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                                Table of Contents

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                                                                    EXHIBIT 10.2

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                                    GUARANTY

                            HARKEN ENERGY CORPORATION
                                  ("Guarantor")

                               FOR THE BENEFIT OF

                               GUARANTY BANK, FSB
                                   ("Lender")

                                December 6, 2002

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

        CREDIT FACILITY TO HARKEN EXPLORATION COMPANY, XPLOR ENERGY, INC.
          HARKEN ENERGY WEST TEXAS, INC., SOUTH COAST EXPLORATION CO.,
                            XPLOR ENERGY SPV-1, INC.,
                         HARKEN GULF EXPLORATION COMPANY

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

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                               Table of Contents
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                                  (continued)

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<S>                                                                         <C>
ARTICLE 1         General Terms ...........................................   1
  Section 1.1     Terms Defined Above .....................................   1
  Section 1.2     Terms Defined in Credit Agreement .......................   1
  Section 1.3     Additional Defined Terms ................................   1

ARTICLE 2         The Guaranty ............................................   2
  Section 2.1     Liabilities Guaranteed ..................................   2
  Section 2.2     Nature of Guaranty ......................................   2
  Section 2.3     Lender's Rights .........................................   2
  Section 2.4     Guarantor's Waivers .....................................   3
  Section 2.5     Maturity of Liabilities; Payment ........................   3
  Section 2.6     Lender's Expenses .......................................   3
  Section 2.7     Primary Liability .......................................   4
  Section 2.8     Subordination ...........................................   4
  Section 2.9     Events and Circumstances Not Reducing or Discharging
                  the Guarantor's Obligations .............................   4

ARTICLE 3         Representations and Warranties ..........................   6
  Section 3.1     By Guarantor ............................................   6

ARTICLE 4         Miscellaneous ............................................  7
  Section 4.1     Successors and Assigns ...................................  7
  Section 4.2     Reliance on Guaranty Agreement ...........................  7
  Section 4.3     Full Review ..............................................  7
  Section 4.4     Notices ..................................................  7
  Section 4.5     CONSTRUCTION .............................................  8
  Section 4.6     JURISDICTION .............................................  8
  Section 4.7     WAIVER OF RIGHTS TO JURY TRIAL ...........................  8
  Section 4.8     ENTIRE AGREEMENT .........................................  8
</TABLE>

                                       ii

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                               GUARANTY AGREEMENT

         THIS GUARANTY AGREEMENT is executed this 6th day of December, 2002,by
and between HARKEN ENERGY CORPORATION, a Delaware corporation (hereinafter
referred to as the "Guarantor"), whose address for purposes hereof is 580
Westlake Park Boulevard, Suite 600, Houston, Texas 77079 and GUARANTY BANK, FSB,
a federal savings bank, whose address is 333 Clay Street, Suite 4400, Houston,
Texas 77002 (hereinafter referred to as the "Lender").

                              W I T N E S S E T H:

         WHEREAS, HARKEN EXPLORATION COMPANY, a Delaware corporation, XPLOR
ENERGY, INC., a Texas corporation, HARKEN ENERGY WEST TEXAS, INC., a Delaware
corporation, SOUTH COAST EXPLORATION CO., a Texas corporation, XPLOR ENERGY
SPV-1, INC., an Oklahoma corporation, and HARKEN GULF EXPLORATION COMPANY, a
Delaware corporation (hereinafter referred to collectively as the "Borrower")
and the Lender have entered into the Credit Agreement of even date herewith (as
amended, restated, or supplemented from time to time, the "Credit Agreement")
pursuant to which the Lender has agreed, upon the terms and conditions set forth
therein, to make Loans (as such term is defined in the Credit Agreement and so
used herein) to the Borrower from time to time; and

         WHEREAS, as an inducement to the Lender to extend credit to the
Borrower and in satisfaction of a condition precedent provided in the Credit
Agreement, the Guarantor has agreed to execute this Guaranty Agreement in favor
of the Lender;

         NOW, THEREFORE, in order to comply with the terms and conditions of the
Credit Agreement and in consideration of the premises and the extension of
credit by the Lender to the Borrower pursuant to the Credit Agreement and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor hereby agrees as follows:

                                    ARTICLE 1

                                  General Terms

         Section 1.1 Terms Defined Above. As used in this Guaranty Agreement,
the terms "Borrower," "Credit Agreement," "Guarantor," and "Lender" shall have
the meanings indicated above.

         Section 1.2 Terms Defined in Credit Agreement. As used in this Guaranty
Agreement, each term defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement, unless expressly provided to the
contrary herein.

         Section 1.3 Additional Defined Terms. As used in this Guaranty
Agreement, each of the following terms shall have the meaning assigned to such
term below, unless the context otherwise requires:

         "Guarantor Collateral" shall have the meaning indicated in Section 4.1
hereof.

                                       1

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         "Guaranty Agreement" shall mean this Guaranty Agreement, as the same
         may be amended, supplemented, or restated from time to time in writing.

         "Liabilities" shall have the meaning indicated in Section 2.1 hereof.

                                   ARTICLE 2

                                  The Guaranty

         Section 2.1 Liabilities Guaranteed. The Guarantor hereby
unconditionally and irrevocably guarantees the prompt payment when due, whether
at maturity or upon the occurrence and continuation of an Event of Default under
the Credit Agreement, of the Obligations (hereinafter referred to as the
"Liabilities"). The Liabilities shall also include all Obligations which would
be owed by the Borrower but for the fact that they are determined to be void,
unenforceable, uncollectible, or not allowable for any reason against the
Borrower, including, without limitation, under any Insolvency Proceeding of the
Borrower.

         Section 2.2 Nature of Guaranty. This is an irrevocable, absolute,
completed, and continuing guaranty of payment and not a guaranty of collection,
and no notice of the Liabilities or any extension of credit already or hereafter
contracted by or extended to the Borrower need be given to the Guarantor. The
Liabilities may be rearranged, increased, reduced, extended for any period,
and/or renewed from time to time, or paid in full without notice to the
Guarantor; and such events shall not release, discharge, or reduce the
obligation of the Guarantor with respect to the Liabilities, and the Guarantor
shall remain fully bound hereunder notwithstanding the occurrence of such
events. In the event that the Lender must rescind or restore any payment
received by such Lender in satisfaction of the Liabilities, as set forth herein,
any prior release or discharge from the terms of this Guaranty Agreement given
to the Guarantor by such Lender shall be without effect, and this Guaranty
Agreement shall continue to be effective or shall be reinstated, as the case may
be. It is the intention of the Borrower and the Guarantor that obligations of
the Guarantor hereunder shall not be discharged except by the Guarantor's
performance of such obligations and then only to the extent of such performance.
This Guaranty Agreement shall not be discharged by the assignment or negotiation
of all or part of the Liabilities. This Guaranty Agreement may not be revoked by
the Guarantor and shall continue to be effective or be reinstated, as the case
may be, if at any time any payment of any of the Liabilities is rescinded or
must otherwise be returned by the Lender upon the insolvency, bankruptcy,
reorganization, receivership, or other debtor relief proceeding involving the
Borrower, or after any attempted revocation by the Guarantor, all as though such
payment had not been made. The Guarantor hereby expressly waives presentment,
demand, notice of non-payment, notice of intent to accelerate, notice of
acceleration, protest, notice of protest and dishonor, or any other notice
whatsoever on any and all forms of such Liabilities, and also notice of
acceptance of this Guaranty Agreement.

         Section 2.3 Lender's Rights. The Guarantor authorizes the Lender,
without notice or demand and without affecting the Guarantor's liability
hereunder, to take and hold security for the payment of this Guaranty Agreement
and/or any of the Liabilities, and exchange, enforce, waive, and release any
such security; and to apply such security and direct the order or manner of sale
thereof as the Lender in its discretion may determine; and to obtain a guaranty
of the Liabilities from any one or more Persons and at any time or times to
enforce, waive, rearrange, modify, limit, or

                                       2

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release any of such other Persons from their obligations under such guaranties,
and the Guarantor hereby acknowledges and agrees that the obligations of all
Persons to pay and satisfy the Liabilities pursuant to their respective
guaranties (including the Guarantor's obligations under this Guaranty Agreement)
shall be joint and several.

         Section 2.4 Guarantor's Waivers. The Guarantor waives any right to
require the Lender to (and it shall not be necessary for the Lender, in order to
enforce such payment by the Guarantor to first) (a) proceed against the Borrower
or any other Person liable on the Liabilities, (b) proceed against or exhaust
any security given to secure the Liabilities, (c) have the Borrower joined with
the Guarantor in any suit arising out of this Guaranty Agreement and/or any of
the Liabilities, (d) enforce its rights against any other guarantor of the
Liabilities, or (e) pursue or exhaust any other right in the Lender's power
whatsoever. The Lender shall not be required to mitigate damages or take any
action to reduce, collect, or enforce the Liabilities. The Guarantor waives any
defense arising by reason of any disability, lack of authority or power, or
other defense of the Borrower or any other guarantor of any of the Liabilities,
and shall remain liable hereon regardless of whether the Borrower or any other
guarantor is found not liable thereon for any reason including, without
limitation, disability, bankruptcy, insolvency, reorganization, dissolution, or
operation of law, even though rendering the Liabilities void or unenforceable or
uncollectible as against the Borrower or any other guarantor. Prior to the
payment in full of the Liabilities and, in any event, not until 367 days after
the making of any payment and/or the granting of any Lien to secure all or any
part of the Liabilities by any Person, (x) the Guarantor shall have no right of
subrogation, and waives any right to enforce any remedy which the Lender now has
or may hereafter have against the Borrower, and waives any benefit of any right
to participate in any security now or hereafter held by the Lender, (y) the
Guarantor hereby waives any obligation of the Borrower to pay, reimburse, or
otherwise compensate the Guarantor for any payments the Guarantor may have to
make to the Lender pursuant to this Guaranty Agreement, and (z) in addition, the
Guarantor hereby waives any right or claim it now has or may hereafter have
against the Borrower in connection with any payments which the Guarantor may
have to make to the Lender pursuant to this Guaranty Agreement.

         Section 2.5 Maturity of Liabilities; Payment. The Guarantor agrees that
if the maturity of any Liabilities is accelerated by bankruptcy or otherwise,
such maturity shall also be deemed accelerated for the purpose of this Guaranty
Agreement without demand or notice to the Guarantor. The Guarantor will,
forthwith upon notice from the Lender of the Borrower's failure to pay any
Liabilities when due, pay to the Lender at its Principal Office, the amount due
and unpaid by the Borrower and guaranteed hereby. The failure of the Lender to
give this notice shall not in any way release the Guarantor hereunder.

         Section 2.6 Lender's Expenses. If the Guarantor fails to pay the
Liabilities after notice from the Lender of the Borrower's failure to pay any
Liabilities when due, and if the Lender obtains the services of an attorney for
collection of amounts owing by the Guarantor hereunder, or if suit is filed to
enforce this Guaranty Agreement, or if proceedings are had in any bankruptcy,
probate, receivership, or other judicial proceeding for the establishment or
collection of any amount owing by the Guarantor hereunder, or if any amount
owing by the Guarantor hereunder is collected through such proceedings, the
Guarantor agrees to pay to the Lender at its Principal Office all court costs
and all reasonable attorneys' fees incurred by the Lender.

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         Section 2.7  Primary Liability. It is expressly agreed that the
liability of the Guarantor for the payment of the Liabilities guaranteed hereby
shall be primary and not secondary.

         Section 2.8  Subordination. The Guarantor hereby subordinates (in
liquidation, dissolution, bankruptcy, reorganization, or otherwise) all sums due
and owing to the Guarantor by the Borrower to all sums due and owing to the
Lender by the Borrower.

         Section 2.9  Events and Circumstances Not Reducing or Discharging the
Guarantor's Obligations. The Guarantor hereby consents and agrees to each of the
following, and agrees that the Guarantor's obligations under this Guaranty
Agreement shall not be released, diminished, impaired, reduced, or adversely
affected by any of the following, and waives any rights (including, without
limitation, rights to notice) which the Guarantor might otherwise have as a
result of or in connection with any of the following:

                  (a) Modifications, etc. Any renewal, extension, modification,
         alteration, or rearrangement of all or any part of the Liabilities, the
         Loan Documents, or any instrument executed in connection therewith, or
         any contract or understanding between the Borrower and the Lender, or
         any other parties, pertaining to the Liabilities;

                  (b) Adjustment, etc. Any adjustment, indulgence, forbearance,
         or compromise that might be granted or given by the Lender to the
         Borrower or the Guarantor;

                  (c) Condition of Borrower or Guarantor. The insolvency,
         bankruptcy, arrangement, adjustment, composition, liquidation,
         disability, dissolution, or lack of power of the Borrower or any other
         party at any time liable for the payment of all or part of the
         Liabilities; or any dissolution of the Borrower, or any sale, lease, or
         transfer of any or all of the assets of the Borrower or the Guarantor;
         or any reorganization of the Borrower or the Guarantor;

                  (d) Invalidity of Liabilities. The invalidity, illegality, or
         unenforceability of all or any part of the Liabilities, or any document
         or agreement executed in connection with the Liabilities, for any
         reason whatsoever, including, without limitation, the fact that the
         Liabilities, or any part thereof, exceed the amount permitted by law,
         the act of creating the Liabilities or any part thereof is ultra vires,
         the officers, partners, or representatives executing the documents or
         otherwise creating the Liabilities acted in excess of their authority,
         the Liabilities violate applicable usury laws, the Borrower has valid
         defenses, claims, or offsets (whether at law, in equity or by
         agreement) which render the Liabilities wholly or partially
         uncollectible from the Borrower, the creation, performance, or
         repayment of the Liabilities (or the execution, delivery, and
         performance of any document or instrument representing part of the
         Liabilities or executed in connection with the Liabilities, or given to
         secure the repayment of the Liabilities) is illegal, uncollectible,
         legally impossible, or unenforceable, or the Credit Agreement or other
         Loan Documents or other instruments pertaining to the Liabilities have
         been forged or otherwise are irregular or not genuine or authentic;

                                       4

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                  (e) Release of Obligors. Any inadvertent or unintentional full
         or partial release of the liability of the Borrower on the Liabilities
         or any part thereof, or any full or partial release of the liability of
         any coguarantor, or any other Person now or hereafter liable, whether
         directly or indirectly, jointly, severally, or jointly and severally,
         to pay, perform, guarantee, or assure the payment of the Liabilities or
         any part thereof, it being recognized, acknowledged, and agreed by the
         Guarantor that the Guarantor may be required to pay the Liabilities in
         full without assistance or support of any other Person, and the
         Guarantor has not been induced to enter into this Guaranty Agreement on
         the basis of an understanding or agreement that other Persons will be
         liable to perform the Liabilities, or the Lender will look to other
         Persons to perform the Liabilities;

                  (f) Other Security. The taking or accepting of any other
         security, collateral, or guaranty, or other assurance of payment, for
         all or any part of the Liabilities;

                  (g) Release of Collateral, etc. Any release, surrender,
         exchange, subordination, deterioration, waste, loss, or impairment
         (including, without limitation, negligent, willful, unreasonable, or
         unjustifiable impairment) of any Collateral, Guarantor Collateral,
         Property or security, at any time existing in connection with or
         assuring or securing payment of, all or any part of the Liabilities;

                  (h) Care and Diligence. The failure of the Lender or any other
         Person to exercise diligence or reasonable care in the preservation,
         protection, enforcement, sale, or other handling or treatment of all or
         any part of such Collateral, Guarantor Collateral, Property, or
         security;

                  (i) Status of Liens. The fact that any Collateral, Guarantor
         Collateral, security, security interest, or Lien contemplated or
         intended to be given, created, or granted as security for the repayment
         of the Liabilities shall not be properly perfected or created, or shall
         prove to be unenforceable or subordinate to any other security interest
         or Lien, it being agreed by the Guarantor that the Guarantor is not
         entering into this Guaranty Agreement in reliance on, or in
         contemplation of the benefits of, the validity, enforceability,
         collectibility, or value of any of the Collateral and/or Guarantor
         Collateral;

                  (j) Preference. Any payment by the Borrower to the Lender is
         held to constitute a preference under bankruptcy laws, or for any
         reason the Lender is required to refund such payment or pay such amount
         to the Borrower or some other Person; or

                  (k) Other Actions Taken or Omitted. Any other action taken or
         omitted to be taken with respect to the Credit Agreement, the other
         Loan Documents, the Liabilities, or the security and Collateral
         therefor, whether or not such action or omission prejudices the
         Guarantor or increases the likelihood that the Guarantor will be
         required to pay the Liabilities pursuant to the terms hereof; it is the
         unequivocal intention of the Guarantor that the Guarantor shall be
         obligated to pay the Liabilities

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         when due, notwithstanding any occurrence, circumstance, event, action,
         or omission whatsoever, whether or not contemplated, and whether or not
         otherwise or particularly described herein, except for the full and
         final payment and satisfaction of the Liabilities.

                                   ARTICLE 3

                         Representations and Warranties

         Section 3.1 By Guarantor. In order to induce the Lender to accept this
Guaranty Agreement, the Guarantor represents and warrants to the Lender (which
representations and warranties will survive the creation of the Liabilities and
any extension of credit thereunder) that:

                  (a) Benefit to the Guarantor. (i) The Guarantor has determined
         that it will benefit from the Loans extended to the Borrower pursuant
         to the Credit Agreement, and (ii) the Guarantor has further determined
         that it will benefit from its entry into, and performance of, the
         provisions of this Guaranty Agreement, and that such actions are in the
         best interests of the Guarantor;

                  (b) Existence. The Guarantor is a corporation duly organized,
         legally existing, and in good standing under the laws of the State of
         Delaware, and is duly qualified as a foreign corporation and is in good
         standing in all jurisdictions wherein the ownership of Property or the
         operation of its business necessitates same;

                  (c) Power and Authorization. The execution and delivery of
         this Guaranty Agreement by the Guarantor and the performance of the
         obligations of the Guarantor under this Guaranty Agreement and the
         other Loan Documents to which it is a party are within the power of the
         Guarantor and have been duly authorized by all necessary corporate
         action;

                  (d) Binding Obligations. This Guaranty Agreement constitutes
         valid and binding obligations of the Guarantor, enforceable in
         accordance with its terms;

                  (e) No Legal Bar or Resultant Lien. The execution and delivery
         of this Guaranty Agreement by the Guarantor and the performance of the
         obligations of the Guarantor under this Guaranty Agreement and the
         other Loan Documents to which they are a party do not and will not (a)
         contravene or conflict with any Requirement of Law, (b) contravene or
         conflict with any indenture, instrument, or other agreement to which
         the Guarantor is a party or by which any Property of the Guarantor may
         be presently bound or encumbered, or (c) result in or require the
         creation or imposition of any Lien in, upon or of any Property of the
         Guarantor under any such indenture, instrument, or other agreement,
         other than pursuant to this Guaranty Agreement or the other Loan
         Documents to which it is a party;

                  (f) No Consent. The execution and delivery of this Guaranty
         Agreement by the Guarantor and the performance of the obligations of
         the Guarantor under this Guaranty Agreement and the other Loan
         Documents to which it is a party do not

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         require the consent or approval of any other Person, including, without
         limitation, any Governmental Authority;

                  (g) Familiarity and Reliance. The Guarantor is familiar with,
         and has independently reviewed books and records regarding, the
         financial condition of the Borrower and is familiar with the value of
         any and all Collateral intended to be created as security for payment
         of the Notes and the Liabilities; provided, however, the Guarantor is
         not relying on such financial condition or the Collateral as an
         inducement to enter into this Guaranty Agreement;

                  (h) No Representation. Neither the Lender nor any other Person
         has made any representation, warranty, or statement to the Guarantor
         with regard to the Borrower or its financial condition in order to
         induce the Guarantor to execute this Guaranty Agreement; and

                  (i) Guarantor's Financial Condition. As of the date hereof and
         after giving effect to this Guaranty Agreement and the contingent
         liability evidenced hereby, the Guarantor is and will be solvent, and
         has assets which, fairly valued, exceed the Indebtedness.

                                    ARTICLE 4

                                  Miscellaneous

         Section 4.1  Successors and Assigns. This Guaranty Agreement is and
shall be in every particular available to the legal representatives, successors,
and assigns of the Lender, and in the event of an assignment of the Liabilities,
or any part thereof, the rights and benefits hereunder, to the extent applicable
to the indebtedness so assigned, may be transferred with such indebtedness, and
is and shall always be fully binding upon the legal representatives, successors,
and assigns of the Guarantor, notwithstanding that some or all of the monies,
the repayment of which this Guaranty Agreement applies, may be actually advanced
after any bankruptcy, receivership, reorganization, or other event affecting the
Guarantor.

         Section 4.2  Reliance on Guaranty Agreement. The Guarantor recognizes
that the Lender is relying upon this Guaranty Agreement and the undertakings of
the Guarantor hereunder in making an extension of credit to the Borrower under
the Credit Agreement and further recognizes that the execution and delivery of
this Guaranty Agreement are material inducements to the Lender in entering into
the Credit Agreement.

         Section 4.3  Full Review. This Guaranty Agreement was reviewed by the
Guarantor and the Guarantor acknowledges that it (a) understands fully all of
the terms of this Guaranty Agreement and the consequences and implications of
the Guarantor's execution of this Guaranty Agreement, and (b) has been afforded
an opportunity to have this Guaranty Agreement reviewed by, and to discuss the
terms, consequences, and implications of this Guaranty Agreement with, an
attorney or such other Persons as the Guarantor may have desired.

         Section 4.4  Notices. Any notice or demand to the Guarantor under or in
connection with this Guaranty Agreement shall be in writing and mailed by first
class or express mail, postage

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prepaid, or sent by telex, telegram, telecopy or other similar form of rapid
transmission confirmed by mailing (by first class or express mail, postage
prepaid) written confirmation at substantially the same time as such rapid
transmission, or personally delivered to the Guarantor. All such communications
shall be mailed, sent, or delivered to the Guarantor at the address of the
Guarantor appearing on the records of the Lender. Any communication so addressed
and mailed shall be deemed to be given when so mailed; any notice so sent by
rapid transmission shall be deemed to be given when receipt of such transmission
is acknowledged; any communication so delivered in person shall be deemed to be
given when receipted for by, or actually received by, the Guarantor.

         Section 4.5 CONSTRUCTION. THIS GUARANTY AGREEMENT IS A CONTRACT MADE
UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF TEXAS.

         Section 4.6 JURISDICTION. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO
THIS GUARANTY AGREEMENT MAY BE INSTITUTED AT THE DISCRETION OF THE LENDER IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS. BY EXECUTION
AND DELIVERY OF THIS GUARANTY AGREEMENT, THE GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS TO THE JURISDICTION (BOTH SUBJECT MATTER AND PERSONAL)
OF SUCH COURT, AND IRREVOCABLY AND UNCONDITIONALLY WAIVES (A) ANY OBJECTION THE
GUARANTOR MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN SUCH COURT, AND
(B) ANY CLAIM THAT ANY ACTION OR PROCEEDING BROUGHT OF SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.

         Section 4.7 WAIVER OF RIGHTS TO JURY TRIAL. THE GUARANTOR AND THE
LENDER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, IRREVOCABLY, AND
UNCONDITIONALLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, COUNTERCLAIM, OR OTHER LITIGATION THAT RELATES TO OR ARISES OUT OF
ANY OF THIS GUARANTY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE ACTS OR
OMISSIONS OF THE LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR PROVISIONS OF
THIS GUARANTY AGREEMENT OR ANY OTHER LOAN DOCUMENT OR OTHERWISE WITH RESPECT
THERETO. THE PROVISIONS OF THIS SECTION ARE A MATERIAL INDUCEMENT FOR THE LENDER
EXTENDING CREDIT TO THE BORROWER.

         Section 4.8 ENTIRE AGREEMENT. THIS GUARANTY AGREEMENT CONSTITUTES THE
ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT HEREOF
AND SHALL SUPERSEDE ANY PRIOR AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT HEREOF. FURTHERMORE, IN THIS REGARD,
THIS GUARANTY AGREEMENT AND THE OTHER WRITTEN LOAN DOCUMENTS REPRESENT,
COLLECTIVELY, THE FINAL AGREEMENT AMONG THE PARTIES THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH
PARTIES.

                                       8

<PAGE>

         EXECUTED this 6/th/ day of December, 2002.

                                            GUARANTOR:

                                            HARKEN ENERGY CORPORATION

                                            By: /s/ Anna Williams
                                                -----------------
                                                    Executive Vice President and
                                                    Chief Financial Officer

                                            LENDER:

                                            GUARANTY BANK, FSB

                                            By: /s/ Jonathan Gregory
                                                --------------------
                                                    Jonathan Gregory
                                                    Vice President

                                       9<PAGE>

                                                                     EXHIBIT 4.1

                       FIRST HORIZON ASSET SECURITIES INC.

                                    Depositor

                       FIRST HORIZON HOME LOAN CORPORATION

                                 Master Servicer

                                       and

                              THE BANK OF NEW YORK,

                                     Trustee

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

                         POOLING AND SERVICING AGREEMENT

                          Dated as of November 1, 2002

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

                FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2002-8

                MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2002-8

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                          <C>
ARTICLE I DEFINITIONS .....................................................................................   5

ARTICLE II CONVEYANCE OF MORTGAGE LOANS;  REPRESENTATIONS AND WARRANTIES ..................................  35
  SECTION 2.1  Conveyance of Mortgage Loans. ..............................................................  35
  SECTION 2.2  Acceptance by Trustee of the Mortgage Loans. ...............................................  39
  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. ..................  43
  SECTION 2.5  Delivery of Opinion of Counsel in Connection with Substitutions. ...........................  43
  SECTION 2.6  Execution and Delivery of Certificates. ....................................................  44
  SECTION 2.7  REMIC Matters. .............................................................................  44
  SECTION 2.8  Covenants of the Master Servicer. ..........................................................  44

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS ................................................  44
  SECTION 3.1  Master Servicer to Service Mortgage Loans. .................................................  44
  SECTION 3.2  Subservicing; Enforcement of the Obligations of Servicers. .................................  45
  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. .........................................................  46
  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. ..............  51
  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. ................  53
  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. ...........  56
  SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files. ...........................................  58
  SECTION 3.13 Documents Records and Funds in Possession of Master Servicer to be Held for the Trustee. ...  59
  SECTION 3.14 Master Servicing Compensation. .............................................................  60
  SECTION 3.15 Access to Certain Documentation. ...........................................................  60
  SECTION 3.16 Annual Statement as to Compliance. .........................................................  60
  SECTION 3.17 Annual Independent Public Accountants' Servicing Statement; Financial Statements. ..........  61
  SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds. ............................................  61

ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER ..............................................  62
  SECTION 4.1  Advances. ..................................................................................  62
  SECTION 4.2  Priorities of Distribution. ................................................................  62
  SECTION 4.3  Method of Distribution. ....................................................................  68
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                                                          <C>
  SECTION 4.4  Allocation of Losses. ......................................................................  69
  SECTION 4.5  Reserved. ..................................................................................  71
  SECTION 4.6  Monthly Statements to Certificateholders. ..................................................  71
  SECTION 4.7  Determination of Pass-Through Rates for LIBOR Certificates. ................................  73

ARTICLE V THE CERTIFICATES ................................................................................  73
  SECTION 5.1  The Certificates. ..........................................................................  73
  SECTION 5.2  Certificate Register; Registration of Transfer and Exchange of Certificates. ...............  74
  SECTION 5.3  Mutilated, Destroyed, Lost or Stolen Certificates. .........................................  79
  SECTION 5.4  Persons Deemed Owners. .....................................................................  79
  SECTION 5.5  Access to List of Certificateholders' Names and Addresses. .................................  79
  SECTION 5.6  Maintenance of Office or Agency. ...........................................................  79

ARTICLE VI THE DEPOSITOR AND THE MASTER SERVICER ..........................................................  80
  SECTION 6.1  Respective Liabilities of the Depositor and the Master Servicer. ...........................  80
  SECTION 6.2  Merger or Consolidation of the Depositor or the Master Servicer. ...........................  80
  SECTION 6.3  Limitation on Liability of the Depositor, the Master Servicer and Others. ..................  80
  SECTION 6.4  Limitation on Resignation of Master Servicer. ..............................................  81

ARTICLE VII DEFAULT .......................................................................................  81
  SECTION 7.1  Events of Default. .........................................................................  81
  SECTION 7.2  Trustee to Act; Appointment of Successor. ..................................................  83
  SECTION 7.3  Notification to Certificateholders. ........................................................  84

ARTICLE VIII CONCERNING THE TRUSTEE .......................................................................  84
  SECTION 8.1  Duties of Trustee. .........................................................................  84
  SECTION 8.2  Certain Matters Affecting the Trustee. .....................................................  86
  SECTION 8.3  Trustee Not Liable for Certificates or Mortgage Loans. .....................................  87
  SECTION 8.4  Trustee May Own Certificates. ..............................................................  88
  SECTION 8.5  Trustee's Fees and Expenses. ...............................................................  88
  SECTION 8.6  Eligibility Requirements for Trustee. ......................................................  88
  SECTION 8.7  Resignation and Removal of Trustee. ........................................................  89
  SECTION 8.8  Successor Trustee. .........................................................................  90
  SECTION 8.9  Merger or Consolidation of Trustee. ........................................................  90
  SECTION 8.10 Appointment of Co-Trustee or Separate Trustee. .............................................  90
  SECTION 8.11 Tax Matters. ...............................................................................  92
  SECTION 8.12 Periodic Filings. ..........................................................................  93

ARTICLE IX TERMINATION ....................................................................................  94
  SECTION 9.1  Termination upon Liquidation or Purchase of all Mortgage Loans. ............................  94
  SECTION 9.2  Final Distribution on the Certificates. ....................................................  94
  SECTION 9.3  Additional Termination Requirements. .......................................................  96

ARTICLE X [RESERVED] ......................................................................................  96

ARTICLE XI MISCELLANEOUS PROVISIONS .......................................................................  96
  SECTION 11.1 Amendment. .................................................................................  96
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                     <C>
  SECTION 11.2  Recordation of Agreement; Counterparts. .............................   98
  SECTION 11.3  Governing Law. ......................................................   98
  SECTION 11.4  Intention of Parties. ...............................................   98
  SECTION 11.5  Notices. ............................................................   99
  SECTION 11.6  Severability of Provisions. .........................................  100
  SECTION 11.7  Assignment. .........................................................  100
  SECTION 11.8  Limitation on Rights of Certificateholders. .........................  100
  SECTION 11.9  Inspection and Audit Rights. ........................................  101
  SECTION 11.10 Certificates Nonassessable and Fully Paid. ..........................  101
  SECTION 11.11 Limitations on Actions; No Proceedings. .............................  102
  SECTION 11.12 Acknowledgment of Seller. ...........................................  102
</TABLE>

                                    SCHEDULES

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

                                    EXHIBITS

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

                                       iii

<PAGE>

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

                                 WITNESSETH THAT

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

                              PRELIMINARY STATEMENT

       The Depositor is the owner of the Trust Fund that is hereby conveyed to
the Trustee in return for the Certificates. The Trust Fund for federal income
tax purposes will consist of a single REMIC. The Certificates will represent the
entire beneficial ownership interest in the Trust Fund. The Regular Certificates
will represent "regular interests" in a single REMIC. The Class II-A-R
Certificates will represent the sole class of residual interests in the REMIC,
as described in Section 2.7. The "latest possible maturity date" for federal
income tax purposes of all interests created hereby will be the Latest Possible
Maturity Date.

The following table sets forth characteristics of the Certificates, together
with the minimum denominations and integral multiples in excess thereof in which
such Classes shall be issuable (except that one Certificate of each Class of
Certificates may be issued in a different amount and, in addition, one Residual
Certificate representing the Tax Matters Person Certificate may be issued in a
different amount):

                  [Remainder of Page Intentionally Left Blank]

                                       1

<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
                             Initial Class                                                  Integral Multiples
   Class Designation      Certificate Balance    Pass Through Rate   Minimum Denomination    in Excess Minimum
----------------------------------------------------------------------------------------------------------------
<S>                      <C>                    <C>                  <C>                    <C>
Class I-A-1              $ 246,975,000.00           6.000%               $     25,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class I-A-2              $   6,000,000.00           8.500%               $     25,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class I-A-3              $  20,000,000.00           5.250%               $     25,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class I-A-4              $   8,420,000.00           6.000%               $      1,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class I-A-5              $  22,116,000.00           6.000%               $     25,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class I-A-6              $  72,500,000.00           6.000%               $     25,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class I-A-7              $  25,000,000.00           6.000%               $     25,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class I-A-8              $  40,000,000.00           6.000%               $     25,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class I-A-PO             $     877,422.00           /(1)/                $     25,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class II-A-1             $  97,442,000.00           5.250%               $     25,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class II-A-R             $         100.00           5.250%               $        100                   N/A
----------------------------------------------------------------------------------------------------------------
Class B-1                $   6,248,000.00        Variable/(2)/           $    100,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class B-2                $   1,999,000.00        Variable/(2)/           $    100,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class B-3                $   1,250,000.00        Variable/(2)/           $    100,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class B-4                $     999,000.00        Variable/(2)/           $    100,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class B-5                $     500,000.00        Variable/(2)/           $    100,000           $     1,000
----------------------------------------------------------------------------------------------------------------
Class B-6                $     750,142.00        Variable/(2)/           $    100,000           $     1,000
----------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Class I-A-PO Certificates are principal only certificates and will not
accrue interest.

(2) 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.

                                       2

<PAGE>

<TABLE>
<S>                                 <C>
Accretion Directed Certificates     The Class I-A-5 and Class I-A-6
                                    Certificates.

Accrual Certificates .............  The Class I-A-7 Certificates.

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

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

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

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 and, until an ERISA Qualifying
                                    Underwriting has occurred with respect to
                                    such Class, the Class I-A- PO Certificates

Floating Rate Certificates .......  None.

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 and Class I-A-PO
                                    Certificates.

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

Insured Retail Certificates ......  None.

Interest Only Certificates .......  None.

Inverse Floating Rate
Certificates .....................  None.

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

LIBOR Certificates ...............  None.

Non-Delay Certificates ...........  None.

Notional Principal Amount
Certificates .....................  None.

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

Physical Certificates ............  The Class I-A-PO Certificates, the Private
                                    Certificates and the Residual Certificates.
</TABLE>

                                        3

<PAGE>

<TABLE>
<S>                               <C>
Planned Principal Classes ......  None.

Principal Only Certificates ....  The Class I-A-PO Certificates.

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 II-A-R Certificates.

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

Scheduled Principal Classes ....  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 ...................  UBS Warburg LLC
</TABLE>

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

                                       4

<PAGE>

                                    ARTICLE I
                                   DEFINITIONS

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

     Accretion Termination Date: For each Class of Accrual Certificates, the
earlier of: (x) the Cross-over Date and (y) the Distribution Date upon which the
Class Certificate Balances of the Class I-A-5 and Class I-A-6 Certificates have
been reduced to zero.

     Accrual Amount: For each Class of Accrual Certificates and each
Distribution Date through the Accretion Termination Date, an amount equal to the
sum of (a) any amounts allocable to Accrued Certificate Interest in respect of
such class of Accrual Certificates in accordance with Section 4.2(a)(i), and (b)
any available amounts allocable to such Class of 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 of
such Class of Certificates immediately prior to such Distribution Date, less
such Class' share of any Net Interest Shortfall, allocable among the outstanding
Classes of Senior Certificates of the related Certificate Group based on the
Accrued Certificate Interest otherwise distributable thereto, and allocable to
the Subordinated Certificates based on interest accrued on their related
Apportioned Principal Balances.

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

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

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

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

     Allocable Share: With respect to any Class of Subordinated Certificates on
any Distribution Date, such Class' pro rata share (based on the Class
Certificate Balance of each Class entitled thereto) of each of the components of
the Subordinated Optimal Principal Amount for both Mortgage Pools; provided,
that, except as provided in this Agreement, no Subordinated Certificates (other
than the Class of Subordinated Certificates with the highest priority of

                                       5

<PAGE>

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;

                                       6

<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.

                                       7

<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 2002-8."

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

     Certificate Principal Balance: With respect to any Certificate and as of
any Distribution Date, the Certificate Principal Balance on the date of the
initial issuance of such Certificate,

(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.

(2)  in the case of the Accrual Certificates, as increased by any Accrual Amount
therefor on such previous Distribution Dates.

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

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

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

     Class I-A-8 Distribution Percentage: 0% through the Distribution Date in
November 2007; 30% of the applicable Class I-A-8 Percentage thereafter through
the Distribution Date in November 2008; 40% of the applicable Class I-A-8
Percentage thereafter through the

                                       8

<PAGE>

Distribution Date in November 2009; 60% of the applicable Class I-A-8 Percentage
thereafter through the Distribution Date in November 2010; 80% of the applicable
Class I-A-8 Percentage thereafter through the Distribution Date in November
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 applicable Non-PO
Percentage of 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

     (a)  the amounts described in clause (1) of the definition of Senior
Optimal Principal Amount for Pool I (determined without application of the
Senior Percentage) for such date multiplied by the Class I-A-8 Scheduled
Distribution Percentage for such date

     (b)  the amounts described in clauses (2) 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 I-A-8 Scheduled Distribution Percentage: For any Distribution Date,
0% through the Distribution Date in November 2007.

     Class I-A-PO Deferred Amount: With respect to any Distribution Date through
the Cross-over Date, the sum of (1) the applicable PO Percentage of the
principal portion of Non-Excess Losses on a Discount Mortgage Loan in Pool I
allocated to the Class I-A-PO Certificates on such Distribution Date, and (2)
all amounts previously allocated to the Class I-A-PO Certificates in respect of
such losses and not distributed to the Class I-A-PO Certificates on prior
Distribution Dates.

     Class I-A-PO Deferred Payment Writedown Amount: For any Distribution Date,
the amount, if any, distributed on such date in respect of the Class I-A-PO
Deferred Amount pursuant to Section 4.2(a)(iv).

     Class I-A-PO Principal Distribution Amount: With respect to each
Distribution Date, an amount equal to the sum of:

     (1)  the applicable PO Percentage of all Scheduled Payments of principal
due on each Mortgage Loan in Pool I 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;

                                       9

<PAGE>

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

     (3)  the applicable PO Percentage of all partial prepayments of principal
for each Mortgage Loan in Pool I received by the Master Servicer during the
related Prepayment Period;

     (4)  the applicable PO Percentage of the sum of (a) the net Liquidation
Proceeds allocable to principal on each Mortgage Loan in Pool I which became a
Liquidated Mortgage Loan during the related Prepayment Period, other than
Mortgage Loans described in clause (b), and (b) the Stated Principal Balance of
each Mortgage Loan in Pool I 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

     (5)  the applicable PO Percentage of the sum of (a) the Stated Principal
Balance of each Mortgage Loan in Pool I 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 Pool I that has been replaced
by the Seller with a Substitute Mortgage Loan pursuant to Section 2.3(b) in
connection with such Distribution Date and the Stated Principal Balance of such
Substitute Mortgage Loan.

     For purposes of clauses (2) and (5) above, the Stated Principal Balance of
a Mortgage Loan shall be reduced by the amount of any Deficient Valuation that
occurred prior to the reduction of the Bankruptcy Loss Coverage Amount to zero.

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

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

     Closing Date: November 26, 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

                                       10

<PAGE>

month prior to the month of such Distribution Date through the last day of such
month, an additional payment to the related Mortgage Pool made by the Master
Servicer, to the extent funds are available from the Master Servicing Fee, equal
to the amount of interest at the Adjusted Net Mortgage Rate for that Mortgage
Loan from the date of the prepayment to the related Due Date; provided that the
aggregate of all such payments as to the Mortgage Loans in a Mortgage Pool shall
not exceed 0.0083% of the Pool Principal Balance of such Mortgage Pool as of the
related Determination Date, and provided further that if a partial Principal
Prepayment is applied after the first of the month following the month of
receipt, no additional payment is required for such Principal Prepayment.

     Component: Not applicable.

     Component Balance: Not applicable.

     Component Certificates: Not applicable.

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

     Coop Shares: Shares issued by a Cooperative Corporation.

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

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

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

     Corporate Trust Office: The designated office of the Trustee in the State
of New York at which at any particular time its corporate trust business with
respect to this Agreement shall be administered, which office at the date of the
execution of this Agreement is located at The Bank of New York, 101 Barclay
Street, 8W, New York, New York 10286 (Attn: Corporate Trust Mortgage-Backed
Securities Group, First Horizon Asset Securities Inc. Series 2002-8), facsimile
no. (212) 815-3986, and which is the address to which notices to and
correspondence with the Trustee should be directed.

     Corresponding Classes of Certificates: Not applicable.

     Cross-over Date: The Distribution Date on which the respective Class
Certificate Balances of each Class of Subordinated Certificates have been
reduced to zero.

     Custodial Agreement: The Custodial Agreement dated as of November 26, 2002
by and among the Trustee, the Master Servicer and the Custodian.

                                       11

<PAGE>

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

     Cut-off Date: November 1, 2002.

     Cut-off Date Pool Principal Balance: With respect to Pool I, $400,012,266,
and with respect to Pool II, $99,787,399.

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

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

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

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

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

     Delay Certificates: As specified in the Preliminary Statement.

     Delay Delivery Mortgage Loans: The Mortgage Loans for which all or a
portion of a related Mortgage File is not delivered to Trustee on the Closing
Date. The number of Delay Delivery Mortgage Loans shall not exceed 25% of the
aggregate number of Mortgage Loans as of the Closing Date.

     Deleted Mortgage Loan: As defined in Section 2.3(b) hereof.

     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

                                       12

<PAGE>

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, 6.00%, and with
respect to Pool II, 5.25%.

     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 6.25%.

     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 2002-8." 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 December 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

                                       13

<PAGE>

depository institution or (b) a trust company, acting in its fiduciary capacity
or (iv) any other account acceptable to each Rating Agency. Eligible Accounts
may bear interest, and may include, if otherwise qualified under this
definition, accounts maintained with the Trustee.

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

     ERISA-Restricted Certificate: As specified in the Preliminary Statement.

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

     Event of Default: As defined in Section 7.1 hereof.

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

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

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

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

     FHLMC: The Federal Home Loan Mortgage Corporation, a corporate
instrumentality of the United States created and existing under Title III of the
Emergency Home Finance Act of 1970, as amended, or any successor thereto.

     FIRREA: The Financial Institutions Reform, Recovery, and Enforcement Act of
1989.

     First Horizon: First Horizon Home Loan Corporation, a Kansas corporation
and an indirect wholly owned subsidiary of First Tennessee National Corporation,
a Tennessee corporation.

     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

                                       14

<PAGE>

Mortgage Surveillance Group, or such other address as Fitch may hereafter
furnish to the Depositor and the Master Servicer.

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

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

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

     Fraud Loss Coverage Amount: As of the Closing Date, $4,997,997. As of any
Distribution Date from the first anniversary of the Cut-off Date and prior to
the third anniversary of the Cut-off Date, the Fraud Loss Coverage Amount will
equal $4,997,997 minus the aggregate amount of Fraud Losses that would have been
allocated to the Subordinated Certificates in the absence of the Loss Allocation
Limitation since the Cut-off Date. As of any Distribution Date from the third to
the fifth 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: As specified in the Preliminary Statement.

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

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

                                       15

<PAGE>

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

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

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

     Insured Retail Certificates: Not applicable.

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

     Interest Determination Date: Not applicable.

     Interest Only Certificates: As specified in the Preliminary Statement.

     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: Not applicable.

     LIBOR Certificates: As specified in the Preliminary Statement.

     Liquidated Mortgage Loan: With respect to any Distribution Date, a
defaulted Mortgage Loan (including any REO Property) which was liquidated in the
calendar month preceding the month of such Distribution Date and as to which the
Master Servicer has determined (in accordance with this Agreement) that it has
received all amounts it expects to receive in 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

                                       16

<PAGE>

REO Property, less the sum of related unreimbursed Master Servicing Fees,
Servicing Advances and Advances.

     Loan-to-Value Ratio: With respect to any Mortgage Loan and as to any date
of determination, the fraction (expressed as a percentage) the numerator of
which is the principal balance of the related Mortgage Loan at such date of
determination and the denominator of which is the Appraised Value of the related
Mortgaged Property.

     Loss Allocation Limitation: As defined in Section 4.4(g).

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

     Lower REMIC: Not applicable.

     Lower REMIC Interests: Not applicable.

     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 6.006%.

     MLPA: The Mortgage Loan Purchase Agreement dated as of November 26, 2002,
by and between First Horizon Home Loan Corporation, as seller, and First Horizon
Asset Securities Inc., as purchaser, as related to the transfer, sale and
conveyance of the Mortgage Loans.

     Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.6.

                                       17

<PAGE>

     Moody's: Moody's Investors Service, Inc., or any successor thereto. If
Moody's is designated as a Rating Agency in the Preliminary Statement, for
purposes of Section 11.5(b) the address for notices to Moody's shall be Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007, Attention:
Residential Pass-Through Monitoring, or such other address as Moody's may
hereafter furnish to the Depositor or the Master Servicer.

     Mortgage: The mortgage, deed of trust or other instrument creating a first
lien on an estate in fee simple or leasehold interest in real property securing
a Mortgage Note.

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

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

               (1)  the loan number;

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

               (3)  the maturity date;

               (4)  the original principal balance;

               (5)  the Cut-off Date Principal Balance;

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

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

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

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

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

               (11) the Mortgage Rate;

               (12) the purpose for the Mortgage Loan;

                                       18

<PAGE>

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

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

     Such schedule shall also set forth the total of the amounts described under
(4) and (5) above for all of the Mortgage Loans.

     Mortgage Loans: Such of the mortgage loans transferred and assigned to the
Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Fund (including any REO Property), the mortgage loans so held
being identified in the Mortgage Loan Schedule, notwithstanding foreclosure or
other acquisition of title of the related Mortgaged Property.

     Mortgage Note: The original executed note or other evidence of indebtedness
evidencing the indebtedness of a Mortgagor under a Mortgage Loan.

     Mortgage Pool: 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-Discount Mortgage Loan: Any Mortgage Loan in Pool I with an Adjusted
Net Mortgage Rate that is equal to or greater than 6.00%.

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

                                       19

<PAGE>

     Non-PO Percentage: As to any Discount Mortgage Loan in Pool I, a fraction
(expressed as a percentage) the numerator of which is the Adjusted Net Mortgage
Rate of such Discount Mortgage Loan and the denominator of which is 6.00%. As to
any Non-Discount Mortgage Loan in Pool I, 100%.

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

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

     Notional Amount: Not applicable.

     Notional 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.

                                       20

<PAGE>

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

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

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

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

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

     Pass-Through Rate: For any interest bearing Class of Certificates 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

                                       21

<PAGE>

          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;

               (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;

                                       22

<PAGE>

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 REMIC created hereunder to fail to qualify as a REMIC at
any time that the Certificates are outstanding; provided, however, that if a
person is classified as a partnership under the Code, such person shall only be
a Permitted Transferee if all of its beneficial owners are described in
subclauses (a), (b), (c) or (d) of clause (vi) and the governing documents of
such person prohibits a transfer of any interest in such person to any person
described in clause (vi). The terms "United States," "State" and "International
Organization" shall have the meanings set forth in section 7701 of the Code or
successor provisions. A corporation will not be treated as an instrumentality of
the United States or of any State or political subdivision thereof for these
purposes if all of its activities are subject to tax and, with the exception of
the Federal Home Loan Mortgage Corporation, a majority of its board of directors
is not selected by such government unit.

     Person: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government, or any agency or political subdivision thereof.

     Physical Certificate: As specified in the Preliminary Statement.

     Planned Balance: Not applicable.

     Planned Principal Classes: As specified in the Preliminary Statement.

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

                                       23

<PAGE>

     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.

     PO Percentage: As to any Discount Mortgage Loan in Pool I, a fraction
(expressed as a percentage) the numerator of which is difference between (a)
6.00% and (b) the Adjusted Net Mortgage Rate of such Discount Mortgage Loan, and
the denominator of which is 6.00%. As to any Non-Discount Mortgage Loan in Pool
I, 0%.

     Prepayment Interest Excess: As to any Principal Prepayment received by the
Master Servicer from the first day through the fifteenth day of any calendar
month (other than the calendar month in which the Cut-off Date occurs), all
amounts paid by the related Mortgagor in respect of interest on such Principal
Prepayment. All Prepayment Interest Excess shall be paid to the Master Servicer
as additional master servicing compensation.

     Prepayment Interest Shortfall: As to any Distribution Date and each
Mortgage Pool, Mortgage Loan and Principal Prepayment received (a) during the
period from the sixteenth day of the month preceding the month of such
Distribution Date through the last day of such month, in the case of a Principal
Prepayment in full, or (b) during the month preceding the month of such
Distribution Date, in the case of a partial Principal Prepayment, the amount, if
any, by which one month's interest at the related Adjusted Mortgage Rate on such
Principal Prepayment exceeds the amount of interest actually paid by the
Mortgagor in connection with such Principal Prepayment.

     Prepayment Period: (a) With respect to any Principal Prepayments in Full
and any Distribution Date, the period from the sixteenth day of the month
preceding the month of such Distribution Date (or, in the case of the first
Distribution Date, from the Cut-off Date) through the fifteenth day of the month
of such Distribution Date, and (b) with respect to any other Principal
Prepayments and any Distribution Date, the month preceding the month of such
Distribution Date.

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

     Principal 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.

                                       24

<PAGE>

     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 the purchaser is the Master
Servicer) from the date through which interest was last paid by the Mortgagor to
the Due Date in the month in which the Purchase Price is to be distributed to
Certificateholders.

     Qualified Insurer: A mortgage guaranty insurance company duly qualified as
such under the laws of the state of its principal place of business and each
state having jurisdiction over such insurer in connection with the insurance
policy issued by such insurer, duly authorized and licensed in such states to
transact a mortgage guaranty insurance business in such states and to write the
insurance provided by the insurance policy issued by it, approved as a
FNMA-approved mortgage insurer and having a claims paying ability rating of at
least "AA" or equivalent rating by a nationally recognized statistical rating
organization. Any replacement insurer with respect to a Mortgage Loan must have
at least as high a claims paying ability rating as the insurer it replaces had
on the Closing Date.

     Rating Agency: Each of the Rating Agencies specified in the Preliminary
Statement. If any such organization or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical rating
organization, or other comparable Person, as is designated by the Depositor,
notice of which designation shall be given to the Trustee. References herein to
a given rating category of a Rating Agency shall mean such rating category
without giving effect to any modifiers.

     Realized Loss: With respect to each Liquidated Mortgage Loan, an amount
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such liquidation, equal to (i) the Stated Principal
Balance of the Liquidated Mortgage Loan as of the date of such liquidation, plus
(ii) interest at the Adjusted Net Mortgage Rate from the Due Date as to which
interest was last paid or advanced (and not reimbursed) to Certificateholders up
to the Due Date in the month in which Liquidation Proceeds are required to be
distributed on the Stated Principal Balance of such Liquidated Mortgage Loan
from time to time, minus (iii) the Liquidation Proceeds, if any, received during
the month in which such liquidation occurred, to the extent applied as
recoveries of interest at the Adjusted Net Mortgage Rate and to principal of the
Liquidated Mortgage Loan. With respect to each Mortgage Loan which has become
the subject of a Deficient Valuation, if the principal amount due under the
related Mortgage Note has been reduced, the difference between the principal
balance of the Mortgage Loan outstanding immediately prior to such Deficient
Valuation and the principal balance of the Mortgage Loan as reduced by the
Deficient Valuation.

                                       25

<PAGE>

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

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

     Reference Bank: Not applicable.

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

     Regular Certificates: As specified in the Preliminary Statement.

     Relief Act: The 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.

     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, 6.25% per annum, and with respect
to Pool II, 5.50% 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.

                                       26

<PAGE>

     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.

     Scheduled Principal Classes: Not applicable.

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

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

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

     Senior Certificates: As specified in the Preliminary Statement.

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

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

                                       27

<PAGE>

          (1)  the related Senior Percentage of all Scheduled Payments of
principal (or, in the case of Pool I, the applicable Non-PO Percentage) 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 (or, in the case of Pool
I, the applicable Non-PO 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 (or, in the case of Pool
I, the applicable Non-PO Percentage) of all partial prepayments of principal in
respect of each Mortgage Loan in such Mortgage Pool received during the
applicable Prepayment Period;

          (4)  the lesser of:

               (a)  the related Senior Prepayment Percentage of the sum of (x)
          the Liquidation Proceeds allocable to principal (or, in the case of
          Pool I, the applicable Non-PO Percentage thereof) 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 (or, in the
          case of Pool I, the applicable Non-PO Percentage thereof) 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 (or, in the case of Pool I, the applicable
          Non-PO Percentage thereof) of each Mortgage Loan in such Mortgage Pool
          which became a Liquidated Mortgage Loan during the related Prepayment
          Period, other than Mortgage Loans described in clause (y), and (y) the
          Stated Principal Balance (or, in the case of Pool I, the applicable
          Non-PO Percentage thereof) 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 applicable Non-PO 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 (or in the case of Pool
I, the applicable Non-PO 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

                                       28

<PAGE>

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 (other than the Class I-A-PO Certificates) of such Certificate
Group immediately preceding such Distribution Date by the Pool Principal Balance
of the related Mortgage Pool (excluding, in the case of Pool I, the aggregate of
the applicable PO Percentage of the principal balance of each Discount Mortgage
Loan included therein) for the immediately preceding Distribution Date.

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

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
Period (Dates Inclusive)                Senior Prepayment Percentage
------------------------------------------------------------------------------------------------------
<S>                                     <C>
December 2002 - November 2007           100%
------------------------------------------------------------------------------------------------------
December 2007 - November 2008           the related Senior Percentage plus 70% of the related
                                        Subordinated Percentage
------------------------------------------------------------------------------------------------------
December 2008 - November 2009           the related Senior Percentage plus 60% of the related
                                        Subordinated Percentage
------------------------------------------------------------------------------------------------------
December 2009 - November 2010           the related Senior Percentage plus 40% of the related
                                        Subordinated Percentage
------------------------------------------------------------------------------------------------------
December 2010 - November 2011           the related Senior Percentage plus 20% of the related
                                        Subordinated Percentage
------------------------------------------------------------------------------------------------------
December 2011 and thereafter            the related Senior Percentage
------------------------------------------------------------------------------------------------------
</TABLE>

     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:

          (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) 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:

                                       29

<PAGE>

               (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
          December 2007 and November 2008;

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

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

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

               (e) 50% of the Original Subordinated Principal Balance if such
          Distribution Date occurs during or after December 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.

     Servicing Rights Transfer and Subservicing Agreement: The servicing rights
transfer and subservicing agreement dated as of November 26, 2002, by and
between First Horizon Home Loan Corporation, as transferor and subservicer, and
First Tennessee Mortgage Services, Inc., as transferee and servicer, pursuant to
which First Horizon Home Loan Corporation transferred the servicing rights for
the Mortgage Loans to First Tennessee Mortgage Services, Inc. and First
Tennessee Mortgage Services, Inc. designated First Horizon Home Loan Corporation
as the subservicer of the Mortgage Loans.

     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:

                                       30

<PAGE>

          (1)  normal wear and tear;

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

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

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

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

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

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

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

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

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

          Special Hazard Loss Coverage Amount: Upon the initial issuance of the
Certificates, $6,506,525.93. As of any Distribution Date, the Special Hazard
Loss Coverage Amount will equal the greater of

          (a)  1.00% (or if greater than 1.00%, the highest percentage of
Mortgage Loans by principal balance secured by Mortgaged Properties in any
single California zip code) of the outstanding principal balance of all the
Mortgage Loans as of the related Determination Date; and

          (b)  twice the outstanding principal balance of the Mortgage Loan
which has the largest outstanding principal balance as of the related
Determination Date,

less, in each case, the aggregate amount of Special Hazard Losses that would
have been previously allocated to the Subordinated Certificates in the absence
of the Loss Allocation Limitation. As of any Distribution Date on or after the
Cross-over Date, the Special Hazard Loss Coverage Amount will be zero.

                                       31

<PAGE>

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

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

     Startup Day: The Closing Date.

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

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

     Subordinated Certificates: As specified in the Preliminary Statement.

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

     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 (or, in the case of Pool I, the applicable Non-PO Percentage thereof)
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 (or, in the
case of Pool I, the

                                       32

<PAGE>

applicable Non-PO Percentage thereof) 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 (or, in the case of Pool I, the applicable Non-PO
Percentage thereof) 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 (or, in
the case of Pool I, the applicable Non-PO Percentage thereof), other than
Mortgage Loans described in clause (b), and (b) the principal balance of each
Mortgage Loan in the related Mortgage Pool (or, in the case of Pool I, the
applicable Non-PO Percentage thereof) that was purchased by a private mortgage
insurer during the related Prepayment Period as an alternative to paying a claim
under the related Insurance Policy exceeds (c) the sum of the amounts
distributable to the Senior Certificateholders (other than the Holders of the
Class I-A-PO Certificates) under clause (4) of the definition of applicable
Senior Optimal Principal Amount on such Distribution Date; and

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

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

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

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

     Substitute Mortgage Loan: A Mortgage Loan substituted by the Seller for a
Deleted Mortgage Loan which must, on the date of such substitution, as confirmed
in a Request for Release, substantially in the form of Exhibit L, (i) have a
Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
more than 10% less than the Stated Principal Balance of the Deleted Mortgage
Loan; (ii) have an Adjusted Net Mortgage Rate not lower than the 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

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<PAGE>

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: As specified in the Preliminary Statement.

     Targeted Balances: Not applicable.

     Targeted Principal Classes: As specified in the Preliminary Statement.

     Tax Matters Person: The person designated as "tax matters person" in the
manner provided under Treasury regulation (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 II-A-R Certificate with a
Denomination of $0.01.

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

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

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

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

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

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

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

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<PAGE>

     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: Not applicable.

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

                                   ARTICLE II
                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

          SECTION 2.1 Conveyance of Mortgage Loans.

     (a)  The Depositor, concurrently with the execution and delivery hereof,
          hereby sells, transfers, assigns, sets over and otherwise conveys to
          the Trustee for the benefit of the Certificateholders, without
          recourse, all the right, title and interest of the Depositor in and to
          the Trust Fund together with the Depositor's right (i) to require the
          Seller to cure any breach of a representation or warranty made by the
          Seller pursuant to the MLPA, or (ii) to repurchase or substitute for
          any affected Mortgage Loan in accordance herewith.

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

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

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

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<PAGE>

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

          (iii) a duly executed assignment of the Mortgage in blank (which may
                be included in a blanket assignment or assignments), together
                with, except as provided below, all interim recorded assignments
                of such mortgage (each such assignment, when duly and validly
                completed, to be in recordable form and sufficient to effect the
                assignment of and transfer to the assignee thereof, under the
                Mortgage to which the assignment relates); provided that, if the
                related Mortgage has not been returned from the applicable
                public recording office, such assignment of the Mortgage may
                exclude the information to be provided by the recording office;

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

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

          (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).

                                       36

<PAGE>

     In the event that in connection with any Mortgage Loan the Depositor cannot
deliver (a) the original recorded Mortgage or (b) all interim recorded
assignments satisfying the requirements of clause (ii) or (iii) above,
respectively, concurrently with the execution and delivery hereof because such
document or documents have not been returned from the applicable public
recording office, the Depositor shall promptly deliver or cause to be delivered
to the Trustee or the Custodian on its behalf such original Mortgage or such
interim assignment, as the case may be, with evidence of recording indicated
thereon upon receipt thereof from the public recording office, or a copy
thereof, certified, if appropriate, by the relevant recording office, but in no
event shall any such delivery of the original Mortgage and each such interim
assignment or a copy thereof, certified, if appropriate, by the relevant
recording office, be made later than one year following the Closing Date;
provided, however, in the event the Depositor is unable to deliver or cause to
be delivered by such date each Mortgage and each such interim assignment by
reason of the fact that any such documents have not been returned by the
appropriate recording office, or, in the case of each such interim assignment,
because the related Mortgage has not been returned by the appropriate recording
office, the Depositor shall deliver or cause to be delivered such documents to
the Trustee or the Custodian on its behalf as promptly as possible upon receipt
thereof and, in any event, within 720 days following the Closing Date. The
Depositor shall forward or cause to be forwarded to the Trustee or the Custodian
on its behalf (a) from time to time additional original documents evidencing an
assumption or modification of a Mortgage Loan and (b) any other documents
required to be delivered by the Depositor or the Master Servicer to the Trustee.
In the event that the original Mortgage is not delivered and in connection with
the payment in full of the related Mortgage Loan and the public recording office
requires the presentation of a "lost instruments affidavit and indemnity" or any
equivalent document, because only a copy of the Mortgage can be delivered with
the instrument of satisfaction or reconveyance, the Master Servicer shall
execute and deliver or cause to be executed and delivered such a document to the
public recording office. In the case where a public recording office retains the
original recorded Mortgage or in the case where a Mortgage is lost after
recordation in a public recording office, the Depositor shall deliver or cause
to be delivered to the Trustee or the Custodian on its behalf a copy of such
Mortgage certified by such public recording office to be a true and complete
copy of the original recorded Mortgage.

     In addition, in the event that in connection with any Mortgage Loan the
Depositor cannot deliver or cause to be delivered the original or duplicate
original lender's title policy (together with all riders thereto), satisfying
the requirements of clause (v) above, concurrently with the execution and
delivery hereof because the related Mortgage has not been returned from the
applicable public recording office, the Depositor shall promptly deliver or
cause to be delivered to the Trustee or the Custodian on its behalf such
original or duplicate original lender's title policy (together with all riders
thereto) upon receipt thereof from the applicable title insurer, but in no event
shall any such delivery of the original or duplicate original lender's title
policy be made later than one year following the Closing Date; provided,
however, in the event the Depositor is unable to deliver or cause to be
delivered by such date the original or duplicate original lender's title policy
(together with all riders thereto) because the related Mortgage has not been
returned by the appropriate recording office, the Depositor shall deliver or
cause to be delivered such documents to the Trustee or the Custodian on its
behalf as promptly as possible upon receipt thereof and, in any event, within
720 days following the Closing Date. Notwithstanding the preceding, in
connection with any Mortgage Loan for which either the original or duplicate
original title policy has not been delivered to the Trust, if at any time during

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<PAGE>

the term of this Agreement the parent company of the Seller does not have a long
term senior debt rating of A- or higher from S&P and A- or higher from Fitch (if
rated by Fitch), then the Depositor shall within 30 days deliver or cause to be
delivered to the Trustee or the Custodian on its behalf (if it has not
previously done so) a written commitment or interim binder or preliminary report
of the title issued by the title insurance or escrow company with respect to the
mortgaged property.

     Subject to the immediately following sentence, as promptly as practicable
subsequent to such transfer and assignment, and in any event, within thirty (30)
days thereafter, the Master Servicer shall (i) complete each assignment of
Mortgage, as follows: "First Horizon Mortgage Pass-Through Certificates, Series
2002-8, The Bank of New York, as trustee for the holders of the Certificates",
(ii) cause such assignment to be in proper form for recording in the appropriate
public office for real property records and (iii) cause to be delivered for
recording in the appropriate public office for real property records the
assignments of the Mortgages to the Trustee, except that, with respect to any
assignments of Mortgage as to which the Master Servicer has not received the
information required to prepare such assignment in recordable form, the Master
Servicer's obligation to do so and to deliver the same for such recording shall
be as soon as practicable after receipt of such information and in any event
within thirty (30) days after receipt thereof. Notwithstanding the foregoing,
the Master Servicer need not cause to be recorded any assignment which relates
to a Mortgage Loan in any state other than the Required Recordation States.

     In the case of Mortgage Loans that have been prepaid in full as of the
Closing Date, the Depositor, in lieu of delivering the above documents to the
Trustee or the Custodian on its behalf, will deposit in the Certificate Account
the portion of such payment that is required to be deposited in the Certificate
Account pursuant to Section 3.8 hereof.

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

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<PAGE>

          SECTION 2.2 Acceptance by Trustee of the Mortgage Loans.

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

     The Trustee agrees to execute and deliver or to cause the Custodian to
execute and deliver on the Closing Date to the Depositor and the Master Servicer
an Initial Certification in the form annexed hereto as Exhibit E. Based on its
or the Custodian's review and examination, and only as to the documents
identified in such Initial Certification, the Custodian, on behalf of the
Trustee, acknowledges that such documents appear regular on their face and
relate to such Mortgage Loan. Neither the Trustee nor the Custodian shall be
under any duty or obligation to inspect, review or examine said documents,
instruments, certificates or other papers to determine that the same are
genuine, enforceable or appropriate for the represented purpose or that they
have actually been recorded in the real estate records or that they are other
than what they purport to be on their face.

     On or about the thirtieth (30th) day after the Closing Date, the Trustee
shall deliver or shall cause the Custodian to deliver to the Depositor and the
Master Servicer a Delay Delivery Certification in the form annexed hereto as
Exhibit F, with any applicable exceptions noted thereon. Notwithstanding
anything to the contrary contained in this Agreement, none of the Mortgage Loans
in the Trust Fund is or will be Delay Delivery Mortgage Loans.

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

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

                                       39

<PAGE>

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.

     It is understood and agreed that the obligation of the Seller to substitute
for or to purchase any Mortgage Loan which does not meet the requirements of
Section 2.1 above shall constitute the sole remedy respecting such defect
available to the Trustee, the Depositor and any Certificateholder against the
Seller.

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

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

     (b)  Upon discovery by any of the parties hereto of a breach of a
          representation or warranty made pursuant to Schedule B to the MLPA
          that materially and adversely affects the interests of the
          Certificateholders in any Mortgage Loan, the party discovering such
          breach shall give prompt notice thereof to the other parties. The
          Seller hereby covenants that within 90 days of the earlier of its
          discovery or its

                                       40

<PAGE>

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

     With respect to any Substitute Mortgage Loan or Loans, the Seller shall
deliver to the Trustee or the Custodian on its behalf for the benefit of the
Certificateholders the Mortgage Note, the Mortgage, the related assignment of
the Mortgage, and such other documents and agreements as are required by Section
2.1, with the Mortgage Note endorsed and the Mortgage assigned as required by
Section 2.1. No substitution is permitted to be made in any calendar month after
the Determination Date for such month. Scheduled Payments due with respect to
Substitute Mortgage Loans in the month of substitution shall not be part of the
Trust Fund and will be retained by the Seller on the next succeeding
Distribution Date. For the month of substitution, distributions to
Certificateholders will include the monthly payment due on any Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain all
amounts received in respect of such Deleted Mortgage Loan. The Master Servicer
shall amend the Mortgage Loan Schedule for the benefit of the Certificateholders
to reflect the removal of such Deleted Mortgage Loan and the substitution of the
Substitute Mortgage Loan or Loans and the Master Servicer shall deliver the
amended Mortgage Loan Schedule to the Trustee. Upon such substitution, the
Substitute Mortgage Loan or Loans shall be subject to the terms of this
Agreement in all respects, and the Seller shall be deemed to have made with
respect to such Substitute Mortgage Loan or Loans, as of the date of
substitution, the representations and warranties made pursuant to Schedule B to
the MLPA with respect to such Mortgage Loan. Upon any such substitution and the
deposit to the Certificate Account of the amount required to be deposited
therein in connection with such substitution as described in the following

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<PAGE>

paragraph, the Trustee shall release or shall cause the Custodian to release the
Mortgage File held for the benefit of the Certificateholders relating to such
Deleted Mortgage Loan to the Seller and shall execute and deliver at the
Seller's direction such instruments of transfer or assignment prepared by the
Seller, in each case without recourse, as shall be necessary to vest title in
the Seller, or its designee, the Trustee's interest in any Deleted Mortgage Loan
substituted for pursuant to this Section 2.3.

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

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

     After giving effect to the sale of the Certificates by the Depositor to the
Underwriters, and thereafter, so long as any Certificates remain outstanding,
the Seller, its affiliates and agents, collectively, shall not beneficially own
Certificates the aggregate fair value of which would represent 90% or more of
the beneficial interests in the Trust Fund.

     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.

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<PAGE>

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

     The Depositor hereby represents and warrants to the Trustee with respect to
each Mortgage Loan as of the date hereof or such other date set forth herein
that as of the Closing Date, and following the transfer of the Mortgage Loans to
it pursuant to the MLPA and immediately prior to the conveyance of the Mortgage
Loans by it to the Trustee pursuant to Section 2.1(a) hereof, the Depositor had
good title to the Mortgage Loans and the Mortgage Notes were subject to no
offsets, defenses or counterclaims.

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

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

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

     (b)  Upon discovery by the Depositor, the Master Servicer or the Trustee
          that any Mortgage Loan does not constitute a "qualified mortgage"
          within the meaning of Section 860G(a)(3) of the Code, the party
          discovering such fact shall promptly (and in any event within five (5)
          Business Days of discovery) give written notice thereof to the other
          parties. In connection therewith, the Trustee shall require the
          Depositor to cause the Seller, pursuant to the MLPA and at the
          Seller's option, to either (i) substitute, if the conditions in
          Section 2.3(b) with respect to substitutions are satisfied, a
          Substitute Mortgage Loan for the affected Mortgage Loan, or (ii)
          repurchase the affected Mortgage Loan within 90 days of such discovery
          in the same manner as it would a Mortgage Loan for a breach of
          representation or warranty made pursuant to Section 2.3. The Trustee
          shall reconvey or shall cause the Custodian to reconvey to the Seller
          the Mortgage Loan to be released pursuant hereto in the same manner,
          and on the same terms and conditions, as it would a Mortgage Loan
          repurchased for breach of a representation or warranty contained in
          Section 2.3.

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          SECTION 2.6 Execution and Delivery of Certificates.

     The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations evidencing directly or indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred to above for the benefit of all present and future Holders of the
Certificates and to perform the duties set forth in this Agreement to the best
of its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.

          SECTION 2.7 REMIC Matters.

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

          SECTION 2.8 Covenants of the Master Servicer.

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

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

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

                                   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, the Servicing Rights Transfer and Subservicing 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

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limited to, the power and authority, subject to the terms hereof (i) to execute
and deliver, on behalf of the Certificateholders and the Trustee, customary
consents or waivers and other instruments and documents, (ii) to consent to
transfers of any Mortgaged Property and assumptions of the Mortgage Notes and
related Mortgages (but only in the manner provided in this Agreement), (iii) to
collect any Insurance Proceeds and other Liquidation Proceeds, and (iv) to
effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing any Mortgage Loan; provided that the Master Servicer shall not
take any action that is inconsistent with or prejudices the interests of the
Trust Fund or the Certificateholders in any Mortgage Loan or the rights and
interests of the Depositor, the Trustee and the Certificateholders under this
Agreement. The Master Servicer shall represent and protect the interests of the
Trust Fund in the same manner as it protects its own interests in mortgage loans
in its own portfolio in any claim, proceeding or litigation regarding a Mortgage
Loan, and shall not make or permit any modification, waiver or amendment of any
Mortgage Loan which would cause the REMIC created hereunder to fail to qualify
as a REMIC or result in the imposition of any tax under Section 860F(a) or
Section 860G(d) of the Code. Without limiting the generality of the foregoing,
the Master Servicer, in its own name or in the name of the Depositor and the
Trustee, is hereby authorized and empowered by the Depositor and the Trustee,
when the Master Servicer believes it appropriate in its reasonable judgment, to
execute and deliver, on behalf of the Trustee, the Depositor, the
Certificateholders or any of them, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge and all other
comparable instruments, with respect to the Mortgage Loans, and with respect to
the Mortgaged Properties held for the benefit of the Certificateholders. The
Master Servicer shall prepare and deliver to the Depositor and/or the Trustee
such documents requiring execution and delivery by either or both of them as are
necessary or appropriate to enable the Master Servicer to service and administer
the Mortgage Loans to the extent that the Master Servicer is not permitted to
execute and deliver such documents pursuant to the preceding sentence. Upon
receipt of such documents, the Depositor and/or the Trustee shall execute such
documents and deliver them to the Master Servicer.

     In accordance with the standards of the preceding paragraph, the Master
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the payment of 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

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          the Master Servicer in servicing the Mortgage Loans include actions
          taken or to be taken by a Subservicer on behalf of the Master
          Servicer. Notwithstanding the provisions of any subservicing
          agreement, any of the provisions of this Agreement relating to
          agreements or arrangements between the Master Servicer and a
          Subservicer or reference to actions taken through a Subservicer or
          otherwise, the Master Servicer shall remain obligated and liable to
          the Depositor, the Trustee and the Certificateholders for the
          servicing and administration of the Mortgage Loans in accordance with
          the provisions of this Agreement without diminution of such obligation
          or liability by virtue of such subservicing agreements or arrangements
          or by virtue of indemnification from the Subservicer and to the same
          extent and under the same terms and conditions as if the Master
          Servicer alone were servicing and administering the Mortgage Loans.
          All actions of each Subservicer performed pursuant to the related
          subservicing agreement shall be performed as an agent of the Master
          Servicer with the same force and effect as if performed directly by
          the Master Servicer.

     (b)  For purposes of this Agreement, the Master Servicer shall be deemed to
          have received any collections, recoveries or payments with respect to
          the Mortgage Loans that are received by a Subservicer regardless of
          whether such payments are remitted by the Subservicer to the Master
          Servicer.

          SECTION 3.3 Rights of the Depositor and the Trustee in Respect of the
     Master Servicer.

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

          SECTION 3.4 Trustee to Act as Master Servicer.

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

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<PAGE>

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 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:

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          (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.

          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

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

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

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

                  (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

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

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

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

         (a)      To the extent required by the related Mortgage Note and not
                  violative of current law, the Master Servicer shall establish
                  and maintain one or more accounts (each, an "Escrow Account")
                  and deposit and retain therein all collections from the
                  Mortgagors (or advances by the Master Servicer) for the
                  payment of taxes, assessments, hazard insurance premiums or
                  comparable items for the 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.

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

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

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

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

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

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

                  (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;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

         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

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<PAGE>

                  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 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

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<PAGE>

                  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 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

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<PAGE>

the same, or any part thereof, as the Master Servicer deems to be in the best
interest of the Certificateholders for the period prior to the sale of such REO
Property. The Master Servicer shall prepare for and deliver to the Trustee a
statement with respect to each REO Property that has been rented showing the
aggregate rental income received and all expenses incurred in connection with
the management and maintenance of such REO Property at such times as is
necessary to enable the Trustee to comply with the reporting requirements of the
REMIC Provisions. The net monthly rental income, if any, from such REO Property
shall be deposited in the Certificate Account no later than the close of
business on each Determination Date. The Master Servicer shall perform the tax
reporting and withholding required by Sections 1445 and 6050J of the Code with
respect to foreclosures and abandonments, the tax reporting required by Section
6050H of the Code with respect to the receipt of mortgage interest from
individuals and any tax reporting required by Section 6050P of the Code with
respect to the cancellation of indebtedness by certain financial entities, by
preparing such tax and information returns as may be required, in the form
required, and delivering the same to the Trustee for filing.

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

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<PAGE>

incurred (including any property or other taxes) in connection with such
management and net of unreimbursed Master Servicing Fees, Advances and Servicing
Advances, shall be applied to the payment of principal of and interest on the
related defaulted Mortgage Loans (with interest accruing as though such Mortgage
Loans were still current) and all such income shall be deemed, for all purposes
in this Agreement, to be payments on account of principal and interest on the
related Mortgage Notes and shall be deposited into the applicable subaccount of
the Certificate Account. To the extent the net income received during any
calendar month is in excess of the amount attributable to amortizing principal
and accrued interest at the related Mortgage Rate on the related Mortgage Loan
for such calendar month, such excess shall be considered to be a partial
prepayment of principal of the related Mortgage Loan.

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

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

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<PAGE>

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

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

          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

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<PAGE>

set off against and deduct from any such funds any amounts that are properly due
and payable to the Master Servicer under this Agreement.

          SECTION 3.14 Master Servicing Compensation.

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

     Additional servicing compensation in the form of (i) 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 2002 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

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<PAGE>

Servicer under this Agreement has been made under such officer's supervision and
(ii) to the best of such officer's knowledge, based on such review, the Master
Servicer has fulfilled all its obligations under this Agreement throughout such
year, or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. The Trustee shall forward a copy of each such statement to each Rating
Agency.

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

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

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                                   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 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
               applicable 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 Balances 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

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                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 applicable 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 Balances 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) (1) to the Classes of Senior Certificates of the related
                Certificate Group, other than the Class I-A-PO Certificates, 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, and (2) concurrently with the
                Senior Certificates corresponding to Pool I, from the Available
                Funds for such Mortgage Pool, to the Class I-A-PO Certificates,
                the Class I-A-PO Principal Distribution Amount for such
                Distribution Date;

          (iv)  to the Class I-A-PO Certificates, to the extent of remaining
                Available Funds, the Class I-A-PO Deferred Amount for such
                Distribution Date, until the Class Certificate Balance thereof
                has been reduced to zero; provided that, (1) on any Distribution
                Date, distributions pursuant to this Section 4.2(a)(iv) shall
                not exceed the aggregate Subordinated Optimal Principal Amount
                for both Mortgage Pools on such Distribution Date, (2) such
                distributions shall not reduce the Class Certificate Balance of
                the Class I-A-PO Certificates, and (3) no distribution will be
                made in respect of the Class I-A-PO Deferred Amount after the
                Cross-over Date;

          (v)   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 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-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;

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          (vii)  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;

          (viii) 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;

          (ix)   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

          (x)    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 through the Accretion Termination
          Date, before distributions are made pursuant to 4.2(b)(ii), an amount
          equal to the Accrual Amount for the Class I-A-7 Certificates will be
          added to the Class Certificate Balance thereof and will be distributed
          in reduction of the Class Certificate Balances of the specified
          Certificate Classes in the following priority:

                 (A)   to the Class I-A-5 Certificates, until the Class
                       Certificate Balance thereof has been reduced to zero;

                 (B)   to the Class I-A-6 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:

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

                           (B)      concurrently, to the Class I-A-1, Class
                                    I-A-2, Class I-A-3 and Class I-A-4
                                    Certificates, as follows:

                                    (1) 87.76808401% of such remaining Senior
                                    Optimal Principal Amount for Pool I to the
                                    Class I-A-1 Certificates until the Class
                                    Certificate Balance thereof has been reduced
                                    to zero;

                                    (2) 12.23191599% of such remaining Senior
                                    Optimal Principal Amount for Pool I to the
                                    Class I-A-2, Class I-A-3 and Class I-A-4
                                    Certificates in the following order of
                                    priority:

                                        (x) first, pro rata, to the Class I-A-2
                                        and Class I-A-3 Certificates until their
                                        respective Class Certificate Balances
                                        have each been reduced to zero; and

                                        (y) second, to the Class I-A-4
                                        Certificates until the Class Certificate
                                        Balance thereof has been reduced to
                                        zero; and

                           (C)      to the Class I-A-8 Certificates, without
                                    regard to the Class I-A-8 Principal
                                    Distribution Amount, until the Class
                                    Certificate Balance thereof has been reduced
                                    to zero.

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

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

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

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

         (d)      On and after the Cross-Over Date, the amount distributable to
                  the Senior Certificates of the related Certificate Group
                  pursuant to Section 4.2(a)(iii) for the

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                  related Distribution Date shall be allocated among the related
                  Classes of Senior Certificates, pro rata, on the basis of
                  their respective Class Certificate Balances immediately prior
                  to such Distribution Date, regardless of the priorities and
                  amounts set forth in Section 4.2.

         (e)      If 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, to the extent of such Class'
                  remaining Allocable Share, shall be distributed on such
                  Distribution Date to the remaining Classes of Subordinated
                  Certificates on a pro rata basis, subject to the priority of
                  payments described in Section 4.2(a).

         (f)      In the event that in any calendar month the Master Servicer
                  recovers an amount (an "Unanticipated Recovery") in respect of
                  principal of a Mortgage Loan which had previously been
                  allocated as a Realized Loss to any Class of Certificates
                  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 (i) with respect to the Class
         I-A-PO Certificates, based on the applicable PO Percentage of the

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         principal portion of the Realized Loss previously allocated thereto
         with respect to such Mortgage Loan (or all Mortgage Loans for purposes
         of the next to last sentence of the preceding paragraph), and (ii) with
         respect to any other Class of Certificates, based on its pro rata share
         (in proportion to the Class Certificate Balances thereof with respect
         to such Distribution Date) of the principal portion (or in the case of
         Pool I, the applicable Non-PO Percentage thereof) of any such Realized
         Loss previously allocated with respect to such Mortgage Loan (or
         Loans); provided however, that (i) the share of an Unanticipated
         Recovery allocable to a Class I-A-PO Certificate with respect to any
         Mortgage Loan (or Loans) shall be reduced by the aggregate amount
         previously distributed to such Class on account of the applicable Class
         PO Deferred Amount in respect of such Mortgage Loan (or Loans) and (ii)
         the amount by which the distributions to the Class I-A-PO Certificates
         have been so reduced shall be distributed to the Classes of
         Certificates described in clause (ii) of the preceding paragraph in the
         same proportion as described in such clause (ii). For purposes of the
         preceding sentence, any Class PO Deferred Amount distributable to a
         Class I-A-PO Certificate on previous Distribution Dates shall be deemed
         to have been allocated in respect of the Mortgage Loans as to which the
         applicable PO Percentage of the principal portion of Realized Losses
         has previously been allocated to such Class on a pro rata basis (based
         on the amount of Realized Losses so allocated).

         (g) On any Distribution Date on which any Certificate Group constitutes
             an Undercollateralized Group, all amounts otherwise distributable
             as principal on the Subordinated Certificates, in reverse order of
             priority (or, following the Cross-over Date, such other amounts
             described in the immediately following sentence), will be
             distributed as principal to the Senior Certificates of such
             Undercollateralized Group in accordance with the priorities set
             forth in Section 4.2(b), until the total Class Certificate Balance
             of such Senior Certificates equals the Pool Principal Balance of
             the related Mortgage Pool (such distribution, an
             "Undercollateralization Distribution"). 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 other Mortgage Pool
             remaining after all required amounts for that Distribution Date
             have been distributed to the Senior Certificates of the other
             Certificate Group. In addition, the amount of any unpaid Net
             Interest Shortfalls with respect to the Undercollateralized Group
             (including any Net Interest Shortfalls for the related Distribution
             Date) will be distributed to the Senior Certificates of the
             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).

             In addition, if on any Distribution Date the total Class
             Certificate Balance of the Senior Certificates of a Certificate
             Group (after giving effect to distributions to be made on that
             Distribution Date) has been reduced to zero, all amounts otherwise
             distributable as prepayments of principal to the Subordinated
             Certificates, in reverse order of priority, will instead be
             distributed as principal to the Senior

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             Certificates of the other Certificate Group unless (a) the weighted
             average of the Subordinated Percentages for both Mortgage Pools,
             weighted on the basis of the stated principal balance of the
             Mortgage Loans in the related Mortgage Pool, is at least two times
             the weighted average of the initial Subordinate Percentage for both
             Mortgage Pools (calculated on such basis) and (b) the aggregate
             Stated Principal Balance of all of the Mortgage Loans in both
             Mortgage Pools delinquent 60 days or more (including for this
             purpose any such Mortgage Loans in foreclosure and Mortgage Loan
             with respect to which the related mortgaged property has been
             acquired by the trust), averaged over the preceding six month
             period, as a percentage of the then current aggregate Class
             Certificate Balance of the Subordinated Certificates, is less than
             100%. All distributions described above will be made in accordance
             with the priorities set forth in Section 4.2(b).

             SECTION 4.3 Method of Distribution.

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

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<PAGE>

             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.

         (b) With respect to any Distribution Date, the principal portion of
             each Realized Loss (other than any Excess Loss) with respect to a
             Mortgage Pool shall be allocated as follows:

             (i)    In the case of Pool I, the applicable PO Percentage of the
                    principal portion of any such Realized Loss shall be
                    allocated to the Class I-A-PO Certificates until the Class
                    Certificate Balance thereof has been reduced to zero; and

             (ii)   the principal portion of any such Realized Loss (or in the
                    case of Pool I, the Non-PO Percentage thereof) 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;

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<PAGE>

                    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 (other than the Class I-A-PO
                    Certificates), 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 (i) in the case of Pool I, the PO Percentage
               of any such loss shall be allocated to the Class I-A-PO
               Certificates, and (2) any such loss (or in the case of Pool I,
               the applicable Non-PO Percentage thereof) shall be allocated pro
               rata to each Class of Certificates of the related Certificate
               Group (other than, in the case of Pool I, the Class I-A-PO
               Certificates) 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 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).

         (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 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. The aggregate amount of Realized
               Losses to be allocated to the Class I-A-PO Certificates on such
               Distribution Date will be taken into account in determining
               distributions in respect of any Class PO Deferred Amount for such
               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

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               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/or may post such statement on its
               website located at www.mbsreporting.com:

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

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

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

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

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

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<PAGE>

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

         (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.

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<PAGE>

         (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.

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

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

              SECTION 4.7 Reserved.

                                   ARTICLE V
                                THE CERTIFICATES

              SECTION 5.1 The Certificates.

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

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

         The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the countersignature and delivery of such Certificates
or

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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.

              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

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                  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 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

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         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 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)

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                           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, in the case of
                           a Residual Certificate which is also a Private
                           Certificate, either the Rule 144A Letter or the
                           Investment Letter. The Trustee shall be entitled but
                           not obligated to recover from any Holder of a
                           Residual Certificate that was in fact not a Permitted
                           Transferee at the time it became a Holder or, at such
                           subsequent time as it became other than a Permitted
                           Transferee, all payments made on such Residual
                           Certificate at and after either such time. Any such
                           payments so recovered by the Trustee shall be paid
                           and delivered by the Trustee to the last preceding
                           Permitted Transferee of such Certificate.

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

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

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

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         (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 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

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         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 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

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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.

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

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

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

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

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

           SECTION 6.4 Limitation on Resignation of Master Servicer.

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

                                   ARTICLE VII
                                     DEFAULT

           SECTION 7.1 Events of Default.

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

           (i)    any f1ailure 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

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                           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

                  (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,

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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. Any
termination of the activities of the Master Servicer hereunder will
simultaneously result in the termination of the Master Servicer's duties as a
subservicer pursuant to the Servicing Rights Transfer and Subservicing
Agreement.

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

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connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of the Master Servicing Fee permitted the Master
Servicer hereunder. The Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. Neither the Trustee nor any other successor master servicer shall be
deemed to be in default hereunder by reason of any failure to make, or any delay
in making, any distribution hereunder or any portion thereof or any failure to
perform, or any delay in performing, any duties or responsibilities hereunder,
in either case caused by the failure of the Master Servicer to deliver or
provide, or any delay in delivering or providing, any cash, information,
documents or records to it.

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

           SECTION 7.3 Notification to Certificateholders.

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

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

                                  ARTICLE VIII
                             CONCERNING THE TRUSTEE

           SECTION 8.1 Duties of Trustee.

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

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conform in any material respect to the requirements of this Agreement, the
Trustee shall notify the Certificateholders of such instrument in the event that
the Trustee, after so requesting, does not receive a satisfactorily corrected
instrument.

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

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

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

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

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

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                      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 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

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                    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 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

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Mortgage Loan or related document other than with respect to the Trustee's
execution and counter-signature of the Certificates. The Trustee shall not be
accountable for the use or application by the Depositor or the Master Servicer
of any funds paid to the Depositor or the Master Servicer in respect of the
Mortgage Loans or deposited in or withdrawn from the Certificate Account by the
Depositor or the Master Servicer.

           SECTION 8.4 Trustee May Own Certificates.

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

           SECTION 8.5 Trustee's Fees and Expenses.

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

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current ratings of the Certificates (or having provided such security from time
to time as is sufficient to avoid such reduction). If such corporation or
association publishes reports of condition at least annually, pursuant to law or
to the requirements of the aforesaid supervising or examining authority, then
for the purposes of this Section 8.6 the combined capital and surplus of such
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section 8.6, the Trustee shall resign immediately in the
manner and with the effect specified in Section 8.7 hereof. The entity serving
as Trustee may have normal banking and trust relationships with the Depositor
and its affiliates or the Master Servicer and its affiliates; provided, however,
that such entity cannot be an affiliate of the Master Servicer other than the
Trustee in its role as successor to the Master Servicer.

              SECTION 8.7 Resignation and Removal of Trustee.

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

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

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

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               SECTION 8.8 Successor Trustee.

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

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

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

               SECTION 8.9 Merger or Consolidation of Trustee.

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

               SECTION 8.10 Appointment of Co-Trustee or Separate Trustee.

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

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the case an Event of Default shall have occurred and be continuing, the Trustee
alone shall have the power to make such appointment. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 8.6 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 8.8.

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

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

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

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

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

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

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

               SECTION 8.11 Tax Matters.

         It is intended that the assets with respect to which the REMIC election
is to be made, as set forth in the preliminary statement shall constitute, and
that the conduct of matters relating to such assets shall be such as to qualify
such assets as, a "real estate mortgage investment conduit" as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
Trustee covenants and agrees that it shall act as agent (and the Trustee is
hereby appointed to act as agent) on behalf of the 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 the 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 the 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

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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 the 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 the 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 the
REMIC, enter into settlement agreements with any governmental taxing agency,
extend any statute of limitations relating to any tax item of the REMIC, and
otherwise act on behalf of the REMIC in relation to any tax matter or
controversy involving it.

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

         In the event that any tax is imposed on "prohibited transactions" of
the REMIC as defined in Section 860F(a)(2) of the Code, on the "net income from
foreclosure property" of the REMIC as defined in Section 860G(c) of the Code, on
any contribution to the REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed, if not paid as otherwise provided for
herein, such tax shall be paid by (i) the Trustee, if any such other tax arises
out of or results from a breach by the Trustee of any of its obligations under
this Agreement which breach was caused by its negligence or willful misconduct,
(ii) the Master Servicer, in the case of any such minimum tax, or if such tax
arises out of or results from a breach by the Master Servicer of any of their
obligations under this Agreement, (iii) the Seller, if any such tax arises out
of or results from the Seller's obligation to repurchase a Mortgage Loan
pursuant to Section 2.2 or 2.3 or (iv) in all other cases, or in the event that
the Trustee, the Master Servicer or the Seller fails to honor its obligations
under the preceding clauses (i), (ii) or (iii), any such tax will be paid with
amounts otherwise to be distributed to the Certificateholders, as provided in
Section 3.8(b).

               SECTION 8.12 Periodic Filings.

         The Depositor hereby directs the Trustee to prepare, execute (pursuant
to a limited power of attorney given by the Depositor to the Trustee) and file
on behalf of the Depositor all periodic reports required under the Securities
Exchange Act of 1934 in conformity with the terms of the "no-action" relief
granted by the SEC to issuers of asset-backed securities such as the

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Certificates and the Trustee hereby agrees to do so. The Master Servicer will
also prepare and execute any certifications to be filed with the Form 10-K as
required under the Sarbanes-Oxley Act of 2002. In connection with the
preparation and filing of such periodic reports, the Depositor and the Master
Servicer shall timely provide to the Trustee all material information available
to them which is required to be included in such reports and not known to them
to be in the possession of the Trustee and such other information as the Trustee
reasonably may request from either of them and otherwise reasonably shall
cooperate with the Trustee. The Trustee shall have no liability with respect to
any failure to properly prepare or file such periodic reports resulting from or
relating to the Trustee's inability or failure to obtain any information not
resulting from its own negligence or willful misconduct.

                                   ARTICLE IX
                                   TERMINATION

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

         Subject to Section 9.3, the obligations and responsibilities of the
Depositor, the Master Servicer and the Trustee created hereby with respect to
the Trust Fund shall terminate upon the earlier of (a) the purchase by the
Master Servicer of all Mortgage Loans (and REO Properties) remaining in the
Trust Fund at the price equal to the sum of (i) 100% of the Stated Principal
Balance of each Mortgage Loan (other than a Mortgage Loan that has been
foreclosed and subject to clause (ii)) plus one month's accrued interest thereon
at the applicable Adjusted Mortgage Rate 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

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of the date the Master Servicer intends to terminate the Trust Fund and of the
applicable repurchase price of the Mortgage Loans and REO Properties.

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

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

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

         In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Holders of each of the
Class II-A-R Certificates shall be entitled to all unclaimed funds and other
assets of the Trust Fund, held for distribution to such Certificateholders,
which remain subject hereto.

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               SECTION 9.3 Additional Termination Requirements.

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

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

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

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

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

                                    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

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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 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

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shall approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable regulations as the Trustee may prescribe.

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

              SECTION 11.2 Recordation of Agreement; Counterparts.

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

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

              SECTION 11.3 Governing Law.

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

              SECTION 11.4 Intention of Parties.

       (a)    It is the express intent of the parties hereto that the conveyance
              of the Trust Fund by the Depositor to the Trustee be, and be
              construed as, absolute sales thereof to the Trustee. It is,
              further, not the intention of the parties that such conveyances be
              deemed a pledge thereof by the Depositor to the Trustee. However,
              in the event that, notwithstanding the intent of the parties, such
              assets are held to be the

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              property of the Depositor, or if for any other reason this
              Agreement is held or deemed to create a security interest in such
              assets, then (i) this Agreement shall be deemed to be a security
              agreement within the meaning of the Uniform Commercial Code of the
              State of New York and (ii) the conveyance provided for in this
              Agreement shall be deemed to be an assignment and a grant by the
              Depositor to the Trustee, for the benefit of the
              Certificateholders, of a security interest in all of the assets
              that constitute the Trust Fund, whether now owned or hereafter
              acquired.

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

              SECTION 11.5 Notices.

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

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

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

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

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

                  (5) The final payment to Certificateholders.

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

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

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

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

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

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

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

              SECTION 11.6 Severability of Provisions.

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

              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

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of an association; nor shall any Certificateholder be under any liability to any
third party by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.

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

              SECTION 11.9 Inspection and Audit Rights.

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

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              SECTION 11.11 Limitations on Actions; No Proceedings.

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

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

              SECTION 11.12 Acknowledgment of Seller.

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

                                   * * * * * *

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

                           FIRST HORIZON ASSET SECURITIES INC.,
                           as Depositor

                           By:__________________________________________________
                                 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, in its capacity as Master Servicer

                           By:__________________________________________________
                                 Wade Walker
                                 Senior Vice President - Asset Securitization

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

FIRST HORIZON HOME LOAN CORPORATION,
in its capacity as Seller

By:__________________________________________________
         Wade Walker
         Senior Vice President - Asset Securitization

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                                   SCHEDULE I

                       First Horizon Asset Securities Inc.
                Mortgage Pass-Through Certificates Series 2002-8

                             Mortgage Loan Schedule

                      [Available Upon Request from Trustee]

                                      I-1

<PAGE>

                                   SCHEDULE II

                       First Horizon Asset Securities Inc.
                Mortgage Pass-Through Certificates Series 2002-8

              Representations and Warranties of the Master Servicer

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

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

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

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

                                     II-1

<PAGE>

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

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

                                     II-2

<PAGE>

                                  SCHEDULE III

                       First Horizon Asset Securities Inc.
                Mortgage Pass-Through Certificates Series 2002-8

                     Form of Monthly Master Servicer Report

                              [Begins on Next Page]

                                      III-1

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