with respect to the second Distribution Date, the number and
                 aggregate balance of any Delay Delivery Mortgage Loans in each
                 Mortgage Pool not delivered within thirty days after the
                 Closing Date.

     (b)  The Trustee's responsibility for disbursing the above information to
          the Certificateholders is limited to the availability, timeliness and
          accuracy of the information provided by the Master Servicer.

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     (c)  On or before the fifth Business Day following the end of each
          Prepayment Period (but in no event later than the third Business Day
          prior to the related Distribution Date), the Master Servicer shall
          deliver to the Trustee (which delivery may be by electronic data
          transmission) a report in substantially the form set forth as Schedule
          III hereto.

     (d)  Within a reasonable period of time after the end of each calendar
          year, the Trustee shall cause to be furnished to each Person who at
          any time during the calendar year was a Certificateholder, a statement
          containing the information set forth in clauses (a)(i), (a)(ii) and
          (a)(vii) of this Section 4.6 aggregated for such calendar year or
          applicable portion thereof during which such Person was a
          Certificateholder. Such obligation of the Trustee shall be deemed to
          have been satisfied to the extent that substantially comparable
          information shall be provided by the Trustee pursuant to any
          requirements of the Code as from time to time in effect.

          SECTION 4.7 Reserved.

                                   ARTICLE V
                                THE CERTIFICATES

          SECTION 5.1 The Certificates.

     The Certificates shall be substantially in the forms attached hereto as
exhibits. The Certificates shall be issuable in registered form, in the minimum
denominations, integral multiples in excess thereof (except that one Certificate
in each Class may be issued in a different amount which must be in excess of the
applicable minimum denomination) and aggregate denominations per Class set forth
in the Preliminary Statement.

     Subject to Section 9.2 hereof respecting the final distribution on the
Certificates, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by wire
transfer in immediately available funds to the account of such Holder at a bank
or other entity having appropriate facilities therefor, if (i) such Holder has
so notified the Trustee at least five Business Days prior to the related Record
Date and (ii) such Holder shall hold (A) 100% of the Class Certificate Balance
of any Class of Certificates or (B) Certificates of any Class with aggregate
principal Denominations of not less than $1,000,000 or (y) by check mailed by
first class mail to such Certificateholder at the address of such Holder
appearing in the Certificate Register.

     The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the countersignature and delivery of such Certificates
or did not hold such offices at the date of such Certificate. No Certificate
shall be entitled to any benefit under this Agreement, or be valid for any
purpose, unless countersigned by the Trustee by manual signature, and such
countersignature upon any Certificate shall be conclusive

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evidence, and the only evidence, that such Certificate has been duly executed
and delivered hereunder. All Certificates shall be dated the date of their
countersignature. On the Closing Date, the Trustee shall countersign the
Certificates to be issued at the direction of the Depositor, or any affiliate
thereof.

     The Depositor shall provide, or cause to be provided, to the Trustee on a
continuous basis, an adequate inventory of Certificates to facilitate transfers.

          SECTION 5.2 Certificate Register; Registration of Transfer and
     Exchange of Certificates.

     (a)  The Trustee shall maintain, or cause to be maintained in accordance
          with the provisions of Section 5.6 hereof, a Certificate Register for
          the Trust Fund in which, subject to the provisions of subsections (b)
          and (c) below and to such reasonable regulations as it may prescribe,
          the Trustee shall provide for the registration of Certificates and of
          transfers and exchanges of Certificates as herein provided. Upon
          surrender for registration of transfer of any Certificate, the Trustee
          shall execute and deliver, in the name of the designated transferee or
          transferees, one or more new Certificates of the same Class and
          aggregate Percentage Interest.

          At the option of a Certificateholder, Certificates may be exchanged
     for other Certificates of the same Class in authorized denominations and
     evidencing the same aggregate Percentage Interest upon surrender of the
     Certificates to be exchanged at the office or agency of the Trustee.
     Whenever any Certificates are so surrendered for exchange, the Trustee
     shall execute, authenticate, and deliver the Certificates which the
     Certificateholder making the exchange is entitled to receive. Every
     Certificate presented or surrendered for registration of transfer or
     exchange shall be accompanied by a written instrument of transfer in form
     satisfactory to the Trustee duly executed by the Holder thereof or his
     attorney duly authorized in writing.

          No service charge to the Certificateholders shall be made for any
     registration of transfer or exchange of Certificates, but payment of a sum
     sufficient to cover any tax or governmental charge that may be imposed in
     connection with any transfer or exchange of Certificates may be required.

          All Certificates surrendered for registration of transfer or exchange
     shall be cancelled and subsequently destroyed by the Trustee in accordance
     with the Trustee's customary procedures.

     (b)  No transfer of a Private Certificate shall be made unless such
          transfer is made pursuant to an effective registration statement under
          the Securities Act and any applicable state securities laws or is
          exempt from the registration requirements under said Act and such
          state securities laws. In the event that a transfer is to be made in
          reliance upon an exemption from the Securities Act and such laws, in
          order to assure compliance with the Securities Act and such laws, the
          Certificateholder desiring to effect such transfer and such
          Certificateholder's

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          prospective transferee shall each certify to the Trustee in writing
          the facts surrounding the transfer in substantially the forms set
          forth in Exhibit I (the "Transferor Certificate") and (i) deliver a
          letter in substantially the form of either Exhibit J (the "Investment
          Letter") or Exhibit K (the "Rule 144A Letter") or (ii) there shall be
          delivered to the Trustee at the expense of the transferor an Opinion
          of Counsel that such transfer may be made pursuant to an exemption
          from the Securities Act. The Depositor shall provide to any Holder of
          a Private Certificate and any prospective transferee designated by any
          such Holder, information regarding the related Certificates and the
          Mortgage Loans and such other information as shall be necessary to
          satisfy the condition to eligibility set forth in Rule 144A(d)(4) for
          transfer of any such Certificate without registration thereof under
          the Securities Act pursuant to the registration exemption provided by
          Rule 144A. The Trustee and the Master Servicer shall cooperate with
          the Depositor in providing the Rule 144A information referenced in the
          preceding sentence, including providing to the Depositor such
          information regarding the Certificates, the Mortgage Loans and other
          matters regarding the Trust Fund as the Depositor shall reasonably
          request to meet its obligation under the preceding sentence. Each
          Holder of a Private Certificate desiring to effect such transfer
          shall, and does hereby agree to, indemnify the Trustee and the
          Depositor, the Seller and the Master Servicer against any liability
          that may result if the transfer is not so exempt or is not made in
          accordance with such federal and state laws.

          No transfer of an ERISA-Restricted Certificate shall be made unless
     the Trustee shall have received either (i) a representation from the
     transferee of such Certificate acceptable to and in form and substance
     satisfactory to the Trustee (in the event such Certificate is a Private
     Certificate, such requirement is satisfied only by the Trustee's receipt of
     a representation letter from the transferee substantially in the form of
     Exhibit J or Exhibit K), to the effect that such transferee is not an
     employee benefit plan or arrangement subject to Section 406 of ERISA or a
     plan or arrangement subject to Section 4975 of the Code, nor a person
     acting on behalf of any such plan or arrangement, nor using the assets of
     any such plan or arrangement to effect such transfer, (ii) in the case of a
     Private Certificate or a Residual Certificate, if the purchaser is an
     insurance company, a representation that the purchaser is an insurance
     company which is purchasing such Certificates with funds contained in an
     "insurance company general account" (as such term is defined in Section
     V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and
     that the purchase and holding of such Certificates are covered under
     Sections I and III of PTCE 95-60 or (iii) in the case of any such
     ERISA-Restricted Certificate presented for registration in the name of an
     employee benefit plan subject to ERISA, or a plan or arrangement subject to
     Section 4975 of the Code (or comparable provisions of any subsequent
     enactments), or a trustee of any such plan or any other person acting on
     behalf of any such plan or arrangement, or using such plan's or
     arrangement's assets, an Opinion of Counsel satisfactory to the Trustee,
     which Opinion of Counsel shall not be an expense of either the Trustee or
     the Trust Fund, addressed to the Trustee to the effect that the purchase or
     holding of such ERISA-Restricted Certificate will not result in prohibited
     transactions under Section 406 of ERISA and Section 4975 of the Code and
     will not subject the Trustee, the Depositor or the Master Servicer to any
     obligation in addition to those expressly undertaken in this Agreement or

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     to any liability. Notwithstanding anything else to the contrary herein, any
     purported transfer of an ERISA-Restricted Certificate to or on behalf of an
     employee benefit plan subject to ERISA or to the Code without the delivery
     to the Trustee of an Opinion of Counsel satisfactory to the Trustee as
     described above shall be void and of no effect.

          To the extent permitted under applicable law (including, but not
     limited to, ERISA), the Trustee shall be under no liability to any Person
     for any registration of transfer of any ERISA-Restricted Certificate that
     is in fact not permitted by this Section 5.2(b) or for making any payments
     due on such Certificate to the Holder thereof or taking any other action
     with respect to such Holder under the provisions of this Agreement so long
     as the transfer was registered by the Trustee in accordance with the
     foregoing requirements.

     (c)  Each Person who has or who acquires any Ownership Interest in a
          Residual Certificate shall be deemed by the acceptance or acquisition
          of such Ownership Interest to have agreed to be bound by the following
          provisions, and the rights of each Person acquiring any Ownership
          Interest in a Residual Certificate are expressly subject to the
          following provisions:

          (i)    Each Person holding or acquiring any Ownership Interest in a
                 Residual Certificate shall be a Permitted Transferee and shall
                 promptly notify the Trustee of any change or impending change
                 in its status as a Permitted Transferee.

          (ii)   No Ownership Interest in a Residual Certificate may be
                 registered on the Closing Date or thereafter transferred, and
                 the Trustee shall not register the Transfer of any Residual
                 Certificate unless, in addition to the certificates required to
                 be delivered to the Trustee under subparagraph (b) above, the
                 Trustee shall have been furnished with an affidavit (a
                 "Transfer Affidavit") of the initial owner or the proposed
                 transferee in the form attached hereto as Exhibit H.

          (iii)  Each Person holding or acquiring any Ownership Interest in a
                 Residual Certificate shall agree (A) to obtain a Transfer
                 Affidavit from any other Person to whom such Person attempts to
                 Transfer its Ownership Interest in a Residual Certificate, (B)
                 to obtain a Transfer Affidavit from any Person for whom such
                 Person is acting as nominee, trustee or agent in connection
                 with any Transfer of a Residual Certificate and (C) not to
                 Transfer its Ownership Interest in a Residual Certificate or to
                 cause the Transfer of an Ownership Interest in a Residual
                 Certificate to any other Person if it has actual knowledge that
                 such Person is not a Permitted Transferee.

          (iv)   Any attempted or purported Transfer of any Ownership Interest
                 in a Residual Certificate in violation of the provisions of
                 this Section 5.2(c) shall be absolutely null and void and shall
                 vest no rights in the purported Transferee. If any purported
                 transferee shall become a Holder of a Residual Certificate in
                 violation of the provisions of this Section 5.2(c),

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                 then the last preceding Permitted Transferee shall be restored
                 to all rights as Holder thereof retroactive to the date of
                 registration of Transfer of such Residual Certificate. The
                 Trustee shall be under no liability to any Person for any
                 registration of Transfer of a Residual Certificate that is in
                 fact not permitted by Section 5.2(b) and this Section 5.2(c) or
                 for making any payments due on such Certificate to the Holder
                 thereof or taking any other action with respect to such Holder
                 under the provisions of this Agreement so long as the Transfer
                 was registered after receipt of the related Transfer Affidavit,
                 Transferor Certificate and, in the case of a Residual
                 Certificate which is also a Private Certificate, either the
                 Rule 144A Letter or the Investment Letter. The Trustee shall be
                 entitled but not obligated to recover from any Holder of a
                 Residual Certificate that was in fact not a Permitted
                 Transferee at the time it became a Holder or, at such
                 subsequent time as it became other than a Permitted Transferee,
                 all payments made on such Residual Certificate at and after
                 either such time. Any such payments so recovered by the Trustee
                 shall be paid and delivered by the Trustee to the last
                 preceding Permitted Transferee of such Certificate.

          (v)    The Depositor shall use its best efforts to make available,
                 upon receipt of written request from the Trustee, all
                 information necessary to compute any tax imposed under Section
                 860E(e) of the Code as a result of a Transfer of an Ownership
                 Interest in a Residual Certificate to any Holder who is not a
                 Permitted Transferee.

          The restrictions on Transfers of a Residual Certificate set forth in
     this Section 5.2(c) shall cease to apply (and the applicable portions of
     the legend on a Residual Certificate may be deleted) with respect to
     Transfers occurring after delivery to the Trustee of an Opinion of Counsel,
     which Opinion of Counsel shall not be an expense of the Trust Fund, the
     Trustee, the Seller or the Master Servicer, to the effect that the
     elimination of such restrictions will not cause the REMIC created hereunder
     to fail to qualify as a REMIC at any time that the Certificates are
     outstanding or result in the imposition of any tax on the Trust Fund, a
     Certificateholder or another Person. Each Person holding or acquiring any
     Ownership Interest in a Residual Certificate hereby consents to any
     amendment of this Agreement which, based on an Opinion of Counsel furnished
     to the Trustee, is reasonably necessary (a) to ensure that the record
     ownership of, or any beneficial interest in, a Residual Certificate is not
     transferred, directly or indirectly, to a Person that is not a Permitted
     Transferee and (b) to provide for a means to compel the Transfer of a
     Residual Certificate which is held by a Person that is not a Permitted
     Transferee to a Holder that is a Permitted Transferee.

     (d)  The preparation and delivery of all certificates and opinions referred
          to above in this Section 5.2 in connection with transfer shall be at
          the expense of the parties to such transfers.

     (e)  Except as provided below, the Book-Entry Certificates shall at all
          times remain registered in the name of the Depository or its nominee
          and at all times: (i) registration of the Certificates may not be
          transferred by the Trustee except to

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          another Depository; (ii) the Depository shall maintain book-entry
          records with respect to the Certificate Owners and with respect to
          ownership and transfers of such Book-Entry Certificates; (iii)
          ownership and transfers of registration of the Book-Entry Certificates
          on the books of the Depository shall be governed by applicable rules
          established by the Depository; (iv) the Depository may collect its
          usual and customary fees, charges and expenses from its Depository
          Participants; (v) the Trustee shall deal with the Depository,
          Depository Participants and indirect participating firms as
          representatives of the Certificate Owners of the Book-Entry
          Certificates for purposes of exercising the rights of holders under
          this Agreement, and requests and directions for and votes of such
          representatives shall not be deemed to be inconsistent if they are
          made with respect to different Certificate Owners; and (vi) the
          Trustee may rely and shall be fully protected in relying upon
          information furnished by the Depository with respect to its Depository
          Participants and furnished by the Depository Participants with respect
          to indirect participating firms and persons shown on the books of such
          indirect participating firms as direct or indirect Certificate Owners.

          All transfers by Certificate Owners of Book-Entry Certificates shall
     be made in accordance with the procedures established by the Depository
     Participant or brokerage firm representing such Certificate Owner. Each
     Depository Participant shall only transfer Book-Entry Certificates of
     Certificate Owners it represents or of brokerage firms for which it acts as
     agent in accordance with the Depository's normal procedures.

          If (x) (i) the Depository or the Depositor advises the Trustee in
     writing that the Depository is no longer willing or able to properly
     discharge its responsibilities as Depository, and (ii) the Trustee or the
     Depositor is unable to locate a qualified successor, (y) the Depositor at
     its option advises the Trustee in writing that it elects to terminate the
     book-entry system through the Depository or (z) after the occurrence of an
     Event of Default, Certificate Owners representing at least 51% of the Class
     Certificate Balance of the Book-Entry Certificates together advise the
     Trustee and the Depository through the Depository Participants in writing
     that the continuation of a book-entry system through the Depository is no
     longer in the best interests of the Certificate Owners, the Trustee shall
     notify all Certificate Owners, through the Depository, of the occurrence of
     any such event and of the availability of definitive, fully-registered
     Certificates (the "Definitive Certificates") to Certificate Owners
     requesting the same. Upon surrender to the Trustee of the related Class of
     Certificates by the Depository, accompanied by the instructions from the
     Depository for registration, the Trustee shall issue the Definitive
     Certificates. Neither the Master Servicer, the Depositor nor the Trustee
     shall be liable for any delay in delivery of such instruction and each may
     conclusively rely on, and shall be protected in relying on, such
     instructions. The Master Servicer shall provide the Trustee with an
     adequate inventory of certificates to facilitate the issuance and transfer
     of Definitive Certificates. Upon the issuance of Definitive Certificates
     all references herein to obligations imposed upon or to be performed by the
     Depository shall be deemed to be imposed upon and performed by the Trustee,
     to the extent applicable with respect to such Definitive Certificates and
     the Trustee shall recognize the Holders of the Definitive Certificates as
     Certificateholders hereunder; provided that the Trustee shall not by virtue

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     of its assumption of such obligations become liable to any party for any
     act or failure to act of the Depository.

          SECTION 5.3 Mutilated, Destroyed, Lost or Stolen Certificates.

     If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Master Servicer and the
Trustee such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, countersign and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 5.3, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section 5.3 shall constitute complete and indefeasible evidence of
ownership, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.

          SECTION 5.4 Persons Deemed Owners.

     The Master Servicer, the Trustee and any agent of the Master Servicer or
the Trustee may treat the Person in whose name any Certificate is registered as
the owner of such Certificate for the purpose of receiving distributions as
provided in this Agreement and for all other purposes whatsoever, and neither
the Master Servicer the Trustee nor any agent of the Master Servicer or the
Trustee shall be affected by any notice to the contrary.

          SECTION 5.5 Access to List of Certificateholders' Names and
     Addresses.

     If three or more Certificateholders (a) request such information in writing
from the Trustee, (b) state that such Certificateholders desire to communicate
with other Certificateholders with respect to their rights under this Agreement
or under the Certificates, and (c) provide a copy of the communication which
such Certificateholders propose to transmit, or if the Depositor or Master
Servicer shall request such information in writing from the Trustee, then the
Trustee shall, within ten Business Days after the receipt of such request,
provide the Depositor, the Master Servicer or such Certificateholders at such
recipients' expense the most recent list of the Certificateholders of such Trust
Fund held by the Trustee, if any. The Depositor and every Certificateholder, by
receiving and holding a Certificate, agree that the Trustee shall not be held
accountable by reason of the disclosure of any such information as to the list
of the Certificateholders hereunder, regardless of the source from which such
information was derived.

          SECTION 5.6 Maintenance of Office or Agency.

     The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates its Corporate Trust Office for such purposes. The Trustee will give
prompt written notice to the Certificateholders of any change in such location
of any such office or agency.

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                                   ARTICLE VI
                      THE DEPOSITOR AND THE MASTER SERVICER

          SECTION 6.1 Respective Liabilities of the Depositor and the Master
     Servicer.

     The Depositor and the Master Servicer shall each be liable in accordance
herewith only to the extent of the obligations specifically and respectively
imposed upon and undertaken by them herein.

          SECTION 6.2 Merger or Consolidation of the Depositor or the Master
     Servicer.

     The Depositor and the Master Servicer will each keep in full effect its
existence, rights and franchises as a corporation under the laws of the United
States or under the laws of one of the states thereof and will each obtain and
preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, or any of the Mortgage Loans and
to perform its respective duties under this Agreement.

     Any Person into which the Depositor or the Master Servicer may be merged or
consolidated, or any Person resulting from any merger or consolidation to which
the Depositor or the Master Servicer shall be a party, or any person succeeding
to the business of the Depositor or the Master Servicer, shall be the successor
of the Depositor or the Master Servicer, as the case may be, hereunder, without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided,
however, that the successor or surviving Person to the Master Servicer shall be
qualified to sell mortgage loans to, and to service mortgage loans on behalf of,
FNMA or FHLMC.

          SECTION 6.3 Limitation on Liability of the Depositor, the Master
     Servicer and Others.

     None of the Depositor, the Master Servicer or any of the directors,
officers, employees or agents of the Depositor or the Master Servicer shall be
under any liability to the Certificateholders for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Master Servicer or any such Person against
any breach of representations or warranties made by it herein or protect the
Depositor, the Master Servicer or any such Person from any liability which would
otherwise be imposed by reasons of willful misfeasance, bad faith or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Depositor, the Master Servicer and any
director, officer, employee or agent of the Depositor or the Master Servicer may
rely in good faith on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Depositor,
the Master Servicer and any director, officer, employee or agent of the
Depositor or the Master Servicer shall be indemnified by the Trust Fund and held
harmless against any loss, liability or expense incurred in connection with any
audit, controversy or judicial proceeding relating to a governmental taxing
authority or any legal action relating to this Agreement or the Certificates,
other than any loss, liability or expense related to any specific Mortgage Loan
or Mortgage Loans (except as any such loss, liability or

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expense shall be otherwise reimbursable pursuant to this Agreement) and any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. Neither the Depositor
nor the Master Servicer shall be under any obligation to appear in, prosecute or
defend any legal action that is not incidental to its respective duties
hereunder and which in its opinion may involve it in any expense or liability;
provided, however, that either the Depositor, or the Master Servicer may in its
discretion undertake any such action that it may deem necessary or desirable in
respect of this Agreement and the rights and duties of the parties hereto and
interests of the Trustee and the Certificateholders hereunder. In such event,
the legal expenses and costs of such action and any liability resulting
therefrom shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor, and the Master Servicer shall be entitled to be reimbursed therefor
out of the applicable subaccount of the Certificate Account.

          SECTION 6.4 Limitation on Resignation of Master Servicer.

     The Master Servicer shall not resign from the obligations and duties hereby
imposed on it except (a) upon appointment of a successor servicer and receipt by
the Trustee of a letter from each Rating Agency that such a resignation and
appointment will not result in a downgrading of the rating of any of the
Certificates, or (b) upon determination that its duties hereunder are no longer
permissible under applicable law. Any such determination under clause (b)
permitting the resignation of the Master Servicer shall be evidenced by an
Opinion of Counsel to such effect delivered to the Trustee. No such resignation
shall become effective until the Trustee or a successor master servicer shall
have assumed the Master Servicer's responsibilities, duties, liabilities and
obligations hereunder.

                                  ARTICLE VII
                                     DEFAULT

          SECTION 7.1 Events of Default.

     "Event of Default," wherever used herein, means any one of the following
events:

          (i)    any failure by the Master Servicer to deposit in the applicable
                 subaccount of the Certificate Account or remit to the Trustee
                 any payment required to be made under the terms of this
                 Agreement, which failure shall continue unremedied for five
                 days after the date upon which written notice of such failure
                 shall have been given to the Master Servicer by the Trustee or
                 the Depositor or to the Master Servicer and the Trustee by the
                 Holders of Certificates having not less than 25% of the Voting
                 Rights evidenced by the Certificates; or

          (ii)   any failure by the Master Servicer to observe or perform in any
                 material respect any other of the covenants or agreements on
                 the part of the Master Servicer contained in this Agreement,
                 which failure materially affects the rights of
                 Certificateholders, which failure continues unremedied for a
                 period of 60 days after the date on which written notice of
                 such failure shall have been given to the Master Servicer by
                 the Trustee or the

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                 Depositor, or to the Master Servicer and the Trustee by the
                 Holders of Certificates evidencing not less than 25% of the
                 Voting Rights evidenced by the Certificates; provided, however,
                 that the 60-day cure period shall not apply to the initial
                 delivery of the Mortgage File for Delay Delivery Mortgage Loans
                 nor the failure to substitute or repurchase in lieu thereof; or

          (iii)  a decree or order of a court or agency or supervisory authority
                 having jurisdiction in the premises for the appointment of a
                 receiver or liquidator in any insolvency, readjustment of debt,
                 marshalling of assets and liabilities or similar proceedings,
                 or for the winding-up or liquidation of its affairs, shall have
                 been entered against the Master Servicer and such decree or
                 order shall have remained in force undischarged or unstayed for
                 a period of 60 consecutive days; or

          (iv)   the Master Servicer shall consent to the appointment of a
                 receiver or liquidator in any insolvency, readjustment of debt,
                 marshalling of assets and liabilities or similar proceedings of
                 or relating to the Master Servicer or all or substantially all
                 of the property of the Master Servicer; or

          (v)    the Master Servicer shall admit in writing its inability to pay
                 its debts generally as they become due, file a petition to take
                 advantage of, or commence a voluntary case under, any
                 applicable insolvency or reorganization statute, make an
                 assignment for the benefit of its creditors, or voluntarily
                 suspend payment of its obligations; or

          (vi)   the failure of the Master Servicer to remit any Advance
                 required to be remitted by the Master Servicer pursuant to
                 Section 4.1 which failure continues unremedied at 11:00 a.m.,
                 Central time, on the related Distribution Date.

     If an Event of Default described in clauses (i) to (v) of this Section
shall occur, then, and in each and every such case, so long as such Event of
Default shall not have been remedied, the Trustee may, or at the direction of
the Holders of Certificates evidencing not less than 66 2/3% of the Voting
Rights evidenced by the Certificates, the Trustee shall by notice in writing to
the Master Servicer (with a copy to each Rating Agency), terminate all of the
rights and obligations of the Master Servicer under this Agreement and in and to
the Mortgage Loans and the proceeds thereof, other than its rights as a
Certificateholder hereunder. If an Event of Default described in clause (vi) of
this Section shall occur, the Trustee shall immediately, by notice in writing to
the Master Servicer (with a copy to each Rating Agency), terminate all of the
rights and obligations of the Master Servicer under this Agreement and in and to
the Mortgage Loans and proceeds thereof, other than its rights as a
Certificateholder hereunder. On and after the receipt by the Master Servicer of
such written notice, all authority and power of the Master Servicer hereunder,
whether with respect to the Mortgage Loans or otherwise, shall pass to and be
vested in the Trustee or another successor to the Master Servicer appointed by
the Trustee pursuant to Section 7.2. The Trustee, in its capacity as successor
to the Master Servicer, shall thereupon make any Advance which the Master
Servicer failed to make subject to Section 4.1 hereof. The Trustee is

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hereby authorized and empowered to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise. Unless expressly provided in such written
notice, no such termination shall affect any obligation of the Master Servicer
to pay amounts owed pursuant to Article VIII. The Master Servicer agrees to
cooperate with the Trustee in effecting the termination of the Master Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Trustee of all cash amounts which shall at the time be credited
to the Certificate Account, or thereafter be received with respect to the
Mortgage Loans. All expenses incurred in the transferring of the servicing
duties from the Master Servicer to a Successor Servicer shall be paid by the
Master Servicer, and if not paid by the Master Servicer, shall be paid from
amounts on deposit in the Certificate Account.

     Notwithstanding any termination of the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to receive, out of any late
collection of a Scheduled Payment on a Mortgage Loan which was due prior to the
notice terminating such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
such Master Servicer would have been entitled pursuant to Sections 3.8(a)(i)
through (viii),and any other amounts payable to such Master Servicer hereunder
the entitlement to which arose prior to the termination of its activities
hereunder. Any termination of the activities of the Master Servicer hereunder
will simultaneously result in the termination of the Master Servicer's duties as
a subservicer pursuant to the Servicing Rights Transfer and Subservicing
Agreement.

          SECTION 7.2 Trustee to Act; Appointment of Successor.

     On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.1 hereof, the Trustee shall, subject to and to the extent
provided in Section 3.4, be the successor to the Master Servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to all the responsibilities, duties and liabilities relating thereto
placed on the Master Servicer by the terms and provisions hereof and applicable
law including the obligation to make Advances pursuant to Section 4.1. As
compensation therefor, the Trustee shall be entitled to all funds relating to
the Mortgage Loans that the Master Servicer would have been entitled to charge
to the Certificate Account or Distribution Account if the Master Servicer had
continued to act hereunder. Notwithstanding the foregoing, if the Trustee has
become the successor to the Master Servicer in accordance with Section 7.1
hereof, the Trustee may, if it shall be unwilling to so act, or shall, if it is
prohibited by applicable law from making Advances pursuant to Section 4.1 hereof
or if it is otherwise unable to so act, appoint, or petition a court of
competent jurisdiction to appoint, any established mortgage loan servicing
institution the appointment of which does not adversely affect the then current
rating of the Certificates by each Rating Agency as the successor to the Master
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities of the Master Servicer hereunder. Any successor to the
Master Servicer shall be an institution which is a FNMA and FHLMC approved
seller/servicer in good standing, which has a net worth of at least $10,000,000,
and which is willing to service the Mortgage Loans and executes and delivers to
the Depositor and the Trustee an agreement accepting such delegation and
assignment, which contains an assumption by such Person of the rights, powers,
duties, responsibilities, obligations and liabilities of the Master

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Servicer (other than liabilities of the Master Servicer under Section 6.3
hereof incurred prior to termination of the Master Servicer under Section 7.1),
with like effect as if originally named as a party to this Agreement; and
provided further that each Rating Agency acknowledges that its rating of the
Certificates in effect immediately prior to such assignment and delegation will
not be qualified or reduced, as a result of such assignment and delegation.
Pending appointment of a successor to the Master Servicer hereunder, the
Trustee, unless the Trustee is prohibited by law from so acting, shall, subject
to Section 3.4 hereof, act in such capacity as provided above. In connection
with such appointment and assumption, the Trustee may make such arrangements for
the compensation of such successor out of payments on Mortgage Loans as it and
such successor shall agree; provided, however, that no such compensation shall
be in excess of the Master Servicing Fee permitted the Master Servicer
hereunder. The Trustee and such successor shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Neither the Trustee nor any other successor master servicer shall be deemed to
be in default hereunder by reason of any failure to make, or any delay in
making, any distribution hereunder or any portion thereof or any failure to
perform, or any delay in performing, any duties or responsibilities hereunder,
in either case caused by the failure of the Master Servicer to deliver or
provide, or any delay in delivering or providing, any cash, information,
documents or records to it.

     Any successor to the Master Servicer as master servicer shall give notice
to the Mortgagors of such change of servicer and shall, during the term of its
service as master servicer maintain in force the policy or policies that the
Master Servicer is required to maintain pursuant to Section 6.5.

          SECTION 7.3 Notification to Certificateholders.

     (a)  Upon any termination of or appointment of a successor to the Master
          Servicer, the Trustee shall give prompt written notice thereof to
          Certificateholders and to each Rating Agency.

     (b)  Within 60 days after the occurrence of any Event of Default, the
          Trustee shall transmit by mail to all Certificateholders notice of
          each such Event of Default hereunder known to the Trustee, unless such
          Event of Default shall have been cured or waived.

                                   ARTICLE VIII
                             CONCERNING THE TRUSTEE

          SECTION 8.1 Duties of Trustee.

     The Trustee, prior to the occurrence of an Event of Default of which a
Responsible Officer of the Trustee has actual knowledge and after the curing of
all Events of Default that may have occurred, shall undertake to perform such
duties and only such duties as are specifically set forth in this Agreement. In
case an Event of Default of which a Responsible Officer of the Trustee has
actual knowledge has occurred and remains uncured, the Trustee shall exercise
such of the rights and powers vested in it by this Agreement, and use the same
degree of care and skill

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in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.

     The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement shall examine them to determine whether they are in the form
required by this Agreement; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, order or other instrument. If any such
instrument is found not to conform in any material respect to the requirements
of this Agreement, the Trustee shall notify the Certificateholders of such
instrument in the event that the Trustee, after so requesting, does not receive
a satisfactorily corrected instrument.

     No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own negligent action, its own negligent failure to act or
its own willful misconduct; provided, however, that:

          (i)    unless an Event of Default of which a Responsible Officer of
                 the Trustee has actual knowledge shall have occurred and be
                 continuing, the duties and obligations of the Trustee shall be
                 determined solely by the express provisions of this Agreement,
                 the Trustee shall not be liable except for the performance of
                 such duties and obligations as are specifically set forth in
                 this Agreement, no implied covenants or obligations shall be
                 read into this Agreement against the Trustee and the Trustee
                 may conclusively rely, as to the truth of the statements and
                 the correctness of the opinions expressed therein, upon any
                 certificates or opinions furnished to the Trustee and
                 conforming to the requirements of this Agreement which it
                 believed in good faith to be genuine and to have been duly
                 executed by the proper authorities respecting any matters
                 arising hereunder;

          (ii)   the Trustee shall not be liable for an error of judgment made
                 in good faith by a Responsible Officer or Responsible Officers
                 of the Trustee, unless it shall be finally proven that the
                 Trustee was negligent in ascertaining the pertinent facts;

          (iii)  the Trustee shall not be liable with respect to any action
                 taken, suffered or omitted to be taken by it in good faith in
                 accordance with the direction of Holders of Certificates
                 evidencing not less than 25% of the Voting Rights of
                 Certificates relating to the time, method and place of
                 conducting any proceeding for any remedy available to the
                 Trustee, or exercising any trust or power conferred upon the
                 Trustee under this Agreement;

          (iv)   the Trustee shall not be required to expend or risk its own
                 funds or otherwise incur financial liability in the performance
                 of any of its duties hereunder or the exercise of any of its
                 rights or powers if there is reasonable ground for believing
                 that the repayment of such funds or adequate indemnity against
                 such risk or liability is not assured to it, and

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                 none of the provisions contained in this Agreement shall in any
                 event require the Trustee to perform, or be responsible for the
                 manner of performance of, any of the obligations of the Master
                 Servicer under this Agreement except during such time, if any,
                 as the Trustee shall be the successor to, and be vested with
                 the rights, duties, powers and privileges of, the Master
                 Servicer; and

          (v)    without limiting the generality of this Section 8.1, the
                 Trustee shall have no duty (A) to see to any recording, filing,
                 or depositing of this Agreement or any agreement referred to
                 herein or any financing statement or continuation statement
                 evidencing a security interest, or to see to the maintenance of
                 any such recording or filing or deposit or to any rerecording,
                 refiling or redepositing of any thereof, (B) to see to any
                 insurance, (C) to see to the payment or discharge of any tax,
                 assessment, or other governmental charge or any lien or
                 encumbrance of any kind owing with respect to, assessed or
                 levied against, any part of the Trust Fund other than from
                 funds available in the Distribution Account (D) to confirm or
                 verify the contents of any reports or certificates of the
                 Servicer delivered to the Trustee pursuant to this Agreement
                 believed by the Trustee to be genuine and to have been signed
                 or presented by the proper party or parties.

          SECTION 8.2 Certain Matters Affecting the Trustee.

     Except as otherwise provided in Section 8.1:

          (i)    the Trustee may request and rely upon and shall be protected in
                 acting or refraining from acting upon any resolution, Officers'
                 Certificate, certificate of auditors or any other certificate,
                 statement, instrument, opinion, report, notice, request,
                 consent, order, appraisal, bond or other paper or document
                 believed by it to be genuine and to have been signed or
                 presented by the proper party or parties and the Trustee shall
                 have no responsibility to ascertain or confirm the genuineness
                 of any signature of any such party or parties;

          (ii)   the Trustee may consult with counsel, financial advisers or
                 accountants and the advice of any such counsel, financial
                 advisers or accountants and any Opinion of Counsel shall be
                 full and complete authorization and protection in respect of
                 any action taken or suffered or omitted by it hereunder in good
                 faith and in accordance with such Opinion of Counsel;

          (iii)  the Trustee shall not be liable for any action taken, suffered
                 or omitted by it in good faith and believed by it to be
                 authorized or within the discretion or rights or powers
                 conferred upon it by this Agreement;

          (iv)   the Trustee shall not be bound to make any investigation into
                 the facts or matters stated in any resolution, certificate,
                 statement, instrument, opinion,

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                 report, notice, request, consent, order, approval, bond
                 or other paper or document, unless requested in writing so to
                 do by Holders of Certificates evidencing not less than 25% of
                 the Voting Rights allocated to each Class of Certificates;
                 provided, however, that if the payment within a reasonable time
                 to the Trustee of the costs, expenses or liabilities likely to
                 be incurred by it in the making of such investigation is, in
                 the opinion of the Trustee, not assured to the Trustee by the
                 security afforded to it by the terms of this Agreement, the
                 Trustee may require indemnity satisfactory to the Trustee
                 against such cost, expense or liability as a condition to
                 taking any such action. The reasonable expense of every such
                 examination shall be paid by the Master Servicer or, if paid by
                 the Trustee, shall be repaid by the Master Servicer upon demand
                 from the Servicer's own funds.

          (v)    the Trustee may execute any of the trusts or powers hereunder
                 or perform any duties hereunder either directly or by or
                 through agents, accountants or attorneys and the Trustee shall
                 not be responsible for any misconduct or negligence on the part
                 of such agent, accountant or attorney appointed by the Trustee
                 with due care;

          (vi)   the Trustee shall not be required to risk or expend its own
                 funds or otherwise incur any financial liability in the
                 performance of any of its duties or in the exercise of any of
                 its rights or powers hereunder if it shall have reasonable
                 grounds for believing that repayment of such funds or adequate
                 indemnity against such risk or liability is not assured to it;

          (vii)  the Trustee shall not be liable for any loss on any investment
                 of funds pursuant to this Agreement (other than as issuer of
                 the investment security);

          (viii) the Trustee shall not be deemed to have knowledge of an Event
                 of Default until a Responsible Officer of the Trustee shall
                 have received written notice thereof and in the absence of such
                 notice, the Trustee may conclusively assume that there is no
                 Event of Default;

          (ix)   the Trustee shall be under no obligation to exercise any of the
                 trusts, rights or powers vested in it by this Agreement or to
                 institute, conduct or defend any litigation hereunder or in
                 relation hereto at the request, order or direction of any of
                 the Certificateholders, pursuant to the provisions of this
                 Agreement, unless such Certificateholders shall have offered to
                 the Trustee reasonable security or indemnity satisfactory to
                 the Trustee against the costs, expenses and liabilities which
                 may be incurred therein or thereby;

          (x)    the right of the Trustee to perform any discretionary act
                 enumerated in this Agreement shall not be construed as a duty,
                 and the Trustee shall not be answerable for other than its
                 negligence or willful misconduct in the performance of such
                 act; and

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          (xi)   the Trustee shall not be required to give any bond or surety in
                 respect of the execution of the Trust Fund created hereby or
                 the powers granted hereunder.

          SECTION 8.3   Trustee Not Liable for Certificates or Mortgage Loans.

     The recitals contained herein and in the Certificates shall be taken as the
statements of the Depositor and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or
related document other than with respect to the Trustee's execution and
counter-signature of the Certificates. The Trustee shall not be accountable for
the use or application by the Depositor or the Master Servicer of any funds paid
to the Depositor or the Master Servicer in respect of the Mortgage Loans or
deposited in or withdrawn from the Certificate Account by the Depositor or the
Master Servicer.

          SECTION 8.4 Trustee May Own Certificates.

     The Trustee in its individual or any other capacity may become the owner or
pledgee of Certificates with the same rights as it would have if it were not the
Trustee.

          SECTION 8.5 Trustee's Fees and Expenses.

     The Trustee, as compensation for its activities prior to making the
distributions pursuant to Section 4.2 hereunder, shall be entitled to withdraw
from the Distribution Account on each Distribution Date an amount equal to the
Trustee Fee for such Distribution Date. The Trustee and any director, officer,
employee or agent of the Trustee shall be indemnified by the Master Servicer and
held harmless against any loss, liability or expense (including reasonable
attorney's fees) (i) incurred in connection with any claim or legal action
relating to (a) this Agreement, (b) the Certificates or (c) in connection with
the performance of any of the Trustee's duties hereunder, other than any loss,
liability or expense incurred by reason of willful misfeasance, bad faith or
negligence in the performance of any of the Trustee's duties hereunder or
incurred by reason of any action of the Trustee taken at the direction of the
Certificateholders and (ii) resulting from any error in any tax or information
return prepared by the Master Servicer. Such indemnity shall survive the
termination of this Agreement or the resignation or removal of the Trustee
hereunder. Without limiting the foregoing, the Master Servicer covenants and
agrees, except as otherwise agreed upon in writing by the Depositor and the
Trustee, and except for any such expense, disbursement or advance as may arise
from the Trustee's negligence, bad faith or willful misconduct, to pay or
reimburse the Trustee, for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any of the provisions of this
Agreement with respect to: (A) the reasonable compensation and the expenses and
disbursements of its counsel not associated with the closing of the issuance of
the Certificates, (B) the reasonable compensation, expenses and disbursements of
any accountant, engineer or appraiser that is not regularly employed by the
Trustee, to the extent that the Trustee must engage such persons to perform acts
or services hereunder and (C) printing and engraving expenses in connection with
preparing any Definitive Certificates. Except as otherwise provided herein, the
Trustee shall not be entitled to payment or reimbursement for any routine
ongoing expenses

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incurred by the Trustee in the ordinary course of its duties as
Trustee, Registrar, Tax Matters Person or Paying Agent hereunder or for any
other expenses.

          SECTION 8.6 Eligibility Requirements for Trustee.

     The Trustee hereunder shall at all times be a corporation or association
organized and doing business under the laws of a state or the United States of
America, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, subject to supervision or
examination by federal or state authority and with a credit rating which would
not cause either of the Rating Agencies to reduce their respective then current
ratings of the Certificates (or having provided such security from time to time
as is sufficient to avoid such reduction). If such corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purposes of this Section 8.6 the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 8.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 8.7 hereof. The entity serving
as Trustee may have normal banking and trust relationships with the Depositor
and its affiliates or the Master Servicer and its affiliates; provided, however,
that such entity cannot be an affiliate of the Master Servicer other than the
Trustee in its role as successor to the Master Servicer.

          SECTION 8.7 Resignation and Removal of Trustee.

     The Trustee may at any time resign and be discharged from the trusts hereby
created by giving written notice of resignation to the Depositor and the Master
Servicer and each Rating Agency not less than 60 days before the date specified
in such notice when, subject to Section 8.8, such resignation is to take effect,
and acceptance by a successor trustee in accordance with Section 8.8 meeting the
qualifications set forth in Section 8.6. If no successor trustee meeting such
qualifications shall have been so appointed and have accepted appointment within
30 days after the giving of such notice or resignation, the resigning Trustee
may petition any court of competent jurisdiction for the appointment of a
successor trustee.

     If at any time the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.6 hereof and shall fail to resign after written
request thereto by the Depositor, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or a tax
is imposed with respect to the Trust Fund by any state in which the Trustee or
the Trust Fund is located and the imposition of such tax would be avoided by the
appointment of a different trustee, then the Depositor or the Master Servicer
may remove the Trustee and appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument shall be delivered to the Trustee, one
copy of which shall be delivered to the Master Servicer and one copy to the
successor trustee.

     The Holders of Certificates entitled to at least 51% of the Voting Rights
may at any time remove the Trustee and appoint a successor trustee by written
instrument or instruments, in

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triplicate, signed by such Holders or their attorneys-in-fact duly
authorized, one complete set of which instruments shall be delivered by the
successor Trustee to the Master Servicer, one complete set to the Trustee so
removed and one complete set to the successor so appointed. Notice of any
removal of the Trustee shall be given to each Rating Agency by the Successor
Trustee.

     Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section 8.7 shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 8.8 hereof.

          SECTION 8.8 Successor Trustee.

     Any successor trustee appointed as provided in Section 8.7 hereof shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and the Master Servicer an instrument accepting such appointment hereunder and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with the like effect as if originally
named as trustee herein. The Depositor, the Master Servicer and the predecessor
trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for more fully and certainly vesting and confirming
in the successor trustee all such rights, powers, duties, and obligations.

     No successor trustee shall accept appointment as provided in this Section
8.8 unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.6 hereof and its appointment shall
not adversely affect the then current rating of the Certificates.

     Upon acceptance of appointment by a successor trustee as provided in this
Section 8.8, the Depositor shall mail notice of the succession of such trustee
hereunder to all Holders of Certificates. If the Depositor fails to mail such
notice within 10 days after acceptance of appointment by the successor trustee,
the successor trustee shall cause such notice to be mailed at the expense of the
Depositor.

          SECTION 8.9 Merger or Consolidation of Trustee.

     Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the business of the Trustee, shall be the successor of
the Trustee hereunder, provided that such corporation shall be eligible under
the provisions of Section 8.6 hereof without the execution or filing of any
paper or further act on the part of any of the parties hereto, anything herein
to the contrary notwithstanding.

          SECTION 8.10 Appointment of Co-Trustee or Separate Trustee.

     Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust Fund or

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property securing any Mortgage Note may at the time be located, the Master
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust Fund or any part thereof, whichever
is applicable, and, subject to the other provisions of this Section 8.10, such
powers, duties, obligations, rights and trusts as the Master Servicer and the
Trustee may consider necessary or desirable. If the Master Servicer shall not
have joined in such appointment within 15 days after the receipt by it of a
request to do so, or in the case an Event of Default shall have occurred and be
continuing, the Trustee alone shall have the power to make such appointment. No
co-trustee or separate trustee hereunder shall be required to meet the terms of
eligibility as a successor trustee under Section 8.6 and no notice to
Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under Section 8.8.

     Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

          (i)    To the extent necessary to effectuate the purposes of this
                 Section 8.10, all rights, powers, duties and obligations
                 conferred or imposed upon the Trustee shall be conferred or
                 imposed upon and exercised or performed by the Trustee and such
                 separate trustee or co-trustee jointly (it being understood
                 that such separate trustee or co-trustee is not authorized to
                 act separately without the Trustee joining in such act), except
                 to the extent that under any law of any jurisdiction in which
                 any particular act or acts are to be performed (whether as
                 Trustee hereunder or as successor to the Master Servicer
                 hereunder), the Trustee shall be incompetent or unqualified to
                 perform such act or acts, in which event such rights, powers,
                 duties and obligations (including the holding of title to the
                 applicable Trust Fund or any portion thereof in any such
                 jurisdiction) shall be exercised and performed singly by such
                 separate trustee or co-trustee, but solely at the direction of
                 the Trustee;

          (ii)   No trustee hereunder shall be held personally liable by reason
                 of any act or omission of any other trustee hereunder and such
                 appointment shall not, and shall not be deemed to, constitute
                 any such separate trustee or co-trustee as agent of the
                 Trustee;

          (iii)  The Trustee may at any time accept the resignation of or remove
                 any separate trustee or co-trustee; and

          (iv)   The Master Servicer, and not the Trustee, shall be liable for
                 the payment of reasonable compensation, reimbursement and
                 indemnification to any such separate trustee or co-trustee.

     Any notice, request or other writing given to the Trustee shall be deemed
to have been given to each of the separate trustees and co-trustees, when and as
effectively as if given to each

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of them. Every instrument appointing any separate trustee or co-trustee
shall refer to this Agreement and the conditions of this Article VIII. Each
separate trustee and co-trustee, upon its acceptance of the trusts conferred,
shall be vested with the estates or property specified in its instrument of
appointment, either jointly with the Trustee or separately, as may be provided
therein, subject to all the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the Master Servicer
and the Depositor.

     Any separate trustee or co-trustee may, at any time, constitute the Trustee
its agent or attorney-in-fact, with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of this Agreement on
its behalf and in its name. If any separate trustee or co-trustee shall die,
become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.

          SECTION 8.11 Tax Matters.

     It is intended that the assets with respect to which the REMIC election is
to be made, as set forth in the preliminary statement shall constitute, and that
the conduct of matters relating to such assets shall be such as to qualify such
assets as, a "real estate mortgage investment conduit" as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Trustee covenants and agrees that it shall act as agent (and the Trustee is
hereby appointed to act as agent) on behalf of any such REMIC and that in such
capacity it shall: (a) prepare and file, or cause to be prepared and filed, in a
timely manner, a U.S. Real Estate Mortgage Investment Conduit Income Tax Return
(Form 1066 or any successor form adopted by the Internal Revenue Service) and
prepare and file or cause to be prepared and filed with the Internal Revenue
Service and applicable state or local tax authorities income tax or information
returns for each taxable year with respect to any such REMIC, containing such
information and at the times and in the manner as may be required by the Code or
state or local tax laws, regulations, or rules, and furnish or cause to be
furnished to Certificateholders the schedules, statements or information at such
times and in such manner as may be required thereby; (b) within thirty days of
the Closing Date, furnish or cause to be furnished to the Internal Revenue
Service, on Forms 8811 or as otherwise may be required by the Code, the name,
title, address, and telephone number of the person that the Holders of the
Certificates may contact for tax information relating thereto, together with
such additional information as may be required by such Form, and update such
information at the time or times in the manner required by the Code; (c) make or
cause to be made elections that such assets be treated as a REMIC on the federal
tax return for its first taxable year (and, if necessary, under applicable state
law); (d) prepare and forward, or cause to be prepared and forwarded, to the
Certificateholders and to the Internal Revenue Service and, if necessary, state
tax authorities, all information returns and reports as and when required to be
provided to them in accordance with the REMIC Provisions, including without
limitation, the calculation of any original issue discount using the prepayment
assumption; (e) provide information necessary for the computation of tax imposed
on the transfer of a Residual Certificate to a Person that is not a Permitted
Transferee, or an agent (including a broker, nominee or other middleman) of a
Non-Permitted Transferee, or a pass-through entity in which a Non-Permitted
Transferee is the record holder of an interest (the reasonable cost of computing

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and furnishing such information may be charged to the Person liable for such
tax); (f) to the extent that they are under its control conduct matters relating
to such assets at all times that any Certificates are outstanding so as to
maintain the status as a REMIC under the REMIC Provisions; (g) not knowingly or
intentionally take any action or omit to take any action that would cause the
termination of the REMIC status; (h) pay, from the sources specified in the last
paragraph of this Section 8.11, the amount of any federal or state tax,
including prohibited transaction taxes as described below, imposed on any such
REMIC prior to its termination when and as the same shall be due and payable
(but such obligation shall not prevent the Trustee or any other appropriate
Person from contesting any such tax in appropriate proceedings and shall not
prevent the Trustee from withholding payment of such tax, if permitted by law,
pending the outcome of such proceedings); (i) ensure that federal, state or
local income tax or information returns shall be signed by the Trustee or such
other person as may be required to sign such returns by the Code or state or
local laws, regulations or rules; (j) maintain records relating to any such
REMIC, including but not limited to the income, expenses, assets and liabilities
thereof and the fair market value and adjusted basis of the assets determined at
such intervals as may be required by the Code, as may be necessary to prepare
the foregoing returns, schedules, statements or information; and (k) as and when
necessary and appropriate, represent any such REMIC in any administrative or
judicial proceedings relating to an examination or audit by any governmental
taxing authority, request an administrative adjustment as to any taxable year of
any such REMIC, enter into settlement agreements with any governmental taxing
agency, extend any statute of limitations relating to any tax item of any such
REMIC, and otherwise act on behalf of any such REMIC in relation to any tax
matter or controversy involving it.

     In order to enable the Trustee to perform its duties as set forth herein,
the Depositor shall provide, or cause to be provided, to the Trustee within ten
(10) days after the Closing Date all information or data that the Trustee
requests in writing and determines to be relevant for tax purposes to the
valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide
to the Trustee promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, reasonably request
in order to enable the Trustee to perform its duties as set forth herein. The
Depositor hereby indemnifies the Trustee for any losses, liabilities, damages,
claims or expenses of the Trustee arising from any errors or miscalculations of
the Trustee that result from any failure of the Depositor to provide, or to
cause to be provided, accurate information or data to the Trustee on a timely
basis.

     In the event that any tax is imposed on "prohibited transactions" of any
REMIC as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of any REMIC as defined in Section 860G(c) of the Code, on
any contribution to any REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed, if not paid as otherwise provided for
herein, such tax shall be paid by (i) the Trustee, if any such other tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement which breach was caused by its negligence or willful misconduct,
(ii) the Master Servicer, in the case of any such minimum tax, or if such tax
arises out of or results from a breach by the Master Servicer of any of their
obligations under this Agreement, (iii) the Seller, if any such tax arises out
of or results from the Seller's obligation to repurchase a Mortgage Loan
pursuant to Section 2.2 or 2.3 or (iv) in all other cases, or in the event that
the Trustee, the Master

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Servicer or the Seller fails to honor its obligations under the preceding
clauses (i), (ii) or (iii), any such tax will be paid with amounts otherwise to
be distributed to the Certificateholders, as provided in Section 3.8(b).

          SECTION 8.12 Periodic Filings.

     The Depositor hereby directs the Trustee to prepare, execute (pursuant to a
limited power of attorney given to the Trustee by the Depositor) and file on
behalf of the Depositor all periodic reports required under the Securities
Exchange Act of 1934 in conformity with the terms of the "no-action" relief
granted by the SEC to issuers of asset-backed securities such as the
Certificates and the Trustee hereby agrees to do so. The Master Servicer will
also prepare and execute any certifications to be filed with the Form 10-K as
required under the Sarbanes-Oxley Act of 2002. In connection with the
preparation and filing of such periodic reports, the Depositor and the Master
Servicer shall timely provide to the Trustee all material information available
to them which is required to be included in such reports and not known to them
to be in the possession of the Trustee and such other information as the Trustee
reasonably may request from either of them and otherwise reasonably shall
cooperate with the Trustee. The Trustee shall have no liability with respect to
any failure to properly prepare or file such periodic reports resulting from or
relating to the Trustee's inability or failure to obtain any information not
resulting from its own negligence or willful misconduct.

                                   ARTICLE IX
                                   TERMINATION

          SECTION 9.1 Termination upon Liquidation or Purchase of all Mortgage
     Loans.

     Subject to Section 9.3, the obligations and responsibilities of the
Depositor, the Master Servicer and the Trustee created hereby with respect to
the Trust Fund shall terminate upon the earlier of (a) the purchase by the
Master Servicer of all Mortgage Loans (and REO Properties) remaining in the
Trust Fund at the price equal to the sum of (i) 100% of the Stated Principal
Balance of each Mortgage Loan (other than a Mortgage Loan that has been
foreclosed and subject to clause (ii)) plus one month's accrued interest thereon
at the applicable Adjusted Mortgage Rate, (ii) the lesser of (x) the appraised
value of any REO Property as determined by the higher of two appraisals
completed by two independent appraisers selected by the Master Servicer at the
expense of the Master Servicer and (y) the Stated Principal Balance of each
Mortgage Loan related to any REO Property plus accrued and unpaid interest
thereon at the applicable Adjusted Mortgage Rate, 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,
and (b) the later of (i) the maturity or other liquidation (or any Advance with
respect thereto) of the last Mortgage Loan remaining in the Trust Fund and the
disposition of all REO Property and (ii) the distribution to Certificateholders
of all amounts required to be distributed to them pursuant to this Agreement. In
no event shall the trusts created hereby continue beyond the earlier of (i) the
expiration of 21 years from the death of the survivor of the descendants of
Joseph P. Kennedy, the late Ambassador of the United States to the Court of St.
James's, living on the date hereof, and (ii) the Latest Possible Maturity Date.
The right to purchase all Mortgage Loans and REO Properties pursuant to clause
(a) above shall be conditioned upon the Pool Principal Balance for each Mortgage
Pool, at the time of any such

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repurchase, aggregating less than ten percent of the aggregate Cut-off Date
Principal Balance of the Mortgage Loans.

          SECTION 9.2 Final Distribution on the Certificates.

     If on any Determination Date, the Master Servicer determines that there are
no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than the funds in the Certificate Account, the Master Servicer shall
direct the Trustee promptly to send a final distribution notice to each
Certificateholder. If the Master Servicer elects to terminate the Trust Fund
pursuant to clause (a) of Section 9.1, at least 20 days prior to the date notice
is to be mailed to the affected Certificateholders, the Master Servicer shall
notify the Depositor and the Trustee of the date the Master Servicer intends to
terminate the Trust Fund and of the applicable repurchase price of the Mortgage
Loans and REO Properties.

     Notice of any termination of the Trust Fund, specifying the Distribution
Date on which Certificateholders may surrender their Certificates for payment of
the final distribution and cancellation, shall be given promptly by the Trustee
by letter to Certificateholders mailed not earlier than the 10th day and no
later than the 15th day of the month next preceding the month of such final
distribution. Any such notice shall specify (a) the Distribution Date upon which
final distribution on the Certificates will be made upon presentation and
surrender of Certificates at the office therein designated, (b) the amount of
such final distribution, (c) the location of the office or agency at which such
presentation and surrender must be made, and (d) that the Record Date otherwise
applicable to such Distribution Date is not applicable, distributions being made
only upon presentation and surrender of the Certificates at the office therein
specified. The Master Servicer will give such notice to each Rating Agency at
the time such notice is given to Certificateholders.

     In the event such notice is given, the Master Servicer shall cause all
funds in the Certificate Account to be remitted to the Trustee for deposit in
the applicable subaccounts of the Distribution Account on the Business Day prior
to the applicable Distribution Date in an amount equal to the final distribution
in respect of the Certificates. Upon such final deposit with respect to the
Trust Fund and the receipt by the Trustee of a Request for Release therefor, the
Trustee shall promptly release to the Master Servicer the Mortgage Files for the
Mortgage Loans.

     Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in the order
set forth in Section 4.2 hereof, on the final Distribution Date, in the case of
the Certificateholders, in proportion to their respective Percentage Interests,
with respect to Certificateholders of the same Class, an amount equal to (i) as
to each Class of Regular Certificates, the Class Certificate Balance thereof
plus accrued interest thereon in the case of an interest bearing Certificate,
and (ii) as to the Residual Certificates, the amount, if any, which remains on
deposit in the Distribution Account (other than the amounts retained to meet
claims) after application pursuant to clause (i) above.

     In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six

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months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Holders of each of the
Class II-A-R Certificates shall be entitled to all unclaimed funds and other
assets of the Trust Fund, held for distribution to such Certificateholders,
which remain subject hereto.

          SECTION 9.3 Additional Termination Requirements.

     (a)  In the event the Master Servicer exercises its purchase option as
          provided in Section 9.1, the Trust Fund and the REMIC created
          hereunder shall be terminated in accordance with the following
          additional requirements, unless the Trustee has been supplied with an
          Opinion of Counsel, at the expense of the Master Servicer, to the
          effect that the failure to comply with the requirements of this
          Section 9.3 will not (i) result in the imposition of taxes on
          "prohibited transactions" on the REMIC as defined in Section 860F of
          the Code, or (ii) cause any REMIC to fail to qualify as a REMIC at any
          time that any Certificates are outstanding:

                    (1)  Within 90 days prior to the final Distribution Date set
               forth in the notice given by the Master Servicer under Section
               9.2, the Master Servicer shall prepare and the Trustee, at the
               expense of the "tax matters person," shall adopt a plan of
               complete liquidation within the meaning of Section 860F(a)(4) of
               the Code for the REMIC created hereunder which, as evidenced by
               an Opinion of Counsel addressed to the Trustee (which opinion
               shall not be an expense of the Trustee or the Tax Matters
               Person), meets the requirements of a qualified liquidation; and

                    (2)  Within 90 days after the time of adoption of such plans
               of complete liquidation, the Trustee shall sell all of the assets
               of the Trust Fund to the Master Servicer for cash in accordance
               with Section 9.1.

     (b)  The Trustee as agent for the REMIC established hereunder hereby agrees
          to adopt and sign such a plan of complete liquidation upon the written
          request of the Master Servicer, and the receipt of the Opinion of
          Counsel referred to in Section 9.3(a)(1) and to take such other action
          in connection therewith as may be reasonably requested by the Master
          Servicer.

     (c)  By their acceptance of the Certificates, the Holders thereof hereby
          authorize the Master Servicer to prepare and the Trustee to adopt and
          sign plans of complete liquidation.

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                                    ARTICLE X
                                   [RESERVED]

                                   ARTICLE XI
                            MISCELLANEOUS PROVISIONS

          SECTION 11.1 Amendment.

     This Agreement may be amended from time to time by the Depositor, the
Master Servicer and the Trustee without the consent of any of the
Certificateholders (i) to cure any ambiguity or mistake, (ii) to correct any
defective provision herein or to supplement any provision herein which may be
inconsistent with any other provision herein, (iii) to add to the duties of the
Depositor, the Seller or the Master Servicer, (iv) to add any other provisions
with respect to matters or questions arising hereunder or (v) to modify, alter,
amend, add to or rescind any of the terms or provisions contained in this
Agreement; provided that any action pursuant to clauses (iv) or (v) above shall
not, as evidenced by an Opinion of Counsel delivered to the Trustee (which
Opinion of Counsel shall not be an expense of the Trustee or the Trust Fund),
adversely affect in any material respect the interests of any Certificateholder;
provided, however, that the amendment shall not be deemed to adversely affect in
any material respect the interests of the Certificateholders if the Person
requesting the amendment obtains a letter from each Rating Agency stating that
the amendment would not result in the downgrading or withdrawal of the
respective ratings then assigned to the Certificates; it being understood and
agreed that any such letter in and of itself will not represent a determination
as to the materiality of any such amendment and will represent a determination
only as to the credit issues affecting any such rating. The Trustee, the
Depositor and the Master Servicer also may at any time and from time to time
amend this Agreement without the consent of the Certificateholders to modify,
eliminate or add to any of its provisions to such extent as shall be necessary
or helpful to (i) maintain the qualification of the REMIC established hereunder
as a REMIC under the Code, (ii) avoid or minimize the risk of the imposition of
any tax on the REMIC established hereunder pursuant to the Code that would be a
claim at any time prior to the final redemption of the Certificates or (iii)
comply with any other requirements of the Code, provided that the Trustee has
been provided an Opinion of Counsel, which opinion shall be an expense of the
party requesting such opinion but in any case shall not be an expense of the
Trustee or the Trust Fund, to the effect that such action is necessary or
helpful to, as applicable, (i) maintain such qualification, (ii) avoid or
minimize the risk of the imposition of such a tax or (iii) comply with any such
requirements of the Code.

     This Agreement may also be amended from time to time by the Depositor, the
Master Servicer and the Trustee with the consent of the Holders of a Majority in
Interest of each Class of Certificates affected thereby for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Holders of Certificates; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments required to
be distributed on any Certificate without the consent of the Holder of such
Certificate, (ii) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in (i),
without the consent of the Holders of Certificates of such Class evidencing, as
to such Class, Percentage Interests aggregating 66%, or (iii) reduce the
aforesaid

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percentages of Certificates the Holders of which are required to consent to
any such amendment, without the consent of the Holders of all such Certificates
then outstanding.

     Notwithstanding any contrary provision of this Agreement, the Trustee shall
not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, which opinion shall not be an expense of the
Trustee or the Trust Fund, to the effect that such amendment will not cause the
imposition of any tax on the REMIC established hereunder or the
Certificateholders or cause the REMIC established hereunder to fail to qualify
as a REMIC at any time that any Certificates are outstanding.

     Promptly after the execution of any amendment to this Agreement requiring
the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.

     It shall not be necessary for the consent of Certificateholders under this
Section to approve the particular form of any proposed amendment, but it shall
be sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable regulations as
the Trustee may prescribe.

     Nothing in this Agreement shall require the Trustee to enter into an
amendment without receiving an Opinion of Counsel (which Opinion shall not be an
expense of the Trustee or the Trust Fund), satisfactory to the Trustee that (i)
such amendment is permitted and is not prohibited by this Agreement and that all
requirements for amending this Agreement have been complied with; and (ii)
either (A) the amendment does not adversely affect in any material respect the
interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 11.1.

          SECTION 11.2 Recordation of Agreement; Counterparts.

     This Agreement is subject to recordation in all appropriate public offices
for real property records in all the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Master Servicer at its expense, but only upon direction a
majority of the Certificateholders to the effect that such recordation
materially and beneficially affects the interests of the Certificateholders.

     For the purpose of facilitating the recordation of this Agreement as herein
provided and for other purposes, this Agreement may be executed (by facsimile or
otherwise) simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.

          SECTION 11.3 Governing Law.

     THIS AGREEMENT (OTHER THAN SECTION 2.1 HEREOF) SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK AND
THE OBLIGATIONS, RIGHTS

                                       94

<PAGE>

AND REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 2.1 OF THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE
OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THE STATE OF
DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HERETO AND THE
CERTIFICATEHOLDERS UNDER SUCH SECTION SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.

          SECTION 11.4 Intention of Parties.

     (a)  It is the express intent of the parties hereto that the conveyance of
          the Trust Fund by the Depositor to the Trustee be, and be construed
          as, absolute sales thereof to the Trustee. It is, further, not the
          intention of the parties that such conveyances be deemed a pledge
          thereof by the Depositor to the Trustee. However, in the event that,
          notwithstanding the intent of the parties, such assets are held to be
          the property of the Depositor, or if for any other reason this
          Agreement is held or deemed to create a security interest in such
          assets, then (i) this Agreement shall be deemed to be a security
          agreement within the meaning of the Uniform Commercial Code of the
          State of New York and (ii) the conveyance provided for in this
          Agreement shall be deemed to be an assignment and a grant by the
          Depositor to the Trustee, for the benefit of the Certificateholders,
          of a security interest in all of the assets that constitute the Trust
          Fund, whether now owned or hereafter acquired.

               The Depositor, for the benefit of the Certificateholders, shall,
          to the extent consistent with this Agreement, take such actions as may
          be necessary to ensure that, if this Agreement were deemed to create a
          security interest in the Trust Fund, such security interest would be
          deemed to be a perfected security interest of first priority under
          applicable law and will be maintained as such throughout the term of
          the Agreement. The Depositor shall arrange for filing any Uniform
          Commercial Code continuation statements in connection with any
          security interest granted or assigned to the Trustee for the benefit
          of the Certificateholders.

          SECTION 11.5 Notices.

     (a)  The Trustee shall use its best efforts to promptly provide notice to
          each Rating Agency with respect to each of the following of which it
          has actual knowledge:

               (1)  Any material change or amendment to this Agreement;

               (2)  The occurrence of any Event of Default that has not been
                    cured;

               (3)  The resignation or termination of the Master Servicer or the
                    Trustee and the appointment of any successor;

               (4)  The repurchase or substitution of Mortgage Loans pursuant to
                    Section 2.3; and

                                       95

<PAGE>

               (5)  The final payment to Certificateholders.

               (6)  Any rating action involving the long-term credit rating of
                    the Master Servicer, which notice shall be made by
                    first-class mail within two Business Days after the Trustee
                    gains actual knowledge thereof.

     In addition,  the Trustee shall promptly  furnish to each Rating Agency
copies of the following:

               (7)  Each report to Certificateholders described in Section 4.6;

               (8)  Each annual statement as to compliance described in Section
                    3.16;

               (9)  Each annual independent public accountants' servicing report
                    described in Section 3.17; and

               (10) Any notice of a purchase of a Mortgage Loan pursuant to
                    Section 2.2, 2.3 or 3.11.

     (b)  All directions, demands, authorizations, consents, waivers,
          communications and notices hereunder shall be in writing and shall be
          deemed to have been duly given when delivered to by first class mail,
          facsimile or courier (a) in the case of the Depositor, First Horizon
          Asset Securities Inc., 4000 Horizon Way, Irving, Texas 75063,
          Attention: Wade Walker; (b) in the case of the Master Servicer, First
          Horizon Home Loan Corporation, 4000 Horizon Way, Irving, Texas 75063,
          Attention: Larry P. Cole or such other address as may be hereafter
          furnished to the Depositor and the Trustee by the Master Servicer in
          writing; (c) in the case of the Trustee, The Bank of New York, 101
          Barclay Street, 8W, New York, New York 10286, Attention: Diane
          Pickett, or such other address as the Trustee may hereafter furnish to
          the Depositor or Master Servicer; and (d) in the case of the Rating
          Agencies, the address specified therefor in the definition
          corresponding to the name of such Rating Agency. Notices to
          Certificateholders shall be deemed given when mailed, first class
          postage prepaid, to their respective addresses appearing in the
          Certificate Register.

          SECTION 11.6 Severability of Provisions.

     If any one or more of the covenants, agreements, provisions or terms of
this  Agreement  shall be for any  reason  whatsoever  held  invalid,  then such
covenants,  agreements,  provisions or terms shall be deemed  severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or  enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.

                                       96

<PAGE>

          SECTION 11.7 Assignment.

     Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.2, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.

          SECTION 11.8 Limitation on Rights of Certificateholders.

     The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.

     No Certificateholder shall have any right to vote (except as provided
herein) or in any manner otherwise control the operation and management of the
Trust Fund, or the obligations of the parties hereto, nor shall anything herein
set forth or contained in the terms of the Certificates be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
party by reason of any action taken by the parties to this Agreement pursuant to
any provision hereof.

     No Certificateholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of an Event
of Default and of the continuance thereof, as herein provided, and unless the
Holders of Certificates evidencing not less than 25% of the Voting Rights
evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and enforcement of
the provisions of this Section 11.8, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.

          SECTION 11.9 Inspection and Audit Rights.

     The Master Servicer agrees that, on reasonable prior notice, it will permit
and will cause each Subservicer to permit any representative of the Depositor or
the Trustee during the Master Servicer's normal business hours, to examine all
the books of account, records, reports and other papers of the Master Servicer
relating to the Mortgage Loans, to make copies and extracts

                                       97

<PAGE>

therefrom, to cause such books to be audited by independent certified
public accountants selected by the Depositor or the Trustee and to discuss its
affairs, finances and accounts relating to the Mortgage Loans with its officers,
employees and independent public accountants (and by this provision the Master
Servicer hereby authorizes said accountants to discuss with such representative
such affairs, finances and accounts), all at such reasonable times and as often
as may be reasonably requested. Any out-of-pocket expense incident to the
exercise by the Depositor or the Trustee of any right under this Section 11.9
shall be borne by the party requesting such inspection; all other such expenses
shall be borne by the Master Servicer or the related Subservicer.

          SECTION 11.10 Certificates Nonassessable and Fully Paid.

     It is the intention of the Depositor that Certificateholders shall not be
personally liable for obligations of the Trust Fund, that the interests in the
Trust Fund represented by the Certificates shall be nonassessable for any reason
whatsoever, and that the Certificates, upon due authentication thereof by the
Trustee pursuant to this Agreement, are and shall be deemed fully paid.

          SECTION 11.11 Limitations on Actions; No Proceedings.

     (a)  Other than pursuant to this Agreement, or in connection with or
          incidental to the provisions or purposes of this Agreement, the trust
          created hereunder shall not (i) issue debt or otherwise borrow money,
          (ii) merge or consolidate with any other entity reorganize, liquidate
          or transfer all or substantially all of its assets to any other
          entity, or (iii) otherwise engage in any activity or exercise any
          power not provided for in this Agreement.

     (b)  Notwithstanding any prior termination of this Agreement, the Trustee,
          the Master Servicer and the Depositor shall not, prior to the date
          which is one year and one day after the termination of this Agreement,
          acquiesce, petition or otherwise invoke or cause any Person to invoke
          the process of any court or government authority for the purpose of
          commencing or sustaining a case against the Depositor or the Trust
          Fund under any federal or state bankruptcy, insolvency or other
          similar law or appointing a receiver, liquidator, assignee, trustee,
          custodian, sequestrator or other similar official of the Depositor or
          the Trust Fund or any substantial part of their respective property,
          or ordering the winding up or liquidation of the affairs of the
          Depositor or the Trust Fund.

          SECTION 11.12 Acknowledgment of Seller.

     Seller hereby acknowledges the provisions of this Agreement,  including
the obligations  under Sections  2.1(a),  2.2, 2.3(b) and 8.11 of this Agreement
and further  acknowledges the Depositor's  assignment of its rights and remedies
for the breach of the  representations  and warranties  made by the Seller under
MLPA I.

                                   * * * * * *

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<PAGE>

     IN WITNESS WHEREOF, the Depositor, the Trustee and the Master Servicer have
caused their names to be signed hereto by their respective officers thereunto
duly authorized as of the day and year first above written.

                                            FIRST HORIZON ASSET SECURITIES INC.,
                                            as Depositor


                                            By:       /s/  Wade Walker
                                               ---------------------------------
                                                         Wade Walker
                                                   Senior Vice President -
                                                    Asset Securitization


                                            THE BANK OF NEW YORK,
                                            not in its individual capacity,
                                            but solely as Trustee


                                            By:      /s/  Diane Pickett
                                               ---------------------------------
                                                        Diane Pickett
                                                       Vice President


                                            FIRST HORIZON HOME LOAN CORPORATION,
                                            in its capacity as Master Servicer


                                            By:       /s/  Wade Walker
                                               ---------------------------------
                                                         Wade Walker
                                                   Senior Vice President -
                                                    Asset Securitization


The foregoing agreement is hereby
acknowledged and accepted as of the
date first above written.

FIRST HORIZON HOME LOAN CORPORATION,
in its capacity as Seller


By:             /s/  Wade Walker
   --------------------------------------------
                   Wade Walker
   Senior Vice President - Asset Securitization


FHASI 2003-AR2
Pooling and Servicing Agreement - Signature Page

<PAGE>

                                   SCHEDULE I

                       First Horizon Asset Securities Inc.
               Mortgage Pass-Through Certificates Series 2003-AR2

                             Mortgage Loan Schedule
                             ----------------------

                      [Available Upon Request from Trustee]

                                      I-1

<PAGE>

                                   SCHEDULE II

                       First Horizon Asset Securities Inc.
               Mortgage Pass-Through Certificates Series 2003-AR2

              Representations and Warranties of the Master Servicer
              -----------------------------------------------------

     First Horizon Home Loan Corporation ("First Horizon") hereby makes the
representations and warranties set forth in this Schedule II to the Depositor
and the Trustee, as of the Closing Date, or if so specified herein, as of the
Cut-off Date. Capitalized terms used but not otherwise defined in this Schedule
II shall have the meanings ascribed thereto in the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") relating to the
above-referenced Series, among First Horizon, as master servicer, First Horizon
Asset Securities Inc., as depositor, and The Bank of New York, as trustee.

          (1)  First Horizon is duly organized as a Kansas corporation and is
     validly existing and in good standing under the laws of the State of Kansas
     and is duly authorized and qualified to transact any and all business
     contemplated by the Pooling and Servicing Agreement to be conducted by
     First Horizon in any state in which a Mortgaged Property is located or is
     otherwise not required under applicable law to effect such qualification
     and, in any event, is in compliance with the doing business laws of any
     such state, to the extent necessary to ensure its ability to enforce each
     Mortgage Loan, to service the Mortgage Loans in accordance with the terms
     of the Pooling and Servicing Agreement and to perform any of its other
     obligations under the Pooling and Servicing Agreement in accordance with
     the terms thereof.

          (2)  First Horizon has the full corporate power and authority to
     service each Mortgage Loan, and to execute, deliver and perform, and to
     enter into and consummate the transactions contemplated by the Pooling and
     Servicing Agreement and has duly authorized by all necessary corporate
     action on the part of First Horizon the execution, delivery and performance
     of the Pooling and Servicing Agreement; and the Pooling and Servicing
     Agreement, assuming the due authorization, execution and delivery thereof
     by the other parties thereto, constitutes a legal, valid and binding
     obligation of First Horizon, enforceable against First Horizon in
     accordance with its terms, except that (a) the enforceability thereof may
     be limited by bankruptcy, insolvency, moratorium, receivership and other
     similar laws relating to creditors' rights generally and (b) the remedy of
     specific performance and injunctive and other forms of equitable relief may
     be subject to equitable defenses and to the discretion of the court before
     which any proceeding therefor may be brought.

          (3)  The execution and delivery of the Pooling and Servicing Agreement
     by First Horizon, the servicing of the Mortgage Loans by First Horizon
     under the Pooling and Servicing Agreement, the consummation of any other of
     the transactions contemplated by the Pooling and Servicing Agreement, and
     the fulfillment of or compliance with the terms thereof are in the ordinary
     course of business of First Horizon and will not (A) result in a material
     breach of any term or provision of the charter or by-laws of First Horizon
     or (B) materially conflict with, result in a material breach, violation or
     acceleration of, or result in a material default under, the terms of any
     other material agreement or instrument to which First Horizon is a party or
     by which it may be bound,

                                      II-1

<PAGE>

     or (C) constitute a material violation of any statute, order or regulation
     applicable to First Horizon of any court, regulatory body, administrative
     agency or governmental body having jurisdiction over First Horizon; and
     First Horizon is not in breach or violation of any material indenture or
     other material agreement or instrument, or in violation of any statute,
     order or regulation of any court, regulatory body, administrative agency or
     governmental body having jurisdiction over it which breach or violation may
     materially impair First Horizon's ability to perform or meet any of its
     obligations under the Pooling and Servicing Agreement.

          (4)  No litigation is pending or, to the best of First Horizon's
     knowledge, threatened against First Horizon that would prohibit the
     execution or delivery of, or performance under, the Pooling and Servicing
     Agreement by First Horizon.

                                      II-2

<PAGE>

                                  SCHEDULE III

                       First Horizon Asset Securities Inc.
               Mortgage Pass-Through Certificates Series 2003-AR2

                     Form of Monthly Master Servicer Report
                     --------------------------------------

                             [Begins on Next Page]

                                     III-1