Document:

<PAGE>

                                                                 Exhibit 10.16
                                                                 Amendment 17 To
                                                                 Agreement No.
                                                                 GSA005D

Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as *. A complete version of this exhibit has been filed
separately with the Securities and Exchange Commission.

                                 [LOGO OF AT&T]
                          SUPPLIER MANAGEMENT DIVISION

                                                                Amendment No. 17

The Contract Services Agreement effective August 1, 1995, between NetSolve,
Incorporated ("NetSolve") and AT&T Corp. ("AT&T") ("Original Contract") as
heretofore modified by Amendments Number 5, Number 11 and Number 14
(collectively the "GSA005D Agreement" or "Agreement") is further amended by this
Amendment No. 17 as follows effective as of January 1, 2002:

     1)  Amendment Number 14, entitled "AT&T Frame Relay Plus Services" is
         hereby deleted and replaced by this Amendment 17, attached hereto, and
         incorporated as part of the Agreement.

     2)  Attachments K-1, K-2, K-3 and K-4 to Attachment K to Amendment Number 7
         remain in effect and are not deleted by this Amendment.

ALL OTHER TERMS AND CONDITIONS OF THE AGREEMENT REMAIN UNCHANGED.

NETSOLVE, INCORPORATED                     AT&T CORP.

By:          Robert C. Pojman              By:  Debra Bell

Signature:    /s/ Robert C. Pojman         Signature:     /s/ Debra Bell
             ------------------------                   ------------------------
Title:       VP Business Development       Title:      Chief Procurement Officer

Date:             April 18, 2002           Date:            April 8, 2002
             ------------------------                   ------------------------

Page 1 of 9

<PAGE>

                                                                 Amendment 17 To
                                                                 Agreement No.
                                                                 GSA005D

                                  AMENDMENT 17

                         AT&T Frame Relay Plus Services

This Amendment for Contract Services ("Amendment 17") to the Agreement covers
AT&T Frame Relay Plus Implementation and Management Services ("Services") that
NetSolve shall provide to AT&T in support of AT&T's Frame Relay Plus Service
offering, as requested by AT&T and as described herein. This Amendment 17 is an
integral part of the Agreement and shall be governed by the terms of the
Agreement. In the event of any conflict between the terms of this Amendment 17
and the terms of the Agreement, the terms of this Amendment 17 shall prevail
with respect to the Services provided under this Amendment.

For purposes of this Amendment 17 only, the following Paragraphs in the
Agreement are deleted in their entirety and replaced with the Paragraphs below:

Paragraph 1 - Statement of Work

NetSolve shall provide Services to AT&T in support of AT&T's Frame Relay Plus
Service offering in accordance with the "Statement of Work," Attachments K-1,
K-2, K-3, and K-4 attached to Amendment Number 7 to the Agreement.
Notwithstanding the preceding sentence, the Order Management portions of these
attachments are deleted in their entirety. Services shall be available to AT&T
worldwide. Modifications to this Statement of Work and its requirements as set
forth in Attachments K-1, K-2, K-3, and K-4 may be requested from time to time
by AT&T. The pricing contained herein shall apply to Services requested or any
modification, provided that the modifications requested do not require the
furnishing of more material or labor by NetSolve or longer times for performance
of services. NetSolve shall immediately notify AT&T's Contract Representative,
in writing, of any requested modification which NetSolve reasonably believes
will require an increase to the prices contained in Paragraph 4 - Payment for
Services, and shall furnish the amount of such proposed increase in such writing
with appropriate supporting documentation substantiating the basis for the
requested price increase. Following delivery of such notice, NetSolve shall not
proceed with Services with any such modification until AT&T and NetSolve
Contract Representatives (as then designated and authorized) agree, in writing,
to the appropriate charges.

"Orders" for Services pursuant to this Amendment 17 shall be sent to NetSolve
via a mutually agreed upon method with the current practice of providing
NetSolve copies of the AT&T order documents with the End User being deemed
approved by both parties for all Orders to date and for future Orders unless a
new method is approved in writing by both parties. For purposes of this
Amendment 17, "AT&T End User Customer" or "End user customer" means an AT&T end
user customer to which NetSolve is providing Services pursuant to this Amendment
17. Monthly recurring Service charges as further described in Paragraph 4 shall
commence on the start date of Services as requested by AT&T (such date is herein
defined as the "CRD") and continue for the number of months specified on the
current End User contract between AT&T and AT&T's End User (up to a maximum of
36 months) (the "Service Term") except that to the extent AT&T continues the
Services to the End User beyond the Service Term on a month-month basis then
NetSolve may, at AT&T's option, provide the Services until cancellation by AT&T
with thirty (30) days notice to NetSolve. Renewals or extensions of end user
contracts between AT&T and AT&T End Users are not defined herein as Service Term
or End User Service Term and Services under such renewals and extensions may
only be given to NetSolve under this Amendment 17 in AT&T's sole discretion and
with AT&T's express written consent. AT&T may, at its option, keep End Users
with NetSolve under this Amendment 17 after expiration of such End Users'
Service Terms on a month-to-month basis until the earlier of cancellation by
AT&T with thirty (30) days notice to NetSolve or December 31, 2007. The
agreement term for ordering Frame Relay Plus Service is set forth in Paragraph 3
("Ordering Term").

Upon expiration or termination of this Amendment 17, all Services will continue
to be provided through the end of each End User Service Term and will be
non-cancelable by either party except as set forth herein in Paragraph 24 of
this Amendment 17.

Page 2 of 9

<PAGE>

                                                                 Amendment 17 To
                                                                 Agreement No.
                                                                 GSA005D

Paragraph 2 - Contract Representative:

AT&T's Contract Representative for this Amendment 17 is * who has an office at
900 Route 202/206, Room 5B216C, Bedminster, NJ 07921-0752. AT&T will notify
NetSolve in writing if a new Contract Representative is designated by AT&T.

Paragraph 3 - Term

The Effective Date of this Amendment 17 is January 1, 2002 and it shall end upon
expiration or termination of the last End User Service Term hereunder. ("Term").
AT&T may order Services hereunder through June 30, 2003 ("Ordering Period")

Paragraph 4 - Payment for Services

For services performed by NetSolve under this Amendment 17, AT&T will pay
NetSolve the following:

Recurring Services

<TABLE>
<CAPTION>
                                                              ---------------------------------------
                                                                                 Price
-----------------------------------------------------------------------------------------------------
<S>                          <C>                                 <C>                <C>
       Service Type                Network Component Type            Domestic         International
-----------------------------------------------------------------------------------------------------
FRP 1                        Visual CPE                          $*/month/unit      $*/month/unit
-----------------------------------------------------------------------------------------------------
FRP 2                        Visual CPE                          $*/month/unit      $*/month/unit
-----------------------------------------------------------------------------------------------------
FRP 3                        Visual CPE                          $*/month/unit      $*/month/unit
-----------------------------------------------------------------------------------------------------
</TABLE>

The Recurring Services pricing in this Amendment 17 will continue to apply to
all new end user customers from December 31, 2000 until expiration or
termination of this Amendment. Customers for which NetSolve received an order
from AT&T on or before December 31, 2000 which is currently being billed at less
than $* shall increase to $* as of the Effective Date. This Recurring Services
pricing will remain effective provided the ratio of unmanaged PVCs to managed
PVCs does not exceed 1.2 to 1. In the event that such ratio exceeds 1.2 to 1,
the parties shall negotiate reasonable pricing modifications to the Recurring
Services pricing herein. The above pricing shall apply to AT&T IPFR Sites
installed until July 31, 2002.

In the event the following operating results are achieved, NetSolve will
negotiate in good faith to reduce the above pricing under this Amendment 17 for
recurring services. Any lower price which NetSolve and AT&T agree to will apply
to all new orders entered into after the effective date of the price decrease.

o    The mean-time-to-repair, as reported from NetSolve's Trouble Ticket system
     (and which is currently utilized for the monthly performance reporting to
     AT&T by NetSolve), is 3.0 hours or less for three consecutive months; and

o    The ratio of the total number of Trouble Tickets to the total number of
     devices managed is less than or equal to one Trouble Ticket per four
     devices managed over the same period as the previous bullet point.

Page 3 of 9

<PAGE>

                                                                 Amendment 17 To
                                                                 Agreement No.
                                                                 GSA005D

Nonrecurring Services

<TABLE>
<CAPTION>
                                                         ------------------------------------------------------
                                                            Domestic Price (1)
---------------------------------------------------------------------------------------------------------------
<S>                            <C>                          <C>             <C>
      Service Type             Network Component Type       0-* New Site     * + New Sites
                                                            installation      installation
                                                            Orders in the    Orders in the
                                                             applicable     applicable time
                                                             time period       period set
                                                           set forth below    forth below
---------------------------------------------------------------------------------------------------------------
Program Management         Visual CPE and/or Port          $*/CPE and/or    $*/CPE and/or
                                                           Port             Port
                                                           ($* Int'l)       ($* Int'l)
---------------------------------------------------------------------------------------------------------------
Installation Engineering   Visual CPE and PAM              $*/Visual unit   $*/Visual unit
(8:00 a.m. - 5:00 p.m.                                     ($* Int'l)       ($* Int'l)
local time)
---------------------------------------------------------------------------------------------------------------
Installation Engineering   Visual CPE and PAM              $*/Visual unit   $*/Visual unit
(Outside the hours of                                      ($* Int'l)       ($* Int'l)
8:00 a.m. - 5:00 p.m.
local time)
---------------------------------------------------------------------------------------------------------------
Transition Fee (2)         Applies to any sites            $* per Site      $* per Site
                           transitioned to a
                           non-NetSolve operations
                           center.  (2)
---------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Pricing is based on the total number of new Site installation Orders by AT&T
hereunder during the time periods set forth below.

(2) This charge will include the creation and delivery of customer-specific
information contained in NetSolve's database in a format to be mutually agreed
upon, thirty (30) minutes of project management assistance per site (including
any time required for turn-up of management PVC) (collectively Transition
Services"). Any time in excess of thirty (30) minutes per site on a per-customer
basis will be billed at $* per hour (in half-hour increments). See Exhibit 2.
This charge will not apply to Sites which are migrated to a non-NetSolve
operations center that do not require Transition Services and Sites cancelled or
terminated under Paragraph 24-1) for NetSolve's default; 24-2)a) (unless due to
AT&T's default of its payment obligations); 24-2)b); 24-3)(a)(1) and (2); and
24-3(a)(4) as long as no Transition Services are required.

The above pricing for Nonrecurring Services will be fixed for the Term of this
Agreement as set forth in Paragraph 3.

NetSolve will maintain capacity to install up to * Sites per quarter as long as
the Minimum New Site Installation Percentage is at or above 90%; if the Minimum
New Site Installation Percentage falls below 90% in any quarter, then NetSolve
will maintain capacity to install 120% of the Site installations performed by
NetSolve in the immediately preceding quarter. In return, AT&T agrees to order
for installation the minimum new site percentage throughout the periods set
forth in the following table ("Minimum New Site Installation Percentage"). The
Minimum New Site Installation Percentage shall be calculated as a percentage of
the total new AT&T Frame Plus Sites to be installed by AT&T over the time
periods set forth less any Site that NetSolve is unable to install in strict
conformance with the installation schedule per the applicable End User contract.
This minimum will include all installations of Sites under (i) this Amendment
17 and Amendment 14 plus (ii) Amendment Number 15 (AT&T ATM Plus) plus (iii)
Amendment No. X (AT&T ATM Plus Service utilizing ADC Kentrox Platform). This
minimum will further include installations for Sites for AT&T IPFR. In the event
that AT&T does not meet the applicable target Minimum New Site
-------------------------
Page 4 of 9

<PAGE>

                                                                 Amendment 17 To
                                                                 Agreement No.
                                                                 GSA005D

Installation Percentage during any period set forth below, AT&T shall have the
option to increase the following period's Minimum New Site Installation
Percentage by the difference between the actual installed new site installation
percentage and the applicable target Minimum New Site Installation Percentage
("Shortfall"). In the event AT&T does not increase the Minimum New Site
Installation Percentage or does not increase the Minimum New Site Installation
Percentage in an amount equal to the Shortfall in the period following such a
failure to meet the applicable target Minimum New Site Installation Percentage,
AT&T shall pay NetSolve an amount equal to the Recurring Service fees that AT&T
would have paid NetSolve had such Sites been installed until AT&T actually
installs enough new Sites with NetSolve to make up for the Shortfall at which
time such payments shall immediately cease.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Time Period                                             Minimum New Site Installation as % of total New
                                                        AT&T Frame Plus Sites ("Minimum New Site
                                                        Installation Percentage")
-------------------------------------------------------------------------------------------------------------
<S>                                                     <C>
Effective date through 6/30/02                          90%
-------------------------------------------------------------------------------------------------------------
7/1/02 through September 30, 2002                       75%
-------------------------------------------------------------------------------------------------------------
10/1/02 through December 31, 2002                       60%
-------------------------------------------------------------------------------------------------------------
1/1/03 through March 31, 2003                           45%
-------------------------------------------------------------------------------------------------------------
April 1,2003 through June 30, 2003                      25%
-------------------------------------------------------------------------------------------------------------
July 1, 2003 and after                                  Zero percent
-------------------------------------------------------------------------------------------------------------
</TABLE>

Time and Material Services

Time and Materials charges shall apply for work done by NetSolve, and approved
in advance in writing by AT&T, for all services outside the scope of this
Statement of Work.

     o    $* per hour for time and material SERVICES done remotely.

     o    All Time and Material SERVICES are to be authorized in advance in
          writing by AT&T.

Paragraph 6 - COMPETITION

Paragraph 6 of the Agreement as amended by Amendment 5 is replaced by the
following for this Amendment 17 only:

Paragraph 6- COMPETITION

A. NetSolve shall not, without prior written authorization by AT&T's Contract
Representative for this Amendment 17, directly contract with any AT&T End User
Customer to provide substantially the same Services hereunder (i.e., management
of only a Visual Networks DSU and the associated Visual Networks PAM) during the
Term of this Amendment 17 and for a period of ninety (90) days thereafter. If
NetSolve breaches or violates the preceding sentence on more than one occasion,
AT&T may, in its sole discretion, immediately reduce the Minimum New Site
Installation Percentage by notifying NetSolve in writing that AT&T has elected
to make such reduction and upon receipt of such notice, NetSolve will install
any pending Orders in accordance with the schedule for such Orders but shall not
be obligated to maintain any additional installation capacity beyond such
pending Orders. All Orders received by NetSolve prior to the date of AT&T's
notice shall remain in place for the remainder of the Service Term unless
otherwise cancelable under Paragraph 24. NetSolve may, however, subcontract with
an independent third party to provide substantially the same Services to an AT&T
End User Customer up to a maximum total removal from AT&T of 2750 End User
Customer Sites (including any Sites obtained by NetSolve as a result of
NetSolve's above obligation to refrain from directly contracting with AT&T End
Users) if the specific End User Customer opportunity was not developed as a
result of performing Services hereunder and did not involve any Solicitation by
NetSolve. Upon removal of more than 2750 Sites, AT&T shall have the right to
immediately reduce the Minimum Site Installation percentage to zero. For
purposes of this Paragraph 6 of Amendment 17, "AT&T End User Customer" means an
end user customer to which NetSolve is providing Services pursuant to this
Amendment 17.

In addition, NetSolve agrees that with respect to the Services provided by
NetSolve under this Amendment 17 that it will not directly contact any End User
Customer or perform any activity with any End User Customer that is not
reasonably necessary in order for NetSolve to perform its responsibilities as
specifically set forth in the Agreement or this Amendment 17, including without
limitation, marketing activities, customer surveys, forums or meetings without
the specific prior written authorization of AT&T's Contract Representative as
set forth in Paragraph 2. In the event that an AT&T End

Page 5 of 9

<PAGE>

                                                                 Amendment 17 To
                                                                 Agreement No.
                                                                 GSA005D

User Customer contacts NetSolve with respect to the Services for a purpose that
is not reasonably necessary in order for NetSolve to perform its
responsibilities as specifically set forth in the Agreement or this Amendment
17, NetSolve shall inform such AT&T End User Customer that such contact is not
permitted and shall terminate the contact and report immediately such contact to
AT&T's Contract Representative as set forth in Paragraph 2. NetSolve shall
represent itself to any End User Customer hereunder as a representative of AT&T.

NetSolve acknowledges and agrees that all customer information derived as a
result of performing Services hereunder is the property of AT&T. NetSolve shall
promptly return all such customer information to AT&T upon termination or
expiration of this Amendment or the transfer of the applicable AT&T End User
Customer from NetSolve whichever is earlier with the exception of (i) Orders and
other business records which NetSolve must retain to support its financial and
tax reporting obligations and customary corporate record-keeping requirements;
and (ii) data contained electronically in NetSolve's databases which NetSolve
will purge in accordance with its standard practices. The applicable data in
item (ii) will be provided to AT&T for the Transition Fee specified in Paragraph
4. In perpetuity, NetSolve shall not: (1) use any customer information that it
obtains as a result of performing the Services hereunder or the network designs
developed hereunder to compete with AT&T or others; and (2) NetSolve should not
disclose such customer information or network designs to any third party,
employees, agents, subcontractors or suppliers for the purpose of competing with
AT&T or others. Such disclosure shall not be prohibited: (i) if NetSolve is
required in a judicial, administrative or governmental proceeding to disclose
any such information, however, NetSolve shall provide AT&T with prompt notice of
such a requirement so AT&T may seek an appropriate protective order; or (ii) in
connection with a federal or state securities filing, or in any effort to raise
capital or borrow funds from any public or private source provided NetSolve
shall provide AT&T with prompt notice of any disclosure (for example, in
connection with a road show regarding a pending public offering of securities,
NetSolve would inform AT&T in advance of the types of information NetSolve
proposes to disclose such as length and estimated value of any contract or
amendment thereto with AT&T). AT&T may seek an appropriate protective order if
the parties do not reach agreement about the scope and content of any proposed
disclosure.

Paragraph 7 - Invoicing and Payment

NetSolve's invoices shall be rendered 1) upon completion of the Services, 2)
monthly, sent in advance, for recurring monthly charges, or 3) at other times
expressly provided for in this Amendment 17, and shall be payable when the
Services have been performed to the satisfaction of AT&T. NetSolve shall mail
invoices referring to GSA0005D Agreement, Amendment 7 with copies of any
supporting documentation required by AT&T to: *, 900 Route 202/206, Room 5B216C,
Bedminster, NJ 07921-0752. Undisputed invoices shall be paid within forty-five
(45) days after AT&T's receipt of the invoice.

Paragraph 24 - Termination

1)   Termination of the Agreement- The provisions contained in the Original
     Contract as modified by Amendment 5 of the Agreement that apply to the
     entire Agreement shall survive the expiration or termination of the
     Original Contract and/or Amendment 5 and shall continue to apply to this
     Amendment 17 as if the Original Contract and Amendment 5 had not expired or
     been terminated, subject to AT&T's right to terminate under Paragraph 24 2)
     a) below.

2)   Termination of the Agreement and/or Amendment 17-
     a)   Except as otherwise specifically set forth herein, in the event
          NetSolve shall be in breach or default of any of the terms, conditions
          or covenants of the Agreement , this Amendment 17, or any or all
          Orders placed under this Amendment 17, or in the event AT&T is in
          breach or default of its payment obligations under the Agreement, and
          such breach or default shall continue for a period of thirty (30) days
          after the receipt of written notice, then in addition to all other
          rights and remedies of law or equity or otherwise (subject to the
          limitations in the Agreement specifically set forth in Paragraph 36 of
          Amendment 5 to the Agreement), the non-defaulting party shall have the
          right to terminate this Amendment 17 and/or any such Orders placed by
          AT&T hereunder (except that if a given breach or default relates to
          the dissatisfaction of only one End User Customer in such End User's
          sole discretion, with the Services performed by NetSolve and does not
          involve a breach of Paragraph 6 herein, then only the Order(s) for
          that End User customer may be terminated) without any charge,
          obligation or liability whatsoever, except as to the payment for
          Services already received and accepted by AT&T and, if AT&T is the
          defaulting party, the Transition Fee under Paragraph 4.

     b)   This Amendment 17 and any or all Orders placed hereunder may be
          terminated by AT&T, by notice in writing:

          i)   if NetSolve makes an assignment for the benefit of creditors
               (other than solely an assignment of moneys due); or

Page 6 of 9

<PAGE>
                                                                Amendment 17 To
                                                                Agreement No.
                                                                GSA005D

          ii)  if NetSolve evidences an inability to pay debts as they become
               due, unless adequate assurance of such ability to pay is provided
               within thirty (30) days of such notice; or

          iii) if a voluntary proceeding is commenced under any provision of the
               United States Bankruptcy Code by NetSolve, the Agreement, this
               Amendment 17, and any or all Orders may be immediately terminated
               by AT&T; or

          iv)  if an involuntary proceeding is commenced under an provision of
               the United States Bankruptcy Code against NetSolve that is not
               dismissed within thirty (30) days of its filing, the Agreement,
               this Amendment 17, and any or all Orders may be immediately
               terminated by AT&T.

     c)   This Amendment 17 and any or all Orders may be terminated at any time
          by AT&T upon twenty-four hours' written notice in the event of
          NetSolve's acquisition by or merger with a competitor of AT&T.

3)   Termination of Individual Orders placed pursuant to this Amendment 17.

     a)   AT&T may terminate an Order, without charge, upon 30 days written
          notice if 1) AT&T's End User is dissatisfied, in such End User's sole
          discretion, with the Services performed by NetSolve; 2) AT&T's End
          User has a change in its normal course of business that impacts
          Services, such as relocation to a location not utilizing Frame Relay
          Plus Services, office closings or any business condition or downturn
          resulting in removal of Sites from AT&T Frame Plus by the AT&T End
          User; 3) the End User's Contract expires or is terminated for any
          reason; 4) the End User downgrades to a non-managed service; or 5) the
          End User changes to a another AT&T service. In the event of
          terminations where under Paragraph 24-3)a)5), and End User purchases
          another AT&T managed service resulting in cancellation of AT&T Frame
          Plus service hereunder in the first twelve months of such End User's
          Service Term, AT&T shall pay NetSolve a termination fee equal to the
          Recurring Service charge that would have been payable from AT&T to
          NetSolve for the terminated Sites from the date of cancellation to the
          end of first twelve months of the End User's Service Term. If an End
          User cancels AT&T Frame Plus services any time after the first 12
          months of the applicable Service Term, there shall be no termination
          fee payable to NetSolve for such Sites.

     b)   AT&T may terminate upon thirty (30) days written notice by AT&T, at no
          charge, all Orders upon expiration of the Service Term between AT&T
          and NetSolve.

     c)   AT&T may terminate upon thirty (30) days written notice by AT&T, at no
          charge, any Order that includes modifications (as described in
          Paragraph 1 of this Amendment 17), in the event AT&T and NetSolve are
          unable to agree on pricing for any modifications to the Statement Of
          Work. Modifications cannot apply retroactively to installed business
          unless AT&T and NetSolve mutually agree.

4)   Ownership and Return of Data upon Termination

     In accordance with proprietary information or confidentiality clauses
     contained within the Original Contract under Paragraph 6, Competition or
     the Agreement, NetSolve agrees and acknowledges that all customer data
     {e.g. (without limitation): the customer premises equipment configurations,
     customer database, trouble history, passwords etc.) is the property of AT&T
     and will be promptly conveyed and returned to AT&T in electronic format
     upon written notice.

Paragraph 37 - Access to AT&T Systems

AT&T agrees to provide NetSolve, at no charge, access to all AT&T internal
information systems, which include provisioning and maintenance systems, which
AT&T determines in its reasonable judgment to be necessary for NetSolve to
effectively perform under the SOW as outlined in Attachments K-1, K-2, K-3, and
K-4. If applicable, any such information shall be provided to NetSolve subject
to Data Connect Agreement #197 dated April 16, 1998 and Non-Disclosure Agreement
dated July 17, 1997, each between AT&T Corp. and NetSolve.

Page 7 of 9

<PAGE>

                                                                Amendment 17 To
                                                                Agreement No.
                                                                GSA005D

                            Exhibit 1 to Amendment 17

                                      SLAs
                                      ----

SLAs include the performance of NetSolve and any third party suppliers of
NetSolve for which NetSolve has management responsibilities under Amendment 17
to Amendment Number 17. SLAs shall not include a failure resulting from any act,
omission or failure of AT&T or its affiliates, service supplier, or End User
customer. In the event any act, omission, or failure of AT&T or the End User can
be reasonably managed by NetSolve to increase the SLA performance, NetSolve will
attempt to work with that entity to increase the SLA performance if such work
does not, in NetSolve's sole opinion, significantly increase NetSolve's costs.

        ------------------------------------ ------------------------------
        SLA                                  Target (1)
        ------------------------------------ ------------------------------
        ASA (Average Speed of Answer)        *
                                             *
        ------------------------------------ ------------------------------
        Pro-Active Monitoring - % of         *
        troubles NetSolve calls              *
        customer first
        ------------------------------------ ------------------------------
        Time to Isolate fault                *
                                             *
        ------------------------------------ ------------------------------
        Mean Time to Repair - Overall        *
        ------------------------------------ ------------------------------
        Mean Time to Repair - with           *
        dispatch
        ------------------------------------ ------------------------------
        On-Time Installation                 *
        ------------------------------------ ------------------------------

         (1) Failure to achieve these SLAs (after deletion of failures resulting
         from any act, omission or failure of AT&T or its affiliates, service
         supplier, or End User customer) shall not be considered a default under
         Paragraph 24 unless those SLAs marked with an "*" are fifteen
         percentage points below the stated SLA for two consecutive months and
         AT&T notifies NetSolve it is in default within ten (10) days after
         receipt of the applicable SLA report.

Page 8 of 9

<PAGE>

                                                                Amendment 17 To
                                                                Agreement No.
                                                                GSA005D

                            Exhibit 2 to Amendment 17

              Process for transitioning End Users to another center

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

AT&T must submit all transition requests via the MACD process and must state the
reason for transition on the request. An AT&T single-point-of-contact (SPOC)
must be included on the request. Once the approved MACD is received at NetSolve
a CSO will be created with a de-install line item. A precise date and time
should be scheduled with NetSolve by AT&T for this activity.

Upon receipt of a complete MACD, the following actions will be taken:

     o    NetSolve will un-manage the End User customer sites based on the
          requested MACD date (take the sites off of the poller).

     o    NetSolve will send the AT&T SPOC the current End User customer
          information from our records in a spreadsheet format.

     o    NetSolve will participate in the scheduling of the de-install with the
          End User customer and the AT&T SPOC.

     o    AT&T will notify NetSolve via email when the management and PAC (Level
          3) PVC have been disconnected.

     o    Upon receipt of the confirmation email, NetSolve will coordinate 1)
          deletion of customer information off of PAM and 2) disconnecting IPs,
          virtual circuits and devices in NetSolve's tools.

Any work in addition to that above, or any additional work required due to
delays, changes, or failure of AT&T or the End User customer to perform their
obligations, will be billed at $* per hour (in half-hour increments).

Page 9 of 9<PAGE>

                                                                    Exhibit 10.1

                       FIRST HORIZON ASSET SECURITIES INC.

                                    Depositor

                       FIRST HORIZON HOME LOAN CORPORATION

                           Seller and Master Servicer

                                       and

                              THE BANK OF NEW YORK,

                                     Trustee

                        _________________________________

                         POOLING AND SERVICING AGREEMENT

                             Dated as of May 1, 2002

                        _________________________________

                FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2002-3

                MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2002-3

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                       Page
                                                                                       ----
<S>                                                                                    <C>
ARTICLE I - DEFINITIONS ..............................................................    6

ARTICLE II - CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND WARRANTIES ............   34
     SECTION 2.1  Conveyance of Mortgage Loans .......................................   34
     SECTION 2.2  Acceptance by Trustee of the Mortgage Loans ........................   38
     SECTION 2.3  Representations, Warranties and Covenants of the
             Seller and Master Servicer ..............................................   40
     SECTION 2.4  Representations and Warranties of the Depositor
             as to the Mortgage Loans ................................................   42
     SECTION 2.5  Delivery of Opinion of Counsel in Connection with Substitutions ....   42
     SECTION 2.6  Execution and Delivery of Certificates .............................   43
     SECTION 2.7  REMIC Matters ......................................................   43
     SECTION 2.8  Covenants of the Master Servicer ...................................   45

ARTICLE III - ADMINISTRATION AND SERVICING OF MORTGAGE LOANS .........................   45
     SECTION 3.1  Master Servicer to Service Mortgage Loans ..........................   45
     SECTION 3.2  Subservicing; Enforcement of the Obligations of Servicers ..........   46
     SECTION 3.3  Rights of the Depositor and the Trustee in Respect of
             the Master Servicer .....................................................   46
     SECTION 3.4  Trustee to Act as Master Servicer ..................................   47
     SECTION 3.5  Collection of Mortgage Loan Payments; Certificate
             Account; Distribution Account ...........................................   47
     SECTION 3.6  Collection of Taxes, Assessments and Similar Items;
             Escrow Accounts .........................................................   50
     SECTION 3.7  Access to Certain Documentation and Information Regarding
             the Mortgage Loans ......................................................   50
     SECTION 3.8  Permitted Withdrawals from the Certificate Account
             and Distribution Account ................................................   51
     SECTION 3.9  Maintenance of Hazard Insurance; Maintenance of
             Primary Insurance Policies ..............................................   52
     SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption Agreements ..........   54
     SECTION 3.11 Realization Upon Defaulted Mortgage Loans; Repurchase
             of Certain Mortgage Loans ...............................................   55
     SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files ....................   57
     SECTION 3.13 Documents Records and Funds in Possession of
             Master Servicer to be Held for the Trustee .............................    58
     SECTION 3.14 Master Servicing Compensation ......................................   58
     SECTION 3.15 Access to Certain Documentation ....................................   59
     SECTION 3.16 Annual Statement as to Compliance ..................................   59
     SECTION 3.17 Annual Independent Public Accountants= Servicing Statement;
             Financial Statements ....................................................   59
     SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds .....................   60

ARTICLE IV - DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER .......................   60
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                                    <C>
     SECTION 4.1  Advances .........................................................   60
     SECTION 4.2  Priorities of Distribution .......................................   61
     SECTION 4.3  Method of Distribution ...........................................   65
     SECTION 4.4  Allocation of Losses .............................................   65
     SECTION 4.5  Reserved .........................................................   67
     SECTION 4.6  Monthly Statements to Certificateholders .........................   67
     SECTION 4.7  Determination of Pass-Through Rates for LIBOR Certificates .......   69
     SECTION 4.8  Reserved .........................................................   70

ARTICLE V - THE CERTIFICATES .......................................................   71
     SECTION 5.1  The Certificates .................................................   71
     SECTION 5.2  Certificate Register; Registration of Transfer and Exchange
             of Certificates .......................................................   71
     SECTION 5.3  Mutilated, Destroyed, Lost or Stolen Certificates ................   75
     SECTION 5.4  Persons Deemed Owners ............................................   76
     SECTION 5.5  Access to List of Certificateholders= Names and Addresses ........   76
     SECTION 5.6  Maintenance of Office or Agency ..................................   76

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 Seller, the Master
             Servicer and Others ...................................................   77
     SECTION 6.4  Limitation on Resignation of Master Servicer .....................   78

ARTICLE VII - DEFAULT ..............................................................   78
     SECTION 7.1  Events of Default ................................................   78
     SECTION 7.2  Trustee to Act; Appointment of Successor .........................   79
     SECTION 7.3  Notification to Certificateholders ...............................   80

ARTICLE VIII - CONCERNING THE TRUSTEE ..............................................   81
     SECTION 8.1  Duties of Trustee ................................................   81
     SECTION 8.2  Certain Matters Affecting the Trustee ............................   82
     SECTION 8.3  Trustee Not Liable for Certificates or Mortgage Loans ............   83
     SECTION 8.4  Trustee May Own Certificates .....................................   84
     SECTION 8.5  Trustee=s Fees and Expenses ......................................   84
     SECTION 8.6  Eligibility Requirements for Trustee .............................   84
     SECTION 8.7  Resignation and Removal of Trustee ...............................   85
     SECTION 8.8  Successor Trustee ................................................   85
     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 ......................................................   87
     SECTION 8.12 Periodic Filings .................................................   89

ARTICLE IX - TERMINATION ...........................................................   89
     SECTION 9.1  Termination upon Liquidation or Purchase of all Mortgage Loans ...   89
     SECTION 9.2  Final Distribution on the Certificates ...........................   90
     SECTION 9.3  Additional Termination Requirements ..............................   91
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                 <C>
ARTICLE X - [RESERVED] ..........................................................   92

ARTICLE XI - MISCELLANEOUS PROVISIONS ...........................................   92
     SECTION 11.1  Amendment ....................................................   92
     SECTION 11.2  Recordation of Agreement; Counterparts .......................   93
     SECTION 11.3  Governing Law ................................................   94
     SECTION 11.4  Intention of Parties .........................................   94
     SECTION 11.5  Notices ......................................................   95
     SECTION 11.6  Severability of Provisions ...................................   95
     SECTION 11.7  Assignment ...................................................   96
     SECTION 11.8  Limitation on Rights of Certificateholders ...................   96
     SECTION 11.9  Inspection and Audit Rights ..................................   97
     SECTION 11.10 Certificates Nonassessable and Fully Paid ....................   97
     SECTION 11.11 Limitations on Actions; No Proceedings .......................   97
</TABLE>

                                       iii

<PAGE>

                                          SCHEDULES

<TABLE>
<S>                                                                                   <C>
   Schedule I:     Mortgage Loan Schedule .........................................     S-I-1
   Schedule II:    Representations and Warranties of the Seller/Master Servicer ...    S-II-1
   Schedule III:   Representations and Warranties as to the Mortgage Loans ........   S-III-1
   Schedule IV:    Form of Monthly Master Servicer Report .........................    S-IV-1
   Schedule V:     Principal Balance Schedules                                          S-V-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
</TABLE>

                                       iv

<PAGE>

     THIS POOLING AND SERVICING AGREEMENT, dated as of May 1, 2002, among FIRST
HORIZON ASSET SECURITIES INC., a Delaware corporation, as depositor (the
"Depositor"), FIRST HORIZON HOME LOAN CORPORATION, a Kansas corporation, as
seller (in such capacity, the "Seller") and as master servicer (in such
capacity, the "Master Servicer"), and THE BANK OF NEW YORK, a banking
corporation organized under the laws of the State of New York, as trustee (the
"Trustee").

                                 WITNESSETH THAT

     In consideration of the mutual agreements herein contained, the parties
hereto agree as follows:

                              PRELIMINARY STATEMENT

     The Depositor is the owner of the Trust Fund that is hereby conveyed to the
Trustee in return for the Certificates. The Trust Fund for federal income tax
purposes will consist of two separate REMICs. The Certificates will represent
the entire beneficial ownership interest in the Trust Fund. The Regular
Certificates will represent "regular interests" in the Upper REMIC. The Class
I-A-RU Certificates (also referred to as the Class A-RU Certificates) will
represent the sole class of residual interests in the Upper REMIC and the Class
I-A-RL Certificates (also referred to as the Class A-RL Certificates) will
represent the sole class of residual interests in the Lower 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]

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
       Class              Initial Class          Pass-Through         Minimum        Integral Multiples in
     Designation       Certificate Balance           Rate           Denomination       in Excess Minimum
--------------------------------------------------------------------------------------------------------------
     <S>               <C>                       <C>                <C>              <C>
      Class I-A-1         $177,739,000.00           6.500%           $   25,000             $   1,000
--------------------------------------------------------------------------------------------------------------

      Class I-A-2         $ 23,931,000.00           6.500%           $   25,000             $   1,000
--------------------------------------------------------------------------------------------------------------

      Class I-A-3         $ 16,553,000.00           6.500%           $   25,000             $   1,000
--------------------------------------------------------------------------------------------------------------

      Class I-A-4         $ 14,513,400.00           6.500%           $   25,000             $   1,000
--------------------------------------------------------------------------------------------------------------

      Class I-A-5         $ 18,750,000.00        Variable /(1)/      $   25,000             $   1,000
--------------------------------------------------------------------------------------------------------------

      Class I-A-6         $           /(2)/      Variable /(3)/      $9,375,000             $   1,000
--------------------------------------------------------------------------------------------------------------

      Class I-A-7         $ 50,000,000.00           5.750%           $   25,000             $   1,000
--------------------------------------------------------------------------------------------------------------

      Class I-A-8         $ 34,515,000.00           6.500%           $   25,000             $   1,000
--------------------------------------------------------------------------------------------------------------

     Class I-A-RU         $         50.00           6.500%           $       50                   N/A
--------------------------------------------------------------------------------------------------------------

     Class I-A-RL         $         50.00           6.500%           $       50                   N/A
--------------------------------------------------------------------------------------------------------------

     Class II-A-1         $ 58,078,000.00           6.000%           $   25,000             $   1,000
--------------------------------------------------------------------------------------------------------------

     Class II-A-2         $  8,969,000.00           6.000%           $   25,000             $   1,000
--------------------------------------------------------------------------------------------------------------

       Class B-1          $  5,382,000.00        Variable /(4)/      $  100,000             $   1,000
--------------------------------------------------------------------------------------------------------------

       Class B-2          $  2,070,000.00        Variable /(4)/      $  100,000             $   1,000
--------------------------------------------------------------------------------------------------------------

       Class B-3          $  1,449,000.00        Variable /(4)/      $  100,000             $   1,000
--------------------------------------------------------------------------------------------------------------

       Class B-4          $    828,000.00        Variable /(4)/      $  100,000             $   1,000
--------------------------------------------------------------------------------------------------------------

       Class B-5          $    621,000.00        Variable /(4)/      $  100,000             $   1,000
--------------------------------------------------------------------------------------------------------------

       Class B-6          $    621,527.00        Variable /(4)/      $  100,000             $   1,000
--------------------------------------------------------------------------------------------------------------
</TABLE>

     /(1)/ The Pass-Through Rate with respect to any Distribution Date (and the
related Interest Accrual Period) for the Class I-A-5 Certificates is the per
annum rate equal to (a) 2.39% with respect to the first Distribution Date, and
(b) thereafter, the lesser of (i) LIBOR plus 0.55% and (ii) 8.50%, subject to a
minimum rate of 0.55%.

     /(2)/ The Notional Amount with respect to any Distribution Date (and the
related Interest Accrual Period) of the Class I-A-6 Certificates will equal the
Class Certificate Balance of the Class I-A-5 Certificates immediately preceding
such Distribution Date.

     /(3)/ The Pass-Through Rate with respect to any Distribution Date (and the
related Interest Accrual Period) for the Class I-A-6 Certificates is the per
annum rate equal to (a) 6.11% with respect to the first Distribution Date, and
(b) thereafter, 7.95% minus LIBOR, subject to a minimum rate of 0.00%.

     /(4)/ The Pass-Through Rate on each Class of Subordinated Certificates is
variable and will be equal to the weighted average of the Designated Mortgage
Pool Rates, weighted on the basis of the Group Subordinate Amount for each
Mortgage Pool.

Accretion Directed
Certificates ........................   The Class I-A-3 Certificates.

                                       -2-

<PAGE>

Accrual Certificates .................  The Class I-A-4 Certificates.

Accrual Components ...................  None.

Book-Entry Certificates ..............  All Classes of Certificates other than
                                        the Physical Certificates.

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
                                                     Component
                                        Designation   Balance  Pass-Through 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 ...........  The Class I-A-5 Certificates.

Group I Senior Certificates ..........  The Class I-A-1, Class I-A2, Class
                                        I-A-3, Class I-A-4, Class I-A-5, Class
                                        I-A-6, Class I-A-7, Class I-A-8, Class
                                        I-A-RU and Class I-A-RL Certificates.

Group II Senior Certificates .........  The Class II-A-1 and Class II-A-2
                                        Certificates.

Insured Retail Certificates ..........  None.

Interest Only Certificates ...........  The Class I-A-6 Certificates.

Inverse Floating Rate
Certificates .........................  The Class I-A-6 Certificates.

COFI Certificates ....................  None.

LIBOR Certificates ...................  The Class I-A-5 and Class I-A-6
                                        Certificates.

Non-Delay Certificates ...............  The LIBOR Certificates.

Notional Principal Amount
Certificates .........................  The Class I-A-6 Certificates.

                                       -3-

<PAGE>

Offered Certificates .................  All Classes of Certificates other than
                                        the Private Certificates.

Physical Certificates ................  The Private Certificates and the
                                        Residual Certificates.

Planned Principal Classes ............  The Primary Planned Principal Classes
                                        and the Secondary Planned Principal
                                        Classes.

Primary Planned Principal
Classes ..............................  None.

Principal Only
Certificates .........................  None.

Private Certificates .................  The Class B-4, Class B-5 and Class B-6
                                        Certificates.

Rating Agencies ......................  S&P and Fitch.

Regular Certificates .................  All Classes of Certificates, other than
                                        the Residual Certificates.

Residual Certificates ................  The Class I-A-RU and Class I-A-RL
                                        Certificates (also referred to as the
                                        Class A-RU and Class A-RL Certificates,
                                        respectively).

Retail Certificates ..................  None.

Scheduled Principal
Classes ..............................  None.

Secondary Planned Principal
Class ................................  None.

Senior Certificates ..................  The Group I Senior Certificates and the
                                        Group II 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
Classes ..............................  None.

Underwriters .........................  Banc of America Securities LLC and
                                        Countrywide Securities Corporation.

     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

                                       -4-

<PAGE>

relating to statistical rating agencies not designated above as Rating Agencies
shall be of no force or effect.

                                       -5-

<PAGE>

                                    ARTICLE I
                                   DEFINITIONS

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

     Accretion Directed Certificates: As described in the Preliminary Statement.

     Accretion Termination Date: For the Accrual Certificates, the earlier of:
(x) the Cross-over Date, and (y) the Distribution Date on which the Class
Certificate Balance of the Class I-A-3 Certificates has been reduced to zero.

     Accrual Amount: For each Distribution Date through the Accretion
Termination Date, an amount equal to the sum of (a) any available amounts
allocable to the Accrued Certificate Interest in respect of the Accrual
Certificates in accordance with Section 4.2(a)(i), and (b) any available amounts
allocable to the Accrual Certificates in accordance with Section 4.2(a)(ii).

     Accrual Certificates: As described in the Preliminary Statement.

     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 (or
Notional Amount, in the case of any Interest Only Certificates) 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 Rate.

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

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

     Allocable Share: With respect to any Class of Subordinated Certificates on
any Distribution Date, such Class' pro rata share (based on the Class
Certificate Balance of each Class entitled thereto) of each of the components of
the Subordinated Optimal Principal Amount for both Mortgage

                                       -6-

<PAGE>

Pools; provided, that, except as provided in this Agreement, no Subordinated
Certificates (other than the Class of Subordinated Certificates with the highest
priority of distribution) shall be entitled on any Distribution Date to receive
distributions pursuant to clauses (2), (3) and (5) of the definition of
Subordinated Optimal Principal Amount unless the Class Prepayment Distribution
Trigger for such Class is satisfied for such Distribution Date.

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

     Apportioned Principal Balance: For any Class of Subordinated Certificates
and any Distribution Date 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, the Trustee Fee and any amounts due to First Horizon in respect
          of the Retained Yield on such Distribution Date, and all scheduled
          installments of principal due in respect of the Mortgage Loans in such
          Mortgage Pool on the Due Date in the month in which the Distribution
          Date occurs and received before the related Determination Date,
          together with any Advances in respect thereof;

     .    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;

                                       -7-

<PAGE>

     .    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

     .    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.

     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.

                                       -8-

<PAGE>

     Certificate Account: The separate Eligible Account or Accounts created and
maintained by the Master Servicer pursuant to Section 3.5 with a depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of Certificateholders and designated "First Horizon Home Loan Corporation
in trust for the registered holders of First Horizon Asset Securities Inc.
Mortgage Pass-Through Certificates, Series 2002-3."

     Certificate Group: With respect to Pool I, the Group I Senior Certificates,
and with respect to Pool II, the Group II Senior Certificates. The Subordinated
Certificates correspond to both Mortgage Pools.

     Certificate Principal Balance: With respect to any Certificate (other than
the Class I-A-6 Certificates) and as of any Distribution Date, the Certificate
Principal Balance on the date of the initial issuance of such Certificate,

(1) 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

(2) in the case of the Accrual Certificates, as increased by the Accrual Amount
    added to the Certificate Principal Balance thereof on previous Distribution
    Dates.

     Certificate Owner: With respect to a Book-Entry Certificate, the Person who
is the beneficial owner of such Book-Entry Certificate.

     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 any affiliate of the Depositor 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.

                                       -9-

<PAGE>

     Class Certificate Balance: With respect to any Class of Certificates (other
than the Class I-A-6 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 I-A-8 Distribution Percentage: 0% through the Distribution Date in
May 2007; 30% of the applicable Class I-A-8 Percentage thereafter through the
Distribution Date in May 2008; 40% of the applicable Class I-A-8 Percentage
thereafter through the Distribution Date in May 2009; 60% of the applicable
Class I-A-8 Percentage thereafter through the Distribution Date in May 2010; 80%
of the applicable Class I-A-8 Percentage thereafter through the Distribution
Date in May 2011; and 100% of the applicable Class I-A-8 Percentage thereafter.

     Class I-A-8 Percentage: For any Distribution Date, the lesser of (x) 100%
and (y) the percentage (carried to six places rounded up) obtained by dividing
(1) the aggregate Class Certificate Balance of the Class I-A-8 Certificates
immediately preceding such Distribution Date by (2) the aggregate Stated
Principal Balance of the Mortgage Loans in Pool I immediately preceding such
Distribution Date.

     Class I-A-8 Principal Distribution Amount: For any Distribution Date, the
total of the amounts described in clauses (1) through (5) of the definition of
Senior Optimal Principal Amount for Pool I (determined without application of
the Senior Percentage and the Senior Prepayment Percentage) for such date
multiplied by the Class I-A-8 Distribution Percentage for such date.

     Class Prepayment Distribution Trigger: For a Class of Subordinated
Certificates (other than the Class of Subordinated Certificates with the highest
priority of distribution), a trigger that is satisfied on any Distribution Date
on which a fraction (expressed as a percentage), the numerator of which is the
aggregate Class Certificate Balance of such Class and each Class subordinate
thereto, if any, and the denominator of which is the aggregate Pool Principal
Balance for both Mortgage Pools with respect to such Distribution Date, equals
or exceeds such percentage calculated as of the Closing Date.

     Closing Date: May 30, 2002.

     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

                                      -10-

<PAGE>

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 Balance: Not applicable.

     Component Certificates: Not applicable.

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

     Coop Shares: Shares issued by a Cooperative Corporation.

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

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

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

     Corporate Trust Office: The designated office of the Trustee in the State
of New York at which at any particular time its corporate trust business with
respect to this Agreement shall be administered, which office at the date of the
execution of this Agreement is located at The Bank of New York, 5 Penn Plaza,
16/th/ Floor, New York, New York 10001 (Attn: Corporate Trust Mortgage-Backed
Securities Group, First Horizon Asset Securities Inc. Series 2002-3), facsimile
no. (212) 328-7620, 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, 2002 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, 2002.

     Cut-off Date Pool Principal Balance: With respect to Pool I,
$345,147,760.42, and with respect to Pool II, $68,872,267.35.

                                      -11-

<PAGE>

     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(c) hereof.

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

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

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

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

     Designated Mortgage Pool Rates: With respect to Pool I, 6.50%, and with
respect to Pool II, 6.00%.

                                      -12-

<PAGE>

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

     Discount Mortgage Loan: Any Mortgage Loan in Pool I with a Mortgage Rate of
less than 6.75% per annum and any Mortgage Loan in Pool II with a Mortgage Rate
of less than 6.25% per annum.

     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 2002-3." 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 2002.

     Due Date: With respect to any Distribution Date, the first day of the month
in which the related Distribution Date occurs.

     Eligible Account: Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC or the SAIF (to the
limits established by the FDIC or the SAIF, as applicable) and the uninsured
deposits in which accounts are otherwise secured such that, as evidenced by an
Opinion of Counsel delivered to the Trustee and to each Rating Agency, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first priority security interest against any collateral (which shall
be limited to Permitted Investments) securing such funds that is superior to
claims of any other depositors or creditors of the depository institution or
trust company in which such account is maintained, or (iii) a trust account or
accounts maintained with (a) the trust department of a federal or state
chartered depository institution or (b) a trust company, acting in its fiduciary
capacity or (iv) any other account acceptable to each Rating Agency. Eligible
Accounts may bear interest, and may include, if otherwise qualified under this
definition, accounts maintained with the Trustee.

     ERISA: The Employee Retirement Income Security Act of 1974, as amended.

     ERISA-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.

                                      -13-

<PAGE>

     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 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.

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

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

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

     Fraud Losses: Realized Losses on Mortgage Loans as to which a loss is
sustained by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with the related

                                      -14-

<PAGE>

Mortgage Loan, including a loss by reason of the denial of coverage under any
related Primary Insurance Policy because of such fraud, dishonesty or
misrepresentation.

     Fraud Loss Coverage Amount: As of the Closing Date, $4,140,200. As of any
Distribution Date from the first anniversary of the Cut-off Date and prior to
the fourth anniversary of the Cut-off Date, the Fraud Loss Coverage Amount will
equal $4,140,200 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 fourth
to the fifth anniversaries 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) 0.5% 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 Limitation
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.

     Group I Senior Certificates: The Class I-A-1, Class I-A-2, Class I-A-3,
Class I-A-4, Class I-A-5, Class I-A-6, Class I-A-7, Class I-A-8, Class I-A-RU
and Class I-A-RL Certificates.

     Group II Senior Certificates: The Class II-A-1 and Class II-A-2
Certificates.

     Group Subordinate Amount: For each Mortgage Pool and any Distribution Date
is the excess of the Pool Principal Balance of that Mortgage Pool for the
immediately preceding 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.

     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.

     Initial Component Balance: Not applicable.

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

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

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

                                      -15-

<PAGE>

     Interest Only Certificates: As specified in the Preliminary Statement.

     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.

     Latest Possible Maturity Date: As to each Class of Subordinated
Certificates and each Class of Senior Certificates in the Certificate Group
corresponding to Pool I, the Distribution Date following the third anniversary
of the scheduled maturity date of the Mortgage Loan in Pool I having the latest
scheduled maturity date as of the Cut-off Date; as to each Class of Senior
Certificates in the Certificate Group corresponding to Pool II, the Distribution
Date following the third anniversary of the scheduled maturity date of the
Mortgage Loan in Pool II having the latest scheduled maturity date as of the
Cut-off Date.

     Lender PMI Mortgage Loan: Not applicable.

     LIBOR: The London Interbank offered rate for one-month United States dollar
deposits calculated in the manner described in Section 4.08.

     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 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).

                                      -16-

<PAGE>

         Lost Mortgage Note: Any Mortgage Note the original of which was
permanently lost or destroyed and has not been replaced.

         Lower REMIC: The segregated pool of assets consisting of the Trust Fund
but excluding the Retained Yield and the Lower REMIC Interests.

         Lower REMIC Interests: The regular REMIC interests issued by the Lower
REMIC as set forth in Section 2.7.

         Maintenance: With respect to any Cooperative Unit, the rent paid by the
Mortgagor to the Cooperative Corporation pursuant to the Proprietary Lease.

         Majority in Interest: As to any Class of Regular Certificates, the
Holders of Certificates of such Class evidencing, in the aggregate, at least 51%
of the Percentage Interests evidenced by all Certificates of such Class.

         Master Servicer: First Horizon Home Loan Corporation, a Kansas
corporation, and its successors and assigns, in its capacity as master servicer
hereunder.

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

         Master Servicing Fee: As to each Mortgage Loan and any Distribution
Date, an amount payable out of each full payment of interest received on such
Mortgage Loan and equal to one-twelfth of the Master Servicing Fee Rate
multiplied by the Stated Principal Balance of such Mortgage Loan as of the Due
Date in the month of such Distribution Date (prior to giving effect to any
Scheduled Payments due on such Mortgage Loan on such Due Date), subject to
reduction as provided in Section 3.14.

         Master Servicing Fee Rate: For each Mortgage Loan, other than Discount
Mortgage Loans, a per annum rate equal to 0.244%. For each Discount Mortgage
Loan corresponding to Pool I, a per annum rate equal to the excess, if any, of
the Mortgage Rate thereof over 6.506%. For each Discount Mortgage Loan
corresponding to Pool II, a per annum rate equal to the excess, if any, of the
Mortgage Rate thereof over 6.006%.

         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.

                                      -17-

<PAGE>

     Mortgage File: The mortgage documents listed in Section 2.1 hereof
pertaining to a particular Mortgage Loan and any additional documents delivered
to the Trustee to be added to the Mortgage File pursuant to this Agreement.

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

                  (i)      the loan number;

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

                  (iii)    the maturity date;

                  (iv)     the original principal balance;

                  (v)      the Cut-off Date Principal Balance;

                  (vi)     the first payment date of the Mortgage Loan;

                  (vii)    the Scheduled Payment in effect as of the Cut-off
     Date;

                  (viii)   the Loan-to-Value Ratio at origination;

                  (ix)     a code indicating whether the residential dwelling at
     the time of origination was represented to be owner-occupied;

                  (x)      a code indicating whether the residential dwelling is
     either (a) a detached single family dwelling (b) a dwelling in a de
     minimis PUD, (c) a condominium unit or PUD (other than a de minimis PUD),
     (d) a two- to four-unit residential property or (e) a Cooperative Unit;

                  (xi)     the Mortgage Rate;

                  (xii)    the purpose for the Mortgage Loan;

                  (xiii)   the type of documentation program pursuant to which
     the Mortgage Loan was originated; and

                  (xiv)    the Master Servicing Fee for the Mortgage Loan.

     Such schedule shall also set forth the total of the amounts described
under (iv) and (v) above for all of the Mortgage Loans.

                                      -18-

<PAGE>

         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: Either Pool I or Pool II.

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

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

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

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

         Net Interest Shortfall: For any Distribution Date and each Mortgage
Pool, the sum of (a) the amount of interest which would otherwise have been
received for any Mortgage Loan 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 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: With respect to the Class I-A-6 Certificates and any
Distribution Date, an amount equal to the Class Certificate Balance of the Class
I-A-5 Certificates immediately prior to such Distribution Date.

                                      -19-

<PAGE>

     Notional Principal Amount Certificates: As specified in the Preliminary
Statement.

     Offered Certificates: As specified in the Preliminary Statement.

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

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

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

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

     Original Subordinated Principal Balance: The aggregate of the Class
Certificate Balances of the Subordinated Certificates as of the Closing Date.

     OTS: The Office of Thrift Supervision.

     Outside Reference Date: Not applicable.

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

                  (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.

                                      -20-

<PAGE>

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

     Pass-Through Rate: For any interest bearing Class of Certificates or
Component, 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, or such lower rating
     as will not result in the downgrading or withdrawal of the ratings then
     assigned to the Certificates by 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, or such lower rating as will not result in the downgrading
     or withdrawal of the ratings then assigned to the Certificates by each
     Rating Agency;

           (iv)    certificates of deposit, demand or time deposits, or bankers'
     acceptances issued by any depository institution or trust company
     incorporated under the laws of the United States or of any state thereof
     and subject to supervision and examination by federal and/or state banking
     authorities, provided that the commercial paper and/or long term unsecured
     debt obligations of such depository institution or trust company (or in the
     case of the principal depository institution in a holding company system,
     the commercial paper or long-term unsecured debt obligations of such
     holding company, but only if Moody's is not a Rating Agency) are then rated
     one of the two highest long-term and the highest short-term ratings of each
     Rating Agency for such securities, or such lower ratings as will not result
     in the downgrading or withdrawal of the rating then assigned to the
     Certificates by either Rating Agency;

           (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;

           (vi)    guaranteed reinvestment agreements issued by any bank,
     insurance company or other corporation 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;

                                      -21-

<PAGE>

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

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

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

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

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

     Permitted Transferee: Any person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in section 521 of the Code)
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by section 511 of the Code on unrelated business taxable income) on any
excess inclusions (as defined in section 860E(c)(l) of the Code) with respect to
any Residual Certificate, (iv) rural electric and telephone cooperatives
described in section 1381(a)(2)(C) of the Code, (v) an "electing large
partnership" as defined in section 775 of the Code, (vi) a Person that is not
(a) a citizen or resident of the United States, (b) a corporation, partnership,
or other entity created or organized in or under the laws of the United States,
any state thereof or the District of Columbia, (c) an estate whose income from
sources without the United States is includible in gross income for United
States federal income tax purposes regardless of its connection with the conduct
of a trade or business within the United States or (d) a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust, unless such Person
has furnished the transferor and the Trustee with a duly completed Internal
Revenue Service Form W-8ECI or any applicable successor form, and (vii) any
other Person so designated by the Depositor based upon an Opinion of Counsel
that the Transfer of an Ownership Interest in a Residual Certificate to such
Person may cause the

                                      -22-

<PAGE>

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 Principal Classes: Not applicable.

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

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

     Pool Principal Balance: For each Mortgage Pool, with respect to any
Distribution Date, the aggregate of the Stated Principal Balances of the
Mortgage Loans which were Outstanding Mortgage Loans on the Due Date in the
month preceding the month of such Distribution Date.

     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.

                                      -23-

<PAGE>

     Primary Insurance Policy: Each policy of primary mortgage guaranty
insurance or any replacement policy therefor with respect to any Mortgage Loan.

     Primary Planned Principal Classes: Not applicable.

     Principal Balance Schedules: Not applicable.

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

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

     Private Certificate: As specified in the Preliminary Statement.

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

     PUD: Planned Unit Development.

     Purchase Price: With respect to any Mortgage Loan required to be purchased
by the Seller pursuant to Section 2.2 or 2.3 hereof or purchased at the option
of the Master Servicer pursuant to Section 3.11, an amount equal to the sum of
(i) 100% of the unpaid principal balance of the Mortgage Loan on the date of
such purchase, and (ii) accrued interest thereon at the applicable Mortgage Rate
(or at the applicable Adjusted Mortgage Rate if (x) the purchaser is the Master
Servicer or (y) if the purchaser is the Seller and the Seller 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.

     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.

                                      -24-

<PAGE>

     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: A leading bank with an established place of business in
London engaged in transactions in Eurodollar deposits in the international
Eurocurrency market, not controlled by, or under the common control with, the
Trustee.

     Refinancing Mortgage Loan: Any Mortgage Loan originated in connection with
the refinancing of an existing mortgage loan.

     Regular Certificates: As specified in the Preliminary Statement.

     Relief Act: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended.

     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.

                                      -25-

<PAGE>

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

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

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

     Required Coupon: With respect to Pool I, 6.75% per annum, and with respect
to Pool II, 6.25% per annum.

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

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

     Residual Certificates: As specified in the Preliminary Statement.

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

     Retail Certificates: Not applicable.

     Retained Yield: As to each Mortgage Loan and any Distribution Date, an
amount payable to First Horizon Home Loan Corporation out of each full payment
of interest received on such Mortgage Loan and equal to one-twelfth of the
Retained Yield Rate multiplied by the Stated Principal Balance of such Mortgage
Loan as of the Due Date in the month of such Distribution Date (prior to giving
effect to any Scheduled Payments due on such Mortgage Loan on such Due Date).

     Retained Yield Rate: For any Mortgage Loan, other than the Discount
Mortgage Loans, a per annum rate equal to the excess of (a) the applicable
Mortgage Rate over (b) the Required Coupon. For any Discount Mortgage Loan, 0%.

     Scheduled Balances: Not applicable.

     Scheduled Classes: Not applicable.

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

                                      -26-

<PAGE>

     Scheduled Principal Classes: Not applicable.

     Secondary Planned Principal Classes: Not applicable.

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

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

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

     Senior Certificates: As specified in the Preliminary Statement.

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

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

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

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

                (b)   (i) the related Senior Percentage of the sum of (x) the
          Stated Principal Balance of each Mortgage Loan in such Mortgage Pool
          which became a Liquidated Mortgage Loan during the related Prepayment
          Period, other than Mortgage Loans

                                      -27-

<PAGE>

          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 the
immediately preceding 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 2002 - May 2007              100%
--------------------------------------------------------------------------------
June 2007 - May 2008              the related Senior Percentage plus 70% of the
                                  related Subordinated Percentage
--------------------------------------------------------------------------------
June 2008 - May 2009              the related Senior Percentage plus 60% of the
                                  related Subordinated Percentage
--------------------------------------------------------------------------------
June 2009 - May 2010              the related Senior Percentage plus 40% of the
                                  related Subordinated Percentage
--------------------------------------------------------------------------------
June 2010 - May 2011              the related Senior Percentage plus 20% of the
                                  related Subordinated Percentage
--------------------------------------------------------------------------------
June 2011 and thereafter          the related Senior Percentage
--------------------------------------------------------------------------------

     Notwithstanding the foregoing, if the Senior Percentage for a Certificate
Group on any Distribution Date exceeds the initial Senior Percentage, for that
Certificate Group, the related Senior Prepayment Percentage for such
Distribution Date will equal 100%.

     In addition, no reduction of the Senior Prepayment Percentage for a
Certificate Group below the level in effect for the most recent prior period
specified in the table above shall be effective on any Distribution Date unless,
as of the last day of the month preceding such Distribution Date, either:

                                      -28-

<PAGE>

          (A)(1) the aggregate Stated Principal Balance of Mortgage Loans in the
     related Mortgage Pool delinquent 60 days or more (including for this
     purpose any Mortgage Loans in foreclosure and Mortgage Loans with respect
     to which the related Mortgaged Property has been acquired by the Trust
     Fund) does not exceed 50% of the related Group Subordinate Amount as of
     such date; and

          (2)    cumulative Realized Losses with respect to the Mortgage Loans
     in the related Mortgage Pool do not exceed:

                 (a)  30% of the related Group Subordinate Amount as of the
          Cut-off Date (the "Original Group Subordinated Amount" with respect to
          such Mortgage Pool) if such Distribution Date occurs between and
          including June 2007 and May 2008;

                 (b)  35% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including June 2008 and May 2009;

                 (c)  40% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including June 2009 and May 2010;

                 (d)  45% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including June 2010 and May 2011;
          and

                 (e)  50% of the Original Subordinated Principal Balance if such
          Distribution Date occurs during or after June 2011; or

          (B)(1) the aggregate Stated Principal Balance of Mortgage Loans in the
     related Mortgage Pool delinquent 60 days or more (including for this
     purpose any Mortgage Loans in foreclosure and Mortgage Loans with respect
     to which the related Mortgaged Property has been acquired by the Trust
     Fund), averaged over the last three months, as a percentage of the
     aggregate Stated Principal Balance of all Mortgage Loans in the related
     Mortgage Pool averaged over the last three months, does not exceed 4%; and

          (2)    cumulative Realized Losses with respect to the Mortgage Loans
     in the related Mortgage Pool do not exceed:

                 (a)  10% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including June 2007 and May 2008;

                 (b)  15% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including June 2008 and May 2009;

                 (c)  20% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including June 2009 and May 2010;

                 (d)  25% of the Original Subordinated Principal Balance if such
          Distribution Date occurs between and including June 2010 and May 2011;
          and

                                      -29-

<PAGE>

                 (e)   30% of the Original Subordinated Principal Balance if
          such Distribution Date occurs during or after June 2011.

     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 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.

     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:

          (a)    normal wear and tear;

          (b)    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);

          (c)    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;

          (d)    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";

          (e)    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; or

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

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

                                      -30-

<PAGE>

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

          (g)    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, $4,796,562.12 Distribution Date, the Special Hazard Loss Coverage
Amount will equal the greater of

     .    1.15% (or if greater than 1.15%, the highest percentage of Mortgage
          Loans by principal balance secured by Mortgaged Properties in any
          single California zip code) of the outstanding principal balance of
          all the Mortgage Loans as of the related Determination Date; and

     .    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.

                                      -31-

<PAGE>

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

         Subordinated Optimal Principal Amount: With respect to each Mortgage
Pool and each Distribution Date, an amount equal to the sum of the following
(but in no event greater than the aggregate Class Certificate Balances of the
Subordinated Certificates immediately prior to such Distribution Date):

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

                  (2) the related Subordinated Prepayment Percentage of the
         Stated Principal Balance of each Mortgage Loan in the related Mortgage
         Pool which was the subject of a 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 each 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.

                                      -32-

<PAGE>

         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, except that on any Senior Final
Distribution Date, the related Subordinated Prepayment Percentage will equal
100%.

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

         Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for
a Deleted Mortgage Loan which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form of Exhibit L, (i)
have a Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
more than 10% less than the Stated Principal Balance of the Deleted Mortgage
Loan; (ii) have an Adjusted Net Mortgage Rate not lower than the applicable
Required Coupon, 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) be accruing interest at a rate no lower than and not more than 1%
per annum higher than, that of the Deleted Mortgage Loan; (iv) have a
Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (v) have a
remaining term to maturity no greater than (and not more than one year less than
that of) the Deleted Mortgage Loan; (vi) not be a Cooperative Loan unless the
Deleted Mortgage Loan was a Cooperative Loan and (vii) comply with each
representation and warranty set forth in Section 2.3 hereof.

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

         Support Classes: Not applicable.

         Targeted Balances: Not applicable.

         Targeted Principal Classes: Not applicable.

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

         Tax Matters Person Certificate: The Class I-A-RU and Class I-A-RL
Certificate, each 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) the Certificate Account and the
Distribution Account and all amounts deposited therein pursuant to the
applicable provisions of this Agreement; (iii) property that secured a Mortgage
Loan and has been acquired by foreclosure,

                                      -33-

<PAGE>

deed-in-lieu of foreclosure or otherwise; and (iv) all proceeds of the
conversion, voluntary or involuntary, of any of the foregoing; provided that the
Trust Fund shall exclude the Retained Yield.

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

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

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

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

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

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

         Underwriters:  As specified in the Preliminary Statement.

         Upper REMIC: The segregated pool of assets consisting of the Lower
REMIC Interests.

         Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. As of any date of
determination, (a) 98% of all Voting Rights will be allocated among all Holders
of the Certificates, other than the Class I-A-RU and Class I-A-RL Certificates,
in proportion to their then outstanding Class Certificate Balances; (b) 1% of
all Voting Rights shall be allocated among the Holders of the Class I-A-6
Certificates in proportion to their then outstanding Notional Amounts; and (c)
0.50% of all Voting Rights will be allocated among the Holders of each of the
Class I-A-RU and Class I-A-RL Certificates, in each case in proportion to their
respective outstanding Class Certificate Balances.

                                   ARTICLE II
                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

         SECTION 2.1  Conveyance of Mortgage Loans.

         (a)    The Seller, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the
Depositor, without recourse, all the right, title and interest of the Seller in
and to the Mortgage Loans, including all interest and principal received or
receivable by the Seller on or with respect to the Mortgage Loans after the
Cut-off Date and all interest and principal payments on the Mortgage Loans
received on or prior to the Cut-off Date in respect of installments of interest
and principal due thereafter, but not including payments of principal and
interest due and payable on the Mortgage Loans on or before the Cut-off Date or
amounts attributable to Retained Yield. On or prior to the Closing Date, the
Seller shall deliver to the

                                      -34-

<PAGE>

Depositor or, at the Depositor's direction, to the Trustee or the Custodian, the
Mortgage File for each Mortgage Loan listed in the Mortgage Loan Schedule
(except that, in the case of the Delay Delivery Mortgage Loans, such delivery
may take place within thirty (30) days following the Closing Date). Such
delivery of the Mortgage Files shall be made against payment by the Depositor of
the purchase price, previously agreed to by the Seller and the Depositor, for
the Mortgage Loans. With respect to any Mortgage Loan that does not have a first
payment date on or before the Due Date in the month of the first Distribution
Date, the Seller shall deposit into the Distribution Account on or before the
Distribution Account Deposit Date relating to the first Distribution Date, an
amount equal to one month's interest at the related Adjusted Mortgage Rate on
the Cut-off Date Principal Balance of such Mortgage Loan.

         (b) 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 the
Depositor's right to require the Seller to cure any breach of a representation
or warranty made herein by the Seller or to repurchase or substitute for any
affected Mortgage Loan in accordance herewith.

         (c) In connection with the transfer and assignment set forth in clause
(b) 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;

                                      -35-

<PAGE>

             (iv) the original or copies of each assumption, modification,
         written assurance or substitution agreement, if any;

             (v)  either the original or duplicate original title policy
         (including all riders thereto) with respect to the related mortgaged
         property, if available, provided that the title policy (including all
         riders thereto) will be delivered as soon as it becomes available, and
         if the title policy is not available, and to the extent required
         pursuant to the second paragraph below or otherwise in connection with
         the rating of the Certificates, a written commitment or interim binder
         or preliminary report of the title issued by the title insurance or
         escrow company with respect to the mortgaged property, and

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

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

             (b) The executed Security Agreement;

             (c) The executed Proprietary Lease;

             (d) The executed Recognition Agreement;

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

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

         In the event that in connection with any Mortgage Loan 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 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 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 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

                                      -36-

<PAGE>

evidencing an assumption or modification of a Mortgage Loan and (b) any other
documents required to be delivered by the Depositor or the Master Servicer to
the Trustee. In the event that the original Mortgage is not delivered and in
connection with the payment in full of the related Mortgage Loan and the public
recording office requires the presentation of a "lost instruments affidavit and
indemnity" or any equivalent document, because only a copy of the Mortgage can
be delivered with the instrument of satisfaction or reconveyance, the Master
Servicer shall execute and deliver or cause to be executed and delivered such a
document to the public recording office. In the case where a public recording
office retains the original recorded Mortgage or in the case where a Mortgage is
lost after recordation in a public recording office, the Seller shall deliver to
the Trustee 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 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 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 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 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 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
2002-3, The Bank of New York, as trustee for the holders of the Certificates",
(ii) cause such assignment to be in proper form for recording in the appropriate
public office for real property records and (iii) cause to be delivered for
recording in the appropriate public office for real property records the
assignments of the Mortgages to the Trustee, except that, with respect to any
assignments of Mortgage as to which the Master Servicer has not received the
information required to prepare such assignment in recordable form, the Master
Servicer's obligation to do so and to deliver the same for such recording shall
be as soon as practicable after receipt of such information and in any event
within thirty (30) days after receipt thereof. Notwithstanding the foregoing,
the Master Servicer need not cause to be recorded any assignment which relates
to a Mortgage Loan in any state other than the Required Recordation States.

     In the case of Mortgage Loans that have been prepaid in full as of the
Closing Date, the Depositor, in lieu of delivering the above documents to the
Trustee or the Custodian on its behalf,

                                      -37-

<PAGE>

will deposit in the Certificate Account the portion of such payment that is
required to be deposited in the Certificate Account pursuant to Section 3.8
hereof.

     Notwithstanding anything to the contrary in this Agreement, within thirty
days after the Closing Date, the Seller shall either (i) deliver 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 a
Substitute Mortgage Loan for the Delay Delivery Mortgage Loan or (B) repurchase
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 Seller fails to
deliver a Mortgage File for any Delay Delivery Mortgage Loan within the
thirty-day period provided in the prior sentence, the Seller shall use its best
reasonable efforts to effect 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 Seller shall
have five (5) Business Days to cure such failure to deliver. At the end of such
thirty-day period, the Trustee or the Custodian, on behalf of the Trustee 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 constituting the Mortgage
Files, and that it or the Custodian 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, the Master Servicer
and the Seller 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, the
Master Servicer and the Seller 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.

                                      -38-

<PAGE>

     Not later than 90 days after the Closing Date, the Trustee shall deliver or
shall cause the Custodian to deliver to the Depositor, the Master Servicer and
the Seller 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.

                                      -39-

<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, Warranties and Covenants of the Seller and
Master Servicer.

     (a)   First Horizon Home Loan Corporation, in its capacities as Seller and
Master Servicer, hereby makes the representations and warranties set forth in
Schedule II hereto, respectively, 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)   The Seller, in its capacity as Seller, hereby makes the
representations and warranties set forth in Schedule III 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.

     (c)   Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Section 2.3(b) 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 Section 2.3(b) which materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
it shall cure such breach in all material respects, and if such breach is not so
cured, shall, (i) if such 90-day period expires prior to the second anniversary
of the Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from
the Trust Fund and substitute in its place a Substitute Mortgage Loan, in the
manner and subject to the conditions set forth in this Section; or (ii)
repurchase the affected Mortgage Loan or Mortgage Loans from the Trustee at the
Purchase Price in the manner set forth below; provided, however, that any such
substitution pursuant to (i) above shall not be effected prior to the delivery
to the Trustee of the Opinion of Counsel required by Section 2.5 hereof, if any,
and any such substitution pursuant to (i) above shall not be effected prior to
the additional delivery to the Trustee or the Custodian on its behalf of a
Request for Release substantially in the form of Exhibit M and the Mortgage File
for any such Substitute Mortgage Loan. The Seller shall promptly reimburse the
Master Servicer and the Trustee for any expenses reasonably incurred by the
Master Servicer or the Trustee in respect of enforcing the remedies for such
breach. With respect to the representations and warranties described in this
Section which are made to the best of the Seller's knowledge, if it is
discovered by either the Depositor, the Seller or the Trustee that the substance
of such representation and warranty is inaccurate and such inaccuracy materially
and adversely affects the value of the related Mortgage Loan or the interests of
the Certificateholders therein, notwithstanding the Seller's lack of knowledge
with respect to the substance of such representation or warranty, such
inaccuracy shall be deemed a breach of the applicable representation or
warranty.

     With respect to any Substitute Mortgage Loan or Loans, the Seller shall
deliver to the Trustee or the Custodian on its behalf for the benefit of the
Certificateholders the Mortgage Note, the Mortgage, the related assignment of
the Mortgage, and such other documents and agreements as are required by Section
2.1, with the Mortgage Note endorsed and the Mortgage assigned as required by
Section 2.1. No substitution is permitted to be made in any calendar month after
the Determination

                                      -40-

<PAGE>

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 Section 2.3(b) with respect to such Mortgage Loan.
Upon any such substitution and the deposit to the Certificate Account of the
amount required to be deposited therein in connection with such substitution as
described in the following paragraph, the Trustee shall release or shall cause
the Custodian to release the Mortgage File held for the benefit of the
Certificateholders relating to such Deleted Mortgage Loan to the Seller and
shall execute and deliver at the Seller's direction such instruments of transfer
or assignment prepared by the Seller, in each case without recourse, as shall be
necessary to vest title in the Seller, or its designee, the Trustee's interest
in any Deleted Mortgage Loan substituted for pursuant to this Section 2.3.

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

     In the event that the Seller shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Certificate Account pursuant
to Section 3.5 on or before the Distribution Account Deposit Date for the
Distribution Date in the month following the month during which the Seller
became obligated hereunder to repurchase or replace such Mortgage Loan and upon
such deposit of the Purchase Price, the delivery of the Opinion of Counsel
required by Section 2.5 and receipt of a Request for Release in the form of
Exhibit M hereto, the Trustee shall release or shall cause the Custodian to
release the related Mortgage File held for the benefit of the Certificateholders
to such Person, and the Trustee shall execute and deliver or shall cause the
Custodian to execute and deliver at such Person's direction such instruments of
transfer or assignment prepared by such Person, in each case without recourse,
as shall be necessary to transfer title from the Trustee. It is understood and
agreed that the obligation under this Agreement of the Seller to cure,
repurchase or replace any Mortgage Loan as to which a breach has occurred and is
continuing shall constitute the sole remedy against the Seller respecting such
breach available to Certificateholders, the Depositor or the Trustee on their
behalf.

     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.

                                      -41-

<PAGE>

     (d)   The Seller hereby represents, warrants and covenants to the Depositor
and the Trustee that, on the Closing Date, after giving effect to the sale of
the Certificates by the Depositor to the Underwriters, and thereafter, so long
as any Certificates remain outstanding, the Seller, its affiliates and agents,
collectively, shall not beneficially own Certificates the aggregate fair value
of which would represent 90% or more of the beneficial interests in the Trust
Fund.

     SECTION 2.4   Representations and Warranties of the Depositor as to the
Mortgage Loans.

     The Depositor hereby represents and warrants to the Trustee with respect to
each Mortgage Loan as of the date hereof or such other date set forth herein
that as of the Closing Date, and following the transfer of the Mortgage Loans to
it by the Seller, the Depositor had good title to the Mortgage Loans and the
Mortgage Notes were subject to no offsets, defenses or counterclaims.

     The Depositor hereby assigns, transfers and conveys to the Trustee all of
its rights with respect to the Mortgage Loans including, without limitation, the
representations and warranties of the Seller made pursuant to Section 2.3(b)
hereof, together with all rights of the Depositor to require the Seller to cure
any breach thereof or to repurchase or substitute for any affected Mortgage Loan
in accordance with this Agreement.

     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 Seller 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 Seller, 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 Seller, at the Seller's option, to either (i)
substitute, if the conditions in Section 2.3(c) 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

                                      -42-

<PAGE>

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 interests created hereby
in the Upper REMIC. Each interest identified in the table below by a designation
beginning with "L" shall be a "regular interest" in the Lower REMIC and the
Class I-A-RL Certificates shall be the sole class of residual interest in the
Lower REMIC. The Lower REMIC Interests shall be uncertificated and shall be held
by the Trustee as assets of the Upper REMIC. The assets of the Lower REMIC shall
be as set forth in the definition thereof. The assets of the Upper REMIC shall
be as set forth in the definition thereof. The "Startup Day" for purposes of the
REMIC Provisions shall be the Closing Date. The Tax Matters Person with respect
to each REMIC hereunder shall be the Trustee and the Trustee shall hold the Tax
Matters Person Certificate. Each REMIC's taxable year shall be the calendar year
and its accounts shall be maintained using the accrual method.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
   Lower REMIC                        Lower REMIC                                       Latest Possible
   Interest or          Lower REMIC    Interest         Corresponding Class of           Maturity Date
   Certificate     Interest Balance      Rate                Certificates                (Payment Date
                                                    -------------------------------           in)
                                                        Interest       Principal
-----------------------------------------------------------------------------------------------------------
<S>                <C>                <C>           <C>                <C>              <C>
     LTI-A-1          $ 177,739,000      6.500%          I-A-1           I-A-1           June 25, 2035
------------------------------------------------------------------------------------------------------------

     LTI-A-2          $  23,931,000      6.500%          I-A-2           I-A-2           June 25, 2035
------------------------------------------------------------------------------------------------------------

     LTI-A-3          $  16,553,000      6.500%          I-A-3           I-A-3           June 25, 2035
------------------------------------------------------------------------------------------------------------

     LTI-A-4          $  14,513,400      6.500%          I-A-4           I-A-4           June 25, 2035
------------------------------------------------------------------------------------------------------------

     LTI-A-5             18,750,000      8.50%         I-A-5/(1)/,       I-A-5           June 25, 2035
                                                       I-A-6/(2)(3)/
------------------------------------------------------------------------------------------------------------

     LTI-A-7          $  50,000,000      5.750%          I-A-7           I-A-7           June 25, 2035
------------------------------------------------------------------------------------------------------------

     LTI-A-8          $  34,515,000      6.500%          I-A-8           I-A-8           June 25, 2035
------------------------------------------------------------------------------------------------------------

     LTI-A-RU         $          50      6.500%          I-A-RU         I-A-RU           June 25, 2035
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
</TABLE>

                                      -43-

<PAGE>

<TABLE>
<S>                  <C>                <C>             <C>            <C>            <C>
----------------------------------------------------------------------------------------------------
      I-A-RL         $         50       6.500%           N/A             N/A               N/A
----------------------------------------------------------------------------------------------------
     LTII-A-1        $ 58,078,000       6.000%          II-A-1         II-A-1         June 25, 2020
----------------------------------------------------------------------------------------------------
     LTII-A-2        $  8,969,000       6.000%          II-A-2         II-A-2         June 25, 2020
----------------------------------------------------------------------------------------------------
      LTB-1          $  5,382,000        (4)             B-1             B-1          June 25, 2035
----------------------------------------------------------------------------------------------------
      LTB-2          $  2,070,000        (4)             B-2             B-2          June 25, 2035
----------------------------------------------------------------------------------------------------
      LTB-3          $  1,449,000        (4)             B-3             B-3          June 25, 2035
----------------------------------------------------------------------------------------------------
      LTB-4          $    828,000        (4)             B-4             B-4          June 25, 2035
----------------------------------------------------------------------------------------------------
      LTB-5          $    621,000        (4)             B-5             B-5          June 25, 2035
----------------------------------------------------------------------------------------------------
      LTB-6          $    621,527        (4)             B-6             B-6          June 25, 2035
----------------------------------------------------------------------------------------------------
</TABLE>

_______________________

(1)  The Pass-Through Rate with respect to any Distribution Date (and the
     related Interest Accrual Period) for the Class I-A-5 Certificates is the
     per annum rate equal to (a) 2.39% with respect to the first Distribution
     Date, and (b) thereafter, the lesser of (i) LIBOR plus 0.55% and (ii)
     8.50%, subject to a minimum rate of 0.40%.

(2)  The Notional Amount with respect to any Distribution Date (and the related
     Interest Accrual Period) of the Class I-A-6 Certificates will equal the
     Class Certificate Balance of the Class I-A-5 Certificates immediately
     preceding such Distribution Date.

(3)  The Pass-Through Rate with respect to any Distribution Date (and the
     related Interest Accrual Period) for the Class I-A-6 Certificates is the
     per annum rate equal to (a) 6.11% with respect to the first Distribution
     Date, and (b) thereafter, 7.95% minus LIBOR, subject to a minimum rate of
     0.00%.

(4)  The Pass-Through Rate on each Class of Subordinated Certificates is
     variable and will be equal to the weighted average of the Designated
     Mortgage Pool Rates, weighted on the basis of the Group Subordinate Amount
     for each Mortgage Pool.

_______________________

     On each Distribution Date Available Funds shall be distributed with respect
to the Lower REMIC Interests and the Class I-A-RL Certificate in a manner such
that:

     (i)   interest accrued on each Lower REMIC Interest is distributed with
           respect to each such Lower REMIC Interest in the same manner that
           Accrued Certificate Interest is distributed with respect to the
           Corresponding Class or Classes of Certificates pursuant to Section
           4.2(a)(i) and (ii);

     (ii)  interest accrued on the Class I-A-RU and Class I-A-RL Certificates is
           distributed in the manner provided in Section 4.2(a)(i) and (ii);

     (iii) principal is distributed on each Lower REMIC Interest, such that the
           principal balance of each such Lower REMIC Interest always equals the
           principal balance of its Corresponding Class of Certificates; and

     (iv)  principal is distributed on the Class II-AR-U and Class I-A-RL
           Certificates as provided in Section 4.2(b)(ii)(1).

                                      -44-

<PAGE>

     Losses allocated to the Certificates pursuant to Section 4.4 shall be
allocated to the corresponding class of Lower REMIC Interest as set forth in the
above table.

     SECTION 2.8   Covenants of the Master Servicer.

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

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

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

                                   ARTICLE III
                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

     SECTION 3.1   Master Servicer to Service Mortgage Loans.

     For and on behalf of the Certificateholders, the Master Servicer shall
service and administer the Mortgage Loans in accordance with the terms of this
Agreement and customary and usual standards of practice of prudent mortgage loan
servicers. 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

                                      -45-

<PAGE>

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 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

                                      -46-

<PAGE>

obligation of the Master Servicer hereunder and in connection with any such
defaulted obligation to exercise the related rights of the Master Servicer
hereunder; provided that the Master Servicer shall not be relieved of any of its
obligations hereunder by virtue of such performance by the Depositor or its
designee. Neither the Trustee nor the Depositor shall have any responsibility or
liability for any action or failure to act by the Master Servicer nor shall the
Trustee or the Depositor be obligated to supervise the performance of the Master
Servicer hereunder or otherwise.

     SECTION 3.4  Trustee to Act as Master Servicer.

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

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

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

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

                                      -47-

<PAGE>

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 two 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, any
     Prepayment Interest Excess and, for so long as First Horizon is the Master
     Servicer, any Retained Yield;

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

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

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

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

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

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

     In addition, with respect to any Mortgage Loan that is subject to a buydown
agreement, on each Due Date for such Mortgage Loan, in addition to the monthly
payment remitted by the Mortgagor, the Master Servicer shall 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.

                                      -48-

<PAGE>

     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 two 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 thi
     Section 3.5(c) in connection with any losses on Permitted Investments; and

         (iii) any other amounts deposited hereunder which are required to be
     deposited in the Distribution Account.

     In the event that the Master Servicer shall remit any amount not required
to be remitted, it may at any time direct the Trustee to withdraw such amount
from the applicable subaccount of the Distribution Account, any provision herein
to the contrary notwithstanding. Such direction may be accomplished by
delivering an Officer's Certificate to the Trustee which describes the amounts
deposited in error in the Distribution Account. All funds deposited in the
Distribution Account shall be held by the Trustee in trust for the related
Certificateholders until disbursed in accordance with this Agreement or
withdrawn in accordance with Section 3.8. In no event shall the Trustee incur
liability for withdrawals from the Distribution Account at the direction of the
Master Servicer.

         (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

                                      -49-

<PAGE>

     Certificateholders. All income and gain net of any losses realized from any
     such investment of funds on deposit in the Certificate Account shall be for
     the benefit of the Master Servicer as servicing compensation and all income
     and gain net of any losses realized from any such investment of funds on
     deposit in the Distribution Account shall be for the benefit of the
     Trustee. The amount of any Realized Losses in the Certificate Account in
     respect of any such investments shall promptly be deposited by the Master
     Servicer in the Certificate Account and the amount of any Realized Losses
     in the Distribution Account in respect of any such investments shall
     promptly be deposited by the Trustee into the Distribution Account. All
     reinvestment income earned on amounts on deposit in the Distribution
     Account shall be for the benefit of the Trustee. The Trustee in its
     fiduciary capacity shall not be liable for the amount of any loss incurred
     in respect of any investment or lack of investment of funds held in the
     Certificate Account and made in accordance with this Section 3.5.

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

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

     (a) To the extent required by the related Mortgage Note and not violative
of current law, the Master Servicer shall establish and maintain one or more
accounts (each, an "Escrow Account") and deposit and retain therein all
collections from the Mortgagors (or advances by the Master Servicer) for the
payment of taxes, assessments, hazard insurance premiums or comparable items for
the account of the Mortgagors. Nothing herein shall require the Master Servicer
to compel a Mortgagor to establish an Escrow Account in violation of applicable
law.

     (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.

                                      -50-

<PAGE>

         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:

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

             (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;

                                      -51-

<PAGE>

              (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 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.

         The Master Servicer shall distribute the Retained Yield, if any, to
First Horizon on each Distribution Account Deposit Date during the term of this
Agreement.

         (b)  The Trustee shall withdraw funds from the 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

                                      -52-

<PAGE>

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 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

                                      -53-

<PAGE>

80% or less of the new appraised value or (ii) if maintaining such Primary
Insurance Policy is prohibited by applicable law.

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

         (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.

         (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

                                      -54-

<PAGE>

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 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

                                      -55-

<PAGE>

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 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, 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

                                      -56-

<PAGE>

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, in its sole discretion, 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, 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,

                                      -57-

<PAGE>

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.

         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.

                                      -58-

<PAGE>

         As compensation for its activities hereunder, 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) Retained Yield,
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; provided that in the
event the Master Servicer is terminated pursuant to Section 7.1, the Retained
Yield shall be payable to First Horizon Home Loan Corporation in its individual
capacity and shall not be payable to the Trustee or any successor to the Master
Servicer. 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.

         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 2001 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.

                                      -59-

<PAGE>

     On or before 120 days after the end of the Master Servicer's fiscal year,
commencing with its 2002 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 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.

                                   ARTICLE IV
                                DISTRIBUTIONS AND
                         ADVANCES BY THE MASTER SERVICER

     SECTION 4.1  Advances.

     The Master Servicer shall determine on or before 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

                                      -60-

<PAGE>

replaced by the Master Servicer by deposit in the applicable subaccount of the
Certificate Account no later than the close of business on 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 if
such Mortgage Loan has been foreclosed or otherwise terminated and the related
Mortgaged Property has not been liquidated.

     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, any shortfall in available amounts being allocated
     among such Classes in proportion to the amount of Accrued Certificate
     Interest otherwise distributable thereon; provided, however, that on each
     Distribution Date through the Accretion Termination Date, such amounts with
     respect to the Accrual Certificates will not be distributed on such
     Certificates under this Section 4.2(a)(i) but will instead be added to the
     Class Certificate Balance thereof and distributed in accordance with
     Section 4.2(b)(i) below;

           (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, any shortfall in available
     amounts being allocated among such Classes in proportion to the amount of
     such Accrued Certificate Interest remaining undistributed for each such
     Class for such Distribution Date; provided, however, that on each
     Distribution Date through the Accretion Termination Date, such amounts with
     respect to the Accrual Certificates will not be distributed on such
     Certificates under this Section 4.2(a)(ii) but will instead be added to the
     Class Certificate Balance thereof, to the extent not previously added
     pursuant to Section 4.2(a)(i) above, and distributed in accordance with
     Section 4.2(b)(i) below;

           (iii) to the Classes of Senior Certificates of the related
     Certificate Group, in reduction of the Class Certificate Balances thereof,
     to the extent of remaining Available Funds from the related Mortgage Pool,
     the related Senior Optimal Principal Amount for such Distribution Date, 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 both 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

                                      -61-

<PAGE>

     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 both 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;

           (vi)    to the Class B-3 Certificates, to the extent of remaining
     Available Funds for both 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 both 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 both 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 both 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.

     (b)   (i)     On each Distribution Date, before distributions are made
pursuant to the following paragraph, an amount equal to the Accrual Amount for
the Class I-A-4 Certificates will be distributed in the following order of
priority to the following classes in reduction of their Class Certificate
Balances:

                   (1)    to the Class I-A-3 Certificates, until the Class
     Certificate Balance thereof has been reduced to zero;

                   (2)    to the Class I-A-4 Certificates, until the Class
     Certificate Balance thereof has been reduced to zero.

           (ii)    Amounts allocated to the Senior Certificates corresponding to
Pool I pursuant to Section 4.2(a)(iii) above will be distributed in the
following order of priority:

                                      -62-

<PAGE>

               (1) pro rata, to the Class I-A-RU and Class I-A-RL Certificates
               until the respective Class Certificate Balances thereof have each
               been reduced to zero;

               (2)   to the Class I-A-8 Certificates in an amount equal to the
          Class I-A-8 Principal Distribution Amount for such Distribution Date,
          until the Class Certificate Balance thereof has been reduced to zero;

               (3)   concurrently, to the Class I-A-1, Class I-A-5 and Class
          I-A-7 Certificates, pro rata, until their respective Class Certificate
          Balances have been reduced to zero; and

               (4)   sequentially, to the Class I-A-2, Class I-A-3, Class I-A-4,
          and Class I-A-8 Certificates, in that order, until their respective
          Class Certificate Balances have been reduced to zero.

     Amounts allocated to the Senior Certificates corresponding to Pool II
pursuant to Section 4.2(a)(iii) above will be distributed sequentially, to the
Class II-A-1 and Class II-A-2 Certificates, in that order, until their
respective Class Certificate Balances have been reduced to zero.

     On each Distribution Date through the Accretion Termination Date, the
Accrual Amount for the Accrual Certificates will be added to the Class
Certificate Balance thereof.

     (c)  On each Distribution Date, the Trustee shall distribute to the Holders
of the Class I-A-RU or Class I-A-RL 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 I-A-RU and Class I-A-RL Certificates.

     (d)  If on any Distribution Date the Class Certificate Balances of the
Subordinated Certificates have each been reduced to zero, the amount
distributable for Pool I to the Senior Certificates of the related Certificate
Group pursuant to Section 4.2(a)(iii) for such Distribution Date and each
succeeding Distribution Date shall be allocated among such 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 on any Distribution Date (i) 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 (ii) amounts distributable to such Class 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 (v) through
(x) of Section 4.2(a) have been distributed, such amounts 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 Certificates while a prior such Class is outstanding.

     (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

                                      -63-

<PAGE>

allocated as a Realized Loss to any Class of Certificates 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 reduce 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(a)(iii), 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"). In the event that
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 Net Interest Shortfalls with respect to any
Undercollateralized Group on any Distribution Date (including any Net Interest
Shortfalls for such 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). If Senior
Certificates of each Certificate Group are Undercollateralized Groups, the
distributions described above will be made in proportion to the amount by which
the aggregate Class Certificate Balance of the Senior Certificates of each such
Certificate Group exceeds the Pool Principal Balance of the related Mortgage
Pool. All distributions described above will be made in accordance with the
priorities set forth in Section 4.2(a).

                                      -64-

<PAGE>

        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 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.

                                      -65-

<PAGE>

        (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:

                     first, to the Class B-6 Certificates until the Class
              Certificate Balance thereof has been reduced to zero;

                     second, to the Class B-5 Certificates until the Class
              Certificate Balance thereof has been reduced to zero;

                     third, to the Class B-4 Certificates until the Class
              Certificate Balance thereof has been reduced to zero;

                     fourth, to the Class B-3 Certificates until the Class
              Certificate Balance thereof has been reduced to zero;

                     fifth, to the Class B-2 Certificates until the Class
              Certificate Balance thereof has been reduced to zero;

                     sixth, to the Class B-1 Certificates until the Class
              Certificate Balance thereof has been reduced to zero;

                     seventh, to the Classes of Senior Certificates of the
              related Certificate Group, pro rata, in accordance with their
              Class Certificate Balances; provided, that any such loss allocated
              to the Accrual Certificates shall instead be allocated on the
              basis of the lesser of (x) the Class Certificate Balance thereof
              immediately prior to the applicable Distribution Date and (y) the
              Class Certificate Balance thereof on the Closing Date (as reduced
              by any Realized Losses previously allocated thereto).

        (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); provided, that any such loss allocated to the Accrual
Certificates shall be allocated on the basis of the lesser of (x) the Class
Certificate Balance thereof immediately prior to the applicable Distribution
Date and (y) the Class Certificate Balance thereof on the Closing Date (as
reduced by any Realized Losses previously allocated thereto).

        (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, (i) in the case of the principal portion
thereof, after giving effect to the distributions made on such Distribution

                                      -66-

<PAGE>

Date, and (ii) in the case of the interest portion thereof, after giving effect
to the calculation of the Accrual Amount for the Accrual Certificates for 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 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 Scheduled 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 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;

                                      -67-

<PAGE>

                  (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.

                                      -68-

<PAGE>

         (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 IV 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     Determination of Pass-Through Rates for LIBOR
Certificates.

         (a) On each Interest Determination Date so long as any LIBOR
Certificates are outstanding, the Trustee will determine LIBOR on the basis of
the British Bankers' Association ("BBA") "Interest Settlement Rate" for
one-month deposits in U.S. dollars as found on Telerate page 3750 as of 11:00
a.m. London time on each LIBOR Determination Date. Interest Settlement Rates
currently are based on rates quoted by sixteen BBA designated banks as being, in
the view of such banks, the offered rate at which deposits are being quoted to
prime banks in the London interbank market. Such Interest Settlement Rates are
calculated by eliminating the four highest rates and the four lowest rates,
averaging the eight remaining rates, carrying the result (expressed as a
percentage) out to six decimal places, and rounding to five decimal places.
"Telerate Page 3750" means the display page currently so designated on the
Bridge Telerate Service (formerly the Dow Jones Markets) (or such other page as
may replace that page on that service for the purpose of displaying comparable
rates or prices.)

         (b) If LIBOR cannot be determined as provided in paragraph (A) of this
Section 4.07, the Trustee shall either (i) request each Reference Bank to inform
the Trustee of the quotation offered by its principal London office for making
one-month United States dollar deposits in leading banks in the London interbank
market, as of 11:00 a.m. (London time) on such Interest Determination Date or
(ii) in lieu of making any such request, rely on such Reference Bank quotations
that appear at such time on the Reuters Screen LIBO Page (as defined in the
International Swap Dealers Association Inc. Code of Standard Wording,
Assumptions and Provisions for Swaps, 1986 Edition), to the extent available.
LIBOR for the next Interest Accrual Period will be established by the Trustee on
each interest Determination Date as follows:

             (i)  If on any interest Determination Date two or more Reference
         Banks provide such offered quotations, LIBOR for the next Interest
         Accrual Period shall be the arithmetic mean of such offered quotations
         (rounding such arithmetic mean upwards if necessary to the nearest
         whole multiple of 1/32%).

             (ii) If on any Interest Determination Date only one or none of the
         Reference Banks provides such offered quotations, LIBOR for the next
         Interest Accrual Period shall be whichever is the higher of (i) LIBOR
         as determined on the previous Interest Determination Date or (ii) the
         Reserve Interest Rate. The "Reserve Interest Rate" shall be the rate
         per annum which the Trustee determines to be either (i) the arithmetic
         mean (rounded upwards if

                                      -69-

<PAGE>

         necessary to the nearest whole multiple of 1/32%) of the one-month
         United States dollar lending rates that New York City banks selected by
         the Trustee are quoting, on the relevant Interest Determination Date,
         to the principal London offices of at least two of the Reference Banks
         to which such quotations are, in the opinion of the Trustee, being so
         made, or (ii) in the event that the Trustee can determine no such
         arithmetic mean, the lowest one-month United States dollar lending rate
         which New York City banks selected by the Trustee are quoting on such
         Interest Determination Date to leading European banks.

                  (iii)   If on any interest Determination Date the trustee is
         required but is unable to determine the Reserve Interest Rate in the
         manner provided in paragraph (b) above, LIBOR shall be LIBOR as
         determined on the preceding Interest Determination Date.

         Until all of the LIBOR Certificates are paid in full, the Trustee will
at all times retain at least four Reference Banks for the purpose of determining
LIBOR with respect to each Interest Determination Date. The Master Servicer
initially shall designate the Reference Banks. Each "Reference Bank" shall be a
leading bank engaged in transactions in Eurodollar deposits in the international
Eurocurrency market, shall not control, be controlled by, or be under common
control with, the Trustee and shall have an established place of business in
London. If any such Reference Bank should be unwilling or unable to act as such
or if the Master Servicer should terminate its appointment as Reference Bank,
the Trustee shall promptly appoint or cause to be appointed another Reference
Bank. The Trustee shall have no liability or responsibility to any Person for
(i) the selection of any Reference Bank for purposes of determining LIBOR or
(ii) any inability to retain at least four Reference Banks which is caused by
circumstances beyond its reasonable control.

         (c) The Pass-Through Rate for each Class of LIBOR Certificates for each
Interest Accrual Period shall be determined by the Trustee on each Interest
Determination Date so long as the LIBOR Certificates are outstanding on the
basis of LIBOR and the respective formulae appearing in footnotes corresponding
to the LIBOR Certificates in the table relating to the Certificates in the
Preliminary Statement.

         In determining LIBOR, any Pass-Through Rate for the LIBOR Certificates,
any Interest Settlement Rate, or any Reserve Interest Rate, the Trustee may
conclusively rely and shall be protected in relying upon the offered quotations
(whether written, oral or on the Dow Jones Markets) from the BBA designated
banks, the Reference Banks or the New York City banks as to LIBOR, the Interest
Settlement Rate or the Reserve Interest Rate, as appropriate, in effect from
time to time. The Trustee shall not have any liability or responsibility to any
Person for (i) the Trustee's selection of New York City banks for purposes of
determining any Reserve Interest Rate or (ii) its inability, following a
good-faith reasonable effort, to obtain such quotations from, the BBA designated
banks, the Reference Banks or the New York City banks or to determine such
arithmetic mean, all as provided for in this Section 4.07.

         The establishment of LIBOR and each Pass-Through Rate for the LIBOR
Certificates by the Trustee shall (in the absence of manifest error) be final,
conclusive and binding upon each Holder of a Certificate and the Trustee.

         SECTION 4.8  Reserved.

                                      -70-

<PAGE>

                                    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 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.

                                      -71-

<PAGE>

         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 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

                                      -72-

<PAGE>

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 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 the assets of the Trust Fund being deemed to be
"plan assets" and subject to the prohibited transaction provisions of ERISA and
the Code and will not subject the Trustee to any obligation in addition to those
expressly undertaken in this Agreement or 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

                                      -73-

<PAGE>

         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), 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 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 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

                                      -74-

<PAGE>

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 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

                                      -75-

<PAGE>

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.

                                   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.

                                      -76-

<PAGE>

         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 Seller, the
Master Servicer and Others.

         None of the Depositor, the Seller, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Seller 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 Seller, the Master Servicer
or any such Person against any breach of representations or warranties made by
it herein or protect the Depositor, the Seller, 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 Seller, the Master Servicer and any director, officer, employee or agent of
the Depositor, the Seller 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 Seller, the Master
Servicer and any director, officer, employee or agent of the Depositor, the
Seller 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 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. None of the Depositor, the Seller or 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 any of the Depositor, the Seller 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, the Seller and the Master

                                      -77-

<PAGE>

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 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

                                      -78-

<PAGE>

              (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.

         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. 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. 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 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.

         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 in
its capacity as 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

                                      -79-

<PAGE>

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 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.

                                      -80-

<PAGE>

                                  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 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;

                                      -81-

<PAGE>

              (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 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, 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

                                      -82-

<PAGE>

         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

                  (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 or the Seller, as the case may be, 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

                                      -83-

<PAGE>

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 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

                                      -84-

<PAGE>

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 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

                                      -85-

<PAGE>

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 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:

                                      -86-

<PAGE>

                  (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 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 each 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

                                      -87-

<PAGE>

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
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.

                                      -88-

<PAGE>

         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 or Seller 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 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.

         Pursuant to written instructions from the Depositor, the Trustee shall
prepare, execute and file 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. 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

                                      -89-

<PAGE>

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 and
(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, in each
case plus accrued and unpaid interest thereon at the applicable Adjusted
Mortgage Rate 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 both Mortgage Pools, at the time of any such 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

                                      -90-

<PAGE>

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 (or on their Notional Principal Amount, if
applicable) 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 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 I-A-RU and Class I-A-RL 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 each 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 each 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.

                                      -91-

<PAGE>

         (b) The Trustee as agent for any 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.

                                   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 as a REMIC under the
Code, (ii) avoid or minimize the risk of the imposition of any tax on the REMIC
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

                                      -92-

<PAGE>

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 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 or the Certificateholders or cause the REMIC
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.

                                      -93-

<PAGE>

         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 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 CERTIFICATEHOLDER UNDER SUCH SECTION 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 Mortgage Loans by the Seller to the Depositor be, and be construed as,
absolute sales thereof. It is, further, not the intention of the parties that
such conveyances be deemed a pledge thereof by the Seller to the Depositor.
However, in the event that, notwithstanding the intent of the parties, the
Mortgage Loans are held to be the property of the Seller, 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 of the Mortgage Loans provided for in this Agreement shall
be deemed to be an assignment and a grant by the Seller to the Depositor, for
the benefit of the Certificateholders, of a security interest in all of the
Mortgage Loans, whether now owned or hereafter acquired.

         The Seller, 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
Mortgage Loans, 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 Seller shall arrange for
filing any Uniform Commercial Code continuation statements in connection with
any security interest granted or assigned to the Depositor for the benefit of
the Certificateholders.

         (b) 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.

                                      -94-

<PAGE>

         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
         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:

         1.   Each report to Certificateholders described in Section 4.6;
         2.   Each annual statement as to compliance described in Section 3.16;
         3.   Each annual independent public accountants' servicing report
              described in Section 3.17; and
         4.   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: Wade Walker 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, 5 Penn Plaza, 16/th/
Floor, New York, New York 10001, 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.

                                      -95-

<PAGE>

         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.

         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.

                                      -96-

<PAGE>

         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
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.

                                   * * * * * *

                                      -97-

<PAGE>

         IN WITNESS WHEREOF, the Depositor, the Trustee, the Seller 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: _________________________________
                                               Wade Walker
                                               Senior Vice President - Asset
                                               Securitization

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

                                           By: _________________________________
                                               Karon Greene
                                               Assistant Treasurer

                                           FIRST HORIZON HOME LOAN CORPORATION,
                                             as Seller and Master Servicer

                                           By: _________________________________
                                               Wade Walker
                                               Senior Vice President - Asset
                                               Securitization

FHASI 2002-3
Pooling and Servicing Agreement - Signature Page

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00040-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00040-of-00352.parquet"}]]