Prospectus supplement dated December 28, 2006 (to prospectus dated December 27, 2006)
$1,831,882,000
(Approximate)
Bear Stearns Mortgage Funding Trust 2006-AR5
Issuing Entity
EMC Mortgage Corporation
Servicer and Sponsor
Structured Asset Mortgage Investments II Inc.
Depositor
Bear Stearns Mortgage Funding Trust 2006-AR5
Mortgage Pass-Through Certificates, Series 2006-AR5
You should consider carefully the risk factors beginning on page S-12 in this prospectus supplement.
The Trust
The trust will consist primarily of a pool of 30-year and 40-year conventional, adjustable rate, negative amortization mortgage loans
secured by first liens on one- to four-family residential properties, divided into two primary loan groups, designated loan group I
and loan group II.
The trust will issue the following classes of certificates that are offered under this prospectus supplement:
o 4 classes of group I senior certificates designated Class I-A-1, Class I-A-2, Class I-A-3 and Class I-X Certificates;
o 9 classes of group I subordinate certificates designated Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5,
Class I-B-6, Class I-B-7, Class I-B-8 and Class I-B-9 Certificates;
o 3 classes of group II senior certificates designated Class II-A-1, Class II-A-2 and Class II-A-3 Certificates; and
o 4 classes of group II subordinate certificates designated Class II-B-1, Class II-B-2, Class II-B-3 and Class II-B-4
Certificates;
each as more fully described in the tables beginning on page S-2 of this prospectus supplement.
Credit Enhancement
Credit enhancement for the offered certificates will consist of excess spread, overcollateralization and additional classes of
subordinated certificates. The group II offered certificates and the Class II-B-5 Certificates may receive additional distributions
in respect of interest from payments under the related cap contracts, as described herein.
Distributions on the certificates will be on the 25th of each month, or, if the 25th is not a business day, on the next business day,
beginning in January 2007.
Neither the Securities and Exchange Commission nor any state securities commission has approved the certificates or determined if
this prospectus supplement or the prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
The Attorney General of the State of New York has not passed on or endorsed the merits of this offering. Any representation to the
contrary is unlawful.
The price to investors will vary from time to time and will be determined at the time of sale. The proceeds to the depositor from the
offering are expected to be approximately 100.28% of the aggregate principal amount of the offered certificates, plus accrued
interest thereon, less expenses. See “Method of Distribution” in this prospectus supplement.
The Underwriter will deliver to purchasers the offered certificates in book-entry form through The Depository Trust Company,
Clearstream Banking, société anonyme and the Euroclear System, in each case, on or about December 29, 2006.
Bear, Stearns & Co. Inc.
Underwriter
Important notice about information presented in this prospectus supplement
and the accompanying prospectus
You should rely only on the information contained in this document. We have not authorized anyone to provide you with different
information.
We provide information to you about the offered certificates in two separate documents that progressively provide more detail:
o the accompanying prospectus, which provides general information, some of which may not apply to this series of certificates; and
o this prospectus supplement, which describes the specific terms of your certificates.
Schedule 1, Annex I, Annex II and Schedule A are incorporated into and comprise a part of this prospectus supplement as if fully set
forth herein.
The description of your certificates in this prospectus supplement is intended to enhance the related description in the prospectus
and you should rely on the information in this prospectus supplement as providing additional detail not available in the prospectus.
The Depositor’s principal offices are located at 383 Madison Avenue, New York, New York10179 and its telephone number is (212)
272-2000.
NOTWITHSTANDING ANY OTHER EXPRESS OR IMPLIED AGREEMENT TO THE CONTRARY, THE SPONSOR, THE SERVICER, THE TRUSTEE, EACH RECIPIENT OF THE
RELATED PROSPECTUS SUPPLEMENT AND, BY ITS ACCEPTANCE THEREOF, EACH HOLDER OF A CERTIFICATE, AGREES AND ACKNOWLEDGES THAT EACH PARTY
HERETO HAS AGREED THAT EACH OF THEM AND THEIR EMPLOYEES, REPRESENTATIVES AND OTHER AGENTS MAY DISCLOSE, IMMEDIATELY UPON COMMENCEMENT
OF DISCUSSIONS, TO ANY AND ALL PERSONS THE TAX TREATMENT AND TAX STRUCTURE OF THE CERTIFICATES AND THE REMICS, THE TRANSACTIONS
DESCRIBED HEREIN AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR OTHER TAX ANALYSES) THAT ARE PROVIDED TO ANY OF THEM RELATING
TO SUCH TAX TREATMENT AND TAX STRUCTURE.
SUMMARY OF PROSPECTUS SUPPLEMENT
The following summary is a very broad overview of the offered certificates and does not contain all of the information that
you should consider in making your investment decision. To understand all of the terms of the offered certificates, read carefully
this entire prospectus supplement and the entire accompanying prospectus. A glossary is included at the end of this prospectus
supplement. Capitalized terms used but not defined in the glossary at the end of this prospectus supplement or in the following
summary have the meanings assigned to them in the glossary at the end of the prospectus.
Issuing Entity.............................. Bear Stearns Mortgage Funding Trust 2006-AR5.
Title of Series............................. Bear Stearns Mortgage Funding Trust 2006-AR5 Mortgage Pass-Through
Certificates, Series 2006-AR5.
Cut-off Date................................ December 1, 2006.
Closing Date................................ On or about December 29, 2006.
Depositor................................... Structured Asset Mortgage Investments II Inc.
Sponsor and Servicer........................ EMC Mortgage Corporation, an affiliate of the depositor.
Originators................................. Bear Stearns Residential Mortgage Corporation and EMC Mortgage
Corporation.
Trustee..................................... Wells Fargo Bank, National Association.
Cap Counterparty............................ ABN AMRO Bank N.V.
Distribution Dates.......................... Distributions on the offered certificates will be made on the 25th
day of each month or, if such day is not a business day, on the
next succeeding business day, beginning in January 2007.
Offered Certificates........................ The classes of offered certificates and their pass-through rates
and current principal amounts are set forth in the table below.
Group I
Offered Certificates
Pass-Through Initial Current Initial Rating
Class Rate Principal Amount (S&P/Moody’s) Designation
I-A-1 Variable Rate $455,207,000 AAA/Aaa Group I Super Senior
I-A-2 Variable Rate $227,603,000 AAA/Aaa Group I Senior Support
I-A-3 Variable Rate $75,868,000 AAA/Aaa Group I Senior Support
I-X Fixed Rate Notional AAA/Aaa Group I Senior Interest
Only
I-B-1 Variable Rate $20,390,000 AA+/Aaa Group I Subordinate
I-B-2 Variable Rate $16,142,000 AA/Aa1 Group I Subordinate
I-B-3 Variable Rate $5,947,000 AA-/Aa1 Group I Subordinate
I-B-4 Variable Rate $11,894,000 A+/Aa2 Group I Subordinate
I-B-5 Variable Rate $4,248,000 A/Aa3 Group I Subordinate
I-B-6 Variable Rate $4,248,000 A-/A1 Group I Subordinate
I-B-7 Variable Rate $7,221,000 BBB+/A3 Group I Subordinate
I-B-8 Variable Rate $4,248,000 BBB/Baa2 Group I Subordinate
I-B-9 Variable Rate $4,248,000 BBB-/Baa3 Group I Subordinate
Total Group I Offered Certificates: $837,264,000
Group I
Non-Offered Certificates
Pass-Through Initial Current Initial Rating
Class Rate Principal Amount (S&P/Moody’s) Designation
I-XP-1 N/A N/A NR Group I Subordinate
I-XP-2 N/A N/A NR Group I Subordinate
I-B-IO N/A $0 NR Group I Subordinate
Total Group I Non-Offered Certificates: $0
Group II
Offered Certificates
Pass-Through Initial Current Initial Rating
Class Rate Principal Amount (S&P/Moody’s) Designation
II-A-1 Variable Rate $550,417,000 AAA/Aaa Group II Super Senior
II-A-2 Variable Rate $275,208,000 AAA/Aaa Group II Senior Support
II-A-3 Variable Rate $91,736,000 AAA/Aaa Group II Senior Support
II-B-1 Variable Rate $37,349,000 AA/Aaa Group II Subordinate
II-B-2 Variable Rate $19,954,000 A/Aa3 Group II Subordinate
II-B-3 Variable Rate $14,326,000 BBB/A3 Group II Subordinate
II-B-4 Variable Rate $5,628,000 BBB-/Baa1 Group II Subordinate
Total Group II Offered Certificates: $994,618,000
Group II
Non-Offered Certificates
Pass-Through Initial Current Initial Rating
Class Rate Principal Amount (S&P/Moody’s) Designation
II-B-5 Variable Rate $20,977,000 BB/Ba1 Group II Subordinate
II-XP N/A N/A NR Group II Subordinate
II-B-IO N/A $0 NR Group II Subordinate
Total Group II Non-Offered Certificates: $20,977,000
Total Offered Certificates $1,831,882,000
Total Certificates $1,852,859,000
Residual CertificatesResidual Certificates
Pass-Through Initial Current Initial Rating
Class Rate Principal Amount (S&P/Moody’s) Designation
R N/A $0 NR Residual
R-X N/A $0 NR Residual
Total Residual Certificates: $0
Other Information:
The pass-through rates on the certificates are described in detail on pages S-47 and S-53 in this prospectus supplement.
Class I-X Certificates:
The Class I-X Certificates are sometimes referred to herein as the Class X Certificates. The Class X Certificates do not have a
principal amount.
The Class I-X Certificates will have a notional amount equal to the aggregate outstanding principal balance of the group I mortgage
loans having "hard" prepayment charges for a term of three years from origination, as set forth in this prospectus supplement. The
Class I-X Certificates will have an initial notional amount of approximately $626,636,221.
The Issuing Entity
The depositor will establish a trust with respect to the Bear Stearns Mortgage Funding Trust 2006-AR5 Mortgage Pass-Through
Certificates, Series 2006-AR5, pursuant to a pooling and servicing agreement dated as of December 1, 2006, among the depositor, the
servicer and sponsor and the trustee.
The certificates represent in the aggregate the entire beneficial ownership interest in the trust.
Distributions of interest and/or principal on the offered certificates will be made only from payments received in connection with
the related mortgage loans as described below.
See “Description of the Certificates” in this prospectus supplement.
The Sponsor
EMC Mortgage Corporation, in its capacity as mortgage loan seller, a Delaware corporation and an affiliate of the depositor and the
underwriter, will sell the mortgage loans to the depositor and is sometimes referred to herein as the Sponsor or EMC.
The Originators
Approximately 35.97% of the group I mortgage loans and approximately 36.20% of the group II mortgage loans were originated by Bear
Stearns Residential Mortgage Corporation. Approximately 64.03% of the group I mortgage loans and approximately 63.80% of the group
II mortgage loans were originated by EMC Mortgage Corporation.
The Servicer
All of the mortgage loans will be serviced by EMC Mortgage Corporation.
The Mortgage Loans
The mortgage pool consists of approximately 4,781 first lien adjustable rate negative amortization mortgage loans secured by one- to
four-family residential real properties and individual condominium units. The mortgage pool will be divided into two loan groups.
The group I mortgage loans will include mortgage loans originated under the Bear Stearns Option ARM program and the group II mortgage
loans will include mortgage loans originated under the 5 Yr. Bear Stearns Secure Option ARM program, each as more fully described
below.
The mortgage loans have an aggregate principal balance of approximately $1,872,852,623 as of the cut-off date.
All of the mortgage loans have a negative amortization feature, under which accrued interest on a mortgage loan will be deferred and
added to the principal balance of that mortgage loan if the minimum monthly payment on any payment date is less than the amount of
accrued interest due on the mortgage loan on that payment date. See “Description of the Mortgage Loans-General-Negative Amortization”
in this prospectus supplement.
The mortgage rate on each group I mortgage loan is adjustable, generally after a period of one or three months following its
origination, and thereafter adjusts monthly. The mortgage rate on each group II mortgage loan is adjustable, generally after a period
of five years following its origination, and thereafter adjusts every six (6) months or every twelve (12) months as set forth in the
related mortgage note. Approximately 14.86% of the group I mortgage loans and all of the group II mortgage loans are still in their
initial fixed rate period.
With respect to the group I mortgage loans, the minimum monthly payment will be an interest only payment in an amount equal to the
full amount of accrued interest of the mortgage loan calculated based on the outstanding principal balance of the mortgage loan and
the interest rate then in effect. The minimum monthly payment will adjust annually on a date specified in the related mortgage note,
subject to the conditions that (i) the amount of the monthly payment (with the exception of each fifth payment adjustment date or the
final payment adjustment date) will not increase or decrease by an amount that is more than 7.50% of the monthly payment prior to the
adjustment, (ii) as of the fifth payment adjustment date and on the same day every fifth year thereafter and on the last payment
adjustment date, the monthly payment will be recast without regard to the limitation in clause (i) above and (iii) if the unpaid
principal balance exceeds a percentage (either 110% or 115%, depending on the maximum negative amortization for that mortgage loan)
of the original principal balance due to deferred interest, the monthly payment will be recast without regard to the limitation in
clause (i) to amortize fully the then unpaid principal balance over its remaining term to maturity.
With respect to the group II mortgage loans, during the initial fixed rate period, the mortgagor will be required to pay a minimum
monthly payment calculated on the basis of the original loan amount and a note rate below the original note rate by up to 3% per
annum. The minimum monthly payment will adjust at the earlier of (i) the end of the initial five year fixed rate period or (ii) the
date upon which the unpaid principal balance equals or exceeds a percentage (either 110% or 115%, depending on the maximum amount of
negative amortization for that mortgage loan) of the original principal balance of the mortgage loan due to deferred interest. The
period from origination to the date on which the minimum monthly payment first adjusts is sometimes referred to herein as the option
period. Upon adjustment, the required monthly payment will be an interest only payment in an amount equal to the full amount of
accrued interest of the mortgage loan calculated based on the outstanding principal balance of the mortgage loan and the interest
rate then in effect. The required monthly payment may change at the end of the initial fixed rate period once every six months
thereafter based on the semi-annual adjustment of interest or once every twelve months thereafter based on the annual adjustment of
interest. This interest-only period will expire on the tenth anniversary of the loan, at which time the monthly payment will be
adjusted semi-annually or annually to pay interest and amortize fully the then unpaid principal balance over its remaining term to
maturity (assuming the then current interest rate remains in effect until maturity).
With respect to the group I mortgage loans and with respect to the group II mortgage loans, during the option period only, in
addition to the minimum monthly payment option, the mortgagor is offered three additional payment options to the extent they result
in a larger payment than the minimum monthly payment. The payment options include an interest-only payment, a fully amortizing
payment and a 15-year amortizing payment. If a payment option would not result in an amount greater than the minimum payment due,
the payment option will not be available to a mortgagor.
See “Description of the Mortgage Loans-General” in this prospectus supplement.
After the initial fixed-rate period, the interest rate on each group I mortgage loans will adjust monthly based on One-Year MTA, the
12-month moving average yield on United States Treasury Securities adjusted to a constant maturity of one year. After the option
period, the interest rate on each group II mortgage loan, will adjust semi-annually based on Six-Month LIBOR or annually based on
One-Year LIBOR. The rate adjustments are subject to limitations set forth under “Description of the Mortgage Loans” in this
prospectus supplement.
Mortgage Pool Characteristics
The Group I Mortgage Loans
The following table summarizes the approximate characteristics of the group I mortgage loans as of the cut-off date:
Number of mortgage loans:...................2,121
Aggregate principal balance:.........$849,583,065
Range of principal
balances:................$59,857 to $2,426,600
Average principal balance:...............$400,558
Range of mortgage rates (per annum):............ 1.000% to 9.125%
Weighted average mortgage rate (per annum): 7.303%
Range of remaining terms to stated maturity (months): 355 to 480
Weighted average remaining term to stated maturity (months): 406
Weighted average loan-to-value ratio at origination: 77.64%
Weighted average gross margin (per annum):.3.488%
Weighted average maximum lifetime mortgage rate (per annum): 9.950%
Weighted average months to next interest adjustment date (months): 1
Loan Index:
One-Year MTA..............................100.00%
The Group II Mortgage Loans
The following table summarizes the approximate characteristics of the group II mortgage loans as of the cut-off date:
Number of mortgage loans:...................2,660
Aggregate principal balance:.......$1,023,269,558
Range of principal
balances:................$60,351 to $1,964,900
Average principal balance:...............$384,688
Range of mortgage rates (per annum):............ 5.750% to 10.125%
Weighted average mortgage rate (per annum): 7.675%
Range of remaining terms to stated maturity (months): 356 to 360
Weighted average remaining term to stated maturity (months): 359
Weighted average loan-to-value ratio at origination: 77.63%
Weighted average gross margin (per annum):.2.253%
Weighted average maximum lifetime mortgage rate (per annum): 12.673%
Weighted average months to next interest adjustment date (months): 59
Loan Index:
6 Month LIBOR..............................99.55%
1 Year LIBOR................................0.45%
For additional information regarding the mortgage loans, see “Description of the Mortgage Loans” in this prospectus supplement and
Schedule A, which is attached and is part of this prospectus supplement.
Removal and Substitution of a Mortgage Loan
The trustee will acknowledge the sale, transfer and assignment to it (or the custodian as its agent) by the depositor and receipt of
the mortgage loans, subject to further review and the exceptions which may be noted pursuant to the procedures described in the
pooling and servicing agreement. If the trustee (or the custodian as its agent) finds that any mortgage loan appears defective on its
face, appears to have not been executed or received, or appears to be unrelated to the mortgage loans identified in the mortgage loan
schedule (determined on the basis of the mortgagor name, original principal balance and loan number), the trustee (or the custodian
as its agent) shall promptly notify the sponsor. The sponsor must then correct or cure any such defect within 90 days from the date
of notice from the trustee (or the custodian as its agent) of the defect and if the sponsor fails to correct or cure such defect
within such period and such defect materially and adversely affects the interests of the certificateholders in the related mortgage
loan, the sponsor will, in accordance with the terms of the pooling and servicing agreement and the mortgage loan purchase agreement,
within 90 days of the date of notice, provide the trustee with a substitute mortgage loan (if within two years of the closing date)
or repurchase the mortgage loan; provided that, if such defect would cause the mortgage loan to be other than a “qualified mortgage”
as defined in Section 860G(a)(3)(a) of the Internal Revenue Code, any such cure or substitution must occur within 90 days from the
date such breach was discovered.
Description of the CertificatesGeneral
The trust will issue the certificates in two certificate groups.
The Class I-A-1, Class I-A-2, Class I-A-3 and Class I-X Certificates will represent interests principally in loan group I and are
sometimes referred to herein as the group I senior certificates.
The Class I-A-1, Class I-A-2 and Class I-A-3 Certificates are sometimes referred to herein as the Class I-A Certificates.
The Class I-X Certificates are sometimes referred to herein as the Class X Certificates.
The Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7, Class I-B-8 and Class I-B-9
Certificates will each represent subordinated interests in the group I mortgage loans and are sometimes referred to herein as the
group I subordinate certificates or the Class I-B Certificates.
The group I senior certificates and the group I subordinate certificates are sometimes referred to herein as the group I offered
certificates.
The Class I-XP-1, Class I-XP-2 and Class I-B-IO Certificates are not offered by this prospectus supplement and are sometimes referred
to herein as the group I non-offered certificates. The Class I-XP-1, the Class I-XP-2 and the Class I-B-IO Certificates will each
represent subordinated interests in the group I mortgage loans.
The group I offered certificates and the group I non-offered certificates are sometimes referred to herein as the group I
certificates.
The Class II-A-1, the Class II-A-2 and Class II-A-3 Certificates will represent interests principally in loan group II and are
sometimes referred to herein as the group II senior certificates or the Class II-A Certificates.
The group I senior certificates and the group II senior certificates are sometimes referred to herein as the senior certificates.
The Class II-B-1, Class II-B-2, Class II-B-3, Class II-B-4 and Class II-B-5 Certificates will each represent subordinated interests
in the group II mortgage loans and are sometimes referred to herein as the group II subordinate certificates or the Class II-B
Certificates.
The group II senior certificates and the Class II-B-1, Class II-B-2, Class II-B-3 and Class II-B-4 Certificates are sometimes
referred to herein as the group II offered certificates.
The group I subordinate certificates and the group II subordinate certificates are sometimes referred to herein as the subordinate
certificates.
The Class II-B-5, Class II-XP and Class II-B-IO Certificates, which are not offered by this prospectus supplement, and are sometimes
referred to herein as the group II non-offered certificates, will each represent subordinated interests in the group II mortgage
loans.
The group II offered certificates and the group II non-offered certificates are sometimes referred to herein as the group II
certificates.
Payments of interest and principal on each class of group I certificates will be made from group I mortgage loans. Payments of
interest and principal on each class of group II certificates will be made from group II mortgage loans.
The Class R Certificates and the Class R-X Certificates (also referred to herein as the residual certificates) are not offered by
this prospectus supplement and represent the residual interests in the real estate mortgage investment conduits established by the
trust.
The group I offered certificates and the group II offered certificates are sometimes referred to herein as the offered certificates.
The group I non-offered certificates, the group II non-offered certificates, the Class R Certificates and the Class R-X Certificates
are sometimes referred to herein as the non-offered certificates.
The non-offered certificates, together with the offered certificates are sometimes referred to herein as the certificates.
The Class I-XP-1, the Class I-XP-2 and the Class II-XP Certificates are sometimes referred to as the Class XP Certificates.
The assumed final distribution date for the group I offered certificates is December 2036. The assumed final distribution date for
the group II offered certificates is January 2037.
With respect to the group I mortgage loans, it is intended that the amounts deposited in the final maturity reserve account will be
sufficient to retire the group I offered certificates on the December 2036 assumed final distribution date, even though the
outstanding principal balance of the group I mortgage loans having 40-year original terms to maturity will not have been reduced to
zero on such assumed final distribution date. The actual final distribution date for each class of the group I offered certificates
may be earlier, and could be substantially earlier, than the distribution date in December 2036. If amounts on deposit in the final
maturity reserve account are not sufficient to pay the outstanding current principal amounts of the group I certificates to zero, the
actual final distribution date of the group I certificates could be later than December 2036.
Record Date
For each class of offered certificates (other than the Class X Certificates), and for any distribution date, the business day
preceding the applicable distribution date so long as the offered certificates remain in book-entry form. For each class of Class X
Certificates and any other class of offered certificate that is no longer in book-entry form, and for any distribution date, the
record date shall be the last business day of the month preceding the month in which such distribution date occurs.
Denominations
For each class of certificates, other than the residual certificates, $25,000 and multiples of $1.00 in excess thereof.
Registration of Offered Certificates
The trust will issue the offered certificates initially in book-entry form. Persons acquiring interests in these offered certificates
will hold their beneficial interests through The Depository Trust Company, in the United States, or Clearstream Banking, société
anonyme or the Euroclear System, in Europe.
See“Description of the Certificates-Book-Entry Registration” in this prospectus supplement.
Interest Accrual Period
Interest will accrue at the rate described herein on each class of certificates.
The interest accrual period for the offered certificates (other than the Class X Certificates) and the Class II-B-5 Certificates,
will be the period commencing on the distribution date in the month preceding the month in which a distribution date occurs (or the
closing date, in the case of the first interest accrual period) and ending on the day immediately prior to such distribution date.
Interest on the offered certificates (other than the Class X Certificates) will be calculated on the basis of a 360-day year and the
actual number of days elapsed in the applicable interest accrual period.
The interest accrual period for the Class X Certificates, will be the calendar month immediately preceding the calendar month in
which a distribution date occurs. Interest on the Class X Certificates will be calculated on the basis of a 360-day year consisting
of twelve 30-day months.
Pass -Through Rates
The pass-through rates on each class of offered certificates are as follows:
The offered certificates (other than the Class X Certificates) will bear interest at a pass-through rate equal to the least of (i)
one-month LIBOR plus the related margin, (ii) 10.50% per annum and (iii) the related net rate cap of the related mortgage loans.
The net rate cap for the group I offered certificates (other than the Class X Certificates) is equal to the weighted average of the
net rates of the group I mortgage loans, less the coupon strip rate (described below), if applicable, and the pass-through rate on
the Class X Certificates rate described below.
The net rate cap for the group II offered certificates and the Class II-B-5 Certificates is equal to the weighted average of the net
rates of the group II mortgage loans.
The coupon strip rate for loan group I will equal the coupon strip, if any, payable to the final maturity reserve account on any
distribution date, expressed as a per annum rate calculated on the basis of the aggregate stated principal balance of the group I
mortgage loans as of such distribution date.
The related margin for the Class I-A-1, Class I-A-2, Class I-A-3, Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5,
Class I-B-6, Class I-B-7, Class I-B-8, Class I-B-9, Class II-A-1, Class II-A-2, Class II-A-3, Class II-B-1, Class II-B-2, Class
II-B-3, Class II-B-4 and Class II-B-5 Certificates will be 0.160%, 0.210%, 0.250%, 0.380%, 0.400%, 0.430%, 0.500%, 0.550%,
0.600%,1.150%, 1.500%, 2.100%, 0.190%, 0.230%, 0.270%, 0.380%, 0.570%, 1.500%, 2.150% and 2.150%, per annum, respectively, provided
that, after the first possible related optional termination date, the related margin for the Class I-A-1, Class I-A-2, Class I-A-3,
Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7, Class I-B-8, Class I-B-9, Class II-A-1,
Class II-A-2, Class II-A-3, Class II-B-1, Class II-B-2, Class II-B-3, Class II-B-4 and Class II-B-5 Certificates will be 0.320%,
0.420%, 0.500%, 0.570%, 0.600%, 0.645%, 0.750%, 0.825%, 0.900%, 1.725%, 2.250%, 3.150%, 0.380%, 0.460%, 0.540%, 0.570%, 0.855%,
2.250%, 3.225% and 3.225%, per annum, respectively.
One-month LIBOR for the first interest accrual period and for all subsequent accrual periods shall be determined as described in
“Description of the Certificates-Calculation of One-Month LIBOR” in this prospectus supplement.
The Class I-X Certificates will bear interest at a fixed pass-through rate equal to 0.500% per annum based on a notional amount equal
to the aggregate outstanding principal balance of the group I mortgage loans having "hard" prepayment charges for a term of three
years from origination immediately prior to such distribution date. The Class I-X Certificates will have an initial notional amount
of approximately $626,636,221.
The Class I-XP-1, Class I-XP-2, Class II-XP, Class I-B-IO, Class II-B-IO, Class R and Class R-X Certificates do not have a
pass-through rate and will not bear interest.
Interest Payments
On each distribution date holders of the offered certificates and the Class II-B-5 Certificates will generally be entitled to receive:
• the interest that has accrued on the current principal amount or notional amount of such certificates at the applicable
pass-through rate during the related interest accrual period, and
• any interest due on a prior distribution date that was not paid,
less
• interest shortfalls allocated to such certificates.
However, the amount of interest distributable on a distribution date with respect to any class of certificates will be reduced by the
amount, if any, of net deferred interest for the related distribution date that is allocated to such class of certificates, and,
after the distribution date occurring in January 2017, any amounts paid into the final maturity reserve account, if applicable, each
as described under “Description of the Certificates” in this prospectus supplement.
In the event that an increase in the index causes interest to accrue on a mortgage loan for a given month in excess of the monthly
payment for that mortgage loan, the excess interest will be added to the outstanding principal balance of that mortgage loan in the
form of “negative amortization.” For any distribution date, the excess, if any, of (i) the aggregate amount of negative amortization
with respect to all mortgage loans for the calendar month prior to that distribution date, over (ii) the aggregate amount of
scheduled and unscheduled payments of principal received with respect to all mortgage loans during the related due period and
prepayment period, referred to herein as net deferred interest, will be deducted from interest payable to the related certificates as
described in this prospectus supplement. The amount deducted from the interest payable to each class of offered certificates (other
than the Class I-X Certificates) and the Class II-B-5 Certificates will be added to the principal balance of that class. See
“Description of the Certificates” in this prospectus supplement.
Principal Payments
On each distribution date, to the extent that the scheduled and unscheduled payments of principal on the mortgage loans during the
related due period and prepayment period exceed the deferred interest on the mortgage loans, principal will be paid on each class of
certificates entitled to receive principal payments on each distribution date. You should review the priority of payments described
under “Description of the Certificates -Distributions on the Certificates” in this prospectus supplement.
Final Maturity Reserve Account
If, on the distribution date occurring in January 2017 or on any distribution date thereafter, up to and including the distribution
date for the group I offered certificates in December 2036, any group I offered certificates are outstanding and the aggregate stated
principal balance of the group I mortgage loans with original terms to maturity in excess of 30 years is greater than or equal to the
scheduled amount specified in Schedule 1 to this prospectus supplement for the related distribution date, the trustee will be
required to deposit, from interest collections from the group I mortgage loans, into the final maturity reserve account on each such
distribution date, an amount equal to the lesser of (a) the product of (i) 1.00%, (ii) the aggregate stated principal balance of the
group I mortgage loans with original terms to maturity in excess of 30 years as of the due date occurring in the month prior to such
distribution date and (iii) one-twelfth and (b) the excess of (i) the final maturity reserve fund target for such distribution date
over (ii) the amount on deposit in the final maturity reserve fund immediately prior to such distribution date, until the amount on
deposit in the final maturity reserve account is equal to the final maturity reserve account target. Amounts on deposit in the final
maturity reserve account will be used to pay the outstanding current principal amount of the group I offered certificates then
outstanding on the distribution date in December 2036 (or such earlier date upon which the final distribution of payments on the
group I mortgage loans and other assets of the trust is expected to be made). See "Description of the Certificates-Final Maturity
Reserve Account" in this prospectus supplement.
Advances
The servicer will make cash advances with respect to delinquent payments of minimum interest due on the mortgage loans for which it
acts as servicer, generally to the extent that the servicer reasonably believes that such cash advances can be repaid from future
payments on the related mortgage loans. If the servicer fails to make any required advances, the Trustee may be obligated to do so in
its capacity as successor servicer, as described in this prospectus supplement. These cash advances are only intended to maintain a
regular flow of scheduled interest and principal payments on the certificates and are not intended to guarantee or insure against
losses. See “The Pooling and Servicing Agreement-Monthly Advances” in this prospectus supplement.
Servicing Fee
The servicer will be entitled to receive a servicing fee, as compensation for its activities under the pooling and servicing
agreement, equal to 1/12th of the servicing fee rate multiplied by the stated principal balance of each mortgage loan serviced by it
as of the due date in the month preceding the month in which such distribution date occurs. The servicing fee rate will be 0.375%
per annum. Interest shortfalls on the related mortgage loans resulting from prepayments in full in any calendar month will be offset
by the servicer on the distribution date in the following calendar month to the extent of compensating interest payments as described
in this prospectus supplement.
Credit Enhancement
Credit enhancement provides limited protection to holders of specified certificates against shortfalls in payments received on the
mortgage loans. This transaction employs the following forms of credit enhancement.
Excess Spread and Overcollateralization. The mortgage loans are expected to generate more interest than is needed to pay interest on
the related certificates because we expect the weighted average net interest rate of the mortgage loans to be higher than the
weighted average pass-through rate on the related certificates. In addition, such higher interest rate is paid on a principal balance
of mortgage loans that is larger than the current principal amount of the related certificates. Interest payments received in respect
of the mortgage loans in excess of the amount that is needed to pay interest on the related certificates, related trust expenses and,
with respect to the group I mortgage loans, on and after the distribution date occurring in January 2017, any amounts paid into the
final maturity reserve account, will be used to reduce the total current principal amount of the related certificates until a
required level of overcollateralization has been achieved.
See “Description of the Certificates-Excess Spread and Overcollateralization Provisions” in this prospectus supplement.
Subordination; Allocation of Losses. By issuing senior certificates and subordinate certificates, the trust has increased the
likelihood that senior certificateholders will receive regular payments of interest and principal.
The senior certificates will have a payment priority over the related subordinate certificates. Among the classes of subordinate
certificates, each class of Class B Certificate with a lower numerical class designation will have payment priority over each class
of related Class B Certificate with a higher numerical class designation.
Subordination provides the holders of certificates having a higher payment priority protection against losses realized when the
remaining unpaid principal balance on a related mortgage loan exceeds the amount of proceeds recovered upon the liquidation of that
mortgage loan. In general, this loss protection is accomplished by allocating any realized losses in excess of available excess
spread and any current overcollateralization to the related subordinate certificates, beginning with the related subordinate
certificates with the lowest payment priority, until the current principal amount of that subordinate class has been reduced to zero
and then allocating any loss to the next most junior class of related subordinate certificates, until the current principal amount of
each class of subordinate certificates is reduced to zero. If no related subordinate certificates remain outstanding, the principal
portion of realized losses on the mortgage loans in each loan group will be allocated to the related senior certificates thereof in
accordance with the priorities set forth herein under "Description of the Certificates-Allocation of Realized Losses; Subordination."
As of the closing date, the aggregate current principal amount of the Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class
I-B-5, Class I-B-6, Class I-B-7, Class I-B-8 and Class I-B-9 Certificates will equal approximately 9.25% of the aggregate principal
balance of the group I mortgage loans as of the cut-off date.
As of the closing date, the aggregate current principal amount of the Class II-B-1, Class II-B-2, Class II-B-3, Class II-B-4 and
Class II-B-5 Certificates will equal approximately 9.60% of the aggregate principal balance of the group II mortgage loans as of the
cut-off date.
See “Description of the Certificates-Allocation of Realized Losses; Subordination” in this prospectus supplement.
The Cap Contracts
The group II offered certificates and the Class II-B-5 certificates will be entitled to the benefits provided by the related cap
contract. There can be no assurance as to the extent of benefits, if any, that may be realized by the certificateholders as a result
of the cap contracts.
See “The Cap Contracts” in this prospectus supplement.
Optional Termination
At its option, the depositor or its designee may purchase from the trust all of the (i) group I mortgage loans, together with any
properties in respect thereof acquired on behalf of the trust and thereby effect termination and early retirement of the group I
certificates after the stated principal balance of the group I mortgage loans (and properties acquired in respect thereof), remaining
in the trust has been reduced to less than 10% of the stated principal balance of the group I mortgage loans as of the cut-off date
and (ii) group II mortgage loans, together with any properties in respect thereof acquired on behalf of the trust and thereby effect
termination and early retirement of the group II certificates after the stated principal balance of the group II mortgage loans (and
properties acquired in respect thereof), remaining in the trust has been reduced to less than 10% of the stated principal balance of
the group II mortgage loans as of the cut-off date.
See “Pooling and Servicing Agreement-Termination” in this prospectus supplement.
Federal Income Tax Consequences
One or more elections will be made to treat the mortgage loans and certain related assets as one or more real estate mortgage
investment conduits for federal income tax purposes.
See “Federal Income Tax Consequences” in this prospectus supplement.
Ratings
It is a condition to the issuance of the certificates that the offered certificates receive the following ratings from Standard &
Poor's Rating Services, a division of The McGraw-Hill Companies, Inc., which is referred to herein as S&P and Moody’s Investors
Service, Inc., which is referred to herein as Moody’s:
Offered Certificates S&P Moody’s
Class I-A-1 AAA Aaa
Class I-A-2 AAA Aaa
Class I-A-3 AAA Aaa
Class I-X AAA Aaa
Class II-A-1 AAA Aaa
Class II-A-2 AAA Aaa
Class II-A-3 AAA Aaa
Class I-B-1 AA+ Aaa
Class I-B-2 AA Aa1
Class I-B-3 AA- Aa1
Class I-B-4 A+ Aa2
Class I-B-5 A Aa3
Class I-B-6 A- A1
Class I-B-7 BBB+ A3
Class I-B-8 BBB Baa2
Class I-B-9 BBB- Baa3
Class II-B-1 AA Aaa
Class II-B-2 A Aa3
Class II-B-3 BBB A3
Class II-B-4 BBB- Baa1
A rating is not a recommendation to buy, sell or hold securities and either rating agency can revise or withdraw such ratings at any
time. In general, ratings address credit risk and do not address the likelihood of prepayments.
See “Yield and Prepayment Considerations” and “Ratings” in this prospectus supplement and “Yield Considerations” in the prospectus.
Legal Investment
The offered certificates (other than the Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7, Class I-B-8, Class I-B-9, Class II-B-2,
Class II-B-3 and Class II-B-4 Certificates) will constitute “mortgage related securities” for purposes of SMMEA, so long as they are
rated in one of the two highest rating categories by a nationally recognized statistical rating organization. The Class I-B-4, Class
I-B-5, Class I-B-6, Class I-B-7, Class I-B-8, Class I-B-9, Class II-B-2, Class II-B-3 and Class II-B-4 Certificates will not
constitute “mortgage related securities” for purposes of SMMEA.
See “Legal Investment” in this prospectus supplement and “Legal Investment Matters” in the prospectus.
ERISA Considerations
The offered certificates may be purchased by persons investing assets of employee benefit plans or individual retirement accounts,
subject to important considerations. Plans should consult with their legal advisors before investing in the offered certificates.
See “ERISA Considerations” in this prospectus supplement.
RISK FACTORS
You are encouraged to carefully consider the following risk factors in connection with the purchase of the offered
certificates:
Your Yield on the Certificates Will be Subject to any Negative Amortization on the Related Mortgage Loans.
All of the mortgage loans in the trust fund are negative amortization loans.
Negative amortization may occur with respect to the group I mortgage loans, because, generally, after the initial fixed rate
period following origination (as set forth in the related mortgage note), the interest rates on the negative amortization loans
included in loan group I will typically adjust monthly but their monthly payments and amortization schedules adjust annually. During
a period of rising interest rates, the amount of interest accruing on the principal balance of these mortgage loans may exceed the
amount of the minimum monthly payment. In addition, in most circumstances, the amount by which a monthly payment may be adjusted on
an annual payment adjustment date may be limited and may not be sufficient to amortize fully the unpaid principal balance of a
mortgage loan over its remaining term to maturity. Approximately 14.86% of the group I mortgage loans are still in their initial
fixed rate period. The initial interest rates on most of the group I mortgage loans during the initial fixed rate period are lower
than the sum of the indices applicable and the related margins and range from not lower than 1.000% per annum and in no case
exceeding 3.000% per annum. For approximately 12.36% of the group I mortgage loans, the interest rates are currently 1.000% per
annum.
Negative amortization may occur with respect to the group II mortgage loans because during the initial fixed rate period,
monthly payments made by the mortgagor may be less than the interest accrued on such group II mortgage loan for the related payment
period.
As a result, a portion of the accrued interest on negatively amortizing loans may become deferred interest which will be
added to their principal balances and will also bear interest at the applicable interest rates. The amount of any deferred interest
accrued on a mortgage loan during a due period will reduce the amount of interest available to be distributed on the related classes
of certificates on the related distribution date.
If the interest rates on the mortgage loans decrease prior to an adjustment in the monthly payment, a larger portion of the
monthly payment will be applied to the unpaid principal balance of the mortgage loan, which may cause the related classes of
certificates to amortize more quickly. Conversely, if the interest rates on the mortgage loans increase prior to an adjustment in
the monthly payment, a smaller portion of the monthly payment will be applied to the unpaid principal balance of the mortgage loan,
which may cause the related classes of certificates to amortize more slowly. With respect to the group I mortgage loans, on the
fifth payment adjustment date of a mortgage loan and every fifth payment adjustment date thereafter and the last payment adjustment
date prior to the mortgage loan's maturity, the monthly payment due on such mortgage loan will be reset without regard to the related
periodic payment cap or if the unpaid principal balance exceeds a percentage of 110% or 115%, as applicable, of the original
principal balance due to deferred interest, the monthly payment due on that mortgage loan will be reset, without regard to the
related periodic payment cap, in each case in order to provide for the outstanding balance of the mortgage loan to be paid in full at
its maturity by the payment of equal monthly installments. With respect to the group II mortgage loans, the initial minimum monthly
payment is calculated on the basis of the original loan amount and an interest rate below the original interest rate by generally up
to 3% per annum. After the end of the five-year period after origination or if the unpaid principal balance equals or exceeds a
percentage of 110% or 115% (as applicable) of the original principal balance due to deferred interest, the monthly payment due on
that mortgage loan will be reset without regard to the related periodic payment cap, to an interest-only payment in an amount equal
to the full amount of accrued interest on the mortgage loan calculated based on the outstanding principal balance of the mortgage
loan and the interest rate then in effect. These adjustment features are likely to substantially increase the monthly payment due
from borrowers and are likely to affect the rate at which principal on these mortgage loans is paid. In addition, the adjustment
features may create a greater risk of default if the borrowers are unable to pay the higher monthly payments that may result in
increases in the interest rates and increased principal balances. It is expected that if a borrower paid only the minimum monthly
payment due under the mortgage loan, such mortgage loan would reach the applicable negative amortization percentage within
approximately four years of origination.
The amount of deferred interest, if any, with respect to the mortgage loans for a given month will reduce the amount of
interest collected on these mortgage loans and available to be distributed as a distribution of interest to the related classes of
certificates. The resulting reduction in interest collections on the mortgage loans will be offset, in part or in whole, by applying
all payments of principal received on the mortgage loans in the related loan group to interest distributions on the related classes
of certificates. For any distribution date, the net deferred interest on the mortgage loans will be allocated to those classes of
certificates as set forth in this prospectus supplement under “Description of the Certificates-Distributions on the Certificates."
The amount of the reduction of accrued interest distributable to a class of certificates attributable to net deferred interest will
be added to the current principal amount of that class. Only the amount by which the payments of principal received on the mortgage
loans exceed the amount of deferred interest on the mortgage loans will be distributed as principal to the related classes of
certificates in accordance with the priorities set forth in this prospectus supplement under “Description of the
Certificates-Distributions on the Certificates.” The increase in the current principal amount of any class of certificates and the
slower reduction in the current principal amounts due to the use of all principal collected on the related mortgage loans to offset
the deferred interest will have the effect of increasing the weighted average lives of the certificates and increasing your exposure
to realized losses on the related mortgage loans. We cannot predict the extent to which mortgagors will prepay their mortgage loans
and therefore cannot predict the extent of the effect of the allocation of net deferred interest on your certificates.
In addition, as the principal balance of a mortgage loan subject to negative amortization will increase by the amount of
deferred interest allocated to such loan, the increasing principal balance of a negative amortization loan may approach or exceed the
value of the related mortgaged property, thus increasing the likelihood of defaults as well as the amount of any loss experienced
with respect to any such negative amortization that is required to be liquidated. Furthermore, each mortgage loan provides for the
payment of any remaining unamortized principal balance thereto (due to the addition of deferred interest, if any, to the principal
balance of the mortgage loan) in a single payment at the maturity of such mortgage loan. Because the related mortgagors may be
required to make a larger single payment upon maturity, it is possible that the default risk associated with mortgage loans subject
to negative amortization is greater than associated with fully amortizing mortgage loans.
Some of the Mortgage Loans Have a Limited Performance History.
The 5 Yr. Bear Stearns Secure Option ARM loans included in loan group II are a new product in the mortgage marketplace. The
performance of these mortgage loans may be significantly different than mortgage loans that fully amortize or have other negative
amortization features that are more common to the mortgage marketplace. In particular, the depositor is not aware of any performance
history for mortgage loans of this type, including with respect to losses, delinquencies or prepayments. If the performance of these
mortgage loans is substantially worse or different than assumed by an investor, there may be delays in payment and increased losses
on the mortgage loans. Such delays and losses on the mortgage loans could affect the rate and timing of payments on the certificates
and could increase the risk that realized losses will be allocated to the certificates.
The Offered Certificates Will Have Limited Liquidity, So You May Be Unable to Sell Your Securities or May Be Forced to Sell
Them at a Discount from Their Fair Market Value.
The underwriter intends to make a secondary market in the offered certificates, however the underwriter will not be
obligated to do so. There can be no assurance that a secondary market for the offered certificates will develop or, if it does
develop, that it will provide holders of the offered certificates with liquidity of investment or that it will continue for the life
of the offered certificates. As a result, any resale prices that may be available for any offered certificate in any market that may
develop may be at a discount from the initial offering price or the fair market value thereof. The offered certificates will not be
listed on any securities exchange.
Credit Enhancement Is Limited; The Failure of Credit Enhancement to Cover Losses on the Trust Fund Assets May Result in
Losses Allocated to the Offered Certificates.
The subordination of the subordinate certificates to the related senior certificates as described in this prospectus
supplement, is intended to enhance the likelihood that holders of the senior certificates and, to a more limited extent, holders of
the offered subordinate certificates, will receive regular payments of interest and principal and to provide the holders of the
senior certificates and, to a more limited extent, the holders of the related offered subordinate certificates with a higher payment
priority, with protection against losses realized when the remaining unpaid principal balance on a related mortgage loan exceeds the
amount of proceeds recovered upon the liquidation of that mortgage loan. In general, this loss protection is accomplished by
allocating the principal portion of any realized losses, to the extent not covered by excess spread or any overcollateralization,
among the certificates in the related loan group, beginning with the subordinate certificates with the lowest payment priority, until
the current principal amount of that subordinate class has been reduced to zero. The principal portion of realized losses are then
allocated to the next most junior class of subordinate certificates, until the current principal amount of each class of subordinate
certificates is reduced to zero. If no subordinate certificates remain outstanding, the principal portion of realized losses on the
mortgage loans in a loan group will be allocated to the related senior certificates in the order of priority set forth in this
prospectus supplement under “Description of the Certificates-Allocation of Losses; Subordination." Accordingly, if the aggregate
current principal amount of the related subordinate certificates were to be reduced to zero, delinquencies and defaults on the
mortgage loans in a loan group would reduce the amount of funds available for monthly distributions to the holders of the related
senior certificates.
The ratings of the offered certificates by the rating agencies may be lowered following the initial issuance thereof as a
result of losses on the mortgage loans in the related loan group in excess of the levels contemplated by the rating agencies at the
time of their initial rating analysis. None of the depositor, the sponsor, the trustee nor any of their respective affiliates will
have any obligation to replace or supplement any credit enhancement, or to take any other action to maintain the ratings of the
offered certificates. See “Description of Credit Enhancement-Subordinate Securities” in the prospectus.
Developments in Specified Regions Could Have a Disproportionate Effect on the Mortgage Loans due to Geographical
Concentrations of Mortgaged Properties.
Approximately 67.35% of the mortgage loans as of the cut-off date are secured by properties in California. Property in
certain regions may be more susceptible than properties located in other parts of the country to certain types of uninsurable
hazards, such as earthquakes, floods, mudslides and other natural disasters. In addition:
• economic conditions in a specific region with a significant concentration of properties underlying the mortgage
loans (which may or may not affect real property values) may affect the ability of borrowers to repay their loans on
time;
• declines in a region’s residential real estate market may reduce the values of properties located in that region,
which would result in an increase in the loan-to-value ratios; and
• any increase in the market value of properties located in a particular region would reduce the loan-to-value ratios
and could, therefore, make alternative sources of financing available to the borrowers at lower interest rates,
which could result in an increased rate of prepayment of the mortgage loans.
Any risks associated with mortgage loan concentration may affect the yield to maturity of the offered certificates to the
extent losses caused by these risks are not covered by subordination provided by the subordinate certificates.
A Transfer of Servicing May Result in an Increased Risk of Delinquency and Loss on the Mortgage Loans.
The primary servicing for a majority of the mortgage loans was transferred to EMC within the last three months. Any
servicing transfer involves notifying mortgagors to remit payments to a new servicer, transferring physical possession of loan files
and records to the new servicer and entering loan and mortgagor data on the management information systems of the new servicer.
Accordingly, such transfers could result in misdirected notices, misapplied payments, data input problems and other problems. In
addition, investors should note that when the servicing of mortgage loans is transferred, there is generally an increase in
delinquencies associated with such transfer. Such increase in delinquencies and problems incurred with the transfer to the new
servicer may result in losses, which, to the extent they are not absorbed by credit enhancement, will cause losses or shortfalls to
be incurred by the holders of the offered certificates. In addition, any higher default rate resulting from such transfer may result
in an acceleration of prepayments on those mortgage loans.
The Underwriting Standards of Some of the Mortgage Loans Do Not Conform to the Standards of Fannie Mae or Freddie Mac, And
May Increase the Risk of Payment Application Errors.
Some of the mortgage loans were underwritten generally in accordance with underwriting standards which are primarily
intended to provide for single family “non-conforming” mortgage loans. A “non-conforming” mortgage loan means a mortgage loan which
is ineligible for purchase by Fannie Mae or Freddie Mac due to either credit characteristics of the related mortgagor or
documentation standards in connection with the underwriting of the related mortgage loan that do not meet the Fannie Mae or Freddie
Mac underwriting guidelines for “A” credit mortgagors. These credit characteristics include mortgagors whose creditworthiness and
repayment ability do not satisfy such Fannie Mae or Freddie Mac underwriting guidelines and mortgagors who may have a record of
credit write-offs, outstanding judgments, prior bankruptcies and other credit items that do not satisfy such Fannie Mae or Freddie
Mac underwriting guidelines. These documentation standards may include mortgagors who provide limited or no documentation in
connection with the underwriting of the related mortgage loan. Accordingly, mortgage loans underwritten under the originator's
non-conforming credit underwriting standards are likely to experience rates of delinquency, foreclosure and loss that are higher, and
may be substantially higher, than mortgage loans originated in accordance with the Fannie Mae or Freddie Mac underwriting guidelines.
Any resulting losses, to the extent not covered by credit enhancement, may affect the yield to maturity of the offered certificates.
Book-Entry Securities May Delay Receipt of Payment and Reports.
If the trust fund issues certificates in book-entry form, certificateholders may experience delays in receipt of payments
and/or reports since payments and reports will initially be made to the book-entry depository or its nominee. In addition, the
issuance of certificates in book-entry form may reduce the liquidity of certificates so issued in the secondary trading market since
some investors may be unwilling to purchase certificates for which they cannot receive physical certificates.
The Yield to Maturity on the Offered Certificates Will Depend on a Variety of Factors.
The yield to maturity on the offered certificates will depend, in general, on:
• the applicable purchase price; and
• the rate and timing of principal payments (including prepayments and collections upon defaults, liquidations and
repurchases) relative to the amount and timing of deferred interest on the related mortgage loans and the allocation
thereof to reduce or increase the current principal amount of the related offered certificates, as well as other
factors.
The yield to investors on the offered certificates will be adversely affected by any allocation thereto of interest
shortfalls on the related mortgage loans.
In general, if the offered certificates are purchased at a premium and principal distributions occur at a rate faster than
anticipated at the time of purchase, the investor’s actual yield to maturity will be lower than that assumed at the time of purchase.
Conversely, if the offered certificates are purchased at a discount and principal distributions occur at a rate slower than that
anticipated at the time of purchase, the investor’s actual yield to maturity will be lower than that originally assumed.
The proceeds to the depositor from the sale of the offered certificates were determined based on a number of assumptions,
including a 25% constant rate of prepayment each month or CPR, relative to the then outstanding principal balance of the mortgage
loans. No representation is made that the mortgage loans will prepay at this rate or at any other rate or that the mortgage loans
will prepay at the same rate. The yield assumptions for the offered certificates will vary as determined at the time of sale. See
“Yield and Prepayment Considerations” in this prospectus supplement.
The rate and timing of distributions allocable to principal on the offered certificates will depend, in general, on the rate
and timing of principal payments (including prepayments, collections upon defaults, liquidations and repurchases and the allocation
of deferred interest) on the related mortgage loans and the allocation thereof to pay principal on such certificates as provided in
this prospectus supplement. As is the case with mortgage pass-through certificates generally, the offered certificates are subject
to substantial inherent cash-flow uncertainties because the mortgage loans may be prepaid at any time. However, with respect to
approximately 80.70% of the mortgage loans, a prepayment within four months to three years of its origination may subject the related
mortgagor to a prepayment charge, which may act as a deterrent to prepayment of the mortgage loan during the applicable period.
However, under certain circumstances, the prepayment charge may be waived by the servicer. There can be no assurance that any
prepayment charges will have any effect on the prepayment performance of the mortgage loans. See “Description of the Mortgage Loans”
in this prospectus supplement.
The sponsor may, from time to time, implement programs designed to encourage refinancing. These programs may include,
without limitation, modifications of existing loans, general or targeted solicitations, the offering of pre-approved applications,
reduced origination fees or closing costs or other financial incentives. Targeted solicitations may be based on a variety of factors,
including the credit of the borrower or the location of the mortgaged property. In addition, the sponsor may encourage assumptions of
mortgage loans, including defaulted mortgage loans, under which creditworthy borrowers assume the outstanding indebtedness of the
mortgage loans which may be removed from the related mortgage pool. As a result of these programs, with respect to the mortgage pool
underlying any trust, the rate of principal prepayments of the mortgage loans in the mortgage pool may be higher than would otherwise
be the case and in some cases, the average credit or collateral quality of the mortgage loans remaining in the mortgage pool may
decline.
Generally, when prevailing interest rates increase, prepayment rates on mortgage loans tend to decrease. A decrease in the
prepayment rates on the mortgage loans will result in a reduced rate of return of principal to investors in the offered certificates
at a time when reinvestment at higher prevailing rates would be desirable.
Conversely, when prevailing interest rates decline, prepayment rates on mortgage loans tend to increase. An increase in the
prepayment rates on the mortgage loans will result in a greater rate of return of principal to investors in the offered certificates
at a time when reinvestment at comparable yields may not be possible.
During at least the first three years after the closing date, the entire amount of payments of principal with respect to the
mortgage loans will be allocated to the related senior certificates, as described herein, unless the current principal amount of the
senior certificates has been reduced to zero. This will accelerate the amortization of the senior certificates in each certificate
group as a whole while, in the absence of losses in respect of the mortgage loans, increasing the percentage interest in the
principal balance of the mortgage loans the subordinate certificates evidence.
For further information regarding the effect of principal prepayments on the weighted average lives of the offered
certificates, see “Yield and Prepayment Considerations” in this prospectus supplement.
Excess Spread May be Inadequate to Cover Losses and/or to Build Overcollateralization.
The mortgage loans are expected to generate more interest than is needed to pay interest on the offered certificates and the
Class II-B-5 Certificates because we expect the weighted average net interest rate on the mortgage loans to be higher than the
weighted average pass-through rate on the offered certificates and the Class II-B-5 Certificates. If the mortgage loans generate
more interest than is needed to pay interest on the offered certificates and the Class II-B-5 Certificates and trust fund expenses
and, with respect to loan group I, on or after the distribution date occurring in January 2017, any amounts paid into the final
maturity reserve account, such “excess spread” will be used to make additional principal payments on the related offered certificates
or the Class II-B-5 Certificates (as applicable), which will reduce the total principal balance of such certificates below the
aggregate principal balance of the related mortgage loans, thereby creating “overcollateralization.” Overcollateralization is
intended to provide limited protection to certificateholders by absorbing the certificate's share of losses from liquidated mortgage
loans. However, we cannot assure you that enough excess spread will be generated on the mortgage loans to establish or maintain the
required level of overcollateralization. On the closing date the required level of overcollateralization is expected to be met with
respect to both loan groups. If the protection afforded by overcollateralization is insufficient, then you could experience a loss on
your investment.
The excess spread available on any distribution date will be affected by the actual amount of interest received, advanced or
recovered in respect of the related mortgage loans during the preceding month. Such amount may be influenced by changes in the
weighted average of the mortgage rates resulting from prepayments, defaults and liquidations of the related mortgage loans. The
amount of deferred interest on a mortgage loan resulting from negative amortization will decrease the amount of excess spread
available to increase the overcollateralization, which may reduce the amount of overcollateralization available to provide credit
enhancement on the certificates.
If at any time the amount of overcollateralization is at a level below the required level, the overcollateralization
provisions are intended to result in an accelerated rate of principal distributions to holders of the classes of certificates then
entitled to distributions of principal. An earlier return of principal to the holders of the offered certificates as a result of the
overcollateralization provisions will influence the yield on such certificates in a manner similar to the manner in which principal
prepayments on the mortgage loans will influence the yield on the related offered certificates.
The Subordinate Certificates Have a Greater Risk of Loss than the Senior Certificates.
When certain classes of certificates provide credit enhancement for other classes of certificates it is sometimes referred
to as “subordination.” For purposes of this prospectus supplement, subordination with respect to the offered certificates and the
Class II-B-5 Certificates or “subordinated classes” generally means:
• with respect to the Class I-A-1 Certificates and the Class I-X Certificates: the Class I-A-2, the Class I-A-3 and
the Class I-B Certificates;
• with respect to the Class I-A-2 Certificates: the Class I-A-3 Certificates and the Class I-B Certificates;
• with respect to the Class I-A-3 Certificates: the Class I-B Certificates;
• with respect to the Class I-B-1 Certificates: the Class I-B-2, the Class I-B-3, the Class I-B-4, the Class I-B-5,
the Class I-B-6, the Class I-B-7, the Class I-B-8 and the Class I-B-9 Certificates;
• with respect to the Class I-B-2 Certificates: the Class I-B-3, the Class I-B-4, the Class I-B-5, the Class I-B-6,
the Class I-B-7, the Class I-B-8 and the Class I-B-9 Certificates;
• with respect to the Class I-B-3 Certificates: the Class I-B-4, the Class I-B-5, the Class I-B-6, the Class I-B-7,
the Class I-B-8 and the Class I-B-9 Certificates;
• with respect to the Class I-B-4 Certificates: the Class I-B-5, the Class I-B-6, the Class I-B-7, the Class I-B-8 and
the Class I-B-9 Certificates;
• with respect to the Class I-B-5 Certificates: the Class I-B-6, the Class I-B-7, the Class I-B-8 and the Class I-B-9
Certificates;
• with respect to the Class I-B-6 Certificates: the Class I-B-7, the Class I-B-8 and the Class I-B-9 Certificates;
• with respect to the Class I-B-7 Certificates: the Class I-B-8 Certificates and the Class I-B-9 Certificates;
• with respect to the Class I-B-8 Certificates: the Class I-B-9 Certificates;
• with respect to the Class II-A-1 Certificates: the Class II-A-2, the Class II-A-3 and the Class II-B Certificates;
• with respect to the Class II-A-2 Certificates: the Class II-A-3 Certificates and the Class II-B Certificates;
• with respect to the Class II-A-3 Certificates: the Class II-B Certificates;
• with respect to the Class II-B-1 Certificates: the Class II-B-2, the Class II-B-3, the Class II-B-4 and the Class
II-B-5 Certificates;
• with respect to the Class II-B-2 Certificates: the Class II-B-3, the Class II-B-4 and the Class II-B-5 Certificates;
• with respect to the Class II-B-3 Certificates: the Class II-B-4 Certificates and the Class II-B-5 Certificates; and
• with respect to the Class II-B-4 Certificates: the Class II-B-5 Certificates.
In addition to excess spread and the overcollateralization features, credit enhancement for the senior certificates will be
provided by the right of the holders of the senior certificates to receive certain payments of interest and principal, as applicable,
prior to the related subordinated classes and by the allocation of realized losses to the subordinated classes before allocation to
the senior certificates. This form of credit enhancement uses collections on the mortgage loans otherwise payable to the holders of
the subordinate classes to pay amounts due on the related more senior classes. Realized losses in excess of any related available
excess spread and any related current overcollateralization are allocated to the related subordinate certificates, beginning with the
related Class B Certificates with the highest numerical designation, until the current principal amount of the related Class B
Certificates has been reduced to zero. Accordingly, if the aggregate current principal amount of a subordinated class were to be
reduced to zero, delinquencies and defaults on the mortgage loans would reduce the amount of funds available for monthly
distributions to holders of the related remaining subordinated class or classes of certificates and, if the aggregate current
principal amount of all the related subordinated classes were to be reduced to zero, delinquencies and defaults on the mortgage loans
in each loan group would reduce the amount of funds available for monthly distributions to holders of the related senior
certificates. You should fully consider the risks of investing in a subordinate certificate, including the risk that you may not
fully recover your initial investment as a result of realized losses. See “Description of the Certificates” in this prospectus
supplement.
The weighted average lives of, and the yields to maturity on, the Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class
I-B-5, Class I-B-6, Class I-B-7, Class I-B-8 and Class I-B-9 Certificates will be progressively more sensitive, in that order, to the
rate and timing of mortgage defaults and the severity of ensuing losses on the group I mortgage loans. The Class II-B-1, Class
II-B-2, Class II-B-3, Class II-B-4 and Class II-B-5 Certificates will be progressively more sensitive, in that order, to the rate and
timing of mortgagor defaults and the severity of ensuing losses on the group II mortgage loans. If the actual rate and severity of
losses on the mortgage loans is higher than those assumed by an investor in such certificates, the actual yield to maturity of such
certificates may be lower than the yield anticipated by such holder based on such assumption. The timing of losses on the mortgage
loans will also affect an investor's actual yield to maturity, even if the rate of defaults and severity of losses over the life of
the mortgage loans are consistent with an investor's expectations. In general, the earlier a loss occurs, the greater the effect on
an investor's yield to maturity. Realized losses on the group I mortgage loans, to the extent they exceed the amount of
overcollateralization following distributions of principal on the related distribution date, will reduce the current principal
amounts of the Class I-B-9, Class I-B-8, Class I-B-7, Class I-B-6, Class I-B-5, Class I-B-4, Class I-B-3, Class I-B-2 and Class I-B-1
Certificates, in that order. Realized losses on the group II mortgage loans, to the extent they exceed the amount of
overcollateralization following distributions of principal on the related distribution date, will reduce the current principal
amounts of the Class II-B-5, Class II-B-4, Class II-B-3, Class II-B-2 and Class II-B-1 Certificates, in that order. As a result of
such reductions, less interest will accrue on such class of subordinate certificates than would otherwise be the case. Once a
realized loss is allocated to a subordinate certificate, no interest will be distributable with respect to such written down amount.
However, the amount of any realized losses allocated to the subordinate certificates may be reimbursed to the holders of the
subordinate certificates according to the priorities set forth under “Description of the Certificates-Distributions on the
Certificates” in this prospectus supplement.
Unless the current principal amounts of the related senior certificates have been reduced to zero, the subordinate
certificates will not be entitled to any principal distributions until at least the distribution date occurring in January 2010 or
during any period in which delinquencies or losses on the related mortgage loans exceed certain levels. As a result, the weighted
average life of the subordinate certificates will be longer than would otherwise be the case if distributions of principal were
allocated among all of the related certificates at the same time. As a result of the longer weighted average lives of the subordinate
certificates, the holders of such certificates have a greater risk of suffering a loss on their investments. Furthermore, because
such certificates might not receive any principal if certain delinquency levels occur, it is possible for such certificates to
receive no principal distributions even if no losses have occurred on the mortgage pool.
In addition, the multiple class structure of the subordinate certificates causes the yield of such classes to be
particularly sensitive to changes in the rates of prepayment of the related mortgage loans. Because distributions of principal will
be made to the holders of such certificates according to the priorities described herein, the yield to maturity on such classes of
certificates will be sensitive to the rates of prepayment on the mortgage loans experienced both before and after the commencement of
principal distributions on such classes. The yield to maturity on such classes of certificates will also be extremely sensitive to
losses due to defaults on the mortgage loans and the timing thereof, to the extent such losses are not covered by
overcollateralization, excess spread, or a class of subordinate certificates with a lower payment priority. Furthermore, the timing
of receipt of principal and interest by the subordinate certificates may be adversely affected by losses even if such classes of
certificates do not ultimately bear such loss.
The Net Rate Cap May Reduce the Yields on the Class A Certificates and the Class B Certificates.
The pass-through rates on the offered certificates (other than the Class X Certificates) and the Class II-B-5 Certificates
are each subject to a net rate cap equal to, approximately, the weighted average of the net mortgage rates on the related mortgage
loans (in the case of the group I offered certificates, less the related Coupon Strip Rate, if applicable, and the pass-through rate
on the Class X Certificates) as more fully described in this prospectus supplement. If on any distribution date the pass-through
rate for a class of offered certificates and the Class II-B-5 Certificates is limited to the related net rate cap, the holders of the
applicable certificates will receive a smaller amount of interest than they would have received on that distribution date had the
pass-through rate for that class not been calculated based on the related net rate cap. The holders of those certificates will not be
entitled to recover any resulting shortfall in interest on that distribution date or on any other distribution date except to the
extent of excess cashflow available for that purpose. If mortgage loans with relatively higher mortgage rates prepay or default, the
net rate cap would result in lower interest than otherwise would be the case.
The Offered Certificates May Not Always Receive Interest Based on One-Month LIBOR Plus the Related Margin.
The offered certificates (other than the Class I-X Certificates) and the Class II-B-5 Certificates will receive interest at
a pass-through rate equal to the least of (i) one-month LIBOR plus the related margin, (ii) 10.50% per annum and (iii) the applicable
net rate cap (in the case of the group I offered certificates, less the related Coupon Strip Rate, if applicable, and the
pass-through rate on the Class X Certificates). For any class of such certificates, the prepayment of the related mortgage loans
with relatively higher pass-through rates may cause the related net rate cap to be lower than one-month LIBOR plus the related
margin, in which case the pass-through rate for such certificates will be more likely to be limited to the related net rate cap.
If on any distribution date the pass-through rate for any class of the certificates is limited by the applicable net rate
cap, a carryover shortfall amount, equal to the difference between (i) interest that would have accrued at the lesser of one-month
LIBOR plus the related margin and 10.50% per annum and (ii) interest accrued on that class of certificates as limited by the related
net rate cap, will be payable to such certificates, to the extent of available funds on that distribution date or future distribution
dates, provided that any basis risk shortfall carry-forward amount will be reduced by the amount of net deferred interest that is
added to the current principal amount of that class of certificates. Such shortfall will be covered to the extent of excess cash flow
available for that purpose and, for the group II offered certificates and the Class II-B-5 Certificates, to the extent of available
payments under the related cap contracts. However, payments under the cap contracts are based on the lesser of the actual current
principal amount of the related class of certificates and an assumed principal amount of such certificates based on certain
prepayment assumptions regarding the related mortgage loans. If the related mortgage loans do not prepay according to those
assumptions, it may result in the cap contracts providing insufficient funds to cover such shortfalls. In addition, each cap
contract provides for payment of the excess of the lesser of One-Month LIBOR or the related ceiling rate over a specified per annum
rate, which also may not provide sufficient funds to cover such shortfalls. Accordingly, such shortfalls may remain unpaid on the
final distribution date, including the optional termination date. The holders of the certificates will be subject to the risk that
interest distributable to those classes will be limited by the net rate cap. See "Description of the Certificates-Distributions on
the Certificates" in this prospectus supplement.
In addition, although the group II offered certificates and the Class II-B-5 Certificates are entitled to payments under the
related cap contracts during periods of increased One-Month LIBOR rates, the counterparty thereunder will only be obligated to make
such payments under certain circumstances.
To the extent that payments on the group II offered certificates and the Class II-B-5 Certificates depend in part on
payments to be received under the cap contracts, the ability of the trust to make payments on those classes of certificates will be
subject to the credit risk of the cap counterparty.
The cap contracts terminate in accordance with their terms on the dates set forth in the related cap contract. This date was
selected based on certain prepayment assumptions regarding the related mortgage loans and that the optional termination right becomes
exercisable and is exercisable at that time. These prepayment assumptions were used to determine the projected principal balance of
the applicable class of certificates under the cap contracts. If prepayments on the related mortgage loans occur at rates that are
slower than those assumptions, or even if such mortgage loans prepay according to those assumptions, if the optional termination
right is not exercised, the contracts will terminate prior to the repayment in full of the related classes of certificates. See “TheCap Contracts” in this prospectus supplement.
Specific Considerations for the Class X Certificates.
Interest accruing on the Class I-X Certificates will be based on a fixed rate of 0.500% per annum and a notional balance
equal to the aggregate outstanding principal balance of the group I mortgage loans having "hard" prepayment charges for a term of
three years from origination, calculated on the basis of a year of 360 days with twelve 30 day months. Prepayments on mortgage loans
with relatively higher pass-through rates may cause the weighted average net rates of the related mortgage loans to be lower, which
could reduce the amount of interest accrued on the Class I-X Certificates. See "Description of the Certificates-Distributions on the
Certificates" in this prospectus supplement.
The Securities Are Not Suitable Investments for All Investors.
The certificates are complex investments that are not appropriate for all investors. The interaction of the factors
described above is difficult to analyze and may change from time to time while the certificates are outstanding. It is impossible to
predict with any certainty the amount or timing of distributions on the certificates or the likely return on an investment in any
such securities. As a result, only sophisticated investors with the resources to analyze the potential risks and rewards of an
investment in the certificates should consider such an investment.
Statutory and Judicial Limitations on Foreclosure Procedures May Delay Recovery in Respect of the Mortgaged Property and, in
Some Instances, Limit the Amount that May Be Recovered by the Foreclosing Lender, Resulting in Losses on the Mortgage Loans That
Might be Allocated to the Offered Certificates.
Foreclosure procedures may vary from state to state. Two primary methods of foreclosing a mortgage instrument are judicial
foreclosure, involving court proceedings, and non-judicial foreclosure pursuant to a power of sale granted in the mortgage
instrument. A foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or
counterclaims are asserted. Delays may also result from difficulties in locating necessary defendants. Non-judicial foreclosures may
be subject to delays resulting from state laws mandating the recording of notice of default and notice of sale and, in some states,
notice to any party having an interest of record in the real property, including junior lienholders. Some states have adopted
“anti-deficiency” statutes that limit the ability of a lender to collect the full amount owed on a loan if the property sells at
foreclosure for less than the full amount owed. In addition, United States courts have traditionally imposed general equitable
principles to limit the remedies available to lenders in foreclosure actions that are perceived by the court as harsh or unfair. The
effect of these statutes and judicial principles may be to delay and/or reduce distributions in respect of the offered certificates.
See “Legal Aspects of Mortgage Loans” in the prospectus.
The Value of the Mortgage Loans May Be Affected By, Among Other Things, a Decline in Real Estate Values, Which May Result in
Losses on the Offered Certificates.
No assurance can be given that values of the mortgaged properties have remained or will remain at their levels on the dates
of origination of the related mortgage loans. If the residential real estate market should experience an overall decline in property
values so that the outstanding balances of the mortgage loans, and any secondary financing on the mortgaged properties, in the
mortgage pool become equal to or greater than the value of the mortgaged properties, the actual rates of delinquencies, foreclosures
and losses could be higher than those now generally experienced in the mortgage lending industry. In some areas of the United States,
real estate values have risen at a greater rate in recent years than in the past. In particular, mortgage loans with high principal
balances or high loan-to-value ratios will be affected by any decline in real estate values. Real estate values in any area of the
country may be affected by several factors, including population trends, mortgage interest rates, and the economic well-being of that
area. Any decrease in the value of the mortgage loans may result in the allocation of losses which are not covered by credit
enhancement to the offered certificates.
The Ratings on the Offered Certificates are Not a Recommendation to Buy, Sell or Hold the Offered Certificates and are
Subject to Withdrawal at any Time, Which May Affect the Liquidity or the Market Value of the Offered Certificates.
It is a condition to the issuance of the offered certificates that each class of offered certificates be rated in the
categories shown on pages S-2 and S-3 of this prospectus supplement. A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time. In general, ratings address credit risk and do not address the
likelihood of prepayments or basis risk shortfalls. No person is obligated to maintain the rating on any offered certificate, and,
accordingly, there can be no assurance that the ratings assigned to any offered certificate on the date on which the offered
certificates are initially issued will not be lowered or withdrawn by a rating agency at any time thereafter. In the event any rating
is revised or withdrawn, the liquidity or the market value of the related offered certificates may be adversely affected. See
“Ratings” in this prospectus supplement and “Ratings” in the prospectus.
The Mortgage Loans May Have Limited Recourse to the Related Borrower, Which May Result in Losses with Respect to These
Mortgage Loans.
Some or all of the mortgage loans included in the trust fund will be non-recourse loans or loans for which recourse may be
restricted or unenforceable. As to those mortgage loans, recourse in the event of mortgagor default will be limited to the specific
real property and other assets, if any, that were pledged to secure the mortgage loan. However, even with respect to those mortgage
loans that provide for recourse against the mortgagor and its assets generally, there can be no assurance that enforcement of the
recourse provisions will be practicable, or that the other assets of the mortgagor will be sufficient to permit a recovery in respect
of a defaulted mortgage loan in excess of the liquidation value of the related mortgaged property. Any risks associated with mortgage
loans with no or limited recourse may affect the yield to maturity of the offered certificates to the extent losses caused by these
risks which are not covered by credit enhancement are allocated to the offered certificates.
The Mortgage Loans May Have Environmental Risks, Which May Result in Increased Losses with Respect to These Mortgage Loans.
To the extent that the servicer or the trustee (in its capacity as successor servicer) for a mortgage loan acquires title to
any related mortgaged property on behalf of the trust, which is contaminated with or affected by hazardous wastes or hazardous
substances, these mortgage loans may incur additional losses. See “Servicing of Mortgage Loans-Realization Upon or Sale of Defaulted
Mortgage Loans” and “Legal Aspects of Mortgage Loans-Environmental Legislation” in the prospectus. To the extent these environmental
risks result in losses on the mortgage loans, the yield to maturity of the offered certificates, to the extent not covered by credit
enhancement, may be affected.
Violation of Various Federal, State and Local Laws May Result in Losses on the Mortgage Loans.
Applicable state and local laws generally regulate interest rates and other charges, require specific disclosure, and
require licensing of the originator. In addition, other state and local laws, public policy and general principles of equity relating
to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing
and collection of the mortgage loans. The mortgage loans are also subject to various federal laws.
Depending on the provisions of the applicable law and the specific facts and circumstances involved, violations of these
federal or state laws, policies and principles may limit the ability of the trust to collect all or part of the principal of or
interest on the mortgage loans, may entitle the borrower to a refund of amounts previously paid and, in addition, could subject the
trust to damages and administrative enforcement. See “Legal Aspects of Mortgage Loans” in the prospectus.
Under the anti-predatory lending laws of some states, the borrower is required to meet a net tangible benefits test in
connection with the origination of the related mortgage loan. This test may be highly subjective and open to interpretation. As a
result, a court may determine that a mortgage loan does not meet the test even if the originator reasonably believed that the test
was satisfied at the time of origination. Any determination by a court that the mortgage loan does not meet the test will result in a
violation of the state anti-predatory lending law, in which case the sponsor will be required to purchase that mortgage loan from the
trust.
On the closing date, the sponsor will represent that each mortgage loan at the time it was made complied in all material
respects with all applicable laws and regulations, including, without limitation, usury, equal credit opportunity, disclosure and
recording laws and all predatory lending laws; and each mortgage loan has been serviced in all material respects in accordance with
all applicable laws and regulations, including, without limitation, usury, equal credit opportunity, disclosure and recording laws
and all predatory lending laws and the terms of the related mortgage note, the mortgage and other loan documents. In the event of a
breach of this representation, the sponsor will be obligated to cure the breach or repurchase or replace the affected mortgage loan
in the manner described in the prospectus.
The Return on the Offered Certificates Could be Reduced by Shortfalls Due to The Application of the Servicemembers’ Civil
Relief Act and Similar State Laws.
The Servicemembers’ Civil Relief Act or the Relief Act and similar state or local laws provide relief to mortgagors who
enter active military service and to mortgagors in reserve status who are called to active military service after the origination of
their mortgage loans. The military operations by the United States in Iraq and Afghanistan has caused an increase in the number of
citizens in active military duty, including those citizens previously in reserve status. Under the Relief Act, the interest rate
applicable to a mortgage loan for which the related mortgagor is called to active military service will be reduced from the
percentage stated in the related mortgage note to 6.00%. This interest rate reduction and any reduction provided under similar state
or local laws will result in an interest shortfall because the servicer will not be able to collect the amount of interest which
otherwise would be payable with respect to such mortgage loan if the Relief Act or similar state law was not applicable thereto. This
shortfall will not be paid by the mortgagor on future due dates or advanced by the servicer and, therefore, will reduce the amount
available to pay interest to the certificateholders on subsequent distribution dates. We do not know how many mortgage loans in the
mortgage pool have been or may be affected by the application of the Relief Act or similar state law. In addition, the Relief Act
imposes limitations that would impair the ability of the servicer to foreclose on an affected single family loan during the
mortgagor’s period of active duty status, and, under some circumstances, during an additional three month period thereafter. Thus, in
the event that the Relief Act or similar legislation or regulations applies to any mortgage loan which goes into default, there may
be delays in payment and losses on the certificates in connection therewith. Any other interest shortfalls, deferrals or forgiveness
of payments on the mortgage loans resulting from similar legislation or regulations may result in delays in payments or losses to
holders of the offered certificates.
DESCRIPTION OF THE MORTGAGE LOANS
General
References to percentages of the mortgage loans unless otherwise noted are calculated based on the aggregate unpaid
principal balance of the mortgage loans as of the Cut-off Date.
All of the mortgage loans will be acquired by the Depositor on the date of issuance of the Offered Certificates from the
Sponsor, an affiliate of the Depositor and the underwriter, pursuant to the Mortgage Loan Purchase Agreement. The Sponsor acquired
the mortgage loans directly in privately negotiated transactions. See “Mortgage Loan Origination-General” in this prospectus
supplement.
We have provided below and in Schedule A to this prospectus supplement information with respect to the conventional mortgage
loans that we expect to include in the pool of mortgage loans in the trust fund as of the Closing Date. Prior to the closing date of
December 29, 2006, we may remove mortgage loans from the mortgage pool and we may substitute other mortgage loans for the mortgage
loans we remove. The Depositor believes that the information set forth in this prospectus supplement will be representative of the
characteristics of the mortgage pool as it will be constituted at the time the Certificates are issued, although the range of
mortgage rates and maturities and other characteristics of the mortgage loans may vary. The actual mortgage loans included in the
trust fund as of the Closing Date may vary from the mortgage loans as described in this prospectus supplement by up to plus or minus
5% as to any material characteristics described herein. If, as of the Closing Date, any material pool characteristic differs by 5%
or more from the description in this prospectus supplement, revised disclosure will be provided either in a supplement or in a
Current Report on Form 8-K.
The mortgage pool will consist of approximately 4,781 first lien adjustable-rate negative amortization mortgage loans
secured by one- to four-family residences and individual condominium units, having an aggregate unpaid principal balance as of the
Cut-off Date of approximately $1,872,852,623. The mortgage loans generally have original terms to maturity of not greater than 30
years, provided, however, approximately 39.13% of the group I mortgage loans have original terms to maturity of not greater than 40
years.
The mortgage pool has been divided into two primary loan groups, designated as Loan Group I and Loan Group II and are
referred to herein as the group I mortgage loans and the group II mortgage loans, respectively. Loan Group I and Loan Group II are
each referred to herein as a Loan Group.
Loan Group I will consist of 2,121 first lien adjustable-rate negative amortization mortgage loans secured by one- to
four-family residences and individual condominium units, having an aggregate unpaid principal balance as of the Cut-off Date of
approximately $849,583,065.
Loan Group II will consist of 2,660 first lien adjustable-rate negative amortization mortgage loans secured by one- to
four-family residences and individual condominium units, having an aggregate unpaid principal balance as of the Cut-off Date of
approximately $1,023,269,558.
The group I mortgage loans will include mortgage loans originated under the Bear Stearns Option ARM program and the group II
mortgage loans will include mortgage loans originated under the 5 Yr. Bear Stearns Secure Option ARM program, each as more fully
described below.
The mortgage loans will be selected for inclusion in the mortgage pool based on rating agency criteria, compliance with
representations and warranties, and conformity to criteria relating to the characterization of securities for tax, ERISA, SMMEA, Form
S-3 eligibility and other legal purposes.
The mortgage loans are being serviced as described below under “The Servicer-EMC” in this prospectus supplement. The
mortgage loans were originated generally in accordance with the guidelines described under “Mortgage Loan Origination-Underwriting
Guidelines” in this prospectus supplement.
All of the mortgage loans have scheduled monthly payments due on the Due Date.
Approximately 62.86% of the group I mortgage loans and approximately 64.76% of the group II mortgage loans are assumable
under some circumstances if, in the sole judgment of the servicer, the prospective purchaser of a mortgaged property is creditworthy
and the security for the mortgage loan is not impaired by the assumption. The remainder of the mortgage loans are subject to
customary due-on-sale provisions.
Any mortgage loan may be prepaid in full or in part at any time. However, certain of the mortgage loans provided at
origination for the payment by the borrower of a prepayment charge on voluntary prepayments typically made up to the first three
years from the date of execution of the related mortgage note. The holders of the Class I-XP-2 Certificates will be entitled to the
three-year "hard" prepayment charges, as described herein, received on the group I mortgage loans, and the holders of the Class
I-XP-1 Certificates will be entitled to all other prepayment charges received on the group I mortgage loans, to the extent not
retained by the Servicer. The holders of the Class II-XP Certificates will be entitled to the prepayment charges received on the
group II mortgage loans. No prepayment charges will be available for distribution on the other classes of Certificates. There can be
no assurance that the prepayment charges will have any effect on the prepayment performance of the mortgage loans.
Bear Stearns Option ARM Loans
The mortgage rates for the Bear Stearns Option ARM loans included in loan group I are fixed for the one or three month
period following their origination. After the initial fixed-rate period, the interest rate borne by each Bear Stearns Option ARM
mortgage loan will be adjusted monthly based on One-Year MTA, referred to in this prospectus supplement as an Index as described
below, computed in accordance with the related note, plus (or minus) the related gross margin and generally subject to rounding. The
Bear Stearns Option ARM mortgage loans generally contain a maximum lifetime mortgage rate and a minimum lifetime mortgage rate. As
of the Cut-off Date, approximately 14.86% of the group I mortgage loans are in their initial fixed rate period.
Each month, the mortgagor will be required to pay a minimum monthly payment as provided in the related mortgage note. The
minimum monthly payment will be an interest only payment in an amount equal to the full amount of accrued interest of the mortgage
loan calculated based on the outstanding principal balance of the mortgage loan and the interest rate then in effect. The minimum
monthly payment will adjust annually on a date specified in the related mortgage note, subject to the conditions that (i) the amount
of the monthly payment (with the exception of each fifth payment adjustment date or the final payment adjustment date) will not
increase or decrease by an amount that is more than 7.50% of the monthly payment prior to the adjustment, (ii) as of the fifth
payment adjustment date and on the same day every fifth year thereafter and on the last payment adjustment date, the monthly payment
will be recast without regard to the limitation in clause (i) above and (iii) if the unpaid principal balance exceeds a percentage
(either 110% or 115%, depending on the maximum negative amortization for that mortgage loan) of the original principal balance due to
deferred interest, the monthly payment will be recast without regard to the limitation in clause (i) to amortize fully the then
unpaid principal balance over its remaining term to maturity.
In addition to the minimum monthly payment option, under the Bear Stearns Option ARM program, the mortgagor is offered three
additional payment options to the extent they result in a larger payment than the minimum monthly payment. The payment options
include: (i) the Interest Only Payment, where the mortgagor would pay the full amount of accrued interest on the mortgage loan at the
current interest rate and the principal balance would not be decreased by any amount, (ii) the Fully Amortized Payment, where the
mortgagor would make payments in an amount that would pay interest and amortize fully the then unpaid principal balance over its
remaining term to maturity in substantially equal payments (assuming the interest rate was not adjusted prior to maturity) and (iii)
the 15 Year Amortized Payment, where the mortgagor would make payments in an amount that would pay interest and amortize fully the
then unpaid principal balance over a remaining term of fifteen (15) years in substantially equal payments (assuming the then current
interest rate remains in effect until maturity). If a payment option would not result in an amount greater than the minimum payment
due, the payment option will not be available to a mortgagor.
5 Yr. Bear Stearns Secure Option ARM Loans
The mortgage rates for the 5 Yr. Bear Stearns Secure Option ARM loans included in loan group II are fixed for the five year
period following the origination of the mortgage loan. After the initial fixed rate period, the interest rate borne by each 5 Yr.
Bear Stearns Secure Option ARM loan will be adjusted semi-annually based on Six-Month LIBOR or annually based on One-Year LIBOR, each
LIBOR index referred to in this prospectus supplement as an Index as described below, computed in accordance with the related note,
plus (or minus) the related gross margin and generally subject to rounding and to certain other limitations. The 5 Yr. Bear Stearns
Secure Option ARM loans will generally contain a maximum mortgage rate cap for the first adjustment date, a periodic adjustment cap
of 1% and a maximum lifetime mortgage rate. As of the Cut-off Date, all of the group II mortgage loans are in their initial fixed
rate period.
During the option period, the mortgagor will be required to pay a minimum monthly payment calculated on the basis of the
original loan amount and a note rate below the original note rate of up to 3%. The optional period will end and the minimum monthly
payment will adjust, at the earlier of (i) the end of the initial five year fixed period or (ii) the date upon which the unpaid
principal balance equals or exceeds a percentage (either 110% or 115%, depending on the maximum amount of negative amortization for
that mortgage loan) of the original principal balance of the mortgage loan due to deferred interest. Upon adjustment, the required
monthly payment will be an interest only payment in an amount equal to the full amount of accrued interest of the mortgage loan
calculated based on the outstanding principal balance of the mortgage loan and the interest rate then in effect. The required
monthly payment may change at the end of the initial fixed rate period and once every six months thereafter based on the semi-annual
adjustment of interest or once every twelve months thereafter based on the annual adjustment of interest. This interest-only period
will expire on the tenth anniversary of the loan, at which time the monthly payment will be adjusted semi-annually or annually (as
applicable) to pay interest and amortize fully the then unpaid principal balance over its remaining term to maturity (assuming the
then current interest rate is not adjusted prior to maturity). In addition to the minimum monthly payment option, under the 5 Yr.
Bear Stearns Secure Option ARM program, during the option period, the mortgagor is offered three additional payment options to the
extent they result in a larger payment than the minimum monthly payment. The payment options include the Interest Only Payment, the
Fully Amortized Payment and the 15 Year Amortized Payment, as offered pursuant to the Bear Stearns Option ARM program. As with the
Bear Stearns Option ARM program, if a payment option would not result in an amount greater than the minimum payment due, the payment
option will not be available to a mortgagor.
Billing and Payment Procedures
The mortgage loans require monthly payments to be made no later than either the 1st or 15th day of each month, with a grace
period as specified in the related mortgage note. Each month, the Servicer sends monthly invoices to borrowers which provide the
payment options available to each borrower. Borrowers may elect for monthly payments to be deducted automatically from deposit
accounts and may make payments by various means, including online transfers, phone payment although an additional fee may be charged
for these payment methods.
Prepayment Charges on the Mortgage Loans
Approximately 94.02% of the group I mortgage loans and approximately 69.65% of the group II mortgage loans provide for
payment by the mortgagor of a prepayment charge in connection with some prepayments. The amount of the prepayment charge is as
provided in the related mortgage note, and the prepayment charge will generally apply if, in any twelve-month period during the first
year, first three years or other period as provided in the related mortgage note from the date of origination of the mortgage loan,
the mortgagor prepays an aggregate amount exceeding 20% of the original principal balance of the mortgage loan or another amount
permitted by applicable law. The amount of the prepayment charge will, for the majority of the mortgage loans, be equal to 6 months’
advance interest calculated on the basis of the mortgage rate in effect at the time of the prepayment on the amount prepaid in excess
of 20% of the original principal balance of the mortgage loan, but it may be a lesser or greater amount as provided in the related
mortgage note. A prepayment charge may not apply with respect to a sale of the related mortgaged property, and in some circumstances,
such as illegality, may be unenforceable.
Generally, the Servicer shall not waive any prepayment charge unless: (i) the enforceability thereof shall have been limited
by bankruptcy, insolvency, moratorium, receivership and other similar laws relating to creditors’ rights generally, (ii) the
enforcement thereof is illegal, or any local, state or federal agency has threatened legal action if the prepayment penalty is
enforced, (iii) the mortgage debt has been accelerated in connection with a foreclosure or other involuntary payment or (iv) such
waiver is standard and customary in servicing similar mortgage loans and relates to a default or a reasonably foreseeable default and
would, in the reasonable judgment of the Servicer, maximize recovery of total proceeds taking into account the value of such
prepayment charge and the related mortgage loan. Accordingly, there can be no assurance that the prepayment charges will have any
effect on the prepayment performance of the mortgage loans.
Certain prepayment charges are classified as “hard” prepayment charges, meaning that the mortgagor has to cover the
prepayment charge regardless of the reason for prepayment, while others are classified as “soft,” meaning that the mortgagor has to
cover the prepayment charge unless the mortgagor has conveyed the related mortgaged property to a third-party. Approximately 94.02%
of the group I mortgage loans and approximately 69.25% the group II mortgage loans have hard prepayment charges and none of the group
I mortgage loans and approximately 0.40% of the group II mortgage loans have soft prepayment charges.
Negative Amortization
All of the mortgage loans have a negative amortization feature, under which accrued interest may be deferred and added to
the principal balance of the mortgage loan. In the case of the group I mortgage loans, negative amortization results from the fact
that while the interest rate on a negative amortization loan adjusts monthly, the amount of the monthly payment adjusts only on an
annual basis. In addition, the monthly payment may not fully amortize the principal balance of the loan on an annual adjustment date
if a payment cap applies.
In the case of the group II mortgage loans, negative amortization may result because during the initial fixed rate period,
monthly payments made by the mortgagor may be less than the interest accrued on such group II mortgage loan for the related payment
period.
In any given month, the mortgage loan may be subject to:
(1) reduced amortization if the monthly payment is sufficient to pay current accrued interest at the mortgage rate but
is not sufficient to reduce principal in accordance with a fully amortizing schedule;
(2) negative amortization, if current accrued interest is greater than the monthly payment, which would result in the
accrued interest not currently paid being treated as Deferred Interest; or
(3) accelerated amortization if the monthly payment is greater than the amount necessary to pay Current Interest and to
reduce principal in accordance with a fully amortizing schedule.
Deferred Interest may result in a final lump sum payment at maturity significantly greater than the monthly payment that
would otherwise be payable.
The total amount of Deferred Interest that may be added is limited by a provision in the mortgage note to the effect that
the principal amount of the mortgage loan may not exceed a percentage or periodic cap, multiplied by the principal amount of the loan
at origination.
Indices on the Mortgage LoansOne-Year MTA. The interest rate on the group I mortgage loans will adjust monthly based on One-Year MTA. One-Year MTA will
be a per annum rate equal to the twelve-month moving average monthly yield on United States Treasury Securities adjusted to a
constant maturity of one year as published by the Federal Reserve Board in the Federal Reserve Statistical Release “Selected Interest
Rates (H.15),” determined by averaging the monthly yields for the most recently available twelve months. The index figure used for
each interest rate adjustment date will be the most recent index figure available as of fifteen days before that date.
The following levels of One-Year MTA do not purport to be representative of future levels of One-Year MTA. No assurance can
be given as to the level of One-Year MTA on any adjustment date or during the life of any mortgage loan with an Index of One-Year MTA.
One-Year MTA
Date 2001 2002 2003 2004 2005 2006
January 1 5.999% 3.260% 1.935% 1.234% 2.022% 3.751%
February 1 5.871 3.056 1.858 1.229 2.171 3.888
March 1 5.711 2.912 1.747 1.225 2.347 4.011
April 1 5.530 2.786 1.646 1.238 2.504 4.143
May 1 5.318 2.668 1.548 1.288 2.633 4.282
June 1 5.102 2.553 1.449 1.381 2.737 4.432
July 1 4.897 2.414 1.379 1.463 2.865 4.563
August 1 4.671 2.272 1.342 1.522 3.019 4.664
September 1 4.395 2.180 1.302 1.595 3.163 4.758
October 1 4.088 2.123 1.268 1.677 3.326 4.827
November 1 3.763 2.066 1.256 1.773 3.478 4.883
December 1 3.481 2.002 1.244 1.887 3.618
Six-Month LIBOR. The interest rate on approximately 99.55% of the group II mortgage loans will adjust semi-annually based
on Six-Month LIBOR. Six-Month LIBOR will be a per annum rate equal to the average of interbank offered rates for six-month U.S.
dollar-denominated deposits in the London market based on quotations of major banks as published in The Wall Street Journal and are
most recently available as of the time specified in the related mortgage note.
The following does not purport to be representative of future levels of Six-Month LIBOR. No assurance can be given as to the
level of Six-Month LIBOR on any adjustment date or during the life of any mortgage loan with an Index of Six-Month LIBOR.
Six-Month LIBOR
Date 2001 2002 2003 2004 2005 2006
January 1..................... 6.20% 2.03% 1.38% 1.22% 2.78% 4.71%
February 1.................... 5.26 2.08 1.35 1.21 2.97 4.82
March 1....................... 4.91 2.04 1.34 1.17 3.19 5.26
April 1....................... 4.71 2.36 1.23 1.16 3.39 5.14
May 1......................... 4.30 2.12 1.29 1.38 3.41 5.22
June 1........................ 3.98 2.08 1.21 1.60 3.54 5.39
July 1........................ 3.91 1.95 1.12 1.89 3.73 5.59
August 1...................... 3.69 1.87 1.21 1.99 3.95 5.51
September 1................... 3.45 1.80 1.20 1.98 4.00 5.42
October 1..................... 2.52 1.71 1.14 2.20 4.27 5.37
November 1.................... 2.15 1.60 1.23 2.32 4.47 5.37
December 1.................... 2.03 1.47 1.27 2.63 4.63 5.35
One-Year LIBOR. The interest rate on approximately 0.45% of the group II mortgage loans will adjust annually based on
One-Year LIBOR. One-Year LIBOR will be a per annum rate equal to the average of interbank offered rates for one-year U.S.
dollar-denominated deposits in the London market based on quotations of major banks as published in The Wall Street Journal and are
most recently available as of the time specified in the related mortgage note.
STATIC POOL INFORMATION
The depositor will provide static pool information, material to this offering, with respect to the experience of the sponsor
in securitizing asset pools of a type similar to the Bear Stearns Option ARM loans included in Loan Group I at
http://www.bearstearns.com/transactions/sami_ii/bsmf2006-ar5/.
Information provided through the internet address above will not be deemed to be a part of this prospectus supplement or the
registration statement for the securities offered hereby if it relates to any prior securities pool formed prior to January 1, 2006
or vintage data related to periods before January 1, 2006, or with respect to the mortgage pool (if applicable) for any period before
January 1, 2006.
The 5 Yr. Bear Stearns Secure Option ARM mortgage loans included in Loan Group II are a new product in the mortgage
marketplace. The performance of these mortgage loans may be significantly different than mortgage loans that fully amortize or have
other negative amortization features that are more common to the mortgage marketplace. In particular, the depositor is not aware of
any performance history for these mortgage loans.
THE ISSUING ENTITY
Bear Stearns Mortgage Funding Trust 2006-AR5 is a common law trust formed under the laws of the State of New York pursuant
to the Agreement. The Agreement constitutes the “governing instrument” under the laws of the State of New York. After its formation,
Bear Stearns Mortgage Funding Trust 2006-AR5 will not engage in any activity other than (i) acquiring and holding the mortgage loans
and the other assets of the trust and proceeds therefrom, (ii) issuing the certificates, (iii) making payments on the certificates
and (iv) engaging in other activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental
thereto or connected therewith. The foregoing restrictions are contained in the Agreement. For a description of other provisions
relating to amending the Pooling and Servicing Agreement, please see “The Agreements- Amendment” in the prospectus.
The assets of Bear Stearns Mortgage Funding Trust 2006-AR5 will consist of the mortgage loans and certain related assets.
Bear Stearns Mortgage Funding Trust 2006-AR5’s fiscal year end is December 31.
THE DEPOSITOR
Structured Asset Mortgage Investments II Inc., referred to herein as the Depositor, was formed in the state of Delaware in
June 2003, and is a wholly-owned subsidiary of The Bear Stearns Companies Inc. The Depositor was organized for the sole purpose of
serving as a private secondary mortgage market conduit. The Depositor does not have, nor is it expected in the future to have, any
significant assets.
The Depositor has been serving as a private secondary mortgage market conduit for residential mortgage loans since 2003. As
of June 30, 2006, the Depositor has been involved in the issuance of securities backed by residential mortgage loans in excess of
approximately $115,594,490,169. In conjunction with the Sponsor’s acquisition of the mortgage loans, the Depositor will execute a
mortgage loan purchase agreement through which the loans will be transferred to itself. These loans are subsequently deposited in a
common law or statutory trust, described herein, which will then issue the Certificates.
After issuance and registration of the securities contemplated in this prospectus supplement and any supplement hereto, the
Depositor will have no duties or responsibilities with respect to the pool assets or the securities.
The Depositor’s principal executive offices are located at 383 Madison Avenue, New York, New York10179. Its telephone
number is (212) 272-2000.
THE SPONSOR
The sponsor, EMC Mortgage Corporation, referred to herein as EMC or the Sponsor, was incorporated in the State of Delaware
on September 26, 1990, as a wholly owned subsidiary corporation of The Bear Stearns Companies Inc., and is an affiliate of the
Depositor and the Underwriter. The Sponsor was established as a mortgage banking company to facilitate the purchase and servicing of
whole loan portfolios containing various levels of quality from “investment quality” to varying degrees of “non-investment quality”
up to and including real estate owned assets (“REO”). The Sponsor commenced operation in Texas on October 9, 1990.
The Sponsor maintains its principal office at 2780 Lake Vista Drive, Lewisville, Texas75067. Its telephone number is (214)
626-3800.
Since its inception in 1990, the Sponsor has purchased over $100 billion in residential whole loans and servicing rights,
which include the purchase of newly originated alternative A, jumbo (prime) and sub-prime loans. Loans are purchased on a bulk and
flow basis. The Sponsor is one of the United States’ largest purchasers of scratch and dent and sub-performing residential mortgages
and REO from various institutions, including banks, mortgage companies, thrifts and the U.S. government. Loans are generally
purchased with the ultimate strategy of securitization into an array of Bear Stearns’ securitizations based upon product type and
credit parameters, including those where the loan has become re-performing or cash-flowing.
Performing loans include first lien fixed rate and ARMs, as well as closed end fixed rate second liens and lines of credit
(“HELOCs”). Performing loans acquired by the Sponsor are subject to varying levels of due diligence prior to purchase. Portfolios
may be reviewed for credit, data integrity, appraisal valuation, documentation, as well as compliance with certain laws. Performing
loans purchased will have been originated pursuant to the Sponsor’s underwriting guidelines or the originator’s underwriting
guidelines that are acceptable to the Sponsor.
Subsequent to purchase by the Sponsor, performing loans are pooled together by product type and credit parameters and
structured into RMBS, with the assistance of Bear Stearns’ Financial Analytics and Structured Transactions group, for distribution
into the primary market.
The Sponsor has been securitizing residential mortgage loans since 1999. The following table describes size, composition
and growth of the Sponsor’s total portfolio of assets it has securitized as of the dates indicated.
December 31, 2003 December331, 2004 December 31, 2005September 30, 2006
Loan Type Number Total Portfolio of Loans Number Total Portfolio of Loans Number Total Portfolio of Loans Number Total Portfolio of Loans
Alt-A ARM 12,268 $ 3,779,319,393.84 44,821 $ 11,002,497,283.49 73,638 $ 19,087,119,981.75 54,448 $ 16,005,022,680.66
Alt-A Fixed 15,907 $ 3,638,653,583.24 15,344 $ 4,005,790,504.28 17,294 $ 3,781,150,218.13 10,480 $ 2,487,265,691.18
HELOC - $ - - $ - 9,309 $ 509,391,438.93 9,642 $ 671,297,933.89
Neg-Am ARM - $ - - $ - - $ - 36,469 $ 13,375,355,933.41
Prime ARM 16,279 $ 7,179,048,567.39 30,311 $ 11,852,710,960.78 27,384 $ 13,280,407,388.92 7,050 $ 3,481,137,519.89
Prime Fixed 2,388 $ 1,087,197,396.83 1,035 $ 509,991,605.86 3,526 $ 1,307,685,538.44 1,803 $ 484,927,212.35
Prime Short Duration ARM 7,089 $ 2,054,140,083.91 23,326 $ 7,033,626,375.35 38,819 $ 14,096,175,420.37 12,256 $ 5,085,828,335.31
Reperforming 2,800 $ 247,101,330.36 2,802 $ 311,862,677.46 2,877 $ 271,051,465.95 1,084 $ 115,127,847.83
Seconds - $ - 14,842 $ 659,832,093.32 114,899 $ 5,609,656,263.12 96,106 $ 5,363,659,738.17
SubPrime 29,303 $ 2,898,565,285.44 98,426 $ 13,051,338,552.19 101,156 $ 16,546,152,274.44 43,470 $ 7,619,506,951.48
Totals 86,034 $ 20,884,025,641.01 230,907 $ 48,427,650,052.73 388,902 $ 74,488,789,990.05 272,808 $ 54,689,129,844.17
With respect to some of the securitizations organized by the Sponsor, a "step-down" trigger has occurred with respect to the
loss and delinquency experience of the mortgage loans included in those securitizations, resulting in a sequential payment of
principal to the Offered Certificates, from the certificates with the highest credit rating to the one with the lowest rating. In
addition, with respect to one securitization organized by the Sponsor, a servicing trigger required by the related financial guaranty
insurer has occurred; however, the insurer has granted extensions enabling the normal servicing activities to continue.
The Sponsor has received a civil investigative demand (CID), from the Federal Trade Commission (FTC), seeking documents and
data relating to the Sponsor’s business and servicing practices. The CID was issued pursuant to a December 8, 2005 resolution of the
FTC authorizing non-public investigations of various unnamed subprime lenders, loan servicers and loan brokers to determine whether
there have been violations of certain consumer protections laws. The Sponsor is cooperating with the FTC’s inquiry.
THE SERVICERGeneral
EMC will act as the Servicer of the mortgage loans pursuant to the Pooling and Servicing Agreement, referred to herein as
the Agreement, dated as of the Cut-off Date, among the Depositor, EMC, in its capacity as Sponsor and Servicer and the Trustee.
Among other things, the Agreement will require that the Servicer accurately and fully report its borrower credit files to credit
repositories in a timely manner.
The information set forth in the following paragraphs with respect to the Servicer has been provided by the Servicer. None
of the Depositor, the Underwriter, the Trustee or any of their respective affiliates (other than the Servicer) have made or will make
any representation as to the accuracy or completeness of such information.
The ServicerEMC
For a description of EMC, please see "-The Sponsor" in this prospectus supplement. EMC will service the mortgage loans in
accordance with the description of the applicable servicing procedures contained in this section in the prospectus supplement. EMC
has been servicing residential mortgage loans since 1990.
The principal business of EMC since inception has been specializing in the acquisition, securitization, servicing and
disposition of mortgage loans. EMC's servicing portfolio consists primarily of two categories:
o "performing loans," or performing investment quality loans serviced for EMC's own account or the account of
Fannie Mae, Freddie Mac, private mortgage conduits and various institutional investors; and
o "non-performing loans," or non-investment grade, sub-performing loans, non-performing loans and REO properties
serviced for EMC's own account and for the account of investors in securitized performing and non-performing
collateral transactions.
EMC has been servicing residential mortgage loans since 1990. As of September 30, 2006, EMC was acting as servicer for
approximately 250 series of residential mortgage-backed securities and other mortgage loans with an outstanding principal balance of
approximately $66.8 billion. From year end 2004 to June 30, 2006, the loan count of EMC’s servicing portfolio grew by approximately
95.9%, and the unpaid principal balance of EMC’s servicing portfolio grew by approximately 132.5%.
There have been no appreciable changes to EMC’s servicing procedures outside of the normal changes warranted by regulatory
and product type changes in the portfolio.
The following table describes size, composition and growth of EMC’s total residential mortgage loan servicing portfolio as
of the dates indicated.
As of December 31, 2003 As of December 31, 2004
-----------------------------------------------------------------------------------------------------
Loan Type No. of Dollar Amount Percent Percent No. of Dollar Amount Percent Percent
by No. by by No. by
of Dollar of Dollar
Loans Loans Amount Loans Loans Amount
--------------------------------------------------------------------------------------
Alta-A Arm. 2,439 $653,967,868.93 1.40% 4.75% 19,498 $4,427,820,707.76 7.96% 15.94%
Alta-A Fixed 19,396 $3,651,416,056.11.14% 26.51% 25,539 $4,578,725,473.28 10.43% 16.48%
Prime Arm.. 7,978 $868,798,347.46 4.58% 6.31% 8,311 $1,045,610,015.30 3.39% 3.76%
Prime Fixed 16,377 $1,601,411,491.39.40% 11.63% 14,560 $1,573,271,574.42 5.95% 5.66%
Seconds.... 25,290 $690,059,168.8014.52% 5.01% 39,486 $1,381,961,155.08 16.13% 4.98%
Subprime... 76,166 $5,058,932,125.43.73% 36.73% 114,436 $13,706,363,249.7846.74% 49.34%
Other...... 26,523 $1,249,014,372.15.23% 9.07% 23,010 $1,063,682,459.11 9.40% 3.83%
--------------------------------------------------------------------------------------
Total...... 174,169 $13,773,599,431100.00% 100.00% $27,777,434,634.7100.00% 100.00%
244,840
------------------------------------------
As of December 31, 2005 As of September 30, 2006
-----------------------------------------------------------------------------------------------------
Loan Type No. of Dollar Amount Percent Percent No. of Dollar Amount Percent Percent
by No. by by No. by
of Dollar of Dollar
Loans Loans Amount Loans Loans Amount
--------------------------------------------------------------------------------------
Alta-A Arm. 57,510 $13,625,934,321.12.69% 23.00% 49,349 $12,808,629,726 10.53% 19.18%
Alta-A Fixed 17,680 $3,569,563,859.333.90% 6.03% 29,790 $5,963,962,332 6.36% 8.93%
Prime Arm.. 7,428 $1,010,068,678.921.64% 1.71% 6,580 $892,567,395 1.40% 1.34%
Prime Fixed 15,975 $2,140,487,565.903.52% 3.61% 15,228 $2,175,294,849 3.25% 3.26%
Seconds.... 155,510 $7,164,515,426.234.31% 12.10% 163,821 $7,935,367,230 34.96% 11.88%
Subprime... 142,890 $20,373,550,690.31.53% 34.40% 130,821 $18,898,856,705 27.91% 28.30%
Other...... 56,216 $11,347,144,055.12.40% 19.16% 73,059 $18,107,974,659 15.59% 27.11%
--------------------------------------------------------------------------------------
Total...... 453,209 $59,231,264,598.100.00% 100.00% 468,648 66,782,652,895 100.00% 100.00%
---------------------------------------------------------------------------------------------------------------------------------------
MORTGAGE LOAN ORIGINATION
General
A portion of the Bear Stearns Option ARM mortgage loans included in Loan Group I were originated or acquired by the Sponsor
from various sellers and were originated generally in accordance with the underwriting guidelines established by the Sponsor as set
forth below. A portion of the Bear Stearns Option ARM mortgage loans included in Loan Group II were originated or acquired by the
Sponsor from various sellers and were originated generally in accordance with the underwriting guidelines established by the Sponsor
as set forth below. The remainder of the Bear Stearns Option ARM mortgage loans included in Loan Group I and Loan Group II were
originated by Bear Stearns Residential Mortgage Corporation, or BSRM, an affiliate of the Sponsor, the Depositor and the
Underwriter.
Underwriting Guidelines
EMC Underwriting Guidelines
The following is a description of the underwriting policies customarily employed by EMC with respect to the residential
mortgage loans that EMC originated during the period of origination of the mortgage loans. EMC has represented to the depositor that
the mortgage loans were originated generally in accordance with such policies.
The mortgage loans originated by EMC, or EMC mortgage loans, are “conventional non-conforming mortgage loans” (i.e., loans
that are not insured by the Federal Housing Authority, or FHA, or partially guaranteed by the Veterans Administration or which do not
qualify for sale to Fannie Mae or Freddie Mac) and are secured by first liens on one-to four-family residential properties. These
loans typically differ from those underwritten to the guidelines established by Fannie Mae and Freddie Mac primarily with respect to
the original principal balances, loan-to-value ratios, borrower income, required documentation, interest rates, borrower occupancy of
the mortgaged property, property types and/or mortgage loans with loan-to-value ratios over 80% that do not have primary mortgage
insurance. The EMC mortgage loans have either been originated or purchased by an originator and were generally underwritten in
accordance with the standards described herein. Exceptions to the underwriting guidelines are permitted when the seller's
performance supports such action and the variance request is approved by credit management.
Such underwriting standards are applied to evaluate the prospective borrower’s credit standing and repayment ability and the
value and adequacy of the mortgaged property as collateral. These standards are applied in accordance with the applicable federal and
state laws and regulations. Exceptions to the underwriting standards are permitted where compensating factors are present and are
managed through a formal exception process.
Generally, each mortgagor will have been required to complete an application designed to provide to the lender pertinent
credit information concerning the mortgagor. The mortgagor will have given information with respect to its assets, liabilities,
income (except as described below), credit history, employment history and personal information, and will have furnished the lender
with authorization to obtain a credit report which summarizes the mortgagor’s credit history. In the case of investment properties
and two- to four-unit dwellings, income derived from the mortgaged property may have been considered for underwriting purposes, in
addition to the income of the mortgagor from other sources. With respect to second homes or vacation properties, no income derived
from the property will have been considered for underwriting purposes.
With respect to purchase money or rate/term refinance loans secured by single family residences the following loan-to-value
ratios and original principal balances are allowed: loan-to-value ratios at origination of up to 90% for EMC mortgage loans with
original principal balances of up to $650,000 if the loan is secured by the borrower's primary residence, up to 90% for EMC mortgage
loans secured by one-to-two family, primary residences with original balances up to $1,000,000, 90% for EMC mortgage loans secured by
single family second homes with original principal balances of up to $650,000, up to 80% for EMC mortgage loans secured by single
family second homes with original principal balances of up to $1,000,000 and up to 70% for mortgage loans secured by one-to-two
family, primary residences and single family second homes with original principal balances of up to $3,000,000. For cash out
refinance loans, the maximum loan-to-value ratio generally is 90% and the maximum “cash out” amount permitted is based in part on the
original amount of the related EMC mortgage loan.
With respect to mortgage loans secured by investment properties, loan-to-value ratios at origination of up to 90% for
mortgage loans with original principal balances up to $500,000 are permitted. Mortgage loans secured by investment properties may
have higher original principal balances if they have lower loan-to-value ratios at origination. For cash out refinance loans, the
maximum loan-to-value ratio generally is 90% and the maximum “cash out” amount permitted is based in part on the original amount of
the related mortgage loan.
All other EMC mortgage loans included in the mortgage pool with a loan-to-value ratio at origination exceeding 80%, have
primary mortgage insurance policies insuring a portion of the balance of the EMC Loan at least equal to the product of the original
principal balance of the mortgage loan and a fraction, the numerator of which is the excess of the original principal balance of such
mortgage loan over 75% of the lesser of the appraised value and the selling price of the related mortgaged property and the
denominator of which is the original principal balance of the related mortgage loan, plus accrued interest thereon and related
foreclosure expenses is generally required. No such primary mortgage insurance policy will be required with respect to any such EMC
Loan after the date on which the related loan-to-value ratio decreases to 80% or less or, based upon new appraisal, the principal
balance of such mortgage loan represents 80% or less of the new appraised value. All of the insurers that have issued primary
mortgage insurance policies with respect to the EMC mortgage loans meet Fannie Mae’s or Freddie Mac’s standard or are acceptable to
the Rating Agencies.
In determining whether a prospective borrower has sufficient monthly income available (i) to meet the borrower’s monthly
obligation on their proposed mortgage loan and (ii) to meet the monthly housing expenses and other financial obligations on the
proposed mortgage loan, each lender generally considers, when required by the applicable documentation program, the ratio of such
amounts to the proposed borrower’s acceptable stable monthly gross income. Such ratios vary depending on a number of underwriting
criteria, including loan-to-value ratios, and are determined on a loan-by-loan basis.
Each lender also examines a prospective borrower’s credit report. Generally, each credit report provides a credit score for
the borrower. Credit scores generally range from 350 to 840 and are available from three major credit bureaus: Experian (formerly TRW
Information Systems and Services), Equifax and Trans Union. If three credit scores are obtained, the originator applies the middle
score of the primary wage earner. If a primary wage earner cannot be determined because of the documentation type, the lowest middle
score of all borrowers is used. Credit scores are empirically derived from historical credit bureau data and represent a numerical
weighing of a borrower’s credit characteristics over a two-year period. A credit score is generated through the statistical analysis
of a number of credit-related characteristics or variables. Common characteristics include the number of credit lines (trade lines),
payment history, past delinquencies, severity of delinquencies, current levels of indebtedness, types of credit and length of credit
history. Attributes are the specific values of each characteristic. A scorecard (the model) is created with weights or points
assigned to each attribute. An individual loan applicant’s credit score is derived by adding together the attribute weights for that
applicant.
The mortgage loans have been underwritten under one of the following documentation programs: full/alternative documentation
(“Full/Alt Doc”), stated income/verified asset documentation (“SIVA”), no ratio documentation (“No Ratio”), and stated income/stated
assets (“SISA”) documentation.
Under a stated income/verified asset documentation program, more emphasis is placed on the value and adequacy of the
mortgaged property as collateral, credit history and other assets of the borrower than on a verified income of the borrower. Although
the income is not verified, the originators obtain a telephonic verification of the borrower’s employment without reference to
income. Borrower’s assets are verified.
Under the no ratio documentation program the borrower’s income is not stated and no ratios are calculated. Although the
income is not stated nor verified, lenders obtain a telephonic verification of the borrower’s employment without reference to income.
Borrower’s assets are verified.
Under the stated income/stated asset documentation program, the borrower’s income and assets are stated but not verified.
The underwriting of such mortgage loans may be based entirely on the adequacy of the mortgaged property as collateral and on the
credit history of the borrower.
Under the no income/no asset documentation program, the borrower’s income and assets are neither stated nor verified. The
underwriting of such mortgage loans may be based entirely on the adequacy of the mortgaged property as collateral and on the credit
history of the borrower
Each mortgaged property relating to an EMC mortgage loan has been appraised by a qualified independent appraiser who is
approved by each lender. All appraisals are required to conform to the Uniform Standards of Professional Appraisal Practice adopted
by the Appraisal Standard Board of the Appraisal Foundation. Each appraisal must meet the requirements of Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac require, among other things, that the appraiser, or its agent on its behalf, personally inspect the
property inside and out, verify whether the property was in good condition and verify that construction, if new, had been
substantially completed. The appraisal generally will have been based on prices obtained on recent sales of comparable properties,
determined in accordance with Fannie Mae and Freddie Mac guidelines. In certain cases an analysis based on income generated from the
property or a replacement cost analysis based on the current cost of constructing or purchasing a similar property may be used.
BSRM
The following is a description of BSRM and the underwriting policies customarily employed by BSRM with respect to the
residential mortgage loans that BSRM originated during the period of origination of the mortgage loans. BSRM has represented to the
depositor that the mortgage loans were originated generally in accordance with such policies.
BSRM is a Delaware corporation and a wholly-owned subsidiary of The Bear Stearns Companies, Inc., a publicly traded
financial services firm (under “BSC” on the NYSE), with an executive and administrative office located in Scottsdale, Arizona. BSRM
is a full-service residential mortgage banking company that is licensed to originate loans throughout the United States. BSRM
originates single-family (1-4 unit) residential mortgage loans for both prime and sub-prime credit borrowers and offers a full range
of loan products from 30 yr fixed rate to hybrid and short-term adjustable rate mortgages.
BSRM has been in the residential mortgage banking business since March 2005. For the first five months ending May 31, 2006,
BSRM has originated approximately $1.3 billion in mortgage loans, all of which are secured by one- to four-family residential real
estate properties.
The following table describes the size and composition of BSRM’s total residential mortgage loan production since it’s
inception through May, 2006.
---------------------------- ------------------------- -------------------------- -------------------------- ------------------------------ --------------------------- ----------------------------
2nd Qtr. 2005 3rd Qtr. 2005 4th Qtr. 2005 1st Qtr. 2006 Apr-May 2006 Total
Loan Type ------------------------- -------------------------- -------------------------- ------------------------------ --------------------------- ----------------------------
Loan Amount Units Loan Amount Units Loan Amount Units Loan Amount Units Loan Amount Units Loan Amount Units
---------------------------- -------------- --------- --------------- --------- ---------------- -------- -------------------- -------- ---------------- --------- ----------------- ---------
Alt-A ARM $38,345,211 142 $89,814,104 322 $173,110,864 586 $ 256,139,998 826 $189,521,195 624 $746,931,373 2,500
-------------- --------- --------------- --------- ---------------- -------- -------------------- -------- ---------------- --------- ----------------- ---------
MTA Option ARM $0 0 $3,512,827 7 $83,586,961 224 $ 149,955,670 409 $147,389,081 397 $384,444,539 1,037
-------------- --------- --------------- --------- ---------------- -------- -------------------- -------- ---------------- --------- ----------------- ---------
5 Yr. Option ARM $0 0 $0 0 $0 0 $ 4,367,514 14 $253,217,629 772 $257,585,143 786
-------------- --------- --------------- --------- ---------------- -------- -------------------- -------- ---------------- --------- ----------------- ---------
Alt-A Fixed $9,970,639 44 $45,157,203 165 $65,596,814 239 $ 57,511,280 254 $24,213,642 101 $202,449,578 803
-------------- --------- --------------- --------- ---------------- -------- -------------------- -------- ---------------- --------- ----------------- ---------
Alt-A Second Lien $5,769,960 106 $16,208,131 276 $48,277,170 472 $ 74,542,985 1,052 $105,170,955 1,445 $249,969,201 3,351
-------------- --------- --------------- --------- ---------------- -------- -------------------- -------- ---------------- --------- ----------------- ---------
Sub-Prime $2,027,417 10 $2,977,950 21 $47,311,725 434 $ 44,504,754 254 $ 17,158,346 103 $113,980,192 822
-------------- --------- --------------- --------- ---------------- -------- -------------------- -------- ---------------- --------- ----------------- ---------
TOTAL $56,113,227 302 $157,670,215 791 $417,883,534 1,955 $587,022,201 2,809 $736,670,848 3,442 $1,955,360,025 9,299
---------------------------- -------------- --------- --------------- --------- ---------------- -------- -------------------- -------- ---------------- --------- ----------------- ---------
BSRM Underwriting Guidelines
The BSRM Alt-A Underwriting Guidelines are intended to ensure that (i) the loan terms relate to the borrower’s willingness
and ability to repay and (ii) the value and marketability of the property are acceptable. Both the Bear Stearns Option ARM loans
originated by BSRM and the 5 Yr. Bear Stearns Secure Option ARM loans are originated pursuant to the BSRM Alt-A Underwriting
Guidelines.
The BSRM Alt-A Underwriting Guidelines are less stringent than the standards generally acceptable to Fannie Mae and Freddie
Mac with regard to: (i) documentation parameters and (ii) debt to income ratios. The BSRM Underwriting Guidelines establish the
maximum permitted loan-to-value ratio and maximum loan amount for each loan type based upon prior payment history, credit score,
occupancy type and other risk factors. The maximum loan amount allowable for the Alt A program is $3,000,000.
All of the Alt-A mortgage loans originated by BSRM are based on loan application packages submitted through the wholesale or
correspondent channel. Based on the documentation type each loan application package has an application completed by the prospective
borrower that includes information with respect to the applicant’s assets, liabilities, income, credit and employment history, as
well as certain other personal information. During the underwriting process, BSRM calculates and verifies the loan applicant’s
sources of income (except documentation types, which do not require such information to be stated or independently verified), reviews
the credit history of the applicant, calculates the debt-to-income ratio to determine the applicant’s ability to repay the loan, and
reviews the mortgaged property for compliance with the BSRM Underwriting Guidelines. The mortgage loan file also contains a credit
report on each applicant from an approved credit reporting company. Credit history is measured on credit depth, number of
obligations, delinquency patterns and demonstrated intent to repay debts, which can be used to underwrite any file.
The maximum allowable loan-to-value ratio varies based upon the income documentation, property type, creditworthiness, debt
service-to-income ratio of the applicant and the overall risks associated with the loan decision. BSRM may provide secondary
financing to a borrower contemporaneously with the origination of a mortgage loan, subject to a maximum combined loan-to-value ratio
of 100%. BSRM’s Underwriting Guidelines do not prohibit or otherwise restrict a borrower from obtaining secondary financing from
lenders other than BSRM, whether at origination of the mortgage loan or thereafter.
With respect to purchase money or rate/term refinance loans secured by single family residences the following loan-to-value
ratios and original principal balances are allowed: loan-to-value ratios at origination of up to 95% for BSRM mortgage loans with
original principal balances of up to $500,000 if the loan is secured by the borrower's primary residence, up to 90% for BSRM mortgage
loans secured by one-to-two family, primary residences with original balances up to $650,000, up to 80% for BSRM mortgage loans
secured by one-to-two family, primary residences with original balances up to $1,000,000, up to 75% for mortgage loans secured by
one-to-two family, primary residences with original principal balances of up to $3,000,000, up to 90% for BSRM mortgage loans secured
by single family second homes with original principal balances of up to $500,000, up to 80% for BSRM mortgage loans secured by single
family second homes with original principal balances of up to $1,000,000, up to 70% for mortgage loans secured by single family
second homes with original principal balances of up to $1,500,000 and up to 65% for mortgage loans secured by single family second
homes with original principal balances of up to $2,000,000. For cash out refinance loans, the maximum loan-to-value ratio generally
is 90% and the maximum “cash out” amount permitted is based in part on the original amount of the related BSRM mortgage loan.
With respect to mortgage loans secured by investment properties, loan-to-value ratios at origination of up to 90% for
mortgage loans with original principal balances up to $650,000 are permitted. Mortgage loans secured by investment properties may
have higher original principal balances if they have lower loan-to-value ratios at origination. For cash out refinance loans, the
maximum loan-to-value ratio generally is 90% and the maximum “cash out” amount permitted is based in part on the original amount of
the related mortgage loan.
Exceptions to the BSRM Underwriting Guidelines are considered with reasonable compensating factors on a case-by-case basis
and at the sole discretion of senior management. When exception loans are reviewed, all loan elements are examined as a whole to
determine the level of risk associated with approving the loan including appraisal, credit report, employment, compensating factors
and borrower’s willingness and ability to repay the loan. Compensating factors may include, but are not limited to, validated or
sourced/seasoned liquid reserves in excess of the program requirements, borrower’s demonstrated ability to accumulate savings or
devote a greater portion of income to housing expense and borrowers’ potential for increased earnings based on education, job
training, etc. Loan characteristics such as refinance transactions where borrowers are reducing mortgage payments and lowering debt
ratios may become compensating factors as well.
Documentation Types
The BSRM mortgage loans were originated in accordance with guidelines established by BSRM with one of the following
documentation types: “Full Documentation”; “Limited Documentation”; “Lite Documentation”; “Stated Income/Verified Assets”; “No
Ratio/Verified Assets”; “Stated Income/Stated Assets”; “No Income/No Assets (NINA)”; “No Doc”; and “No Doc with Assets”. The nature
of the information that a borrower is required to disclose and whether the information is verified depends, in part, on the
documentation type used in the origination process.
Full Documentation: The Full Documentation type is based upon current year to date income documentation as well as the
previous two year’s income documentation (i.e., tax returns and/or W-2 forms) and either one recent pay-stub with current year income
on pay stub or two recent pay-stubs within 30 days of closing if year to date income is not provided on pay-stub) or bank statements
for the previous 24 months. Self-employed borrowers must be self-employed in the same business or have received 1099 income in the
same job for the past two years. Borrowers self-employed for less than two years (but at least one year) are considered on a
case-by-case basis subject to a two-year history of previous successful employment in the same occupation or related field. Assets
must be documented and independently verified by means of a written verification of deposit (VOD) with two (2) months’ average
balance; most recent bank statements, stocks or securities statements covering a two-(2) month period. The borrower must demonstrate
that they have sufficient reserves (sourced and seasoned) of greater than or equal to three months principal, interest, taxes and
insurance. A verbal verification of employment is also completed within 10 days of funding the loan.
Limited Documentation: The Limited Documentation type is based on the recent twelve (12) months of consecutive bank
statements. Self-employed borrowers must be self-employed in the same business or have received 1099 income in the same job for the
past two years. Assets must be documented and independently verified by means of a written verification of deposit (VOD) with two
(2) months’ average balance; most recent bank statements, stocks or securities statements covering a two-(2) month period. The
borrower must demonstrate that they have sufficient reserves (sourced and seasoned) of greater than or equal to three months
principal, interest, taxes and insurance. A verbal verification of employment is also completed within 10 days of funding the loan.
Lite Documentation: The Lite Documentation type is based on the recent six (6) months of consecutive bank statements.
Self-employed borrowers must be self-employed in the same business or have received 1099 income in the same job for the past two
years. Assets must be documented and independently verified by means of a written verification of deposit (VOD) with two (2) months’
average balance; most recent bank statements, stocks or securities statements covering a two-(2) month period. The borrower must
demonstrate that they have sufficient reserves (sourced and seasoned) of greater than or equal to three months principal, interest,
taxes and insurance. A verbal verification of employment is also completed within 10 days of funding the loan.
Stated Income: The Stated Income documentation type requires the applicant’s employment and income sources covering the past
two (2) year period to be stated on the application. Self-employed borrowers must be self-employed in the same business or have
received 1099 income in the same job for the past two years. The applicant’s income as stated must be reasonable for the related
occupation, borrowers’ credit profile and stated asset, in the loan underwriter’s discretion. However, the applicant’s income as
stated on the application is not independently verified. Assets must be documented and independently verified by means of a written
verification of deposit (VOD) with two (2) months’ average balance; most recent bank statements, stocks or securities statements
covering a two-(2) month period. The borrower must demonstrate that they have sufficient reserves (sourced and seasoned) of greater
than or equal to three months principal, interest, taxes and insurance. A verbal verification of employment is also completed within
10 days of funding the loan.
No Ratio: The No Ratio documentation type requires the applicant’s employment sources covering the past two (2) year period
to be stated on the application. Self-employed borrowers must be self-employed in the same business or have received 1099 income in
the same job for the past two years. The applicant’s employment is independently verified through a verbal verification of
employment, however the income is not stated on the application. Assets must be documented and independently verified by means of a
written verification of deposit (VOD) with two (2) months’ average balance; most recent bank statements, stocks or securities
statements covering a two-(2) month period. The borrower must demonstrate that they have sufficient reserves (sourced and seasoned)
of greater than or equal to three months principal, interest, taxes and insurance.
Stated Income/Stated Assets: The Stated Income/Stated Assets documentation type requires the applicant’s employment and
income sources covering the past two (2) year period to be stated on the application. Self-employed borrowers must be self-employed
in the same business or have received 1099 income in the same job for the past two years. The applicant’s income as stated must be
reasonable for the related occupation, borrowers’ credit profile and stated asset, in the loan underwriter’s discretion. However, the
applicant’s income as stated on the application is not independently verified. Assets as stated on the application are not
independently verified. The borrower must demonstrate that they have sufficient reserves (sourced and seasoned) of greater than or
equal to three months principal, interest, taxes and insurance. A verbal verification of employment is also completed within 10 days
of funding the loan.
No Income/No Assets (NINA): The NINA documentation type requires the applicant’s employment sources covering the past two
(2) year period to be stated on the application. Self-employed borrowers must be self-employed in the same business or have received
1099 income in the same job for the past two years. The applicant’s employment is independently verified through a verbal
verification of employment; however the income and the assets are not stated on the application. Borrower’s ability to repay the
loan is based upon past credit history and FICO score.
No Doc: The No Doc documentation type does not require the applicant’s income, employment sources or assets to be stated
on the application. Borrower’s ability to repay the loan is based upon past credit history and FICO score.
No Doc with Assets: The No Doc with Assets documentation type does not require the applicant’s income, employment sources
to be stated on the application. Assets must be documented and independently verified by means of a written verification of deposit
(VOD) with two (2) months’ average balance; most recent bank statements, stocks or securities statements covering a two-(2) month
period. The borrower must demonstrate that they have sufficient reserves (sourced and seasoned) of greater than or equal to three
months principal, interest, taxes and insurance. Borrower’s ability to repay the loan is based upon past credit history; FICO score
and verified assets.
Credit Profile
The mortgage loan file also contains a credit report on each applicant from an approved credit reporting company. Credit
history is measured on credit depth, number of obligations, delinquency patterns and demonstrated intent to repay reports, which can
be used to underwrite any file. A tri-merged credit report is required for all loan submissions. The report must be from the three
nationally recognized credit repositories and show all credit trades regardless of negative or positive status.
The credit profile review must encompass the last twenty-four months. If the borrower has lived in his or her current
residence for less than twelve months, credit must be searched using both the current and former address(es). In assessing a
prospective borrower’s creditworthiness, BSRM may use FICO Credit Scores. “FICO Credit Scores” are statistical credit scores designed
to assess a borrower's creditworthiness and likelihood to default on a consumer obligation over a two-year period based on a
borrower's credit history. FICO Credit Scores were not developed to predict the likelihood of default on mortgage loans and,
accordingly, may not be indicative of the ability of a borrower to repay its mortgage loan. FICO Credit Scores range from
approximately 250 to approximately 900, with higher scores indicating an individual with a more favorable credit history compared to
an individual with a lower score. Underwriters arrive at each borrower’s credit score by selecting the middle score of three credit
scores or the lower of two scores, when only two scores are reported. The representative score for the loan is determined by the
score of the primary wage-earner or the lowest-scoring borrower in the case in which the income is not verified or documented. The
minimum representative score for each loan underwritten to BSRM’s Alt-A underwriting guidelines is 620.
Property Requirements
The BSRM Underwriting Guidelines are applied in accordance with a procedure that complies with applicable federal and state
laws and regulations and requires (i) an appraisal of the mortgaged property that conforms to the Uniform Standards of Professional
Appraisal Practice and are generally on forms similar to those acceptable to Fannie Mae and Freddie Mac and (ii) a review of such
appraisal, which review is conducted by a BSRM underwriter.
Properties that secure BSRM mortgage loans have a valuation appraisal performed by a qualified and licensed appraiser. All
appraisers providing services must comply with the respective state and federal laws. An appraisal must not be more than 120 days old
at the Closing Date or a re-certification of value is required. The original appraiser must perform re-certification. As an
alternative, a field review with comparable properties that sold in the last three months and support the value is also acceptable,
in lieu of the re-certification of value. After 180 days, a new appraisal is required regardless of whether an existing or new
construction property. All combined loan amounts greater than $650,000 and less than or equal to $1,000,000 require two original
appraisals. The second appraisal must be from a BSRM nationally approved appraiser. The value used to determine the LTV/CLTV will be
the lesser of the two values. BSRM combined loans amounts greater that $1,500,000 in the state of California will require two
appraisals; the second appraisal must be from a BSRM nationally approved appraiser. The value used to determine the LTV/CLTV will be
the lesser of the two values.
Each appraisal is reviewed by a representative of BSRM, who has the right to request a second appraisal, additional
information or explanations, lower the approved loan amount, reduce the maximum allowable loan-to-value ratio or deny the loan based
on the appraisal.
Generally, each mortgage with an LTV at origination of greater than 80% is covered by a primary mortgage insurance policy
issued by a mortgage insurance company acceptable to Fannie Mae or Freddie Mac. The policy provides coverage in the amount equal to
a specified percentage multiplied by the sum of the remaining principal balance of the related mortgage loan, the accrued interest on
it and the related foreclosure expenses. The specified coverage percentage is, generally, 12% for LTV’s between 80.01% and 85.00%,
25% for LTV’s between 85.01% and 90% and 30% for LTV’s between 90.01% and 95%. However, under certain circumstances, the specified
coverage levels for these mortgage loans may vary from the foregoing. No primary mortgage insurance policy will be required with
respect to any mortgage loan if maintaining the policy is prohibited by applicable law, after the date on which the related LTV is
80% or less, or where, based on a new appraisal, the principal balance of the mortgage loan represents 80% or less of the new
appraised value.
BSRM requires title insurance on all of its mortgage loans secured by first liens on real property. In addition, BSRM
requires that fire and extended coverage casualty insurance be maintained on the mortgaged property in an amount at least equal to
the principal balance of the related single-family mortgage loan or the replacement cost of the mortgaged property, whichever is
less. BSRM also requires flood insurance to be maintained on the mortgaged property if and to the extent such insurance is required
by applicable law or regulation.
DESCRIPTION OF THE CERTIFICATES
The trust will issue the certificates pursuant to the Agreement. The Certificates consist of the classes of offered
certificates reflected on pages S-2 and S-3 of this prospectus supplement, which we refer to collectively as the Offered
Certificates, and the Class II-B-5, Class I-XP-1, Class I-XP-2, Class II-XP, Class I-B-IO, Class II-B-IO and the Residual
Certificates. The Class II-B-5, Class I-XP-1, Class I-XP-2, Class II-XP, Class I-B-IO, Class II-B-IO and the Residual Certificates
are not offered publicly and are collectively referred to herein as the Non-Offered Certificates. The various classes of Class A
Certificates are also referred to as the Senior Certificates; and the various classes of Class B Certificates are referred to herein
as the Class B Certificates, respectively or the Subordinate Certificates.
Holders of the Class I-B-IO, Class II-B-IO and the Residual Certificates will be entitled to receive any residual cash flow
from the mortgage pool, which is not expected to be significant. A holder of a Class I-B-IO, Class II-B-IO or a Residual Certificate
will not have a right to alter the structure of the transaction. The initial owner of the Class I-B-IO, the Class II-B-IO and the
Residual Certificates is expected to be Bear, Stearns Securities Corp.
General
The certificates issued by Bear Stearns Mortgage Funding Trust 2006-AR5 will consist of the Offered Certificates and the
Non-Offered Certificates. Only the Offered Certificates are offered by this prospectus supplement.
The Certificates represent in the aggregate the entire beneficial ownership interest in a trust fund consisting of the
following:
o all of the Depositor’s right, title and interest in and to the mortgage loans, the related mortgage notes, mortgages and
other related documents, including all interest and principal due with respect to the mortgage loans after the Cut-off
Date, but excluding any payments of principal or interest due on or prior to the Cut-off Date,
o any mortgaged properties acquired on behalf of certificateholders by foreclosure or by deed in lieu of foreclosure and
any revenues received thereon,
o the rights of the Trustee under all insurance policies required to be maintained pursuant to the Agreement,
o the rights of the Depositor under the Mortgage Loan Purchase Agreement and any subsequent transfer instruments between
the Depositor and the Sponsor,
o the rights of the Depositor with respect to the Cap Contracts,
o such assets relating to the mortgage loans as from time to time may be held in the Custodial Account, the Distribution
Account and the Final Maturity Reserve Account, and
o any proceeds of the foregoing.
The aggregate principal balance of the mortgage loans as of the Cut-off Date, is approximately $1,872,852,623, subject to a
permitted variance as described in this prospectus supplement under “Additional Information.”
Each class of the Certificates will have the approximate initial Current Principal Amount or Notional Amount as set forth on
pages S-2 and S-3 hereof and will have the pass-through rate determined as provided under “Summary of Prospectus
Supplement-Description of the Certificates-Pass Through Rates” in this prospectus supplement. The Residual Certificates also
represent the right to receive additional distributions in respect of the trust fund on any distribution date after all required
payments of principal and interest have been made on such date in respect of the other classes of Certificates in the related Loan
Group, although it is not anticipated that funds will be available for any additional distribution. The Class I-XP-1, Class I-XP-2,
Class I-B-IO, Class R, Class R-X, Class II-B-5, Class II-XP and Class II-B-IO Certificates are not being offered by this prospectus
supplement.
For each distribution date, the Class I-X Certificates will accrue interest on a Notional Amount. The Class I-X
Certificates will have a notional amount equal to the aggregate outstanding principal balance of such mortgage loans having "hard"
prepayment charges for a term of three years from origination.
The initial Notional Amount of the Class I-X Certificates will be approximately $626,636,221.
The Offered Certificates (other than the Residual Certificates) will be issued, maintained and transferred on the book-entry
records of DTC, Clearstream, Luxembourg and the Euroclear System and each of their participants in minimum denominations of $25,000
and integral multiples of $1.00 in excess thereof. One certificate of each of these classes may be issued in a different principal
amount to accommodate the remainder of the initial principal amount of the certificates of such class. The Offered Certificates will
be issued as global securities. See Annex II to this prospectus supplement and “Description of the Securities” in the prospectus.
The Book-Entry Certificates will initially be represented by one or more Global Securities registered in the name of a
nominee of DTC. The Depositor has been informed by DTC that DTC’s nominee will be Cede & Co. No person acquiring an interest in any
class of the Book-Entry Certificates will be entitled to receive a certificate representing such person’s interest, except as set
forth below under “-Definitive Certificates”. Unless and until definitive certificates are issued under the limited circumstances
described in this prospectus supplement, all references to actions by certificateholders with respect to the Book-Entry Certificates
shall refer to actions taken by DTC upon instructions from its participants and all references in this prospectus supplement to
distributions, notices, reports and statements to certificateholders with respect to the Book-Entry Certificates shall refer to
distributions, notices, reports and statements to DTC or Cede & Co., as the registered holder of the Book-Entry Certificates, for
distribution to Certificate Owners in accordance with DTC procedures. See “-Book-Entry Registration” and “-Definitive Certificates”
in this prospectus supplement.
The Residual Certificates may not be purchased by or transferred to a Plan except upon delivery of a certification of facts
or an opinion of counsel, as provided in this prospectus supplement. See “-Restrictions on Transfer of the Residual Certificates” and
“ERISA Considerations” in this prospectus supplement. Transfer of the Residual Certificates will be subject to additional
restrictions and transfer of the Residual Certificates to any non-United States person will be prohibited, in each case as described
under “Federal Income Tax Consequences-REMICS-Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations” and “-Taxation of Owners of REMIC Residual Certificates-Noneconomic REMIC Residual Certificates” in the prospectus. No
service charge will be imposed for any registration of transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
All distributions to holders of the Offered Certificates, other than the final distribution on any class of Offered
Certificates, will be made on each distribution date by or on behalf of the Trustee to the persons in whose names the Offered
Certificates are registered at the close of business on the related Record Date. Distributions will be made either (a) by check
mailed to the address of each certificateholder as it appears in the certificate register or (b) upon written request to the Trustee
at least five Business Days prior to the relevant Record Date by any holder of Offered Certificate, by wire transfer in immediately
available funds to the account of the certificateholders specified in the request. The final distribution on any class of Offered
Certificates will be made in a like manner, but only upon presentment and surrender of the related Certificate at the corporate trust
office of the Trustee, for these purposes located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota55479, Attention:
Corporate Trust Group, Bear Stearns Mortgage Funding Trust 2006-AR5, or any other location specified in the notice to
certificateholders of the final distribution.
The Certificates will not be listed on any securities exchange or quoted in the automated quotation system of any registered
securities association. As a result, investors in the Certificates may experience limited liquidity. See “Risk Factors-The Offered
Certificates Will Have Limited Liquidity, So You May Be Unable to Sell Your Securities or May Be Forced to Sell Them at a Discount
from Their Fair Market Value” in this prospectus supplement.
Book-Entry Registration
DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve
System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities transactions between participants through electronic book entries, thereby
eliminating the need for physical movement of certificates.
Certificate Owners that are not participants or indirect participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, the Book-Entry Certificates may do so only through participants and indirect participants. In
addition, Certificate Owners will receive all distributions of principal of and interest on the Book-Entry Certificates from the
Trustee through DTC and DTC participants. The Trustee will forward payments to DTC in same day funds and DTC will forward payments
to participants in next day funds settled through the New York Clearing House. Each participant will be responsible for disbursing
the payments. Unless and until definitive certificates are issued, it is anticipated that the only certificateholders of the
Book-Entry Certificates will be Cede & Co., as nominee of DTC. Certificate Owners will not be recognized by the Trustee as
certificateholders, as such term is used in the Agreement, and Certificate Owners will be permitted to exercise the rights of
certificateholders only indirectly through DTC and its participants.
Under the Rules, DTC is required to make book-entry transfers of Book-Entry Certificates among participants and to receive
and transmit distributions of principal of, and interest on, the Book-Entry Certificates. Participants and indirect participants with
which Certificate Owners have accounts with respect to the Book-Entry Certificates similarly are required to make book-entry
transfers and receive and transmit these payments on behalf of their respective Certificate Owners. Accordingly, although Certificate
Owners will not possess definitive certificates, the Rules provide a mechanism by which Certificate Owners through their participants
and indirect participants will receive payments and will be able to transfer their interest.
Because DTC can only act on behalf of participants, who in turn act on behalf of indirect participants and on behalf of
certain banks, the ability of a Certificate Owner to pledge Book-Entry Certificates to persons or entities that do not participate in
the DTC system, or to otherwise act with respect to Book-Entry Certificates, may be limited due to the absence of physical
certificates for the Book-Entry Certificates. In addition, under a book-entry format, Certificate Owners may experience delays in
their receipt of payments since distribution will be made by the Trustee to Cede & Co., as nominee for DTC.
Under the Rules, DTC will take action permitted to be taken by a certificateholders under the Agreement only at the
direction of one or more participants to whose DTC account the Book-Entry Certificates are credited. Additionally, under the Rules,
DTC will take actions with respect to specified voting rights only at the direction of and on behalf of participants whose holdings
of Book-Entry Certificates evidence these specified voting rights. DTC may take conflicting actions with respect to voting rights, to
the extent that participants whose holdings of Book-Entry Certificates evidence voting rights authorize divergent action.
The Depositor, the Servicer and the Trustee will have no liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests in the Book-Entry Certificates held by Cede & Co., as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to beneficial ownership interests or transfers thereof.
Definitive Certificates
Definitive certificates will be issued to Certificate Owners or their nominees, respectively, rather than to DTC or its
nominee, only if (1) the Depositor advises the Trustee in writing that DTC is no longer willing or able to properly discharge its
responsibilities as clearing agency with respect to the Book-Entry Certificates and the Depositor is unable to locate a qualified
successor within 30 days or (2) the Depositor, at its option, elects to terminate the book-entry system through DTC. Additionally,
after the occurrence of an event of default under the Agreement, any Certificate Owner materially and adversely affected thereby may,
at its option, request and, subject to the procedures set forth in the Agreement, receive a definitive certificate evidencing such
Certificate Owner’s fractional undivided interest in the related class of certificates.
Upon its receipt of notice of the occurrence of any event described in the immediately preceding paragraph, the Trustee is
required to request that DTC notify all Certificate Owners through its participants of the availability of definitive certificates.
Upon surrender by DTC of the definitive certificates representing the Book-Entry Certificates and receipt of instructions for
re-registration, the Trustee will reissue the Book-Entry Certificates as definitive certificates issued in the respective principal
amounts owned by individual Certificate Owners, and thereafter the Trustee will recognize the holders of definitive certificates as
certificateholders under the Agreement.
Distributions on the Certificates
Loan Group I
On each distribution date, the Trustee will withdraw the available funds for Loan Group I from the Distribution Account for
such distribution date and apply such amounts as follows:
First, from Interest Funds from Loan Group I on each distribution date on and after the distribution date in January 2017,
if applicable, to the Final Maturity Reserve Account, an amount equal to the related Coupon Strip for such distribution date.
Second, from Interest Funds with respect to Loan Group I, to pay any accrued and unpaid interest on the Group I Offered
Certificates in the following order of priority:
(1) to each class of Class I-A Certificates and the Class I-X Certificates, the Current Interest and then any Interest
Carry Forward Amount for each such class, pro rata, based on the Current Interest and Interest Carry Forward Amount due to
each such class;
(2) to the Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7, Class I-B-8 and Class
I-B-9 Certificates, sequentially, in that order, the Current Interest for each such class of certificates;
(3) any Excess Spread with respect to Loan Group I to the extent necessary to meet a level of overcollateralization equal
to the Group I Overcollateralization Target Amount will be the Extra Principal Distribution Amount with respect to Loan
Group I and will be included as part of the Group I Principal Distribution Amount and distributed in accordance with Third
(A) and (B) below; and
(4) any remaining Excess Spread with respect to Loan Group I will be the Remaining Excess Spread with respect to Loan Group
I and will be applied, together with the Group I Overcollateralization Release Amount, as Excess Cashflow for Loan Group I
pursuant to clauses Fourth through Seventeenth below.
As described in the definition of “Current Interest,” the Current Interest on each class of Group I Certificates is subject
to reduction in the event of specified interest shortfalls and shortfalls resulting from Net Deferred Interest on the group I
mortgage loans allocated to such class of Group I Certificates, the sum of the Coupon Strip, if applicable, and the interest portion
of Realized Losses on the group I mortgage loans allocated to that class of Certificates.
On any distribution date, any shortfalls resulting from the application of the Relief Act and any Prepayment Interest
Shortfalls to the extent not covered by Compensating Interest Payments will be allocated, first, in reduction of amounts otherwise
distributable to the Class I-B-IO, the Class R and the Class R-X Certificates, and thereafter, to the Current Interest payable to the
Class I-A Certificates and Class I-X Certificates (in each case, with respect to shortfalls resulting from the group I mortgage
loans) and Class I-B Certificates, on a pro rata basis, on such distribution date, based on the respective amounts of interest
accrued on such certificates for such distribution date. The holders of the Class I-A, Class I-X and Class I-B Certificates will not
be entitled to reimbursement for any such interest shortfalls.
Third, to pay as principal on the Class I-A Certificates and Class I-B Certificates, in the following order of priority:
(A) On each distribution date (i) prior to the related Stepdown Date or (ii) on which a Group I Trigger Event is in effect,
Group I Principal Distribution Amount for such distribution date will be distributed as follows:
1. to each class of Class I-A Certificates on a pro rata basis until the Current Principal Amount of each such
class is reduced to zero;
2. to the Class I-B-1 Certificates, any remaining Group I Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
3. to the Class I-B-2 Certificates, any remaining Group I Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
4. to the Class I-B-3 Certificates, any remaining Group I Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
5. to the Class I-B-4 Certificates, any remaining Group I Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
6. to the Class I-B-5 Certificates, any remaining Group I Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
7. to the Class I-B-6 Certificates, any remaining Group I Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
8. to the Class I-B-7 Certificates, any remaining Group I Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
9. to the Class I-B-8 Certificates, any remaining Group I Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero; and
10. to the Class I-B-9 Certificates, any remaining Group I Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero.
(B) On each distribution date on or after the related Stepdown Date, so long as a Group I Trigger Event is not in effect, Group
I Principal Distribution Amount for such distribution date will be distributed as follows:
1. to the Class I-A Certificates, from the Group I Principal Distribution Amount, an amount equal to the Class I-A
Principal Distribution Amount will be distributed to each class of Class I-A Certificates on a pro rata basis until the
Current Principal Amount of each such class is reduced to zero;
2. to the Class I-B-1 Certificates, from any remaining Group I Principal Distribution Amount, the Class I- B-1
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
3. to the Class I-B-2 Certificates, from any remaining Group I Principal Distribution Amount, the Class I-B-2
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
4. to the Class I-B-3 Certificates, from any remaining Group I Principal Distribution Amount, the Class I-B-3
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
5. to the Class I-B-4 Certificates, from any remaining Group I Principal Distribution Amount, the Class I-B-4
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
6. to the Class I-B-5 Certificates, from any remaining Group I Principal Distribution Amount, the Class I-B-5
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
7. to the Class I-B-6 Certificates, from any remaining Group I Principal Distribution Amount, the Class I-B-6
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
8. to the Class I-B-7 Certificates, from any remaining Group I Principal Distribution Amount, the Class I-B-7
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
9. to the Class I-B-8 Certificates, from any remaining Group I Principal Distribution Amount, the Class I-B-8
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero; and
10. to the Class I-B-9 Certificates, from any remaining Group I Principal Distribution Amount, the Class I-B-9
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero.
Fourth, from any Excess Cashflow with respect to Loan Group I, to the Class I-A Certificates, pro rata in accordance with
the respective amounts owed to each such class an amount equal to (a) any remaining Interest Carry Forward Amount, and then (b) any
Unpaid Realized Loss Amount for such class for such distribution date;
Fifth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-1 Certificates, an amount equal to
(a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Sixth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-2 Certificates, an amount equal to
(a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Seventh, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-3 Certificates, an amount equal
to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Eighth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-4 Certificates, an amount equal to
(a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Ninth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-5 Certificates, an amount equal to
(a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Tenth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-6 Certificates, an amount equal to
(a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Eleventh, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-7 Certificates, an amount equal
to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Twelfth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-8 Certificates, an amount equal
to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Thirteenth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-9 Certificates, an amount
equal to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution
date;
Fourteenth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-A Certificates, any Basis Risk
Shortfall or any Basis Risk Shortfall Carry-forward Amount (as applicable) for each such class for such distribution date, pro rata,
based on the Basis Risk Shortfall or Basis Risk Shortfall Carry-forward Amount (as applicable) owed to each such class;
Fifteenth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-1, Class I-B-2, Class I-B-3,
Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7 Class I-B-8 and Class I-B-9 Certificates, sequentially, in that order, any Basis
Risk Shortfall or Basis Risk Shortfall Carry-forward Amount (as applicable), in each case for such class for such distribution date;
Sixteenth, from any remaining Excess Cashflow with respect to Loan Group I, to the Class I-B-IO certificates an amount
specified in the Agreement; and
Seventeenth, any remaining amounts to the Residual Certificates.
On each distribution date, all amounts representing prepayment charges in respect of the group I mortgage loans received
during the related Prepayment Period will be withdrawn from the Distribution Account and shall not be available for distribution to
the holders of the Offered Certificates. All amounts representing three-year "hard" prepayment charges with respect to the group I
mortgage loans will be distributed to the Class I-XP-2 Certificates, and all other prepayment charges with respect to the group I
mortgage loans, to the extent not permitted to be retained by the Servicer, will be distributed to the Class I-XP-1 Certificates.
Loan Group II
On each distribution date, the Trustee will withdraw the available funds for Loan Group II from the Distribution Account for
such distribution date and apply such amounts as follows:
First, from Interest Funds with respect to Loan Group II, to pay any accrued and unpaid interest on the Group II Offered
Certificates and the Class II-B-5 Certificates in the following order of priority:
(1) to each class of Class II-A Certificates, the Current Interest and then any Interest Carry Forward Amount for each such
class, pro rata, based on the Current Interest and Interest Carry Forward Amount due to each such class;
(2) to the Class II-B-1, Class II-B-2, Class II-B-3, Class II-B-4 and Class II-B-5 Certificates, sequentially, in that
order, the Current Interest for each such class of certificates;
(3) any Excess Spread with respect to Loan Group II to the extent necessary to meet a level of overcollateralization equal
to the Group II Overcollateralization Target Amount will be the Extra Principal Distribution Amount with respect to Loan
Group II and will be included as part of the Group II Principal Distribution Amount and distributed in accordance with
Second (A) and (B) below;
(4) any remaining Excess Spread with respect to Loan Group II will be the Remaining Excess Spread with respect to Loan
Group II and will be applied, together with the Group II Overcollateralization Release Amount with respect to Loan Group
II, as Excess Cashflow for Loan Group II pursuant to clauses Third through Twelfth below.
As described in the definition of “Current Interest,” the Current Interest on each class of Group II Certificates is subject
to reduction in the event of specified interest shortfalls and shortfalls resulting from Net Deferred Interest on the group II
mortgage loans allocated to that class of Group II Certificates the interest portion of Realized Losses on the group II mortgage
loans allocated to that class of Certificates.
On any distribution date, any shortfalls resulting from the application of the Relief Act and any Prepayment Interest
Shortfalls to the extent not covered by Compensating Interest Payments will be allocated, first, in reduction of amounts otherwise
distributable to the Class II-B-IO, the Class R and the Class R-X Certificates, and thereafter, to the Current Interest payable to
the Class II-A Certificates (in each case, with respect to shortfalls resulting from the group II mortgage loans) and Class II-B
Certificates, on a pro rata basis, on such distribution date, based on the respective amounts of interest accrued on such
certificates for such distribution date. The holders of the Class II-A Certificates and Class II-B Certificates will not be entitled
to reimbursement for any such interest shortfalls.
Second, to pay as principal on the Class II-A Certificates and Class II-B Certificates, in the following order of priority:
(A) On each distribution date (i) prior to the related Stepdown Date or (ii) on which a Group II Trigger Event is in effect, the
Group II Principal Distribution Amount for such distribution date will be distributed as follows:
1. to each class of Class II-A Certificates on a pro rata basis until the Current Principal Amount of each such
class is reduced to zero;
2. to the Class II-B-1 Certificates, any remaining Group II Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
3. to the Class II-B-2 Certificates, any remaining Group II Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
4. to the Class II-B-3 Certificates, any remaining Group II Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero;
5. to the Class II-B-4 Certificates, any remaining Group II Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero; and
6. to the Class II-B-5 Certificates, any remaining Group II Principal Distribution Amount until the Current
Principal Amount thereof is reduced to zero.
(B) On each distribution date on or after the related Stepdown Date, so long as a Group II Trigger Event is not in effect, Group
II Principal Distribution Amount for such distribution date will be distributed as follows:
1. to the Class II-A Certificates, from the Group II Principal Distribution Amount, an amount equal to the Class
II-A Principal Distribution Amount will be distributed to each class of Class II-A Certificates on a pro rata basis until
the Current Principal Amount of each such class is reduced to zero;
2. To the Class II-B-1 Certificates, from any remaining Group II Principal Distribution Amount, the Class II-B-1
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
3. To the Class II-B-2 Certificates, from any remaining Group II Principal Distribution Amount, the Class II-B-2
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
4. To the Class II-B-3 Certificates, from any remaining Group II Principal Distribution Amount, the Class II-B-3
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero;
5. To the Class II-B-4 Certificates, from any remaining Group II Principal Distribution Amount, the Class II-B-4
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero; and
6. To the Class II-B-5 Certificates, from any remaining Group II Principal Distribution Amount, the Class II-B-5
Principal Distribution Amount, until the Current Principal Amount thereof is reduced to zero.
Third, from any Excess Cashflow with respect to Loan Group II, to the Class II-A Certificates, pro rata in accordance with
the respective amounts owed to each such class an amount equal to (a) any remaining Interest Carry Forward Amount, and then (b) any
Unpaid Realized Loss Amount for such class for such distribution date;
Fourth, from any remaining Excess Cashflow with respect to Loan Group II, to the Class II-B-1 Certificates, an amount equal
to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Fifth, from any remaining Excess Cashflow with respect to Loan Group II, to the Class II-B-2 Certificates, an amount equal
to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Sixth, from any remaining Excess Cashflow with respect to Loan Group II, to the Class II-B-3 Certificates, an amount equal
to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Seventh, from any remaining Excess Cashflow with respect to Loan Group II, to the Class II-B-4 Certificates, an amount equal
to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Eighth, from any remaining Excess Cashflow with respect to Loan Group II, to the Class II-B-5 Certificates, an amount equal
to (a) any Interest Carry Forward Amount, and then (b) any Unpaid Realized Loss Amount for such class for such distribution date;
Ninth, from any remaining Excess Cashflow with respect to Loan Group II, to the Class II-A Certificates, any Basis Risk
Shortfall or Basis Risk Shortfall Carry-forward Amount (as applicable) for each such class for such distribution date, pro rata,
based on the Basis Risk Shortfall or Basis Risk Shortfall Carry-forward Amount (as applicable) owed to each such class;
Tenth, from any remaining Excess Cashflow with respect to Loan Group II, to the Class II-B-1, Class II-B-2, Class II-B-3,
Class II-B-4 and Class II-B-5 Certificates, sequentially, in that order, any Basis Risk Shortfall or Basis Risk Shortfall
Carry-forward Amount (as applicable), in each case for such class for such distribution date;
Eleventh, from any remaining Excess Cashflow with respect to Loan Group II, to the Class II-B-IO certificates an amount
specified in the Agreement; and
Twelfth, any remaining amounts to the Residual Certificates.
On each distribution date, all amounts representing prepayment charges in respect of the group II mortgage loans, to the
extent not permitted to be retained by the Servicer, received during the related Prepayment Period will be withdrawn from the
Distribution Account and shall not be available for distribution to the holders of the Group II Offered Certificates or the Class
II-B-5 Certificates. Such prepayment charges with respect to the group II mortgage loans will be distributed to the Class II-XP
Certificates.
When a borrower prepays all or a portion of a mortgage loan between Due Dates, the borrower pays interest on the amount
prepaid only to the date of prepayment. Accordingly, an interest shortfall will result equal to the difference between the amount of
interest collected and the amount of interest that would have been due absent such prepayment. We refer to this interest shortfall as
a Prepayment Interest Shortfall. Any Prepayment Interest Shortfalls resulting from a prepayment in full or in part that are
distributed to the certificateholders in the calendar month following the month in which the prepayment was made are required to be
paid by the Servicer, but only to the extent that such amount does not exceed the aggregate of the Servicing Fees on the mortgage
loans serviced by it for the applicable distribution date. The Servicer is not obligated to fund interest shortfalls resulting from
the application of the Relief Act. The amount of the Servicing Fees used to offset such Prepayment Interest Shortfalls is referred to
herein as Compensating Interest Payments.
Final Maturity Reserve Account
If, on the distribution date occurring in December 2036, or on any distribution date thereafter, up to and including the
distribution date in January 2017, if any Group I Offered Certificates are outstanding and the aggregate Stated Principal Balance of
the group I mortgage loans with original terms to maturity in excess of 30 years is greater than the amount specified in Schedule 1
to this prospectus supplement for the related distribution date, the Trustee will be required to deposit from Interest Funds with
respect to the group I mortgage loans into the Final Maturity Reserve Account the Coupon Strip for such distribution date until the
amount on deposit in the Final Maturity Reserve Account is equal to the Final Maturity Reserve Account Target. On any applicable
distribution date, the "Coupon Strip" for Loan Group I shall be an amount equal to the lesser of (a) the product of (i) 1.00%, (ii)
the aggregate Stated Principal Balance of the mortgage loans with original terms to maturity in excess of 30 years in Loan Group I as
of the Due Date occurring in the month prior to such distribution date and (iii) one-twelfth and (b) the excess of (i) the Final
Maturity Reserve Account Target for such distribution date over (ii) the amount on deposit in the Final Maturity Reserve Account
immediately prior to such distribution date. The "Final Maturity Reserve Account Target" means, for any distribution date beginning
with the distribution date in January 2017, the lesser of (a) the product of (i) the aggregate principal balance of the group I
mortgage loans with original terms to maturity in excess of 30 years as of the Due Date occurring in the month prior to such
distribution date and (ii) the fraction the numerator of which is 1.00 and the denominator of which is 0.85, and (b) $35,336,223.
On each distribution date, any amounts on deposit in the Final Maturity Reserve Account in excess of the lesser of (i) the
Current Principal Amount of the Group I Offered Certificates and (ii) the aggregate Stated Principal Balance of the group I mortgage
loans with original terms to maturity in excess of 30 years, will be distributed to the Class I-B-IO Certificates.
On the earlier of the distribution date occurring in January 2017 and the distribution date on which the final distribution
of payments from the group I mortgage loans and the other assets in the trust is expected to be made, any remaining amounts on
deposit in the Final Maturity Reserve Account will be distributed to the Group I Offered Certificates in the following order of
priority:
(1) to the Class I-A Certificates, pro rata, in accordance with their respective outstanding Current Principal Amounts
until the Current Principal Amounts thereof have been reduced to zero;
(2) sequentially, to the Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7,
Class I-B-8 and Class I-B-9 Certificates, in that order, after giving effect to principal distributions on such distribution date,
until the Current Principal Amounts thereof have been reduced to zero;
(3) to each class of Group I Offered Certificates, any Current Interest and Interest Carry Forward Amount for each such
class remaining unpaid after giving effect to interest distributions on such distribution date in accordance with payment priorities
set forth in “Description of the Certificates-Distributions on the Certificates;”
(4) to each class of Group I Offered Certificates, any Basis Risk Shortfall Carry-forward Amount for each such class
remaining unpaid after giving effect to the distributions on such distribution date in accordance with payment priorities set forth
in “Description of the Certificates-Distributions on the Certificates-Loan Group I;” and
(5) to the Class I-B-IO Certificates, any remaining amount.
If the group I mortgage loans are purchased in connection with an optional termination of Loan Group I, the funds on deposit
in the Final Maturity Reserve Account will be used to make payments in accordance with priorities (4) and (5) above after application
of the purchase price pursuant to the exercise of the optional termination.
Monthly Advances
If the minimum payment of interest on a mortgage loan which was due on a related Due Date is delinquent other than as a
result of application of the Relief Act or similar state law, the Servicer will be required to deposit in to the Custodial Account on
the date specified in the Agreement an amount equal to such delinquency, net of the Servicing Fee Rate, except to the extent the
Servicer determines any such advance to be nonrecoverable from Liquidation Proceeds, Insurance Proceeds or from future payments on
the mortgage loan for which such advance was made. Subject to the foregoing, such advances will be made by the Servicer or
subservicer, if applicable, through final disposition or liquidation of the related mortgaged property. Any failure of the Servicer
to make such advances would constitute an Event of Default under the Agreement, in which case the Trustee, as successor servicer,
will be required to make such advance in accordance with the Agreement. See “The Agreements-Events of Default and Rights Upon Event
of Default” in the prospectus.
All Monthly Advances will be reimbursable to the party making such Monthly Advance from late collections, Insurance Proceeds
and Liquidation Proceeds from the mortgage loan as to which the unreimbursed Monthly Advance was made. In addition, any Monthly
Advances previously made in respect of any mortgage loan that are deemed by the Servicer or a subservicer to be nonrecoverable from
related late collections, Insurance Proceeds or Liquidation Proceeds may be reimbursed to such party out of any funds in the
Custodial Account prior to the distributions on the Certificates.
Allocation of Realized Losses; SubordinationGeneral
Subordination provides the holders of Offered Certificates in a Loan Group having a higher payment priority with protection
against Realized Losses on the related mortgage loans. In general, this loss protection is accomplished by allocating any Realized
Losses in a Loan Group in excess of available Excess Spread and any current overcollateralization (if any) for such loan group among
the related Subordinate Certificates, beginning with the Subordinate Certificates with the lowest payment priority until the Current
Principal Amount of that subordinate class has been reduced to zero.
With respect to any defaulted mortgage loan that is finally liquidated through foreclosure sale, disposition of the related
mortgaged property if acquired on behalf of the certificateholders by deed-in-lieu of foreclosure or otherwise, the amount of loss
realized, if any, will equal the portion of the unpaid principal balance remaining, if any, plus interest thereon through the last
day of the month in which such mortgage loan was finally liquidated, after application of all amounts recovered (net of amounts
reimbursable to the Servicer for Monthly Advances, the Servicing Fee, servicing advances and certain other amounts specified in the
Agreement) towards interest and principal owing on the mortgage loan. The amount of such loss realized on a mortgage loan, together
with the amount of any Bankruptcy Loss (if any) in respect of a mortgage loan is referred to in this prospectus supplement as a
Realized Loss.
There are two types of Bankruptcy Losses that can occur with respect to a mortgage loan. The first type of Bankruptcy Loss,
referred to in this prospectus supplement as a Deficient Valuation, results if a court, in connection with a personal bankruptcy of a
mortgagor, establishes the value of a mortgaged property at an amount less than the unpaid principal balance of the mortgage loan
secured by such mortgaged property. In such a case, the holder of such mortgage loan would become an unsecured creditor to the
extent of the difference between the unpaid principal balance of such mortgage loan and such reduced unsecured debt. The second type
of Bankruptcy Loss, referred to in this prospectus supplement as a Debt Service Reduction, results from a court reducing the amount
of the monthly payment on the related mortgage loan, in connection with the personal bankruptcy of a mortgagor.
The principal portion of Debt Service Reductions will not be allocated in reduction of the Current Principal Amount of any
class of Certificates. Regardless of when they occur, Debt Service Reductions may reduce the amount of available funds that would
otherwise be available for distribution on a distribution date. As a result of the subordination of the Subordinate Certificates in a
loan group in right of distribution of available funds to the related Senior Certificates, any Debt Service Reductions will be borne
by the Subordinate Certificates (to the extent then outstanding) in inverse order of priority.
Any allocation of a principal portion of a Realized Loss to a Certificate will be made by reducing the Current Principal
Amount thereof by the amount so allocated as of the distribution date in the month following the calendar month in which such
Realized Loss was incurred.
An allocation of a Realized Loss on a pro rata basis among two or more classes of Certificates means an allocation to each
such class of Certificates on the basis of its then outstanding Current Principal Amount prior to giving effect to distributions to
be made on such distribution date.
The interest portion of Realized Losses will be allocated among the outstanding related classes of Certificates offered
hereby to the extent described under “Distributions on the Certificates-Interest” above.
In the event that the Servicer or any subservicer recovers any amount in respect of a Liquidated Mortgage Loan with respect
to which a Realized Loss has been incurred after liquidation and disposition of such mortgage loan, any such amount, which is
referred to in this prospectus supplement as a Subsequent Recovery, will be distributed as part of available funds in accordance with
the priorities described under “Description of the Certificates-Distributions on the Certificates” in this prospectus supplement.
Additionally, the Current Principal Amount of each class of Subordinate Certificates that has been reduced by the allocation of a
Realized Loss to such Certificate will be increased, in order of seniority, by the amount of such Subsequent Recovery, but not in
excess of the amount of any Realized Losses previously allocated to such class of Certificates and not previously offset by
Subsequent Recoveries. Holders of such Certificates will not be entitled to any payment in respect of Current Interest on the amount
of such increases for an Interest Accrual Period preceding the distribution date on which such increase occurs.
Allocation of Realized Losses
The Applied Realized Loss Amount for the group I mortgage loans will be allocated first to the Class I-B-9, Class I-B-8,
Class I-B-7, Class I-B-6, Class I-B-5, Class I-B-4, Class I-B-3, Class I-B-2 and Class I-B-1 Certificates, sequentially in that
order, in each case until the Current Principal Amount of each such class has been reduced to zero. Thereafter, the principal
portion of Realized Losses on the group I mortgage loans will be allocated on any distribution date to the Class I-A-3, the Class
I-A-2 and the Class I-A-1 Certificates, sequentially in that order, until the Current Principal Amount of each such class has been
reduced to zero. Realized Losses will not be allocated to the Class I-X Certificates.
The Applied Realized Loss Amount for the group II mortgage loans will be allocated first to the Class II-B-5, Class II-B-4,
Class II-B-3, Class II-B-2 and Class II-B-1 Certificates, sequentially in that order, in each case until the Current Principal Amount
of each such class has been reduced to zero. Thereafter, the principal portion of Realized Losses on the group II mortgage loans
will be allocated on any distribution date to the Class II-A-3, the Class II-A-2 and the Class II-A-1 Certificates sequentially in
that order, until the Current Principal Amount of each such class has been reduced to zero.
No reduction of the Current Principal Amount of any class will be made on any distribution date on account of Realized Losses
to the extent that such allocation would result in the reduction of the aggregate Current Principal Amounts of all Certificates as of
such distribution date, after giving effect to all distributions and prior allocations of Realized Losses on the mortgage loans in
the related Loan Group on such date, to an amount less than the aggregate Stated Principal Balance of all of the mortgage loans in
the related Loan Group as of the first day of the month of such distribution date. The limitation described in this paragraph is
referred to herein as the Loss Allocation Limitation.
Excess Spread and Overcollateralization Provisions
Excess Spread in each Loan Group will be required to be applied as an Extra Principal Distribution Amount with respect to the
related Offered Certificates and the Class II-B-5 Certificates whenever the related Overcollateralization Amount is less than the
related Overcollateralization Target Amount. If on any distribution date, after giving effect to allocations of Principal
Distribution Amounts, the aggregate Current Principal Amount of the Offered Certificates in a Loan Group and the Class II-B-5
Certificates exceeds the aggregate Stated Principal Balance of the related mortgage loans for such distribution date, the Current
Principal Amounts of the Subordinate Certificates in such Loan Group will be reduced, in inverse order of seniority (beginning with
the related Class B Certificates with the highest numerical designation) by an amount equal to such excess. Any such reduction is an
Applied Realized Loss Amount.
Pass-Through Rates
The pass-through rate per annum for the Offered Certificates (other than the Class I-X Certificates) and the Class II-B-5
Certificates will be equal to the least of:
1. the London interbank offered rate for one month United States dollar deposits, which we refer to as One-Month LIBOR,
calculated as described below under “-Calculation of One-Month LIBOR”, plus the related Margin;
2. 10.50% per annum; and
3. the related Net Rate Cap.
The pass-through rate for the Class I-X Certificates will be a fixed rate equal to 0.500% per annum.
Calculation of One-Month LIBOR
On the second LIBOR business day preceding the commencement of each Interest Accrual Period for the Offered Certificates,
which date we refer to as an interest determination date, the Trustee will determine One-Month LIBOR for such Interest Accrual Period
on the basis of such rate as it appears on Telerate Screen Page 3750, as of 11:00 a.m. London time on such interest determination
date. If such rate does not appear on such page, or such other page as may replace that page on that service, or if such service is
no longer offered, such other service for displaying LIBOR or comparable rates as may be reasonably selected by the Trustee,
One-Month LIBOR for the applicable Interest Accrual Period will be the Reference Bank Rate. If no such quotations can be obtained and
no Reference Bank Rate is available, One-Month LIBOR will be the One-Month LIBOR applicable to the preceding Interest Accrual Period.
The Reference Bank Rate with respect to any Interest Accrual Period, means the arithmetic mean, rounded upwards, if
necessary, to the nearest whole multiple of 0.03125%, of the offered rates for United States dollar deposits for one month that are
quoted by the Reference Banks, as described below, as of 11:00 a.m., New York City time, on the related interest determination date
to prime banks in the London interbank market for a period of one month in amounts approximately equal to the aggregate Current
Principal Amount of all classes of Offered Certificates for such Interest Accrual Period, provided that at least two such Reference
Banks provide such rate. If fewer than two offered rates appear, the Reference Bank Rate will be the arithmetic mean, rounded
upwards, if necessary, to the nearest whole multiple of 0.03125%, of the rates quoted by one or more major banks in New York City,
selected by the Trustee, as of 11:00 a.m., New York City time, on such date for loans in U.S. dollars to leading European banks for a
period of one month in amounts approximately equal to the aggregate Current Principal Amount of all classes of Offered Certificates.
As used in this section, LIBOR business day means a day on which banks are open for dealing in foreign currency and exchange in
London and New York City; and Reference Banks means leading banks selected by the Trustee and engaged in transactions in Eurodollar
deposits in the international Eurocurrency market:
1. with an established place of business in London,
2. which have been designated as such by the Trustee, and
3. which are not controlling, controlled by, or under common control with, the Depositor or the Sponsor.
The establishment of one-month LIBOR on each interest determination date by the Trustee and the Trustee's calculation of the
pass-through rates applicable to the related Offered Certificates for the related Interest Accrual Period shall, in the absence of
manifest error, be final and binding.
Optional Purchase of Defaulted Loans
With respect to any mortgage loan which as of the first day of a Fiscal Quarter is delinquent in payment by 90 days or more
or is an REO Property, the Sponsor shall have the right to purchase such mortgage loan from the trust at a price equal to the
Repurchase Price; provided, however (i) that such mortgage loan is still 90 days or more delinquent or is an REO Property as of the
date of such purchase and (ii) this purchase option, if not theretofore exercised, shall terminate on the date prior to the last day
of the related Fiscal Quarter. This purchase option, if not exercised, shall not be thereafter reinstated unless the delinquency is
cured and the mortgage loan thereafter again becomes 90 days or more delinquent or becomes an REO Property, in which case the option
shall again become exercisable as of the first day of the related Fiscal Quarter.
Restrictions on Transfer of the Residual Certificates
The Residual Certificates will be subject to additional restrictions described under “Federal Income Tax
Consequences-Special Tax Considerations Applicable to Residual Certificates” in this prospectus supplement and “Federal Income Tax
Consequences-REMICS-Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations” and “-Taxation of
Owners of REMIC Residual Certificates-Noneconomic REMIC Residual Certificates” in the prospectus.
THE CAP CONTRACTS
The Trustee, on behalf of the Trust, will enter into one or more cap contracts, or Cap Contracts, with ABN AMRO Bank N.V.
that provide for payments to the Trustee for the benefit of the holders of the Group II Offered Certificates and the Class II-B-5
Certificates. The Cap Contracts are intended to provide partial protection to the Group II Offered Certificates and the Class II-B-5
Certificates in the event that the pass-through rate applicable to such classes of Certificates is limited by the related Net Rate
Cap and to cover certain interest shortfalls.
The Cap Counterparty is ABN AMRO Bank N.V., or ABN AMRO. ABN AMRO, a public limited liability company incorporated under the
laws of The Netherlands, is an international banking group offering a wide range of banking products and financial services on a
global basis through a network of 3,557 offices and branches in 58 countries and territories as of year-end 2005. ABN AMRO is one of
the largest banking groups in the world, with total consolidated assets of € 880.8 billion at December 31, 2005. As of the date of
this prospectus supplement, ABN AMRO’s senior unsecured debt obligations are rated “AA-“ by Standard & Poor’s and ”Aa3” by Moody’s.
Additional information, including the most recent form 20-F for the year ended December 31, 2005 of ABN AMRO Holding N.V.,
the parent company of ABN AMRO, and additional quarterly and current reports filed with the Securities and Exchange Commission by ABN
AMRO Holding N.V., may be obtained upon written request to ABN ARMO Bank N.V., ABN AMRO Investor Relations Department, Hoogoorddreef
66-68, P.O. Box 283, 1101 BE Amsterdam, The Netherlands. Except for the information provided in this paragraph and in the
immediately preceding paragraph, neither the Cap Counterparty nor ABN AMRO Holding N.V. have been involved in the preparation of, and
do not accept responsibility for, this prospectus supplement or the accompanying prospectus.
On or prior to each distribution date through and including the distribution date set forth in the related Cap Contract,
payments under the related Cap Contract will be made to the Trustee, under an account established and maintained by the Trustee, for
the benefit of the holders of the related Certificates. The payment to be made by the Cap Counterparty under each Cap Contract will
be equal to the interest accrued during the Interest Accrual Period on the related notional balance at a rate equal to the excess of
(i) the lesser of (a) One-Month LIBOR and (b) the ceiling rate set forth in Annex I over (ii) the strike rate set forth in Annex I.
The notional balance will be equal to the lesser of (i) the Certificate Principal Balance of such class of Certificates for the
related distribution date and (ii) the related certificate notional amount set forth in Annex I.
On each distribution date, amounts received under each Cap Contract with respect to such distribution date will be allocated
in the following order of priority:
First, to the holders of the related class of Certificates, the payment of any Basis Risk Shortfall Carry-forward Amount for
such distribution date, to the extent not covered by the related Excess Cashflow for such distribution date;
Second, from any remaining amounts, to the holders of the related class of Certificates, the payment of any Current Interest
and Interest Carry-forward Amount for such class to the extent not covered by Interest Funds or Excess Cashflow on such
distribution date;
Third, from any excess amounts available from the Cap Contracts, to the Class II-A Certificates, pro rata, and then to the
Class II-B-1, the Class II-B-2, the Class II-B-3, the Class II-B-4 and the Class II-B-5 Certificates, in that order, to the
extent not paid pursuant to clauses first or second above; and
Fourth, from any remaining amounts, for deposit into the Reserve Fund, allocated as further described herein.
On each distribution date, amounts on deposit in the Reserve Fund will be allocated first to the Class II-A Certificates,
pro rata, based on the current Realized Losses and any Unpaid Realized Loss Amount for each such class for such distribution date,
and then to the Class II-B-1, the Class II-B-2, the Class II-B-3, the Class II-B-4 and the Class II-B-5 Certificates, in that order,
to pay any current Realized Losses and any Unpaid Realized Loss Amount, in each case, for such class and for such distribution date.
Any remaining amounts on deposit in the Reserve Fund on such distribution date will be distributed as described in the Agreement.
The Cap Contracts terminate after the distribution date occurring in November 2011.
The Depositor has determined that the significance percentage of payments under the Cap Contracts, as calculated in
accordance with Regulation AB under the Securities Act of 1933, is less than 10%.
YIELD AND PREPAYMENT CONSIDERATIONSGeneral
The yield to maturity and weighted average life of each class of Offered Certificates will be affected by the amount and
timing of principal payments on the related mortgage loans, the allocation of available funds to such class of Certificates, the
applicable Pass-Through Rate for such class of Certificates, the purchase price paid for such Certificates and the amount of Excess
Spread. In addition, the yields on the Certificates will be adversely affected by Realized Losses and interest shortfalls on the
related mortgage loans. The interaction of the foregoing factors may have different effects on the various classes of Certificates,
and may have varying effects with respect to any one class of Certificates during the life of such class. No representation is made
as to the anticipated rate of prepayments on the mortgage loans, the amount and timing of Realized Losses or interest shortfalls or
as to the anticipated yield to maturity of any class of Certificates. Prospective investors are urged to consider their own estimates
as to the anticipated rate of future prepayments on the mortgage loans and the suitability of the Certificates to their investment
objectives. Investors should carefully consider the associated risks discussed below and under the heading “Legal Investment” herein
and under the headings “Yield Considerations,”“Maturity and Prepayment Considerations” and “Legal Investment Matters” in the
prospectus.
The mortgage interest rates on the mortgage loans will adjust monthly, semi-annually or annually, as applicable, after the
expiration of the applicable initial fixed-rate period, and may vary significantly over time. When a mortgage loan begins its
adjustable period, increases and decreases in the mortgage interest rate on that mortgage loan will be calculated for each monthly
accrual period based on the index as of a specified date. The index may not rise and fall consistently with mortgage interest
rates. As a result, the mortgage interest rates on the mortgage loans at any time may not equal the prevailing mortgage interest
rates for similar adjustable-rate loans and accordingly the prepayment rate may be lower or higher than would otherwise be
anticipated. Moreover, each mortgage loan is subject to a maximum interest rate.
Although mortgage interest rates will increase (subject to a maximum interest rate) or decrease as the index changes
(following the initial fixed-rate period), the Monthly Payments on the group II mortgage loans generally will adjust only once or
twice a year. Monthly payments on the group I mortgagte loans generally will adjust monthly. As a result, an increase or decrease in
the index will cause the amortization of the mortgage loans to decelerate or accelerate, thereby causing a corresponding change in
the amortization of the Certificates. In the event that an increase in the index causes the interest due on a mortgage loan for a
given month to exceed the current minimum monthly payment for that month, the shortfall in interest will be added to the outstanding
principal balance of that mortgage loan as Deferred Interest. In addition, because the initial minimum monthly payment is set based
on the initial fixed rate rather than the sum of the Margin and then-current Index, the minimum monthly payment could be less than
the interest due on that mortgage loan during at least the first year (or during the first five years, with respect to the 5 Yr. Bear
Stearns Secure Option ARM loans) of a mortgage loan. If a mortgagor only pays the minimum monthly payment due, there will likely be
negative amortization on the mortgage loan until such time that the minimum monthly payment will be reset to a fully amortizing
amount.
Prepayment Considerations
The rate of principal payments on each class of Offered Certificates (other than the Class I-X Certificates), the aggregate
amount of distributions on each class of Offered Certificates and the yield to maturity of each class of Offered Certificates will be
related to the rate and timing of payments of principal on the related mortgage loans. The rate of principal payments on the mortgage
loans will in turn be affected by the amortization schedules of the related mortgage loans and by the rate and timing of Principal
Prepayments on the related mortgage loans (including for this purpose payments resulting from refinancings, liquidations of the
mortgage loans due to defaults, casualties, condemnations and repurchases, whether optional or required). The mortgage loans
generally may be prepaid by the mortgagors at any time; however, as described under “Description of the Mortgage Loans” in this
prospectus supplement, with respect to approximately 80.70% of the mortgage loans, a prepayment may subject the related mortgagor to
a prepayment charge. Prepayment charges may be restricted under some state laws as described under “Legal Aspects of Mortgage
Loans-Enforceability of Certain Provisions” in the prospectus. Prepayment charges may be restricted under some state laws as described
under “Legal Aspects of Mortgage Loans” in the prospectus. All amounts representing three-year "hard" prepayment charges with
respect to the group I mortgage loans will be paid to the holders of the Class I-XP-2 Certificates, and all other prepayment charges
with respect to the group I mortgage loans, to the extent not retained by the Servicer, will be paid to the holders of the Class
I-XP-1 Certificates. All prepayment charges with respect to the group II mortgage loans will be paid to the holders of the Class
II-XP Certificates. Approximately 62.86% of the group I mortgage loans and approximately 64.76% of the group II mortgage loans are
assumable. The remainder of the mortgage loans are subject to customary due-on-sale provisions.
Because the interest rate on each mortgage loan adjust semi-annually or annually, as applicable, (after any initial fixed
period) and the minimum monthly payment adjusts annually, the portion of the monthly payment that will be applied to reduce the
principal balance of the mortgage loan may vary.
The negative amortization feature of the mortgage loans may affect the yield on the Certificates. As a result of the
negative amortization of the mortgage loans, the outstanding principal balance of a mortgage loan will increase by the amount of
Deferred Interest as described in this prospectus supplement under “Description of the Certificates-Interest.” During periods in
which the outstanding principal balance of a mortgage loan is increasing due to the addition of Deferred Interest, the increasing
principal balance of the mortgage loan may approach or exceed the value of the related mortgaged property, thus increasing both the
likelihood of defaults and the risk of loss on any mortgage loan that is required to be liquidated. Furthermore, each mortgage loan
provides for the payment of any remaining unamortized principal balance of such mortgage loan (due to the addition of Deferred
Interest, if any, to the principal balance of the mortgage loan) in a single payment at the maturity of the mortgage loan. Because
the mortgagors may be so required to make a larger single payment upon maturity, it is possible that the default risk associated with
the mortgage loans is greater than that associated with fully amortizing mortgage loans. The rate of Deferred Interest on the
mortgage loans will also affect the rate of principal distributions on the related certificates because scheduled and unscheduled
principal collections on the mortgage loans will be applied to cover Deferred Interest on the mortgage loans.
Principal Prepayments, liquidations and repurchases of the related mortgage loans, and with respect to the group I mortgage
loans, together with payments from the Final Maturity Reserve Account, will result in distributions in respect of principal to the
holders of the related Offered Certificates then entitled to receive these principal distributions that otherwise would be
distributed over the remaining terms of the mortgage loans. See “Maturity and Prepayment Considerations” in the prospectus. Since
the rate and timing of payments of principal on the mortgage loans will depend on future events and a variety of factors (as
described more fully in this prospectus supplement and in the prospectus under “Yield Considerations” and “Maturity and PrepaymentConsiderations”), no assurance can be given as to the rate of Principal Prepayments. The extent to which the yield to maturity of
any class of Offered Certificates may vary from the anticipated yield will depend upon the degree to which they are purchased at a
discount or premium and the degree to which the timing of payments on the Offered Certificates is sensitive to prepayments on the
mortgage loans. Further, an investor should consider, in the case of any Offered Certificate purchased at a discount, the risk that
a slower than anticipated rate of Principal Prepayments on the mortgage loans could result in an actual yield to an investor that is
lower than the anticipated yield and, in the case of any Offered Certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield to the investor that is lower than the anticipated yield. In
general, the earlier a prepayment of principal on the mortgage loans, the greater will be the effect on the investor’s yield to
maturity. As a result, the effect on an investor’s yield of principal payments occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately following the issuance of the Offered Certificates would not be fully
offset by a subsequent like reduction (or increase) in the rate of principal payments.
It is highly unlikely that the mortgage loans will prepay at any constant rate until maturity or that all of the mortgage
loans will prepay at the same rate. Moreover, the timing of prepayments on the mortgage loans may significantly affect the actual
yield to maturity on the Offered Certificates, even if the average rate of principal payments experienced over time is consistent
with an investor’s expectation.
Because principal distributions are paid to some classes of Offered Certificates before other classes, holders of classes of
Offered Certificates having a later priority of payment bear a greater risk of losses than holders of classes having earlier
priorities for distribution of principal.
The rate of payments (including prepayments) on pools of mortgage loans is influenced by a variety of economic, geographic,
social and other factors. If prevailing mortgage rates fall significantly below the mortgage rates on the mortgage loans, the rate of
prepayment (and refinancing) would be expected to increase. Conversely, if prevailing mortgage rates rise significantly above the
mortgage rates on the mortgage loans, the rate of prepayment on the mortgage loans would be expected to decrease. Other factors
affecting prepayment of mortgage loans include changes in mortgagors’ housing needs, job transfers, unemployment, mortgagors’ net
equity in the mortgaged properties and servicing decisions. In addition, the existence of the applicable periodic rate cap, maximum
mortgage rate and minimum mortgage rate may effect the likelihood of prepayments resulting from refinancings. There can be no
certainty as to the rate of prepayments on the mortgage loans during any period or over the life of the Certificates. See “YieldConsiderations” and “Maturity and Prepayment Considerations” in the prospectus.
Excess Spread. The weighted average life and yield to maturity of each class of Offered Certificates will also be
influenced by the amount of Excess Spread generated by the related mortgage loans and applied in reduction of the Current Principal
Amounts of the related Certificates. The level of Excess Spread for each Loan Group available on any distribution date to be applied
in reduction of the Current Principal Amounts of the related Offered Certificates and will be influenced by, among other factors,
o the overcollateralization level of the assets in the related mortgage pool at such time, i.e., the extent to which
interest on the related mortgage loans is accruing on a higher Stated Principal Balance than the aggregate Current
Principal Amount of the related Certificates;
o the delinquency and default experience of the related mortgage loans;
o whether a Coupon Strip payment, if applicable, is required to be made;
o the level of One-Month LIBOR, Six-Month LIBOR, One-Year LIBOR and One-Year MTA; and
o the provisions of the Agreement that permit principal collections to be distributed to the related Class B-IO
Certificates and the related Residual Certificates in each case as provided in the Agreement when required
overcollateralization levels have been met.
To the extent that greater amounts of Excess Spread are distributed in reduction of the Current Principal Amount of a class
of Offered Certificates, the weighted average life thereof can be expected to shorten. No assurance, however, can be given as to the
amount of Excess Spread to be distributed at any time or in the aggregate.
The yields to maturity of the Offered Certificates and, in particular the Subordinate Certificates, in the order of payment
priority, will be progressively more sensitive to the rate, timing and severity of Realized Losses on the related mortgage loans . If
an Applied Realized Loss Amount is allocated to a class of Offered Certificates , that class will thereafter accrue interest on a
reduced Current Principal Amount. Although the Applied Realized Loss Amount so allocated may be recovered on future distribution
dates to the extent Excess Cashflow is available for that purpose, there can be no assurance that those amounts will be available or
sufficient.
In general, defaults on mortgage loans are expected to occur with greater frequency in their early years. In addition,
default rates generally are higher for mortgage loans used to refinance an existing mortgage loan. In the event of a mortgagor’s
default on a mortgage loan, there can be no assurance that recourse beyond the specific mortgaged property pledged as security for
repayment will be available.
The Sponsor may, from time to time, implement programs designed to encourage refinancing. These programs may include,
without limitation, modifications of existing loans, general or targeted solicitations, the offering of pre-approved applications,
reduced origination fees or closing costs or other financial incentives. Targeted solicitations may be based on a variety of factors,
including the credit of the borrower or the location of the mortgaged property. In addition, the Sponsor may encourage assumptions of
mortgage loans, including defaulted mortgage loans, under which creditworthy borrowers assume the outstanding indebtedness of the
mortgage loans which may be removed from the related mortgage pool. As a result of these programs, with respect to the mortgage pool
underlying any trust, the rate of Principal Prepayments of the mortgage loans in the mortgage pool may be higher than would otherwise
be the case and in some cases, the average credit or collateral quality of the mortgage loans remaining in the mortgage pool may
decline.
Interest Shortfalls and Realized Losses
When a Principal Prepayment in full is made on a mortgage loan, the mortgagor is charged interest only for the period from
the Due Date of the preceding monthly payment up to the date of the Principal Prepayment, instead of for a full month. When a partial
Principal Prepayment is made on a mortgage loan, the mortgagor is not charged interest on the amount of the prepayment for the month
in which the prepayment is made. In addition, the application of the Relief Act or similar state law to any mortgage loan will
adversely affect, for an indeterminate period of time, the ability of the Servicer to collect full amounts of interest on the
mortgage loan. See “Legal Aspects of Mortgage Loans-The Servicemembers Civil Relief Act” in the prospectus. Any interest shortfalls
resulting from a Principal Prepayment in full or a partial Principal Prepayment are required to be paid by the Servicer, but only to
the extent that such amount does not exceed the Servicing Fee on the mortgage loans serviced by it for the related Due Period. The
Servicer is not obligated to fund interest shortfalls resulting from the application of the Relief Act or similar state law. See
“Pooling and Servicing Agreement-Servicing and Other Compensation and Payment of Expenses” in this prospectus supplement and “Legal
Aspects of Mortgage Loans-The Servicemembers Civil Relief Act” in the prospectus. Accordingly, the effect of (1) any Principal
Prepayments on the mortgage loans, to the extent that any resulting interest shortfall due to such Principal Prepayments exceeds any
Compensating Interest Payments or (2) any shortfalls resulting from the application of the Relief Act or similar state law, will be
to reduce the aggregate amount of interest collected that is available for distribution to holders of the Certificates. Any
resulting shortfalls will be allocated among the Certificates as provided in this prospectus supplement under “Description of the
Certificates-Interest Distributions.”
The yields to maturity and the aggregate amount of distributions on the Offered Certificates will be affected by the timing
of mortgagor defaults resulting in Realized Losses. The timing of Realized Losses on the related mortgage loans and the allocation
of Realized Losses to the related Offered Certificates could significantly affect the yield to an investor in the related
Certificates. In addition, Realized Losses on the mortgage loans may affect the market value of the related Certificates, even if
these losses are not allocated to the related Certificates.
The yield to maturity on the class of Subordinate Certificates in a Loan Group then outstanding with the lowest payment
priority will be extremely sensitive to losses on the related mortgage loans and the timing of those losses because the entire amount
of losses that are covered by subordination will be allocated to that class of Subordinate Certificates.
As described under “Description of the Certificates-Allocation of Losses; Subordination”, amounts otherwise distributable to
holders of the Subordinate Certificates in a Loan Group may be made available to protect the holders of the related Senior
Certificates against interruptions in distributions due to mortgagor delinquencies, to the extent not covered by Monthly Advances and
amounts otherwise distributable to holders of the Subordinate Certificates in a Loan Group with a lower priority may be made
available to protect the holders of Subordinate Certificates with a higher priority in such Loan Group against interruptions in
distributions. Delinquencies on the mortgage loans may affect the yield to investors on the related Subordinate Certificates, and,
even if subsequently cured, will affect the timing of the receipt of distributions by the holders of the related Subordinate
Certificates.
Pass-Through Rates
The yields to maturity on the Offered Certificates will be affected by their pass-through rates. The pass-through rates on
the Offered Certificates and the Class II-B-5 Certificates will be sensitive to the adjustable mortgage rates on the related mortgage
loans. As a result, these pass-through rates will be sensitive to the index on the mortgage loans, any periodic caps, maximum and
minimum rates and the related gross margins.
Assumed Final Distribution Date
The assumed final distribution date for distributions on the Group I Offered Certificates is December 2036 and the assumed
final distribution date for distributions on the Group II Offered Certificates is January 2037. It is intended that amounts
deposited in the Final Maturity Reserve Account will be sufficient to retire the Group I Offered Certificates on the assumed final
distribution date even though the outstanding Principal Balance of the group I mortgage loans having 40 year original terms to
maturity have not been reduced to zero on the assumed final distribution date. Since the rate of payment (including prepayments) of
principal on the mortgage loans can be expected to exceed the scheduled rate of payments and could exceed the scheduled rate by a
substantial amount, the disposition of the last remaining mortgage loan may be earlier and could be substantially earlier, than the
assumed final distribution date. Furthermore, the actual final distribution date with respect to each class of Offered Certificates
could occur significantly earlier than the assumed final distribution date because Excess Spread for each Loan Group to the extent
available and, with respect to Loan Group I, any amounts available for distribution from the Final Maturity Reserve Account, will be
applied as an accelerated payment of principal on the related Offered Certificates to the extent described in this prospectus
supplement. In addition, the Depositor or its designee may, at its option, repurchase all the mortgage loans in a Loan Group from
the trust and thereby effect the termination of the trust and early retirement of the related Certificates, on or after any
distribution date on which the aggregate unpaid principal balances of the mortgage loans in the related Loan Group are less than 10%
of the Cut-off Date Stated Principal Balance of the mortgage loans in such Loan Group. See “The Pooling and Servicing
Agreement-Termination” herein and “The Agreements-Termination; Retirement of Securities” in the prospectus.
Weighted Average Life
The weighted average life refers to the amount of time that will elapse from the date of issuance of a security until each
dollar of principal of the security will be repaid to the investor. The weighted average life of a Certificate is determined by (a)
multiplying the amount of the reduction, if any, of the Current Principal Amount of such Certificate by the number of years from the
date of issuance of such Certificate to the related distribution date, (b) adding the results and (c) dividing the sum by the
aggregate amount of the net reductions in the Current Principal Amount of such Certificate referred to in clause (a). The weighted
average life of the Offered Certificates of each class will be influenced by the rate at which principal on the mortgage loans is
paid, which may be in the form of scheduled payments or prepayments (including prepayments of principal by the mortgagor as well as
amounts received by virtue of condemnation, insurance or foreclosure with respect to the mortgage loans) and the timing thereof.
Prepayments on mortgage loans are commonly measured relative to a prepayment standard or model. The prepayment model used
in this prospectus supplement with respect to the mortgage loans, assumes a constant rate of prepayment each month or CPR, relative
to the then outstanding principal balance of a pool of mortgage loans similar to the mortgage loans. To assume a 25% CPR or any other
CPR is to assume that the stated percentage of the outstanding principal balance of the related mortgage pool is prepaid over the
course of a year. No representation is made that the mortgage loans will prepay at these or any other rates.
The Certificates were structured assuming, among other things, a 25% CPR for the Certificates. The prepayment assumption to
be used for pricing purposes for the respective classes may vary as determined at the time of sale. The actual rate of prepayment may
vary considerably from the rate used for any prepayment assumption.
The tables following the next paragraph indicate the percentages of the initial principal amount of the indicated classes of
Offered Certificates that would be outstanding after each of the dates shown at various percentages of the CPR and the corresponding
weighted average life of the indicated class of Offered Certificates . The table is based on the following modeling assumptions:
(1) the mortgage pool consists of 87 group I mortgage loans and 473 group II mortgage loans with the characteristics set
forth in the table below,
(2) the mortgage loans prepay at the specified percentages of the CPR,
(3) no defaults or delinquencies occur in the payment by mortgagors of principal and interest on the mortgage loans,
(4) scheduled payments on the mortgage loans are received, in cash, on the first day of each month, commencing in
January 2007 and are computed prior to giving effect to prepayments received on the last day of the prior month,
(5) prepayments are allocated as described herein assuming the loss and delinquency tests are satisfied,
(6) there are no interest shortfalls caused by (a) the application of the Relief Act or similar state law or (b)
prepayments on the mortgage loans, which in the case of (b) have not been covered by Compensating Interest Payments and prepayments
represent prepayments in full of individual mortgage loans and are received on the last day of each month, commencing in December
2006,
(7) Scheduled Monthly Payments of principal and interest on the mortgage loans are calculated on their respective
principal balances (prior to giving effect to prepayments received thereon during the preceding calendar month), mortgage rate and
remaining terms to stated maturity such that the mortgage loans will fully amortize by their stated maturities,
(8) the levels of One-Month LIBOR, One-Year MTA, Six-Month LIBOR and One-Year LIBOR remain constant at 5.350%, 4.883%,
5.300% and 5.120% respectively,
(9) the mortgage rate on each mortgage loan will be adjusted on each interest adjustment date (as necessary) to a rate
equal to the Index (as described in (8) above), plus the applicable gross margin, subject to maximum lifetime mortgage rates, minimum
lifetime mortgage rates and periodic caps (as applicable),
(10) Scheduled Monthly Payments of principal and interest on the group I mortgage loans will be adjusted in the payment
adjustment date set forth in the following table, subject to periodic payment caps of 7.50%, negative amortization limits of 110% or
115%, as applicable, rate change frequencies of 1 month (after expiration of the initial interest periods) and payment change
frequencies of twelve months, and Scheduled Monthly Payments of principal and interest on the group II mortgage loans will adjust
every 6 months or every 12 months (as applicable) after the first 5 years following origination, subject to negative amortization
limits of 110% or 115%, as applicable,
(11) the initial principal amounts and notional amounts of the Certificates are as set forth on pages S-2 and S-3 in
this prospectus supplement and under “Summary of Terms-Description of the Certificates”,
(12) distributions in respect of the Offered Certificates are received in cash on the 25th day of each month, commencing
in January 2007,
(13) the Offered Certificates are purchased on December 29, 2006,
(14) the Servicing Fee Rate remains constant at 0.375%,
(15) neither the Depositor nor its designee exercises the option to repurchase the mortgage loans in either Loan Group
described under the caption “The Pooling and Servicing Agreement-Termination”, and
(16) the Group I Offered Certificates will be paid in full on the distribution date in December 2036 without application
of the amounts in the Final Maturity Reserve Account.
MORTGAGE LOAN ASSUMPTIONS
Original Remaining
Term to Term to
Current Current Initial Maturity Maturity Initial Subsequent
Loan Group Gross Mortgage Net Mortgage Monthly (in (in Gross Periodic Periodic
Number Group Balance ($) Rate (%) Rate (%) Payment ($) months) months) Margin (%) Rate Cap (%) Rate Cap (%)
1 I 533,843.00 8.3750000000 8.0000000000 1,717.56 360 358 3.5000000000 Uncapped Uncapped
2 I 3,831,393.29 1.0000000000 0.6250000000 12,326.70 360 360 3.1947650864 Uncapped Uncapped
3 I 388,000.00 1.0000000000 0.6250000000 1,247.96 360 360 3.5000000000 Uncapped Uncapped
4 I 168,000.00 2.0000000000 1.6250000000 620.97 360 360 3.5000000000 Uncapped Uncapped
5 I 12,121,096.74 8.3201896091 7.9451896091 39,098.40 360 359 3.4451896091 Uncapped Uncapped
6 I 331,208.82 8.3750000000 8.0000000000 1,067.85 360 359 3.5000000000 Uncapped Uncapped
7 I 2,029,372.91 8.2449286945 7.8699286945 7,516.25 360 359 3.3699286945 Uncapped Uncapped
8 I 6,883,910.70 8.1953264198 7.8203264198 22,126.24 360 358 3.3046246473 Uncapped Uncapped
9 I 444,504.07 8.3750000000 8.0000000000 1,641.12 360 358 3.5000000000 Uncapped Uncapped
10 I 290,108.19 8.3750000000 8.0000000000 1,064.50 360 356 3.5000000000 Uncapped Uncapped
11 I 5,120,524.50 1.0000000000 0.6250000000 12,952.18 480 480 3.4095747713 Uncapped Uncapped
12 I 508,792.00 1.0000000000 0.6250000000 1,286.52 480 480 3.5000000000 Uncapped Uncapped
13 I 352,000.00 2.0000000000 1.6250000000 1,065.95 480 480 3.5000000000 Uncapped Uncapped
14 I 297,500.00 3.0000000000 2.6250000000 1,065.01 480 480 3.5000000000 Uncapped Uncapped
15 I 5,762,550.17 8.1255325255 7.7505325255 14,596.41 480 479 3.2505325255 Uncapped Uncapped
16 I 1,190,376.96 8.3750000000 8.0000000000 3,609.70 480 479 3.5000000000 Uncapped Uncapped
17 I 935,097.76 8.1783478941 7.8033478941 2,358.62 480 478 3.3033478941 Uncapped Uncapped
18 I 3,891,754.00 1.7500000000 1.3750000000 13,932.50 360 359 3.3750000000 Uncapped Uncapped
19 I 2,426,600.28 2.2500000000 1.8750000000 9,319.16 360 359 3.3750000000 Uncapped Uncapped
20 I 3,265,250.00 1.7500000000 1.3750000000 11,664.91 360 360 3.3614194931 Uncapped Uncapped
21 I 327,218.35 8.3750000000 8.0000000000 1,054.98 360 359 3.5000000000 Uncapped Uncapped
22 I 263,370.87 8.3750000000 8.0000000000 849.13 360 359 3.5000000000 Uncapped Uncapped
23 I 4,879,200.00 1.0000000000 0.6250000000 15,693.48 360 360 3.3380792445 Uncapped Uncapped
24 I 1,413,200.00 1.0000000000 0.6250000000 4,545.42 360 360 3.5000000000 Uncapped Uncapped
25 I 546,000.00 2.0000000000 1.6250000000 2,018.12 360 360 3.5000000000 Uncapped Uncapped
26 I 41,773,204.65 8.2275626561 7.8525626561 134,692.63 360 359 3.3525626561 Uncapped Uncapped
27 I 1,725,198.91 8.3750000000 8.0000000000 5,562.19 360 359 3.5000000000 Uncapped Uncapped
28 I 5,280,481.29 8.3166604301 7.9416604301 19,557.39 360 359 3.4416604301 Uncapped Uncapped
29 I 39,690,395.93 8.1983788267 7.8233788267 127,826.47 360 358 3.3214643161 Uncapped Uncapped
30 I 1,548,268.85 8.3750000000 8.0000000000 4,989.92 360 358 3.5000000000 Uncapped Uncapped
31 I 1,501,811.20 8.3750000000 8.0000000000 5,176.80 360 358 3.5000000000 Uncapped Uncapped
32 I 1,654,912.96 8.2777113517 7.9027113517 6,110.45 360 358 3.4027113517 Uncapped Uncapped
33 I 1,787,896.85 8.2626353172 7.8876353172 5,724.06 360 357 3.3876353172 Uncapped Uncapped
34 I 465,391.93 7.7500000000 7.3750000000 1,714.74 360 357 2.8750000000 Uncapped Uncapped
35 I 11,458,716.16 1.0000000000 0.6250000000 28,983.09 480 480 3.4040304058 Uncapped Uncapped
36 I 1,219,200.00 1.0000000000 0.6250000000 3,082.83 480 480 3.5000000000 Uncapped Uncapped
37 I 21,057,343.34 8.3360184037 7.9610184037 53,335.24 480 479 3.4610184037 Uncapped Uncapped
38 I 565,439.82 8.3750000000 8.0000000000 1,432.18 480 479 3.5000000000 Uncapped Uncapped
39 I 2,168,543.30 8.3750000000 8.0000000000 6,575.86 480 479 3.5000000000 Uncapped Uncapped
40 I 22,285,030.02 8.2748380186 7.8998380186 56,215.42 480 478 3.3998380186 Uncapped Uncapped
41 I 862,061.46 8.3750000000 8.0000000000 2,174.04 480 478 3.5000000000 Uncapped Uncapped
42 I 600,733.63 8.3750000000 8.0000000000 1,814.68 480 478 3.5000000000 Uncapped Uncapped
43 I 653,508.33 8.3750000000 8.0000000000 1,643.56 480 477 3.5000000000 Uncapped Uncapped
44 I 1,714,097.02 8.0000000000 7.6250000000 4,729.26 480 477 3.1250000000 Uncapped Uncapped
45 I 598,982.86 7.7500000000 7.3750000000 1,517.14 480 476 2.8750000000 Uncapped Uncapped
46 I 483,750.00 2.0000000000 1.6250000000 1,788.04 360 360 3.5000000000 Uncapped Uncapped
47 I 1,987,751.75 7.9824654965 7.6074654965 6,408.67 360 359 3.1074654965 Uncapped Uncapped
48 I 410,032.53 8.3750000000 8.0000000000 1,321.98 360 359 3.5000000000 Uncapped Uncapped
49 I 992,000.00 1.0000000000 0.6250000000 2,508.33 480 480 3.2500000000 Uncapped Uncapped
50 I 186,084.00 8.3750000000 8.0000000000 471.33 480 479 3.5000000000 Uncapped Uncapped
51 I 857,950.57 8.2500000000 7.8750000000 2,766.10 360 359 3.3750000000 Uncapped Uncapped
52 I 548,690.02 8.3750000000 8.0000000000 1,762.58 360 358 3.5000000000 Uncapped Uncapped
53 I 462,044.20 8.3750000000 8.0000000000 1,479.54 360 357 3.5000000000 Uncapped Uncapped
54 I 206,449.42 8.1250000000 7.7500000000 522.91 480 479 3.2500000000 Uncapped Uncapped
55 I 268,000.00 2.0000000000 1.6250000000 990.59 360 360 3.2500000000 Uncapped Uncapped
56 I 283,323.21 8.5000000000 8.1250000000 913.46 360 359 3.6250000000 Uncapped Uncapped
57 I 32,237,539.08 1.0000000000 0.6250000000 103,710.56 360 360 3.3868164270 Uncapped Uncapped
58 I 9,459,174.00 1.0000000000 0.6250000000 30,424.51 360 360 3.4411832101 Uncapped Uncapped
59 I 5,213,342.26 2.0000000000 1.6250000000 19,272.08 360 360 3.2667121614 Uncapped Uncapped
60 I 108,141,336.80 8.3907839239 8.0157839239 348,683.35 360 359 3.5157839239 Uncapped Uncapped
61 I 8,407,030.82 8.3720689848 7.9970689848 27,101.39 360 359 3.4970689848 Uncapped Uncapped
62 I 34,827,928.16 8.4393753837 8.0643753837 128,994.86 360 359 3.5643753837 Uncapped Uncapped
63 I 2,394,034.67 8.5558216764 8.1808216764 10,110.71 360 359 3.6808216764 Uncapped Uncapped
64 I 110,300,951.13 8.3802392475 8.0052392475 354,436.37 360 358 3.5052392475 Uncapped Uncapped
65 I 7,853,284.71 8.3988234359 8.0238234359 25,248.35 360 358 3.5238234359 Uncapped Uncapped
66 I 41,690,176.41 8.4907153844 8.1157153844 153,939.65 360 358 3.6157153844 Uncapped Uncapped
67 I 1,644,175.18 8.4085341822 8.0335341822 6,925.27 360 358 3.5335341822 Uncapped Uncapped
68 I 3,695,736.52 8.4076045135 8.0326045135 11,830.07 360 357 3.5326045135 Uncapped Uncapped
69 I 1,830,036.88 8.4041203551 8.0291203551 5,859.21 360 357 3.5291203551 Uncapped Uncapped
70 I 2,277,773.83 8.2307623250 7.8557623250 8,389.91 360 357 3.3774234029 Uncapped Uncapped
71 I 1,068,867.66 8.4586845800 8.0836845800 4,490.08 360 357 3.5836845800 Uncapped Uncapped
72 I 660,980.78 8.2601307276 7.8851307276 2,110.92 360 356 3.3851307276 Uncapped Uncapped
73 I 505,822.26 8.3750000000 8.0000000000 1,608.20 360 355 3.5000000000 Uncapped Uncapped
74 I 23,080,165.00 1.0000000000 0.6250000000 58,359.84 480 480 3.5183845414 Uncapped Uncapped
75 I 10,403,821.16 1.0000000000 0.6250000000 26,308.94 480 480 3.5888305970 Uncapped Uncapped
76 I 4,197,028.60 2.0000000000 1.6250000000 12,711.60 480 480 3.4814520146 Uncapped Uncapped
77 I 97,947,013.30 8.4180081730 8.0430081730 248,116.19 480 479 3.5430081730 Uncapped Uncapped
78 I 8,819,353.58 8.4567029982 8.0817029982 22,338.39 480 479 3.5817029982 Uncapped Uncapped
79 I 21,959,756.60 8.4342524710 8.0592524710 66,593.14 480 479 3.5592524710 Uncapped Uncapped
80 I 68,632,392.01 8.4401162305 8.0651162305 173,092.91 480 478 3.5626016859 Uncapped Uncapped
81 I 2,986,049.50 8.4521620468 8.0771620468 7,535.44 480 478 3.5771620468 Uncapped Uncapped
82 I 11,637,363.10 8.5449248736 8.1699248736 35,153.94 480 478 3.6699248736 Uncapped Uncapped
83 I 421,014.73 8.6250000000 8.2500000000 1,503.53 480 478 3.7500000000 Uncapped Uncapped
84 I 2,788,057.35 8.2755361520 7.9005361520 7,007.91 480 477 3.4005361520 Uncapped Uncapped
85 I 475,373.44 8.3750000000 8.0000000000 1,430.85 480 477 3.5000000000 Uncapped Uncapped
86 I 362,118.32 8.5000000000 8.1250000000 905.22 480 476 3.6250000000 Uncapped Uncapped
87 I 167,200.00 1.7500000000 1.3750000000 597.32 360 360 3.5000000000 Uncapped Uncapped
88 II 233,866.41 6.0000000000 5.6250000000 581.75 360 358 2.2500000000 5.0000000000 1.0000000000
89 II 1,271,055.89 6.8750000000 6.5000000000 4,093.14 360 358 2.2500000000 5.0000000000 1.0000000000
90 II 293,464.49 7.3750000000 7.0000000000 1,064.58 360 358 2.2500000000 5.0000000000 1.0000000000
91 II 315,574.91 7.5000000000 7.1250000000 1,177.50 360 358 2.2500000000 5.0000000000 1.0000000000
92 II 249,422.00 6.5000000000 6.1250000000 725.67 360 359 2.2500000000 5.0000000000 1.0000000000
93 II 546,863.75 6.6250000000 6.2500000000 1,647.86 360 359 2.2500000000 5.0000000000 1.0000000000
94 II 244,610.00 6.7500000000 6.3750000000 762.50 360 359 2.2500000000 5.0000000000 1.0000000000
95 II 250,625.00 7.1250000000 6.7500000000 859.38 360 359 2.2500000000 5.0000000000 1.0000000000
96 II 208,520.00 7.7500000000 7.3750000000 823.33 360 359 2.2500000000 5.0000000000 1.0000000000
97 II 518,793.75 7.5000000000 7.1250000000 1,940.63 360 359 2.2500000000 5.0000000000 1.0000000000
98 II 248,820.50 7.7500000000 7.3750000000 982.46 360 359 2.2500000000 5.0000000000 1.0000000000
99 II 240,600.00 7.8750000000 7.5000000000 975.00 360 359 2.2500000000 5.0000000000 1.0000000000
100 II 166,244.47 6.7500000000 6.3750000000 515.63 360 357 2.2500000000 5.0000000000 1.0000000000
101 II 369,547.67 7.1250000000 6.7500000000 1,265.00 360 357 2.2500000000 5.0000000000 1.0000000000
102 II 222,668.23 7.7500000000 7.3750000000 874.79 360 357 2.2500000000 1.5000000000 1.0000000000
103 II 515,864.84 7.7500000000 7.3750000000 2,026.67 360 357 2.2500000000 5.0000000000 1.0000000000
104 II 1,143,202.01 6.1250000000 5.7500000000 2,962.24 360 358 2.2500000000 5.0000000000 1.0000000000
105 II 155,036.63 6.3750000000 6.0000000000 434.95 360 358 2.2500000000 5.0000000000 1.0000000000
106 II 2,899,944.32 6.5000000000 6.1250000000 8,423.63 360 358 2.2500000000 5.0000000000 1.0000000000
107 II 245,022.30 6.5000000000 6.1250000000 711.08 360 358 2.2500000000 5.0000000000 1.0000000000
108 II 1,343,664.49 6.6250000000 6.2500000000 4,038.85 360 358 2.2500000000 5.0000000000 1.0000000000
109 II 1,155,766.17 6.7500000000 6.3750000000 3,593.75 360 358 2.2500000000 5.0000000000 1.0000000000
110 II 502,484.42 6.7500000000 6.3750000000 1,565.00 360 358 2.2500000000 5.0000000000 1.0000000000
111 II 1,856,260.85 6.8750000000 6.5000000000 5,964.28 360 358 2.2500000000 5.0000000000 1.0000000000
112 II 182,912.61 6.8750000000 6.5000000000 587.71 360 358 2.2500000000 5.0000000000 1.0000000000
113 II 2,788,729.19 7.1250000000 6.7500000000 9,544.21 360 358 2.2500000000 5.0000000000 1.0000000000
114 II 817,077.07 7.1250000000 6.7500000000 2,794.69 360 358 2.2500000000 5.0000000000 1.0000000000
115 II 2,810,122.75 7.2500000000 6.8750000000 9,902.85 360 358 2.2500000000 5.0000000000 1.0000000000
116 II 180,098.70 7.2500000000 6.8750000000 634.67 360 358 2.2500000000 5.0000000000 1.0000000000
117 II 2,207,415.75 7.3750000000 7.0000000000 8,007.70 360 358 2.2500000000 5.0000000000 1.0000000000
118 II 1,817,771.51 7.3750000000 7.0000000000 6,602.28 360 358 2.2500000000 5.0000000000 1.0000000000
119 II 4,116,598.27 7.5000000000 7.1250000000 15,372.57 360 358 2.2500000000 5.0000000000 1.0000000000
120 II 2,903,329.51 7.5000000000 7.1250000000 10,833.75 360 358 2.2500000000 5.0000000000 1.0000000000
121 II 2,423,515.01 7.6250000000 7.2500000000 9,295.17 360 358 2.2500000000 5.0000000000 1.0000000000
122 II 2,549,524.31 7.6250000000 7.2500000000 9,777.24 360 358 2.2500000000 5.0000000000 1.0000000000
123 II 2,949,961.77 7.7500000000 7.3750000000 11,623.65 360 358 2.2500000000 5.0000000000 1.0000000000
124 II 3,357,053.40 7.7500000000 7.3750000000 13,224.12 360 358 2.2500000000 5.0000000000 1.0000000000
125 II 1,298,481.20 7.8750000000 7.5000000000 5,248.75 360 358 2.2500000000 5.0000000000 1.0000000000
126 II 3,708,912.55 7.8750000000 7.5000000000 14,992.25 360 358 2.2500000000 5.0000000000 1.0000000000
127 II 1,196,317.17 8.0000000000 7.6250000000 4,960.30 360 358 2.2500000000 5.0000000000 1.0000000000
128 II 2,836,559.02 8.0000000000 7.6250000000 11,760.01 360 358 2.2500000000 5.0000000000 1.0000000000
129 II 1,459,133.80 8.1250000000 7.7500000000 6,200.62 360 358 2.2500000000 5.0000000000 1.0000000000
130 II 1,012,799.57 8.1250000000 7.7500000000 4,305.00 360 358 2.2500000000 5.0000000000 1.0000000000
131 II 1,491,445.51 8.2500000000 7.8750000000 6,492.50 360 358 2.2500000000 5.0000000000 1.0000000000
132 II 1,039,478.87 8.2500000000 7.8750000000 4,529.00 360 358 2.2500000000 5.0000000000 1.0000000000
133 II 3,374,622.03 8.3750000000 8.0000000000 15,047.31 360 358 2.2500000000 5.0000000000 1.0000000000
134 II 3,188,710.40 8.3750000000 8.0000000000 14,216.26 360 358 2.2500000000 5.0000000000 1.0000000000
135 II 1,466,521.84 8.5000000000 8.1250000000 6,688.00 360 358 2.2500000000 5.0000000000 1.0000000000
136 II 296,279.22 8.5000000000 8.1250000000 1,351.17 360 358 2.2500000000 5.0000000000 1.0000000000
137 II 290,624.75 5.7500000000 5.3750000000 664.35 360 359 2.2500000000 5.0000000000 1.0000000000
138 II 348,870.00 5.8750000000 5.5000000000 833.75 360 359 2.2500000000 5.0000000000 1.0000000000
139 II 396,990.00 6.1250000000 5.7500000000 1,031.25 360 359 2.2500000000 5.0000000000 1.0000000000
140 II 406,012.49 6.2500000000 5.8750000000 1,096.88 360 359 2.2500000000 5.0000000000 1.0000000000
141 II 2,157,881.25 6.3750000000 6.0000000000 6,053.91 360 359 2.2500000000 5.0000000000 1.0000000000
142 II 247,818.00 6.3750000000 6.0000000000 695.25 360 359 2.2500000000 5.0000000000 1.0000000000
143 II 3,750,152.00 6.5000000000 6.1250000000 10,910.66 360 359 2.2500000000 4.4787211292 1.0000000000
144 II 1,706,569.53 6.6250000000 6.2500000000 5,145.68 360 359 2.2500000000 5.0000000000 1.0000000000
145 II 1,886,304.00 6.6250000000 6.2500000000 5,684.00 360 359 2.2500000000 5.0000000000 1.0000000000
146 II 1,985,401.12 6.7500000000 6.3750000000 6,188.91 360 359 2.2500000000 5.0000000000 1.0000000000
147 II 8,465,611.24 6.8750000000 6.5000000000 27,268.73 360 359 2.2500000000 4.8578956716 1.0000000000
148 II 1,117,988.00 6.8750000000 6.5000000000 3,601.17 360 359 2.2500000000 5.0000000000 1.0000000000
149 II 10,741,518.16 7.0000000000 6.6250000000 35,716.11 360 359 2.2500000000 5.0000000000 1.0000000000
150 II 2,562,436.12 7.0000000000 6.6250000000 8,520.15 360 359 2.2500000000 5.0000000000 1.0000000000
151 II 11,037,132.68 7.1250000000 6.7500000000 37,845.62 360 359 2.3573462315 5.0000000000 1.0000000000
152 II 2,302,442.68 7.1250000000 6.7500000000 7,894.92 360 359 2.2500000000 5.0000000000 1.0000000000
153 II 11,470,362.05 7.2500000000 6.8750000000 40,529.61 360 359 2.2500000000 5.0000000000 1.0000000000
154 II 5,574,782.20 7.2500000000 6.8750000000 19,694.80 360 359 2.2500000000 5.0000000000 1.0000000000
155 II 9,603,092.65 7.3750000000 7.0000000000 34,926.69 360 359 2.2500000000 4.8509261493 1.0000000000
156 II 5,638,614.16 7.3750000000 7.0000000000 20,509.86 360 359 2.2500000000 5.0000000000 1.0000000000
157 II 13,762,864.15 7.5000000000 7.1250000000 51,483.74 360 359 2.2500000000 5.0000000000 1.0000000000
158 II 8,553,327.01 7.5000000000 7.1250000000 31,994.98 360 359 2.2734411709 5.0000000000 1.0000000000
159 II 9,364,554.99 7.6250000000 7.2500000000 36,002.56 360 359 2.2500000000 5.0000000000 1.0000000000
160 II 4,301,125.98 7.6250000000 7.2500000000 16,535.92 360 359 2.2500000000 5.0000000000 1.0000000000
161 II 13,144,679.72 7.7500000000 7.3750000000 51,901.28 360 359 2.2500000000 5.0000000000 1.0000000000
162 II 4,148,665.80 7.7500000000 7.3750000000 16,380.85 360 359 2.2500000000 5.0000000000 1.0000000000
163 II 14,554,832.77 7.8750000000 7.5000000000 58,985.06 360 359 2.2500000000 5.0000000000 1.0000000000
164 II 7,886,680.03 7.8750000000 7.5000000000 31,963.54 360 359 2.2500000000 5.0000000000 1.0000000000
165 II 9,440,562.55 8.0000000000 7.6250000000 39,237.59 360 359 2.2500000000 5.0000000000 1.0000000000
166 II 4,369,616.79 8.0000000000 7.6250000000 18,161.35 360 359 2.2500000000 5.0000000000 1.0000000000
167 II 4,335,261.12 8.1250000000 7.7500000000 18,469.01 360 359 2.2500000000 5.0000000000 1.0000000000
168 II 2,966,076.70 8.1250000000 7.7500000000 12,636.03 360 359 2.2500000000 5.0000000000 1.0000000000
169 II 5,684,776.49 8.2500000000 7.8750000000 24,808.90 360 359 2.2500000000 5.0000000000 1.0000000000
170 II 3,999,387.53 8.2500000000 7.8750000000 17,453.69 360 359 2.2500000000 5.0000000000 1.0000000000
171 II 5,871,622.44 8.3750000000 8.0000000000 26,234.41 360 359 2.2500000000 5.0000000000 1.0000000000
172 II 3,821,595.45 8.3750000000 8.0000000000 17,078.35 360 359 2.2500000000 5.0000000000 1.0000000000
173 II 314,785.00 8.5000000000 8.1250000000 1,439.17 360 359 2.2500000000 5.0000000000 1.0000000000
174 II 350,474.00 8.5000000000 8.1250000000 1,602.33 360 359 2.2500000000 5.0000000000 1.0000000000
175 II 346,463.99 8.6250000000 8.2500000000 1,620.01 360 359 2.2500000000 5.0000000000 1.0000000000
176 II 480,000.00 10.1250000000 9.7500000000 2,850.01 360 360 2.2500000000 5.0000000000 1.0000000000
177 II 267,000.00 6.2500000000 5.8750000000 723.13 360 360 2.2500000000 5.0000000000 1.0000000000
178 II 767,419.00 6.5000000000 6.1250000000 2,238.31 360 360 2.2500000000 5.0000000000 1.0000000000
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395 II 380,950.00 7.7500000000 7.3750000000 1,504.17 360 359 2.2500000000 5.0000000000 1.0000000000
396 II 693,729.99 8.0000000000 7.6250000000 2,883.34 360 359 2.2500000000 5.0000000000 1.0000000000
397 II 721,800.00 8.1250000000 7.7500000000 3,075.00 360 359 2.2500000000 5.0000000000 1.0000000000
398 II 765,909.99 8.3750000000 8.0000000000 3,422.09 360 359 2.2500000000 5.0000000000 1.0000000000
399 II 288,641.23 8.7500000000 8.3750000000 1,376.17 360 359 2.2500000000 5.0000000000 1.0000000000
400 II 180,000.00 6.7500000000 6.3750000000 562.51 360 360 2.2500000000 5.0000000000 1.0000000000
401 II 608,232.00 6.8750000000 6.5000000000 1,964.09 360 360 2.2500000000 5.0000000000 1.0000000000
402 II 631,600.00 7.0000000000 6.6250000000 2,105.34 360 360 2.2500000000 5.0000000000 1.0000000000
403 II 412,450.00 7.1250000000 6.7500000000 1,417.80 360 360 2.2500000000 5.0000000000 1.0000000000
404 II 269,760.00 7.1250000000 6.7500000000 927.31 360 360 2.2500000000 5.0000000000 1.0000000000
405 II 408,000.00 7.2500000000 6.8750000000 1,445.01 360 360 2.2500000000 5.0000000000 1.0000000000
406 II 1,290,400.00 7.2500000000 6.8750000000 4,570.19 360 360 2.2500000000 5.0000000000 1.0000000000
407 II 908,800.00 7.3750000000 7.0000000000 3,313.34 360 360 2.2500000000 5.0000000000 1.0000000000
408 II 324,000.00 7.5000000000 7.1250000000 1,215.01 360 360 2.2500000000 5.0000000000 1.0000000000
409 II 1,030,400.00 7.5000000000 7.1250000000 3,864.03 360 360 2.2500000000 5.0000000000 1.0000000000
410 II 1,780,350.00 7.6250000000 7.2500000000 6,861.79 360 360 2.2500000000 5.0000000000 1.0000000000
411 II 262,400.00 7.6250000000 7.2500000000 1,011.34 360 360 2.2500000000 5.0000000000 1.0000000000
412 II 502,750.00 7.7500000000 7.3750000000 1,990.06 360 360 2.2500000000 5.0000000000 1.0000000000
413 II 996,800.00 7.7500000000 7.3750000000 3,945.67 360 360 2.2500000000 5.0000000000 1.0000000000
414 II 220,000.00 7.8750000000 7.5000000000 893.76 360 360 2.2500000000 5.0000000000 1.0000000000
415 II 650,400.00 7.8750000000 7.5000000000 2,642.27 360 360 2.2500000000 5.0000000000 1.0000000000
416 II 1,610,000.00 8.0000000000 7.6250000000 6,708.35 360 360 2.2500000000 5.0000000000 1.0000000000
417 II 240,000.00 8.1250000000 7.7500000000 1,025.00 360 360 2.2500000000 5.0000000000 1.0000000000
418 II 440,000.00 8.1250000000 7.7500000000 1,879.17 360 360 2.2500000000 5.0000000000 1.0000000000
419 II 672,000.00 8.5000000000 8.1250000000 3,080.00 360 360 2.2500000000 5.0000000000 1.0000000000
420 II 668,800.00 8.5000000000 8.1250000000 3,065.34 360 360 2.2500000000 5.0000000000 1.0000000000
421 II 151,358.01 6.8750000000 6.5000000000 490.83 360 357 2.2500000000 5.0000000000 1.0000000000
422 II 1,552,245.57 7.3750000000 7.0000000000 5,618.96 360 357 2.5376115246 5.0000000000 1.0000000000
423 II 538,536.66 7.5000000000 7.1250000000 2,010.94 360 357 2.2500000000 5.0000000000 1.0000000000
424 II 677,073.15 7.8750000000 7.5000000000 2,730.00 360 357 2.2500000000 5.0000000000 1.0000000000
425 II 536,016.24 7.8750000000 7.5000000000 2,161.25 360 357 2.2500000000 5.0000000000 1.0000000000
426 II 278,084.26 8.2500000000 7.8750000000 1,207.50 360 357 2.2500000000 5.0000000000 1.0000000000
427 II 515,866.87 8.3750000000 8.0000000000 2,293.33 360 357 2.2500000000 5.0000000000 1.0000000000
428 II 237,183.25 6.6250000000 6.2500000000 712.92 360 358 2.2500000000 5.0000000000 1.0000000000
429 II 432,156.05 6.7500000000 6.3750000000 1,343.75 360 358 2.2500000000 5.0000000000 1.0000000000
430 II 1,377,824.39 6.8750000000 6.5000000000 4,427.02 360 358 2.2500000000 5.0000000000 1.0000000000
431 II 816,071.84 7.0000000000 6.6250000000 2,706.67 360 358 2.2500000000 5.0000000000 1.0000000000
432 II 498,758.83 7.0000000000 6.6250000000 1,656.00 360 358 2.2500000000 5.0000000000 1.0000000000
433 II 1,629,570.18 7.1250000000 6.7500000000 5,578.25 360 358 2.2500000000 5.0000000000 1.0000000000
434 II 965,517.68 7.1250000000 6.7500000000 3,302.75 360 358 2.2500000000 5.0000000000 1.0000000000
435 II 522,607.85 7.2500000000 6.8750000000 1,841.67 360 358 2.2500000000 5.0000000000 1.0000000000
436 II 1,301,695.57 7.2500000000 6.8750000000 4,587.17 360 358 2.2500000000 5.0000000000 1.0000000000
437 II 1,861,187.95 7.3750000000 7.0000000000 6,751.72 360 358 2.2500000000 5.0000000000 1.0000000000
438 II 3,067,127.07 7.3750000000 7.0000000000 11,124.50 360 358 2.2500000000 5.0000000000 1.0000000000
439 II 5,171,914.61 7.5000000000 7.1250000000 19,302.00 360 358 2.2500000000 5.0000000000 1.0000000000
440 II 2,695,819.44 7.5000000000 7.1250000000 10,071.15 360 358 2.2500000000 5.0000000000 1.0000000000
441 II 2,531,484.25 7.6250000000 7.2500000000 9,708.07 360 358 2.2500000000 5.0000000000 1.0000000000
442 II 4,241,980.75 7.6250000000 7.2500000000 16,271.76 360 358 2.2840053240 5.0000000000 1.0000000000
443 II 4,104,385.42 7.7500000000 7.3750000000 16,165.45 360 358 2.2500000000 5.0000000000 1.0000000000
444 II 3,647,999.57 7.7500000000 7.3750000000 14,367.92 360 358 2.2500000000 5.0000000000 1.0000000000
445 II 6,789,399.91 7.8750000000 7.5000000000 27,444.44 360 358 2.2500000000 5.0000000000 1.0000000000
446 II 4,091,078.10 7.8750000000 7.5000000000 16,538.83 360 358 2.2500000000 5.0000000000 1.0000000000
447 II 2,126,163.02 8.0000000000 7.6250000000 8,814.79 360 358 2.2500000000 5.0000000000 1.0000000000
448 II 1,875,189.38 8.0000000000 7.6250000000 7,777.66 360 358 2.2500000000 5.0000000000 1.0000000000
449 II 1,503,852.29 8.1250000000 7.7500000000 6,395.20 360 358 2.2500000000 5.0000000000 1.0000000000
450 II 2,746,510.28 8.1250000000 7.7500000000 11,671.31 360 358 2.2500000000 5.0000000000 1.0000000000
451 II 1,176,473.12 8.2500000000 7.8750000000 5,121.38 360 358 2.2500000000 5.0000000000 1.0000000000
452 II 4,300,320.34 8.2500000000 7.8750000000 18,725.00 360 358 2.2500000000 5.0000000000 1.0000000000
453 II 2,457,356.70 8.3750000000 8.0000000000 10,962.67 360 358 2.2500000000 5.0000000000 1.0000000000
454 II 6,214,014.70 8.3750000000 8.0000000000 27,702.51 360 358 2.2500000000 5.0000000000 1.0000000000
455 II 346,729.94 6.8750000000 6.5000000000 1,114.06 360 358 2.2500000000 5.0000000000 1.0000000000
456 II 573,429.99 10.1250000000 9.7500000000 3,396.26 360 359 2.2500000000 5.0000000000 1.0000000000
457 II 183,501.22 6.0000000000 5.6250000000 460.01 360 359 2.2500000000 5.0000000000 1.0000000000
458 II 839,593.75 6.3750000000 6.0000000000 2,355.47 360 359 2.2500000000 5.0000000000 1.0000000000
459 II 1,459,940.74 6.5000000000 6.1250000000 4,247.55 360 359 2.2500000000 5.0000000000 1.0000000000
460 II 593,480.00 6.6250000000 6.2500000000 1,788.33 360 359 2.2500000000 5.0000000000 1.0000000000
461 II 312,739.90 6.6250000000 6.2500000000 942.38 360 359 2.2500000000 5.0000000000 1.0000000000
462 II 7,008,458.37 6.7500000000 6.3750000000 21,849.16 360 359 2.2500000000 5.0000000000 1.0000000000
463 II 1,330,116.99 6.7500000000 6.3750000000 4,146.26 360 359 2.2500000000 5.0000000000 1.0000000000
464 II 6,316,552.00 6.8750000000 6.5000000000 20,346.35 360 359 2.2500000000 4.8800152362 1.0000000000
465 II 1,598,190.66 6.8750000000 6.5000000000 5,149.37 360 359 2.2500000000 5.0000000000 1.0000000000
466 II 4,552,903.87 7.0000000000 6.6250000000 15,138.51 360 359 2.2500000000 4.8763417775 1.0000000000
467 II 4,546,561.06 7.0000000000 6.6250000000 15,117.41 360 359 2.2500000000 5.0000000000 1.0000000000
468 II 5,488,847.78 7.1250000000 6.7500000000 18,822.21 360 359 2.2500000000 5.0000000000 1.0000000000
469 II 3,401,101.51 7.1250000000 6.7500000000 11,662.18 360 359 2.2500000000 5.0000000000 1.0000000000
470 II 15,421,517.39 7.2500000000 6.8750000000 54,490.79 360 359 2.2500000000 5.0000000000 1.0000000000
471 II 4,814,085.19 7.2500000000 6.8750000000 17,007.38 360 359 2.2500000000 5.0000000000 1.0000000000
472 II 13,126,030.55 7.3750000000 7.0000000000 47,737.27 360 359 2.2500000000 5.0000000000 1.0000000000
473 II 10,110,048.40 7.3750000000 7.0000000000 36,769.57 360 359 2.2500000000 5.0000000000 1.0000000000
474 II 21,629,321.52 7.5000000000 7.1250000000 80,921.25 360 359 2.2563034802 5.0000000000 1.0000000000
475 II 14,258,736.44 7.5000000000 7.1250000000 53,333.88 360 359 2.2500000000 5.0000000000 1.0000000000
476 II 8,478,160.38 7.6250000000 7.2500000000 32,594.78 360 359 2.2500000000 5.0000000000 1.0000000000
477 II 10,269,774.09 7.6250000000 7.2500000000 39,485.08 360 359 2.2628277919 5.0000000000 1.0000000000
478 II 15,724,198.42 7.7500000000 7.3750000000 62,086.43 360 359 2.2624800877 5.0000000000 1.0000000000
479 II 21,157,165.92 7.7500000000 7.3750000000 83,543.08 360 359 2.2638359741 5.0000000000 1.0000000000
480 II 23,250,551.11 7.8750000000 7.5000000000 94,257.80 360 359 2.2500000000 5.0000000000 1.0000000000
481 II 15,984,343.47 7.8750000000 7.5000000000 64,774.55 360 359 2.2624933502 5.0000000000 1.0000000000
482 II 13,084,411.15 8.0000000000 7.6250000000 54,382.81 360 359 2.2500000000 5.0000000000 1.0000000000
483 II 11,897,059.07 8.0000000000 7.6250000000 49,450.19 360 359 2.2500000000 5.0000000000 1.0000000000
484 II 14,661,985.54 8.1250000000 7.7500000000 62,462.76 360 359 2.2500000000 5.0000000000 1.0000000000
485 II 9,849,050.81 8.1250000000 7.7500000000 41,961.97 360 359 2.2500000000 5.0000000000 1.0000000000
486 II 204,510.00 8.1300000000 7.7550000000 872.10 360 359 2.2500000000 5.0000000000 1.0000000000
487 II 11,469,807.00 8.2500000000 7.8750000000 50,055.28 360 359 2.2500000000 5.0000000000 1.0000000000
488 II 15,311,604.16 8.2500000000 7.8750000000 66,825.00 360 359 2.2500000000 5.0000000000 1.0000000000
489 II 234,687.20 8.3500000000 7.9750000000 1,045.03 360 359 2.2500000000 5.0000000000 1.0000000000
490 II 12,961,895.07 8.3750000000 8.0000000000 57,913.69 360 359 2.2500000000 5.0000000000 1.0000000000
491 II 14,242,334.53 8.3750000000 8.0000000000 63,644.95 360 359 2.2500000000 5.0000000000 1.0000000000
492 II 578,091.62 8.5000000000 8.1250000000 2,642.98 360 359 2.2500000000 5.0000000000 1.0000000000
493 II 2,991,460.00 8.5000000000 8.1250000000 13,676.68 360 359 2.2500000000 5.0000000000 1.0000000000
494 II 669,669.98 8.6250000000 8.2500000000 3,131.27 360 359 2.2500000000 5.0000000000 1.0000000000
495 II 1,053,827.99 8.6250000000 8.2500000000 4,927.51 360 359 2.2500000000 5.0000000000 1.0000000000
496 II 1,399,489.33 8.7500000000 8.3750000000 6,689.18 360 359 2.2500000000 5.0000000000 1.0000000000
497 II 617,539.99 8.8750000000 8.5000000000 3,015.84 360 359 2.2500000000 5.0000000000 1.0000000000
498 II 421,050.00 8.8750000000 8.5000000000 2,056.25 360 359 2.2500000000 5.0000000000 1.0000000000
499 II 316,789.99 9.0000000000 8.6250000000 1,580.01 360 359 2.2500000000 5.0000000000 1.0000000000
500 II 421,049.99 9.0000000000 8.6250000000 2,100.01 360 359 2.2500000000 5.0000000000 1.0000000000
501 II 465,160.00 9.2500000000 8.8750000000 2,416.67 360 359 2.2500000000 5.0000000000 1.0000000000
502 II 137,133.98 9.3750000000 9.0000000000 726.71 360 359 2.2500000000 5.0000000000 1.0000000000
503 II 707,765.00 7.7500000000 7.3750000000 2,794.58 360 359 2.2500000000 5.0000000000 1.0000000000
504 II 360,900.00 8.3750000000 8.0000000000 1,612.50 360 359 2.2500000000 5.0000000000 1.0000000000
505 II 331,948.00 10.0000000000 9.6250000000 1,936.37 360 360 2.2500000000 5.0000000000 1.0000000000
506 II 417,000.00 6.1250000000 5.7500000000 1,085.94 360 360 2.2500000000 5.0000000000 1.0000000000
507 II 809,000.00 6.2500000000 5.8750000000 2,191.06 360 360 2.2500000000 5.0000000000 1.0000000000
508 II 250,000.00 6.6250000000 6.2500000000 755.21 360 360 2.2500000000 5.0000000000 1.0000000000
509 II 505,600.00 6.6250000000 6.2500000000 1,527.34 360 360 2.2500000000 5.0000000000 1.0000000000
510 II 1,436,489.47 6.7500000000 6.3750000000 4,495.49 360 360 2.2500000000 5.0000000000 1.0000000000
511 II 713,514.00 6.7500000000 6.3750000000 2,229.76 360 360 2.2500000000 5.0000000000 1.0000000000
512 II 3,144,150.00 6.8750000000 6.5000000000 10,153.03 360 360 2.2500000000 5.0000000000 1.0000000000
513 II 1,996,000.00 6.8750000000 6.5000000000 6,445.44 360 360 2.2500000000 5.0000000000 1.0000000000
514 II 2,218,600.00 7.0000000000 6.6250000000 7,395.34 360 360 2.2500000000 5.0000000000 1.0000000000
515 II 656,000.00 7.0000000000 6.6250000000 2,186.67 360 360 2.2500000000 5.0000000000 1.0000000000
516 II 1,734,646.00 7.1250000000 6.7500000000 5,962.87 360 360 2.2500000000 5.0000000000 1.0000000000
517 II 1,995,600.00 7.1250000000 6.7500000000 6,859.93 360 360 2.2500000000 5.0000000000 1.0000000000
518 II 3,809,579.00 7.2500000000 6.8750000000 13,492.32 360 360 2.2500000000 5.0000000000 1.0000000000
519 II 5,752,800.00 7.2500000000 6.8750000000 20,374.59 360 360 2.2500000000 5.0000000000 1.0000000000
520 II 3,493,700.00 7.3750000000 7.0000000000 12,733.83 360 360 2.2500000000 5.0000000000 1.0000000000
521 II 4,335,241.00 7.3750000000 7.0000000000 15,802.44 360 360 2.2500000000 5.0000000000 1.0000000000
522 II 2,321,712.00 7.5000000000 7.1250000000 8,706.49 360 360 2.2500000000 5.0000000000 1.0000000000
523 II 3,592,640.00 7.5000000000 7.1250000000 13,472.50 360 360 2.2500000000 5.0000000000 1.0000000000
524 II 2,037,500.00 7.6250000000 7.2500000000 7,852.91 360 360 2.2500000000 5.0000000000 1.0000000000
525 II 5,891,520.00 7.6250000000 7.2500000000 22,706.98 360 360 2.2500000000 5.0000000000 1.0000000000
526 II 4,926,166.00 7.7500000000 7.3750000000 19,499.44 360 360 2.2500000000 5.0000000000 1.0000000000
527 II 6,947,573.00 7.7500000000 7.3750000000 27,494.95 360 360 2.2500000000 5.0000000000 1.0000000000
528 II 5,131,076.00 7.8750000000 7.5000000000 20,842.95 360 360 2.2500000000 5.0000000000 1.0000000000
529 II 10,081,583.00 7.8750000000 7.5000000000 40,956.68 360 360 2.2500000000 5.0000000000 1.0000000000
530 II 2,592,000.00 8.0000000000 7.6250000000 10,800.04 360 360 2.2500000000 5.0000000000 1.0000000000
531 II 4,169,450.00 8.0000000000 7.6250000000 17,368.06 360 360 2.2500000000 5.0000000000 1.0000000000
532 II 1,480,000.00 8.1250000000 7.7500000000 6,320.85 360 360 2.2500000000 5.0000000000 1.0000000000
533 II 3,491,114.00 8.1250000000 7.7500000000 14,904.49 360 360 2.2500000000 5.0000000000 1.0000000000
534 II 442,600.00 8.2500000000 7.8750000000 1,936.39 360 360 2.2500000000 5.0000000000 1.0000000000
535 II 6,642,502.00 8.2500000000 7.8750000000 29,058.28 360 360 2.2500000000 5.0000000000 1.0000000000
536 II 320,000.00 8.3750000000 8.0000000000 1,433.34 360 360 2.2500000000 5.0000000000 1.0000000000
537 II 2,922,000.00 8.3750000000 8.0000000000 13,088.15 360 360 2.2500000000 5.0000000000 1.0000000000
538 II 544,000.00 8.5000000000 8.1250000000 2,493.33 360 360 2.2500000000 5.0000000000 1.0000000000
539 II 901,600.00 8.5000000000 8.1250000000 4,132.34 360 360 2.2500000000 5.0000000000 1.0000000000
540 II 637,500.00 8.6250000000 8.2500000000 2,988.28 360 360 2.2500000000 5.0000000000 1.0000000000
541 II 1,080,000.00 8.6250000000 8.2500000000 5,062.53 360 360 2.2500000000 5.0000000000 1.0000000000
542 II 788,000.00 8.7500000000 8.3750000000 3,775.84 360 360 2.2500000000 5.0000000000 1.0000000000
543 II 503,920.00 8.8750000000 8.5000000000 2,467.11 360 360 2.2500000000 5.0000000000 1.0000000000
544 II 454,400.00 8.8750000000 8.5000000000 2,224.67 360 360 2.2500000000 5.0000000000 1.0000000000
545 II 423,200.00 9.3750000000 9.0000000000 2,248.25 360 360 2.2500000000 5.0000000000 1.0000000000
546 II 785,960.00 9.5000000000 9.1250000000 4,246.67 360 360 2.2500000000 5.0000000000 1.0000000000
547 II 550,400.00 9.7500000000 9.3750000000 3,096.00 360 360 2.2500000000 5.0000000000 1.0000000000
548 II 205,023.13 7.3750000000 7.0000000000 743.75 360 356 2.2500000000 5.0000000000 1.0000000000
549 II 420,144.15 6.3750000000 6.0000000000 1,172.81 360 357 2.2500000000 5.0000000000 1.0000000000
550 II 377,226.17 7.7500000000 7.3750000000 1,482.00 360 357 2.2500000000 5.0000000000 1.0000000000
551 II 384,960.00 7.0000000000 6.6250000000 1,280.00 360 358 2.2500000000 5.0000000000 1.0000000000
552 II 806,023.15 7.8750000000 7.5000000000 3,258.13 360 358 2.2500000000 5.0000000000 1.0000000000
553 II 846,829.55 8.0000000000 7.6250000000 3,516.66 360 358 2.2500000000 5.0000000000 1.0000000000
554 II 804,013.34 8.0000000000 7.6250000000 3,333.33 360 358 2.2500000000 5.0000000000 1.0000000000
555 II 190,551.26 8.2500000000 7.8750000000 829.50 360 358 2.2500000000 5.0000000000 1.0000000000
556 II 683,411.86 8.3750000000 8.0000000000 3,045.83 360 358 2.2500000000 5.0000000000 1.0000000000
557 II 593,480.00 7.3750000000 7.0000000000 2,158.33 360 359 2.2500000000 5.0000000000 1.0000000000
558 II 328,820.00 7.5000000000 7.1250000000 1,230.00 360 359 2.2500000000 5.0000000000 1.0000000000
559 II 434,684.00 7.8750000000 7.5000000000 1,761.50 360 359 2.2500000000 5.0000000000 1.0000000000
560 II 360,098.00 8.1250000000 7.7500000000 1,534.08 360 359 2.2500000000 5.0000000000 1.0000000000
MORTGAGE LOAN ASSUMPTIONS (CONTINUED)
Number of Number of
Months Until Months Until Rate Payment Remaining
Maximum Minimum Next Rate Next Pay Adjustment Adjustment Interest- Negative
Loan Gross Mortgage Gross Mortgage Adjustment Adjustment Frequency Frequency Only Amortization
Number Group Rate (%) Rate (%) (in months) (in months) (in months)(in months) (in months) Index Cap (%)
1 I 9.9500000000 3.5000000000 1 11 1 12 N/A MTA 110.00
2 I 9.9500000000 3.1947650864 1 13 1 12 N/A MTA 115.00
3 I 9.9500000000 3.5000000000 1 13 1 12 N/A MTA 115.00
4 I 9.9500000000 3.5000000000 1 13 1 12 N/A MTA 115.00
5 I 9.9500000000 3.4451896091 1 12 1 12 N/A MTA 115.00
6 I 9.9500000000 3.5000000000 1 12 1 12 N/A MTA 115.00
7 I 9.9500000000 3.3699286945 1 12 1 12 N/A MTA 115.00
8 I 9.9500000000 3.3046246473 1 11 1 12 N/A MTA 115.00
9 I 9.9500000000 3.5000000000 1 11 1 12 N/A MTA 115.00
10 I 9.9500000000 3.5000000000 1 9 1 12 N/A MTA 115.00
11 I 9.9500000000 3.4095747713 1 13 1 12 N/A MTA 115.00
12 I 9.9500000000 3.5000000000 1 13 1 12 N/A MTA 115.00
13 I 9.9500000000 3.5000000000 1 13 1 12 N/A MTA 115.00
14 I 9.9500000000 3.5000000000 1 13 1 12 N/A MTA 115.00
15 I 9.9500000000 3.2505325255 1 12 1 12 N/A MTA 115.00
16 I 9.9500000000 3.5000000000 1 12 1 12 N/A MTA 115.00
17 I 9.9500000000 3.3033478941 1 11 1 12 N/A MTA 115.00
18 I 9.9500000000 3.3750000000 2 12 1 12 N/A MTA 115.00
19 I 9.9500000000 3.3750000000 2 12 1 12 N/A MTA 115.00
20 I 9.9500000000 3.3614194931 3 13 1 12 N/A MTA 115.00
21 I 9.9500000000 3.5000000000 1 12 1 12 N/A MTA 110.00
22 I 9.9500000000 3.5000000000 1 12 1 12 N/A MTA 110.00
23 I 9.9500000000 3.3380792445 1 13 1 12 N/A MTA 115.00
24 I 9.9500000000 3.5000000000 1 13 1 12 N/A MTA 115.00
25 I 9.9500000000 3.5000000000 1 13 1 12 N/A MTA 115.00
26 I 9.9500000000 3.3525626561 1 12 1 12 N/A MTA 115.00
27 I 9.9500000000 3.5000000000 1 12 1 12 N/A MTA 115.00
28 I 9.9500000000 3.4416604301 1 12 1 12 N/A MTA 115.00
29 I 9.9500000000 3.3214643161 1 11 1 12 N/A MTA 115.00
30 I 9.9500000000 3.5000000000 1 11 1 12 N/A MTA 115.00
31 I 9.9500000000 3.5000000000 1 11 1 12 N/A MTA 115.00
32 I 9.9500000000 3.4027113517 1 11 1 12 N/A MTA 115.00
33 I 9.9500000000 3.3876353172 1 10 1 12 N/A MTA 115.00
34 I 9.9500000000 2.8750000000 1 10 1 12 N/A MTA 115.00
35 I 9.9500000000 3.4040304058 1 13 1 12 N/A MTA 115.00
36 I 9.9500000000 3.5000000000 1 13 1 12 N/A MTA 115.00
37 I 9.9500000000 3.4610184037 1 12 1 12 N/A MTA 115.00
38 I 9.9500000000 3.5000000000 1 12 1 12 N/A MTA 115.00
39 I 9.9500000000 3.5000000000 1 12 1 12 N/A MTA 115.00
40 I 9.9500000000 3.3998380186 1 11 1 12 N/A MTA 115.00
41 I 9.9500000000 3.5000000000 1 11 1 12 N/A MTA 115.00
42 I 9.9500000000 3.5000000000 1 11 1 12 N/A MTA 115.00
43 I 9.9500000000 3.5000000000 1 10 1 12 N/A MTA 115.00
44 I 9.9500000000 3.1250000000 1 10 1 12 N/A MTA 115.00
45 I 9.9500000000 2.8750000000 1 9 1 12 N/A MTA 115.00
46 I 9.9500000000 3.5000000000 1 13 1 12 N/A MTA 115.00
47 I 9.9500000000 3.1074654965 1 12 1 12 N/A MTA 115.00
48 I 9.9500000000 3.5000000000 1 12 1 12 N/A MTA 115.00
49 I 9.9500000000 3.2500000000 1 13 1 12 N/A MTA 115.00
50 I 9.9500000000 3.5000000000 1 12 1 12 N/A MTA 115.00
51 I 9.9500000000 3.3750000000 1 12 1 12 N/A MTA 115.00
52 I 9.9500000000 3.5000000000 1 11 1 12 N/A MTA 115.00
53 I 9.9500000000 3.5000000000 1 10 1 12 N/A MTA 115.00
54 I 9.9500000000 3.2500000000 1 12 1 12 N/A MTA 115.00
55 I 9.9500000000 3.2500000000 1 13 1 12 N/A MTA 110.00
56 I 9.9500000000 3.6250000000 1 12 1 12 N/A MTA 110.00
57 I 9.9500000000 3.3868164270 1 13 1 12 N/A MTA 115.00
58 I 9.9500000000 3.4411832101 1 13 1 12 N/A MTA 115.00
59 I 9.9500000000 3.2667121614 1 13 1 12 N/A MTA 115.00
60 I 9.9500000000 3.5157839239 1 12 1 12 N/A MTA 115.00
61 I 9.9500000000 3.4970689848 1 12 1 12 N/A MTA 115.00
62 I 9.9500000000 3.5643753837 1 12 1 12 N/A MTA 115.00
63 I 9.9500000000 3.6808216764 1 12 1 12 N/A MTA 115.00
64 I 9.9500000000 3.5052392475 1 11 1 12 N/A MTA 115.00
65 I 9.9500000000 3.5238234359 1 11 1 12 N/A MTA 115.00
66 I 9.9500000000 3.6157153844 1 11 1 12 N/A MTA 115.00
67 I 9.9500000000 3.5335341822 1 11 1 12 N/A MTA 115.00
68 I 9.9500000000 3.5326045135 1 10 1 12 N/A MTA 115.00
69 I 9.9500000000 3.5291203551 1 10 1 12 N/A MTA 115.00
70 I 9.9500000000 3.3774234029 1 10 1 12 N/A MTA 115.00
71 I 9.9500000000 3.5836845800 1 10 1 12 N/A MTA 115.00
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393 II 12.6250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
394 II 12.7500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
395 II 12.7500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
396 II 13.0000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
397 II 13.1250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
398 II 13.3750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
399 II 13.7500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
400 II 11.7500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
401 II 11.8750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
402 II 12.0000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
403 II 12.1250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
404 II 12.1250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
405 II 12.2500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
406 II 12.2500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
407 II 12.3750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
408 II 12.5000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
409 II 12.5000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
410 II 12.6250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
411 II 12.6250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
412 II 12.7500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
413 II 12.7500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
414 II 12.8750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
415 II 12.8750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
416 II 13.0000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
417 II 13.1250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
418 II 13.1250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
419 II 13.5000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
420 II 13.5000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
421 II 11.8750000000 2.2500000000 57 58 6 6 117 Six-Month LIBOR 115.00
422 II 12.3750000000 2.5376115246 57 58 6 6 117 Six-Month LIBOR 115.00
423 II 12.5000000000 2.2500000000 57 58 6 6 117 Six-Month LIBOR 115.00
424 II 12.8750000000 2.2500000000 57 58 6 6 117 Six-Month LIBOR 115.00
425 II 12.8750000000 2.2500000000 57 58 6 6 117 Six-Month LIBOR 115.00
426 II 13.2500000000 2.2500000000 57 58 6 6 117 Six-Month LIBOR 115.00
427 II 13.3750000000 2.2500000000 57 58 6 6 117 Six-Month LIBOR 115.00
428 II 11.6250000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
429 II 11.7500000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
430 II 11.8750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
431 II 12.0000000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
432 II 12.0000000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
433 II 12.1250000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
434 II 12.1250000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
435 II 12.2500000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
436 II 12.2500000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
437 II 12.3750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
438 II 12.3750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
439 II 12.5000000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
440 II 12.5000000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
441 II 12.6250000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
442 II 12.6250000000 2.2840053240 58 59 6 6 118 Six-Month LIBOR 115.00
443 II 12.7500000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
444 II 12.7500000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
445 II 12.8750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
446 II 12.8750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
447 II 13.0000000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
448 II 13.0000000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
449 II 13.1250000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
450 II 13.1250000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
451 II 13.2500000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
452 II 13.2500000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
453 II 13.3750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
454 II 13.3750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
455 II 11.8750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
456 II 15.1250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
457 II 11.0000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
458 II 11.3750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
459 II 11.5000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
460 II 11.6250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
461 II 11.6250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
462 II 11.7500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
463 II 11.7500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
464 II 11.7550152362 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
465 II 11.8750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
466 II 12.0000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
467 II 12.0000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
468 II 12.1250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
469 II 12.1250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
470 II 12.2500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
471 II 12.2500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
472 II 12.3750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
473 II 12.3750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
474 II 12.5000000000 2.2563034802 59 60 6 6 119 Six-Month LIBOR 115.00
475 II 12.5000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
476 II 12.6250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
477 II 12.6250000000 2.2628277919 59 60 6 6 119 Six-Month LIBOR 115.00
478 II 12.7500000000 2.2624800877 59 60 6 6 119 Six-Month LIBOR 115.00
479 II 12.7500000000 2.2638359741 59 60 6 6 119 Six-Month LIBOR 115.00
480 II 12.8750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
481 II 12.8750000000 2.2624933502 59 60 6 6 119 Six-Month LIBOR 115.00
482 II 13.0000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
483 II 13.0000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
484 II 13.1250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
485 II 13.1250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
486 II 13.1300000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
487 II 13.2500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
488 II 13.2500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
489 II 13.3500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
490 II 13.3750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
491 II 13.3750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
492 II 13.5000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
493 II 13.5000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
494 II 13.6250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
495 II 13.6250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
496 II 13.7500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
497 II 13.8750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
498 II 13.8750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
499 II 14.0000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
500 II 14.0000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
501 II 14.2500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
502 II 14.3750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
503 II 12.7500000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
504 II 13.3750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
505 II 15.0000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
506 II 11.1250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
507 II 11.2500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
508 II 11.6250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
509 II 11.6250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
510 II 11.7500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
511 II 11.7500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
512 II 11.8750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
513 II 11.8750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
514 II 12.0000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
515 II 12.0000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
516 II 12.1250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
517 II 12.1250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
518 II 12.2500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
519 II 12.2500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
520 II 12.3750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
521 II 12.3750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
522 II 12.5000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
523 II 12.5000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
524 II 12.6250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
525 II 12.6250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
526 II 12.7500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
527 II 12.7500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
528 II 12.8750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
529 II 12.8750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
530 II 13.0000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
531 II 13.0000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
532 II 13.1250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
533 II 13.1250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
534 II 13.2500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
535 II 13.2500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
536 II 13.3750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
537 II 13.3750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
538 II 13.5000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
539 II 13.5000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
540 II 13.6250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
541 II 13.6250000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
542 II 13.7500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
543 II 13.8750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
544 II 13.8750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
545 II 14.3750000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
546 II 14.5000000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
547 II 14.7500000000 2.2500000000 60 61 6 6 120 Six-Month LIBOR 115.00
548 II 12.3750000000 2.2500000000 56 57 6 6 116 Six-Month LIBOR 115.00
549 II 11.3750000000 2.2500000000 57 58 6 6 117 Six-Month LIBOR 115.00
550 II 12.7500000000 2.2500000000 57 58 6 6 117 Six-Month LIBOR 115.00
551 II 12.0000000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
552 II 12.8750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
553 II 13.0000000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
554 II 13.0000000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
555 II 13.2500000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
556 II 13.3750000000 2.2500000000 58 59 6 6 118 Six-Month LIBOR 115.00
557 II 12.3750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
558 II 12.5000000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
559 II 12.8750000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
560 II 13.1250000000 2.2500000000 59 60 6 6 119 Six-Month LIBOR 115.00
There will be discrepancies between the characteristics of the actual mortgage loans and the characteristics assumed in preparing the
tables below. Any discrepancy may have an effect upon the percentages of the initial principal amounts outstanding (and the weighted
average lives) of the classes of Offered Certificates set forth in the tables. In addition, to the extent that the actual mortgage
loans included in the mortgage pool have characteristics that differ from those assumed in preparing the tables below, the classes of
Offered Certificates set forth below may mature earlier or later than indicated by the tables below. Based on the foregoing
assumptions, the tables below indicate the weighted average life of each class of Offered Certificates and sets forth the percentage
of the initial principal balances of each such class that would be outstanding after each of the distribution dates shown, at
specified percentages of the CPR. Neither the prepayment model used in this prospectus supplement nor any other prepayment model or
assumption purports to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of
any pool of mortgage loans, including the mortgage loans included in the trust fund. Variations in the prepayment experience and the
balance of the mortgage loans that prepay may increase or decrease the percentages of the initial principal balances (and weighted
average lives) shown in the following tables. Variations may occur even if the average prepayment experience of all of the mortgage
loans equals any of the specified percentages of the CPR. The timing of changes in the rate of prepayment may significantly affect
the actual yield to maturity to investors, even if the average rate of Principal Prepayments is consistent with the expectations of
investors.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
Class I-A Certificates Class I-B-1 Certificates
-------------------------------------------- -------------------------------------------
5% 15% 25% 40% 50% 5% 15% 25% 40% 50%
Distribution Date
Initial Percentage. 100 100 100 100 100 100 100 100 100 100
December 2007...... 99 88 76 58 47 100 100 100 100 100
December 2008...... 99 77 57 32 19 100 100 100 100 100
December 2009...... 97 66 42 16 4 100 100 100 100 100
December 2010...... 92 55 30 12 4 100 100 90 37 87
December 2011...... 86 44 22 7 3 100 100 67 22 9
December 2012...... 80 36 17 4 1 100 100 51 14 0
December 2013...... 75 31 13 3 * 100 71 30 6 0
December 2014...... 69 26 10 1 0 100 60 22 0 0
December 2015...... 64 22 7 1 0 100 50 16 0 0
December 2016...... 60 18 5 * 0 100 42 12 0 0
December 2017...... 55 15 4 0 0 100 35 9 0 0
December 2018...... 50 13 3 0 0 100 29 7 0 0
December 2019...... 46 11 2 0 0 100 24 1 0 0
December 2020...... 43 9 1 0 0 97 20 0 0 0
December 2021...... 40 7 1 0 0 90 17 0 0 0
December 2022...... 37 6 * 0 0 83 14 0 0 0
December 2023...... 34 5 * 0 0 77 12 0 0 0
December 2024...... 31 4 * 0 0 71 10 0 0 0
December 2025...... 28 3 0 0 0 65 8 0 0 0
December 2026...... 26 3 0 0 0 59 6 0 0 0
December 2027...... 23 2 0 0 0 53 2 0 0 0
December 2028...... 21 2 0 0 0 48 0 0 0 0
December 2029...... 19 1 0 0 0 43 0 0 0 0
December 2030...... 17 1 0 0 0 38 0 0 0 0
December 2031...... 15 1 0 0 0 33 0 0 0 0
December 2032...... 13 * 0 0 0 28 0 0 0 0
December 2033...... 11 * 0 0 0 24 0 0 0 0
December 2034...... 9 0 0 0 0 20 0 0 0 0
December 2035...... 7 0 0 0 0 15 0 0 0 0
December 2036...... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life
--------------------
to Maturity
(years)** 14.00 6.01 3.41 1.85 1.26 22.02 10.47 6.54 4.27 4.38
(*) Indicates a number that is greater than zero but less than 0.5%.
(**) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of the Current
Principal Amount by the number of years from the date of issuance of the certificate to the related distribution date, (ii)
adding the results and (iii) dividing the sum by the aggregate of the net reductions of the Current Principal Amount described
in (i) above.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
Class I-B-2 Certificates Class I-B-3 Certificates
-------------------------------------------- -------------------------------------------
5% 15% 25% 40% 50% 5% 15% 25% 40% 50%
Distribution Date
Initial Percentage. 100 100 100 100 100 100 100 100 100 100
December 2007...... 100 100 100 100 100 100 100 100 100 100
December 2008...... 100 100 100 100 100 100 100 100 100 100
December 2009...... 100 100 100 100 100 100 100 100 100 100
December 2010...... 100 100 90 37 18 100 100 90 37 18
December 2011...... 100 100 67 22 9 100 100 67 22 9
December 2012...... 100 100 51 12 0 100 100 51 10 0
December 2013...... 100 71 30 1 0 100 71 30 0 0
December 2014...... 100 60 22 0 0 100 60 22 0 0
December 2015...... 100 50 16 0 0 100 50 16 0 0
December 2016...... 100 42 12 0 0 100 42 12 0 0
December 2017...... 100 35 9 0 0 100 35 9 0 0
December 2018...... 100 29 2 0 0 100 29 0 0 0
December 2019...... 100 24 0 0 0 100 24 0 0 0
December 2020...... 97 20 0 0 0 97 20 0 0 0
December 2021...... 90 17 0 0 0 90 17 0 0 0
December 2022...... 83 14 0 0 0 83 14 0 0 0
December 2023...... 77 12 0 0 0 77 12 0 0 0
December 2024...... 71 10 0 0 0 71 10 0 0 0
December 2025...... 65 8 0 0 0 65 0 0 0 0
December 2026...... 59 1 0 0 0 59 0 0 0 0
December 2027...... 53 0 0 0 0 53 0 0 0 0
December 2028...... 48 0 0 0 0 48 0 0 0 0
December 2029...... 43 0 0 0 0 43 0 0 0 0
December 2030...... 38 0 0 0 0 38 0 0 0 0
December 2031...... 33 0 0 0 0 33 0 0 0 0
December 2032...... 28 0 0 0 0 28 0 0 0 0
December 2033...... 24 0 0 0 0 24 0 0 0 0
December 2034...... 20 0 0 0 0 20 0 0 0 0
December 2035...... 15 0 0 0 0 15 0 0 0 0
December 2036...... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life
--------------------
to Maturity (years)* 22.02 10.38 6.48 4.18 3.99 22.02 10.31 6.43 4.10 3.82
(*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of the Current
Principal Amount by the number of years from the date of issuance of the certificate to the related distribution date, (ii)
adding the results and (iii) dividing the sum by the aggregate of the net reductions of the Current Principal Amount described
in (i) above.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
Class I-B-4 Certificates Class I-B-5 Certificates
-------------------------------------------- -------------------------------------------
5% 15% 25% 40% 50% 5% 15% 25% 40% 50%
Distribution Date
Initial Percentage. 100 100 100 100 100 100 100 100 100 100
December 2007...... 100 100 100 100 100 100 100 100 100 100
December 2008...... 100 100 100 100 100 100 100 100 100 100
December 2009...... 100 100 100 100 100 100 100 100 100 100
December 2010...... 100 100 90 37 18 100 100 90 37 18
December 2011...... 100 100 67 22 * 100 100 67 22 0
December 2012...... 100 100 50 7 0 100 96 40 0 0
December 2013...... 100 71 30 0 0 100 71 30 0 0
December 2014...... 100 60 22 0 0 100 60 22 0 0
December 2015...... 100 50 16 0 0 100 50 16 0 0
December 2016...... 100 42 12 0 0 100 42 3 0 0
December 2017...... 100 35 * 0 0 100 35 0 0 0
December 2018...... 100 29 0 0 0 100 29 0 0 0
December 2019...... 100 24 0 0 0 100 24 0 0 0
December 2020...... 97 20 0 0 0 97 20 0 0 0
December 2021...... 90 17 0 0 0 90 17 0 0 0
December 2022...... 83 14 0 0 0 83 14 0 0 0
December 2023...... 77 11 0 0 0 77 0 0 0 0
December 2024...... 71 3 0 0 0 71 0 0 0 0
December 2025...... 65 0 0 0 0 65 0 0 0 0
December 2026...... 59 0 0 0 0 59 0 0 0 0
December 2027...... 53 0 0 0 0 53 0 0 0 0
December 2028...... 48 0 0 0 0 48 0 0 0 0
December 2029...... 43 0 0 0 0 43 0 0 0 0
December 2030...... 38 0 0 0 0 38 0 0 0 0
December 2031...... 33 0 0 0 0 33 0 0 0 0
December 2032...... 28 0 0 0 0 28 0 0 0 0
December 2033...... 24 0 0 0 0 24 0 0 0 0
December 2034...... 20 0 0 0 0 20 0 0 0 0
December 2035...... 15 0 0 0 0 15 0 0 0 0
December 2036...... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life
--------------------
to Maturity
(years)** 22.02 10.22 6.37 4.06 3.70 21.98 10.09 6.29 4.02 3.59
(*) Indicates a number that is greater than zero but less than 0.5%.
(**) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of
the Current Principal Amount by the number of years from the date of issuance of the certificate to the related
distribution date, (ii) adding the results and (iii) dividing the sum by the aggregate of the net reductions of the
Current Principal Amount described in (i) above.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
Class I-B-6 Certificates Class I-B-7 Certificates
-------------------------------------------- -------------------------------------------
5% 15% 25% 40% 50% 5% 15% 25% 40% 50%
Distribution Date
Initial Percentage. 100 100 100 100 100 100 100 100 100 100
December 2007...... 100 100 100 100 100 100 100 100 100 100
December 2008...... 100 100 100 100 100 100 100 100 100 100
December 2009...... 100 100 100 100 100 100 100 100 100 100
December 2010...... 100 100 90 37 18 100 100 90 37 10
December 2011...... 100 100 67 22 0 100 100 67 22 0
December 2012...... 100 84 40 0 0 100 84 40 0 0
December 2013...... 100 71 30 0 0 100 71 30 0 0
December 2014...... 100 60 22 0 0 100 60 22 0 0
December 2015...... 100 50 16 0 0 100 50 4 0 0
December 2016...... 100 42 0 0 0 100 42 0 0 0
December 2017...... 100 35 0 0 0 100 35 0 0 0
December 2018...... 100 29 0 0 0 100 29 0 0 0
December 2019...... 100 24 0 0 0 100 24 0 0 0
December 2020...... 97 20 0 0 0 97 20 0 0 0
December 2021...... 90 17 0 0 0 90 7 0 0 0
December 2022...... 83 7 0 0 0 83 0 0 0 0
December 2023...... 77 0 0 0 0 77 0 0 0 0
December 2024...... 71 0 0 0 0 71 0 0 0 0
December 2025...... 65 0 0 0 0 65 0 0 0 0
December 2026...... 59 0 0 0 0 59 0 0 0 0
December 2027...... 53 0 0 0 0 53 0 0 0 0
December 2028...... 48 0 0 0 0 48 0 0 0 0
December 2029...... 43 0 0 0 0 43 0 0 0 0
December 2030...... 38 0 0 0 0 38 0 0 0 0
December 2031...... 33 0 0 0 0 33 0 0 0 0
December 2032...... 28 0 0 0 0 28 0 0 0 0
December 2033...... 24 0 0 0 0 24 0 0 0 0
December 2034...... 20 0 0 0 0 17 0 0 0 0
December 2035...... 15 0 0 0 0 * 0 0 0 0
December 2036...... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life
--------------------
to Maturity
(years)** 21.93 9.99 6.23 4.00 3.54 21.80 9.81 6.12 3.94 3.44
(*) Indicates a number that is greater than zero but less than 0.5%.
(**) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of the
Current Principal Amount by the number of years from the date of issuance of the certificate to the related distribution
date, (ii) adding the results and (iii) dividing the sum by the aggregate of the net reductions of the Current Principal
Amount described in (i) above.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
Class I-B-8 Certificates Class I-B-9 Certificates
-------------------------------------------- -------------------------------------------
5% 15% 25% 40% 50% 5% 15% 25% 40% 50%
Distribution Date
Initial Percentage. 100 100 100 100 100 100 100 100 100 100
December 2007...... 100 100 100 100 100 100 100 100 100 100
December 2008...... 100 100 100 100 100 100 100 100 100 100
December 2009...... 100 100 100 100 100 100 100 100 100 100
December 2010...... 100 100 90 37 0 100 100 90 37 0
December 2011...... 100 100 67 8 0 100 100 67 0 0
December 2012...... 100 84 40 0 0 100 84 40 0 0
December 2013...... 100 71 30 0 0 100 71 15 0 0
December 2014...... 100 60 7 0 0 100 60 0 0 0
December 2015...... 100 50 0 0 0 100 50 0 0 0
December 2016...... 100 42 0 0 0 100 42 0 0 0
December 2017...... 100 35 0 0 0 100 35 0 0 0
December 2018...... 100 29 0 0 0 100 15 0 0 0
December 2019...... 100 20 0 0 0 100 0 0 0 0
December 2020...... 97 0 0 0 0 97 0 0 0 0
December 2021...... 90 0 0 0 0 90 0 0 0 0
December 2022...... 83 0 0 0 0 83 0 0 0 0
December 2023...... 77 0 0 0 0 77 0 0 0 0
December 2024...... 71 0 0 0 0 71 0 0 0 0
December 2025...... 65 0 0 0 0 65 0 0 0 0
December 2026...... 59 0 0 0 0 59 0 0 0 0
December 2027...... 53 0 0 0 0 53 0 0 0 0
December 2028...... 48 0 0 0 0 48 0 0 0 0
December 2029...... 43 0 0 0 0 43 0 0 0 0
December 2030...... 38 0 0 0 0 38 0 0 0 0
December 2031...... 33 0 0 0 0 29 0 0 0 0
December 2032...... 28 0 0 0 0 11 0 0 0 0
December 2033...... 17 0 0 0 0 0 0 0 0 0
December 2034...... 0 0 0 0 0 0 0 0 0 0
December 2035...... 0 0 0 0 0 0 0 0 0 0
December 2036...... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life
--------------------
to Maturity (years)* 21.56 9.52 5.94 3.80 3.32 21.16 9.15 5.71 3.67 3.20
(*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of
the Current Principal Amount by the number of years from the date of issuance of the certificate to the related
distribution date, (ii) adding the results and (iii) dividing the sum by the aggregate of the net reductions of the
Current Principal Amount described in (i) above.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
Class II-A -1 Certificates Class II-A -2 Certificates
-------------------------------------------- -------------------------------------------
5% 15% 25% 40% 50% 5% 15% 25% 40% 50%
Distribution Date
Initial Percentage. 100 100 100 100 100 100 100 100 100 100
December 2007...... 98 86 75 57 46 98 86 75 57 46
December 2008...... 96 74 55 31 18 96 74 55 31 18
December 2009...... 94 64 40 15 4 94 64 40 15 4
December 2010...... 92 55 30 12 4 92 55 30 12 4
December 2011...... 88 45 23 7 3 88 45 23 7 3
December 2012...... 83 37 17 5 1 83 37 17 5 1
December 2013...... 78 33 14 3 * 78 33 14 3 *
December 2014...... 73 28 10 2 0 73 28 10 2 0
December 2015...... 69 24 8 1 0 69 24 8 1 0
December 2016...... 65 20 6 * 0 65 20 6 * 0
December 2017...... 60 17 4 0 0 60 17 4 0 0
December 2018...... 54 14 3 0 0 54 14 3 0 0
December 2019...... 49 11 2 0 0 49 11 2 0 0
December 2020...... 45 9 1 0 0 45 9 1 0 0
December 2021...... 41 8 1 0 0 41 8 1 0 0
December 2022...... 37 6 1 0 0 37 6 1 0 0
December 2023...... 34 5 * 0 0 34 5 * 0 0
December 2024...... 31 4 0 0 0 31 4 0 0 0
December 2025...... 28 3 0 0 0 28 3 0 0 0
December 2026...... 25 3 0 0 0 25 3 0 0 0
December 2027...... 22 2 0 0 0 22 2 0 0 0
December 2028...... 19 2 0 0 0 19 2 0 0 0
December 2029...... 16 1 0 0 0 16 1 0 0 0
December 2030...... 14 1 0 0 0 14 1 0 0 0
December 2031...... 11 * 0 0 0 11 * 0 0 0
December 2032...... 9 * 0 0 0 9 * 0 0 0
December 2033...... 6 0 0 0 0 6 0 0 0 0
December 2034...... 4 0 0 0 0 4 0 0 0 0
December 2035...... 2 0 0 0 0 2 0 0 0 0
December 2036...... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life
--------------------
to Maturity
(years)** 13.94 6.04 3.40 1.83 1.24 13.94 6.04 3.40 1.83 1.24
(*) Indicates a number that is greater than zero but less than 0.5%.
(**) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of
the Current Principal Amount by the number of years from the date of issuance of the certificate to the related
distribution date, (ii) adding the results and (iii) dividing the sum by the aggregate of the net reductions of the
Current Principal Amount described in (i) above.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
Class II-A-3 Certificates Class II-B-1 Certificates
-------------------------------------------- -------------------------------------------
5% 15% 25% 40% 50% 5% 15% 25% 40% 50%
Distribution Date
Initial Percentage. 100 100 100 100 100 100 100 100 100 100
December 2007...... 98 86 75 57 46 100 100 100 100 100
December 2008...... 96 74 55 31 18 100 100 100 100 100
December 2009...... 94 64 40 15 4 100 100 100 100 100
December 2010...... 92 55 30 12 4 100 100 90 37 69
December 2011...... 88 45 23 7 3 100 100 68 22 9
December 2012...... 83 37 17 5 1 100 100 52 14 0
December 2013...... 78 33 14 3 * 100 74 31 5 0
December 2014...... 73 28 10 2 0 100 63 23 0 0
December 2015...... 69 24 8 1 0 100 53 17 0 0
December 2016...... 65 20 6 * 0 100 45 13 0 0
December 2017...... 60 17 4 0 0 100 38 9 0 0
December 2018...... 54 14 3 0 0 100 31 6 0 0
December 2019...... 49 11 2 0 0 100 26 1 0 0
December 2020...... 45 9 1 0 0 100 21 0 0 0
December 2021...... 41 8 1 0 0 92 17 0 0 0
December 2022...... 37 6 1 0 0 84 14 0 0 0
December 2023...... 34 5 * 0 0 77 12 0 0 0
December 2024...... 31 4 0 0 0 69 9 0 0 0
December 2025...... 28 3 0 0 0 62 8 0 0 0
December 2026...... 25 3 0 0 0 56 3 0 0 0
December 2027...... 22 2 0 0 0 49 0 0 0 0
December 2028...... 19 2 0 0 0 43 0 0 0 0
December 2029...... 16 1 0 0 0 37 0 0 0 0
December 2030...... 14 1 0 0 0 31 0 0 0 0
December 2031...... 11 * 0 0 0 25 0 0 0 0
December 2032...... 9 * 0 0 0 20 0 0 0 0
December 2033...... 6 0 0 0 0 15 0 0 0 0
December 2034...... 4 0 0 0 0 9 0 0 0 0
December 2035...... 2 0 0 0 0 0 0 0 0 0
December 2036...... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life
--------------------
to Maturity
(years)** 13.94 6.04 3.40 1.83 1.24 21.24 10.60 6.60 4.26 4.31
(*) Indicates a number that is greater than zero but less than 0.5%.
(**) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of
the Current Principal Amount by the number of years from the date of issuance of the certificate to the related
distribution date, (ii) adding the results and (iii) dividing the sum by the aggregate of the net reductions of the
Current Principal Amount described in (i) above.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
Class II-B-2 Certificates Class II-B-3 Certificates
-------------------------------------------- -------------------------------------------
5% 15% 25% 40% 50% 5% 15% 25% 40% 50%
Distribution Date
Initial Percentage. 100 100 100 100 100 100 100 100 100 100
December 2007...... 100 100 100 100 100 100 100 100 100 100
December 2008...... 100 100 100 100 100 100 100 100 100 100
December 2009...... 100 100 100 100 100 100 100 100 100 100
December 2010...... 100 100 90 37 18 100 100 90 37 18
December 2011...... 100 100 68 22 5 100 100 68 22 0
December 2012...... 100 100 52 11 0 100 90 44 1 0
December 2013...... 100 74 31 0 0 100 74 31 0 0
December 2014...... 100 63 23 0 0 100 63 23 0 0
December 2015...... 100 53 17 0 0 100 53 17 0 0
December 2016...... 100 45 13 0 0 100 45 8 0 0
December 2017...... 100 38 7 0 0 100 38 0 0 0
December 2018...... 100 31 0 0 0 100 31 0 0 0
December 2019...... 100 26 0 0 0 100 26 0 0 0
December 2020...... 100 21 0 0 0 100 21 0 0 0
December 2021...... 92 17 0 0 0 92 17 0 0 0
December 2022...... 84 14 0 0 0 84 13 0 0 0
December 2023...... 77 12 0 0 0 77 4 0 0 0
December 2024...... 69 7 0 0 0 69 0 0 0 0
December 2025...... 62 * 0 0 0 62 0 0 0 0
December 2026...... 56 0 0 0 0 56 0 0 0 0
December 2027...... 49 0 0 0 0 49 0 0 0 0
December 2028...... 43 0 0 0 0 43 0 0 0 0
December 2029...... 37 0 0 0 0 37 0 0 0 0
December 2030...... 31 0 0 0 0 31 0 0 0 0
December 2031...... 25 0 0 0 0 25 0 0 0 0
December 2032...... 20 0 0 0 0 20 0 0 0 0
December 2033...... 15 0 0 0 0 14 0 0 0 0
December 2034...... 7 0 0 0 0 0 0 0 0 0
December 2035...... 0 0 0 0 0 0 0 0 0 0
December 2036...... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life
--------------------
to Maturity
(years)** 21.19 10.46 6.50 4.12 3.83 21.12 10.28 6.38 4.03 3.62
(*) Indicates a number that is greater than zero but less than 0.5%.
(**) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of
the Current Principal Amount by the number of years from the date of issuance of the certificate to the related
distribution date, (ii) adding the results and (iii) dividing the sum by the aggregate of the net reductions of the
Current Principal Amount described in (i) above.
Percent of Initial Principal Amount Outstanding at the
Following CPR Percentage
Class II-B-4 Certificates Class II-B-5 Certificates
-------------------------------------------- -------------------------------------------
5% 15% 25% 40% 50% 5% 15% 25% 40% 50%
Distribution Date
Initial Percentage. 100 100 100 100 100 100 100 100 100 100
December 2007...... 100 100 100 100 100 100 100 100 100 100
December 2008...... 100 100 100 100 100 100 100 100 100 100
December 2009...... 100 100 100 100 100 100 100 100 100 100
December 2010...... 100 100 90 37 18 100 100 90 26 0
December 2011...... 100 100 68 22 0 100 100 68 6 0
December 2012...... 100 87 41 0 0 100 87 31 0 0
December 2013...... 100 74 31 0 0 100 74 17 0 0
December 2014...... 100 63 23 0 0 100 61 7 0 0
December 2015...... 100 53 14 0 0 100 48 0 0 0
December 2016...... 100 45 0 0 0 100 37 0 0 0
December 2017...... 100 38 0 0 0 100 27 0 0 0
December 2018...... 100 31 0 0 0 100 18 0 0 0
December 2019...... 100 26 0 0 0 100 11 0 0 0
December 2020...... 100 21 0 0 0 100 5 0 0 0
December 2021...... 92 15 0 0 0 92 0 0 0 0
December 2022...... 84 0 0 0 0 84 0 0 0 0
December 2023...... 77 0 0 0 0 77 0 0 0 0
December 2024...... 69 0 0 0 0 69 0 0 0 0
December 2025...... 62 0 0 0 0 61 0 0 0 0
December 2026...... 56 0 0 0 0 52 0 0 0 0
December 2027...... 49 0 0 0 0 43 0 0 0 0
December 2028...... 43 0 0 0 0 34 0 0 0 0
December 2029...... 37 0 0 0 0 26 0 0 0 0
December 2030...... 31 0 0 0 0 18 0 0 0 0
December 2031...... 25 0 0 0 0 10 0 0 0 0
December 2032...... 20 0 0 0 0 3 0 0 0 0
December 2033...... 0 0 0 0 0 0 0 0 0 0
December 2034...... 0 0 0 0 0 0 0 0 0 0
December 2035...... 0 0 0 0 0 0 0 0 0 0
December 2036...... 0 0 0 0 0 0 0 0 0 0
Weighted Average
Life
--------------------
to Maturity (years)* 21.01 10.09 6.24 3.97 3.49 20.22 9.25 5.75 3.63 3.23
(*) The weighted average life of a certificate is determined by (i) multiplying the net reduction, if any, of
the Current Principal Amount by the number of years from the date of issuance of the certificate to the related
distribution date, (ii) adding the results and (iii) dividing the sum by the aggregate of the net reductions of the
Current Principal Amount described in (i) above.
Yield Sensitivity of the Subordinate Certificates
As the Current Principal Amount of a class of Subordinate Certificates is reduced to zero, the yield to maturity on the next
most junior related class of Subordinate Certificates will become extremely sensitive to losses on the related mortgage loans (and
the timing thereof) that are covered by subordination, because the entire amount of losses on the related mortgage loans to the
extent not covered by any related Excess Spread or related overcollateralization will be allocated such class of Subordinate
Certificates. The initial undivided interest in the mortgage loans evidenced by the Class I-B Certificates, in the aggregate, is
approximately 9.25%. The initial undivided interest in the mortgage loans evidenced by the Class II-B Certificates, in the aggregate,
is approximately 9.60%. Investors in the Subordinate Certificates should fully consider the risk that Realized Losses on the mortgage
loans could result in the failure of these investors to fully recover their investments. For additional considerations relating to
the yield on the Subordinate Certificates, see “Yield Considerations” and “Maturity and Prepayment Considerations” in the prospectus.
Yield Sensitivity of the Class I-X Certificates
The Class X Certificates receive only distributions of interest. The yield to maturity on the Class X Certificates will be
extremely sensitive to both the timing of receipt of prepayments and the overall rate of Principal Prepayments and defaults on the
group I mortgage loans having "hard" prepayment charges for a term of three years from origination. The related yield to maturity on
the Class X Certificates may fluctuate significantly over time because the Notional Amount of the Class X Certificates is equal to
the aggregate outstanding principal balance of such mortgage loans having "hard" prepayment charges for a term of three years from
origination. Investors in the Class X Certificates should fully consider the risk that a rapid rate of prepayments on the related
mortgage loans could result in the failure of such investors to fully recover their investments.
The following table indicates the sensitivity of the pre-tax yield to maturity on the Class X Certificates to various
constant rates of prepayment on the related group I mortgage loans by projecting the monthly aggregate payments on the Class X
Certificates and computing the corresponding pre-tax yields to maturity on a corporate bond equivalent basis, based on the
structuring assumptions, including the assumptions regarding the characteristics and performance of such mortgage loans, which differ
from the actual characteristics and performance thereof and assuming the aggregate purchase price for the Class X Certificates set
forth below. Any differences between such assumptions and the actual characteristics and performance of the related group I mortgage
loans and of the Class X Certificates may result in yields being different from those shown in such table. Discrepancies between
assumed and actual characteristics and performance underscore the hypothetical nature of the tables, which are provided only to give
a general sense of the sensitivity of yields in varying prepayment scenarios.
Pre-Tax Yield to Maturity of the Class X Certificates at the Following CPR Percentages
Assumed Purchase Price 5% 15% 25% 40% 50%
$9,643,235.18 32.00% 19.75% 6.74% (14.57)% (30.33)%
Each pre-tax yield to maturity set forth in the preceding tables was calculated by determining the monthly discount rate
which, when applied to the assumed stream of cash flows to be paid on the Class X Certificates, would cause the discounted present
value of such assumed stream of cash flows to equal the assumed purchase price listed in the table. Accrued interest is included in
the assumed purchase price in computing the yields shown. These yields do not take into account the different interest rates at which
investors may be able to reinvest funds received by them as distributions on the Class X Certificates and thus do not reflect the
return on any investment in the Class X Certificates when any reinvestment rates other than the discount rates set forth in the
preceding table are considered.
Notwithstanding the assumed prepayment rates reflected in the preceding tables, it is highly unlikely that the mortgage
loans will be prepaid according to one particular pattern. For this reason and because the timing of cash flows is critical to
determining yields, the pre-tax yield to maturity on the Class X Certificates are likely to differ from those shown in the tables
above, even if the prepayment assumption equals the percentages of CPR indicated in the tables above over any given time period or
over the entire life of the Class X Certificates.
There can be no assurance that the mortgage loans having "hard" prepayment charges for a term of three years from
origination will prepay at any particular rate or that the yield on the Class X Certificates will conform to the yields described
herein. Moreover, the various remaining terms to maturity and mortgage rates of the mortgage loans could produce slower or faster
principal distributions than indicated in the preceding tables at the various percentages of the CPR specified, even if the weighted
average remaining term to maturity and weighted average mortgage rate of those mortgage loans are as assumed. Investors are urged to
make their investment decisions based on their determinations as to anticipated rates of prepayment under a variety of scenarios.
Investors in the Class X Certificates should fully consider the risk that a rapid rate of prepayments on the mortgage loans could
result in the failure of such investors to fully recover their investments.
For additional considerations relating to the yield on the Offered Certificates, see "Yield Considerations" in the
prospectus.
THE POOLING AND SERVICING AGREEMENTGeneral
The Certificates will be issued pursuant to the Agreement, a form of which is filed as an exhibit to the registration
statement. A current report on Form 8-K relating to the Certificates containing a copy of the Agreement as executed will be filed by
the Depositor with the Securities and Exchange Commission within fifteen days of the initial issuance of the Certificates. The trust
fund created under the Agreement will consist of (1) all of the Depositor’s right, title and interest in and to the mortgage loans,
the related mortgage notes, mortgages and other related documents, including all interest and principal due with respect to the
mortgage loans after the Cut-off Date, but excluding any payments of principal or interest due on or prior to the Cut-off Date, (2)
any mortgaged properties acquired on behalf of certificateholders by foreclosure or by deed in lieu of foreclosure and any revenues
received thereon, (3) the rights of the Trustee under all insurance policies required to be maintained pursuant to the Agreement, (4)
the rights of the Depositor under the Mortgage Loan Purchase Agreement between the Depositor and the Sponsor, (5) such assets
relating to the mortgage loans as from time to time may be held in the Custodial Account, the Distribution Account and the Final
Maturity Reserve Account, (6) the rights with respect to the Cap Contracts and (7) any proceeds of the foregoing. Reference is made
to the prospectus for important information in addition to that set forth in this prospectus supplement regarding the trust fund, the
terms and conditions of the Agreement and the Offered Certificates. The Offered Certificates will be transferable and exchangeable at
the corporate trust offices of the Trustee; for these purposes and for purposes of presentment and surrender located at Sixth Street
and Marquette Avenue, Minneapolis, Minnesota55479, Attention: Corporate Trust Group, Bear Stearns Mortgage Funding 2006-AR5 and for
all other purposes located at 9062 Old Annapolis Road, Columbia, Maryland21045, Attention: Client Manager, Bear Stearns Mortgage
Funding 2006-AR5. The Depositor will provide to prospective or actual certificateholders without charge, on written request, a copy
(without exhibits) of the Agreement. Requests should be addressed to Structured Asset Mortgage Investments II Inc., 383 Madison
Avenue, New York, New York10179.
Assignment of the Mortgage Loans
At the time of issuance of the Certificates, the Depositor will cause the mortgage loans, together with all principal and
interest due on or with respect to such mortgage loans after the Cut-off Date, to be sold to the trust. The mortgage loans will be
identified in a schedule appearing as an exhibit to the Agreement (as amended). Such schedule will include information as to the
principal balance of each mortgage loan as of the Cut-off Date, as well as information including, among other things, the mortgage
rate, the Net Rate, the Monthly Payment, the maturity date of each mortgage note and the loan-to-value ratio.
Representations and Warranties
In the Mortgage Loan Purchase Agreement pursuant to which the Depositor purchased the mortgage loans from the Sponsor, the
Sponsor made certain representations and warranties to the Depositor concerning the mortgage loans. The Trustee, on behalf of the
certificateholders, will be assigned all right, title and interest in the Mortgage Loan Purchase Agreement insofar as they relate to
such representations and warranties made by the Sponsor.
The representations and warranties of the Sponsor with respect to the mortgage loans generally will include the following,
among others:
(1) The information set forth in the mortgage loan schedule is true, complete and correct in all material respects as of
the date such representation was made;
(2) Immediately prior to the sale of the mortgage loans pursuant to the Mortgage Loan Purchase Agreement, the Sponsor
was the sole owner of beneficial title and holder of each mortgage and mortgage note relating to the related mortgage loans as of the
Closing Date or as of another specified date, is conveying the same to the Depositor free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest and the Sponsor has full right and authority to sell and
assign each mortgage loan pursuant to the Mortgage Loan Purchase Agreement; and
(3) As of the Closing Date, there is no monetary default existing under any mortgage or the related mortgage note and
there is no material event which, with the passage of time or with notice and the expiration of any grace or cure period, would
constitute a default, breach or event of acceleration; and neither the Sponsor nor any of its respective affiliates has taken any
action to waive any default, breach or event of acceleration; and no foreclosure action is threatened or has been commenced with
respect to the mortgage loan.
Generally, the Mortgage Loan Purchase Agreement will provide that, in the case of a breach of any representation or warranty
set forth above which materially and adversely affects the value of the interests of certificateholders or the Trustee in any of the
mortgage loans, within 90 days from the date of discovery or notice from the Trustee, the Depositor or the Sponsor, the Sponsor will
either (i) cure such breach in all material respects, (ii) provide the Trustee with a substitute mortgage loan (if within two years
of the Closing Date) or (iii) purchase the related mortgage loan at the applicable Repurchase Price. The obligations of the Sponsor
to cure, purchase or substitute shall constitute the Trustee’s sole and exclusive remedy respecting a breach of such representations
and warranties.
The Custodian
Wells Fargo Bank, National Association (“Wells Fargo Bank”) is acting as custodian of the mortgage loan files pursuant to
the custodial agreement. In that capacity, Wells Fargo Bank is responsible to hold and safeguard the mortgage notes and other
contents of the mortgage files on behalf of the Trustee and the certificateholders. Wells Fargo Bank maintains each mortgage loan
file in a separate file folder marked with a unique bar code to assure loan-level file integrity and to assist in inventory
management. Files are segregated by transaction or investor. Wells Fargo Bank has been engaged in the mortgage document custody
business for more than 25 years. Wells Fargo Bank maintains document custody facilities in its Minneapolis, Minnesota headquarters
and in three regional offices located in Richfield, Minnesota, Irvine, California, and Salt Lake City, Utah. As of June 30, 2006,
Wells Fargo Bank maintains mortgage custody vaults in each of those locations with an aggregate capacity of over eleven million
files.
Wells Fargo Bank serves or may have served within the past two years as loan file custodian for various mortgage loans owned
by the Sponsor or an affiliate of the Sponsor and anticipates that one or more of those mortgage loans may be included in the Trust.
The terms of any custodial agreement under which those services are provided by Wells Fargo Bank are customary for the
mortgage-backed securitization industry and provide for the delivery, receipt, review and safekeeping of mortgage loan files. For a
general description of Wells Fargo Bank, see the description herein under "The Trustee."The Trustee
Wells Fargo Bank will act as Trustee for the certificates pursuant to the Agreement. Wells Fargo Bank is a national banking
association and a wholly-owned subsidiary of Wells Fargo & Company. A diversified financial services company with approximately $482
billion in assets, 23 million customers and 153,000+ employees as of December 31, 2005, Wells Fargo & Company is a U.S. bank holding
company, providing banking, insurance, trust, mortgage and consumer finance services throughout the United States and
internationally. Wells Fargo Bank provides retail and commercial banking services and corporate trust, custody, securities lending,
securities transfer, cash management, investment management and other financial and fiduciary services. The Depositor, the Sponsor
and the Servicer may maintain banking and other commercial relationships with Wells Fargo Bank and its affiliates. Wells Fargo Bank
maintains principal corporate trust offices located at 9062 Old Annapolis Road, Columbia, Maryland21045-1951 (among other locations)
and its office for certificate transfer services is located at Sixth Street and Marquette Avenue, Minneapolis, Minnesota55479.
As of June 30, 2006, Wells Fargo Bank acts as a trustee for a variety of transactions and asset types, including corporate
and municipal bonds, mortgage-backed and asset-backed securities and collateralized debt obligations. As of June 30, 2006, Wells
Fargo Bank was acting as trustee on approximately 1,230 series of residential mortgage-backed securities with an aggregate principal
balance of approximately $282,142,062,265.
Wells Fargo Bank serves or has served within the past two years as warehouse master servicer for various mortgage loans
owned by the Sponsor or an affiliate of the Sponsor and anticipates that one or more of those mortgage loans may be included in the
Trust. The terms of the warehouse master servicing agreement under which those services are provided by Wells Fargo Bank are
customary for the mortgage-backed securitization industry.
The Trustee will be entitled to receive as compensation under the Agreement the investment income on amounts in the
Distribution Account for the period specified in the Agreement. The Agreement will provide that the Trustee and any director,
officer, employee or agent of the Trustee will be entitled to recover from the Distribution Account all reasonable out-of pocket
expenses, disbursements and advances and expenses of the Trustee in connection with any Monthly Advance, Event of Default, any breach
of the Agreement or any loss, liability, expense, claim or legal action (including any pending or threatened claim or legal action)
incurred or made by the Trustee in the administration of the trust created pursuant to the Agreement (including the reasonable
compensation and disbursements of its counsel), other than any such expense, disbursement or advance as may arise from the Trustee’s
negligence or intentional misconduct or which is the responsibility of the certificateholders.
If an event of default has not occurred (or has occurred but is no longer continuing) under the Agreement, then the Trustee,
will perform only such duties as are specifically set forth in the Agreement as being the duties to be performed by the Trustee prior
to the occurrence (or following the discontinuance) of an event of default thereunder. If an event of default occurs and is
continuing under the Agreement, the Trustee is required to exercise such of the rights and powers vested in it by the Agreement, such
as (upon the occurrence and during the continuance of certain events of default) either acting as the servicer or appointing a
successor servicer, and use the same degree of care and skill in their exercise as a prudent investor would exercise or use under the
circumstances in the conduct of such investor’s own affairs. Subject to certain qualifications specified in the Agreement, the
Trustee, will be liable for its own negligent action, its own negligent failure to act and its own willful misconduct.
The Trustee’s duties and responsibilities under the Agreement include, upon receipt of resolutions, certificates and reports
which are specifically required to be furnished to it pursuant to the Agreement, examining them to determine whether they are in the
form required by the Agreement, providing to the Rating Agencies notices of the occurrence of certain events of default under the
Agreement, appointing a successor servicer, and effecting any optional termination of either Loan Group or the Trust.
The Trustee may resign at any time, in which event the Depositor will be obligated to appoint a successor trustee. The
Depositor may also remove the Trustee if the Trustee ceases to be eligible to continue as Trustee under the Agreement and fails to
resign after written request therefor by the Depositor or if the Trustee becomes insolvent. Upon becoming aware of those
circumstances, the Depositor will be obligated to appoint a successor trustee. The Trustee may also be removed at any time by the
holders of certificates evidencing not less than 51% of the aggregate voting rights in the related trust. Any resignation or removal
of the Trustee and appointment of a successor trustee will not become effective until acceptance of the appointment by the successor
trustee as set forth in the Agreement.
On and after the time the Servicer receives a notice of termination pursuant to the Agreement, the Trustee shall become the
successor to the Servicer, or shall appoint a successor servicer (as described below) with respect to the transactions set forth or
provided for in the Agreement and after a transition period (not to exceed 90 days), shall be subject to all the responsibilities,
duties, liabilities and limitations on liabilities relating thereto placed on the Servicer by the terms and provisions of the
Agreement; provided, however, that the Trustee shall have no obligation whatsoever with respect to any liability (other than advances
deemed recoverable and not previously made) incurred by the Servicer at or prior to the time of termination. Effective on the date of
such notice of termination, as compensation therefor, the Trustee shall be entitled to all compensation, reimbursement of expenses
and indemnification that the Servicer would have been entitled to if it had continued to act pursuant to the Agreement except for
those amounts due the Servicer as reimbursement permitted under this Agreement for advances previously made or expenses previously
incurred. Notwithstanding the foregoing, the Trustee may, if it shall be unwilling to so act, or shall, if it is prohibited by
applicable law from making advances 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 pursuant to the Agreement in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer pursuant to the Agreement. Any successor servicer shall be an
established housing and home finance institution which is a Fannie Mae- or Freddie Mac-approved servicer and shall have a net worth
of not less than $10,000,000; provided, that the Trustee shall obtain a letter from each Rating Agency that the ratings, if any, on
each of the Certificates will not be lowered as a result of the selection of the successor to the Servicer. If the Trustee assumes
the duties and responsibilities of the Servicer, the Trustee shall not resign as servicer until a successor servicer has been
appointed and has accepted such appointment. Pending appointment of a successor to the Servicer under the Agreement, the Trustee,
unless the Trustee is prohibited by law from so acting, shall act in such capacity as provided in the Agreement. 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 or otherwise as it and such successor shall agree; provided that such compensation shall not be in excess of that
which the Servicer would have been entitled to if the Servicer had continued to act under the Agreement, and that such successor
shall undertake and assume the obligations of the Trustee to pay compensation to any third Person acting as an agent or independent
contractor in the performance of servicing responsibilities under the Agreement. The Trustee and such successor shall take such
action, consistent with the Agreement, as shall be necessary to effectuate any such succession.
The costs and expenses of the Trustee in connection with the termination of the Servicer, appointment of a successor
servicer and any transfer of servicing, including, without limitation, all costs and expenses associated with the complete transfer
of all servicing data and the completion, correction or manipulation of such servicing data as may be required by the Trustee to
correct any errors or insufficiencies in the servicing data or otherwise enable the Trustee or successor servicer to service the
mortgage loans properly and effectively, to the extent not paid by the terminated servicer, will be payable to the Trustee pursuant
to the Agreement. Any successor servicer shall give notice to the applicable mortgagors of such change of servicer and will, during
the term of its service as successor servicer, maintain in force the policy or policies that the Servicer is required to maintain
pursuant to the Agreement.
If the Trustee will succeed to any duties of the Servicer respecting the mortgage loans as provided herein, it will do so in
a separate capacity and not in its capacity as Trustee and, accordingly, the provisions of the Agreement concerning the Trustee’s
duties will be inapplicable to the Trustee in its duties as the successor to the Servicer in the servicing of the mortgage loans
(although such provisions will continue to apply to the Trustee in its capacity as Trustee); the provisions of the Agreement relating
to the Servicer, however, will apply to the Trustee in its capacity as successor servicer.
Upon any termination or appointment of a successor to the Servicer, the Trustee will give prompt written notice thereof to
the Rating Agencies.
Servicing and Other Compensation and Payment of Expenses
The Servicer will be entitled to receive a Servicing Fee as compensation for its activities under the Agreement equal to
1/12 of the Servicing Fee Rate multiplied by the Stated Principal Balance of each mortgage loan as of the first day of the related
Due Period. The Servicing Fee Rate for each mortgage loan will be 0.375% per annum.
In addition to the primary compensation described above, the Servicer may be entitled to retain assumption fees, tax service
fees and late payment charges, all to the extent collected from mortgagors and as provided in the Agreement.
The Servicer will pay all related expenses incurred in connection with its servicing responsibilities (subject to limited
reimbursement as described in the Agreement).
Servicing Responsibilities
The Servicer will be responsible for servicing the mortgage loans in accordance with the provisions of the Agreement. The
responsibilities generally include:
o communicating with borrowers;
o sending monthly remittance statements to borrowers;
o collecting payments from borrowers;
o recommending a loss mitigation strategy for borrowers who have defaulted on their loans (i.e. repayment plan,
modification, foreclosure, etc.);
o accurate and timely accounting, reporting and remittance of the principal and interest portions of monthly
installment payments to the Trustee, together with any other sums paid by borrowers that are required to be remitted;
o accurate and timely accounting and administration of escrow and impound accounts, if applicable;
o accurate and timely reporting of negative amortization amounts, if any;
o paying escrows for borrowers, if applicable;
o calculating and reporting payoffs and liquidations;
o maintaining an individual file for each loan; and
o maintaining primary mortgage insurance commitments or certificates if required, and filing any primary mortgage
insurance claims.
Table of Fees
The following table indicates the fees expected to be paid from the cash flows from the mortgage loans and other assets of
the trust fund while the Offered Certificates are outstanding.
The Servicing Fee is expressed as a percentage, at an annualized rate, applied to the outstanding aggregate principal
balance of the mortgage loans.
Item Fee(1) Paid From
Servicing Fee 0.375% per annum Mortgage Loan Interest Collections
(1) The Servicing Fee is paid on a first priority basis from collections allocable to interest on
the mortgage loans, prior to distributions to certificateholders.
Realization Upon Defaulted Mortgage Loans
The Servicer will take such action either as it deems to be in the best interest of the trust, or as is consistent with
accepted servicing practices or in accordance with established practices for other mortgage loans serviced by the Servicer with
respect to defaulted mortgage loans and foreclose upon or otherwise comparably convert the ownership of properties securing defaulted
mortgage loans as to which no satisfactory collection arrangements can be made. To the extent set forth in the Agreement, the
Servicer will service the property acquired by the trust through foreclosure or deed-in-lieu of foreclosure in accordance with
procedures that the Servicer employs and exercises in servicing and administering mortgage loans for its own account and which are in
accordance with accepted mortgage servicing practices of prudent lending institutions, and Fannie Mae guidelines. The Servicer will
not be required to expend its own moneys with respect to the restoration or to make servicing advances with respect to such mortgaged
properties unless the Servicer has determined that (i) such amounts would be recovered, and (ii) it believes such restoration will
increase proceeds to the trust following the mortgaged property’s eventual liquidation.
Since Insurance Proceeds received in connection with a mortgage loan cannot exceed deficiency claims and certain expenses
incurred by the Servicer, no insurance payments will result in a recovery to certificateholders which exceeds the principal balance
of the defaulted mortgage loan together with accrued interest thereon at its applicable Net Rate.
Monthly Reports to Certificateholders
On each distribution date, the Trustee will make available to each certificateholder, the Servicer and the Depositor a
statement generally setting forth, among other information:
(a) the Current Principal Amount or Notional Amount of each class of Certificates after giving effect (i) to all
distributions allocable to principal on such distribution date and (ii) the allocation of any Applied Realized Loss Amounts for such
distribution date;
(b) the amount of the related distribution to holders of each class allocable to principal, separately identifying (A)
the aggregate amount of any Principal Prepayments included therein, (B) the aggregate of all scheduled payments of principal included
therein and (C) the Extra Principal Distribution Amount (if any);
(c) the pass-through rate for each applicable class of Certificates with respect to the current Due Period, and, if
applicable, whether such pass-through rate was limited by the applicable Net Rate Cap;
(d) the amount of such distribution to holders of each class allocable to interest;
(e) the applicable accrual periods dates for calculating distributions and general distribution dates;
(f) the total cash flows received and the general sources thereof;
(g) the amount, if any, of fees or expenses accrued and paid, with an identification of the payee and the general
purpose of such fees including the related amount of the Servicing Fees paid to or retained by the Servicer for the related Due
Period;
(h) the Interest Carry Forward Amount and any Basis Risk Shortfall Carry-forward Amount for each class of Certificates;
(i) with respect to each Loan Group, the aggregate of the Stated Principal Balance of all of the mortgage loans for the
following distribution date;
(j) the number and outstanding principal balance of the mortgage loans that were Delinquent (exclusive of any mortgage
loan in foreclosure) (A) that are 30 to 59 days Delinquent, (B) that are 60 to 89 days Delinquent, (C) that are 90 or more days
Delinquent and (D) for which foreclosure proceedings have been commenced, in each case as of the close of business on the last day of
the calendar month preceding such distribution date and separately identifying such information for the first lien mortgage loans and
second lien mortgage loans;
(k) with respect to each Loan Group, the amount of Monthly Advances included in the distribution on such distribution
date (including the general purpose of such Monthly Advances);
(l) with respect to each Loan Group, the cumulative amount of Applied Realized Loss Amounts to date;
(m) if applicable, material modifications, extensions or waivers to mortgage loan terms, fees, penalties or payments
during the preceding calendar month or that have become material over time;
(n) with respect to each Loan Group and with respect to any mortgage loan that was liquidated during the preceding
calendar month, the loan number and aggregate Stated Principal Balance of, and Realized Loss on, such mortgage loan as of the close
of business on the determination date preceding such distribution date;
(o) with respect to each Loan Group, the total number and principal balance of any real estate owned or REO Properties
as of the close of business on the last day of the calendar month preceding such distribution date;
(p) with respect to each Loan Group, the three month rolling average of the percent equivalent of a fraction, the
numerator of which is the aggregate Stated Principal Balance of the mortgage loans that are 60 days or more Delinquent or are in
bankruptcy or foreclosure or are REO Properties, and the denominator of which is the aggregate Stated Principal Balance of all of the
mortgage loans in each case as of the close of business on the last day of the calendar month preceding such distribution date and
separately identifying such information for the first lien mortgage loans;
(q) with respect to each Loan Group, the Realized Losses during the related Due Period and the cumulative Realized
Losses through the end of the preceding month;
(r) with respect to each Loan Group, whether a Trigger Event exists;
(s) updated pool composition data, including the weighted average mortgage rate and the weighted average remaining term;
(t) the special hazard amount, fraud loss amount and bankruptcy amount, if applicable, as of the close of business on
the applicable distribution date and a description of any change in the calculation of these amounts;
(u) the amount of the distribution made on such distribution date to the holders of the Class XP Certificates allocable
to prepayment charges; and
(v) the amount of the Reimbursement Amount, if any.
The Trustee will make the monthly statement and, at its option, any additional files containing the same information in an
alternative format, available each month to certificateholders via the Trustee’s internet website at www.ctslink.com. Assistance in
using the website service can be obtained by calling the Trustee’s customer service desk at (301) 815-6600. Parties that are unable
to use the above distribution options are entitled to have a paper copy mailed to them via first class mail by calling the customer
service desk and indicating such. The Trustee may change the way monthly statements are distributed in order to make such
distributions more convenient or more accessible to the above parties.
The annual reports on Form 10-K, the distribution reports on Form 10-D, the current reports on Form 8-K and amendments to
those reports filed or furnished with respect to the trust pursuant to section 13(a) or 15(d) of the Exchange Act which were filed by
the Trustee will be made available on the website of the Trustee promptly after such material is electronically filed with, or
furnished to, the SEC. In addition, upon request, the Trustee will prepare and make available to a requesting certificateholder of
record during the previous calendar year a statement containing information necessary to enable certificateholders to prepare their
tax returns. Such statements will not have been examined and reported upon by an independent public accountant.
Collection and Other Servicing Procedures and Modifications
The Servicer will use its reasonable efforts to ensure that all payments required under the terms and provisions of the
mortgage loans are collected, and will follow collection procedures comparable to the collection procedures of prudent mortgage
lenders servicing mortgage loans for its own account, to the extent such procedures will be consistent with the Agreement.
In instances in which a mortgage loan is in default or if default is reasonably foreseeable, and if determined by the
Servicer to be in the best interests of the certificateholders, the Servicer may engage, either directly or through subservicers, in a
wide variety of loss mitigation practices including waivers, modifications, payment forbearances, partial forgiveness, entering into
repayment schedule arrangements, and capitalization of arrearages rather than proceeding with foreclosure or repossession, if
applicable. In making that determination, the estimated Realized Loss that might result if the loan were liquidated would be taken
into account. Modifications may have the effect of, among other things, reducing the loan rate, forgiving payments of principal,
interest or other amounts owed under the mortgage loan or contract, such as taxes or insurance premiums, extending the final maturity
date of the loan, capitalizing delinquent interest and other amounts owed under the mortgage loan or contract, or any combination of
these or other modifications. In addition, if the loan is not in default or if default is not reasonably foreseeable, the Servicer
may modify the loan only to the extent set forth in the Agreement; provided that, such modification will not result in the imposition
of taxes on any REMIC or otherwise adversely affect the REMIC status of the trust. Any modified loan may remain in the related trust,
and the reduction in collections resulting from a modification may result in reduced distributions of interest or principal on, or
may extend the final maturity of, one or more classes of the related securities.
Approximately 62.86% of the group I mortgage loans and approximately 64.76% of the group II mortgage loans are assumable
under some circumstances if, in the sole judgment of the servicer, the prospective purchaser of a mortgaged property is creditworthy
and the security for the mortgage loan is not impaired by the assumption. The remainder of the mortgage loans are subject to
customary due-on-sale provisions.
Certain mortgage loans contain due-on-sale clauses. If a Mortgaged Property has been or is about to be conveyed by the
Mortgagor and the Servicer has knowledge thereof, the Servicer will accelerate the maturity of the mortgage loan, to the extent
permitted by the terms of the related mortgage note, the terms of any primary mortgage insurance policy and applicable law. If it
reasonably believes that the due-on-sale clause cannot be enforced under applicable law, or would otherwise potentially impair any
recovery under a primary mortgage insurance policy, if applicable, the Servicer in some cases with the prior consent of the Trustee
(not to be unreasonably withheld) may enter into an assumption agreement 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 the Mortgagor, to the extent permitted by
applicable law, remains liable thereon. The Servicer will retain any fee collected for entering into an assumption agreement as
additional servicing compensation to the extent provided in the Servicing Agreement. In regard to circumstances in which the
Servicer may be unable to enforce due-on-sale clauses, see “Legal Aspects of Mortgage Loans” in the prospectus. In connection with
any such assumption, the mortgage rate borne by the related mortgage note may not be changed. Certain other mortgage loans are
assumable under some circumstances if, in the sole judgment of the servicer, the prospective purchaser of a mortgaged property is
creditworthy and the security for the mortgage loan is not impaired by the assumption.
The Servicer will establish and maintain, in addition to the Custodial Account described under “-The Custodial Account,” one
or more accounts which comply with the requirements of the Servicing Agreement. The Servicer will deposit and retain therein all
collections from the mortgagors for the payment of taxes, assessments, insurance premiums, or comparable items as agent of the
mortgagors as provided in the Servicing Agreement. Each of these accounts and the investment of deposits therein shall comply with
the requirements of the Servicing Agreement and shall meet the requirements of the Rating Agencies. Withdrawals of amounts from the
Protected Accounts may be made to effect timely payment of taxes, assessments, insurance premiums, or comparable items, to reimburse
the Servicer for any advances made with respect to such items, for application to restoration or repair of the Mortgaged Property, to
refund to any mortgagors any sums as may be determined to be overages, to pay to the Servicer, or to the Mortgagor to the extent
required by law, interest paid on the funds on deposit in such accounts to clear and terminate, such accounts at or at any time after
the termination of the Servicing Agreement, and to make such other withdrawals as provided in the Servicing Agreement.
The Servicer will maintain errors and omissions insurance and fidelity bonds in certain specified amounts.
Hazard Insurance
The Servicer will maintain and keep, or cause to be maintained and kept, with respect to each mortgage loan, other than a
mortgage loan secured by a condominium unit, in full force and effect for each Mortgaged Property a hazard insurance policy equal to
at least the lesser of (i) the Outstanding Principal Balance of the mortgage loan or (ii) the maximum insurable value of the
improvements securing such mortgage loan, or equal to such other amount as calculated pursuant to a similar formulation as provided
in the Servicing Agreement, and containing a standard or union mortgagee clause; provided, however, that the amount of the hazard
insurance may not be less than the amount necessary to prevent loss due to the application of any co-insurance provision of the
related policy. Any amounts collected by the Servicer under any such hazard insurance policy (other than amounts to be applied to the
restoration or repair of the Mortgaged Property or amounts released to the Mortgagor in accordance with normal servicing procedures)
shall be deposited in a Protected Account. Any cost incurred in maintaining any such hazard insurance policy shall not be added to
the amount owing under the mortgage loan for the purpose of calculating monthly distributions by the Servicer to the Trustee
notwithstanding that the terms of the mortgage loan so permit. Such costs shall be recoverable by the Servicer out of related late
payments by the Mortgagor or out of Insurance Proceeds or Liquidation Proceeds or any other amounts in the related Protected Account.
The right of the Servicer to reimbursement for such costs incurred will be prior to the right of Trustee to receive any related
Insurance Proceeds or Liquidation Proceeds or any other amounts in the related Protected Account.
In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the
improvements on the property by fire, lightning, explosion, smoke, windstorm and hail, riot, strike and civil commotion, subject to
the conditions and exclusions particularized in each policy. Although the policies relating to the mortgage loans will be
underwritten by different insurers and therefore will not contain identical terms and conditions, the basic terms thereof are
dictated by state law. Such policies typically do not cover any physical damage resulting from the following: war, revolution,
governmental actions, floods and other water-related causes, earth movement (including earthquakes, landslides and mud flows),
nuclear reactions, wet or dry rot, vermin, rodents, insects or domestic animals, theft and, in certain cases, vandalism and malicious
mischief. The foregoing list is merely indicative of certain kinds of uninsured risks and is not intended to be all-inclusive.
Since the amount of hazard insurance to be maintained on the improvements securing the mortgage loans may decline as the
principal balances owing thereon decrease, and since residential properties have historically appreciated in value over time, in the
event of partial loss, hazard insurance proceeds may be insufficient to restore fully the damaged property.
Where the property securing a mortgage loan is located at the time of origination, or at such other time as set forth in the
Servicing Agreement, in a federally designated flood area, the Servicer will cause with respect to such mortgage loan flood insurance
to the extent available and in accordance with industry practices to be maintained. Such flood insurance will be in an amount equal
to the lesser of (i) the Outstanding Principal Balance of the related mortgage loan and (ii) the minimum amount required under the
terms of coverage to compensate for any damage or loss on a replacement cost basis, or equal to such other amount as calculated
pursuant to a similar formulation as provided in the Servicing Agreement, but not more than the maximum amount of such insurance
available for the related Mortgaged Property under either the regular or emergency programs of the National Flood Insurance Program
(assuming that the area in which such Mortgaged Property is located is participating in such program).
The Servicer, on behalf of the Trustee and Certificateholders, will present claims to the insurer under any applicable
hazard insurance policy. If the Servicer obtains and maintains a blanket hazard insurance policy, the Servicer is required to deposit
in a Protected Account the amount not otherwise payable due to such deductible under such blanket hazard insurance policy.
Evidence as to Compliance
The Agreement will provide that on or before March 15 of each year, beginning with the first year after the year in which
the Cut-off Date occurs, each party participating in the servicing function will provide to the Servicer, the Depositor and the
Trustee a report on an assessment of compliance with the minimum servicing criteria established in Item 1122(a) of Regulation AB (the
“AB Servicing Criteria”). The AB Servicing Criteria include specific criteria relating to the following areas: general servicing
considerations, cash collection and administration, investor remittances and reporting, and pool-asset administration. Such report
will indicate that the AB Servicing Criteria were used to test compliance on a platform level basis and will set out any material
instances of noncompliance.
The Agreement will also provide that each party participating in the servicing function will deliver to the Servicer, the
Depositor and the Trustee along with its report on assessment of compliance, an attestation report from a firm of independent public
accountants on the assessment of compliance with the AB Servicing Criteria.
The Agreement will also provide for delivery on or before March 15 of each year, of a separate annual statement of
compliance from each party participating in the servicing function to the effect that, to the best knowledge of the signing officer,
such party has fulfilled in all material respects its obligations under the Agreement or related servicing agreement throughout the
preceding year or, if there has been a material failure in the fulfillment of any such obligation, the statement will specify such
failure and the nature and status thereof. This statement may be provided as a single form making the required statements as to more
than one Agreement or related servicing agreement.
Copies of the annual reports of assessment of compliance, attestation reports, and statements of compliance may be obtained
by certificateholders without charge upon written request to the Servicer at the address of the Servicer set forth above under “TheServicer.” These items will be filed with the Issuing Entity’s annual report on Form 10-K, to the extent required under Regulation
AB.
The Custodial Account
The Servicer will establish and maintain in the name of the Trustee, for the benefit of the certificateholders, an account,
referred to herein as the Custodial Account, into which it will deposit daily all collections of principal and interest on any
mortgage loans, including but not limited to Principal Prepayments, Insurance Proceeds, Liquidation Proceeds (less amounts
reimbursable to the Servicer out of Liquidation Proceeds in accordance with the Agreement), the Repurchase Price for any mortgage
loans repurchased and Monthly Advances made from the Servicer’s own funds (less the Servicing Fee) and Compensating Interest
Payments. The amount at any time credited to the Custodial Account, if invested, shall be invested in the name of the Trustee in
permitted investments selected by the Servicer. The Servicer will be entitled to any amounts earned on permitted investments in the
Custodial Account. The Servicer will also deposit into the Custodial Account any amounts required to be deposited with respect to
losses on Permitted Investments and any other amounts received by the Servicer and required to be deposited in the Custodial Account
pursuant to the Agreement. The Custodial Account and amounts at any time credited thereto shall comply with the requirements of the
Agreement and shall meet the requirements of the Rating Agencies.
The Distribution Account
The Trustee shall establish and maintain in the name of the Trustee, for the benefit of the certificateholders, an account,
referred to herein as the Distribution Account, into which on the second Business Day prior to each distribution date, all available
funds in the Custodial Account for such distribution date will be transferred by the Servicer. All amounts deposited to the
Distribution Account shall be held in the name of the Trustee in trust for the benefit of the certificateholders in accordance with
the terms and provisions of the Agreement. The amount at any time credited to the Distribution Account, if invested, shall be
invested in the name of the Trustee in permitted investments selected by the Trustee. The Trustee will be entitled to any amounts
earned and will be liable for any losses on permitted investments in the Distribution Account.
On each distribution date, the Trustee shall pay the certificateholders in accordance with the provisions set forth under
“Description of the Certificates-Distributions on the Certificates” herein.
The Reserve Fund
The Trustee shall establish and maintain, for the benefit of the holders of the Group II Offered Certificates, Class II-B-5
Certificates and Class II-B-IO Certificates, an account, referred to herein as the Reserve Fund, into which on each distribution
date, amounts received under each Cap Contract will be deposited in accordance with the provisions as set forth under “The CapContracts” in this prospectus supplement. The amount at any time on deposit in the Reserve Fund held in trust for the benefit of the
Group II Offered Certificates, Class II-B-5 Certificates and Class II-B-IO Certificates, shall be held either (i) uninvested in a
trust or deposit account of the Trustee with no liability for interest or other compensation thereon or (ii) invested in permitted
investments that mature no later than the Business Day prior to the next succeeding distribution date. Any losses on such permitted
investments shall not in any case be a liability of the Trustee but an amount equal to such losses shall be given by the Class
II-B-IO Certificateholders to the Trustee out of such Certificateholders’ own funds immediately as realized, for deposit by the
Trustee into the Reserve Fund.
On each distribution date, amounts held in the Reserve Fund for the benefit of the Group II Certificates will be allocated
to the Group II Offered Certificates and the Class II-B-5 Certificates, to the extent of amounts available for distribution with
respect to the related Loan Group in the Reserve Fund, in accordance with the provisions set forth with respect thereto under “TheCap Contracts” in this prospectus supplement.
Voting Rights
Voting rights of the trust in general will be allocated among the classes of certificates (other than the Residual
Certificates) as set forth in the Agreement.
Termination
The obligations of the Trustee and the Servicer created by the Agreement will terminate upon (i) the later of the making of
the final payment or other liquidation or any advance with respect thereto, of the last mortgage loan subject thereto or the
disposition of all property acquired upon foreclosure or acceptance of a deed in lieu of foreclosure of any such mortgage loans, (ii)
the payment to certificateholders of all amounts required to be paid to them pursuant to the Agreement or (iii) the repurchase by or
at the direction of the Depositor or its designee of all of the mortgage loans and all related REO Property in the trust, as further
discussed below.
On any distribution date on which the aggregate Stated Principal Balance of the group I mortgage loans is less than 10% of
the aggregate Stated Principal Balance of the group I mortgage loans as of the Cut-off Date or aggregate Stated Principal Balance of
the group II mortgage loans is less than 10% of the aggregate Stated Principal Balance of the group II mortgage loans as of the
Cut-off Date, the Depositor or its designee, may repurchase from the trust all of the mortgage loans in the related Loan Group
remaining outstanding and any REO Property remaining in the trust at a purchase price equal to the sum of, without duplication, (a)
the unpaid principal balance of the mortgage loans in the related Loan Group (other than mortgage loans related to REO Property), net
of the principal portion of any unreimbursed Monthly Advances relating to the mortgage loans in the related Loan Group made by the
purchaser, plus accrued but unpaid interest thereon at the applicable mortgage rate to, but not including, the first day of the month
of repurchase, (b) the appraised value of any related REO Property, less the good faith estimate of the Servicer of liquidation
expenses to be incurred in connection with its disposal thereof (but not more than the unpaid principal balance of the related
mortgage loan, together with accrued but unpaid interest on that balance at the applicable mortgage rate, but not including the first
day of the month of repurchase), (c) unreimbursed out-of-pocket costs of the Servicer related to the applicable Loan Group, including
unreimbursed servicing advances and the principal portion of any unreimbursed Monthly Advances, made on the related mortgage loans
prior to the exercise of such repurchase and (d) any unreimbursed costs and expenses of the Trustee related to the applicable Loan
Group payable in accordance with the terms of the Agreement. Such person exercising this right, if not the Depositor or an
affiliate, shall be deemed to represent that one of the following will be true and correct: (i) the exercise of such option shall not
result in a non-exempt prohibited transaction under ERISA or Section 4975 of the Code or (ii) such person is (A) not a party in
interest with respect to any Plan and (B) is not a "benefit plan investor" (other than a plan sponsored or maintained by such person,
provided that no assets of such plan are invested or deemed to be invested in the certificates). If the holder of the option is
unable to exercise such option by reason of the preceding sentence, then the Depositor may exercise such option. Any such repurchase
will result in the retirement of all of the certificates and termination of the trust. The trust may also be terminated and the
Certificates may be retired on any distribution date upon the Depositor’s determination, based upon an opinion of counsel, that the
status of the trust fund as a REMIC has been lost or that a substantial risk exists that such status will be lost for the then
current taxable year. In no event will the trust created by the Agreement continue beyond the expiration of 21 years from the death
of the survivor of the persons named in the Agreement. See “The Agreements-Termination; Retirement of Securities” in the prospectus.
FEDERAL INCOME TAX CONSEQUENCES
Upon the issuance of the Offered Certificates, Orrick, Herrington & Sutcliffe LLP, counsel to the Depositor, will deliver
its opinion generally to the effect that, assuming compliance with all provisions of the Agreement, for federal income tax purposes,
each REMIC election made by the trust fund will qualify as a REMIC under the Internal Revenue Code of 1986, or the Code. The Offered
Certificates will represent ownership of regular interests in a REMIC coupled, except in the case of the Class X Certificates, with
certain rights to the payment of amounts in respect of Basis Risk Shortfalls and, in the case of the Group I Offered Certificates
(other than the Class X Certificates), amounts in respect of interest accrued at a pass-through rate in excess of the related net
rate cap calculated using the maximum Coupon Strip Rate instead of the actual Coupon Strip Rate, if applicable ("Excess Coupon Strip
Amount"), and are herein referred to as the “Regular Certificates” or the “REMIC Regular Certificates.” Each of the Residual
Certificates will be designated as the residual interest in the related REMIC and are herein referred to as the “ResidualCertificates” or the “REMIC Residual Certificates”. All certificateholders are advised to see “Federal Income Tax Consequences” in
the prospectus for a discussion of the anticipated federal income tax consequences of the purchase, ownership and disposition of the
REMIC Regular Certificates and the REMIC Residual Certificates. Holders of the Offered Certificates should see “Special TaxConsiderations Applicable to the Class A Certificates and Class B Certificates” in this prospectus supplement.
The portions of the Regular Certificates that represent ownership of regular interests in a REMIC generally will be taxable
as debt obligations under the Code and interest paid or accrued on that portion of the Regular Certificates, including original issue
discount with respect to any Regular Certificates issued with original issue discount, will be taxable to certificateholders in
accordance with the accrual method of accounting, regardless of their usual method of accounting. It is anticipated that, for federal
income tax purposes, some or all of the Regular Certificates may be issued with original issue discount. See “Federal Income Tax
Consequences-Taxation of Classes of Exchangeable Securities-Tax Accounting for Exchangeable Securities” in the prospectus. The
Internal Revenue Service referred to herein as the IRS, has issued OID regulations under Sections 1271 to 1275 of the Code generally
addressing the treatment of debt instruments issued with original issue discount referred to herein as the OID Regulations. All
purchasers of REMIC Regular Certificates are urged to consult their tax advisors for advice regarding the effect, in any, of the
original issue discount provisions and regulations on the purchase of the Regular Certificates. The prepayment assumption that will
be used in determining the rate of accrual of original issue discount with respect to the Regular Certificates is 25% CPR. The
prepayment assumption represents a rate of payment of unscheduled principal on a pool of mortgage loans, expressed as an annualized
percentage of the outstanding principal balance of such mortgage loans at the beginning of each period. See “Yield on the
Certificates-Weighted Average Life” herein for a description of the prepayment assumption model used herein. However, no
representation is made as to the rate at which prepayments actually will occur.
In certain circumstances the OID Regulations permit the holder of a debt instrument to recognize original issue discount
under a method that differs from that used by the Issuing Entity. Accordingly, it is possible that the holder of a Regular
Certificate may be able to select a method for recognizing original issue discount that differs from that used by the Trustee in
preparing reports to the certificateholders and the IRS.
Certain classes of the Regular Certificates may be treated for federal income tax purposes as having been issued at a
premium. Whether any holder of such a class of certificates will be treated as holding a certificate with amortizable bond premium
will depend on such certificateholder's purchase price and the distributions remaining to be made on such certificate at the time of
its acquisition by such certificateholder. Holders of such classes of certificates should consult their tax advisors regarding the
possibility of making an election to amortize such premium. See “Federal Income Tax Consequences-Taxation of Classes of Exchangeable
Securities-Tax Accounting for Exchangeable Securities” in the prospectus.
Special Tax Considerations Applicable to the Class A Certificates and Class B Certificates
All holders of the Class A Certificates and Class B Certificates will be entitled to amounts paid in respect of Basis Risk
Shortfall Carryforward Amounts from excess cash flow and, in the case of the Class I-A Certificates and Class I-B Certificates,
Excess Coupon Strip Amounts, if any. Accordingly, holders of the Class A Certificates and Class B Certificates will be treated for
federal income tax purposes as owning a regular interest in a REMIC and a beneficial ownership interest in the right to receive
payments of Basis Risk Shortfall Carryforward Amounts and, in the case of the Class I-A Certificates and Class I-B Certificates,
Excess Coupon Strip Amounts, if any, which are not included in any REMIC. The treatment of amounts received by a Certificateholder
with respect to such Certificateholder's right to receive Basis Risk Shortfall Carry-forward Amounts as a result of the application
of the Net Rate Cap or Excess Coupon Strip Amounts, if any, will depend upon the portion of such Certificateholder's purchase price
allocable thereto. Under the REMIC regulations, each Certificateholder of a Class A Certificate or Class B Certificate must allocate
its purchase price for its Certificate between its undivided interest in the related REMIC regular interest and its interest in the
right to receive payments from the reserve fund in respect of any Basis Risk Shortfall Carry-forward Amounts and, if applicable,
Excess Coupon Strip Amounts, if any in accordance with the relative fair market values of each property right. Such allocation will
be used for, among other things, purposes of computing any original issue discount, market discount or premium, as well as for
determining gain or loss on disposition. No representation is or will be made as to the relative fair market values thereof.
Generally, payments made to Certificates with respect to any Basis Risk Shortfall Carry-forward Amounts and Excess Coupon Strip
Amounts, if any, will be included in income based on, and the purchase price allocated to such property rights may be amortized in
accordance with, the regulations relating to notional principal contracts. In the case of non-corporate holders, the amortization of
the purchase price may be subject to limitations as an itemized deduction, and may not be useable at all, if the taxpayer is subject
to the alternative minimum tax. However, regulations have been proposed that modify the taxation of notional principal contracts
that contain contingent nonperiodic payments. As the application of such regulations (i.e., whether they apply, and if so, how they
apply) are, at this time, unclear, holders of the Class A Certificates and Class B Certificates should consult with their own tax
advisors with respect to the proper treatment of their interest in the reserve fund.
Characterization of the Offered Certificates
We make no representation on whether the Offered Certificates (or what, if any, portion thereof) will constitute "real
estate assets" or whether the interest (or any portion) thereon will be considered "interest on obligations secured by mortgages on
real property", in each case for real estate investment trusts, or REITs. In addition, we make no representation on whether the
Offered Certificates (or what, if any, portion thereof) will constitute a "regular interest in a REMIC" under section 7701(a)(19)(C)
for purposes of domestic building and loan associations.
Backup Withholding
Pursuant to the Agreement, the Trustee will (i) deliver or cause to be delivered a United States Internal Revenue Service
Form W-9 for the Trust or successor applicable form, or other appropriate United States tax forms as may be reasonably required, to
the Cap Counterparty on or before the first payment date under the Cap Contracts and thereafter prior to the expiration or
obsolescence of such form, and (ii) request each Class II-B-IO Certificateholder, as required by the Agreement, to provide
certification reasonably acceptable to the Trustee to enable the Trust to make payments on the Class II-B-IO Certificates without
U.S. federal backup withholding and (iii) as authorized by the Class II-B-IO Certificateholders, deliver such certification to the
Cap Counterparty upon request. If the above obligations are satisfied, under current law, no U.S. federal backup withholding taxes
will be required to be deducted or withheld from payments by the Cap Counterparty to the Trust. If any Class II-B-IO
Certificateholder fails to provide the forms required by clause (ii) above, amounts otherwise payable by the Cap Counterparty under
the Cap Contracts may be reduced on account of taxes withheld by the Cap Counterparty and/or the Trustee.
Penalty Protection
If penalties were asserted against purchasers of the Certificates offered hereunder in respect of their treatment of the
Certificates for tax purposes, the summary of tax considerations contained and the opinions stated, herein and in the prospectus may
not meet the conditions necessary for purchasers’ reliance on that summary and those opinions to exculpate them from the asserted
penalties.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting agreement, the Offered Certificates, are being purchased
from the Depositor by the Underwriter upon issuance. The Underwriter is an affiliate of the Depositor and BSRM. The Offered
Certificates will be offered by the Underwriter (only as and if issued and delivered to and accepted by the Underwriter) from time to
time in negotiated transactions or otherwise at varying prices to be determined at the time of sale. Proceeds to the Depositor are
expected to be approximately 100.28% of the aggregate principal balance of the Offered Certificates, as of the Cut-off Date, plus
accrued interest thereon, but before deducting expenses payable by the Depositor in connection with the Offered Certificates which
are estimated to be approximately $2,270,000. The Depositor will indemnify the Underwriter against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended, or will contribute to payments the Underwriter may be required to
make in respect thereof.
The Underwriter may effect these transactions by selling the underwritten certificates to or through dealers, and those
dealers may receive compensation in the form of underwriting discounts, concessions or commissions from the underwriter for whom they
act as agent. In connection with the sale of the underwritten certificates, the Underwriter may be deemed to have received
compensation from the Depositor in the form of underwriting compensation. The Underwriter and any dealers that participate with the
underwriters in the distribution of the related underwritten certificates may be deemed to be underwriters and any profit on the
resale of the underwritten certificates positioned by them may be deemed to be underwriting discounts and commissions under the
Securities Act.
There is currently no secondary market for the certificates and no assurances are made that such a market will develop. The
Underwriter intends to establish a market in the Offered Certificates, but is not obligated to do so. Any such market, even if
established, may or may not continue.
SECONDARY MARKET
There is currently no secondary market for the Certificates and no assurances are made that such a market will develop. The
Underwriter intends to establish a market in the Offered Certificates, but is not obligated to do so. Any such market, even if
established, may or may not continue.
The primary source of information available to investors concerning the Offered Certificates will be the monthly statements
discussed in this prospectus supplement under “The Pooling and Servicing Agreement-Monthly Reports to Certificateholders,” which will
include information as to the Current Principal Amount of the Offered Certificates and the status of the applicable form of credit
enhancement. There can be no assurance that any additional information regarding the Offered Certificates will be available through
any other source. In addition, the Depositor is not aware of any source through which price information about the Offered
Certificates will be generally available on an ongoing basis. The limited nature of information regarding the Offered Certificates
may adversely affect the liquidity of the Offered Certificates, even if a secondary market for the Offered Certificates becomes
available.
LEGAL MATTERS
Legal matters relating to the Offered Certificates will be passed upon for the Depositor and the Underwriter by Orrick,
Herrington & Sutcliffe LLP, New York, New York.
LEGAL PROCEEDINGS
There are no material legal proceedings pending against the Depositor, the Trustee, the Issuing Entity, BSRM, the Cap
Counterparty or the Custodian, or with respect to which the property of any of the foregoing transaction parties is subject, that are
material to the certificateholders. No legal proceedings against any of the foregoing transaction parties is known to be
contemplated by governmental authorities, that are material to the certificateholders. We refer you to “The Sponsor” and “Servicing
of the Mortgage Loans-The Servicer” for a description of the legal proceedings against the Sponsor and the Servicer.
AFFILIATIONS, RELATIONSHIPS AND RELATED TRANSACTIONS
The Sponsor, the Issuing Entity, the underwriter, BSRM, ABN AMRO Bank N.V., the Servicer and the Depositor are affiliated
parties. The Custodian and the Trustee are the same entity. There are no affiliations between the Sponsor, the Depositor, the
underwriter, BSRM, the Servicer or the Issuing Entity and any of the Trustee, the Cap Counterparty or the Custodian. There are no
affiliations among the Trustee and any 10% concentration originator, the Cap Counterparty or the Servicer. There are currently no
business relationships, agreements, arrangements, transactions or understandings between (a) the Sponsor, the Depositor, or the
Issuing Entity and (b) any of the parties referred to in the preceding sentence, or any of their respective affiliates, that were
entered into outside the normal course of business or that contain terms other than would be obtained in an arm’s length transaction
with an unrelated third party and that are material to the investor's understanding of the certificates, or, except as disclosed
herein, that relate to the certificates or the pooled assets. No such business relationship, agreement, arrangement, transaction or
understanding has existed during the past two years, other than as described under “The Pooling and Servicing Agreement-The
Custodian” herein.
RATINGS
It is a condition to the issuance of each class of Offered Certificates that it receives at least the ratings set forth
below from S&P and Moody’s.
Rating
Class S&P Moody’s
Class I-A-1 AAA Aaa
Class I-A-2 AAA Aaa
Class I-A-3 AAA Aaa
Class I-X AAA Aaa
Class II-A-1 AAA Aaa
Class II-A-2 AAA Aaa
Class II-A-3 AAA Aaa
Class I-B-1 AA+ Aaa
Class I-B-2 AA Aa1
Class I-B-3 AA- Aa1
Class I-B-4 A+ Aa2
Class I-B-5 A Aa3
Class I-B-6 A- A1
Class I-B-7 BBB+ A3
Class I-B-8 BBB Baa2
Class I-B-9 BBB- Baa3
Class II-B-1 AA Aaa
Class II-B-2 A Aa3
Class II-B-3 BBB A3
Class II-B-4 BBB- Baa1
The ratings assigned by S&P and Moody’s to mortgage pass-through certificates address the likelihood of the receipt of all
distributions on the mortgage loans by the related certificateholders under the agreements pursuant to which such certificates were
issued. S&P’s and Moody’s ratings take into consideration the credit quality of the related mortgage pool, structural and legal
aspects associated with such certificates and the extent to which the payment stream in the mortgage pool is adequate to make
payments required under such certificates. S&P’s and Moody’s ratings on such certificates do not, however, constitute a statement
regarding frequency of prepayments on the mortgages.
The ratings of the Rating Agencies do not address the possibility that, as a result of Principal Prepayments or recoveries
certificateholders might suffer a lower than anticipated yield.
The ratings assigned to the Offered Certificates should be evaluated independently from similar ratings on other types of
securities. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time
by the Rating Agencies.
The Depositor has not requested a rating of the Offered Certificates by any rating agency other than the Rating Agencies.
However, there can be no assurance as to whether any other rating agency will rate the Offered Certificates or, in such event, what
rating would be assigned to the Offered Certificates by such other rating agency. The ratings assigned by such other rating agency to
the Offered Certificates may be lower than the ratings assigned by the Rating Agencies.
The fees paid by the Depositor to the Rating Agencies at closing include a fee for ongoing surveillance by the Rating
Agencies for so long as any Offered Certificates are outstanding. However, the Rating Agencies are under no obligation to the
Depositor to continue to monitor or provide a rating on the Offered Certificates.
LEGAL INVESTMENT
The Offered Certificates (other than the Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7, Class I-B-8, Class I-B-9,
Class II-B-2, Class II-B-3 and Class II-B-4 Certificates) will constitute “mortgage related securities” for purposes of the Secondary
Mortgage Market Enhancement Act of 1984 referred to herein as SMMEA so long as they are rated in one of the two highest rating
categories by a nationally recognized statistical rating organization and, as such, will be legal investments for certain entities to
the extent provided in SMMEA, subject to state laws overriding SMMEA. Certain states have enacted legislation overriding the legal
investment provisions of SMMEA. It is not anticipated that the Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7, Class I-B-8,
Class I-B-9, Class II-B-2, Class II-B-3 and Class II-B-4 Certificates will be rated in one of the two highest rating categories and
therefore will not constitute “mortgage related securities” for purposes of SMMEA. The Class I-B-4, Class I-B-5, Class I-B-6, Class
I-B-7, Class I-B-8, Class I-B-9, Class II-B-2, Class II-B-3 and Class II-B-4 Certificates are referred to herein as the Non-SMMEA
Certificates. The appropriate characterization of the Non-SMMEA Certificates under various legal investment restrictions and thus
the ability of investors subject to these restrictions to purchase Non-SMMEA Certificates, may be subject to significant
interpretative uncertainties.
The Office of Thrift Supervision referred to herein as the OTS has issued Thrift Bulletins 73a, entitled “Investing in
Complex Securities” referred to herein as TB 73a, which is effective as of December 18, 2001 and applies to savings associations
regulated by the OTS and 13a, entitled “Management of Interest Rate Risk, Investment Securities and Derivatives Activities” referred
to herein as TB 13a, which is effective as of December 1, 1998 and applies to thrift institutions regulated by the OTS.
One of the primary purposes of TB 73a is to require savings associations, prior to taking any investment position, to
determine that the investment position meets applicable regulatory and policy requirements (including those set forth TB 13a (see
below)) and internal guidelines, is suitable for the institution and is safe and sound. The OTS recommends, with respect to
purchases of specific securities, additional analysis, including, among others, analysis of repayment terms, legal structure,
expected performance of the issuer and any underlying assets as well as analysis of the effects of payment priority, with respect to
a security which is divided into separate tranches with unequal payments and collateral investment parameters, with respect to a
security that is prefunded or involves a revolving period. TB 73a reiterates the OTS's due diligence requirements for investing in
all securities and warns that if a savings association makes an investment that does not meet the applicable regulatory requirements,
the savings association's investment practices will be subject to criticism and the OTS may require divestiture of such securities.
The OTS also recommends, with respect to an investment in any “complex securities,” that savings associations should take into
account quality and suitability, interest rate risk and classification factors. For the purposes of each of TB 73a and TB 13a,
“complex security” includes among other things any collateralized mortgage obligation or real estate mortgage investment conduit
security, other than any “plain vanilla” mortgage pass-through security (that is, securities that are part of a single class of
securities in the related pool that are non-callable and do not have any special features). Accordingly, all classes of the Offered
Certificates would likely be viewed as “complex securities.” With respect to quality and suitability factors, TB 73a warns (i) that a
savings association's sole reliance on outside ratings for material purchases of complex securities is an unsafe and unsound
practice, (ii) that a savings association should only use ratings and analyses from nationally recognized rating agencies in
conjunction with and in validation of, its own underwriting processes and (iii) that it should not use ratings as a substitute for
its own thorough underwriting analyses. With respect the interest rate risk factor, TB 73a recommends that savings associations
should follow the guidance set forth in TB 13a.
One of the primary purposes of TB 13a is to require thrift institutions, prior to taking any investment position, to (i)
conduct a pre-purchase portfolio sensitivity analysis for any “significant transaction” involving securities or financial derivatives
and (ii) conduct a pre-purchase price sensitivity analysis of any “complex security” or financial derivative. The OTS recommends
that while a thrift institution should conduct its own in-house pre-acquisition analysis, it may rely on an analysis conducted by an
independent third-party as long as management understands the analysis and its key assumptions. Further, TB 13a recommends
that the use of “complex securities with high price sensitivity” be limited to transactions and strategies that lower a thrift
institution's portfolio interest rate risk. TB 13a warns that investment in complex securities by thrift institutions that do not
have adequate risk measurement, monitoring and control systems may be viewed by OTS examiners as an unsafe and unsound practice.
All investors whose investment activities are subject to legal investment laws and regulations or to review by certain
regulatory authorities may be subject to restrictions on investment in the Certificates. Any such institution should consult its own
legal advisors in determining whether and to what extent there may be restrictions on its ability to invest in the Certificates. See
“Legal Investment Matters” in the prospectus.
ERISA CONSIDERATIONS
Fiduciaries of employee benefit plans subject to Title I of the Employee Retirement Income Security Act of 1974, as amended
(referred to herein as ERISA), should consider the ERISA fiduciary investment standards before authorizing an investment by any such
plan in the Certificates. In addition, fiduciaries of employee benefit plans subject to Title I of ERISA, as well as certain plans or
other retirement arrangements that are not subject to Title I of ERISA but are subject to Section 4975 of the Code (such as
individual retirement accounts and Keogh plans covering only a sole proprietor or partners) or any entity whose underlying assets
include plan assets by reason of a plan or account investing in such entity, including an insurance company general account
(collectively referred to herein as Plan(s)), should consult with their legal counsel to determine whether an investment in the
Certificates will cause the assets of the Trust (referred to herein as Trust Assets) to be considered plan assets pursuant to the
plan asset regulations set forth at 29 C.F.R. § 2510.3-101, as modified by Section 3(42) of ERISA (referred to herein as the Plan
Asset Regulations), thereby subjecting the Plan to the prohibited transaction rules with respect to the Trust Assets and the Trustee
or the Servicer to the fiduciary investments standards of ERISA or cause the excise tax provisions of Section 4975 of the Code to
apply to the Trust Assets, unless an exemption granted by the United States Department of Labor (referred to herein as the DOL)
applies to the purchase, sale, transfer or holding of the Certificates.
The DOL has issued Prohibited Transaction Exemption 90-30 (as most recently amended by Prohibited Transaction Exemption
2002-41) (referred to herein as the Underwriter’s Exemption) to the Underwriter which is expected to apply to the Offered
Certificates (other than the Residual Certificates) if the conditions described below are satisfied. However, the Underwriter’s
Exemption contains a number of conditions which must be met for the exemption to apply, including the requirements that (i) the
investing Plan must be an “accredited investor” as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act and (ii) the Offered Certificates be rated at least “BBB-” (or its equivalent) by Fitch Inc. or
Fitch, S&P or Moody’s, at the time of the Plan’s purchase, provided that no Mortgage Loan has an LTV in excess of 100% on the Closing
Date. See “ERISA Considerations” in the prospectus. The DOL amended the Underwriter’s Exemption in Prohibited Transaction Exemption
2002-41 (67 Fed. Reg. 54487, September 22, 2002) to allow the Trustee to be affiliated with the underwriter in spite of the
restriction in PTE 2000-58 to the contrary.
The Underwriter’s Exemption is expected to apply to the Subordinate Certificates (other than the Class II-B-5 Certificates)
if the conditions described above are satisfied. Therefore, each beneficial owner of a Subordinate Certificate (other than a Class
II-B-5 Certificate) or any interest therein shall be deemed to have represented, by virtue of its acquisition or holding of that
Certificate or interest therein, that either (i) that Certificate was rated at least “BBB-” at the time of purchase, (ii) such
beneficial owner is not a benefit plan investor or (iii) (1) it is an insurance company, (2) the source of funds used to acquire or
hold the certificate or interest therein is an “insurance company general account,” as such term is defined in PTCE 95-60 and (3) the
conditions in Sections I and III of PTCE 95-60 have been satisfied.
If any Subordinate Certificate or any interest therein is acquired or held in violation of the conditions described in the
preceding paragraph, the next preceding permitted beneficial owner will be treated as the beneficial owner of that Subordinate
Certificate, retroactive to the date of transfer to the purported beneficial owner. Any purported beneficial owner whose acquisition
or holding of that Certificate or interest therein was effected in violation of the conditions described in the preceding paragraph
shall indemnify and hold harmless the Depositor, the Trustee, the Servicer, any subservicer and the trust from and against any and
all liabilities, claims, costs or expenses incurred by those parties as a result of that acquisition or holding.
Before purchasing an Offered Certificate, a fiduciary of a Plan should itself confirm that the Certificate constitutes
“securities” for purposes of the Underwriter’s Exemption and that the specific and general conditions of the Underwriter’s Exemption
and the other requirements set forth in the Underwriter’s Exemption would be satisfied. The Residual Certificates do not satisfy the
requirements of the Underwriter’s Exemption and may not be purchased by or on behalf of, or with plan assets of, any Plans.
Any Plan fiduciary that proposes to cause a Plan to purchase a Certificate should consult with its counsel with respect to
the potential applicability to such investment of the fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code to the proposed investment. For further information regarding the ERISA considerations of investing in the
Certificates, see “ERISA Considerations” in the prospectus.
A governmental plan, as defined in Section 3(32) of ERISA, is not subject to Title I of ERISA or Section 4975 of the Code.
However, such governmental plan may be subject to Federal, state and local law, which is, to a material extent, similar to the
fiduciary provisions of Title I of ERISA. A fiduciary of a governmental plan should make its own determination as to the propriety of
such investment under applicable fiduciary or other investment standards.
The sale of any Certificates to a Plan is in no respect a representation by the Underwriter that such an investment meets
all relevant legal requirements with respect to investments by Plans generally or any particular Plan or that such an investment is
appropriate for Plans generally or any particular Plan.
INCORPORATION OF INFORMATION BY REFERENCE
There are incorporated into this prospectus supplement by reference all documents, including but not limited to the
financial statements and reports filed or caused to be filed or incorporated by reference by the depositor with respect to a trust
fund pursuant to the requirements of Sections 13(a) or 15(d) of the Exchange Act, prior to the termination of the offering of the
Offered Certificates of the related series; provided, however, this prospectus supplement and any related prospectus do not
incorporate by reference the Issuing Entity's annual reports filed on Form 10-K with respect to a trust fund.
The Depositor will provide or cause to be provided without charge to each person to whom this prospectus supplement is
delivered in connection with the offering of one or more classes of Offered Certificates, upon written or oral request of the person,
a copy of any or all the reports incorporated in this prospectus supplement, in each case to the extent the reports relate to one or
more of such classes of the Offered Certificates, other than the exhibits to the documents, unless the exhibits are specifically
incorporated by reference in the documents. Requests should be directed in writing to Structured Asset Mortgage Investments II Inc.,
383 Madison Avenue, New York, New York10179, Attention: Secretary, or by telephone at (212) 272-2000. The Depositor has determined
that its financial statements will not be material to the offering of any Offered Certificates.
GLOSSARY
Below are abbreviated definitions of significant capitalized terms used herein. Capitalized terms used herein but not
defined herein shall have the meanings assigned to them in the prospectus.
Actual Monthly Payments - For any mortgage loan and each Due Period, the actual monthly payments of principal and interest received
during such month on such mortgage loan.
Adjusted Rate Cap - With respect to the Class I-A Certificates and Class I-B Certificates, each distribution date and the related Due
Period, the sum of (i) the scheduled Monthly Payments owed on the group I mortgage loans for such Due Period less the related
Servicing Fees and (ii) the related Actual Monthly Payments received in excess of such scheduled Monthly Payments, expressed as a
per annum rate calculated on the basis of the aggregate Stated Principal Balance of the group I mortgage loans for such Due Period
and further reflecting the accrual of interest on an actual/360 basis, minus the sum of (a) the interest payable to the Class I-X
Certificates and (b) the Coupon Strip with respect to Loan Group I, if any, payable to the Final Maturity Reserve Account with
respect to such distribution date, expressed as a per annum rate.
With respect to the Group II Certificates, each distribution date and the related Due Period, the sum of (i) the scheduled Monthly
Payments owed on the group II mortgage loans for such Due Period less the related Servicing Fees and (ii) the related Actual Monthly
Payments received in excess of such scheduled Monthly Payments, expressed as a per annum rate calculated on the basis of the
aggregate Stated Principal Balance of the group II mortgage loans for such Due Period and further reflecting the accrual of interest
on an actual/360 basis.
Agreement - The Pooling and Servicing Agreement, dated as of December 1, 2006, among the Depositor, the Sponsor and Servicer and the
Trustee.
Applied Realized Loss Amount - With respect to any class of Offered Certificates (other than the Class X Certificates) and the Class
II-B-5 Certificates, and as to any distribution date, the sum of the Realized Losses with respect to the mortgage loans in the
related Loan Group, which have been applied in reduction of the Current Principal Amount of such class, in an amount equal to the
amount, if any, by which, (i) the aggregate Current Principal Amount of all of the Certificates in the related Loan Group (after all
distributions of principal on such distribution date) exceeds (ii) the aggregate Stated Principal Balance of the mortgage loans in
the related Loan Group for such distribution date.
Bankruptcy Loss - Any loss resulting from a bankruptcy court, in connection with a personal bankruptcy of a mortgagor, (1)
establishing the value of a mortgaged property at an amount less than the Outstanding Principal Balance of the mortgage loan secured
by such mortgaged property or (2) reducing the amount of the Monthly Payment on the related mortgage loan.
Basis Risk Shortfall - On any distribution date, the excess, if any of:
1. The amount of Current Interest that such class would have been entitled to receive on such distribution date had the
applicable pass-though rate been calculated at a per annum rate equal to the lesser of (i) One-Month LIBOR plus the
related Margin and (ii) 10.50% per annum, over
2. The amount of Current Interest on such class calculated using a pass-though rate equal to the applicable Net Rate
Cap for such distribution date.
Basis Risk Shortfall Carry-forward Amount - As of any distribution date for the Offered Certificates (other than the Class X
Certificates) and the Class II-B-5 Certificates, the sum of the Basis Risk Shortfall for such distribution date and the Basis Risk
Shortfall for all previous distribution dates not previously paid, together with interest thereon at a rate equal to the applicable
pass-through rate for such distribution date.
Book-Entry Certificates - The Class A, the Class X and the Class B Certificates issued, maintained and transferred at the DTC.
BSRM - Bear Stearns Residential Mortgage Corporation.
Business Day - Generally any day other than a Saturday, a Sunday or a day on which the New York Stock Exchange or Federal Reserve is
closed or on which banking institutions in New York City or in any jurisdiction in which the Trustee, Custodian or the Servicer is
located are obligated by law or executive order to be closed.
Cap Contracts - The interest rate cap contracts that the Trustee, on behalf of the Trust, entered into with the Cap Counterparty with
respect to the Group II Offered Certificates and the Class II-B-5 Certificates.
Cap Counterparty - ABN AMRO Bank N.V.
Cede - Cede & Co.
Certificate Owner - Any person who is the beneficial owner of a Book-entry Certificate.
Certificates - The Offered Certificates and the Non-Offered Certificates.
Class I-A Certificates - The Class I-A-1, Class I-A-2, and Class I-A-3 Certificates.
Class I-A Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I Trigger
Event is not in effect, an amount equal to the excess (if any) of (x) the aggregate Current Principal Amount of the Class I-A
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated Principal
Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and
Realized Losses on the group I mortgage loans incurred during the related calendar month) over (b) the aggregate Stated Principal
Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and
Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior to the
distribution date in December 2012, approximately 26.750% and (ii) on or after the distribution date in December 2012, approximately
21.400%, and (II) the excess of (a) the aggregate Stated Principal Balance of the group I mortgage loans as of the last day of the
related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I mortgage loans incurred during the
related Prepayment Period) over (b) 0.50% of the principal balance of the group I mortgage loans as of the Cut-off Date.
Class I-B Certificates - The Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7,
Class I-B-8 and Class I-B-9 Certificates.
Class I-B-1 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class I-B-1
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated Principal
Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and
Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1) the aggregate
Current Principal Amount of the Class I-A Certificates (after taking into account the payment of the Class I-A Principal Distribution
Amount for such distribution date) and (2) the aggregate Stated Principal Balance of the group I mortgage loans as of the last day of
the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I mortgage loans incurred during
the related Prepayment Period) multiplied by (i) prior to the distribution date in December 2012, approximately 20.750% and (ii) on
or after the distribution date in December 2012, approximately 16.600%, and (II) the excess of (a) the aggregate Stated Principal
Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and
Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) 0.50% of the principal balance
of the group I mortgage loans as of the Cut-off Date.
Class I-B-2 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class I-B-2
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated Principal
Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and
Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1) the aggregate
Current Principal Amount of the Class I-A Certificates (after taking into account the payment of the Class I-A Principal Distribution
Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class I-B-1 Certificates (after taking into
account the payment of the Class I-B-1 Principal Distribution Amounts for such distribution date) and (3) the aggregate Stated
Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior
to the distribution date in December 2012, approximately 16.000% and (ii) on or after the distribution date in December 2012,
approximately 12.800%, and (II) the excess of (a) the aggregate Stated Principal Balance of the group I mortgage loans as of the
last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I mortgage loans
incurred during the related Prepayment Period) over (b) 0.50% of the principal balance of the group I mortgage loans as of the
Cut-off Date.
Class I-B-3 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class I-B-3
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated
Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1)
the aggregate Current Principal Amount of the Class I-A Certificates (after taking into account the payment of the Class I-A
Principal Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class I-B-1 Certificates
(after taking into account the payment of the Class I-B-1 Principal Distribution Amounts for such distribution date), (3) the
aggregate Current Principal Amount of the Class I-B-2 Certificates (after taking into account the payment of the Class I-B-2
Principal Distribution Amounts for such distribution date) and (4) the aggregate Stated Principal Balance of the group I mortgage
loans as of the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I
mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior to the distribution date in December 2012,
approximately 14.250% and (ii) on or after the distribution date in December 2012, approximately 11.400%, and (II) the excess of (a)
the aggregate Stated Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction
for Principal Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b)
0.50% of the principal balance of the group I mortgage loans as of the Cut-off Date.
Class I-B-4 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class I-B-4
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated
Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1)
the aggregate Current Principal Amount of the Class I-A Certificates (after taking into account the payment of the Class I-A
Principal Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class I-B-1 Certificates
(after taking into account the payment of the Class I-B-1 Principal Distribution Amounts for such distribution date), (3) the
aggregate Current Principal Amount of the Class I-B-2 Certificates (after taking into account the payment of the Class I-B-2
Principal Distribution Amounts for such distribution date), (4) the aggregate Current Principal Amount of the Class I-B-3
Certificates (after taking into account the payment of the Class I-B-3 Principal Distribution Amounts for such distribution date) and
(5) the aggregate Stated Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after
reduction for Principal Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period)
multiplied by (i) prior to the distribution date in December 2012, approximately 10.750% and (ii) on or after the distribution date
in December 2012, approximately 8.600%, and (II) the excess of (a) the aggregate Stated Principal Balance of the group I mortgage
loans as of the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I
mortgage loans incurred during the related Prepayment Period) over (b) 0.50% of the principal balance of the group I mortgage loans
as of the Cut-off Date.
Class I-B-5 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class I-B-5
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated
Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1)
the aggregate Current Principal Amount of the Class I-A Certificates (after taking into account the payment of the Class I-A
Principal Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class I-B-1 Certificates
(after taking into account the payment of the Class I-B-1 Principal Distribution Amounts for such distribution date), (3) the
aggregate Current Principal Amount of the Class I-B-2 Certificates (after taking into account the payment of the Class I-B-2
Principal Distribution Amounts for such distribution date), (4) the aggregate Current Principal Amount of the Class I-B-3
Certificates (after taking into account the payment of the Class I-B-3 Principal Distribution Amounts for such distribution date),
(5) the aggregate Current Principal Amount of the Class I-B-4 Certificates (after taking into account the payment of the Class I-B-4
Principal Distribution Amounts for such distribution date) and (6) the aggregate Stated Principal Balance of the group I mortgage
loans as of the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I
mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior to the distribution date in December 2012,
approximately 9.500% and (ii) on or after the distribution date in December 2012, approximately 7.600%, and (II) the excess of (a)
the aggregate Stated Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction
for Principal Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b)
0.50% of the principal balance of the group I mortgage loans as of the Cut-off Date.
Class I-B-6 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class I-B-6
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated
Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1)
the aggregate Current Principal Amount of the Class I-A Certificates (after taking into account the payment of the Class I-A
Principal Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class I-B-1 Certificates
(after taking into account the payment of the Class I-B-1 Principal Distribution Amounts for such distribution date), (3) the
aggregate Current Principal Amount of the Class I-B-2 Certificates (after taking into account the payment of the Class I-B-2
Principal Distribution Amounts for such distribution date), (4) the aggregate Current Principal Amount of the Class I-B-3
Certificates (after taking into account the payment of the Class I-B-3 Principal Distribution Amounts for such distribution date),
(5) the aggregate Current Principal Amount of the Class I-B-4 Certificates (after taking into account the payment of the Class I-B-4
Principal Distribution Amounts for such distribution date), (6) the aggregate Current Principal Amount of the Class I-B-5
Certificates (after taking into account the payment of the Class I-B-5 Principal Distribution Amounts for such distribution date) and
(7) the aggregate Stated Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after
reduction for Principal Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period)
multiplied by (i) prior to the distribution date in December 2012, approximately 8.250% and (ii) on or after the distribution date in
December 2012, approximately 6.600%, and (II) the excess of (a) the aggregate Stated Principal Balance of the group I mortgage loans
as of the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I mortgage
loans incurred during the related Prepayment Period) over (b) 0.50% of the principal balance of the group I mortgage loans as of the
Cut-off Date.
Class I-B-7 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class I-B-7
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated
Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1)
the aggregate Current Principal Amount of the Class I-A Certificates (after taking into account the payment of the Class I-A
Principal Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class I-B-1 Certificates
(after taking into account the payment of the Class I-B-1 Principal Distribution Amounts for such distribution date), (3) the
aggregate Current Principal Amount of the Class I-B-2 Certificates (after taking into account the payment of the Class I-B-2
Principal Distribution Amounts for such distribution date), (4) the aggregate Current Principal Amount of the Class I-B-3
Certificates (after taking into account the payment of the Class I-B-3 Principal Distribution Amounts for such distribution date),
(5) the aggregate Current Principal Amount of the Class I-B-4 Certificates (after taking into account the payment of the Class I-B-4
Principal Distribution Amounts for such distribution date), (6) the aggregate Current Principal Amount of the Class I-B-5
Certificates (after taking into account the payment of the Class I-B-5 Principal Distribution Amounts for such distribution date),
(7) the aggregate Current Principal Amount of the Class I-B-6 Certificates (after taking into account the payment of the Class I-B-6
Principal Distribution Amounts for such distribution date) and (8) the aggregate Stated Principal Balance of the group I mortgage
loans as of the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I
mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior to the distribution date in December 2012,
approximately 6.125% and (ii) on or after the distribution date in December 2012, approximately 4.900%, and (II) the excess of (a)
the aggregate Stated Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction
for Principal Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b)
0.50% of the principal balance of the group I mortgage loans as of the Cut-off Date.
Class I-B-8 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class I-B-8
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated
Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1)
the aggregate Current Principal Amount of the Class I-A Certificates (after taking into account the payment of the Class I-A
Principal Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class I-B-1 Certificates
(after taking into account the payment of the Class I-B-1 Principal Distribution Amounts for such distribution date), (3) the
aggregate Current Principal Amount of the Class I-B-2 Certificates (after taking into account the payment of the Class I-B-2
Principal Distribution Amounts for such distribution date), (4) the aggregate Current Principal Amount of the Class I-B-3
Certificates (after taking into account the payment of the Class I-B-3 Principal Distribution Amounts for such distribution date),
(5) the aggregate Current Principal Amount of the Class I-B-4 Certificates (after taking into account the payment of the Class I-B-4
Principal Distribution Amounts for such distribution date), (6) the aggregate Current Principal Amount of the Class I-B-5
Certificates (after taking into account the payment of the Class I-B-5 Principal Distribution Amounts for such distribution date),
(7) the aggregate Current Principal Amount of the Class I-B-6 Certificates (after taking into account the payment of the Class I-B-6
Principal Distribution Amounts for such distribution date), (8) the aggregate Current Principal Amount of the Class I-B-7
Certificates (after taking into account the payment of the Class I-B-7 Principal Distribution Amounts for such distribution date) and
(9) the aggregate Stated Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after
reduction for Principal Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period)
multiplied by (i) prior to the distribution date in December 2012, approximately 4.875% and (ii) on or after the distribution date in
December 2012, approximately 3.900%, and (II) the excess of (a) the aggregate Stated Principal Balance of the group I mortgage loans
as of the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I mortgage
loans incurred during the related Prepayment Period) over (b) 0.50% of the principal balance of the group I mortgage loans as of the
Cut-off Date.
Class I-B-9 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group I
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class I-B-9
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated
Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1)
the aggregate Current Principal Amount of the Class I-A Certificates (after taking into account the payment of the Class I-A
Principal Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class I-B-1 Certificates
(after taking into account the payment of the Class I-B-1 Principal Distribution Amounts for such distribution date), (3) the
aggregate Current Principal Amount of the Class I-B-2 Certificates (after taking into account the payment of the Class I-B-2
Principal Distribution Amounts for such distribution date), (4) the aggregate Current Principal Amount of the Class I-B-3
Certificates (after taking into account the payment of the Class I-B-3 Principal Distribution Amounts for such distribution date),
(5) the aggregate Current Principal Amount of the Class I-B-4 Certificates (after taking into account the payment of the Class I-B-4
Principal Distribution Amounts for such distribution date), (6) the aggregate Current Principal Amount of the Class I-B-5
Certificates (after taking into account the payment of the Class I-B-5 Principal Distribution Amounts for such distribution date),
(7) the aggregate Current Principal Amount of the Class I-B-6 Certificates (after taking into account the payment of the Class I-B-6
Principal Distribution Amounts for such distribution date) (8) the aggregate Current Principal Amount of the Class I-B-7 Certificates
(after taking into account the payment of the Class I-B-7 Principal Distribution Amounts for such distribution date), (9) the
aggregate Current Principal Amount of the Class I-B-8 Certificates (after taking into account the payment of the Class I-B-8
Principal Distribution Amounts for such distribution date) and (10) the aggregate Stated Principal Balance of the group I mortgage
loans as of the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group I
mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior to the distribution date in December 2012,
approximately 3.625% and (ii) on or after the distribution date in December 2012, approximately 2.900%, and (II) the excess of (a)
the aggregate Stated Principal Balance of the group I mortgage loans as of the last day of the related Due Period (after reduction
for Principal Prepayments and Realized Losses on the group I mortgage loans incurred during the related Prepayment Period) over (b)
0.50% of the principal balance of the group I mortgage loans as of the Cut-off Date.
Class II-A Certificates - The Class II-A-1, Class II-A-2 and Class II-A-3 Certificates.
Class II-A Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group II
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the aggregate Current Principal Amount of the Class
II-A Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated
Principal Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group II mortgage loans incurred during the related calendar month) over (b) the aggregate
Stated Principal Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior
to the distribution date in December 2012, approximately 25.875% and (ii) on or after the distribution date in December 2012,
approximately 20.700%, and (II) the excess of (a) the aggregate Stated Principal Balance of the group II mortgage loans as of the
last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group II mortgage loans
incurred during the related Prepayment Period) over (b) 0.50% of the principal balance of the group II mortgage loans as of the
Cut-off Date.
Class II-B Certificates - The Class II-B-1, Class II-B-2, Class II-B-3, Class II-B-4 and Class II-B-5 Certificates.
Class II-B-1 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group II
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class II-B-1
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated Principal
Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and
Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1) the aggregate
Current Principal Amount of the Class II-A Certificates (after taking into account the payment of the Class II-A Principal
Distribution Amount for such distribution date) and (2) the aggregate Stated Principal Balance of the group II mortgage loans as of
the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group II mortgage loans
incurred during the related Prepayment Period) multiplied by (i) prior to the distribution date in December 2012, approximately
16.750% and (ii) on or after the distribution date in December 2012, approximately 13.400%, and (II) the excess of (a) the aggregate
Stated Principal Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) over (b) 0.50% of the
principal balance of the group II mortgage loans as of the Cut-off Date.
Class II-B-2 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group II
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class II-B-2
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated Principal
Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and
Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1) the aggregate
Current Principal Amount of the Class II-A Certificates (after taking into account the payment of the Class II-A Principal
Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class II-B-1 Certificates (after
taking into account the payment of the Class II-B-1 Principal Distribution Amounts for such distribution date) and (3) the aggregate
Stated Principal Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior
to the distribution date in December 2012, approximately 11.875% and (ii) on or after the distribution date in December 2012,
approximately 9.500%, and (II) the excess of (a) the aggregate Stated Principal Balance of the group II mortgage loans as of the last
day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group II mortgage loans incurred
during the related Prepayment Period) over (b) 0.50% of the principal balance of the group II mortgage loans as of the Cut-off Date.
Class II-B-3 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group II
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class II-B-3
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated
Principal Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1)
the aggregate Current Principal Amount of the Class II-A Certificates (after taking into account the payment of the Class II-A
Principal Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class II-B-1
Certificates (after taking into account the payment of the Class II-B-1 Principal Distribution Amounts for such distribution date),
(3) the aggregate Current Principal Amount of the Class II-B-2 Certificates (after taking into account the payment of the Class
II-B-2 Principal Distribution Amounts for such distribution date) and (4) the aggregate Stated Principal Balance of the group II
mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the
group II mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior to the distribution date in December
2012, approximately 8.375% and (ii) on or after the distribution date in December 2012, approximately 6.700%, and (II) the excess of
(a) the aggregate Stated Principal Balance of the group II mortgage loans as of the last day of the related Due Period (after
reduction for Principal Prepayments and Realized Losses on the group II mortgage loans incurred during the related Prepayment Period)
over (b) 0.50% of the principal balance of the group II mortgage loans as of the Cut-off Date.
Class II-B-4 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group II
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class II-B-4
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated Principal
Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and
Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1) the aggregate
Current Principal Amount of the Class II-A Certificates (after taking into account the payment of the Class II-A Principal
Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class II-B-1 Certificates (after
taking into account the payment of the Class II-B-1 Principal Distribution Amounts for such distribution date), (3) the aggregate
Current Principal Amount of the Class II-B-2 Certificates (after taking into account the payment of the Class II-B-2 Principal
Distribution Amounts for such distribution date), (4) the aggregate Current Principal Amount of the Class II-B-3 Certificates (after
taking into account the payment of the Class II-B-3 Principal Distribution Amounts for such distribution date) and (5) the aggregate
Stated Principal Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) multiplied by (i) prior
to the distribution date in December 2012, approximately 7.000% and (ii) on or after the distribution date in December 2012,
approximately 5.600%, and (II) the excess of (a) the aggregate Stated Principal Balance of the group II mortgage loans as of the last
day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group II mortgage loans incurred
during the related Prepayment Period) over (b) 0.50% of the principal balance of the group II mortgage loans as of the Cut-off Date.
Class II-B-5 Principal Distribution Amount - For any distribution date on or after the related Stepdown Date on which a Group II
Trigger Event is not in effect, an amount equal to the excess (if any) of (x) the Current Principal Amount of the Class II-B-5
Certificates immediately prior to such distribution date over (y) the lesser of (I) the excess of (a) the aggregate Stated Principal
Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal Prepayments and
Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) over (b) the sum of (1) the aggregate
Current Principal Amount of the Class II-A Certificates (after taking into account the payment of the Class II-A Principal
Distribution Amount for such distribution date), (2) the aggregate Current Principal Amount of the Class II-B-1 Certificates (after
taking into account the payment of the Class II-B-1 Principal Distribution Amounts for such distribution date), (3) the aggregate
Current Principal Amount of the Class II-B-2 Certificates (after taking into account the payment of the Class II-B-2 Principal
Distribution Amounts for such distribution date), (4) the aggregate Current Principal Amount of the Class II-B-3 Certificates (after
taking into account the payment of the Class II-B-3 Principal Distribution Amounts for such distribution date), (5) the aggregate
Current Principal Amount of the Class II-B-4 Certificates (after taking into account the payment of the Class II-B-4 Principal
Distribution Amounts for such distribution date) and (6) the aggregate Stated Principal Balance of the group II mortgage loans as of
the last day of the related Due Period (after reduction for Principal Prepayments and Realized Losses on the group II mortgage loans
incurred during the related Prepayment Period) multiplied by (i) prior to the distribution date in December 2012, approximately
1.875% and (ii) on or after the distribution date in December 2012, approximately 1.500%, and (II) the excess of (a) the aggregate
Stated Principal Balance of the group II mortgage loans as of the last day of the related Due Period (after reduction for Principal
Prepayments and Realized Losses on the group II mortgage loans incurred during the related Prepayment Period) over (b) 0.50% of the
principal balance of the group II mortgage loans as of the Cut-off Date.
Class A Certificates - The Class I-A Certificates and the Class II-A Certificates.
Class B Certificates - The Class I-B Certificates and the Class II-B Certificates.
Class X Certificates - The Class I-X Certificates.
Class XP Certificates - The Class I-XP-1, Class I-XP-2 and Class II-XP Certificates.
Closing Date - December 29, 2006.
Compensating Interest Payments - Any payments made by the Servicer from its own funds to cover Prepayment Interest Shortfalls on the
related mortgage loans.
Coupon Strip - With respect to Loan Group I, as defined in “Description of the Certificates-Final Maturity Reserve Account” in this
prospectus supplement.
Coupon Strip Rate - With respect to Loan Group I, shall equal the related Coupon Strip, if any, payable to the Final Maturity Reserve
Account on any distribution date, expressed as a per annum rate calculated on the basis of the aggregate Stated Principal Balance of
the group I mortgage loans as of such distribution date.
CPR - A constant rate of prepayment on the mortgage loans.
Credit Enhancement Percentage - For any distribution date is the percentage obtained by dividing (x) the aggregate Current Principal
Amount of the Subordinate Certificates in the related Loan Group (including the related Overcollateralization Amount) thereto by (y)
the aggregate principal balance of the mortgage loans in the related Loan Group, calculated after taking into account distributions
of principal on the related mortgage loans and distribution of the Principal Distribution Amounts to the holders of the related
Certificates then entitled to distributions of principal on such distribution date.
Cumulative Loss Test Violation - The Group I Cumulative Loss Test Violation or the Group II Cumulative Loss Test Violation, as
applicable.
Current Interest - With respect to each class of Offered Certificates and the Class II-B-5 Certificates and each distribution date,
the interest accrued at the applicable pass-through rate for the applicable Interest Accrual Period on the Current Principal Amount
or Notional Amount of such class plus any amount previously distributed with respect to interest for such class that is recovered as
a voidable preference by a trustee in bankruptcy reduced by, in the case of a Class A Certificate or Class B Certificate, such
class's share of (x) any Net Deferred Interest allocated to that class of Certificates, (y) the interest portion of any Realized
Losses on the related mortgage loans allocated to that class of certificates and (z) any Prepayment Interest Shortfall to the extent
not covered by Compensating Interest Payments and any shortfalls resulting from the application of the Relief Act, in each case to
the extent allocated to such class of certificates as described under clause Second in “Description of the Certificates-Distributions
on the Certificates” in this prospectus supplement.
Current Principal Amount - With respect to any class of Offered Certificates and the Class II-B-5 Certificates and any distribution
date, the original current principal amount of such class plus the amount of any Net Deferred Interest allocated thereto on the
related distribution date and all previous distribution dates plus any Subsequent Recoveries added to the Current Principal Amount of
such certificate, as described under “Description of the Certificates-Allocation of Realized Losses; Subordination” herein, less the
sum of (i) all amounts in respect of principal distributed to such class on previous distribution dates and (ii) any Applied Realized
Loss Amounts allocated to such class on previous distribution dates.
Custodial Account - As described under “The Pooling and Servicing Agreement-Custodial Account” in this prospectus supplement.
Cut-off Date -December 1, 2006.
Deferred Interest - The amount of accrued interest on the mortgage loans, the payment of which is deferred and added to the principal
balance of a mortgage loan due to the negative amortization feature as described in this prospectus supplement.
Deficient Valuation - A Bankruptcy Loss that results if a court, in connection with a personal bankruptcy of a mortgagor, establishes
the value of a mortgaged property at an amount less than the unpaid principal balance of the mortgage loan secured by such mortgaged
property.
Delinquency Test Violation - A Group I Delinquency Test Violation or a Group II Delinquency Test Violation, as applicable.
Delinquent - A mortgage loan is "Delinquent" if any payment due thereon is not made pursuant to the terms of such mortgage loan by
the close of business on the day such payment is scheduled to be due. A mortgage loan is "30 days delinquent" if such payment has not
been received by the close of business on the last day of the month immediately succeeding the month in which such payment was due.
For example, a mortgage loan with a payment due on December 1 that remained unpaid as of the close of business on January 31 would
then be considered to be 30 to 59 days delinquent. Similarly for "60 days delinquent,""90 days delinquent" and so on.
Distribution Account - As described under “The Pooling and Servicing Agreement-Distribution Account” in this prospectus supplement.
DOL - United States Department of Labor.
Due Date - With respect to each mortgage loan, the date in each month on which its Monthly Payment is due if such due date is the
first day of a month and otherwise is deemed to be the first day of the following month.
Due Period - With respect to any distribution date, the period commencing on the second day of the month immediately preceding the
month in which such distribution date occurs and ending on the first day of the month in which such distribution date occurs.
EMC - EMC Mortgage Corporation.
Excess Cashflow - With respect to any distribution date and each Loan Group the sum of (i) the Remaining Excess Spread for such Loan
Group and such distribution date and (ii) the Overcollateralization Release Amount for such Loan Group and such distribution date.
Excess Overcollateralization Amount - With respect to any distribution date and each Loan Group, the excess, if any, of the
Overcollateralization Amount for such Loan Group over the Overcollateralization Target Amount for such Loan Group.
Excess Spread - With respect to any distribution date and each Loan Group, the excess, if any, of the related Interest Funds for such
distribution date over the sum of (i) with respect to Loan Group I only, the Coupon Strip, if applicable, (ii) the Current Interest
on the related Offered Certificates and the Class II-B-5 Certificates and (iii) any Interest Carry Forward Amounts on the related
Senior Certificates on such distribution date.
Extra Principal Distribution Amount - With respect to any distribution date and each Loan Group, an amount derived from the related
Excess Spread equal to the lesser of (a) the excess, if any, of the Overcollateralization Target Amount for such Loan Group and such
distribution date over the Overcollateralization Amount for such Loan Group and such distribution date and (b) the Excess Spread for
such Loan Group and such distribution date.
Final Maturity Reserve Account - As described under “Description of the Certificates-Final Maturity Reserve Account” in this
prospectus supplement.
Final Maturity Reserve Account Target - As defined in “Description of the Certificates-Final Maturity Reserve Account” in this
prospectus supplement.
Group I Cumulative Loss Test Violation - If on any distribution date the aggregate amount of Realized Losses incurred on the mortgage
loans in Loan Group I since the Cut-off Date through the last day of the prior calendar month divided by the aggregate principal
balance of the related mortgage loans as of the Cut-off Date exceeds the applicable percentages set forth below with respect to such
distribution date:
Distribution Date Occurring in Percentage
January 2010 through December 2010 0.50%
January 2011 through December 2011 0.85%
January 2012 through December 2012 1.25%
January 2013 through December 2013 1.70%
January 2014 and thereafter 1.85%
Group I Delinquency Test Violation - If on any distribution date if the percentage obtained by dividing (x) the aggregate outstanding
principal balance of the Group I mortgage loans that are 60 days or more Delinquent or are in bankruptcy or foreclosure or are REO
Properties by (y) the aggregate outstanding principal balance of the Group I mortgage loans, in each case, as of the last day of the
previous calendar month, exceeds (i) prior to the distribution date in December 2012, 27.00% of the Credit Enhancement Percentage and
(ii) on or after the distribution date in December 2012, 33.75%.
Group I Offered Certificates - The Class I-A-1, Class I-A-2, Class I-A-3, Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class
I-B-5, Class I-B-6, Class I-B-7, Class I-B-8 and Class I-B-9 Certificates.
Group I Overcollateralization Amount - With respect to any distribution date, the excess, if any, of (i) the aggregate principal
balance of the group I mortgage loans as of the last day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses on the related mortgage loans incurred during the prior
calendar month) over (ii) the aggregate Current Principal Amount of the Class I-A Certificates and the Class I-B Certificates, after
taking into account the distributions of principal, less Net Deferred Interest, to be made on such distribution date.
Group I Overcollateralization Release Amount - With respect to Loan Group I and any distribution date for which the related Excess
Overcollateralization Amount is, or would be, after taking into account all other distributions to be made on that distribution date,
greater than zero, an amount equal to the lesser of (i) the related Excess Overcollateralization Amount for that distribution date
and (ii) related Principal Funds for that distribution date.
Group I Overcollateralization Target Amount - With respect to Loan Group I and any distribution date, (i) prior to the related
Stepdown Date, an amount equal to approximately 1.450% of the aggregate principal balance of the group I mortgage loans as of the
Cut-off Date, (ii) on or after the related Stepdown Date provided a Group I Trigger Event is not in effect, the greater of (x) (1)
prior to the distribution date in December 2012, 3.625% of the then current aggregate outstanding principal balance of the group I
mortgage loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the
related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related
Prepayment Period, and after reduction for Realized Losses on the group I mortgage loans incurred during the prior calendar month)
and (2) on or after the distribution date in December 2012, 2.900% of the then current aggregate outstanding principal balance of the
group I mortgage loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due
during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses on the group I mortgage loans incurred during the prior calendar
month) and (y) 0.50% of the aggregate principal balance of the group I mortgage loans as of the Cut-Off Date (approximately
$4,247,915) or (iii) on or after the related Stepdown Date and if a Group I Trigger Event is in effect, the Group I
Overcollateralization Target Amount for the immediately preceding distribution date.
Group I Principal Distribution Amount - With respect to each distribution date, an amount equal to:
1. the Principal Funds for Loan Group I for such distribution date, plus
2. any Extra Principal Distribution Amount with respect to Loan Group I for such distribution date, minus
3. any Group I Overcollateralization Release Amount for such distribution date.
Group I Trigger Event - The occurrence of either a Group I Delinquency Test Violation or Group I Cumulative Loss Test Violation.
Group II Cumulative Loss Test Violation - If on any distribution date the aggregate amount of Realized Losses incurred on the
mortgage loans in Loan Group II since the Cut-off Date through the last day of the prior calendar month divided by the aggregate
principal balance of the related mortgage loans as of the Cut-off Date exceeds the applicable percentages set forth below with
respect to such distribution date:
Distribution Date Occurring in Percentage
January 2010 through December 2010 0.45%
January 2011 through December 2011 0.75%
January 2012 through December 2012 1.10%
January 2013 through December 2013 1.50%
January 2014 and thereafter 1.65%
Group II Delinquency Test Violation - If on any distribution date if the percentage obtained by dividing (x) the aggregate
outstanding principal balance of the Group II mortgage loans that are 60 days or more Delinquent or are in bankruptcy or foreclosure
or are REO Properties by (y) the aggregate outstanding principal balance of the Group II mortgage loans, in each case, as of the last
day of the previous calendar month, exceeds (i) prior to the distribution date in December 2012, 26.10% of the Credit Enhancement
Percentage and (ii) on or after the distribution date in December 2012, 32.65%.
Group II Offered Certificates - The Class II-A-1, Class II-A-2, Class II-A-3, Class II-B-1, Class II-B-2, Class II-B-3 and Class
II-B-4 Certificates.
Group II Overcollateralization Amount - With respect to any distribution date, the excess, if any, of (i) the aggregate principal
balance of the group II mortgage loans as of the last day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period, and after reduction for Realized Losses on the related mortgage loans incurred during the prior
calendar month) over (ii) the aggregate Current Principal Amount of the Class II-A Certificates and the Class II-B Certificates,
after taking into account the distributions of principal, less Net Deferred Interest, to be made on such distribution date.
Group II Overcollateralization Release Amount - With respect to Loan Group II and any distribution date for which the related Excess
Overcollateralization Amount is, or would be, after taking into account all other distributions to be made on that distribution date,
greater than zero, an amount equal to the lesser of (i) the related Excess Overcollateralization Amount for that distribution date
and (ii) related Principal Funds for that distribution date.
Group II Overcollateralization Target Amount - With respect to Loan Group II and any distribution date, (i) prior to the related
Stepdown Date, an amount equal to approximately 0.750% of the aggregate principal balance of the group II mortgage loans as of the
Cut-off Date, (ii) on or after the related Stepdown Date provided a Group II Trigger Event is not in effect, the greater of
(x) (1) prior to the distribution date in December 2012, 1.875% of the then current aggregate outstanding principal balance of the
group II mortgage loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due
during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses on the group II mortgage loans incurred during the prior calendar
month) and (2) on or after the distribution date in December 2012, 1.500% of the then current aggregate outstanding principal balance
of the group II mortgage loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal
due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the
related Prepayment Period, and after reduction for Realized Losses on the group II mortgage loans incurred during the prior calendar
month) and (y) 0.50% of the aggregate principal balance of the group II mortgage loans as of the Cut-Off Date (approximately
$5,116,348) or (iii) on or after the related Stepdown Date and if a Group II Trigger Event is in effect, the Group II
Overcollateralization Target Amount for the immediately preceding distribution date.
Group II Principal Distribution Amount - With respect to each distribution date, an amount equal to
1. the Principal Funds for Loan Group II for such distribution date, plus
2. any Extra Principal Distribution Amount with respect to Loan Group II for such distribution date, minus
3. any Group II Overcollateralization Release Amount for such distribution date.
Group II Trigger Event - The occurrence of either a Group II Delinquency Test Violation or Group II Cumulative Loss Test Violation.
Insurance Proceeds - All proceeds of any insurance policies, to the extent such proceeds are not applied to the restoration of the
property or released to the mortgagor in accordance with the servicer's normal servicing procedures, other than proceeds that
represent reimbursement of the Servicer's costs and expenses incurred in connection with presenting claims under the related
insurance policies.
Interest Accrual Period - For each of the Offered Certificates (other than the Class X Certificates) and the Class II-B-5
Certificates and for any distribution date, the period commencing on the distribution date in the month preceding the month in which
a distribution date occurs (or the Closing Date, in the case of the first Interest Accrual Period) and ending on the day immediately
prior to such distribution date. For each of the Class X Certificates and for any distribution date, the calendar month preceding
the month in which such distribution date occurs.
Interest Carry Forward Amount - With respect to each class of Offered Certificates and the Class II-B-5 Certificates and the first
distribution date, zero, and for each distribution date thereafter, the sum of:
1. the excess of:
(a) Current Interest for such class with respect to prior distribution dates, over
(b) the amount actually distributed to such class with respect to interest on or after such prior distribution
dates, and
2. interest on such excess (to the extent permitted by applicable law) at the applicable pass through rate for the
related Interest Accrual Period including the Interest Accrual Period relating to such distribution date.
Interest Funds - With respect to each Loan Group any distribution date, the sum, without duplication, of:
1. all scheduled interest collected in respect of the related mortgage loans during the related Due Period, less the
Servicing Fee, if any, and any related amounts required to be reimbursed to EMC, the Servicer, the Trustee and the
Custodian as provided in the Agreement,
2. all advances relating to interest on the related mortgage loans made by the Servicer,
3. all Compensating Interest Payments with respect to the related mortgage loans,
4. Insurance Proceeds, Liquidation Proceeds and Subsequent Recoveries received during the related Prepayment Period, to
the extent such proceeds relate to interest, less all non-recoverable advances relating to interest and certain
expenses, in each case, with respect to the mortgage loans in the related Loan Group,
5. the interest portion of proceeds from mortgage loans in the related Loan Group that were repurchased during the
related Due Period,
6. the interest portion of the purchase price of the assets of the Trust allocated to the related Loan Group upon
exercise by the depositor or its designee of its optional termination right, and
7. the amount of any Principal Prepayments in full, partial Principal Prepayments, Net Liquidation Proceeds, Repurchase
Proceeds and scheduled principal payments, in that order, allocated to the related Loan Group included in available
funds for such distribution date that are applied in connection with any Deferred Interest in accordance with the
definition of Net Deferred Interest,
minus
8. any amounts required to be reimbursed to EMC, the Depositor, the Servicer, the Trustee or the Custodian and
allocated to the related Loan Group, as provided in the Agreement.
Issuing Entity- Bear Stearns Mortgage Funding Trust 2006-AR5.
Liquidated Mortgage Loan - Any defaulted mortgage loan as to which the Servicer has determined that all amounts which it expects to
recover from or on account of such mortgage loan have been recovered.
Liquidation Proceeds - All net proceeds, other than Insurance Proceeds, received in connection with the partial or complete
liquidation of the related mortgage loans, whether through trustee’s sale, foreclosure sale or otherwise, or in connection with any
condemnation or partial release of a mortgaged property, together with the net proceeds received with respect to any mortgaged
properties acquired by the Servicer by foreclosure or deed in lieu of foreclosure in connection with defaulted mortgage loans, other
than the amount of such net proceeds representing any profit realized by the Servicer in connection with the disposition of any such
properties, and Subsequent Recoveries.
Loan Group - Loan Group I and Loan Group II, as applicable.
Loan Group I - The pool of mortgage loans designated as Loan Group I.
Loan Group II - The pool of mortgage loans designated as Loan Group II.
Loss Allocation Limitation - As defined under “Description of the Certificates-Allocation of Realized Losses”.
Margin - With respect to the Class I-A-1, Class I-A-2, Class I-A-3, Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5,
Class I-B-6, Class I-B-7, Class I-B-8, Class I-B-9, Class II-A-1, Class II-A-2, Class II-A-3, Class II-B-1, Class II-B-2, Class
II-B-3, Class II-B-4 and Class II-B-5 Certificates will be 0.160%, 0.210%, 0.250%, 0.380%, 0.400%, 0.430%, 0.500%, 0.550%,
0.600%,1.150%, 1.500%, 2.100%, 0.190%, 0.230%, 0.270%, 0.380%, 0.570%, 1.500%, 2.150% and 2.150%, per annum, respectively, provided
that, after the first possible related optional termination date, the related margin with respect to the Class I-A-1, Class I-A-2,
Class I-A-3, Class I-B-1, Class I-B-2, Class I-B-3, Class I-B-4, Class I-B-5, Class I-B-6, Class I-B-7, Class I-B-8, Class I-B-9,
Class II-A-1, Class II-A-2, Class II-A-3, Class II-B-1, Class II-B-2, Class II-B-3, Class II-B-4 and Class II-B-5 Certificates will
be 0.320%, 0.420%, 0.500%, 0.570%, 0.600%, 0.645%, 0.750%, 0.825%, 0.900%, 1.725%, 2.250%, 3.150%, 0.380%, 0.460%, 0.540%, 0.570%,
0.855%, 2.250%, 3.225% and 3.225%, per annum, respectively.
Moody’s - Moody’s Investors Service, Inc., and any successor in interest.
Monthly Advance - The aggregate of all payments of interest, net of the Servicing Fee, that were due during the related Due Period on
the mortgage loans and that were delinquent on the related Due Date (other than shortfalls in interest due to the application of the
Relief Act or similar state law).
Monthly Payments - For any mortgage loan and any month, the scheduled payment or payments of principal (if any) and interest due
during such month on such mortgage loan which either is payable by a mortgagor in such month under the related mortgage note or in
the case of any mortgaged property acquired through foreclosure or deed in lieu of foreclosure, would otherwise have been payable
under the related mortgage note.
Mortgage Loan Purchase Agreement - The Mortgage Loan Purchase Agreement, dated as of December 29, 2006 between the Depositor and the
Sponsor.
Net Deferred Interest - On any distribution date, Deferred Interest on the mortgage loans in the related Loan Group during the
related Due Period net of Principal Prepayments in full, partial Principal Prepayments, Net Liquidation Proceeds, Repurchase Proceeds
and scheduled principal payments, in that order, available to be distributed on the Certificates on that distribution date. With
respect to any Class of Certificates as of any distribution date will be an amount equal to the product of (1) the difference, if any
between (a) the lesser of (i) the pass-through rate for such class without regard to the related Net Rate Cap on such distribution
date and (ii) the related Net Rate Cap on such distribution date, and (b) the Adjusted Rate Cap for such distribution date, (2) the
Current Principal Amount of the Certificate immediately prior to such distribution date, and (3) the actual number of days in such
Interest Accrual Period divided by 360.
Net Liquidation Proceeds - Liquidation Proceeds net of unreimbursed advances by the Servicer, Monthly Advances, expenses incurred by
the Servicer in connection with the liquidation of such mortgage loan and the related mortgaged property and any other amounts
payable to the Servicer under the Agreement.
Net Rate - For any mortgage loan, the then applicable mortgage rate thereon less the Servicing Fee Rate, expressed as a per annum
rate.
Net Rate Cap - (A) With respect to the Group I Offered Certificates (other than the Class X Certificates) is equal to the weighted
average of the Net Rates of the group I mortgage loans (less the Coupon Strip Rate, if applicable, and the pass-through rate on the
Class X Certificates) and (B) with respect to the Group II Offered Certificates and the Class II-B-5 Certificates is equal to the
weighted average of the Net Rates of the group II mortgage loans, in each case as adjusted to an effective rate reflecting the
accrual of interest on an actual/360 basis.
Non-Offered Certificates - The Class II-B-5, Class I-XP-1, Class I-XP-2, Class II-XP, Class I-B-IO, Class II-B-IO, Class R and Class
R-X Certificates.
Offered Certificates - The Group I Offered Certificates and the Group II Offered Certificates.
Overcollateralization Amount - The Group I Overcollateralization Amount or the Group II Overcollateralization Amount, as applicable.
Overcollateralization Release Amount - The Group I Overcollateralization Release Amount or the Group II Overcollateralization Release
Amount, as applicable.
Overcollateralization Target Amount -The Group I Overcollateralization Target Amount or the Group II Overcollateralization Target
Amount, as applicable.
Prepayment Interest Shortfalls - With respect to any distribution date, for each mortgage loan that was the subject of a partial
principal prepayment during the prior calendar month or a principal prepayment in full during the related prepayment period, the
amount, if any, by which (i) one month’s interest at the applicable net rate on the scheduled principal balance of such mortgage loan
immediately prior to such prepayment, or, in the case of a partial principal prepayment, on the amount of such prepayment, exceeds
(ii) the amount of interest paid or collected in connection with such principal prepayment less the sum of (a) any prepayment charges
relating to such mortgage loan and (b) the Servicing Fee.
Prepayment Period - With respect to any distribution date and (i) Principal Prepayments in full, the period from the sixteenth day of
the calendar month preceding the calendar month in which such distribution date occurs through the close of business on the fifteenth
day of the calendar month in which such distribution date occurs, or (ii) Liquidation Proceeds, Realized Losses, Subsequent
Recoveries and partial Principal Prepayments, the prior calendar month.
Principal Distribution Amount - The Group I Principal Distribution Amount or the Group II Principal Distribution Amount, as
applicable.
Principal Funds - With respect to each Loan Group and each distribution date, the greater of zero and the sum, without duplication,
of:
1. the scheduled principal collected on the mortgage loans in the related Loan Group during the related Due Period or
advanced on or before the servicer advance date,
2. Principal Prepayments in respect of the mortgage loans in the related Loan Group, exclusive of any prepayment
charges, collected in the related Prepayment Period,
3. the Stated Principal Balance of each mortgage loan in the related Loan Group that was repurchased by the Depositor
or the Servicer during the related Due Period,
4. the amount, if any, by which the aggregate unpaid principal balance of any replacement mortgage loans is less than
the aggregate unpaid principal balance of any deleted mortgage loans delivered by the Servicer in connection with a
substitution of a mortgage loan in the related Loan Group during the related Due Period,
5. Insurance Proceeds, Liquidation Proceeds and Subsequent Recoveries collected during the related Prepayment Period on
the mortgage loans in the related Loan Group, to the extent such proceeds relate to principal, less all related
non-recoverable advances relating to principal reimbursed during the related Due Period,
6. the principal portion of the purchase price of the assets of the Trust allocated to the related Loan Group upon the
exercise by the depositor or its designee of its optional termination right,
7. the principal portion of the amounts, if any, transferred from the Final Maturity Reserve Account and allocated to
Loan Group I on such distribution date,
minus
8. any amounts required to be reimbursed to EMC, the Depositor, the Servicer, the Trustee or the Custodian, as provided
in the Agreement, and
9. the amount of any Principal Prepayments in full, partial Principal Prepayments, Net Liquidation Proceeds, Repurchase
Proceeds and scheduled principal payments, in that order, included in available funds and allocated to the related
Loan Group for such distribution date that are applied as Interest Funds in connection with any Deferred Interest in
accordance with the definition of Net Deferred Interest.
Principal Prepayment - Any payment or other recovery of principal on a mortgage loan which is received in advance of its scheduled
Due Date to the extent that it is not accompanied by an amount as to interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment, including Insurance Proceeds and Repurchase Proceeds, but
excluding the principal portion of Net Liquidation Proceeds received at the time a mortgage loan becomes a Liquidated Mortgage Loan.
Rating Agencies - Standard and Poor’s, a division of The McGraw-Hill Companies, Inc. and Moody’s Investors Service, Inc.
Realized Loss - With respect to a mortgage loan is (1) a Bankruptcy Loss or (2) as to any Liquidated Mortgage Loan, the unpaid
principal balance thereof plus accrued and unpaid interest thereon at the mortgage rate through the last day of the month of
liquidation less the Net Liquidation Proceeds with respect to such mortgage loan and the related mortgaged property.
Record Date - For each class of Offered Certificates (other than the Class X Certificates) and for any distribution date, the close
of business on the business day prior to that distribution date. For the Class X Certificates and for any distribution date, the last
business day of the prior calendar month.
Regular Certificates - All classes of certificates other than the Residual Certificates.
Remaining Excess Spread - With respect to any distribution date and each Loan Group, the related Excess Spread remaining after the
distribution of any related Extra Principal Distribution Amount for such distribution date.
REO Property - A mortgage property acquired by the trust through foreclosure or deed-in-lieu of foreclosure.
Repurchase Price - With respect to any mortgage loan required to be repurchased, an amount equal to the sum of (i) (a) 100% of the
Outstanding Principal Balance of such mortgage loan plus accrued but unpaid interest on the Outstanding Principal Balance at the
related mortgage rate through and including the last day of the month of repurchase reduced by (b) any portion of the Servicing Fee
or advances payable to the purchaser of the mortgage loan and (ii) any costs and damages incurred by the trust in connection with any
violation of such mortgage loan of any predatory lending laws.
Repurchase Proceeds - The Repurchase Price in connection with any repurchase of a mortgage loan by the seller and any cash deposit in
connection with the substitution of a mortgage loan. See “Description of the Securities” in the prospectus and “The Pooling and
Servicing Agreement-Representations and Warranties” in this prospectus supplement.
Reserve Fund - As described under “The Pooling and Servicing Agreement-The Reserve Fund” in this prospectus supplement.
Residual Certificates - The Class R Certificates and the Class R-X Certificates.
Rules - The rules, regulations and procedures creating and affecting DTC and its operations.
S&P - Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor thereto.
Scheduled Monthly Payments - For any mortgage loan and each Due Period, the minimum payment of principal and interest due during such
Due Period on such mortgage loan which either is payable by a mortgagor in such Due Period under the related mortgage note or in the
case of any mortgaged property acquired through foreclosure or deed in lieu of foreclosure, would otherwise have been payable under
the related mortgage note.
Senior Certificates - The Class I-A-1, Class I-A-2, Class I-A-3, Class I-X, Class II-A-1, Class II-A-2 and Class II-A-3 Certificates.
Servicer - EMC Mortgage Corporation.
Servicing Fee - With respect to each mortgage loan, a fee that accrues at the Servicing Fee Rate on the same principal balance on
which interest on the mortgage loan accrues for the calendar month.
Servicing Fee Rate - 0.375% per annum.
Sponsor - EMC Mortgage Corporation.
Stated Principal Balance - For any mortgage loan, with respect to any distribution date, the sum of the principal balance thereof as
of the Cut-off Date (taking account of the principal payment to be made on the related Due Date and irrespective of any delinquency
in its payment), as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization
schedule by reason of any bankruptcy or similar proceeding occurring after the Cut-off Date (other than a Deficient Valuation) or any
moratorium or similar waiver or grace period) plus any amount by which the principal balance thereof has been increased for Deferred
Interest pursuant to the terms of the related mortgage note on or prior to such distribution date, minus the sum of:
1. the principal portion of the Scheduled Monthly Payments due from mortgagors with respect to such mortgage loan due
during each Due Period ending prior to such distribution date (and irrespective of any delinquency in their payment);
2. all prepayments of principal with respect to such mortgage loan received prior to or during the related Prepayment
Period, and all Liquidation Proceeds to the extent applied by the Servicer as recoveries of principal in accordance
with the Agreement or the Servicing Agreement that were received by the Servicer as of the close of business on the
last day of the calendar month related to such distribution date; and
3. any Realized Loss thereon incurred prior to or during the related Prepayment Period.
The Stated Principal Balance of any Liquidated Mortgage Loan is zero.
Stepdown Date - (a) With respect to Loan Group I, the earlier to occur of (i) the distribution date on which the aggregate Current
Principal Amount of the Class I-A Certificates has been reduced to zero and (ii) the later to occur of (x) the distribution date
occurring in January 2010 and (y) the first distribution date for which the aggregate Current Principal Amount of the Subordinate
Certificates in the Loan Group I plus the related Overcollateralization Amount divided by the aggregate Stated Principal Balance of
the group I mortgage loans is greater than or equal (i) prior to the distribution date in December 2012, 26.750% and (ii) on or after
the distribution date in December 2012, 21.400%; or (b) with respect to Loan Group II, the earlier to occur of (i) the distribution
date on which the aggregate Current Principal Amount of the Class II-A Certificates has been reduced to zero and (ii) the later to
occur of (x) the distribution date occurring in January 2010 and (y) the first distribution date for which the aggregate Current
Principal Amount of the Subordinate Certificates in the Loan Group II plus the related Overcollateralization Amount divided by the
aggregate Stated Principal Balance of the group II mortgage loans is greater than or equal (i) prior to the distribution date in
December 2012, 25.875% and (ii) on or after the distribution date in December 2012, 20.700%.
Subordinate Certificates - The Class B Certificates.
Subsequent Recoveries - As of any distribution date, amounts received during the prior calendar month by the Servicer or surplus
amounts held by the Servicer to cover estimated expenses (including, but not limited to, recoveries in respect of the representations
and warranties made by the Sponsor) specifically related to a Liquidated Mortgage Loan or disposition of an REO property prior to the
related Prepayment Period that resulted in a Realized Loss, after liquidation or disposition of such mortgage loan.
Trigger Event - A Group I Trigger Event or a Group II Trigger Event, as applicable.
Trust- Bear Stearns Mortgage Funding Trust 2006-AR5.
Trustee - Wells Fargo Bank, National Association.
Unpaid Realized Loss Amount - With respect to any class of Class A Certificates or Class B Certificates and as to any distribution
date, the excess of:
1. Applied Realized Loss Amounts with respect to such class, over
2. the sum of all distributions in reduction of the Applied Realized Loss Amounts on all previous distribution dates.
Any amounts distributed to a class of Offered Certificates in respect of any Unpaid Realized Loss Amount will not be applied
to reduce the Current Principal Amount of such class.
Schedule 1
----------------------- -----------------------------------
Balance of 40 Year
Distribution Date Group I Loans at 16% CPR
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2006 332,444,537.44
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2007 328,746,325.11
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2007 325,434,662.29
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2007 322,160,007.75
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2007 318,921,908.60
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2007 315,719,917.92
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2007 312,553,594.61
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2007 309,422,503.33
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2007 306,326,214.44
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2007 303,264,144.47
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2007 300,235,077.24
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2007 297,221,692.99
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2007 294,215,556.15
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2008 291,233,933.16
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2008 288,285,822.08
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2008 285,370,810.98
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2008 282,488,493.31
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2008 279,638,467.88
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2008 276,820,338.72
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2008 274,033,715.08
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2008 271,278,211.31
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2008 268,553,302.86
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2008 265,857,893.79
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2008 263,176,346.64
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2008 260,501,046.35
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2009 257,847,586.75
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2009 255,224,095.32
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2009 252,630,202.28
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2009 250,065,542.71
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2009 247,529,756.51
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2009 245,022,488.27
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2009 242,500,619.86
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2009 239,350,051.62
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2009 236,035,413.58
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2009 232,693,509.87
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2009 229,360,622.55
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2009 225,998,409.41
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2010 222,678,012.97
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2010 219,393,824.27
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2010 216,157,551.47
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2010 212,967,513.66
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2010 209,824,032.76
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2010 206,726,433.13
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2010 203,674,048.92
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2010 200,665,601.34
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2010 197,701,079.89
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2010 194,779,846.95
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2010 191,901,274.17
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2010 189,064,742.24
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2011 186,269,640.85
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2011 183,515,368.51
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2011 180,801,332.44
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2011 178,126,948.43
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2011 175,491,640.73
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2011 172,894,841.93
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2011 170,335,992.84
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2011 167,814,542.33
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2011 165,329,947.28
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2011 162,881,672.42
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2011 160,469,190.23
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2011 158,091,980.83
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2012 155,749,531.86
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2012 153,441,338.38
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2012 151,166,902.76
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2012 148,925,734.57
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2012 146,717,350.50
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2012 144,541,274.20
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2012 142,397,036.26
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2012 140,284,174.03
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2012 138,202,231.58
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2012 136,150,759.59
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2012 134,129,315.21
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2012 132,137,462.04
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2013 130,174,769.98
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2013 128,240,815.17
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2013 126,335,179.87
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2013 124,457,452.42
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2013 122,607,227.08
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2013 120,784,104.03
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2013 118,987,689.22
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2013 117,217,594.29
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2013 115,473,436.54
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2013 113,754,838.80
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2013 112,061,429.34
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2013 110,392,841.85
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2014 108,748,715.31
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2014 107,128,693.93
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2014 105,532,427.07
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2014 103,959,569.18
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2014 102,409,779.72
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2014 100,882,723.05
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2014 99,378,068.45
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2014 97,895,489.93
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2014 96,434,666.28
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2014 94,995,280.90
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2014 93,577,021.80
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2014 92,179,581.51
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2015 90,802,657.01
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2015 89,445,949.67
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2015 88,109,165.20
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2015 86,792,013.56
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2015 85,494,208.92
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2015 84,215,469.60
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2015 82,955,517.98
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2015 81,714,080.50
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2015 80,490,887.54
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2015 79,285,673.39
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2015 78,098,176.19
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2015 76,928,137.88
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2016 75,775,304.16
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2016 74,639,424.39
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2016 73,520,251.57
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2016 72,417,542.29
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2016 71,331,056.66
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2016 70,260,558.27
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2016 69,205,814.15
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2016 68,166,594.69
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2016 67,142,673.62
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2016 66,133,827.96
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2016 65,139,837.94
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2016 64,160,486.99
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2017 63,195,561.70
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2017 62,244,851.72
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2017 61,308,149.78
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2017 60,385,251.60
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2017 59,475,955.87
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2017 58,580,064.19
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2017 57,697,381.06
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2017 56,827,713.80
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2017 55,970,872.53
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2017 55,126,670.12
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2017 54,294,922.15
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2017 53,475,446.91
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2018 52,668,065.28
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2018 51,872,600.77
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2018 51,088,879.44
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2018 50,316,729.88
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2018 49,555,983.16
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2018 48,806,472.81
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2018 48,068,034.77
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2018 47,340,507.36
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2018 46,623,731.26
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2018 45,917,549.45
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2018 45,221,807.19
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2018 44,536,351.99
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2019 43,861,033.57
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2019 43,195,703.85
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2019 42,540,216.87
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2019 41,894,428.81
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2019 41,258,197.94
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2019 40,631,384.57
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2019 40,013,851.06
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2019 39,405,461.75
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2019 38,806,082.97
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2019 38,215,582.97
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2019 37,633,831.93
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2019 37,060,701.91
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2020 36,496,066.84
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2020 35,939,802.45
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2020 35,391,786.31
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2020 34,851,897.74
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2020 34,320,017.85
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2020 33,796,029.44
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2020 33,279,817.04
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2020 32,771,266.83
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2020 32,270,266.68
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2020 31,776,706.06
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2020 31,290,476.06
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2020 30,811,469.34
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2021 30,339,580.15
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2021 29,874,704.24
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2021 29,416,738.90
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2021 28,965,582.91
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2021 28,521,136.51
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2021 28,083,301.41
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2021 27,651,980.73
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2021 27,227,079.00
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2021 26,808,502.15
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2021 26,396,157.49
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2021 25,989,953.63
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2021 25,589,800.57
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2022 25,195,609.56
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2022 24,807,293.20
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2022 24,424,765.31
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2022 24,047,941.00
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2022 23,676,736.59
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2022 23,311,069.64
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2022 22,950,858.89
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2022 22,596,024.26
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2022 22,246,486.87
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2022 21,902,168.95
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2022 21,562,993.87
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2022 21,228,886.13
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2023 20,899,771.32
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2023 20,575,576.11
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2023 20,256,228.25
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2023 19,941,656.52
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2023 19,631,790.75
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2023 19,326,561.81
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2023 19,025,901.53
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2023 18,729,742.79
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2023 18,438,019.40
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2023 18,150,666.16
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2023 17,867,618.81
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2023 17,588,814.03
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2024 17,314,189.42
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2024 17,043,683.49
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2024 16,777,235.65
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2024 16,514,786.18
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2024 16,256,276.25
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2024 16,001,647.87
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2024 15,750,843.90
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2024 15,503,808.05
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2024 15,260,484.81
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2024 15,020,819.53
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2024 14,784,758.31
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2024 14,552,248.08
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2025 14,323,236.50
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2025 14,097,672.02
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2025 13,875,503.84
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2025 13,656,681.89
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2025 13,441,156.84
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2025 13,228,880.09
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2025 13,019,803.71
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2025 12,813,880.52
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2025 12,611,063.99
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2025 12,411,308.28
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2025 12,214,568.23
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2025 12,020,799.33
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2026 11,829,957.71
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2026 11,642,000.16
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2026 11,456,884.09
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2026 11,274,567.52
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2026 11,095,009.12
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2026 10,918,168.11
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2026 10,744,004.36
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2026 10,572,478.29
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2026 10,403,550.91
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2026 10,237,183.80
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2026 10,073,339.09
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2026 9,911,979.49
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2027 9,753,068.22
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2027 9,596,569.07
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2027 9,442,446.34
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2027 9,290,664.84
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2027 9,141,189.94
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2027 8,993,987.46
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2027 8,849,023.76
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2027 8,706,265.68
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2027 8,565,680.53
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2027 8,427,236.12
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2027 8,290,900.72
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2027 8,156,643.07
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2028 8,024,432.36
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2028 7,894,238.23
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2028 7,766,030.77
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2028 7,639,780.51
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2028 7,515,458.40
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2028 7,393,035.82
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2028 7,272,484.58
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2028 7,153,776.89
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2028 7,036,885.37
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2028 6,921,783.04
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2028 6,808,443.32
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2028 6,696,840.01
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2029 6,586,947.30
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2029 6,478,739.76
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2029 6,372,192.33
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2029 6,267,280.31
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2029 6,163,979.38
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2029 6,062,265.56
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2029 5,962,115.22
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2029 5,863,505.09
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2029 5,766,412.23
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2029 5,670,814.05
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2029 5,576,688.27
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2029 5,484,012.95
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2030 5,392,766.48
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2030 5,302,927.55
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2030 5,214,475.16
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2030 5,127,388.64
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2030 5,041,647.61
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2030 4,957,231.99
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2030 4,874,121.99
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2030 4,792,298.12
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2030 4,711,741.17
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2030 4,632,432.21
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2030 4,554,352.59
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2030 4,477,483.95
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2031 4,401,808.17
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2031 4,327,307.41
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2031 4,253,964.10
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2031 4,181,760.92
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2031 4,110,680.80
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2031 4,040,706.94
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2031 3,971,822.77
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2031 3,904,011.95
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2031 3,837,258.42
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2031 3,771,546.32
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2031 3,706,860.04
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2031 3,643,184.20
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2032 3,580,503.64
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2032 3,518,803.42
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2032 3,458,068.84
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2032 3,398,285.39
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2032 3,339,438.78
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2032 3,281,514.96
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2032 3,224,500.04
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2032 3,168,380.37
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2032 3,113,142.48
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2032 3,058,773.11
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2032 3,005,259.20
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2032 2,952,587.86
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2033 2,900,746.42
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2033 2,849,722.37
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2033 2,799,503.40
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2033 2,750,077.38
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2033 2,701,432.35
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2033 2,653,556.54
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2033 2,606,438.34
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2033 2,560,066.32
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2033 2,514,429.21
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2033 2,469,515.92
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2033 2,425,315.52
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2033 2,381,817.23
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2034 2,339,010.44
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2034 2,296,884.70
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2034 2,255,429.69
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2034 2,214,635.27
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2034 2,174,491.45
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2034 2,134,988.36
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2034 2,096,116.31
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2034 2,057,865.72
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2034 2,020,227.19
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2034 1,983,191.42
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2034 1,946,749.27
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2034 1,910,891.73
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2035 1,875,609.92
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2035 1,840,895.11
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2035 1,806,738.67
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2035 1,773,132.12
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2035 1,740,067.09
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2035 1,707,535.35
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2035 1,675,528.78
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2035 1,644,039.38
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2035 1,613,059.28
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2035 1,582,580.71
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2035 1,552,596.04
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2035 1,523,097.72
----------------------- -----------------------------------
----------------------- -----------------------------------
January 2036 1,494,078.34
----------------------- -----------------------------------
----------------------- -----------------------------------
February 2036 1,465,530.58
----------------------- -----------------------------------
----------------------- -----------------------------------
March 2036 1,437,447.25
----------------------- -----------------------------------
----------------------- -----------------------------------
April 2036 1,409,821.25
----------------------- -----------------------------------
----------------------- -----------------------------------
May 2036 1,382,645.59
----------------------- -----------------------------------
----------------------- -----------------------------------
June 2036 1,355,913.39
----------------------- -----------------------------------
----------------------- -----------------------------------
July 2036 1,329,617.85
----------------------- -----------------------------------
----------------------- -----------------------------------
August 2036 1,303,752.30
----------------------- -----------------------------------
----------------------- -----------------------------------
September 2036 1,278,310.15
----------------------- -----------------------------------
----------------------- -----------------------------------
October 2036 1,253,284.92
----------------------- -----------------------------------
----------------------- -----------------------------------
November 2036 1,228,670.22
----------------------- -----------------------------------
----------------------- -----------------------------------
December 2036 1,204,459.75
----------------------- -----------------------------------
ANNEX I
Distribution Class II-A Class II-A Class II-A Class II-B-1 Class Class Class II-B-2 Class Class
II-B-1 II-B-1 II-B-2 II-B-2
Date Notional Strike Rate Ceiling Notional Strike Rate Ceiling Notional Strike Ceiling
Balance ($) (%) Rate (%) Balance ($) (%) Rate (%) Balance ($) Rate (%) Rate (%)
January 2007 917,361,000.00 7.88 10.31 37,349,000.00 7.71 10.12 19,954,000.00 7.52 9.93
February 2007 901,028,678.37 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
March 2007 884,966,614.50 7.59 10.31 37,349,000.00 7.42 10.12 19,954,000.00 7.23 9.93
April 2007 869,170,237.52 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
May 2007 853,635,020.16 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
June 2007 838,356,514.08 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
July 2007 823,330,348.48 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
August 2007 808,552,228.70 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
September 2007 794,017,934.92 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
October 2007 779,723,320.78 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
November 2007 765,664,312.10 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
December 2007 751,836,905.62 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
January 2008 738,237,167.72 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
February 2008 724,861,233.18 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
March 2008 711,705,304.00 7.32 10.31 37,349,000.00 7.15 10.12 19,954,000.00 6.96 9.93
April 2008 698,765,648.19 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
May 2008 686,038,598.60 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
June 2008 673,520,551.79 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
July 2008 661,207,966.87 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
August 2008 649,097,364.46 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
September 2008 637,185,325.50 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
October 2008 625,468,490.30 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
November 2008 613,943,557.39 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
December 2008 602,607,282.55 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
January 2009 591,456,477.81 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
February 2009 580,488,010.39 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
March 2009 569,698,801.80 7.59 10.31 37,349,000.00 7.42 10.12 19,954,000.00 7.23 9.93
April 2009 559,085,826.83 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
May 2009 548,646,112.64 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
June 2009 538,376,737.82 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
July 2009 528,274,831.50 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
August 2009 518,337,572.42 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
September 2009 508,562,188.11 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
October 2009 498,945,954.01 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
November 2009 489,486,192.59 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
December 2009 480,180,272.57 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
January 2010 471,022,529.20 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
February 2010 462,013,593.69 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
March 2010 453,150,966.44 7.59 10.31 37,349,000.00 7.42 10.12 19,954,000.00 7.23 9.93
April 2010 444,432,190.98 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
May 2010 435,854,853.19 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
June 2010 427,416,580.55 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
July 2010 419,115,041.40 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
August 2010 410,947,944.26 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
September 2010 402,913,037.06 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
October 2010 395,008,106.53 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
November 2010 387,230,977.45 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
December 2010 379,579,511.99 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
January 2011 372,051,609.10 6.84 10.31 37,349,000.00 6.67 10.12 19,954,000.00 6.48 9.93
February 2011 364,642,514.84 6.84 10.31 37,349,000.00 6.67 10.12 19,954,000.00 6.48 9.93
March 2011 357,294,002.56 7.59 10.31 37,349,000.00 7.42 10.12 19,954,000.00 7.23 9.93
April 2011 349,180,041.20 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
May 2011 340,808,342.38 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
June 2011 332,578,267.58 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
July 2011 324,499,819.32 7.07 10.31 37,349,000.00 6.90 10.12 19,954,000.00 6.71 9.93
August 2011 316,570,204.10 6.83 10.31 37,349,000.00 6.66 10.12 19,954,000.00 6.47 9.93
September 2011 308,786,679.92 6.84 10.31 37,349,000.00 6.67 10.12 19,954,000.00 6.48 9.93
October 2011 301,146,555.26 7.12 10.31 37,349,000.00 6.95 10.12 19,954,000.00 6.76 9.93
November 2011 296,170,550.45 7.56 10.31 36,459,127.73 7.39 10.12 19,478,578.67 7.20 9.93
Class Class Class Class Class Class
Class II-B-3 II-B-3 II-B-3 Class II-B-4 II-B-4 II-B-4 Class II-B-5 II-B-5 II-B-5
Distribution Date Notional Strike Rate Ceiling Notional Strike Ceiling Notional Strike Ceiling
Balance ($) (%) Rate (%) Balance ($) Rate (%) Rate (%) Balance ($) Rate (%) Rate (%)
January 2007 14,326,000.00 6.59 9.00 5,628,000.00 5.94 8.35 20,977,000.00 5.94 8.35
February 2007 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
March 2007 14,326,000.00 6.30 9.00 5,628,000.00 5.65 8.35 20,977,000.00 5.65 8.35
April 2007 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
May 2007 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
June 2007 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
July 2007 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
August 2007 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
September 2007 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
October 2007 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
November 2007 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
December 2007 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
January 2008 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
February 2008 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
March 2008 14,326,000.00 6.03 9.00 5,628,000.00 5.38 8.35 20,977,000.00 5.38 8.35
April 2008 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
May 2008 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
June 2008 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
July 2008 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
August 2008 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
September 2008 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
October 2008 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
November 2008 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
December 2008 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
January 2009 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
February 2009 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
March 2009 14,326,000.00 6.30 9.00 5,628,000.00 5.65 8.35 20,977,000.00 5.65 8.35
April 2009 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
May 2009 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
June 2009 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
July 2009 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
August 2009 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
September 2009 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
October 2009 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
November 2009 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
December 2009 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
January 2010 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
February 2010 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
March 2010 14,326,000.00 6.30 9.00 5,628,000.00 5.65 8.35 20,977,000.00 5.65 8.35
April 2010 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
May 2010 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
June 2010 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
July 2010 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
August 2010 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
September 2010 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
October 2010 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
November 2010 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
December 2010 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
January 2011 14,326,000.00 5.55 9.00 5,628,000.00 4.90 8.35 20,977,000.00 4.90 8.35
February 2011 14,326,000.00 5.55 9.00 5,628,000.00 4.90 8.35 20,977,000.00 4.90 8.35
March 2011 14,326,000.00 6.30 9.00 5,628,000.00 5.65 8.35 20,977,000.00 5.65 8.35
April 2011 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
May 2011 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
June 2011 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
July 2011 14,326,000.00 5.78 9.00 5,628,000.00 5.13 8.35 20,977,000.00 5.13 8.35
August 2011 14,326,000.00 5.54 9.00 5,628,000.00 4.89 8.35 20,977,000.00 4.89 8.35
September 2011 14,326,000.00 5.55 9.00 5,628,000.00 4.90 8.35 20,977,000.00 4.90 8.35
October 2011 14,326,000.00 5.83 9.00 5,628,000.00 5.18 8.35 20,977,000.00 5.18 8.35
November 2011 13,984,670.65 6.27 9.00 5,493,908.03 5.62 8.35 20,477,204.81 5.62 8.35
ANNEX II
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the certificates, which are referred to as the global securities, will be available
only in book-entry form. Investors in the global securities may hold interests in these global securities through any of DTC,
Clearstream or Euroclear. Initial settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding interests in global securities through Clearstream and Euroclear will be
conducted in accordance with their normal rules and operating procedures and in accordance with conventional eurobond practice.
Secondary market trading between investors holding interests in global securities through DTC will be conducted according to the
rules and procedures applicable to U.S. corporate debt obligations.
Secondary cross-market trading between investors holding interests in global securities through Clearstream or Euroclear and
investors holding interests in global securities through DTC participants will be effected on a delivery-against-payment basis
through the respective depositories of Clearstream and Euroclear, in such capacity and other DTC participants.
Although DTC, Euroclear and Clearstream are expected to follow the procedures described below in order to facilitate
transfers of interests in the global securities among participants of DTC, Euroclear and Clearstream, they are under no obligation to
perform or continue to perform those procedures and those procedures may be discontinued at any time. None of the Depositor, the
Servicer nor the Trustee will have any responsibility for the performance by DTC, Euroclear and Clearstream or their respective
participants or indirect participants of their respective obligations under the rules and procedures governing their obligations.
Non-U.S. holders of global securities will be subject to U.S. withholding taxes unless those holders meet certain
requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their participants.
Initial Settlement
The global securities will be registered in the name of Cede & Co. as nominee of DTC. Investors' interests in the global
securities will be represented through financial institutions acting on their behalf as direct and indirect participants in DTC.
Clearstream and Euroclear will hold positions on behalf of their participants through their respective depositories, which in turn
will hold such positions in accounts as DTC participants.
Investors electing to hold interests in global securities through DTC participants, rather than through Clearstream or
Euroclear accounts, will be subject to the settlement practices applicable to similar issues of mortgage-backed certificate.
Investors' securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold interests in global securities through Clearstream or Euroclear accounts will follow the
settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no “lock-up”
or restricted period. Interests in global securities will be credited to the securities custody accounts on the settlement date
against payment in same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the
purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date.
Transfers between DTC Participants. Secondary market trading between DTC participants will be settled using the DTC
procedures applicable to similar issues of certificate in same-day funds.
Transfers between Clearstream and/or Euroclear Participants. Secondary market trading between Clearstream participants or
Euroclear participants and/or investors holding interests in global securities through them will be settled using the procedures
applicable to conventional eurobonds in same-day funds.
Transfers between DTC Seller and Clearstream or Euroclear Purchaser. When interests in global securities are to be
transferred on behalf of a seller from the account of a DTC participant to the account of a Clearstream participant or a Euroclear
participant for a purchaser, the purchaser will send instructions to Clearstream or Euroclear through a Clearstream participant or
Euroclear participant at least one business day prior to settlement. Clearstream or the Euroclear operator will instruct its
respective depository to receive an interest in the global securities against payment. Payment will include interest accrued on the
global securities from and including the last payment date to but excluding the settlement date. Payment will then be made by the
respective depository to the DTC participant's account against delivery of an interest in the global securities. After this
settlement has been completed, the interest will be credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Clearstream participant's or Euroclear participant's account. The credit of this
interest will appear on the next business day and the cash debit will be back-valued to and the interest on the global securities
will accrue from, the value date, which would be the preceding day when settlement occurred in New York. If settlement is not
completed through DTC on the intended value date, i.e., the trade fails, the Clearstream or Euroclear cash debit will be valued
instead as of the actual settlement date.
Clearstream participants and Euroclear participants will need to make available to the respective clearing system the funds
necessary to process same-day funds settlement. The most direct means of doing so is to pre-position funds for settlement from cash
on hand, in which case the Clearstream participants or Euroclear participants will take on credit exposure to Clearstream or the
Euroclear operator until interests in the global securities are credited to their accounts one day later.
As an alternative, if Clearstream or the Euroclear operator has extended a line of credit to them, Clearstream participants
or Euroclear participants can elect not to pre-position funds and allow that credit line to be drawn upon. Under this procedure,
Clearstream participants or Euroclear participants receiving interests in global securities for purchasers would incur overdraft
charges for one day, to the extent they cleared the overdraft when interests in the global securities were credited to their
accounts. However, interest on the global securities would accrue from the value date. Therefore, the investment income on the
interest in the global securities earned during that one-day period would tend to offset the amount of these overdraft charges,
although this result will depend on each Clearstream participant's or Euroclear participant's particular cost of funds.
Since the settlement through DTC will take place during New York business hours, DTC participants are subject to DTC
procedures for transferring interests in global securities to the respective depository of Clearstream or Euroclear for the benefit
of Clearstream participants or Euroclear participants. The sale proceeds will be available to the DTC seller on the settlement
date. Thus, to the seller settling the sale through a DTC participant, a cross-market transaction will settle no differently than a
sale to a purchaser settling through a DTC participant.
Finally, intra-day traders that use Clearstream participants or Euroclear participants to purchase interests in global
securities from DTC participants or sellers settling through them for delivery to Clearstream participants or Euroclear participants
should note that these trades will automatically fail on the sale side unless affirmative action is taken. At least three techniques
should be available to eliminate this potential condition:
o borrowing interests in global securities through Clearstream or Euroclear for one day, until the purchase side of the intra-day
trade is reflected in the relevant Clearstream or Euroclear accounts, in accordance with the clearing system's customary
procedures;
o borrowing interests in global securities in the United States from a DTC participant no later than one day prior to settlement,
which would give sufficient time for such interests to be reflected in the relevant Clearstream or Euroclear accounts in order to
settle the sale side of the trade; or
o staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC
participant is at least one day prior to the value date for the sale to the Clearstream participant or Euroclear participant.
Transfers between Clearstream or Euroclear Seller and DTC Purchaser. Due to time zone differences in their favor,
Clearstream participants and Euroclear participants may employ their customary procedures for transactions in which interests in
global securities are to be transferred by the respective clearing system, through the respective depository, to a DTC participant.
The seller will send instructions to Clearstream or the Euroclear operator through a Clearstream participant or Euroclear participant
at least one business day prior to settlement. Clearstream or Euroclear will instruct its respective depository, to credit an
interest in the global securities to the DTC participant's account against payment. Payment will include interest accrued on the
global securities from and including the last payment date to but excluding the settlement date. The payment will then be reflected
in the account of the Clearstream participant or Euroclear participant the following business day and receipt of the cash proceeds in
the Clearstream participant's or Euroclear participant's account would be back-valued to the value date, which would be the preceding
day, when settlement occurred through DTC in New York. If settlement is not completed on the intended value date, i.e., the trade
fails, receipt of the cash proceeds in the Clearstream participant's or Euroclear participant's account would instead be valued as of
the actual settlement date.
Certain U.S. Federal Income Tax Documentation Requirements
A beneficial owner who is an individual or corporation holding the global security on its own behalf through Clearstream or
Euroclear or through DTC if the holder has an address outside the U.S., will be subject to the 30% U.S. withholding tax that
typically applies to payments of interest, including original issue discount, on registered debt issued by U.S. persons, unless:
o each clearing system, bank or other institution that holds customers' securities in the ordinary course of its trade or business
in the chain of intermediaries between the beneficial owner or a foreign corporation or foreign trust and the U.S. entity
required to withhold tax complies with applicable certification requirements; and
o the beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate:
o Exemption for Non-U.S. Persons-Form W-8BEN. Beneficial holders of global securities that are Non-U.S. persons generally can
obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN or Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding. Non-U.S. persons residing in a country that has a tax treaty with the United
States can obtain an exemption or reduced tax rate, depending on the treaty terms, by filing Form W-8BEN. If the
information shown on Form W-8BEN changes, a new Form W-8BEN must be filed within 30 days of the change.
o Exemption for Non-U.S. persons with effectively connected income-Form W-8ECI. A Non-U.S. person, including a non-U.S.
corporation or bank with a U.S. branch, for which the interest income is effectively connected with its conduct of a trade or
business in the United States, can obtain an exemption from the withholding tax by filing Form W-8ECI or Certificate of Foreign
Person's Claim for Exemption from Withholding on Income Effectively Connected with the Conduct of a Trade or Business in the
United States.
o Exemption for U.S. Persons-Form W-9. U.S. persons can obtain a complete exemption from the withholding tax by filing Form W-9 or
Payer's Request for Taxpayer Identification Number and Certification.
U.S. Federal Income Tax Reporting Procedure. The holder of a global security or, in the case of a Form W-8BEN or Form
W-8ECI filer, his agent, files by submitting the appropriate form to the person through whom it holds the security-the clearing
agency, in the case of persons holding directly on the books of the clearing agency. Form W-8BEN and Form W-8ECI generally are
effective until the third succeeding calendar year from the date the form is signed. However, the W-8BEN and W-8ECI with a taxpayer
identification number will remain effective until a change in circumstances makes any information on the form incorrect, provided
that the withholding agent reports at least annually to the beneficial owner on Form 1042-S. The term “U.S. person” means:
o a citizen or resident of the United States;
o a corporation, partnership or other entity treated as a corporation or a partnership for United States federal income tax
purposes organized in or under the laws of the United States or any state thereof, including for this purpose the District of
Columbia, unless, in the case of a partnership, future Treasury regulations provide otherwise;
o an estate that is subject to U.S. federal income tax regardless of the source of its income; or
o a trust if a court within the United States is able to exercise primary supervision of the administration of the trust and one or
more United States persons have the authority to control all substantial decisions of the trust.
If the information shown on Form W-8BEN or Form W-8ECI changes, a new Form W-8BEN or Form W-8ECI, as applicable, must be filed within
30 days of the change. Certain trusts not described in the final bullet of the preceding sentence in existence on August 20, 1996
that elect to be treated as a United States Person will also be a U.S. person. The term “Non-U.S. person” means any person who is
not a U.S. person. This summary does not deal with all aspects of U.S. federal income tax withholding that may be relevant to
foreign holders of the global securities. Investors are advised to consult their own tax advisors for specific tax advice concerning
their holding and disposing of the global securities.
SCHEDULE A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
The description herein of the Mortgage Loans is based upon the estimates of the composition thereof as of the Cut-off Date, as adjusted to reflect
the Principal Balances as of the Cut-off Date. Prior to the issuance of the Certificates, Mortgage Loans may be removed as a result of (i) Principal
Prepayments thereof in full prior to December 1, 2006, (ii) requirements of Moody's or S&P, or (iii) delinquencies, or otherwise. In any such event,
other mortgage loans may be included in the Trust. SAMI II believes that the estimated information set forth herein with respect to the Mortgage
Loans as presently constituted is representative of the characteristics thereof at the time the Certificates are issued, although certain
characteristics of the Mortgage Loans may vary.
Principal Balances of the Mortgage Loans at Origination in Group I
Aggregate Principal Balance
Number of Outstanding as of % of
Original Principal Balance ($) Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
0 - 100,000 12 $ 1,029,056 0.12 %
100,001 - 200,000 206 33,951,399 4.00
200,001 - 300,000 445 113,529,240 13.36
300,001 - 400,000 526 184,895,331 21.76
400,001 - 500,000 466 211,807,699 24.93
500,001 - 600,000 244 133,472,383 15.71
600,001 - 700,000 124 79,349,530 9.34
700,001 - 800,000 33 24,481,957 2.88
800,001 - 900,000 27 22,949,605 2.70
900,001 - 1,000,000 20 19,458,049 2.29
1,000,001 - 1,100,000 2 2,076,117 0.24
1,100,001 - 1,200,000 5 5,841,206 0.69
1,200,001 - 1,300,000 2 2,553,899 0.30
1,300,001 - 1,400,000 4 5,558,929 0.65
1,400,001 - 1,500,000 3 4,487,967 0.53
1,500,001 or Greater 2 4,140,697 0.49
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Minimum Original Principal Balance: $60,000
Maximum Original Principal Balance: $2,438,000
Average Original Principal Balance: $400,731
Principal Balances of the Mortgage Loans as of the Cut-Off Date in Group I
Aggregate Principal Balance
Number of Outstanding as of % of
Principal Balance ($) Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
0 - 100,000 12 $ 1,029,056 0.12 %
100,001 - 200,000 204 33,550,962 3.95
200,001 - 300,000 441 112,126,268 13.20
300,001 - 400,000 529 185,494,888 21.83
400,001 - 500,000 450 203,486,889 23.95
500,001 - 600,000 260 141,147,150 16.61
600,001 - 700,000 127 81,199,426 9.56
700,001 - 800,000 33 24,481,957 2.88
800,001 - 900,000 25 21,147,900 2.49
900,001 - 1,000,000 20 19,255,440 2.27
1,000,001 - 1,100,000 4 4,080,431 0.48
1,100,001 - 1,200,000 5 5,841,206 0.69
1,200,001 - 1,300,000 2 2,553,899 0.30
1,300,001 - 1,400,000 3 4,157,340 0.49
1,400,001 - 1,500,000 3 4,387,745 0.52
1,500,001 or Greater 3 5,642,509 0.66
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Minimum Principal Balance: $59,857
Maximum Principal Balance: $242,600
Average Principal Balance: $400,558
Mortgage Rates of the Mortgage Loans as of the Cut-Off Date in Group I
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Interest Rates (%) Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
1.000 - 1.249 257 $ 104,991,725 12.36 %
1.750 - 1.999 8 7,324,204 0.86
2.000 - 2.249 37 11,228,121 1.32
2.250 - 2.499 1 2,426,600 0.29
3.000 - 3.249 1 297,500 0.04
7.000 - 7.249 2 1,937,426 0.23
7.250 - 7.499 10 4,857,732 0.57
7.500 - 7.749 23 8,140,185 0.96
7.750 - 7.999 93 39,364,319 4.63
8.000 - 8.249 238 95,876,813 11.29
8.250 - 8.499 605 249,539,645 29.37
8.500 - 8.749 842 322,318,449 37.94
8.750 - 8.999 3 935,185 0.11
9.000 - 9.249 1 345,158 0.04
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Minimum Mortgage Rate: 1.000%
Maximum Mortgage Rate: 9.125%
Weighted Average Mortgage Rate: 7.303%
Original Loan-to-Value Ratios* of the Mortgage Loans as of the Cut Off Date in Group I
Aggregate Principal Balance
Number of Outstanding as of % of
Original Loan-to-Value Ratios($) Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
0.00 - 30.00 4 $ 465,105 0.05 %
30.01 - 40.00 9 2,410,716 0.28
40.01 - 50.00 12 3,434,126 0.40
50.01 - 55.00 10 3,266,449 0.38
55.01 - 60.00 18 9,307,089 1.10
60.01 - 65.00 35 17,899,362 2.11
65.01 - 70.00 95 43,622,091 5.13
70.01 - 75.00 290 126,227,529 14.86
75.01 - 80.00 1,565 616,568,634 72.57
80.01 - 85.00 15 4,360,778 0.51
85.01 - 90.00 66 21,520,971 2.53
90.01 - 95.00 1 194,734 0.02
95.01 - 100.00 1 305,481 0.04
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Weighted Average Original Loan-to-Value: 77.64%
*Loan to Value Ratios are calculated by taking the Original Principal Balance and dividing by
the lesser of the original or current appraised value of the related Mortgaged Property and the sale price
of the related Mortgaged Property.
Geographic Distribution* of the Mortgaged Properties in Group I
Aggregate Principal Balance
Number of Outstanding as of % of
Geographic Distribution Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
Arizona 114 $ 38,753,571 4.56 %
California 1,326 591,203,661 69.59
Colorado 16 4,250,809 0.50
Connecticut 4 820,628 0.10
Delaware 1 385,080 0.05
District of Columbia 9 3,207,800 0.38
Florida 205 59,169,416 6.96
Georgia 7 1,708,879 0.20
Hawaii 7 4,033,707 0.47
Idaho 1 145,984 0.02
Illinois 5 1,398,749 0.16
Kansas 1 114,400 0.01
Maryland 57 24,437,869 2.88
Massachusetts 10 3,656,099 0.43
Michigan 2 400,208 0.05
Minnesota 3 488,614 0.06
Missouri 1 125,200 0.01
Nevada 123 40,466,643 4.76
New Hampshire 1 336,299 0.04
New Jersey 18 5,285,166 0.62
New Mexico 1 196,800 0.02
New York 6 1,675,755 0.20
North Carolina 2 1,628,704 0.19
Oregon 23 5,573,883 0.66
Pennsylvania 12 2,641,697 0.31
Rhode Island 1 191,542 0.02
South Carolina 1 486,338 0.06
Tennessee 1 131,443 0.02
Texas 4 1,185,778 0.14
Utah 8 1,941,527 0.23
Virginia 93 35,314,134 4.16
Washington 54 17,378,668 2.05
Wisconsin 4 848,014 0.10
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
*No more than approximately 0.79% of the Mortgage Loans by Principal
Balance in the pool will be secured by properties located in any one zip code area.
Credit Scores as of the Date of Origination of the Mortgage Loans in Group I
Range of Credit Scores
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
N/A 8 $ 2,025,790 0.24 %
620 - 639 101 35,778,166 4.21
640 - 659 131 45,218,648 5.32
660 - 679 313 123,062,720 14.49
680 - 699 398 158,049,634 18.60
700 - 719 345 141,563,820 16.66
720 - 739 302 125,102,907 14.73
740 - 759 246 103,804,202 12.22
760 - 779 172 70,189,626 8.26
780 - 799 82 35,916,570 4.23
800 - 819 23 8,870,982 1.04
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Non-Zero Weighted Average Credit Score: 710
Property Types of Mortgaged Properties in Group I
Property Type
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
2-4 Family 78 $ 32,291,366 3.80 %
Condominium 189 60,856,372 7.16
PUD 418 177,176,338 20.85
Single Family 1,400 570,226,585 67.12
Townhouse 36 9,032,403 1.06
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Occupancy Status of Mortgaged Properties in Group I
Occupancy Status
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
Investor 181 $ 55,922,626 6.58 %
Owner Occupied 1,855 765,964,940 90.16
Second Home 85 27,695,498 3.26
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Loan Purpose of the Mortgage Loans in Group I
Loan Purpose
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
Cash Out Refinance 867 $ 318,367,350 37.47 %
Purchase 637 270,917,817 31.89
Rate/Term Refinance 617 260,297,897 30.64
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Documentation Type of the Mortgage Loans in Group I
Documentation Type
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
Full/Alternative 92 $ 30,640,950 3.61 %
No Income/No Asset 1 179,992 0.02
No Ratio 976 411,254,688 48.41
Stated Income 809 326,403,757 38.42
Stated/Stated 243 81,103,677 9.55
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Original Terms to Stated Maturity of the Mortgage Loans in Group I
Original Term (Months)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
360 1,321 $ 517,138,527 60.87 %
480 800 332,444,537 39.13
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Minimum Original Term to Stated Maturity (Mths): 360
Maximum Original Term to Stated Maturity (Mths): 480
Weighted Average Original Term to Stated Maturity (Mths): 407
Remaining Terms to Stated Maturity of the Mortgage Loans in Group I
Stated Remaining Term (Months)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
300 - 359 1,159 $ 454,818,479 53.53 %
360 - 360 162 62,320,049 7.34
361 or Greater 800 332,444,537 39.13
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Minimum Remaining Term to Stated Maturity (Mths): 355
Maximum Remaining Term to Stated Maturity (Mths): 480
Weighted Average Remaining Term to Stated Maturity (Mths): 406
Index of the Mortgage Loans in Group I
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
MTA 2,121 $ 849,583,065 100.00 %
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Rate Adjustment Frequency of the Mortgage Loans in Group I
Rate Adjustment Frequency
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
1 Month 2,121 $ 849,583,065 100.00 %
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Payment Adjustment Frequency of the Mortgage Loans in Group I
Pay Adjustment Frequency
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
1 Year 2,121 $ 849,583,065 100.00 %
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Months to Next Rate Adjustment* of the Mortgage Loans in Group I
Months to Next Rate Adjust
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
1 2,112 $ 839,832,260 98.85 %
2 4 6,318,354 0.74
3 5 3,432,450 0.40
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Weighted Average Next Rate Adjustment (Mths): 1
Maximum Lifetime Mortgage Rate of the Mortgage Loans in Group I
Maximum Mortgage Rate (%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
9.751 - 10.000 2,121 $ 849,583,065 100.00 %
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Weighted Average Maximum Mortgage Rate: 9.950%
Periodic Rate Cap of the Mortgage Loans in Group I
Periodic Rate Cap (%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
NonCapped 2,121 $ 849,583,065 100.00 %
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Non-Zero Weighted Average Periodic Rate Cap: NonCapped
Initial Rate Cap of the Mortgage Loans in Group I
Initial Rate Cap (%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
NonCapped 2,121 $ 849,583,065 100.00 %
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Non-Zero Weighted Average Initial Rate Cap: NonCapped
Gross Margin of the Mortgage Loans in Group I
Gross Margin (%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
---------------------------------------------------------------------------------
2.001 - 2.250 4 $ 2,428,426 0.29 %
2.251 - 2.500 12 5,876,546 0.69
2.501 - 2.750 26 9,419,435 1.11
2.751 - 3.000 115 48,124,799 5.66
3.001 or Greater 1,964 783,733,858 92.25
---------------------------------------------------------------------------------
Total 2,121 $ 849,583,065 100.00 %
=================================================================================
Weighted Average Gross Margin: 3.488%
Principal Balances of the Mortgage Loans at Origination in Group II
Original Principal Balance ($)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
0 - 100,000 23 $ 1,883,574 0.18 %
100,001 - 200,000 322 53,015,660 5.18
200,001 - 300,000 642 163,851,827 16.01
300,001 - 400,000 614 217,609,008 21.27
400,001 - 500,000 493 220,761,054 21.57
500,001 - 600,000 308 168,371,886 16.45
600,001 - 700,000 143 92,379,141 9.03
700,001 - 800,000 50 37,828,143 3.70
800,001 - 900,000 19 16,416,011 1.60
900,001 - 1,000,000 29 28,216,185 2.76
1,000,001 - 1,100,000 1 1,089,718 0.11
1,100,001 - 1,200,000 4 4,556,598 0.45
1,200,001 - 1,300,000 4 5,070,773 0.50
1,300,001 - 1,400,000 2 2,750,994 0.27
1,400,001 - 1,500,000 4 5,960,238 0.58
1,500,001 - or Greater 2 3,508,750 0.34
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Minimum Original Principal Balance: $60,200
Maximum Original Principal Balance: $1,960,000
Average Original Principal Balance: $383,827
Principal Balances of the Mortgage Loans as of the Cut-Off Date in Group II
Principal Balance ($)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
0 - 100,000 22 $ 1,783,374 0.17 %
100,001 - 200,000 310 50,509,811 4.94
200,001 - 300,000 643 162,848,822 15.91
300,001 - 400,000 602 211,589,342 20.68
400,001 - 500,000 499 221,363,242 21.63
500,001 - 600,000 313 169,572,165 16.57
600,001 - 700,000 155 99,504,446 9.72
700,001 - 800,000 45 33,715,178 3.29
800,001 - 900,000 24 20,325,637 1.99
900,001 - 1,000,000 22 21,098,529 2.06
1,000,001 - 1,100,000 9 9,111,660 0.89
1,100,001 - 1,200,000 4 4,556,598 0.45
1,200,001 - 1,300,000 4 5,070,773 0.50
1,300,001 - 1,400,000 1 1,350,000 0.13
1,400,001 - 1,500,000 3 4,353,731 0.43
1,500,001 - or Greater 4 6,516,250 0.64
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Minimum Principal Balance: $60,351
Maximum Principal Balance: $1,964,900
Average Principal Balance: $384,688
Mortgage Rates of the Mortgage Loans as of the Cut-Off Date in Group II
Mortgage Interest Rates (%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
5.750 - 5.999 2 $ 639,495 0.06 %
6.000 - 6.249 5 2,374,560 0.23
6.250 - 6.499 18 6,583,836 0.64
6.500 - 6.749 55 20,051,477 1.96
6.750 - 6.999 148 54,177,750 5.29
7.000 - 7.249 213 79,046,498 7.72
7.250 - 7.499 396 150,051,482 14.66
7.500 - 7.749 477 177,377,403 17.33
7.750 - 7.999 613 241,293,821 23.58
8.000 - 8.249 323 125,696,952 12.28
8.250 - 8.499 337 135,554,417 13.25
8.500 - 8.749 39 15,507,072 1.52
8.750 - 8.999 13 5,410,020 0.53
9.000 - 9.249 8 3,731,576 0.36
9.250 - 9.499 6 2,647,436 0.26
9.500 - 9.749 1 785,960 0.08
9.750 - 9.999 3 954,426 0.09
10.000 - 10.249 3 1,385,378 0.14
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Minimum Mortgage Rate: 5.750%
Maximum Mortgage Rate: 10.125%
Weighted Average Mortgage Rate: 7.675%
Original Loan-to-Value Ratios* of the Mortgage Loans as of the Cut Off Date in Group II
Original Loan-to-Value Ratios(%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
0.00 - 30.00 2 $ 335,275 0.03 %
30.01 - 40.00 8 1,722,786 0.17
40.01 - 50.00 29 9,703,709 0.95
50.01 - 55.00 20 7,353,084 0.72
55.01 - 60.00 32 10,879,242 1.06
60.01 - 65.00 68 28,974,806 2.83
65.01 - 70.00 110 51,981,985 5.08
70.01 - 75.00 164 72,310,364 7.07
75.01 - 80.00 2,217 837,816,074 81.88
80.01 - 85.00 2 313,782 0.03
85.01 - 90.00 5 961,172 0.09
90.01 - 95.00 3 917,279 0.09
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Weighted Average Original Loan-to-Value: 77.63%
*Loan to Value Ratios are calculated by taking the Original Principal Balance and dividing by
the lesser of the original or current appraised value of the related Mortgaged Property and the sale price
of the related Mortgaged Property.
Geographic Distribution* of the Mortgaged Properties in Group II
Geographic Distribution
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
Alabama 5 $ 655,043 0.06 %
Arizona 198 58,004,529 5.67
California 1,521 670,117,398 65.49
Colorado 24 7,915,435 0.77
Connecticut 3 2,240,050 0.22
Delaware 3 884,526 0.09
District of Columbia 6 2,201,555 0.22
Florida 221 63,624,573 6.22
Georgia 23 6,070,583 0.59
Hawaii 7 2,784,041 0.27
Idaho 1 417,040 0.04
Illinois 7 1,851,468 0.18
Indiana 2 340,449 0.03
Iowa 1 222,668 0.02
Maine 2 1,116,719 0.11
Maryland 88 32,001,157 3.13
Massachusetts 3 1,027,470 0.10
Michigan 15 2,241,209 0.22
Minnesota 24 5,909,120 0.58
Missouri 5 2,441,333 0.24
Nevada 133 43,998,781 4.30
New Jersey 41 14,578,558 1.42
New Mexico 2 330,874 0.03
New York 4 1,910,394 0.19
North Carolina 6 1,467,458 0.14
Oregon 37 10,076,144 0.98
Pennsylvania 10 2,723,711 0.27
Rhode Island 1 203,508 0.02
South Carolina 7 2,566,052 0.25
Tennessee 3 607,515 0.06
Texas 14 2,489,493 0.24
Utah 12 3,911,815 0.38
Virginia 122 42,024,128 4.11
Washington 104 33,552,900 3.28
Wisconsin 5 761,863 0.07
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
*No more than approximately 0.68% of the Mortgage Loans by Principal
Balance in the pool will be secured by properties located in any one zip code area.
Credit Scores as of the Date of Origination of the Mortgage Loans in Group II
Range of Credit Scores
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
N/A 4 $ 879,798 0.09 %
620 - 639 46 17,973,047 1.76
640 - 659 74 26,907,223 2.63
660 - 679 450 164,087,014 16.04
680 - 699 500 200,001,677 19.55
700 - 719 483 189,662,773 18.53
720 - 739 428 165,219,070 16.15
740 - 759 275 109,319,015 10.68
760 - 779 232 87,823,024 8.58
780 - 799 125 45,691,727 4.47
800 - 819 41 14,975,992 1.46
820 - 839 2 729,200 0.07
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Non-Zero Weighted Average Credit Score: 713
Property Types of Mortgaged Properties in Group II
Property Type
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
2-4 Family 67 $ 27,621,848 2.70 %
Condominium 275 82,063,881 8.02
PUD 687 272,063,668 26.59
Single Family 1,597 630,867,282 61.65
Townhouse 34 10,652,879 1.04
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Occupancy Status of Mortgaged Properties in Group II
Occupancy Status
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
Investor 163 $ 43,560,704 4.26 %
Owner Occupied 2,449 963,657,022 94.17
Second Home 48 16,051,832 1.57
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Loan Purpose of the Mortgage Loans in Group II
Loan Purpose
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
Cash Out Refinance 482 $ 196,954,475 19.25 %
Purchase 1,642 622,351,890 60.82
Rate/Term Refinance 536 203,963,193 19.93
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Documentation Type of the Mortgage Loans in Group II
Documentation Type
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
Full/Alternative 197 $ 60,756,774 5.94 %
Limited 5 1,201,861 0.12
No Income/No Asset 47 19,072,711 1.86
No Income/Verif Asset 333 117,711,773 11.50
No Ratio 828 339,290,157 33.16
Stated Income 1,223 475,167,483 46.44
Stated/Stated 27 10,068,799 0.98
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Original Terms to Stated Maturity of the Mortgage Loans in Group II
Original Term (Months)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
360 2,660 $ 1,023,269,558 100.00 %
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Minimum Original Term to Stated Maturity (Mths): 360
Maximum Original Term to Stated Maturity (Mths): 360
Weighted Average Original Term to Stated Maturity (Mths): 360
Remaining Terms to Stated Maturity of the Mortgage Loans in Group II
Stated Remaining Term (Months)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
300 - 359 2,026 $ 783,372,144 76.56 %
360 - 360 634 239,897,414 23.44
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Minimum Remaining Term to Stated Maturity (Mths): 356
Maximum Remaining Term to Stated Maturity (Mths): 360
Weighted Average Remaining Term to Stated Maturity (Mths): 359
Index of the Mortgage Loans in Group II
Index
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
1 Year LIBOR 13 $ 4,622,217 0.45 %
6 Month LIBOR 2,647 1,018,647,342 99.55
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Rate Adjustment Frequency of the Mortgage Loans in Group II
Rate Adjustment Frequency
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
6 Months 2,647 $ 1,018,647,342 99.55 %
12 Months 13 4,622,217 0.45
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Payment Adjustment Frequency of the Mortgage Loans in Group II
Pay Adjustment Frequency
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
6 Months 2,647 $ 1,018,647,342 99.55 %
12 Months 13 4,622,217 0.45
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Months to Next Rate Adjustment* of the Mortgage Loans in Group II
Months to Next Rate Adjust
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
56 2 $ 385,833 0.04 %
57 24 9,124,773 0.89
58 355 144,901,880 14.16
59 1,645 628,959,658 61.47
60 634 239,897,414 23.44
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Weighted Average Next Rate Adjustment (Mths): 59
Maximum Lifetime Mortgage Rate of the Mortgage Loans in Group II
Maximum Mortgage Rate (%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
- 9.75 3 $ 691,838 0.07 %
10.501 - 10.750 1 290,625 0.03
10.751 - 11.000 3 766,238 0.07
11.001 - 11.250 8 3,439,205 0.34
11.251 - 11.500 39 15,039,374 1.47
11.501 - 11.750 74 26,471,095 2.59
11.751 - 12.000 194 71,651,995 7.00
12.001 - 12.250 302 114,243,614 11.16
12.251 - 12.500 487 183,449,455 17.93
12.501 - 12.750 506 190,777,923 18.64
12.751 - 13.000 478 191,166,601 18.68
13.001 - 13.250 317 123,768,439 12.10
13.251 - 13.500 202 82,637,667 8.08
13.501 - 13.750 19 6,632,994 0.65
13.751 - 14.000 13 6,222,360 0.61
14.001 - or Greater 14 6,020,136 0.59
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Weighted Average Maximum Mortgage Rate: 12.673%
Periodic Rate Cap of the Mortgage Loans in Group II
Periodic Rate Cap (%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
1.000 2,660 $ 1,023,269,558 100.00 %
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Non-Zero Weighted Average Periodic Rate Cap: 1.000%
Initial Rate Cap of the Mortgage Loans in Group II
Initial Rate Cap (%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
1.500 1 $ 222,668 0.02 %
2.000 6 1,970,113 0.19
5.000 2,653 1,021,076,777 99.79
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Non-Zero Weighted Average Initial Rate Cap: 4.993%
Gross Margin of the Mortgage Loans in Group II
Gross Margin (%)
Aggregate Principal Balance
Number of Outstanding as of % of
Mortgage Loans Cut-off Date Mortgage Loans
-------------------- ---------------------------------- --------------------
2.001 - 2.250 2,650 $ 1,019,456,889 99.63 %
2.501 - 2.750 9 3,495,879 0.34
3.001 - or Greater 1 316,790 0.03
---------------------------------------------------------------------------------
Total 2,660 $ 1,023,269,558 100.00 %
=================================================================================
Weighted Average Gross Margin: 2.253%
STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.
Depositor
MORTGAGE PASS-THROUGH CERTIFICATES
MORTGAGE-BACKED NOTES
___________________________________________________________________________________________________________________________________
You should consider carefully the risk factors beginning on page 6 in this prospectus and the risk factors in the prospectus
supplement.
___________________________________________________________________________________________________________________________________
The Offered Securities
The depositor proposes to establish one or more trusts to issue and sell from time to time one or more classes of offered securities,
which shall be mortgage pass-through certificates or mortgage-backed notes.
The Trust Fund
Each series of securities will be secured by a trust fund consisting primarily of a segregated pool of mortgage loans, including:
o mortgage loans secured by first and junior liens on the related mortgage property;
o home equity revolving lines of credit;
o mortgage loans where the borrower has little or no equity in the related mortgaged property;
o mortgage loans secured by one-to-four-family residential properties;
o mortgage loans secured by multifamily properties, commercial properties and mixed residential and commercial properties,
provided that the concentration of these properties is less than 10% of the pool;
o manufactured housing conditional sales contracts and installment loan agreements or interests therein; and
o mortgage securities issued or guaranteed by Ginnie Mae, Fannie Mae, Freddie Mac or other government agencies or
government-sponsored agencies or privately issued mortgage securities;
in each case acquired by the depositor from one or more affiliated or unaffiliated institutions.
Credit Enhancement
If so specified in the related prospectus supplement, the trust for a series of securities may include any one or any combination of a
financial guaranty insurance policy, mortgage pool insurance policy, letter of credit, special hazard insurance policy or reserve fund,
currency or interest rate exchange agreements or other type of credit enhancement. In addition to or in lieu of the foregoing, credit
enhancement may be provided by means of subordination of one or more classes of securities, by cross-collateralization or by
overcollateralization.
The securities of each series will represent interests or obligations of the issuing entity, and will not represent interests in or
obligations of the sponsor, depositor, or any of their affiliates.
The offered securities may be offered to the public through different methods as described in "Methods of Distribution" in this
prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities offered
hereby or determined that this prospectus or the prospectus supplement is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is December 27, 2006.
INTRODUCTION
All capitalized terms in this prospectus are defined in the glossary at the end.
General
The mortgage pass-through certificates or mortgage-backed notes offered by this prospectus and the related prospectus
supplement will be offered from time to time in series. The securities of each series will consist of the offered securities of the
series, together with any other mortgage pass-through certificates or mortgage-backed notes of the series.
Each series of certificates will represent in the aggregate the entire beneficial ownership interest in, and each series of
notes will represent indebtedness of, a trust fund to be established by the depositor. Each trust fund will consist primarily of a pool
of mortgage loans or interests therein, which may include mortgage securities, acquired by the depositor from one or more affiliated or
unaffiliated sellers. See "The Depositor" and "The Mortgage Pools" in this prospectus. The mortgage loans may include sub-prime mortgage
loans. The trust fund assets, may also include, if applicable, reinvestment income, reserve funds, cash accounts, swaps and other
derivatives that are described in this prospectus, and various forms of credit enhancement as described in this prospectus and will be
held in trust for the benefit of the related securityholders pursuant to: (1) with respect to each series of certificates, a pooling and
servicing agreement or other agreement, or (2) with respect to each series of notes, an indenture, in each case as more fully described
in this prospectus and in the related prospectus supplement. Information regarding the offered securities of a series, and the general
characteristics of the mortgage loans and other trust fund assets in the related trust fund, will be set forth in the related prospectus
supplement.
Each series of securities will include one or more classes. Each class of securities of any series will represent the right,
which right may be senior or subordinate to the rights of one or more of the other classes of the securities, to receive a specified
portion of payments of principal or interest or both on the mortgage loans and the other trust fund assets in the related trust fund in
the manner described in this prospectus under "Description of the Securities" and in the related prospectus supplement. A series may
include one or more classes of securities entitled to principal distributions, with disproportionate, nominal or no interest
distributions, or to interest distributions, with disproportionate, nominal or no principal distributions. A series may include two or
more classes of securities which differ as to the timing, sequential order, priority of payment, pass-through rate or amount of
distributions of principal or interest or both.
The depositor's only obligations with respect to a series of securities will be pursuant to representations and warranties made
by the depositor, except as provided in the related prospectus supplement. The master servicer and each principal servicer for any
series of securities will be named in the related prospectus supplement. The principal obligations of the master servicer will be
pursuant to its contractual servicing obligations, which include its limited obligation to make advances in the event of delinquencies
in payments on the related mortgage loans if the servicer of a mortgage loan fails to make such advance. See "Description of theSecurities" in this prospectus.
If so specified in the related prospectus supplement, the trust fund for a series of securities may include any one or any
combination of a financial guaranty insurance policy, mortgage pool insurance policy, letter of credit, special hazard insurance policy,
reserve fund, currency or interest rate exchange agreements or any other type of credit enhancement described in this prospectus. In
addition to or in lieu of the foregoing, credit enhancement may be provided by means of subordination of one or more classes of
securities, by cross-collateralization or by overcollateralization. See "Description of Credit Enhancement" in this prospectus.
The rate of payment of principal of each class of securities entitled to a portion of principal payments on the mortgage loans
in the related mortgage pool and the trust fund assets will depend on the priority of payment of the class and the rate and timing of
principal payments on the mortgage loans and other trust fund assets, including by reason of prepayments, defaults, liquidations and
repurchases of mortgage loans. A rate of principal payments lower or faster than that anticipated may affect the yield on a class of
securities in the manner described in this prospectus and in the related prospectus supplement. See "Yield Considerations" in this
prospectus.
With respect to each series of securities, one or more separate elections may be made to treat the related trust fund or a
designated portion thereof as a REMIC for federal income tax purposes. If applicable, the prospectus supplement for a series of
securities will specify which class or classes of the securities will be considered to be regular interests in the related REMIC and
which class of securities or other interests will be designated as the residual interest in the related REMIC. See "Federal Income TaxConsequences" in this prospectus.
The offered securities may be offered through one or more different methods, including offerings through underwriters, as more
fully described under "Methods of Distribution" in this prospectus and in the related prospectus supplement.
There will be no secondary market for the offered securities of any series prior to the offering thereof. There can be no
assurance that a secondary market for any of the offered securities will develop or, if it does develop, that it will continue. The
offered securities will not be listed on any securities exchange, unless so specified in the related prospectus supplement.
RISK FACTORS
You should carefully consider, among other things, the following factors in connection with the purchase of the offered
certificates:
The Offered Certificates or Notes Will Have Limited Liquidity, So You May Be Unable to Sell Your Securities or May Be Forced to Sell
Them at a Discount from Their Fair Market Value.
The underwriter intends to make a secondary market in the offered certificates or notes, however the underwriter will not be
obligated to do so. There can be no assurance that a secondary market for the offered certificates or notes will develop or, if it does
develop, that it will provide holders of the offered certificates or notes with liquidity of investment or that it will continue for the
life of the offered certificates or notes. As a result, any resale prices that may be available for any offered certificate in any
market that may develop may be at a discount from the initial offering price or the fair market value thereof. The offered certificates
or notes will not be listed on any securities exchange.
The Rate and Timing of Principal Distributions on the Offered Certificates or Notes Will Be Affected by Prepayment Speeds.
The rate and timing of distributions allocable to principal on the offered certificates or notes, other than the interest only
certificates, will depend, in general, on the rate and timing of principal payments, including prepayments and collections upon
defaults, liquidations and repurchases, on the mortgage loans in the related loan group, or in the case of the offered subordinate
certificates, both loan groups, and the allocation thereof to pay principal on these certificates as provided in the prospectus
supplement. As is the case with mortgage pass-through certificates generally, the offered certificates or notes are subject to
substantial inherent cash-flow uncertainties because the mortgage loans may be prepaid at any time. However, if applicable, with
respect to the percentage of the mortgage loans set forth in the prospectus supplement, a prepayment within five years, as provided in
the mortgage note, of its origination may subject the related mortgagor to a prepayment charge, which may act as a deterrent to
prepayment of the mortgage loan. See "The Mortgage Pool" in the prospectus supplement.
Generally, when prevailing interest rates are increasing, prepayment rates on mortgage loans tend to decrease. A decrease in
the prepayment rates on the mortgage loans will result in a reduced rate of return of principal to investors in the offered certificates
or notes at a time when reinvestment at higher prevailing rates would be desirable.
Conversely, when prevailing interest rates are declining, prepayment rates on mortgage loans tend to increase. An increase in
the prepayment rates on the mortgage loans will result in a greater rate of return of principal to investors in the offered certificates
or notes, at time when reinvestment at comparable yields may not be possible.
During a certain period as described in the related prospectus supplement after the closing date, the entire amount of any
prepayments and certain other unscheduled recoveries of principal with respect to the mortgage loans in a loan group will be allocated
to the senior certificates in the related certificate group, other than the interest only certificates, with such allocation to be
subject to further reduction over an additional four year period thereafter, as described in the prospectus supplement, unless the
amount of subordination provided to the senior certificates by the subordinate certificates is twice the amount as of the cut-off date,
and certain loss and delinquency tests are satisfied. This will accelerate the amortization of the senior certificates in each
certificate group, other than the interest only certificates, as a whole while, in the absence of losses in respect of the mortgage
loans in the related loan group, increasing the percentage interest in the principal balance of the mortgage loans in such loan group
the subordinate certificates evidence.
For further information regarding the effect of principal prepayments on the weighted average lives of the offered certificates
or notes, see "Yield on the Certificates" or "Yield on the Notes" in the prospectus supplement, including the table entitled "Percent of
Initial Principal Balance Outstanding at the Following Percentages of the Prepayment Assumption" in the prospectus supplement.
The Yield to Maturity on the Offered Certificates or Notes Will Depend on a Variety of Factors.
The yield to maturity on the offered certificates or notes, particularly the interest only certificates, will depend, in
general, on:
o the applicable purchase price; and
o the rate and timing of principal payments, including prepayments and collections upon defaults, liquidations and
repurchases, on the related mortgage loans and the allocation thereof to reduce the current principal amount or
notional amount of the offered certificates or notes, as well as other factors.
The yield to investors on the offered certificates or notes will be adversely affected by any allocation thereto of interest
shortfalls on the mortgage loans.
In general, if the offered certificates or notes, other than the interest only certificates or notes, are purchased at a
premium and principal distributions occur at a rate faster than anticipated at the time of purchase, the investor's actual yield to
maturity will be lower than that assumed at the time of purchase. Conversely, if the offered certificates or notes, other than the
interest only certificates, are purchased at a discount and principal distributions occur at a rate slower than that anticipated at the
time of purchase, the investor's actual yield to maturity will be lower than that originally assumed.
The proceeds to the depositor from the sale of the offered certificates or notes were determined based on a number of
assumptions, including a constant rate of prepayment each month, or CPR, relative to the then outstanding principal balance of the
mortgage loans. No representation is made that the mortgage loans will prepay at this rate or at any other rate, or that the mortgage
loans will prepay at the same rate. The yield assumptions for the offered certificates or notes will vary as determined at the time of
sale. See "Yield on the Certificates" or "Yield on the Notes" in the prospectus supplement.
The Mortgage Loans Concentrated in a Specific Region May Present a Greater Risk of Loss with Respect to Such Mortgage Loans.
Mortgage loans secured by properties located in the State of California are more likely to incur defaults or losses as a result
of physical damage to the properties resulting from natural causes such as earthquake, mudslide and wildfire, as compared to mortgage
loans secured by properties located in other locations. Investors should note that some geographic regions of the United States from
time to time will experience weaker regional economic conditions and housing markets, and, consequently, will experience higher rates of
loss and delinquency than will be experienced on mortgage loans generally. For example, a region's economic condition and housing market
may be directly, or indirectly, adversely affected by natural disasters or civil disturbances such as earthquakes, hurricanes, floods,
eruptions or riots. The economic impact of any of these types of events may also be felt in areas beyond the region immediately affected
by the disaster or disturbance. The mortgage loans securing the offered certificates or notes may be concentrated in these regions, and
any concentration may present risk considerations in addition to those generally present for similar mortgage-backed securities without
this concentration. Any risks associated with mortgage loan concentration may affect the yield to maturity of the offered certificates
or notes to the extent losses caused by these risks are not covered by the subordination provided by the non-offered subordinate
certificates or notes.
Statutory and Judicial Limitations on Foreclosure Procedures May Delay Recovery in Respect of the Mortgaged Property and, in Some
Instances, Limit the Amount That May Be Recovered by the Foreclosing Lender, Resulting in Losses on the Mortgage Loans That Might be
Allocated to the Offered Certificates or Notes.
Foreclosure procedures may vary from state to state. Two primary methods of foreclosing a mortgage instrument are judicial
foreclosure, involving court proceedings, and non-judicial foreclosure pursuant to a power of sale granted in the mortgage instrument. A
foreclosure action is subject to most of the delays and expenses of other lawsuits if defenses are raised or counterclaims are asserted.
Delays may also result from difficulties in locating necessary defendants. Non-judicial foreclosures may be subject to delays resulting
from state laws mandating the recording of notice of default and notice of sale and, in some states, notice to any party having an
interest of record in the real property, including junior lienholders. Some states have adopted "anti-deficiency" statutes that limit
the ability of a lender to collect the full amount owed on a loan if the property sells at foreclosure for less than the full amount
owed. In addition, United States courts have traditionally imposed general equitable principles to limit the remedies available to
lenders in foreclosure actions that are perceived by the court as harsh or unfair. The effect of these statutes and judicial principles
may be to delay and/or reduce distributions in respect of the offered certificates or notes. See "Legal Aspects of Mortgage
Loans—Foreclosure on Mortgages and Some Contracts" in this prospectus.
The Value of the Mortgage Loans May Be Affected By, Among Other Things, a Decline in Real Estate Values, Which May Result in Losses on
the Offered Certificates or Notes.
No assurance can be given that values of the mortgaged properties have remained or will remain at their levels on the dates of
origination of the related mortgage loans. If the residential real estate market should experience an overall decline in property values
so that the outstanding balances of the mortgage loans, and any secondary financing on the mortgaged properties, in the mortgage pool
become equal to or greater than the value of the mortgaged properties, the actual rates of delinquencies, foreclosures and losses could
be higher than those now generally experienced in the mortgage lending industry. In some areas of the United States, real estate values
have risen at a greater rate in recent years than in the past. In particular, mortgage loans with high principal balances or high
loan-to-value ratios will be affected by any decline in real estate values. Real estate values in any area of the country may be
affected by several factors, including population trends, mortgage interest rates, and the economic well-being of that area. Any
decrease in the value of the mortgage loans may result in the allocation of losses which are not covered by credit enhancement to the
offered certificates or notes.
The Ratings on the Offered Certificates or Notes Are Not a Recommendation to Buy, Sell or Hold the Offered Certificates or Notes and Are
Subject to Withdrawal at Any Time, Which May Affect the Liquidity or the Market Value of the Offered Certificates or Notes.
It is a condition to the issuance of the offered certificates or notes that each class of offered certificates or notes be
rated in one of the four highest rating categories by a nationally recognized statistical rating agency. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time. No person is obligated to
maintain the rating on any offered certificate, and, accordingly, there can be no assurance that the ratings assigned to any offered
certificate on the date on which the offered certificates or notes are initially issued will not be lowered or withdrawn by a rating
agency at any time thereafter. In the event any rating is revised or withdrawn, the liquidity or the market value of the related offered
certificates or notes may be adversely affected. See "Ratings" in the prospectus supplement and "Rating" in this prospectus.
The ratings of the offered certificates or notes by the rating agencies may be lowered following the initial issuance thereof
as a result of losses on the mortgage loans in excess of the levels contemplated by the rating agencies at the time of their initial
rating analysis. Neither the depositor, the master servicer, the servicers, the securities administrator, the trustee nor any of their
respective affiliates will have any obligation to replace or supplement any credit enhancement, or to take any other action to maintain
the ratings of the offered certificates or notes. See "Description of Credit Enhancement—Reduction or Substitution of Credit
Enhancement" in this prospectus.
The Mortgage Loans May Have Limited Recourse to the Related Borrower, Which May Result in Losses with Respect to These Mortgage Loans.
Some or all of the mortgage loans included in the trust fund will be nonrecourse loans or loans for which recourse may be
restricted or unenforceable. As to those mortgage loans, recourse in the event of mortgagor default will be limited to the specific real
property and other assets, if any, that were pledged to secure the mortgage loan. However, even with respect to those mortgage loans
that provide for recourse against the mortgagor and its assets generally, there can be no assurance that enforcement of the recourse
provisions will be practicable, or that the other assets of the mortgagor will be sufficient to permit a recovery in respect of a
defaulted mortgage loan in excess of the liquidation value of the related mortgaged property. Any risks associated with mortgage loans
with no or limited recourse may affect the yield to maturity of the offered certificates or notes to the extent losses caused by these
risks which are not covered by credit enhancement are allocated to the offered certificates or notes.
The Mortgage Loans May Have Environmental Risks, Which May Result in Increased Losses with Respect to These Mortgage Loans.
To the extent that a servicer or the master servicer, in its capacity as successor servicer, for a mortgage loan acquires title
to any related mortgaged property which is contaminated with or affected by hazardous wastes or hazardous substances, these mortgage
loans may incur losses. See "Servicing of Mortgage Loans—Realization Upon or Sale of Defaulted Mortgage Loans" and "Legal Aspects of
Mortgage Loans—Environmental Legislation" in this prospectus. To the extent these environmental risks result in losses on the mortgage
loans, the yield to maturity of the offered certificates or notes, to the extent not covered by credit enhancement, may be affected.
Violation of Various Federal, State and Local Laws May Result in Losses on the Mortgage Loans.
Applicable state and local laws generally regulate interest rates and other charges, require specific disclosure, and require
licensing of the originator. In addition, other state and local laws, public policy and general principles of equity relating to the
protection of consumers, unfair and deceptive practices and debt collection practices may apply to the origination, servicing and
collection of the mortgage loans.
The mortgage loans are also subject to federal laws, including:
o the Federal Truth-in-Lending Act and Regulation Z promulgated thereunder, which require specific disclosures to the
borrowers regarding the terms of the mortgage loans;
o the Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit discrimination on the basis
of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of
any right under the Consumer Credit Protection Act, in the extension of credit; and
o the Fair Credit Reporting Act, which regulates the use and reporting of information related to the borrower's credit
experience.
Depending on the provisions of the applicable law and the specific facts and circumstances involved, violations of these
federal or state laws, policies and principles may limit the ability of the trust to collect all or part of the principal of or interest
on the mortgage loans, may entitle the borrower to a refund of amounts previously paid and, in addition, could subject the trust to
damages and administrative enforcement. See "Legal Aspects of Mortgage Loans" in this prospectus.
On the closing date, the Sponsor will represent that each mortgage loan at the time it was made complied in all material
respects with all applicable laws and regulations, including, without limitation, usury, equal credit opportunity, disclosure and
recording laws and all anti-predatory lending laws; and each mortgage loan has been serviced in all material respects in accordance with
all applicable laws and regulations, including, without limitation, usury, equal credit opportunity, disclosure and recording laws and
all anti-predatory lending laws and the terms of the related mortgage note, the mortgage and other loan documents. In the event of a
breach of this representation, the Sponsor will be obligated to cure the breach or repurchase or substitute the affected mortgage loan
in the manner described in the prospectus.
Under the anti-predatory lending laws of some states, the borrower is required to meet a net tangible benefits test in
connection with the origination of the related mortgage loan. This test may be highly subjective and open to interpretation. As a
result, a court may determine that a mortgage loan does not meet the test even if the originator reasonably believed that the test was
satisfied, Any determination by a court that the mortgage loan does not meet the test will result in a violation of the state
anti-predatory lending law, in which case the related Sponsor will be required to purchase that mortgage loan from the trust.
The Return on the Offered Certificates or Notes Could Be Reduced by Shortfalls Due to the Application of the Servicemembers Civil Relief
Act and Similar State Laws.
The Servicemembers Civil Relief Act, or the Relief Act, and similar state laws provide relief to mortgagors who enter active
military service and to mortgagors in reserve status and the national guard who are called to active military service after the
origination of their mortgage loans. The military operations by the United States in Iraq and Afghanistan has caused an increase in the
number of citizens in active military duty, including those citizens previously in reserve status. Under the Relief Act the interest
rate applicable to a mortgage loan for which the related mortgagor is called to active military service will be reduced from the
percentage stated in the related mortgage note to 6.00%. This interest rate reduction and any reduction provided under similar state
laws will result in an interest shortfall because neither the master servicer nor the related servicer will be able to collect the
amount of interest which otherwise would be payable with respect to such mortgage loan if the Relief Act or similar state law was not
applicable thereto. This shortfall will not be paid by the mortgagor on future due dates or advanced by the master servicer or the
related servicer and, therefore, will reduce the amount available to pay interest to the certificateholders on subsequent distribution
dates. We do not know how many mortgage loans in the mortgage pool have been or may be affected by the application of the Relief Act or
similar state law. In addition, the Relief Act imposes limitations that would impair the ability of the master servicer or the related
servicer to foreclose on an affected single family loan during the mortgagor's period of active duty status, and, under some
circumstances, during an additional three month period thereafter. Thus, in the event that the Relief Act or similar legislation or
regulations applies to any mortgage loan which goes into default, there may be delays in payment and losses on the certificates or notes
in connection therewith. Any other interest shortfalls, deferrals or forgiveness of payments on the mortgage loans resulting from
similar legislation or regulations may result in delays in payments or losses to holders of the offered certificates or notes.
Negative Amortization May Increase Losses Applied to the Certificates or Notes.
When interest due on a negative amortization loan is added to the principal balance of the negative amortization loan through
negative amortization, the mortgaged property provides proportionally less security for the repayment of the negative amortization
loan. Therefore, if the mortgagor defaults on the negative amortization loan, there is a greater likelihood that a loss will be
incurred upon the liquidation of the mortgaged property. Furthermore, the loss will be larger than would otherwise have been in the
absence of negative amortization.
Allocation of Deferred Interest May Affect the Yield on the Certificates or Notes.
The amount of deferred interest, if any, with respect to the negative amortization loans for a given month will reduce the
amount of interest collected on the negative amortization loans and available to be distributed as interest to the certificates or
notes. The reduction in interest collections will be offset, in whole or in part, by applying principal prepayments received on the
mortgage loans to interest distributions on the certificates or notes. To the extent the amount of deferred interest on the negative
amortization loans exceeds the principal prepayments and/or other amounts as described in the related prospectus supplement received on
the mortgage loans, the net rate cap on the certificates or notes will be reduced.
A Security Interest In A Manufactured Home Could Be Rendered Subordinate to the Interests of Other Parties Claiming an Interest in the
Home.
Perfection of security interests in manufactured homes and enforcement of rights to realize upon the value of the manufactured
homes as collateral for the manufactured housing contracts are subject to a number of federal and state laws, including the Uniform
Commercial Code as adopted in each state and each state's certificate of title statutes. The steps necessary to perfect the security
interest in a manufactured home will vary from state to state. If the servicer of the contract fails, due to clerical errors or
otherwise, to take the appropriate steps to perfect the security interest, the trustee may not have a first priority security interest
in the manufactured home securing a manufactured housing contract. Additionally, courts in many states have held that manufactured homes
may become subject to real estate title and recording laws. As a result, a security interest in a manufactured home could be rendered
subordinate to the interests of other parties claiming an interest in the home under applicable state real estate law.
Acquiring Board Approval for the Sale of Cooperative Loans Could Limit the Number of Potential Purchasers for those Shares and Otherwise
Limit the Servicer's Ability to Sell, and Realize the Value of, those Shares Backed by Such Loans.
With respect to collateral securing a cooperative loan, any prospective purchaser will generally have to obtain the approval of
the board of directors of the relevant cooperative before purchasing the shares and acquiring rights under the proprietary lease or
occupancy agreement securing the cooperative loan. This approval is usually based on the purchaser's income and net worth and numerous
other factors. The necessity of acquiring board approval could limit the number of potential purchasers for those shares and otherwise
limit the servicer's ability to sell, and realize the value of, those shares. In addition, the servicer will not require that a hazard
or flood insurance policy be maintained for any cooperative loan. Generally, the cooperative is responsible for maintenance of hazard
insurance for the property owned by the cooperative, and the tenant-stockholders of that cooperative do not maintain individual hazard
insurance policies. However, if a cooperative and the related borrower on a cooperative note do not maintain hazard insurance or do not
maintain adequate coverage or any insurance proceeds are not applied to the restoration of the damaged property, damage to the related
borrower's cooperative apartment or the cooperative's building could significantly reduce the value of the collateral securing the
cooperative note.
Defects in Security Interest Could Result in Losses.
o The security interest in certain manufactured homes may not be perfected.
Every contract will be secured by either (1) a security interest in the manufactured home or (2) if it is a land-and-home
contract, the mortgage or deed of trust on the real estate where the manufactured home is permanently affixed. Several federal and state
laws, including (i) the UCC as adopted in the relevant state, (ii) certificate of title statutes as adopted in the relevant states; and
(iii) if applicable, the real estate laws as adopted in the states in which the manufactured homes are located, govern the perfection of
security interests in the manufactured homes and the enforcement of rights to realize upon the value of the manufactured homes as
collateral for the contracts. The steps required to perfect a security interest in a manufactured home vary from state to state. The
originator will represent and warrant that each contract is secured by a perfected security interest in the manufactured home, and the
originator must repurchase the contract if there is a breach of this representation and warranty. Nevertheless, if the originator fails
to perfect its security interest in the manufactured homes securing a number of contracts, it could cause an increase in losses on the
contracts, and you could suffer a loss on your investment as a result. In addition, under federal and state laws, a number of factors
may limit the ability of the holder of a perfected security interest in manufactured homes to realize upon the related manufactured
homes or may limit the amount realized to less than the amount due under the related contract which could result in a loss on your
investment.
o The assignment of the security interest in the manufactured home to the trustee may not be perfected.
Due to the expense and administrative inconvenience, the originator will not amend a certificate of title to a manufactured
home to name the trustee as the lienholder or note the trustee's interest on the certificate of title. As a result, in some states the
assignment of the security interest in the manufactured home to the trustee may not be effective against the seller's creditors or a
trustee in the event the seller enters bankruptcy, or the security interest may not be perfected. Also, the seller will not record the
assignment to the trustee of the mortgage or deed of trust securing land-and-home contracts because of the expense and administrative
inconvenience involved. As a result, in some states the assignment of the mortgage or deed of trust to the trustee may not be effective
against the seller's creditors or bankruptcy trustee. If an affiliate of the seller is no longer the servicer and the trustee or a
successor servicer is unable to enforce the security interest in the manufactured home following a default on a contract, losses on the
contracts would increase and you could suffer a loss on your investment as a result.
FICO Scores are Not an Indicator of Future Performance of Borrowers.
Investors should be aware that FICO scores are based on past payment history of the borrower. Investors should not rely on
FICO scores as an indicator of future borrower performance. See "Loan Program — FICO Scores" in this prospectus.
THE MORTGAGE POOLSGeneral
Each mortgage pool will consist primarily of mortgage loans. The mortgage loans may consist of single family loans, multifamily
loans, commercial loans, mixed-use loans and Contracts, each as described below.
The single family loans will be evidenced by mortgage notes and secured by mortgages that, in each case, create a first or
junior lien on the related mortgagor's fee or leasehold interest in the related mortgaged property. The related mortgaged property for a
single family loan may be owner-occupied or may be a vacation, second or non-owner-occupied home.
If specified in the related prospectus supplement relating to a series of securities, the single family loans may include
cooperative apartment loans evidenced by a mortgage note secured by security interests in the related mortgaged property including
shares issued by cooperatives and in the related proprietary leases or occupancy agreements granting exclusive rights to occupy specific
dwelling units in the related buildings.
The multifamily loans will be evidenced by mortgage notes and secured by mortgages that create a first or junior lien on
residential properties consisting of five or more dwelling units in high-rise, mid- rise or garden apartment structures or projects.
The commercial loans will be evidenced by mortgage notes and secured mortgages that create a first or junior lien on commercial
properties including office building, retail building and a variety of other commercial properties as may be described in the related
prospectus supplement.
The mixed-use loans will be evidenced by mortgage loans and secured by mortgages that create a first or junior lien on
properties consisting of mixed residential and commercial structures.
The aggregate concentration by original principal balance of commercial, multifamily and mixed-use loans in any mortgage pool
will be less than 10% of the original principal balance of the mortgage pool.
Mortgaged properties may be located in any one of the 50 states, the District of Columbia or the Commonwealth of Puerto Rico.
The mortgage loans will not be guaranteed or insured by the depositor or any of its affiliates. However, if so specified in the
related prospectus supplement, mortgage loans may be insured by the FHA or guaranteed by the VA. See "Description of Primary Mortgage
Insurance, Hazard Insurance; Claims Thereunder—FHA Insurance" and "—VA Mortgage Guaranty" in this prospectus.
A mortgage pool may include mortgage loans that are delinquent as of the date the related series of securities is issued. In
that case, the related prospectus supplement will set forth, as to each mortgage loan, available information as to the period of
delinquency and any other information relevant for a prospective investor to make an investment decision. No mortgage loan in a mortgage
pool shall be non-performing. Mortgage loans which are more than 30 days delinquent included in any mortgage pool will have delinquency
data relating to them included in the related prospectus supplement. No mortgage pool will include a concentration of mortgage loans
which is more than 30 days delinquent of 20% or more.
A mortgage pool may contain more than one mortgage loan made to the same borrower with respect to a single mortgaged property,
and may contain multiple mortgage loans made to the same borrower on several mortgaged properties.
The mortgage loans may include "sub-prime" mortgage loans. "Sub-prime" mortgage loans will be underwritten in accordance with
underwriting standards which are less stringent than guidelines for "A" quality borrowers. Mortgagors may have a record of outstanding
judgments, prior bankruptcies and other credit items that do not satisfy the guidelines for "A" quality borrowers. They may have had
past debts written off by past lenders.
A mortgage pool may include mortgage loans that do not meet the purchase requirements of Fannie Mae and Freddie Mac. These
mortgage loans are known as nonconforming loans. The mortgage loans may be nonconforming because they exceed the maximum principal
balance of mortgage loans purchased by Fannie Mae and Freddie Mac, known as jumbo loans, because the mortgage loan may have been
originated with limited or no documentation, because they are sub-prime mortgage loans, or because of some other failure to meet the
purchase criteria of Fannie Mae and Freddie Mac. The related prospectus supplement will detail to what extent the mortgage loans are
nonconforming mortgage loans.
Each mortgage loan will be selected by the depositor or its affiliates for inclusion in a mortgage pool from among those
purchased by the depositor, either directly or through its affiliates, from Unaffiliated Sellers or Affiliated Sellers. As to each
series of securities, the mortgage loans will be selected for inclusion in the mortgage pool based on rating agency criteria, compliance
with representations and warranties, and conformity to criteria relating to the characterization of securities for tax, ERISA, SMMEA,
Form S-3 eligibility and other legal purposes. If a mortgage pool is composed of mortgage loans acquired by the depositor directly from
Unaffiliated Sellers, the related prospectus supplement will specify the extent of mortgage loans so acquired. The characteristics of
the mortgage loans will be as described in the related prospectus supplement. Other mortgage loans available for purchase by the
depositor may have characteristics which would make them eligible for inclusion in a mortgage pool but were not selected for inclusion
in the mortgage pool.
The mortgage loans may be delivered to the trust fund pursuant to a Designated Seller Transaction, concurrently with the
issuance of the related series of securities. These securities may be sold in whole or in part to the Seller in exchange for the related
mortgage loans, or may be offered under any of the other methods described in this prospectus under "Methods of Distribution." The
related prospectus supplement for a mortgage pool composed of mortgage loans acquired by the depositor pursuant to a Designated Seller
Transaction will generally include information, provided by the related Seller, about the Seller, the mortgage loans and the
underwriting standards applicable to the mortgage loans.
If specified in the related prospectus supplement, the trust fund for a series of securities may include mortgage securities,
as described in this prospectus. The mortgage securities may have been issued previously by the depositor or an affiliate thereof, a
financial institution or other entity engaged generally in the business of mortgage lending or a limited purpose corporation organized
for the purpose of, among other things, acquiring and depositing mortgage loans into trusts, and selling beneficial interests in
trusts. In addition the mortgage securities may have been issued or guaranteed by Ginnie Mae, Fannie Mae, Freddie Mac or other
government agencies or government-sponsored agencies, as specified in the related prospectus supplement. The mortgage securities will be
generally similar to securities offered under this prospectus. In any securitization where mortgage securities are included in a trust
fund, unless the mortgage securities are exempt from registration under the Securities Act, the offering of the mortgage securities will
be registered if required in accordance with Rule 190 under the Securities Act. As to any series of mortgage securities, the related
prospectus supplement will include a description of (1) the mortgage securities and any related credit enhancement, and (2) the mortgage
loans underlying the mortgage securities.
In addition, if specified in the related prospectus supplement United States Treasury securities and other securities issued by
the U.S. Government, any of its agencies or other issuers established by federal statute may be included in the trust fund. Such
securities will be backed by the full faith and credit of the United States or will represent the obligations of the U.S. Government or
such agency or such other issuer or obligations payable from the proceeds of U.S. Government Securities, as specified in the related
prospectus supplement.
The Mortgage Loans
Each of the mortgage loans will be a type of mortgage loan described or referred to below:
o Fixed-rate, fully-amortizing mortgage loans (which may include mortgage loans converted from adjustable-rate mortgage loans
or otherwise modified) providing for level monthly payments of principal and interest and terms at origination or
modification of not more than approximately 15 years;
o Fixed-rate, fully-amortizing mortgage loans (which may include mortgage loans converted from adjustable-rate mortgage loans
or otherwise modified) providing for level monthly payments of principal and interest and terms at origination or
modification of more than 15 years, but not more than approximately 30 years;
o Fully-amortizing ARM Loans having an original or modified term to maturity of not more than approximately 30 years with a
related mortgage rate which generally adjusts initially either three months, six months or one, two, three, five, seven or
ten years or other intervals subsequent to the initial payment date, and thereafter at either three- month, six-month,
one-year or other intervals (with corresponding adjustments in the amount of monthly payments) over the term of the mortgage
loan to equal the sum of the related Note Margin and the note index. The related prospectus supplement will set forth the
relevant Index, which will be of a type that is customarily used in the debt and fixed income markets to measure the cost of
borrowed funds, and the highest, lowest and weighted average Note Margin with respect to the ARM Loans in the related
mortgage pool. The related prospectus supplement will also indicate any periodic or lifetime limitations on changes in any
per annum mortgage rate at the time of any adjustment. If specified in the related prospectus supplement, an ARM Loan may
include a provision that allows the mortgagor to convert the adjustable mortgage rate to a fixed rate at some point during
the term of the ARM Loan generally not later than six to ten years subsequent to the initial payment date;
o Negatively-amortizing ARM Loans having original or modified terms to maturity of not more than approximately 30 years with
mortgage rates which generally adjust initially on the payment date referred to in the related prospectus supplement, and on
each of specified periodic payment dates thereafter, to equal the sum of the Note Margin and the Index. The scheduled monthly
payment will be adjusted as and when described in the related prospectus supplement to an amount that would fully amortize
the mortgage loan over its remaining term on a level debt service basis; provided that increases in the scheduled monthly
payment may be subject to limitations as specified in the related prospectus supplement. Any Deferred Interest will be added
to the principal balance of the mortgage loan;
o Fixed-rate, graduated payment mortgage loans having original or modified terms to maturity of not more than approximately 15
years with monthly payments during the first year calculated on the basis of an assumed interest rate which is a specified
percentage below the mortgage rate on the mortgage loan. Monthly payments on these mortgage loans increase at the beginning
of the second year by a specified percentage of the monthly payment during the preceding year and each year thereafter to the
extent necessary to amortize the mortgage loan over the remainder of its approximately 15-year term. Deferred Interest, if
any, will be added to the principal balance of these mortgage loans;
o Fixed-rate, graduated payment mortgage loans having original or modified terms to maturity of not more than approximately 30
years with monthly payments during the first year calculated on the basis of an assumed interest rate which is a specified
percentage below the mortgage rate on the mortgage loan. Monthly payments on these mortgage loans increase at the beginning
of the second year by a specified percentage of the monthly payment during the preceding year and each year thereafter to the
extent necessary to fully amortize the mortgage loan over the remainder of its approximately 30-year term. Deferred Interest,
if any, will be added to the principal balance of these mortgage loans;
o Balloon loans having payment terms similar to those described in one of the preceding paragraphs, calculated on the basis of
an assumed amortization term, but providing for a balloon payment of all outstanding principal and interest to be made at the
end of a specified term that is shorter than the assumed amortization term;
o Mortgage loans that provide for a line of credit pursuant to which amounts may be advanced to the borrower from time to time;
o Mortgage loans that require that each monthly payment consist of an installment of interest which is calculated according to
the simple interest method. This method calculates interest using the outstanding principal balance of the mortgage loan
multiplied by the loan rate and further multiplied by a fraction, the numerator of which is the number of days in the period
elapsed since the preceding payment of interest was made and the denominator of which is the number of days in the annual
period for which interest accrues on the mortgage loan. As payments are received on simple interest mortgage loans, the
amount received is applied first to interest accrued to the date of payment and the balance is applied to reduce the unpaid
principal balance of the mortgage loan; or
o Mortgage loans which provide for an interest only period and do not provide for the payment of principal for the number of
years specified in the related prospectus supplement.
The mortgage pool may contain mortgage loans secured by junior liens. The related senior lien, which may have been made at the
same time as the first lien, may or may not be included in the mortgage pool as well. The primary risk to holders of mortgage loans
secured by junior liens is the possibility that adequate funds will not be received in connection with a foreclosure of the related
senior liens to satisfy fully both the senior liens and the mortgage loan secured by a junior lien. In the event that a holder of a
senior lien forecloses on a mortgaged property, the proceeds of the foreclosure or similar sale will be applied first to the payment of
court costs and fees in connection with the foreclosure, second to real estate taxes, third in satisfaction of all principal, interest,
prepayment or acceleration penalties, if any, and any other sums due and owing to the holder of the senior liens. The claims of the
holders of the senior liens will be satisfied in full out of proceeds of the liquidation of the related mortgaged property, if the
proceeds are sufficient, before the trust fund as holder of the junior lien receives any payments in respect of the mortgage loan. If
the master servicer or a servicer were to foreclose on a mortgage loan secured by a junior lien, it would do so subject to any related
senior liens. In order for the debt related to the mortgage loan to be paid in full at the sale, a bidder at the foreclosure sale of the
mortgage loan would have to bid an amount sufficient to pay off all sums due under the mortgage loan and the senior liens or purchase
the mortgaged property subject to the senior liens. In the event that the proceeds from a foreclosure or similar sale of the related
mortgaged property are insufficient to satisfy all senior liens and the mortgage loan in the aggregate, the trust fund, as the holder of
the junior lien, and, accordingly, holders of one or more classes of the securities of the related series bear (1) the risk of delay in
distributions while a deficiency judgment against the borrower is sought and (2) the risk of loss if the deficiency judgment is not
realized upon. Moreover, deficiency judgments may not be available in some jurisdictions or the mortgage loan may be nonrecourse. In
addition, a junior mortgagee may not foreclose on the property securing a junior mortgage unless it forecloses subject to the senior
mortgages.
A mortgage loan may require payment of a prepayment charge or penalty, the terms of which will be more fully described in the
prospectus supplement. Prepayment penalties may apply if the borrower makes a substantial prepayment, or may apply only if the borrower
refinances the mortgage loans. A multifamily, commercial or mixed-use loan may also contain a prohibition on prepayment or lock-out
period.
The mortgage loans may be "equity refinance" mortgage loans, as to which a portion of the proceeds are used to refinance an
existing mortgage loan, and the remaining proceeds may be retained by the mortgagor or used for purposes unrelated to the mortgaged
property. Alternatively, the mortgage loans may be "rate and term refinance" mortgage loans, as to which substantially all of the
proceeds (net of related costs incurred by the mortgagor) are used to refinance an existing mortgage loan or loans (which may include a
junior lien) primarily in order to change the interest rate or other terms thereof. The mortgage loans may be mortgage loans which have
been consolidated and/or have had various terms changed, mortgage loans which have been converted from adjustable rate mortgage loans to
fixed rate mortgage loans, or construction loans which have been converted to permanent mortgage loans. In addition, a mortgaged
property may be subject to secondary financing at the time of origination of the mortgage loan or thereafter. In addition, some or all
of the single family loans secured by junior liens may be High LTV Loans.
If provided for in the related prospectus supplement, a mortgage pool may contain convertible mortgage loans which allow the
mortgagors to convert the interest rates on these mortgage loans from a fixed rate to an adjustable rate, or an adjustable rate to a
fixed rate, at some point during the life of these mortgage loans. In addition, if provided for in the related prospectus supplement, a
mortgage pool may contain mortgage loans which may provide for modification to other fixed rate or adjustable rate programs offered by
the Seller. If specified in the related prospectus supplement, upon any conversion or modification, the depositor, the related master
servicer, the related servicer, the applicable Seller or a third party will repurchase the converted or modified mortgage loan as and to
the extent set forth in the related prospectus supplement. Upon the failure of any party so obligated to repurchase any converted or
modified mortgage loan, it will remain in the mortgage pool.
If provided for in the related prospectus supplement, the mortgage loans may include buydown mortgage loans. Under the terms of
a buydown mortgage loan, the monthly payments made by the mortgagor during the early years of the mortgage loan will be less than the
scheduled monthly payments on the mortgage loan. The resulting difference will be made up from:
o funds contributed by the Seller of the mortgaged property or another source and placed in a custodial account,
o if funds contributed by the Seller are contributed on a present value basis, investment earnings on these funds, or
o additional funds to be contributed over time by the mortgagor's employer or another source.
Generally, the mortgagor under each buydown mortgage loan will be qualified at the applicable lower monthly payment.
Accordingly, the repayment of a buydown mortgage loan is dependent on the ability of the mortgagor to make larger level monthly payments
after the Buydown Funds have been depleted and, for some buydown mortgage loans, during the Buydown Period.
The prospectus supplement for each series of securities will contain information as to the type of mortgage loans that will be
included in the related mortgage pool. Each prospectus supplement applicable to a series of securities will include information,
generally as of the cut-off date and to the extent then available to the depositor, on an approximate basis, as to the following:
o the aggregate principal balance of the mortgage loans,
o the type of property securing the mortgage loans,
o the original or modified terms to maturity of the mortgage loans,
o the range of principal balances of the mortgage loans at origination or modification,
o the earliest origination or modification date and latest maturity date of the mortgage loans,
o the Loan-to-Value Ratios of the mortgage loans,
o the mortgage rate or range of mortgage rates borne by the mortgage loans,
o if any of the mortgage loans are ARM Loans, the applicable Index, the range of Note Margins and the weighted average Note
Margin,
o the geographical distribution of the mortgage loans,
o the percentage of buydown mortgage loans, if applicable, and
o the percent of ARM Loans which are convertible to fixed-rate mortgage loans, if applicable.
A Current Report on Form 8-K will be sent, upon request, to holders of the related series of securities and will be filed, together
with the related pooling and servicing agreement, with respect to each series of certificates, or the related servicing agreement, owner
trust agreement and indenture, with respect to each series of notes, with the Commission after the initial issuance of the securities.
In the event that mortgage loans are added to or deleted from the trust fund after the date of the related prospectus supplement but on
or before the date of issuance of the securities if any material pool characteristic differs by 5% or more from the description in the
prospectus supplement, revised disclosure will be provided either in a supplement or in a Current Report on Form 8-K which will be
available to investors on the SEC website.
The depositor will cause the mortgage loans included in each mortgage pool, or mortgage securities evidencing interests
therein, to be assigned, without recourse, to the trustee named in the related prospectus supplement, for the benefit of the holders of
the securities of a series. Except to the extent that servicing of any mortgage loan is to be transferred to a special servicer, the
master servicer named in the related prospectus supplement will service the mortgage loans, directly or through servicers, pursuant to a
pooling and servicing agreement, with respect to each series of certificates, or a servicing agreement, with respect to each series of
notes, and will receive a fee for these services. See "Servicing of Mortgage Loans,""Description of the Securities" and "TheAgreements" in this prospectus. The master servicer's obligations with respect to the mortgage loans will consist principally of its
contractual servicing obligations under the related pooling and servicing agreement or servicing agreement (including its obligation to
supervise, monitor and oversee the obligations of the servicers to service and administer their respective mortgage loans in accordance
with the terms of the applicable servicing agreements), as more fully described in this prospectus under "Servicing of Mortgage
Loans—Servicers," and, if and to the extent set forth in the related prospectus supplement, its obligation to make cash advances in the
event of delinquencies in payments on or with respect to the mortgage loans as described in this prospectus under "Description of the
Securities—Advances") or pursuant to the terms of any mortgage securities. The obligations of a master servicer to make advances may be
subject to limitations, to the extent this prospectus and the related prospectus supplement so provides.
Underwriting Standards
Mortgage loans to be included in a mortgage pool will be purchased on the closing date by the depositor either directly or
indirectly from Affiliated Sellers or Unaffiliated Sellers. The depositor will acquire mortgage loans utilizing re-underwriting criteria
which it believes are appropriate, depending to some extent on the depositor's or its affiliates' prior experience with the Seller and
the servicer, as well as the depositor's prior experience with a particular type of mortgage loan or with mortgage loans relating to
mortgaged properties in a particular geographical region. A standard approach to re-underwriting is to compare loan file information
and information that is represented to the depositor on a tape with respect to a percentage of the mortgage loans the depositor deems
appropriate in the circumstances. The depositor will not undertake any independent investigations of the creditworthiness of particular
obligors.
The mortgage loans, as well as mortgage loans underlying mortgage securities will have been originated in accordance with
underwriting standards described below.
The underwriting standards to be used in originating the mortgage loans are primarily intended to assess the creditworthiness
of the mortgagor, the value of the mortgaged property and the adequacy of the property as collateral for the mortgage loan.
The mortgage loans will be originated under "full/alternative", "stated income/verified assets", "stated income/stated assets",
"no documentation" or "no ratio" programs. The "full/alternative" documentation programs generally verify income and assets in
accordance with Fannie Mae/Freddie Mac automated underwriting requirements. The stated income/verified assets, stated income/stated
assets, no documentation or no ratio programs generally require less documentation and verification than do full documentation programs
which generally require standard Fannie Mae/Freddie Mac approved forms for verification of income/employment, assets and certain payment
histories. Generally, under both "full/alternative" documentation programs, at least one month of income documentation is provided.
This documentation is also required to include year-to-date income or prior year income in case the former is not sufficient to
establish consistent income. Generally under a "stated income verified assets" program no verification of a mortgagor's income is
undertaken by the origination however, verification of the mortgagor's assets is obtained. Under a "stated income/stated assets"
program, no verification of either a mortgagor's income or a mortgagor's assets is undertaken by the originator although both income and
assets are stated on the loan application and a "reasonableness test" is applied. Generally, under a "no documentation" program, the
mortgagor is not required to state his or her income or assets and therefore, no verification of such mortgagor's income or assets is
undertaken by the originator. The underwriting for such mortgage loans may be based primarily or entirely on the estimated value of the
mortgaged property and the LTV ratio at origination as well as on the payment history and credit score. Generally, under a "no ratio"
program, the mortgagor is not required to disclose their income although the nature of employment is disclosed. Additionally, on a "noratio" program assets are verified.
The primary considerations in underwriting a mortgage loan are the mortgagor's employment stability and whether the mortgagor
has sufficient monthly income available (1) to meet the mortgagor's monthly obligations on the proposed mortgage loan (generally
determined on the basis of the monthly payments due in the year of origination) and other expenses related to the home (including
property taxes and hazard insurance) and (2) to meet monthly housing expenses and other financial obligations and monthly living
expenses. However, the Loan-to-Value Ratio of the mortgage loan is another critical factor. In addition, a mortgagor's credit history
and repayment ability, as well as the type and use of the mortgaged property, are also considerations.
High LTV Loans are underwritten with an emphasis on the creditworthiness of the related mortgagor. High LTV Loans are
underwritten with a limited expectation of recovering any amounts from the foreclosure of the related mortgaged property.
In the case of the multifamily loans, commercial loans or mixed-use loans, lenders typically look to the debt service coverage
ratio of a loan as an important measure of the risk of default on that loan. Unless otherwise defined in the related prospectus
supplement, the debt service coverage ratio of a multifamily loan, commercial loan or mixed-use loan at any given time is the ratio of
(1) the net operating income of the related mortgaged property for a twelve-month period to (2) the annualized scheduled payments on the
mortgage loan and on any other loan that is secured by a lien on the mortgaged property prior to the lien of the related mortgage. The
net operating income of a mortgaged property is the total operating revenues derived from a multifamily, commercial or mixed-use
property, as applicable, during that period, minus the total operating expenses incurred in respect of that property during that period
other than (a) non-cash items such as depreciation and amortization, (b) capital expenditures and (c) debt service on loans (including
the related mortgage loan) secured by liens on that property. The net operating income of a multifamily, commercial or mixed-use
property, as applicable, will fluctuate over time and may or may not be sufficient to cover debt service on the related mortgage loan at
any given time. As the primary source of the operating revenues of a multifamily, commercial or mixed-use property, as applicable,
rental income (and maintenance payments from tenant-stockholders of a cooperatively owned multifamily property) may be affected by the
condition of the applicable real estate market and/or area economy. Increases in operating expenses due to the general economic climate
or economic conditions in a locality or industry segment, such as increases in interest rates, real estate tax rates, energy costs,
labor costs and other operating expenses, and/or to changes in governmental rules, regulations and fiscal policies, may also affect the
risk of default on a multifamily, commercial or mixed-use loan. Lenders also look to the Loan-to-Value Ratio of a multifamily,
commercial or mixed-use loan as a measure of risk of loss if a property must be liquidated following a default.
Each prospective mortgagor will generally complete a mortgage loan application that includes information on the applicant's
liabilities, income, credit history, employment history and personal information. One or more credit reports on each applicant from
national credit reporting companies generally will be required. The report typically contains information relating to credit history
with local and national merchants and lenders, installment debt payments and any record of defaults, bankruptcies, repossessions, or
judgments. In the case of a multifamily loan, commercial loan or mixed-use loan, the mortgagor will also be required to provide certain
information regarding the related mortgaged property, including a current rent roll and operating income statements (which may be pro
forma and unaudited). In addition, the originator will generally also consider the location of the mortgaged property, the availability
of competitive lease space and rental income of comparable properties in the relevant market area, the overall economy and demographic
features of the geographic area and the mortgagor's prior experience in owning and operating properties similar to the multifamily
properties or commercial properties, as the case may be.
Mortgaged properties generally will be appraised by licensed appraisers or through an automated valuation system. A licensed
appraiser will generally address neighborhood conditions, site and zoning status and condition and valuation of improvements. In the
case of mortgaged properties secured by single family loans, the appraisal report will generally include a reproduction cost analysis
(when appropriate) based on the current cost of constructing a similar home and a market value analysis based on recent sales of
comparable homes in the area. With respect to multifamily properties, commercial properties and mixed-use properties, the appraisal must
specify whether an income analysis, a market analysis or a cost analysis was used. An appraisal employing the income approach to value
analyzes a property's projected net cash flow, capitalization and other operational information in determining the property's value. The
market approach to value analyzes the prices paid for the purchase of similar properties in the property's area, with adjustments made
for variations between those other properties and the property being appraised. The cost approach to value requires the appraiser to
make an estimate of land value and then determine the current cost of reproducing the improvements less any accrued depreciation. In any
case, the value of the property being financed, as indicated by the appraisal, must support, and support in the future, the outstanding
loan balance. All appraisals by licensed appraisers are required to be on forms acceptable to Fannie Mae or Freddie Mac. Automated
valuation systems generally rely on publicly available information regarding property values and will be described more fully in the
related prospectus supplement. An appraisal for purposes of determining the Value of a mortgaged property may include an automated
valuation.
Notwithstanding the foregoing, Loan-to-Value Ratios will not necessarily provide an accurate measure of the risk of liquidation
loss in a pool of mortgage loans. For example, the value of a mortgaged property as of the date of initial issuance of the related
series of securities may be less than the Value determined at loan origination, and will likely continue to fluctuate from time to time
based upon changes in economic conditions and the real estate market. Mortgage loans which are subject to negative amortization will
have Loan-to-Value Ratios which will increase after origination as a result of negative amortization. Also, even when current, an
appraisal is not necessarily a reliable estimate of value for a multifamily property or commercial property. As stated above, appraised
values of multifamily, commercial and mixed-use properties are generally based on the market analysis, the cost analysis, the income
analysis, or upon a selection from or interpolation of the values derived from those approaches. Each of these appraisal methods can
present analytical difficulties. It is often difficult to find truly comparable properties that have recently been sold; the replacement
cost of a property may have little to do with its current market value; and income capitalization is inherently based on inexact
projections of income and expenses and the selection of an appropriate capitalization rate. Where more than one of these appraisal
methods are used and provide significantly different results, an accurate determination of value and, correspondingly, a reliable
analysis of default and loss risks, is even more difficult.
If so specified in the related prospectus supplement, the underwriting of a multifamily loan, commercial loan or mixed-use loan
may also include environmental testing. Under the laws of some states, contamination of real property may give rise to a lien on the
property to assure the costs of cleanup. In several states, this type of lien has priority over an existing mortgage lien on that
property. In addition, under the laws of some states and under CERCLA, a lender may be liable, as an "owner" or "operator", for costs of
addressing releases or threatened releases of hazardous substances at a property, if agents or employees of the lender have become
sufficiently involved in the operations of the borrower, regardless of whether or not the environmental damage or threat was caused by
the borrower or a prior owner. A lender also risks such liability on foreclosure of the mortgage as described under "Legal Aspects of
Mortgage Loans—Environmental Legislation" in this prospectus.
With respect to any FHA loan or VA loans the mortgage loan Seller will be required to represent that it has complied with the
applicable underwriting policies of the FHA or VA, respectively. See "Description of Primary Mortgage Insurance, Hazard Insurance;
Claims Thereunder—FHA Insurance" and "—VA Insurance" in this prospectus.
FICO Scores
The FICO Score is a statistical ranking of likely future credit performance developed by Fair, Isaac & Company ("Fair, Isaac")
and the three national credit repositories-Equifax, Trans Union and First American (formerly Experian which was formerly TRW). The FICO
Scores available from the three national credit repositories are calculated by the assignment of weightings to the most predictive data
collected by the credit repositories and range from the 300's to the 900's. Although the FICO Scores are based solely on the
information at the particular credit repository, such FICO Scores have been calibrated to indicate the same level of credit risk
regardless of which credit repository is used. The FICO Scores is used along with, but not limited to, mortgage payment history,
seasoning on bankruptcy and/or foreclosure, and is not a substitute for the underwriter's judgment.
Qualifications of Originators and Sellers
Each mortgage loan generally will be originated, directly or through mortgage brokers and correspondents, by a savings and loan
association, savings bank, commercial bank, credit union, insurance company, or similar institution which is supervised and examined by
a federal or state authority, or by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to sections 203 and
211 of the Housing Act, unless otherwise provided in the related prospectus supplement.
Representations by Sellers
Each Seller will have made representations and warranties in respect of the mortgage loans and/or mortgage securities sold by
the Seller and evidenced by a series of securities. In the case of mortgage loans, representations and warranties will generally
include, among other things, that as to each mortgage loan:
o With respect to any first lien mortgage loan, a lender's title insurance policy (on an ALTA or CLTA form) or binder,
or other assurance of title customary in the relevant jurisdiction therefore in a form acceptable to Fannie Mae or
Freddie Mac, was issued on the date that each mortgage loan was created by a title insurance company which, to the
best of the related seller's knowledge, was qualified to do business in the jurisdiction where the related mortgaged
property is located, insuring the related seller and its successors and assigns that the mortgage is a first priority
lien on the related mortgaged property in the original principal amount of the mortgage loan; and the related seller
is the sole insured under such lender's title insurance policy, and such policy, binder or assurance is valid and
remains in full force and effect, and each such policy, binder or assurance shall contain all applicable endorsements
including a negative amortization endorsement, if applicable. With respect to any second lien mortgage loan, other
than any Piggyback Loan that has an initial principal amount less than or equal to $200,000, (a) a lender's title
insurance policy or binder, or other assurance of title customary in the relevant jurisdiction therefore in a form
acceptable to Fannie Mae or Freddie Mac, was issued on the date that each mortgage loan was created by a title
insurance company which, to the best of the related seller's knowledge, was qualified to do business in the
jurisdiction where the related mortgaged property is located, insuring the related seller and its successors and
assigns; and the related seller is the sole insured under such lender's title insurance policy, and such policy,
binder or assurance is valid and remains in full force and effect, and each such policy, binder or assurance shall
contain all applicable endorsements including a negative amortization endorsement, if applicable, or (b) a lien
search was conducted at the time of origination with respect to the related property;
o immediately prior to the transfer to the depositor, the related Seller was the sole owner of beneficial title and
holder of the mortgage and mortgage note relating to such mortgage loan and is conveying the same free and clear of
any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of
any nature and the related Seller has full right and authority to sell or assign the same pursuant to the related
mortgage loan purchase agreement;
o there is no mechanics' lien or claim for work, labor or material affecting the premises subject to any mortgage which
is or may be a lien prior to, or equal with, the lien of such mortgage except those which are insured against by the
title insurance policy referred to above;
o the mortgage is a valid and enforceable first or other applicable lien on the property securing the related mortgage
note and each mortgaged property is owned by the mortgagor in fee simple (except with respect to common areas in the
case of condominiums, PUDs and de minimis PUDs) or by leasehold for a term longer than the term of the related
mortgage, subject only to (i) the lien of current real property taxes and assessments, (ii) covenants, conditions and
restrictions, rights of way, easements and other matters of public record as of the date of recording of such
mortgage, such exceptions being acceptable to mortgage lending institutions generally or specifically reflected in the
appraisal obtained in connection with the origination of the related mortgage loan or referred to in the lender's
title insurance policy delivered to the originator of the related mortgage loan and (iii) other matters to which like
properties are commonly subject which do not materially interfere with the benefits of the security intended to be
provided by such mortgage;
o the physical property subject to the mortgage is free of material damage and is in good repair and there is no
proceeding pending or threatened for the total or partial condemnation of any mortgaged property;
o there was no delinquent tax or assessment lien against the property subject to any mortgage, except where such lien
was being contested in good faith and a stay had been granted against levying on the property; and
o each mortgage loan at the time it was made complied in all material respects with all applicable local, state and
federal laws and regulations, including, without limitation, usury, equal credit opportunity, disclosure and recording
laws and all applicable predatory, abusive and fair lending laws; and each mortgage loan has been serviced in all
material respects in accordance with all applicable laws and regulations, including, without limitation, usury, equal
credit opportunity, disclosure and recording laws and all applicable anti-predatory lending laws and the terms of the
related mortgage note, the mortgage and other loan documents.
If the mortgage loans include cooperative mortgage loans, representations and warranties with respect to title insurance or hazard
insurance may not be given. Generally, the cooperative itself is responsible for the maintenance of hazard insurance for property owned
by the cooperative, and the borrowers (tenant-stockholders) of the cooperative do not maintain hazard insurance on their individual
dwelling units. In the case of mortgage securities, representations and warranties will generally include, among other things, that as
to each mortgage security, the Seller has good title to the mortgage security free of any liens. In the event of a breach of a Seller's
representation or warranty that materially adversely affects the interests of the securityholders in a mortgage loan or mortgage
security, the related Seller will be obligated to cure the breach or repurchase or, if permitted, replace the mortgage loan or mortgage
security as described below. However, there can be no assurance that a Seller will honor its obligation to repurchase or, if permitted,
replace any mortgage loan or mortgage security as to which a breach of a representation or warranty arises.
All of the representations and warranties of a Seller in respect of a mortgage loan or mortgage security will have been made as
of the date on which the mortgage loan or mortgage security was purchased from the Seller by or on behalf of the depositor, unless a
specific representation or warranty relates to an earlier date, in which case such representation or warranty shall be made as of such
earlier date. As a result, the date as of which the representations and warranties were made may be a date prior to the date of initial
issuance of the related series of securities or, in the case of a Designated Seller Transaction, will be the date of closing of the
related sale by the applicable Seller. A substantial period of time may have elapsed between the date as of which the representations
and warranties were made and the later date of initial issuance of the related series of securities. Accordingly, the Seller's
repurchase obligation (or, if specified in the related prospectus supplement, limited replacement option) described below will not arise
if, during the period commencing on the date of sale of a mortgage loan or mortgage security by the Seller, an event occurs that would
have given rise to a repurchase obligation had the event occurred prior to sale of the affected mortgage loan or mortgage security, as
the case may be. The only representations and warranties to be made for the benefit of holders of securities in respect of any related
mortgage loan or mortgage security relating to the period commencing on the date of sale of the mortgage loan or mortgage security by
the Seller to or on behalf of the depositor will be the limited corporate representations of the depositor and the master servicer
described under "Description of the Securities—Assignment of Trust Fund Assets" below.
The depositor will assign to the trustee for the benefit of the holders of the related series of securities all of its right,
title and interest in each purchase agreement by which it purchased a mortgage loan or mortgage security from a Seller insofar as the
purchase agreement relates to the representations and warranties made by the Seller in respect of the mortgage loan or mortgage security
and any remedies provided for with respect to any breach of representations and warranties with respect to the mortgage loan or mortgage
security. If a Seller cannot cure a breach of any representation or warranty made by it in respect of a mortgage loan or mortgage
security which materially and adversely affects the interests of the securityholders therein within a specified period after having
discovered or received notice of a breach, then, the Seller will be obligated to repurchase the mortgage loan or mortgage security at a
purchase price set forth in the related pooling and servicing agreement or other agreement which purchase price generally will be equal
to the principal balance thereof as of the date of repurchase plus accrued and unpaid interest through or about the date of repurchase
at the related mortgage rate or pass-through rate, as applicable (net of any portion of this interest payable to the Seller in respect
of master servicing compensation, special servicing compensation or servicing compensation, as applicable, and any interest retained by
the depositor).
As to any mortgage loan required to be repurchased by a Seller as provided above, rather than repurchase the mortgage loan, the
Seller, if so specified in the related prospectus supplement, will be entitled, at its sole option, to remove the Deleted Mortgage Loan
from the trust fund and substitute in its place a Qualified Substitute Mortgage Loan; however, with respect to a series of certificates
for which no REMIC election is to be made, the substitution must be effected within 120 days of the date of the initial issuance of the
related series of certificates. With respect to a trust fund for which a REMIC election is to be made, the substitution of a defective
mortgage loan must be effected within two years of the date of the initial issuance of the related series of certificates, and may not
be made if the substitution would cause the trust fund, or any portion thereof, to fail to qualify as a REMIC or result in a Prohibited
Transaction Tax under the Code. Any Qualified Substitute Mortgage Loan generally will, on the date of substitution:
o have an outstanding principal balance, after deduction of the principal portion of the monthly payment due in the month of
substitution, not in excess of the outstanding principal balance of the Deleted Mortgage Loan (the amount of any shortfall to
be deposited in the Distribution Account by the related Seller or the master servicer in the month of substitution for
distribution to the securityholders),
o have a mortgage rate and a Net Mortgage Rate not less than (and not materially greater than) the mortgage rate and Net
Mortgage Rate, respectively, of the Deleted Mortgage Loan as of the date of substitution,
o have a Loan-to-Value Ratio at the time of substitution no higher than that of the Deleted Mortgage Loan at the time of
substitution,
o have a remaining term to maturity not materially earlier or later than (and not later than the latest maturity date of any
mortgage loan) that of the Deleted Mortgage Loan, and
o comply with all of the representations and warranties made by the Seller as of the date of substitution.
The related mortgage loan purchase agreement may include additional requirements relating to ARM Loans or other specific types of
mortgage loans, or additional provisions relating to meeting the foregoing requirements on an aggregate basis where a number of
substitutions occur contemporaneously. A Seller will have an option to substitute for a mortgage security that it is obligated to
repurchase in connection with a breach of a representation and warranty only if it satisfies the criteria set forth in the related
prospectus supplement.
The master servicer or the trustee will be required under the applicable pooling and servicing agreement or servicing agreement
to use reasonable efforts to enforce this repurchase or substitution obligation for the benefit of the trustee and the securityholders,
following those practices it would employ in its good faith business judgment and which are normal and usual in its general mortgage
servicing activities; provided, however, that this repurchase or substitution obligation will not become an obligation of the master
servicer in the event the applicable Seller fails to honor the obligation. In instances where a Seller is unable, or disputes its
obligation, to repurchase affected mortgage loans and/or mortgage securities, the master servicer or the trustee, employing the
standards set forth in the preceding sentence, may negotiate and enter into one or more settlement agreements with the related Seller
that could provide for the repurchase of only a portion of the affected mortgage loans and/or mortgage securities. Any settlement could
lead to losses on the mortgage loans and/or mortgage securities which would be borne by the related securities. In accordance with the
above described practices, the master servicer or trustee will not be required to enforce any repurchase obligation of a Seller arising
from any misrepresentation by the Seller, if the master servicer determines in the reasonable exercise of its business judgment that the
matters related to the misrepresentation did not directly cause or are not likely to directly cause a loss on the related mortgage loan
or mortgage security. If the Seller fails to repurchase and no breach of any other party's representations has occurred, the Seller's
repurchase obligation will not become an obligation of the depositor or any other party. In the case of a Designated Seller Transaction
where the Seller fails to repurchase a mortgage loan or mortgage security and neither the depositor nor any other entity has assumed the
representations and warranties, the repurchase obligation of the Seller will not become an obligation of the depositor or any other
party. The foregoing obligations will constitute the sole remedies available to securityholders or the trustee for a breach of any
representation by a Seller or for any other event giving rise to the obligations as described above.
Neither the depositor nor the master servicer will be obligated to repurchase a mortgage loan or mortgage security if a Seller
defaults on its obligation to do so, and no assurance can be given that the Sellers will carry out their repurchase obligations. A
default by a Seller is not a default by the depositor or by the master servicer. However, to the extent that a breach of the
representations and warranties of a Seller also constitutes a breach of a representation made by the depositor or the master servicer,
as described below under "Description of the Securities—Assignment of Trust Fund Assets," the depositor or the master servicer may have
a repurchase or substitution obligation. Any mortgage loan or mortgage security not so repurchased or substituted for shall remain in
the related trust fund and any losses related thereto shall be allocated to the related credit enhancement, to the extent available, and
otherwise to one or more classes of the related series of securities.
If a person other than a Seller makes the representations and warranties referred to in the first paragraph of this
"—Representations by Sellers" section, or a person other than a Seller is responsible for repurchasing or replacing any mortgage loan or
mortgage security for a breach of those representations and warranties, the identity of that person will be specified in the related
prospectus supplement. The master servicer's responsibilities for enforcing these representations and warranties will be as provided in
the second preceding paragraph.
Optional Purchase of Defaulted Mortgage Loans
If the related prospectus supplement so specifies, the master servicer or another entity identified in such prospectus
supplement may, at its option, purchase from the trust fund any mortgage loan which is delinquent in payment by 90 days or more or is an
REO Mortgage Loan as the date of such purchase. Any such purchase shall be at the price described in the related prospectus supplement.
STATIC POOL INFORMATION
For each mortgage pool discussed above, the depositor will provide static pool information with respect to the experience of
the sponsor, or other appropriate entity, in securitizing asset pools of the same type to the extent material.
With respect to each series of securities, the information referred to in this section will be provided through an internet web
site at the address disclosed in the related prospectus supplement.
SERVICING OF MORTGAGE LOANSGeneral
The mortgage loans and mortgage securities included in each mortgage pool will be serviced and administered pursuant to either
a pooling and servicing agreement or a servicing agreement. A form of pooling and servicing agreement and a form of servicing agreement
have each been filed as an exhibit to the registration statement of which this prospectus is a part. However, the provisions of each
pooling and servicing agreement or servicing agreement will vary depending upon the nature of the related mortgage pool. The following
summaries describe the material servicing-related provisions that may appear in a pooling and servicing agreement or servicing agreement
for a mortgage pool that includes mortgage loans. The related prospectus supplement will describe any servicing-related provision of its
related pooling and servicing agreement or servicing agreement that materially differs from the description thereof contained in this
prospectus. If the related mortgage pool includes mortgage securities, the related prospectus supplement will summarize the material
provisions of the related pooling and servicing agreement and identify the responsibilities of the parties to that pooling and servicing
agreement.
With respect to any series of securities as to which the related mortgage pool includes mortgage securities, the servicing and
administration of the mortgage loans underlying any mortgage securities will be pursuant to the terms of those mortgage securities.
Mortgage loans underlying mortgage securities in a mortgage pool will be serviced and administered generally in the same manner as
mortgage loans included in a mortgage pool, however, there can be no assurance that this will be the case, particularly if the mortgage
securities are issued by an entity other than the depositor or any of its affiliates.
The Master Servicer
The master servicer, if any, for a series of securities will be named in the related prospectus supplement and may be an
affiliate of the depositor. The master servicer is required to maintain a fidelity bond and errors and omissions policy with respect to
its officers and employees and other persons acting on behalf of the master servicer in connection with its activities under a pooling
and servicing agreement or a servicing agreement.
The master servicer shall supervise, monitor and oversee the obligation of the servicers to service and administer their
respective mortgage loans in accordance with the terms of the applicable servicing agreements and shall have full power and authority to
do any and all things which it may deem necessary or desirable in connection with such master servicing and administration. In addition,
the Master Servicer shall oversee and consult with each servicer as necessary from time-to-time to carry out the master servicer's
obligations under the pooling and servicing agreement or servicing agreement, shall receive, review and evaluate all reports,
information and other data provided to the master servicer by each servicer and shall cause each servicer to perform and observe the
covenants, obligations and conditions to be performed or observed by such servicer under its applicable servicing agreement. Each
pooling and servicing agreement or servicing agreement, as applicable, for a series of securities, will provide that in the event a
servicer fails to perform its obligations in accordance with its servicing agreement, the master servicer shall terminate such servicer
and act as servicer of the related mortgage loans or cause the trustee to enter into a new servicing agreement with a successor servicer
selected by the master servicer.
The Servicers
Each of the servicers, if any, for a series of securities will be named in the related prospectus supplement and may be an
affiliate of the depositor or the Seller of the mortgage loans for which it is acting as servicer. Each servicer will service the
mortgage loans pursuant to a servicing agreement between the master servicer and the related servicer, which servicing agreement will
not contain any terms which are inconsistent with the related pooling and servicing agreement or other agreement that governs the
servicing responsibilities of the master servicer or pursuant to the related pooling and servicing agreement, as specified in the
related prospectus supplement. Each servicer is required to maintain a fidelity bond and errors and omissions policy with respect to its
officers and employees and other persons acting on behalf of the servicer in connection with its activities under a servicing agreement
or the related pooling and servicing agreement.
Collection and Other Servicing Procedures; Mortgage Loan Modifications
The master servicer for any mortgage pool will be obligated under the pooling and servicing agreement or servicing agreement to
supervise, monitor and oversee the obligations of the servicers to service and administer their respective mortgage loans in the
mortgage pool for the benefit of the related securityholders, in accordance with applicable law, the terms of the pooling and servicing
agreement or servicing agreement, the mortgage loans and any instrument of credit enhancement included in the related trust fund, and,
to the extent consistent with the foregoing, the customs and standards of prudent institutional mortgage lenders servicing comparable
mortgage loans for their own account in the jurisdictions where the related mortgaged properties are located. Subject to the foregoing,
the master servicer will have full power and authority to do any and all things in connection with servicing and administration that it
may deem necessary and desirable.
As part of its servicing duties, the master servicer will be required to, and to cause each of the servicers to, make
reasonable efforts to collect all payments called for under the terms and provisions of the mortgage loans that it services. The master
servicer and each servicer will be obligated to follow the same collection procedures as it would follow for comparable mortgage loans
held for its own account, so long as these procedures are consistent with the servicing standard of and the terms of the related pooling
and servicing agreement or servicing agreement and the servicing standard generally described in the preceding paragraph, and do not
impair recovery under any instrument of credit enhancement included in the related trust fund. Consistent with the foregoing, the master
servicer or any servicer will be permitted, to the extent provided in the related prospectus supplement, to waive any prepayment
premium, late payment charge or other charge in connection with any mortgage loan.
Under a pooling and servicing agreement or a servicing agreement, a master servicer and each servicer may be granted discretion
to extend relief to mortgagors whose payments become delinquent. In the case of single family loans and Contracts, a master servicer or
servicer may, for example, grant a period of temporary indulgence to a mortgagor or may enter into a liquidating plan providing for
repayment of delinquent amounts within a specified period from the date of execution of the plan. However, the master servicer or
servicer must first determine that any waiver or extension will not impair the coverage of any related insurance policy or materially
adversely affect the security for the mortgage loan. In addition, unless otherwise specified in the related prospectus supplement, if a
material default occurs or a payment default is reasonably foreseeable with respect to a multifamily loan, commercial loan or mixed-use
loan, the master servicer or servicer will be permitted, subject to any specific limitations set forth in the related pooling and
servicing agreement or servicing agreement and described in the related prospectus supplement, to modify, waive or amend any term of
such mortgage loan, including deferring payments, extending the stated maturity date or otherwise adjusting the payment schedule,
provided that the modification, waiver or amendment (1) is reasonably likely to produce a greater recovery with respect to that mortgage
loan on a present value basis than would liquidation and (2) will not adversely affect the coverage under any applicable instrument of
credit enhancement.
In the case of multifamily loans, commercial loans and mixed-use loans, a mortgagor's failure to make required mortgage loan
payments may mean that operating income is insufficient to service the mortgage debt, or may reflect the diversion of that income from
the servicing of the mortgage debt. In addition, a mortgagor under a multifamily, commercial or mixed-use loan that is unable to make
mortgage loan payments may also be unable to make timely payment of taxes and otherwise to maintain and insure the related mortgaged
property. Generally, the related master servicer or servicer will be required to monitor any multifamily loan or commercial loan that is
in default, evaluate whether the causes of the default can be corrected over a reasonable period without significant impairment of the
value of the related mortgaged property, initiate corrective action in cooperation with the mortgagor if cure is likely, inspect the
related mortgaged property and take any other actions as are consistent with the servicing standard described above and in the pooling
and servicing agreement or servicing agreement. A significant period of time may elapse before the master servicer or servicer is able
to assess the success of any such corrective action or the need for additional initiatives. The time within which the master servicer or
servicer can make the initial determination of appropriate action, evaluate the success of corrective action, develop additional
initiatives, institute foreclosure proceedings and actually foreclose (or accept a deed to a mortgaged property in lieu of foreclosure)
on behalf of the securityholders of the related series may vary considerably depending on the particular multifamily, commercial or
mixed-use loan, the mortgaged property, the mortgagor, the presence of an acceptable party to assume that loan and the laws of the
jurisdiction in which the mortgaged property is located. If a mortgagor files a bankruptcy petition, the master servicer or servicer may
not be permitted to accelerate the maturity of the related multifamily, commercial or mixed-use loan or to foreclose on the mortgaged
property for a considerable period of time. See "Legal Aspects of Mortgage Loans" in this prospectus.
Some or all of the mortgage loans in a mortgage pool may contain a due-on-sale clause that entitles the lender to accelerate
payment of the mortgage loan upon any sale or other transfer of the related mortgaged property made without the lender's consent. In any
case in which a mortgaged property is being conveyed by the mortgagor, the master servicer will in general be obligated, to the extent
it has knowledge of the conveyance, to exercise its rights, or cause the servicer of the mortgage loan to exercise its rights, to
accelerate the maturity of the related mortgage loan under any due-on-sale clause applicable thereto, but only if the exercise of these
rights is permitted by applicable law and only to the extent it would not adversely affect or jeopardize coverage under any Primary
Insurance Policy or applicable credit enhancement arrangements. If applicable law prevents the master servicer or servicer from
enforcing a due-on-sale or due-on-encumbrance clause or if the master servicer or servicer determines that it is reasonably likely that
the related mortgagor would institute a legal action to avoid enforcement of a due-on-sale or due-on-encumbrance clause, the master
servicer or servicer may enter into (1) an assumption and modification agreement with the person to whom the property has been or is
about to be conveyed, pursuant to which this person becomes liable under the mortgage note subject to specified conditions and the
mortgagor, to the extent permitted by applicable law, remains liable thereon or (2) a substitution of liability agreement pursuant to
which the original mortgagor is released from liability and the person to whom the property has been or is about to be conveyed is
substituted for the original mortgagor and becomes liable under the mortgage note, subject to specified conditions. The original
mortgagor may be released from liability on a single family loan if the master servicer or servicer shall have determined in good faith
that the release will not adversely affect the collectability of the mortgage loan. The master servicer or servicer will determine
whether to exercise any right the trustee may have under any due-on-sale or due-on-encumbrance provision in a multifamily loan,
commercial loan or mixed-use loan in a manner consistent with the servicing standard. The master servicer or servicer generally will be
entitled to retain as additional servicing compensation any fee collected in connection with the permitted transfer of a mortgaged
property. See "Legal Aspects of Mortgage Loans—Enforceability of Certain Provisions" in this prospectus. FHA loans do not contain
due-on-sale or due-on-encumbrance clauses and may be assumed by the purchaser of the mortgaged property.
Mortgagors may, from time to time, request partial releases of the mortgaged properties, easements, consents to alteration or
demolition and other similar matters. The master servicer or the servicer may approve a request if it has determined, exercising its
good faith business judgment in the same manner as it would if it were the owner of the related mortgage loan, that approval will not
adversely affect the security for, or the timely and full collectability of, the related mortgage loan. Any fee collected by the master
servicer or servicer for processing these requests will be retained by the master servicer or servicer, as the case may be, as
additional servicing compensation.
In the case of mortgage loans secured by junior liens on the related mortgaged properties, the master servicer will be required
to file, or cause the servicer of the mortgage loans to file, of record a request for notice of any action by a superior lienholder
under the senior lien for the protection of the related trustee's interest, where permitted by local law and whenever applicable state
law does not require that a junior lienholder be named as a party defendant in foreclosure proceedings in order to foreclose the junior
lienholder's equity of redemption. The master servicer also will be required to notify, or cause the servicer of the mortgage loan to
notify, any superior lienholder in writing of the existence of the mortgage loan and request notification of any action (as described
below) to be taken against the mortgagor or the mortgaged property by the superior lienholder. If the master servicer or a servicer is
notified that any superior lienholder has accelerated or intends to accelerate the obligations secured by the related senior lien, or
has declared or intends to declare a default under the mortgage or the promissory note secured thereby, or has filed or intends to file
an election to have the related mortgaged property sold or foreclosed, then, the master servicer will be required to take, or cause the
servicer of the related mortgaged property to take, on behalf of the related trust fund, whatever actions are necessary to protect the
interests of the related securityholders, and/or to preserve the security of the related mortgage loan, subject to the REMIC Provisions,
if applicable. The master servicer will be required to advance, or cause the servicer of the mortgage loan to advance, the necessary
funds to cure the default or reinstate the superior lien, if the advance is in the best interests of the related securityholders and the
master servicer or the servicer, as the case may be, determines the advances are recoverable out of payments on or proceeds of the
related mortgage loan.
The master servicer for any mortgage pool will also be required to perform, or cause the servicers of the mortgage loans in the
mortgage pool to perform, other customary functions of a servicer of comparable loans, including maintaining escrow or impound accounts
for payment of taxes, insurance premiums and similar items, or otherwise monitoring the timely payment of those items; adjusting
mortgage rates on ARM Loans; maintaining Buydown Accounts; supervising foreclosures and similar proceedings; managing REO properties;
and maintaining servicing records relating to the mortgage loans in the mortgage pool. The master servicer will be responsible for
filing and settling claims in respect of particular mortgage loans under any applicable instrument of credit enhancement. See
"Description of Credit Enhancement" in this prospectus.
Special Servicers
If and to the extent specified in the related prospectus supplement, a special servicer may be a party to the related pooling
and servicing agreement or servicing agreement or may be appointed by the master servicer or another specified party to perform
specified duties in respect of servicing the related mortgage loans that would otherwise be performed by the master servicer (for
example, the workout and/or foreclosure of defaulted mortgage loans). The rights and obligations of any special servicer will be
specified in the related prospectus supplement, and the master servicer will be liable for the performance of a special servicer only
if, and to the extent, set forth in that prospectus supplement.
Realization Upon or Sale of Defaulted Mortgage Loans
Except as described below and in the related prospectus supplement, the master servicer will be required, in a manner
consistent with the servicing standard, to, or to cause the servicers of the mortgage loans to, foreclose upon or otherwise comparably
convert the ownership of properties securing any mortgage loans in the related mortgage pool that come into and continue in default and
as to which no satisfactory arrangements can be made for collection of delinquent payments. Generally, the foreclosure process will
commence no later than 90 days after delinquency of the related mortgage loan. The master servicer and each servicer will be authorized
to institute foreclosure proceedings, exercise any power of sale contained in the related mortgage, obtain a deed in lieu of
foreclosure, or otherwise acquire title to the related mortgaged property, by operation of law or otherwise, if the action is consistent
with the servicing standard. The master servicer's or applicable servicer's actions in this regard must be conducted, however, in a
manner that will permit recovery under any instrument of credit enhancement included in the related trust fund. In addition, neither the
master servicer nor any other servicer will be required to expend its own funds in connection with any foreclosure or to restore any
damaged property unless it shall determine that (1) the foreclosure and/or restoration will increase the proceeds of liquidation of the
mortgage loan to the related securityholders after reimbursement to itself for these expenses and (2) these expenses will be recoverable
to it from related Insurance Proceeds, Liquidation Proceeds or amounts drawn out of any fund or under any instrument constituting credit
enhancement (respecting which it shall have priority for purposes of withdrawal from the Distribution Account in accordance with the
pooling and servicing agreement or servicing agreement).
However, unless otherwise specified in the related prospectus supplement, neither the master servicer nor any other servicer
may acquire title to any multifamily property or commercial property securing a mortgage loan or take any other action that would cause
the related trustee, for the benefit of securityholders of the related series, or any other specified person to be considered to hold
title to, to be a "mortgagee-in-possession" of, or to be an "owner" or an "operator" of such mortgaged property within the meaning of
federal environmental laws, unless the master servicer or the servicer of the mortgage loan has previously determined, based on a report
prepared by a person who regularly conducts environmental audits (which report will be an expense of the trust fund), that either:
(1) the mortgaged property is in compliance with applicable environmental laws and regulations or, if not, that
taking actions as are necessary to bring the mortgaged property into compliance with these laws is reasonably likely to produce
a greater recovery on a present value basis than not taking those actions; and
(2) there are no circumstances or conditions present at the mortgaged property that have resulted in any
contamination for which investigation, testing, monitoring, containment, clean-up or remediation could be required under any
applicable environmental laws and regulations or, if those circumstances or conditions are present for which any such action
could be required, taking those actions with respect to the mortgaged property is reasonably likely to produce a greater
recovery on a present value basis than not taking those actions. See "Legal Aspects of Mortgage Loans—Environmental
Legislation" in this prospectus.
Neither the master servicer nor any other servicer will be obligated to foreclose upon or otherwise convert the ownership of
any mortgaged property securing a single family loan if it has received notice or has actual knowledge that the property may be
contaminated with or affected by hazardous wastes or hazardous substances; however, environmental testing will not be required. The
master servicer or servicer, as applicable, will not be liable to the securityholders of the related series if, based on its belief that
no such contamination or effect exists, the master servicer or such servicer forecloses on a mortgaged property and takes title to the
mortgaged property, and thereafter the mortgaged property is determined to be so contaminated or affected.
With respect to a mortgage loan in default, the master servicer or servicer of the mortgage loan may pursue foreclosure (or
similar remedies) concurrently with pursuing any remedy for a breach of a representation and warranty. However, neither the master
servicer nor the servicer of the mortgage loan is required to continue to pursue both remedies if it determines that one remedy is more
likely than the other to result in a greater recovery. Upon the first to occur of final liquidation (by foreclosure or otherwise) or a
repurchase or substitution pursuant to a breach of a representation and warranty, the mortgage loan will be removed from the related
trust fund if it has not been removed previously. The master servicer or servicer may elect to treat a defaulted mortgage loan as having
been finally liquidated if a substantial portion or all of the amounts expected to be received from that mortgage loan have been
received. Any additional liquidation expenses relating to the mortgage loan thereafter incurred will be reimbursable to the master
servicer or servicer, as applicable, from any amounts otherwise distributable to holders of securities of the related series, or may be
offset by any subsequent recovery related to the mortgage loan. Alternatively, for purposes of determining the amount of related
Liquidation Proceeds to be distributed to securityholders, the amount of any Realized Loss or the amount required to be drawn under any
applicable form of credit support, the master servicer and servicer may take into account minimal amounts of additional receipts
expected to be received, as well as estimated additional liquidation expenses expected to be incurred in connection with the defaulted
mortgage loan.
As provided above, the master servicer or a servicer may pass through less than the full amount it expects to receive from the
related mortgage loan; however, the master servicer or servicer may only do this if the master servicer or servicer reasonably believes
it will maximize the proceeds to the securityholders in the aggregate. To the extent the master servicer or servicer receives additional
recoveries following liquidation, the amount of the Realized Loss will be restated, and the additional recoveries will be passed through
the trust as Liquidation Proceeds. In the event the amount of the Realized Loss is restated, the amount of overcollateralization or the
principal balance of the most subordinate class of securities in the trust may be increased. However, the holders of any securities
whose principal balance is increased will not be reimbursed interest for the period during which the principal balance of their
securities was lower.
With respect to a series of securities, if so provided in the related prospectus supplement, the applicable form of credit
enhancement may provide, to the extent of coverage, that a defaulted mortgage loan will be removed from the trust fund prior to the
final liquidation thereof. In addition, a pooling and servicing agreement or servicing agreement may grant to the depositor, an
affiliate of the depositor, the master servicer, a special servicer, a provider of credit enhancement and/or the holder or holders of
specified classes of securities of the related series a right of first refusal to purchase from the trust fund, at a predetermined
purchase price, any mortgage loan as to which a specified number of scheduled payments are delinquent. If the purchase price is
insufficient to fully fund the entitlements of securityholders to principal and interest, it will be specified in the related prospectus
supplement. Furthermore, a pooling and servicing agreement or a servicing agreement may authorize the master servicer or servicer of the
mortgage loan to sell any defaulted mortgage loan if and when the master servicer or servicer determines, consistent with the servicing
standard, that the sale would produce a greater recovery to securityholders on a present value basis than would liquidation of the
related mortgaged property.
In the event that title to any mortgaged property is acquired by foreclosure or by deed in lieu of foreclosure, the deed or
certificate of sale will be issued to the trustee or to its nominee on behalf of securityholders of the related series. Notwithstanding
any acquisition of title and cancellation of the related mortgage loan, the REO Mortgage Loan will be considered for most purposes to be
an outstanding mortgage loan held in the trust fund until the mortgaged property is sold and all recoverable Liquidation Proceeds and
Insurance Proceeds have been received with respect to the defaulted mortgage loan. For purposes of calculations of amounts distributable
to securityholders in respect of an REO Mortgage Loan, the amortization schedule in effect at the time of any acquisition of title
(before any adjustment thereto by reason of any bankruptcy or any similar proceeding or any moratorium or similar waiver or grace
period) will be deemed to have continued in effect (and, in the case of an ARM Loan, the amortization schedule will be deemed to have
adjusted in accordance with any interest rate changes occurring on any adjustment date therefor) so long as the REO Mortgage Loan is
considered to remain in the trust fund.
If title to any mortgaged property is acquired by a trust fund as to which a REMIC election has been made, the master servicer,
on behalf of the trust fund, will be required to sell, or cause the servicer of the mortgage loan to sell, the mortgaged property within
three years of acquisition, unless (1) the IRS grants an extension of time to sell the property or (2) the trustee receives an opinion
of independent counsel to the effect that the holding of the property by the trust fund for more than three years after its acquisition
will not result in the imposition of a tax on the trust fund or cause the trust fund to fail to qualify as a REMIC under the Code at any
time that any certificate is outstanding. Subject to the foregoing and any other tax-related constraints, the master servicer generally
will be required to solicit bids, or to cause a servicer to solicit bids, for any mortgaged property so acquired in a manner as will be
reasonably likely to realize a fair price for the property. If title to any mortgaged property is acquired by a trust fund as to which a
REMIC election has been made, the master servicer will also be required to ensure that the mortgaged property is administered so that it
constitutes "foreclosure property" within the meaning of Section 860G(a)(8) of the Code at all times, that the sale of the property does
not result in the receipt by the trust fund of any income from non-permitted assets as described in Section 860F(a)(2)(B) of the Code,
and that the trust fund does not derive any "net income from foreclosure property" within the meaning of Section 860G(c)(2) of the Code
with respect to the property.
If Liquidation Proceeds collected with respect to a defaulted mortgage loan are less than the outstanding principal balance of
the defaulted mortgage loan plus accrued interest plus the aggregate amount of reimbursable expenses incurred by the master servicer or
the servicer, as applicable, with respect to the mortgage loan, and the shortfall is not covered under any applicable instrument or fund
constituting credit enhancement, the trust fund will realize a loss in the amount of the difference. The master servicer or servicer, as
applicable, will be entitled to reimburse itself from the Liquidation Proceeds recovered on any defaulted mortgage loan, prior to the
distribution of Liquidation Proceeds to securityholders, amounts that represent unpaid servicing compensation in respect of the mortgage
loan, unreimbursed servicing expenses incurred with respect to the mortgage loan and any unreimbursed advances of delinquent payments
made with respect to the mortgage loan. If so provided in the related prospectus supplement, the applicable form of credit enhancement
may provide for reinstatement subject to specified conditions in the event that, following the final liquidation of a mortgage loan and
a draw under the credit enhancement, subsequent recoveries are received. In addition, if a gain results from the final liquidation of a
defaulted mortgage loan or an REO Mortgage Loan which is not required by law to be remitted to the related mortgagor, the master
servicer or servicer, as applicable, will be entitled to retain the gain as additional servicing compensation unless the related
prospectus supplement provides otherwise. For a description of the master servicer's (or other specified person's) obligations to
maintain and make claims under applicable forms of credit enhancement and insurance relating to the mortgage loans, see "Description ofCredit Enhancement" and "Description of Primary Mortgage Insurance, Hazard Insurance; Claims Thereunder" in this prospectus.
Servicing and Other Compensation and Payment of Expenses; Retained Interest
The principal servicing compensation to be paid to the master servicer in respect of its master servicing activities for a
series of securities will be equal to the percentage or range of percentages per annum described in the related prospectus supplement of
the outstanding principal balance of each mortgage loan, and this compensation will be retained by it on a monthly or other periodic
basis from collections of interest on each mortgage loan in the related trust fund at the time the collections are deposited into the
applicable Distribution Account. This portion of the servicing fee will be calculated with respect to each mortgage loan by multiplying
the fee by the principal balance of the mortgage loan. In addition, to the extent not permitted to be retained by the servicer of the
mortgage loan, the master servicer may retain all prepayment premiums, assumption fees and late payment charges, to the extent collected
from mortgagors, and any benefit which may accrue as a result of the investment of funds in the applicable Distribution Account. Any
additional servicing compensation will be described in the related prospectus supplement.
The principal servicing compensation to be paid to each servicer in respect of its servicing activities for a series of
securities will be equal to the percentage or range of percentages per annum described in the related prospectus supplement of the
outstanding principal balance of each mortgage loan serviced by such servicer, and this compensation will be retained by it on a monthly
or other periodic basis from collections of interest on each mortgage loan in the related trust fund at the time the collections are
deposited into such servicer's Protected Account. This portion of the servicing fee will be calculated with respect to each mortgage
loan serviced by a servicer by multiplying the fee by the principal balance of the mortgage loan. In addition, each servicer may retain
all prepayment premiums, assumption fees and late payment charges, to the extent collected from mortgagors, and any benefit which may
accrue as a result of the investment of funds in its Protected Account. Any additional servicing compensation will be described in the
related prospectus supplement.
The master servicer will pay or cause to be paid some of the ongoing expenses associated with each trust fund and incurred by
it in connection with its responsibilities under the pooling and servicing agreement or servicing agreement, including, if so specified
in the related prospectus supplement, payment of any fee or other amount payable in respect of any alternative credit enhancement
arrangements, payment of the fees and disbursements of the trustee, any custodian appointed by the trustee and the security registrar,
and payment of expenses incurred in enforcing the obligations of the servicers and the Sellers. The master servicer will be entitled to
reimbursement of expenses incurred in enforcing the obligations of the servicers and the Sellers under limited circumstances. In
addition, the master servicer and each servicer will be entitled to reimbursements for some of its expenses incurred in connection with
liquidated mortgage loans and in connection with the restoration of mortgaged properties, this right of reimbursement being prior to the
rights of securityholders to receive any related Liquidation Proceeds or Insurance Proceeds. If and to the extent so provided in the
related prospectus supplement, the master servicer and each servicer will be entitled to receive interest on amounts advanced to cover
reimbursable expenses for the period that the advances are outstanding at the rate specified in the prospectus supplement, and the
master servicer and each servicer will be entitled to payment of the interest periodically from general collections on the mortgage
loans in the related trust fund prior to any payment to securityholders or as otherwise provided in the related pooling and servicing
agreement or servicing agreement and described in the prospectus supplement.
If and to the extent provided in the related prospectus supplement, the master servicer and the servicers may be required to
apply a portion of the servicing compensation otherwise payable to it in respect of any period to any Prepayment Interest Shortfalls
resulting from mortgagor prepayments during that period. See "Yield Considerations" in this prospectus.
DESCRIPTION OF THE SECURITIESGeneral
The securities will be issued in series. Each series of certificates (or, in some instances, two or more series of
certificates) will be issued pursuant to a pooling and servicing agreement, similar to one of the forms filed as an exhibit to the
registration statement of which this prospectus is a part. Each pooling and servicing agreement will be filed with the Commission as an
exhibit to a Current Report on Form 8-K. Each series of notes (or, in some instances, two or more series of notes) will be issued
pursuant to an indenture between the related issuing entity and the trustee, similar to the form filed as an exhibit to the registration
statement of which this prospectus is a part. The trust fund will be created pursuant to an owner trust agreement between the depositor
and the owner trustee. Each indenture, along with the related servicing agreement and owner trust agreement, will be filed with the
Commission as an exhibit to a Current Report on Form 8-K. Qualified counsel will render an opinion to the effect that the trust fund's
assets will not be considered assets of the Seller or the depositor in the event of the bankruptcy of the Seller or the depositor. The
following summaries (together with additional summaries under "The Agreements" below) describe the material provisions relating to the
securities common to each Agreements.
Certificates of each series covered by a particular pooling and servicing agreement will evidence specified beneficial
ownership interests in a separate trust fund created pursuant to the pooling and servicing agreement. Each series of notes covered by a
particular indenture will evidence indebtedness of a separate trust fund created pursuant to the related owner trust agreement. A trust
fund will consist of, to the extent provided in the pooling and servicing agreement or owner trust agreement:
o the mortgage loans (and the related mortgage documents) or interests therein (including any mortgage securities) underlying a
particular series of securities as from time to time are subject to the pooling and servicing agreement or servicing
agreement, exclusive of, if specified in the related prospectus supplement, any interest retained by the depositor or any of
its affiliates with respect to each mortgage loan;
o all payments and collections in respect of the mortgage loans or mortgage securities due after the related cut-off date, as
from time to time are identified as deposited in respect thereof in the related Protected Account, Distribution Account or
any other account established pursuant to the Agreement as described below;
o any property acquired in respect of mortgage loans in the trust fund, whether through foreclosure of a mortgage loan or by
deed in lieu of foreclosure;
o hazard insurance policies, Primary Insurance Policies, FHA insurance policies and VA guarantees, if any, maintained in
respect of mortgage loans in the trust fund and the proceeds of these policies;
o U.S. Government Securities;
o the rights of the depositor under any mortgage loan purchase agreement, including in respect of any representations and
warranties therein; and
o any combination, as and to the extent specified in the related prospectus supplement, of a financial guaranty insurance
policy, mortgage pool insurance policy, letter of credit, special hazard insurance policy, or currency or interest rate
exchange agreements as described under "Description of Credit Enhancement" in this prospectus.
If provided in the related prospectus supplement, the original principal amount of a series of securities may exceed the
principal balance of the mortgage loans or mortgage securities initially being delivered to the trustee. Cash in an amount equal to this
difference will be deposited into a pre-funding account maintained with the trustee. During the period set forth in the related
prospectus supplement, amounts on deposit in the pre-funding account may be used to purchase additional mortgage loans or mortgage
securities for the related trust fund. Any amounts remaining in the pre-funding account at the end of the period will be distributed as
a principal prepayment to the holders of the related series of securities at the time and in the manner set forth in the related
prospectus supplement.
Each series of securities may consist of any one or a combination of the following types of classes:
Accretion Directed A class of securities designated to receive principal payments
primarily from the interest that accrues on specified Accrual
Classes.
Accrual A class of securities where the accrued interest otherwise
payable to such certificates is allocated to specified classes of
certificates as principal payments in reduction of their
certificate principal balance. The certificate principal balance
of the Accrual Class will be increased to the extent such accrued
interest is so allocated.
Companion A class that receives principal payments on any distribution date
only if scheduled payments have been made on specified planned
amortization classes, targeted amortization classes or scheduled
principal classes.
Component A class consisting of "components." The components of a class of
component securities may have different principal and/or interest
payment characteristics but together constitute a single class.
Each component of a class of component securities may be
identified as falling into one or more of the categories in this
list.
Fixed Rate A class with an interest rate that is fixed throughout the life
of the class.
Floating Rate A class that receives interest payments based on an interest rate
that fluctuates each payment period based on a designated index,
which will be of a type that is customarily used in the debt and
fixed income markets to measure the cost of borrowed funds, plus
a specified margin.
Interest Only or IO A class of securities with no principal balance and which is not
entitled to principal payments. Interest usually accrues based
on a specified notional amount.
Inverse Floating Rate A class of securities where the pass-through rate adjusts based
on the excess between a specified rate and LIBOR or another
index, which will be of a type that is customarily used in the
debt and fixed income markets to measure the cost of borrowed
funds.
Lock Out A class of securities which is "locked out" of certain payments,
usually principal, for a specified period of time.
Partial Accrual A class that accretes a portion of the amount of accrued interest
thereon, which amount will be added to the principal balance of
such class on each applicable distribution date, with the
remainder of such accrued interest to be distributed currently as
interest on such class. Such accretion may continue until a
specified event has occurred or until such Partial Accrual class
is retired.
Principal Only A class of securities which is not entitled to interest payments.
Planned Amortization Class or PAC A class of securities with a principal balance that is reduced
based on a schedule of principal balances, assuming a certain
range of prepayment rates on the underlying assets.
Scheduled Principal A class that is designed to receive principal payments using a
predetermined principal balance schedule but is not designated as
a Planned Amortization Class or Targeted Amortization Class. In
many cases, the schedule is derived by assuming two constant
prepayment rates for the underlying assets. These two rates are
the endpoints for the "structuring range" for the scheduled
principal class.
Senior Support A class that absorbs the realized losses other than excess losses
that would otherwise be allocated to a Super Senior Class after
the related classes of subordinated securities are no longer
outstanding.
Sequential Pay Classes that receive principal payments in a prescribed sequence,
that do not have predetermined principal balance schedules and
that under all circumstances receive payments of principal
continuously from the first distribution date on which they
receive principal until they are retired. A single class that
receives principal payments before or after all other classes in
the same series of securities may be identified as a sequential
pay class.
Super Senior A class that will not bear its proportionate share of realized
losses (other than excess losses) as its share is directed to
another class, referred to as the "support class" until the class
principal balance of the support class is reduced to zero.
Target Amortization or TAC A class of securities with a principal balance that is reduced
based on a scheduled of principal balances, assuming a certain
targeted rate of prepayments on the related collateral.
Variable Rate A class with an interest rate that resets periodically and is
calculated by reference to the rate or rates of interest
applicable to specified assets or instruments (e.g., the mortgage
rates borne by the underlying loans).
With respect to any series of notes, the related Equity Certificates, insofar as they represent the beneficial ownership interest in the
Issuing Entity, will be subordinate to the related notes. As to each series, the offered securities will be rated in one of the four
highest rating categories by one or more Rating Agencies. Credit support for the offered securities of each series may be provided by a
financial guaranty insurance policy, mortgage pool insurance policy, letter of credit, reserve fund, currency or interest rate exchange
agreement, overcollateralization, cross-collateralization or by the subordination of one or more other classes of securities, each, as
described under "Description of Credit Enhancement" in this prospectus, or by any combination of the foregoing.
If so specified in the prospectus supplement relating to a series of certificates, one or more elections may be made to treat
the related trust fund, or a designated portion thereof, as a REMIC. If an election is made with respect to a series of certificates,
one of the classes of certificates in the series will be designated as evidencing the sole class of "residual interests" in each related
REMIC, as defined in the Code; alternatively, a separate class of ownership interests will evidence the residual interests. All other
classes of certificates in the series will constitute "regular interests" in the related REMIC, as defined in the Code. As to each
series of certificates as to which a REMIC election is to be made, the master servicer, trustee or other specified entity will be
obligated to take specified actions required in order to comply with applicable laws and regulations.
Form of Securities
Except as described below, the offered securities of each series will be issued as physical certificates or notes in fully
registered form only in the denominations specified in the related prospectus supplement, and will be transferable and exchangeable at
the corporate trust office of the registrar named in the related prospectus supplement. No service charge will be made for any
registration of exchange or transfer of offered securities, but the trustee may require payment of a sum sufficient to cover any tax or
other governmental charge. A "securityholder" or "holder" is the entity whose name appears on the records of the registrar (consisting
of or including the security register) as the registered holder of a security.
If so specified in the related prospectus supplement, specified classes of a series of securities will be initially issued
through the book-entry facilities of DTC. As to any class of DTC Registered Securities, the recordholder of the securities will be DTC's
nominee. DTC is a limited-purpose trust company organized under the laws of the State of New York, which holds securities for its
participants and facilitates the clearance and settlement of securities transactions between participants through electronic book-entry
changes in the accounts of participants. Intermediaries have indirect access to DTC's clearance system.
If securities are issued as DTC Registered Securities, no Beneficial Owner will be entitled to receive a security representing
its interest in registered, certificated form, unless either (1) DTC ceases to act as depository in respect thereof and a successor
depository is not obtained, or (2) the depositor elects, with the consent of the Beneficial Owners, to discontinue the registration of
the securities through DTC. Prior to one of these events, Beneficial Owners will not be recognized by the trustee or the master servicer
as holders of the related securities for purposes of the related pooling and servicing agreement or indenture, and Beneficial Owners
will be able to exercise their rights as owners of the securities only indirectly through DTC, participants and Intermediaries. Any
Beneficial Owner that desires to purchase, sell or otherwise transfer any interest in DTC Registered Securities may do so only through
DTC, either directly if the Beneficial Owner is a participant or indirectly through participants and, if applicable, Intermediaries.
Pursuant to the procedures of DTC, transfers of the beneficial ownership of any DTC Registered Securities will be required to be made in
minimum denominations specified in the related prospectus supplement. The ability of a Beneficial Owner to pledge DTC Registered
Securities to persons or entities that are not participants in the DTC system, or to otherwise act with respect to the securities, may
be limited because of the lack of physical certificates or notes evidencing the securities and because DTC may act only on behalf of
participants.
Distributions in respect of the DTC Registered Securities will be forwarded by the trustee or other specified entity to DTC,
and DTC will be responsible for forwarding the payments to participants, each of which will be responsible for disbursing the payments
to the Beneficial Owners it represents or, if applicable, to Intermediaries. Accordingly, Beneficial Owners may experience delays in the
receipt of payments in respect of their securities. Under DTC's procedures, DTC will take actions permitted to be taken by holders of
any class of DTC Registered Securities under the pooling and servicing agreement or indenture only at the direction of one or more
participants to whose account the DTC Registered Securities are credited and whose aggregate holdings represent no less than any minimum
amount of Percentage Interests or voting rights required therefor. DTC may take conflicting actions with respect to any action of
holders of securities of any class to the extent that participants authorize these actions. None of the master servicer, the depositor,
the trustee or any of their respective affiliates will have any liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in the DTC Registered Securities, or for maintaining, supervising or reviewing any records
relating to the beneficial ownership interests.
Global Securities
Some of the offered securities may be Global Securities. Except in some limited circumstances, the Global Securities will be
available only in book-entry form. Investors in the Global Securities may hold those Global Securities through any of DTC, Clearstream,
or Euroclear System (in Europe). The Global Securities will be traceable as home market instruments in both the European and U.S.
domestic markets. Initial settlement and all secondary trades will settle in same-day funds.
Secondary market trading between investors through Clearstream and Euroclear System will be conducted in the ordinary way in
accordance with the normal rules and operating procedures of Clearstream and Euroclear System and in accordance with conventional
eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors through DTC will be conducted according to DTC's rules and procedures applicable to
U.S. corporate debt obligations.
Secondary cross-market trading between Clearstream or Euroclear System and DTC participants holding interests in Global
Securities will be effected on a delivery-against-payment basis through the respective depositories of Clearstream and Euroclear System
(in that capacity) and as DTC participants.
Non-U.S. holders (as described below) of interests in Global Securities will be subject to U.S. withholding taxes unless those
holders meet various requirements and deliver appropriate U.S. tax documents to the securities clearing organizations or their
participants.
All Global Securities will be held in book-entry form by DTC in the name of Cede & Co. as nominee of DTC. Investors' interests
in the Global Securities will be represented through financial institutions acting on their behalf as direct and indirect participants
in DTC. As a result, Clearstream and Euroclear System will hold positions on behalf of their participants through their relevant
depositary which in turn will hold those positions in their accounts as DTC participants.
Investors electing to hold their interests in Global Securities through DTC will follow DTC settlement practices. Investor
securities custody accounts will be credited with their holdings against payment in same-day funds on the settlement date.
Investors electing to hold their interests in Global Securities through Clearstream or Euroclear System accounts will follow
the settlement procedures applicable to conventional eurobonds, except that there will be no temporary global security and no "lock-up"
or restricted period. Global Securities will be credited to the securities custody accounts on the settlement date against payment in
same-day funds.
Since the purchaser determines the place of delivery, it is important to establish at the time of the trade where both the
purchaser's and seller's accounts are located to ensure that settlement can be made on the desired value date.
Secondary market trading between DTC participants will occur in accordance with DTC rules. Secondary market trading between
Clearstream participants or Euroclear System participants will be settled using the procedures applicable to conventional eurobonds in
same-day funds. When Global Securities are to be transferred from the account of a DTC participant to the account of a Clearstream
participant or a Euroclear System participant, the purchaser will send instructions to Clearstream or Euroclear System through a
Clearstream participant or Euroclear System participant at least one business day prior to settlement. Clearstream or Euroclear System
will instruct the relevant depositary, as the case may be, to receive the Global Securities against payment. Payment will include
interest accrued on the Global Securities from and including the last coupon payment date to and excluding the settlement date, on the
basis of the actual number of days in that accrual period and a year assumed to consist of 360 days. For transactions settling on the
31st of the month, payment will include interest accrued to and excluding the first day of the following month. Payment will then be
made by the relevant depositary to the DTC participant's account against delivery of the Global Securities. After settlement has been
completed, the Global Securities will be credited to the respective clearing system and by the clearing system, in accordance with its
usual procedures, to the Clearstream participant's or Euroclear System participant's account. The securities credit will appear the next
day (European time) and the cash debit will be back-valued to, and the interest on the Global Securities will accrue from, the value
date (which would be the preceding day when settlement occurred in New York). If settlement is not completed on the intended value date
(i.e., the trade fails),the Clearstream or Euroclear System cash debit will be valued instead as of the actual settlement date.
Clearstream participants and Euroclear System participants will need to make available to the respective clearing systems the
funds necessary to process same-day funds settlement. The most direct means of doing so is to preposition funds for settlement, either
from cash on hand or existing lines of credit, as they would for any settlement occurring within Clearstream or Euroclear System. Under
this approach, they may take on credit exposure to Clearstream or Euroclear System until the Global Securities are credited to their
account one day later. As an alternative, if Clearstream or Euroclear System has extended a line of credit to them, Clearstream
participants or Euroclear System participants can elect not to preposition funds and allow that credit line to be drawn upon to finance
settlement. Under this procedure, Clearstream participants or Euroclear System participants purchasing Global Securities would incur
overdraft charges for one day, assuming they cleared the overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore, in many cases the investment income on the Global
Securities earned during that one-day period may substantially reduce or offset the amount of those overdraft charges, although the
result will depend on each Clearstream participant's or Euroclear System participant's particular cost of funds. Since the settlement is
taking place during New York business hours, DTC participants can employ their usual procedures for crediting Global Securities to the
respective European depositary for the benefit of Clearstream participants or Euroclear System participants. The sale proceeds will be
available to the DTC seller on the settlement date. Thus, to the DTC participants a cross-market transaction will settle no differently
than a trade between two DTC participants.
Due to time zone differences in their favor, Clearstream participants and Euroclear System participants may employ their
customary procedures for transactions in which Global Securities are to be transferred by the respective clearing system, through the
respective depositary, to a DTC participant. The seller will send instructions to Clearstream or Euroclear System through a Clearstream
participant or Euroclear System participant at least one business day prior to settlement. In these cases Clearstream or Euroclear
System will instruct the respective depositary, as appropriate, to credit the Global Securities to the DTC participant's account against
payment. Payment will include interest accrued on the Global Securities from and including the last coupon payment to and excluding the
settlement date on the basis of the actual number of days in that accrual period and a year assumed to consist to 360 days. For
transactions settling on the 31st of the month, payment will include interest accrued to and excluding the first day of the following
month. The payment will then be reflected in the account of Clearstream participant or Euroclear System participant the following day,
and receipt of the cash proceeds in the Clearstream participant's or Euroclear System participant's account would be back-valued to the
value date (which would be the preceding day, when settlement occurred in New York). Should the Clearstream participant or Euroclear
System participant have a line of credit with its respective clearing system and elect to be in debt in anticipation of receipt of the
sale proceeds in its account, the back-valuation will extinguish any overdraft incurred over that one-day period. If settlement is not
completed on the intended value date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream participant's or Euroclear
System participant's account would instead be valued as of the actual settlement date.
Finally, day traders that use Clearstream or Euroclear System and that purchase interests in Global Securities from DTC
participants for delivery to Clearstream participants or Euroclear System participants should note that these trades would automatically
fail on the sale side unless affirmative action is taken. At least three techniques should be readily available to eliminate this
potential problem:
o borrowing through Clearstream or Euroclear System for one day (until the purchase side of the trade is reflected in their
Clearstream or Euroclear System accounts) in accordance with the clearing system's customary procedures;
o borrowing the Global Securities in the U.S. from a DTC participant no later than one day prior to settlement, which would
give the Global Securities sufficient time to be reflected in their Clearstream or Euroclear System account in order to
settle the sale side of the trade; or
o staggering the value dates for the buy and sell sides of the trade so that the value date for the purchase from the DTC
participant is at least one day prior to the value date for the sale to the Clearstream participant or Euroclear System
participant.
A beneficial owner of interests in Global Securities holding securities through Clearstream or Euroclear System (or through DTC
if the holder has an address outside the U.S.) will be subject to the 30% U.S. withholding tax that generally applies to payments of
interest (including original issue discount) on registered debt issued by U.S. Persons (as defined below), unless (i) each clearing
system, bank or other financial institution that holds customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between that beneficial owner and the U.S. entity required to withhold tax complies with applicable
certification requirements and (ii) that beneficial owner takes one of the following steps to obtain an exemption or reduced tax rate:
Exemption for Non-U.S. Persons (Form W-8BEN). Beneficial holders of interests in Global Securities that are Non-U.S. Persons (as defined
below) can obtain a complete exemption from the withholding tax by filing a signed Form W-8BEN (Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding). If the information shown on Form W-8BEN changes, a new Form W-8BEN must be filed
within 30 days of that change.
A Non-U.S. Person (as defined below), including a non-U.S. corporation or bank with a U.S. branch, for which the interest
income is effectively connected with its conduct of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form W-8ECI (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or
Business in the United States).
Non-U.S. Persons residing in a country that has a tax treaty with the United States can obtain an exemption or reduced tax rate
(depending on the treaty terms) by filing Form W-8BEN (Holdership, Exemption or Reduced Rate Certificate). Form W-8BEN may be filed by
Noteholders or their agent.
U.S. Persons can obtain a complete exemption from the withholding tax by filing Form W-9 (Payer's Request for Taxpayer
Identification Number and Certification).
The holder of an interest in a Global Security or, in the case of a Form W-8BEN or a Form W-8ECI filer, his agent, files by
submitting the appropriate form to the person through whom it holds the security (the clearing agency, in the case of persons holding
directly on the books of the clearing agency). Form W-8BEN and Form W-8ECI are effective for three calendar years. The term "U.S.
Person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in, or under
the laws of, the United States or any political subdivision thereof (except, in the case of a partnership, to the extent provided in
regulations), or an estate whose income is subject to United States federal income tax regardless of its source, or 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. The term "Non-U.S. Person" means any person who is not a
U.S. Person. This summary does not deal with all aspects of U.S. Federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax advisors for specific tax advice concerning their holding and
disposing of the Global Securities.
Exchangeable SecuritiesGeneral
As the related prospectus supplement will discuss, some series will include one or more classes of exchangeable securities. In
any of these series, the holders specified in the related prospectus supplement will be entitled, after notice and payment to the
trustee of an administrative fee, to exchange all or a portion of those classes for proportionate interests in one or more of the other
classes of exchangeable securities.
If the related prospectus supplement describes the issuance of exchangeable securities, all of these classes of exchangeable
securities will be listed on the cover of the prospectus supplement. The classes of securities that are exchangeable for one another
will be referred to in the related prospectus supplement as "related" to each other, and each related grouping of exchangeable
securities will be referred to as a "combination." Each combination of exchangeable securities will be issued by the related trust fund
and, in the aggregate, will represent a distinct combination of uncertificated interests in the trust fund. At any time after their
initial issuance, any class of exchangeable securities may be exchanged for the related class or classes of exchangeable securities. In
some cases, multiple classes of exchangeable securities may be exchanged for one or more classes of related exchangeable securities.
Descriptions in the related prospectus supplement about the securities of that series, including descriptions of principal and
interest distributions, registration and denomination of securities, credit enhancement, yield and prepayment considerations and tax,
ERISA and legal investment considerations, will also apply to each class of exchangeable securities. The related prospectus supplement
will separately describe the yield and prepayment considerations applicable to, and the risks of investment in, each class of
exchangeable securities in a combination. For example, separate decrement tables and yield tables, if applicable, will be included for
each class of a combination of exchangeable securities.
Exchanges
If a holder elects to exchange its exchangeable securities for related exchangeable securities the following three conditions
must be satisfied:
o the aggregate principal balance of the exchangeable securities received in the exchange, immediately after the exchange, must
equal the aggregate principal balance, immediately prior to the exchange, of the exchanged securities—for purposes of
this condition, an interest only class will have a principal balance of zero;
o the annual interest amount payable with respect to the exchangeable securities received in the exchange must equal the
aggregate annual interest amount of the exchanged securities; and
o the class or classes of exchangeable securities must be exchanged in the applicable proportions, if any, described in the
related prospectus supplement.
There are different types of combinations that can exist. Any individual series of securities may have multiple types of
combinations. Some examples of combinations include:
o A class of exchangeable securities with an interest rate that varies directly with changes in an index and a class of
exchangeable securities with an interest rate that varies indirectly with changes in an index may be exchangeable for
a class of exchangeable securities with a fixed interest rate. In this case, the classes that vary with an index
would produce, in the aggregate, an annual interest amount equal to that generated by the class with a fixed interest
rate. In addition, the aggregate principal balance of the two classes that vary with an index would equal the
principal balance of the class with the fixed interest rate.
o An interest only class and principal only class of exchangeable securities may be exchangeable, together, for a class that is
entitled to both principal and interest payments. The principal balance of the principal and interest class would be
equal to the principal balance of the exchangeable principal only class, and the interest rate on the principal and
interest class would be a fixed rate that when applied to the principal balance of this class would generate an annual
interest amount equal to the annual interest amount of the exchangeable interest only class.
o Two classes of principal and interest classes with different fixed interest rates may be exchangeable, together, for a class
that is entitled to both principal and interest payments, with a principal balance equal to the aggregate principal
balance of the two exchanged classes, and a fixed interest rate that when applied to the principal balance of the
exchanged for class, would generate an annual interest amount equal to the aggregate annual interest amount of the two
exchanged classes.
These examples of combinations of exchangeable securities describe combinations of exchangeable securities which differ in
their interest characteristics. In some series, a securityholder may be able to exchange its exchangeable securities for other
exchangeable securities that have different principal payment characteristics. Examples of these types of combinations include:
o A class of exchangeable securities that accretes all of its interest for a specified period, with the accreted amount added to
the principal balance of the accreting class, and a class of exchangeable securities that receives principal payments
from these accretions may be exchangeable, together, for a single class of exchangeable securities that receives
payments of principal continuously from the first distribution date on which it receives interest until it is retired.
o A class of exchangeable securities that is designed to receive principal payments in accordance with a predetermined schedule,
or a planned amortization class, and a class of exchangeable securities that only receives principal payments on a
distribution date if scheduled payments have been made on the planned amortization class, may be exchangeable,
together, for a class of exchangeable securities that receives principal payments without regard to the schedule from
the first distribution date on which it receives principal until it is retired.
A number of factors may limit the ability of an exchangeable securityholder to effect an exchange. For example, the
securityholder must own, at the time of the proposed exchange, the class or classes necessary to make the exchange in the necessary
proportions. If a securityholder does not own the necessary classes or does not own the necessary classes in the proper proportions,
the securityholder may not be able to obtain the desired class of exchangeable securities. The securityholder desiring to make the
exchange may not be able to purchase the necessary class from the then-current owner at a reasonable price or the necessary proportion
of the needed class may no longer be available due to principal payments or prepayments that have been applied to that class.
Procedures
The related prospectus supplement will describe the procedures that must be followed to make an exchange. A securityholder
will be required to provide notice to the trustee five business days prior to the proposed exchange date or as otherwise specified in
the related prospectus supplement. The notice must include the outstanding principal or notional amount of the securities to be
exchanged and to be received, and the proposed exchange date. When the trustee receives this notice, it will provide instructions to
the securityholder regarding delivery of the securities and payment of the administrative fee. A securityholder's notice to the trustee
will become irrevocable on the second business day prior to the proposed exchange date. Any exchangeable securities in book-entry form
will be subject to the rules, regulations and procedures applicable to DTC's book-entry securities.
If the related prospectus supplement describes exchange proportions for a combination of classes of exchangeable securities,
these proportions will be based on the original, rather than the outstanding, principal or notional amounts of these classes.
The first payment on an exchangeable security received in an exchange will be made on the distribution date in the month
following the month of the exchange or as otherwise described in the related prospectus supplement. This payment will be made to the
securityholder of record as of the applicable record date.
Assignment of Trust Fund Assets
At the time of issuance of a series of securities, the depositor will assign, or cause to be assigned, to the related trustee
(or its nominee),without recourse, the mortgage loans or mortgage securities being included in the related trust fund, together with,
all principal and interest received on or with respect to the mortgage loans or mortgage securities after the cut-off date, other than
principal and interest due on or before the cut-off date. If specified in the related prospectus supplement, the depositor or any of its
affiliates may retain an interest in the trust fund assets, if any, for itself or transfer the same to others. The trustee will,
concurrently with the assignment, deliver the securities of the series to or at the direction of the depositor in exchange for the
mortgage loans and/or mortgage securities in the related trust fund. Each mortgage loan will be identified in a schedule appearing as an
exhibit to the related pooling and servicing agreement or servicing agreement. The schedule will include, among other things,
information as to the principal balance of each mortgage loan in the related trust fund as of the cut-off date, as well as information
respecting the mortgage rate, the currently scheduled monthly payment of principal and interest, the maturity of the mortgage note and
the Loan-to-Value Ratio at origination or modification (without regard to any secondary financing).
In addition, the depositor will, as to each mortgage loan, other than (1) mortgage loans underlying any mortgage securities and
(2) Contracts, deliver, or cause to be delivered, to the related trustee (or to the custodian described below) the following documents:
o the mortgage note endorsed, without recourse, either in blank or to the order of the trustee (or its nominee),
o the mortgage with evidence of recording indicated on the mortgage (except for any mortgage not returned from the public
recording office) or, in the case of a cooperative mortgage loan, on the related financing statement,
o an assignment of the mortgage in blank or to the trustee (or its nominee) in recordable form (or, with respect to a
cooperative mortgage loan, an assignment of the respective security agreements, any applicable UCC financing statements,
recognition agreements, relevant stock certificates, related blank stock powers and the related proprietary leases or
occupancy agreements),
o any intervening assignments of the mortgage with evidence of recording on the assignment (except for any assignment not
returned from the public recording office),
o if applicable, any riders or modifications to the mortgage note and mortgage,
o if the mortgage loan is secured by additional collateral, certain security and assignment documents relating to the pledge of
the additional collateral, and
o any other documents set forth in the related pooling and servicing agreement, mortgage loan purchase agreement or servicing
agreement.
The assignments may be blanket assignments covering mortgages on mortgaged properties located in the same county, if permitted by law.
Notwithstanding the foregoing, a trust fund may include mortgage loans where the original mortgage note is not delivered to the
trustee if the depositor delivers, or causes to be delivered, to the related trustee (or the custodian) a copy or a duplicate original
of the mortgage note, together with an affidavit certifying that the original thereof has been lost or destroyed. In addition, if the
depositor cannot deliver, with respect to any mortgage loan, the mortgage or any intervening assignment with evidence of recording on
the assignment concurrently with the execution and delivery of the related pooling and servicing agreement or servicing agreement
because of a delay caused by the public recording office, the depositor will deliver, or cause to be delivered, to the related trustee
(or the custodian) a true and correct photocopy of the mortgage or assignment as submitted for recording within one year. The depositor
will deliver, or cause to be delivered, to the related trustee (or the custodian) the mortgage or assignment with evidence of recording
indicated on the assignment after receipt thereof from the public recording office. If the depositor cannot deliver, with respect to any
mortgage loan, the mortgage or any intervening assignment with evidence of recording on the mortgage or assignment concurrently with the
execution and delivery of the related pooling and servicing agreement or servicing agreement because the mortgage or assignment has been
lost, the depositor will deliver, or cause to be delivered, to the related trustee (or the custodian) a true and correct photocopy of
the mortgage or assignment with evidence of recording on the mortgage or assignment. If the depositor cannot deliver, with respect to
any mortgage loan, the mortgage or any intervening assignment with evidence of recording on the mortgage or assignment because the
applicable jurisdiction retains the originals of such documents, the depositor will deliver photocopies of such documents containing an
original certification by the judicial or other governmental authority of the jurisdiction where such documents were recorded.
Assignments of the mortgage loans to the trustee (or its nominee) will be recorded in the appropriate public recording office, except
(1) where recordation is not required by the Rating Agencies rating the applicable securities, (2) in states where, in the opinion of
counsel acceptable to the trustee, recording is not required to protect the trustee's interests in the mortgage loan against the claim
of any subsequent transferee or any successor to or creditor of the depositor or the originator of the mortgage loan or (3) where
Mortgage Electronic Registration Systems, Inc. is identified on the mortgage or a properly recorded assignment of mortgage as the
mortgagee of record solely as nominee for a Seller and its successors and assigns. In addition, the depositor shall not be required to
deliver intervening assignments or mortgage note endorsements between the underlying sellers of the mortgage loans and the Seller,
between the Seller and the depositor and between the depositor and the trustee.
As to each Contract, the depositor will deliver, or cause to be delivered, to the related trustee (or the custodian) the
following documents:
o the original Contract endorsed, without recourse, to the order of the trustee,
o copies of documents and instruments related to the Contract and the security interest in the Manufactured Home securing the
Contract, and
o a blanket assignment to the trustee of all Contracts in the related trust fund and the related documents and instruments.
In order to give notice of the right, title and interest of the securityholders to the Contracts, the depositor will cause to be
executed and delivered to the trustee a UCC-1 financing statement identifying the trustee as the secured party and identifying all
Contracts as collateral.
The depositor will, as to each mortgage security included in a mortgage pool, deliver, or cause to be delivered, to the related
trustee (or the custodian), either (i) cause an electronic transfer of that security or (ii) provide a physical certificate or note
evidencing the mortgage security, registered in the name of the related trustee (or its nominee), or endorsed in blank or to the related
trustee (or its nominee), or accompanied by transfer documents sufficient to effect a transfer to the trustee (or its nominee).
The trustee (or the custodian) will hold the documents in trust for the benefit of the related securityholders, and generally
will review the documents within 180 days after receipt thereof in the case of documents delivered concurrently with the execution and
delivery of the related pooling and servicing agreement or indenture, and within the time period specified in the related pooling and
servicing agreement or indenture in the case of all other documents delivered. If any document is found to be missing or defective in
any material respect, the trustee (or the custodian) will be required to promptly so notify the master servicer, the depositor, and the
related Seller. If the related Seller does not cure the omission or defect within a specified period after notice is given thereto by
the trustee, and the omission or defect materially and adversely affects the interests of securityholders in the affected mortgage loan
or mortgage security, then, the related Seller will be obligated to repurchase the mortgage loan or mortgage security from the trustee
at its purchase price (or, if and to the extent it would otherwise be permitted to do so for a breach of representation and warranty as
described under "The Mortgage Pools—Representations of Sellers," to substitute for the mortgage loan or mortgage security). The trustee
will be obligated to enforce this obligation of the Seller to the extent described above under "The Mortgage Pools—Representations by
Sellers," but there can be no assurance that the applicable Seller will fulfill its obligation to repurchase (or substitute for) the
affected mortgage loan or mortgage security as described above. The depositor will not be obligated to repurchase or substitute for the
mortgage loan or mortgage security if the Seller defaults on its obligation to do so. This repurchase or substitution obligation
constitutes the sole remedy available to the related securityholders and the related trustee for omission of, or a material defect in, a
constituent document. Any affected mortgage loan or mortgage security not so repurchased or substituted for shall remain in the related
trust fund.
The trustee will be authorized at any time to appoint one or more custodians pursuant to a custodial agreement to hold title to
the mortgage loans and/or mortgage securities in any mortgage pool, and to maintain possession of and, if applicable, to review, the
documents relating to the mortgage loans and/or mortgage securities, in any case as the agent of the trustee. The identity of any
custodian to be appointed on the date of initial issuance of the securities will be set forth in the related prospectus supplement. A
custodian may be an affiliate of the depositor or the master servicer.
Except as to mortgage loans underlying any mortgage securities, the Seller will make representations and warranties as to the
types and geographical concentrations of the mortgage loans and as to the accuracy of some of the information furnished to the related
trustee in respect of each mortgage loan (for example, the original Loan-to-Value Ratio, the principal balance as of the cut-off date,
the mortgage rate and maturity). Upon a breach of any of these representations which materially and adversely affects the interests of
the securityholders in a mortgage loan, the Seller will be obligated to cure the breach in all material respects, to repurchase the
mortgage loan at its purchase price or, to substitute for the mortgage loan a Qualified Substitute Mortgage Loan in accordance with the
provisions for substitution by Sellers as described above under "The Mortgage Pools—Representations by Sellers." This repurchase or
substitution obligation constitutes the sole remedy available to securityholders or the trustee for a breach of a representation by a
Seller. Any mortgage loan not so repurchased or substituted for shall remain in the related trust fund.
Pursuant to the related pooling and servicing agreement or servicing agreement, the master servicer for any mortgage pool,
either directly or through servicers, will service and administer the mortgage loans included in the mortgage pool and assigned to the
related trustee as more fully set forth under "Servicing of Mortgage Loans" in this prospectus. Each of the depositor and the master
servicer will make limited representations and warranties regarding its authority to enter into, and its ability to perform its
obligations under, the pooling and servicing agreement or servicing agreement.
Distribution AccountGeneral. The master servicer, trustee or securities administrator, as applicable, will, as to each trust fund, establish and
maintain or cause to be established and maintained a Distribution Account, which will be established so as to comply with the standards
of each Rating Agency that has rated any one or more classes of securities of the related series. A Distribution Account shall be
maintained as an Eligible Account, and the funds held therein may be held as cash or invested in Permitted Investments. The master
servicer, trustee or securities administrator, or other entity designated in the related prospectus supplement, will have sole
discretion to determine the particular investments made so long as it complies with the investment terms of the related pooling and
servicing agreement or the related servicing agreement and indenture. Any Permitted Investments shall not cause the depositor to
register under the Investment Company Act of 1940. Any interest or other income earned on funds in the Distribution Account will be paid
to the master servicer, trustee or securities administrator, or other entity designated in the related prospectus supplement, as
additional compensation or will be available for payments on the securities as provided in the prospectus supplement. If permitted by
the Rating Agency or Agencies and so specified in the related prospectus supplement, a Distribution Account may contain funds relating
to more than one series of mortgage pass-through certificates or mortgage-backed notes and may contain other funds representing payments
on mortgage loans owned by the related master servicer or serviced by it on behalf of others.
Deposits. With respect to each series of securities, the related master servicer, servicers, trustee or special servicer will
be required to deposit or cause to be deposited in the Distribution Account for the related trust fund within a period following receipt
(in the case of collections and payments), the following payments and collections received, or advances made, by the master servicer,
the servicers, the trustee or any special servicer subsequent to the cut-off date with respect to the mortgage loans and/or mortgage
securities in the trust fund (other than payments due on or before the cut-off date):
o all payments on account of principal, including principal prepayments, on the mortgage loans;
o all payments on account of interest on the mortgage loans, including any default interest collected, in each case net of any
portion thereof retained by the master servicer, any servicer or any special servicer as its servicing compensation or as
compensation to the trustee, and further net of any retained interest of the depositor;
o all payments on the mortgage securities;
o all payments on the U.S. Government Securities (if any);
o all Insurance Proceeds and Liquidation Proceeds;
o any amounts paid under any instrument or drawn from any fund that constitutes credit enhancement for the related series of
securities as described under "Description of Credit Enhancement" in this prospectus;
o any advances made as described under "—Advances" below;
o any Buydown Funds (and, if applicable, investment earnings on the Buydown Funds) required to be paid to securityholders, as
described below;
o any amounts paid by the master servicer and the servicers to cover Prepayment Interest Shortfalls arising out of the
prepayment of mortgage loans as described under "Servicing of Mortgage Loans—Servicing and Other Compensation and Payment of
Expenses; Retained Interest" in this prospectus;
o to the extent that any item does not constitute additional servicing compensation to the master servicer, a servicer or a
special servicer, any payments on account of modification or assumption fees, late payment charges or prepayment premiums on
the mortgage loans;
o any amount required to be deposited by the master servicer or the trustee in connection with losses realized on investments
for the benefit of the master servicer or the trustee, as the case may be, of funds held in the Distribution Account; and
o any other amounts required to be deposited in the Distribution Account as provided in the related pooling and servicing
agreement or the related servicing agreement and indenture and described in this prospectus or in the related prospectus
supplement.
With respect to each buydown mortgage loan, the master servicer will be required to deposit, or cause the related servicer to
deposit, the related Buydown Funds provided to it in a Buydown Account which will comply with the requirements set forth in this
prospectus with respect to the Distribution Account. The terms of all buydown mortgage loans provide for the contribution of Buydown
Funds in an amount equal to or exceeding either (1) the total payments to be made from the funds pursuant to the related buydown plan or
(2) if the Buydown Funds are to be deposited on a discounted basis, that amount of Buydown Funds which, together with investment
earnings on the Buydown Funds at a rate as will support the scheduled level of payments due under the buydown mortgage loan. Neither the
master servicer, any servicer nor the depositor will be obligated to add to any discounted Buydown Funds any of its own funds should
investment earnings prove insufficient to maintain the scheduled level of payments. To the extent that any insufficiency is not
recoverable from the mortgagor or, in an appropriate case, from the Seller, distributions to securityholders may be affected. With
respect to each buydown mortgage loan, the master servicer will be required monthly to withdraw from the Buydown Account and deposit, or
cause the servicer of the mortgage loans to withdraw from the Buydown Account and deposit, in the Distribution Account as described
above the amount, if any, of the Buydown Funds (and, if applicable, investment earnings on the Buydown Funds) for each buydown mortgage
loan that, when added to the amount due from the mortgagor on the buydown mortgage loan, equals the full monthly payment which would be
due on the buydown mortgage loan if it were not subject to the buydown plan.
If the mortgagor on a buydown mortgage loan prepays the mortgage loan in its entirety during the Buydown Period, the master
servicer or servicer of the mortgage loan will be required to withdraw from the Buydown Account and remit to the mortgagor or the other
designated party in accordance with the related buydown plan any Buydown Funds remaining in the Buydown Account. If a prepayment by a
mortgagor during the Buydown Period together with Buydown Funds will result in full prepayment of a buydown mortgage loan, the master
servicer or servicer of the mortgage loan generally will be required to withdraw from the Buydown Account and deposit in the
Distribution Account the Buydown Funds and investment earnings on the Buydown Funds, if any, which together with the prepayment will
result in a prepayment in full; provided that Buydown Funds may not be available to cover a prepayment under some mortgage loan
programs. Any Buydown Funds so remitted to the master servicer or the servicer of the mortgage loan in connection with a prepayment
described in the preceding sentence will be deemed to reduce the amount that would be required to be paid by the mortgagor to repay
fully the related mortgage loan if the mortgage loan were not subject to the buydown plan. Any investment earnings remaining in the
Buydown Account after prepayment or after termination of the Buydown Period will be remitted to the related mortgagor or the other
designated party pursuant to the Buydown Agreement relating to each buydown mortgage loan. If the mortgagor defaults during the Buydown
Period with respect to a buydown mortgage loan and the property securing the buydown mortgage loan is sold in liquidation (either by the
master servicer, the servicer of the mortgage loan, the primary insurer, any pool insurer or any other insurer), the master servicer or
related servicer will be required to withdraw from the Buydown Account the Buydown Funds and all investment earnings on the Buydown
Funds, if any, and either deposit the same in the Distribution Account or, alternatively, pay the same to the primary insurer or the
pool insurer, as the case may be, if the mortgaged property is transferred to the insurer and the insurer pays all of the loss incurred
in respect of the default.
Prior to the deposit of funds into the Distribution Account, as described under "—Deposits" above, funds related to the
mortgage loans serviced by a master servicer or a servicer may be maintained by a master servicer or a servicer in a Protected Account
which will be established so as to comply with the standards of each Rating Agency that has rated any one or more classes of securities
of the related series. Each Protected Account shall be maintained as an Eligible Account, and the funds held therein may be held as cash
or invested in Permitted Investments. Any interest or other income earned on funds in a Protected Account will be paid to the master
servicer or servicer, as applicable, as additional compensation. If permitted by the Rating Agency or Agencies and so specified in the
related prospectus supplement, a Protected Account may contain funds relating to more than one series of mortgage pass-through
certificates or mortgage-backed notes and may contain other funds representing payments on mortgage loans owned by the related master
servicer or serviced by it on behalf of others. In the event that a trust fund has multiple servicers, funds from the Protected
Accounts may first be remitted to a Master Servicer Collection Account, meeting the same eligibility standards as the Protected
Accounts, prior to being deposited into the Distribution Account.
Withdrawals. With respect to each series of securities, the master servicer, trustee or special servicer generally may make
withdrawals from the Distribution Account for the related trust fund for any one or more of the following purposes, unless otherwise
provided in the related agreement and described in the related prospectus supplement:
(1) to make distributions to the related securityholders on each distribution date;
(2) to reimburse the master servicer, any servicer or any other specified person for unreimbursed amounts advanced by it
in respect of mortgage loans in the trust fund as described under "—Advances" below, these reimbursements to be made
out of amounts received which were identified and applied by the master servicer or a servicer as late collections of
interest (net of related servicing fees) on and principal of the particular mortgage loans with respect to which the
advances were made or out of amounts drawn under any form of credit enhancement with respect to the mortgage loans;
(3) to reimburse the master servicer, a servicer or a special servicer for unpaid servicing fees earned by it and some
unreimbursed servicing expenses incurred by it with respect to mortgage loans in the trust fund and properties
acquired in respect thereof, these reimbursement to be made out of amounts that represent Liquidation Proceeds and
Insurance Proceeds collected on the particular mortgage loans and properties, and net income collected on the
particular properties, with respect to which the fees were earned or the expenses were incurred or out of amounts
drawn under any form of credit enhancement with respect to the mortgage loans and properties;
(4) to reimburse the master servicer, a servicer or any other specified person for any advances described in clause (2)
above made by it and any servicing expenses referred to in clause (3) above incurred by it which, in the good faith
judgment of the master servicer, the applicable servicer or the other person, will not be recoverable from the amounts
described in clauses (2) and (3), respectively, the reimbursement to be made from amounts collected on other mortgage
loans in the trust fund or, if and to the extent so provided by the related pooling and servicing agreement or the
related servicing agreement and indenture and described in the related prospectus supplement, only from that portion
of amounts collected on the other mortgage loans that is otherwise distributable on one or more classes of subordinate
securities of the related series;
(5) if and to the extent described in the related prospectus supplement, to pay the master servicer, a servicer, a special
servicer or another specified entity (including a provider of credit enhancement) interest accrued on the advances
described in clause (2) above made by it and the servicing expenses described in clause (3) above incurred by it while
these remain outstanding and unreimbursed;
(6) to reimburse the master servicer, a servicer, the depositor, or any of their respective directors, officers, employees
and agents, as the case may be, for expenses, costs and liabilities incurred thereby, as and to the extent described
under "The Agreements—Certain Matters Regarding the Master Servicer and the Depositor" in this prospectus;
(7) if and to the extent described in the related prospectus supplement, to pay the fees of the trustee;
(8) to reimburse the trustee or any of its directors, officers, employees and agents, as the case may be, for expenses,
costs and liabilities incurred thereby, as and to the extent described under "The Agreements—Some Matters Regarding
the Trustee" in this prospectus;
(9) to pay the master servicer or the trustee, as additional compensation, interest and investment income earned in
respect of amounts held in the Distribution Account;
(10) to pay (generally from related income) the master servicer, a servicer or a special servicer for costs incurred in
connection with the operation, management and maintenance of any mortgaged property acquired by the trust fund by
foreclosure or by deed in lieu of foreclosure;
(11) if one or more elections have been made to treat the trust fund or designated portions thereof as a REMIC, to pay any
federal, state or local taxes imposed on the trust fund or its assets or transactions, as and to the extent described
under "Federal Income Tax Consequences—REMICS—Prohibited Transactions and Other Possible REMIC Taxes" in this
prospectus;
(12) to pay for the cost of an independent appraiser or other expert in real estate matters retained to determine a fair
sale price for a defaulted mortgage loan or a property acquired in respect thereof in connection with the liquidation
of the mortgage loan or property;
(13) to pay for the cost of various opinions of counsel obtained pursuant to the related pooling and servicing agreement or
the related servicing agreement and indenture for the benefit of the related securityholders;
(14) to pay to itself, the depositor, a Seller or any other appropriate person all amounts received with respect to each
mortgage loan purchased, repurchased or removed from the trust fund pursuant to the terms of the related pooling and
servicing agreement or the related servicing agreement and indenture and not required to be distributed as of the date
on which the related purchase price is determined;
(15) to make any other withdrawals permitted by the related pooling and servicing agreement or the related servicing
agreement and indenture and described in the related prospectus supplement;
(16) to pay for costs and expenses incurred by the trust fund for environmental site assessments performed with respect to
multifamily or commercial properties that constitute security for defaulted mortgage loans, and for any containment,
clean-up or remediation of hazardous wastes and materials present on that mortgaged properties, as described under
"Servicing of Mortgage Loans—Realization Upon or Sale of Defaulted Mortgage Loans" in this prospectus; and
(17) to clear and terminate the Distribution Account upon the termination of the trust fund.
Distributions
Distributions on the securities of each series will be made by or on behalf of the related trustee or securities administrator,
as applicable, on each distribution date as specified in the related prospectus supplement from the available funds for the series and
the distribution date. The available funds for any series of securities and any distribution date will generally refer to the total of
all payments or other collections (or advances in lieu thereof) on, under or in respect of the mortgage loans and/or mortgage securities
and any other assets included in the related trust fund that are available for distribution to the securityholders of the series on that
date. The particular components of the available funds for any series on each distribution date will be more specifically described in
the related prospectus supplement.
Distributions on the securities of each series (other than the final distribution in retirement of any certificate) will be
made to the persons in whose names the securities are registered on the Record Date, and the amount of each distribution will be
determined as of the Determination Date. All distributions with respect to each class of securities on each distribution date will be
allocated in accordance with the holder's Percentage Interest in a particular class. Payments will be made either by wire transfer in
immediately available funds to the account of a securityholder at a bank or other entity having appropriate facilities therefor, if the
securityholder has provided the trustee or other person required to make the payments with wiring instructions no later than five
business days prior to the related Record Date or other date specified in the related prospectus supplement (and, if so provided in the
related prospectus supplement, the securityholder holds securities in any requisite amount or denomination specified therein), or by
check mailed to the address of the securityholder as it appears on the security register; provided, however, that the final distribution
in retirement of any class of securities will be made only upon presentation and surrender of the securities at the location specified
in the notice to securityholders of the final distribution.
Distributions of Interest and Principal on the Securities
Each class of securities of each series, other than Strip Securities and REMIC Residual Certificates that have no security
interest rate, may have a different per annum rate at which interest accrues on that class of securities, which may be fixed, variable
or adjustable, or any combination of rates. The related prospectus supplement will specify the security interest rate or, in the case of
a variable or adjustable security interest rate, the method for determining the security interest rate, for each class. The related
prospectus supplement will specify whether interest on the securities of the series will be calculated on the basis of a 360-day year
consisting of twelve 30-day months or on a different method.
Distributions of interest in respect of the securities of any class, other than any class of Accrual Securities, Strip
Securities or REMIC Residual Certificates that is not entitled to any distributions of interest, will be made on each distribution date
based on the accrued interest for the class and the distribution date, subject to the sufficiency of the portion of the available funds
allocable to the class on the distribution date. Prior to the time interest is distributable on any class of Accrual Securities, the
amount of accrued interest otherwise distributable on the class will be added to the principal balance thereof on each distribution
date. With respect to each class of interest-bearing securities, accrued interest for each distribution date will be equal to interest
at the applicable security interest rate accrued for a specified period (generally one month) on the outstanding principal balance
thereof immediately prior to the distribution date. Accrued interest for each distribution date on Strip Securities entitled to
distributions of interest will be similarly calculated except that it will accrue on a notional amount that is based on either (1) the
principal balances of some or all of the mortgage loans and/or mortgage securities in the related trust fund or (2) the principal
balances of one or more other classes of securities of the same series. Reference to a notional amount with respect to a class of Strip
Securities is solely for convenience in making calculations of accrued interest and does not represent the right to receive any
distribution of principal. If so specified in the related prospectus supplement, the amount of accrued interest that is otherwise
distributable on (or, in the case of Accrual Securities, that may otherwise be added to the principal balance of) one or more classes of
the securities of a series will be reduced to the extent that any Prepayment Interest Shortfalls, as described under "YieldConsiderations" in this prospectus, exceed the amount of any sums (including, if and to the extent specified in the related prospectus
supplement, the master servicer's or applicable servicer's servicing compensation) that are applied to offset the shortfalls. The
particular manner in which the shortfalls will be allocated among some or all of the classes of securities of that series will be
specified in the related prospectus supplement. The related prospectus supplement will also describe the extent to which the amount of
accrued interest that is otherwise distributable on (or, in the case of Accrual Securities, that may otherwise be added to the principal
balance of) a class of offered securities may be reduced as a result of any other contingencies, including delinquencies, losses and
Deferred Interest on or in respect of the related mortgage loans or application of the Relief Act with respect to the mortgage loans.
Any reduction in the amount of accrued interest otherwise distributable on a class of securities by reason of the allocation to the
class of a portion of any Deferred Interest on or in respect of the related mortgage loans will result in a corresponding increase in
the principal balance of the class.
As and to the extent described in the related prospectus supplement, distributions of principal with respect to a series of
securities will be made on each distribution date to the holders of the class or classes of securities of the series entitled thereto
until the principal balance or balances of the securities have been reduced to zero. In the case of a series of securities which
includes two or more classes of securities, the timing, order, priority of payment or amount of distributions in respect of principal,
and any schedule or formula or other provisions applicable to the determination thereof (including distributions among multiple classes
of senior securities or subordinate securities), shall be as set forth in the related prospectus supplement. Distributions of principal
with respect to one or more classes of securities may be made at a rate that is faster (and, in some cases, substantially faster) than
the rate at which payments or other collections of principal are received on the mortgage loans and/or mortgage securities in the
related trust fund, may not commence until the occurrence of events such as the retirement of one or more other classes of securities of
the same series, or may be made at a rate that is slower (and, in some cases, substantially slower) than the rate at which payments or
other collections of principal are received on the mortgage loans and/or mortgage securities. In addition, distributions of principal
with respect to one or more classes of securities may be made, subject to available funds, based on a specified principal payment
schedule and, with respect to one or more classes of securities, may be contingent on the specified principal payment schedule for
another class of the same series and the rate at which payments and other collections of principal on the mortgage loans and/or mortgage
securities in the related trust fund are received.
Pre-Funding Account
If so specified in the related prospectus supplement, the pooling and servicing agreement or other agreement may provide for
the transfer by the Sellers of additional mortgage loans to the related trust after the Closing Date. The additional mortgage loans will
be required to conform to the requirements set forth in the related pooling and servicing agreement or other agreement providing for the
transfer, and will be underwritten to the same standards as the mortgage loans initially included in the trust fund as described in the
prospectus supplement. As specified in the related prospectus supplement, the transfer may be funded by the establishment of a
pre-funding account established with the trustee. If a pre-funding account is established, all or a portion of the proceeds of the sale
of one or more classes of securities of the related series will be deposited in the account to be released as additional mortgage loans
are transferred. A pre-funding account will be required to be maintained as an Eligible Account, the amounts therein may be required to
be invested in Permitted Investments and the amount held therein shall at no time exceed 50% of the proceeds of the offering of the
related securities. The related pooling and servicing agreement or other agreement providing for the transfer of additional mortgage
loans generally will provide that the transfers must be made within up to three months (with respect to any series of certificates) or
up to, but not in excess of, one year (with respect to any series of notes) after the Closing Date, and that amounts set aside to fund
the transfers (whether in a pre-funding account or otherwise) and not so applied within the required period of time will be deemed to be
principal prepayments and applied in the manner set forth in the prospectus supplement. To the extent amounts in any pre-funding account
have not been used to purchase additional mortgage loans, holders of the securities may receive an additional prepayment, which may
affect their yield to maturity. In addition, securityholders may not be able to reinvest amounts received from any pre-funding account
in comparable securities, or may only be able to do so at a lower interest rate.
Distributions on the Securities in Respect of Prepayment Premiums
Prepayment premiums will generally be retained by the master servicer, a servicer, or by the Seller as additional compensation.
However, if so provided in the related prospectus supplement, prepayment premiums received on or in connection with the mortgage loans
or mortgage securities in any trust fund will be distributed on each distribution date to the holders of the class or classes of
securities of the related series entitled thereto in accordance with the provisions described in the prospectus supplement.
Allocation of Losses and Shortfalls
The amount of any losses or shortfalls in collections on the mortgage loans and/or mortgage securities in any trust fund (to
the extent not covered or offset by draws on any reserve fund or under any instrument of credit enhancement or applied against
overcollateralization) will be allocated among the respective classes of securities of the related series in the priority and manner,
and subject to the limitations, specified in the related prospectus supplement. As described in the related prospectus supplement, these
allocations may result in reductions in the entitlements to interest and/or principal balances of one or more classes of securities, or
may be effected simply by a prioritization of payments among classes of securities.
Advances
If and to the extent provided in the related prospectus supplement, and subject to any limitations specified therein, the
related master servicer or any servicer will be obligated to advance, or have the option of advancing, on or before each distribution
date, from its own funds or from excess funds held in the related Master Servicer Collection Account or Protected Account that are not
part of the available funds for the related series of securities for that distribution date, an amount up to the aggregate of any
scheduled payments of interest (and, if specified in the related prospectus supplement, principal) on the mortgage loans that were
delinquent on, or not received by, the related Determination Date (or such other date specified in the Agreement, but in any event prior
to the related distribution date). No notice will be given to the certificateholders of these advances. Advances are intended to
maintain a regular flow of scheduled interest and principal payments to holders of the class or classes of securities entitled thereto,
rather than to guarantee or insure against losses. Accordingly, all advances made from the master servicer's or a servicer's own funds
will be reimbursable out of related recoveries on the mortgage loans (including, to the extent described in the prospectus supplement,
amounts received under any fund or instrument constituting credit enhancement) respecting which advances were made and other specific
sources as may be identified in the related prospectus supplement, including amounts which would otherwise be payable to the offered
securities. No Nonrecoverable Advance will be required to be made by the master servicer or a servicer; and, if previously made by a
master servicer or a servicer, a Nonrecoverable Advance will be reimbursable from any amounts in the related Master Servicer Collection
Account or Protected Account prior to any distributions being made to the related series of securityholders. If advances have been made
from excess funds in a Master Servicer Collection Account, the master servicer will be required to replace the funds in such account on
any future distribution date to the extent that funds then in such account are insufficient to permit full distributions to
securityholders on that date. If so specified in the related prospectus supplement, the obligation of a master servicer or a servicer to
make advances may be secured by a cash advance reserve fund or a surety bond. If applicable, information regarding the characteristics
of, and the identity of any obligor on, a surety bond, will be set forth in the related prospectus supplement. If any person other than
the master servicer has any obligation to make advances as described above, the related prospectus supplement will identify the person.
If and to the extent so provided in the related prospectus supplement, any entity making advances will be entitled to receive interest
on the advances for the period that the advances are outstanding at the rate specified in the prospectus supplement, and the entity will
be entitled to payment of the interest periodically from general collections on the mortgage loans in the related trust fund prior to
any payment to securityholders or as otherwise provided in the related pooling and servicing agreement or servicing agreement and
described in the prospectus supplement. As specified in the related prospectus supplement with respect to any series of securities as to
which the trust fund includes mortgage securities, the advancing obligations with respect to the underlying mortgage loans will be
pursuant to the terms of the mortgage securities, as may be supplemented by the terms of the applicable pooling and servicing agreements
or servicing agreements for such mortgage securities, and may differ from the provisions described above.
Modifications
In instances in which a mortgage loan is in default or if default is reasonably foreseeable, and if determined by the master
servicer to be in the best interest of the securityholders, the master servicer or servicer may permit servicing modifications of the
mortgage loan rather than proceeding with foreclosure. However, the master servicer's and the servicer's ability to perform servicing
modifications will be subject to some limitations, including but not limited to the following:
o Advances and other amounts may be added to the outstanding principal balance of a mortgage loan only once during the
life of a mortgage loan.
o Any amounts added to the principal balance of the mortgage loan, or capitalized amounts added to the mortgage loan,
will be required to be fully amortized over the remaining term of the mortgage loan.
o All capitalizations are to be implemented in accordance with the sponsor's standards and may be implemented only by
servicers that have been approved by the master servicer for that purpose.
o The final maturity of any mortgage loan shall not be extended beyond the assumed final distribution date.
o No servicing modification with respect to a mortgage loan will have the effect of reducing the mortgage rate below one
half of the mortgage rate as in effect on the cut off date, but not less than the servicing fee rate.
Any advances made on any mortgage loan will be reduced to reflect any related servicing modifications previously made. The
mortgage rate and Net Mortgage Rate as to any mortgage loan will be deemed not reduced by any servicing modification, so that the
calculation of accrued certificate interest (as defined in the prospectus supplement) payable on the offered securities will not be
affected by the servicing modification.
Reports to Securityholders
With each distribution to securityholders of a particular class of offered securities, the related master servicer, trustee or
other specified person will make available to each holder of record of the class of securities a monthly statement or statements with
respect to the related trust fund setting forth the information specifically described in the related prospectus supplement and the
related pooling and servicing agreement or the related servicing agreement or indenture.
In addition, within a reasonable period of time after the end of each calendar year, the master servicer, trustee or securities
administrator, as applicable, will furnish a report to each holder of record of a class of offered securities at any time during the
calendar year or, in the event the person was a holder of record of a class of securities during a portion of the calendar year, for the
applicable portion of the year. Reports, whether monthly or annual, will be transmitted in the method described in the related
prospectus supplement to the holder of record of the class of securities contemporaneously with the distribution on that particular
class. In addition, the monthly reports will be posted on a website as described below under "Available Information" and "Reports toSecurityholders" in this prospectus.
DESCRIPTION OF CREDIT ENHANCEMENTGeneral
As set forth below and in the applicable prospectus supplement, credit enhancement may be provided by one or more of a
financial guaranty insurance policy, a special hazard insurance policy, a mortgage pool insurance policy or a letter of credit. In
addition, if provided in the applicable prospectus supplement, in lieu of or in addition to any or all of the foregoing arrangements,
credit enhancement may be in the form of a reserve fund to cover the losses, subordination of one or more classes of subordinate
securities for the benefit of one or more classes of senior securities, of cross-collateralization or overcollateralization, or a
combination of the foregoing. The credit support may be provided by an assignment of the right to receive specified cash amounts, a
deposit of cash into a reserve fund or other pledged assets, or by guarantees provided by a third-party or any combination thereof
identified in the applicable prospectus supplement. Each component will have limitations and will provide coverage with respect to
Realized Losses on the related mortgage loans. Credit support will cover Defaulted Mortgage Losses, but coverage may be limited or
unavailable with respect to Special Hazard Losses, Fraud Losses, Bankruptcy Losses and Extraordinary Losses. To the extent that the
credit support for the offered securities of any series is exhausted, the holders thereof will bear all further risk of loss.
The amounts and types of credit enhancement arrangements as well as the providers thereof, if applicable, with respect to the
offered securities of each series will be set forth in the related prospectus supplement. To the extent provided in the applicable
prospectus supplement and the pooling and servicing agreement or indenture, the credit enhancement arrangements may be periodically
modified, reduced and substituted for based on the aggregate outstanding principal balance of the mortgage loans covered thereby or the
principal amount or interest due on one or more classes of securities. See "Description of Credit Enhancement—Reduction or Substitution
of Credit Enhancement" in this prospectus. If specified in the applicable prospectus supplement, credit support for the offered
securities of one series may cover the offered securities of one or more other series.
In general, references to "mortgage loans" under this "Description of Credit Enhancement" section are to mortgage loans in a
trust fund. However, if so provided in the prospectus supplement for a series of securities, any mortgage securities included in the
related trust fund and/or the related underlying mortgage loans may be covered by one or more of the types of credit support described
in this prospectus. The related prospectus supplement will specify, as to each form of credit support, the information indicated below
with respect thereto, to the extent the information is material and available.
Subordinate Securities
If so specified in the related prospectus supplement, one or more classes of securities of a series may be subordinate
securities. Subordinate securities may be offered securities. To the extent specified in the related prospectus supplement, the rights
of the holders of subordinate securities to receive distributions from the Distribution Account on any distribution date will be
subordinated to the corresponding rights of the holders of senior securities. In addition, as provided in the prospectus supplement,
losses or shortfalls will be allocated to subordinate securities before they are allocated to more senior securities. If so provided in
the related prospectus supplement, the subordination of a class may apply only in the event of (or may be limited to) some types of
losses or shortfalls. The related prospectus supplement will set forth information concerning the manner and amount of subordination
provided by a class or classes of subordinate securities in a series and the circumstances under which the subordination will be
available.
Cross-Collateralization
If the mortgage loans and/or mortgage securities in any trust fund are divided into separate groups, each supporting a separate
class or classes of securities of the related series, credit enhancement may be provided by cross-collateralization support provisions
requiring that distributions be made on senior securities evidencing interests in one group of mortgage loans and/or mortgage securities
prior to distributions on subordinate securities evidencing interests in a different group of mortgage loans and/or mortgage securities
within the trust fund. The prospectus supplement for a series that includes a cross-collateralization provision will describe the manner
and conditions for applying the provisions.
Overcollateralization
If so specified in the related prospectus supplement, interest collections on the mortgage loans may exceed interest payments
on the offered securities for the related distribution date. The excess interest may be deposited into a reserve fund or applied as a
payment of principal on the securities. To the extent excess interest is applied as principal payments on the securities, the effect
will be to reduce the principal balance of the securities relative to the outstanding balance of the mortgage loans, thereby creating
overcollateralization and additional protection to the securityholders, as specified in the related prospectus supplement. If so
provided in the related prospectus supplement, overcollateralization may also be provided as to any series of securities by the issuance
of securities in an initial aggregate principal amount which is less than the aggregate principal amount of the related mortgage loans.
Financial Guaranty Insurance Policy
If so specified in the related prospectus supplement, a financial guaranty insurance policy may be obtained and maintained for
a class or series of securities. The insurer with respect to a financial guaranty insurance policy will be described in the related
prospectus supplement.
A financial guaranty insurance policy will be unconditional and irrevocable and will guarantee to holders of the applicable
securities that an amount equal to the full amount of payments due to the holders will be received by the trustee or its agent on behalf
of the holders for payment on each distribution date. The specific terms of any financial guaranty insurance policy will be set forth in
the related prospectus supplement. A financial guaranty insurance policy may have limitations and generally will not insure the
obligation of the Sellers or the master servicer to repurchase or substitute for a defective mortgage loan, will not insure Prepayment
Interest Shortfalls or interest shortfalls due to the application of the Relief Act and will not guarantee any specific rate of
principal payments. The insurer will be subrogated to the rights of each holder to the extent the insurer makes payments under the
financial guaranty insurance policy.
Mortgage Pool Insurance Policies
Any mortgage pool insurance policy obtained by the depositor for a trust fund will be issued by the insurer named in the
applicable prospectus supplement. Each mortgage pool insurance policy will cover Defaulted Mortgage Losses in an amount equal to a
percentage specified in the applicable prospectus supplement of the aggregate principal balance of the mortgage loans on the cut-off
date, or will cover a portion of Defaulted Mortgage Losses on any mortgage up to a specified percentage of the Value of that mortgage
loan. As set forth under "Maintenance of Credit Enhancement" in this prospectus, the master servicer will use reasonable efforts to
maintain, or cause the servicers to maintain, any mortgage pool insurance policy and to present claims thereunder to the insurer on
behalf of itself, the related trustee and the related securityholders. The mortgage pool insurance policies, however, are not blanket
policies against loss, since claims thereunder may only be made respecting particular defaulted mortgage loans and only upon
satisfaction of the terms of the related policy. Any exceptions to coverage will be described in the related prospectus supplement.
Unless specified in the related prospectus supplement, the mortgage pool insurance policies may not cover losses due to a failure to pay
or denial of a claim under a Primary Insurance Policy, irrespective of the reason therefor.
Letter of Credit
If any component of credit enhancement as to the offered securities of a series is to be provided by a letter of credit, a bank
will deliver to the related trustee an irrevocable letter of credit. The letter of credit may provide direct coverage with respect to
the mortgage loans. The bank that delivered the letter of credit, as well as the amount available under the letter of credit with
respect to each component of credit enhancement, will be specified in the applicable prospectus supplement. If so specified in the
related prospectus supplement, the letter of credit may permit draws only in the event of certain types of losses and shortfalls. The
letter of credit may also provide for the payment of required advances which the master servicer or any servicer fails to make. The
amount available under the letter of credit will, in all cases, be reduced to the extent of any unreimbursed payments thereunder and may
otherwise be reduced as described in the related prospectus supplement. The letter of credit will expire on the expiration date set
forth in the related prospectus supplement, unless earlier terminated or extended in accordance with its terms.
Special Hazard Insurance Policies
Any special hazard insurance policy covering Special Hazard Losses obtained by the depositor for a trust fund will be issued by
the insurer named in the applicable prospectus supplement. Each special hazard insurance policy will, subject to limitations described
below, protect holders of the related series of securities from Special Hazard Losses. See "Description of Primary Mortgage Insurance,Hazard Insurance; Claims Thereunder" in this prospectus. However, a special hazard insurance policy will not cover losses occasioned by
war, civil insurrection, some governmental actions, errors in design, faulty workmanship or materials (except under some circumstances),
nuclear reaction, chemical contamination, waste by the mortgagor and other risks. Aggregate claims under a special hazard insurance
policy will be limited to the amount set forth in the related prospectus supplement and will be subject to reduction as described in the
related prospectus supplement.
Subject to the foregoing limitations, a special hazard insurance policy will provide that, where there has been damage to
property securing a foreclosed mortgage loan (title to which has been acquired by the insured) and to the extent the damage is not
covered by the hazard insurance policy or flood insurance policy, if any, maintained by the mortgagor or the master servicer, special
servicer or the servicer, the insurer will pay the lesser of (1) the cost of repair or replacement of the property or (2) upon transfer
of the property to the insurer, the unpaid principal balance of the mortgage loan at the time of acquisition of the property by
foreclosure or deed in lieu of foreclosure, plus accrued interest at the mortgage rate to the date of claim settlement and expenses
incurred by the master servicer, special servicer or servicer with respect to the property. If the property is transferred to a third
party in a sale approved by the issuer of the special hazard insurance policy, the amount that the issuer will pay will be the amount
under (2) above reduced by the net proceeds of the sale of the property. No claim may be validly presented under the special hazard
insurance policy unless hazard insurance on the property securing a defaulted mortgage loan has been kept in force and other
reimbursable protection, preservation and foreclosure expenses have been paid (all of which must be approved in advance by the issuer of
the special hazard insurance policy). If the unpaid principal balance plus accrued interest and expenses is paid by the insurer, the
amount of further coverage under the related special hazard insurance policy will be reduced by that amount less any net proceeds from
the sale of the property. Any amount paid as the cost of repair of the property will further reduce coverage by that amount. Restoration
of the property with the proceeds described under (1) above will satisfy the condition under each mortgage pool insurance policy that
the property be restored before a claim under the mortgage pool insurance policy may be validly presented with respect to the defaulted
mortgage loan secured by the property. The payment described under (2) above will render presentation of a claim in respect of the
mortgage loan under the related mortgage pool insurance policy unnecessary. Therefore, so long as a mortgage pool insurance policy
remains in effect, the payment by the insurer under a special hazard insurance policy of the cost of repair or of the unpaid principal
balance of the related mortgage loan plus accrued interest and expenses will not affect the total Insurance Proceeds paid to
securityholders, but will affect the relative amounts of coverage remaining under the related special hazard insurance policy and
mortgage pool insurance policy.
As and to the extent set forth in the applicable prospectus supplement, coverage in respect of Special Hazard Losses for a
series of securities may be provided, in whole or in part, by a type of instrument other than a special hazard insurance policy or by
means of a special hazard representation of the Seller or the depositor.
Reserve Funds
If so provided in the related prospectus supplement, the depositor will deposit or cause to be deposited in a reserve fund any
combination of cash, one or more irrevocable letters of credit or one or more Permitted Investments in specified amounts, or any other
instrument satisfactory to the relevant Rating Agency or Agencies, which will be applied and maintained in the manner and under the
conditions specified in the prospectus supplement. In the alternative or in addition to the deposit, to the extent described in the
related prospectus supplement, a reserve fund may be funded through application of all or a portion of amounts otherwise payable on any
related subordinate securities, from the retained interest of the depositor or otherwise. To the extent that the funding of the reserve
fund is dependent on amounts otherwise payable on related subordinate securities, any retained interest of the depositor or other cash
flows attributable to the related mortgage loans or reinvestment income, the reserve fund may provide less coverage than initially
expected if the cash flows or reinvestment income on which the funding is dependent are lower than anticipated. In addition, with
respect to any series of securities as to which credit enhancement includes a letter of credit, if so specified in the related
prospectus supplement, if specified conditions are met, the remaining amount of the letter of credit may be drawn by the trustee and
deposited in a reserve fund. Amounts in a reserve fund may be distributed to securityholders, or applied to reimburse the master
servicer or a servicer for outstanding advances, or may be used for other purposes, in the manner and to the extent specified in the
related prospectus supplement. The related prospectus supplement will disclose whether a reserve fund is part of the related trust fund.
If set forth in the related prospectus supplement, a reserve fund may provide coverage to more than one series of securities.
In connection with the establishment of any reserve fund, the reserve fund will be structured so that the trustee will have a
perfected security interest for the benefit of the securityholders in the assets in the reserve fund. However, to the extent that the
depositor, any affiliate thereof or any other entity has an interest in any reserve fund, in the event of the bankruptcy, receivership
or insolvency of that entity, there could be delays in withdrawals from the reserve fund and corresponding payments to the
securityholders which could adversely affect the yield to investors on the related securities.
Amounts deposited in any reserve fund for a series will be invested in Permitted Investments by, or at the direction of, and
for the benefit of the master servicer or any other person named in the related prospectus supplement.
Cash Flow Agreements
If so provided in the related prospectus supplement, the trust fund may include guaranteed investment contracts pursuant to
which moneys held in the funds and accounts established for the related series will be invested at a specified rate. The principal terms
of a guaranteed investment contract or other cash flow agreement, and the identity of the obligor, will be described in the prospectus
supplement for a series of notes.
Maintenance of Credit Enhancement
To the extent that the applicable prospectus supplement does not expressly provide for alternative credit enhancement
arrangements in lieu of some or all of the arrangements mentioned below, the following paragraphs shall apply.
If a financial guaranty insurance policy has been obtained for one or more classes of securities of a series, the trustee will
be obligated to exercise reasonable efforts to keep the financial guaranty insurance policy in full force and effect throughout the term
of the applicable pooling and servicing agreement or servicing agreement, until the specified class or classes of securities have been
paid in full, unless coverage thereunder has been exhausted through payment of claims, or until the financial guaranty insurance policy
is replaced in accordance with the terms of the applicable pooling and servicing agreement or servicing agreement. The trustee will
agree to remit the premiums for each financial guaranty insurance policy, from available funds of the related trust, in accordance with
the provisions and priorities set forth in the applicable pooling and servicing agreement or servicing agreement, on a timely basis. In
the event the insurer ceases to be a qualified insurer as described in the related prospectus supplement, or fails to make a required
payment under the related financial guaranty insurance policy, neither the trustee nor any other person will have any obligation to
replace the insurer. Any losses associated with any reduction or withdrawal in rating by an applicable Rating Agency shall be borne by
the related securityholders.
If a mortgage pool insurance policy has been obtained for some or all of the mortgage loans related to a series of securities,
the master servicer will be obligated to exercise reasonable efforts to keep the mortgage pool insurance policy (or an alternate form of
credit support) in full force and effect throughout the term of the applicable pooling and servicing agreement or servicing agreement to
the extent provided in the related prospectus supplement. The master servicer will agree to pay the premiums for each mortgage pool
insurance policy on a timely basis. In the event the pool insurer ceases to be a qualified insurer because it ceases to be qualified by
law to transact pool insurance business or coverage is terminated for any reason other than exhaustion of the coverage, the master
servicer will use reasonable efforts to obtain from another qualified insurer a replacement insurance policy comparable to the mortgage
pool insurance policy with a total coverage equal to the then outstanding coverage of the mortgage pool insurance policy, provided that,
if the cost of the replacement policy is greater than the cost of the mortgage pool insurance policy, the coverage of the replacement
policy will, unless otherwise agreed to by the depositor, be reduced to a level such that its premium rate does not exceed the premium
rate on the mortgage pool insurance policy.
If a letter of credit or alternate form of credit enhancement has been obtained for a series, the trustee will be obligated to
exercise reasonable efforts cause to be kept or to keep the letter of credit (or an alternate form of credit support) in full force and
effect throughout the term of the applicable pooling and servicing agreement or indenture, unless coverage thereunder has been exhausted
through payment of claims or otherwise, or substitution therefor is made as described below under "—Reduction or Substitution of CreditEnhancement." Unless otherwise specified in the applicable prospectus supplement, if a letter of credit obtained for a series of
securities is scheduled to expire prior to the date the final distribution on the securities is made and coverage under the letter of
credit has not been exhausted and no substitution has occurred, the trustee will draw the amount available under the letter of credit
and maintain the amount in trust for the securityholders.
If a special hazard insurance policy has been obtained for the mortgage loans related to a series of securities, the master
servicer will also be obligated to exercise reasonable efforts to maintain and keep the policy in full force and effect throughout the
term of the applicable pooling and servicing agreement or servicing agreement, unless coverage thereunder has been exhausted through
payment of claims or otherwise or substitution therefor is made as described below under "—Reduction or Substitution of CreditEnhancement." If coverage for Special Hazard Losses takes the form of a special hazard insurance policy, the policy will provide
coverage against risks of the type described in this prospectus under "Description of Credit Enhancement—Special Hazard Insurance
Policies." The master servicer may obtain a substitute policy for the existing special hazard insurance policy if prior to the
substitution the master servicer obtains written confirmation from the Rating Agency or Agencies that rated the related securities that
the substitution shall not adversely affect the then-current ratings assigned to the securities by the Rating Agency or Agencies.
The master servicer, on behalf of itself, the trustee and securityholders, will provide the trustee information required for
the trustee to draw under the letter of credit and will present claims to each pool insurer, to the issuer of each special hazard
insurance policy, and, in respect of defaulted mortgage loans for which there is no servicer, to each primary insurer and take any
reasonable steps as are necessary to permit recovery under the letter of credit, insurance policies or comparable coverage respecting
defaulted mortgage loans or mortgage loans which are the subject of a bankruptcy proceeding. As set forth above, all collections by the
master servicer under any mortgage pool insurance policy or any Primary Insurance Policy and, where the related property has not been
restored, a special hazard insurance policy, are to be deposited in the related Distribution Account, subject to withdrawal as described
above. All draws under any letter of credit are also to be deposited in the related Distribution Account. In those cases in which a
mortgage loan is serviced by a servicer, the servicer, on behalf of itself, the trustee and the securityholders will present claims to
the primary insurer, and all paid claims shall initially be deposited in a Protected Account prior to being delivered to the master
servicer for ultimate deposit to the related Distribution Account.
If any property securing a defaulted mortgage loan is damaged and proceeds, if any, from the related hazard insurance policy or
any applicable special hazard insurance policy are insufficient to restore the damaged property to a condition sufficient to permit
recovery under any financial guaranty insurance policy, mortgage pool insurance policy, letter of credit or any related Primary
Insurance Policy, neither the master servicer nor any servicer is required to expend its own funds to restore the damaged property
unless it determines (1) that the restoration will increase the proceeds to one or more classes of securityholders on liquidation of the
mortgage loan after reimbursement of the master servicer for its expenses and (2) that the expenses will be recoverable by it through
liquidation Proceeds or Insurance Proceeds. If recovery under any financial guaranty insurance policy, mortgage pool insurance policy,
letter of credit or any related Primary Insurance Policy is not available because the master servicer or a servicer has been unable to
make the above determinations, has made the determinations incorrectly or recovery is not available for any other reason, the master
servicer and each servicer is nevertheless obligated to follow the normal practices and procedures (subject to the preceding sentence)
as it deems necessary or advisable to realize upon the defaulted mortgage loan and in the event the determinations have been incorrectly
made, is entitled to reimbursement of its expenses in connection with the restoration.
Reduction or Substitution of Credit Enhancement
The amount of credit support provided pursuant to any form of credit enhancement may be reduced. In most cases, the amount
available pursuant to any form of credit enhancement will be subject to periodic reduction in accordance with a schedule or formula on a
nondiscretionary basis pursuant to the terms of the related pooling and servicing agreement or indenture. Additionally, in most cases,
the form of credit support (and any replacements therefor) may be replaced, reduced or terminated, and the formula used in calculating
the amount of coverage with respect to Bankruptcy Losses, Special Hazard Losses or Fraud losses may be changed, without the consent of
the securityholders, upon the written assurance from each applicable Rating Agency that its then-current rating of the related series of
securities will not be adversely affected. Furthermore, in the event that the credit rating of any obligor under any applicable credit
enhancement is downgraded, the credit rating or ratings of the related series of securities may be downgraded to a corresponding level,
and, neither the master servicer nor any other person will be obligated to obtain replacement credit support in order to restore the
rating or ratings of the related series of securities. The master servicer will also be permitted to replace the credit support with
other credit enhancement instruments issued by obligors whose credit ratings are equivalent to the downgraded level and in lower amounts
which would satisfy the downgraded level, provided that the then-current rating or ratings of the related series of securities are
maintained. Where the credit support is in the form of a reserve fund, a permitted reduction in the amount of credit enhancement will
result in a release of all or a portion of the assets in the reserve fund to the depositor, the master servicer or the other person that
is entitled thereto. Any assets so released will not be available for distributions in future periods.
OTHER FINANCIAL OBLIGATIONS RELATED TO THE SECURITIESDerivatives
The trust fund may include one or more derivative instruments, as described in this section. All derivative instruments
included in any trust fund will be used only in a manner that reduces or alters risk resulting from the mortgage loans or other assets
in the pool, and only in a manner such that the return on the offered securities will be based primarily on the performance of the
mortgage loans or other assets in the pool. Derivative instruments may include 1) interest rate swaps (or caps, floors and collars) and
yield supplement agreements as described below, 2) currency swaps and 3) market value swaps that are referenced to the value of one or
more of the mortgage loans or other assets included in the trust fund or to a class of offered securities.
An interest rate swap is an agreement between two parties to exchange a stream of interest payments on an agreed hypothetical
or "notional" principal amount. No principal amount is exchanged between the counterparties to an interest rate swap. In a typical swap,
one party agrees to pay a fixed rate on a notional principal amount, while the counterparty pays a floating rate based on one or more
reference interest rates including the London Interbank Offered Rate, or LIBOR, a specified bank's prime rate or U.S. Treasury Bill
rates. Interest rate swaps also permit counterparties to exchange a floating rate obligation based upon one reference interest rate,
such as LIBOR, for a floating rate obligation based upon another referenced interest rate, such as U.S. Treasury Bill rates. An
interest rate cap, collar or floor is an agreement where the counterparty agrees to make payments representing interest on a notional
principal amount when a specified reference interest rate is above a strike rate, outside of a range of strike rates, or below a strike
rate as specified in the agreement, generally in exchange for a fixed amount paid to the counterparty at the time the agreement is
entered into. A yield supplement agreement is a type of cap agreement, and is substantially similar to a cap agreement as described
above.
The trustee, securities administrator or supplemental interest trust trustee on behalf of the related trust fund may enter into
interest rate swaps, caps, floors and collars, or yield supplement agreements, to minimize the risk to securityholders from adverse
changes in interest rates or to provide supplemental credit support. Cap agreements and yield supplement agreements may be entered into
to supplement the interest rate or other rates available to make interest payments on one or more classes of the securities of any
series.
A market value swap might be used in a structure where the pooled assets are hybrid ARMs, or mortgage loans that provide for a
fixed rate period and then convert by their terms to adjustable rate loans. Such a structure might provide that at a specified date near
the end of the fixed rate period, the investors must tender their securities to the trustee who will then transfer the securities to
other investors in a mandatory auction procedure. The market value swap would ensure that the original investors would receive at least
par at the time of tender, by covering any shortfall between par and the then current market value of their securities.
In a market value swap, five business days prior to the mandatory auction date set forth in the prospectus supplement, the
auction administrator will auction the classes of certificates referred to in the prospectus supplement as the mandatory auction
certificates then outstanding, to third party investors. On the mandatory auction date, the mandatory auction certificates will be
transferred, as described in the prospectus supplement, to third party investors, and holders of the mandatory auction certificates will
be entitled to receive the current principal amount of those certificates, after application of all principal distributions and realized
losses on the mandatory auction date, plus accrued interest on such classes at the related pass-through rate from the first day of the
month of the mandatory auction, up to but excluding the mandatory auction date.
The auction administrator will enter into a market value swap with a swap counterparty pursuant to which the swap counterparty
will agree to pay the excess, if any, of the current principal amount of the mandatory auction certificates, after application of all
principal distributions and realized losses on such distribution date, plus, accrued interest as described above, over the amount
received in the auction. The transfer in the auction will not occur in the event that the swap counterparty fails to pay any amounts
payable under the market value swap.
In the event that all or a portion of a class of the mandatory auction certificates is not sold in the auction, the swap
counterparty will make no payment with respect to such class or portion thereof, and the holders thereof will not be able to transfer
those certificates on the mandatory auction date as a result of the auction. However, the auction administrator will repeat the auction
procedure each month thereafter until a bid has been received for each class or portion thereof. Upon receipt of a bid, the swap
counterparty will make the payment described above if required.
Any derivative contracts will be documented based upon the standard forms provided by the International Swaps and Derivatives
Association, or ISDA. These forms generally consist of an ISDA master agreement, a schedule to the master agreement, and a
confirmation, although in some cases the schedule and confirmation will be combined in a single document and the standard ISDA master
agreement will be incorporated therein by reference. Standard ISDA definitions also will be incorporated by reference. Each
confirmation will provide for payments to be made by the derivative counterparty to the trust, and in some cases by the trust to the
derivative counterparty, generally based upon specified notional amounts and upon differences between specified interest rates or
values. For example, the confirmation for an interest rate cap agreement will contain a schedule of fixed interest rates, generally
referred to as strike rates, and a schedule of notional amounts, for each distribution date during the term of the interest rate cap
agreement. The confirmation also will specify a reference rate, generally a floating or adjustable interest rate, and will provide that
payments will be made by the derivative counterparty to the trust on each distribution date, based on the notional amount for that
distribution date and the excess, if any, of the specified reference rate over the strike rate for that distribution date.
In the event of the withdrawal of the credit rating of a derivative counterparty or the downgrade of such credit rating below
levels specified in the derivative contract (where the derivative contract is relevant to the ratings of the offered securities, such
levels generally are set by the rating agencies rating the offered securities), the derivative counterparty may be required to post
collateral for the performance of its obligations under the derivative contract, or to take certain other measures intended to assure
performance of those obligations. Posting of collateral will be documented using the ISDA Credit Support Annex.
There can be no assurance the trustee, securities administrator or supplemental interest trust trustee will be able to enter
into derivatives at any specific time or at prices or on other terms that are advantageous. In addition, although the terms of the
derivatives may provide for termination under various circumstances, there can be no assurance that the trustee will be able to
terminate a derivative when it would be economically advantageous to the trust fund to do so.
Purchase Obligations
Some types of trust assets and some classes of securities of any series, as specified in the related prospectus supplement, may
be subject to a purchase obligation that would become applicable on one or more specified dates, or upon the occurrence of one or more
specified events, or on demand made by or on behalf of the applicable securityholders. A purchase obligation may be in the form of a
conditional or unconditional purchase commitment, liquidity facility, maturity guaranty, put option or demand feature. The terms and
conditions of each purchase obligation, including the purchase price, timing and payment procedure, will be described in the
accompanying prospectus supplement. A purchase obligation relating to trust assets may apply to those trust assets or to the related
securities. Each purchase obligation may be a secured or unsecured obligation of the provider thereof, which may include a bank or other
financial institution or an insurance company. Each purchase obligation will be evidenced by an instrument delivered to the trustee for
the benefit of the applicable securityholders of the related series. As specified in the accompanying prospectus supplement, each
purchase obligation relating to trust assets will be payable solely to the trustee for the benefit of the securityholders of the related
series. Other purchase obligations may be payable to the trustee or directly to the holders of the securities to which that obligation
relate.
DESCRIPTION OF PRIMARY MORTGAGE INSURANCE, HAZARD INSURANCE;
CLAIMS THEREUNDERGeneral
The mortgaged property with respect to each mortgage loan will be required to be covered by a hazard insurance policy and, if
required as described below, a Primary Insurance Policy. The following is only a brief description of these insurance policies and does
not purport to summarize or describe all of the provisions of these policies. The insurance is subject to underwriting and approval of
individual mortgage loans by the respective insurers.
Primary Mortgage Insurance Policies
In a securitization of single family loans, single family loans included in the related mortgage pool having a Loan-to-Value
Ratio at origination of over 80% (or other percentage as described in the related prospectus supplement) may be required by the
depositor to be covered by a Primary Insurance Policy. The Primary Insurance Policy will insure against default on a mortgage loan as to
at least the principal amount thereof exceeding 75% of the Value of the related mortgaged property (or other percentage as described in
the related prospectus supplement) at origination of the mortgage loan, unless and until the principal balance of the mortgage loan is
reduced to a level that would produce a Loan-to-Value Ratio equal to or less than at least 80% (or other percentage as described in the
prospectus supplement). This type of mortgage loan will not be considered to be an exception to the foregoing standard if no Primary
Insurance Policy was obtained at origination but the mortgage loan has amortized to below the above Loan-to-Value Ratio percentage as of
the applicable cut-off date. Mortgage loans which are subject to negative amortization will only be covered by a Primary Insurance
Policy if the coverage was so required upon their origination, notwithstanding that subsequent negative amortization may cause the
mortgage loan's Loan-to-Value Ratio, based on the then-current balance, to subsequently exceed the limits which would have required the
coverage upon their origination. Multifamily, commercial and mixed-use loans will not be covered by a Primary Insurance Policy,
regardless of the related Loan-to-Value Ratio.
While the terms and conditions of the Primary Insurance Policies issued by a primary insurer will differ from those in Primary
Insurance Policies issued by other primary insurers, each Primary Insurance Policy will in general cover the Primary Insurance Covered
Loss. The primary insurer generally will be required to pay:
o the insured percentage of the Primary Insurance Covered Loss;
o the entire amount of the Primary Insurance Covered Loss, after receipt by the primary insurer of good and merchantable title
to, and possession of, the mortgaged property; or
o at the option of the primary insurer, the sum of the delinquent monthly payments plus any advances made by the insured, both
to the date of the claim payment and, thereafter, monthly payments in the amount that would have become due under the
mortgage loan if it had not been discharged plus any advances made by the insured until the earlier of (1) the date the
mortgage loan would have been discharged in full if the default had not occurred or (2) an approved sale.
As conditions precedent to the filing or payment of a claim under a Primary Insurance Policy, in the event of default by the
mortgagor, the insured will typically be required, among other things, to:
o advance or discharge (1) hazard insurance premiums and (2) as necessary and approved in advance by the primary insurer, real
estate taxes, protection and preservation expenses and foreclosure and related costs;
o in the event of any physical loss or damage to the mortgaged property, have the mortgaged property restored to at least its
condition at the effective date of the Primary Insurance Policy (ordinary wear and tear excepted); and
o tender to the primary insurer good and merchantable title to, and possession of, the mortgaged property.
For any single family loan for which the coverage is required under the standard described above, the master servicer will
maintain, or will cause each servicer to maintain, in full force and effect and to the extent coverage is available a Primary Insurance
Policy with regard to each single family loan, provided that the Primary Insurance Policy was in place as of the cut-off date and the
depositor had knowledge of the Primary Insurance Policy. The master servicer or the Seller will not cancel or refuse to renew a Primary
Insurance Policy in effect at the time of the initial issuance of a series of securities that is required to be kept in force under the
applicable pooling and servicing agreement or indenture unless the replacement Primary Insurance Policy for the canceled or non-renewed
policy is maintained with an insurer whose claims-paying ability is acceptable to the Rating Agency or Agencies that rated the series of
securities for mortgage pass-through certificates or mortgage-backed notes having a rating equal to or better than the highest
then-current rating of any class of the series of securities. For further information regarding the extent of coverage under any
mortgage pool insurance policy or primary Insurance Policy, see "Description of Credit Enhancement—Mortgage Pool insurance Policies" in
this prospectus.
Hazard Insurance Policies
The terms of the mortgage loans require each mortgagor to maintain a hazard insurance policy for their mortgage loan.
Additionally, the pooling and servicing agreement or servicing agreement will require the master servicer to cause to be maintained for
each mortgage loan a hazard insurance policy providing for no less than the coverage of the standard form of fire insurance policy with
extended coverage customary in the state in which the property is located. The coverage generally will be in an amount equal to the
lesser of the principal balance owing on the mortgage loan and 100% of the insurable value of the improvements securing the mortgage
loan; provided, that in any case, such amount shall be sufficient to prevent the mortgagor and/or mortgagee from becoming a co-insurer.
The ability of the master servicer to ensure that hazard insurance proceeds are appropriately applied may be dependent on it, or the
servicer of the mortgage loan, being named as an additional insured under any hazard insurance policy and under any flood insurance
policy referred to below, or upon the extent to which information in this regard is furnished to the master servicer by mortgagors or
servicers.
As set forth above, all amounts collected by the master servicer or a servicer under any hazard policy (except for amounts to
be applied to the restoration or repair of the mortgaged property or released to the mortgagor in accordance with teamster servicer's
normal servicing procedures) will be deposited in the related Distribution Account. The pooling and servicing agreement or servicing
agreement will provide that the master servicer may satisfy its obligation to cause hazard policies to be maintained by maintaining, or
causing a servicer to maintain, a blanket policy insuring against losses on the mortgage loans. If the blanket policy contains a
deductible clause, the master servicer will deposit, or will cause the applicable servicer to deposit, in the related Distribution
Account all sums which would have been deposited therein but for the clause.
In general, the standard form of fire and extended coverage policy covers physical damage to or destruction of the improvements
on the property by fire, lightning, explosion, smoke, windstorm, hail, riot, strike and civil commotion, subject to the conditions and
exclusions specified in each policy. Although the policies relating to the mortgage loans will be underwritten by different insurers
under different state laws in accordance with different applicable state forms and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and most of these policies typically do not cover any
physical damage resulting from the following: war, revolution, governmental actions, floods and other water-related causes, earth
movement (including earthquakes, landslides and mudflows), nuclear reactions, wet or dry rot, vermin, rodents, insects or domestic
animals, theft and, depending on the case, vandalism. The foregoing list is merely indicative of the kinds of uninsured risks and is not
intended to be all-inclusive. Where the improvements securing a mortgage loan are located in a federally designated flood area at the
time of origination of the mortgage loan, the pooling and servicing agreement or servicing agreement requires the master servicer to
cause to be maintained for this mortgage loan, flood insurance (to the extent available) in an amount equal in general to the lesser of
the amount required to compensate for any loss or damage on a replacement cost basis or the maximum insurance available under the
federal flood insurance program.
The hazard insurance policies covering the mortgaged properties typically contain a co-insurance clause which in effect
requires the insured at all times to carry insurance of a specified percentage (generally 80% to 90%) of the full replacement value of
the improvements on the property in order to recover the full amount of any partial loss. If the insured's coverage falls below this
specified percentage, the clause generally provides that the insurer's liability in the event of partial loss does not exceed the
greater of (1) the replacement cost of the improvements damaged or destroyed less physical depreciation or (2) the proportion of the
loss as the amount of insurance carried bears to the specified percentage of the full replacement cost of the improvements.
Since the amount of hazard insurance that mortgagors are required to maintain on the improvements securing the mortgage loans
may decline as the principal balances of the related mortgage loans decrease, and since residential properties have historically
appreciated in value over time, hazard insurance proceeds could be insufficient to restore fully the damaged property in the event of a
partial loss. See "Description of Credit Enhancement—Special Hazard Insurance Policies" in this prospectus for a description of the
limited protection afforded by any special hazard insurance policy against losses occasioned by hazards which are otherwise uninsured
against (including losses caused by the application of the co-insurance clause described in the preceding paragraph).
Under the terms of the mortgage loans, mortgagors are generally required to present claims to insurers under hazard insurance
policies maintained on the mortgaged properties. The master servicer, on behalf of the trustee and securityholders, is obligated to
present claims, or cause the servicer of the mortgage loans to present claims, under any special hazard insurance policy and any blanket
insurance policy insuring against hazard losses on the mortgaged properties. However, the ability of the master servicer or servicer to
present the claims is dependent upon the extent to which information in this regard is furnished to the master servicer or the servicers
by mortgagors.
FHA Mortgage Insurance
The Housing Act authorizes various FHA mortgage insurance programs. Some of the mortgage loans may be insured under either
Section 203(b), Section 221, Section 223, Section 234 or Section 235 of the Housing Act. Under Section 203(b), FHA insures mortgage
loans of up to 30 years' duration for the purchase of one- to four-family dwelling units. Mortgage loans for the purchase of multifamily
residential rental properties are insured by the FHA under Section 221 and Section 223. Mortgage loans for the purchase of condominium
units are insured by FHA under Section 234. Trust assets insured under these programs must bear interest at a rate not exceeding the
maximum rate in effect at the time the loan is made, as established by HUD, and may not exceed specified percentages of the lesser of
the appraised value of the property and the sales price, less seller-paid closing costs for the property, up to certain specified
maximums. In addition, FHA imposes initial investment minimums and other requirements on mortgage loans insured under the Section 203(b)
and Section 234 programs.
Under Section 235, assistance payments are paid by HUD to the mortgagee on behalf of eligible borrowers for as long as the
borrowers continue to be eligible for the payments. To be eligible, a borrower must be part of a family, have income within the limits
prescribed by HUD at the time of initial occupancy, occupy the property and meet requirements for recertification at least annually.
The regulations governing these programs provide that insurance benefits are payable either on foreclosure, or other
acquisition of possession, and conveyance of the mortgaged premises to HUD or on assignment of the defaulted mortgage loan to HUD. The
FHA insurance that may be provided under these programs on the conveyance of the home to HUD is equal to 100% of the outstanding
principal balance of the mortgage loan, plus accrued interest, as described below, and certain additional costs and expenses. When
entitlement to insurance benefits results from assignment of the mortgage loan to HUD, the insurance payment is computed as of the date
of the assignment and includes the unpaid principal amount of the mortgage loan plus mortgage interest accrued and unpaid to the
assignment date.
When entitlement to insurance benefits results from foreclosure (or other acquisition of possession) and conveyance, the
insurance payment is equal to the unpaid principal amount of the mortgage loan, adjusted to reimburse the mortgagee for certain tax,
insurance and similar payments made by it and to deduct certain amounts received or retained by the mortgagee after default, plus
reimbursement not to exceed two-thirds of the mortgagee's foreclosure costs. Any FHA insurance relating to the mortgage loans underlying
a series of securities will be described in the related prospectus supplement.
The mortgage loans may also be insured under Title I Program of the FHA. The applicable provisions of this program will be
described in the related prospectus supplement. The master servicer will be required to take steps, or cause the servicers of the
mortgage loans to take steps, reasonably necessary to keep any FHA insurance in full force and effect.
VA Mortgage Guaranty
The Servicemen's Readjustment Act of 1944, as amended, permits a veteran or, in some instances, his or her spouse, to obtain a
mortgage loan guaranty by the VA covering mortgage financing of the purchase of a one-to four-family dwelling unit to be occupied as the
veteran's home at an interest rate not exceeding the maximum rate in effect at the time the loan is made, as established by HUD. The
program has no limit on the amount of a mortgage loan, requires no down payment for the purchaser and permits the guaranty of mortgage
loans with terms, limited by the estimated economic life of the property, up to 30 years. The maximum guaranty that may be issued by the
VA under this program is 50% of the original principal amount of the mortgage loan up to a dollar limit established by the VA. The
liability on the guaranty is reduced or increased pro rata with any reduction or increase in amount of indebtedness, but in no event
will the amount payable on the guaranty exceed the amount of the original guaranty. Notwithstanding the dollar and percentage
limitations of the guaranty, a mortgagee will ordinarily suffer a monetary loss only when the difference between the unsatisfied
indebtedness and the proceeds of a foreclosure sale of mortgaged premises is greater than the original guaranty as adjusted. The VA may,
at its option, and without regard to the guaranty, make full payment to a mortgagee of the unsatisfied indebtedness on a mortgage upon
its assignment to the VA.
Since there is no limit imposed by the VA on the principal amount of a VA-guaranteed mortgage loan but there is a limit on the
amount of the VA guaranty, additional coverage under a Primary Mortgage Insurance Policy may be required by the depositor for VA loans
in excess of amounts specified by the VA. The amount of the additional coverage will be set forth in the related prospectus supplement.
Any VA guaranty relating to Contracts underlying a series of certificates or notes will be described in the related prospectus
supplement.
THE SPONSOR
The sponsor will be EMC Mortgage Corporation ("EMC") for each series of securities unless otherwise indicated in the related
prospectus supplement. The sponsor was incorporated in the State of Delaware on September 26, 1990, as a wholly owned subsidiary
corporation of The Bear Stearns Companies Inc., and is an affiliate of the depositor and the underwriter. The sponsor was established
as a mortgage banking company to facilitate the purchase and servicing of whole loan portfolios containing various levels of quality
from "investment quality" to varying degrees of "non-investment quality" up to and including real estate owned assets ("REO"). The
sponsor commenced operation in Texas on October 9, 1990.
Since its inception in 1990, the sponsor has purchased over $100 billion in residential whole loans and servicing rights, which
include the purchase of newly originated alternative A, jumbo (prime) and sub-prime loans. Loans are purchased on a bulk and flow
basis. The sponsor is one of the United States' largest purchasers of scratch and dent, sub-performing and non-performing residential
mortgages and REO from various institutions, including banks, mortgage companies, thrifts and the U.S. government. Loans are generally
purchased with the ultimate strategy of securitization into an array of Bear Stearns' securitizations based upon product type and credit
parameters, including those where the loan has become re-performing or cash-flowing.
Performing loans include first lien fixed rate and ARMs, as well as closed end fixed rate second liens and lines of credit
("HELOCs"). Performing loans acquired by the sponsor are subject to varying levels of due diligence prior to purchase. Portfolios may
be reviewed for credit, data integrity, appraisal valuation, documentation, as well as compliance with certain laws. Performing loans
purchased will have been originated pursuant to the sponsor's underwriting guidelines or the originator's underwriting guidelines that
are acceptable to the sponsor.
Subsequent to purchase by the sponsor, performing loans are pooled together by product type and credit parameters and
structured into RMBS, with the assistance of Bear Stearns' Financial Analytics and Structured Transactions Group, for distribution into
the primary market.
The sponsor has been securitizing residential mortgage loans since 1999.
THE DEPOSITOR
The depositor, Structured Asset Mortgage Investments II Inc., was formed in the state of Delaware on June 10, 2003, and is a
wholly-owned subsidiary of The Bear Stearns Companies Inc. The depositor was organized for the sole purpose of serving as a private
secondary mortgage market conduit. The depositor does not have, nor is it expected in the future to have, any significant assets.
The depositor has been serving as a private secondary mortgage market conduit for residential mortgage loans since 2003. In
conjunction with the Seller's acquisition of the mortgage loans, the depositor will execute a mortgage loan purchase agreement through
which the loans will be transferred to itself. These loans are subsequently deposited in a common law or statutory trust, described in
this prospectus supplement, which will then issue the certificates or notes.
After issuance and registration of the securities contemplated in this prospectus, in the related prospectus supplement and any
supplement hereto, the depositor will have substantially no duties or responsibilities with respect to the pool assets or the
securities, other than certain administrative duties as described in the related prospectus supplement.
THE AGREEMENTSGeneral
Each series of certificates will be issued pursuant to a pooling and servicing agreement or other agreement specified in the
related prospectus supplement. In general, the parties to a pooling and servicing agreement will include the depositor, the trustee, the
master servicer and, in some cases, a special servicer. However, a pooling and servicing agreement that relates to a trust fund that
includes mortgage securities may include a party solely responsible for the administration of the mortgage securities, and a pooling and
servicing agreement that relates to a trust fund that consists solely of mortgage securities may not include a master servicer, special
servicer or other servicer as a party. All parties to each pooling and servicing agreement under which securities of a series are issued
will be identified in the related prospectus supplement. Each series of notes will be issued pursuant to an indenture. The parties to
each indenture will be the related Issuing Entity and the trustee. The Issuing Entity will be created pursuant to an owner trust
agreement between the depositor and the owner trustee and the mortgage loans or mortgage securities securing the notes will be serviced
pursuant to a servicing agreement between the depositor and the master servicer.
Forms of the Agreements have been filed as exhibits to the registration statement of which this prospectus is a part. However,
the provisions of each Agreement will vary depending upon the nature of the related securities and the nature of the related trust fund.
The following summaries describe provisions that may appear in a pooling and servicing agreement with respect to a series of
certificates or in either the servicing agreement or indenture with respect to a series of notes. The prospectus supplement for a series
of securities will describe material provisions of the related Agreements that differ from the description thereof set forth below. The
depositor will provide a copy of each Agreement (without exhibits) that relates to any series of securities without charge upon written
request of a holder of an offered security of the series addressed to it at its principal executive offices specified in this prospectus
under "The Depositor". As to each series of securities, the related agreements will be filed with the Commission in a current report on
Form 8-K following the issuance of the securities.
Certain Matters Regarding the Master Servicer and the Depositor
The pooling and servicing agreement or servicing agreement for each series of securities will provide that the master servicer
may not resign from its obligations and duties except upon a determination that performance of the duties is no longer permissible under
applicable law or except (1) in connection with a permitted transfer of servicing or (2) upon appointment of a successor servicer
reasonably acceptable to the trustee and upon receipt by the trustee of letter from each Rating Agency generally to the effect that the
resignation and appointment will not, in and of itself, result in a downgrading of the securities. No resignation will become effective
until the trustee or a successor servicer has assumed the master servicer's responsibilities, duties, liabilities and obligations under
the pooling and servicing agreement or servicing agreement.
Each pooling and servicing agreement and servicing agreement will also provide that the master servicer, the depositor and
their directors, officers, employees or agents will not be under any liability to the trust fund or the securityholders for any action
taken or for refraining from the taking of any action in good faith, or for errors in judgment, unless the liability which would
otherwise be imposed was by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of
reckless disregard of obligations and duties. Each pooling and servicing agreement and servicing agreement will further provide that the
master servicer, the depositor, and any director, officer, employee or agent of the master servicer or the depositor are entitled to
indemnification by the trust fund and will be held harmless against any loss, liability or expense (including reasonable legal fees and
disbursements of counsel) incurred in connection with any legal action relating to the pooling and servicing agreement or servicing
agreement or the related series of securities, other than any loss, liability or expense related to any specific mortgage loan or
mortgage loans (except a loss, liability or expense otherwise reimbursable pursuant to the pooling and servicing agreement) and any
loss, liability or expense incurred by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of obligations and duties. In addition, each pooling and servicing agreement and servicing agreement
will provide that neither the master servicer nor the depositor will be under any obligation to appear in, prosecute or defend any legal
or administrative action that is not incidental to its respective duties under the pooling and servicing agreement or servicing
agreement and which in its opinion may involve it in any expense or liability. The master servicer or the depositor may, however, in its
discretion undertake any action which it may deem necessary or desirable with respect to the pooling and servicing agreement or
servicing agreement and the rights and duties of the parties to that agreement and the interests of the securityholders. The legal
expenses and costs of the action and any resulting liability will be expenses, costs and liabilities of the trust fund, and the master
servicer or the depositor, as the case may be, will be entitled reimbursement from funds otherwise distributable to securityholders.
Any person into which the master servicer may be merged or consolidated, any person resulting from any merger or consolidation
to which the master servicer is a party or any person succeeding to the business of the master servicer will be the successor of the
master servicer under the related pooling and servicing agreement or servicing agreement, provided that (1) the person is qualified to
service mortgage loans on behalf of Fannie Mae or Freddie Mac and (2) the merger, consolidation or succession does not adversely affect
the then-current ratings of the classes of securities of the related series that have been rated. In addition, notwithstanding the
prohibition on its resignation, the master servicer may assign its rights under a pooling and servicing agreement or servicing
agreement, provided clauses (1) and (2) above are satisfied and the person is reasonably satisfactory to the depositor and the trustee.
In the case of an assignment, the master servicer will be released from its obligations under the pooling and servicing agreement or
servicing agreement, exclusive of liabilities and obligations incurred by it prior to the time of the assignment.
Events of Default and Rights Upon Event of DefaultPooling and Servicing Agreement
Events of default under the pooling and servicing agreement in respect of a series of certificates, unless otherwise specified
in the prospectus supplement, will include:
o any failure by the master servicer to make a required deposit to the Distribution Account (other than a Monthly Advance)
which continues unremedied for 3 days (or other time period described in the related prospectus supplement) after the giving
of written notice of the failure to the master servicer;
o any failure by the master servicer to observe or perform in any material respect any other of its material covenants or
agreements in the pooling and servicing agreement with respect to the series of certificates, which covenants and agreements
materially affect the rights of certificateholders of such series, and which failure continues unremedied for a period of 60
days days (or other time period described in the related prospectus supplement) after the date on which written notice of
such failure, properly requiring the same to be remedied, shall have been given to the master servicer by the trustee, or to
the master servicer and the trustee by the holders of certificates evidencing not less than 25% of the aggregate undivided
interests (or, if applicable, voting rights) in the related trust fund;
o events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings regarding the master
servicer and some actions by the master servicer indicating its insolvency or inability to pay its obligations, as specified
in the related pooling and servicing agreement;
o any failure of the master servicer to make advances as described in this prospectus under "Description of the
Securities—Advances," by the date and time set forth in the pooling and servicing agreement;
o any assignment or delegation by the master servicer of its rights and duties under the pooling and servicing agreement, in
contravention of the provisions permitting assignment and delegation in the pooling and servicing agreement; and
o any other event of default as set forth in the pooling and servicing agreement.
Additional events of default will be described in the related prospectus supplement. A default pursuant to the terms of any mortgage
securities included in any trust fund will not constitute an event of default under the related pooling and servicing agreement.
So long as an event of default remains unremedied, either the trustee or holders of certificates evidencing not less than a
percentage specified in the related prospectus supplement of the aggregate undivided interests (or, if applicable, voting rights) in the
related trust fund as specified in the related pooling and servicing agreement may, by written notification to the master servicer (and
to the trustee if given by certificateholders), with the consent of EMC, terminate all of the rights and obligations of the master
servicer under the pooling and servicing agreement (other than any right of the master servicer as certificateholder and other than the
right to receive servicing compensation and expenses for master servicing the mortgage loans during any period prior to the date of the
termination) covering the trust fund and in and to the mortgage loans and the proceeds thereof. Upon such notification, the trustee or,
upon notice to the depositor and with the depositor's (or an affiliate of the depositor's) consent, its designee will succeed to all
responsibilities, duties and liabilities of the master servicer under the pooling and servicing agreement (other than any obligation to
purchase mortgage loans) and will be entitled to similar compensation arrangements. In the event that the trustee would be obligated to
succeed the master servicer but is unwilling so to act, it may appoint (or if it is unable so to act, it shall appoint) or petition a
court of competent jurisdiction for the appointment of, an established mortgage loan servicing institution with a net worth of at least
an amount specified in the related prospectus supplement to act as successor to the master servicer under the pooling and servicing
agreement (unless otherwise set forth in the pooling and servicing agreement). Pending an appointment, the trustee is obligated to act
as master servicer. The trustee and the successor may agree upon the servicing compensation to be paid, which in no event may be greater
than the compensation to the initial master servicer under the pooling and servicing agreement. Notwithstanding the above, upon a
termination or resignation of the master servicer in accordance with terms of the pooling and servicing agreement, EMC shall have the
right to either assume the duties of the master servicer or appoint a successor master servicer meeting the requirements set forth in
the pooling and servicing agreement. In addition, even if none of the events of default listed above under "—Events of Default andRights Upon Event of Default — Pooling and Servicing Agreement" have occurred, EMC will have the right under the pooling and servicing
agreement to terminate the master servicer without cause and either assume the duties of the master servicer or a appoint a successor
master servicer meeting the requirements set forth in the pooling and servicing agreement.
No certificateholder will have any right under a pooling and servicing agreement to institute any proceeding with respect to
the pooling and servicing agreement unless (1) that holder previously gave the trustee written notice of a default that is continuing,
(2) the holders of certificates evidencing not less than the percentage specified in the related prospectus supplement of the aggregate
undivided interests (or, if applicable, voting rights) in the related trust fund requested the trustee in writing to institute the
proceeding in its own name as trustee and shall have offered to the trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities that may be incurred in or because of the proceeding and (3) the trustee for 60 days after receipt of
the request and indemnity has neglected or refused to institute any proceeding.
The holders of certificates representing at least 51% of the aggregate undivided interests (or, if applicable, voting rights)
evidenced by those certificates may waive the default or event of default (other than a failure by the master servicer to make an
advance); provided, however, that (1) a default or event of default under the first or fourth items listed under "—Events of Default"
above may be waived only by all of the holders of certificates affected by the default or event of default and (2) no waiver shall
reduce in any manner the amount of, or delay the timing of, payments received on mortgage loans which are required to be distributed to,
or otherwise materially adversely affect, any non-consenting certificateholder.
Servicing Agreement
For a series of notes, a servicing default under the related servicing agreement generally will include:
o any failure by the master servicer to make a required deposit to the Distribution Account or, if the master servicer
is so required, to distribute to the holders of any class of notes or Equity Certificates of the series any required
payment which continues unremedied for 5 business days (or other period of time described in the related prospectus
supplement) after the giving of written notice of the failure to the master servicer by the trustee or the Issuing
Entity;
o any failure by the master servicer to observe or perform in any material respect any other of its material covenants
or agreements in the servicing agreement with respect to the series of securities, which covenants and agreements
materially affect the rights of the securityholders of such series, and which failure continues unremedied for a
period of 60 days after the date on which written notice of such failure, properly requiring the same to be remedied,
shall have been given to the master servicer by the trustee or the Issuing Entity;
o events of insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings regarding the
master servicer and some actions by the master servicer indicating its insolvency or inability to pay its obligations,
as specified in the related servicing agreement;
o any failure of the master servicer to make advances as described in this prospectus under "Description of the
Securities—Advances," and
o any other servicing default as set forth in the servicing agreement.
So long as a servicing default remains unremedied, either the trustee or holders of notes evidencing not less than a percentage
specified in the related prospectus supplement of the voting rights of the related trust fund, as specified in the related servicing
agreement may, by written notification to the master servicer and to the Issuing Entity (and to the trustee if given by noteholders),
with the consent of EMC, terminate all of the rights and obligations of the master servicer under the servicing agreement (other than
any right of the master servicer as noteholder or as holder of the Equity Certificates and other than the right to receive servicing
compensation and expenses for master servicing the mortgage loans during any period prior to the date of the termination), whereupon the
trustee will succeed to all responsibilities, duties and liabilities of the master servicer under the servicing agreement (other than
any obligation to purchase mortgage loans) and will be entitled to similar compensation arrangements. In the event that the trustee
would be obligated to succeed the master servicer but is unwilling so to act, it may appoint (or if it is unable so to act, it shall
appoint) or petition a court of competent jurisdiction for the appointment of an approved mortgage servicing institution with a net
worth of at least an amount specified in the related prospectus supplement to act as successor to the master servicer under the
servicing agreement (unless otherwise set forth in the servicing agreement). Pending the appointment, the trustee is obligated to act in
the capacity. The trustee and the successor may agree upon the servicing compensation to be paid, which in no event may be greater than
the compensation to the initial master servicer under the servicing agreement. Notwithstanding the above, upon a termination or
resignation of the master servicer in accordance with terms of the servicing agreement, EMC shall have the right to either assume the
duties of the master servicer or appoint a successor master servicer meeting the requirements set forth in the servicing agreement. In
addition, even if none of the events of default listed above under "—Events of Default and Rights Upon Event of Default— ServicingAgreement" have occurred, EMC will have the right under the related servicing agreement to terminate the master servicer without cause
and either assume the duties of the master servicer or a appoint a successor master servicer meeting the requirements set forth in the
related servicing agreement.
Indenture
For a series of notes, an event of default under the indenture generally will include:
o a default for five days or more (or other period of time described in the related prospectus supplement) in the
payment of any principal of or interest on any note of the series;
o failure to perform any other covenant of the Depositor in the indenture which continues for a period of thirty days
after notice thereof is given in accordance with the procedures described in the related indenture;
o any representation or warranty made by the Depositor in the indenture or in any certificate or other writing delivered
pursuant thereto or in connection therewith with respect to or affecting the series having been incorrect in a
material respect as of the time made, and the breach is not cured within thirty days after notice thereof is given in
accordance with the procedures described in the related indenture;
o events of bankruptcy, insolvency, receivership or liquidation of the Depositor, as specified in the indenture; or
o any other event of default provided with respect to notes of that series.
If an event of default with respect to the notes of any series at the time outstanding occurs and is continuing, the trustee or
the holders of a majority of the then aggregate outstanding amount of the notes of the series may declare the principal amount of all
the notes of the series to be due and payable immediately. The declaration may, in some circumstances, be rescinded and annulled by the
holders of a majority in aggregate outstanding amount of the related notes.
If following an event of default with respect to any series of notes, the notes of the series have been declared to be due and
payable, the trustee may, in its discretion, notwithstanding the acceleration, elect to maintain possession of the collateral securing
the notes of the series and to continue to apply payments on the collateral as if there had been no declaration of acceleration if the
collateral continues to provide sufficient funds for the payment of principal of and interest on the notes of the series as they would
have become due if there had not been a declaration. In addition, the trustee may not sell or otherwise liquidate the collateral
securing the notes of a series following an event of default, unless (1) the holders of 100% of the then aggregate outstanding amount of
the notes of the series consent to the sale, (2) the proceeds of the sale or liquidation are sufficient to pay in full the principal of
and accrued interest, due and unpaid, on the outstanding notes of the series at the date of the sale or (3) the trustee determines that
the collateral would not be sufficient on an ongoing basis to make all payments on the notes as the payments would have become due if
the notes had not been declared due and payable, and the trustee obtains the consent of the holders of a percentage specified in the
related prospectus supplement of the then aggregate outstanding amount of the notes of the series.
In the event that the trustee liquidates the collateral in connection with an event of default, the indenture provides that the
trustee will have a prior lien on the proceeds of the liquidation for unpaid fees and expenses. As a result, upon the occurrence of an
event of default, the amount available for payments to the noteholders would be less than would otherwise be the case. However, the
trustee may not institute a proceeding for the enforcement of its lien except in connection with a proceeding for the enforcement of the
lien of the indenture for the benefit of the noteholders after the occurrence of the event of default.
In the event the principal of the notes of a series is declared due and payable, as described above, the holders of the notes
issued at a discount from par may be entitled to receive no more than an amount equal to the unpaid principal amount thereof less the
amount of the discount that is unamortized.
No noteholder or holder of an Equity Certificate generally will have any right under an owner trust agreement or indenture to
institute any proceeding with respect to the Agreement unless (1) that holder previously has given to the trustee written notice of
default and the continuance thereof, (2) the holders of notes or Equity Certificates of any class evidencing not less than 25% of the
aggregate Percentage Interests constituting that class (a) have made written request upon the trustee to institute the proceeding in its
own name as trustee and (b) have offered to the trustee reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred in or because of the proceeding, (3) the trustee has neglected or refused to institute the proceeding for 60 days
after receipt of the request and indemnity and (4) no direction inconsistent with the written request has been given to the trustee
during the 60 day period by the holders of a majority of the aggregate Percentage Interests constituting that class.
Amendment
Each pooling and servicing agreement may be amended by the parties thereto, without the consent of any of the holders of
certificates covered by the pooling and servicing agreement,
o to cure any ambiguity,
o to correct or supplement any provision therein which may be defective or inconsistent with any other provision therein,
o if a REMIC election has been made with respect to the related trust fund, to modify, eliminate or add to any of its
provisions (A) to the extent as shall be necessary to maintain the qualification of the trust fund as a REMIC or to avoid or
minimize the risk of imposition of any tax on the related trust fund, provided that the trustee has received an opinion of
counsel to the effect that (1) the action is necessary or desirable to maintain the qualification or to avoid or minimize the
risk, and (2) the action will not adversely affect in any material respect the interests of any holder of certificates
covered by the pooling and servicing agreement, or (B) to restrict the transfer of the REMIC Residual Certificates, provided
that the depositor has determined that the then-current ratings of the classes of the certificates that have been rated will
not be adversely affected, as evidenced by a letter from each applicable Rating Agency, and that the amendment will not give
rise to any tax with respect to the transfer of the REMIC Residual Certificates to a non-permitted transferee,
o to make any other provisions with respect to matters or questions arising under the pooling and servicing agreement which are
not materially inconsistent with the provisions thereof, provided that the action will not adversely affect in any material
respect the interests of any certificateholder, or
o to comply with any changes in the Code.
The pooling and servicing agreement may also be amended by the parties thereto with the consent of the holders of certificates
evidencing over 50% of the aggregate Percentage Interests of the trust fund or of the applicable class or classes, if such amendment
affects only such class or classes, for the purpose of adding any provisions to or changing in any manner or eliminating any of the
provisions of the pooling and servicing agreement or of modifying in any manner the rights of the holders of certificates covered by the
pooling and servicing agreement, except that the amendment may not (1) reduce in any manner the amount of, or delay the timing of,
payments received on mortgage loans which are required to be distributed on a certificate of any class without the consent of the holder
of the certificate or (2) reduce the aforesaid percentage of certificates of any class the holders of which are required to consent to
the amendment without the consent of the holders of all certificates of the class covered by the pooling and servicing agreement then
outstanding.
With respect to each series of notes, each related servicing agreement or indenture may be amended by the parties thereto
without the consent of any of the holders of the notes covered by the Agreement, to cure any ambiguity, to correct, modify or supplement
any provision therein, or to make any other provisions with respect to matters or questions arising under the Agreement which are not
inconsistent with the provisions thereof, provided that the action will not adversely affect in any material respect the interests of
any holder of notes covered by the Agreement. Each Agreement may also be amended by the parties thereto with the consent of the holders
of notes evidencing not less than the percentage specified in the related prospectus supplement of the voting rights, for any purpose;
provided, however, that the amendment may not:
(1) reduce in any manner the amount of or delay the timing of, payments received on trust fund assets which are
required to be distributed on any certificate without the consent of the holder of the certificate,
(2) adversely affect in any material respect the interests of the holders of any class of notes in a manner other
than as described in (1), without the consent of the holders of notes of the class evidencing not less than
the percentage specified in the related prospectus supplement of the aggregate Percentage Interests of the
trust fund or of the applicable class or classes, if such amendment affects only such class or classes or
(3) reduce the aforesaid percentage of voting rights required for the consent to the amendment without the consent
of the holders of all notes covered by the Agreement then outstanding.
The voting rights evidenced by any security will be the portion of the voting rights of all of the securities in the related series
allocated in the manner described in the related prospectus supplement.
Notwithstanding the foregoing, if a REMIC election has been made with respect to the related trust fund, the trustee or
indenture trustee will not be entitled to consent to any amendment to a pooling and servicing agreement or an indenture without having
first received an opinion of counsel to the effect that the amendment or the exercise of any power granted to the master servicer, the
depositor, the trustee or indenture trustee, or any other specified person in accordance with the amendment will not result in the
imposition of a tax on the related trust fund or cause the trust fund to fail to qualify as a REMIC.
The Master Servicer and any director, officer, employee or agent of 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 under the transaction documents.
Termination; Retirement of Securities
The obligations created by the related Agreements for each series of securities (other than the limited payment and notice
obligations of the trustee) will terminate upon the payment to securityholders of that series of all amounts held in the Distribution
Account or by the master servicer and required to be paid to them pursuant to the Agreements following the earlier of, (1) the final
payment or other liquidation or disposition (or any advance with respect thereto) of the last mortgage loan, REO property and/or
mortgage security subject thereto and (2) the purchase by the master servicer, a servicer, the depositor or its designee (or (a) if
specified in the related prospectus supplement with respect to each series of certificates, by the holder of the REMIC Residual
Certificates (see "Federal Income Tax Consequences" below) or (b) if specified in the prospectus supplement with respect to each series
of notes, by the holder of the Equity Certificates) from the trust fund for the series of all remaining mortgage loans, REO properties
and/or mortgage securities. In addition to the foregoing, the master servicer, a servicer, the depositor or its designee may have the
option to purchase, in whole but not in part, the securities specified in the related prospectus supplement in the manner set forth in
the related prospectus supplement. With respect to any series of certificates which provides for such a purchase, the purchase shall not
be made unless either: (1) the aggregate principal balance of the certificates as of the date is equal to or less than the percentage
specified in the related prospectus supplement of the aggregate principal balance of the certificates as of the Closing Date or (2) the
aggregate principal balance of the mortgage loans as of the date is equal to or less than the percentage specified in the related
prospectus supplement of the aggregate principal balance of the mortgage loans as of the cut-off date. In the event that any series of
certificates which provides for such a purchase at 25% or more of the aggregate principal balance outstanding, the certificates will use
the word "Callable" in their title. With respect to any series of notes which provides for such a purchase, the purchase shall not be
made unless the aggregate principal balance of the notes as of the date is equal to or less than the percentage specified in the related
prospectus supplement of the aggregate principal balance of the notes as of the Closing Date or a period specified in the related
prospectus supplement has elapsed since the initial distribution date. In the event that any series of notes which provides for such a
purchase at 25% or more of the aggregate principal balance outstanding, the notes will use the word "Callable" in their title. Upon the
purchase of the securities or at any time thereafter, at the option of the master servicer, a servicer, the depositor or its designee,
the assets of the trust fund may be sold, thereby effecting a retirement of the securities and the termination of the trust fund, or the
securities so purchased may be held or resold by the master servicer, the depositor or its designee. In no event, however, unless
otherwise provided in the prospectus supplement, will a trust created by a pooling and servicing agreement related to a series of
certificates continue beyond the expiration of 21 years from the death of the survivor of the persons named in the pooling and servicing
agreement. Written notice of termination of the pooling and servicing agreement will be given to each securityholder, and the final
distribution will be made only upon surrender and cancellation of the securities at an office or agency appointed by the trustee which
will be specified in the notice of termination. If the securityholders are permitted to terminate the trust under the applicable pooling
and servicing agreement, a penalty may be imposed upon the securityholders based upon the fee that would be foregone by the master
servicer because of the termination.
The purchase of mortgage loans and property acquired in respect of mortgage loans evidenced by a series of securities shall be
made at the option of the master servicer, a servicer, the depositor, its designee or, if applicable, the holder of the REMIC Residual
Certificates or Equity Certificates at the price specified in the related prospectus supplement. The exercise of the right will effect
early retirement of the securities of that series, but the right of the master servicer, a servicer, the depositor, its designee or, if
applicable, the holder to so purchase is subject to the aggregate principal balance of the mortgage loans and/or mortgage securities in
the trust fund for that series as of the distribution date on which the purchase is to occur being less than the percentage specified in
the related prospectus supplement of the aggregate principal balance of the mortgage loans and/or mortgage securities at the cut-off
date or closing date, as specified in the prospectus supplement, for that series. The prospectus supplement for each series of
securities will set forth the amounts that the holders of the securities will be entitled to receive upon the early retirement. The
early termination may adversely affect the yield to holders of the securities. With respect to any series of certificates, an optional
purchase of the mortgage loans in the related trust fund may not result in the related certificates receiving an amount equal to the
principal balance thereof plus accrued and unpaid interest and any undistributed shortfall on the related certificates. If a REMIC
election has been made, the termination of the related trust fund will be effected in a manner consistent with applicable federal income
tax regulations and its status as a REMIC.
Following any optional termination, there will be no continuing direct or indirect liability of the trust fund or any
securityholder as sellers of the assets of the trust fund.
The Securities Administrator
Each prospectus supplement for a series of securities may provide for a securities administrator which shall be responsible for
performing certain administrative and tax functions typically performed by the trustee. The securities administrator shall at all times
be a corporation or an association organized and doing business under the laws of any state or the United States of America, authorized
under the laws to exercise corporate trust powers, having a combined capital and surplus of at least $40,000,000 and subject to
supervision or examination by federal or state authority. The entity that serves as securities administrator may have typical banking or
other relationships with the depositor and its affiliates. The securities administrator may also act as master servicer for a series of
securities.
Duties of Securities Administrator
The securities administrator for each series of securities will make no representation as to the validity or sufficiency of the
related Agreements, the securities or any underlying mortgage loan, mortgage security or related document and will not be accountable
for the use or application by or on behalf of any master servicer (unless the securities administrator is also acting as master
servicer), servicer or special servicer of any funds paid to the master servicer, servicer or special servicer in respect of the
securities or the underlying mortgage loans or mortgage securities, or any funds deposited into or withdrawn from the Distribution
Account for the series or any other account by or on behalf of the master servicer, servicer or special servicer. The securities
administrator for each series of securities will be required to perform only those duties specifically required under the related
Agreement. However, upon receipt of any of the various certificates, reports or other instruments required to be furnished to it
pursuant to the related Agreement, a securities administrator will be required to examine the documents and to determine whether they
conform to the requirements of the agreement.
Some Matters Regarding the Securities Administrator
As and to the extent described in the related prospectus supplement, the fees and normal disbursements of any securities
administrator may be the expense of the related master servicer or other specified person or may be required to be borne by the related
trust fund.
The securities administrator for each series of securities generally will be entitled to indemnification from amounts held in
the Distribution Account for the series, for any loss, liability or expense incurred by the securities administrator in connection with
the securities administrator's administration of the trust under the related pooling and servicing agreement or indenture unless the
loss, liability, cost or expense was incurred by reason of willful misfeasance, bad faith or negligence on the part of the securities
administrator in the performance of its obligations and duties, or by reason of its reckless disregard of its obligations or duties.
Resignation and Removal of the Securities Administrator
The securities administrator for each series of securities may resign at any time, in which event the depositor will be
obligated to appoint a successor securities administrator. The depositor may also remove the securities administrator if the securities
administrator ceases to be eligible to continue as such under the pooling and servicing agreement or indenture or if the securities
administrator becomes incapable of acting, bankrupt, insolvent or if a receiver or public officer takes charge of the securities
administrator or its property. Upon such resignation or removal of the securities administrator, the depositor will be entitled to
appoint a successor securities administrator. The securities administrator may also be removed at any time by the holders of securities
evidencing ownership of not less than the percentage specified in the related prospectus supplement of the trust. In the event that the
securityholders remove the securities administrator, the compensation of any successor securities administrator shall be paid by the
securityholders to the extent that such compensation exceeds the amount agreed to by the depositor and the original securities
administrator. Any resignation or removal of the securities administrator and appointment of a successor securities administrator will
not become effective until acceptance of the appointment by the successor securities administrator.
The Trustee
The trustee under each pooling and servicing agreement and indenture will be named in the related prospectus supplement. The
trustee shall at all times be a corporation or an association organized and doing business under the laws of any state or the United
States of America, authorized under the laws to exercise corporate trust powers, having a combined capital and surplus of at least
$40,000,000 and subject to supervision or examination by federal or state authority. The entity that serves as trustee may have typical
banking relationships with the depositor and its affiliates.
Duties of the Trustee
The trustee for each series of securities will make no representation as to the validity or sufficiency of the related
Agreements, the securities or any underlying mortgage loan, mortgage security or related document and will not be accountable for the
use or application by or on behalf of any master servicer, servicer or special servicer of any funds paid to the master servicer,
servicer or special servicer in respect of the securities or the underlying mortgage loans or mortgage securities, or any funds
deposited into or withdrawn from the Distribution Account for the series or any other account by or on behalf of the master servicer,
servicer or special servicer. If no event of default has occurred and is continuing, the trustee for each series of securities will be
required to perform only those duties specifically required under the related pooling and servicing agreement or indenture. However,
upon receipt of any of the various certificates, reports or other instruments required to be furnished to it pursuant to the related
Agreement, a trustee will be required to examine the documents and to determine whether they conform to the requirements of the
agreement.
If an Event of Default shall occur, the trustee shall, by notice in writing to the master servicer, which may be delivered by
telecopy, immediately terminate all of the rights and obligations (but not the liabilities) of the master servicer thereafter arising
under the Agreements, but without prejudice to any rights it may have as a security holder or to reimbursement of Monthly Advances and
other advances of its own funds. Upon the receipt by the master servicer of the written notice, all authority and power of the master
servicer under the Agreements, whether with respect to the securities, the Mortgage Loans, REO Property or under any other related
agreements (but only to the extent that such other agreements relate to the Mortgage Loans or related REO Property) shall automatically
and without further action pass to and be vested in the trustee. The trustee shall act to carry out the duties of the master servicer,
including the obligation to make any Monthly Advance the nonpayment of which was an Event of Default. Any such action taken by the
trustee must be prior to the distribution on the relevant Distribution Date.
Upon the receipt by the master servicer of a notice of termination, the trustee shall automatically become the successor in all
respects to the master servicer in its capacity under the Agreements and the transactions set forth or provided for therein and shall
thereafter be subject to all the responsibilities, duties, liabilities and limitations on liabilities relating thereto placed on the
master servicer by the terms and provisions thereof; provided, however, that the sponsor shall have the right to either (a) immediately
assume the duties of the master servicer or (b) select a successor master servicer; provided further, however, that the trustee shall
have no obligation whatsoever with respect to any liability (other than advances deemed recoverable and not previously made) incurred by
the master servicer at or prior to the time of termination. As compensation, the trustee shall be entitled to compensation which the
master servicer would have been entitled to retain if the master servicer had continued to act thereunder, except for those amounts due
the master servicer as reimbursement permitted under the Agreements for advances previously made or expenses previously incurred.
Notwithstanding the above, the trustee may, if it shall be unwilling so to act, or shall, if it is legally unable so to act, appoint or
petition a court of competent jurisdiction to appoint, any established housing and home finance institution which is a Fannie Mae- or
Freddie Mac-approved servicer, and with respect to a successor to the master servicer only, having a net worth of not less than an
amount specified in the related prospectus supplement, 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; provided, that the trustee shall obtain a letter
from each rating agency that the ratings, if any, on each of the securities will not be lowered as a result of the selection of the
successor to the master servicer. Pending appointment of a successor to the master servicer, the trustee shall act in such capacity as
hereinabove provided. In connection with such appointment and assumption, the trustee may make such arrangements for the compensation of
such successor out of payments on the Mortgage Loans as it and such successor shall agree; provided, however, that the provisions of the
Agreements shall apply, the compensation shall not be in excess of that which the master servicer would have been entitled to if the
master servicer had continued to act hereunder, and that such successor shall undertake and assume the obligations of the Trustee to pay
compensation to any third Person acting as an agent or independent contractor in the performance of master servicing responsibilities
hereunder. The trustee and such successor shall take such action, consistent with the Agreements, as shall be necessary to effectuate
any such succession.
If the trustee shall succeed to any duties of the master servicer respecting the Mortgage Loans as provided herein, it shall do
so in a separate capacity and not in its capacity as trustee and, accordingly, the provisions of the Agreements concerning the trustee's
duties shall be inapplicable to the trustee in its duties as the successor to the master servicer in the servicing of the Mortgage Loans
(although such provisions shall continue to apply to the trustee in its capacity as trustee); the provisions of the Agreements relating
to the master servicer, however, shall apply to it in its capacity as successor master servicer.
Upon any termination or appointment of a successor to the master servicer, the trustee shall give prompt written notice thereof
to security holders of record pursuant to the Agreements and to the rating agencies.
The trustee shall transmit by mail to all securityholders, within the number of days specified by the Agreements after the
occurrence of any Event of Default actually known to a responsible officer of the trustee, unless such Event of Default shall have been
cured, notice of each such Event of Default. In the event that the security holders waive the Event of Default pursuant to the
Agreements, the trustee shall give notice of any such waiver to the rating agencies.
Upon written request of three or more securityholders of record, for purposes of communicating with other securityholders with
respect to their rights under the Agreements, the trustee will afford such securityholders access during business hours to the most
recent list of securityholders held by the trustee.
Some Matters Regarding the Trustee
As and to the extent described in the related prospectus supplement, the fees and normal disbursements of any trustee may be
the expense of the related master servicer or other specified person or may be required to be borne by the related trust fund.
The trustee for each series of securities generally will be entitled to indemnification from amounts held in the Distribution
Account for the series, for any loss, liability or expense incurred by the trustee in connection with the trustee's acceptance or
administration of its trusts under the related pooling and servicing agreement or indenture unless the loss, liability, cost or expense
was incurred by reason of willful misfeasance, bad faith or negligence on the part of the trustee in the performance of its obligations
and duties, or by reason of its reckless disregard of its obligations or duties.
Resignation and Removal of the Trustee
The trustee may resign at any time, in which event the depositor will be obligated to appoint a successor trustee. The
depositor may also remove the trustee if the trustee ceases to be eligible to continue under the pooling and servicing agreement or if
the trustee becomes insolvent. Upon becoming aware of the circumstances, the depositor will be obligated to appoint a successor trustee.
The trustee may also be removed at any time by the holders of securities evidencing not less than the percentage specified in the
related prospectus supplement of the aggregate undivided interests (or, if applicable, voting rights) in the related trust fund. Any
resignation or removal of the trustee and appointment of a successor trustee will not become effective until acceptance of the
appointment by the successor trustee. If the trustee resigns or is removed by the depositor, the expenses associated with the change of
trustees will be paid by the former trustee and reimbursed from the Distribution Account by the paying agent. If the trustee is removed
by holders of securities, such holders shall be responsible for paying any compensation payable to a successor trustee, in excess of the
amount paid to the predecessor trustee.
YIELD CONSIDERATIONS
The yield to maturity of an offered security will depend on the price paid by the holder for the security, the security
interest rate on a security entitled to payments of interest (which security interest rate may vary if so specified in the related
prospectus supplement) and the rate and timing of principal payments (including prepayments, defaults, liquidations and repurchases) on
the mortgage loans and the allocation thereof to reduce the principal balance of the security (or notional amount thereof if applicable)
and other factors.
A class of securities may be entitled to payments of interest at a fixed security interest rate, a variable security interest
rate or adjustable security interest rate, or any combination of security interest rates, each as specified in the related prospectus
supplement. A variable security interest rate may be calculated based on the weighted average of the Net Mortgage Rates of the related
mortgage loans, or the weighted average of the interest rates (which may be net of trustee fees) paid on the mortgage securities, for
the month preceding the distribution date if so specified in the related prospectus supplement. As will be described in the related
prospectus supplement, the aggregate payments of interest on a class of securities, and their yield to maturity, will be affected by the
rate of payment of principal on the securities (or the rate of reduction in the notional balance of securities entitled only to payments
of interest), in the case of securities evidencing interests in ARM Loans, by changes in the Net Mortgage Rates on the ARM Loans, and in
the case of securities evidencing interests in mortgage securities with floating or variable rates, by changes in such rates and the
indices on which they are based. See "Maturity and Prepayment Considerations" below. The yield on the securities will also be affected
by liquidations of mortgage loans following mortgagor defaults and by purchases of mortgage loans in the event of breaches of
representations and warranties made in respect of the mortgage loans by the depositor, the master servicer and others, or conversions of
ARM Loans to a fixed interest rate. See "The Mortgage Pools—Representations by Sellers" and "Descriptions of the Securities—Assignment
of Trust Fund Assets" above. Holders of Strip Securities or a class of securities having a security interest rate that varies based on
the weighted average mortgage rate of the underlying mortgage loans may be affected by disproportionate prepayments and repurchases of
mortgage loans having higher Net Mortgage Rates or rates applicable to the Strip Securities, as applicable.
With respect to any series of securities, a period of time will elapse between the date upon which payments on the related
mortgage loans are due and the distribution date on which the payments are passed through to securityholders. That delay will
effectively reduce the yield that would otherwise be produced if payments on the mortgage loans were distributed to securityholders on
or near the date they were due.
In general, if a class of securities is purchased at initial issuance at a premium and payments of principal on the related
mortgage loans occur at a rate faster than anticipated at the time of purchase, the purchaser's actual yield to maturity will be lower
than that assumed at the time of purchase. Similarly, if a class of securities is purchased at initial issuance at a discount and
payments of principal on the related mortgage loans occur at a rate slower than that assumed at the time of purchase, the purchaser's
actual yield to maturity will be lower than that originally anticipated. The effect of principal prepayments, liquidations and purchases
on yield will be particularly significant in the case of a series of securities having a class entitled to payments of interest only or
to payments of interest that are disproportionately high relative to the principal payments to which the class is entitled. Such a class
will likely be sold at a substantial premium to its principal balance and any faster than anticipated rate of prepayments will adversely
affect the yield to its holders. Extremely rapid prepayments may result in the failure of such holders to recoup their original
investment. In addition, the yield to maturity on other types of classes of securities, including Accrual Securities and securities with
a security interest rate which fluctuates inversely with or at a multiple of an index, may be relatively more sensitive to the rate of
prepayment on the related mortgage loans than other classes of securities.
The timing of changes in the rate of principal payments on or repurchases of the mortgage loans may significantly affect an
investor's actual yield to maturity, even if the average rate of principal payments experienced over time is consistent with an
investor's expectation. In general, the earlier a prepayment of principal on the underlying mortgage loans or a repurchase thereof, the
greater will be the effect on an investor's yield to maturity. As a result, the effect on an investor's yield of principal payments and
repurchases occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the
issuance of a series of securities would not be fully offset by a subsequent like reduction (or increase) in the rate of principal
payments.
When a principal prepayment in full is made on a mortgage loan, the borrower is generally charged interest only for the period
from the due date of the preceding scheduled payment up to the date of the prepayment, instead of for the full accrual period, that is,
the period from the due date of the preceding scheduled payment up to the due date for the next scheduled payment. In addition, a
partial principal prepayment may likewise be applied as of a date prior to the next scheduled due date (and, accordingly, be accompanied
by accrued interest for less than the full accrual period). However, interest accrued and distributable on any series of securities on
any distribution date will generally correspond to interest accrued on the principal balance of mortgage loans for their respective full
accrual periods. Consequently, if a prepayment on any mortgage loan is distributable to securityholders on a particular distribution
date, but the prepayment is not accompanied by accrued interest for the full accrual period, the interest charged to the borrower (net
of servicing and administrative fees and any retained interest of the depositor) may be less than the corresponding amount of interest
accrued and otherwise payable on the related mortgage loan, and a Prepayment Interest Shortfall will result. If and to the extent that
the shortfall is allocated to a class of offered securities, its yield will be adversely affected. The prospectus supplement for a
series of securities will describe the manner in which the shortfalls will be allocated among the classes of the securities. If so
specified in the related prospectus supplement, the master servicer, or the servicer servicing the mortgage loan which was prepaid, will
be required to apply some or all of its servicing compensation for the corresponding period to offset the amount of the shortfalls. The
related prospectus supplement will also describe any other amounts available to off set the shortfalls. See "Servicing of Mortgage
Loans—Servicing and Other Compensation and Payment of Expenses; Retained Interest" in this prospectus.
The trust fund with respect to any series may include ARM Loans. As is the case with conventional, fixed-rate mortgage loans
originated in a high interest rate environment which may be subject to a greater rate of principal prepayments when interest rates
decrease, ARM Loans may be subject to a greater rate of principal prepayments (or purchases by the related servicer or the master
servicer) due to their refinancing in a low interest rate environment. For example, if prevailing interest rates fall significantly, ARM
Loans could be subject to higher prepayment rates than if prevailing interest rates remain constant because the availability of
fixed-rate or other adjustable-rate mortgage loans at competitive interest rates may encourage mortgagors to refinance their
adjustable-rate mortgages to "lock in" a lower fixed interest rate or to take advantage of the availability of other adjustable-rate
mortgage loans. A rising interest rate environment may also result in an increase in the rate of defaults on the mortgage loans.
The trust fund with respect to any series may include convertible ARM Loans. Convertible ARM Loans may be subject to a greater
rate of principal prepayments (or purchases by the related servicer or the master servicer) due to their conversion to fixed interest
rate loans in a low interest rate environment. The conversion feature may also be exercised in a rising interest rate environment as
mortgagors attempt to limit their risk of higher rates. A rising interest rate environment may also result in an increase in the rate of
defaults on these mortgage loans. If the related servicer or the master servicer purchases convertible ARM Loans, a mortgagor's exercise
of the conversion option will result in a distribution of the principal portion thereof to the securityholders, as described in this
prospectus. Alternatively, to the extent a servicer or the master servicer fails to purchase converting ARM Loans, the mortgage pool
will include fixed-rate mortgage loans.
The rate of defaults on the mortgage loans will also affect the rate and timing of principal payments on the mortgage loans and
thus the yield on the securities. In general, defaults on single family loans are expected to occur with greater frequency in their
early years. The rate of default on single family loans which are refinanced or limited documentation mortgage loans, and on mortgage
loans, with high Loan-to-Value Ratios, may be higher than for other types of mortgage loans. Furthermore, the rate and timing of
prepayments, defaults and liquidations on the mortgage loans will be affected by the general economic condition of the region of the
country in which the related mortgaged properties are located. The risk of delinquencies and loss is greater and prepayments are less
likely in regions where a weak or deteriorating economy exists, as may be evidenced by, among other factors, increasing unemployment or
falling property values.
With respect to some mortgage loans in a mortgage pool, the mortgage rate at origination may be below the rate that would
result if the index and margin relating thereto were applied at origination. Under the applicable underwriting standards, the mortgagor
under each mortgage loan generally will be qualified, or the mortgage loan otherwise approved, on the basis of the mortgage rate in
effect at origination. The repayment of the mortgage loan may thus be dependent on the ability of the mortgagor to make larger level
monthly payments following the adjustment of the mortgage rate. In addition, the periodic increase in the amount paid by the mortgagor
of a buydown mortgage loan during or at the end of the applicable Buydown Period may create a greater financial burden for the
mortgagor, who might not have otherwise qualified for a mortgage under applicable underwriting guidelines, and may accordingly increase
the risk of default with respect to the related mortgage loan.
The mortgage rates on ARM Loans subject to negative amortization generally adjust monthly and their amortization schedules
adjust less frequently. During a period of rising interest rates as well as immediately after origination (initial mortgage rates are
generally lower than the sum of the Indices applicable at origination and the related Note Margins), the amount of interest accruing on
the principal balance of the mortgage loans may exceed the amount of their minimum scheduled monthly payment. As a result, a portion of
the accrued interest on negatively amortizing mortgage loans may become Deferred Interest which will be added to the principal balance
thereof and will bear interest at the applicable mortgage rate. The addition of the Deferred Interest to the principal balance of any
related class or classes of securities will lengthen the weighted average life thereof and may adversely affect yield to holders
thereof, depending upon the price at which the securities were purchased. In addition, with respect to ARM Loans subject to negative
amortization, during a period of declining interest rates, it might be expected that each minimum scheduled monthly payment on the
mortgage loan would exceed the amount of scheduled principal and accrued interest on the principal balance thereof, and since the excess
will be applied to reduce the principal balance of the related class or classes of securities, the weighted average life of the
securities will be reduced and may adversely affect the yield to holders thereof, depending upon the price at which the securities were
purchased.
MATURITY AND PREPAYMENT CONSIDERATIONS
As indicated above under "The Mortgage Pools," the original terms to maturity of the mortgage loans in a given mortgage pool
will vary depending upon the type of mortgage loans included in the mortgage pool. The prospectus supplement for a series of securities
will contain information with respect to the types and maturities of the mortgage loans in the related mortgage pool. The prepayment
experience with respect to the mortgage loans in a mortgage pool will affect the life and yield of the related series of securities.
With respect to balloon loans, payment of the balloon payment (which, based on the amortization schedule of the mortgage loans,
is expected to be a substantial amount) will generally depend on the mortgagor's ability to obtain refinancing of the mortgage loans or
to sell the mortgaged property prior to the maturity of the balloon loan. The ability to obtain refinancing will depend on a number of
factors prevailing at the time refinancing or sale is required, including real estate values, the mortgagor's financial situation,
prevailing mortgage loan interest rates, the mortgagor's equity in the related mortgaged property, tax laws and prevailing general
economic conditions. None of the depositor, the master servicer, a servicer or any of their affiliates will be obligated to refinance or
repurchase any mortgage loan or to sell the mortgaged property.
The extent of prepayments of principal of the mortgage loans may be affected by a number of factors, including solicitations
and the availability of mortgage credit, the relative economic vitality of the area in which the mortgaged properties are located and,
in the case of multifamily, commercial and mixed-use loans, the quality of management of the mortgage properties, the servicing of the
mortgage loans, possible changes in tax laws and other opportunities for investment. In addition, the rate of principal payments on the
mortgage loans may be affected by the existence of lock-out periods and requirements that principal prepayments be accompanied by
prepayment premiums, as well as due-on-sale and due-on-encumbrance provisions, and by the extent to which the provisions may be
practicably enforced. See "Servicing of Mortgage Loans—Collection and Other Servicing Procedures" and "Legal Aspects of the Mortgage
Loans—Enforceability of Certain Provisions" in this prospectus for a description of provisions of the pooling and servicing agreement
and legal aspects of mortgage loans that may affect the prepayment experience on the mortgage loans.
The rate of prepayment on a pool of mortgage loans is also affected by prevailing market interest rates for mortgage loans of a
comparable type, term and risk level. When the prevailing market interest rate is below a mortgage coupon, a borrower may have an
increased incentive to refinance its mortgage loan. In addition, as prevailing market interest rates decline, even borrowers with ARM
Loans that have experienced a corresponding interest rate decline may have an increased incentive to refinance for purposes of either
(1) converting to a fixed rate loan and thereby "locking in" the rate or (2) taking advantage of the initial "teaser rate" (a mortgage
interest rate below what it would otherwise be if the applicable index and gross margin were applied) on another adjustable rate
mortgage loan. Moreover, although the mortgage rates on ARM Loans will be subject to periodic adjustments, the adjustments generally
will not increase or decrease the mortgage rates by more than a fixed percentage amount on each adjustment date, will not increase the
mortgage rates over a fixed percentage amount during the life of any ARM Loan and will be based on an index (which may not rise and fall
consistently with mortgage interest rates) plus the related Note Margin (which may be different from margins being used at the time for
newly originated adjustable rate mortgage loans). As a result, the mortgage rates on the ARM Loans at any time may not equal the
prevailing rates for similar, newly originated adjustable rate mortgage loans. In high interest rate environments, the prevailing rates
on fixed-rate mortgage loans may be sufficiently high in relation to the then-current mortgage rates on newly originated ARM Loans that
the rate of prepayment may increase as a result of refinancings. There can be no assurance as to the rate of prepayments on the mortgage
loans during any period or over the life of any series of securities.
If the applicable pooling and servicing agreement for a series of securities provides for a pre-funding account or other means
of funding the transfer of additional mortgage loans to the related trust fund, as described under "Description of the
Securities—Pre-Funding Account" in this prospectus, and the trust fund is unable to acquire the additional mortgage loans within any
applicable time limit, the amounts set aside for the purpose may be applied as principal payments on one or more classes of securities
of the series. See "Yield Considerations" in this prospectus for a description of certain provisions of the mortgage loans that may
affect the prepayment experience on the mortgage loans.
There can be no assurance as to the rate of prepayment of the mortgage loans. The depositor is not aware of any publicly
available statistics relating to the principal prepayment experience of diverse portfolios of mortgage loans such as the mortgage loans
over an extended period of time. All statistics known to the depositor that have been compiled with respect to prepayment experience on
mortgage loans indicate that while some mortgage loans may remain outstanding until their stated maturities, a substantial number will
be paid prior to their respective stated maturities. No representation is made as to the particular factors that will affect the
prepayment of the mortgage loans or as to the relative importance of these factors.
As described in this prospectus and in the prospectus supplement, the master servicer, the depositor, an affiliate of the
depositor or a person specified in the related prospectus supplement (other than holder of any class of offered certificates, other than
the REMIC Residual Certificates, if offered) may have the option to purchase the assets in a trust fund and effect early retirement of
the related series of securities. See "The Agreements—Termination; Retirement of Securities" in this prospectus.
LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion summarizes legal aspects of mortgage loans that is general in nature. The summaries do not purport to
be complete. They do not reflect the laws of any particular state nor the laws of all states in which the mortgaged properties may be
situated. This is because these legal aspects are governed in part by the law of the state that applies to a particular mortgaged
property and the laws of the states may vary substantially. You should refer to the applicable federal and state laws governing the
mortgage loans.
Mortgages
Each single family, multifamily, commercial and mixed-use loan and, if applicable, the Contracts (in each case other than
cooperative mortgage loans),will be evidenced by a note or bond and secured by an instrument granting a security interest in real
property, which may be a mortgage, deed of trust or a deed to secure debt, depending upon the prevailing practice and law in the state
in which the related mortgaged property is located, and may have first, second or third priority. Mortgages and deeds to secure debt are
referred to as "mortgages."Contracts evidence both the obligation of the obligor to repay the loan evidenced thereby and grant a
security interest in the related Manufactured Homes to secure repayment of the loan. However, as Manufactured Homes have become larger
and often have been attached to their sites without any apparent intention by the borrowers to move them, courts in many states have
held that Manufactured Homes may become subject to real estate title and recording laws. See "—Contracts" below. In some states, a
mortgage or deed of trust creates a lien upon the real property encumbered by the mortgage or deed of trust. However, in other states,
the mortgage or deed of trust conveys legal title to the property respectively, to the mortgagee or to a trustee for the benefit of the
mortgagee subject to a condition subsequent (i.e., the payment of the indebtedness secured thereby). The lien created by the mortgage or
deed of trust is not prior to the lien for real estate taxes and assessments and other charges imposed under governmental police powers.
Priority between mortgages depends on their terms or on the terms of separate subordination or inter-creditor agreements, the knowledge
of the parties in some cases and generally on the order of recordation of the mortgage in the appropriate recording office. There are
two parties to a mortgage, the mortgagor, who is the borrower and homeowner, and the mortgagee, who is the lender. Under the mortgage
instrument, the mortgagor delivers to the mortgagee a note or bond and the mortgage. In the case of a land trust, there are three
parties because title to the property is held by a land trustee under a land trust agreement of which the borrower is the beneficiary;
at origination of a mortgage loan, the borrower executes a separate undertaking to make payments on the mortgage note. Although a deed
of trust is similar to a mortgage, a deed of trust has three parties: the trustor who is the borrower-homeowner; the beneficiary who is
the lender; and a third-party grantee called the trustee. Under a deed of trust, the borrower grants the property, irrevocably until the
debt is paid, in trust, generally with a power of sale, to the trustee to secure payment of the obligation. The trustee's authority
under a deed of trust, the grantee's authority under a deed to secure debt and the mortgagee's authority under a mortgage are governed
by the law of the state in which the real property is located, the express provisions of the deed of trustor mortgage, and, in deed of
trust transactions, the directions of the beneficiary.
Cooperative Mortgage Loans
If specified in the prospectus supplement relating to a series of certificates, the mortgage loans and Contracts may include
cooperative mortgage loans. Each mortgage note evidencing a cooperative mortgage loan will be secured by a security interest in shares
issued by the related Cooperative, and in the related proprietary lease or occupancy agreement granting exclusive rights to occupy a
specific dwelling unit in the Cooperative's building. The security agreement will create a lien upon the shares of the Cooperative, the
priority of which will depend on, among other things, the terms of the particular security agreement as well as the order of recordation
and/or filing of the agreement (or financing statements related thereto) in the appropriate recording office.
Cooperative buildings relating to the cooperative mortgage loans are located primarily in the State of New York. Generally,
each Cooperative owns in fee or has a long-term leasehold interest in all the real property and owns in fee or leases the building and
all separate dwelling units therein. The Cooperative is directly responsible for property management and, in most cases, payment of real
estate taxes, other governmental impositions and hazard and liability insurance. If there is an underlying mortgage (or mortgages) on
the Cooperative's building or underlying land, as is generally the case, or an underlying lease of the land, as is the case in some
instances, the Cooperative, as mortgagor or lessor, as the case may be, is also responsible for fulfilling the mortgage or rental
obligations. An underlying mortgage loan is ordinarily obtained by the Cooperative in connection with either the construction or
purchase of the Cooperative's building or the obtaining of capital by the Cooperative. The interest of the occupant under proprietary
leases or occupancy agreements as to which that Cooperative is the landlord is generally subordinate to the interest of the holder of an
underlying mortgage and to the interest of the holder of a land lease. If the Cooperative is unable to meet the payment obligations (1)
arising under an underlying mortgage, the mortgagee holding an underlying mortgage could foreclose on that mortgage and terminate all
subordinate proprietary leases and occupancy agreements or (2) arising under its land lease, the holder of the landlord's interest under
the land lease could terminate it and all subordinate proprietary leases and occupancy agreements. In addition, an underlying mortgage
on a Cooperative may provide financing in the form of a mortgage that does not fully amortize, with a significant portion of principal
being due in one final payment at maturity. The inability of the Cooperative to refinance a mortgage and its consequent inability to
make the final payment could lead to foreclosure by the mortgagee. Similarly, a land lease has an expiration date and the inability of
the Cooperative to extend its term or, in the alternative, to purchase the land, could lead to termination of the Cooperative's interest
in the property and termination of all proprietary leases and occupancy agreements. In either event, a foreclosure by the holder of an
underlying mortgage or the termination of the underlying lease could eliminate or significantly diminish the value of any collateral
held by the mortgagee who financed the purchase by an individual tenant-stockholder of shares of the Cooperative or, in the case of the
mortgage loans, the collateral securing the cooperative mortgage loans.
Each Cooperative is owned by shareholders (referred to as tenant-stockholders) who, through ownership of stock or shares in the
Cooperative, receive proprietary leases or occupancy agreements which confer exclusive rights to occupy specific dwellings. Generally, a
tenant-stockholder of a Cooperative must make a monthly payment to the Cooperative pursuant to the proprietary lease, which payment
represents the tenant-stockholder's proportional share of the Cooperative's payments for its underlying mortgage, real property taxes,
maintenance expenses and other capital or ordinary expenses. An ownership interest in a Cooperative and accompanying occupancy rights
may be financed through a cooperative mortgage loan evidenced by a mortgage note and secured by an assignment of and a security interest
in the occupancy agreement or proprietary lease and a security interest in the related shares of the related Cooperative. The mortgagee
generally takes possession of the share certificate and a counterpart of the proprietary lease or occupancy agreement and a financing
statement covering the proprietary lease or occupancy agreement and the Cooperative shares is filed in the appropriate state and local
offices to perfect the mortgagee's interest in its collateral. Subject to the limitations discussed below, upon default of the
tenant-stockholder, the lender may sue for judgment on the mortgage note, dispose of the collateral at a public or private sale or
otherwise proceed against the collateral or tenant-stockholder as an individual as provided in the security agreement covering the
assignment of the proprietary lease or occupancy agreement and the pledge of Cooperative shares. See "—Foreclosure on Shares ofCooperatives" below.
Tax Aspects of Cooperative Ownership
In general, a "tenant-stockholder" (as defined in Section 216(b)(2) of the Code) of a corporation that qualifies as a
"cooperative housing corporation" within the meaning of Section 216(b)(1) of the Code is allowed a deduction for amounts paid or accrued
within his taxable year to the corporation representing his proportionate share of interest expenses and real estate taxes allowable as
a deduction under Section 216(a) of the Code to the corporation under Sections 163 and 164 of the Code. In order for a corporation to
qualify under Section 216(b)(1) of the Code for its taxable year in which the items are allowable as a deduction to the corporation,
that section requires, among other things, that at least 80% of the gross income of the corporation be derived from its
tenant-stockholders. By virtue of this requirement, the status of a corporation for purposes of Section 216(b)(1) of the Code must be
determined on a year-to-year basis. Consequently, there can be no assurance that Cooperatives relating to the cooperative mortgage loans
will qualify under the section for any particular year. In the event that the Cooperative fails to qualify for one or more years, the
value of the collateral securing any related cooperative mortgage loans could be significantly impaired because no deduction would be
allowable to tenant- stockholders under Section 216(a) of the Code with respect to those years. In view of the significance of the tax
benefits accorded tenant-stockholders of a corporation that qualifies under Section 216(b)(1) of the Code, the likelihood that a failure
would be permitted to continue over a period of years appears remote.
Leases and Rents
Mortgages that encumber income-producing multifamily and commercial properties often contain an assignment of rents and leases,
pursuant to which the borrower assigns to the lender the borrower's right, title and interest as landlord under each lease and the
income derived therefrom, while (unless rents are to be paid directly to the lender) retaining a revocable license to collect the rents
for so long as there is no default. If the borrower defaults, the license terminates and the lender is entitled to collect the rents.
Local law may require that the lender take possession of the property and/or obtain a court-appointed receiver before becoming entitled
to collect the rents.
Contracts
Under the laws of most states, manufactured housing constitutes personal property and is subject to the motor vehicle
registration laws of the state or other jurisdiction in which the unit is located. In a few states, where certificates of title are not
required for manufactured homes, security interests are perfected by the filing of a financing statement under Article 9 of the UCC
which has been adopted by all states. Financing statements are effective for five years and must be renewed prior to the end of each
five year period. The certificate of title laws adopted by the majority of states provide that ownership of motor vehicles and
manufactured housing shall be evidenced by a certificate of title issued by the motor vehicles department (or a similar entity) of the
state. In the states that have enacted certificate of title laws, a security interest in a unit of manufactured housing, so long as it
is not attached to land in so permanent a fashion as to become a fixture, is generally perfected by the recording of the interest on the
certificate of title to the unit in the appropriate motor vehicle registration office or by delivery of the required documents and
payment of a fee to the appropriate motor vehicle registration office, depending on state law.
The master servicer will be required under the related pooling and servicing agreement or servicing agreement to, or to cause
the servicer of the Contract to, effect the notation or delivery of the required documents and fees, and to obtain possession of the
certificate of title, as appropriate under the laws of the state in which any Manufactured Home is registered. In the event the master
servicer or servicer, as applicable, fails, due to clerical errors or otherwise, to effect the notation or delivery, or files the
security interest under the wrong law (for example, under a motor vehicle title statute rather than under the UCC, in a few states), the
trustee may not have a first priority security interest in the Manufactured Home securing a Contract. As Manufactured Homes have become
larger and often have been attached to their sites without any apparent intention by the borrowers to move them, courts in many states
have held that Manufactured Homes may become subject to real estate title and recording laws. As a result, a security interest in a
Manufactured Home could be rendered subordinate to the interests of other parties claiming an interest in the home under applicable
state real estate law. In order to perfect a security interest in a Manufactured Home under real estate laws, the holder of the security
interest must file either a "fixture filing" under the provisions of the UCC or a real estate mortgage under the real estate laws of the
state where the home is located. These filings must be made in the real estate records office of the county where the home is located.
Generally, Contracts will contain provisions prohibiting the obligor from permanently attaching the Manufactured Home to its site. So
long as the obligor does not violate this agreement, a security interest in the Manufactured Home will be governed by the certificate of
title laws or the UCC, and the notation of the security interest on the certificate of title or the filing of a UCC financing statement
will be effective to maintain the priority of the security interest in the Manufactured Home. If, however, a Manufactured Home is
permanently attached to its site, other parties could obtain an interest in the Manufactured Home that is prior to the security interest
originally retained by the Seller and transferred to the depositor.
The depositor will assign or cause to be assigned a security interest in the Manufactured Homes to the trustee, on behalf of
the securityholders. Neither the depositor, the master servicer, any servicer, nor the trustee will amend the certificates of title to
identify the trustee, on behalf of the securityholders, as the new secured party and, accordingly, the depositor or the Seller will
continue to be named as the secured party on the certificates of title relating to the Manufactured Homes. In most states, the
assignment is an effective conveyance of the security interest without amendment of any lien noted on the related certificate of title
and the new secured party succeeds to the depositor's rights as the secured party. However, in some states there exists a risk that, in
the absence of an amendment to the certificate of title, the assignment of the security interest might not be held effective against
creditors of the depositor or Seller.
In the absence of fraud, forgery or permanent affixation of the Manufactured Home to its site by the Manufactured Home owner,
or administrative error by state recording officials, the notation of the lien of the depositor on the certificate of title or delivery
of the required documents and fees will be sufficient to protect the trustee against the rights of subsequent purchasers of a
Manufactured Home or subsequent lenders who take a security interest in the Manufactured Home. If there are any Manufactured Homes as to
which the depositor has failed to perfect or cause to be perfected the security interest assigned to the trust fund, the security
interest would be subordinate to, among others, subsequent purchasers for value of Manufactured Homes and holders of perfected security
interests. There also exists a risk in not identifying the trustee, on behalf of the securityholders, as the new secured party on the
certificate of title that, through fraud or negligence, the security interest of the trustee could be released.
In the event that the owner of a Manufactured Home moves it to a state other than the state in which the Manufactured Home
initially is registered, under the laws of most states the perfected security interest in the Manufactured Home would continue for four
months after the relocation and thereafter until the owner re-registers the Manufactured Home in the state of relocation. If the owner
were to relocate a Manufactured Home to another state and re-register the Manufactured Home in that state, and if the depositor did not
take steps to re-perfect its security interest in that state, the security interest in the Manufactured Home would cease to be
perfected. A majority of states generally require surrender of a certificate of title to re-register a Manufactured Home; accordingly,
the depositor must surrender possession if it holds the certificate of title to the Manufactured Home or, in the case of Manufactured
Homes registered in states that provide for notation of lien, the depositor would receive notice of surrender if the security interest
in the Manufactured Home is noted on the certificate of title. Accordingly, the depositor would have the opportunity to re-perfect its
security interest in the Manufactured Home in the state of relocation. In states that do not require a certificate of title for
registration of a Manufactured Home, re-registration could defeat perfection. Similarly, when an obligor under a manufactured housing
conditional sales contract sells a Manufactured Home, the obligee must surrender possession of the certificate of title or it will
receive notice as a result of its lien noted thereon and accordingly will have an opportunity to require satisfaction of the related
manufactured housing conditional sales contract before release of the lien. Under each related pooling and servicing agreement or
servicing agreement, the master servicer will be obligated to, or to cause each of the servicers of the Contracts to, take these steps,
at the master servicer's or servicers expense, as are necessary to maintain perfection of security interests in the Manufactured Homes.
Under the laws of most states, liens for repairs performed on a Manufactured Home take priority even over a perfected security
interest. The depositor will obtain the representation of the related Seller that it has no knowledge of any of these liens with respect
to any Manufactured Home securing a Contract. However, these liens could arise at any time during the term of a Contract. No notice will
be given to the trustee or securityholders in the event this type of lien arises.
Foreclosure on Mortgages and Some Contracts
Foreclosure of a deed of trust is generally accomplished by a non-judicial trustee's sale under a specific provision in the
deed of trust which authorizes the trustee to sell the property upon any default by the borrower under the terms of the note or deed of
trust. In addition to any notice requirements contained in a deed of trust, in some states, the trustee must record a notice of default
and send a copy to the borrower- trustor and to any person who has recorded a request for a copy of notice of default and notice of
sale. In addition, the trustee must provide notice in some states to any other individual having an interest of record in the real
property, including any junior lienholders. If the deed of trust is not reinstated within a specified period, a notice of sale must be
posted in a public place and, in most states, published for a specific period of time in one or more newspapers in a specified manner
prior to the date of trustee's sale. In addition, some state laws require that a copy of the notice of sale be posted on the property
and sent to all parties having an interest of record in the real property.
In some states, the borrower-trustor has the right to reinstate the loan at any time following default until shortly before the
trustee's sale. In general, in these states, the borrower, or any other person having a junior encumbrance on the real estate, may,
during a reinstatement period, cure the default by paying the entire amount in arrears plus the costs and expenses incurred in enforcing
the obligation.
Foreclosure of a mortgage is generally accomplished by judicial action. Generally, the action is initiated by the service of
legal pleadings upon all parties having an interest of record in the real property. Delays in completion of the foreclosure may
occasionally result from difficulties in locating necessary parties. Judicial foreclosure proceedings are often not contested by any of
the applicable parties. If the mortgagee's right to foreclose is contested, the legal proceedings necessary to resolve the issue can be
time-consuming.
In the case of foreclosure under either a mortgage or a deed of trust, the sale by the referee or other designated officer or
by the trustee is a public sale. However, because of the difficulty a potential buyer at the sale would have in determining the exact
status of title and because the physical condition of the property may have deteriorated during the foreclosure proceedings, it is
uncommon for a third party to purchase the property at a foreclosure sale. Rather, it is common for the lender to purchase the property
from the trustee or referee for a credit bid less than or equal to the unpaid principal amount of the note plus the accrued and unpaid
interest and the expense of foreclosure, in which case the mortgagor's debt will be extinguished unless the lender purchases the
property for a lesser amount in order to preserve its right against a borrower to seek a deficiency judgment and the remedy is available
under state law and the related loan documents. In the same states, there is a statutory minimum purchase price which the lender may
offer for the property and generally, state law controls the amount of foreclosure costs and expenses, including attorneys' fees, which
may be recovered by a lender. Thereafter, subject to the right of the borrower in some states to remain in possession during the
redemption period, the lender will assume the burdens of ownership, including obtaining hazard insurance, paying taxes and making the
repairs at its own expense as are necessary to render the property suitable for sale. Generally, the lender will obtain the services of
a real estate broker and pay the broker's commission in connection with the sale of the property. Depending upon market conditions, the
ultimate proceeds of the sale of the property may not equal the lender's investment in the property and, in some states, the lender may
be entitled to a deficiency judgment. Any loss may be reduced by the receipt of any mortgage insurance proceeds or other forms of credit
enhancement for a series of certificates. See "Description of Credit Enhancement" in this prospectus.
A junior mortgagee may not foreclose on the property securing a junior mortgage unless it forecloses subject to the senior
mortgages. The junior mortgagee must either pay the entire amount due on the senior mortgages prior to or at the time of the foreclosure
sale or undertake to pay on any senior mortgages on which the mortgagor is currently in default. Under either course of action, the
junior mortgagee may add the amounts paid to the balance due on the junior loan, and may be subrogated to the rights of the senior
mortgagees. In addition, in the event that the foreclosure of a junior mortgage triggers the enforcement of a "due-on-sale" clause, the
junior mortgagee may be required to pay the full amount of the senior mortgages to the senior mortgagees. Accordingly, with respect to
those single family loans which are junior mortgage loans, if the lender purchases the property, the lender's title will be subject to
all senior liens and claims and governmental liens. The proceeds received by the referee or trustee from the sale are applied first to
the costs, fees and expenses of sale and then in satisfaction of the indebtedness secured by the mortgage or deed of trust under which
the sale was conducted. Any remaining proceeds are generally payable to the holders of junior mortgages or deeds of trust and other
liens and claims in order of their priority, whether or not the borrower is in default. Any additional proceeds are generally payable to
the mortgagor or trustor. The payment of the proceeds to the holders of junior mortgages may occur in the foreclosure action of the
senior mortgagee or may require the institution of separate legal proceeds.
In foreclosure, courts have imposed general equitable principles. The equitable principles are generally designed to relieve
the borrower from the legal effect of its defaults under the loan documents. Examples of judicial remedies that have been fashioned
include judicial requirements that the lender undertake affirmative and expensive actions to determine the causes for the borrower's
default and the likelihood that the borrower will be able to reinstate the loan. In some cases, courts have substituted their judgment
for the lender's judgment and have required that lenders reinstate loans or recast payment schedules in order to accommodate borrowers
who are suffering from temporary financial disability. In other cases, courts have limited the right of the lender to foreclose if the
default under the mortgage instrument is not monetary, such as the borrower's failure to adequately maintain the property or the
borrower's execution of a second mortgage or deed of trust affecting the property. Finally, some courts have been faced with the issue of
whether or not federal or state constitutional provisions reflecting due process concerns for adequate notice require that borrowers
under deeds of trust or mortgages receive notices in addition to the statutorily-prescribed minimums. For the most part, these cases
have upheld the notice provisions as being reasonable or have found that the sale by a trustee under a deed of trust, or under a
mortgage having a power of sale, does not involve sufficient state action to afford constitutional protection to the borrower.
Foreclosure on Shares of Cooperatives
The Cooperative shares owned by the tenant-stockholder, together with the rights of the tenant- stockholder under the
proprietary lease or occupancy agreement, are pledged to the lender and are, in almost all cases, subject to restrictions on transfer as
set forth in the Cooperative's certificate of incorporation and by-laws, as well as in the proprietary lease or occupancy agreement. The
Cooperative may cancel the proprietary lease or occupancy agreement, even while pledged, for failure by the tenant- stockholder to pay
the obligations or charges owed by the tenant-stockholder, including mechanics' liens against the Cooperative's building incurred by the
tenant-stockholder. Generally, obligations and charges arising under a proprietary lease or occupancy agreement which are owed to the
Cooperative are made liens upon the shares to which the proprietary lease or occupancy agreement relates. In addition, the Cooperative
may generally terminate a proprietary lease or occupancy agreement in the event the borrower breaches its covenants in the proprietary
lease or occupancy agreement. Typically, the lender and the Cooperative enter into a recognition agreement which, together with any
lender protection provisions contained in the proprietary lease or occupancy agreement, establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder on its obligations under the proprietary lease or occupancy agreement. A
default by the tenant-stockholder under the proprietary lease or occupancy agreement will usually constitute a default under the
security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the tenant-stockholder has defaulted under the proprietary
lease or occupancy agreement, the Cooperative will take no action to terminate the lease or agreement until the lender has been provided
with notice of and an opportunity to cure the default. The recognition agreement typically provides that if the proprietary lease or
occupancy agreement is terminated, the Cooperative will recognize the lender's lien against proceeds from a sale of the shares and the
proprietary lease or occupancy agreement allocated to the dwelling, subject, however, to the Cooperative's right to sums due under the
proprietary lease or occupancy agreement or which have become liens on the shares relating to the proprietary lease or occupancy
agreement. The total amount owed to the Cooperative by the tenant-stockholder, which the lender generally cannot restrict and does not
monitor, could reduce the amount realized upon a sale of the collateral below the outstanding principal balance of the cooperative
mortgage loan and accrued and unpaid interest on the loan.
Recognition agreements also generally provide that in the event the lender succeeds to the tenant- shareholder's shares and
proprietary lease or occupancy agreement as the result of realizing upon its collateral for a cooperative mortgage loan, the lender must
obtain the approval or consent of the board of directors of the Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. The approval or consent is usually based on the prospective purchaser's income
and net worth, among other factors, and may significantly reduce the number of potential purchasers, which could limit the ability of
the lender to sell and realize upon the value of the collateral. Generally, the lender is not limited in any rights it may have to
dispossess the tenant-stockholder.
Because of the nature of cooperative mortgage loans, lenders do not require the tenant-stockholder (i.e., the borrower) to
obtain title insurance of any type. Consequently, the existence of any prior liens or other imperfections of title affecting the
Cooperative's building or real estate also may adversely affect the marketability of the shares allocated to the dwelling unit in the
event of foreclosure.
In New York, foreclosure on the Cooperative shares is accomplished by public sale in accordance with the provisions of Article
9 of the New York UCC and the security agreement relating to those shares. Article 9 of the New York UCC requires that a sale be
conducted in a "commercially reasonable" manner. Whether a sale has been conducted in a "commercially reasonable" manner will depend on
the facts in each case. In determining commercial reasonableness, a court will look to the notice given the debtor and the method,
manner, time, place and terms of the sale and the sale price. Generally, a sale conducted according to the usual practice of banks
selling similar collateral in the same area will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be applied first to pay the costs and expenses of the sale and
then to satisfy the indebtedness secured by the lender's security interest. The recognition agreement, however, generally provides that
the lender's right to reimbursement is subject to the right of the Cooperative corporation to receive sums due under the proprietary
lease or occupancy agreement. If there are proceeds remaining, the lender must account to the tenant-stockholder for the surplus.
Conversely, if a portion of the indebtedness remains unpaid, the tenant-stockholder is generally responsible for the deficiency. See
"—Anti-Deficiency Legislation and other Limitations on Lenders" below.
Repossession with respect to ContractsGeneral. Repossession of manufactured housing is governed by state law. A few states have enacted legislation that requires
that the debtor be given an opportunity to cure its default (typically 30 days to bring the account current) before repossession can
commence. So long as a manufactured home has not become so attached to real estate that it would be treated as a part of the real estate
under the law of the state where it is located, repossession of the home in the event of a default by the obligor generally will be
governed by the UCC (except in Louisiana). Article 9 of the UCC provides the statutory framework for the repossession of manufactured
housing. While the UCC as adopted by the various states may vary in small particulars, the general repossession procedure established by
the UCC is as follows:
1. Except in those states where the debtor must receive notice of the right to cure a default, repossession can commence
immediately upon default without prior notice. Repossession may be effected either through self-help (peaceable retaking without court
order), voluntary repossession or through judicial process (repossession pursuant to court-issued writ of replevin). The self-help
and/or voluntary repossession methods are more commonly employed, and are accomplished simply by retaking possession of the manufactured
home. In cases in which the debtor objects or raises a defense to repossession, a court order must be obtained from the appropriate
state court, and the manufactured home must then be repossessed in accordance with that order. Whether the method employed is self-help,
voluntary repossession or judicial repossession, the repossession can be accomplished either by an actual physical removal of the
manufactured home to a secure location for refurbishment and resale or by removing the occupants and their belongings from the
manufactured home and maintaining possession of the manufactured home on the location where the occupants were residing. Various factors
may affect whether the manufactured home is physically removed or left on location, such as the nature and term of the lease of the site
on which it is located and the condition of the unit. In many cases, leaving the manufactured home on location is preferable, in the
event that the home is already set up, because the expenses of retaking and redelivery will be saved. However, in those cases where the
home is left on location, expenses for site rentals will usually be incurred.
2. Once repossession has been achieved, preparation for the subsequent disposition of the manufactured home can commence. The
disposition may be by public or private sale provided the method, manner, time, place and terms of the sale are commercially reasonable.
3. Sale proceeds are to be applied first to repossession expenses (expenses incurred in retaking, storage, preparing for sale to
include refurbishing costs and selling) and then to satisfaction of the indebtedness. While some states impose prohibitions or
limitations on deficiency judgments if the net proceeds from resale do not cover the full amount of the indebtedness, the remainder may
be sought from the debtor in the form of a deficiency judgement in those states that do not prohibit or limit deficiency judgments. The
deficiency judgment is a personal judgment against the debtor for the shortfall. Occasionally, after resale of a manufactured home and
payment of all expenses and indebtedness, there is a surplus of funds. In that case, the UCC requires the party suing for the deficiency
judgment to remit the surplus to the debtor. Because the defaulting owner of a manufactured home generally has very little capital or
income available following repossession, a deficiency judgment may not be sought in many cases or, if obtained, will be settled at a
significant discount in light of the defaulting owner's strained financial condition.
Louisiana Law. Any contract secured by a manufactured home located in Louisiana will be governed by Louisiana law rather than
Article 9 of the UCC. Louisiana laws provide similar mechanisms for perfection and enforcement of security interests in manufactured
housing used as collateral for an installment sale contract or installment loan agreement.
Under Louisiana law, a manufactured home that has been permanently affixed to real estate will nevertheless remain subject to
the motor vehicle registration laws unless the obligor and any holder of a security interest in the property execute and file in the
real estate records for the parish in which the property is located a document converting the unit into real property. A manufactured
home that is converted into real property but is then removed from its site can be converted back to personal property governed by the
motor vehicle registration laws if the obligor executes and files various documents in the appropriate real estate records and all
mortgagees under real estate mortgages on the property and the land to which it was affixed file releases with the motor vehicle
commission.
So long as a manufactured home remains subject to the Louisiana motor vehicle laws, liens are recorded on the certificate of
title by the motor vehicle commissioner and repossession can be accomplished by voluntary consent of the obligor, executory process
(repossession proceedings which must be initiated through the courts but which involve minimal court supervision) or a civil suit for
possession. In connection with a voluntary surrender, the obligor must be given a full release from liability for all amounts due under
the contract. In executory process repossessions, a sheriff's sale (without court supervision) is permitted, unless the obligor brings
suit to enjoin the sale, and the lender is prohibited from seeking a deficiency judgment against the obligor unless the lender obtained
an appraisal of the manufactured home prior to the sale and the property was sold for at least two-thirds of its appraised value.
Rights of Redemption
Single Family, Multifamily and Commercial Properties. The purposes of a foreclosure action in respect of a mortgaged property
is to enable the lender to realize upon its security and to bar the borrower, and all persons who have interests in the property that
are subordinate to that of the foreclosing lender, from exercise of their "equity of redemption". The doctrine of equity of redemption
provides that, until the property encumbered by a mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the foreclosing lender have an equity of redemption and may
redeem the property by paying the entire debt with interest. Those having an equity of redemption must generally be made parties and
joined in the foreclosure proceeding in order for their equity of redemption to be terminated.
The equity of redemption is a common-law (non-statutory) right which should be distinguished from post-sale statutory rights of
redemption. In some states, after sale pursuant to a deed of trust or foreclosure of a mortgage, the borrower and foreclosed junior
lienors are given a statutory period in which to redeem the property. In some states, statutory redemption may occur only upon payment
of the foreclosure sale price. In other states, redemption may be permitted if the former borrower pays only a portion of the sums due.
The effect of a statutory right of redemption is to diminish the ability of the lender to sell the foreclosed property because the
exercise of a right of redemption would defeat the title of any purchase through a foreclosure. Consequently, the practical effect of
the redemption right is to force the lender to maintain the property and pay the expenses of ownership until the redemption period has
expired. In some states, a post-sale statutory right of redemption may exist following a judicial foreclosure, but not following a
trustee's sale under a deed of trust.
Manufactured Homes. While state laws do not usually require notice to be given to debtors prior to repossession, many states do
require delivery of a notice of default and of the debtor's right to cure defaults before repossession. The law in most states also
requires that the debtor be given notice of sale prior to the resale of the home so that the owner may redeem at or before resale. In
addition, the sale must comply with the requirements of the UCC.
Anti-Deficiency Legislation and Other Limitations on Lenders
Single Family, Multifamily and Commercial Loans. Some states have imposed statutory prohibitions which limit the remedies of a
beneficiary under a deed of trust or a mortgagee under a mortgage. In some states (including California), statutes limit the right of
the beneficiary or mortgagee to obtain a deficiency judgment against the borrower following non-judicial foreclosure by power of sale. A
deficiency judgment is a personal judgment against the former borrower equal in most cases to the difference between the net amount
realized upon the public sale of the real property and the amount due to the lender. In the case of a mortgage loan secured by a
property owned by a trust where the mortgage note is executed on behalf of the trust, a deficiency judgment against the trust following
foreclosure or sale under a deed of trust, even if obtainable under applicable law, may be of little value to the mortgagee or
beneficiary if there are no trust assets against which the deficiency judgment may be executed. Some state statutes require the
beneficiary or mortgagee to exhaust the security afforded under a deed of trust or mortgage by foreclosure in an attempt to satisfy the
full debt before bringing a personal action against the borrower. In other states, the lender has the option of bringing a personal
action against the borrower on the debt without first exhausting the security; however in some of these states, the lender, following
judgment on the personal action, may be deemed to have elected a remedy and may be precluded from exercising remedies with respect to
the security. Consequently, the practical effect of the election requirement, in those states permitting the election, is that lenders
will usually proceed against the security first rather than bringing a personal action against the borrower. Finally, in some states,
statutory provisions limit any deficiency judgment against the former borrower following a foreclosure to the excess of the outstanding
debt over the fair value of the property at the time of the public sale. The purpose of these statutes is generally to prevent a
beneficiary or mortgagee from obtaining a large deficiency judgment against the former borrower as a result of low or no bids at the
judicial sale.
Generally, Article 9 of the UCC governs foreclosure on Cooperative Shares and the related proprietary lease or occupancy
agreement. Some courts have interpreted Article 9 to prohibit or limit a deficiency award in some circumstances, including circumstances
where the disposition of the collateral (which, in the case of a cooperative mortgage loan, would be the shares of the Cooperative and
the related proprietary lease or occupancy agreement) was not conducted in a commercially reasonable manner.
In addition to laws limiting or prohibiting deficiency judgments, numerous other federal and state statutory provisions,
including the federal bankruptcy laws and state laws affording relief to debtors, may interfere with or affect the ability of the
secured mortgage lender to realize upon collateral or enforce a deficiency judgment. For example, under the federal Bankruptcy Code,
virtually all actions (including foreclosure actions and deficiency judgment proceedings) to collect a debt are automatically stayed
upon the filing of the bankruptcy petition and, often, no interest or principal payments are made during the course of the bankruptcy
case. The delay and the consequences thereof caused by the automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in a bankruptcy by or on behalf of a junior lienor may stay the senior lender from taking action to foreclose out
the junior lien. Moreover, with respect to federal bankruptcy law, a court with federal bankruptcy jurisdiction may permit a debtor
through his or her Chapter 11 or Chapter 13 rehabilitative plan to cure a monetary default in respect of a mortgage loan on a debtor's
residence by paying arrearage within a reasonable time period and reinstating the original mortgage loan payment schedule even though
the lender accelerated the mortgage loan and final judgment of foreclosure had been entered in state court (provided no sale of the
residence had yet occurred) prior to the filing of the debtor's petition. Some courts with federal bankruptcy jurisdiction have approved
plans, based on the particular facts of the reorganization case, that effected the curing of a mortgage loan default by paying arrearage
over a number of years.
Courts with federal bankruptcy jurisdiction have also indicated that the terms of a mortgage loan secured by property of the
debtor may be modified. These courts have allowed modifications that include reducing the amount of each monthly payment, changing the
rate of interest, altering the repayment schedule, forgiving all or a portion of the debt and reducing the lender's security interest to
the value of the residence, thus leaving the lender a general unsecured creditor for the difference between the value of the residence
and the outstanding balance of the loan. Generally, however, the terms of a mortgage loan secured only by a mortgage on real property
that is the debtor's principal residence may not be modified pursuant to a plan confirmed pursuant to Chapter 13 except with respect to
mortgage payment arrearages, which may be cured within a reasonable time period.
In the case of income-producing multifamily properties, federal bankruptcy law may also have the effect of interfering with or
affecting the ability of the secured lender to enforce the borrower's assignment of rents and leases related to the mortgaged property.
Under Section 362 of the Bankruptcy Code, the lender will be stayed from enforcing the assignment, and the legal proceedings necessary
to resolve the issue could be time-consuming, with resulting delays in the lender's receipt of the rents.
Tax liens arising under the Code may have priority over the lien of a mortgage or deed of trust. In addition, substantive
requirements are imposed upon mortgage lenders in connection with the origination and the servicing of mortgage loans by numerous
federal and some state consumer protection laws. These laws include the federal Truth-in-Lending Act, Real Estate Settlement Procedures
Act, Equal Credit Opportunity Act, Fair Credit Billing Act, Fair Credit Reporting Act and related statutes. These federal laws impose
specific statutory liabilities upon lenders who originate mortgage loans and who fail to comply with the provisions of the law. In some
cases, this liability may affect assignees of the mortgage loans.
Contracts. In addition to the laws limiting or prohibiting deficiency judgments, numerous other statutory provisions, including
federal bankruptcy laws and related state laws, may interfere with or affect the ability of a lender to realize upon collateral and/or
enforce a deficiency judgment. For example, in a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a lender
from repossessing a home, and, as part of the rehabilitation plan, reduce the amount of the secured indebtedness to the market value of
the home at the time of bankruptcy (as determined by the court), leaving the party providing financing as a general unsecured creditor
for the remainder of the indebtedness. A bankruptcy court may also reduce the monthly payments due under a contract or change the rate
of interest and time of repayment of the indebtedness.
Environmental Legislation
Under CERCLA, and under state law in some states, a secured party which takes a deed-in-lieu of foreclosure, purchases a
mortgaged property at a foreclosure sale, or operates a mortgaged property may become liable for the costs of cleaning up hazardous
substances regardless of whether they have contaminated the property. CERCLA imposes strict, as well as joint and several, liability on
several classes of potentially responsible parties, including current owners and operators of the property who did not cause or
contribute to the contamination. Furthermore, liability under CERCLA is not limited to the original or unamortized principal balance of
a loan or to the value of the property securing a loan. Lenders may be held liable under CERCLA as owners or operators unless they
qualify for the secured creditor exemption to CERCLA. This exemption exempts from the definition of owners and operators those who,
without participating in the management of a facility, hold indicia of ownership primarily to protect a security interest in the
facility.
The Conservation Act amended, among other things, the provisions of CERCLA with respect to lender liability and the secured
creditor exemption. The Conservation Act offers substantial protection to lenders by defining the activities in which a lender can
engage and still have the benefit of the secured creditor exemption. In order for lender to be deemed to have participated in the
management of a mortgaged property, the lender must actually participate in the operational affairs of the property of the borrower. The
Conservation Act provides that "merely having the capacity to influence, or unexercised right to control" operations does not constitute
participation in management. A lender will lose the protection of the secured creditor exemption only if it exercises decision-making
control over the borrower's environmental compliance and hazardous substance handling and disposal practices, or assumes day-to-day
management of all operational functions of the mortgaged property. The Conservation Act also provides that a lender will continue to
have the benefit of the secured creditor exemption even if it forecloses on a mortgaged property, purchases it at a foreclosure sale or
accepts a deed-in-lieu of foreclosure provided that the lender seeks to sell the mortgaged property at the earliest practicable
commercially reasonable time on commercially reasonable terms.
Other federal and state laws may impose liability on a secured party which takes a deed-in-lieu of foreclosure, purchases a
mortgaged property at a foreclosure sale, or operates a mortgaged property on which contaminants other than CERCLA hazardous substances
are present, including petroleum, agricultural chemicals, hazardous wastes, asbestos, radon, and lead-based paint. The cleanup costs may
be substantial. It is possible that the cleanup costs could become a liability of a trust fund and reduce the amounts otherwise
distributable to the holders of the related series of certificates or notes. Moreover, federal statutes and states by statute may impose
a lien for any cleanup costs incurred by the state on the property that is the subject of the cleanup costs. All subsequent liens on the
property generally are subordinated to the lien and, in some states, even prior recorded liens are subordinated to such lien. In the
latter states, the security interest of the trustee in a related parcel of real property that is subject to the lien could be adversely
affected.
Traditionally, many residential mortgage lenders have not taken steps to evaluate whether contaminants are present with respect
to any mortgaged property prior to the origination of the mortgage loan or prior to foreclosure or accepting a deed-in-lieu of
foreclosure. Accordingly, the depositor has not made and will not make the evaluations prior to the origination of the secured
contracts. Neither the master servicer nor any servicer will be required by any Agreement to undertake these evaluations prior to
foreclosure or accepting a deed-in-lieu of foreclosure. The depositor does not make any representations or warranties or assume any
liability with respect to the absence or effect of contaminants on any related real property or any casualty resulting from the presence
or effect of contaminants. However, neither the master servicer nor any servicer will be obligated to foreclose on related real property
or accept a deed-in-lieu of foreclosure if it knows or reasonably believes that there are material contaminated conditions on the
property. A failure so to foreclose may reduce the amounts otherwise available to certificateholders of the related series.
Consumer Protection Laws
In addition, substantive requirements are imposed upon mortgage lenders in connection with the origination and the servicing of
mortgage loans by numerous federal and some state consumer protection laws. These laws include TILA, as implemented by Regulation Z,
Real Estate Settlement Procedures Act, as implemented by Regulation X, Equal Credit Opportunity Act, as implemented by Regulation B,
Fair Credit Billing Act, Fair Credit Reporting Act and related statutes. These federal laws impose specific statutory liabilities upon
lenders who originate mortgage loans and who fail to comply with the provisions of the law. In some cases, this liability may affect
assignees of the mortgage loans. In particular, an originator's failure to comply with certain requirements of the federal TILA, as
implemented by Regulation Z, could subject both originators and assignees of such obligations to monetary penalties and could result in
obligors' rescinding the mortgage loans either against the originators or assignees. Further, the failure of the borrower to use the
correct form of notice of right to cancel in connection with non-purchase money transactions could subject the originator and assignees
to extended borrower rescission rights.
Homeownership Act and Similar State Laws
Some of the mortgage loans, known as High Cost Loans, may be subject to special rules, disclosure requirements and other
provisions that were added to the federal TILA by the Homeownership Act, if such trust assets were originated after October 1, 1995, are
not loans made to finance the purchase of the mortgaged property and have interest rates or origination costs in excess of certain
prescribed levels. The Homeownership Act requires certain additional disclosures, specifies the timing of those disclosures and limits
or prohibits the inclusion of certain provisions in mortgages subject to the Homeownership Act. Purchasers or assignees of any High Cost
Loan, including any trust, could be liable under federal law for all claims and subject to all defenses that the borrower could assert
against the originator of the High Cost Loan under the federal TILA or any other law, unless the purchaser or assignee did not know and
could not with reasonable diligence have determined that the mortgage loan was subject to the provisions of the Homeownership Act.
Remedies available to the borrower include monetary penalties, as well as rescission rights if the appropriate disclosures were not
given as required or if the particular mortgage includes provisions prohibited by law. The maximum damages that may be recovered under
these provisions from an assignee, including the trust, is the remaining amount of indebtedness plus the total amount paid by the
borrower in connection with the mortgage loan.
In addition to the Homeownership Act, a number of legislative proposals have been introduced at the federal, state and local
level that are designed to discourage predatory lending practices. Some states have enacted, or may enact, laws or regulations that
prohibit inclusion of some provisions in mortgage loans that have interest rates or origination costs in excess of prescribed levels,
and require that borrowers be given certain disclosures prior to the consummation of the mortgage loans. In some cases, state or local
law may impose requirements and restrictions greater than those in the Homeownership Act. An originators' failure to comply with these
laws could subject the trust (and other assignees of the mortgage loans) to monetary penalties and could result in the borrowers
rescinding the mortgage loans against either the trust or subsequent holders of the mortgage loans.
Lawsuits have been brought in various states making claims against assignees of High Cost Loans for violations of state law
allegedly committed by the originator. Named defendants in these cases include numerous participants within the secondary mortgage
market, including some securitization trusts.
Under the anti-predatory lending laws of some states, the borrower is required to meet a net tangible benefits test in
connection with the origination of the related mortgage loan. This test may be highly subjective and open to interpretation. As a
result, a court may determine that a mortgage loan does not meet the test even if the originator reasonably believed that the test was
satisfied. Any determination by a court that the mortgage loan does not meet the test will result in a violation of the state
anti-predatory lending law, in which case the related seller will be required to purchase that mortgage loan from the trust.
Additional Consumer Protections Laws with Respect to ContractsContracts often contain provisions obligating the obligor to pay late charges if payments are not timely made. Federal and
state law may specifically limit the amount of late charges that may be collected. Under the related pooling and servicing agreement or
servicing agreement, late charges will be retained by the master servicer or servicer as additional servicing compensation, and any
inability to collect these amounts will not affect payments to Securityholders.
Courts have imposed general equitable principles upon repossession and litigation involving deficiency balances. These
equitable principles are generally designed to relieve a consumer from the legal consequences of a default.
In several cases, consumers have asserted that the remedies provided to secured parties under the UCC and related laws violate
the due process protections provided under the 14th Amendment to the Constitution of the United States. For the most part, courts have
upheld the notice provisions of the UCC and related laws as reasonable or have found that the repossession and resale by the creditor
does not involve sufficient state action to afford constitutional protection to consumers.
The FTC Rule has the effect of subjecting a seller (and some related creditors and their assignees) in a consumer credit
transaction and any assignee of the creditor to all claims and defenses which the debtor in the transaction could assert against the
seller of the goods. Liability under the FTC Rule is limited to the amounts paid by a debtor on the Contract, and the holder of the
Contract may also be unable to collect amounts still due under the Contract. Most of the Contracts in a trust fund will be subject to
the requirements of the FTC Rule. Accordingly, the trust fund, as holder of the Contracts, will be subject to any claims or defenses
that the purchaser of the related Manufactured Home may assert against the seller of the Manufactured Home, subject to a maximum
liability equal to the amounts paid by the obligor on the Contract. If an obligor is successful in asserting the claim or defense, and
if the Seller had or should have had knowledge of the claim or defense, the master servicer will have the right to require the Seller to
repurchase the Contract because of breach of its Seller's representation and warranty that no claims or defenses exist that would affect
the obligor's obligation to make the required payments under the Contract. The Seller would then have the right to require the
originating dealer to repurchase the Contract from it and might also have the right to recover from the dealer any losses suffered by
the Seller with respect to which the dealer would have been primarily liable to the obligor.
Enforceability of Certain Provisions
Transfer of Mortgaged Properties. Unless the related prospectus supplement indicates otherwise, the mortgage loans generally
contain due-on-sale clauses. These clauses permit the lender to accelerate the maturity of the loan if the borrower sells, transfers or
conveys the property without the prior consent of the lender. The enforceability of these clauses has been the subject of legislation or
litigation in many states, and in some cases the enforceability of these clauses was limited or denied. However, Garn-St Germain Act
preempts state constitutional, statutory and case law that prohibits the enforcement of due-on-sale clauses and permits lenders to
enforce these clauses in accordance with their terms, subject to limited exceptions. The Garn-St Germain Act does "encourage" lenders to
permit assumption of loans at the original rate of interest or at some other rate less than the average of the original rate and the
market rate.
The Garn-St Germain Act also sets forth nine specific instances in which a mortgage lender covered by the Garn-St Germain Act
may not exercise a due-on-sale clause, notwithstanding the fact that a transfer of the property may have occurred. These include,
amongst others, intra-family transfers, some transfers by operation of law, leases of fewer than three years and the creation of a
junior encumbrance. Regulations promulgated under the Garn-St Germain Act also prohibit the imposition of a prepayment penalty upon the
acceleration of a loan pursuant to a due-on-sale clause.
The inability to enforce a due-on-sale clause may result in a mortgage loan bearing an interest rate below the current market
rate being assumed by the buyer rather than being paid off, which may have an impact upon the average life of the mortgage loans and the
number of mortgage loans which may be outstanding until maturity.
Transfer of Manufactured Homes. Generally, Contracts contain provisions prohibiting the sale or transfer of the related
Manufactured Home without the consent of the obligee on the Contract and permitting the acceleration of the maturity of the Contracts by
the obligee on the Contract upon a sale or transfer that is not consented to. The master servicer will, or will cause the servicer of
the Contract, to the extent it has knowledge of the conveyance or proposed conveyance, to exercise or cause to be exercised its rights
to accelerate the maturity of the related Contracts through enforcement of due-on-sale clauses, subject to applicable state law. In some
cases, the transfer may be made by a delinquent obligor in order to avoid a repossession proceeding with respect to a Manufactured Home.
In the case of a transfer of a Manufactured Home as to which the master servicer or servicer of the Contract desires to
accelerate the maturity of the related Contract, the master servicer's or servicer's ability to do so will depend on the enforceability
under state law of the due-on-sale clause. The Garn-St Germain Act preempts, subject to certain exceptions and conditions, state laws
prohibiting enforcement of due-on-sale clauses applicable to the Manufactured Homes. Consequently, in some cases the master servicer or
servicer may be prohibited from enforcing a due-on-sale clause in respect of a Manufactured Home.
Late Payment Charges and Prepayment Restrictions. Notes and mortgages, as well as manufactured housing conditional sales
contracts and installment loan agreements, may contain provisions that obligate the borrower to pay a late charge or additional interest
if payments are not timely made, and in some circumstances, may prohibit prepayments for a specified period and/or condition prepayments
upon the borrower's payment of prepayment fees or yield maintenance penalties. In some states, there are or may be specific limitations
upon the late charges which a lender may collect from a borrower for delinquent payments or the amounts that a lender may collect from a
borrower as an additional charge if the loan is prepaid even when the loans expressly provide for the collection of those charges.
Although the Parity Act permits the collection of prepayment charges and late fees in connection with some types of eligible loans
preempting any contrary state law prohibitions, some states may not recognize the preemptive authority of the Parity Act or have
formally opted out of the Parity Act. As a result, it is possible that prepayment charges and late fees may not be collected even on
loans that provide for the payment of those charges unless otherwise specified in the related prospectus supplement. The master
servicer or another entity identified in the accompanying prospectus supplement will be entitled to all prepayment charges and late
payment charges received on the loans and those amounts will not be available for payment on the bonds. The Office of Thrift
Supervision (OTS), the agency that administers the Parity Act for unregulated housing creditors, withdrew its favorable Parity Act
regulations and Chief Counsel Opinions that previously authorized lenders to charge prepayment charges and late fees in certain
circumstances notwithstanding contrary state law, effective with respect to loans originated on or after July 1, 2003. However, the
OTS's ruling does not retroactively affect loans originated before July 1, 2003.
Subordinate Financing
When the mortgagor encumbers mortgaged property with one or more junior liens, the senior lender is subjected to additional
risk. First, the mortgagor may have difficulty servicing and repaying multiple loans. In addition, if the junior loan permits recourse
to the mortgagor (as junior loans often do) and the senior loan does not, a mortgagor may be more likely to repay sums due on the junior
loan than those on the senior loan. Second, acts of the senior lender that prejudice the junior lender or impair the junior lender's
security may create a superior equity in favor of the junior lender. For example, if the mortgagor and the senior lender agree to an
increase in the principal amount of or the interest rate payable on the senior loan, the senior lender may lose its priority to the
extent an existing junior lender is harmed or the mortgagor is additionally burdened. Third, if the mortgagor defaults on the senior
loan and/or any junior loan or loans, the existence of junior loans and actions taken by junior lenders can impair the security
available to the senior lender and can interfere with or delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the senior lender.
Installment Contracts
The trust fund assets may also consist of installment sales contracts. Under an installment contract the seller (referred to in
this section as the "lender") retains legal title to the property and enters into an agreement with the purchaser (referred to in this
section as the "borrower") for the payment of the purchase price, plus interest, over the term of the contract. Only after full
performance by the borrower of the installment contract is the lender obligated to convey title to the property to the purchaser. As
with mortgage or deed of trust financing, during the effective period of the installment contract, the borrower is generally responsible
for the maintaining the property in good condition and for paying real estate taxes, assessments and hazard insurance premiums
associated with the property.
The method of enforcing the rights of the lender under an installment contract varies on a state-by- state basis depending upon
the extent to which state courts are willing, or able pursuant to state statute, to enforce the contract strictly according to its
terms. The terms of installment contracts generally provide that upon a default by the borrower, the borrower loses his or her right to
occupy the property, the entire indebtedness is accelerated and the buyer's equitable interest in the property is forfeited. The lender
in this situation is not required to foreclose in order to obtain title to the property, although in some cases a quiet title action is
in order if the borrower has filed the installment contract in local land records and an ejectment action may be necessary to recover
possession. In a few states, particularly in cases of borrower default during the early years of an installment contract, the courts
will permit ejectment of the buyer and a forfeiture of his or her interest in the property. However, most state legislatures have
enacted provisions by analogy to mortgage law protecting borrowers under installment contracts from the harsh consequences of
forfeiture. Under these statutes, a judicial or nonjudicial foreclosure may be required, the lender may be required to give notice of
default and the borrower may be granted some grace period during which the installment contract may be reinstated upon full payment of
the defaulted amount and the borrower may have a post-foreclosure statutory redemption right. In other states, courts in equity may
permit a borrower with significant investment in the property under an installment contract for the sale of real estate to share in the
proceeds of sale of the property after the indebtedness is repaid or may otherwise refuse to enforce the forfeiture clause.
Nevertheless, the lender's procedures for obtaining possession and clear title under an installment contract in a given state are
simpler and less time consuming and costly than are the procedures for foreclosing and obtaining clear title to a property subject to
one or more liens.
Applicability of Usury Laws
Title V provides that state usury limitations shall not apply to some types of residential first mortgage loans originated by
some lenders after March 31,1980. A similar federal statute was in effect with respect to mortgage loans made during the first three
months of 1980. The Office of Thrift Supervision is authorized to issue rules and regulations and to publish interpretations governing
implementation of Title V. The statute authorized any state to reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision which expressly rejects application of the federal law. In addition, even where Title V is not so rejected, any
state is authorized by the law to adopt a provision limiting discount points or other charges on mortgage loans covered by Title V. Some
states have taken action to reimpose interest rate limits or to limit discount points or other charges.
Title V also provides that, subject to the following conditions, state usury limitations shall not apply to any loan that is
secured by a first lien on some kinds of Manufactured Housing. Contracts would be covered if they satisfy conditions including, among
other things, terms governing any prepayments, late charges and deferral fees and requiring a 30-day notice period prior to instituting
any action leading to repossession of or foreclosure with respect to the related unit. Title V authorized any state to reimpose
limitations on interest rates and finance charges by adopting before April 1,1983 a law or constitutional provision which expressly
rejects application of the federal law. Fifteen states adopted this type of law prior to the April 1,1983 deadline. In addition, even
where Title V was not so rejected, any state is authorized by the law to adopt a provision limiting discount points or other charges on
loans covered by Title V. In any state in which application of Title V was expressly rejected or a provision limiting discount points or
other charges has been adopted, no Contract which imposes finance charges or provides for discount points or charges in excess of
permitted levels has been included in the trust fund.
Usury limits apply to junior mortgage loans in many states. Any applicable usury limits in effect at origination will be
reflected in the maximum mortgage rates for ARM Loans, as set forth in the related prospectus supplement.
As indicated above under "The Mortgage Pools—Representations by Sellers," each Seller of a mortgage loan will have represented
that the mortgage loan was originated in compliance with then applicable state laws, including usury laws, in all material respects.
However, the mortgage rates on the mortgage loans will be subject to applicable usury laws as in effect from time to time.
Alternative Mortgage Instruments
Alternative mortgage instruments, including adjustable rate mortgage loans and early ownership mortgage loans, originated by
non-federally chartered lenders historically have been subjected to a variety of restrictions. The restrictions differed from state to
state, resulting in difficulties in determining whether a particular alternative mortgage instrument originated by a state-chartered
lender was in compliance with applicable law. These difficulties were alleviated substantially as a result of the enactment of Title
VIII. Title VIII provides that, notwithstanding any state law to the contrary, (1) state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the Comptroller of the Currency with respect to origination of
alternative mortgage instruments by national banks, (2) state-chartered credit unions may originate alternative mortgage instruments in
accordance with regulations promulgated by the National Credit Union Administration with respect to origination of alternative mortgage
instruments by federal credit unions, and (3) all other non-federally chartered housing creditors, including state-chartered savings and
loan associations, state-chartered savings banks and mutual savings banks and mortgage banking companies, may originate alternative
mortgage instruments in accordance with the regulations promulgated by the Federal Home Loan Bank Board, predecessor to the Office of
Thrift Supervision, with respect to origination of alternative mortgage instruments by federal savings and loan associations. Title VIII
provides that any state may reject applicability of the provisions of Title VIII by adopting, prior to October 15, 1985, a law or
constitutional provision expressly rejecting the applicability of the provisions. Some states have taken this action.
Formaldehyde Litigation with Respect to Contracts
A number of lawsuits are pending in the United States alleging personal injury from exposure to the chemical formaldehyde,
which is present in many building materials, including components of manufactured housing such as plywood flooring and wall paneling.
Some of these lawsuits are pending against manufacturers of manufactured housing, suppliers of component parts, and related persons in
the distribution process. The depositor is aware of a limited number of cases in which plaintiffs have won judgments in these lawsuits.
Under the FTC Rule, which is described above under "Consumer Protection Laws", the holder of any Contract secured by a
Manufactured Home with respect to which a formaldehyde claim has been successfully asserted may be liable to the obligor for the amount
paid by the obligor on the related Contract and may be unable to collect amounts still due under the Contract. In the event an obligor
is successful in asserting this claim, the related securityholders could suffer a loss if (1) the related Seller fails or cannot be
required to repurchase the affected Contract for a breach of representation and warranty and (2) the master servicer, servicer of the
Contract or the trustee were unsuccessful in asserting any claim of contribution or subornation on behalf of the securityholders against
the manufacturer or other persons who were directly liable to the plaintiff for the damages. Typical products liability insurance
policies held by manufacturers and component suppliers of manufactured homes may not cover liabilities arising from formaldehyde in
manufactured housing, with the result that recoveries from these manufacturers, suppliers or other persons may be limited to their
corporate assets without the benefit of insurance.
The Servicemembers Civil Relief Act
Under the terms of the Relief Act, a mortgagor who enters military service after the origination of the mortgagor's mortgage
loan (including a mortgagor who was in reserve status and is called to active duty after origination of the mortgage loan), may not be
charged interest (including fees and charges) above an annual rate of 6% during the period of the mortgagor's active duty status, unless
a court orders otherwise upon application of the lender. The Relief Act applies to mortgagors who are members of the Army, Navy, Air
Force, Marines, National Guard, Reserves, Coast Guard, and officers of the U.S. Public Health Service assigned to duty with the
military. Because the Relief Act applies to mortgagors who enter military service, including reservists who are called to active duty,
after origination of the related mortgage loan, no information can be provided as to the number of loans that may be affected by the
Relief Act. With respect to any mortgage loan subject to the Relief Act with an interest rate in excess of 6% per annum, application of
the Relief Act would adversely affect, for an indeterminate period of time, the ability of the master servicer or servicer to collect
full amounts of interest on that mortgage loan. Any shortfall in interest collections resulting from the application of the Relief Act
or similar legislation or regulations, which would not be recoverable from the related mortgage loans, would result in a reduction of
the amounts distributable to the holders of the related securities, and would not be covered by advances by the master servicer, any
servicer or other entity or by any form of credit enhancement provided in connection with the related series of securities, unless
described in the prospectus supplement. In addition, the Relief Act imposes limitations that would impair the ability of the master
servicer or servicer to foreclose on an affected single family loan or enforce rights under a Contract during the mortgagor's period of
active duty status, and, under some circumstances, during an additional three month period thereafter. Thus, in the event that the
Relief Act or similar legislation or regulations applies to any mortgage loan which goes into default, there may be delays in payment
and losses on the related securities in connection therewith. Any other interest shortfalls, deferrals or forgiveness of payments on the
mortgage loans resulting from similar legislation or regulations may result in delays in payments or losses to securityholders of the
related series.
Certain states have enacted or may enact their own versions of the Relief Act which may provide for more enhanced consumer
protection provisions than those set forth in the Relief Act. The Relief Act may not preempt those state laws.
Forfeitures in Drug and RICO Proceedings
Federal law provides that property owned by persons convicted of drug-related crimes or of criminal violations of RICO can be
seized by the government if the property was used in, or purchased with the proceeds of, these crimes. Under procedures contained in the
Crime Control Act, the government may seize the property even before conviction. The government must publish notice of the forfeiture
proceeding and may give notice to all parties "known to have an alleged interest in the property", including the holders of mortgage
loans.
A lender may avoid forfeiture of its interest in the property if it establishes that: (1) its mortgage was executed and
recorded before commission of the crime upon which the forfeiture is based, or (2) the lender was, at the time of execution of the
mortgage, "reasonably without cause to believe" that the property was used in, or purchased with the proceeds of, illegal drug or RICO
activities.
Junior Mortgages
Some of the mortgage loans may be secured by mortgages or deeds of trust which are junior to senior mortgages or deeds of trust
which are not part of the trust fund. The rights of the securityholders, as mortgagee under a junior mortgage, are subordinate to those
of the mortgagee under the senior mortgage, including the prior rights of the senior mortgagee to receive hazard insurance and
condemnation proceeds and to cause the property securing the mortgage loan to be sold upon default of the mortgagor, which may
extinguish the junior mortgagee's lien unless the junior mortgagee asserts its subordinate interest in the property in foreclosure
litigation and, in some cases, either reinitiates or satisfies the defaulted senior loan or loans. A junior mortgagee may satisfy a
defaulted senior loan in full or, in some states, may cure the default and bring the senior loan current thereby reinstating the senior
loan, in either event usually adding the amounts expended to the balance due on the junior loan. In most states, absent a provision in
the mortgage or deed of trust, no notice of default is required to be given to a junior mortgagee. Where applicable law or the terms of
the senior mortgage or deed of trust do not require notice of default to the junior mortgagee, the lack of this notice may prevent the
junior mortgagee from exercising any right to reinstate the loan which applicable law may provide.
The standard form of the mortgage or deed of trust used by most institutional lenders confers on the mortgagee the right both
to receive all proceeds collected under any hazard insurance policy and all awards made in connection with condemnation proceedings, and
to apply the proceeds and awards to any indebtedness secured by the mortgage or deed of trust, in the order the mortgagee may determine.
Thus, in the event improvements on the property are damaged or destroyed by fire or other casualty, or in the event the property is
taken by condemnation, the mortgagee or beneficiary under underlying senior mortgages will have the prior right to collect any insurance
proceeds payable under a hazard insurance policy and any award of damages in connection with the condemnation and to apply the same to
the indebtedness secured by the senior mortgages. Proceeds in excess of the amount of senior mortgage indebtedness, in most cases, may
be applied to the indebtedness of junior mortgages in the order of their priority.
Another provision sometimes found in the form of the mortgage or deed of trust used by institutional lenders obligates the
mortgagor to pay before delinquency all taxes and assessments on the property and, when due, all encumbrances, charges and liens on the
property which are prior to the mortgage or deed of trust, to provide and maintain fire insurance on the property, to maintain and
repair the property and not to commit or permit any waste thereof, and to appear in and defend any action or proceeding purporting to
affect the property or the rights of the mortgagee under the mortgage. Upon a failure of the mortgagor to perform any of these
obligations, the mortgagee or beneficiary is given the right under some mortgages or deeds of trust to perform the obligation itself, at
its election, with the mortgagor agreeing to reimburse the mortgagee for any sums expended by the mortgagee on behalf of the mortgagor.
All sums so expended by a senior mortgagee become part of the indebtedness secured by the senior mortgage.
Negative Amortization Loans
A notable case decided by the United States Court of Appeals, First Circuit, held that state restrictions on the compounding of
interest are not preempted by the provisions of the DIDMC and as a result, a mortgage loan that provided for negative amortization
violated New Hampshire's requirement that first mortgage loans provide for computation of interest on a simple interest basis. The
holding was limited to the effect of DIDMC on state laws regarding the compounding of interest and the court did not address the
applicability of the Parity Act, which authorizes lender to make residential mortgage loans that provide for negative amortization. The
First Circuit's decision is binding authority only on Federal District Courts in Maine, New Hampshire, Massachusetts, Rhode Island and
Puerto Rico.
FEDERAL INCOME TAX CONSEQUENCESGeneral
The following discussion is the opinion of Thacher Proffitt & Wood llp, Orrick, Herrington & Sutcliffe LLP and Greenberg
Traurig, LLP counsel to the depositor, with respect to the anticipated material federal income tax consequences of the purchase,
ownership and disposition of offered securities offered under this prospectus and the prospectus supplement insofar as it relates to
matters of law or legal conclusions with respect thereto. This discussion is directed solely to securityholders that hold the securities
as capital assets within the meaning of Section 1221 of the Code and does not purport to discuss all federal income tax consequences
that may be applicable to the individual circumstances of particular categories of investors, some of which (such as banks, insurance
companies and foreign investors) may be subject special treatment under the Code. Further, the authorities on which this discussion, and
the opinion referred to below, are based are subject to change or differing interpretations, which could apply retroactively.
Prospective investors should note that no rulings have been or will be sought from the IRS with respect to any of the federal income tax
consequences discussed below, and no assurance can be given that the IRS will not take contrary positions. Taxpayers and preparers of
tax returns (including those filed by any REMIC or other issuer) should be aware that under applicable Treasury regulations a provider
of advice on specific issues of law is not considered an income tax return preparer unless the advice (1) is given with respect to
events that have occurred at the time the advice is rendered and is not given with respect to the consequences of contemplated actions,
and (2) is directly relevant to the determination of an entry on a tax return. Accordingly, taxpayers are encouraged to consult their
own tax advisors and tax return preparers regarding the preparation of any item on a tax return, even where the anticipated tax
treatment has been discussed in this prospectus. In addition to the federal income tax consequences described in this prospectus,
potential investors are encouraged to consider the state and local tax consequences, if any, of the purchase, ownership and disposition
of the securities. See "State and Other Tax Consequences" in this prospectus.
The following discussion addresses securities of three general types:
1. REMIC Certificates representing interests in a trust fund, or a portion thereof, that the REMIC Administrator will elect to
have treated as one or more REMICs under the REMIC Provisions of the Code,
2. notes representing indebtedness of a trust fund as to which no REMIC election will be made,
3. Grantor Trust Certificates representing interests in a Grantor Trust Fund as to which no REMIC election will be made, and
4. securities representing an ownership interest in some or all of the assets included in the exchangeable security trust fund for
an ES Class.
The prospectus supplement for each series of certificates will indicate whether a REMIC election (or elections) will be made for the
related trust fund and, if this election is to be made, will identify all "regular interests" and "residual interests" in the REMIC. For
purposes of this tax discussion, references to a "securityholder,""certificateholder" or a "holder" are to the beneficial owner of a
security or certificate, as the case may be.
The prospectus supplement for each series of securities will indicate which of the foregoing treatments will apply to that
series. In addition, if a Partnership Structure is being used, the tax treatment of such structure will be described in the related
prospectus supplement.
The following discussion is based in part upon the OID Regulations and in part upon REMIC Regulations. The OID Regulations do
not adequately address issues relevant to securities such as the offered securities. In some instances, the OID Regulations provide that
they are not applicable to securities such as the offered securities.
REMICS
Classification of REMICS. On or prior to the date of the related prospectus supplement with respect to the proposed issuance
of each series of REMIC Certificates, any of Thacher Proffitt & Wood llp, Orrick, Herrington & Sutcliffe LLP or Greenberg Traurig LLP,
as counsel to the depositor, or another law firm identified in the related prospectus supplement, will deliver its opinion generally to
the effect that, assuming compliance with all provisions of the related pooling and servicing agreement, for federal income tax
purposes, the related trust fund (or each applicable portion thereof) will qualify as a REMIC and the REMIC Certificates offered with
respect thereto will be considered to evidence ownership of REMIC Regular Certificates or REMIC Residual Certificates in that REMIC
within the meaning of the REMIC Provisions.
If an entity electing to be treated as a REMIC fails to comply with one or more of the ongoing requirements of the Code for
status as a REMIC during any taxable year, the Code provides that the entity will not be treated as a REMIC for that year and
thereafter. In that event, the entity may be taxable as a corporation under Treasury regulations, and the related REMIC Certificates may
not be accorded the status or given the tax treatment described below. Although the Code authorizes the Treasury Department to issue
regulations providing relief in the event of an inadvertent termination of REMIC status, no such regulations have been issued. Any such
relief, moreover, may be accompanied by sanctions, such as the imposition of a corporate tax on all or a portion of the REMIC's income
for the period in which the requirements for status as a REMIC are not satisfied. The pooling and servicing agreement with respect to
each REMIC will include provisions designed to maintain the related trust fund's status as a REMIC under the REMIC Provisions. It is not
anticipated that the status of any trust fund as a REMIC will be inadvertently terminated.
Characterization of Investments in REMIC Certificates. In general, the REMIC Certificates will be "real estate assets" within
the meaning of Section 856(c)(4)(A) of the Code and assets described in Section 7701(a)(19)(C) of the Code in the same proportion that
the assets of the REMIC underlying the certificates would be so treated. Moreover, if 95% or more of the assets of the REMIC qualify for
any of the foregoing treatments at all times during a calendar year, the REMIC Certificates will qualify for the corresponding status in
their entirety for that calendar year. Interest (including original issue discount) on the REMIC Regular Certificates and income
allocated to the class of REMIC Residual Certificates will be interest described in Section 856(c)(3)(B) of the Code to the extent that
the certificates are treated as "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code. In addition, the REMIC
Regular Certificates will be "qualified mortgages" within the meaning of Section 860G(a)(3) of the Code if transferred to another REMIC
on its startup day in exchange for regular or residual interests therein. The determination as to the percentage of the REMIC's assets
that constitute assets described in the foregoing sections of the Code will be made with respect to each calendar quarter based on the
average adjusted basis of each category of the assets held by the REMIC during the calendar quarter. The REMIC Administrator will report
those determinations to certificateholders in the manner and at the times required by applicable Treasury regulations.
The assets of the REMIC will include, in addition to mortgage loans, payments on mortgage loans held pending distribution on
the REMIC Certificates and any property acquired by foreclosure held pending sale, and may include amounts in reserve accounts. It is
unclear whether property acquired by foreclosure held pending sale and amounts in reserve accounts would be considered to be part of the
mortgage loans, or whether the assets (to the extent not invested in assets described in the foregoing sections) otherwise would receive
the same treatment as the mortgage loans for purposes of all of the Code sections mentioned in the immediately preceding paragraph. In
addition, in some instances mortgage loans may not be treated entirely as assets described in the foregoing sections of the Code. If so,
the related prospectus supplement will describe the mortgage loans that may not be so treated. The REMIC Regulations do provide,
however, that cash received from payments on mortgage loans held pending distribution is considered part of the mortgage loans for
purposes of Section 856(c)(4)(A) of the Code. Furthermore, foreclosure property will qualify as "real estate assets" under Section
856(c)(4)(A) of the Code.
Tiered REMIC Structures. For some series of REMIC Certificates, two or more separate elections may be made to treat designated
portions of the related trust fund as REMICs for federal income tax purposes. As to each such series of REMIC Certificates, in the
opinion of counsel to the depositor, assuming compliance with all provisions of the related pooling and servicing agreement, each of the
REMICs in that trust fund will qualify as a REMIC and the REMIC Certificates issued by these REMICs will be considered to evidence
ownership of REMIC Regular Certificates or REMIC Residual Certificates in the related REMIC within the meaning of the REMIC Provisions.
Solely for purposes of determining whether the REMIC Certificates will be "real estate assets" within the meaning of Section
856(c)(4)(A) of the Code, and "loans secured by an interest in real property" under Section 7701(a)(19)(C) of the Code, and whether the
income on the certificates is interest described in Section 856(c)(3)(B) of the Code, all of the REMICs in that trust fund will be
treated as one REMIC.
Taxation of Owners of REMIC Regular Certificates.General. Except as otherwise stated in this discussion, REMIC Regular Certificates will be treated for federal income tax
purposes as debt instruments issued by the REMIC and not as ownership interests in the REMIC or its assets. Moreover, holders of REMIC
Regular Certificates that otherwise report income under a cash method of accounting will be required to report income with respect to
REMIC Regular Certificates under an accrual method.
Original Issue Discount. A REMIC Regular Certificate may be issued with "original issue discount" within the meaning of Section
1273(a) of the Code. Any holder of a REMIC Regular Certificate issued with original issue discount generally will be required to include
original issue discount in income as it accrues, in accordance with the "constant yield" method described below, in advance of the
receipt of the cash attributable to that income. In addition, Section 1272(a)(6) of the Code provides special rules applicable to REMIC
Regular Certificates and some other debt instruments issued with original issue discount. Regulations have not been issued under that
section.
The Code requires that a reasonable prepayment assumption be used with respect to mortgage loans held by a REMIC in computing
the accrual of original issue discount on REMIC Regular Certificates issued by that REMIC, and that adjustments be made in the amount
and rate of accrual of that discount to reflect differences between the actual prepayment rate and the prepayment assumption. The
prepayment assumption is to be determined in a manner prescribed in Treasury regulations; as noted above, those regulations have not
been issued. The Committee Report indicates that the regulations will provide that the prepayment assumption used with respect to a
REMIC Regular Certificate must be the same as that used in pricing the initial offering of the REMIC Regular Certificate. The Prepayment
Assumption used in reporting original issue discount for each series of REMIC Regular Certificates will be consistent with this standard
and will be disclosed in the related prospectus supplement. However, none of the depositor, the master servicer or the trustee will make
any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment Assumption or at any other rate.
The original issue discount, if any, on a REMIC Regular Certificate will be the excess of its stated redemption price at
maturity over its issue price. The issue price of a particular class of REMIC Regular Certificates will be the first cash price at which
a substantial amount of REMIC Regular Certificates of that class is sold (excluding sales to bond houses, brokers and underwriters). If
less than a substantial amount of a particular class of REMIC Regular Certificates is sold for cash on or prior to the Closing Date, the
issue price for that class will be the fair market value of that class on the Closing Date. Under the OID Regulations, the stated
redemption price of a REMIC Regular Certificate is equal to the total of all payments to be made on the certificate other than
"qualified stated interest.""Qualified stated interest" is interest that is unconditionally payable at least annually (during the entire
term of the instrument) at a single fixed rate, or at a "qualified floating rate," an "objective rate," a combination of a single fixed
rate and one or more "qualified floating rates" or one "qualified inverse floating rate," or a combination of "qualified floating rates"
that does not operate in a manner that accelerates or defers interest payments on the REMIC Regular Certificate.
In the case of REMIC Regular Certificates bearing adjustable interest rates, the determination of the total amount of original
issue discount and the timing of the inclusion thereof will vary according to the characteristics of the REMIC Regular Certificates. If
the original issue discount rules apply to the certificates in a particular series, the related prospectus supplement will describe the
manner in which these rules will be applied with respect to the certificates in that series that bear an adjustable interest rate in
preparing information returns to the certificateholders and the IRS.
The first interest payment on a REMIC Regular Certificate may be made more than one month after the date of issuance, which is
a period longer than the subsequent monthly intervals between interest payments. Assuming the "accrual period" (as defined below) for
original issue discount is each monthly period that ends on the day prior to each distribution date, in some cases, as a consequence of
this "long first accrual period," some or all interest payments may be required to be included in the stated redemption price of the
REMIC Regular Certificate and accounted for as original issue discount. Because interest on REMIC Regular Certificates must in any event
be accounted for under an accrual method, applying this analysis would result in only a slight difference in the timing of the inclusion
in income of the yield on the REMIC Regular Certificates.
In addition, if the accrued interest to be paid on the first distribution date is computed with respect to a period that begins
prior to the Closing Date, a portion of the purchase price paid for a REMIC Regular Certificate will reflect the accrued interest. In
such cases, information returns to the certificateholders and the IRS will be based on the position that the portion of the purchase
price paid for the interest accrued with respect to periods prior to the Closing Date is treated as part of the overall cost of the
REMIC Regular Certificate (and not as a separate asset the cost of which is recovered entirely out of interest received on the next
distribution date) and that portion of the interest paid on the first distribution date in excess of interest accrued for a number of
days corresponding to the number of days from the Closing Date to the first distribution date should be included in the stated
redemption price of the REMIC Regular Certificate. However, the OID Regulations state that all or some portion of the accrued interest
may be treated as a separate asset the cost of which is recovered entirely out of interest paid on the first distribution date. It is
unclear how an election to do so would be made under the OID Regulations and whether such an election could be made unilaterally by a
certificateholder.
Notwithstanding the general definition of original issue discount, original issue discount on a REMIC Regular Certificate will
be considered to be de minimis if it is less than 0.25% of the stated redemption price of the REMIC Regular Certificate multiplied by
its weighted average life. For this purpose, the weighted average life of a REMIC Regular Certificate is computed as the sum of the
amounts determined, as to each payment included in the stated redemption price of the REMIC Regular Certificate, by multiplying (1) the
number of complete years (rounding down for partial years) from the issue date until that payment is expected to be made (presumably
taking into account the Prepayment Assumption) by (2) a fraction, the numerator of which is the amount of the payment, and the
denominator of which is the stated redemption price at maturity of the REMIC Regular Certificate. Under the OID Regulations, original
issue discount of only a de minimis amount (other than de minimis original issue discount attributable to a so-called "teaser" interest
rate or an initial interest holiday) will be included in income as each payment of stated principal is made, based on the product of the
total amount of de minimis original issue discount attributable to that certificate and a fraction, the numerator of which is the amount
of the principal payment and the denominator of which is the outstanding stated principal amount of the REMIC Regular Certificate. The
OID Regulations also would permit a certificateholder to elect to accrue de minimis original issue discount into income currently based
on a constant yield method. See "REMICS—Taxation of Owners of REMIC Regular Certificates—Market Discount" in this prospectus for a
description of this election under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of a de minimis amount, the holder of the certificate
must include in ordinary gross income the sum of the "daily portions" of original issue discount for each day during its taxable year on
which it held the REMIC Regular Certificate, including the purchase date but excluding the disposition date. In the case of an original
holder of a REMIC Regular Certificate, the daily portions of original issue discount will be determined as follows.
As to each "accrual period," that is, each period that ends on a date that corresponds to the day prior to each distribution
date and begins on the first day following the immediately preceding accrual period (or in the case of the first such period, begins on
the Closing Date), a calculation will be made of the portion of the original issue discount that accrued during the accrual period. The
portion of original issue discount that accrues in any accrual period will equal the excess, if any, of (1) the sum of (a) the present
value, as of the end of the accrual period, of all of the distributions remaining to be made on the REMIC Regular Certificate, if any,
in future periods and (b) the distributions made on the REMIC Regular Certificate during the accrual period of amounts included in the
stated redemption price, over (2) the adjusted issue price of the REMIC Regular Certificate at the beginning of the accrual period. The
present value of the remaining distributions referred to in the preceding sentence will be calculated (1) assuming that distributions on
the REMIC Regular Certificate will be received in future periods based on the mortgage loans being prepaid at a rate equal to the
Prepayment Assumption, (2) using a discount rate equal to the original yield to maturity of the certificate and (3) taking into account
events (including actual prepayments) that have occurred before the close of the accrual period. For these purposes, the original yield
to maturity of the certificate will be calculated based on its issue price and assuming that distributions on the certificate will be
made in all accrual periods based on the mortgage loans being prepaid at a rate equal to the Prepayment Assumption. The adjusted issue
price of a REMIC Regular Certificate at the beginning of any accrual period will equal the issue price of the certificate, increased by
the aggregate amount of original issue discount that accrued with respect to the certificate in prior accrual periods, and reduced by
the amount of any distributions made on the certificate in prior accrual periods of amounts included in the stated redemption price. The
original issue discount accruing during any accrual period, computed as described above, will be allocated ratably to each day during
the accrual period to determine the daily portion of original issue discount for that day.
A subsequent purchaser of a REMIC Regular Certificate that purchases a certificate that is treated as having been issued with
original issue discount at a cost (excluding any portion of the cost attributable to accrued qualified stated interest) less than its
remaining stated redemption price will also be required to include in gross income the daily portions of any original issue discount
with respect to the certificate. However, each such daily portion will be reduced, if the cost of the certificate is in excess of its
"adjusted issue price," in proportion to the ratio the excess bears to the aggregate original issue discount remaining to be accrued on
the REMIC Regular Certificate. The adjusted issue price of a REMIC Regular Certificate on any given day equals the sum of (1) the
adjusted issue price (or, in the case of the first accrual period, the issue price) of the certificate at the beginning of the accrual
period which includes that day and (2) the daily portions of original issue discount for all days during the accrual period prior to
that day.
Market Discount. A certificateholder that purchases a REMIC Regular Certificate at a market discount, that is, in the case of a
REMIC Regular Certificate issued without original issue discount, at a purchase price less than its remaining stated principal amount,
or in the case of a REMIC Regular Certificate issued with original issue discount, at a purchase price less than its adjusted issue
price will recognize gain upon receipt of each distribution representing stated redemption price. In particular, under Section 1276 of
the Code such a certificateholder generally will be required to allocate the portion of each distribution representing stated redemption
price first to accrued market discount not previously included in income, and to recognize ordinary income to that extent. A
certificateholder may elect to include market discount in income currently as it accrues rather than including it on a deferred basis in
accordance with the foregoing. If made, the election will apply to all market discount bonds acquired by the certificateholder on or
after the first day of the first taxable year to which the election applies. In addition, the OID Regulations permit a certificateholder
to elect to accrue all interest, discount (including de minimis market or original issue discount) in income, and to amortize premium,
based on a constant yield method. If such an election were made with respect to a REMIC Regular Certificate with market discount, the
certificateholder would be deemed to have made an election to include currently market discount in income with respect to all other debt
instruments having market discount that the certificateholder acquires during the taxable year of the election or thereafter.
Similarly, a certificateholder that made this election for a certificate that is acquired at a premium would be deemed to have made an
election to amortize bond premium with respect to all debt instruments having amortizable bond premium that the certificateholder owns
or acquires. See "REMICS—Taxation of Owners of REMIC Regular Certificates—Premium" below. Each of these elections to accrue interest,
discount and premium with respect to a certificate on a constant yield method would be irrevocable, except with the approval of the IRS.
However, market discount with respect to a REMIC Regular Certificate will be considered to be de minimis for purposes of
Section 1276 of the Code if the market discount is less than 0.25% of the remaining stated redemption price of the REMIC Regular
Certificate multiplied by the number of complete years to maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in installments, the OID Regulations refer to the weighted average
maturity of obligations, and it is likely that the same rule will be applied with respect to market discount, presumably taking into
account the Prepayment Assumption. If market discount is treated as de minimis under this rule, it appears that the actual discount
would be treated in a manner similar to original issue discount of a de minimis amount. See "REMICS—Taxation of Owners of REMIC Regular
Certificates—Original Issue Discount" above. This treatment would result in discount being included in income at a slower rate than
discount would be required to be included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury Department to issue regulations providing for the method
for accruing market discount on debt instruments, the principal of which is payable in more than one installment. Until regulations are
issued by the Treasury Department, the rules described in the Committee Report apply. The Committee Report indicates that in each
accrual period market discount on REMIC Regular Certificates should accrue, at the certificateholder's option: (1) on the basis of a
constant yield method, (2) in the case of a REMIC Regular Certificate issued without original issue discount, in an amount that bears
the same ratio to the total remaining market discount as the stated interest paid in the accrual period bears to the total amount of
stated interest remaining to be paid on the REMIC Regular Certificate as of the beginning of the accrual period, or (3) in the case of a
REMIC Regular Certificate issued with original issue discount, in an amount that bears the same ratio to the total remaining market
discount as the original issue discount accrued in the accrual period bears to the total original issue discount remaining on the REMIC
Regular Certificate at the beginning of the accrual period. Moreover, the Prepayment Assumption used in calculating the accrual of
original issue discount is also used in calculating the accrual of market discount. Because the regulations referred to in this
paragraph have not been issued, it is not possible to predict what effect these regulations might have on the tax treatment of a REMIC
Regular Certificate purchased at a discount in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other periodic distributions throughout their term, the
effect of these rules may be to require market discount to be includible in income at a rate that is not significantly slower than the
rate at which the discount would accrue if it were original issue discount. Moreover, in any event a holder of a REMIC Regular
Certificate generally will be required to treat a portion of any gain on the sale or exchange of the certificate as ordinary income to
the extent of the market discount accrued to the date of disposition under one of the foregoing methods, less any accrued market
discount previously reported as ordinary income.
Further, under Section 1277 of the Code a holder of a REMIC Regular Certificate may be required to defer a portion of its
interest deductions for the taxable year attributable to any indebtedness incurred or continued to purchase or carry a REMIC Regular
Certificate purchased with market discount. For these purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during the taxable year and is, in general, allowed as a deduction
not later than the year in which the market discount is includible in income. If a holder elects to include market discount in income
currently as it accrues on all market discount instruments acquired by the holder in that taxable year or thereafter, the interest
deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding any portion of the cost attributable to accrued qualified
stated interest) greater than its remaining stated redemption price will be considered to be purchased at a premium. The holder of a
REMIC Regular Certificate may elect under Section 171 of the Code to amortize the premium under the constant yield method over the life
of the certificate. If made, the election will apply to all debt instruments having amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be treated as an offset to interest income on the related debt instrument, rather than
as a separate interest deduction. The OID Regulations also permit certificateholders to elect to include all interest, discount and
premium in income based on a constant yield method, further treating the certificateholder as having made the election to amortize
premium generally. See "REMICS—Taxation of Owners of REMIC Regular Certificates—Market Discount" above. The Committee Report states that
the same rules that apply to accrual of market discount (which rules will require use of a Prepayment Assumption in accruing market
discount with respect to REMIC Regular Certificates without regard to whether the certificates have original issue discount) will also
apply in amortizing bond premium under Section 171 of the Code. The use of an assumption that there will be no prepayments may be
required.
Realized Losses. Under Section 166 of the Code, both corporate holders of the REMIC Regular Certificates and non-corporate
holders of the REMIC Regular Certificates that acquire the certificates in connection with a trade or business should be allowed to
deduct, as ordinary losses, any losses sustained during a taxable year in which their certificates become wholly or partially worthless
as the result of one or more realized losses on the mortgage loans. However, it appears that a non-corporate holder that does not
acquire a REMIC Regular Certificate in connection with a trade or business will not be entitled to deduct a loss under Section 166 of
the Code until the holder's certificate becomes wholly worthless (i.e., until its outstanding principal balance has been reduced to
zero) and that the loss will be characterized as a short-term capital loss.
Each holder of a REMIC Regular Certificate will be required to accrue interest and original issue discount with respect to the
certificate, without giving effect to any reductions in distributions attributable to defaults or delinquencies on the mortgage loans or
the certificate underlying the REMIC Certificates, as the case may be, until it can be established that the reduction ultimately will
not be recoverable. As a result, the amount of taxable income reported in any period by the holder of a REMIC Regular Certificate could
exceed the amount of economic income actually realized by that holder in the period. Although the holder of a REMIC Regular Certificate
eventually will recognize a loss or reduction in income attributable to previously accrued and included income that as the result of a
realized loss ultimately will not be realized, the law is unclear with respect to the timing and character of this loss or reduction in
income.
Taxation of Owners of REMIC Residual Certificates
General. Although a REMIC is a separate entity for federal income tax purposes, a REMIC generally is not subject to
entity-level taxation, except with regard to prohibited transactions and some other transactions. See "—Prohibited Transactions andOther Possible REMIC Taxes" below. Rather, the taxable income or net loss of a REMIC is generally taken into account by the holder of
the REMIC Residual Certificates. Accordingly, the REMIC Residual Certificates will be subject to tax rules that differ significantly
from those that would apply if the REMIC Residual Certificates were treated for federal income tax purposes as direct ownership
interests in the mortgage loans or as debt instruments issued by the REMIC.
A holder of a REMIC Residual Certificate generally will be required to report its daily portion of the taxable income or,
subject to the limitations noted in this discussion, the net loss of the REMIC for each day during a calendar quarter that the holder
owned the REMIC Residual Certificate. For this purpose, the taxable income or net loss of the REMIC will be allocated to each day in the
calendar quarter ratably using a "30 days per month/90 days per quarter/360 days per year" convention unless otherwise disclosed in the
related prospectus supplement. The daily amounts so allocated will then be allocated among the REMIC Residual Certificateholders in
proportion to their respective ownership interests on that day. Any amount included in the gross income or allowed as a loss of any
REMIC Residual Certificateholder by virtue of this paragraph will be treated as ordinary income or loss. The taxable income of the REMIC
will be determined under the rules described below in "Taxable Income of the REMIC" and will be taxable to the REMIC Residual
Certificateholders without regard to the timing or amount of cash distributions by the REMIC. Ordinary income derived from REMIC
Residual Certificates will be "portfolio income" for purposes of the taxation of taxpayers subject to limitations under Section 469 of
the Code on the deductibility of "passive losses."
A holder of a REMIC Residual Certificate that purchased the certificate from a prior holder of that certificate also will be
required to report on its federal income tax return amounts representing its daily share of the taxable income (or net loss) of the
REMIC for each day that it holds the REMIC Residual Certificate. Those daily amounts generally will equal the amounts of taxable income
or net loss determined as described above. The Committee Report indicates that some modifications of the general rules may be made, by
regulations, legislation or otherwise to reduce (or increase) the income of a REMIC Residual Certificateholder that purchased the REMIC
Residual Certificate from a prior holder of the certificate at a price greater than (or less than) the adjusted basis (as defined below)
the REMIC Residual Certificate would have had in the hands of an original holder of the certificate. The REMIC Regulations, however, do
not provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate in connection with the acquisition of the REMIC Residual
Certificate will be taken into account in determining the income of the holder for federal income tax purposes. Although it appears
likely that any of these payments would be includible in income immediately upon its receipt, the IRS might assert that these payments
should be included in income over time according to an amortization schedule or according to some other method. Because of the
uncertainty concerning the treatment of these payments, holders of REMIC Residual Certificates are encouraged to consult their tax
advisors concerning the treatment of these payments for income tax purposes.
The amount of income REMIC Residual Certificateholders will be required to report (or the tax liability associated with the
income) may exceed the amount of cash distributions received from the REMIC for the corresponding period. Consequently, REMIC Residual
Certificateholders should have other sources of funds sufficient to pay any federal income taxes due as a result of their ownership of
REMIC Residual Certificates or unrelated deductions against which income may be offset, subject to the rules relating to "excessinclusions" and "noneconomic" residual interests discussed below. The fact that the tax liability associated with the income allocated
to REMIC Residual Certificateholders may exceed the cash distributions received by the REMIC Residual Certificateholders for the
corresponding period may significantly adversely affect the REMIC Residual Certificateholders' after-tax rate of return. This disparity
between income and distributions may not be offset by corresponding losses or reductions of income attributable to the REMIC Residual
Certificateholder until subsequent tax years and, then, may not be completely offset due to changes in the Code, tax rates or character
of the income or loss.
Taxable Income of the REMIC. The taxable income of the REMIC will equal the income from the mortgage loans and other assets of
the REMIC plus any cancellation of indebtedness income due to the allocation of realized losses to REMIC Regular Certificates, less the
deductions allowed to the REMIC for interest (including original issue discount and reduced by any income from premium on issuance) on
the REMIC Regular Certificates (and any other class of REMIC Certificates constituting "regular interests" in the REMIC not offered by
the prospectus), amortization of any premium on the mortgage loans, bad debt losses with respect to the mortgage loans and, except as
described below, for servicing, administrative and other expenses.
For purposes of determining its taxable income, the REMIC will have an initial aggregate basis in its assets equal to the sum
of the issue prices of all REMIC Certificates (or, if a class of REMIC Certificates is not sold initially, their fair market values).
The aggregate basis will be allocated among the mortgage loans and the other assets of the REMIC in proportion to their respective fair
market values. The issue price of any offered REMIC Certificates will be determined in the manner described above under "—Taxation of
Owners of REMIC Regular Certificates—Original Issue Discount." The issue price of a REMIC Certificate received in exchange for an
interest in the mortgage loans or other property will equal the fair market value of the interests in the mortgage loans or other
property. Accordingly, if one or more classes of REMIC Certificates are retained initially rather than sold, the REMIC Administrator may
be required to estimate the fair market value of the interests in order to determine the basis of the REMIC in the mortgage loans and
other property held by the REMIC.
Subject to possible application of the de minimis rules, the method of accrual by the REMIC of original issue discount income
and market discount income with respect to mortgage loans that it holds will be equivalent to the method for accruing original issue
discount income for holders of REMIC Regular Certificates (that is, under the constant yield method taking into account the Prepayment
Assumption). However, a REMIC that acquires loans at a market discount must include the market discount in income currently, as it
accrues, on a constant yield basis. See "—Taxation of Owners of REMIC Regular Certificates" above, which describes a method for accruing
discount income that is analogous to that required to be used by a REMIC as to mortgage loans with market discount that it holds.
A mortgage loan will be deemed to have been acquired with discount (or premium) to the extent that the REMIC's basis therein,
determined as described in the preceding paragraph, is less than (or greater than) its stated redemption price. Any such discount will
be includible in the income of the REMIC as it accrues, in advance of receipt of the cash attributable to the income, under a method
similar to the method described above for accruing original issue discount on the REMIC Regular Certificates. It is anticipated that
each REMIC will elect under Section 171 of the Code to amortize any premium on the mortgage loans. Premium on any mortgage loan to which
the election applies may be amortized under a constant yield method, presumably taking into account a Prepayment Assumption. Further,
such an election would not apply to any mortgage loan originated on or before September 27, 1985. Instead, premium on such a mortgage
loan should be allocated among the principal payments thereon and be deductible by the REMIC as those payments become due or upon the
prepayment of the mortgage loan.
A REMIC will be allowed deductions for interest (including original issue discount) on the REMIC Regular Certificates
(including any other class of REMIC Certificates constituting "regular interests" in the REMIC not offered by this prospectus) equal to
the deductions that would be allowed if the REMIC Regular Certificates (including any other class of REMIC Certificates constituting
"regular interests" in the REMIC not offered by this prospectus) were indebtedness of the REMIC. Original issue discount will be
considered to accrue for this purpose as described above under "—Taxation of Owners of REMIC Regular certificates—Original Issue
Discount," except that the de minimis rule and the adjustments for subsequent holders of REMIC Regular Certificates (including any other
class of REMIC Certificates constituting "regular interests" in the REMIC not offered by this prospectus) described therein will not
apply.
If a class of REMIC Regular Certificates is issued with Issue Premium, the net amount of interest deductions that are allowed
the REMIC in each taxable year with respect to the REMIC Regular Certificates of that class will be reduced by an amount equal to the
portion of the Issue Premium that is considered to be amortized or repaid in that year. Although the matter is not entirely clear, it is
likely that Issue Premium would be amortized under a constant yield method in a manner analogous to the method of accruing original
issue discount described above under "—Taxation of Owners of REMIC Regular certificates—Original Issue Discount."
As a general rule, the taxable income of a REMIC will be determined in the same manner as if the REMIC were an individual
having the calendar year as its taxable year and using the accrual method of accounting. However, no item of income, gain, loss or
deduction allocable to a prohibited transaction will betaken into account. See "—Prohibited Transactions and Other Possible REMIC Taxes"
below. Further, the limitation on miscellaneous itemized deductions imposed on individuals by Section 67 of the Code (which allows these
deductions only to the extent they exceed in the aggregate two percent of the taxpayer's adjusted gross income) will not be applied at
the REMIC level so that the REMIC will be allowed deductions for servicing, administrative and other non-interest expenses in
determining its taxable income. All such expenses will be allocated as a separate item to the holders of REMIC Certificates, subject to
the limitation of Section 67 of the Code. See "—Possible Pass-Through of Miscellaneous Itemized Deductions" below. If the deductions
allowed to the REMIC exceed its gross income for a calendar quarter, the excess will be the net loss for the REMIC for that calendar
quarter.
Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC Residual Certificate will be equal to the amount paid
for the REMIC Residual Certificate, increased by amounts included in the income of the REMIC Residual Certificateholder and decreased
(but not below zero) by distributions made, and by net losses allocated, to the REMIC Residual Certificateholder.
A REMIC Residual Certificateholder is not allowed to take into account any net loss for any calendar quarter to the extent the
net loss exceeds the REMIC Residual Certificateholder's adjusted basis in its REMIC Residual Certificate as of the close of the calendar
quarter (determined without regard to the net loss). Any loss that is not currently deductible by reason of this limitation may be
carried forward indefinitely to future calendar quarters and, subject to the same limitation, may be used only to offset income from the
REMIC Residual Certificate. The ability of REMIC Residual Certificateholders to deduct net losses may be subject to additional
limitations under the Code, as to which REMIC Residual Certificateholders are encouraged to consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a nontaxable return of capital to the extent it does not
exceed the holder's adjusted basis in the REMIC Residual Certificate. To the extent a distribution on a REMIC Residual Certificate
exceeds the adjusted basis, it will be treated as gain from the sale of the REMIC Residual Certificate. Holders of REMIC Residual
Certificates may be entitled to distributions early in the term of the related REMIC under circumstances in which their bases in the
REMIC Residual Certificates will not be sufficiently large that the distributions will be treated as nontaxable returns of capital.
Their bases in the REMIC Residual Certificates will initially equal the amount paid for the REMIC Residual Certificates and will be
increased by their allocable shares of taxable income of the REMIC. However, these bases increases may not occur until the end of the
calendar quarter, or perhaps the end of the calendar year, with respect to which the REMIC taxable income is allocated to the REMIC
Residual Certificateholders. To the extent the REMIC Residual Certificateholders' initial bases are less than the distributions to the
REMIC Residual Certificateholders, and increases in initial bases either occur after the distributions or (together with their initial
bases) are less than the amount of the distributions, gain will be recognized to the REMIC Residual Certificateholders on these
distributions and will be treated as gain from the sale of their REMIC Residual Certificates.
The effect of these rules is that a REMIC Residual Certificateholder may not amortize its basis in a REMIC Residual
Certificate, but may only recover its basis through distributions, through the deduction of any net losses of the REMIC or upon the sale
of its REMIC Residual Certificate. See "—Sales of REMIC Certificates" below. For a discussion of possible modifications of these rules
that may require adjustments to income of a holder of a REMIC Residual Certificate other than an original holder in order to reflect any
difference between the cost of the REMIC Residual Certificate to the REMIC Residual Certificateholder and the adjusted basis the REMIC
Residual Certificate would have in the hands of an original holder, see "—Taxation of Owners of REMIC Residual Certificates—General"
above.
Excess Inclusions. Any "excess inclusions" with respect to a REMIC Residual Certificate will be subject to federal income tax
in all events. In general, the "excess inclusions" with respect to a REMIC Residual Certificate for any calendar quarter will be the
excess, if any, of (1) the daily portions of REMIC taxable income allocable to the REMIC Residual Certificate over (2) the sum of the
"daily accruals" (as defined below) for each day during the quarter that the REMIC Residual Certificate was held by the REMIC Residual
Certificateholder. The daily accruals of a REMIC Residual Certificateholder will be determined by allocating to each day during a
calendar quarter its ratable portion of the product of the "adjusted issue price" of the REMIC Residual Certificate at the beginning of
the calendar quarter and 120% of the "long-term Federal rate" in effect on the Closing Date. For this purpose, the adjusted issue price
of a REMIC Residual Certificate as of the beginning of any calendar quarter will be equal to the issue price of the REMIC Residual
Certificate, increased by the sum of the daily accruals for all prior quarters and decreased (but not below zero) by any distributions
made with respect to the REMIC Residual Certificate before the beginning of that quarter. The issue price of a REMIC Residual
Certificate is the initial offering price to the public (excluding bond houses and brokers) at which a substantial amount of the REMIC
Residual Certificates were sold. The "long-term Federal rate" is an average of current yields on Treasury securities with a remaining
term of greater than nine years, computed and published monthly by the IRS. Although it has not done so, the Treasury has authority to
issue regulations that would treat the entire amount of income accruing on a REMIC Residual Certificate as an excess inclusion if the
REMIC Residual Certificates are not considered to have "significant value."
For REMIC Residual Certificateholders, an excess inclusion (1) will not be permitted to be offset by deductions, losses or loss
carryovers from other activities, (2) will be treated as "unrelated business taxable income" to an otherwise tax-exempt organization and
(3) will not be eligible for any rate reduction or exemption under any applicable tax treaty with respect to the 30% United States
withholding tax imposed on distributions to REMIC Residual Certificateholders that are foreign investors. See, however, "—Foreigninvestors in REMIC Certificates," below.
Furthermore, for purposes of the alternative minimum tax, excess inclusions will not be permitted to be offset by the
alternative tax net operating loss deduction and alternative minimum taxable income may not be less than the taxpayer's excess
inclusions. The latter rule has the effect of preventing nonrefundable tax credits from reducing the taxpayer's income tax to an amount
lower than the tentative minimum tax on excess inclusions.
In the case of any REMIC Residual Certificates held by a real estate investment trust, the aggregate excess inclusions with
respect to the REMIC Residual Certificates, reduced (but not below zero) by the real estate investment trust taxable income (within the
meaning of Section 857(b)(2) of the Code, excluding any net capital gain), will be allocated among the shareholders of the trust in
proportion to the dividends received by the shareholders from the trust, and any amount so allocated will be treated as an excess
inclusion with respect to a REMIC Residual Certificate as if held directly by the shareholder. Treasury regulations yet to be issued
could apply a similar rule to regulated investment companies, common trust funds and cooperatives; the REMIC Regulations currently do
not address this subject.
Noneconomic REMIC Residual Certificates. Under the REMIC Regulations, transfers of "noneconomic" REMIC Residual Certificates
will be disregarded for all federal income tax purposes if "a significant purpose of the transfer was to enable the transferor to impede
the assessment or collection of tax." If the transfer is disregarded, the purported transferor will continue to remain liable for any
taxes due with respect to the income on the "noneconomic" REMIC Residual Certificate. The REMIC Regulations provide that a REMIC
Residual Certificate is non-economic unless, based on the Prepayment Assumption and on any required or permitted clean up calls, or
required liquidation provided for in the REMIC's organizational documents, (1) the present value of the expected future distributions
(discounted using the "applicable Federal rate" for obligations whose term ends on the close of the last quarter in which excess
inclusions are expected to accrue with respect to the REMIC Residual Certificate, which rate is computed and published monthly by the
IRS) on the REMIC Residual Certificate equals at least the present value of the expected tax on the anticipated excess inclusions, and
(2) the transferor reasonably expects that the transferee will receive distributions with respect to the REMIC Residual Certificate at
or after the time the taxes accrue on the anticipated excess inclusions in an amount sufficient to satisfy the accrued taxes.
Accordingly, all transfers of REMIC Residual Certificates that may constitute noneconomic residual interests will be subject to
restrictions under the terms of the related pooling and servicing agreement that are intended to reduce the possibility of any such
transfer being disregarded. These restrictions will require each party to a transfer to provide an affidavit that no purpose of the
transfer is to impede the assessment or collection of tax, including representations as to the financial condition of the prospective
transferee, as to which the transferor is also required to make a reasonable investigation to determine the transferee's historic
payment of its debts and ability to continue to pay its debts as they come due in the future. The IRS has issued final REMIC regulations
that add to the conditions necessary to assure that a transfer of a noneconomic residual interest would be respected. The additional
conditions require that in order to qualify as a safe harbor transfer of a residual, the transferee represent that it will not cause the
income "to be attributable to a foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of
the transferee or another U.S. taxpayer" and either (i) the amount received by the transferee be no less on a present value basis than
the present value of the net tax detriment attributable to holding the residual interest reduced by the present value of the projected
payments to be received on the residual interest or (ii) the transfer is to a domestic taxable corporation with specified large amounts
of gross and net assets and that meets certain other requirements where agreement is made that all future transfers will be to taxable
domestic corporations in transactions that qualify for the same "safe harbor" provision. Eligibility for the safe harbor requires, among
other things, that the facts and circumstances known to the transferor at the time of transfer not indicate to a reasonable person that
the taxes with respect to the residual interest will not be paid, with an unreasonably low cost for the transfer specifically mentioned
as negating eligibility. The regulations generally apply to transfers of residual interests occurring on or after February 4, 2000.
Prior to purchasing a REMIC Residual Certificate, prospective purchasers are encouraged to consider the possibility that a purported
transfer of the REMIC Residual Certificate by such a purchaser to another purchaser at some future day may be disregarded in accordance
with the above described rules which would result in the retention of tax liability by that purchaser.
The related prospectus supplement will disclose whether offered REMIC Residual Certificates may be considered "noneconomic"
residual interests under the REMIC Regulations; provided, however, that any disclosure that a REMIC Residual Certificate will not be
considered "noneconomic" will be based upon assumptions, and the depositor will make no representation that a REMIC Residual Certificate
will not be considered "noneconomic" for purposes of the above-described rules. See "—Foreign Investors in REMIC Certificates—REMIC
Residual Certificates" below for additional restrictions applicable to transfers of REMIC Residual Certificates to foreign persons.
On May 11, 2004, the IRS issued final regulations relating to the federal income tax treatment of "inducement fees" received by
transferees of noneconomic REMIC residual interests. The regulations provide tax accounting rules for the inclusion of such fees in
income over an appropriate period, and clarify that inducement fees represent income from sources within the United States. These rules
apply to taxable years ending on or after May 11, 2004. On the same date, the IRS issued administrative guidance addressing the
procedures by which transferees of such REMIC residual interests may obtain consent to change the method of accounting for REMIC
inducement fee income to one of the methods provided in the regulations. Prospective purchasers of REMIC Residual Certificates are
encouraged to consult with their tax advisors regarding the effect of these regulations and the related administrative guidance.
Mark-to-Market Rules. In general, all securities owned by a dealer, except to the extent that the dealer has specifically
identified a security as held for investment, must be marked to market in accordance with the applicable Code provision and the related
regulations. However, the IRS has issued regulations which provide that for purposes of this mark-to-market requirement, a REMIC
Residual Certificate is not treated as a security and thus may not be marked to market.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and expenses of a REMIC generally will be allocated to the
holders of the related REMIC Residual Certificates. The applicable Treasury regulations indicate, however, that in the case of a REMIC
that is similar to a single class grantor trust, all or a portion of these fees and expenses should be allocated to the holders of the
related REMIC Regular Certificates. Except as stated in the related prospectus supplement, these fees and expenses will be allocated to
holders of the related REMIC Residual Certificates in their entirety and not to the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates the holders of which receive an allocation of fees
and expenses in accordance with the preceding discussion, if any holder thereof is an individual, estate or trust, or a "pass-through
entity" beneficially owned by one or more individuals, estates or trusts, (1) an amount equal to the individual's, estate's or trust's
share of the fees and expenses will be added to the gross income of the holder and (2) the individual's, estate's or trust's share of
the fees and expenses will be treated as a miscellaneous itemized deduction allowable subject to the limitation of Section 67 of the
Code, which permits these deductions only to the extent they exceed in the aggregate two percent of taxpayer's adjusted gross income. In
addition, Section 68 of the Code provides that the amount of itemized deductions otherwise allowable for an individual whose adjusted
gross income exceeds a specified amount will be reduced by the lesser of (1) 3% of the excess of the individual's adjusted gross income
over the amount or (2) 80% of the amount of itemized deductions otherwise allowable for the taxable year. The amount of additional
taxable income reportable by REMIC Certificateholders that are subject to the limitations of either Section 67 or Section 68 of the Code
may be substantial. Furthermore, in determining the alternative minimum taxable income of such a holder of a REMIC Certificate that is
an individual, estate or trust, or a "pass-through entity" beneficially owned by one or more individuals, estates or trusts, no
deduction will be allowed for the holder's allocable portion of servicing fees and other miscellaneous itemized deductions of the REMIC,
even though an amount equal to the amount of the fees and other deductions will be included in the holder's gross income. Accordingly,
these REMIC Certificates may not be appropriate investments for individuals, estates, or trusts, or pass-through entities beneficially
owned by one or more individuals, estates or trusts. Prospective investors are encouraged to consult with their tax advisors prior to
making an investment in the certificates.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling Certificateholder will recognize gain or loss equal to
the difference between the amount realized on the sale and its adjusted basis in the REMIC Certificate. The adjusted basis of a REMIC
Regular Certificate generally will equal the cost of the REMIC Regular Certificate to the certificateholder, increased by income
reported by the certificateholder with respect to the REMIC Regular Certificate (including original issue discount and market discount
income) and reduced (but not below zero) by distributions on the REMIC Regular Certificate received by the certificateholder and by any
amortized premium. The adjusted basis of a REMIC Residual Certificate will be determined as described under "—Taxation of Owners of
REMIC Residual Certificates—Basis Rules, Net Losses and Distributions" in this prospectus. Except as provided in the following four
paragraphs, any such gain or loss will be capital gain or loss, provided the REMIC Certificate is held as a capital asset (generally,
property held for investment) within the meaning of Section 1221 of the Code.
Gain from the sale of a REMIC Regular Certificate that might otherwise be capital gain will be treated as ordinary income to
the extent the gain does not exceed the excess, if any, of (1) the amount that would have been includible in the seller's income with
respect to the REMIC Regular Certificate assuming that income had accrued thereon at a rate equal to 110% of the "applicable Federal
rate" (generally, a rate based on an average of current yields on Treasury securities having a maturity comparable to that of the
certificate based on the application of the Prepayment Assumption applicable to the certificate, which rate is computed and published
monthly by the IRS), determined as of the date of purchase of the REMIC Regular Certificate, over (2) the amount of ordinary income
actually includible in the seller's income prior to the sale. In addition, gain recognized on the sale of a REMIC Regular Certificate by
a seller who purchased the REMIC Regular Certificate at a market discount will be taxable as ordinary income in an amount not exceeding
the portion of the discount that accrued during the period the REMIC Certificate was held by the holder, reduced by any market discount
included in income under the rules described above under "—Taxation of Owners of REMIC Regular Certificates—Market Discount"
and"—Premium."
REMIC Certificates will be "evidences of indebtedness" within the meaning of Section 582(c)(1) of the Code, so that gain or
loss recognized from the sale of a REMIC Certificate by a bank or thrift institution to which this section applies will be ordinary
income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that might otherwise be capital gain may be treated as
ordinary income to the extent that the certificate is held as part of a "conversion transaction" within the meaning of Section 1258 of
the Code. A conversion transaction generally is one in which the taxpayer has taken two or more positions in the same or similar
property that reduce or eliminate market risk, if substantially all of the taxpayer's return is attributable to the time value of the
taxpayer's net investment in the transaction. The amount of gain so realized in a conversion transaction that is recharacterized as
ordinary income generally will not exceed the amount of interest that would have accrued on the taxpayer's net investment at 120% of the
appropriate "applicable Federal rate" (which rate is computed and published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of interest and other ordinary income items from the
transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary income rates rather than capital gains rates in order
to include the net capital gain in total net investment income for the taxable year, for purposes of the rule that limits the deduction
of interest on indebtedness incurred to purchase or carry property held for investment to a taxpayer's net investment income.
Except as may be provided in Treasury regulations yet to be issued, if the seller of a REMIC Residual Certificate reacquires
the REMIC Residual Certificate, or acquires any other residual interest in a REMIC or any similar interest in a "taxable mortgage pool"
(as defined in Section 7701(i) of the Code) during the period beginning six months before, and ending six months after, the date of the
sale, such sale will be subject to the "wash sale" rules of Section 1091 of the Code. In that event, any loss realized by the REMIC
Residual Certificateholder on the sale will not be deductible, but instead will be added to the REMIC Residual Certificateholder's
adjusted basis in the newly-acquired asset.
Losses on the sale of a REMIC Residual Certificate in excess of a threshold amount (which amount could need to be aggregated
with similar or previous losses) may require disclosure of such loss on an IRS Form 8886. Investors are encouraged to consult with
their tax advisors as to the need to file such form.
Prohibited Transactions and Other Possible REMIC Taxes. In the event a REMIC engages in a prohibited transaction, the Code
imposes a 100% tax on the income derived by the REMIC from the prohibited transaction. In general, subject to specified exceptions, a
prohibited transaction means the disposition of a mortgage loan, the receipt of income from a source other than a mortgage loan or other
permitted investments, the receipt of compensation for services, or gain from the disposition of an asset purchased with the payments on
the mortgage loans for temporary investment pending distribution on the REMIC Certificates. It is not anticipated that any REMIC will
engage in any prohibited transactions in which it would recognize a material amount of net income.
In addition, a contribution to a REMIC made after the day on which the REMIC issues all of its interests could result in the
imposition on the REMIC of a tax equal to 100% of the value of the contributed property. Each pooling and servicing agreement will
include provisions designed to prevent the acceptance of any contributions that would be subject to this tax.
REMICs also are subject to federal income tax at the highest corporate rate on "net income from foreclosure property,"
determined by reference to the rules applicable to real estate investment trusts. "Net income from foreclosure property" generally means
gain from the sale of a foreclosure property that is inventory property and gross income from foreclosure property other than qualifying
rents and other qualifying income for a real estate investment trust. It is not anticipated that any REMIC will recognize "net income
from foreclosure property" subject to federal income tax.
To the extent permitted by then applicable laws, any tax resulting from a prohibited transaction, tax resulting from a
contribution made after the Closing Date, tax on "net income from foreclosure property" or state or local income or franchise tax that
may be imposed on the REMIC will be borne by the related master servicer or trustee in either case out of its own funds, provided that
the master servicer or the trustee, as the case may be, has sufficient assets to do so, and provided further that the tax arises out of
a breach of the master servicer's or the trustee's obligations, as the case may be, under the related pooling and servicing agreement
and in respect of compliance with applicable laws and regulations. Any such tax not borne by the master servicer or the trustee will be
charged against the related trust fund resulting in a reduction in amounts payable to holders of the related REMIC Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain Organizations. If a REMIC Residual Certificate is
transferred to a "disqualified organization" (as defined below), a tax would be imposed in an amount (determined under the REMIC
Regulations) equal to the product of (1) the present value (discounted using the "applicable Federal rate" for obligations whose term
ends on the close of the last quarter in which excess inclusions are expected to accrue with respect to the REMIC Residual Certificate,
which rate is computed and published monthly by the IRS) of the total anticipated excess inclusions with respect to the REMIC Residual
Certificate for periods after the transfer and (2) the highest marginal federal income tax rate applicable to corporations. The
anticipated excess inclusions must be determined as of the date that the REMIC Residual Certificate is transferred and must be based on
events that have occurred up to the time of the transfer, the Prepayment Assumption and any required or permitted clean up calls or
required liquidation provided for in the REMIC's organizational documents. Such a tax generally would be imposed on the transferor of
the REMIC Residual Certificate, except that where the transfer is through an agent for a disqualified organization, the tax would
instead be imposed on the agent. However, a transferor of a REMIC Residual Certificate would in no event be liable for the tax with
respect to a transfer if the transferee furnishes to the transferor an affidavit that the transferee is not a disqualified organization
and, as of the time of the transfer, the transferor does not have actual knowledge that the affidavit is false. Moreover, an entity will
not qualify as a REMIC unless there are reasonable arrangements designed to ensure that (1) residual interests in the entity are not
held by disqualified organizations and (2) information necessary for the application of the tax described in this prospectus will be
made available. Restrictions on the transfer of REMIC Residual Certificates and other provisions that are intended to meet this
requirement will be included in the pooling and servicing agreement, and will be discussed more fully in any prospectus supplement
relating to the offering of any REMIC Residual Certificate.
In addition, if a "pass-through entity" (as defined below) includes in income excess inclusions with respect to a REMIC
Residual Certificate, and a disqualified organization is the record holder of an interest in the entity, then a tax will be imposed on
the entity equal to the product of (1) the amount of excess inclusions on the REMIC Residual Certificate that are allocable to the
interest in the pass-through entity held by the disqualified organization and (2) the highest marginal federal income tax rate imposed
on corporations. A pass-through entity will not be subject to this tax for any period, however, if each record holder of an interest in
the pass-through entity furnishes to the pass-through entity (1) the holder's social security number and a statement under penalties of
perjury that the social security number is that of the recordholder or (2) a statement under penalties of perjury that the record holder
is not a disqualified organization. For taxable years beginning after December 31,1997, notwithstanding the preceding two sentences, in
the case of a REMIC Residual Certificate held by an "electing large partnership," all interests in the partnership shall be treated as
held by disqualified organizations (without regard to whether the record holders of the partnership furnish statements described in the
preceding sentence) and the amount that is subject to tax under the second preceding sentence is excluded from the gross income of the
partnership allocated to the partners (in lieu of allocating to the partners a deduction for the tax paid by the partnership).
For these purposes, a "disqualified organization" means:
1. the United States, any State or political subdivision thereof, any foreign government, any international organization, or any
agency or instrumentality of the foregoing (but would not include instrumentalities described in Section 168(h)(2)(D) of the Code or
Freddie Mac),
2. any organization (other than a cooperative described in Section 521 of the Code) that is exempt from federal income tax, unless
it is subject to the tax imposed by Section 511 of the Code,
3. any organization described in Section 1381(a)(2)(C) of the Code, or
4. an electing large partnership within the meaning of Section 775 of the Code.
For these purposes, a "pass-through entity" means any regulated investment company, real estate investment trust, trust, partnership or
certain other entities described in Section 860E(e)(6) of the Code. In addition, a person holding an interest in a pass-through entity
as a nominee for another person will, with respect to the interest, be treated as a pass-through entity.
Termination. A REMIC will terminate immediately after the distribution date following receipt by the REMIC of the final payment
in respect of the mortgage loans or upon a sale of the REMIC's assets following the adoption by the REMIC of a plan of complete
liquidation. The last distribution on a REMIC Regular Certificate will be treated as a payment in retirement of a debt instrument. In
the case of a REMIC Residual Certificate, if the last distribution on the REMIC Residual Certificate is less than the REMIC Residual
Certificateholder's adjusted basis in the certificate, the REMIC Residual Certificateholder should (but may not) be treated as realizing
a loss equal to the amount of the difference, and the loss may be treated as a capital loss.
Reporting and Other Administrative Matters. Solely for purposes of the administrative provisions of the Code, the REMIC will be
treated as a partnership and REMIC Residual Certificateholders will be treated as partners. The REMIC Administrator (or other party
described in the related prospectus supplement) will file REMIC federal income tax returns on behalf of the related REMIC, and under the
terms of the related Agreement will either (1) be irrevocably appointed by the holders of the largest percentage interest in the related
REMIC Residual Certificates as their agent to perform all of the duties of the "tax matters person" with respect to the REMIC in all
respects or (2) will be designated as and will act as the "tax matters person" with respect to the related REMIC in all respects and
will hold at least a nominal amount of REMIC Residual Certificates.
The REMIC Administrator, as the tax matters person or as agent for the tax matters person, subject to notice requirements and
various restrictions and limitations, generally will have the authority to act on behalf of the REMIC and the REMIC Residual
Certificateholders in connection with the administrative and judicial review of items of income, deduction, gain or loss of the REMIC,
as well as the REMIC's classification. REMIC Residual Certificateholders generally will be required to report these REMIC items
consistently with their treatment on the REMIC's tax return and may in some circumstances be bound by a settlement agreement between the
REMIC Administrator, as either tax matters person or as agent for the tax matters person, and the IRS concerning any such REMIC item.
Adjustments made to the REMIC tax return may require a REMIC Residual Certificateholder to make corresponding adjustments on its return,
and an audit of the REMIC's tax return, or the adjustments resulting from such an audit, could result in an audit of a REMIC Residual
Certificateholder's return. Any person that holds a REMIC Residual Certificate as a nominee for another person may be required to
furnish the REMIC, in a manner to be provided in Treasury regulations, with the name and address of the person and other information.
Reporting of interest income, including any original issue discount, with respect to REMIC Regular Certificates is required
annually, and may be required more frequently under Treasury regulations. These information reports generally are required to be sent to
individual holders of REMIC Regular Interests and the IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and some other non-individuals will be provided interest and original issue discount income information and the
information set forth in the following paragraph upon request in accordance with the requirements of the applicable regulations. The
information must be provided by the later of 30 days after the end of the quarter for which the information was requested, or two weeks
after the receipt of the request. The REMIC must also comply with rules requiring a REMIC Regular Certificate issued with original issue
discount to disclose the information to the IRS. Reporting with respect to the REMIC Residual Certificates, including income, excess
inclusions, investment expenses and relevant information regarding qualification of the REMIC's assets will be made as required under
the Treasury regulations, generally on a quarterly basis.
As applicable, the REMIC Regular Certificate information reports will include a statement of the adjusted issue price of the
REMIC Regular Certificate at the beginning of each accrual period. In addition, the reports will include information required by
regulations with respect to computing the accrual of any market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's purchase price that the REMIC may not have, Treasury
regulations only require that information pertaining to the appropriate proportionate method of accruing market discount be provided.
See "REMICS—Taxation of Owners of REMIC Regular certificates—Market Discount" in this prospectus.
The responsibility for complying with the foregoing reporting rules will be borne by the REMIC Administrator or other party
designated in the related prospectus supplement.
Backup Withholding With Respect to REMIC Certificates. Payments of interest and principal, as well as payments of proceeds from
the sale of REMIC Certificates, may be subject to the "backup withholding tax" under Section 3406 of the Code if recipients of the
payments fail to furnish to the payor certain information, including their taxpayer identification numbers, or otherwise fail to
establish an exemption from the backup withholding tax. Any amounts deducted and withheld from a distribution to a recipient would be
allowed as a credit against the recipient's federal income tax. Furthermore, penalties may be imposed by the IRS on a recipient of
payments that is required to supply information but that does not do so in the proper manner.
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder that is not a United States person and is not
subject to federal income tax as a result of any direct or indirect connection to the United States in addition to its ownership of a
REMIC Regular Certificate will not be subject to United States federal income or withholding tax in respect of a distribution on a REMIC
Regular Certificate, provided that the holder complies to the extent necessary with identification requirements, including delivery of a
statement, signed by the certificateholder under penalties of perjury, certifying that the certificateholder is not a United States
person and providing the name and address of the certificateholder. This statement is generally made on IRS Form W-8BEN and must be
updated whenever required information has changed or within 3 calendar years after the statement is first delivered. It is possible that
the IRS may assert that the foregoing tax exemption should not apply with respect to a REMIC Regular Certificate held by a REMIC
Residual Certificateholder that owns directly or indirectly a 10% or greater interest in the REMIC Residual Certificates. If the holder
does not qualify for exemption, distributions of interest, including distributions in respect of accrued original issue discount, to the
holder may be subject to a tax rate of 30%, subject to reduction under any applicable tax treaty.
Special rules apply to partnerships, estates and trusts, and in certain circumstances certifications as to foreign status and
other matters may be required to be provided by partners and beneficiaries thereof.
In addition, in certain circumstances the foregoing rules will not apply to exempt a United States shareholder of a controlled
foreign corporation from taxation on the United States shareholder's allocable portion of the interest income received by the controlled
foreign corporation.
Further, it appears that a REMIC Regular Certificate would not be included in the estate of a non- resident alien individual
and would not be subject to United States estate taxes. However, certificateholders who are non-resident alien individuals are
encouraged to consult their tax advisors concerning this question.
Except as stated in the related prospectus supplement, transfers of REMIC Residual Certificates to investors that are not
United States persons will be prohibited under the related pooling and servicing agreement.
Notes
On or prior to the date of the related prospectus supplement with respect to the proposed issuance of each series of notes, any
of Thacher Proffitt & Wood llp, Orrick, Herrington & Sutcliffe LLP or Greenberg Traurig LLP as counsel to the depositor, or another law
firm identified in the related prospectus supplement, will deliver its opinion to the effect that, assuming compliance with all
provisions of the indenture, owner trust agreement and other related documents, for federal income tax purposes (1) the notes will be
treated as indebtedness and (2) the Issuing Entity, as created pursuant to the terms and conditions of the owner trust agreement, will
not be characterized as an association (or publicly traded partnership) taxable as a corporation or as a taxable mortgage pool. For
purposes of this tax discussion, references to a "noteholder" or a "holder" are to the beneficial owner of a note.
Status as Real Property Loans
Notes held by a domestic building and loan association will not constitute "loans . . . secured by an interest in real
property" within the meaning of Code section 7701(a)(19)(C)(v); notes held by a real estate investment trust will not constitute "real
estate assets" within the meaning of Code section 856(c)(4)(A), and interest on notes will not be considered "interest on obligations
secured by mortgages on real property" within the meaning of Code section 856(c)(3)(B).
Taxation of Noteholders
Notes generally will be subject to the same rules of taxation as REMIC Regular Certificates issued by a REMIC, as described
above, except that (1) income reportable on any notes issued without original issue discount is not required to be reported under the
accrual method unless the holder otherwise uses the accrual method and (2) the special rule treating a portion of the gain on sale or
exchange of a REMIC Regular Certificate that does not exceed a specified amount as ordinary income is inapplicable to the notes. See
"REMICS—Taxation of Owners of REMIC Regular Certificates" and "—Sales of REMIC Certificates" in this prospectus.
Grantor Trust Funds
Classification of Grantor Trust Funds. On or prior to the date of the related prospectus supplement with respect to the
proposed issuance of each series of Grantor Trust Certificates, any of Thacher Proffitt & Wood llp, Orrick, Herrington & Sutcliffe LLP
or Greenberg Traurig LLP, as counsel to the depositor, or another law firm identified in the related prospectus supplement, will deliver
its opinion generally to the effect that, assuming compliance with all provisions of the related pooling and servicing agreement, the
related Grantor Trust Fund will be classified as a grantor trust under subpart E, part I of subchapter J of Chapter 1 of the Code and
not as a partnership or an association taxable as a corporation.
Characterization of Investments in Grantor Trust Certificates.
Grantor Trust Fractional Interest Certificates. In the case of Grantor Trust Fractional Interest Certificates, except as
disclosed in the related prospectus supplement, counsel to the depositor will deliver an opinion that, in general, Grantor Trust
Fractional Interest Certificates will represent interests in (1) "loans . . . secured by an interest in real property" within the
meaning of Section 7701(a)(19)(C)(v) of the Code; (2) "obligation[s] (including any participation or Certificate of beneficial ownership
therein) which [are] principally secured by an interest in real property" within the meaning of Section 860G(a)(3) of the Code; and (3)
"real estate assets" within the meaning of Section 856(c)(4)(A) of the Code. In addition, counsel to the depositor will deliver an
opinion that interest on Grantor Trust Fractional Interest Certificates will to the same extent be considered "interest on obligations
secured by mortgages on real property or on interests in real property" within the meaning of Section 856(c)(3)(B) of the Code.
Grantor Trust Strip Certificates. Even if Grantor Trust Strip Certificates evidence an interest in a Grantor Trust Fund
consisting of mortgage loans that are "loans . . . secured by an interest in real property" within the meaning of Section
7701(a)(19)(C)(v) of the Code, and "real estate assets" within the meaning of Section 856(c)(4)(A) of the Code, and the interest on
which is "interest on obligations secured by mortgages on real property" within the meaning of Section 856(c)(3)(B) of the Code, it is
unclear whether the Grantor Trust Strip Certificates, and the income therefrom, will be so characterized. However, the policies
underlying these sections (namely, to encourage or require investments in mortgage loans by thrift institutions and real estate
investment trusts) may suggest that this characterization is appropriate. Counsel to the depositor will not deliver any opinion on these
questions. Prospective purchasers to which the characterization of an investment in Grantor Trust Strip Certificates is material are
encouraged to consult their tax advisors regarding whether the Grantor Trust Strip Certificates, and the income therefrom, will be so
characterized.
The Grantor Trust Strip Certificates will be "obligation[s] (including any participation or Certificate of beneficial ownership
therein) which . . . [are] principally secured by an interest in real property" within the meaning of Section 860G(a)(3)(A) of the Code.
Taxation of Owners of Grantor Trust Fractional Interest Certificates. Holders of a particular series of Grantor Trust
Fractional Interest Certificates generally will be required to report on their federal income tax returns their shares of the entire
income from the mortgage loans (including amounts used to pay reasonable servicing fees and other expenses) and will be entitled to
deduct their shares of any such reasonable servicing fees and other expenses. Because of stripped interests, market or original issue
discount, or premium, the amount includible in income on account of a Grantor Trust Fractional Interest Certificate may differ
significantly from the amount distributable thereon representing interest on the mortgage loans. Under Section 67 of the Code, an
individual, estate or trust holding a Grantor Trust Fractional Interest Certificate directly or through some pass-through entities will
be allowed a deduction for the reasonable servicing fees and expenses only to the extent that the aggregate of the holder's
miscellaneous itemized deductions exceeds two percent of the holder's adjusted gross income. In addition, Section 68 of the Code
provides that the amount of itemized deductions otherwise allowable for an individual whose adjusted gross income exceeds a specified
amount will be reduced by the lesser of (1) 3% of the excess of the individual's adjusted gross income over the amount or (2) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The amount of additional taxable income reportable by holders of
Grantor Trust Fractional Interest Certificates who are subject to the limitations of either Section 67 or Section 68 of the Code may be
substantial. Further, certificateholders (other than corporations) subject to the alternative minimum tax may not deduct miscellaneous
itemized deductions in determining the holder's alternative minimum taxable income. Although it is not entirely clear, it appears that
in transactions in which multiple classes of Grantor Trust Certificates (including Grantor Trust Strip Certificates) are issued, the
fees and expenses should be allocated among the classes of Grantor Trust Certificates using a method that recognizes that each such
class benefits from the related services. In the absence of statutory or administrative clarification as to the method to be used, it
currently is intended to base information returns or reports to the IRS and certificateholders on a method that allocates the expenses
among classes of Grantor Trust Certificates with respect to each period based on the distributions made to each such class during that
period.
The federal income tax treatment of Grantor Trust Fractional Interest Certificates of any series will depend on whether they
are subject to the "stripped bond" rules of Section 1286 of the Code. Grantor Trust Fractional Interest Certificates may be subject to
those rules if (1) a class of Grantor Trust Strip Certificates is issued as part of the same series of certificates or (2) the depositor
or any of its affiliates retains (for its own account or for purposes of resale) a right to receive a specified portion of the interest
payable on the mortgage loans. Further, the IRS has ruled that an unreasonably high servicing fee retained by a seller or servicer will
be treated as a retained ownership interest in mortgages that constitutes a stripped coupon. For purposes of determining what
constitutes reasonable servicing fees for various types of mortgages the IRS has established "safe harbors." The servicing fees paid
with respect to the mortgage loans for a series of Grantor Trust Certificates may be higher than the "safe harbors" and, accordingly,
may not constitute reasonable servicing compensation. The related prospectus supplement will include information regarding servicing
fees paid to the master servicer, any subservicer or their respective affiliates necessary to determine whether the preceding "safe
harbor" rules apply.
If Stripped Bond Rules Apply. If the stripped bond rules apply, each Grantor Trust Fractional Interest Certificate will be
treated as having been issued with "original issue discount" within the meaning of Section 1273(a) of the Code, subject, however, to the
discussion below regarding the treatment of some stripped bonds as market discount bonds and the discussion regarding de minimis market
discount. See "REMICS—Taxation of Owners of Grantor Trust Fractional Interest Certificates—Market Discount" below. Under the stripped
bond rules, the holder of a Grantor Trust Fractional Interest Certificate (whether a cash or accrual method taxpayer) will be required
to report interest income from its Grantor Trust Fractional Interest Certificate for each month in an amount equal to the income that
accrues on the certificate in that month calculated under a constant yield method, in accordance with the rules of the Code relating to
original issue discount.
The original issue discount on a Grantor Trust Fractional Interest Certificate will be the excess of the certificate's stated
redemption price over its issue price. The issue price of a Grantor Trust Fractional Interest Certificate as to any purchaser will be
equal to the price paid by the purchaser for the Grantor Trust Fractional Interest Certificate. The stated redemption price of a Grantor
Trust Fractional Interest Certificate will be the sum of all payments to be made on the certificate, other than "qualified stated
interest," if any, as well as the certificate's share of reasonable servicing fees and other expenses. See "REMICS—Taxation of Owners of
Grantor Trust Fractional Interest Certificates—If Stripped Bond Rules Do Not Apply" in this prospectus for a definition of "qualified
stated interest." In general, the amount of the income that accrues in any month would equal the product of the holder's adjusted basis
in the Grantor Trust Fractional Interest Certificate at the beginning of the month (see "Sales of Grantor Trust Certificates" in this
prospectus) and the yield of the Grantor Trust Fractional Interest Certificate to the holder. This yield would be computed at the rate
(compounded based on the regular interval between distribution dates) that, if used to discount the holder's share of future payments on
the mortgage loans, would cause the present value of those future payments to equal the price at which the holder purchased the
certificate. In computing yield under the stripped bond rules, a certificateholder's share of future payments on the mortgage loans will
not include any payments made in respect of any ownership interest in the mortgage loans retained by the depositor, the master servicer,
any subservicer or their respective affiliates, but will include the certificateholder's share of any reasonable servicing fees and
other expenses.
To the extent the Grantor Trust Fractional Interest Certificates represent an interest in any pool of debt instruments the
yield on which may be affected by reason of prepayments, for taxable years beginning after August 5, 1997, Section 1272(a)(6) of the
Code requires (1) the use of a reasonable prepayment assumption in accruing original issue discount and (2) adjustments in the accrual
of original issue discount when prepayments do not conform to the prepayment assumption. It is uncertain, if a prepayment assumption is
used, whether the assumed prepayment rate would be determined based on conditions at the time of the first sale of the Grantor Trust
Fractional Interest Certificate or, with respect to any holder, at the time of purchase of the Grantor Trust Fractional Interest
Certificate by that holder. Certificateholders are advised to consult their own tax advisors concerning reporting original issue
discount with respect to Grantor Trust Fractional Interest Certificates and, in particular, whether a prepayment assumption should be
used in reporting original issue discount.
In the case of a Grantor Trust Fractional Interest Certificate acquired at a price equal to the principal amount of the
mortgage loans allocable to the certificate, the use of a prepayment assumption generally would not have any significant effect on the
yield used in calculating accruals of interest income. In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than the principal amount, respectively), the use of a
reasonable prepayment assumption would increase or decrease the yield, and thus accelerate or decelerate, respectively, the reporting of
income.
If a prepayment assumption is not used, then when a mortgage loan prepays in full, the holder of a Grantor Trust Fractional
Interest Certificate acquired at a discount or a premium generally will recognize ordinary income or loss equal to the difference
between the portion of the prepaid principal amount of the mortgage loan that is allocable to the certificate and the portion of the
adjusted basis of the certificate that is allocable to the certificateholder's interest in the mortgage loan. If a prepayment assumption
is used, it appears that no separate item of income or loss should be recognized upon a prepayment. Instead, a prepayment should be
treated as a partial payment of the stated redemption price of the Grantor Trust Fractional Interest Certificate and accounted for under
a method similar to that described for taking account of original issue discount on REMIC Regular Certificates. See "REMICS—Taxation of
Owners of REMIC Regular Certificates—Original Issue Discount" in this prospectus. It is unclear whether any other adjustments would be
required to reflect differences between an assumed prepayment rate and the actual rate of prepayments.
It is currently intended to base information reports or returns to the IRS and certificateholders in transactions subject to
the stripped bond rules on a Prepayment Assumption that will be disclosed in the related prospectus supplement and on a constant yield
computed using a representative initial offering price for each class of certificates. However, none of the depositor, the master
servicer or the trustee will make any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment
Assumption or any other rate and certificateholders should bear in mind that the use of a representative initial offering price will
mean that the information returns or reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as
to the initial certificateholders of each series who bought at that price.
Under Treasury regulation Section 1.1286-1, some stripped bonds are to be treated as market discount bonds and, accordingly,
any purchaser of such a bond is to account for any discount on the bond as market discount rather than original issue discount. This
treatment only applies, however, if immediately after the most recent disposition of the bond by a person stripping one or more coupons
from the bond and disposing of the bond or coupon (1) there is no original issue discount (or only a de minimis amount of original issue
discount) or (2) the annual stated rate of interest payable on the original bond is no more than one percentage point lower than the
gross interest rate payable on the original mortgage loan (before subtracting any servicing fee or any stripped coupon). If interest
payable on a Grantor Trust Fractional Interest Certificate is more than one percentage point lower than the gross interest rate payable
on the mortgage loans, the related prospectus supplement will disclose that fact. If the original issue discount or market discount on
a Grantor Trust Fractional Interest Certificate determined under the stripped bond rules is less than 0.25% of the stated redemption
price multiplied by the weighted average maturity of the mortgage loans, then that original issue discount or market discount will be
considered to be de minimis. Original issue discount or market discount of only a de minimis amount will be included in income in the
same manner as de minimis original issue and market discount described in "Characteristics of Investments in Grantor Trust
Certificates—If Stripped Bond Rules Do Not Apply" and"—Market Discount" below.
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on original issue discount, if the stripped bond rules do
not apply to a Grantor Trust Fractional Interest Certificate, the certificateholder will be required to report its share of the interest
income on the mortgage loans in accordance with the certificateholder's normal method of accounting. The original issue discount rules
will apply to a Grantor Trust Fractional Interest Certificate to the extent it evidences an interest in mortgage loans issued with
original issue discount.
The original issue discount, if any, on the mortgage loans will equal the difference between the stated redemption price of the
mortgage loans and their issue price. Under the OID Regulations, the stated redemption price is equal to the total of all payments to be
made on the mortgage loan other than "qualified stated interest.""Qualified stated interest" is interest that is unconditionally
payable at least annually at a single fixed rate, or at a "qualified floating rate," an "objective rate," a combination of a single
fixed rate and one or more "qualified floating rates" or one "qualified inverse floating rate," or a combination of "qualified floating
rates" that does not operate in a manner that accelerates or defers interest payments on the mortgage loan. In general, the issue price
of a mortgage loan will be the amount received by the borrower from the lender under the terms of the mortgage loan, less any "points"
paid by the borrower, and the stated redemption price of a mortgage loan will equal its principal amount, unless the mortgage loan
provides for an initial below-market rate of interest or the acceleration or the deferral of interest payments. The determination as to
whether original issue discount will be considered to be de minimis will be calculated using the same test described in the REMIC
discussion. See "—Taxation of Owners of REMIC Regular Certificates—Original Issue Discount" above.
In the case of mortgage loans bearing adjustable or variable interest rates, the related prospectus supplement will describe
the manner in which the rules will be applied with respect to those mortgage loans by the master servicer or the trustee in preparing
information returns to the certificateholders and the IRS.
If original issue discount is in excess of a de minimis amount, all original issue discount with respect to a mortgage loan
will be required to be accrued and reported in income each month, based on a constant yield. Section 1272(a)(6) of the Code requires
that a prepayment assumption be made in computing yield with respect to any pool of debt instruments the yield on which may be affected
by reason of prepayments. Accordingly, for certificates or notes backed by these pools, it is intended to base information reports and
returns to the IRS and certificateholders for taxable years beginning after August 5, 1997, on the use of a prepayment assumption.
Certificateholders are advised to consult their own tax advisors concerning whether a prepayment assumption should be used in reporting
original issue discount with respect to Grantor Trust Fractional Interest Certificates. Certificateholders should refer to the related
prospectus supplement with respect to each series to determine whether and in what manner the original issue discount rules will apply
to mortgage loans in the series.
A purchaser of a Grantor Trust Fractional Interest Certificate that purchases the Grantor Trust Fractional Interest Certificate
at a cost less than the certificate's allocable portion of the aggregate remaining stated redemption price of the mortgage loans held in
the related trust fund will also be required to include in gross income the certificate's daily portions of any original issue discount
with respect to the mortgage loans. However, each such daily portion will be reduced, if the cost of the Grantor Trust Fractional
Interest Certificate to the purchaser is in excess of the certificate's allocable portion of the aggregate "adjusted issue prices" of
the mortgage loans held in the related trust fund, approximately in proportion to the ratio the excess bears to the certificate's
allocable portion of the aggregate original issue discount remaining to be accrued on the mortgage loans. The adjusted issue price of a
mortgage loan on any given day equals the sum of (1) the adjusted issue price (or, in the case of the first accrual period, the issue
price) of the mortgage loan at the beginning of the accrual period that includes the day and (2) the daily portions of original issue
discount for all days during the accrual period prior to the day. The adjusted issue price of a mortgage loan at the beginning of any
accrual period will equal the issue price of the mortgage loan, increased by the aggregate amount of original issue discount with
respect to the mortgage loan that accrued in prior accrual periods, and reduced by the amount of any payments made on the mortgage loan
in prior accrual periods of amounts included in its stated redemption price.
In addition to its regular reports, the master servicer or the trustee, except as provided in the related prospectus
supplement, will provide to any holder of a Grantor Trust Fractional Interest Certificate such information as the holder may reasonably
request from time to time with respect to original issue discount accruing on Grantor Trust Fractional Interest Certificates. See
"Grantor Trust Reporting" below.
Market Discount. If the stripped bond rules do not apply to the Grantor Trust Fractional Interest Certificate, a
certificateholder may be subject to the market discount rules of Sections 1276 through 1278 of the Code to the extent an interest in a
mortgage loan is considered to have been purchased at a "market discount," that is, in the case of a mortgage loan issued without
original issue discount, at a purchase price less than its remaining stated redemption price (as defined above), or in the case of a
mortgage loan issued with original issue discount, at a purchase price less than its adjusted issue price (as defined above). If market
discount is in excess of a de minimis amount (as described below), the holder generally will be required to include in income in each
month the amount of the discount that has accrued (under the rules described in the next paragraph) through the month that has not
previously been included in income, but limited, in the case of the portion of the discount that is allocable to any mortgage loan, to
the payment of stated redemption price on the mortgage loan that is received by the trust fund in that month. A certificateholder may
elect to include market discount in income currently as it accrues (under a constant yield method based on the yield of the certificate
to the holder) rather than including it on a deferred basis in accordance with the foregoing under rules similar to those described in
"—Taxation of Owners of REMIC Regular Certificates—Market Discount" above.
Section 1276(b)(3) of the Code authorized the Treasury Department to issue regulations providing for the method for accruing
market discount on debt instruments, the principal of which is payable in more than one installment. Until such time as regulations are
issued by the Treasury Department, some rules described in the Committee Report will apply. Under those rules, in each accrual period
market discount on the mortgage loans should accrue, at the certificateholder's option: (1) on the basis of a constant yield method, (2)
in the case of a mortgage loan issued without original issue discount, in an amount that bears the same ratio to the total remaining
market discount as the stated interest paid in the accrual period bears to the total stated interest remaining to be paid on the
mortgage loan as of the beginning of the accrual period, or (3) in the case of a mortgage loan issued with original issue discount, in
an amount that bears the same ratio to the total remaining market discount as the original issue discount accrued in the accrual period
bears to the total original issue discount remaining at the beginning of the accrual period. The prepayment assumption, if any, used in
calculating the accrual of original issue discount is to be used in calculating the accrual of market discount. The effect of using a
prepayment assumption could be to accelerate the reporting of the discount income.
Because the mortgage loans will provide for periodic payments of stated redemption price, the market discount may be required
to be included in income at a rate that is not significantly slower than the rate at which the discount would be included in income if
it were original issue discount.
Market discount with respect to mortgage loans may be considered to be de minimis and, if so, will be includible in income
under de minimis rules similar to those described above in "—REMICs—Taxation of Owners of REMIC Regular Certificates—Original Issue
Discount" with the exception that it is less likely that a prepayment assumption will be used for purposes of these rules with respect
to the mortgage loans.
Further, under the rules described in "—REMICs—Taxation of Owners of REMIC Regular Certificates—Market Discount," above, any
discount that is not original issue discount and exceeds a de minimis amount may require the deferral of interest expense deductions
attributable to accrued market discount not yet includible in income, unless an election has been made to report market discount
currently as it accrues. This rule applies without regard to the origination dates of the mortgage loans.
Premium. If a certificateholder is treated as acquiring the underlying mortgage loans at a premium, that is, at a price in
excess of their remaining stated redemption price, the certificateholder may elect under Section 171 of the Code to amortize using a
constant yield method the portion of the premium allocable to mortgage loans originated after September 27, 1985. Amortizable premium is
treated as an offset to interest income on the related debt instrument, rather than as a separate interest deduction. However, premium
allocable to mortgage loans originated before September 28, 1985 or to mortgage loans for which an amortization election is not made,
should be allocated among the payments of stated redemption price on the mortgage loan and be allowed as a deduction as these payments
are made (or, for a certificateholder using the accrual method of accounting, when the payments of stated redemption price are due).
It is unclear whether a prepayment assumption should be used in computing amortization of premium allowable under Section 171
of the Code. If premium is not subject to amortization using a prepayment assumption and a mortgage loan prepays in full, the holder of
a Grantor Trust Fractional Interest Certificate acquired at a premium should recognize a loss, equal to the difference between the
portion of the prepaid principal amount of the mortgage loan that is allocable to the certificate and the portion of the adjusted basis
of the certificate that is allocable to the mortgage loan. If a prepayment assumption is used to amortize premium, it appears that such
a loss would be unavailable. Instead, if a prepayment assumption is used, a prepayment should be treated as a partial payment of the
stated redemption price of the Grantor Trust Fractional Interest Certificate and accounted for under a method similar to that described
for taking account of original issue discount on REMIC Regular Certificates. See "REMICS—Taxation of Owners of REMIC Regular
Certificates—Original Issue discount" in this prospectus. It is unclear whether any other adjustments would be required to reflect
differences between the prepayment assumption used, and the actual rate of prepayments.
Taxation of Owners of Grantor Trust Strip Certificates. The "stripped coupon" rules of Section 1286 of the Code will apply to
the Grantor Trust Strip Certificates. Except as described above in "Characterization of Investments in Grantor Trust Certificates—If
Stripped Bond Rules Apply," no regulations or published rulings under Section 1286 of the Code have been issued and some uncertainty
exists as to how it will be applied to securities such as the Grantor Trust Strip Certificates. Accordingly, holders of Grantor Trust
Strip Certificates are encouraged to consult their own tax advisors concerning the method to be used in reporting income or loss with
respect to the certificates.
The OID Regulations do not apply to "stripped coupons," although they provide general guidance as to how the original issue
discount sections of the Code will be applied. In addition, the discussion below is subject to the discussion under "—PossibleApplication of Contingent Payment Rules" and assumes that the holder of a Grantor Trust Strip Certificate will not own any Grantor Trust
Fractional Interest Certificates.
Under the stripped coupon rules, it appears that original issue discount will be required to be accrued in each month on the
Grantor Trust Strip Certificates based on a constant yield method. In effect, each holder of Grantor Trust Strip Certificates would
include as interest income in each month an amount equal to the product of the holder's adjusted basis in the Grantor Trust Strip
Certificate at the beginning of that month and the yield of the Grantor Trust Strip Certificate to the holder. The yield would be
calculated based on the price paid for that Grantor Trust Strip Certificate by its holder and the payments remaining to be made thereon
at the time of the purchase, plus an allocable portion of the servicing fees and expenses to be paid with respect to the mortgage loans.
See "Characterization of Investments in Grantor Trust Certificates—If Stripped Bond Rules Apply" above.
As noted above, Section 1272(a)(6) of the Code requires that a prepayment assumption be used in computing the accrual of
original issue discount with respect to some categories of debt instruments, and that adjustments be made in the amount and rate of
accrual of the discount when prepayments do not conform to the prepayment assumption. To the extent the Grantor Trust Strip Certificates
represent an interest in any pool of debt instruments the yield on which may be affected by reason of prepayments, those provisions will
apply to the Grantor Trust Strip Certificates for taxable years beginning after August 5, 1997. It is uncertain, if a prepayment
assumption is used, whether the assumed prepayment rate would be determined based on conditions at the time of the first sale of the
Grantor Trust Strip Certificate or, with respect to any subsequent holder, at the time of purchase of the Grantor Trust Strip
Certificate by that holder.
The accrual of income on the Grantor Trust Strip Certificates will be significantly slower if a prepayment assumption is
permitted to be made than if yield is computed assuming no prepayments. It currently is intended to base information returns or reports
to the IRS and certificateholders on the Prepayment Assumption disclosed in the related prospectus supplement and on a constant yield
computed using a representative initial offering price for each class of certificates. However, none of the depositor, the master
servicer or the trustee will make any representation that the mortgage loans will in fact prepay at a rate conforming to the Prepayment
Assumption or at any other rate, and certificateholders should bear in mind that the use of a representative initial offering price will
mean that the information returns or reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as
to the initial certificateholders of each series who bought at that price. Prospective purchasers of the Grantor Trust Strip
Certificates are encouraged to consult their own tax advisors regarding the use of the Prepayment Assumption.
It is unclear under what circumstances, if any, the prepayment of a mortgage loan will give rise to a loss to the holder of a
Grantor Trust Strip Certificate. If a Grantor Trust Strip Certificate is treated as a single instrument (rather than an interest in
discrete mortgage loans) and the effect of prepayments is taken into account in computing yield with respect to the Grantor Trust Strip
Certificate, it appears that no loss may be available as a result of any particular prepayment, except possibly if prepayments occur at
a rate faster than the Prepayment Assumption. However, if a Grantor Trust Strip Certificate is treated as an interest in discrete
mortgage loans, or if the Prepayment Assumption is not used, then when a mortgage loan is prepaid, the holder of a Grantor Trust Strip
Certificate should be able to recognize a loss equal to the portion of the adjusted issue price of the Grantor Trust Strip Certificate
that is allocable to the mortgage loan.
Possible Application of Contingent Payment Rules. The coupon stripping rules' general treatment of stripped coupons is to
regard them as newly issued debt instruments in the hands of each purchaser. To the extent that payments on the Grantor Trust Strip
Certificates would cease if the mortgage loans were prepaid in full, the Grantor Trust Strip Certificates could be considered to be debt
instruments providing for contingent payments. Under the OID Regulations, debt instruments providing for contingent payments are not
subject to the same rules as debt instruments providing for noncontingent payments. Regulations were promulgated on June 14, 1996,
regarding contingent payment debt instruments (the "Contingent Payment Regulations"), but it appears that Grantor Trust Strip
Certificates, to the extent subject to Section 1272(a)(6) of the Code, as described above, or due to their similarity to other
mortgage-backed securities(such as REMIC regular interests and debt instruments subject to Section 1272(a)(6) of the Code) that are
expressly excepted from the application of the Contingent Payment Regulations, are or may be excepted from these regulations. Like the
OID Regulations, the Contingent Payment Regulations do not specifically address securities, such as the Grantor Trust Strip
Certificates, that are subject to the stripped bond rules of Section 1286 of the Code.
If the contingent payment rules under the Contingent Payment Regulations were to apply, the holder of a Grantor Trust Strip
Certificate would be required to apply the "noncontingent bond method." Under the "noncontingent bond method," the issuing entity of a
Grantor Trust Strip Certificate determines a projected payment schedule on which interest will accrue. Holders of Grantor Trust Strip
Certificates are bound by the issuing entity's projected payment schedule. The projected payment schedule consists of all noncontingent
payments and a projected amount for each contingent payment based on the projected yield (as described below) of the Grantor Trust Strip
Certificate. The projected amount of each payment is determined so that the projected payment schedule reflects the projected yield. The
projected amount of each payment must reasonably reflect the relative expected values of the payments to be received by the holder of a
Grantor Trust Strip Certificate. The projected yield referred to above is a reasonable rate, not less than the "applicable Federal rate"
that, as of the issue date, reflects general market conditions, the credit quality of the Depositor, and the terms and conditions of the
mortgage loans. The holder of a Grantor Trust Strip Certificate would be required to include as interest income in each month the
adjusted issue price of the Grantor Trust Strip Certificate at the beginning of the period multiplied by the projected yield, and would
add to, or subtract from, the income any variation between the payment actually received in that month and the payment originally
projected to be made in that month.
Assuming that a prepayment assumption were used, if the Contingent Payment Regulations or their principles were applied to
Grantor Trust Strip Certificates, the amount of income reported with respect thereto would be substantially similar to that described
under "Taxation of Owners of Grantor Trust Strip Certificates" in this prospectus. Certificateholders are encouraged to consult their
tax advisors concerning the possible application of the contingent payment rules to the Grantor Trust Strip Certificates.
Sales of Grantor Trust Certificates. Any gain or loss equal to the difference between the amount realized on the sale or
exchange of a Grantor Trust Certificate and its adjusted basis, recognized on the sale or exchange of a Grantor Trust Certificate by an
investor who holds the Grantor Trust Certificate as a capital asset, will be capital gain or loss, except to the extent of accrued and
unrecognized market discount, which will be treated as ordinary income, and (in the case of banks and other financial institutions)
except as provided under Section 582(c) of the Code. The adjusted basis of a Grantor Trust Certificate generally will equal its cost,
increased by any income reported by the seller (including original issue discount and market discount income) and reduced (but not below
zero) by any previously reported losses, any amortized premium and by any distributions with respect to the Grantor Trust Certificate.
Gain or loss from the sale of a Grantor Trust Certificate may be partially or wholly ordinary and not capital in some
circumstances. Gain attributable to accrued and unrecognized market discount will be treated as ordinary income, as will gain or loss
recognized by banks and other financial institutions subject Section 582(c) of the Code. Furthermore, a portion of any gain that might
otherwise be capital gain may be treated as ordinary income to the extent that the Grantor Trust Certificate is held as part of a
"conversion transaction" within the meaning of Section 1258 of the Code. A conversion transaction generally is one in which the taxpayer
has taken two or more positions in the same or similar property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net investment in the transaction. The amount of gain realized in
a conversion transaction that is recharacterized as ordinary income generally will not exceed the amount of interest that would have
accrued on the taxpayer's net investment at 120% of the appropriate "applicable Federal rate" (which rate is computed and published
monthly by the IRS) at the time the taxpayer enters into the conversion transaction, subject to appropriate reduction for prior
inclusion of interest and other ordinary income items from the transaction. Finally, a taxpayer may elect to have net capital gain taxed
at ordinary income rates rather than capital gains rates in order to include the net capital gain in total net investment income for
that taxable year, for purposes of the rule that limits the deduction of interest on indebtedness incurred to purchase or carry property
held for investment to a taxpayer's net investment income.
Grantor Trust Reporting. The master servicer or the trustee will furnish to each holder of a Grantor Trust Fractional Interest
Certificate with each distribution a statement setting forth the amount of the distribution allocable to principal on the underlying
mortgage loans and to interest thereon at the related pass-through rate. In addition, the master servicer or the trustee will furnish,
within a reasonable time after the end of each calendar year, to each holder of a Grantor Trust Certificate who was a holder at any time
during that year, information regarding the amount of servicing compensation received by the master servicer and subservicer (if any)
and any other customary factual information as the master servicer or the trustee deems necessary or desirable to enable holders of
Grantor Trust Certificates to prepare their tax returns and will furnish comparable information to the IRS as and when required by law
to do so. Because the rules for accruing discount and amortizing premium with respect to the Grantor Trust Certificates are uncertain in
various respects, there is no assurance the IRS will agree with the trust fund's information reports of these items of income and
expense. Moreover, these information reports, even if otherwise accepted as accurate by the IRS, will in any event be accurate only as
to the initial certificateholders that bought their certificates at the representative initial offering price used in preparing the
reports.
Except as disclosed in the related prospectus supplement, the responsibility for complying with the foregoing reporting rules
will be borne by the master servicer or the trustee.
Backup Withholding. In general, the rules described in "—REMICS—Backup Withholding with Respect to REMIC Certificates" in this
prospectus will also apply to Grantor Trust Certificates.
Foreign Investors. In general, the discussion with respect to REMIC Regular certificates in "REMICS—Foreign Investors in REMIC
Certificates" in this prospectus applies to Grantor Trust Certificates except that Grantor Trust Certificates will, except as disclosed
in the related prospectus supplement, be eligible for exemption from U.S. withholding tax, subject to the conditions described in the
discussion, only to the extent the related mortgage loans were originated after July 18, 1984.
To the extent that interest on a Grantor Trust Certificate would be exempt under Sections 871(h)(1) and 881(c) of the Code from
United States withholding tax, and the Grantor Trust Certificate is not held in connection with a certificateholder's trade or business
in the United States, the Grantor Trust Certificate will not be subject to United States estate taxes in the estate of a non-resident
alien individual.
Taxation of Classes of Exchangeable SecuritiesGeneral
The arrangement pursuant to which the ES Classes of a series are created, sold and administered will be classified as a grantor
trust under subpart E, part I of subchapter J of the Code. The interests in the classes of securities that have been exchanged for ES
Classes will be the assets of the exchangeable security trust fund, and the ES Classes represent beneficial ownership of these interests
in the classes of securities.
Tax Status
The ES Classes will represent "real estate assets" within the meaning of Code Section 856(c)(4)(A) and assets described in
Section 7701(a)(19)(C) of the Code, and original issue discount and interest accruing on ES Classes will represent "interest on
obligations secured by mortgages on real property" within the meaning of Section 856(c)(3)(B) of the Code, in each case, to the extent
the securities or income on the securities would be qualifying if held directly (although the matter is not entirely clear for Strips,
defined below). ES Classes will be "qualified mortgages" under Section 860G(a) (3) of the Code for a REMIC to the extent the securities
the interest in which is represented by such classes would be qualifying if held directly.
Tax Accounting for Exchangeable Securities
An ES Class represents beneficial ownership of an interest in one or more classes of securities on deposit in an exchangeable
security trust fund, as specified in the applicable prospectus supplement. If it represents an interest in more than one class of
securities, a purchaser must allocate its basis in the ES Class among the interests in the classes of securities in accordance with
their relative fair market values as of the time of acquisition. Similarly, on the sale of such an ES Class, the holder must allocate
the amount received on the sale among the interests in the classes of securities in accordance with their relative fair market values as
of the time of sale.
The holder of an ES Class must account separately for each interest in a class of securities (there may be only one such
interest). Where the interest represents a pro rata portion of a class of securities that are REMIC regular securities, the holder of
the ES Class should account for such interest as described under "REMICS—Taxation of Owners of REMIC Regular Certificates" above. Where
the interest represents beneficial ownership of a disproportionate part of the principal and interest payments on a class of securities
(a "Strip"), the holder is treated as owning, pursuant to Section 1286 of the Code, "stripped bonds" to the extent of its share of
principal payments and "stripped coupons" to the extent of its share of interest payments on such class of securities. We intend to
treat each Strip as a single debt instrument for purposes of information reporting. The IRS, however, could take a different position.
For example, the IRS could contend that a Strip should be treated as a pro rata part of the class of securities to the extent that the
Strip represents a pro rata portion thereof, and "stripped bonds" or "stripped coupons" with respect to the remainder. An investor is
encouraged to consult its tax advisor regarding this matter.
A holder of an ES Class should calculate original issue discount with respect to each Strip and include it in ordinary income
as it accrues, which may be before the receipt of cash attributable to such income, in accordance with a constant interest method that
takes into account the compounding of interest. The holder should determine its yield to maturity based on its purchase price allocated
to the Strip and on a schedule of payments projected using a prepayment assumption, and then make periodic adjustments to take into
account actual prepayment experience. With respect to a particular holder, Treasury regulations do not address whether the prepayment
assumption used to calculate original issue discount would be determined at the time of purchase of the Strip or would be the original
prepayment assumption with respect to the related class of securities. Further, if the related class of securities is subject to
redemption as described in the applicable prospectus supplement, Treasury regulations do not address the extent to which such prepayment
assumption should take into account the possibility of the retirement of the Strip concurrently with the redemption of such class of
securities. An investor is encouraged to consult its tax advisor regarding these matters. For purposes of information reporting
relating to original issue discount, the original yield to maturity of the Strip, determined as of the date of issuance of the series,
will be calculated based on the original prepayment assumption.
If original issue discount accruing with respect to a Strip, computed as described above, is negative for any period, the
holder may be entitled to offset such amount only against future positive original issue discount accruing from such Strip (or possibly
also against original issue discount from prior periods). We intend to report by offsetting negative OID accruals only against future
positive accruals of OID. Although not entirely free from doubt, such a holder may be entitled to deduct a loss to the extent that its
remaining basis would exceed the maximum amount of future payments to which the holder is entitled with respect to such Strip, assuming
no further prepayments of the Mortgages (or, perhaps, assuming prepayments at a rate equal to the prepayment assumption). Although the
issue is not free from doubt, all or a portion of such loss may be treated as a capital loss if the Strip is a capital asset in the
hands of the holder.
A holder realizes gain or loss on the sale of a Strip in an amount equal to the difference between the amount realized and its
adjusted basis in such Strip. The holder's adjusted basis generally is equal to the holder's allocated cost of the Strip, increased by
income previously included, and reduced (but not below zero) by distributions previously received. Except as described below, any gain
or loss on such sale generally is capital gain or loss if the holder has held its interest as a capital asset and is long-term if the
interest has been held for the long-term capital gain holding period (more than one year). Such gain or loss will be ordinary income or
loss (1) for a bank or thrift institution or (2) if the securities are REMIC regular securities to the extent income recognized by the
holder is less than the income that would have been recognized if the yield on such interest were 110% of the applicable federal rate
under Section 1274(d) of the Code.
If a holder exchanges a single ES Class, an "Exchanged ES Class", for several ES Classes, each, a "Received ES Class," and then
sells one of the Received ES Classes, the sale may be subject the investor to the coupon stripping rules of Section 1286 of the Code.
The holder must allocate its basis in the Exchanged ES Class between the part of such class underlying the Received ES Class that was
sold and the part of the Exchanged ES Class underlying the Received ES Classes that were retained, in proportion to their relative fair
market values as of the date of such sale. The holder is treated as purchasing the interest retained for the amount of basis allocated
to such interest. The holder must calculate original issue discount with respect to the retained interest as described above.
Although the matter is not free from doubt, a holder that acquires in one transaction a combination of ES Classes that may be
exchanged for a single ES Class that is identical to a class of securities that is on deposit in the related exchangeable security trust
fund should be treated as owning the relevant class of securities.
Exchanges of Exchangeable Securities
An exchange of an interest in one or more ES Classes for an interest in one or more other related ES Classes that are part of
the same combination, or vice versa, will not be a taxable exchange. After the exchange, the holder is treated as continuing to own the
interests in the class or classes of exchangeable securities that it owned immediately before the exchange.
Tax Treatment of Foreign Investors
A foreign holder of an ES Class is subject to taxation in the same manner as foreign holders of REMIC Regular Certificates.
Such manner of taxation is discussed under the heading in this prospectus "—REMICS —Foreign Investors in REMIC Certificates."Backup Withholding
A holder of an ES Class is subject to backup withholding rules similar to those applicable to REMIC Regular Certificates. Such
manner of taxation is discussed under the heading in this prospectus "—REMICS —Backup Withholding With Respect to REMIC Certificates."
Reporting and Administrative Matters
Reports will be made to the IRS and to holders of record of ES Classes that are not excepted from the reporting requirements.
Callable Classes
The tax consequences of holding or selling a Callable Class will be discussed in the related Prospectus Supplement.
PENALTY AVOIDANCE
The summary of tax considerations contained in this prospectus was written to support the promotion and marketing of the
securities, and was not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding United States
Federal income tax penalties that may be imposed. Each taxpayer is encouraged to seek advice based on the taxpayer's particular
circumstances from an independent tax advisor.
STATE AND OTHER TAX CONSEQUENCES
In addition to the federal income tax consequences described in this prospectus in "Federal Income Tax Consequences", potential
investors should consider the state and local tax consequences of the acquisition, ownership, and disposition of the securities offered
under this prospectus and the prospectus supplement. State and local law may differ substantially from the corresponding federal tax
law, and the discussion above does not purport to describe any aspect of the tax laws of any state or other jurisdiction. Therefore,
prospective investors are encouraged to consult their own tax advisors with respect to the various state and other tax consequences of
investments in the securities offered under this prospectus and the prospectus supplement.
ERISA CONSIDERATIONS
Sections 404 and 406 of ERISA impose fiduciary and prohibited transaction restrictions on ERISA Plans and on various other
retirement plans and arrangements, including bank collective investment funds and insurance company general and separate accounts in
which ERISA Plans are invested. Section 4975 of the Code imposes essentially the same prohibited transaction restrictions on Tax Favored
Plans. ERISA and the Code prohibit a broad range of transactions involving assets of Plans and persons having obtained certain
relationships to a Plan, called "Parties in Interest", unless a statutory or administrative exemption is available with respect to any
such transaction.
Some employee benefit plans, including governmental plans (as defined in Section 3(32) of ERISA), and, if no election has been
made under Section 410(d) of the Code, church plans (as defined in Section 3(33) of ERISA) are not subject to the ERISA requirements.
Accordingly, assets of these plans may be invested in the securities without regard to the ERISA considerations described below, subject
to the provisions of other applicable federal, state and local law. Any such plan which is qualified and exempt from taxation under
Sections 401(a) and 501(a) of the Code, however, is subject to the prohibited transaction rules set forth in Section 503 of the Code.
ERISA generally imposes on Plan fiduciaries general fiduciary requirements, including those of investment prudence and
diversification and the requirement that a Plan's investments be made for the exclusive benefit of Plan participants and their
beneficiaries and in accordance with the documents governing the Plan. Any person who has discretionary authority or control with
respect to the management or disposition of a Plan's assets, or Plan Assets, and any person who provides investment advice with respect
to Plan Assets for a fee is a fiduciary of the investing Plan. If the mortgage loans and other assets included in the trust fund were
to constitute Plan Assets, then any party exercising management or discretionary control with respect to those Plan Assets may be
deemed to be a Plan "fiduciary," and thus subject to the fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and Section 4975 of the Code with respect to any investing Plan. In addition, the acquisition or holding of
securities by or on behalf of a Plan or with Plan Assets, as well as the operation of the trust fund, may constitute or involve a prohibited
transaction under ERISA and the Code unless a statutory or administrative exemption is available. Further, ERISA and the Code prohibit a
broad range of transactions involving Plan Assets and persons, called Parties in Interest unless a statutory or administrative exemption
is available. Some Parties in Interest that participate in a prohibited transaction may be subject to a penalty (or an excise tax)
imposed under Section 502(i) of ERISA or Section 4975 of the Code, unless a statutory or administrative exemption is available with respect
to any transaction of this sort.
Some transactions involving the trust fund might be deemed to constitute prohibited transactions under ERISA and the Code with
respect to a Plan that purchases the securities, if the mortgage loans and other assets included in a trust fund are deemed to be assets
of the Plan. The DOL has promulgated the DOL Regulations concerning whether or not Plan Assets of a Plan would be deemed to
include an interest in the underlying assets of an entity, including a trust fund, for purposes of applying the general fiduciary
responsibility provisions of ERISA and the prohibited transaction provisions of ERISA and the Code. Under the DOL Regulations,
generally, when a Plan acquires an "equity interest" in another entity (such as the trust fund), the underlying assets of that entity
may be considered to be Plan Assets unless an exception applies. Exceptions contained in the DOL Regulations provide that a Plan's
assets will not include an undivided interest in each asset of an entity in which the Plan makes an equity investment if: (1) the entity
is an operating company; (2) the equity investment made by the Plan is either a "publicly-offered security" that is "widely held," both
as defined in the DOL Regulations, or a security issued by an investment company registered under the Investment Company Act of 1940, as
amended; or (3) Benefit Plan Investors do not own 25% or more in value of any class of equity securities issued by the entity. In
addition, the DOL Regulations provide that the term "equity interest" means any interest in an entity other than an instrument which is
treated as indebtedness under applicable local law and which has no "substantial equity features." Under the DOL Regulations, Plan
Assets will be deemed to include an interest in the instrument evidencing the equity interest of a Plan (such as a security with
"substantial equity features"), and, because of the factual nature of some of the rules set forth in the DOL Regulations, Plan Assets may
be deemed to include an interest in the underlying assets of the entity in which a Plan acquires an interest (such as the trust fund).
Without regard to whether the securities are characterized as equity interests, the purchase, sale and holding of securities by or on
behalf of a Plan could be considered to give rise to a prohibited transaction if the Issuing Entity, the trustee or any of their
respective affiliates is or becomes a Party in Interest with respect to the Plan. The depositor, Bear, Stearns & Co. Inc., the master
servicer or other servicer, any pool insurer, any special hazard insurer, the trustee, and certain of their affiliates might be
considered Parties in Interest with respect to a Plan. If so, the acquisition, holding or disposition of securities by or on behalf of
such Plan could be considered to give rise to a "prohibited transaction" within the meaning of ERISA and the Code unless an exemption
is available. Neither Plans nor persons investing Plan Assets should acquire or hold securities in reliance upon the availability of any
exception under the DOL Regulations.
Class and Statutory Exemptions
The DOL has issued Prohibited Transaction Class Exemptions ("PTCEs") which provide exemptive relief to parties to any
transaction which satisfies the conditions of the exemption. A partial listing of the PTCEs which may be available for investments in
securities follows. In addition, the Pension Protection Act of 2006 provides a statutory exemption under Section 408(b)(17) of ERISA and
Section 4975(d)(20) of the Code from certain prohibited transactions between an ERISA plan, Keogh plan, IRA or related investment vehicle
and a person or entity that is a Party in Interest to such Plan solely by reason of providing services to such plan or entity (other than
a Party in Interest that is a fiduciary, or its affiliate, that has or exercises discretionary authority or control or renders investment
advice with respect to the assets of the plan or entity involved in the transaction), provided that there is adequate consideration for the
transaction. Each of these exemptions is available only if specified conditions are satisfied and may provide relief for some,
but not all, of the prohibited transactions that a particular transaction may cause. The prospectus supplement for a particular
offering of securities may tell you whether the securities themselves satisfy the conditions of these exemptions. You are encouraged
to consult with your advisors regarding the specific scope, terms and conditions of an exemption as it applies to you, as an investor,
before relying on that exemption's availability.
Class exemptions for purchases and sales of securities.
The following exemptions may apply to a purchase or sale of securities between a Plan, on the one hand, and a Party in
Interest, on the other hand:
o PTCE 84-14, which exempts certain transactions approved on behalf of the Plan by independent qualified
professional asset managers.
o PTCE 86-128, which exempts certain transactions between a Plan and certain broker-dealers.
o PTCE 90-1, which exempts certain transactions entered into by insurance company pooled separate accounts in which
Plans have made investments.
o PTCE 91-38, which exempts certain transactions entered into by bank collective investment funds in which Plans have
made investments.
o PTCE 96-23, which exempts certain transactions approved on behalf of a Plan by certain in-house investment managers.
These exemptions do not expressly address prohibited transactions that might result from transactions incidental to the
operation of a trust. The issuing entity cannot assure you that a purchase or sale of securities in reliance on one of these exemptions
will not give rise to indirect, non-exempt prohibited transactions.
Class exemptions for purchases and sales of securities and transactions incidental to the operation of the Issuing Entity.
The following exemptions may apply to a purchase or sale of securities between a Plan, on the one hand, and a Party in
Interest, on the other hand, and may also apply to prohibited transactions that may result from transactions incident to the operation
of the Issuing Entity:
o PTCE 95-60, which exempts certain transactions involving insurance company general accounts.
o PTCE 83-1, which exempts certain transactions involving the purchase of pass-through certificates in mortgage pool
investment trusts from, and the sale of such certificates to, the pool sponsor, as well as transactions in connection
with the servicing and operation of the pool.
Prohibited Transaction Class Exemption 83-1. The U.S. Department of Labor has issued an administrative exemption, Prohibited
Transaction Class Exemption 83-1 ("PTCE 83-1"), which, under certain conditions, exempts from the application of the prohibited
transaction rules of ERISA and the excise tax provisions of Section 4975 of the Code transactions involving a Plan in connection with
the operation of a "mortgage pool" and the purchase, sale and holding of "mortgage pool pass-through certificates." A "mortgage pool" is
defined as an investment pool, consisting solely of interest bearing obligations secured by first or second mortgages or deeds of trust
on single-family residential property, property acquired in foreclosure and undistributed cash. A "mortgage pool pass-through
certificate" is defined as a certificate which represents a beneficial undivided interest in a mortgage pool which entitles the holder to
pass-through payments of principal and interest from the mortgage loans.
For the exemption to apply, PTCE 83-1 requires that:
o the depositor and the trustee maintain a system of insurance or other protection for the mortgage loans and the
property securing such mortgage loans, and for indemnifying holders of certificates against reductions in pass-through
payments due to defaults in loan payments or property damage in an amount at least equal to the greater of 1% of the
aggregate principal balance of the mortgage loans, or 1% of the principal balance of the largest covered pooled
mortgage loan;
o the trustee may not be an affiliate of the depositor;
o and the payments made and retained by the depositor in connection with the trust fund, together with all funds inuring
to the depositor's benefit for administering the trust fund, represent no more than "adequate consideration" for
selling the mortgage loans, plus reasonable compensation for services provided to the trust fund.
In addition, if it is applicable, PTCE 83-1 exempts the initial sale of certificates to a Plan with respect to which the
depositor, the special hazard insurer, the pool insurer, the master servicer, or other servicer, or the trustee are or is a party in
interest if the Plan does not pay more than fair market value for such certificate and the rights and interests evidenced by such
certificate are not subordinated to the rights and interests evidenced by other certificates of the same pool. PTCE 83-1 also exempts
from the prohibited transaction rules any transactions in connection with the servicing and operation of the mortgage pool, provided
that any payments made to the master servicer in connection with the servicing of the trust fund are made in accordance with a binding
agreement, copies of which must be made available to prospective investors.
In the case of any Plan with respect to which the depositor, the master servicer, the special hazard insurer, the pool insurer,
or the trustee is a fiduciary, PTCE 83-1 will only apply if, in addition to the other requirements:
o the initial sale, exchange or transfer of certificates is expressly approved by an independent fiduciary who has
authority to manage and control those plan assets being invested in certificates;
o the Plan pays no more for the certificates than would be paid in an arm's length transaction;
o no investment management, advisory or underwriting fee, sale commission, or similar compensation is paid to the
depositor with regard to the sale, exchange or transfer of certificates to the Plan;
o the total value of the certificates purchased by such Plan does not exceed 25% of the amount issued; and
o at least 50% of the aggregate amount of certificates is acquired by persons independent of the depositor, the trustee,
the master servicer, and the special hazard insurer or pool insurer.
Before purchasing certificates, a fiduciary of a Plan should confirm that the trust fund is a "mortgage pool," that the
certificates constitute "mortgage pool pass-through certificates," and that the conditions set forth in PTCE 83-1 would be satisfied. In
addition to making its own determination as to the availability of the exemptive relief provided in PTCE 83-1, the Plan fiduciary should
consider the availability of any other prohibited transaction exemptions. The Plan fiduciary also should consider its general fiduciary
obligations under ERISA in determining whether to purchase any certificates on behalf of a Plan.
Underwriter Exemption
The DOL has issued Exemptions to some underwriters, which generally exempt from the application of the prohibited transaction
provisions of Section 406 of ERISA, and the excise taxes imposed on those prohibited transactions pursuant to Section 4975(a) and (b) of
the Code, some transactions, among others, relating to the servicing and operation of mortgage pools and the initial purchase, holding
and subsequent resale of mortgage-backed securities or other "securities" underwritten by an Underwriter, as defined below, provided
that the conditions set forth in the Exemption are satisfied. For purposes of this section "ERISA Considerations", the term
"Underwriter" shall include (1) the underwriter, (2) any person directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with the underwriter and (3) any member of the underwriting syndicate or selling group of which a
person described in (1) or (2) is a manager or co-manager with respect to a class of securities.
The Exemption sets forth seven general conditions which must be satisfied for the Exemption to apply.
First, the acquisition of securities by a Plan or with Plan Assets must be on terms that are at least as favorable to the Plan
as they would be in an arm's-length transaction with an unrelated party.
Second, the Exemption only applies to securities evidencing rights and interests that are not subordinated to the rights and
interests evidenced by other securities of the same trust, unless none of the mortgage loans has a loan-to- value ratio or combined
loan-to-value ratio at the date of issuance of the securities that exceeds 100%.
Third, the securities at the time of acquisition by a Plan or with Plan Assets must be rated in one of the four highest generic
rating categories by an Exemption Rating Agency. However, the securities must be rated in one of the two highest generic categories by
an Exemption Rating Agency if the loan-to-value ratio or combined loan-to-value ratio of any one- to four-family residential mortgage
loan or home equity loan held in the trust exceeds 100% but does not exceed 125% at the date of issuance of the securities, and in that
case the Exemption will not apply: (1) to any of the securities if any mortgage loan or other asset held in the trust (other than a one-
to four-family residential mortgage loan or home equity loan) has a loan-to-value ratio or combined loan-to-value ratio that exceeds
100% at the Closing Date or (2) to any subordinate securities.
Fourth, the trustee cannot be an affiliate of any member of the Restricted Group, other than the Underwriter. The Restricted Group
consists of any Underwriter, the master servicer, any servicer, any insurer, the depositor, any counterparty to an "eligible swap" (as
described below) and any obligor with respect to assets included in the trust fund consisting of more than 5% of the aggregate unamortized
principal balance of the assets in the trust fund as of the date of initial issuance of the securities other than the underwriter.
Fifth, the sum of all payments made to and retained by the Underwriter(s) must represent not more than reasonable compensation
for underwriting the securities; the sum of all payments made to and retained by the depositor pursuant to the assignment of the assets
to the related trust fund must represent not more than the fair market value of the obligations; and the sum of all payments made to and
retained by the master servicer, the special servicer and any subservicer must represent not more than reasonable compensation for the
person's services under the related Agreement and reimbursement of the person's reasonable expenses in connection therewith.
Sixth, the investing Plan or Plan Asset investor must be an accredited investor as defined in Rule 501(a)(1) of Regulation D of
the Commission under the Securities Act.
Seventh, for Issuing Entities other than certain trusts, the documents establishing the Issuing Entity and governing the
transaction must contain certain provisions as described in the Exemption intended to protect the assets of the Issuing Entity from
creditors of the Depositor.
Permitted trust funds include owner-trusts, as well as grantor-trusts and REMICs. Owner-trusts are subject to certain
restrictions in their governing documents to ensure that their assets may not be reached by creditors of the depositor in the event of
bankruptcy or other insolvency and must provide certain legal opinions.
The Exemption permits interest rate swaps, interest rate caps and yield supplement agreements to be assets of a trust fund if
certain conditions are satisfied.
An interest-rate swap or (if purchased by or on behalf of the Issuing Entity) an interest-rate cap contract (collectively, a
"swap" or "swap agreement") is a permitted trust fund asset if it: (a) is an "eligible swap;" (b) is with an "eligible counterparty;"
(c) meets certain additional specific conditions which depend on whether the swap is a "ratings dependent swap" or a "non-ratings
dependent swap" and (d) permits the Issuing Entity to make termination payments to the swap counterparty (other than currently scheduled
payments) solely from excess spread or amounts otherwise payable to the servicer, depositor, sponsor or any other seller. Securities to
which one or more swap agreements apply may be acquired or held by only "qualified plan investors."
An "eligible swap" is one which: (a) is denominated in U.S. dollars; (b) pursuant to which the Issuing Entity pays or
receives, on or immediately prior to the respective payment or distribution date for the class of securities to which the swap relates,
a fixed rate of interest or a floating rate of interest based on a publicly available index (e.g., LIBOR or the U.S. Federal Reserve's
Cost of Funds Index (COFI)), with the Issuing Entity receiving such payments on at least a quarterly basis and obligated to make
separate payments no more frequently than the counterparty, with all simultaneous payments being netted ("allowable interest rate"); (c)
has a notional amount that does not exceed either: (i) the principal balance of the class of securities to which the swap relates, or
(ii) the portion of the principal balance of such class represented by obligations ("allowable notional amount"); (d) is not leveraged
(i.e., payments are based on the applicable notional amount, the day count fractions, the fixed or floating rates permitted above, and
the difference between the products thereof, calculated on a one-to-one ratio and not on a multiplier of such difference) ("leveraged");
(e) has a final termination date that is either the earlier of the date on which the issuer terminates or the related class of
securities are fully repaid and (f) does not incorporate any provision which could cause a unilateral alteration in the requirements
described in (a) through (d) above.
An "eligible counterparty" means a bank or other financial institution which has a rating at the date of issuance of the
securities, which is in one of the three highest long term credit rating categories or one of the two highest short term credit rating
categories, utilized by at least one of the exemption rating agencies rating the securities; provided that, if a counterparty is relying
on its short term rating to establish eligibility under the Exemption, such counterparty must either have a long term rating in one of
the three highest long term rating categories or not have a long term rating from the applicable exemption rating agency.
A "qualified plan investor" is a plan where the decision to buy a class of securities is made on behalf of the plan by an
independent fiduciary qualified to understand the swap transaction and the effect the swap would have on the rating of the securities
and such fiduciary is either (a) a "qualified professional asset manager" ("QPAM") under PTCE 84-14, (b) an "in-house asset manager"
under PTCE 96-23 or (c) has total assets (both plan and non-plan) under management of at least $100 million at the time the securities
are acquired by the plan.
In "ratings dependent swaps" (where the rating of a class of securities is dependent on the terms and conditions of the swap),
the swap agreement must provide that if the credit rating of the counterparty is withdrawn or reduced by any exemption rating agency
below a level specified by the exemption rating agency, the servicer must, within the period specified under the Pooling and Servicing
Agreement: (a) obtain a replacement swap agreement with an eligible counterparty which is acceptable to the exemption rating agency and
the terms of which are substantially the same as the current swap agreement (at which time the earlier swap agreement must terminate);
or (b) cause the swap counterparty to establish any collateralization or other arrangement satisfactory to the exemption rating agency
such that the then current rating by the exemption rating agency of the particular class of securities will not be withdrawn or reduced
(and the terms of the swap agreement must specifically obligate the counterparty to perform these duties for any class of securities
with a term of more than one year). In the event that the servicer fails to meet these obligations, holders of the securities that are
employee benefit plans or other retirement arrangements must be notified in the immediately following periodic report which is provided
to the holders of the securities but in no event later than the end of the second month beginning after the date of such failure. Sixty
days after the receipt of such report, the exemptive relief provided under the Exemption will prospectively cease to be applicable to
any class of securities held by an employee benefit plan or other retirement arrangement which involves such ratings dependent swap.
"Non-ratings dependent swaps" (those where the rating of the securities does not depend on the terms and conditions of the
swap) are subject to the following conditions. If the credit rating of the counterparty is withdrawn or reduced below the lowest level
permitted above, the servicer will, within a specified period after such rating withdrawal or reduction: (a) obtain a replacement swap
agreement with an eligible counterparty, the terms of which are substantially the same as the current swap agreement (at which time the
earlier swap agreement must terminate); (b) cause the counterparty to post collateral with the Issuing Entity in an amount equal to all
payments owed by the counterparty if the swap transaction were terminated; or (c) terminate the swap agreement in accordance with its
terms.
An "eligible yield supplement agreement" is any yield supplement agreement or similar arrangement or (if purchased by or on
behalf of the Issuing Entity) an interest rate cap contract to supplement the interest rates otherwise payable on obligations held by
the trust fund ("EYS Agreement"). If the EYS Agreement has a notional principal amount and/or is written on an International Swaps and
Derivatives Association, Inc. (ISDA) form, the EYS Agreement may only be held as an asset of the trust fund if it meets the following
conditions: (a) it is denominated in U.S. dollars; (b) it pays an allowable interest rate; (c) it is not leveraged; (d) it does not
allow any of these three preceding requirements to be unilaterally altered without the consent of the trustee; (e) it is entered into
between the Issuing Entity and an eligible counterparty and (f) it has an allowable notional amount.
The Exemption also requires that the trust fund meet the following requirements: (1) the trust fund must consist solely of
assets of the type that have been included in other investment pools; (2) securities evidencing interests in the other investment pools
must have been rated in one of the four highest generic categories of one of the Exemption Rating Agencies for at least one year prior
to the acquisition of securities by or on behalf of a Plan or with Plan Assets; and (3) securities evidencing interests in the other
investment pools must have been purchased by investors other than Plans for at least one year prior to any acquisition of securities by
or on behalf of a Plan or with Plan Assets.
A fiduciary of a Plan or any person investing Plan Assets to purchase a security must make its own determination that the
conditions set forth above will be satisfied with respect to the security.
If the general conditions of the Exemption are satisfied, the Exemption may provide an exemption from the restrictions imposed
by Sections 406(a) and 407(a) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Sections
4975(c)(1)(A) through (D) of the Code, in connection with the direct or indirect sale, exchange or transfer of securities in the initial
issuance of the securities or the direct or indirect acquisition or disposition in the secondary market of securities by a Plan or with
Plan Assets or the continued holding of securities acquired by a Plan or with Plan Assets pursuant to either of the foregoing. However,
no exemption is provided from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a
security on behalf of an "Excluded Plan" by any person who has discretionary authority or renders investment advice with respect to the
assets of an Excluded Plan. For purposes of the securities, an Excluded Plan is a Plan sponsored by any member of the Restricted Group.
If the specific conditions of the Exemption are also satisfied, the Exemption may provide an exemption from the
restrictions imposed by Sections 406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code by
reason of Section 4975(c)(1)(E) of the Code, in connection with:
1. The direct or indirect sale, exchange or transfer of securities in the initial issuance of securities between the
depositor or an Underwriter and a Plan when the person who has discretionary authority or renders investment advice
with respect to the investment of Plan Assets in the securities is (a) a mortgagor with respect to 5% or less of the
fair market value of the trust fund assets or (b) an affiliate of such a person, provided that:
i. The Plan is not an Excluded Plan,
ii. Each Plan's investment in each class of securities does not exceed 25% of the outstanding securities
in the class,
iii. After the Plan's acquisition of the securities, no more than 25% of the assets over which the
fiduciary has investment authority are invested in securities of a trust fund containing assets which
are sold or serviced by the same entity, and
iv. In the case of initial issuance (but not secondary market transactions), at least 50% of each class
of securities and at least 50% of the aggregate interests in the trust fund are acquired by persons
independent of the Restricted Group;
2. The direct or indirect acquisition or disposition in the secondary market of securities by a Plan or with Plan assets
provided that the conditions in (i), (iii) and (iv) of 1 above are met; and
3. The continued holding of securities acquired by a Plan or with Plan Assets pursuant to sections 1 or 2 above.
Further, if the specific conditions of the Exemption are satisfied, the Exemption may provide an exemption from the
restrictions imposed by Sections 406(a), 406(b) and 407 of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code
by reason of Section 4975(c) of the Code for transactions in connection with the servicing, management and operation of the trust fund.
The depositor expects that the specific conditions of the Exemption required for this purpose will be satisfied with respect to the
securities so that the Exemption would provide an exemption from the restrictions imposed by Sections 406(a) and (b) of ERISA (as well
as the excise taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code) for transactions in
connection with the servicing, management and operation of the trust fund, provided that the general conditions of the Exemption are
satisfied.
The Exemption also may provide an exemption from the application of the prohibited transaction provisions of Sections 406(a)
and 407(a) of ERISA, and the excise taxes imposed by Section 4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D)
of the Code if the restrictions are deemed to otherwise apply merely because a person is deemed to be a Party in Interest with respect
to an investing Plan by virtue of providing services to the Plan (or by virtue of having a specified relationship to such a person)
solely as a result of the Plan's ownership of securities.
The Exemption generally extends exemptive relief to mortgage-backed and asset-backed securities transactions using pre-funding
accounts for trusts issuing securities. With respect to the securities, the Exemption will generally allow mortgage loans supporting
payments to securityholders, and having a value equal to no more than 25% of the total principal amount of the securities being offered
by the trust fund, to be transferred to the trust fund within the Pre-Funding Period instead of requiring that all the mortgage loans
be either identified or transferred on or before the Closing Date. In general, the relief applies to the purchase, sale and holding of
securities which otherwise qualify for the Exemption, provided that the following general conditions are met:
o the ratio of the amount allocated to the pre-funding account to the total principal amount of the securities being
offered must be less than or equal to 25%;
o all additional mortgage loans transferred to the related trust fund after the Closing Date must meet the same terms
and conditions for eligibility as the original mortgage loans used to create the trust fund, which terms and
conditions have been approved by one of the Exemption Rating Agencies;
o the transfer of the additional mortgage loans to the trust fund during the Pre-Funding Period must not result in the
securities to be covered by the Exemption receiving a lower credit rating from an Exemption Rating Agency upon
termination of the Pre-Funding Period than the rating that was obtained at the time of the initial issuance of the
securities by the trust fund;
o solely as a result of the use of pre-funding, the weighted average annual percentage interest rate for the mortgage
loans included in the related trust fund on the Closing Date and all additional mortgage loans transferred to the
related trust fund after the Closing Date at the end of the Pre- Funding Period must not be more than 100 basis points
lower than the rate for the mortgage loans which were transferred to the trust fund on the Closing Date;
o either:
(1) the characteristics of the additional mortgage loans transferred to the related trust fund after the Closing
Date must be monitored by an insurer or other credit support provider which is independent of the depositor; or
(2) an independent accountant retained by the depositor must provide the depositor with a letter (with copies
provided to the Exemption Rating Agency rating the securities, the Underwriter and the trustee) stating
whether or not the characteristics of the additional mortgage loans transferred to the related trust fund
after the Closing Date conform to the characteristics described in the prospectus or prospectus supplement
and/or agreement. In preparing the letter, the independent accountant must use the same type of procedures as
were applicable to the mortgage loans which were transferred to the trust fund as of the Closing Date;
o the Pre-Funding Period must end no later than three months or 90 days after the Closing Date or earlier in some
circumstances if the pre-funding accounts falls below the minimum level specified in the Agreement or an event of
default occurs;
o amounts transferred to any pre-funding accounts and/or capitalized interest account used in connection with the
pre-funding may be invested only in investments which are permitted by the Exemption Rating Agencies rating the
securities and must:
(1) be direct obligations of, or obligations fully guaranteed as to timely payment of principal and interest by,
the United States or any agency or instrumentality thereof (provided that the obligations are backed by the
full faith and credit of the United States); or
(2) have been rated (or the obligor has been rated) in one of the three highest generic rating categories by one
of the Exemption Rating Agencies ("ERISA Permitted Investments");
o the prospectus or prospectus supplement must describe the duration of the Pre-Funding Period;
o the trustee (or any agent with which the trustee contracts to provide trust services) must be a substantial financial
institution or trust company experienced in trust activities and familiar with its duties, responsibilities and
liabilities with ERISA. The trustee, as legal owner of the trust fund, must enforce all the rights created in favor of
securityholders of the trust fund, including employee benefit plans subject to ERISA.
Insurance company general accounts
o In the event that securities which are certificates do not meet the requirements of the Exemption solely because
they are subordinate certificates or fail to meet a minimum rating requirements under the Exemption, certain Plans
may be eligible to purchase certificates pursuant to Sections I and III of PTCE 95-60 which permits insurance
company general accounts as defined in PTCE 95-60 to purchase such certificates if they otherwise meet all of the
other requirements of the Exemption.
o Insurance companies contemplating the investment of general account assets in the securities are encouraged to
consult with their legal advisors with respect to the applicability of Section 401(c) of ERISA. The DOL issued final
regulations under Section 401(c) which became effective on July 5, 2001.
Revolving pool features
The Exemption only covers certificates backed by a "fixed" pool of loans which requires that all the loans must be transferred
to the trust fund or identified at closing (or transferred within the Pre-Funding Period, if pre-funding meeting the conditions
described above is used). Accordingly, certificates issued by trust funds which feature revolving pools of assets will not be eligible
for a purchase by Plans. However, securities which are notes backed by revolving pools of assets may be eligible for purchase by Plans
pursuant to certain other prohibited transaction exemptions. See discussion below in "ERISA Considerations Relating to Notes."ERISA Considerations Relating to Notes
Under the DOL Regulations, the assets of the trust fund would be treated as "plan assets" of a Plan for the purposes of ERISA
and the Code only if the Plan acquires an "equity interest" in the trust fund and none of the exceptions contained in the DOL
Regulations is applicable. An equity interest is defined under the DOL Regulations as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no substantial equity features. Assuming that the notes are treated as
indebtedness without substantial equity features for purposes of the DOL Regulations, then such notes will be eligible for purchase by
Plans. However, without regard to whether the notes are treated as an "equity interest" for such purposes, the acquisition or holding of
notes by or on behalf of a Plan could be considered to give rise to a prohibited transaction if the trust fund or any of its affiliates
is or becomes a party in interest or disqualified person with respect to such Plan, or in the event that a note is purchased in the
secondary market and such purchase constitutes a sale or exchange between a Plan and a party in interest or disqualified person with
respect to such Plan. There can be no assurance that the trust fund or any of its affiliates will not be or become a party in interest
or a disqualified person with respect to a Plan that acquires notes.
The Exemption permits trust funds which are grantor trusts, owner-trusts or REMICs to issue notes, as well as certificates,
provided a legal opinion is received to the effect that the noteholders have a perfected security interest in the trust fund's assets.
The exemptive relief provided under the Exemption for any prohibited transactions which could be caused as a result of the operation,
management or servicing of the trust fund and its assets would not be necessary with respect to notes with no substantial equity
features which are issued as obligations of the trust fund. Nevertheless, because other prohibited transactions might be involved, the
Exemption would provide prohibited transaction exemptive relief, provided that the same conditions of the Exemption described above
relating to certificates are met with respect to the notes. The same limitations of such exemptive relief relating to acquisitions of
certificates by fiduciaries with respect to Excluded Plans would also be applicable to the notes as described herein.
In the event that the Exemption is not applicable to the notes, one or more other prohibited transactions exemptions may be
available to Plans purchasing or transferring the notes depending in part upon the type of Plan fiduciary making the decision to acquire
the notes and the circumstances under which such decision is made. These exemptions include, but are not limited to, PTCE 90-1
(regarding investments by insurance company pooled separate accounts), PTCE 91-38 (regarding investments by bank collective investments
funds), PTCE 84-14 (regarding transactions effected by "qualified professional asset managers"), PTCE 95-60 (regarding investments by
insurance company general accounts) and PTCE 96-23 (regarding transactions effected by "in-house asset managers") (collectively, the
"Investor-Based Exemptions"). However, even if the conditions specified in these Investor-Based Exemptions are met, the scope of the
relief provided under such Exemptions might or might not cover all acts which might be construed as prohibited transactions.
In the event that the Exemption is not applicable to the notes, there can be no assurance that any class of notes will be
treated as indebtedness without substantial equity features for purposes of the DOL Regulations. There is increased uncertainty
regarding the characterization of debt instruments that do not carry an investment grade rating. Consequently, in the event of a
withdrawal or downgrade to below investment grade of the rating of a class of notes, the subsequent transfer of such notes or any
interest therein to a Plan trustee or other person acting on behalf of a Plan, or using Plan Assets to effect such transfer, will be
restricted. Unless otherwise stated in the related prospectus supplement, by acquiring a note, each purchaser will be deemed to
represent that either (1) it is not acquiring the note with Plan Assets; or (2) (A) either (i) none of the issuing entity, the depositor
any underwriter, the trustee, the master servicer, any other servicer or any of their affiliates is a party in interest with respect to
such purchaser that is a Plan or (ii) PTCE 90-1, PTCE 91-38, PTCE 84-14, PTCE 95-60, PTCE 96-23 or some other prohibited transaction
exemption is applicable to the acquisition and holding of the note by such purchaser and (B) the notes are rated investment grade or
better and such person believes that the notes are properly treated as indebtedness without substantial equity features for purposes of
the DOL Regulations, and agrees to so treat the notes. Alternatively, regardless of the rating of the notes, such person may provide the
trustee with an opinion of counsel, which opinion of counsel will not be at the expense of the issuing entity, the depositor, the
trustee, the master servicer or any other servicer, which opines that the purchase, holding and transfer of such note or interest
therein is permissible under applicable law, will not constitute or result in a non-exempt prohibited transaction under ERISA or Section
4975 of the Code and will not subject the issuing entity, the depositor, the trustee, the master servicer or any other servicer to any
obligation in addition to those undertaken in the indenture.
EACH PROSPECTUS SUPPLEMENT WILL CONTAIN INFORMATION CONCERNING CONSIDERATIONS RELATING TO ERISA AND THE CODE THAT ARE
APPLICABLE TO THE RELATED SECURITIES. BEFORE PURCHASING SECURITIES IN RELIANCE ON THE EXEMPTION, THE INVESTOR-BASED EXEMPTIONS OR ANY
OTHER EXEMPTION, A FIDUCIARY OF A PLAN SHOULD ITSELF CONFIRM THAT REQUIREMENTS SET FORTH IN SUCH EXEMPTION WOULD BE SATISFIED.
ANY PLAN INVESTOR WHO PROPOSES TO USE "PLAN ASSETS" OF ANY PLAN TO PURCHASE SECURITIES OF ANY SERIES OR CLASS ARE ENCOURAGED TO
CONSULT WITH ITS COUNSEL WITH RESPECT TO THE POTENTIAL CONSEQUENCES UNDER ERISA AND SECTION 4975 OF THE CODE OF THE ACQUISITION AND
OWNERSHIP OF SUCH SECURITIES.
Exchangeable Securities
With respect to those classes of exchangeable securities which were eligible for exemptive relief under the Exemption when
purchased, the Exemption would also cover the acquisition or disposition of such exchangeable securities when the securityholder
exercises its exchange rights. However, with respect to classes of exchangeable securities which were not eligible for exemptive relief
under the Exemption when purchased, the exchange, purchase or sale of such securities pursuant to the exercise of exchange rights or
call rights may give rise to prohibited transactions if a Plan and a Party in Interest with respect to such Plan are involved in the
transaction. However, one or more Investor-Based Exemptions discussed above may be applicable to these transactions.
Tax Exempt Investors
A Plan that is exempt from federal income taxation pursuant to Section 501 of the Code nonetheless will be subject to federal
income taxation to the extent that its income is "unrelated business taxable income" within the meaning of Section 512 of the Code.
Consultation with Counsel
There can be no assurance that the Exemption or any other DOL exemption will apply with respect to any particular Plan that
acquires the securities or, even if all the conditions specified therein were satisfied, that any such exemption would apply to
transactions involving the trust fund. Prospective Plan investors are encouraged to consult with their legal counsel concerning the
impact of ERISA and the Code and the potential consequences to their specific circumstances prior to making an investment in the
securities. Neither the depositor, the trustees, the master servicer nor any of their respective affiliates will make any representation
to the effect that the securities satisfy all legal requirements with respect to the investment therein by Plans generally or any
particular Plan or to the effect that the securities are an appropriate investment for Plans generally or any particular Plan.
Before purchasing a security in reliance on the Exemption, or an Investor-Based Exemption, or any other exemption, a fiduciary
of a Plan or other Plan Asset Investor should itself confirm that (a) all the specific and general conditions set forth in the
Exemption, an Investor-Based Exemption or other exemption would be satisfied and (b) in the case of a security purchased under the
Exemption, the security constitutes a "security" for purposes of the Exemption. In addition to making its own determination as to the
availability
of the exemptive relief provided in the Exemption, and Investor-Based Exemption or other exemption, the Plan fiduciary should consider
its general fiduciary obligations under ERISA in determining whether to purchase the securities on behalf of a Plan.
A governmental plan as defined in Section 3(32) of ERISA is not subject to ERISA, or Code Section 4975. However, such
governmental plan may be subject to federal, state and local law, which is, to a material extent, similar to the provisions of ERISA or
a Code Section 4975. A fiduciary of a governmental plan should make its own determination as to the propriety of such investment under
applicable fiduciary or other investment standards, and the need for the availability of any exemptive relief under any similar law.
LEGAL INVESTMENT MATTERS
Each class of certificates or notes offered by this prospectus and by the related prospectus supplement will be rated at the
date of issuance in one of the four highest rating categories by at least one Rating Agency. If so specified in the related prospectus
supplement, each such class that is rated in one of the two highest rating categories by at least one Rating Agency will constitute
"mortgage related securities" for purposes of SMMEA, and, as such, will be legal investments for persons, trusts, corporations,
partnerships, associations, business trusts and business entities (including depository institutions, life insurance companies and
pension funds) created pursuant to or existing under the laws of the United States or of any State whose authorized investments are
subject to state regulation to the same extent that, under applicable law, obligations issued by or guaranteed as to principal and
interest by the United States or any agency or instrumentality thereof constitute legal investments for the entities. Under SMMEA, if a
State enacted legislation on or prior to October 3, 1991 specifically limiting the legal investment authority of any such entities with
respect to "mortgage related securities," such securities will constitute legal investments for entities subject to the legislation only
to the extent provided therein. Some States have enacted legislation which overrides the preemption provisions of SMMEA. SMMEA provides,
however, that in no event will the enactment of any such legislation affect the validity of any contractual commitment to purchase, hold
or invest in "mortgage related securities," or require the sale or other disposition of the securities, so long as the contractual
commitment was made or the securities acquired prior to the enactment of the legislation.
SMMEA also amended the legal investment authority of federally-chartered depository institutions as follows: federal savings
and loan associations and federal savings banks may invest in, sell or otherwise deal with "mortgage related securities" without
limitation as to the percentage of their assets represented thereby, federal credit unions may invest in the securities, and national
banks may purchase the securities for their own account without regard to the limitations generally applicable to investment securities
set forth in 12 U.S.C. 24 (Seventh), subject in each case to such regulations as the applicable federal regulatory authority may
prescribe.
The Federal Financial Institutions Examination Council has issued a supervisory policy statement applicable to all depository
institutions, setting forth guidelines for and significant restrictions on investments in "high-risk mortgage securities." The policy
statement has been adopted by the Federal Reserve Board, the Office of the Comptroller of the Currency, the FDIC and the OTS with an
effective date of February 10, 1992. The policy statement generally indicates that a mortgage derivative product will be deemed to be
high risk if it exhibits greater price volatility than a standard fixed rate thirty-year mortgage security. According to the policy
statement, prior to purchase, a depository institution will be required to determine whether a mortgage derivative product that it is
considering acquiring is high-risk, and if so that the proposed acquisition would reduce the institution's overall interest rate risk.
Reliance on analysis and documentation obtained from a securities dealer or other outside party without internal analysis by the
institution would be unacceptable. There can be no assurance as to which classes of offered securities will be treated as high-risk
under the policy statement.
The predecessor to the OTS issued a bulletin, entitled, "Mortgage Derivative Products and Mortgage Swaps", which is applicable
to thrift institutions regulated by the OTS. The bulletin established guidelines for the investment by savings institutions in certain
"high-risk" mortgage derivative securities and limitations on the use of the securities by insolvent, undercapitalized or otherwise
"troubled" institutions. According to the bulletin, such "high-risk" mortgage derivative securities include securities having specified
characteristics, which may include some classes of offered securities. In addition, the National Credit Union Administration has issued
regulations governing federal credit union investments which prohibit investment in specified types of securities, which may include
some classes of offered securities. Similar policy statements have been issued by regulators having jurisdiction over other types of
depository institutions.
Any class of securities that is not rated in one of the two highest rating categories by at least one Rating Agency, and any
other class of securities specified in the related prospectus supplement, will not constitute "mortgage related securities" for purposes
of SMMEA. Prospective investors in these classes of securities, in particular, should consider the matters discussed in the following
paragraph.
There may be other restrictions on the ability of investors either to purchase some classes of offered securities or to
purchase any class of offered securities representing more than a specified percentage of the investors' assets. The depositor will make
no representations as to the proper characterization of any class of offered securities for legal investment or other purposes, or as to
the ability of particular investors to purchase any class of certificates or notes under applicable legal investment restrictions. These
uncertainties may adversely affect the liquidity of any class of certificates or notes. Accordingly, all investors whose investment
activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities
are encouraged to consult with their own legal advisors in determining whether and to what extent the offered securities of any class
thereof constitute legal investments or are subject to investment, capital or other restrictions, and, if applicable, whether SMMEA
has been overridden in any jurisdiction relevant to the investor.
USE OF PROCEEDS
Substantially all of the net proceeds to be received from the sale of certificates or notes will be applied by the depositor to
finance the purchase of, or to repay short-term loans incurred to finance the purchase of, the mortgage loans and/or mortgage securities
in the respective mortgage pools and to pay other expenses. The depositor expects that it will make additional sales of securities
similar to the offered securities from time to time, but the timing and amount of any such additional offerings will be dependent upon a
number of factors, including the volume of mortgage loans purchased by the depositor, prevailing interest rates, availability of funds
and general market conditions.
METHODS OF DISTRIBUTION
The depositor will offer the securities in series. The distribution of the securities may be effected from time to time in one
or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices to be determined at the
time of sale or at the time of commitment therefor. If so specified in the related prospectus supplement, Bear, Stearns & Co. Inc., an
affiliate of the depositor, acting as underwriter with other underwriters, if any, named in such prospectus supplement will distribute
the securities in a firm commitment underwriting, subject to the terms and conditions of the underwriting agreement. In such event, the
related prospectus supplement may also specify that the underwriters will not be obligated to pay for any securities agreed to be
purchased by purchasers pursuant to purchase agreements acceptable to the depositor. In connection with the sale of the securities,
underwriters may receive compensation from the depositor or from purchasers of the securities in the form of discounts, concessions or
commissions. The related prospectus supplement will describe any such compensation that is paid by the depositor.
As to any offering of securities, in addition to the method of distribution as described in the prospectus supplement and this
base prospectus, the distribution of any class of the offered securities may be effected through one or more resecuritization
transactions, in accordance with Rule 190(b).
Alternatively, the related prospectus supplement may specify that Bear, Stearns & Co. Inc. acting as agent or in some cases as
principal with respect to securities that it has previously purchased or agreed to purchase, will distribute the securities. If Bear,
Stearns & Co. Inc. acts as agent in the sale of securities, Bear, Stearns & Co. Inc. will receive a selling commission with respect to
each series of securities, depending on market conditions, expressed as a percentage of the aggregate principal balance of the
securities sold hereunder as of the closing date. The exact percentage for each series of securities will be disclosed in the related
prospectus supplement. To the extent that Bear, Stearns & Co. Inc. elects to purchase securities as principal, Bear, Stearns & Co. Inc.
may realize losses or profits based upon the difference between its purchase price and the sales price. The related prospectus
supplement with respect to any series offered other than through underwriters will contain information regarding the nature of such
offering and any agreements to be entered into between the depositor and purchasers of securities of such series.
The depositor will indemnify Bear, Stearns & Co. Inc. and any underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933, or will contribute to payments Bear, Stearns & Co. Inc. and any underwriters may be
required to make in respect thereof.
In the ordinary course of business, the depositor and Bear, Stearns & Co. Inc. may engage in various securities and financing
transactions, including repurchase agreements to provide interim financing of the depositor's mortgage loans pending the sale of such
mortgage loans or interests in such mortgage loans, including the securities.
Bear, Stearns & Co. Inc. may use this prospectus and the related prospectus supplement in connection with offers and sales
related to market-making transactions in the securities. Bear, Stearns & Co. Inc. may act as principal or agent in such transactions.
Such sales will be made at prices related to prevailing market prices at the time of sale or otherwise.
The depositor anticipates that the securities will be sold primarily to institutional investors or sophisticated
non-institutional investors. Purchasers of securities, including dealers, may, depending on the facts and circumstances of such
purchases, be deemed to be "underwriters" within the meaning of the Securities Act of 1933 in connection with reoffers and sales by them
of securities. Securityholders are encouraged to consult with their legal advisors in this regard before any such reoffer or sale.
LEGAL MATTERS
Legal matters in connection with the securities of each series, including both federal income tax matters and the legality of
the securities being offered, will be passed upon for the depositor by Thacher Proffitt & Wood llp, New York, New York, Orrick,
Herrington & Sutcliffe LLP, New York, New York, or Greenberg Traurig LLP, New York, New York.
FINANCIAL INFORMATION
With respect to each series, a new trust fund will be formed, and no trust fund will engage in any business activities or have
any assets or obligations prior to the issuance of the related series. Accordingly, no financial statements with respect to any trust
fund will be included in this prospectus or in the related prospectus supplement.
RATINGS
It is a condition to the issuance of any class of offered securities that they shall have been rated not lower than investment
grade, that is, in one of the four highest rating categories, by at least one Rating Agency.
Ratings on mortgage pass-through certificates and mortgage-backed notes address the likelihood of receipt by the holders
thereof of all collections on the underlying mortgage assets to which the holders are entitled. These ratings address the structural,
legal and issuer-related aspects associated with the certificates and notes, the nature of the underlying mortgage assets and the credit
quality of the guarantor, if any. Ratings on mortgage pass-through certificates and mortgage-backed notes do not represent any
assessment of the likelihood of principal prepayments by borrowers or of the degree by which the prepayments might differ from those
originally anticipated. As a result, securityholders might suffer a lower than anticipated yield, and, in addition, holders of stripped
interest securities in extreme cases might fail to recoup their initial investments.
A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any
time by the assigning rating organization.
AVAILABLE INFORMATION
The depositor is subject to the informational requirements of the Exchange Act and in accordance therewith files reports and
other information with the Commission. Reports and other information filed by the depositor can be inspected and copied at the Public
Reference Room maintained by the Commission at 100 F Street NE, Washington, DC 20549, and its Regional Offices located as follows:
Chicago Regional Office, 500 West Madison, 14th Floor, Chicago, Illinois60661; New York Regional Office, 233 Broadway, New York, NewYork10279. Copies of the material can also be obtained from the Public Reference Section of the Commission, 100 F Street NE,
Washington, DC 20549, at prescribed rates and electronically through the Commission's Electronic Data Gathering, Analysis and Retrieval
system at the Commission's Website (http://www.sec.gov). Information about the operation of the Public Reference Room may be obtained by
calling the Securities and Exchange Commission at (800) SEC-0330. Exchange Act reports as to any series filed with the Commission will
be filed under the issuing entity's name. The depositor does not intend to send any financial reports to security holders.
The issuing entity's annual reports on Form 10-K (including reports of assessment of compliance with the AB Servicing Criteria,
attestation reports, and statements of compliance, discussed in "Servicing of Mortgage Loans—Evidence as to Compliance" in the related
prospectus supplement and "Description of the Securities — Reports to Securityholders" in this prospectus, required to be filed under
Regulation AB), periodic distribution reports on Form 10-D, current reports on Form 8-K and amendments to those reports, together with
such other reports to security holders or information about the securities as shall have been filed with the Commission will be posted
on the trustee's or the securities administrator's internet web site, as applicable, as soon as reasonably practicable after it has been
electronically filed with, or furnished to, the Commission. The address of the website will be provided in the related Prospectus
Supplement.
This prospectus does not contain all of the information set forth in the registration statement (of which this prospectus forms
a part) and exhibits thereto which the depositor has filed with the Commission under the Securities Act and to which reference is hereby
made.
REPORTS TO SECURITYHOLDERS
The master servicer or another designated person will be required to provide periodic unaudited reports concerning each trust
fund to all registered holders of offered securities of the related series with respect to each trust fund as are required under the
Exchange Act and the Commission's related rules and regulations, and under the terms of the applicable agreements.
As to each issuing entity, so long as it is required to file reports under the Exchange Act, those reports will be made
available as described above under "Available Information".
As to each issuing entity that is no longer required to file reports under the Exchange Act, periodic distribution reports will
be posted on the website of the sponsor, depositor, master servicer or securities administrator, as applicable, referenced above under
"Available Information" as soon as practicable. Annual reports of assessment of compliance with the AB Servicing Criteria, attestation
reports, and statements of compliance will be provided to registered holders of the related securities upon request free of charge. See
"Servicing of Mortgage Loans—Evidence as to Compliance" in the related prospectus supplement and "Description of the Securities —
Reports to Securityholders" in this prospectus.
INCORPORATION OF INFORMATION BY REFERENCE
There are incorporated into this prospectus and in the related prospectus supplement by reference all documents, including but
not limited to the financial statements and reports filed or caused to be filed or incorporated by reference by the depositor with
respect to a trust fund pursuant to the requirements of Sections 13(a) or 15(d) of the Exchange Act, prior to the termination of the
offering of the offered securities of the related series; provided, however, this prospectus and any related prospectus supplement do not
incorporate by reference any of the issuing entity's annual reports filed on Form 10-K with respect to a trust fund.
The depositor will provide or cause to be provided without charge to each person to whom this prospectus is delivered in
connection with the offering of one or more classes of offered securities, upon written or oral request of the person, a copy of any or
all the reports incorporated in this prospectus by reference, in each case to the extent the reports relate to one or more of such
classes of the offered securities, other than the exhibits to the documents, unless the exhibits are specifically incorporated by
reference in the documents. Requests should be directed in writing to Structured Asset Mortgage Investments II Inc., 383 Madison Avenue,
New York, New York10179, Attention: Secretary, or by telephone at (212) 272-2000. The depositor has determined that its financial
statements will not be material to the offering of any offered securities.
GLOSSARY
Accrual Security — A security with respect to which some or all of its accrued interest will not be distributed as interest but
rather an amount equal to that interest will be added to the principal balance thereof on each distribution date for the period
described in the related prospectus supplement.
Affiliated Seller — Banks, savings and loan associations, mortgage bankers, mortgage brokers, investment banking firms, and
other mortgage loan originators or sellers affiliated with the depositor, which may include EMC.
Agreement — An owner trust agreement, servicing agreement, indenture or pooling and servicing agreement.
ARM Loan — A mortgage loan with an adjustable interest rate.
Assumption Fee — The fee paid to the mortgagee upon the assumption of the primary liability for payment of the mortgage.
Bankruptcy Amount — The amount of Bankruptcy Losses that may be allocated to the credit enhancement of the related series.
Bankruptcy Code — Title 11 of the United States Code, as amended from time to time.
Bankruptcy Loss — A Realized Loss attributable to certain actions which may be taken by a bankruptcy court in connection with a
mortgage loan, including a reduction by a bankruptcy court of the principal balance of or the mortgage rate on a mortgage loan or an
extension of its maturity.
Beneficial Owner — A person acquiring an interest in any DTC Registered Security.
Benefit Plan Investors — Plans subject to Part 4 of Title I of ERISA or Section 4975 of the Code and any entity whose
underlying assets include Plan Assets by reason of any such Plan's investment in the entity.
Buydown Account — With respect to a buydown mortgage loan, the custodial account where the Buydown Funds are placed.
Buydown Funds — With respect a buydown mortgage loan, the amount contributed by the seller of the mortgaged property or another
source and placed in the Buydown Account.
Buydown Period — The period during which funds on a buydown mortgage loan are made up for from the Buydown Account.
Call Class — A class of securities which entitles the holder thereof to direct the trustee to redeem a Callable class of
securities.
Callable Class — A class of securities of a series which is redeemable, directly or indirectly, at the direction of the holder
of the related Call Class, as provided in the related prospectus supplement. A Callable Class may have a "lock-out period" during which
such securities cannot be called and generally will be called only if the market value of the assets in the trust fund for such Callable
Class exceeds the outstanding principal balance of such assets.
CERCLA — The federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.
Class Factor — For any exchangeable security and any month, will be a truncated seven digit decimal which, which when
multiplied by the original principal amount of that class, will equal its remaining principal amount, after giving effect to any payment
of (or addition to) principal to be made on the distribution date in the following month.
Clearstream — Clearstream Banking, société anonyme, formerly known as Cedelbank SA.
Closing Date — With respect to any series of securities, the date on which the securities are issued.
Code — The Internal Revenue Code of 1986.
Commission — The Securities and Exchange Commission.
Committee Report — The Conference Committee Report accompanying the Tax Reform Act of 1986.
Conservation Act — The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996.
Contract — Manufactured housing conditional sales contracts and installment loan agreements each secured by a Manufactured Home.
Contributions Tax — With respect to specific contributions to a REMIC made after the Closing Date, a tax on the REMIC equal to
100% of the value of the contributed property.
Cooperative — With respect to a cooperative mortgage loan, the corporation that owns the related apartment building.
Crime Control Act — The Comprehensive Crime Control Act of 1984.
Defaulted Mortgage Loss — A Realized Loss other than a Special Hazard Loss, Extraordinary Loss or other losses resulting from
damage to a mortgaged property, Bankruptcy Loss or Fraud Loss.
Deferred Interest — If an adjustment to the mortgage rate on a mortgage loan has caused the amount of accrued interest on the
mortgage loan in any month to exceed the scheduled monthly payment on the mortgage loan, the resulting amount of interest that has
accrued but is not then payable;
Deleted Mortgage Loan — A mortgage loan which has been removed from the related trust fund.
Designated Seller Transaction — A series of securities where the related mortgage loans are provided either directly or
indirectly to the depositor by one or more Sellers identified in the related prospectus supplement.
Determination Date — The close of business on the date on which the amount of each distribution to securityholders will be
determined, which shall be stated in each prospectus supplement.
Distribution Account — One or more separate accounts for the collection of payments on the related mortgage loans and/or
mortgage securities constituting the related trust fund, which may be a Master Servicer Collection Account.
DIDMC — The Depository Institutions Deregulation and Monetary Control Act of 1980.
DOL — The U.S. Department of Labor.
DOL Regulations — Regulations by the DOL promulgated at 29 C.F.R. § 2510.3-101.
DTC — The Depository Trust Company.
DTC Registered Security — Any security initially issued through the book-entry facilities of the DTC.
Eligible Account — An account maintained with a federal or state chartered depository institution (i) the short-term
obligations of which are rated by each of the Rating Agencies in its highest rating at the time of any deposit therein, or (ii) insured
by the FDIC (to the limits established by the FDIC), the uninsured deposits in which account are otherwise secured such that, as
evidenced by an opinion of counsel (obtained by and at the expense of the person requesting that the account be held pursuant to this
clause (ii)) delivered to the trustee prior to the establishment of the account, the securityholders will have a claim with respect to
the funds in the account and a perfected first priority security interest against any collateral (which shall be limited to Permitted
Instruments) securing the funds that is superior to claims of any other depositors or general creditors of the depository institution
with which the account is maintained or (iii) a trust account or accounts maintained with a federal or state chartered depository
institution or trust company with trust powers acting in its fiduciary capacity or (iv) an account or accounts of a depository
institution acceptable to the Rating Agencies (as evidenced in writing by the Rating Agencies that use of any such account as the
Distribution Account will not have an adverse effect on the then-current ratings assigned to the classes of the securities then rated by
the Rating Agencies). Eligible Accounts may or may not bear interest.
Equity Certificates — With respect to any series of notes, the certificate or certificates representing a beneficial ownership
interest in the related issuing entity.
ERISA — The Employee Retirement Income Security Act of 1974, as amended.
ERISA Plans — Employee pension and welfare benefit plans subject to ERISA.
ES Class — A class of exchangeable securities, as described under "Description of the Certificates — Exchangeable Securities."
Exemption — An individual prohibited transactions exemption issued by the DOL to an underwriter, as amended by Prohibited
Transaction Exemption ("PTE") 97-34, 62 Fed. Reg. 39021 (July 21, 1997), PTE 2000-58, 65 Fed. Reg. 67765 (November 13, 2000), and PTE
2002-41, 67 Fed. Reg. 54487 (August 22, 2002) or any amendment thereto.
Exemption Rating Agency — Standard & Poor's, a division of The McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., or
Fitch, Inc. or any other "Rating Agency" within the meaning of the Exemption.
Exchange Act — The Securities Exchange Act of 1934, as amended.
Extraordinary Loss — Any Realized Loss occasioned by war, civil insurrection, certain governmental actions, nuclear reaction
and certain other risks.
Fraud Loss — A Realized Loss incurred on a defaulted mortgage loan as to which there was fraud in the origination of the
mortgage loan.
Fraud Loss Amount — The amount of Fraud Losses that may be allocated to the credit enhancement of the related series.
FTC Rule — The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission.
Garn-St Germain Act — The Garn-St Germain Depository Institutions Act of 1982.
Ginnie Mae — The Government National Mortgage Association.
Global Securities — The certificated securities registered in the name of DTC, its nominee or another depository representing
interests in the class or classes specified in the related prospectus supplement which are held in book-entry form.
Grantor Trust Certificate — A certificate representing an interest in a Grantor Trust Fund.
Grantor Trust Fractional Interest Certificate — A Grantor Trust Certificate representing an undivided equitable ownership
interest in the principal of the mortgage loans constituting the related Grantor Trust Fund, together with interest on the Grantor Trust
Certificates at a pass-through rate.
Grantor Trust Strip Certificate — A certificate representing ownership of all or a portion of the difference between interest
paid on the mortgage loans constituting the related Grantor Trust Fund (net of normal administration fees and any retained interest of
the depositor) and interest paid to the holders of Grantor Trust Fractional Interest Certificates issued with respect to the Grantor
Trust Fund. A Grantor Trust Strip Certificate may also evidence a nominal ownership interest in the principal of the mortgage loans
constituting the related Grantor Trust Fund.
Grantor Trust Fund — A trust fund as to which no REMIC election will be made and which qualifies as a "grantor trust" within
the meaning of Subpart E, part I of subchapter J of the Code.
High Cost Loans — Mortgage loans subject to the Homeownership Act, which amended TILA to provide new requirements applicable to
loans that exceed certain interest rate and/or points and fees thresholds.
High LTV Loans — Mortgage loans with Loan-to-Value Ratios in excess of 80% and as high as 150% and which are not be insured by
a Primary Insurance Policy.
Homeownership Act —The Home Ownership and Equity Protection Act of 1994.
Housing Act — The National Housing Act of 1934, as amended.
Index — With respect to an ARM Loan, the related index will be specified in the related prospectus supplement, will be of a
type that are customarily used in the debt and fixed income markets to measure the cost of borrowed funds, and may include one of the
following indexes: (1) the weekly average yield on U.S. Treasury securities adjusted to a constant maturity of either six months or one
year, (2) the weekly auction average investment yield of U.S. Treasury bills of six months, (3) the daily Bank Prime Loan rate made
available by the Federal Reserve Board, (4) the cost of funds of member institutions for the Federal Home Loan Bank of San Francisco,
(5) the interbank offered rates for U.S. dollar deposits in the London market, each calculated as of a date prior to each scheduled
interest rate adjustment date which will be specified in the related prospectus supplement or (6) any other index described in the
related prospectus supplement.
Insurance Proceeds — Proceeds received under any hazard, title, primary mortgage, FHA or other insurance policy that provides
coverage with respect to a particular mortgaged property or the related mortgage loan (other than proceeds applied to the restoration of
the property or released to the related borrower in accordance with the customary servicing practices of the master servicer (or, if
applicable, a special servicer) and/or the terms and conditions of the related mortgage.
Intermediary — An institution that is not a participant in the DTC but clears through or maintains a custodial relationship
with a participant.
IRS — The Internal Revenue Service.
Issue Premium — The excess of the issue price of a REMIC Regular Certificate over its stated redemption price.
Issuing Entity — With respect to a series of notes, the Delaware statutory trust or other trust, created pursuant to the owner
trust agreement, that issues the notes.
Liquidation Proceeds — (1) All amounts, other than Insurance Proceeds received and retained in connection with the liquidation
of defaulted mortgage loans or property acquired in respect thereof, by foreclosure or otherwise, together with the net operating income
(less reasonable reserves for future expenses) derived from the operation of any mortgaged properties acquired by the trust fund through
foreclosure or otherwise and (2) all proceeds of any mortgage loan or mortgage security purchased (or, in the case of a substitution,
amounts representing a principal adjustment) by the master servicer, the depositor, a Seller or any other person pursuant to the terms
of the related pooling and servicing agreement or servicing agreement as described under "The Mortgage Pools—Representations by
Sellers,""Servicing of Mortgage Loans—Realization Upon and Sale of Defaulted Mortgage Loans,""—Assignment of Trust Fund Assets" above
and "The Agreements—Termination."
Loan-to-Value Ratio — With respect to any mortgage loan at any given time is the ratio (expressed as a percentage) of the then
outstanding principal balance of the mortgage loan plus the principal balance of any senior mortgage loan to the Value of the related
mortgaged property.
Manufactured Home — Manufactured homes within the meaning of 42 United States Code, Section 5402(6), which defines a
"manufactured home" as "a structure, transportable in one or more sections, which in the traveling mode, is eight body feet or more in
width or forty body feet or more in length, or, when erected on site, is three hundred twenty or more square feet, and which is built on
a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required
utilities, and includes the plumbing, heating, air conditioning, and electrical systems contained therein; except that the term shall
include any structure which meets all the requirements of this paragraph except the size requirements and with respect to which the
manufacturer voluntarily files a certification required by the Secretary of Housing and Urban Development and complies with the
standards established under this chapter."
Master Servicer Collection Account — One or more separate accounts established by a master servicer, into which each of the
related servicers are required to remit collections of payments on the related mortgage loans included in the related trust fund.
Net Mortgage Rate — With respect to a mortgage loan, the mortgage rate net of the per annum rate or rates applicable to the
calculation of servicing and administrative fees and any retained interest of the depositor.
Nonrecoverable Advance — An advance which, in the good faith judgment of the master servicer or a servicer, as applicable, will
not be recoverable from recoveries on the related mortgage loan or another specifically identified source.
Note Margin — With respect to an ARM Loan, the fixed percentage set forth in the related mortgage note, which when added to the
related Index, provides the mortgage rate for the ARM Loan.
OID Regulations — The rules governing original issue discount that are set forth in Sections 1271-1273 and 1275 of the Code and
in the related Treasury regulations.
OTS — The Office of Thrift Supervision.
Parity Act — The Alternative Mortgage Transaction Parity Act of 1982.
Parties in Interest — With respect to a Plan, persons who have specified relationships to the Plans, either "Parties in
Interest" within the meaning of ERISA or "Disqualified Persons" within the meaning of Section 4975 of the Code.
Percentage Interest — With respect to a security of a particular class, the percentage obtained by dividing the initial
principal balance or notional amount of the security by the aggregate initial amount or notional balance of all the securities of the
class.
Permitted Investments — United States government securities and other investment grade obligations specified in the related
pooling and servicing agreement or the related servicing agreement and indenture.
Piggyback Loan — A second lien mortgage loan originated by the same originator to the same borrower at the same time as the
first lien mortgage loan, each secured by the same mortgaged property.
Plan Assets — "Plan assets" of a Plan, within the meaning of the DOL Regulations.
Plans — ERISA Plans and Tax Favored Plans.
Prepayment Assumption — With respect to a REMIC Regular Certificate or a Grantor Trust Certificate, the prepayment assumption
used in pricing the initial offering of that security.
Prepayment Interest Shortfall — With respect to any mortgage loan with a prepayment in part or in full the excess, if any, of
interest accrued and otherwise payable on the related mortgage loan over the interest charged to the borrower (net of servicing and
administrative fees and any retained interest of the depositor).
Primary Insurance Covered Loss — With respect to a mortgage loan covered by a Primary Insurance Policy, the amount of the
related loss covered pursuant to the terms of the Primary Insurance Policy, which will generally consist of the unpaid principal amount
of the mortgage loan and accrued and unpaid interest on the mortgage loan and reimbursement of specific expenses, less (1) rents or
other payments collected or received by the insured (other than the proceeds of hazard insurance) that are derived from the related
mortgaged property, (2) hazard insurance proceeds in excess of the amount required to restore the related mortgaged property and which
have not been applied to the payment of the mortgage loan, (3) amounts expended but not approved by the primary insurer, (4) claim
payments previously made on the mortgage loan and (5) unpaid premiums and other specific amounts.
Primary Insurance Policy — A primary mortgage guaranty insurance policy.
Primary Insurer — An issuer of a Primary Insurance Policy.
Protected Account — One or more separate accounts established by each servicer servicing the mortgage loans, for the collection
of payments on the related mortgage loans included in the related trust fund.
PTCE — Prohibited Transaction Class Exemption.
Qualified Substitute Mortgage Loan — A mortgage loan substituted for a Deleted Mortgage Loan, meeting the requirements
described under "The Mortgage Pools— Representations by Sellers" in this prospectus.
Rating Agency — A "nationally recognized statistical rating organization" within the meaning of Section 3(a)(41) of the
Exchange Act.
Realized Loss — Any loss on a mortgage loan attributable to the mortgagor's failure to make any payment of principal or
interest as required under the mortgage note.
Record Date — The close of business on the last business day of the month preceding the month in which the applicable
distribution date occurs.
Relief Act — The Servicemembers Civil Relief Act..
REMIC — A real estate mortgage investment conduit as defined in Sections 860A through 860G of the Code.
REMIC Administrator — The trustee, the master servicer or another specified party who administers the related REMIC.
REMIC Certificates — Certificates evidencing interests in a trust fund as to which a REMIC election has been made.
REMIC Provisions — Sections 860A through 860G of the Code.
REMIC Regular Certificate — A REMIC Certificate designated as a "regular interest" in the related REMIC.
REMIC Regular Certificateholder — A holder of a REMIC Regular Certificate.
REMIC Residual Certificate — A REMIC Certificate designated as a "residual interest" in the related REMIC.
REMIC Residual Certificateholder — A holder of a REMIC Residual Certificate.
REMIC Regulations — The REMIC Provisions and the related Treasury regulations.
REO Mortgage Loan — A mortgage loan where title to the related mortgaged property has been obtained by the trustee or to its
nominee on behalf of securityholders of the related series.
RICO — The Racketeer Influenced and Corrupt Organizations statute.
Securities Act — The Securities Act of 1933, as amended.
Seller — The seller of the mortgage loans or mortgage securities included in a trust fund to the depositor with respect a
series of securities, who shall be an Affiliated Seller or an Unaffiliated Seller.
Single Family Property — An attached or detached one-family dwelling unit, two-to four-family dwelling unit, condominium,
townhouse, row house, individual unit in a planned-unit development and other individual dwelling units.
SMMEA — The Secondary Mortgage Market Enhancement Act of 1984.
Special Hazard Amount — The amount of Special Hazard Losses that may be allocated to the credit enhancement of the related
series.
Special Hazard Loss — (1) losses due to direct physical damage to a mortgaged property other than any loss of a type covered by
a hazard insurance policy or a flood insurance policy, if applicable, and (2) losses from partial damage caused by reason of the
application of the co-insurance clauses contained in hazard insurance policies.
Strip Security — A security which will be entitled to (1) principal distributions, with disproportionate, nominal or no
interest distributions or (2) interest distributions, with disproportionate, nominal or no principal distributions.
Tax Favored Plans — Plans that meet the definition of "plan" in Section 4975(e)(1) of the Code, including tax-qualified
retirement plans described in Section 401(a) of the Code and individual retirement accounts and annuities described in Section 408 of
the Code.
TILA — The Federal Truth-in-Lending Act.
Title V — Title V of the Depository Institutions Deregulation and Monetary Control Act of 1980, enacted in March 1980.
Title VIII — Title VIII of the Garn-St Germain Act.
Unaffiliated Sellers — Banks, savings and loan associations, mortgage bankers, mortgage brokers, investment banking firms, the
Resolution Trust Corporation, the FDIC and other mortgage loan originators or sellers not affiliated with the depositor.
United States Person — A citizen or resident of the United States, a corporation or partnership (including an entity treated as
a corporation or partnership for federal income tax purposes) created or organized in, or under the laws of, the United States or any
state thereof or the District of Columbia (except, in the case of a partnership, to the extent provided in regulations),or an estate
whose income is subject to United States federal income tax regardless of its source, or 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. To the extent prescribed in regulations by the Secretary of the Treasury, which have not
yet been issued, a trust which was in existence on August 20, 1996 (other than a trust treated as owned by the grantor under subpart E
of part I of subchapter J of chapter 1 of the Code), and which was treated as a United States person on August 20, 1996 may elect to
continue to be treated as a United States person notwithstanding the previous sentence.
Value — With respect to a mortgaged property securing a single family, multifamily, commercial or mixed-use loan, the lesser of
(x) the appraised value determined in an appraisal obtained at origination of the mortgage loan, if any, or, if the related mortgaged
property has been appraised subsequent to origination, the value determined in the subsequent appraisal and (y) the sales price for the
related mortgaged property (except in circumstances in which there has been a subsequent appraisal). However, in the case of refinanced,
modified or converted single family, multifamily, commercial or mixed-use loans, the "Value" of the related mortgaged property will be
equal to the lesser of (x) the appraised value of the related mortgaged property determined at origination or in an appraisal, if any,
obtained at the time of refinancing, modification or conversion and (y) the sales price of the related mortgaged property or, if the
mortgage loan is not a rate and term refinance mortgage loan and if the mortgaged property was owned for a relatively short period of
time prior to refinancing, modification or conversion, the sum of the sales price of the related mortgaged property plus the added value
of any improvements. With respect to a new Manufactured Home, the "Value" is no greater than the sum of a fixed percentage of the list
price of the unit actually billed by the manufacturer to the dealer (exclusive of freight to the dealer site), including "accessories"
identified in the invoice, plus the actual cost of any accessories purchased from the dealer, a delivery and set-up allowance, depending
on the size of the unit, and the cost of state and local taxes, filing fees and up to three years prepaid hazard insurance premiums.
With respect to a used Manufactured Home, the "Value" is the least of the sale price, the appraised value, and the National Automobile
Dealer's Association book value plus prepaid taxes and hazard insurance premiums. The appraised value of a Manufactured Home is based
upon the age and condition of the manufactured housing unit and the quality and condition of the mobile home park in which it is
situated, if applicable. An appraisal for purposes of determining the Value of a mortgaged property may include an automated valuation.
===========================================================================================================================
$1,831,882,000
(Approximate)
Structured Asset Mortgage Investments II Inc.
Depositor
Bear Stearns Mortgage Funding Trust
Mortgage Pass-Through Certificates,
Series 2006-AR5
Prospectus Supplement
Bear, Stearns & Co. Inc.
Underwriter
You should rely only on the information contained or incorporated by reference in this prospectus supplement and the
accompanying prospectus. We have not authorized anyone to provide you with different information.
We are not offering the offered certificates in any state where offer is not permitted.
Dealers will be required to deliver a prospectus supplement and prospectus when acting as underwriters of the
certificates offered by this prospectus supplement and with respect to their unsold allotments or subscriptions. In
addition, all dealers selling the offered certificates, whether or not participating in this offering, may be required to
deliver a prospectus supplement and prospectus for 90 days after the date of this prospectus supplement, such delivery
obligation generally may be satisfied through the filing of the prospectus supplement and prospectus with the Securities
and Exchange Commission.
===========================================================================================================================
Dates Referenced Herein and Documents Incorporated by Reference
