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EXHIBIT 10.1

                          PANGEA PETROLEUM CORPORATION
                            EQUITY COMPENSATION PLAN

Pangea  Petroleum  Corporation,  a Colorado  corporation,  (the  "Corporation"),
hereby adopts this Equity  Compensation  Plan (the  "Plan"),  under which Common
Stock in Lieu of Cash  Compensation  Awards ("Awards") of the Corporation may be
granted  from  time to time  to  employees,  directors  and  consultants  of the
Corporation or its subsidiaries, if any.

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

The Plan is intended to aid the  Corporation  in  maintaining  and  developing a
management  team,   attracting  qualified  officers  and  employees  capable  of
assisting  in  the  future  success  of the  Corporation,  and  rewarding  those
individuals  who have  contributed  to the  success  of the  Corporation.  It is
designed to aid the  Corporation  in retaining  the services of  executives  and
employees and in attracting new personnel when needed for future  operations and
growth and to provide such  personnel  with an incentive to remain  employees of
the  Corporation,  to use their  best  efforts  to  promote  the  success of the
Corporation's  business,  and to provide them with an  opportunity  to obtain or
increase a  proprietary  interest  in the  Corporation.  It is also  designed to
permit the Corporation to reward those  individuals who are not employees of the
Corporation  but who are perceived by management  as having  contributed  to the
success of the  Corporation  or who are important to the continued  business and
operations of the  Corporation.  The above aims will be effectuated  through the
granting awards, subject to the terms and conditions of this Plan. Stock granted
pursuant to this Plan, may be registered on Form S-8 or other  appropriate  form
of registration statement.

A. RULE 16B-3 PLAN.

The  Corporation  is subject to the  reporting  requirements  of the  Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and therefore the Plan is
intended  to  comply  with all  applicable  conditions  of Rule  16b-3  (and all
subsequent  revisions thereof) promulgated under the Exchange Act. To the extent
any  provision of the Plan or action by the  Committee or the Board of Directors
or Committee fails to so comply, it shall be deemed null and void, to the extent
permitted  by law and  deemed  advisable  by the  Committee.  In  addition,  the
Committee or the Board of  Directors  may amend the Plan from time to time as it
deems  necessary in order to meet the  requirements  of any  amendments  to Rule
16b-3 without the consent of the shareholders of the Corporation.

B. EFFECTIVE DATE OF PLAN.

The effective  date of this Plan shall be June 1, 2005 (the  "Effective  Date").
The Board of Directors shall,  within one year of the Effective Date, submit the
Plan for  approval to the  shareholders  of the  Corporation.  The plan shall be
approved by at least a majority of shareholders  voting in person or by proxy at
a duly  held  shareholders'  meeting,  or if  the  provisions  of the  corporate
charter,  by-laws  or  applicable  state  law  prescribes  a  greater  degree of
shareholder  approval  for this  action,  the  approval  by the  holders of that
percentage, at a duly held meeting of shareholders.

C. DEFINITIONS.

The following definitions shall apply to this Plan

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"Act" means the Securities Exchange Act of 1934, as amended from time to time.

"Administrator" is defined in Section 2(a).

"Affiliate"  means any parent  corporation and any subsidiary  corporation.  The
term "parent  corporation" means any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation if, at the time of
the action or transaction,  each of the corporations  other than the Corporation
owns stock  possessing  50% or more of the total  combined  voting  power of all
classes  of  stock  in one of the  other  corporations  in the  chain.  The term
"subsidiary  corporation"  means any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation if, at the time
of the  action or  transaction,  each of the  corporations  other  than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined  voting power of all classes of stock in one of the other  corporations
in the chain.

 "Agreement"  means,  individually or collectively,  any agreement  entered into
pursuant to the Plan pursuant to which Stock are granted to a participant.

"Board" means the Board of Directors of the Corporation as constituted from time
to time.

"Cause" shall mean, for purposes of whether and when a participant  has incurred
a Termination of Employment for Cause: (i) any act or omission which permits the
Corporation  to  terminate  the written  agreement  or  arrangement  between the
participant  and the  Corporation or a Subsidiary or Parent for Cause as defined
in  such  agreement  or  arrangement;  or  (ii) in the  event  there  is no such
agreement or  arrangement  or the agreement or  arrangement  does not define the
term  "cause,"  then  Cause  shall  mean  an act or acts  of  dishonesty  by the
participant  resulting or intending to result  directly or indirectly in gain to
or personal  enrichment of the participant at the  Corporation's  expense and/or
gross negligence or willful misconduct on the part of the participant.

"Change in Control" means,  for purposes of this Plan there shall be consummated
(i) any  consolidation  or merger of the Corporation in which the Corporation is
not the  continuing or surviving  corporation or pursuant to which shares of the
Corporation's  common stock would be converted  into cash,  securities  or other
property,  other than a merger of the  Corporation  in which the  holders of the
Corporation's  common stock immediately  prior to the merger have  substantially
the same  proportionate  ownership of common stock of the surviving  corporation
immediately  after  the  merger;  or (ii) any  sale,  lease,  exchange  or other
transfer  (in one  transaction  or a series of related  transactions)  of all or
substantially  all of the assets of the Corporation;  or the shareholders of the
Corporation   shall  approve  any  plan  or  proposal  for  the  liquidation  or
dissolution of the Corporation.

"Code"  means the Internal  Revenue Code of 1986,  as amended from time to time,
and any successor Code, and related rules, regulations and interpretations.

"Common  Stock" or "Stock"  means the Common  Stock,  par value per share of the
Corporation whether presently or hereafter issued, or such other class of shares
or  securities  as to which the Plan may be  applicable  subject to  adjustments
pursuant to Section 3.

"Common Stock in Lieu of Cash Compensation  Award" means Awards granted pursuant
to Section 6.

"Corporation" means Pangea Petroleum  Corporation,  a Colorado Corporation,  and
any successor or assignee company corporations into which the Corporation may be

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merged, changed or consolidated; any company for whose securities the securities
of the  Corporation  shall be  exchanged;  and any  assignee of or  successor to
substantially all of the assets of the Corporation.

"Director"  means any member of the Board of Directors of the Corporation or any
Parent  or  subsidiary  of the  Corporation  that now  exists  or  hereafter  is
organized or acquired by or acquires the Corporation.

"Effective  Date" means the date on which the Plan is initially  approved by the
Board of Directors as set forth in Section 13.

"Eligible  Persons" shall mean, with respect to the Plan,  those persons who, at
the time that an Award is granted,  are (i) officers,  directors or employees of
the Corporation or Affiliate or (ii) attorneys, consultants or subcontractors of
the Corporation or affiliate.

"Employee"  means any  person  employed  on an hourly or  salaried  basis by the
Corporation  or any Parent or Subsidiary of the  Corporation  that now exists or
hereafter is organized or acquired by or acquires the Corporation.

"Fair  Market  Value" means (i) if the Common Stock is not listed or admitted to
trade on a national securities exchange and if bid and ask prices for the Common
Stock are not  furnished  through  NASDAQ or a similar  organization,  the value
established by the Committee, in its sole discretion,  for purposes of the Plan;
(ii) if the Common Stock is listed or admitted to trade on a national securities
exchange or a national market system,  the closing price of the Common Stock, as
published  in the Wall  Street  Journal,  so listed or admitted to trade on such
date or, if there is no  trading  of the  Common  Stock on such  date,  then the
closing  price of the Common Stock on the next  preceding day on which there was
trading in such  shares;  or (iii) if the Common Stock is not listed or admitted
to trade on a national securities exchange or a national market system, the mean
between the bid and ask price for the Common Stock on such date, as furnished by
the National Association of Securities Dealers, Inc. through NASDAQ or a similar
organization if NASDAQ is no longer  reporting such  information.  If trading in
the stock or a price  quotation  does not  occur on the Date of Grant,  the next
preceding  date on which  the  stock  was  traded  or a price  was  quoted  will
determine the fair market value.

"Non-Employee  Director" means a member of the Board who is not also an employee
of the Corporation or any Subsidiary as that term is defined in Rule 16b-3 under
the Exchange Act.

"Plan" means this Equity Compensation Plan as may be amended from time to time.

"Stock Award" means Awards granted pursuant to Section 5.

"Subsidiary"  means any corporation or other entity (other than the Corporation)
in any unbroken  chain of  corporations  or other  entities  beginning  with the
Corporation  if each of the  corporations  or  entities  (other  than  the  last
corporation  or entity in the  unbroken  chain)  owns  stock or other  interests
possessing  50% or more of the economic  interest or the total  combined  voting
power  of all  classes  of  stock  or  other  interests  in  one  of  the  other
corporations or entities in the chain.

"Ten Percent  Shareholder"  means an  individual  who, at the time of the award,
owns Stock  possessing  more than 10% of the total combined  voting power of all
classes of stock of the Corporation or of any Affiliate.  An individual shall be
considered  as owning the Stock  owned,  directly or  indirectly,  by or for his
brothers and sisters  (whether by the whole or half blood),  spouse,  ancestors,
and lineal  descendants;  and Stock owned,  directly or indirectly,  by or for a
corporation,  partnership,  estate, or trust, shall be considered as being owned
proportionately by or for its shareholders, partners, or beneficiaries.

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"Termination" or "Termination of Employment"  means the occurrence of any act or
event whether pursuant to an employment  agreement or otherwise that actually or
effectively  causes or results in the person's ceasing,  for whatever reason, to
be an officer or  employee of the  Corporation  or of any  Subsidiary  or Parent
including, without limitation,  death, disability,  dismissal,  severance at the
election  of the  participant,  retirement,  or  severance  as a  result  of the
discontinuance,  liquidation,  sale  or  transfer  by  the  Corporation  or  its
Subsidiaries or Parent of all businesses owned or operated by the Corporation or
its Subsidiaries.  A Termination of Employment shall occur to an employee who is
employed by a Subsidiary if the  Subsidiary  shall cease to be a Subsidiary  and
the  participant  shall not  immediately  thereafter  become an  employee of the
Corporation or a Subsidiary.

"Subsidiary" means any corporation 50% or more of the voting securities of which
are owned  directly  or  indirectly  by the  Corporation  at any time during the
existence of this Plan.

In addition,  certain  other terms used in this Plan shall have the  definitions
given to them in the first place in which they are used.

SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT
PARTICIPANTS AND DETERMINE AWARDS

A.  ADMINISTRATION

The Plan shall be  administered  by either the entire  Board of  Directors  or a
committee of not fewer than two (2)  Independent  Directors (in either case, the
"Administrator").  Each  member  of  the  Committee  shall  be  a  "non-employee
director" within the meaning of Rule  16b-3(b)(3)(i)  promulgated under the Act,
or any successor definition under said rule.

If this Plan is  administered  by the  Committee,  then a  majority  of the full
Committee  constitutes a quorum for purposes of administering  the Plan, and all
determinations  of the  Committee  shall be made by a  majority  of the  members
present at a meeting at which a quorum is  present or by the  unanimous  written
consent of the Committee.

If no Committee has been appointed, members of the Board may vote on any matters
affecting the  administration  of the Plan or the grant of any Stock pursuant to
the Plan,  except  that no such  member  shall act on the  granting  of Stock to
himself, but such member may be counted in determining the existence of a quorum
at any meeting of the Board  during  which  action is taken with  respect to the
granting of Stock to him.

The  interpretation  and construction of the terms of the Plan by the Board or a
duly authorized  committee shall be final and binding on all participants in the
Plan absent a showing of demonstrable error. No member of the Plan Administrator
shall be liable for any action  taken or  determination  made in good faith with
respect to the Plan.

B.  POWERS OF ADMINISTRATOR.

The Administrator shall have the sole and exclusive power and authority to grant
Awards consistent with the terms of the Plan, including the power and authority:
to  select  the  participants  in this  plan;  establish  the terms of the Stock
granted to each participants  which may not be the same in each case;  determine
the total number of shares of Stock to grant to a grantee,  which may not be the
same amount to each Eligible Person in each case; make all other  determinations
necessary or advisable under the Plan.

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The Plan Administrator has the sole and absolute discretion to determine whether
the  performance of an Eligible Person warrants an award under this Plan, and to
determine the amount of the award. The Plan Administrator has full and exclusive
power to construe and  interpret  this Plan,  to prescribe and rescind rules and
regulations  relating to this Plan, and take all actions  necessary or advisable
for  the  Plan's  administration.  Any  such  determination  made  by  the  Plan
Administrator will be final and binding on all persons. (d) A member of the Plan
Administrator  will  not  be  liable  for  performing  any  act  or  making  any
determination  in  good  faith.  All  decisions  and   interpretations   of  the
Administrator shall be made in the Administrator's  sole and absolute discretion
and shall be final and binding on all persons,  including  the  Corporation  and
Plan participants.

SECTION 3. STOCK ISSUABLE UNDER THE PLAN; TERM OF PLAN;
RECAPITALIZATIONS; MERGERS; SUBSTITUTE AWARDS

A.  STOCK ISSUABLE.

The maximum  number of shares of Stock reserved and available for issuance under
the Plan initially shall be 25,000,000  shares of Stock per year. In addition if
any  portion  of  an  Award  is  forfeited,  cancelled,  or  reacquired  by  the
Corporation,  satisfied  without the issuance of Stock or otherwise  terminated,
the shares of Stock  underlying such portion of the Award shall be added back to
the  shares of Stock  available  for  issuance  under the Plan.  Subject to such
overall  limitation,  shares of Stock may be  issued up to such  maximum  number
pursuant to any type or types of Award.  The shares available for issuance under
the Plan may be  authorized  but  unissued  shares  of Stock or  shares of Stock
reacquired by the Corporation.

B. TERM OF PLAN.

No Awards shall be made after June 1, 2013.

C.  RECAPITALIZATIONS.

Subject  to the  provisions  of Section  12,  if,  through or as a result of any
merger,  consolidation,  sale of all or  substantially  all of the assets of the
Corporation, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar  transaction,  the outstanding
shares of Stock are  increased  or decreased  or are  exchanged  for a different
number or kind of shares or other securities of the  Corporation,  or additional
shares or new or different  shares or other  securities  of the  Corporation  or
other non-cash  assets are  distributed  with respect to such shares of Stock or
other  securities,  the  Administrator  may make an appropriate or proportionate
adjustment in (i) the maximum  number of shares  reserved for issuance under the
Plan, (ii) the number and kind of shares or other securities subject to any then
outstanding Awards under the Plan, The adjustment by the Administrator  shall be
final,  binding and  conclusive.  No fractional  shares of Stock shall be issued
under the Plan resulting from any such adjustment,  but the Administrator in its
discretion may make a cash payment in lieu of fractional shares.

SECTION 4. ELIGIBILITY

Awards  under the Plan may be  granted to  employees,  including  officers,  and
directors of the Corporation or its  subsidiaries,  as may be existing from time
to time, and to other individuals who are not employees of the Corporation,  but
performed  bona fide services to the  Corporation,  as may be deemed in the best
interest of the Corporation by the Board or the duly authorized Committee. These
individuals  may be referred to as consultants or key persons.  Such services to
the  Corporation  or a subsidiary  shall not be in connection  with the offer or
sale of securities in a capital-raising  transaction or for investor  relations.

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Such Awards shall be in the amounts, and shall have the rights and be subject to
the  restrictions,  as  may be  determined  by the  Board  or a duly  authorized
Committee, all as may be within the general provisions of this Plan.

Every  Eligible  Person,  as the Plan  Administrator  of the  Corporation or any
subsidiary  or Parent  shall  only be  eligible  to  receive  an Award if and as
permitted by applicable law and regulations. The Plan Administrator's Award to a
participant in any year does not require the Plan Administrator to make an Award
to that participant in any other year. Furthermore, the Plan Administrator makes
different Awards to different participants.  The Plan Administrator may consider
such factors as it deems pertinent in selecting  participants and in determining
the amount of their Stock, including, without limitation;

 (a) the financial condition of the Corporation or its Subsidiaries;

 (b) expected profits for the current or future years;

 (c) the  contributions  of a prospective  participant to the  profitability  or
success of the Corporation or its Subsidiaries; and

 (d) the adequacy of the prospective participant's other compensation.

 Participants  may include persons to whom stock,  or other benefits  previously
were granted under this or another plan of the Corporation or any Subsidiary.

SECTION 5. COMMON STOCK IN LIEU OF CASH COMPENSATION AWARDS

A. GRANTS OF COMMON STOCK PAYABLE IN LIEU OF CASH.

The  Administrator  may grant shares of Stock  available for issuance  under the
Plan to an  eligible  participant  in lieu of cash  compensation  earned  by the
participant with the consent of the participant,  or under a short- or long-term
incentive plan of the Corporation (an "Other Incentive Plan).

B. DATE OF GRANT.

Stock granted in lieu of cash compensation  shall be granted to each participant
on the date the waived cash  compensation  would  otherwise  by paid,  provided,
however,  that with respect to a participant who is subject to Section 16 of the
Act,  if such grant date is not at least six months and one day from the date of
the election,  the grant shall be delayed until the date which is six months and
one day from the date of the election (or the next  following  business  day, if
such date is not a  business  day) to the  extent  necessary  to  conform to the
requirements for exempt purchases under Rule 16b-3 of the Act.

C. NUMBER OF SHARES.

The  number of shares of Stock  granted  in lieu of cash  compensation  shall be
determined  by dividing the amount of the waived cash  compensation  by the Fair
Market Value of the Stock on the date the Stock is granted.  Such Stock shall be
granted  for the  whole  number  of  shares  so  determined;  the  value  of any
fractional share shall be paid in cash.

SECTION 6. TAX WITHHOLDING

A. PAYMENT BY PARTICIPANT.

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Each participant shall, no later than the date as of which the value of an Award
or of any Stock or other amounts  received there under first becomes  includable
in the gross income of the participant  for Federal income tax purposes,  pay to
the  Corporation,   or  make  arrangements  satisfactory  to  the  Administrator
regarding payment of, any Federal, state, or local taxes of any kind required by
law to be  withheld  with  respect  to  such  income.  The  Corporation  and its
Subsidiaries shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind  otherwise due to the  participant.  The
Corporation's  obligation to deliver stock  certificates  to any  participant is
subject  to  and  conditioned  on  tax   obligations   being  satisfied  by  the
participant.

C. LIABILITY OF THE COMPANY.

The Corporation that is in existence or hereafter comes into existence shall not
be liable to any person for any tax  consequences  expected  but not realized by
any person due to the grant of Stock.

SECTION 7. TRANSFER, LEAVE OF ABSENCE, ETC.

For purposes of the Plan, the following events shall not be deemed a termination
of employment:

         (a) a transfer to the employment of the  Corporation  from a Subsidiary
         or from the  Corporation  to a  Subsidiary,  or from one  Subsidiary to
         another; or

         (b) an approved leave of absence for military  service or sickness,  or
         for any other purpose  approved by the  Corporation,  if the employee's
         right  to re-  employment  is  guaranteed  either  by a  statute  or by
         contract  or under the  written  policy  pursuant to which the leave of
         absence was granted or if the  Administrator  otherwise  so provides in
         writing.

SECTION 8. AMENDMENTS AND TERMINATION

The Board of Directors of the Corporation  may amend,  terminate or suspend this
Plan at any time, in its sole and absolute discretion;  provided,  however, that
to the extent required to qualify this Plan under Rule 16b-3  promulgated  under
Section 16 of the Exchange Act, no amendment that would (a) materially  increase
the number of shares of Stock that may be issued under this Plan, (b) materially
modify the requirements as to eligibility for participation in this Plan, or (c)
otherwise  materially  increase the benefits accruing to participants under this
Plan,  shall be made  without the  approval of the  Corporation's  shareholders.
Subject to the preceding  sentence,  the Board of Directors shall have the power
to make  any  changes  in the  Plan and in the  regulations  and  administrative
provisions  under it as in the  opinion of counsel  for the  Corporation  may be
necessary or appropriate from time to time.

SECTION 9. STATUS OF PLAN

Unless the Administrator shall otherwise  expressly  determine in writing,  with
respect  to the  portion  of any  Award  which  has not been  exercised  and any
payments in cash, Stock or other consideration not received by a participant,  a
participant shall have no rights greater than those of a general creditor of the
Corporation.  In its  sole  discretion,  the  Administrator  may  authorize  the
creation of trusts or other  arrangements to meet the Corporation's  obligations
to deliver  Stock or make payments  with respect to Awards  hereunder,  provided
that the existence of such trusts or other  arrangements  is consistent with the
foregoing sentence.

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SECTION 10. CHANGE OF CONTROL AND MERGER PROVISIONS

In contemplation of and subject to the consummation of a consolidation or merger
or sale of all or  substantially  all of the assets of the  Corporation in which
outstanding shares of Stock are exchanged for securities, cash or other property
of an unrelated  corporation or business entity or in the event of a liquidation
or dissolution of the Corporation or in the event of a corporate  reorganization
of the Corporation (in each case, a  "Transaction"),  the Board, or the board of
directors of any  corporation  or other entity  assuming the  obligations of the
Corporation,  may,  in its  discretion,  take  any one or more of the  following
actions, as to outstanding Awards: (i) provide that such Awards shall be assumed
or  equivalent  awards shall be  substituted,  by the  acquiring  or  succeeding
corporation or other entity (or an affiliate thereof),  and/or (ii) upon written
notice to the participants,  provide that all Awards will terminate  immediately
prior to the  consummation of the  Transaction.  In the event that,  pursuant to
clause (ii) above,  Awards will terminate  immediately prior to the consummation
of the Transaction,  all vested Awards shall be fully settled in cash or in kind
at such appropriate consideration as determined by the Administrator in its sole
discretion after taking into account any and all consideration payable per share
of Stock pursuant to the Transaction (the "Transaction Price").

"Change of Control"  shall be defined as an event  subsequent to the adoption of
this Plan, by any "person," as such term is used in Sections  13(d) and 14(d) of
the Act (other than the Corporation, any of its Subsidiaries, any "affiliate" or
"associate"  (as such  terms are  defined  in Rule  12b-2  under the Act) of the
foregoing persons,  or any trustee,  fiduciary or other person or entity holding
securities under any employee benefit plan or trust of the Corporation or any of
its  Subsidiaries),  together with all  "affiliates"  and  "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person,  who shall become
the  "beneficial  owner" (as such term is defined in Rule 13d-3  under the Act),
directly or indirectly,  of securities of the  Corporation  representing  25% or
more  of the  combined  voting  power  of  the  Corporation's  then  outstanding
securities having the right to vote in an election of the Corporation's Board of
Directors  ("Voting  Securities")  (other than as a result of an  acquisition of
securities directly from the Corporation).

Notwithstanding the foregoing, a "Change of Control" shall not be deemed to have
occurred  for  purposes of the  foregoing  clause (i) solely as the result of an
acquisition of securities by the  Corporation  which,  by reducing the number of
shares of Voting Securities  outstanding,  increases the proportionate number of
shares of Voting Securities  beneficially owned by any person (as defined in the
foregoing  clause (i)) to 25% or more of the  combined  voting power of all then
outstanding  Voting  Securities;  PROVIDED,  however,  that if such person shall
thereafter  become  the  beneficial  owner of any  additional  shares  of Voting
Securities  (other than pursuant to a stock split,  stock  dividend,  or similar
transaction  or as a result of an  acquisition  of securities  directly from the
Corporation),  then a "Change of Control"  shall be deemed to have  occurred for
purposes of the foregoing clause.

SECTION 11. GENERAL PROVISIONS

A. DELIVERY OF STOCK CERTIFICATES.

Stock  certificates  to be  delivered to  participants  under this Plan shall be
deemed delivered for all purposes when the Corporation or a stock transfer agent
of the  Corporation  shall have mailed such  certificates  in the United  States
mail,  addressed to the participant,  at the participant's last known address on
file with the Corporation.

B. OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS.

Nothing  contained in this Plan shall prevent the Board from  adopting  other or
additional  compensation  arrangements,  including trusts, and such arrangements
may be either  generally  applicable or applicable only in specific  cases.  The
adoption of this Plan and the grant of Awards shall not confer upon any employee

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any right to continued  employment  with the  Corporation  or any Subsidiary and
shall  not  interfere  in any way  with  the  right  of the  Corporation  or any
Subsidiary to terminate the employment of any of its employees at any time.

C. TRADING POLICY RESTRICTIONS.

Sale of Stock  acquired  pursuant to an Award under the Plan shall be subject to
such Corporation's insider-trading-policy-related restrictions as established by
the  Corporation  from time,  terms and  conditions as may be established by the
Administrator  from time to time,  or in  accordance  with  policies  set by the
Administrator, from time to time.

D. INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS.

With respect to  administration  of this Plan, the  Corporation  shall indemnify
each  present  and future  member of the  Committee  and the Board of  Directors
against,  and each member of the Committee  and the Board of Directors  shall be
entitled  without further act on his part to indemnity from the Corporation for,
all expenses (including  attorney's fees, the amount of judgments and the amount
of  approved  settlements  made  with a view  to the  curtailment  of  costs  of
litigation,  other  than  amounts  paid to the  Corporation  itself)  reasonably
incurred  by him in  connection  with or arising  out of any  action,  suit,  or
proceeding  in which he may be  involved by reason of his being or having been a
member  of the  Committee  and/or  the  Board of  Directors,  whether  or not he
continues to be a member of the  Committee  and/or the Board of Directors at the
time of incurring the expenses,  including,  without  limitation,  matters as to
which he shall be finally  adjudged in any action,  suit or  proceeding  to have
been found to have been negligent in the  performance of his duty as a member of
the  Committee or the Board of  Directors.  However,  this  indemnity  shall not
include any expenses incurred by any member of the Committee and/or the Board of
Directors in respect of matters as to which he shall be finally  adjudged in any
action,  suit or proceeding  to have been guilty of gross  negligence or willful
misconduct in the  performance  of his duty as a member of the Committee and the
Board of Directors.  In addition,  no right of  indemnification  under this Plan
shall be  available to or  enforceable  by any member of the  Committee  and the
Board of Directors unless,  within 60 days after institution of any action, suit
or proceeding,  he shall have offered the  Corporation the opportunity to handle
and defend same at its own expense. The failure to notify the Corporation within
60  days  shall  only  affect  a  Director  or  committee   member's   right  to
indemnification  if said  failure  to notify  results  in an  impairment  of the
Corporation's  rights  or is  detrimental  to the  Corporation.  This  right  of
indemnification  shall  inure  to  the  benefit  of  the  heirs,   executors  or
administrators  of each member of the  Committee  and the Board of Directors and
shall be in addition to all other rights to which a member of the  Committee and
the  Board of  Directors  may be  entitled  as a  matter  of law,  contract,  or
otherwise.

E. GENDER.

If the  context  requires,  words of one  gender  when used in this  Plan  shall
include the others and words used in the  singular or plural  shall  include the
other.

F.  HEADINGS.

Headings of Articles and Sections are included for convenience of reference only
and do not  constitute  part of the Plan and shall not be used in construing the
terms of the Plan.

                                       9
<PAGE>

G. OTHER COMPENSATION PLANS.

The  adoption  of this Plan shall not affect any other  compensation  or benefit
plans in  effect  for the  Corporation  or any  Affiliate,  nor  shall  the Plan
preclude the  Corporation  from  establishing  any other forms of  compensation,
including  a  stock  option  plan,  for  employees  of  the  Corporation  or any
Affiliate.

H. OTHER AWARDS.

The grant of Stock or Awards shall not confer upon the Eligible Person the right
to receive any future or other Stock or Awards  under this Plan,  whether or not
Stock or Awards may be granted to similarly  situated Eligible  Persons,  or the
right to receive  future  Stock or Awards upon the same terms or  conditions  as
previously granted.

SECTION 12.  EFFECTIVE DATE OF PLAN

The Plan  shall  become  effective  June 1,  2005 on  adoption  by the  board of
directors of the Corporation (the "Board").

SECTION 13. GOVERNING LAW

This Plan and all Awards and actions taken there under shall be governed by, and
construed in accordance with, the laws of the State of Colorado, applied without
regard to conflict of law principles.

                                       10Unassociated Document

FIRST
HORIZON ASSET SECURITIES INC.

 

Depositor

 

FIRST
HORIZON HOME LOAN CORPORATION

 

Master
Servicer

 

and

 

THE BANK
OF NEW YORK,

 

Trustee

 

_____________________________________________________

 

POOLING
AND SERVICING AGREEMENT

 

Dated as
of May 1, 2005

 

_____________________________________________________

 

FIRST
HORIZON ALTERNATIVE MORTGAGE SECURITIES TRUST 2005-AA5

 

MORTGAGE
PASS-THROUGH CERTIFICATES, SERIES 2005-AA5

 

 

TABLE OF
CONTENTS

 

	
      ARTICLE
      I DEFINITIONS
	
      5

	
      ARTICLE
      II CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
      WARRANTIES
	
      33

	
      SECTION
      2.1 Conveyance of Mortgage Loans.
	
      33

	
      SECTION
      2.2 Acceptance by Trustee of the Mortgage Loans.
	
      37

	
      SECTION
      2.3 Representations and Warranties of the Master Servicer; Covenants of
      the Seller.
	
      39

	
      SECTION
      2.4 Representations and Warranties of the Depositor as to the Mortgage
      Loans.
	
      42

	
      SECTION
      2.5 Delivery of Opinion of Counsel in Connection with
      Substitutions.
	
      42

	
      SECTION
      2.6 Execution and Delivery of Certificates.
	
      43

	
      SECTION
      2.7 REMIC Matters.
	
      43

	
      SECTION
      2.8 Covenants of the Master Servicer.
	
      46

	
      ARTICLE
      III ADMINISTRATION AND SERVICING OF MORTGAGE LOANS
	
      46

	
      SECTION
      3.1 Master Servicer to Service Mortgage Loans.
	
      46

	
      SECTION
      3.2 Subservicing; Enforcement of the Obligations of
    Servicers.
	
      47

	
      SECTION
      3.3 Rights of the Depositor and the Trustee in Respect of the Master
      Servicer.
	
      48

	
      SECTION
      3.4 Trustee to Act as Master Servicer.
	
      48

	
      SECTION
      3.5 Collection of Mortgage Loan Payments; Certificate Account;
      Distribution Account.
	
      49

	
      SECTION
      3.6 Collection of Taxes, Assessments and Similar Items; Escrow
      Accounts.
	
      52

	
      SECTION
      3.7 Access to Certain Documentation and Information Regarding the Mortgage
      Loans.
	
      53

	
      SECTION
      3.8 Permitted Withdrawals from the Certificate Account and Distribution
      Account.
	
      53

	
      SECTION
      3.9 Maintenance of Hazard Insurance; Maintenance of Primary Insurance
      Policies.
	
      55

	
      SECTION
      3.10 Enforcement
      of Due-on-Sale Clauses; Assumption Agreements.
	
      56

	
      SECTION
      3.11 Realization Upon Defaulted Mortgage Loans; Repurchase of Certain
      Mortgage Loans.
	
      58

	
      SECTION
      3.12 Trustee to Cooperate; Release of Mortgage Files.
	
      60

	
      SECTION
      3.13 Documents Records and Funds in Possession of Master Servicer to be
      Held for the Trustee.
	
      61

	
      SECTION
      3.14 Master Servicing Compensation.
	
      61

	
      SECTION
      3.15 Access to Certain Documentation.
	
      62

	
      SECTION
      3.16 Annual Statement as to Compliance.
	
      62

	
      SECTION
      3.17 Annual Independent Public Accountants’ Servicing Statement; Financial
      Statements.
	
      62

	
      SECTION
      3.18 Errors and Omissions Insurance; Fidelity Bonds.
	
      63

	
      SECTION
      3.19 Notification of Adjustments.
	
      63

 

i

 

	
      ARTICLE
      IV DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER
	
      64

	
      SECTION
      4.1 Advances.
	
      64

	
      SECTION
      4.2 Priorities of Distribution.
	
      64

	
      SECTION
      4.3 Method of Distribution.
	
      68

	
      SECTION
      4.4 Allocation of Losses.
	
      69

	
      SECTION
      4.5 [RESERVED]
	
      71

	
      SECTION
      4.6 Monthly Statements to Certificateholders.
	
      71

	
      ARTICLE
      V THE CERTIFICATES
	
      73

	
      SECTION
      5.1 The Certificates.
	
      73

	
      SECTION
      5.2 Certificate Register; Registration of Transfer and Exchange of
      Certificates.
	
      74

	
      SECTION
      5.3 Mutilated, Destroyed, Lost or Stolen Certificates.
	
      79

	
      SECTION
      5.4 Persons Deemed Owners.
	
      79

	
      SECTION
      5.5 Access to List of Certificateholders’ Names and
    Addresses.
	
      79

	
      SECTION
      5.6 Maintenance of Office or Agency.
	
      80

	
      ARTICLE
      VI THE DEPOSITOR AND THE MASTER SERVICER
	
      80

	
      SECTION
      6.1 Respective Liabilities of the Depositor and the Master
      Servicer.
	
      80

	
      SECTION
      6.2 Merger or Consolidation of the Depositor or the Master
      Servicer.
	
      80

	
      SECTION
      6.3 Limitation on Liability of the Depositor, the Master Servicer and
      Others.
	
      80

	
      SECTION
      6.4 Limitation on Resignation of Master Servicer.
	
      81

	
      ARTICLE
      VII DEFAULT
	
      81

	
      SECTION
      7.1 Events of Default.
	
      81

	
      SECTION
      7.2 Trustee to Act; Appointment of Successor.
	
      83

	
      SECTION
      7.3 Notification to Certificateholders.
	
      85

	
      ARTICLE
      VIII CONCERNING THE TRUSTEE
	
      85

	
      SECTION
      8.1 Duties of Trustee.
	
      85

	
      SECTION
      8.2 Certain Matters Affecting the Trustee.
	
      87

	
      SECTION
      8.3 Trustee Not Liable for Certificates or Mortgage Loans.
	
      88

	
      SECTION
      8.4 Trustee May Own Certificates.
	
      89

	
      SECTION
      8.5 Trustee’s Fees and Expenses.
	
      89

	
      SECTION
      8.6 Eligibility Requirements for Trustee.
	
      89

	
      SECTION
      8.7 Resignation and Removal of Trustee.
	
      90

	
      SECTION
      8.8 Successor Trustee.
	
      91

	
      SECTION
      8.9 Merger or Consolidation of Trustee.
	
      91

	
      SECTION
      8.10 Appointment of Co-Trustee or Separate Trustee.
	
      91

	
      SECTION
      8.11 Tax Matters.
	
      93

	
      SECTION
      8.12 Periodic Filings.
	
      94

	
      ARTICLE
      IX TERMINATION
	
      95

	
      SECTION
      9.1 Termination upon Liquidation or Purchase of all Mortgage
      Loans.
	
      95

	
      SECTION
      9.2 Final Distribution on the Certificates.
	
      95

	
      SECTION
      9.3 Additional Termination Requirements.
	
      97

	
      ARTICLE
      X [RESERVED]
	
      97

 

ii

 

	
      ARTICLE
      XI MISCELLANEOUS PROVISIONS
	
      97

	
      SECTION
      11.1 Amendment.
	
      97

	
      SECTION
      11.2 Recordation of Agreement; Counterparts.
	
      99

	
      SECTION
      11.3 Governing Law.
	
      99

	
      SECTION
      11.4 Intention of Parties.
	
      99

	
      SECTION
      11.5 Notices.
	
      100

	
      SECTION
      11.6 Severability of Provisions.
	
      101

	
      SECTION
      11.7 Assignment.
	
      101

	
      SECTION
      11.8 Limitation on Rights of Certificateholders.
	
      101

	
      SECTION
      11.9 Inspection and Audit Rights.
	
      102

	
      SECTION
      11.10 Certificates Nonassessable and Fully Paid.
	
      102

	
      SECTION
      11.11 Limitations on Actions; No Proceedings.
	
      103

	
      SECTION
      11.12 Acknowledgment of Seller.
	
      103

 

SCHEDULES

 

	
      Schedule
      I:
	
      Mortgage
      Loan Schedule
	
      S-I-1

	
      Schedule
      II:
	
      Representations
      and Warranties of the Master Servicer
	
      S-II-1

	
      Schedule
      III:
	
      Form
      of Monthly Master Servicer Report
	
      S-III-1

EXHIBITS

 

	
      Exhibit
      A:
	
      Form
      of Senior Certificate
	
      A-1

	
      Exhibit
      B:
	
      Form
      of Subordinated Certificate
	
      B-1

	
      Exhibit
      C:
	
      Form
      of Residual Certificate
	
      C-1

	
      Exhibit
      D:
	
      Form
      of Reverse of Certificates
	
      D-1

	
      Exhibit
      E:
	
      Form
      of Initial Certification
	
      E-1

	
      Exhibit
      F:
	
      Form
      of Delay Delivery Certification
	
      F-1

	
      Exhibit
      G:
	
      Form
      of Subsequent Certification of Custodian
	
      G-1

	
      Exhibit
      H:
	
      Transfer
      Affidavit
	
      H-1

	
      Exhibit
      I:
	
      Form
      of Transferor Certificate
	
      I-1

	
      Exhibit
      J:
	
      Form
      of Investment Letter [Non-Rule 144A]
	
      J-1

	
      Exhibit
      K:
	
      Form
      of Rule 144A Letter
	
      K-1

	
      Exhibit
      L:
	
      Request
      for Release (for Trustee)
	
      L-1

	
      Exhibit
      M:
	
      Request
      for Release (Mortgage Loan)
	
      M-1

 

iii

THIS
POOLING AND SERVICING AGREEMENT, dated as of May 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 two separate REMICs. The Certificates will represent the entire
beneficial ownership interest in the Trust Fund. The Regular Certificates will
represent “regular interests” in the Upper REMIC. The Class I-A-R Certificates
will represent the residual interests in the Lower 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

	
       

      Class
      Designation
	 	 	
      

      Initial
      Class Certificate Balance
	 	 	
      

      Initial

      Pass
      Through Rate
	 	 	
      

      Minimum
      Denomination
	 	 	
      

      Integral
      Multiples in Excess Minimum
	 
	
      Class
      I-A-1
		
      

      $
	
      

      81,005,000.00
	 		
      

      5.3941%(1)
	
      

       
	
      

      $
	
      

      25,000
		
      

      $
	
      

      1,000
	 
	
      Class
      I-A-2
	 	
      

      $
	
      

      3,600,000.00
	 	 	
      

      5.3941%(1)
	
      

      
	
      

      $
	
      

      25,000
	 	
      

      $
	
      

      1,000
	 
	
      Class
      I-A-R
	 	
      

      $
	
      

      100.00
	 	 	
      

      5.3941%(1)
	
      

       
	
      

      $
	
      

      100
	 	
      

      $
	
      

      N/A
	 
	
      Class
      II-A-1
	 	
      

      $
	
      

      315,016,000.00
	 	 	
      

      5.5629%(2)
	
      

       
	
      

      $
	
      

      25,000
	 	
      

      $
	
      

      1,000
	 
	
      Class
      II-A-2
	 	
      

      $
	
      

      14,000,000.00
	 	 	
      

      5.5629%(2)
	
      

       
	
      

      $
	
      

      25,000
	 	
      

      $
	
      

      1,000
	 
	
      Class
      B-1
	 	
      

      $
	
      

      11,441,000.00
	 	 	
      

      5.5283%(3)
	
      

       
	
      

      $
	
      

      100,000
	 	
      

      $
	
      

      1,000
	 
	
      Class
      B-2
	 	
      

      $
	
      

      5,060,000.00
	 	 	
      

      5.5283%(3)
	
      

       
	
      

      $
	
      

      100,000
	 	
      

      $
	
      

      1,000
	 
	
      Class
      B-3
	 	
      

      $
	
      

      3,300,000.00
	 	 	
      

      5.5283%(3)
	
      

       
	
      

      $
	
      

      100,000
	 	
      

      $
	
      

      1,000
	 
	
      Class
      B-4
	 	
      

      $
	
      

      2,860,000.00
	 	 	
      

      5.5283%(3)
	
      

       
	
      

      $
	
      

      100,000
	 	
      

      $
	
      

      1,000
	 
	
      Class
      B-5
	 	
      

      $
	
      

      2,201,000.00
	 	 	
      

      5.5283%(3)
	
      

       
	
      

      $
	
      

      100,000
	 	
      

      $
	
      1,000
	 
	
      Class
      B-6
	 	
      

      $
	
      

      1,540,147.04
	 	 	
      

      5.5283%(3)
	
      

       
	
      

      $
	
      

      100,000
	 	
      

      $
	
      

      1,000
	 

 

(1) The
Pass-Through Rates for the Class I-A-1, Class I-A-2 and Class I-A-R Certificates
for each subsequent Distribution Date will equal the Weighted Average Adjusted
Net Mortgage Rate for Pool I, as of the first day of the month immediately prior
to the month in which the relevant Distribution Date occurs, after taking into
account scheduled payments of principal on that date and any Principal
Prepayments received on or after such date and distributed to Certificateholders
on the prior Distribution Date.

 

(2) The
Pass-Through Rates for the Class II-A-1 and Class II-A-2 Certificates for each
subsequent Distribution Date will equal the Weighted Average Adjusted Net
Mortgage Rate for Pool II, as of the first day of the month immediately prior to
the month in which the relevant Distribution Date occurs, after taking into
account scheduled payments of principal on that date and any Principal
Prepayments received on or after such date and distributed to Certificateholders
on the prior Distribution Date.

 

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

 

2

 

	
      Accretion
      Directed Certificates
	
      None.

	
      Accrual
      Certificates
	
      None.

	
      Accrual
      Components
	
      None.

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

	
      Certificate
      Group
	
      With
      respect to Pool I, the Group I Senior Certificates; and with respect to
      Pool II, the Group II Senior Certificates. The Subordinated Certificates
      correspond to both 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
	
      None.

	
      Group
      I Senior Certificates
	
      The
      Class I-A-1, Class I-A-2 and Class I-A-R Certificates.

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

	
      Insured
      Retail Certificates
	
      None.

	
      Inverse
      Floating Rate Certificates
	
      None.

	
      LIBOR
      Certificates
	
      None.

	
      Non-Delay
      Certificates
	
      None.

	
      Notional
      Amount Components
	
      None.

	
      Notional
      Amount Certificates
	
      None.

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

	
      Physical
      Certificates
	
      The
      Private Certificates and the Residual 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
	
      S&P
      and Moody’s; except that, for the purposes of the Class B-1, Class B-2,
      Class B-3, Class B-4 and Class B-5 Certificates, S&P shall be the sole
      Rating Agency.

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

	
      Residual
      Certificates
	
      The
      Class I-A-R Certificates.

 

3

 

	
      Scheduled
      Principal Classes
	
      None.

	
      Senior
      Certificates
	
      The
      Group I Senior Certificates and the Group II Senior Certificates
      together.

	
      Super
      Senior Mezzanine Certificates
	
      The
      Class I-A-2 and Class II-A-2 Certificates.

	
      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-1 and Class II-A-1 Certificates.

	
      Support
      Classes
	
      None.

	
      Targeted
      Principal Classes
	
      None.

	
      Underwriters
	
      Citigroup
      Global Markets Inc. and Morgan Stanley & Co.
    Incorporated

 

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

ARTICLE
I

DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Alternative
Title Product: Any one
of the following: (i) Lien Protection Insurance issued by Integrated Loan
Services or ATM Corporation of America, (ii) a Mortgage Lien Report issued by
EPN Solutions/ACRAnet, (iii) a Property Plus Report issued by Rapid Refinance
Service through SharperLending.com, or (iv) such other alternative title
insurance product that the Seller utilizes in connection with its then current
underwriting criteria.

 

5

 

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:

 

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

 

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

 

	·  	
      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;

 

6

 

	·  	
      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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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 Trustee 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-AA5.”

 

Certificate
Group: As specified in the Preliminary Statement. 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Class
Certificate Balance: With respect to any Class of Certificates and as of any
Distribution Date the aggregate of the Certificate Principal Balances of all
Certificates of such Class as of such date, plus the amount of any Unanticipated
Recoveries added to the Class Certificate Balance of such Class of Certificate
pursuant to Section 4.2(g).

 

8

 

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

 

Closing
Date: May 27, 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.

 

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.

 

9

 

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-AA5), 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 Lower REMIC Interest identified in Section 2.7, the
Class or Classes that are identified in Section 2.7 as corresponding to
such Lower REMIC Interest.

 

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

 

Custodial
Agreement: The Custodial Agreement dated as of May 27, 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: May 1, 2005.

 

Cut-off
Date Pool Principal Balance: With respect to Pool I, $90,005,695.35 and with
respect to Pool II, $350,017,551.69.

 

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

 

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

 

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

 

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

 

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

 

10

 

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.

 

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-AA5.” Funds in the Distribution Account shall be held
in trust for the Certificateholders for the uses and purposes set forth in this
Agreement.

 

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

 

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

 

11

 

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.

 

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

 

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

 

12

 

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
Loss Coverage Amount: As of the Closing Date, $8,800,465. As of any Distribution
Date from the first anniversary of the Cut-off Date and prior to the fifth
anniversary of the Cut-off Date, the Fraud Loss Coverage Amount will equal
$4,400,232 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 on or after the
earlier of the Cross-over Date or the fifth anniversary
of the Cut-off Date, the Fraud Loss Coverage Amount shall be zero.

 

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

 

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

 

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

 

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

 

Group
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.

 

13

 

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.

 

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

 

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

 

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

 

Insured
Retail Certificates: Not applicable.

 

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

 

Interest
Determination Date: Not applicable.

 

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

 

Lender
PMI Mortgage Loan: Not applicable.

 

LIBOR:
Not applicable.

 

LIBOR
Certificates: Not applicable.

 

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.

 

14

 

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

 

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

 

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

 

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

 

Lower
REMIC: The segregated pool of assets consisting of the Trust Fund but excluding
the Lower REMIC Interests, the RL 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: A per annum rate equal to 0.369%. 

 

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

 

15

 

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

 

MERS®
System: The system of recording transfers of mortgages electronically maintained
by MERS.

 

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

 

MLPA: The
Mortgage Loan Purchase Agreement dated as of May 27, 2005, by and between First
Horizon Home Loan Corporation, as seller, and First Horizon Asset Securities
Inc., as purchaser, as related to the transfer, sale and conveyance of the
Mortgage Loans.

 

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

 

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

 

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

 

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

 

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

 

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

 

	(1)  	
      the
      loan number;

 

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

 

	(3)  	
      the
      maturity date;

 

	(4)  	
      the
      original principal balance;

 

	(5)  	
      the
      Cut-off Date Principal Balance;

 

16

 

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

 

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

 

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

 

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

 

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

 

	(11)  	
      the
      Mortgage Rate;

 

	(12)  	
      the
      purpose for the Mortgage Loan; 

 

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

 

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

 

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

 

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

 

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

 

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

 

Mortgage
Pool: Any of Pool I 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.

 

17

 

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

 

Net
Interest Shortfall: For any Distribution Date and each Mortgage Pool, the sum of
(a) the amount of interest which would otherwise have been received for any
Mortgage Loan 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 in 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: Not applicable.

 

Notional
Amount Component: Not applicable.

 

Notional
Amount Certificates: Not applicable.

 

Offered
Certificates: As specified in the Preliminary Statement.

 

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

 

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

 

18

 

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

 

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

 

OTS: The
Office of Thrift Supervision.

 

Outside
Reference Date: Not applicable.

 

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

 

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

 

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

 

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

 

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 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:

 

19

 

(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;

 

(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

 

20

 

(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.

 

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

 

21

 

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

 

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

 

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

 

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

 

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

 

Principal
Balance Schedules: 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.

 

22

 

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.

 

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

 

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

 

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

 

23

 

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

 

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

 

Reference
Bank: Not applicable.

 

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

 

Regular
Certificates: As specified in the Preliminary Statement.

 

Relief
Act: The 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: Any of the Lower 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.

 

24

 

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

 

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

 

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

 

Residual
Certificates: As specified in the Preliminary Statement.

 

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

 

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.

 

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.

 

Scheduled
Principal Classes: Not applicable.

 

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

 

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

 

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

 

Senior
Certificates: As specified in the Preliminary Statement.

 

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

 

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

 

25

 

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

 

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

 

(3) the
related Senior Prepayment Percentage of the sum of (a) all partial Principal
Prepayments in respect of each Mortgage Loan in such Mortgage Pool received
during the applicable Prepayment Period and (b) all Unanticipated Recoveries
received in respect of each Mortgage Loan in the related Mortgage Pool during
the calendar month prior to such Distribution Date;

 

(4) the
lesser of:

 

(a) the
related Senior Prepayment Percentage of the sum of (x) the 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 each 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 immediately preceding such Distribution Date by the Pool
Principal Balance of the related Mortgage Pool for the immediately preceding
Distribution Date.

 

26

 

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:

 

	
      Period
      (Dates Inclusive)
	
      Senior
      Prepayment Percentage

	
      June
      2005 - May 2012
	
      100%

	
      June
      2012 - May 2013
	
      The
      related Senior Percentage plus 70% of the related Subordinated
      Percentage

	
      June
      2013 - May 2014
	
      The
      related Senior Percentage plus 60% of the related Subordinated
      Percentage

	
      June
      2014 - May 2015
	
      The
      related Senior Percentage plus 40% of the related Subordinated
      Percentage

	
      June
      2015 - May 2016
	
      The
      related Senior Percentage plus 20% of the related Subordinated
      Percentage

	
      June
      2016 and thereafter
	
      The
      related Senior Percentage

 

provided
however, (i) if
on any Distribution Date the Senior Percentage for a Certificate Group exceeds
the initial Senior Percentage for such Certificate Group, the Senior Prepayment
Percentage for each Certificate Group for such Distribution Date will equal
100%, (ii) if on any Distribution Date before the Distribution Date in June
2008, prior to giving effect to any distributions on such Distribution Date, the
Subordinated Percentage for such Certificate Group for such Distribution Date is
equal to or greater than twice the initial Subordinated Percentage for such
Certificate Group, then the Senior Prepayment Percentage for such Certificate
Group for such Distribution Date will equal the Senior Percentage for such
Certificate Group plus 50% of the Subordinated Percentage for such Certificate
Group and (iii) if on any Distribution Date on or after the Distribution Date in
June 2008, prior to giving effect to any distributions on such Distribution
Date, the Subordinated Percentage for such Certificate Group for such
Distribution Date is equal to or greater than twice the initial Subordinated
Percentage for such Certificate Group, then the Senior Prepayment Percentage for
such Certificate Group for such Distribution Date will equal the Senior
Percentage for such Certificate Group.

 

The
reductions in the Senior Prepayment Percentage for each Certificate Group
described above will not occur, and the Senior Prepayment Percentage or each
Certificate Group for such prior period will be calculated without regard to
clause (ii) or (iii) of the paragraph above, unless both of the following
step-down conditions are satisfied with respect to each Mortgage Pool, as of the
last day of the month preceding the Distribution Date: 

 

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

 

27

 

	 	
      (2)
	
      cumulative
      Realized Losses on the Mortgage Loans in both Mortgage Pools do not
      exceed:

 

(a)    20% of
the Original Subordinated Principal Balance if such Distribution Date occurs
between and including June 2005 and May 2008; and 

 

(b)    30% of
the Original Subordinated Principal Balance if such Distribution Date occurs on
or after June 2008. 

 

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);

 

28

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Special
Hazard Loss Coverage Amount: Upon the initial issuance of the Certificates,
$5,785,000. 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.

 

29

 

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 of the Pool Principal
Balances of 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 the sum of (a) all partial
Principal Prepayments received in respect of each Mortgage Loan in the related
Mortgage Pool during the related Prepayment Period, (b) all Unanticipated
Recoveries received in respect of each Mortgage Loan in the related Mortgage
Pool during the calendar month prior to such Distribution Date, and (c) on the
Senior Final Distribution Date, 100% of any related Senior Optimal Principal
Amount remaining undistributed on such date;

 

30

 

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

 

(5) the
related Subordinated Prepayment Percentage of the sum of (a) the Stated
Principal Balance of each Mortgage Loan in the related Mortgage Pool which was
repurchased by the seller in connection with such Distribution Date and (b) the
difference, if any, between the Stated Principal Balance of each Mortgage Loan
in the related Mortgage Pool that has been replaced by the seller with a
Substitute Mortgage Loan pursuant to this 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 Adjusted Net Mortgage Rate of the Deleted
Mortgage Loan, provided that the Master Servicing Fee for the Substitute
Mortgage Loan shall be equal to or greater than that of the Deleted Mortgage
Loan; (iii) have a maximum mortgage rate not more than 1% per annum higher or
lower than the maximum mortgage rate of the Deleted Mortgage Loan; (iv) have a
minimum mortgage rate specified in its related Mortgage Note not more than 1%
per annum higher or lower than the minimum mortgage rate of the Deleted Mortgage
Loan; (v) have the same mortgage index, reset period and periodic rate as the
Deleted Mortgage Loan and a gross margin not more than 1% per annum higher or
lower than that of the Deleted Mortgage Loan (vi) be accruing interest at a rate
no lower than and not more than 1% per annum higher than, that of the Deleted
Mortgage Loan; (iv) have a Loan-to-Value Ratio no higher than that of the
Deleted Mortgage Loan; (vii) have a remaining term to maturity no greater than
(and not more than one year less than that of) the Deleted Mortgage Loan; (viii)
not be a Cooperative Loan unless the Deleted Mortgage Loan was a Cooperative
Loan and (ix) comply with each representation and warranty set forth in Section
2.3 hereof.

 

31

 

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 Mezzanine Certificates: As specified in the Preliminary
Statement.

 

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 § 1.860F-4(d) and Treasury regulation §
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.

 

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.”

 

32

 

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

 

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

 

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.

 

Underwriters’
Exemption: Prohibited Transaction Exemption 89-88, as amended (or any successor
thereto), or any substantially similar administrative exemption granted by the
U.S. Department of Labor.

 

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

 

Voting
Rights: The portion of the voting rights of all of the Certificates which is
allocated to any Certificate. As of any date of determination, (a) 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 each such Class in accordance with their respective
Percentage Interests).

 

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

 

ARTICLE
II

CONVEYANCE
OF MORTGAGE LOANS; 

 

REPRESENTATIONS
AND WARRANTIES

 

SECTION
2.1   Conveyance
of Mortgage Loans.

 

	(a)  	
      The
      Depositor, concurrently with the execution and delivery hereof, hereby
      sells, transfers, assigns, sets over and otherwise conveys to the Trustee
      for the benefit of the Certificateholders, without recourse, all the
      right, title and interest of the Depositor in and to the Trust Fund
      together with (i) the Depositor’s right 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:

 

33

 

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

 

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

 

	(ii)  	
      except
      as provided below 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 or, in lieu thereof, an Alternative Title Product,
      and

 

34

 

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

 

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

 

	(B)  	
      The
      executed Security Agreement;

 

	(C)  	
      The
      executed Proprietary Lease;

 

	(D)  	
      The
      executed Recognition Agreement;

 

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

 

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

 

In the
event that in connection with any Mortgage Loan 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.

 

35

 

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; provided further, however, that the Depositor shall
not be required to deliver an original or duplicate lender’s title policy
(together with all riders thereto) if the Depositor delivers an Alternative
Title Product in lieu thereof. 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-AA5,
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.

 

36

 

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.

 

SECTION
2.2   Acceptance
by Trustee of the Mortgage Loans.

 

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

 

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

 

37

 

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 Subsequent
Certification in the form annexed hereto as Exhibit G, with any applicable
exceptions noted thereon.

 

If, in
the course of such review, the Trustee or the Custodian, on behalf of the
Trustee, finds any document constituting a part of a Mortgage File which does
not meet the requirements of Section 2.1, the Trustee shall list or shall cause
the Custodian to list such as an exception in the Subsequent 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® System in accordance
with MERS’ rules and regulations or (ii) cause MERS to designate on the MERS®
System the Seller as the beneficial holder of such Mortgage Loan.

 

38

 

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

 

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

 

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, which contains, among other representations and
warranties, 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.

 

39

 

	(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.

 

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.

 

40

 

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

 

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

 

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

 

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

 

41

 

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

 

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

 

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

 

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

 

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

 

	(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.

 

42

 

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 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 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. 

 

	
      Lower
      REMIC Interest or Residual
	
      Lower
      REMIC nInterest Balance
	
      Lower
      REMIC Interest Rate
	
      Corresponding
      Class of Upper REMIC Interests

	
      Interest
	
      Principal

	
      L-I-A-1
	
      $48,605.36
	
      (2)
	
      (1)
	
      (1)

	
      L-I-A-2
	
      $5,400.60
	
      (2)
	
      (1)
	
      (1)

	
      L-I-A-ZZZ
	
      $89,951,689.39
	
      (2)
	
      (1)
	
      (1)

	
      RL
	
      $0.00
	
      N/A
	
      N/A
	
      N/A

	
      L-II-A-1
	
      $189,013.97
	
      (3)
	
      (1)
	
      (1)

	
      L-II-A-2
	
      $21,001.55
	
      (3)
	
      (1)
	
      (1)

	
      L-II-A-ZZZ
	
      $349,807,536.17
	
      (3)
	
      (1)
	
      (1)

	
      Total
	
      $440,023,247.04
	 	 	 

 

(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 Certificates:
I-A-1, I-A-2, I-A-R, B-1, B-2, B-3, B-4, B-5 and B-6 (provided that with respect
to B-1, B-2, B-3, B-4, B-5 and 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 Certificates: II-A-1, II-A-2, B-1,
B-2, B-3, B-4, B-5 and B-6 (provided that with respect to B-1, B-2, B-3, B-4,
B-5 and B-6, such Lower REMIC Interests shall only correspond to the portion
supported by Pool II)..

 

43

 

(2) The Lower
REMIC Interest Rate for the Lower REMIC Interest L-I-A-1, L-I-A-2 and L-I-A-ZZZ
will equal the Weighted Average Adjusted Net Mortgage Rate for Pool
I.

 

(3) The Lower
REMIC Interest Rate for the Lower REMIC Interest L-II-A-1, L-II-A-2 and
L-II-A-ZZZ will equal the Weighted Average Adjusted Net Mortgage Rate for 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
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.

 

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.

 

44

 

If a
Cross-over Situation exists, the aggregate principal balances of the outstanding
L1 and L2 Interests of both of the Mortgage Pools shall not be reduced below one
percent of the aggregate Pool Principal Balance of both 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 or Pools 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 Weighted Average Adjusted Net Mortgage Rate lower than the
Weighted Average Adjusted Net Mortgage 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 Weighted
Average Adjusted Net Mortgage Rate higher than the Mortgage Pool from which the
payment was reallocated it shall reimburse the Upper REMIC for prior Realized
Losses. If on any Distribution Date, the L1 Interest or L2 Interest remains
outstanding after the related Pool Principal Balance is at zero as of the
beginning of the Accrual Period corresponding to such Distribution Date, their
Lower REMIC Interest Rate shall be the Weighted Average Adjusted Net Mortgage
Rate of the Mortgage Pool with the lowest Weighted Average Adjusted Net Mortgage
Rate that remains outstanding and the excess of interest at the Pass-Through
Rate for the Subordinated Certificates over interest at such Weighted Average
Adjusted Net Mortgage Rate shall be treated as paid from Lower REMIC to the
Upper REMIC as reimbursement for prior Realized Losses.

 

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.

45

 

SECTION
2.8   Covenants
of the Master Servicer.

 

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

 

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

 

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

 

ARTICLE
III

ADMINISTRATION
AND SERVICING OF MORTGAGE LOANS

 

SECTION
3.1   Master
Servicer to Service Mortgage Loans.

 

For and
on behalf of the Certificateholders, the Master Servicer shall service and
administer the Mortgage Loans in accordance with the terms of (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® System, or cause the removal from the
registration of any Mortgage Loan on the MERS® 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.

 

46

 

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.

 

47

 

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

 

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

 

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

 

SECTION
3.4   Trustee
to Act as Master Servicer.

 

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

 

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.

 

48

 

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

 

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

 

	(b)  	
      The
      Master Servicer shall establish and maintain the Certificate Account. The
      Certificate Account shall consist of two separate subaccounts, each of
      which shall relate to a particular Mortgage Pool. 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 and any Prepayment
      Interest Excess;

 

49

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

	(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:

 

50

 

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

 

	(ii)  	
      any
      amount deposited by the Master Servicer pursuant to this Section 3.5(c) in
      connection with any losses on Permitted Investments;
and

 

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

 

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

 

	(iv)  	
      The
      institutions at which the Certificate Account and the Distribution Account
      are maintained shall invest funds as directed by the Master Servicer in
      Permitted Investments which in both cases shall mature not later than (i)
      in the case of the Certificate Account, the second Business Day next
      preceding the related Distribution Account Deposit Date (except that if
      such Permitted Investment is an obligation of the institution that
      maintains such account, then such Permitted Investment shall mature not
      later than the Business Day next preceding such Distribution Account
      Deposit Date) and (ii) in the case of the Distribution Account, the
      Business Day next preceding the Distribution Date (except that if such
      Permitted Investment is an obligation of the institution that maintains
      such fund or account, then such Permitted Investment shall mature not
      later than such Distribution Date) and, in each case, shall not be sold or
      disposed of prior to its maturity. All such Permitted Investments shall be
      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.

 

51

 

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

 

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

 

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

 

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

 

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

 

52

 

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 the
      Master Servicer the master servicing compensation to which it is entitled
      pursuant to Section 3.14, and earnings on or investment income with
      respect to funds in or credited to the Certificate Account as additional
      master servicing compensation;

 

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

 

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

 

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

 

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

 

53

 

	(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.

 

	(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;

 

54

 

	(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.

 

	(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.

 

55

 

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

 

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

 

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

 

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

 

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

 

	(a)  	
      Except
      as otherwise provided in this Section, when any property subject to a
      Mortgage has been conveyed by the Mortgagor, the Master Servicer shall to
      the 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.

 

56

 

	(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.

 

57

 

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

 

The
Master Servicer shall use reasonable efforts to foreclose upon or otherwise
comparably convert the ownership of properties securing such of the Mortgage
Loans as come into and continue in default and as to which no satisfactory
arrangements can be made for collection of delinquent payments. In connection
with such foreclosure or other conversion, the Master Servicer shall follow such
practices and procedures as it shall deem necessary or advisable and as shall be
normal and usual in its general mortgage servicing activities and meet the
requirements of the insurer under any Required Insurance Policy; provided,
however, that the Master Servicer shall not be required to expend its own funds
in connection with any foreclosure or towards the restoration of any property
unless it shall determine (i) that such restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan after reimbursement to
itself of such expenses and (ii) that such expenses will be recoverable to it
through Liquidation Proceeds (respecting which it shall have priority for
purposes of withdrawals from the Certificate Account). The Master Servicer shall
be responsible for all other costs and expenses incurred by it in any such
proceedings; provided, however, that it shall be entitled to reimbursement
thereof from the liquidation proceeds with respect to the related Mortgaged
Property, as provided in the definition of Liquidation Proceeds. If the Master
Servicer has knowledge that a Mortgaged Property which the Master Servicer is
contemplating acquiring in foreclosure or by deed in lieu of foreclosure is
located within a 1 mile radius of any site listed in the Expenditure Plan for
the Hazardous Substance Clean Up Bond Act of 1984 or other site with
environmental or hazardous waste risks known to the Master Servicer, the Master
Servicer will, prior to acquiring the Mortgaged Property, consider such risks
and only take action in accordance with its established environmental review
procedures.

 

With
respect to any REO Property, the deed or certificate of sale shall be taken in
the name of the Trust Fund for the benefit of the Certificateholders, or its
nominee, on behalf of the Certificateholders. The Master Servicer shall ensure
that the title to such REO Property references the Pooling and Servicing
Agreement and the Trust Fund’s capacity thereunder. Pursuant to its efforts to
sell such REO Property, the Master Servicer shall either itself or through an
agent selected by the Master Servicer protect and conserve such REO Property in
the same manner and to such extent as is customary in the locality where such
REO Property is located. 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.

 

58

 

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.

 

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.

 

59

 

The
Master Servicer, with the consent of the Trustee, shall have the right to
purchase for its own account from the Trust Fund any Mortgage Loan which is 91
days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
applicable subaccount of the Certificate Account and the Trustee, upon receipt
of a certificate from the Master Servicer in the form of Exhibit M hereto, shall
release or cause to be released to the purchaser of such Mortgage Loan the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment prepared by the purchaser of such Mortgage Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee’s right, title and interest
in and to such Mortgage Loan and all security and documents related thereto.
Such assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage Loan, and all
security and documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.

 

SECTION
3.12   Trustee
to Cooperate; Release of Mortgage Files.

 

Upon the
payment in full of any Mortgage Loan, or the receipt by the Master Servicer of a
notification that payment in full will be escrowed in a manner customary for
such purposes, the Master Servicer will immediately notify the Trustee by
delivering, or causing to be delivered a “Request for Release” substantially in
the form of Exhibit M. Upon receipt of such request, the Trustee shall or shall
cause the Custodian to promptly release the related Mortgage File to the 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.

 

60

 

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

 

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

 

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

 

SECTION
3.14   Master
Servicing Compensation.

 

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.

 

61

 

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

 

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.

 

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.

 

62

 

SECTION
3.18   Errors
and Omissions Insurance; Fidelity Bonds.

 

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

 

SECTION
3.19   Notification
of Adjustments.

 

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

 

63

 

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

 

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

 

SECTION
4.2   Priorities
of Distribution.

 

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

 

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

 

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

 

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

 

64

 

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

 

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

 

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

 

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

 

	(ix)  	
      to
      the Class B-6 Certificates, to the extent of remaining Available Funds for
      both of the Mortgage Pools, but subject to the prior payment of amounts
      described under Section 4.2(h), 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.

 

65

 

	(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; and 

 

	(ii)  	
      concurrently
      to the Class I-A-1 and Class I-A-2 Certificates, pro
      rata,
      until the Class Certificate Balances thereof 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 concurrently to the Class II-A-1 and
      Class II-A-2 Certificates, pro
      rata,
      until the Class Certificate Balances thereof have each been reduced to
      zero.

 

	(d)  	
      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) and (b) of this Section 4.2. Any distributions pursuant to this
      subsection (c) shall not reduce the Class Certificate Balance of the Class
      I-A-R Certificates.

 

	(e)  	
      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 Section 4.2.

 

	(f)  	
      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 (iv) through (ix) of
      Section 4.2(a) have been distributed, such amounts, to the extent of such
      Class’ remaining Allocable Share, shall be distributed on such
      Distribution Date to the remaining Classes of Subordinated Certificates on
      a pro rata basis, subject to the priority of payments described in Section
      4.2(a).

 

66

 

	(g)  	
      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, in order of payment priority, 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 Realized Losses previously allocated to such Class pursuant
      to Section 4.4, 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. Holders of any
      Class of Certificates for which the Class Certificate Balance has been
      increased by the amount of any Unanticipated Recovery will not be entitled
      to any payment in respect of Accrued Certificate Interest on the amount of
      any such increase for any Interest Accrual Period preceding the
      Distribution Date on which such increase occurs. When the Class
      Certificate Balance of a Class of Certificates has been reduced to zero,
      the Holders of such Class shall not be entitled to any share of an
      Unanticipated Recovery, and such Unanticipated Recovery shall be allocated
      among all outstanding Classes of Certificates entitled thereto in
      accordance with the preceding sentence, subject to the remainder of this
      subsection (f). In the event that (i) any Unanticipated Recovery remains
      undistributed in accordance with the preceding sentence or (ii) the amount
      of an Unanticipated Recovery exceeds the amount of the Realized Loss
      previously allocated to any outstanding Classes with respect to the
      related Mortgage Loan, on the applicable Distribution Date the Trustee
      shall distribute such Unanticipated Recoveries in accordance with the
      priorities set forth in Section 4.2(a). 

 

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).

 

	(h)  	
      On
      any Distribution Date on which any Certificate Group constitutes an
      Undercollateralized Group, all amounts otherwise distributable as
      principal on the Subordinated Certificates, in reverse order of priority
      (or, following the Cross-over Date, such other amounts described in the
      immediately following sentence), will be distributed as principal to the
      Senior Certificates of such Undercollateralized Group in accordance with
      the priorities set forth in Section 4.2(b) in the case of the Group I
      Senior Certificates, until the total Class Certificate Balance of such
      Senior Certificates (after giving effect to distributions to be made on
      that Distribution Date) equals the Stated Principal Balance of the related
      Mortgage Pool (such distribution, an “Undercollateralization
      Distribution”). If the Senior Certificates of a Certificate Group
      constitute an Undercollateralized Group on any Distribution Date following
      the Cross-over Date, Undercollateralization Distributions will be made
      from the excess of the Available Funds for the Mortgage Pool not related
      to an Undercollateralized Group remaining after all required amounts for
      that Distribution Date have been distributed to the Senior Certificates of
      such other Certificate Group. In addition, the amount of any unpaid
      Accrued Certificate Interest with respect to any Undercollateralized Group
      on any Distribution Date (including any Accrued Certificate Interest for
      the related Distribution Date) will be distributed to the Senior
      Certificates of such Undercollateralized Group prior to the payment of any
      Undercollateralization Distributions from amounts otherwise distributable
      as principal on the Subordinated Certificates, in reverse order of
      priority (or, following the Cross-over Date, as provided in the preceding
      sentence). Except as provided otherwise in this Section 4.2(h), no
      distribution of principal will be made to any Class of Subordinated
      Certificates until an 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.

 

67

 

	 	
      
	
      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 pro
      rata,
      on the basis of the aggregate Class Certificate Balance of the related
      Senior Certificates, unless (a) the weighted average of the Subordinated
      Percentages for the Mortgage Pools, weighted on the basis of the Stated
      Principal Balance of the Mortgage Loans in the related Mortgage Pool, is
      at least two times the weighted average of the initial Subordinate
      Percentage for the Mortgage Pools (calculated on such basis) and (b) the
      aggregate Stated Principal Balance of all of the Mortgage Loans in the
      Mortgage Pools delinquent 60 days or more (including for this purpose any
      such Mortgage Loans in foreclosure or subject to bankruptcy proceedings
      and Mortgage Loans with respect to which the related Mortgaged Property
      has been acquired by the Trust Fund), averaged over the preceding six
      month period, as a percentage of the then current aggregate Class
      Certificate Balance of the Subordinated Certificates, is less than 50%.
      Except as provided otherwise in this Section 4.2(h), all distributions
      described above will be made in accordance with the priorities set forth
      in Section 4.2(a), (b) and (c).

 

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.

 

68

 

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

 

SECTION
4.4   Allocation
of Losses.

 

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

 

	(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:

 

69

 

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

 

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

 

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

 

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

 

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

 

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

 

	(vii)  	
      to
      the Classes of Senior Certificates,
      pro
      rata,
      in accordance with their Class Certificate Balances; provided,
      that (a) the principal portion of Realized Losses (other than Excess
      Losses) on the Mortgage Loans allocable to the Class I-A-1 Certificates
      will instead be borne first by the Class I-A-2 Certificates until its
      Class Certificate Balance is reduced to zero (in addition to other
      Realized Losses allocated to the Class I-A-2 Certificates), and not by the
      Class I-A-1 Certificates, for so long as the Class Certificate Balance of
      the Class I-A-2 Certificates is greater than zero, and (b) the principal
      portion of Realized Losses (other than Excess Losses) on the Mortgage
      Loans allocable to the Class II-A-1 Certificates will instead be borne
      first by the Class II-A-2 Certificates until its Class Certificate Balance
      is reduced to zero (in addition to other Realized Losses allocated to the
      Class II-A-2 Certificates), and not by the Class II-A-1 Certificates, for
      so long as the Class Certificate Balance of the Class II-A-2 Certificates
      is greater than zero.

 

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

 

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

 

70

 

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

 

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

 

	(g)  	
      Notwithstanding
      the foregoing, no such allocation of any Realized Loss shall be made on a
      Distribution Date to a Class of Certificates to the extent that such
      allocation would result in the reduction of the aggregate 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”).

 

SECTION
4.5   [RESERVED]

 

SECTION
4.6   Monthly
Statements to Certificateholders.

 

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

 

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

 

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

 

71

 

	(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;

 

	(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;

 

72

 

	(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.

 

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.

 

73

 

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.

 

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.

 

74

 

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

 

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

 

No
transfer of an ERISA-Restricted Certificate shall be made unless the Trustee
shall have received 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.

 

75

 

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

 

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

 

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

 

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

 

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

 

76

 

	(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.

 

	(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.

 

77

 

	(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.

 

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.

 

78

 

SECTION
5.3   Mutilated,
Destroyed, Lost or Stolen Certificates.

 

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

 

SECTION
5.4   Persons
Deemed Owners.

 

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

 

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

 

If three
or more Certificateholders 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.

 

79

 

SECTION
5.6   Maintenance
of Office or Agency.

 

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

 

ARTICLE
VI

THE
DEPOSITOR AND THE MASTER SERVICER

 

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

 

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

 

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

 

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.

 

80

 

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.

 

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 other 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:

 

81

 

	(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

 

	(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.

 

82

 

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.

 

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.

 

83

 

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® System to the successor Master Servicer or (y) in
causing MERS to designate on the MERS® 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.

 

84

 

SECTION
7.3   Notification
to Certificateholders.

 

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

 

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

 

ARTICLE
VIII

CONCERNING
THE TRUSTEE

 

SECTION
8.1   Duties of
Trustee.

 

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

 

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

 

The
Trustee is hereby directed to execute and deliver to The Depository Trust
Company the Issuer Letter of Representations dated as of the Closing Date on
behalf of the trust created hereunder. The Depositor and the Master Servicer
acknowledge and agree that the Trustee is executing and delivering the Issuer
Letter of Representations on behalf of the trust created hereunder and shall do
so solely in its capacity as Trustee and not in its individual
capacity

 

85

 

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

 

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

 

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

 

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

 

	(iv)  	
      the
      Trustee shall not be required to expend or risk its own funds or otherwise
      incur financial liability in the performance of any of its duties
      hereunder or the exercise of any of its rights or powers if there is
      reasonable ground for believing that the repayment of such funds or
      adequate indemnity against such risk or liability is not assured to it,
      and none of the provisions contained in this Agreement shall in any event
      require the Trustee to perform, or be responsible for the manner of
      performance of, any of the obligations of the Master Servicer under this
      Agreement except during such time, if any, as the Trustee shall be the
      successor to, and be vested with the rights, duties, powers and privileges
      of, the Master Servicer; and

 

	(v)  	
      without
      limiting the generality of this Section 8.1, the Trustee shall have no
      duty (A) to see to any recording, filing, or depositing of this Agreement
      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.

 

86

 

SECTION
8.2   Certain
Matters Affecting the Trustee.

 

Except as
otherwise provided in Section 8.1:

 

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

 

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

 

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

 

	(iv)  	
      the
      Trustee shall not be bound to make any investigation into the facts or
      matters stated in any resolution, certificate, statement, instrument,
      opinion, report, notice, request, consent, order, approval, bond or other
      paper or document, unless requested in writing so to do by Holders of
      Certificates evidencing not less than 25% of the Voting Rights allocated
      to each Class of Certificates; provided, however, that if the payment
      within a reasonable time to the Trustee of the costs, expenses or
      liabilities likely to be incurred by it in the making of such
      investigation is, in the opinion of the Trustee, not assured to the
      Trustee by the security afforded to it by the terms of this Agreement, the
      Trustee may require indemnity satisfactory to the Trustee against such
      cost, expense or liability as a condition to taking any such 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;

 

87

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION
8.3   Trustee
Not Liable for Certificates or Mortgage Loans.

 

The
recitals contained herein and in the Certificates shall be taken as the
statements of the Depositor and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representations as to the validity or
sufficiency of this Agreement or of the Certificates or of any Mortgage Loan or
related document or of MERS or the MERS® 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.

 

88

 

SECTION
8.4   Trustee
May Own Certificates.

 

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

 

SECTION
8.5   Trustee’s
Fees and Expenses.

 

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

 

SECTION
8.6   Eligibility
Requirements for Trustee.

 

The
Trustee hereunder shall at all times be a corporation or association organized
and doing business under the laws of a state or the United States of America,
authorized under such laws to exercise corporate trust powers, having a combined
capital and surplus of at least $50,000,000, subject to supervision or
examination by federal or state authority and with a credit rating which would
not cause either of the Rating Agencies to reduce their respective then current
ratings of the Certificates (or having provided such security from time to time
as is sufficient to avoid such reduction). If such corporation or association
publishes reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for 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.

 

89

 

SECTION
8.7   Resignation
and Removal of Trustee.

 

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

 

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

 

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

 

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

 

90

 

SECTION
8.8   Successor
Trustee.

 

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

 

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

 

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

 

SECTION
8.9   Merger or
Consolidation of Trustee.

 

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

 

SECTION
8.10   Appointment
of Co-Trustee or Separate Trustee.

 

Notwithstanding
any other provisions of this Agreement, at any time, for the purpose of meeting
any legal requirements of any jurisdiction in which any part of the Trust Fund
or property securing any Mortgage Note may at the time be located, the Master
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust Fund, and
to vest in such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust Fund or any part thereof, whichever
is applicable, and, subject to the other provisions of this Section 8.10, such
powers, duties, obligations, rights and trusts as the Master Servicer and the
Trustee may consider necessary or desirable. If the Master Servicer shall not
have joined in such appointment within 15 days after the receipt by it of a
request to do so, or in 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.

 

91

 

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

 

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

 

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

 

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

 

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

 

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

 

92

 

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

 

SECTION
8.11   Tax
Matters.

 

It is
intended that the assets with respect to which each REMIC election is to be
made, as set forth in the preliminary statement shall constitute, and that the
conduct of matters relating to such assets shall be such as to qualify such
assets as, a “real estate mortgage investment conduit” as defined in and in
accordance with the REMIC Provisions. In furtherance of such intention, the
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.

 

93

 

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.

 

94

 

ARTICLE
IX

TERMINATION

 

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

 

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

 

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.

 

95

 

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

 

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

 

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

 

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

 

96

 

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.

 

	(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.

 

97

 

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.

 

98

 

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

 

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

 

SECTION
11.2   Recordation
of Agreement; Counterparts.

 

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

 

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

 

SECTION
11.3   Governing
Law.

 

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

 

99

 

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

 

SECTION
11.5   Notices.

 

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

 

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

 

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

 

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

 

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

 

	(5)  	
      The
      final payment to Certificateholders.

 

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

 

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

 

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

 

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

 

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

 

100

 

	(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.

 

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.

 

101

 

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

 

SECTION
11.9   Inspection
and Audit Rights.

 

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

 

SECTION
11.10   Certificates
Nonassessable and Fully Paid.

 

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

 

102

 

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.

 

* * * * *
*

 

103

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
	 	Vice
President

	 	 	 
	 	THE BANK OF NEW
      YORK,
	 
 	 
 	 not in its individual
      capacity, but solely as Trustee
 
	Date: 	By:  	/s/ 
	 	
      

      Diane Pickett
	 	Vice
President

	 	 	 
	 	FIRST HORIZON HOME LOAN
      CORPORATION,
	 
 	 
 	 in its capacity as Master
      Servicer
 
	Date: 	By:  	/s/ 
	 	
      

      Terry McCoy
	 	Executive 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:
___________________________________ 

    Terry
McCoy

    Executive
Vice President 

 

SCHEDULE
I

 

First
Horizon Asset Securities Inc.

Mortgage
Pass-Through Certificates Series 2005-AA5

 

Mortgage
Loan Schedule

 

[Available
Upon Request from Trustee]

 

I-1

SCHEDULE
II

 

First
Horizon Asset Securities Inc.

Mortgage
Pass-Through Certificates Series 2005-AA5

 

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

 

(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

SCHEDULE
III

 

First
Horizon Asset Securities Inc.

 

Mortgage
Pass-Through Certificates Series 2005-AA5

Form
of Monthly Master Servicer Report

 

[Begins
on Next Page]

 

III-1

EXHIBIT
A

 

[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-1

	
      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 Alternative Mortgage Securities Trust 2005-AA5

Mortgage
Pass-Through Certificates, Series 2005-AA5

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.

 

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.

 

A-2

 

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.

 

A-3

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

 

	 Dated: May __,
      2005	 	 
	 	THE BANK OF NEW
      YORK,
	 
 	 
 	 not in its individual
      capacity, but solely as Trustee
 
		By:  	/s/ 
	 	
      

      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

A-4

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.]

 

[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-1

 

	
      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 Alternative Mortgage Securities Trust 2005-AA5

Mortgage
Pass-Through Certificates, Series 2005-AA5 

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-2

 

[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.

 

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-3

 

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: May __,
      2005	 	 
	 	THE BANK OF NEW
      YORK,
	 
 	 
 	 not in its individual
      capacity, but solely as Trustee
 
		By:  	/s/ 
	 	
      

      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-4

EXHIBIT
C

 

[FORM OF
RESIDUAL CERTIFICATE]

 

SOLELY
FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A “RESIDUAL 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”).

 

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

 

	
      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 Alternative Mortgage Securities Trust 2005-AA5

Mortgage
Pass-Through Certificates, Series 2005-AA5

 

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 (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.

 

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.

 

C-2

 

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.

 

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.

 

C-3

 

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

 

	 Dated: May __,
      2005	 	 
	 	THE BANK OF NEW
      YORK,
	 
 	 
 	 not in its individual
      capacity, but solely as Trustee
 
		By:  	/s/ 
	 	
      

      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

EXHIBIT
D

 

[Form of
Reverse of Certificates]

 

First
Horizon Alternative Mortgage Securities Trust 2005-AA5

Mortgage
Pass-Through Certificates

 

This
Certificate is one of a duly authorized issue of Certificates designated as
First Horizon Alternative Mortgage Securities Trust 2005-AA5 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

 

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 aggregate of the Pool Principal Balances of both
Mortgage Pools is less than 10% of the aggregate Cut-off Date Pool Principal
Balance of both Mortgage Pools, 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

 

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

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 May 27, 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. Capitalized
words and phrases used herein shall have the respective meanings assigned to
them in the Custodial Agreement.

 

E-1

	 	 	 
	 	FIRST TENNESSEE BANK NATIONAL
      ASSOCIATION,
	 
 	 
 	 as Custodian
 
	Date: 	By:  	 
	 	Name:	   
	 	Title:	 

 

E-2

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 May 27, 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

 

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
 
	Date: 	By:  	 
	 	Name:	   
	 	Title:	  

 

F-2

EXHIBIT
G

 

FORM OF
SUBSEQUENT 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 May 27, 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 Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or listed on the attached exception report) it has
received, unless otherwise provided in Section 2 of the Custodial
Agreement:

 

	 	
      (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 in Section 2(c) of the Custodial Agreement 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

 

	 	
      (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 in
      Section 2(c) of the Custodial Agreement, 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
      or, in lieu thereof, an Alternative Title Product,
      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

 

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
 
	Date: 	By:  	 
	 	Name:	   
	 	Title:	  

 

G-3

EXHIBIT
H

 

TRANSFER
AFFIDAVIT

 

First
Horizon Alternative Mortgage Securities Trust 2005-AA5

Mortgage
Pass-Through Certificates

Series
2005-AA5

	
      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

 

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 be 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

 

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

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.

 

H-4

 

“Transferee”:
Any Person who is acquiring by Transfer any Ownership Interest in a
Certificate.

 

H-5

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-6

 

(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-7

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 Alternative Mortgage Securities Trust 2005-AA5 Mortgage
      Pass-Through Certificates, Series 2005-AA5, 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 May 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

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 Alternative Mortgage Securities Trust 2005-AA5 Mortgage
      Pass-Through Certificates, Series 2005-AA5, 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 of 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

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 Alternative Mortgage Securities Trust 2005-AA5 Mortgage
      Pass-Through Certificates, Series 2005-AA5, 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.

 

	 	
       Very truly yours,

       

	 	 
	 	
      Print
      Name of Transferee

       

	 	
      By:
	 
	 	 	Authorized
      Officer 

K-1

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.

 

___ 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.

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-2

 

___ 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.

 

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:
	 

 

K-3

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).

 

K-4

 

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.

 

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-5

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

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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