Document:

Exhibit 10.08

================================================================================
     Certain portions of this exhibit have been omitted based upon a request
      for confidential treatment. The method used to identify the omitted
       confidential information is: [THIS INFORMATION HAS BEEN REDACTED].
       The complete exhibit containing the redacted information has
                   been filed separately with the Commission.
================================================================================

                  PENNSYLVANIA STATE SYSTEM OF HIGHER EDUCATION
                                 FOUNDATION INC.

                     Contract Inquiry No. FOUNDATION 2004-1

      THIS AGREEMENT, made and entered into this 18th day of August 2004 between
the Pennsylvania State System of Higher Education Foundation Inc., 2986 North
2nd Street, Harrisburg, PA 17101 (hereinafter "Foundation")

                                       AND

Vivid Learning Systems, Inc., (hereinafter "Vivid"), 2345 Stevens Dr, Richland
WA 99352 acting through its proper officials, Federal I.D. # 91-1694268.

      Both the Foundation and Vivid, when used together, are hereinafter
referred to as "Parties."

      WHEREAS, the Foundation is a nonprofit corporation incorporated under the
Pennsylvania Nonprofit Corporation Law, 15 Pa. C.S.A. ss.5101 et. seq., and is
authorized thereby to enter into this Contract. The Foundation is a nonprofit
corporation created in part for the purpose of providing successful workforce
development initiatives, both in the Commonwealth of Pennsylvania (hereinafter
"Commonwealth") and worldwide.

      WHEREAS, the Foundation is committed to reducing costs and increasing
profit margins in its online workforce development initiatives; and

      WHEREAS, the Foundation expects to become a world-class provider in
meeting the current and future learning needs of the Commonwealth's business
community; and

      WHEREAS, the Foundation must provide relevant and timely content that
meets the business objectives of its clients and validate that these objectives
are aligned to customers' strategic goals; and

      WHEREAS, the Foundation expects online learning programs and services to
be centered around client goals; that performance can be monitored and reported;
and, all training services can be accurately tracked and reliably delivered; and

      WHEREAS, the Foundation recognizes the need for a coordinated marketing
program to meet revenue objectives; and

      WHEREAS, the Foundation seeks to enter into an agreement with an
Application Service Provider that has a proven track record in providing various
online services, including but not limited to:

<PAGE>

                                                     Contract #FOUNDATION 2004-1

      1.    Services to assist the Foundation in developing its online
            professional workforce development programs and services,
      2.    Marketing consulting services and support,
      3.    Consulting and support for obtaining Continuing Education Units
            (CEUs) for online offering,
      4.    Competitive pricing from Third Party Content Providers (TPCP),
      5.    TPCP services and content,
      6.    Online registration,

      7.    A reliable Learning Management System (LMS) that monitors and tracks
            performance and produces timely customer reports that provide at a
            minimum contract number, company name, employee name, number of
            completed courses, grades when necessary and other information that
            may be requested by the Foundation to adequately report on the usage
            of the WEDnet program, Pennsylvania's Department of Community and
            Economic Development Guaranteed Free Training Program for Workforce
            Development
      8.    e-commerce capabilities,
      9.    Portal development, including Foundation branding and development of
            Foundation's customers websites,
      10.   Links to other related web resources,
      11.   Program administrative control,
      12.   High-quality courseware engine for delivery of courses, and access
            to technical and online course development experts,
      13.   Course Authoring Tool, a technology based curriculum writing
            instrument used for the preparation of online courses,
      14.   Ability to export data into Worksware, the Foundation's grant
            tracking and reporting software for WEDnet P A, and
      15.   Reliable content and technical support to the Foundation and its
            customers.

      AND WHEREAS, Vivid is a corporation that has provided content and
technology solutions to the Foundation for approximately two years. Vivid also
has provided professional consulting and marketing services during this time;
and

      WHEREAS, Vivid has demonstrated that it can meet the Foundation's online
professional workforce development expectations and needs.

      NOW THERFORE, for and in consideration of the foregoing and the mutual
promises hereinafter expressed and intending to be legally bound hereby, the
Parties agree as follows:

A. Vivid's Duties. Vivid, subject to the terms and conditions set forth below,
shall perform the following specified duties:

      l.    Vivid will make available to the Foundation tools needed to support
            the Foundation's Keystone netWORK, a web-based self-directed,
            self-paced asynchronous learning site dedicated to workforce
            development and supported by technological learning programs. These
            tools will include, but are not limited to:

                                                                    Page 2 of 17

<PAGE>

                                                     Contract #FOUNDATION 2004-1

            a Learning Management System, the Vivid Learning library of
            non-credit professional development; information technology;
            desktop; regulatory and compliance; healthcare; and craft skills
            courses. Vivid will provide on-line administrative support for the
            Foundation, including, but not limited to: admissions; registration
            payment services, transcriptions, and technical and content support
            and assistance.

      2.    Vivid's elearning solution proposed to the Foundation will provide
            for, but is not limited to: a Course Authoring Tool, as well as the
            delivery and tracking of content made available from Third Party
            Content Providers; the ability to develop and deliver customized
            content, an easy to use online editor, syllabus, calendar, course
            statistics, chat room, threaded discussions, journal, search
            capabilities, webliography, and streaming audio and video. Vivid's
            elearning solution will be compatible with automatic conversion of
            Microsoft products (Word, Excel, and PowerPoint) and will provide
            the ability to deliver instructor mentoring and technical support.

      3.    Vivid will provide consulting services to the Foundation's Executive
            Director and Director of Business Development when required to
            determine the most cost effective and efficient manner to advance
            the Foundation's online professional workforce development goals and
            objectives.

      4.    Vivid will provide marketing services and support to the Foundation
            that will include development of the Foundation web site,
            development of marketing and collateral training materials and
            training of all Foundation marketing partners.

B. Statement of Work and Description of Services: The Parties are legally bound
to adhere to the work specifications, deliverables and timetables, fees, and fee
schedules included in the "Statement of Work," attached hereto as Exhibit 1 of
this Contract.

C. Term of Contract. The term of the Contract shall commence on the Effective
Date (as defined below) and shall end on June 30, 2006 subject to the other
provisions of the Contract.

The Foundation's Contracting Officer shall fix the Effective Date after the
Contract has been fully executed by the Customer and by the Foundation. The
Contract shall not be a legally binding contract until after the Effective Date
is affixed and a copy of the fully executed Contract has been sent to Vivid.

D. Renewals. This Contract may be renewed for an additional four (4) annual
periods by mutual written agreement of the Parties. Renewals will be negotiated
and agreed upon three (3) months prior to the expiration of the current
agreement.

E. Fees

1.    Compensation/Expenses. The following annual compensation/expenses are in
      consideration of the services provided by the Vivid to the Foundation for
      this Contract.

      a)    Learning Management System- $[THIS INFORMATION HAS BEEN REDACTED]
            per employee

                                                                    Page 3 of 17

<PAGE>

                                                     Contract #FOUNDATION 2004-1

      b)    ICDL Library-
            $[THIS INFORMATION HAS BEEN REDACTED] per employee

      c)    Professional Development Library-
            $[THIS INFORMATION HAS BEEN REDACTED] per employee

      d)    Desktop Computing and Information Technology-
            $[THIS INFORMATION HAS BEEN REDACTED] per employee

      e)    Regulatory and Compliance Library-
            $[THIS INFORMATION HAS BEEN REDACTED] per employee

      f)    Craft Skills Library-
            $[THIS INFORMATION HAS BEEN REDACTED] per employee

      g)    On-line administrative support including: admissions, registration,
            payment services, transcriptions, and technical and content support
            and assistance- No Charge. In addition:

            i.    tech support will be offered through emai1, AND

            ii.   live tech support will be offered during normal business
                  hours, AND tech and content support required by clients will
                  be reduced through proper upfront training that will be
                  provided by Vivid Learning and its Marketing Partners,
                  including but not limited to WEDnet P A partners, MVM Inc.,
                  and DWC Inc.

      h)    Marketing services and support- All Direct Costs only

      i)    Marketing Partner Management, Training and support-
            % [THIS INFORMATION HAS BEEN REDACTED]of funded amount.

2.    Fee Schedule:

a.    Payment for the LMS and each library will be invoiced upon registration
      and is due within thirty (30) days of receipt of the invoice by the
      Foundation.

b.    Payment for Marketing Partner management, training and support will be
      invoiced and is due within thirty (30) days of receipt of the invoice by
      the Foundation.

c.    Payment for all other de1iverab1es will be invoiced upon registration and
      is due within thirty (30) days of receipt of the invoice by the
      Foundation.

d.    Invoices shall be submitted in a format specified by the Parties prior to
      execution of the Contract. Invoices shall be sent to:

Eric Farner
Director of Finance Operations
PA State System of Higher Education Foundation Inc.
2986 North Second Street
Harrisburg, PA 17101

F. Liability. Neither of the parties shall assume any liabilities to each other.
As to liability to each other or death to persons, or damages to property, the
parties do not waive any defense as a result of entering into this contract.

G. Amendments. This Contract represents the complete agreement between the
parties, superseding any other prior or contemporaneous oral or written
agreements. Any changes, corrections or additions to this Contract shall be in
writing in the form of a supplemental agreement signed by all necessary parties
and setting forth therein the proposed change, correction or addition.

                                                                    Page 4 of 17

<PAGE>

                                                     Contract #FOUNDATION 2004-1

H. Applicable Law. This Contract will be governed under the laws of the
Commonwealth of Pennsylvania.

I. Independent Contractor. In performing their respective duties and obligations
under this Contract, each Party will act as an independent contractor and not as
an employee or agent of the other Party. The relationship of the Parties to this
Contract and to each other shall not be construed to constitute a partnership,
joint venture or any other relationship, other than that of independent
contractors.

J. Termination of Contract. The Foundation has the right to terminate the
Contract for any of the following reasons:

      1) Termination for Convenience: If for any reason the Foundation is
dissatisfied with Vivid Learning products or services, the Foundation will
notify Vivid in writing of the specific reasons for their dissatisfaction.
Reasons for dissatisfaction shall be limited to the scope of the contract. Vivid
will have thirty (30) days to make corrections to the satisfaction of the
Foundation. The Foundation will then confirm, in writing, that these changes
have been made.

      If Vivid is unable to make the corrections as described above, the
Foundation will have the right to terminate the Contract at its convenience if
it determines termination to be in its best interest. The Foundation will
compensate Vivid for work satisfactorily completed prior to the effective date
of the termination, but in no event shall Vivid be entitled to recover lost
profits.

      2) Termination for Cause: The Foundation or Vivid shall have the right to
terminate the Contract upon written notice to the other Party for default as to
any of the terms contained in the Contract between the Parties or by law. Either
party shall have sixty (60) days to cure any areas of default upon receipt of
written notice.

L. Hold Harmless Provision: Both Vivid and the Foundation shall hold each other
harmless from and indemnify each other against any and all claims, demands and
actions based upon or arising out of any activities performed by either party
and its employees and agents under this Contract and shall defend any and all
actions brought against either party based upon any such claims or demands.

M. Taxes: The Foundation is exempt from all excised taxes imposed by the
Internal Revenue Service and has accordingly registered with the Internal
Revenue Service to make tax-free purchases under Registration No. 2374001-K. The
Foundation is also exempt from Pennsylvania state sales tax, local sales tax,
public transportation assistance taxes and fees and vehicle rental tax. The
Department of Revenue regulations provide that exemption certificates are not
required for sales made to government entities and none will be issued.

                                                                    Page 5 of 17

<PAGE>

                                                     Contract #FOUNDATION 2004-1

N. Severability. Should a court of competent jurisdiction or any legislative act
render any term of this Contract unlawful, then the parties shall give effect to
the balance of the Contract to the extent possible.

O. Integration. The Contract, including all referenced and/or attached
documents, constitutes the entire agreement between the parties. No agent,
representative, employee or officer of either the Foundation or Vivid has the
authority to make, or has made, any statement, agreement or representation, oral
or written, in connection with the Contract, which in any way can be deemed to
modify, add to and detract from, or otherwise change or alter its terms and
conditions. No negotiations between the parties, nor any custom or usage, shall
be permitted to modify or contradict any of the terms and conditions of the
Contract. No modifications, alterations, changes, or waivers to the Contract or
any of its terms shall be valid or binding unless accomplished by a written
amendment signed by both parties. All such amendments shall be made using the
appropriate Foundation form.

P. Key Personnel. There are key personnel within the Foundation and Vivid
Learning organizations that are critical to the success of the goals of each
organization. Changes to Key Personnel must be communicated between the parties.
Key Personnel are identified as:

For the Foundation

         Kim T. Coon, Executive Director
         PA State System of Higher
         Education FOUNDATION Inc.
         2986 North Second Street
         Harrisburg, PA l 711 0
         Telephone: (717) 720-4086
         Facsimile: (717) 720-7082

         Fred Baer, Director of Business Development
         PA State System of Higher
         Education Foundation Inc.
         2986 North Second Street
         Harrisburg, PA l 7110
         Telephone (717) 720-7063

         Brent Vernon, Business Development Specialist
         PA State System of Higher
         Education Foundation Inc.
         2986 North Second Street
         Harrisburg, Pa 17110
         Telephone (717) 720-4434

                                                                    Page 6 of 17
<PAGE>

                                                     Contract #FOUNDATION 2004-1

         Ed Vollbrecht, Director of Project Management
         PA State System of Higher
         Education Foundation Inc.
         2986 North Second Street
         Harrisburg, PA l 711 0
         Telephone (717) 720-4075

For Vivid Learning Systems, Inc
         Leroy Enger,
         Vice-President of Business Development
         Vivid Learning Systems Inc.
         2345 Stevens Dr.
         Richland, W A 99352
         Telephone: (509) 375-0600
         Facsimile: (509) 375-5349

         Rabindra Nanda,
         Director of Sales and Marketing
         Vivid Learning Systems, Inc.
         2345 Stevens Dr.
         Richland, W A 99352
         Telephone: (509) 375-0600
         Facsimile: (509) 375-5349

Q. Notices. All notices required or permitted or which the Parties may desire to
give under this Agreement shall be in writing, including facsimile copies, and
shall be deemed to have been delivered when delivered to the Party to whom it
was addressed or three (3) days after being deposited in the United States Mail
by certified or registered mail, return receipt requested, or by overnight
courier to the address of the other party which is set forth in this Agreement,
or to such other address as the Party shall designate in writing.

          If to Vivid, attention of:      Leroy Enger,
                                          Vice-President of Business Development
                                          Vivid Learning Systems, Inc.
                                          2345 Stevens Dr.
                                          Richland, W A 99352
                                          Telephone: (509) 375-0600
                                          Facsimile: (509) 375-5349

          With a copy to:                 Sandra I. Muller
                                          General Counsel
                                          Vivid Learning Systems, Inc.
                                          723 The Parkway
                                          Richland, W A 99352
                                          Telephone: (509) 943-5319
                                          Facsimile: (509) 943-5528

                                                                    Page 7 of 17
<PAGE>

                                                     Contract #FOUNDATION 2004-1

         If to FOUNDATION, attention of:    Kim T. Coon, Executive Director
                                            PA State System of Higher
                                            Education Foundation Inc.
                                            2986 North Second Street
                                            Harrisburg, PA 17110
                                            Telephone: (717) 720-4086
                                            Facsimile: (717) 720-7082

R. Assignments. This Agreement shall not be assigned without the express written
consent of the Parties, which consent will not be unreasonably withheld. Any
assignment made without the express written consent of the other Party shall not
relieve the Assignor of its duties and obligations under this Agreement
provided, however, the Foundation may assign this Agreement to any of the
Foundation's subsidiaries or affiliates. Vivid acknowledges that persons or
entities under contract or affiliated with the Foundation may perform certain
services under this Agreement and agrees to allow such services to be provided
upon written notice thereof. To the extent assignable, this Agreement shall be
binding upon, and inure to the benefit of the Parties hereto, and their
respective successors and assigns.

S. Notice of Waiver. No purported waiver by any Party of any default by another
Party of any term or provision contained herein shall be deemed to be a waiver
of such term or provision unless the waiver is in writing and signed by an
authorized representative of the waiving Party. No such waiver shall in any
event be deemed a waiver of any subsequent default under the same or any other
term or provision contained herein.

T. Force Majeure. Neither Party will incur any liability to the other if its
performance of any obligation under this Agreement is prevented or delayed by
causes beyond its control and without the fault or negligence of either Party.
Causes beyond a Party's control may include, but are not limited to, acts of God
or war, changes in controlling law, regulations, orders or the requirements of
any governmental entity, severe weather conditions, civil disorders, natural
disasters, fire, epidemics and quarantines, general strikes throughout the
trade, and freight embargoes.

      A Party shall notify the other Party orally within five (5) days and in
writing within fifteen (15) days of the date on which the Party becomes aware,
or should have reasonably become aware, that such causes would prevent or delay
its performance. Such notification shall (i) describe fully such cause(s) and
its effect on performance, (ii) state whether performance under the Agreement is
prevented or delayed, and (iii) if performance is delayed, state a reasonable
estimate of the duration of the delay. After receipt of such notification, the
Party receiving notification may elect either to cancel the Contract or to
extend the time for performance as reasonably necessary to compensate for the
other Party's delay.

U. Compliance with Law. The Parties shall comply with all applicable federal and
state laws and regulations and local ordinances in the performance of the
Agreement.

                                                                    Page 8 of 17
<PAGE>

                                                     Contract #FOUNDATION 2004-1

                   THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK

                                                                    Page 9 of 17
<PAGE>

                                                     Contract #FOUNDATION 2004-1

      IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed pursuant to due and legal action authorizing the same to be done the
date first written above.

FOR VIVID                                               FOR THE FOUNDATION:
/s/ [ILLEGIBLE]                                         /s/ Kim T. Coon
-----------------------------------                     ------------------------
Individual or Partner                                   Executive Director
(if Customer is an individual or partnership)

Title
/s/ [ILLEGIBLE]
-----------------------------------            APPROVED AS TO FORM AND LEGALITY:
|President| or Vice President of
 ---------
Corporate Customer                             /S/ MD Alcaro
(Cirle Title)                                  ---------------------------------
                                               FOUNDATION Legal Counsel

                                               /s/ Sandra Muller
                                               ---------------------------------
                                               Vivid Legal Counsel

/s/ Sandra Muller
-----------------------------------
|Secretary| or Treasurer of Corporate
 ---------
Customer
(Circle Title)

Note regarding signatures above. If
a corporation, two signatures are
required, one being the President
!l!. Vice President, the second
being the Secretary !l!. Treasurer.
Signatory authority of either
signature can be delegated provided
there is a certified Board
resolution presented with this
contract.

                                                                   Page 10 of 17
<PAGE>

                        STATE SYSTEM OF HIGHER EDUCATION
                                 FOUNDATION INC.

                     Contract Inquiry No. FOUNDATION 2004-1
                                    Exhibit 1
                                Statement of Work

Date: June 24, 2004

This Statement of Work is made pursuant to Contract #Foundation 2004-1 entered
into between the Foundation and Vivid and is incorporated therein by reference.

Vivid shall deliver the Application Service Provider programs and services set
forth in accordance with the terms and conditions stated in Contract #Foundation
2004-1.

1. Statement of Work and Description of Services

Overview

The Foundation has made a strategic decision to partner with an Application
Service Provider that has a proven track record in providing online programs and
services to the business community. This decision will position the Foundation
to more strategically apply resources and technology to better meet the needs of
various markets. As the Foundation moves to a new Application Service Provider
and begins to increase its presence in the online professional workforce
development market, a number of challenges must be addressed during this
transition and growth period, including;

      o     Reducing costs and increasing profit margins
      o     Meeting current and future learning technology needs of the business
            community
      o     Providing content that meets business objectives and that are tied
            to strategic goals
      o     Alignment of processes around client goals
      o     Monitoring and reporting performance
      o     Delivery and tracking of all training resources
      o     Marketing support to meet revenue objectives

Background

Vivid Learning Systems, Inc. has been providing content and technology solutions
to the Foundation for approximately two years. Vivid Learning has also provided
professional consulting and marketing services during this time. As a true
partner, Vivid Learning has developed a thorough understanding of the challenges
being faced by the Foundation. This proposal will present specifications that
should be considered as the Foundation develops, and implements technology for
accomplishing its mission.

                                                                   Page 11 of 17

<PAGE>

                                                     Contract #FOUNDATION 2004-1

Specifications

    Provide a full featured Learning Management Svstem (LMS) that improves speed
    and effectiveness of the training process, improves communication among
    employees, and improves retention. At a minimum the LMS should have or will
    have the following features:

1.    Activity Management
      A.    instructor-led training
      B.    online training
      C.    resources
      D.    mentoring activities

2.    Curriculum Management
      A.    create curriculum maps for individuals
      B.    create curriculum maps for groups
      C     match curriculum to learning objectives
      D.    match curriculum to certification goals

3.    Scheduling and Registration
      A.    online registration
      B.    batch or individual registration
      C.    automated approval process
      D.    wait listing
      E.    class status
      F.    manage grant reimbursement, budgeting and invoicing

4.    Level I & Level II Evaluation
      A.    allow administrators to build, assign and administer course
            evaluations
      B.    allow administrators to build and deliver pre and post tests
      C.    reporting feature that allows for measurement of skill acquisition
            between pre and post test

5.    Facility & Instructor Management*
      A.    view and schedule facilities
      B.    locate facilities based on specific requirements
      C.    certify qualified instructors by course
      D.    certify qualified instructors by geography

6.    Learning Content Management System *
      A.    Allows client built courseware to be imported into the LMS
      B.    Provide authoring tool

                                                                   Page 12 of 17
<PAGE>

                                                     Contract #FOUNDATION 2004-1

*Provide a Performance Manazement Svstem (PMSys) that provides tools for
monitoring performance and supports the achievement of corporate and individual
goals. At a minimum the PMSys should have or will have the following features:

1.    Level 3 Assessment
      A.    360 Feedback
      B.    assign internal and external raters
      C.    schedule assessments
      D.    report assessment data

2.    Development Plans
      A.    automate employee development plans
      B.    develop
      C.    track
      D.    evaluate

3.    Employee Appraisals
      A.    identify goals, objectives, and action items
      B.    approve goals and provide ongoing feedback
      C.    track progress against goals
      D.    evaluate and weight each goal

4.    Compensation & Recognition
      A.    recommend pay increases based on performance scores
      B.    assist management with appropriate compensation decisions

5.    Mentoring & Coaching
      A.    provide advice to employees
      B.    submit goal feedback
      C.    save communication with date/time stamp

6.    Career Planning
      A.    establish typical career paths
      B.    set and track career goals
      C.    create career development plans

*Provide a Talent Management Svstem (TMS) that deploys the right talent at the
right time by aligning recruiting and succession planning with business goals.
At a minimum the TMS should have the following features:

1.    Job Requisitioning A. manage position requirements
      B.    manage minimum qualifications
      C.    create internal job requisitions
      D.    create external job requisitions

                                                                   Page 13 of 17
<PAGE>

                                                     Contract #FOUNDATION 2004-1

2.    Internal & External Sourcing
      A.    post openings to career sites
      B.    allow candidates to apply online
      C.    automatically match candidates to openings

3.    Screening & Interviewing
      A.    build, administer, and score screening assessments
      B.    create behavioral interview guides
      C.    record notes
      D.    evaluate candidates responses

4.    Tracking & Hiring
      A.    automate reference checking
      B.    create and automate job offer letters
      C.    create new hire development plans

*Provide an Organizational Development Svstem (ODS) that aligns people and
processes around corporate goals. At a minimum the ODS should have the following
features:

1.    Organizational Goals
      A.    manage corporate, department, functional and team goals
      B.    enable linkage of goals up and down the organization

2.    Human Capitol Process Management
      A.    link tasks to positions
      B.    analyze business from a process perspective
      C.    workforce planning

3.    Position Management- Skill Gap Analysis
      A.    create comprehensive job requirements
      B.    link competencies, skills, and behaviors to jobs
      C.    match employee talent against job requirements

4.    Competency Management
      A.    report individual competency strength and weaknesses
      B.    report organizational competency strength and weaknesses
      C.    recommend development activities

Provide technology and technology support that will instill the highest level of
confidence in all clients, including:

1.    Servers
2.    Back up systems
3.    Hosting

                                                                   Page 14 of 17
<PAGE>

                                                     Contract #FOUNDATION 2004-1

      a.    PLATO Learning Inc.-Content and Plato Web Learning Network
      b.    Third Party Content
      c.    Rosetta Stone (English as a Second Language) Student Management
            System
4.    Tech Support
5.    Technology consulting

Provide comprehensive content that will increase competitiveness of PA business
by improving employee and organizational skills, including:

1.    Regulatory and Compliance Library
2.    IT Library
3.    Desktop Library
4.    Business Professional Skills Library
5.    Business Management Library
6.    Craft Skills Library

Provide customer support that enables clients to use technology effectively and
efficiently through:

1.    email tech support
2.    call in tech support
3.    consolidated service desk
4.    initial product training
5.    follow-up product training

Provide marketing and sales support that ensures a growing client base and the
highest level of utilization through:

1.    team building
2.    online meetings
3.    presentations
4.    setting and meeting Foundation revenue goals
5.    direct and indirect marketing activities (direct mail, trade shows, print
      advertising)

Provide flexibility of pricing to meet the Foundations revenue objectives by
offering the following options.

1.    price each module separately
2.    price content and performance management system separately
3.    add performance management system cost to the cost of content

* All data will be collected and entered into the system tools by Foundation
administrators or the Foundation's client unless otherwise agreed to by the
parties.

                                                                   Page 15 of 17
<PAGE>

                                                     Contract #FOUNDATION 2004-1

2.    Summary Deliverables and Timetable - Deliverables and timetables are
      subject to change based upon mutual agreement of the parties.

July 1st - initial launch of online offering
August 1st - complete Partner training plan and training timeline
August 15th - complete transition plan
August 18th - begin Partner training
November 15th - Partner training completed
December 15th - Transition completed
December 17th - Statewide launch

3. Fees

    Learning Management System-                     $[THIS INFORMATION HAS BEEN
                                                      REDACTED] per employee

    ICDL Library                                    $[THIS INFORMATION HAS BEEN
                                                      REDACTED] per employee

    Professional Development Library-               $[THIS INFORMATION HAS BEEN
                                                      REDACTED] per employee

    Desktop Computing and Infonnation Technology-   $[THIS INFORMATION HAS BEEN
                                                      REDACTED] per employee

    Regulatory and Compliance Library-              $[THIS INFORMATION HAS BEEN
                                                      REDACTED] per employee

    Craft Skills Library   -                        $[THIS INFORMATION HAS BEEN
                                                      REDACTED] per employee

    On-line administrative support
      including :admissions, registration,
      payment services, transcriptions, and
      technical and content support and assistance-    No Charge In addition:

      iv.   tech support will be offered through email, AND
      v.    live tech support will be offered during normal business hours, AND
      vi.   tech and content support required by clients will be reduced through
            proper up front training that will be provided by Vivid Learning and
            its Marketing Partners, including but not limited to WEDnet P A
            partners, MVM Inc., and DWC Inc.

Marketing services and support-                            All Direct Costs only
Marketing Partner Management, Training and support   [THIS INFORMATION HAS BEEN
                                                      REDACTED]
                                                      % of funded amount.

4.    Fee Schedule:

a.    Payment for the LMS and each library will be invoiced upon registration
      and is due within thirty (30) days of receipt of the invoice by the
      Foundation.
b.    Payment for Marketing Partner management, training and support will be
      invoiced and is due within thirty (30) days of receipt of the invoice by
      the Foundation.
c.    Payment for all other deliverables will be invoiced upon registration and
      is due within thirty (30) days of receipt of the invoice by the
      Foundation.
d.    Invoices shall be submitted in a format specified by the Parties prior to
      execution of the Contract. Invoices shall be sent to:

                                                                   Page 16 of 17
<PAGE>

                                                     Contract #FOUNDATION 2004-1

Eric Farner
Director of Finance Operations
PA State System of Higher Education Foundation Inc. 2986 North Second Street
Harrisburg, PAl 71 0 1

Authorization to Proceed

      Delivery of above Statement of Work by VIVID cannot occur until written
      authorization is received from the FOUNDATION. The signature below
      represents Foundation's approval for VIVID to commence work on these
      services as currently defined, with an agreement to pay all fees incurred
      as detailed selected in this document.

VIVID

By: /s/ Kevin Smith
Printed Name: Kevin Smith
Title: CEO
Date: June 24, 2004

By:
   /s/ Kim T. Coon
   --------------------------------

Date: June 24, 2004

                                                                   Page 17 of 17Exhibit 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 January 1, 2005

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

                FIRST HORIZON MORTGAGE PASS-THROUGH TRUST 2005-1

                MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-1

<PAGE>

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                                                               Page
<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 and Warranties of the Master Servicer;  Covenants of the Seller...................41
   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..................................................................48

ARTICLE III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS.......................................................48
   SECTION 3.1 Master Servicer to Service Mortgage Loans.........................................................48
   SECTION 3.2 Subservicing; Enforcement of the Obligations of Servicers.........................................50
   SECTION 3.3 Rights of the Depositor and the Trustee in Respect of the Master Servicer.........................50
   SECTION 3.4 Trustee to Act as Master Servicer.................................................................51
   SECTION 3.5 Collection of Mortgage Loan Payments; Certificate Account; Distribution Account...................51
   SECTION 3.6 Collection of Taxes, Assessments and Similar Items; Escrow Accounts...............................54
   SECTION 3.7 Access to Certain Documentation and Information Regarding the Mortgage Loans......................55
   SECTION 3.8 Permitted Withdrawals from the Certificate Account and Distribution Account.......................55
   SECTION 3.9 Maintenance of Hazard Insurance; Maintenance of Primary Insurance Policies........................57
   SECTION 3.10 Enforcement of Due-on-Sale Clauses; Assumption Agreements........................................59
   SECTION 3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage Loans..................60
   SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files..................................................63
   SECTION 3.13 Documents Records and Funds in Possession of Master Servicer to be Held for the Trustee..........63
   SECTION 3.14 Master Servicing Compensation....................................................................64
   SECTION 3.15 Access to Certain Documentation..................................................................64
   SECTION 3.16 Annual Statement as to Compliance................................................................65
   SECTION 3.17 Annual Independent Public Accountants' Servicing Statement; Financial Statements.................65
   SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds...................................................66

ARTICLE IV DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER.....................................................66
   SECTION 4.1 Advances..........................................................................................66
   SECTION 4.2 Priorities of Distribution........................................................................66

                                        i
<PAGE>

   SECTION 4.3 Method of Distribution............................................................................72
   SECTION 4.4 Allocation of Losses..............................................................................73
   SECTION 4.5 Reserved..........................................................................................75
   SECTION 4.6 Monthly Statements to Certificateholders..........................................................75
   SECTION 4.7 [RESERVED]........................................................................................77
   SECTION 4.8 [RESERVED]........................................................................................77
   SECTION 4.9 Determination of Pass-Through Rates for LIBOR Certificates........................................77

ARTICLE V THE CERTIFICATES.......................................................................................79
   SECTION 5.1 The Certificates..................................................................................79
   SECTION 5.2 Certificate Register; Registration of Transfer and Exchange of Certificates.......................79
   SECTION 5.3 Mutilated, Destroyed, Lost or Stolen Certificates.................................................84
   SECTION 5.4 Persons Deemed Owners.............................................................................85
   SECTION 5.5 Access to List of Certificateholders' Names and Addresses.........................................85
   SECTION 5.6 Maintenance of Office or Agency...................................................................85

ARTICLE VI THE DEPOSITOR AND THE MASTER SERVICER.................................................................85
   SECTION 6.1 Respective Liabilities of the Depositor and the Master Servicer...................................85
   SECTION 6.2 Merger or Consolidation of the Depositor or the Master Servicer...................................86
   SECTION 6.3 Limitation on Liability of the Depositor, the Master Servicer and Others..........................86
   SECTION 6.4 Limitation on Resignation of Master Servicer......................................................87

ARTICLE VII DEFAULT..............................................................................................87
   SECTION 7.1 Events of Default.................................................................................87
   SECTION 7.2 Trustee to Act; Appointment of Successor..........................................................89
   SECTION 7.3 Notification to Certificateholders................................................................90

ARTICLE VIII CONCERNING THE TRUSTEE..............................................................................91
   SECTION 8.1 Duties of Trustee.................................................................................91
   SECTION 8.2 Certain Matters Affecting the Trustee.............................................................92
   SECTION 8.3 Trustee Not Liable for Certificates or Mortgage Loans.............................................94
   SECTION 8.4 Trustee May Own Certificates......................................................................94
   SECTION 8.5 Trustee's Fees and Expenses.......................................................................94
   SECTION 8.6 Eligibility Requirements for Trustee..............................................................95
   SECTION 8.7 Resignation and Removal of Trustee................................................................95
   SECTION 8.8 Successor Trustee.................................................................................96
   SECTION 8.9 Merger or Consolidation of Trustee................................................................97
   SECTION 8.10 Appointment of Co-Trustee or Separate Trustee....................................................97
   SECTION 8.11 Tax Matters......................................................................................98
   SECTION 8.12 Periodic Filings................................................................................100

ARTICLE IX TERMINATION..........................................................................................100
   SECTION 9.1 Termination upon Liquidation or Purchase of all Mortgage Loans...................................100
   SECTION 9.2 Final Distribution on the Certificates...........................................................101
   SECTION 9.3 Additional Termination Requirements..............................................................102

ARTICLE X [RESERVED]............................................................................................103

ARTICLE XI MISCELLANEOUS PROVISIONS.............................................................................103
   SECTION 11.1 Amendment.......................................................................................103

                                       ii
<PAGE>

   SECTION 11.3 Governing Law...................................................................................105
   SECTION 11.4 Intention of Parties............................................................................105
   SECTION 11.5 Notices.........................................................................................105
   SECTION 11.6 Severability of Provisions......................................................................106
   SECTION 11.7 Assignment......................................................................................107
   SECTION 11.8 Limitation on Rights of Certificateholders......................................................107
   SECTION 11.9 Inspection and Audit Rights.....................................................................108
   SECTION 11.10 Certificates Nonassessable and Fully Paid......................................................108
   SECTION 11.11 Limitations on Actions; No Proceedings.........................................................108
   SECTION 11.12 Acknowledgment of Seller.......................................................................108

<CAPTION>
                                    SCHEDULES

<S>                   <C>                                                                                  <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

                                    EXHIBITS

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

                                       iii
<PAGE>

      THIS POOLING AND SERVICING  AGREEMENT,  dated as of January 1, 2005, among
FIRST HORIZON ASSET SECURITIES INC., a Delaware  corporation,  as depositor (the
"Depositor"),  FIRST HORIZON HOME LOAN  CORPORATION,  a Kansas  corporation,  as
master  servicer  (the "Master  Servicer"),  and THE BANK OF NEW YORK, a banking
corporation  organized  under the laws of the State of New York, as trustee (the
"Trustee").

                                 WITNESSETH THAT

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

                              PRELIMINARY STATEMENT

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

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

                  [Remainder of Page Intentionally Left Blank]

                                       1
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
                             Initial Class                                     Minimum          Integral Multiples
   Class Designation      Certificate Balance      Pass-Through Rate        Denominations      in Excess of Minimum
--------------------------------------------------------------------------------------------------------------------
<S>                          <C>                      <C>                      <C>                    <C>
      Class I-A-1            $135,00,000.00              5.000%                $ 25,000               $1,000
--------------------------------------------------------------------------------------------------------------------
      Class I-A-2            $15,000,000.00           variable(2)              $ 25,000               $1,000
--------------------------------------------------------------------------------------------------------------------
      Class I-A-3            $          (1)           variable(2)              $500,000               $1,000
--------------------------------------------------------------------------------------------------------------------
      Class I-A-4            $19,836,000.00              5.250%                $ 25,000               $1,000
--------------------------------------------------------------------------------------------------------------------
      Class I-A-5            $ 1,000,000.00              5.250%                $  1,000               $1,000
--------------------------------------------------------------------------------------------------------------------
      Class I-A-6            $ 1,000,000.00              5.250%                $ 25,000               $1,000
--------------------------------------------------------------------------------------------------------------------
      Class I-A-7            $ 1,987,000.00              5.250%                $ 25,000               $1,000
--------------------------------------------------------------------------------------------------------------------
      Class I-A-8            $ 8,976,000.00              5.250%                $ 25,000               $1,000
--------------------------------------------------------------------------------------------------------------------
      Class I-A-9            $16,628,000.00              5.250%                $ 25,000               $1,000
--------------------------------------------------------------------------------------------------------------------
      Class I-A-R            $       100.00              5.250%                $    100                 N/A
--------------------------------------------------------------------------------------------------------------------
     Class II-A-1            $22,347,000.00              4.750%                $ 25,000               $1,000
--------------------------------------------------------------------------------------------------------------------
       Class B-1             $ 3,307,000.00           variable(3)              $100,000               $1,000
--------------------------------------------------------------------------------------------------------------------
       Class B-2             $ 1,140,000.00           variable(3)              $100,000               $1,000
--------------------------------------------------------------------------------------------------------------------
       Class B-3             $   684,000.00           variable(3)              $100,000               $1,000
--------------------------------------------------------------------------------------------------------------------
       Class B-4             $   456,000.00           variable(3)              $100,000               $1,000
--------------------------------------------------------------------------------------------------------------------
       Class B-5             $   228,000.00           variable(3)              $100,000               $1,000
--------------------------------------------------------------------------------------------------------------------
       Class B-6             $   456,665.26           variable(3)              $100,000               $1,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Class I-A-3  Certificates  are  notional  amount  certificates  and will
accrue interest during each interest  accrual period on a notional  amount.  The
initial notional amount of the Class I-A-3 Certificates will be $15,000,000.

(2) The Pass-Through  Rate with respect to any  Distribution  Date for the Class
I-A-2  Certificates is the per annum rate equal to (a) 2.75% with respect to the
first Distribution Date, and (b) thereafter,  the lesser of (i) LIBOR plus 0.35%
and (ii) 7.50%,  subject to a minimum rate of 0.35%. The Pass-Through  Rate with
respect to any  Distribution  Date for the Class I-A-3  Certificates  is the per
annum rate equal to (a) 4.75% with respect to the first  Distribution  Date, and
(b) thereafter, the lesser of (i) 7.15% minus LIBOR and (ii) 7.15%, subject to a
minimum rate of 0.00%.

(3) The Pass-Through Rate on each Class of Subordinated Certificates is variable
and will be equal to the weighted average of the Designated Mortgage Pool Rates,
weighted on the basis of the Group  Subordinate  Amount for each Mortgage  Pool.
The initial Pass-Through Rate on each Class of Subordinated Certificates for the
first Interest Accrual Period will be 5.200%.

                                       2
<PAGE>

Accretion Directed Certificates.......  The  Class   I-A-7   and   Class   I-A-9
                                        Certificates.

Accrual Certificates..................  The Class I-A-8 Certificates.

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

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

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

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

Component Certificates................  None.

Components............................  None.

Delay Certificates....................  All    interest-bearing    Classes    of
                                        Certificates  other  than the  Non-Delay
                                        Certificates, if any.

ERISA-Restricted Certificates.........  The   Residual   Certificates,   Private
                                        Certificates  and  Certificates  of  any
                                        Class   that  no  longer   satisfy   the
                                        applicable  rating  requirement  of  the
                                        Underwriters' Exemption.

Floating Rate Certificates............  The Class I-A-2 Certificates.

Group I Senior Certificates...........  The  Class  I-A-1,  Class  I-A-2,  Class
                                        I-A-3,  Class I-A-4,  Class I-A-5, Class
                                        I-A-6,  Class I-A-7,  Class I-A-8, Class
                                        I-A-9 and Class I-A-R Certificates.

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

Inverse Floating Rate Certificates....  The Class I-A-3 Certificates.

LIBOR Certificates....................  The  Class   I-A-2   and   Class   I-A-3
                                        Certificates.

NAS Certificates......................  The  Class   I-A-4   and   Class   I-A-6
                                        Certificates.

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

Notional Certificates.................  The Class I-A-3 Certificates.

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

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

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

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

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

Rating Agencies.......................  Fitch  and  Moody's;  except  that,  for
                                        purposes  of the Class B-1,  B-2,  Class
                                        B-3,    Class    B-4   and   Class   B-5
                                        Certificates,  Fitch  shall  be the sole
                                        Rating Agency.

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

Residual Certificates.................  The Class I-A-R Certificates.

Retail/Lottery Certificates...........  The Class I-A-5 Certificates.

                                       3
<PAGE>

Scheduled Certificates................  None.

Senior Certificates...................  The  Group  I  Senior  Certificates  and
                                        Group    II     Senior     Certificates,
                                        collectively.

Senior Support Certificates...........  None.

Subordinated Certificates.............  The Class  B-1,  Class  B-2,  Class B-3,
                                        Class  B-4,  Class  B-5  and  Class  B-6
                                        Certificates.

Super Senior Certificates.............  The  Class   I-A-5   and   Class   I-A-9
                                        Certificates.

Super Senior Support
Certificates..........................  The Class I-A-6 Certificates.

Support Classes.......................  None.

Targeted Principal Classes............  None.

Underwriters..........................  Credit   Suisse  First  Boston  LLC  and
                                        Countrywide Securities Corporation.

      With  respect  to  any of  the  foregoing  designations  as to  which  the
corresponding  reference  is "None," all  defined  terms and  provisions  herein
relating  solely to such  designations  shall be of no force or effect,  and any
calculations  herein  incorporating  references  to such  designations  shall be
interpreted  without reference to such  designations and amounts.  Defined terms
and provisions  herein  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 the Accrual  Certificates,  the earlier of
(x) the  Cross-over  Date  and (y) the  Distribution  Date on  which  the  Class
Certificate  Balance of the Accretion Directed  Certificates has been reduced to
zero.

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

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

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

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

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

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

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

                                       5
<PAGE>

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

      Apportioned Principal Balance: For any Class of Subordinated  Certificates
and any Distribution  Date, an amount equal to the Class Certificate  Balance of
such Class immediately prior to that Distribution Date multiplied by a fraction,
the  numerator  of which is the  applicable  Group  Subordinate  Amount for such
Distribution  Date  and  the  denominator  of  which  is the  sum  of the  Group
Subordinate Amounts for such Distribution Date.

      Appraised Value: With respect to any Mortgage Loan, the Appraised Value of
the related  Mortgaged  Property  shall be: (i) with respect to a Mortgage  Loan
other  than a  Refinancing  Mortgage  Loan,  the  lesser of (a) the value of the
Mortgaged  Property based upon the appraisal made at the time of the origination
of such Mortgage  Loan and (b) the sales price of the Mortgaged  Property at the
time  of  the  origination  of  such  Mortgage  Loan;  (ii)  with  respect  to a
Refinancing Mortgage Loan other than a Streamlined  Documentation Mortgage Loan,
the value of the Mortgaged Property based upon the appraisal made at the time of
the origination of such  Refinancing  Mortgage Loan; and (iii) with respect to a
Streamlined  Documentation  Mortgage Loan, (a) if the  loan-to-value  ratio with
respect to the Original Mortgage Loan at the time of the origination thereof was
90% or less,  the value of the Mortgaged  Property based upon the appraisal made
at the time of the  origination  of the  Original  Mortgage  Loan and (b) if the
loan-to-value  ratio with respect to the Original  Mortgage  Loan at the time of
the  origination  thereof  was  greater  than 90%,  the  value of the  Mortgaged
Property based upon the appraisal  (which may be a drive-by  appraisal)  made at
the time of the origination of such Streamlined Documentation Mortgage Loan.

      Available  Funds: For each Mortgage Pool, with respect to any Distribution
Date, an amount equal to the sum of:

      (a)   all scheduled  installments of interest, net of the Master Servicing
            Fee, the Trustee Fee and any amounts due to First Horizon in respect
            of the Retained Yield on such  Distribution  Date, and all scheduled
            installments  of principal  due in respect of the Mortgage  Loans in
            such  Mortgage  Pool  on the Due  Date in the  month  in  which  the
            Distribution   Date   occurs  and   received   before  the   related
            Determination Date, together with any Advances in respect thereof;

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

                                       6
<PAGE>

      (c)   all Principal  Prepayments received in respect of the Mortgage Loans
            in such Mortgage  Pool during the related  Prepayment  Period,  plus
            interest received thereon, net of any Prepayment Interest Excess;

      (d)   any  Compensating  Interest in respect of Principal  Prepayments  in
            Full received in respect of the Mortgage Loans in such Mortgage Pool
            during the related  Prepayment  Period (or, in the case of the first
            Distribution Date, from the Cut-off Date); and

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

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

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

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

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

      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.

                                       7
<PAGE>

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

      Certificate Account: The separate Eligible Account or Accounts created and
maintained  by the Master  Servicer  pursuant to Section  3.5 with a  depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of Certificateholders and designated "First Horizon Home Loan Corporation
in trust for the  registered  holders of First  Horizon  Asset  Securities  Inc.
Mortgage Pass-Through Certificates, Series 2005-1."

      Certificate Group: As specified in the Preliminary Statement.

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

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

      (f)   all  amounts  distributed  on  previous  Distribution  Dates on such
            Certificate on account of principal,

      (g)   the principal portion of all Realized Losses previously allocated to
            such Certificate, and

      (h)   in the case of a Subordinated  Certificate,  such  Certificate's pro
            rata share, if any, of the Subordinated Certificate Writedown Amount
            for previous Distribution Dates.

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

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

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

                                       8
<PAGE>

      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: January 28, 2005.

      Code:  The  Internal  Revenue  Code of 1986,  including  any  successor or
amendatory provisions.

      COFI: Not applicable.

      COFI Certificates: Not applicable.

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

      Component: Not applicable.

      Component Balance: Not applicable.

      Component Certificates: Not applicable.

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

      Coop Shares: Shares issued by a Cooperative Corporation.

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

                                       9
<PAGE>

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

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

      Corporate Trust Office:  The designated office of the Trustee in the State
of New York at which at any  particular  time its corporate  trust business with
respect to this Agreement shall be administered, which office at the date of the
execution  of this  Agreement  is located at The Bank of New York,  101  Barclay
Street,  8W, New York,  New York 10286 (Attn:  Corporate  Trust  Mortgage-Backed
Securities Group, First Horizon Asset Securities Inc. Series 2005-1),  facsimile
no.  (212)  815-3986,  and  which  is  the  address  to  which  notices  to  and
correspondence with the Trustee should be directed.

      Corresponding  Classes:  As to any Middle  REMIC  Interest  identified  in
Section  2.7,  the  Class or  Classes  that are  identified  in  Section  2.7 as
corresponding to such Middle REMIC Interest.

      Corresponding  Classes of Middle  REMIC  Interests:  As to any Lower REMIC
Interest  identified  in Section 2.7, the Middle REMIC  Interest or Middle REMIC
Interests  that are  identified  in Section 2.7 as  corresponding  to such Lower
REMIC Interest.

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

      Custodial Agreement:  The Custodial Agreement dated as of January 28, 2005
by and among the Trustee, the Master Servicer and the Custodian.

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

      Cut-off Date: January 1, 2005.

      Cut-off   Date  Pool   Principal   Balance:   With   respect  to  Pool  I,
$205,066,807.33, and with respect to Pool II, $22,978,957.93.

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

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

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

                                       10
<PAGE>

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

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

      Delay Certificates: As specified in the Preliminary Statement.

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

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

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

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

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

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

      Designated  Mortgage Pool Rates:  With respect to Pool I, 5.25%,  and with
respect to Pool II, 4.75%.

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

      Distribution Account: The separate Eligible Account created and maintained
by the  Trustee  pursuant  to  Section  3.5 in the name of the  Trustee  for the
benefit of the Certificateholders and designated "The Bank of New York, in trust
for  registered   Holders  of  First  Horizon  Asset  Securities  Inc.  Mortgage
Pass-Through  Certificates,  Series 2005-1." Funds in the  Distribution  Account
shall be held in trust for the  Certificateholders for the uses and purposes set
forth in this Agreement.

                                       11
<PAGE>

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

      Distribution  Date:  The 25th day of each calendar month after the initial
issuance of the  Certificates,  or if such 25th day is not a Business  Day,  the
next succeeding Business Day, commencing in February 2005.

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

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

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

      ERISA-Qualifying  Underwriting:   With  respect  to  any  ERISA-Restricted
Certificate, a best efforts or firm commitment underwriting or private placement
that meets the requirements of the Underwriters' Exemption.

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

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

      Event of Default: As defined in Section 7.1 hereof.

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

                                       12
<PAGE>

      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 Horizon National Corporation, a
Tennessee corporation.

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

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

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

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

      Fraud Loss Coverage Amount: As of the Closing Date, $4,560,915.  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 $4,560,915 minus the aggregate amount of Fraud Losses that would have been
allocated to the Subordinated Certificates in the absence of the Loss Allocation
Limitation since the Cut-off Date. As of any Distribution Date from the third to
the fifth  anniversary of the Cut-off Date, the Fraud Loss Coverage  Amount will
equal (1) the lesser of (a) the Fraud Loss Coverage Amount as of the most recent
anniversary  of the  Cut-off  Date  and (b)  1.0% of the  aggregate  outstanding
principal balance of all of the Mortgage Loans as of the most recent anniversary
of the Cut-off Date minus (2) the Fraud Losses that would have been allocated to
the Subordinated  Certificates in the absence of the Loss Allocation Limitations
since the most recent  anniversary  of the Cut-off Date. As of any  Distribution
Date on or after the earlier of the Cross-over Date or the fifth  anniversary of
the Cut-off Date, the Fraud Loss Coverage Amount shall be zero.

                                       13
<PAGE>

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

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

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

      Group Subordinate  Amount:  For a Mortgage Pool and any Distribution Date,
the  excess of (a) the Pool  Principal  Balance  of such  Mortgage  Pool for the
immediately   preceding   Distribution   Date,  over  (b)  the  aggregate  Class
Certificate  Balance of the Senior Certificates of the related Certificate Group
immediately prior to that Distribution Date.

      Index: Not applicable.  Indirect  Participant:  A broker,  dealer, bank or
other  financial  institution or other Person that clears through or maintains a
custodial relationship with a Depository Participant.

      Initial Bankruptcy Coverage Amount: $150,000.

      Initial Component Balance: Not applicable.

      Initial One-Month LIBOR Rate: [ ]%.

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

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

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

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

                                       14
<PAGE>

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

      Lender PMI Mortgage Loan: Not applicable.

      LIBOR:  The London  interbank  offered  rate for one month  United  States
dollar deposits calculated in the manner described in Section 4.9.

      LIBOR Business Day: Any day on which banks in London, England and The City
of New York are  open  and  conducting  transactions  in  foreign  currency  and
exchange.

      LIBOR Certificates: As specified in the Preliminary Statement.

      LIBOR   Determination   Date:   For  the  Class   I-A-2  and  Class  I-A-3
Certificates,   the  second  LIBOR  Business  Day   immediately   preceding  the
commencement of each Interest Accrual Period for such Certificates.

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

      Liquidation  Proceeds:  Amounts,  including  Insurance  Proceeds  and  any
Unanticipated  Recoveries,  received in connection  with the partial or complete
liquidation  of  defaulted  Mortgage  Loans,  whether  through  trustee's  sale,
foreclosure  sale or  otherwise  or  amounts  received  in  connection  with any
condemnation or partial  release of a Mortgaged  Property and any other proceeds
received  in  connection  with  an  REO  Property,   less  the  sum  of  related
unreimbursed Master Servicing Fees, Servicing Advances and Advances.

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

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

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

                                       15
<PAGE>

      Lower REMIC:  The segregated  pool of assets  consisting of the Trust Fund
but excluding the Retained Yield,  the Middle REMIC  Interests,  the Lower REMIC
Interests, the RL Interest, the RM Interest, and the RU Interest.

      Lower REMIC Interests: The REMIC regular interests,  within the meaning of
the REMIC Provisions, issued by the Lower REMIC as set forth in Section 2.7.

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

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

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

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

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

      Master  Servicing Fee Rate:  For each Mortgage Loan a per annum rate equal
to 0.244%.

      MERS:  Mortgage  Electronic  Registration  Systems,  Inc.,  a  corporation
organized and existing under the laws of the State of Delaware, or any successor
thereto.

      MERS Mortgage  Loan:  Any Mortgage Loan  registered  with MERS on the MERS
System.

      MERS(R)   System:   The  system  of   recording   transfers  of  mortgages
electronically maintained by MERS.

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

      Middle REMIC Interests: The REMIC regular interests, within the meaning of
the REMIC Provisions, issued by the Middle REMIC as set forth in Section 2.7.

      MIN: The Mortgage Identification Number for any MERS Mortgage Loan.

      MLPA: The Mortgage Loan Purchase  Agreement  dated as of January 28, 2005,
by and between First Horizon Home Loan Corporation, as seller, and First Horizon
Asset  Securities  Inc.,  as  purchaser,  as related to the  transfer,  sale and
conveyance of the Mortgage Loans.

                                       16
<PAGE>

      MOM Loan:  Any  Mortgage  Loan as to which  MERS is  acting as  mortgagee,
solely as nominee for the  originator of such  Mortgage Loan and its  successors
and assigns.

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

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

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

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

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

      (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;

                                       17
<PAGE>

      (11)  the Mortgage Rate;

      (12)  the purpose for the Mortgage Loan;

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

      (14)  the Master Servicing Fee for the Mortgage Loan; and

      (15)  a code indicating whether the Mortgage Loan is a MERS Mortgage Loan.

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

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

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

      Mortgage Pool: Any of Pool I 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.

      NAS Certificates: As specified in the Preliminary Statement.

      NAS Distribution  Percentage:  0% through the Distribution Date in January
2010; 30% of the applicable NAS Percentage  thereafter  through the Distribution
Date in January 2011; 40% of the applicable  NAS Percentage  thereafter  through
the  Distribution  Date in January 2012;  60% of the  applicable  NAS Percentage
thereafter  through the Distribution Date in January 2013; 80% of the applicable
NAS Percentage  thereafter  through the  Distribution  Date in January 2014; and
100% of the applicable NAS Percentage thereafter.

                                       18
<PAGE>

      NAS 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  Balances  of  the  NAS  Certificates  immediately
preceding such  Distribution Date by (2) the aggregate Pool Principal Balance of
the Mortgage Loans in Pool I for such Distribution Date.

      NAS Principal Distribution Amount: For any Distribution Date, the sum of:

      (i)   the total of the amounts  described in clause (1) of the  definition
            of Senior Optimal  Principal Amount for Pool I for such Distribution
            Date  (determined  without the  application  of the  related  Senior
            Percentage)  multiplied by the NAS Percentage for such  Distribution
            Date; and

      (j)   the total of the amounts described in clauses (2) through (5) of the
            definition of Senior  Optimal  Principal  Amount for Pool I for such
            Distribution Date (determined without the application of the related
            Senior  Percentage and Senior Prepayment  Percentage)  multiplied by
            the NAS Distribution Percentage for such Distribution Date.

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

      Net Prepayment Interest  Shortfalls:  As to any Distribution Date and each
Mortgage  Pool,  the  amount  by which  the  aggregate  of  Prepayment  Interest
Shortfalls  in respect of the Mortgage  Loans or such  Mortgage  Pool during the
related  Prepayment Period exceeds an amount equal to the Compensating  Interest
paid in respect of such Mortgage Loans, if any, for such Distribution Date.

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

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

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

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

      Notional Amount: As specified in the Preliminary Statement.

      Notional Amount Component: Not applicable.

                                       19
<PAGE>

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

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

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

      OTS: The Office of Thrift Supervision.

      Outside Reference Date: Not applicable.

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

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

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

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

                                       20
<PAGE>

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

      Pass-Through Rate: For any interest bearing Class of Certificates, the per
annum rate set forth or  calculated in the manner  described in the  Preliminary
Statement.

      Percentage  Interest:  As to  any  Certificate,  the  percentage  interest
evidenced  thereby in  distributions  required to be made on the related  Class,
such  percentage  interest  being set forth on the face  thereof or equal to the
percentage  obtained by dividing the  Denomination  of such  Certificate  by the
aggregate of the Denominations of all Certificates of the same Class.

      Permitted  Investments:  At any  time,  any one or  more of the  following
obligations and securities:

      (i)   obligations  of the United  States or any agency  thereof,  provided
            such  obligations  are  backed by the full  faith and  credit of the
            United States;

      (ii)  general obligations of or obligations guaranteed by any state of the
            United  States or the  District  of Columbia  receiving  the highest
            long-term debt rating of each Rating Agency;

      (iii) commercial  or finance  company  paper which is then  receiving  the
            highest  commercial  or finance  company paper rating of each Rating
            Agency;

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

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

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

                                       21
<PAGE>

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

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

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

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

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

      Permitted  Transferee:  Any person other than (i) the United  States,  any
State or political  subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government,  International  Organization or any
agency or  instrumentality  of either of the  foregoing,  (iii) an  organization
(except  certain  farmers'  cooperatives  described  in section 521 of the Code)
which is exempt  from tax  imposed by Chapter 1 of the Code  (including  the tax
imposed by section 511 of the Code on unrelated  business taxable income) on any
excess inclusions (as defined in section 860E(c)(l) of the Code) with respect to
any  Residual  Certificate,  (iv)  rural  electric  and  telephone  cooperatives
described  in  section  1381(a)(2)(C)  of  the  Code,  (v)  an  "electing  large
partnership"  as defined in section  775 of the Code,  (vi) a Person that is not
(a) a citizen or resident of the United States, (b) a corporation,  partnership,
or other entity  created or organized in or under the laws of the United States,
any state  thereof or the District of Columbia,  (c) an estate whose income from
sources  without  the United  States is  includible  in gross  income for United
States federal income tax purposes regardless of its connection with the conduct
of a trade or business within the United States or (d) a trust if a court within
the  United   States  is  able  to  exercise   primary   supervision   over  the
administration  of the  trust and one or more  United  States  persons  have the
authority to control all substantial  decisions of the trust, unless such Person
has  furnished the  transferor  and the Trustee with a duly  completed  Internal
Revenue  Service Form W-8ECI or any  applicable  successor  form,  and (vii) any
other Person so  designated  by the  Depositor  based upon an Opinion of Counsel
that the Transfer of an  Ownership  Interest in a Residual  Certificate  to such
Person may cause any REMIC  created  hereunder  to fail to qualify as a REMIC at
any time that the  Certificates are outstanding;  provided,  however,  that if a
person is classified as a partnership  under the Code, such person shall only be
a  Permitted  Transferee  if all of  its  beneficial  owners  are  described  in
subclauses  (a), (b), (c) or (d) of clause (vi) and the  governing  documents of
such person  prohibits  a transfer of any  interest in such person to any person
described in clause (vi). The terms "United States," "State" and  "International
Organization"  shall have the  meanings set forth in section 7701 of the Code or
successor provisions. A corporation will not be treated as an instrumentality of
the United  States or of any State or  political  subdivision  thereof for these
purposes if all of its  activities are subject to tax and, with the exception of
the Federal Home Loan Mortgage Corporation, a majority of its board of directors
is not selected by such government unit.

                                       22
<PAGE>

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

      Physical Certificate: As specified in the Preliminary Statement.

      Planned Balance: Not applicable.

      Planned Principal Classes: Not applicable.

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

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

      Pool  Principal  Balance:  For each  Mortgage  Pool,  with  respect to any
Distribution  Date,  the  aggregate  of the  Stated  Principal  Balances  of the
Mortgage  Loans  which were  Outstanding  Mortgage  Loans on the Due Date in the
month  preceding  the  month  of such  Distribution  Date,  and  for  the  first
Distribution  Date,  as of the  Closing  Date,  less any  Principal  Prepayments
received on or after such Due Date and distributed to  Certificateholders on the
prior Distribution Date.

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

                                       23
<PAGE>

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

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

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

      Principal Balance Schedules: Not applicable.

      Principal Only Certificates: Not applicable.

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

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

      Private Certificate: As specified in the Preliminary Statement.

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

      PUD: Planned Unit Development.

      Purchase Price: With respect to any Mortgage Loan required to be purchased
by the Seller  pursuant to Section 2.2 or 2.3 hereof or  purchased at the option
of the Master  Servicer  pursuant to Section 3.11, an amount equal to the sum of
(i) 100% of the unpaid  principal  balance of the  Mortgage  Loan on the date of
such purchase, (ii) accrued interest thereon at the applicable Mortgage Rate (or
at the  applicable  Adjusted  Mortgage  Rate  if  the  purchaser  is the  Master
Servicer) from the date through which interest was last paid by the Mortgagor to
the Due Date in the month in which the Purchase  Price is to be  distributed  to
Certificateholders,  and (iii) any costs and  damages  incurred  by the Trust in
connection with the  noncompliance  of such Mortgage Loan with any  specifically
applicable predatory or abusive lending law.

                                       24
<PAGE>

      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,  other than a
Liquidated Mortgage Loan, which has become the subject of a Deficient Valuation,
if the  principal  amount due under the related  Mortgage Note has been reduced,
the difference  between the principal  balance of the Mortgage Loan  outstanding
immediately  prior to such Deficient  Valuation and the principal balance of the
Mortgage Loan as reduced by the Deficient Valuation.

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

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

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

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

      Regular Certificates: As specified in the Preliminary Statement.

                                       25
<PAGE>

      Relief Act: The  Servicemembers  Civil Relief Act or any similar  state or
local legislation or regulations.

      Relief  Act  Reductions:  With  respect to any  Distribution  Date and any
Mortgage  Loan as to which there has been a reduction  in the amount of interest
collectible  thereon for the most recently  ended  calendar month as a result of
the  application  of the Relief  Act,  the  amount,  if any,  by which  interest
collectible  on such Mortgage Loan for the most recently ended calendar month is
less than interest accrued thereon for such month pursuant to the Mortgage Note.

      REMIC: A "real estate mortgage  investment  conduit" within the meaning of
section 860D of the Code.

      REMIC Change of Law: Any proposed, temporary or final regulation,  revenue
ruling,  revenue  procedure or other  official  announcement  or  interpretation
relating to REMICs and the REMIC Provisions issued after the Closing Date.

      REMIC Pool: Either of the Lower REMIC, Middle REMIC or Upper REMIC.

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

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

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

      Required  Coupon:  With  respect to Pool I,  5.500%  per  annum,  and with
respect to Pool II, 5.000% per annum.

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

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

      Residual Certificates: As specified in the Preliminary Statement.

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

      Retail/Lottery Certificates: Not applicable.

                                       26
<PAGE>

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

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

      RL Interest: The REMIC residual interest,  within the meaning of the REMIC
Provisions,  issued by the Lower REMIC,  which shall be represented by the Class
I-A-R Certificate.

      RM Interest: The REMIC residual interest,  within the meaning of the REMIC
Provisions,  issued by the Middle REMIC, which shall be represented by the Class
I-A-R Certificate.

      RU Interest: The REMIC residual interest,  within the meaning of the REMIC
Provisions,  issued by the Upper REMIC,  which shall be represented by the Class
I-A-R Certificate.

      Scheduled Balances: Not applicable.

      Scheduled Certificates: Not applicable.

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

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

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

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

      Senior Certificates: As specified in the Preliminary Statement.

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

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

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

                                       27
<PAGE>

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

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

            (4) the lesser of:

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

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

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

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

                                       28
<PAGE>

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

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
<S>                                <C>
Period (Dates Inclusive)           Senior Prepayment Percentage
----------------------------------------------------------------------------------------
February 2005 - January 2010       100%
----------------------------------------------------------------------------------------
February 2010 - January 2011       the related Senior Percentage plus 70% of the related
                                   Subordinated Percentage
----------------------------------------------------------------------------------------
February 2011 - January 2012       the related Senior Percentage plus 60% of the related
                                   Subordinated Percentage
----------------------------------------------------------------------------------------
February 2012 - January 2013       the related Senior Percentage plus 40% of the related
                                   Subordinated Percentage
----------------------------------------------------------------------------------------
February 2013 - January 2014       the related Senior Percentage plus 20% of the related
                                   Subordinated Percentage
----------------------------------------------------------------------------------------
February 2014 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 Senior Prepayment  Percentage for both Certificate Groups
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 all
of the Mortgage Pools delinquent 60 days or more (including for this purpose any
Mortgage Loans in foreclosure or subject to bankruptcy  proceedings and Mortgage
Loans with  respect  to which the  related  Mortgaged  Property,  including  REO
Property,  has been  acquired  by the Trust)  does not exceed 50% of the related
Group Subordinate Amount as of such date; and

            (2)  cumulative  aggregate  Realized  Losses in all of the  Mortgage
Pools do not exceed:

            (a)   30% of the aggregate  Original Group Subordinate Amount of the
                  Mortgage  Pools if such  Distribution  Date occurs between and
                  including February 2010 and January 2011;

            (b)   35% of the aggregate  Original Group Subordinate Amount of the
                  Mortgage  Pools if such  Distribution  Date occurs between and
                  including February 2011 and January 2012;

            (c)   40% of the aggregate  Original Group Subordinate Amount of the
                  Mortgage  Pools if such  Distribution  Date occurs between and
                  including February 2012 and January 2013;

                                       29
<PAGE>

            (d)   45% of the aggregate  Original Group Subordinate Amount of the
                  Mortgage  Pools if such  Distribution  Date occurs between and
                  including February 2013 and January 2014; and

            (e)   50% of the aggregate  Original Group Subordinate Amount of the
                  Mortgage  Pools if such  Distribution  Date  occurs  during or
                  after February 2014.

      Servicing  Advances:  All  customary,  reasonable  and  necessary  "out of
pocket" costs and expenses incurred in the performance by the Master Servicer of
its servicing  obligations,  including,  but not limited to, the cost of (i) the
preservation,  restoration  and  protection  of a Mortgaged  Property,  (ii) any
expenses  reimbursable to the Master  Servicer  pursuant to Section 3.11 and any
enforcement  or  judicial  proceedings,   including   foreclosures,   (iii)  the
management  and  liquidation  of any REO Property and (iv)  compliance  with the
obligations under Section 3.9.

      Servicing  Agreement:  The servicing  agreement,  dated as of November 26,
2002 by and between  First  Horizon Asset  Securities  Inc. and its assigns,  as
owner, and First Tennessee Mortgage Services, Inc., as servicer.

      Servicing  Officer:  Any officer of the Master  Servicer  involved  in, or
responsible  for, the  administration  and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the  Trustee  by the  Master  Servicer  on the  Closing  Date  pursuant  to this
Agreement, as such list may from time to time be amended.

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

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

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

            (1) normal wear and tear;

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

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

                                       30
<PAGE>

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

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

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

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

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

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

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

      Special  Hazard Loss  Coverage  Amount:  Upon the initial  issuance of the
Certificates,  $3,638,667.  As of any Distribution Date, the Special Hazard Loss
Coverage Amount will equal the greater of

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

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

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

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

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

                                       31
<PAGE>

      Startup Day: The Closing Date.

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

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

      Subordinated Certificates: As specified in the Preliminary Statement.

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

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

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

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

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

                                       32
<PAGE>

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

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

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

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

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

      Substitute  Mortgage Loan: A Mortgage Loan substituted by the Seller for a
Deleted Mortgage Loan which must, on the date of such substitution, as confirmed
in a Request  for  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 lower of (a)
the Adjusted Net Mortgage Rate of the Deleted  Mortgage Loan or (b) 5.25% in the
case of a Deleted  Mortgage  Loan from Pool I, or 4.75% in the case of a Deleted
Mortgage  Loan from Pool II,  provided  that the  Master  Servicing  Fee for the
Substitute  Mortgage  Loan shall be equal to or greater than that of the Deleted
Mortgage Loan;  (iii) be accruing  interest at a rate no lower than and not more
than 1% per annum higher than,  that of the Deleted  Mortgage Loan;  (iv) have a
Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan; (v) have a
remaining term to maturity no greater than (and not more than one year less than
that of) the Deleted  Mortgage Loan;  (vi) not be a Cooperative  Loan unless the
Deleted  Mortgage  Loan  was a  Cooperative  Loan and  (vii)  comply  with  each
representation and warranty set forth in Section 2.3 hereof.

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

      Super Senior Certificates: As specified in the Preliminary Statement.

      Super  Senior  Support  Certificates:  As  specified  in  the  Preliminary
Statement.

                                       33
<PAGE>

      Support Classes: Not Applicable.

      Targeted Balances: Not applicable.

      Targeted Principal Classes: Not applicable.

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

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

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

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

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

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

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

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

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

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

                                       34
<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: The segregated pool of assets  consisting of the Middle REMIC
Interests.

      Voting Rights: The portion of the voting rights of all of the Certificates
which is allocated to any Certificate. As of any date of determination,  (a) 99%
of all Voting  Rights will be allocated  among all Holders of the  Certificates,
other than the Class I-A-R Certificates, in proportion to their then outstanding
Class Certificate  Balance;  and (b) 1.0% of all Voting Rights will be allocated
to the Class I-A-R  Certificates  (such Voting Rights to be allocated  among the
Holders of  Certificates  of such  Class in  accordance  with  their  respective
Percentage Interests).

                                   ARTICLE II
                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

      SECTION 2.1 Conveyance of Mortgage Loans.

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

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

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

                                       35
<PAGE>

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

      (ii)  except as provided  below and for each  Mortgage  Loan that is not a
            MERS Mortgage Loan, the original recorded Mortgage or a copy of such
            Mortgage  certified by the Seller as being a true and complete  copy
            of the  Mortgage  and in the case of each MERS  Mortgage  Loan,  the
            original  Mortgage,  noting the  presence of the MIN of the Mortgage
            Loans and either language indicating that the Mortgage Loan is a MOM
            Loan if the Mortgage  Loan is a MOM Loan or if the Mortgage Loan was
            not a MOM  Loan  at  origination,  the  original  Mortgage  and  the
            assignment  thereof to MERS,  with  evidence of recording  indicated
            thereon, or a copy of the Mortgage certified by the public recording
            office in which such Mortgage has been recorded;

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

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

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

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

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

            (B)   The executed Security Agreement;

            (C)   The executed Proprietary Lease;

                                       36
<PAGE>

            (D)   The executed Recognition Agreement;

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

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

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

                                       37
<PAGE>

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

      Subject to the immediately  following sentence, as promptly as practicable
subsequent to such transfer and assignment, and in any event, within thirty (30)
days  thereafter,  the Master  Servicer  shall (i) complete  each  assignment of
Mortgage, as follows: "First Horizon Mortgage Pass-Through Certificates,  Series
2005-1,  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.

                                       38
<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.

                                       39
<PAGE>

      If, in the course of such review, the Trustee or the Custodian,  on behalf
of the Trustee,  finds any document constituting a part of a Mortgage File which
does not meet the  requirements  of Section 2.1, the Trustee shall list or shall
cause the  Custodian to list such as an  exception  in the Final  Certification;
provided,  however  that  neither the Trustee nor the  Custodian  shall make any
determination  as to whether (i) any  endorsement  is sufficient to transfer all
right,  title and interest of the party so endorsing,  as noteholder or assignee
thereof,  in and to that Mortgage  Note or (ii) any  assignment is in recordable
form or is sufficient  to effect the  assignment of and transfer to the assignee
thereof  under the mortgage to which the  assignment  relates.  The Seller shall
promptly  correct  or cure  such  defect  within 90 days from the date it was so
notified  of such defect and, if the Seller does not correct or cure such defect
within such  period,  the Seller  shall  either (a)  substitute  for the related
Mortgage  Loan  a  Substitute   Mortgage  Loan,  which   substitution  shall  be
accomplished  in the manner and subject to the  conditions  set forth in Section
2.3, or (b) purchase such Mortgage Loan from the Trustee within 90 days from the
date the Seller was notified of such defect in writing at the Purchase  Price of
such Mortgage Loan; provided,  however, that in no event shall such substitution
or purchase  occur more than 540 days from the Closing Date,  except that if the
substitution  or  purchase of a Mortgage  Loan  pursuant  to this  provision  is
required by reason of a delay in delivery of any  documents  by the  appropriate
recording  office,  and there is a dispute between either the Master Servicer or
the Seller and the Trustee over the location or status of the recorded document,
then such  substitution or purchase shall occur within 720 days from the Closing
Date. The Trustee shall deliver or shall cause the Custodian to deliver  written
notice to each Rating  Agency  within 270 days from the Closing Date  indicating
each Mortgage Loan (a) which has not been returned by the appropriate  recording
office or (b) as to which  there is a dispute as to  location  or status of such
Mortgage Loan. Such notice shall be delivered every 90 days thereafter until the
related Mortgage Loan is returned to the Trustee or the Custodian on its behalf.
Any such  substitution  pursuant to (a) above or purchase  pursuant to (b) above
shall not be  effected  prior to the  delivery  to the Trustee of the Opinion of
Counsel required by Section 2.5 hereof, if any, and any substitution pursuant to
(a) above shall not be effected prior to the additional  delivery to the Trustee
of a Request for Release substantially in the form of Exhibit L. No substitution
is permitted to be made in any calendar month after the  Determination  Date for
such month.  The Purchase Price for any such Mortgage Loan shall be deposited by
the Seller in the Certificate  Account on or prior to the  Distribution  Account
Deposit  Date for the  Distribution  Date in the  month  following  the month of
repurchase  and,  upon  receipt of such deposit and  certification  with respect
thereto in the form of Exhibit M hereto,  the Trustee  shall cause the Custodian
to release the related Mortgage File to the Seller and shall execute and deliver
at the Seller's request such  instruments of transfer or assignment  prepared by
the Seller, in each case without recourse,  as shall be necessary to vest in the
Seller,  or a designee,  the  Trustee's  interest in any Mortgage  Loan released
pursuant hereto. If pursuant to the foregoing  provisions the Seller repurchases
a Mortgage Loan that is a MERS Mortgage Loan,  the Master  Servicer shall either
(i)  cause  MERS to  execute  and  deliver  an  assignment  of the  Mortgage  in
recordable form to transfer the Mortgage from MERS to the Seller and shall cause
such  Mortgage  to be  removed  from  registration  on  the  MERS(R)  System  in
accordance  with MERS' rules and  regulations or (ii) cause MERS to designate on
the MERS(R) System the Seller as the beneficial holder of such Mortgage Loan.

      The Trustee shall retain or shall cause the Custodian to retain possession
and custody of each Mortgage  File in  accordance  with and subject to the terms
and conditions set forth herein.  The Master Servicer shall promptly  deliver to
the  Trustee or the  Custodian  on its  behalf,  upon the  execution  or receipt
thereof,  the originals of such other documents or instruments  constituting the
Mortgage File as come into the  possession  of the Master  Servicer from time to
time.

                                       40
<PAGE>

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

      The mortgage loans permitted by the terms of this Agreement to be included
in the Trust Fund are limited to (i) the  Mortgage  Loans  (which the  Depositor
acquired pursuant to the MLPA, and which refers to, among other  representations
and warranties in the MLPA, a representation  and warranty of the Seller that no
Mortgage Loan is a "high cost loan" as defined by the specific applicable local,
state or  federal  predatory  and  abusive  lending  laws,  and (ii)  Substitute
Mortgage Loans (which, by definition as set forth in this Agreement and referred
to in the MLPA,  are  required to conform to,  among other  representations  and
warranties,  a  representation  and warranty of the Seller set forth in the MLPA
that no  Substitute  Mortgage  Loan is a "high  cost  loan"  as  defined  by the
specific applicable local, state or federal predatory and abusive lending laws).
It is  therefore  understood  and agreed by the  parties  hereto  that it is not
intended  that any  Mortgage  Loan be included in the Trust Fund that is a "high
cost loan" as defined in the by the specific  applicable local, state or federal
predatory and abusive lending laws.

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

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

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

                                       41
<PAGE>

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

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

                                       42
<PAGE>

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

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

      The representations and warranties made pursuant to this Section 2.3 shall
survive  delivery  of  the  respective  Mortgage  Files  to the  Trustee  or the
Custodian for the benefit of the Certificateholders.

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

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

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

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

                                       43
<PAGE>

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

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

      SECTION 2.6 Execution and Delivery of Certificates.

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

      SECTION 2.7 REMIC Matters.

      The Preliminary  Statement sets forth the "latest possible  maturity date"
for federal income tax purposes of all REMIC regular interests created hereby.

      The  assets of the  Lower  REMIC  shall be as set forth in the  definition
thereof.  Each  interest  identified  in the first table below by a  designation
beginning with "L" shall be a "regular  interest" in the Lower REMIC and a Lower
REMIC  Interest,  and the RL  Interests  shall  be the sole  class  of  residual
interest in the Lower REMIC.  The Lower REMIC Interests shall be  uncertificated
and shall be held by the Trustee as assets of the Middle REMIC.

                                       44
<PAGE>

      The assets of the  Middle  REMIC  shall be as set forth in the  definition
thereof.  Each  interest  identified  in the second table below by a designation
beginning  with "M" shall be a  "regular  interest"  in the  Middle  REMIC and a
Middle REMIC Interest,  and the RM Interests shall be the sole class of residual
interest in the Middle REMIC. The Middle REMIC Interests shall be uncertificated
and shall be held by the Trustee as assets of the Upper REMIC.

      The  assets of the  Upper  REMIC  shall be as set forth in the  definition
thereof.  The Regular  Certificates shall represent  "regular  interests" in the
Upper REMIC. The RU Interest shall be the sole class of residual interest in the
Upper REMIC.  The Class I-A-R  Certificate  shall represent  ownership of the RL
Interest, RM Interest and RU Interest.

      The  "Startup  Day" for  purposes of the REMIC  Provisions  for each REMIC
hereunder shall be the Closing Date. The Tax Matters Person with respect to each
REMIC  hereunder shall be the Trustee and the Trustee shall hold the Tax Matters
Person Certificate. Each REMIC's taxable year shall be the calendar year and its
accounts shall be maintained using the accrual method.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
  Lower                                                               Corresponding Class of Middle
  REMIC                                                                       REMIC Interests
Interest or     Lower REMIC            Lower REMIC Interest          ----------------------------------
 Residual       Interest Balance               Rate                    Interest            Principal
-------------------------------------------------------------------------------------------------------
<S>             <C>                           <C>                        <C>                 <C>
L-I-A-1         $     50,757.37               5.25%                      (1)                 (1)
-------------------------------------------------------------------------------------------------------
L-I-A-2         $      5,639.71               5.25%                      (1)                 (1)
-------------------------------------------------------------------------------------------------------
L-I-A-ZZZ       $205,010,410.25               5.25%                      (1)                 (1)
-------------------------------------------------------------------------------------------------------
RL              $          0.00                N/A                       N/A                 N/A
-------------------------------------------------------------------------------------------------------
L-II-A-1        $      5,687.62               4.75%                      (1)                 (1)
-------------------------------------------------------------------------------------------------------
L-II-A-2        $        631.96               4.75%                      (1)                 (1)
-------------------------------------------------------------------------------------------------------
L-II-A-ZZZ      $ 22,972,638.35               4.75%                      (1)                 (1)
-------------------------------------------------------------------------------------------------------
                $228,045,765.26
-------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Lower REMIC Interest  L-I-A-1,  Lower REMIC  Interest  L-I-A-2 and Lower
REMIC  Interest  L-I-A-ZZZ  shall be  Corresponding  Classes to these classes of
Middle REMIC Interests:  M-I-A-1,  M-I-A-2,  M-I-A-4, M-I-A-5, M-I-A-6, M-I-A-7,
M-I-A-8,  M-I-A-9,  M-I-A-RU,  M-B-1,  M-B-2,  M-B-3,  M-B-4,  M-B-5  and  M-B-6
(provided that with respect to M-B-1, M-B-2, M-B-3, M-B-4, M-B-5 and M-B-6, such
Lower REMIC Interests shall only correspond to the portion supported by Pool I).
The Lower REMIC Interest L-II-A-1, Lower REMIC L-II-A-2 and Lower REMIC Interest
L-II-A-ZZZ  shall be  Corresponding  Classes to these  classes  of Middle  REMIC
Interests:  M-II-A-1, M-B-1, M-B-2, M-B-3, M-B-4, M-B-5 and M-B-6 (provided that
with respect to M-B-1,  M-B-2,  M-B-3,  M-B-4, M-B-5 and M-B-6, such Lower REMIC
Interests shall only correspond to the portion supported by Pool II).

      "L1 Interests" refers to the L-I-A-1 Lower REMIC Interest and the L-II-A-1
Lower REMIC Interests. "L2 Interests" refers to the L-I-A-2 Lower REMIC Interest
and the L-II-A-2  Lower REMIC  Interest.  "LZZZ  Interests"  refers to L-I-A-ZZZ
Lower REMIC Interest and L-II-A-ZZZ Lower REMIC Interest. Each L1 Interest shall
have a principal balance initially equal to 0.9% of the Group Subordinate Amount
of its  corresponding  Mortgage  Pool.  Each L2 Interest  shall have a principal
balance  initially  equal  to  0.1%  of  the  Group  Subordinate  Amount  of its
corresponding Mortgage Pool. The initial principal balance of each LZZZ Interest
shall  equal  the  excess of the Pool  Principal  Balance  of its  corresponding
Mortgage Pool over the sum of the initial principal balances of the L1 Interests
and L2 Interests corresponding to such Mortgage Pool.

                                       45
<PAGE>

      Unless a Cross-over  Situation (as defined  below)  exists,  principal and
Realized  Losses  arising with respect to each  Mortgage Pool shall be allocated
first to cause the L1 and L2 Interests  corresponding  to such  Mortgage Pool to
equal 0.9% and 0.1% of the Group Subordinate  Amount of such Mortgage Pool as of
such  Distribution  Date (after  distributions  of principal  and  allocation of
Realized Losses are made) and all excess  principal and Realized Losses shall be
allocated to the LZZZ Interest  corresponding to such Mortgage Pool. A L1, L2 or
LZZZ Interest that is allocated principal on any Distribution Date shall receive
such  principal,  and have its principal  balance  reduced by the amount of such
principal,  on such Distribution Date. Similarly, a L1, L2 or LZZZ Interest that
is allocated a Realized Loss on any  Distribution  Date shall have its principal
balance reduced by the amount of such Realized Loss on such Distribution Date.

      A "Cross-over  Situation" exists if on any Distribution Date (after taking
into account  distributions  of principal and  allocations of Realized Losses on
such  Distribution  Date) the L1 and L2 Interests  corresponding to any Mortgage
Pool are in the aggregate  less than 1% of the Group  Subordinate  Amount of the
corresponding   Mortgage  Pool.  If  a  Cross-over   Situation   exists  on  any
Distribution  Date, and the weighted average interest rate of the outstanding L1
and L2 Interests is less than the Pass-Through Rate for any Class of Subordinate
Certificates  for the  following  Distribution  Date,  a Principal  Reallocation
Payment (as defined below) shall be made  proportionately  to the outstanding L1
Interests prior to any other  distributions of principal from each such Mortgage
Pool so that the Calculation Rate equals the Pass-Through Rate for each Class of
Subordinate  Certificates.  If a Cross-over Situation exists on any Distribution
Date,  and the weighted  average rate of the  outstanding L1 and L2 Interests is
greater than the Pass-Through Rate for any Class of Subordinate Certificates for
the following  Distribution Date, a Principal Reallocation Payment shall be made
proportionately to the outstanding L2 Interests prior to any other distributions
of principal  from each such Mortgage Pool so that the  Calculation  Rate equals
the Pass-Through Rate for each Class of Subordinate  Certificates.  A "Principal
Reallocation  Payment" is a distribution of the minimum amount of principal that
causes the  Calculation  Rate (as defined below) with respect to the outstanding
L1 and L2 Interests to equal the Pass-Through Rate for each Class of Subordinate
Certificates.  The "Calculation Rate" shall equal the product of (i) 10 and (ii)
the weighted  average  interest  rate of the  outstanding  L1 and L2  Interests,
treating each L1 Interest as capped at zero or reduced by a fixed  percentage of
100% of the interest  accruing on such class.  Principal  Reallocation  Payments
shall be made from principal received on the Mortgage Loans from a Mortgage Pool
and shall also consist of a proportionate allocation of Realized Losses from the
Mortgage Loans of a Mortgage Pool. For purposes of making Principal Reallocation
Payments,  to the extent  that the  principal  received  during  the  applicable
collection period from the related Mortgage Pool and related Realized Losses are
insufficient to make the necessary  reduction of principal,  then interest shall
accrue  on the LZZZ  Interest  (and be added to its  principal  balance)  of the
related Mortgage Pool to allow the necessary Principal  Reallocation  Payment to
be made. The Calculation Rate is designed to always equal the Pass-Through  Rate
of each Class of Subordinated Certificates.

                                       46
<PAGE>

      If a Cross-over  Situation exists, the aggregate principal balances of the
outstanding  L1 and L2  Interests  of all of the  Mortgage  Pools  shall  not be
reduced below one percent of the aggregate Pool Principal  Balance of all of the
Mortgage  Pools for the  following  Distribution  Date in  excess of the  Senior
Certificates  as of the related  Distribution  Date (after  taking into  account
distributions   of  principal  and   allocations  of  Realized  Losses  on  such
Distribution  Date). To the extent this limitation  prevents the distribution of
principal  to the L1 and L2  Interests  of a Mortgage  Pool and the related LZZZ
Interest  has already  been  reduced to zero,  such excess  principal  from such
Mortgage  Pool  shall  be paid  proportionately  to the  LZZZ  Interests  of the
Mortgage  Pool whose  aggregate L1 and L2 Interests are less than one percent of
the Group  Subordinate  Amount.  Any such  shortfall as a result of the Mortgage
Pool  receiving  the extra  payment  having a Designated  Mortgage Pool Rate (as
defined below) lower than the Designated Mortgage Pool Rate of the Mortgage Pool
from which the payment was  reallocated  shall be treated as a Realized Loss and
if excess  arises as result of the Mortgage  Pool  receiving  the extra  payment
having a Designated  Mortgage Pool Rate higher than the Mortgage Pool from which
the  payment  was  reallocated  it shall  reimburse  the Middle  REMIC for prior
Realized Losses.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
  Middle                                                                     Corresponding Class or Interest
  REMIC                                                                   ------------------------------------
Interest or             Middle REMIC         Middle REMIC Interest
 Residual             Interest Balance               Rate                   Interest            Principal
--------------------------------------------------------------------------------------------------------------
<S>                    <C>                           <C>                   <C>                     <C>
M-I-A-1                $135,000,000.00               5.00%                     I-A-1               I-A-1
--------------------------------------------------------------------------------------------------------------
M-I-A-2                $ 15,000,000.00               7.50%                 I-A-2, I-A-3            I-A-2
--------------------------------------------------------------------------------------------------------------
M-I-A-4                $ 19,836,000.00               5.25%                     I-A-4               I-A-4
--------------------------------------------------------------------------------------------------------------
M-I-A-5                $  1,000,000.00               5.25%                     I-A-5               I-A-5
--------------------------------------------------------------------------------------------------------------
M-I-A-6                $  1,000,000.00               5.25%                     I-A-6               I-A-6
--------------------------------------------------------------------------------------------------------------
M-I-A-7                $  1,987,000.00               5.25%                     I-A-7               I-A-7
--------------------------------------------------------------------------------------------------------------
M-I-A-8                $  8,976,000.00               5.25%                     I-A-8               I-A-8
--------------------------------------------------------------------------------------------------------------
M-I-A-9                $ 16,628,000.00               5.25%                     I-A-9               I-A-9
--------------------------------------------------------------------------------------------------------------
M-I-A-RU               $        100.00               5.25%                  RU Interest         RU Interest
--------------------------------------------------------------------------------------------------------------
M-II-A-1               $ 22,347,000.00               4.75%                    II-A-1               II-A-1
--------------------------------------------------------------------------------------------------------------
M-B-1                  $  3,307,000.00                (1)                       B-1                 B-1
--------------------------------------------------------------------------------------------------------------
M-B-2                  $  1,140,000.00                (1)                       B-2                 B-2
--------------------------------------------------------------------------------------------------------------
M-B-3                  $    684,000.00                (1)                       B-3                 B-3
--------------------------------------------------------------------------------------------------------------
M-B-4                  $    456,000.00                (1)                       B-4                 B-4
--------------------------------------------------------------------------------------------------------------
M-B-5                  $    228,000.00                (1)                       B-5                 B-5
--------------------------------------------------------------------------------------------------------------
M-B-6                  $    456,665.26                (1)                       B-6                 B-6
--------------------------------------------------------------------------------------------------------------
RM                     $          0.00                N/A                       N/A                 N/A
--------------------------------------------------------------------------------------------------------------
Total                  $228,045,765.26
--------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Middle REMIC Interest Rate for the Middle REMIC Interest  M-B-1,  Middle
REMIC Interest M-B-2,  Middle REMIC Interest M-B-3, Middle REMIC Interest M-B-4,
Middle  REMIC  Interest  M-B-5,  Middle  REMIC  Interest  M-B-6  shall equal the
Calculation Rate as defined in this Section 2.7. The  Pass-Through  Rate on each
Class of Subordinated Certificates is variable and will be equal to the weighted
average of the Middle  REMIC  Interest  Rates on Middle  REMIC  Interest  M-B-1,
Middle REMIC Interest M-B-2,  Middle REMIC Interest M-B-3, Middle REMIC Interest
M-B-4, Middle REMIC Interest M-B-5, Middle REMIC Interest M-B-6, weighted on the
basis of the principal balance of each such Middle REMIC Interest.

                                       47
<PAGE>

      On each  Distribution  Date  Available  Funds  shall be  distributed  with
respect to the Middle REMIC Interests in a manner such that:

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

      (b)   principal is  distributed  (and Realized  Losses shall be allocated)
            with respect to each such Middle  REMIC  Interest in the same manner
            that  principal is  distributed  (and Realized  Losses is allocated)
            with respect to the  Corresponding  Class or Classes of Certificates
            pursuant to Section 4.2 and Section 4.4.

      The  foregoing  REMIC  structure is intended to cause all of the cash from
the  Mortgage  Loans to flow  through to the Upper REMIC as cash flow on a REMIC
regular interest, without creating any shortfall-actual or potential (other than
for  credit  losses)  to any REMIC  regular  interest.  To the  extent  that the
structure is believed to diverge from such  intention  the Trustee shall resolve
ambiguities to accomplish such result and shall to the extent necessary  rectify
any  drafting   errors  or  seek   clarification   to  the   structure   without
Certificateholder  approval (but with  guidance of counsel) to  accomplish  such
intention.

      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.

                                       48
<PAGE>

      For and on behalf of the  Certificateholders,  the Master  Servicer  shall
service and administer  the Mortgage  Loans in accordance  with the terms of (i)
the Servicing  Rights  Transfer and  Subservicing  Agreement,  pursuant to which
First  Tennessee  Mortgage  Services,   Inc.  engaged  the  Master  Servicer  to
subservice the Mortgage  Loans,  (ii) this Agreement and (iii) the customary and
usual standards of practice of prudent mortgage loan servicers; provided that if
there is a  conflict  between  the  terms  of the  Servicing  Agreement  and the
Servicing Rights Transfer and Subservicing  Agreement, on the one hand, and this
Agreement,  on the other hand,  the terms of this Agreement  shall  prevail.  In
connection  with such servicing and  administration,  the Master  Servicer shall
have full power and  authority,  acting alone  and/or  through  Subservicers  as
provided  in Section  3.2  hereof,  to do or cause to be done any and all things
that it may deem  necessary or desirable in connection  with such  servicing and
administration,  including but not limited to, the power and authority,  subject
to  the  terms   hereof  (i)  to  execute   and   deliver,   on  behalf  of  the
Certificateholders  and the  Trustee,  customary  consents  or waivers and other
instruments  and  documents,  (ii) to  consent  to  transfers  of any  Mortgaged
Property and  assumptions of the Mortgage Notes and related  Mortgages (but only
in the  manner  provided  in this  Agreement),  (iii) to collect  any  Insurance
Proceeds and other Liquidation Proceeds,  and (iv) to effectuate  foreclosure or
other  conversion  of the  ownership  of the  Mortgaged  Property  securing  any
Mortgage Loan;  provided that the Master Servicer shall not take any action that
is  inconsistent  with or  prejudices  the  interests  of the Trust  Fund or the
Certificateholders  in any  Mortgage  Loan or the  rights and  interests  of the
Depositor,  the Trustee and the  Certificateholders  under this  Agreement.  The
Master  Servicer shall  represent and protect the interests of the Trust Fund in
the same manner as it protects its own  interests  in mortgage  loans in its own
portfolio in any claim,  proceeding or litigation regarding a Mortgage Loan, and
shall not make or permit any  modification,  waiver or amendment of any Mortgage
Loan which would cause any REMIC created hereunder to fail to qualify as a REMIC
or result in the imposition of any tax under Section  860F(a) or Section 860G(d)
of the Code.  Without  limiting  the  generality  of the  foregoing,  the Master
Servicer,  in its own name or in the name of the Depositor  and the Trustee,  is
hereby  authorized  and  empowered by the  Depositor  and the Trustee,  when the
Master Servicer believes it appropriate in its reasonable  judgment,  to execute
and deliver, on behalf of the Trustee, the Depositor,  the Certificateholders or
any of them, any and all  instruments of  satisfaction  or  cancellation,  or of
partial or full release or discharge and all other comparable instruments,  with
respect to the Mortgage Loans, and with respect to the Mortgaged Properties held
for the benefit of the Certificateholders. The Master Servicer shall prepare and
deliver to the Depositor and/or the Trustee such documents  requiring  execution
and delivery by either or both of them as are necessary or appropriate to enable
the Master  Servicer to service and  administer the Mortgage Loans to the extent
that the Master  Servicer is not permitted to execute and deliver such documents
pursuant  to the  preceding  sentence.  Upon  receipt  of  such  documents,  the
Depositor  and/or the Trustee shall  execute such  documents and deliver them to
the Master Servicer.  The Master Servicer further is authorized and empowered by
the Trustee,  on behalf of the  Certificateholders  and the Trustee,  in its own
name  or in the  name  of the  Subservicer,  when  the  Master  Servicer  or the
Subservicer as the case may be,  believes it appropriate in its best judgment to
register any Mortgage Loan on the MERS(R) System,  or cause the removal from the
registration of any Mortgage Loan on the MERS(R) System, to execute and deliver,
on behalf of the Trustee and the  Certificateholders or any of them, any and all
instruments of assignment and other comparable  instruments with respect to such
assignment or re-recording of a Mortgage in the name of MERS,  solely as nominee
for the Trustee and its successors and assigns.

                                       49
<PAGE>

      In accordance  with the standards of the preceding  paragraph,  the Master
Servicer  shall  advance  or cause to be  advanced  funds as  necessary  for the
purpose of  effecting  the  payment of taxes and  assessments  on the  Mortgaged
Properties,  which  advances  shall be  reimbursable  in the first instance from
related  collections from the Mortgagors pursuant to Section 3.6, and further as
provided in Section 3.8. The costs incurred by the Master  Servicer,  if any, in
effecting  the  timely  payments  of  taxes  and  assessments  on the  Mortgaged
Properties  and  related  insurance  premiums  shall  not,  for the  purpose  of
calculating  monthly  distributions to the  Certificateholders,  be added to the
Stated Principal  Balances of the related Mortgage Loans,  notwithstanding  that
the terms of such Mortgage Loans so permit.

      SECTION 3.2 Subservicing; Enforcement of the Obligations of Servicers.

(a)   The Master Servicer may arrange for the  subservicing of any Mortgage Loan
      by a Subservicer pursuant to a subservicing agreement;  provided, however,
      that  such   subservicing   arrangement  and  the  terms  of  the  related
      subservicing  agreement  must provide for the  servicing of such  Mortgage
      Loans in a manner consistent with the servicing arrangements  contemplated
      hereunder.  Unless the  context  otherwise  requires,  references  in this
      Agreement  to  actions  taken  or to be taken by the  Master  Servicer  in
      servicing  the Mortgage  Loans  include  actions taken or to be taken by a
      Subservicer  on  behalf  of  the  Master  Servicer.   Notwithstanding  the
      provisions of any  subservicing  agreement,  any of the provisions of this
      Agreement  relating  to  agreements  or  arrangements  between  the Master
      Servicer  and a  Subservicer  or  reference  to  actions  taken  through a
      Subservicer or otherwise,  the Master Servicer shall remain  obligated and
      liable to the Depositor,  the Trustee and the  Certificateholders  for the
      servicing and  administration of the Mortgage Loans in accordance with the
      provisions of this  Agreement  without  diminution  of such  obligation or
      liability by virtue of such subservicing  agreements or arrangements or by
      virtue of indemnification  from the Subservicer and to the same extent and
      under the same terms and  conditions as if the Master  Servicer alone were
      servicing  and  administering  the  Mortgage  Loans.  All  actions of each
      Subservicer performed pursuant to the related subservicing agreement shall
      be  performed as an agent of the Master  Servicer  with the same force and
      effect as if performed directly by the Master Servicer.

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

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

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

                                       50
<PAGE>

      SECTION 3.4 Trustee to Act as Master Servicer.

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

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

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

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

                                       51
<PAGE>

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

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

      (ii)  all  payments on account of interest  on the  Mortgage  Loans in the
            related  Mortgage Pool, net of the related Master Servicing Fee, any
            Prepayment  Interest Excess and, for so long as First Horizon is the
            Master Servicer, any Retained Yield;

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

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

      (v)   any  amounts  required  to be  deposited  by the Master  Servicer in
            respect of the related  Mortgage Pool pursuant to Section 3.9(b) and
            3.9(d);

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

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

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

                                       52
<PAGE>

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

(c)   The   Trustee   shall   establish   and   maintain,   on   behalf  of  the
      Certificateholders,  the Distribution  Account.  The Distribution  Account
      shall consist of two separate subaccounts, each of which shall relate to a
      particular  Mortgage  Pool.  The Trustee  shall,  promptly  upon  receipt,
      deposit in the Distribution Account and retain therein the following:

      (i)   the aggregate  amount remitted by the Master Servicer to the Trustee
            in respect of a Mortgage Pool pursuant to Section 3.8(a)(ix);

      (ii)  any amount deposited by the Master Servicer pursuant to 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.

                                       53
<PAGE>

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

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

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

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

                                       54
<PAGE>

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

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

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

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

      Upon  reasonable  advance  notice in  writing,  the Master  Servicer  will
provide to each  Certificateholder  or Certificate  Owner 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 or Certificate Owner 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  or Certificate  Owner
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;

                                       55
<PAGE>

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

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

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

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

      (vi)  to pay to the Seller or Master Servicer, as applicable, 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.

                                       56
<PAGE>

      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 (and with respect to clauses (i) and (ii) below, shall), prior
      to making the distribution  pursuant to Section 4.2 from time to time make
      withdrawals from the Distribution Account for the following purposes:

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

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

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

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

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

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

                                       57
<PAGE>

(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.

                                       58
<PAGE>

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

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

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

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

                                       59
<PAGE>

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

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

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

                                       60
<PAGE>

      With respect to any REO Property, the deed or certificate of sale shall be
taken in the name of the Trust Fund for the  benefit of the  Certificateholders,
or its nominee, on behalf of the  Certificateholders.  The Master Servicer shall
ensure that the title to such REO Property  references the Pooling and Servicing
Agreement and the Trust Fund's capacity  thereunder.  Pursuant to its efforts to
sell such REO Property,  the Master  Servicer  shall either itself or through an
agent selected by the Master Servicer  protect and conserve such REO Property in
the same manner and to such extent as is customary  in the  locality  where such
REO Property is located and may,  incident to its conservation and protection of
the interests of the Certificateholders,  rent the same, or any part thereof, as
the Master  Servicer deems to be in the best interest of the  Certificateholders
for the period prior to the sale of such REO Property. The Master Servicer shall
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 any REMIC  hereunder  as
defined in Section 860F of the Code or cause any 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 any 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.

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

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

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

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

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      SECTION 3.12 Trustee to Cooperate; Release of Mortgage Files.

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

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

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

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

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      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  Certificates  or
Certificate Owners 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.

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      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 2005 fiscal year, an Officer's  Certificate  stating,  as to the signer
thereof,  that (i) a review of the activities of the Master  Servicer during the
preceding calendar year and of the performance of the Master Servicer under this
Agreement has been made under such officer's supervision and (ii) to the best of
such  officer's  knowledge,  based  on such  review,  the  Master  Servicer  has
fulfilled all its obligations under this Agreement  throughout such year, or, if
there has been a default in the fulfillment of any such  obligation,  specifying
each such default known to such officer and the nature and status  thereof.  The
Trustee shall forward a copy of each such statement to each Rating Agency.

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

      On or before 120 days after the end of the Master  Servicer's fiscal year,
commencing  with its 2005 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  or
Certificate Owner upon request at the Master Servicer's  expense,  provided such
statement is delivered by the Master Servicer to the Trustee.

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      SECTION 3.18 Errors and Omissions Insurance; Fidelity Bonds.

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

                                   ARTICLE IV
                DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER

      SECTION 4.1 Advances.

      The Master  Servicer  shall  determine  on the  Business Day prior to each
Master Servicer  Advance Date whether it is required to make an Advance pursuant
to the definition  thereof.  If the Master Servicer determines it is required to
make an Advance, it shall, on or before the Master Servicer Advance Date, either
(i) deposit into the applicable  subaccount of the Certificate Account an amount
equal to the Advance or (ii) make an appropriate  entry in its records  relating
to the applicable subaccount of the Certificate Account that any Amount Held for
Future  Distribution  has been used by the Master  Servicer in  discharge of its
obligation to make any such  Advance.  Any funds so applied shall be replaced by
the Master  Servicer by deposit in the applicable  subaccount of the Certificate
Account no later than the close of business on the next  Business Day  preceding
the next Master Servicer  Advance Date. The Master Servicer shall be entitled to
be reimbursed from the applicable  subaccount of the Certificate Account for all
Advances of its own funds made  pursuant to this  Section as provided in Section
3.8. The  obligation  to make  Advances  with respect to any Mortgage Loan shall
continue  until  the  ultimate  disposition  of the REO  Property  or  Mortgaged
Property relating to such Mortgage Loan. As to any Distribution Date, the Master
Servicer  shall inform the Trustee in writing of the amount of the Advance to be
made by the Master Servicer on each Master  Servicer  Advance Date no later 1:30
p.m.  Central  time  on the  second  Business  Day  immediately  preceding  such
Distribution Date.

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

      SECTION 4.2 Priorities of Distribution.

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

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<PAGE>

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

      (ii)  to the Classes of Senior  Certificates  of the  related  Certificate
            Group entitled to distributions of interest, any Accrued Certificate
            Interest thereon remaining  undistributed from previous Distribution
            Dates,  to the extent of remaining  Available Funds from the related
            Mortgage  Pool, any shortfall in available  amounts being  allocated
            among such  Classes  in  proportion  to the  amount of such  Accrued
            Certificate Interest remaining undistributed for each such Class for
            such Distribution Date; provided, however, that on each Distribution
            Date  through the  Accretion  Termination  Date,  such  amounts with
            respect to the Accrual  Certificates will not be distributed to such
            Certificates under this clause (ii) but will instead be added to the
            Class  Certificate  Balance  thereof,  to the extent not  previously
            added  pursuant to clause (i) above,  and  distributed in accordance
            with the priorities set forth below in Sections 4.2(d);

      (iii) to the Classes of Senior  Certificates  of the  related  Certificate
            Group  entitled to  distributions  of  principal 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 Sections  4.2(b) and (c), as applicable,
            until the respective  Class  Certificate  Balances thereof have been
            reduced to zero;

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

      (v)   to the Class B-2 Certificates,  to the extent of remaining Available
            Funds for the Mortgage  Pools,  but subject to the prior  payment of
            amounts  described under Section 4.2(i), 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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<PAGE>

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

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

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

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

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

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

      (ii)  concurrently,  to the Class I-A-4 and Class I-A-6 Certificates,  pro
            rata, in an amount up to the NAS Principal  Distribution  Amount for
            such  Distribution  Date, until their  respective Class  Certificate
            Balances have each been reduced to zero;

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<PAGE>

      (iii) concurrently,  to the Class I-A-1 and Class I-A-2 Certificates,  pro
            rata, until their respective  Class  Certificate  Balances have each
            been reduced to zero;

      (iv)  concurrently, as follows:

            (1)   3.4976041412% of the remaining Senior Optimal Principal Amount
                  for Pool I for such  Distribution  Date,  to the  Class  I-A-5
                  Certificates,  until the Class Certificate Balance thereof has
                  been reduced to zero; and

            (2)   96.5023958588%  of  the  remaining  Senior  Optimal  Principal
                  Amount for Pool I for such Distribution Date,  sequentially to
                  the Class I-A-7, Class I-A-9 and Class I-A-8 Certificates,  in
                  that order, until their respective Class Certificate  Balances
                  have each been reduced to zero; and

      (v)   concurrently,  to the Class I-A-4 and Class I-A-6 Certificates,  pro
            rata,  without regard to the NAS Principal  Distribution  Amount for
            such  Distribution  Date, until their  respective Class  Certificate
            Balances have each been reduced to zero.

(c)   Amounts allocated to the Group II Senior Certificates  pursuant to Section
      4.2(a)(iii)  above will be distributed  to the Class II-A-1  Certificates,
      until the Class Certificate Balance thereof has been reduced to zero.

(d)   On each  Distribution  Date through the Accretion  Termination  Date,  the
      Accrual  Amount for the  Accrual  Certificates  will be added to the Class
      Certificate  Balance  thereof  and will be  distributed  to the  following
      Classes  of  Certificates  (prior  to giving  effect to the  distributions
      pursuant  to  Section  4.2(a)(iii)  above)  in  reduction  of their  Class
      Certificate Balances in the following order of priority:

      (i)   to the Class I-A-7 Certificates, until the Class Certificate Balance
            thereof has been reduced to zero; and

      (ii)  to the Class I-A-9 Certificates, until the Class Certificate Balance
            thereof has been reduced to zero; and

      (iii) to the Class I-A-8 Certificates, until the Class Certificate Balance
            thereof has been reduced to zero.

(e)   On each Distribution  Date, the Trustee shall distribute to the Holders of
      the Class I-A-R Certificates representing the RL Interest and RU Interest,
      any Available Funds  remaining in the related REMIC created  hereunder for
      such  Distribution  Date after  application  of all amounts  described  in
      clauses (a) through (d) of this Section 4.2. Any distributions pursuant to
      this subsection (e) shall not reduce the Class Certificate Balances of the
      Class I-A-R Certificates.

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<PAGE>

(f)   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 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
      Sections 4.2(b) and (c).

(g)   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 or Classes of  Subordinated  Certificates  pursuant  to clauses
      (2), (3) and (5) of the applicable  Subordinated  Optimal Principal Amount
      remain undistributed on such Distribution Date after all amounts otherwise
      distributable on such date pursuant to clauses (v) through (ix) of Section
      4.2(a) have been distributed,  such amounts,  to the extent of such Class'
      remaining  Allocable Share, shall be distributed on such Distribution Date
      to the remaining Classes of Subordinated Certificates on a pro rata basis,
      subject to the priority of payments described in Section 4.2(a)(iii).

(h)   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  the
      Unanticipated  Recovery  from the  Distribution  Account and  sequentially
      increase the Class  Certificate  Balance of each Class of  Certificates to
      which such Realized Losses were previously allocated by the amount of such
      Unanticipated Recovery, but not to exceed the amount of such Realized Loss
      previously  allocated to such Class,  and shall  distribute  the amount of
      such  Unanticipated  Recovery  to each such Class of  Certificates  in the
      order of payment  priority  described in Section 4.2(a) of this Agreement.
      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 (h). 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 such Unanticipated  Recoveries in accordance with
      the priorities set forth in Section 4.2(a)(iii).

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

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      (i)   On any Distribution  Date on which any Certificate Group constitutes
            an Undercollateralized Group, all amounts otherwise distributable as
            principal  on the  Subordinated  Certificates,  in reverse  order of
            priority (or,  following  the  Cross-over  Date,  such other amounts
            described  in  the   immediately   following   sentence),   will  be
            distributed  as  principal  to  the  Senior   Certificates  of  such
            Undercollateralized  Group in  accordance  with the  priorities  set
            forth in  Section  4.2(a)(iii),  until the total  Class  Certificate
            Balance  of such  Senior  Certificates  equals  the  Pool  Principal
            Balance  of  the  related  Mortgage  Pool  (such  distribution,   an
            "Undercollateralization  Distribution").  If the Senior Certificates
            of a Certificate  Group constitute an  Undercollateralized  Group on
            any    Distribution    Date   following   the    Cross-over    Date,
            Undercollateralization Distributions will be made from the excess of
            the Available  Funds for the 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 Accrued  Certificate  Interest with respect
            to an Undercollateralized  Group on any Distribution Date (including
            any Accrued Certificate  Interest 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). Except as provided otherwise in
            this Section  4.2(i),  no  distribution of principal will be made to
            any    Class    of    Subordinated     Certificates    until    each
            Undercollateralized Group is no longer undercollateralized.  If more
            than  one  Undercollateralized  Group  on any  Distribution  Date is
            entitled   to   an   Undercollateralization    Distribution,    such
            Undercollateralization  Distribution  shall be  allocated  among the
            Undercollateralized  Groups, pro rata, on the basis of the amount by
            which the aggregate Class Certificate  Balance of the related Senior
            Certificates is greater than the aggregate Stated Principal  Balance
            of the Mortgage Loans in the related  Undercollateralized Groups. If
            more than one Certificate Group on any Distribution Date is required
            to   make    an    Undercollateralization    Distribution    to   an
            Undercollateralized      Group,      the     payment     of     such
            Undercollateralization  Distributions  shall be allocated among such
            Certificate  Groups,  pro rata, on the basis of the aggregate  Class
            Certificate Balance of the related Senior Certificates.

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

                                       71
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      SECTION 4.3 Method of Distribution.

(a)   All  distributions  with  respect  to each Class of  Certificates  on each
      Distribution   Date  shall  be  made  pro  rata   among  the   outstanding
      Certificates of such Class, based on the Percentage Interest in such Class
      represented by each  Certificate.  Payments to the  Certificateholders  on
      each   Distribution   Date   will   be  made   by  the   Trustee   to  the
      Certificateholders  of record on the related Record Date by check or money
      order  mailed  to a  Certificateholder  at the  address  appearing  in the
      Certificate Register, or upon written request by such Certificateholder to
      the  Trustee  made not later  than the  applicable  Record  Date,  by wire
      transfer to a U.S. depository institution acceptable to the Trustee, or by
      such  other  means of payment as such  Certificateholder  and the  Trustee
      shall agree.

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

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

                                       72
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      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 in the following order of priority:

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

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

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

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

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

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

            seventh,  to the  Classes  of  Senior  Certificates  of the  related
            Certificate   Group,  pro  rata,  in  accordance  with  their  Class
            Certificate  Balances;  provided,  that  the  principal  portion  of
            Realized  Losses  (other than Excess  Losses) on the Mortgage  Loans
            allocable to the Super Senior  Certificates will instead be borne by
            the Super Senior Support Certificates (in addition to other Realized
            Losses  allocated to the Super Senior  Support  Certificates  in the
            manner  provided  in  paragraph  (c)),  and not by the Super  Senior
            Certificates,  for so long as the Class  Certificate  Balance of the
            Super Senior Support Certificates is greater than zero.

                                       73
<PAGE>

(c)   commencing on the Cross-over  Date, any Realized Losses (other than Excess
      Losses)  which would  otherwise  be allocated to the Class I-A-5 and Class
      I-A-9 Certificates, up to an amount equal to 25% and 75%, respectively, of
      the Class  Certificate  Balance of the Class I-A-6  Certificates  for such
      Distribution  Date,  and  up  to  a  maximum  of  $250,000  and  $750,000,
      respectively,  in addition to other Realized Losses allocated to the Class
      I-A-6 Certificates,  will instead be borne by the Class I-A-6 Certificates
      and not by the Class I-A-5 and Class I-A-9  Certificates,  until the Class
      Certificate Balance of the Class I-A-6 Certificates is reduced to zero.

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

(e)   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).

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

(g)   On each  Distribution  Date,  the  Master  Servicer  shall  determine  the
      Subordinated  Certificate  Writedown Amount, if any. Any such Subordinated
      Certificate  Writedown  Amount shall effect,  without  duplication  of any
      other  provision in this Section 4.4 that  provides for a reduction in the
      Class   Certificate   Balance   of  the   Subordinated   Certificates,   a
      corresponding   reduction  in  the  Class   Certificate   Balance  of  the
      Subordinated   Certificates,   which   reduction   shall   occur  on  such
      Distribution  Date  after  giving  effect  to  distributions  made on such
      Distribution Date.

(h)   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
      Class  Certificate  Balances of all the Senior  Certificates  of a related
      Certificate  Group  as of such  Distribution  Date  plus  the  Apportioned
      Principal  Balances of the  Subordinated  Certificates of such Certificate
      Group  as  of  such   Distribution   Date,  after  giving  effect  to  all
      distributions and prior allocations of Realized Losses on such date, to an
      amount less than the aggregate  Stated  Principal  Balance of the Mortgage
      Loans in the  related  Mortgage  Pool as of the  first day of the month of
      such  Distribution  Date,  less any Deficient  Valuations  occurring on or
      prior to the Bankruptcy  Coverage  Termination Date (such limitation,  the
      "Loss Allocation Limitation").

                                       74
<PAGE>

      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.bnyinvestorreporting.com:

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

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

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

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

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

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

      (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;

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<PAGE>

      (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 not delivered
            within thirty days after the Closing Date.

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

(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.

                                       76
<PAGE>

      SECTION 4.7 [RESERVED]

      SECTION 4.8 [RESERVED]

      SECTION 4.9 Determination of Pass-Through Rates for LIBOR Certificates.

(a)   On each Interest  Determination Date so long as any LIBOR Certificates are
      outstanding,  the Trustee will determine LIBOR on the basis of the British
      Bankers'  Association  ("BBA")  "Interest  Settlement  Rate" for one-month
      deposits in U.S.  dollars as found on Telerate  page 3750 as of 11:00 a.m.
      London time on each LIBOR Determination  Date.  "Telerate Page 3750" means
      the display page  currently so designated on the Bridge  Telerate  Service
      (formerly  the Dow Jones  Markets) (or such other page as may replace that
      page on that  service for the purpose of  displaying  comparable  rates or
      prices.)

(b)   If LIBOR cannot be determined as provided in paragraph (a) of this Section
      4.9, the Trustee shall either (i) request each  Reference  Bank inform the
      Trustee of the quotation offered by such Reference Bank's principal London
      office for making one-month United States dollar deposits in leading banks
      in the London  interbank  market,  as of 11:00 a.m.  (London time) on such
      Interest  Determination  Date or (ii) in lieu of making any such  request,
      rely on such  Reference  Bank  quotations  that appear at such time on the
      Reuters  Screen LIBO Page (as defined in the  International  Swap  Dealers
      Association Inc. Code of Standard Wording,  Assumptions and Provisions for
      Swaps,  1986  Edition),  to the  extent  available.  With  respect to this
      Section  4.9,  LIBOR  for  the  next  Interest   Accrual  Period  will  be
      established by the Trustee on each Interest Determination Date as follows:

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

      (ii)  If on any  Interest  Determination  Date  only  one or  none  of the
            Reference Banks provides such offered quotations, LIBOR for the next
            Interest  Accrual  Period  shall be  whichever  is the higher of (i)
            LIBOR as determined on the previous Interest  Determination  Date or
            (ii) the Reserve Interest Rate. The "Reserve Interest Rate" shall be
            the rate per annum which the Trustee determines to be either (i) the
            arithmetic  mean (rounded  upwards if necessary to the nearest whole
            multiple of 1/32%) of the one-month  United  States  dollar  lending
            rates that New York City banks  selected by the Trustee are quoting,
            on the relevant Interest Determination Date, to the principal London
            offices  of at  least  two of the  Reference  Banks  to  which  such
            quotations  are, in the opinion of the  Trustee,  being so made,  or
            (ii) in the event that the Trustee can determine no such  arithmetic
            mean, the lowest  one-month  United States dollar lending rate which
            New York City banks  selected  by the  Trustee  are  quoting on such
            Interest Determination Date to leading European banks.

                                       77
<PAGE>

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

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

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

      In determining  LIBOR, any Pass-Through  Rate for the LIBOR  Certificates,
any Interest  Settlement  Rate, or any Reserve  Interest  Rate,  the Trustee may
conclusively rely and shall be protected in relying upon the offered  quotations
(whether  written,  oral or on the Dow Jones  Markets)  from the BBA  designated
banks,  the Reference Banks or the New York City banks as to LIBOR, the Interest
Settlement  Rate or the Reserve  Interest Rate, as  appropriate,  in effect from
time to time. The Trustee shall not have any liability or  responsibility to any
Person for (i) the  Trustee's  selection  of New York City banks for purposes of
determining  any  Reserve  Interest  Rate or (ii)  its  inability,  following  a
good-faith reasonable effort, to obtain such quotations from, the BBA designated
banks,  the  Reference  Banks or the New York City  banks or to  determine  such
arithmetic mean, all as provided for in this Section 4.9.

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

                                       78
<PAGE>

                                   ARTICLE V
                                THE CERTIFICATES

      SECTION 5.1 The Certificates.

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

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

      The  Certificates  shall be executed by manual or  facsimile  signature on
behalf of the Trustee by an authorized officer.  Certificates bearing the manual
or  facsimile  signatures  of  individuals  who  were,  at the  time  when  such
signatures were affixed,  authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so authorized prior to the countersignature and delivery of such Certificates
or did not hold such  offices at the date of such  Certificate.  No  Certificate
shall be  entitled  to any  benefit  under this  Agreement,  or be valid for any
purpose,  unless  countersigned  by the  Trustee by manual  signature,  and such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence,  that such Certificate has been duly executed and delivered hereunder.
All  Certificates  shall be dated  the  date of their  countersignature.  On the
Closing Date, the Trustee shall countersign the Certificates to be issued at the
direction of the Depositor, or any affiliate thereof.

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

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

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

                                       79
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      At the option of a  Certificateholder,  Certificates  may be exchanged for
other Certificates of the same Class in authorized  denominations and evidencing
the same aggregate  Percentage Interest upon surrender of the Certificates to be
exchanged at the office or agency of the Trustee.  Whenever any Certificates are
so  surrendered  for exchange,  the Trustee  shall  execute,  authenticate,  and
deliver the  Certificates  which the  Certificateholder  making the  exchange is
entitled to receive. Every Certificate presented or surrendered for registration
of transfer or exchange shall be accompanied by a written instrument of transfer
in form  satisfactory  to the Trustee duly executed by the Holder thereof or his
attorney duly authorized in writing.

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

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

(b)   No transfer of a Private Certificate shall be made unless such transfer is
      made pursuant to an effective  registration statement under the Securities
      Act  and any  applicable  state  securities  laws or is  exempt  from  the
      registration  requirements  under said Act and such state securities laws.
      In the event that a transfer is to be made in reliance  upon an  exemption
      from the Securities Act and such laws, in order to assure  compliance with
      the Securities Act and such laws, the Certificateholder desiring to effect
      such transfer and such  Certificateholder's  prospective  transferee shall
      each certify to the Trustee in writing the facts  surrounding the transfer
      in  substantially  the  forms  set  forth in  Exhibit  I (the  "Transferor
      Certificate") and (i) deliver a letter in substantially the form of either
      Exhibit J (the "Investment  Letter") or Exhibit K (the "Rule 144A Letter")
      or (ii) there  shall be  delivered  to the  Trustee at the  expense of the
      transferor  an Opinion of Counsel that such  transfer may be made pursuant
      to an exemption  from the Securities  Act. The Depositor  shall provide to
      any  Holder  of a  Private  Certificate  and  any  prospective  transferee
      designated  by  any  such  Holder,   information   regarding  the  related
      Certificates and the Mortgage Loans and such other information as shall be
      necessary  to  satisfy  the  condition  to  eligibility  set forth in Rule
      144A(d)(4)  for  transfer  of any such  Certificate  without  registration
      thereof under the  Securities Act pursuant to the  registration  exemption
      provided by Rule 144A. The Trustee and the Master Servicer shall cooperate
      with the  Depositor in providing the Rule 144A  information  referenced in
      the  preceding  sentence,   including  providing  to  the  Depositor  such
      information  regarding  the  Certificates,  the  Mortgage  Loans and other
      matters regarding the Trust Fund as the Depositor shall reasonably request
      to meet its  obligation  under the  preceding  sentence.  Each Holder of a
      Private  Certificate  desiring to effect  such  transfer  shall,  and does
      hereby agree to,  indemnify the Trustee and the Depositor,  the Seller and
      the Master Servicer  against any liability that may result if the transfer
      is not so exempt or is not made in accordance  with such federal and state
      laws.

                                       80
<PAGE>

      No transfer of an  ERISA-Restricted  Certificate  shall be made unless the
Trustee shall have received a Transferor Certificate from the related transferor
and  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 (that has been subject to an ERISA-Qualified  Underwriting)
or a  Residual  Certificate,  if  the  purchaser  is  an  insurance  company,  a
representation  that the  purchaser is an insurance  company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such  term is  defined  in  Section  V(e) of  Prohibited  Transaction  Class
Exemption  95-60  ("PTCE  95-60"))  and that the  purchase  and  holding of such
Certificates  are covered under Sections I and III of PTCE 95-60 or (iii) in the
case of any such ERISA-Restricted  Certificate presented for registration in the
name of an employee  benefit  plan  subject to ERISA,  or a plan or  arrangement
subject to Section 4975 of the Code (or comparable  provisions of any subsequent
enactments),  or a trustee of any such plan or any other person acting on behalf
of any such plan or arrangement,  or using such plan's or arrangement's  assets,
an Opinion of Counsel  satisfactory  to the  Trustee,  which  Opinion of Counsel
shall not be an  expense  of either  the  Trustee,  the  Depositor,  the  Master
Servicer  or the Trust  Fund,  addressed  to the  Trustee to the effect that the
purchase  or holding  of such  ERISA-Restricted  Certificate  will not result in
prohibited  transactions under Section 406 of ERISA and Section 4975 of the Code
and will not subject the Trustee,  the  Depositor or the Master  Servicer to any
obligation in addition to those expressly undertaken in this Agreement or 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.

                                       81
<PAGE>

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

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

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

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

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

                                       82
<PAGE>

      (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
any REMIC  created  hereunder to fail to qualify as a REMIC at any time that the
Certificates are outstanding or result in the imposition of any tax on the Trust
Fund, a  Certificateholder  or another Person.  Each Person holding or acquiring
any  Ownership  Interest  in a  Residual  Certificate  hereby  consents  to  any
amendment of this Agreement which,  based on an Opinion of Counsel  furnished to
the Trustee, is reasonably necessary (a) to ensure that the record ownership of,
or any  beneficial  interest  in, a  Residual  Certificate  is not  transferred,
directly or indirectly,  to a Person that is not a Permitted  Transferee and (b)
to provide for a means to compel the Transfer of a Residual Certificate which is
held by a  Person  that is not a  Permitted  Transferee  to a  Holder  that is a
Permitted Transferee.

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

(e)   Except as provided below, the Book-Entry  Certificates  shall at all times
      remain  registered in the name of the Depository or its nominee and at all
      times:  (i) registration of the Certificates may not be transferred by the
      Trustee except to another  Depository;  (ii) the Depository shall maintain
      book-entry records with respect to the Certificate Owners and with respect
      to  ownership  and  transfers  of  such  Book-Entry  Certificates;   (iii)
      ownership and transfers of registration 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.

                                       83
<PAGE>

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

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

      SECTION 5.3 Mutilated, Destroyed, Lost or Stolen Certificates.

      If (a) any mutilated  Certificate is  surrendered  to the Trustee,  or the
Trustee receives evidence to its satisfaction of the destruction,  loss or theft
of any  Certificate  and (b) there is delivered  to the Master  Servicer and the
Trustee  such  security or  indemnity as may be required by them to save each of
them  harmless,  then,  in the  absence  of  notice  to the  Trustee  that  such
Certificate  has been  acquired  by a bona fide  purchaser,  the  Trustee  shall
execute,  countersign  and  deliver,  in  exchange  for or in 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.

                                       84
<PAGE>

      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 or Certificate Owners (a) request such
information in writing from the Trustee, (b) state that such  Certificateholders
or Certificate Owners 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 or Certificate
Owners 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  or  Certificate  Owners  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  or
Certificate  Owner,  by  receiving  and  holding a  Certificate,  agree that the
Trustee shall not be held  accountable  by reason of the  disclosure of any such
information as to the list of the  Certificateholders  hereunder,  regardless of
the source from which such information was derived.

      SECTION 5.6 Maintenance of Office or Agency.

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

                                   ARTICLE VI
                      THE DEPOSITOR AND THE MASTER SERVICER

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

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

                                       85
<PAGE>

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

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

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

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

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

                                       86
<PAGE>

      SECTION 6.4 Limitation on Resignation of Master Servicer.

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

                                  ARTICLE VII
                                     DEFAULT

      SECTION 7.1 Events of Default.

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

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

      (ii)  any  failure  by the  Master  Servicer  to observe or perform in any
            material  respect any other of the  covenants or  agreements  on the
            part of the  Master  Servicer  contained  in this  Agreement,  which
            failure materially affects the rights of  Certificateholders,  which
            failure continues  unremedied for a period of 60 days after the date
            on which written notice of such failure shall have been given to the
            Master  Servicer by the Trustee or the  Depositor,  or to the Master
            Servicer and the Trustee by the Holders of  Certificates  evidencing
            not  less  than  25%  of  the  Voting   Rights   evidenced   by  the
            Certificates;  provided,  however, that the 60-day cure period shall
            not apply to the  initial  delivery of the  Mortgage  File for Delay
            Delivery  Mortgage Loans nor the failure to substitute or repurchase
            in lieu thereof; or

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

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<PAGE>

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

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

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

      If an Event of Default  described  in clauses  (i) to (v) of this  Section
shall  occur,  then,  and in each and every such case,  so long as such Event of
Default  shall not have been  remedied,  the Trustee may, or at the direction of
the  Holders  of  Certificates  evidencing  not less than 66 2/3% of the  Voting
Rights evidenced by the Certificates,  the Trustee shall by notice in writing to
the Master  Servicer (with a copy to each Rating  Agency),  terminate all of the
rights and obligations of the Master Servicer under this Agreement and in and to
the  Mortgage  Loans  and the  proceeds  thereof,  other  than its  rights  as a
Certificateholder  hereunder. If an Event of Default described in clause (vi) of
this Section shall occur, the Trustee shall immediately, by notice in writing to
the Master  Servicer (with a copy to each Rating  Agency),  terminate all of the
rights and obligations of the Master Servicer under this Agreement and in and to
the  Mortgage  Loans  and  proceeds   thereof,   other  than  its  rights  as  a
Certificateholder  hereunder. On and after the receipt by the Master Servicer of
such written notice,  all authority and power of the Master Servicer  hereunder,
whether with respect to the Mortgage  Loans or  otherwise,  shall pass to and be
vested in the Trustee or another  successor to the Master Servicer  appointed by
the Trustee  pursuant to Section 7.2. The Trustee,  in its capacity as successor
to the  Master  Servicer,  shall  thereupon  make any  Advance  which the Master
Servicer  failed to make  subject to Section 4.1  hereof.  The Trustee is hereby
authorized  and  empowered  to  execute  and  deliver,  on behalf of the  Master
Servicer,  as  attorney-in-fact  or  otherwise,  any and all documents and other
instruments,  and to do or  accomplish  all other  acts or things  necessary  or
appropriate  to effect the  purposes of such notice of  termination,  whether to
complete the transfer and  endorsement  or assignment of the Mortgage  Loans and
related  documents,  or  otherwise.  Unless  expressly  provided in such written
notice,  no such termination  shall affect any obligation of the Master Servicer
to pay amounts owed  pursuant to Article  VIII.  The Master  Servicer  agrees to
cooperate with the Trustee in effecting the termination of the Master Servicer's
responsibilities  and  rights  hereunder,  including,  without  limitation,  the
transfer to the Trustee of all cash amounts  which shall at the time be credited
to the  Certificate  Account,  or  thereafter  be received  with  respect to the
Mortgage  Loans.  All expenses  incurred in the  transferring  of the  servicing
duties from the Master  Servicer to a  Successor  Servicer  shall be paid by the
Master  Servicer,  and if not paid by the  Master  Servicer,  shall be paid from
amounts on deposit in the Certificate Account.

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<PAGE>

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

      SECTION 7.2 Trustee to Act; Appointment of Successor.

      On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.1 hereof, the Trustee shall,  subject to and to the extent
provided in Section  3.4, be the  successor  to the Master  Servicer  under this
Agreement  and the  transactions  set forth or provided  for herein and shall be
subject to all the  responsibilities,  duties and liabilities  relating  thereto
placed on the Master Servicer by the terms and provisions  hereof and applicable
law  including  the  obligation  to make  Advances  pursuant to Section  4.1. As
compensation  therefor,  the Trustee shall be entitled to all funds  relating to
the Mortgage  Loans that the Master  Servicer would have been entitled to charge
to the Certificate  Account or  Distribution  Account if the Master Servicer had
continued to act hereunder.  Notwithstanding  the foregoing,  if the Trustee has
become the  successor  to the Master  Servicer in  accordance  with  Section 7.1
hereof,  the Trustee may, if it shall be unwilling to so act, or shall, if it is
prohibited by applicable law from making Advances pursuant to Section 4.1 hereof
or if it is  otherwise  unable  to so act,  appoint,  or  petition  a  court  of
competent  jurisdiction  to appoint,  any  established  mortgage loan  servicing
institution the appointment of which does not adversely  affect the then current
rating of the  Certificates by each Rating Agency as the successor to the Master
Servicer hereunder in the assumption of all or any part of the responsibilities,
duties or liabilities  of the Master  Servicer  hereunder.  Any successor to the
Master  Servicer  shall be an  institution  which is a FNMA and  FHLMC  approved
seller/servicer in good standing, which has a net worth of at least $10,000,000,
and which is willing to service the Mortgage  Loans and executes and delivers to
the  Depositor  and the  Trustee an  agreement  accepting  such  delegation  and
assignment,  which contains an assumption by such Person of the rights,  powers,
duties,  responsibilities,  obligations  and  liabilities of the Master Servicer
(other than liabilities of the Master Servicer under Section 6.3 hereof incurred
prior to termination of the Master Servicer under Section 7.1), with like effect
as if originally  named as a party to this Agreement;  and provided further that
each Rating Agency  acknowledges  that its rating of the  Certificates in effect
immediately  prior to such  assignment and  delegation  will not be qualified or
reduced, as a result of such assignment and delegation. Pending appointment of a
successor to the Master Servicer hereunder,  the Trustee,  unless the Trustee is
prohibited by law from so acting,  shall,  subject to Section 3.4 hereof, act in
such  capacity  as provided  above.  In  connection  with such  appointment  and
assumption,  the Trustee may make such arrangements for the compensation of such
successor  out of  payments  on Mortgage  Loans as it and such  successor  shall
agree;  provided,  however,  that no such compensation shall be in excess of the
Master  Servicing Fee permitted the Master Servicer  hereunder.  The Trustee and
such successor shall take such action,  consistent with this Agreement, as shall
be  necessary to  effectuate  any such  succession.  Neither the Trustee nor any
other successor  master  servicer shall be deemed to be in default  hereunder by
reason  of any  failure  to make,  or any  delay  in  making,  any  distribution
hereunder  or any portion  thereof or any  failure to  perform,  or any delay in
performing,  any duties or responsibilities  hereunder, in either case caused by
the  failure of the Master  Servicer  to  deliver  or  provide,  or any delay in
delivering or providing, any cash, information, documents or records to it.

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<PAGE>

      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 3.18.

      In connection  with the  termination or resignation of the Master Servicer
hereunder,  either (i) the successor Master  Servicer,  including the Trustee if
the Trustee is acting as successor Master Servicer,  shall represent and warrant
that it is a member of MERS in good  standing  and shall  agree to comply in all
material  respects with the rules and procedures of MERS in connection  with the
servicing  of the  Mortgage  Loans that are  registered  with MERS,  or (ii) the
predecessor  Master Servicer shall cooperate with the successor  Master Servicer
either (x) in causing MERS to execute and deliver an  assignment  of Mortgage in
recordable form to transfer the Mortgage from MERS to the Trustee and to execute
and  deliver  such other  notices,  documents  and other  instruments  as may be
necessary or desirable to effect a transfer of such  Mortgage  Loan or servicing
of such mortgage Loan on the MERS(R) System to the successor  Master Servicer or
(y) in causing  MERS to  designate on the MERS(R)  System the  successor  Master
Servicer as the servicer of such Mortgage Loan. The predecessor  Master Servicer
shall file or cause to be filed any such assignment in the appropriate recording
office.  The  successor  Master  Servicer  shall  cause  such  assignment  to be
delivered to the Trustee  promptly upon receipt of the original with evidence of
recording  thereon or a copy certified by the public  recording  office in which
such assignment was recorded.

      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.

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<PAGE>

                                  ARTICLE VIII
                             CONCERNING THE TRUSTEE

      SECTION 8.1 Duties of Trustee.

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

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

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

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

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

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<PAGE>

      (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 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;

                                       92
<PAGE>

      (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 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;

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<PAGE>

      (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 Mortgage Loan or
related document or of MERS or the MERS(R) System 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.

                                       94
<PAGE>

      SECTION 8.6 Eligibility Requirements for Trustee.

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

      SECTION 8.7 Resignation and Removal of Trustee.

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

                                       95
<PAGE>

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

      The Holders of Certificates  entitled to at least 51% of the Voting Rights
may at any time remove the  Trustee  and appoint a successor  trustee by written
instrument  or  instruments,  in  triplicate,  signed by such  Holders  or their
attorneys-in-fact  duly authorized,  one complete set of which instruments shall
be delivered by the successor  Trustee to the Master Servicer,  one complete set
to the Trustee so removed and one  complete set to the  successor so  appointed.
Notice of any removal of the Trustee shall be given to each Rating Agency by the
Successor Trustee.

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

      SECTION 8.8 Successor Trustee.

      Any  successor  trustee  appointed as provided in Section 8.7 hereof shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
and the Master Servicer an instrument  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.

                                       96
<PAGE>

      SECTION 8.9 Merger or Consolidation of Trustee.

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

      SECTION 8.10 Appointment of Co-Trustee or Separate Trustee.

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

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

      (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;

                                       97
<PAGE>

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

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

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

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

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

      SECTION 8.11 Tax Matters.

                                       98
<PAGE>

      It is intended  that the assets with respect to which each REMIC  election
is to be made, as set forth in the preliminary  statement shall constitute,  and
that the conduct of matters  relating to such assets shall be such as to qualify
such assets as, a "real estate mortgage investment conduit" as defined in and in
accordance  with the REMIC  Provisions.  In furtherance of such  intention,  the
Trustee  covenants  and agrees  that it shall act as agent  (and the  Trustee is
hereby  appointed  to act as agent) on behalf of any such REMIC and that in such
capacity it shall: (a) prepare and file, or cause to be prepared and filed, in a
timely manner, a U.S. Real Estate Mortgage  Investment Conduit Income Tax Return
(Form 1066 or any successor  form adopted by the Internal  Revenue  Service) and
prepare and file or cause to be  prepared  and filed with the  Internal  Revenue
Service and applicable state or local tax authorities  income tax or information
returns for each taxable year with  respect to any such REMIC,  containing  such
information and at the times and in the manner as may be required by the Code or
state or local  tax laws,  regulations,  or rules,  and  furnish  or cause to be
furnished to Certificateholders the schedules, statements or information at such
times and in such manner as may be required  thereby;  (b) within thirty days of
the Closing  Date,  furnish or cause to be  furnished  to the  Internal  Revenue
Service,  on Forms 8811 or as otherwise  may be required by the Code,  the name,
title,  address,  and  telephone  number of the person  that the  Holders of the
Certificates  may contact for tax information  relating  thereto,  together with
such  additional  information  as may be required by such Form,  and update such
information at the time or times in the manner required by the Code; (c) make or
cause to be made elections that such assets be treated as a REMIC on the federal
tax return for its first taxable year (and, if necessary, under applicable state
law);  (d) prepare and forward,  or cause to be prepared and  forwarded,  to the
Certificateholders and to the Internal Revenue Service and, if necessary,  state
tax authorities,  all information returns and reports as and when required to be
provided to them in  accordance  with the REMIC  Provisions,  including  without
limitation,  the calculation of any original issue discount using the prepayment
assumption; (e) provide information necessary for the computation of tax imposed
on the  transfer of a Residual  Certificate  to a Person that is not a Permitted
Transferee,  or an agent  (including a broker,  nominee or other middleman) of a
Non-Permitted  Transferee,  or a  pass-through  entity in which a  Non-Permitted
Transferee is the record holder of an interest (the reasonable cost of computing
and  furnishing  such  information  may be charged to the Person liable for such
tax); (f) to the extent that they are under its control conduct matters relating
to such  assets at all times  that any  Certificates  are  outstanding  so as to
maintain the status as a REMIC under the REMIC Provisions;  (g) not knowingly or
intentionally  take any action or omit to take any action  that would  cause the
termination of any REMIC status; (h) pay, from the sources specified in the last
paragraph  of this  Section  8.11,  the  amount  of any  federal  or state  tax,
including  prohibited  transaction taxes as described below, imposed on any such
REMIC  prior to its  termination  when and as the same shall be due and  payable
(but such  obligation  shall not prevent  the  Trustee or any other  appropriate
Person from  contesting  any such tax in appropriate  proceedings  and shall not
prevent the Trustee from  withholding  payment of such tax, if permitted by law,
pending the outcome of such  proceedings);  (i) ensure  that  federal,  state or
local income tax or  information  returns shall be signed by the Trustee or such
other  person as may be  required  to sign such  returns by the Code or state or
local laws,  regulations  or rules;  (j) maintain  records  relating to any such
REMIC, including but not limited to the income, expenses, assets and liabilities
thereof and the fair market value and adjusted basis of the assets determined at
such  intervals  as may be required by the Code,  as may be necessary to prepare
the foregoing returns, schedules, statements or information; and (k) as and when
necessary and  appropriate,  represent any such REMIC in any  administrative  or
judicial  proceedings  relating to an examination  or audit by any  governmental
taxing authority, request an administrative adjustment as to any taxable year of
any such REMIC,  enter into settlement  agreements with any governmental  taxing
agency,  extend any statute of limitations  relating to any tax item of any such
REMIC,  and  otherwise  act on behalf of any such REMIC in  relation  to any tax
matter or controversy involving it.

                                       99
<PAGE>

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

      In the event that any tax is imposed on "prohibited  transactions"  of any
REMIC as defined in Section  860F(a)(2)  of the Code,  on the "net  income  from
foreclosure property" of any REMIC as defined in Section 860G(c) of the Code, on
any  contribution to any REMIC after the Startup Day pursuant to Section 860G(d)
of the Code, or any other tax is imposed,  if not paid as otherwise provided for
herein,  such tax shall be paid by (i) the Trustee, if any such other tax arises
out of or results from a breach by the Trustee of any of its  obligations  under
this Agreement which breach was caused by its negligence or willful  misconduct,
(ii) the Master  Servicer,  in the case of any such  minimum tax, or if such tax
arises out of or results  from a breach by the Master  Servicer  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 to the Trustee by the  Depositor) and file on
behalf of the  Depositor  all periodic  reports  required  under the  Securities
Exchange  Act of 1934 in  conformity  with the terms of the  "no-action"  relief
granted  by  the  SEC  to  issuers  of  asset-backed   securities  such  as  the
Certificates  and the Trustee  hereby agrees to do so. The Master  Servicer will
also  prepare and execute any  certifications  to be filed with the Form 10-K as
required  under  the   Sarbanes-Oxley  Act  of  2002.  In  connection  with  the
preparation  and filing of such periodic  reports,  the Depositor and the Master
Servicer shall timely provide to the Trustee all material information  available
to them which is required  to be included in such  reports and not known to them
to be in the possession of the Trustee and such other information as the Trustee
reasonably  may  request  from  either of them and  otherwise  reasonably  shall
cooperate with the Trustee.  The Trustee shall have no liability with respect to
any failure to properly prepare or file such periodic reports  resulting from or
relating to the  Trustee's  inability or failure to obtain any  information  not
resulting from its own negligence or willful misconduct.

                                   ARTICLE IX
                                   TERMINATION

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

                                      100
<PAGE>

      Subject  to Section  9.3,  the  obligations  and  responsibilities  of the
Depositor,  the Master  Servicer and the Trustee  created hereby with respect to
the Trust Fund shall  terminate  upon the  earlier  of (a) the  purchase  by the
Master  Servicer of all  Mortgage  Loans (and REO  Properties)  remaining in the
Trust  Fund at the price  equal to the sum of (i) 100% of the  Stated  Principal
Balance  of each  Mortgage  Loan  (other  than a  Mortgage  Loan  that  has been
foreclosed and subject to clause (ii)) plus one month's accrued interest thereon
at the applicable  Adjusted  Mortgage Rate, (ii) the lesser of (x) the appraised
value  of any  REO  Property  as  determined  by the  higher  of two  appraisals
completed by two independent  appraisers  selected by the Master Servicer at the
expense of the Master  Servicer  and (y) the  Stated  Principal  Balance of each
Mortgage  Loan related to any REO  Property,  plus  accrued and unpaid  interest
thereon  at the  applicable  Adjusted  Mortgage  Rate,  and  (iii) any costs and
damages  incurred  by the Trust in  connection  with the  noncompliance  of such
Mortgage Loan with any specifically applicable predatory or abusive lending law,
and (b) the later of (i) the maturity or other  liquidation (or any Advance with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and the
disposition of all REO Property and (ii) the distribution to  Certificateholders
of all amounts required to be distributed to them pursuant to this Agreement. In
no event shall the trusts created hereby  continue beyond the earlier of (i) the
expiration  of 21 years from the death of the  survivor  of the  descendants  of
Joseph P. Kennedy,  the late Ambassador of the United States to the Court of St.
James's,  living on the date hereof, and (ii) the Latest Possible Maturity Date.
The right to purchase all Mortgage Loans and REO  Properties  pursuant to clause
(a) above shall be conditioned upon the Pool Principal Balance for both Mortgage
Pools,  at the time of any such  repurchase,  aggregating  less than ten percent
(10%) of the aggregate Cut-off Date Principal Balance of the Mortgage Loans.

      SECTION 9.2 Final Distribution on the Certificates.

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

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

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

                                      101
<PAGE>

      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 I-A-R  Certificates  shall be entitled  to all  unclaimed  funds and other
assets of the Trust  Fund,  held for  distribution  to such  Certificateholders,
which remain subject hereto.

      SECTION 9.3 Additional Termination Requirements.

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

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

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

                                      102
<PAGE>

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

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

                                   ARTICLE X
                                   [RESERVED]

                                   ARTICLE XI
                            MISCELLANEOUS PROVISIONS

      SECTION 11.1 Amendment.

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

                                      103
<PAGE>

      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  any   REMIC   established   hereunder   or  the
Certificateholders  or cause any REMIC established  hereunder to fail to qualify
as a REMIC at any time that any Certificates are outstanding.

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

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

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

      SECTION 11.2 Recordation of Agreement; Counterparts.

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

                                      104
<PAGE>

      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.

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

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

                                      105
<PAGE>

      (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;

      (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: Alfred Chang; (b) in the case
      of the Master Servicer, First Horizon Home Loan Corporation,  4000 Horizon
      Way, Irving, Texas 75063,  Attention:  Larry P. Cole or such other address
      as may be  hereafter  furnished  to the  Depositor  and the Trustee by the
      Master  Servicer in writing;  (c) in the case of the Trustee,  The Bank of
      New York, 101 Barclay  Street,  8W, New York,  New York 10286,  Attention:
      Diane Pickett,  or such other address as the Trustee may hereafter furnish
      to the  Depositor  or Master  Servicer,  and (d) in the case of the Rating
      Agencies,  the address specified therefor in the definition  corresponding
      to the name of such Rating Agency. Notices to Certificateholders  shall be
      deemed given when mailed, first class postage prepaid, to their respective
      addresses appearing in the Certificate Register.

      SECTION 11.6 Severability of Provisions.

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

                                      106
<PAGE>

      SECTION 11.7 Assignment.

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

      SECTION 11.8 Limitation on Rights of Certificateholders.

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

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

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

                                      107
<PAGE>

      SECTION 11.9 Inspection and Audit Rights.

      The Master  Servicer  agrees that,  on reasonable  prior  notice,  it will
permit and will  cause each  Subservicer  to permit  any  representative  of the
Depositor or the Trustee during the Master  Servicer's normal business hours, to
examine  all the books of  account,  records,  reports  and other  papers of the
Master  Servicer  relating to the  Mortgage  Loans,  to make copies and extracts
therefrom,  to cause such books to be audited by  independent  certified  public
accountants selected by the Depositor or the Trustee and to discuss its affairs,
finances  and  accounts  relating  to the  Mortgage  Loans  with  its  officers,
employees and independent  public  accountants (and by this provision the Master
Servicer hereby authorizes said accountants to discuss with such  representative
such affairs,  finances and accounts), all at such reasonable times and as often
as may be  reasonably  requested.  Any  out-of-pocket  expense  incident  to the
exercise by the  Depositor  or the Trustee of any right under this  Section 11.9
shall be borne by the party requesting such inspection;  all other such expenses
shall be borne by the Master Servicer or the related Subservicer.

      SECTION 11.10 Certificates Nonassessable and Fully Paid.

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

      SECTION 11.11 Limitations on Actions; No Proceedings.

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

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

      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.

                                   * * * * * *

                                      108
<PAGE>

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

                                        FIRST HORIZON ASSET SECURITIES INC.,
                                        as Depositor

                                        By: /s/ Alfred Chang
                                            ------------------------------------
                                            Alfred Chang
                                            Vice President

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

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

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

                                        By: /s/ Terry McCoy
                                            ------------------------------------
                                            Terry McCoy
                                            Senior Vice President

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

                                        FIRST HORIZON HOME LOAN CORPORATION,
                                        in its capacity as Seller

                                        By: /s/ Terry McCoy
                                            ------------------------------------
                                            Terry McCoy
                                            Senior Vice President

<PAGE>

                                   SCHEDULE I

                       First Horizon Asset Securities Inc.
                Mortgage Pass-Through Certificates Series 2005-1

                             Mortgage Loan Schedule

                      [Available Upon Request from Trustee]

                                      I-1
<PAGE>

                                   SCHEDULE II

                       First Horizon Asset Securities Inc.
                Mortgage Pass-Through Certificates Series 2005-1

              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,  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.

                                      II-1
<PAGE>

            (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.

            (5) First  Horizon  is a member of MERS in good  standing,  and will
      comply in all material  respects with the rules and  procedures of MERS in
      connection  with the servicing of the MERS Mortgage  Loans for as along as
      such Mortgage Loans are registered with MERS.

                                      II-2
<PAGE>

                                  SCHEDULE III

                       First Horizon Asset Securities Inc.
                Mortgage Pass-Through Certificates Series 2005-1

                     Form of Monthly Master Servicer Report

                              [Begins on Next Page]

                                     III-1
<PAGE>

                                   EXHIBIT A-1

                          [FORM OF SENIOR CERTIFICATE]

UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN  AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"),  TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE,  OR PAYMENT,  AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE  IS A "REGULAR
INTEREST" IN A "REAL  ESTATE  MORTGAGE  INVESTMENT  CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").

                                     A-I-1
<PAGE>

Certificate No.                :

Cut-off Date                   :

First Distribution Date        :

Initial Certificate Balance
of this Certificate
("Denominations")              :  $

Initial Certificate
Balances of all
Certificate of this
Class                          :  $

CUSIP                          :

                First Horizon Mortgage Pass-Through Trust 2005-1
                Mortgage Pass-Through Certificates, Series 2005-1
                                Class [________]

      evidencing a  percentage  interest in the  distributions  allocable to the
      Certificates  of the  above-referenced  Class with respect to a Trust Fund
      consisting  primarily of one or more pools of conventional  mortgage loans
      (the  "Mortgage  Loans")  secured  by first  liens on one- to  four-family
      residential properties.

                First Horizon Asset Securities Inc., as Depositor

      [Principal in respect of this Certificate is distributable  monthly as set
forth herein. Accordingly,  the Certificate Balance at any time may be less than
the Certificate Balance as set forth herein.] This Certificate does not evidence
an obligation of, or an interest in, and is not guaranteed by the Depositor, the
Master  Servicer  or the Trustee  referred  to below or any of their  respective
affiliates.  Neither this  Certificate  nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

      This certifies  that  __________________  is the  registered  owner of the
Percentage  Interest  evidenced  by this  Certificate  (obtained by dividing the
denomination of this Certificate by the aggregate Initial  Certificate  Balances
of all Certificates of the Class to which this  Certificate  belongs) in certain
monthly  distributions with respect to a Trust Fund consisting  primarily of the
Mortgage  Loans   deposited  by  First  Horizon  Asset   Securities   Inc.  (the
"Depositor").  The Trust Fund was created  pursuant  to a Pooling and  Servicing
Agreement dated as of the Cut-off Date specified above (the  "Agreement")  among
the  Depositor,  First Horizon Home Loan  Corporation,  as master  servicer (the
"Master Servicer"), and The Bank of New York, as trustee (the "Trustee"). To the
extent not defined herein,  the capitalized  terms used herein have the meanings
assigned in the  Agreement.  This  Certificate is issued under and is subject to
the terms,  provisions and conditions of the Agreement,  to which  Agreement the
Holder of this  Certificate  by virtue of the  acceptance  hereof assents and by
which such Holder is bound.

                                      B-1
<PAGE>

      Reference is hereby made to the further provisions of this Certificate set
forth on the reverse  hereof,  which further  provisions  shall for all purposes
have the same effect as if set forth at this place.

      This Certificate  shall not be entitled to any benefit under the Agreement
or be valid for any  purpose  unless  manually  countersigned  by an  authorized
signatory of the Trustee.

                                      B-2
<PAGE>

      IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate  to be duly
executed.

Dated:  January __, 2005

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

                                        By:
                                            ------------------------------------
                                            Authorized Signatory of
                                            THE BANK OF NEW YORK
                                            not in its individual capacity,
                                            but solely as Trustee

Countersigned:

By
   ---------------------------------
   Authorized Signatory of
   THE BANK OF NEW YORK,
   not in its individual capacity,
   but solely as Trustee

                                      B-3
<PAGE>

                                    EXHIBIT B

                       [FORM OF SUBORDINATED CERTIFICATE]

[UNLESS THIS  CERTIFICATE  IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE  OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION  ("DTC"),  TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER,  EXCHANGE,  OR PAYMENT,  AND ANY CERTIFICATE
ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO.  OR IN SUCH  OTHER  NAME AS IS
REQUESTED  BY AN  AUTHORIZED  REPRESENTATIVE  OF DTC (AND ANY PAYMENT IS MADE TO
CEDE  &  CO.  OR  TO  SUCH  OTHER  ENTITY  AS  IS  REQUESTED  BY  AN  AUTHORIZED
REPRESENTATIVE  OF DTC), ANY TRANSFER,  PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE  BY OR TO ANY PERSON IS  WRONGFUL  INASMUCH  AS THE  REGISTERED  OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

SOLELY FOR U.S.  FEDERAL  INCOME TAX PURPOSES,  THIS  CERTIFICATE  IS A "REGULAR
INTEREST" IN A "REAL  ESTATE  MORTGAGE  INVESTMENT  CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO CERTAIN  CERTIFICATES AS
DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.

[THIS  CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED  UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE  "SECURITIES  ACT"),  OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES ("BLUE SKY LAWS"),  AND SUCH  CERTIFICATE  MAY NOT BE
OFFERED,  RESOLD,  PLEDGED OR OTHERWISE  TRANSFERRED EXCEPT (A) TO A PERSON WHOM
THE SELLER  REASONABLY  BELIEVES IS A QUALIFIED  INSTITUTIONAL  BUYER WITHIN THE
MEANING OF RULE 144A  UNDER THE  SECURITIES  ACT IN A  TRANSACTION  MEETING  THE
REQUIREMENTS  OF RULE 144A,  (B)  PURSUANT  TO AN  EXEMPTION  FROM  REGISTRATION
PROVIDED  BY RULE 144  UNDER  THE  SECURITIES  ACT (IF  AVAILABLE)  OR (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR AS DEFINED IN RULE 501(a)(1),  (2), (3) OR (7)
OF  REGULATION  D UNDER THE  SECURITIES  ACT IN A  TRANSACTION  EXEMPT  FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH
ANY APPLICABLE BLUE SKY LAWS. NO  REPRESENTATION  IS MADE AS TO THE AVAILABILITY
OF THE EXEMPTION PROVIDED BY RULE 144 FOR RESALES OF THIS CERTIFICATE.]

                                      B-4
<PAGE>

[NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE REPRESENTS TO THE TRUSTEE THAT SUCH TRANSFEREE IS NOT AN EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"), OR A PLAN OR ARRANGEMENT SUBJECT TO SECTION
4975 OF THE CODE, OR, IF SUCH PURCHASER IS AN INSURANCE COMPANY AND THE
CERTIFICATE HAS BEEN SUBJECT TO AN ERISA-QUALIFYING UNDERWRITING, A
REPRESENTATION IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO
HEREIN, OR DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. SUCH REPRESENTATION SHALL BE
DEEMED TO HAVE BEEN MADE TO THE TRUSTEE BY THE TRANSFEREE'S ACCEPTANCE OF A
CERTIFICATE OF THIS CLASS AND BY A BENEFICIAL OWNER'S ACCEPTANCE OF ITS INTEREST
IN A CERTIFICATE OF THIS CLASS. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY
HEREIN, ANY PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF AN
EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF
COUNSEL SATISFACTORY TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO
EFFECT.]

                                      B-5
<PAGE>

Certificate No.                :

Cut-off Date                   :

First Distribution Date        :

Initial Certificate Balance
of this Certificate
("Denominations")              :  $

Initial Certificate
Balances of all
Certificate of this
Class                          :  $

CUSIP                          :

                First Horizon Mortgage Pass-Through Trust 2005-1
                Mortgage Pass-Through Certificates, Series 2005-1
                                   Class [___]

      evidencing a  percentage  interest in the  distributions  allocable to the
      Certificates  of the  above-referenced  Class with respect to a Trust Fund
      consisting  primarily of one or more pools of conventional  mortgage loans
      (the  "Mortgage  Loans")  secured  by first  liens on one- to  four-family
      residential properties.

                First Horizon Asset Securities Inc., as Depositor

      Principal in respect of this Certificate is  distributable  monthly as set
forth herein. Accordingly,  the Certificate Balance at any time may be less than
the Certificate  Balance as set forth herein. This Certificate does not evidence
an obligation of, or an interest in, and is not guaranteed by the Depositor, the
Master  Servicer  or the Trustee  referred  to below or any of their  respective
affiliates.  Neither this  Certificate  nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

      This certifies that  ___________ is the registered owner of the Percentage
Interest evidenced by this Certificate (obtained by dividing the denomination of
this  Certificate  by  the  aggregate  Initial   Certificate   Balances  of  the
denominations  of all  Certificates  of the  Class  to  which  this  Certificate
belongs)  in  certain  monthly  distributions  with  respect  to  a  Trust  Fund
consisting  primarily of the Mortgage  Loans  deposited by First  Horizon  Asset
Securities  Inc.  (the  "Depositor").  The Trust Fund was created  pursuant to a
Pooling and Servicing  Agreement  dated as of the Cut-off Date  specified  above
(the "Agreement") among the Depositor,  First Horizon Home Loan Corporation,  as
master  servicer (the "Master  Servicer"),  and The Bank of New York, as trustee
(the "Trustee").  To the extent not defined herein,  the capitalized  terms used
herein have the meanings  assigned in the Agreement.  This Certificate is issued
under and is subject to the terms,  provisions  and conditions of the Agreement,
to which  Agreement the Holder of this  Certificate  by virtue of the acceptance
hereof assents and by which such Holder is bound.

                                      B-6
<PAGE>

      [No  transfer  of a  Certificate  of this Class  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  laws.  In the event that a
transfer is to be made in reliance upon an exemption from the Securities Act and
such laws, in order to assure  compliance with the Securities Act and such laws,
the   Certificateholder    desiring   to   effect   such   transfer   and   such
Certificateholder's  prospective transferee shall each certify to the Trustee in
writing the facts surrounding the transfer. In the event that such a transfer is
to be  made  within  two  years  from  the  date  of  the  initial  issuance  of
Certificates  pursuant hereto, there shall also be delivered (except in the case
of a transfer  pursuant  to Rule 144A of the  Securities  Act) to the Trustee an
Opinion of Counsel that such transfer may be made pursuant to an exemption  from
the  Securities  Act and such state  securities  laws,  which Opinion of Counsel
shall not be  obtained  at the expense of the  Trustee,  the Seller,  the Master
Servicer or the  Depositor.  The Holder hereof  desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee and the Depositor 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 a  Certificate  of this Class  shall be made  unless the
Trustee  shall have  received  either  (i) a  representation  [letter]  from the
transferee  of  such  Certificate,  acceptable  to and  in  form  and  substance
satisfactory  to the  Trustee,  to the  effect  that such  transferee  is not an
employee benefit plan or arrangement  subject to Section 406 of ERISA or Section
4975 of the  Code,  nor a  person  acting  on  behalf  of any such  plan,  which
representation  letter shall not be an expense of the Trustee , the Depositor or
the Master  Servicer,  (ii) if the  purchaser  is an  insurance  company and the
certificate   has  been   subject  to  an   ERISA-Qualifying   Underwriting,   a
representation  that the  purchaser is an insurance  company which is purchasing
such Certificates with funds contained in an "insurance company general account"
(as such  term is  defined  in  Section  V(e) of  Prohibited  Transaction  Class
Exemption  95-60  ("PTCE  95-60"))  and that the  purchase  and  holding of such
Certificates  are covered under Sections I and III of PTCE 95-60 or (iii) in the
case of any  such  Certificate  presented  for  registration  in the  name of an
employee  benefit  plan  subject  to  ERISA  or  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,  an  Opinion  of
Counsel  satisfactory  to the Trustee to the effect that the purchase or holding
of such Certificate will not result in prohibited transactions under Section 406
of ERISA and  Section  4975 of the Code and will not subject  the  Trustee,  the
Depositor  or the  Master  Servicer  to any  obligation  in  addition  to  those
undertaken in the Agreement, which Opinion of Counsel shall not be an expense of
the Trustee, the Depositor or the Master Servicer. [Such representation shall be
deemed to have been made to the  Trustee  by the  Transferee's  acceptance  of a
Certificate of this Class and by a beneficial owner's acceptance of its interest
in a Certificate of this Class.]  Notwithstanding  anything else to the contrary
herein, any purported transfer of a Certificate of this Class to or on behalf of
an employee  benefit plan subject to ERISA or to the Code without the opinion of
counsel  satisfactory  to the Trustee as described above shall be void and of no
effect.]Reference  is hereby made to the further  provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

                                      B-7
<PAGE>

      Reference is hereby made to the further provisions of this Certificate set
forth on the reverse  hereof,  which further  provisions  shall for all purposes
have the same effect as if set forth at this place.

      This Certificate  shall not be entitled to any benefit under the Agreement
or be valid for any  purpose  unless  manually  countersigned  by an  authorized
signatory of the Trustee.

      IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate  to be duly
executed.

Dated:  January __, 2005

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

                                        By:
                                            ------------------------------------
                                            Authorized Signatory of
                                            THE BANK OF NEW YORK
                                            not in its individual capacity,
                                            but solely as Trustee

Countersigned:

By
   ----------------------------------
   Authorized Signatory of
   THE BANK OF NEW YORK,
   not in its individual capacity,
   but solely as Trustee

                                      B-8
<PAGE>

                                    EXHIBIT C

                         [FORM OF RESIDUAL CERTIFICATE]

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFICATE REPRESENTS ONE OR
MORE "RESIDUAL  INTERESTS" IN A "REAL ESTATE  MORTGAGE  INVESTMENT  CONDUIT," AS
THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
PROPOSED  TRANSFEREE  DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.

[THIS CERTIFICATE  REPRESENTS THE "TAX MATTERS PERSON RESIDUAL  INTEREST" ISSUED
UNDER THE  POOLING  AND  SERVICING  AGREEMENT  REFERRED  TO BELOW AND MAY NOT BE
TRANSFERRED  TO ANY  PERSON  EXCEPT IN  CONNECTION  WITH THE  ASSUMPTION  BY THE
TRANSFEREE OF THE DUTIES OF THE SERVICER UNDER SUCH AGREEMENT.]

NEITHER THIS  CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED  UNLESS THE
TRANSFEREE  REPRESENTS  TO THE TRUSTEE THAT SUCH  TRANSFEREE  IS NOT AN EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT  SUBJECT TO THE EMPLOYEE  RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED ("ERISA"),  OR A PLAN OR ARRANGEMENT  SUBJECT TO SECTION
4975  OF  THE  CODE,  OR,  IF  SUCH  PURCHASER  IS  AN  INSURANCE   COMPANY,   A
REPRESENTATION  IN ACCORDANCE  WITH THE PROVISIONS OF THE AGREEMENT  REFERRED TO
HEREIN,  OR DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT  REFERRED TO HEREIN.  SUCH  REPRESENTATION  SHALL BE
DEEMED TO HAVE BEEN MADE TO THE  TRUSTEE  BY THE  TRANSFEREE'S  ACCEPTANCE  OF A
CERTIFICATE OF THIS CLASS AND BY A BENEFICIAL OWNER'S ACCEPTANCE OF ITS INTEREST
IN A CERTIFICATE  OF THIS CLASS.  NOTWITHSTANDING  ANYTHING ELSE TO THE CONTRARY
HEREIN,  ANY  PURPORTED  TRANSFER  OF THIS  CERTIFICATE  TO OR ON  BEHALF  OF AN
EMPLOYEE  BENEFIT  PLAN  SUBJECT TO ERISA OR TO THE CODE  WITHOUT THE OPINION OF
COUNSEL  SATISFACTORY  TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO
EFFECT.

                                      C-1
<PAGE>

Certificate No.                :

Cut-off Date                   :

First Distribution Date        :

Initial Certificate Balance
of this Certificate
("Denominations")              :  $

Initial Certificate
Balances of all
Certificate of this
Class                          :  $

CUSIP                          :

                First Horizon Mortgage Pass-Through Trust 2005-1
                Mortgage Pass-Through Certificates, Series 2005-1

      evidencing the distributions  allocable to the [Class I-A-R]  Certificates
      with respect to a Trust Fund consisting  primarily of one or more pools of
      conventional  mortgage loans (the "Mortgage Loans") secured by first liens
      on one- to four-family residential properties.

                First Horizon Asset Securities Inc., as Depositor

      Principal in respect of this Certificate is  distributable  monthly as set
forth herein. Accordingly,  the Certificate Balance at any time may be less than
the Certificate  Balance as set forth herein. This Certificate does not evidence
an obligation of, or an interest in, and is not guaranteed by the Depositor, the
Master  Servicer  or the Trustee  referred  to below or any of their  respective
affiliates.  Neither this  Certificate  nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

      This  certifies  that  _________________  is the  registered  owner of the
Percentage  Interest  (obtained by dividing the denomination of this Certificate
by the  aggregate  Initial  Certificate  Balances  of the  denominations  of all
Certificates of the Class to which this Certificate  belongs) in certain monthly
distributions  with respect to a Trust Fund  consisting  of the  Mortgage  Loans
deposited by First Horizon Asset  Securities Inc. (the  "Depositor").  The Trust
Fund was created  pursuant to a Pooling and Servicing  Agreement dated as of the
Cut-off  Date  specified  above (the  "Agreement")  among the  Depositor,  First
Horizon Home Loan Corporation,  as master servicer (the "Master Servicer"),  and
The Bank of New York,  as trustee  (the  "Trustee").  To the extent not  defined
herein,  the  capitalized  terms used herein have the  meanings  assigned in the
Agreement.  This  Certificate  is issued  under  and is  subject  to the  terms,
provisions  and conditions of the  Agreement,  to which  Agreement the Holder of
this  Certificate by virtue of the  acceptance  hereof assents and by which such
Holder is bound.

                                      C-2
<PAGE>

      Any distribution of the proceeds of any remaining assets of the Trust Fund
will  be made  only  upon  presentment  and  surrender  of  this  [Class  I-A-R]
Certificate at the Corporate Trust Office or the office or agency  maintained by
the Trustee in New York, New York. This [Class I-A-R] Certificate  represents an
ownership in the RL Interest and RU Interest, as defined in the Agreement

      No  transfer  of a [Class  I-A-R]  Certificate  shall be made  unless  the
Trustee  shall have  received  either  (i) a  representation  [letter]  from the
transferee  of  such  Certificate,  acceptable  to and  in  form  and  substance
satisfactory  to the  Trustee,  to the  effect  that such  transferee  is not an
employee benefit plan or arrangement  subject to Section 406 of ERISA or Section
4975 of the  Code,  nor a  person  acting  on  behalf  of any such  plan,  which
representation  letter shall not be an expense of the Trustee,  the Depositor or
the  Master  Servicer,  (ii)  if  the  purchaser  is  an  insurance  company,  a
representation  that the  purchaser is an insurance  company which is purchasing
such Certificate 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
Certificate  are covered under  Sections I and III of PTCE 95-60 or (iii) in the
case of any  such  Certificate  presented  for  registration  in the  name of an
employee  benefit  plan  subject  to  ERISA  or  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,  an  Opinion  of
Counsel  satisfactory  to the Trustee to the effect that the purchase or holding
of such Class I-A-R Certificate will not result in prohibited transactions under
Section  406 of ERISA  and  Section  4975 of the Code and will not  subject  the
Trustee,  the Depositor and the Master Servicer to any obligation in addition to
those  undertaken  in the  Agreement,  which  Opinion of Counsel shall not be an
expense  of  the  Trustee,   the  Depositor  or  the  Master   Servicer.   [Such
representation  shall  be  deemed  to  have  been  made  to the  Trustee  by the
Transferee's  acceptance  of this Class I-A-R  Certificate  and by a  beneficial
owner's  acceptance  of  its  interest  in  such  Certificate.]  Notwithstanding
anything else to the contrary herein,  any purported transfer of a [Class I-A-R]
Certificate  to or on behalf of an employee  benefit plan subject to ERISA or to
the Code without the opinion of counsel satisfactory to the Trustee as described
above shall be void and of no effect.

      Each  Holder  of this  [Class  I-A-R]  Certificate  will be deemed to have
agreed  to be bound by the  restrictions  of the  Agreement,  including  but not
limited  to the  restrictions  that (i) each  person  holding or  acquiring  any
Ownership  Interest  in this  [Class  I-A-R]  Certificate  must  be a  Permitted
Transferee,  (ii) no Ownership Interest in this [Class I-A-R] Certificate may be
transferred  without delivery to the Trustee of (a) a transfer  affidavit of the
proposed  transferee and (b) a transfer  certificate of the transferor,  each of
such documents to be in the form  described in the Agreement,  (iii) each person
holding or acquiring  any Ownership  Interest in this [Class I-A-R]  Certificate
must agree to require a transfer affidavit and to deliver a transfer certificate
to the Trustee as required  pursuant to the Agreement,  (iv) each person holding
or acquiring an Ownership  Interest in this [Class I-A-R] Certificate must agree
not to transfer an Ownership  Interest in this [Class I-A-R]  Certificate  if it
has actual knowledge that the proposed transferee is not a Permitted  Transferee
and (v) any attempted or purported  transfer of any  Ownership  Interest in this
[Class I-A-R]  Certificate in violation of such  restrictions will be absolutely
null and void and will vest no rights in the purported transferee.

                                      C-3
<PAGE>

      Reference is hereby made to the further provisions of this Certificate set
forth on the reverse  hereof,  which further  provisions  shall for all purposes
have the same effect as if set forth at this place.

      This Certificate  shall not be entitled to any benefit under the Agreement
or be valid for any  purpose  unless  manually  countersigned  by an  authorized
signatory of the Trustee.

                                      C-4
<PAGE>

      IN WITNESS  WHEREOF,  the Trustee has caused this  Certificate  to be duly
executed.

Dated:  January __, 2005

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

                                        By:
                                            ------------------------------------
                                            Authorized Signatory of
                                            THE BANK OF NEW YORK
                                            not in its individual capacity,
                                            but solely as Trustee

Countersigned:

By
   ----------------------------------
   Authorized Signatory of
   THE BANK OF NEW YORK,
   not in its individual capacity,
   but solely as Trustee

                                      C-5
<PAGE>

                                    EXHIBIT D

                        [Form of Reverse of Certificates]

                First Horizon Mortgage Pass-Through Trust 2005-1
                       Mortgage Pass-Through Certificates

      This  Certificate  is one  of a  duly  authorized  issue  of  Certificates
designated  as  First  Horizon  Mortgage   Pass-Through  Trust  2005-1  Mortgage
Pass-Through  Certificates,  of the Series  specified on the face hereof (herein
collectively called the "Certificates"), and representing a beneficial ownership
interest in the Trust Fund created by the Agreement.

      The Certificateholder,  by its acceptance of this Certificate, agrees that
it will look  solely to the funds on deposit  in the  Distribution  Account  for
payment  hereunder and that the Trustee is not liable to the  Certificateholders
for any amount  payable  under this  Certificate  or the Agreement or, except as
expressly  provided  in the  Agreement,  subject  to  any  liability  under  the
Agreement.

      This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the  interests,  rights and  limitations of rights,
benefits,  obligations and duties evidenced thereby, and the rights,  duties and
immunities of the Trustee.

      Pursuant to the terms of the Agreement, a distribution will be made on the
25th day of each month or, if such 25th day is not a Business  Day, the Business
Day immediately  following (the  "Distribution  Date"),  commencing on the first
Distribution Date specified on the face hereof, to the Person in whose name this
Certificate is registered at the close of business on the applicable Record Date
in an amount equal to the product of the Percentage  Interest  evidenced by this
Certificate and the amount required to be distributed to Holders of Certificates
of the  Class  to which  this  Certificate  belongs  on such  Distribution  Date
pursuant to the Agreement.  The Record Date applicable to each Distribution Date
is the  last  Business  Day of the  month  next  preceding  the  month  of  such
Distribution Date.

      Distributions  on this  Certificate  shall  be made  by wire  transfer  of
immediately  available  funds to the  account of the Holder  hereof at a bank or
other entity having appropriate  facilities therefor, if such  Certificateholder
shall have so notified the Trustee in writing at least five  Business Days prior
to the  related  Record  Date  and  such  Certificateholder  shall  satisfy  the
conditions  to receive such form of payment set forth in the  Agreement,  or, if
not,   by  check   mailed  by  first   class   mail  to  the   address  of  such
Certificateholder  appearing in the Certificate Register. The final distribution
on each Certificate  will be made in like manner,  but only upon presentment and
surrender  of such  Certificate  at the  Corporate  Trust  Office or such  other
location   specified  in  the  notice  to   Certificateholders   of  such  final
distribution.

      The Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the  Depositor,  the Master  Servicer and the Trustee with the consent of the
Holders of  Certificates  affected by such  amendment  evidencing  the requisite
Percentage  Interest,  as provided  in the  Agreement.  Any such  consent by the
Holder of this  Certificate  shall be conclusive  and binding on such Holder and
upon all future Holders of this  Certificate and of any Certificate  issued upon
the  transfer  hereof or in exchange  therefor or in lieu hereof  whether or not
notation  of such  consent is made upon this  Certificate.  The  Agreement  also
permits the amendment  thereof,  in certain limited  circumstances,  without the
consent of the Holders of any of the Certificates.

                                      D-1
<PAGE>

      As provided in the  Agreement and subject to certain  limitations  therein
set forth,  the transfer of this  Certificate is registrable in the  Certificate
Register of the Trustee upon surrender of this  Certificate for  registration of
transfer at the Corporate Trust Office or the office or agency maintained by the
Trustee in New York, New York,  accompanied by a written  instrument of transfer
in form satisfactory to the Trustee and the Certificate  Registrar duly executed
by the holder hereof or such holder's  attorney duly authorized in writing,  and
thereupon  one  or  more  new  Certificates  of the  same  Class  in  authorized
denominations and evidencing the same aggregate Percentage Interest in the Trust
Fund will be issued to the designated transferee or transferees.

      The  Certificates  are issuable  only as registered  Certificates  without
coupons  in  denominations  specified  in  the  Agreement.  As  provided  in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized  denominations
and  evidencing  the same  aggregate  Percentage  Interest,  as requested by the
Holder surrendering the same.

      No service  charge will be made for any such  registration  of transfer or
exchange,  but the Trustee may require  payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

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

      On any Distribution  Date on which the Pool Principal Balance is less than
10% of the aggregate Cut-off Date Pool Principal  Balances of Pool I and Pool II
combined, the Master Servicer will have the option to repurchase, in whole, from
the Trust Fund all remaining Mortgage Loans and all property acquired in respect
of the Mortgage Loans in the Mortgage  Pools at a purchase  price  determined as
provided  in the  Agreement.  In the  event  that no such  optional  termination
occurs,  the  obligations  and  responsibilities  created by the Agreement  will
terminate  upon the later of the maturity or other  liquidation  (or any advance
with respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund or
the  disposition  of all  property in respect  thereof and the  distribution  to
Certificateholders  of all amounts  required to be  distributed  pursuant to the
Agreement.  In no  event,  however,  will the  trust  created  by the  Agreement
continue  beyond the  expiration of 21 years from the death of the last survivor
of the descendants living at the date of the Agreement of a certain person named
in the Agreement.

      Any term used  herein  that is  defined  in the  Agreement  shall have the
      meaning  assigned in the  Agreement,  and nothing  herein  shall be deemed
      inconsistent with that meaning.

                                      D-2
<PAGE>

                                   ASSIGNMENT

      FOR  VALUE  RECEIVED,  the  undersigned  hereby  sell(s),   assign(s)  and
transfer(s) unto

                         ------------------------------
                        (Please insert social security or
                      other identifying number of assignee)

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

--------------------------------------------------------------------------------
                   (Please print or typewrite name and address
                     including postal zip code of assignee)

--------------------------------------------------------------------------------
the  Percentage   Interest  evidenced  by  the  within  Certificate  and  hereby
authorizes the transfer of registration of such Percentage  Interest to assignee
on the Certificate Register of the Trust Fund.

      I (We)  further  direct the Trustee to issue a new  Certificate  of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:

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

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

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

Dated:
      ---------------------

                                        ----------------------------------------
                                        Signature by or on behalf of assignor

                            DISTRIBUTION INSTRUCTIONS

      The assignee should include the following for purposes of distribution:

      Distributions shall be made, by wire transfer or otherwise, in immediately
available  funds to  ______________________________________,  for the account of
_____________________,  account number  ___________,  or, if mailed by check, to
___________________________.   Applicable   statements   should   be  mailed  to
___________________________.

      This information is provided by  ________________________________________,
the assignee named above, or _________________, as its agent.

                                      D-3
<PAGE>

                                    EXHIBIT E

                   FORM OF INITIAL CERTIFICATION OF CUSTODIAN

                                     [date]

First Horizon Asset Securities Inc.
First Horizon Home Loan Corporation
4000 Horizon Way
Irving, Texas  75063

The Bank of New York
101 Barclay Street, 8W
New York, New York  10286

      Re:   Custodial  Agreement  dated as of January  28, 2005 by and among the
            Bank of New York, as Trustee,  First Horizon Home Loan  Corporation,
            as  Servicer  and First  Tennessee  Bank  National  Association,  as
            Custodian

Gentlemen:

      In accordance with Section 2 of the  above-captioned  Custodial  Agreement
(the "Custodial  Agreement"),  the undersigned,  as Custodian,  hereby certifies
that, as to each Mortgage Loan listed in the Mortgage Loan Schedule  (other than
any Mortgage Loan listed in the attached schedule), it has received:

      (i) the  original  Mortgage  Note,  endorsed as provided in the  following
form: "Pay to the order of ________, without recourse"; and

      (ii) a duly executed  assignment of the Mortgage (which may be included in
a blanket assignment or assignments); provided, however, that it has received no
assignment with respect to any Mortgage for which the related Mortgaged Property
is located in the Commonwealth of Puerto Rico.

      Based  on  its  review  and  examination  and  only  as to  the  foregoing
documents,  such  documents  appear  regular on their  face and  related to such
Mortgage Loan.

      The  Custodian  has  made  no  independent  examination  of any  documents
contained in each Mortgage File beyond the review  specifically  required in the
Custodial  Agreement.  The  Custodian  makes no  representations  as to: (i) the
validity,  legality,  sufficiency,  enforceability  or genuineness of any of the
documents  contained  in  each  Mortgage  File  of  any of  the  Mortgage  Loans
identified  on  the  Mortgage  Loan  Schedule,   or  (ii)  the   collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.

                                      E-1
<PAGE>

      Capitalized  words and  phrases  used  herein  shall  have the  respective
meanings assigned to them in the Custodial Agreement.

                                    FIRST TENNESSEE BANK NATIONAL ASSOCIATION,
                                    as Custodian

                                    By:
                                          --------------------------------------
                                    Name:
                                          --------------------------------------
                                    Title:
                                          --------------------------------------

                                      E-2
<PAGE>

                                    EXHIBIT F

                      FORM OF DELAY DELIVERY CERTIFICATION

                                     [date]

First Horizon Asset Securities Inc.
First Horizon Home Loan Corporation
4000 Horizon Way
Irving, Texas  75063

The Bank of New York
101 Barclay Street, 8W
New York, New York  10286

      Re:   Custodial  Agreement  dated as of January  28, 2005 by and among the
            Bank of New York, as Trustee,  First Horizon Home Loan  Corporation,
            as Servicer,  and First  Tennessee  Bank  National  Association,  as
            Custodian

Ladies and Gentlemen:

      In accordance with Section 3 of the  above-captioned  Custodial  Agreement
(the "Custodial  Agreement"),  the undersigned,  as Custodian,  hereby certifies
that,  as to each Delay  Delivery  Mortgage  Loan  listed in the  Mortgage  Loan
Schedule  (other than any Delay  Delivery  Mortgage  Loan listed in the attached
schedule), it has received:

      (i) the  original  Mortgage  Note,  endorsed as provided in the  following
form: "Pay to the order of_______, without recourse";

      (ii) in the case of each Mortgage  Loan that is not a MERS Mortgage  Loan,
the original recorded Mortgage, [and in the case of each Mortgage Loan that is a
MERS Mortgage  Loan, the original  Mortgage,  noting thereon the presence of the
MIN of the Mortgage Loan and language indicating that the Mortgage Loan is a MOM
Loan if the Mortgage Loan is a MOM Loan,  with  evidence of recording  indicated
thereon,  or a copy of the Mortgage  certified by the public recording office in
which such Mortgage has been recorded]; and

      (iii) in the case of each Mortgage Loan that is not a MERS Mortgage  Loan,
a duly executed  assignment of the Mortgage  (which may be included in a blanket
assignment  or  assignments);   provided,  however,  that  it  has  received  no
assignment with respect to any Mortgage for which the related Mortgage  Property
is located in the Commonwealth of Puerto Rico.

      Based  on  its  review  and  examination  and  only  as to  the  foregoing
documents, such documents appear regular on their face and related to such Delay
Delivery Mortgage Loan.

      The  Custodian  has  made  no  independent  examination  of any  documents
contained in each Mortgage File beyond the review  specifically  required in the
Custodial  Agreement.  The  Custodian  makes no  representations  as to: (i) the
validity,  legality,  sufficiency,  enforceability  or genuineness of any of the
documents  contained in each Mortgage File of any of the Delay Delivery Mortgage
Loans  identified on the Mortgage  Loan  Schedule,  or (ii) the  collectability,
insurability,  effectiveness or suitability of any such Delay Delivery  Mortgage
Loan.

                                      F-1
<PAGE>

      Capitalized  words and  phrases  used  herein  shall  have the  respective
meanings assigned to them in the above-captioned Custodial Agreement.

                                  FIRST TENNESSEE BANK NATIONAL ASSOCIATION,
                                  as Custodian

                                  By:
                                         ---------------------------------------
                                  Name:
                                         ---------------------------------------
                                  Title:
                                         ---------------------------------------

                                      F-2
<PAGE>

                                    EXHIBIT G

                    FORM OF FINAL CERTIFICATION OF CUSTODIAN

                                     [date]

First Horizon Asset Securities Inc.
First Horizon Home Loan Corporation
4000 Horizon Way
Irving, Texas  75063

The Bank of New York
101 Barclay Street, 8W
New York, New York  10286

      Re:   Custodial  Agreement  dated as of January  28, 2005 by and among the
            Bank of New York, as Trustee,  First Horizon Home Loan  Corporation,
            as Servicer,  and First  Tennessee  Bank  National  Association,  as
            Custodian

Ladies and Gentlemen:

      In accordance with Section 2 of the  above-captioned  Custodial  Agreement
(the "Custodial Agreement"), the undersigned, as Custodian hereby certifies that
as to each Mortgage  Loan listed in the Mortgage  Loan Schedule  (other than any
Mortgage Loan paid in full or listed on the attached Document  Exception Report)
it has received:

      (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 endorsements  from the originator to the
            Person  endorsing  the Mortgage  Note (each such  endorsement  being
            sufficient to transfer all right, title and interest of the party so
            endorsing,  as  noteholder  or  assignee  thereof,  in and  to  that
            Mortgage Note); or

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

      (ii)  except as provided  below and for each  Mortgage  Loan that is not a
            MERS Mortgage Loan, the original recorded Mortgage or a copy of such
            Mortgage  certified by the Seller as being a true and complete  copy
            of the  Mortgage  and in the case of each MERS  Mortgage  Loan,  the
            original  Mortgage,  noting the  presence of the MIN of the Mortgage
            Loans and either language indicating that the Mortgage Loan is a MOM
            Loan if the Mortgage  Loan is a MOM Loan or if the Mortgage Loan was
            not a MOM  Loan  at  origination,  the  original  Mortgage  and  the
            assignment  thereof to MERS,  with  evidence of recording  indicated
            thereon, or a copy of the Mortgage certified by the public recording
            office in which such Mortgage has been recorded;

                                      G-1
<PAGE>

      (iii) in the case of each Mortgage Loan that is not a MERS Mortgage  Loan,
            a duly  executed  assignment  of the Mortgage in blank (which may be
            included in a blanket  assignment or  assignments),  together  with,
            except as provided below, all interim  recorded  assignments of such
            mortgage each such assignment,  when duly and validly completed,  to
            be in recordable form and sufficient to effect the assignment of and
            transfer to the  assignee  thereof,  under the Mortgage to which the
            assignment related);  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  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

            (e)   Executed UCC-3 financing  statements or their  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).

            Based on its review  and  examination  and only as to the  foregoing
      documents,  (a) such documents appear regular on their face and related to
      such Mortgage Loan, and (b) the  information set forth in items (i), (ii),
      (iii),  (iv),  (vi)  and  (xi) of the  definition  of the  "Mortgage  Loan
      Schedule" in Article I of the Pooling and Servicing  Agreement  accurately
      reflects information set forth in the Mortgage File.

                                      G-2
<PAGE>

      The  Custodian  has  made  no  independent  examination  of any  documents
contained in each Mortgage File beyond the review  specifically  required in the
Custodial  Agreement.  The  Custodian  makes no  representations  as to: (i) the
validity,  legality,  sufficiency,  enforceability  or genuineness of any of the
documents  contained  in  each  Mortgage  File  of  any of  the  Mortgage  Loans
identified  on  the  Mortgage  Loan  Schedule,   or  (ii)  the   collectability,
insurability,   effectiveness   or   suitability  of  any  such  Mortgage  Loan.
Notwithstanding  anything  herein to the  contrary,  the  Custodian  has made no
determination and makes no  representations 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 sufficient to effect the  assignment of and
transfer to the assignee  thereof,  under the  Mortgage to which the  assignment
relates.

      Capitalized  words and  phrases  used  herein  shall  have the  respective
meanings assigned to them in the Custodial Agreement.

                                  FIRST TENNESSEE BANK NATIONAL ASSOCIATION,
                                  as Custodian

                                  By:
                                         ---------------------------------------
                                  Name:
                                         ---------------------------------------
                                  Title:
                                         ---------------------------------------

                                      G-3
<PAGE>

                                    EXHIBIT H

                               TRANSFER AFFIDAVIT

                First Horizon Mortgage Pass-Through Trust 2005-1
                       Mortgage Pass-Through Certificates
                                  Series 2005-1

STATE OF          )
                  ) ss.:
COUNTY OF         )

      The undersigned, being first duly sworn, deposes and says as follows:

      1. The undersigned is an officer of __________, the proposed Transferee of
an Ownership Interest in a [Class I-A-R] Certificate (the "Certificate")  issued
pursuant to the Pooling and Servicing Agreement, (the "Agreement"),  relating to
the  above-referenced  Series, by and among First Horizon Asset Securities Inc.,
as depositor (the "Depositor"),  First Horizon Home Loan Corporation,  as master
servicer, and The Bank of New York, as trustee.  Capitalized terms used, but not
defined herein or in Exhibit 1 hereto,  shall have the meanings ascribed to such
terms in the Agreement.  The  Transferee has authorized the  undersigned to make
this affidavit on behalf of the Transferee.

      2. The Transferee  is, as of the date hereof,  and will be, as of the date
of the  Transfer,  a Permitted  Transferee.  The  Transferee  is  acquiring  its
Ownership  Interest in the Certificate either (i) for its own account or (ii) as
nominee,  trustee  or agent  for  another  Person  and has  attached  hereto  an
affidavit from such Person in substantially the same form as this affidavit. The
Transferee has no knowledge that any such affidavit is false.

      3. The Transferee has been advised of, and understands  that (i) a tax may
be imposed on Transfers  of the  Certificate  to Persons that are not  Permitted
Transferees;  (ii)  such tax will be  imposed  on the  transferor,  or,  if such
Transfer is through an agent (which includes a broker, nominee or middleman) for
a Person that is not a Permitted Transferee,  on the agent; and (iii) the Person
otherwise  liable for the tax shall be relieved of liability  for the tax if the
subsequent transferee furnished to such Person an affidavit that such subsequent
transferee is a Permitted  Transferee and, at the time of Transfer,  such Person
does not have actual knowledge that the affidavit is false.

      4. The Transferee has been advised of, and  understands  that a tax may be
imposed on a "pass-through entity" holding the Certificate if at any time during
the  taxable  year of the  pass-through  entity a Person that is not a Permitted
Transferee  is the record holder of an interest in such entity.  The  Transferee
understands  that such tax will not be imposed  for any period  with  respect to
which the record holder furnishes to the  pass-through  entity an affidavit that
such record holder is a Permitted  Transferee and the  pass-through  entity does
not have actual  knowledge  that such affidavit is false.  (For this purpose,  a
"pass-through  entity" includes a regulated  investment  company,  a real estate
investment  trust or common  trust fund,  a  partnership,  trust or estate,  and
certain  cooperatives  and,  except as may be provided in Treasury  Regulations,
persons  holding  interests  in  pass-through  entities as a nominee for another
Person.)

                                      H-1
<PAGE>

      5. The  Transferee  has reviewed the  provisions of Section  5.2(c) of the
Agreement  (attached hereto as Exhibit 2 and  incorporated  herein by reference)
and  understands  the legal  consequences  of the  acquisition  of an  Ownership
Interest in the Certificate including,  without limitation,  the restrictions on
subsequent  Transfers  and the  provisions  regarding  voiding the  Transfer and
mandatory sales. The Transferee  expressly agrees to be bound by and to abide by
the provisions of Section 5.2(c) of the Agreement and the restrictions  noted on
the face of the  Certificate.  The  Transferee  understands  and agrees that any
breach of any of the  representations  included herein shall render the Transfer
to the Transferee contemplated hereby null and void.

      6. The Transferee  agrees to require a Transfer  Affidavit from any Person
to whom the  Transferee  attempts  to  Transfer  its  Ownership  Interest in the
Certificate,  and in  connection  with any  Transfer  by a  Person  for whom the
Transferee is acting as nominee,  trustee or agent,  and the Transferee will not
Transfer  its  Ownership   Interest  or  cause  any  Ownership  Interest  to  be
Transferred  to  any  Person  that  the  Transferee  knows  is  not a  Permitted
Transferee.  In  connection  with  any  such  Transfer  by the  Transferee,  the
Transferee  agrees to deliver to the Trustee a certificate  substantially in the
form set forth as Exhibit I to the Agreement (a "Transferor Certificate") to the
effect that such Transferee has no actual knowledge that the Person to which the
Transfer is to be made is not a Permitted Transferee.

      7. The Transferee  does not have the intention to impede the assessment or
collection  of  any  tax  legally  required  to be  paid  with  respect  to  the
Certificate.

      8. The Transferee's taxpayer identification number is ______.

      9. The  Transferee  is either a U.S.  Person as  defined  in Code  Section
7701(a)(30) or the Transferee has furnished the Transferor a properly  completed
Internal Revenue Service Form W-8ECI..

      10. The Transferee is aware that the Certificate may represent one or more
interests in a "noneconomic  residual  interest"  within the meaning of Treasury
regulations  promulgated  pursuant  to the Code and  that  the  transferor  of a
noneconomic  residual interest will remain liable for any taxes due with respect
to the income on such residual  interest,  unless no significant  purpose of the
transfer was to impede the assessment or collection of tax.

      11. The 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.

      12. The  Transferee has  historically  paid its debts as they came due and
the  Transferee  will  continue to pay its debts as they come due in the future;
the  Transferee  understands  that,  as  the  holder  of  the  Certificate,  the
Transferee may incur tax  liabilities  in excess of any cash flows  generated by
the Certificate and the Transferee  intends to pay taxes associated with holding
the Certificate as they become due.

      13.  The  Transferee  is a  domestic  corporation  taxable  as  a  regular
corporation  for U.S.  federal  income  tax  purposes  (a  "taxable  domestic  C
corporation") and is not a real estate investment  trust,  regulated  investment
company or REMIC.  The Transferee  will not cause income from the Certificate to
be attributable,  for U.S. federal income tax purposes, to a non-U.S.  permanent
establishment  or fixed base  (within  the meaning of an  applicable  income tax
treaty) of the Transferee or another U.S. taxpayer. At the time of the Transfer,
and at the close of each of the Transferee's two fiscal years preceding the year
of the Transfer,  the Transferee's gross assets for financial reporting purposes
exceeded $10 million (together,  the "Asset  Requirements"),  and the Transferee
hereby covenants that any subsequent  Transfer of its Ownership  Interest in the
Certificate  will be to another taxable,  domestic C corporation  satisfying the
Asset Requirements

                                      H-2
<PAGE>

      IN WITNESS  WHEREOF,  the  Transferee  has caused  this  instrument  to be
executed on its behalf,  pursuant to authority of its Board of Directors, by its
duly  authorized  officer and its corporate  seal to be hereunto  affixed,  duly
attested, this ___ day of _________, 20__.

                                        ----------------------------------------
                                        Print Name of Transferee

                                        By:
                                              ----------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                              ----------------------------------

      Personally appeared before me the above-named  ________________,  known or
proved to me to be the same person who executed the foregoing  instrument and to
be the  _________________  of the Transferee,  and acknowledged that he executed
the same as his free act and deed and the free act and deed of the Transferee.

      Subscribed and sworn before me this _____ day of ___________, 20____.

                                        ----------------------------------------
                                        NOTARY PUBLIC

                                        My Commission expires the ___ day of
                                        ________________, 20___.

                                      H-3
<PAGE>

                                                          EXHIBIT 1 to EXHIBIT H

                               Certain Definitions

      "Ownership  Interest":  As to any 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.

      "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  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  Certificate  to such Person may cause any REMIC
created pursuant to the Agreement to fail to qualify as a REMIC at any time that
the  Certificates  (as  defined in the  Agreement)  are  outstanding;  provided,
however, that if a person is classified as a partnership or a disregarded entity
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,   bank,  joint-stock  company,  trust  (including  any  beneficiary
thereof),  unincorporated  organization or government or any agency or political
subdivision thereof.

      "Transfer":  Any  direct or  indirect  transfer  or sale of any  Ownership
Interest in a  Certificate,  including the  acquisition  of a Certificate by the
Depositor.

      "Transferee":  Any Person  who is  acquiring  by  Transfer  any  Ownership
Interest in a Certificate.

                                      H-4
<PAGE>

                                                          EXHIBIT 2 to EXHIBIT H

                         Section 5.2(c) of the Agreement

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

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

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

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

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

                                      H-5
<PAGE>

            (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 or the Master  Servicer,
to the effect that the elimination of such restrictions will not cause any 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.

                                      H-6
<PAGE>

                                    EXHIBIT I

                         FORM OF TRANSFEROR CERTIFICATE

                                                         _______________, 20___

First Horizon Asset Securities Inc.
First Horizon Home Loan Corporation
4000 Horizon Way
Irving, Texas  75063

The Bank of New York
101 Barclay Street, 8W
New York, New York  10286

      Re:   First   Horizon   Mortgage   Pass-Through   Trust  2005-1   Mortgage
            Pass-Through Certificates, Series 2005-1, Class __

Ladies and Gentlemen:

      In connection  with our  disposition of the above  Certificates we certify
that (a) to the extent we are disposing of a Private Certificate,  we understand
that the Private Certificate has not been registered under the Securities Act of
1933,  as amended (the "Act"),  and is being  disposed of by us in a transaction
that is exempt from the  registration  requirements  of the Act, (b) we have not
offered or sold any Certificates to, or solicited offers to buy any Certificates
from,  any person,  or otherwise  approached or negotiated  with any person with
respect  thereto,  in a manner that would be deemed,  or taken any other  action
which  would  result in, a  violation  of  Section 5 of the Act,  and (c) to the
extent we are  disposing of a Residual  Certificate,  we have no  knowledge  the
transferee is not a Permitted Transferee.

      Capitalized  terms used  herein  shall have the  meaning  ascribed to such
terms in the Pooling and Servicing Agreement dated as of January 1, 2005, by and
among First Horizon Asset Securities Inc., as depositor, First Horizon Home Loan
Corporation,  as master servicer, and The Bank of New York, as trustee, pursuant
to which the Residual Certificates were issued.

                                        Very truly yours,

                                        ----------------------------------------
                                        Print Name of Transferor

                                        By:
                                           -------------------------------------
                                           Authorized Officer

                                      I-1
<PAGE>

                                    EXHIBIT J

                    FORM OF INVESTMENT LETTER (NON-RULE 144A)

                                                           _____________, 20___

First Horizon Asset Securities Inc.
4000 Horizon Way
Irving, Texas  75063

The Bank of New York
101 Barclay Street, 8W
New York, New York  10286
Attention:  Mortgage-Backed Securities Group

      Re:   First   Horizon   Mortgage   Pass-Through   Trust  2005-1   Mortgage
            Pass-Through Certificates, Series 2005-1, Class ___

Ladies and Gentlemen:

      In connection  with our  acquisition of the above  Certificates we certify
that (a) we understand that the  Certificates are not being registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws and
are  being  transferred  to  us  in  a  transaction  that  is  exempt  from  the
registration  requirements  of  the  Act  and  any  such  laws,  (b)  we  are an
"accredited  investor,"  as defined in Regulation D under the Act, and have such
knowledge and  experience in financial and business  matters that we are capable
of evaluating the merits and risks of investments  in the  Certificates,  (c) we
have had the  opportunity  to ask  questions  of and  receive  answers  from the
Depositor  concerning the purchase of the  Certificates and all matters relating
thereto or any  additional  information  deemed  necessary  to our  decision  to
purchase the Certificates, (d) either (i) we are not an employee benefit plan or
arrangement  that is subject to the Employee  Retirement  Income Security Act of
1974, as amended,  or a plan or  arrangement  that is subject to Section 4975 of
the Internal  Revenue Code of 1986,  as amended,  nor are we acting on behalf of
any such plan or  arrangement  nor are we using  the  assets of any such plan or
arrangement   to  effect   such   acquisition   or  (ii)  if,  in  the  case  of
ERISA-Restricted  Certificates that have been the subject of an ERISA-Qualifying
Underwriting,  we are an  insurance  company,  a  representation  that we are an
insurance  company which is purchasing such Certificates with funds contained in
an "insurance  company general account" (as such term is defined in Section V(e)
of Prohibited  Transaction  Class  Exemption  95-60 ("PTCE 95-60")) and that the
purchase and holding of such  Certificates  are covered under Sections I and III
PTCE 95-60,  (e) we are acquiring the  Certificates  for  investment for our own
account  and not  with a view to any  distribution  of  such  Certificates  (but
without  prejudice to our right at all times to sell or otherwise dispose of the
Certificates  in accordance  with clause (g) below),  (f) we have not offered or
sold any Certificates to, or solicited offers to buy any Certificates  from, any
person,  or  otherwise  approached  or  negotiated  with any person with respect
thereto,  or taken any other action which would result in a violation of Section
5 of the Act,  and (g) we will not sell,  transfer or  otherwise  dispose of any
Certificates  unless  (1)  such  sale,  transfer  or other  disposition  is made
pursuant to an effective  registration statement under the Act or is exempt from
such registration requirements, and if requested, we will at our expense provide
an opinion of counsel  satisfactory to the addressees of this  Certificate  that
such sale,  transfer or other  disposition  may be made pursuant to an exemption
from the Act, (2) the purchaser or transferee of such  Certificate  has executed
and  delivered to you a  certificate  to  substantially  the same effect as this
certificate, and (3) the purchaser or transferee has otherwise complied with any
conditions for transfer set forth in the Pooling and Servicing Agreement.

                                        Very truly yours,

                                        ----------------------------------------
                                        Print Name of Transferee

                                        By:
                                           -------------------------------------
                                           Authorized Officer

                                      J-1
<PAGE>

                                    EXHIBIT K

                            FORM OF RULE 144A LETTER

                                                              ___________, 20__

First Horizon Asset Securities Inc.
4000 Horizon Way
Irving, Texas  75063

The Bank of New York
101 Barclay Street, 8W
New York, New York  10286
Attention:  Mortgage-Backed Securities Group

      Re:   First   Horizon   Mortgage   Pass-Through   Trust  2005-1   Mortgage
            Pass-Through Certificates, Series 2005-1, Class ___

Ladies and Gentlemen:

      In connection  with our  acquisition of the above  Certificates we certify
that (a) we understand that the  Certificates are not being registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws and
are  being  transferred  to  us  in  a  transaction  that  is  exempt  from  the
registration  requirements  of the Act  and  any  such  laws,  (b) we have  such
knowledge and  experience in financial and business  matters that we are capable
of evaluating the merits and risks of investments  in the  Certificates,  (c) we
have had the  opportunity  to ask  questions  of and  receive  answers  from the
Depositor  concerning the purchase of the  Certificates and all matters relating
thereto or any  additional  information  deemed  necessary  to our  decision  to
purchase  the  Certificates,  (d)  we  are  not  an  employee  benefit  plan  or
arrangement  that is subject to the Employee  Retirement  Income Security Act of
1974, as amended,  or a plan or  arrangement  that is subject to Section 4975 of
the Internal  Revenue Code of 1986,  as amended,  nor are we acting on behalf of
any  such  plan  or  arrangement  nor  using  the  assets  of any  such  plan or
arrangement to effect such acquisition, (e) if an insurance company, in the case
of   ERISA-restricted   Certificates   that   have  been  the   subject   of  an
ERISA-Qualifying  Underwriting,  we are purchasing the  Certificates  with funds
contained in an "insurance  company general account" (as defined in Section V(e)
of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60")) and our purchase
and holding of the  Certificates  are covered  under  Sections I and III of PTCE
95-60,  (f)  we  have  not,  nor  has  anyone  acting  on  our  behalf  offered,
transferred,  pledged,  sold or  otherwise  disposed  of the  Certificates,  any
interest in the  Certificates or any other similar security to, or solicited any
offer  to  buy  or  accept  a  transfer,  pledge  or  other  disposition  of the
Certificates,  any interest in the  Certificates  or any other similar  security
from, or otherwise  approached or negotiated  with respect to the  Certificates,
any interest in the  Certificates or any other similar security with, any person
in any manner, or made any general  solicitation by means of general advertising
or in any other  manner,  or taken any other  action,  that would  constitute  a
distribution  of the  Certificates  under  the  Act or  that  would  render  the
disposition  of the  Certificates a violation of Section 5 of the Act or require
registration  pursuant  thereto,  nor  will  act,  nor  has  authorized  or will
authorize  any person to act, in such manner with  respect to the  Certificates,
(g) we are a  "qualified  institutional  buyer" as that term is  defined in Rule
144A  under the Act  ("Rule  144A")  and have  completed  either of the forms of
certification  to that effect  attached hereto as Annex 1 or Annex 2, (h) we are
aware that the sale to us is being made in reliance on Rule 144A, and (i) we are
acquiring the  Certificates  for our own account or for resale  pursuant to Rule
144A and further,  understand that such  Certificates may be resold,  pledged or
transferred  only  (A)  to a  person  reasonably  believed  to  be  a  qualified
institutional  buyer that  purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer  is being made in  reliance  on Rule 144A,  or (B)  pursuant to another
exemption from registration under the Act.

                                      K-1
<PAGE>

                                        Very truly yours,

                                        ----------------------------------------
                                        Print Name of Transferee

                                        By:
                                           -------------------------------------
                                           Authorized Officer

                                      K-2
<PAGE>

                                                            ANNEX 1 TO EXHIBIT K

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

          [For Transferees Other Than Registered Investment Companies]

      The undersigned  (the "Buyer") hereby  certifies as follows to the parties
listed in the Rule  144A  Transferee  Certificate  to which  this  certification
relates with respect to the Certificates described therein:

      1. As indicated below,  the undersigned is the President,  Chief Financial
Officer, Senior Vice President or other executive officer of the Buyer.

      2. In connection  with  purchases by the Buyer,  the Buyer is a "qualified
institutional  buyer" as that term is defined in Rule 144A under the  Securities
Act of 1933,  as  amended  ("Rule  144A")  because  (i) the Buyer  owned  and/or
invested on a  discretionary  basis $ ______(1)  in  securities  (except for the
excluded  securities referred to below) as of the end of the Buyer's most recent
fiscal year (such amount being  calculated in accordance with Rule 144A and (ii)
the Buyer satisfies the criteria in the category marked below.

            ___ Corporation, etc. The Buyer is a corporation (other than a bank,
      savings and loan  association or similar  institution),  Massachusetts  or
      similar business trust, partnership,  or charitable organization described
      in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.

            ___ Bank.  The Buyer (a) is a national  bank or banking  institution
      organized  under  the laws of any  State,  territory  or the  District  of
      Columbia,  the business of which is substantially  confined to banking and
      is supervised by the State or  territorial  banking  commission or similar
      official or is a foreign bank or  equivalent  institution,  and (b) has an
      audited net worth of at least  $25,000,000 as  demonstrated  in its latest
      annual financial statements, a copy of which is attached hereto.

            ___  Savings  and  Loan.  The  Buyer  (a)  is  a  savings  and  loan
      association,  building and loan association,  cooperative bank,  homestead
      association or similar institution,  which is supervised and examined by a
      State or Federal  authority having  supervision over any such institutions
      or is a foreign savings and loan association or equivalent institution and
      (b) has an audited net worth of at least  $25,000,000 as  demonstrated  in
      its  latest  annual  financial  statements,  a copy of which  is  attached
      hereto.

            ___  Broker-dealer.  The Buyer is a dealer  registered  pursuant  to
      Section 15 of the Securities Exchange Act of 1934.

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

(1) Buyer must own and/or invest on a discretionary  basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.

                                      K-3
<PAGE>

            ___  Insurance  Company.  The Buyer is an  insurance  company  whose
      primary and predominant  business  activity is the writing of insurance or
      the reinsuring of risks  underwritten by insurance  companies and which is
      subject to supervision by the insurance commissioner or a similar official
      or agency of a State, territory or the District of Columbia.

            ___  State or  Local  Plan.  The  Buyer  is a plan  established  and
      maintained  by a State,  its  political  subdivisions,  or any  agency  or
      instrumentality  of the  State  or its  political  subdivisions,  for  the
      benefit of its employees.

            ___ ERISA  Plan.  The Buyer is an employee  benefit  plan within the
      meaning of Title I of the Employee Retirement Income Security Act of 1974.

            ___  Investment   Advisor.   The  Buyer  is  an  investment  advisor
      registered under the Investment Advisors Act of 1940.

            ___ Small  Business  Investment  Company.  Buyer is a small business
      investment  company  licensed by the U.S.  Small  Business  Administration
      under Section 301(c) or (d) of the Small Business Investment Act of 1958.

            ___ Business  Development  Company.  Buyer is a business development
      company as defined in Section 202(a)(22) of the Investment Advisors Act of
      1940.

      3. The term "securities" as used herein does not include (i) securities of
issuers that are affiliated with the Buyer,  (ii) securities that are part of an
unsold  allotment  to or  subscription  by the Buyer,  if the Buyer is a dealer,
(iii)  securities  issued  or  guaranteed  by the  U.S.  or any  instrumentality
thereof,  (iv)  bank  deposit  notes  and  certificates  of  deposit,  (v)  loan
participations,  (vi) repurchase agreements,  (vii) securities owned but subject
to a repurchase  agreement  and (viii)  currency,  interest  rate and  commodity
swaps.

      4. For purposes of determining  the aggregate  amount of securities  owned
and/or invested on a discretionary  basis by the Buyer,  the Buyer used the cost
of such  securities  to the  Buyer  and did not  include  any of the  securities
referred to in the preceding  paragraph,  except (i) where the Buyer reports its
securities  holdings in its  financial  statements  on the basis of their market
value,  and  (ii) no  current  information  with  respect  to the  cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market.  Further,  in determining such aggregate
amount,  the Buyer may have included  securities  owned by  subsidiaries  of the
Buyer,  but only if such  subsidiaries  are  consolidated  with the Buyer in its
financial  statements  prepared in accordance with generally accepted accounting
principles  and if the  investments of such  subsidiaries  are managed under the
Buyer's direction.  However, such securities were not included if the Buyer is a
majority-owned,  consolidated  subsidiary of another enterprise and the Buyer is
not itself a reporting  company  under the  Securities  Exchange Act of 1934, as
amended.

      5.  The  Buyer  acknowledges  that  it is  familiar  with  Rule  144A  and
understands  that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements  made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.

                                      K-4
<PAGE>

      6. Until the date of purchase of the Rule 144A Securities,  the Buyer will
notify each of the parties to which this certification is made of any changes in
the information and conclusions herein.  Until such notice is given, the Buyer's
purchase  of  the   Certificates   will  constitute  a  reaffirmation   of  this
certification  as of the date of such purchase.  In addition,  if the Buyer is a
bank or  savings  and loan is  provided  above,  the Buyer  agrees  that it will
furnish to such parties updated annual financial  statements promptly after they
become available.

                                        ----------------------------------------
                                        Print Name of Transferee

                                        By:
                                              ----------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                              ----------------------------------

                                        Date:
                                              ----------------------------------

                                      K-5
<PAGE>

                                                            ANNEX 2 TO EXHIBIT K

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

           [For Transferees That are Registered Investment Companies]

      The undersigned  (the "Buyer") hereby  certifies as follows to the parties
listed in the Rule  144A  Transferee  Certificate  to which  this  certification
relates with respect to the Certificates described therein:

      1. As indicated below,  the undersigned is the President,  Chief Financial
Officer or Senior Vice  President  of the Buyer or, if the Buyer is a "qualified
institutional  buyer" as that term is defined in Rule 144A under the  Securities
Act of 1933,  as  amended  ("Rule  144A")  because  Buyer is part of a Family of
Investment Companies (as defined below), is such an officer of the Adviser.

      2. In  connection  with  purchases  by Buyer,  the  Buyer is a  "qualified
institutional  buyer" as  defined in SEC Rule 144A  because  (i) the Buyer is an
investment  company  registered  under the  Investment  Company Act of 1940,  as
amended and (ii) as marked  below,  the Buyer  alone,  or the Buyer's  Family of
Investment Companies,  owned at least $100,000,000 in securities (other than the
excluded  securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining  the amount of securities  owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was  used,  except  (i)  where the  Buyer or the  Buyer's  Family of  Investment
Companies  reports its  securities  holdings in its financial  statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those  securities  has been  published.  If clause (ii) in the preceding
sentence applies, the securities may be valued at market.

            ___ The  Buyer  owned  $ in  securities  (other  than  the  excluded
      securities  referred  to below) as of the end of the  Buyer's  most recent
      fiscal year (such amount being calculated in accordance with Rule 144A).

            ___ The  Buyer is part of a Family  of  Investment  Companies  which
      owned in the aggregate $ in securities (other than the excluded securities
      referred  to below) as of the end of the Buyer's  most recent  fiscal year
      (such amount being calculated in accordance with Rule 144A).

      3. The term "Family of  Investment  Companies" as used herein means two or
more  registered  investment  companies  (or series  thereof) that have the same
investment  adviser or  investment  advisers that are  affiliated  (by virtue of
being majority owned  subsidiaries  of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

      4. The term "securities" as used herein does not include (i) securities of
issuers that are affiliated  with the Buyer or are part of the Buyer's Family of
Investment  Companies,  (ii) securities  issued or guaranteed by the U.S. or any
instrumentality  thereof,  (iii) bank deposit notes and certificates of deposit,
(iv) loan participations,  (v) repurchase agreements,  (vi) securities owned but
subject  to a  repurchase  agreement  and  (vii)  currency,  interest  rate  and
commodity swaps.

                                      K-6
<PAGE>

      5. The Buyer is familiar with Rule 144A and  understands  that the parties
listed in the Rule  144A  Transferee  Certificate  to which  this  certification
relates  are relying and will  continue  to rely on the  statements  made herein
because  one or more sales to the Buyer  will be in  reliance  on Rule 144A.  In
addition, the Buyer will only purchase for the Buyer's own account.

      6. Until the date of purchase of the  Certificates,  the undersigned  will
notify the parties listed in the Rule 144A Transferee  Certificate to which this
certification  relates of any changes in the information and conclusions herein.
Until such  notice is given,  the  Buyer's  purchase  of the  Certificates  will
constitute a reaffirmation  of this  certification  by the undersigned as of the
date of such purchase.

                                        ----------------------------------------
                                        Print Name of Transferee

                                        By:
                                              ----------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                              ----------------------------------

                                        IF AN ADVISER:

                                        ----------------------------------------
                                        Print Name of Buyer

                                        Date:
                                              ----------------------------------

                                      K-7
<PAGE>

                                    EXHIBIT L

                               REQUEST FOR RELEASE

                     [Substitution of Deleted Mortgage Loans
                                       or
                          Mortgage Loans Paid in Full]

            ____________________________________ Mortgage Loan Files

_____________________   hereby   certifies   that   he/she  is  an   officer  of
_____________________,  holding the office set forth beneath his/her  signature,
and hereby further certifies as follows:

(Check One)

[_]   With respect to the  mortgage  loans  described in the attached  schedule,
      each such mortgage loan  constitutes a "Substitute  Mortgage Loan" (as the
      term is defined in the Pooling and Servicing Agreement).

[_]   With  respect  to the  "Mortgage  Loans"  (as the term is  defined  in the
      custodial agreement) described in the attached schedule:

      All payments of principal,  premium (if any),  and interest have been made
      with respect to the following:

      Loan Number:
                  --------------------------------------

      Borrower's Name:
                      ----------------------------------

      County:
             -------------------------------------------

      We hereby certify that all amounts to be received in connection  with such
      payments have been received.

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

Dated:
      ------------------------

/ / Vice President

/ / Assistant Vice President

                                      L-1
<PAGE>

                                    EXHIBIT M

                         REQUEST FOR RELEASE AND RECEIPT
                         [For Servicing and Foreclosure]

            _____________________________________ Mortgage Loan Files

LOAN INFORMATION

      Name of Mortgagor: __________________________________

      Loan No.:          __________________________________

      The  undersigned  hereby  acknowledges  that it has  received  from  FIRST
TENNESSEE  BANK  NATIONAL  ASSOCIATION,  as Custodian  for  ____________________
Mortgage Loan Files,  the  documents  referred to below (the  "Documents").  All
capitalized  terms not otherwise defined in this Request for Release and Receipt
shall have the meanings ascribed to them in the Custodial  Agreement dated as of
__________________  among  ___________________ and FIRST TENNESSEE BANK NATIONAL
ASSOCIATION, as Custodian (the "Custodial Agreement").

                             [complete as necessary]

      The undersigned hereby acknowledges an agrees as follows:

      (1) The undersigned  shall hold and retain  possession of the Documents in
trust for the benefit of __________________, solely for the purposes provided in
the Custodial Agreement.

      (2) The  undersigned  shall not cause or permit  the  Documents  to become
subject to, or encumbered  by, any claim,  liens,  security  interest,  charges,
writs of attachment or other  impositions  nor shall the  undersigned  assert or
seek to assert any claims or rights of setoff to or against the Documents or any
proceeds thereof.

      (3) The  undersigned  shall  return  each and  every  Document  previously
requested  from the Mortgage  File to the  Custodian  when the need  therefor no
longer  exists,  unless the Mortgage  Loan  relating to the  Documents  has been
liquidated.

Date:
      -----------------------

                                        NAME

                                        By:
                                            ------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

                                      M-1

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