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Novastar Mortgage Funding Corp, et al. – ‘424B5’ on 9/27/06

On:  Wednesday, 9/27/06, at 10:21am ET   ·   Accession #:  1193125-6-197736   ·   File #s:  333-134461, -01, -04

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 9/27/06  Novastar Mortgage Funding Corp    424B5                  1:4.2M                                   RR Donnelley/FA
          NovaStar Mortgage Funding Trust, Series 2006-5
          NovaStar Certificates Financing Corp

Prospectus   —   Rule 424(b)(5)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Prospectus Supplement                               HTML   3.27M 


Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"Summary
"Description of the Certificates
"Pre-Funding Feature
"Distributions on the Certificates
"Credit Enhancement
"Allocation of Losses
"Removal and Substitution of Mortgage Loans
"Advancing
"Servicing Fee
"Clean-up Call
"Federal Income Tax Consequences
"Calculation of LIBOR
"ERISA Considerations
"Legal Investment
"Ratings
"Risk Factors
"Use of Proceeds
"Description of the Mortgage Pool
"Adjustable Rate Feature of the ARM Loans
"Mortgage Loan Groups
"The Group I Initial Mortgage Loans
"The Group II Initial Mortgage Loans
"Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account
"The Originator
"Underwriting Standards for the Mortgage Loans
"Delinquency and Loss Information for the Initial Mortgage Loans
"Private Mortgage Insurance Policies
"Additional Information
"The Sponsor
"Limitations on Liability
"The Servicer
"Foreclosure and Delinquency Experience with Non-Conforming Mortgage Loans
"Static Pool Information
"NovaStar Financial
"The Depositor
"The Trustee
"General
"Dbntc
"The Custodian
"The Hedge Providers
"Wachovia Bank, National Association
"The Royal Bank of Scotland plc
"Deutsche Bank AG
"Legal Proceedings
"Affiliations
"Payments
"Certificates Supported by Each Group
"Available Funds
"Interest Payments on the Certificates
"Supplemental Interest Trust
"Summary of Interest Rate Hedge Agreements
"Interest Allocations
"Principal Allocations
"Overcollateralization Provisions, Allocation of Losses and Subsequent Recoveries
"Definitions
"Fees and Expenses
"Calculation of One-Month LIBOR
"Advances
"Book-Entry Certificates
"Assignment of Mortgage Loans
"The Paying Agent
"Optional Termination
"Optional Purchase Pledge
"Certain Yield and Prepayment Considerations
"The Pooling and Servicing Agreement
"Servicing and Other Compensation
"Purchase of Delinquent Mortgage Loans
"Servicing Defaults
"Limitation on Suits
"The Custodian and the Trustee
"Material Federal Income Tax Consequences
"REMIC Elections
"Discount and Premium
"Cap Contract
"Other Matters
"Method of Distribution
"Certain Legal Matters
"Annex I Global Clearance, Settlement and Tax Documentation Procedures
"Initial Settlement
"Secondary Market Trading
"Certain U.S. Federal Income Tax Documentation Requirements
"Summary of Prospectus
"The Depositors
"The Sponsor and Servicer
"Description of the Securities
"Payments of Interest
"Payments of Principal
"Final Scheduled Distribution Date
"Optional Redemption, Purchase or Termination
"Mandatory Termination; Auction Sale
"Defeasance
"Weighted Average Life of the Securities
"Form of Securities
"The Trust Funds
"The Mortgage Loans
"Revolving Credit Loans
"The Contracts
"Private Securities
"Accounts
"Collection and Distribution Accounts
"Pre-Funding Account
"Over-Collateralization
"Cross-Collateralization
"Subordination
"Insurance
"Reserve Funds
"Letter Of Credit
"Minimum Principal Payment Agreement
"Deposit Agreement
"Hedge Agreements
"Servicing
"Collection Procedures; Escrow Accounts
"Deposits To And Withdrawals From The Collection Account
"Advances And Limitations Thereon
"Maintenance Of Hazard Insurance Policies
"Realization Upon Defaulted Mortgage Loans
"Enforcement Of Due-On-Sale Clauses
"Servicing Compensation And Payment Of Expenses
"Evidence As To Complance
"Matters Regarding The Servicer
"The Agreements
"Sale and Assignment Of Primary Assets
"Reports To Holders
"Events Of Default; Rights Upon Event Of Default
"Duties Of The Trustee
"Resignation Of Trustee
"Amendment Of Agreement
"Voting Rights
"List Of Holders
"REMIC Administrator
"Termination
"Legal Aspects of Loans
"Mortgage Loans
"Contracts
"Security Interests In The Manufactured Homes
"Enforcement Of Security Interests In Manufactured Homes
"Consumer Protection Laws
"Due-On-Sale
"Applicability Of Usury Laws
"Servicemembers Civil Relief Act
"Grantor Trust Securities
"REMIC Securities
"Taxation Of Beneficial Owners Of REMIC Residual Securities
"Taxes On A REMIC Trust
"Debt Securities
"Partnership Interests
"Backup Withholding
"Foreign Investors
"State Tax Considerations
"Considerations for Benefit Plan Investors
"Available Information
"Incorporation of Documents by Reference
"Plan of Distribution
"Legal Matters
"Financial Information

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  Prospectus Supplement  

Filed Pursuant to Rule 424 (b)(5)

Registration Nos. 333-134461, 333-134461-01 and 333-134461-04

 

Prospectus Supplement

(To the Prospectus dated June 16, 2006)

  

NovaStar Mortgage Funding Trust, Series 2006-5

Issuing Entity

   $1,279,850,000

NovaStar Mortgage, Inc.

Sponsor and Servicer

  

NovaStar Mortgage Funding Corporation

Depositor

  

NovaStar Home Equity Loan Asset-Backed Certificates,

Series 2006-5

The certificates will be backed by a pool of residential, subprime mortgage loans. The pool contains both adjustable-rate mortgage loans and fixed-rate mortgage loans.

 

Consider carefully the risk factors starting on page S-13 of this prospectus supplement and page 5 of the prospectus before making a decision to invest in the certificates.

 

The offered certificates represent beneficial ownership interests in the issuing entity. The offered certificates are not interests in or obligations of the Sponsor, Servicer, the Depositor, any of their affiliates, or any other person.

No governmental agency or instrumentality has insured or guaranteed the offered certificates or the underlying mortgage loans.

  

The Certificates-

 

Interest and principal on each class of certificates is scheduled to be paid monthly on the 25th day of the month or, if such day is not a business day, the next succeeding business day. The first scheduled distribution date is October 25, 2006.

 

Credit Enhancement-

 

The more senior classes of certificates will have the benefit of the subordination of the more subordinated classes.

All classes of Class A and Mezzanine Certificates will be supported by overcollateralization, which is available to absorb losses.

Certain mortgage loans are covered by mortgage insurance policies.

Excess cashflow will be available to absorb losses and maintain or restore overcollateralization.

 

Pre-Funding-

 

The trust fund has a pre-funding feature.

 

     Initial Aggregate
Certificate
Balance
  

Pass-Through

Rate(1)

   Price to
Public
    Underwriting
Discount
    Proceeds to the
Depositor (2)

Class A-1A Certificates

   $ 637,531,000    LIBOR + 0.150%    100.00000 %   0.1985282 %   $ 636,265,321

Class A-2A Certificates

   $ 168,800,000    LIBOR + 0.070%    100.00000 %   0.2000000 %   $ 168,462,400

Class A-2B Certificates

   $ 120,500,000    LIBOR + 0.120%    100.00000 %   0.2050000 %   $ 120,252,975

Class A-2C Certificates

   $ 97,300,000    LIBOR + 0.170%    100.00000 %   0.2050000 %   $ 97,100,535

Class A-2D Certificates

   $ 30,169,000    LIBOR + 0.240%    100.00000 %   0.2100000 %   $ 30,105,645

Class M-1 Certificates

   $ 63,050,000    LIBOR + 0.240%    100.00000 %   0.2300000 %   $ 62,904,985

Class M-2 Certificates

   $ 40,300,000    LIBOR + 0.290%    100.00000 %   0.2500000 %   $ 40,199,250

Class M-3 Certificates

   $ 24,050,000    LIBOR + 0.360%    100.00000 %   0.2750000 %   $ 23,983,863

Class M-4 Certificates

   $ 18,850,000    LIBOR + 0.380%    100.00000 %   0.3000000 %   $ 18,793,450

Class M-5 Certificates

   $ 18,850,000    LIBOR + 0.400%    100.00000 %   0.3250000 %   $ 18,788,738

Class M-6 Certificates

   $ 14,950,000    LIBOR + 0.450%    100.00000 %   0.3500000 %   $ 14,897,675

Class M-7 Certificates

   $ 11,050,000    LIBOR + 0.800%    100.00000 %   0.4250000 %   $ 11,003,038

Class M-8 Certificates

   $ 9,100,000    LIBOR + 1.050%    100.00000 %   0.5000000 %   $ 9,054,500

Class M-9 Certificates

   $ 13,650,000    LIBOR + 1.950%    100.00000 %   0.5389581 %   $ 13,576,432

Class M-10 Certificates(3)

   $ 11,700,000    LIBOR + 2.250%    87.85938 %   N/A       N/A
                    

Total

   $ 1,279,850,000           $ 1,265,388,806
                    

(1) Subject to increase as described herein and subject to an available funds cap rate described herein and a maximum rate of 11% provided, however, that the Class A-1A Certificates are subject to a maximum rate of 10%, and the Class A-2A Certificates are not subject to a maximum rate.
(2) Before deducting expenses, estimated to be $520,000.
(3) The Class M-10 Certificates will not be purchased by the underwriters. They will be transferred to an affiliate of the sponsor and servicer as partial consideration for the sale of the mortgage loans to the depositor.


Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement. Any representation to the contrary is a criminal offense.

Greenwich Capital Markets, Inc., Deutsche Bank Securities Inc. and Wachovia Capital Markets, LLC as underwriters, will offer the underwritten certificates only after the underwritten certificates have been issued, delivered to and accepted by the underwriters. The underwriters have the right to reject any order. We expect to deliver the offered certificates on or about September 28, 2006 through The Depository Trust Company and upon request through Clearstream Banking Luxembourg or the Euroclear System.

 

RBS GREENWICH

CAPITAL

  

DEUTSCHE BANK

SECURITIES

  WACHOVIA SECURITIES

(Joint Lead Managers and Joint Book-Runners)

The date of this Prospectus Supplement is September 22, 2006.


Important notice about the information presented in this

prospectus supplement and the accompanying prospectus

We provide information to you about the offered certificates in two separate documents that progressively provide more detail: (1) the accompanying prospectus, which provides general information, some of which may not apply to your series of certificates, and (2) this prospectus supplement, which describes the specific terms of your series of certificates.

This prospectus supplement does not contain complete information about the offering of the certificates. Additional information is contained in the prospectus. You are urged to read both this prospectus supplement and the prospectus in full. We cannot sell the offered certificates to you unless you have received both this prospectus supplement and the accompanying prospectus.

The prospectus contemplates several different types of securities, some of which are not relevant to this offering. You should rely on the information in this prospectus supplement with respect to the certificates offered hereby.

The depositor has filed with the Securities and Exchange Commission a registration statement (Registration No. 333-134461) under the Securities Act of 1933, as amended, with respect to the certificates offered pursuant to this prospectus supplement. This prospectus supplement and the accompanying prospectus, which form a part of the registration statement, omit certain information contained in such registration statement pursuant to the rules and regulations of the Commission. You may inspect and copy the registration statement at the Public Reference Room at the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. and at the Commission’s regional offices at 233 Broadway, New York, New York, 10279 and Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Please call the Commission at 1-800-SEC-0330 for further information on the Public Reference Rooms. In addition, the Commission maintains a site on the World Wide Web containing reports, proxy materials, information statements and other items. The address is http://www.sec.gov.

We include cross-references in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The following table of contents and the table of contents included in the accompanying prospectus provide the pages on which these captions are located.

 

i


TABLE OF CONTENTS

 

Summary

   S-1

Description of the Certificates

   S-1

Pre-Funding Feature

   S-4

Distributions on the Certificates

   S-5

Credit Enhancement

   S-8

Allocation of Losses

   S-9

Removal and Substitution of Mortgage Loans

   S-10

Advancing

   S-10

Servicing Fee

   S-10

Clean-up Call

   S-10

Federal Income Tax Consequences

   S-10

Calculation of LIBOR

   S-11

ERISA Considerations

   S-11

Legal Investment

   S-11

Ratings

   S-11

Risk Factors

   S-12

Use of Proceeds

   S-21

Description of the Mortgage Pool

   S-21

Adjustable Rate Feature of the ARM Loans

   S-41

Mortgage Loan Groups

   S-41

The Group I Initial Mortgage Loans

   S-41

The Group II Initial Mortgage Loans

   S-58

Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account

   S-73

The Originator

   S-74

Underwriting Standards for the Mortgage Loans

   S-74

Delinquency and Loss Information for the Initial Mortgage Loans

   S-78

Private Mortgage Insurance Policies

   S-79

Additional Information

   S-83

The Sponsor

   S-83

Limitations on Liability

   S-84

The Servicer

   S-84

Foreclosure and Delinquency Experience with Non-Conforming Mortgage Loans

   S-85

Static Pool Information

   S-86

NovaStar Financial

   S-86

The Depositor

   S-86

The Trustee

   S-87

General

   S-87

DBNTC

   S-87

The Custodian

   S-88

The Hedge Providers

   S-88

Wachovia Bank, National Association

   S-88

The Royal Bank of Scotland plc

   S-88

Deutsche Bank AG

   S-88

Legal Proceedings

   S-89

Affiliations

   S-89

Description of the Certificates

   S-90

General

   S-90

Payments

   S-91

Certificates Supported by Each Group

   S-91

 

ii


Available Funds

   S-92

Interest Payments on the Certificates

   S-92

Supplemental Interest Trust

   S-94

Summary of Interest Rate Hedge Agreements

   S-95

Interest Allocations

   S-97

Principal Allocations

   S-99

Credit Enhancement

   S-103

Overcollateralization Provisions, Allocation of Losses and Subsequent Recoveries

   S-103

Definitions

   S-105

Fees and Expenses

   S-115

Calculation of One-Month LIBOR

   S-116

Advances

   S-116

Book-Entry Certificates

   S-117

Assignment of Mortgage Loans

   S-121

The Paying Agent

   S-122

Optional Termination

   S-122

Optional Purchase Pledge

   S-122

Certain Yield and Prepayment Considerations

   S-123

The Pooling and Servicing Agreement

   S-146

Servicing and Other Compensation

   S-146

Purchase of Delinquent Mortgage Loans

   S-146

Servicing Defaults

   S-146

Limitation on Suits

   S-148

The Custodian and the Trustee

   S-148

Material Federal Income Tax Consequences

   S-149

REMIC Elections

   S-149

Discount and Premium

   S-150

Cap Contract

   S-150

Other Matters

   S-152

ERISA Considerations

   S-152

Method of Distribution

   S-154

Certain Legal Matters

   S-157

Ratings

   S-157

Legal Investment

   S-158

Annex I Global Clearance, Settlement and Tax Documentation Procedures

   S-159

Initial Settlement

   S-159

Secondary Market Trading

   S-159

Certain U.S. Federal Income Tax Documentation Requirements

   S-161

 

iii


Flow of Funds Diagram – REMIC Trust (Interest)

LOGO

 

iv


Flow of Funds Diagram – REMIC Trust (Principal)

LOGO

 

v


Flow of Funds Diagram – Supplemental Interest

LOGO

 

vi


Summary

This summary highlights selected information from this prospectus supplement and does not contain all of the information that you need to consider in making your investment decision. To understand all of the terms of the offering of the certificates, read carefully this entire prospectus supplement and the accompanying prospectus.

This summary provides an overview of certain calculations, cash flow priorities and other information to aid your understanding and is qualified by the full description of these calculations, cash flow priorities and other information in this prospectus supplement and the accompanying prospectus.

Issuing Entity

NovaStar Mortgage Funding Trust, Series 2006-5.

Sponsor, Originator and Servicer

NovaStar Mortgage, Inc., a Virginia corporation.

Depositor

NovaStar Mortgage Funding Corporation, a Delaware corporation.

Trustee and Successor Servicer

Deutsche Bank National Trust Company, a national banking association organized under the laws of the United States.

Custodian

U.S. Bank National Association.

NovaStar Financial, Inc.

NovaStar Financial, Inc., a Maryland corporation.

Hedge Providers

Deutsche Bank AG, The Royal Bank of Scotland plc and Wachovia Bank, National Association.

Mortgage Insurance Providers

Mortgage Guaranty Insurance Corporation PMI Mortgage Insurance Co. Radian Guaranty, Inc.

Closing Date

On or about September 28, 2006.

Description of the Certificates

The issuing entity will issue Home Equity Loan Asset-Backed Certificates, Series 2006-5, in seventeen classes of Class A and Mezzanine Certificates: five classes of senior Class A Certificates, Class A-1A, Class A-2A, Class A-2B, Class A-2C and Class A-2D; and twelve classes of subordinated, Mezzanine Certificates, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9, Class M-10, Class M-11 and Class M-12. The Class A Certificates are senior to the Mezzanine Certificates. The Mezzanine Certificates with lower numerical class designations are senior to those Mezzanine Certificates with higher numerical class designations. The initial certificate balance of each class of offered certificates is shown on the front cover (subject to a variance of 10%).

The Class A, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8, Class M-9 and Class M-10 Certificates are collectively referred to herein as the “offered certificates”. Only the offered certificates are being offered by this prospectus supplement and the accompanying prospectus. The Class M-10 Certificates are not being purchased by the underwriters. The Class A, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8 and Class M-9 Certificates are collectively referred to herein as the “underwritten certificates.” The Class A-1A Certificates are referred to herein as the “Group I Certificates” and the Class A-2A, Class A-2B, Class A-2C and Class A-2D Certificates are referred to herein as the “Group II Certificates.”

 

S-1


The issuing entity will also issue six other classes of certificates which are not being offered by this prospectus supplement, including (a) a senior interest-only class of certificates, Class I (that is senior to the Class A and Mezzanine Certificates), (b) two mezzanine classes of certificates, the Class M-11 and Class M-12 Certificates, (c) two subordinated classes of certificates, Class CA and Class CB (together the “Class C Certificates”), which (i) entitle the holder to receive payments from excess cashflow, (ii) entitle the holder to receive all collected prepayment penalties and (iii) represent the overcollateralization amount and (d) a REMIC residual interest.

The Issuing Entity

The certificates will represent ownership interests in the issuing entity, which will consist primarily of:

 

  a pool of subprime mortgage loans consisting of two groups — a group of residential first-lien and second-lien, fixed and adjustable rate mortgage loans designated as Group I (which is comprised entirely of conforming balance mortgage loans) and a group of residential first-lien and second-lien, fixed and adjustable rate mortgage loans designated as Group II (which is comprised of non-conforming balance mortgage loans);

 

  a security interest in the properties securing the mortgage loans;

 

  collections on the mortgage loans;

 

  certain hedge agreements (which agreements are not part of any REMIC), as described herein;

 

  money on deposit in a pre-funding account which will be used to purchase subsequent mortgage loans for inclusion in the pool;

 

  money on deposit in any interest coverage account which may be established to fund shortfalls in collections of interest due to the pre-funding feature; and

 

  certain lender paid mortgage insurance policies and related proceeds.

The Mortgage Loans

The initial mortgage loans will consist of 4,526 loans, with an aggregate principal balance of $748,606,624. The Group I initial mortgage loans will consist of 3,066 loans, with an aggregate principal balance of $453,094,304. The Group II initial mortgage loans will consist of 1,460 loans with an aggregate principal balance of $295,512,320.

The initial mortgage loans have the following approximate characteristics as of the cut-off date:

Adjustable-rate mortgage loans: 81.02%

Fixed-rate mortgage loans: 18.98%

Interest only mortgage loans: 12.11%

Second lien mortgage loans: 4.68%

Range of mortgage rates: 5.990% to 13.700%

Weighted average mortgage rate: 9.363%

Range of gross margins of the adjustable-rate mortgage loans: 3.450% to 8.000%

Weighted average gross margin of the adjustable-rate mortgage loans: 5.811%

Range of minimum mortgage rates of the adjustable-rate mortgage loans: 5.800% to 13.700%

Weighted average minimum mortgage rate of the adjustable-rate mortgage loans: 9.300%

Range of maximum mortgage rates of the adjustable-rate mortgage loans: 12.850% to 20.700%

 

S-2


Weighted average maximum mortgage rate of the adjustable-rate mortgage loans: 16.300%

Weighted average next adjustment date of the adjustable-rate mortgage loans: August 2008

Weighted average remaining term to stated maturity: 350 months

Range of principal balances as of the cut-off date: $14,600 to $1,500,000

Average principal balance as of the cut-off date: $165,401

Range of original loan- to-value ratios(1): 10.53% to 100.00%

Weighted average original loan-to-value ratio(1): 83.01%

Geographic concentrations in excess of 5%:

 

Florida

   23.35 %

California

   10.62 %

Maryland

   6.45 %

(1) As used in this prospectus supplement, the loan-to-value ratio for any second lien mortgage loan will mean the combined loan-to-value ratio.

The initial Group I Mortgage Loans have an aggregate principal balance of approximately $453,094,304 as of the cut-off date and have the following approximate characteristics as of the cut-off date:

Adjustable-rate Group I Mortgage Loans: 77.73%

Fixed-rate Group I Mortgage Loans: 22.27%

Interest-only Group I Mortgage Loans: 8.63%

Second lien Group I Mortgage Loans: 1.88%

Range of mortgage rates: 6.300% to 13.100%

Weighted average mortgage rate: 9.328%

Range of gross margins of the adjustable-rate Group I Mortgage Loans: 3.450% to 8.000%

Weighted average gross margin of the adjustable-rate Group I Mortgage Loans: 5.927%

Range of minimum mortgage rates of the adjustable-rate Group I Mortgage Loans: 6.300% to 13.100%

Weighted average minimum mortgage rate of the adjustable-rate Group I Mortgage Loans: 9.367%

Range of maximum mortgage rates of the adjustable-rate Group I Mortgage Loans: 13.300% to 20.100%

Weighted average maximum mortgage rate of the adjustable-rate Group I Mortgage Loans: 16.367%

Weighted average next adjustment date of the adjustable-rate Group I Mortgage Loans: August 2008

Weighted average remaining term to stated maturity: 355 months

Range of principal balances as of the cut-off date: $14,980 to $519,701

Average principal balance as of the cut-off date: $147,780

Range of original loan- to-value ratios(1): 10.53% to 100.00%

Weighted average original loan-to-value ratio(1): 81.24%

Geographic concentrations in excess of 5%:

 

Florida

   21.93 %

California

   7.11 %

Maryland

   6.14 %

(1) As used in this prospectus supplement, the loan-to-value ratio for any second lien mortgage loan will mean the combined loan-to-value ratio.

 

S-3


The initial Group II Mortgage Loans have an aggregate principal balance of approximately $295,512,320 as of the cut-off date and have the following approximate characteristics as of the cut-off date:

Adjustable-rate Group II Mortgage Loans: 86.05%

Fixed-rate Group II Mortgage Loans: 13.95%

Interest-only Group II Mortgage Loans: 17.44%

Second lien Group II Mortgage Loans: 8.98%

Range of mortgage rates: 5.990% to 13.700%

Weighted average mortgage rate: 9.417%

Range of gross margins of the adjustable-rate Group II Mortgage Loans: 4.250% to 7.990%

Weighted average gross margin of the adjustable-rate Group II Mortgage Loans: 5.650%

Range of minimum mortgage rates of the adjustable-rate Group II Mortgage Loans: 5.800% to 13.700%

Weighted average minimum mortgage rate of the adjustable-rate Group II Mortgage Loans: 9.207%

Range of maximum mortgage rates of the adjustable-rate Group II Mortgage Loans: 12.850% to 20.700%

Weighted average maximum mortgage rate of the adjustable-rate Group II Mortgage Loans: 16.207%

Weighted average next adjustment date of the adjustable-rate Group II Mortgage Loans: August 2008

Weighted average remaining term to stated maturity: 343 months

Range of principal balances as of the cut-off date: $14,600 to $1,500,000

Average principal balance as of the cut-off date: $202,406

Range of original loan- to-value ratios(1): 39.02% to 100.00%

Weighted average original loan-to-value ratio(1): 85.71%

Geographic concentrations in excess of 5%:

 

Florida

   25.54 %

California

   16.00 %

Maryland

   6.91 %

New York

   5.03 %

Texas

   5.01 %

(1) As used in this prospectus supplement, the loan-to-value ratio for any second lien mortgage loan will mean the combined loan-to-value ratio.

For additional information on the Mortgage Loans, see “Description of the Mortgage Pool” in this prospectus supplement.

Pre-Funding Feature

On the closing date, the depositor will deposit approximately $551,393,376 into a pre-funding account which will be used from time to time before the end of the pre-funding period to acquire subsequent mortgage loans to include in the mortgage pool, approximately $333,010,003 of which will be used to acquire subsequent mortgage loans for Group I and approximately $218,383,373 of which will be used to acquire subsequent mortgage loans for Group II.

 

S-4


The pre-funding period commences on the closing date and ends on the earlier of (i) the date on which the amount on deposit in the pre-funding account is less than $10,000 and (ii) October 31, 2006.

Purchases of subsequent mortgage loans are subject to the same criteria as the initial mortgage loans and additional restrictions related to the composition of the related loan group following the acquisition of the subsequent mortgage loans, as described in this prospectus supplement.

To the extent that the issuing entity does not fully use amounts on deposit in the pre-funding account to purchase subsequent mortgage loans by the end of the pre-funding period, the issuing entity will apply the remaining amounts as a prepayment of principal to the related classes of certificates on the payment date immediately following the end of the pre-funding period. Although no assurance is possible, we do not anticipate that a material amount of principal will be prepaid on the notes from amounts in the pre-funding account.

If required by the rating agencies, a interest coverage account will be established and funded on the closing date. Funds so deposited will be used to cover shortfalls in collections of interest due to the pre-funding feature.

Final Scheduled Distribution Date

The final scheduled distribution date for all the certificates is the distribution date in November 2036.

We anticipate that the actual final payment on each class will occur significantly earlier than the indicated date.

Book-Entry Format

The Class A and Mezzanine Certificates will be issued, maintained and transferred on the book-entry records of The Depository Trust Company. The offered certificates will be offered in registered form, in minimum denominations of $25,000 and integral multiples of $1,000 in excess thereof, with a minimum investment of $100,000.

Distributions on the Certificates

Distribution Dates

Payments on the certificates will be made on the 25th day of each month or, if that day is not a business day, on the next business day, commencing on October 25, 2006.

Record Dates

The trustee will make payments to the certificateholders of record as of the related record date. The record date for a distribution date (i) for certificates in book-entry form is the close of business on the last business day prior to that distribution date and (ii) for certificates in definitive form is the close of business on the last business day of the month immediately preceding that distributions date.

Distribution priorities

On each distribution date, the available funds representing interest collections on the mortgage pool remaining after paying the administrative fees will be distributed to pay interest on the certificates, up to their required amount, in the following order:

 

  first, the available funds representing interest from both Groups of mortgage loans to the Class I Certificates,

 

  second, concurrently, with equal priority in payment, (i) the remaining available funds representing interest from the Group I mortgage loans to the Group I Certificates and (ii) the remaining available funds representing interest from the Group II mortgage loans to the Group II Certificates,

 

  third, from the remaining available funds representing interest from one group of mortgage loans to the class(es) of Class A Certificates related to the other group of mortgage loans, to the extent necessary to distribute any interest entitlement remaining undistributed, and

 

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  fourth, the remaining available funds representing interest from the Group I and Group II mortgage loans sequentially to the classes of Mezzanine Certificates according to numerical class designation.

Interest distributable to each group of certificates will be paid pro-rata among the classes of certificates in each group, based on their respective interest entitlements for the related date.

On each distribution date, the available funds representing principal collections on the Group I and Group II mortgage loans, including any amounts required to be funded from excess cashflow to the extent necessary to maintain or restore the overcollateralization amount to the required overcollateralization amount, will be distributed to pay principal on the certificates, up to their required amounts, in the following order:

 

  first, the available funds representing principal and excess cashflow from the Group I mortgage loans, to the Class A-1A Certificates until retired;

 

  second, the available funds representing principal and excess cashflow from the Group II mortgage loans, to the Class A-2A Certificates, until retired, then to the Class A-2B Certificates, until retired, then to the Class A-2C Certificates, until retired, and then to the Class A-2D Certificates, until retired (however, if all of the Mezzanine Certificates are reduced or written down to zero, the related share of principal and excess cashflow from the Group II mortgage loans will be distributed to the Group II Certificates pro rata, based on certificate principal balance until their certificate principal balances are paid to zero); and

 

  third, the remaining available funds representing principal and excess cashflow from the Group I and Group II mortgage loans to the Mezzanine Certificates according to numerical class designation, until retired.

In the event that available funds from one group of mortgage loans are insufficient to make a required payment of principal to its related Class A Certificates, then any available funds representing principal and excess cashflow from the other group remaining after payment of principal to its related Class A Certificateholders may be used for such required payment to the extent described in this prospectus supplement.

We refer you to “Description of the Certificates” herein for additional information.

Interest

Interest on the certificates will accrue at the applicable pass-through rate for that class of certificates during the related accrual period. For each distribution date, the accrual period will run from the prior distribution date to and including the day preceding the applicable distribution date, except that for the first distribution date, interest begins to accrue on the closing date.

Interest will be calculated on the basis of the actual number of days elapsed in the accrual period and a year consisting of 360 days.

Pass-Through Rates

The pass-through rate for each class of Class A and Mezzanine Certificates and any distribution date is the lesser of: (1) the formula rate for that class and distribution date and (2) the available funds cap rate for that class and distribution date.

The formula rate for each class of Class A and Mezzanine Certificates is the lesser of (1) the LIBOR Rate and (2) the applicable Maximum Rate, if any. The “Maximum Rate” for the Class A-1A Certificates is 10% and for the Class A-2B, Class A-2C, Class A-2D Certificates and the Mezzanine Certificates is 11%. There is no Maximum Rate for the Class A-2A Certificates.

 

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The LIBOR Rate for each class of certificates is as follows:

 

Class

  

LIBOR Rate

Class A-1A Certificates

   LIBOR plus 0.150%

Class A-2A Certificates

   LIBOR plus 0.070%

Class A-2B Certificates

   LIBOR plus 0.120%

Class A-2C Certificates

   LIBOR plus 0.170%

Class A-2D Certificates

   LIBOR plus 0.240%

Class M-1 Certificates

   LIBOR plus 0.240%

Class M-2 Certificates

   LIBOR plus 0.290%

Class M-3 Certificates

   LIBOR plus 0.360%

Class M-4 Certificates

   LIBOR plus 0.380%

Class M-5 Certificates

   LIBOR plus 0.400%

Class M-6 Certificates

   LIBOR plus 0.450%

Class M-7 Certificates

   LIBOR plus 0.800%

Class M-8 Certificates

   LIBOR plus 1.050%

Class M-9 Certificates

   LIBOR plus 1.950%

Class M-10 Certificates

   LIBOR plus 2.250%

Class M-11 Certificates

   LIBOR plus 2.250%

Class M-12 Certificates

   LIBOR plus 2.250%

If the certificates remain outstanding after the first distribution date on which the clean-up call could be exercised, which is the distribution date on which the aggregate principal balance of the mortgage loans is equal to or less than 10% of the sum of the aggregate principal balance of the initial mortgage loans as of the cut-off date, plus the original pre-funding amount, then the LIBOR Rate on each class of certificates will increase to the following rates:

 

Class

  

LIBOR Rate After Step Up

Class A-1A Certificates

   LIBOR plus 0.300%

Class A-2A Certificates

   LIBOR plus 0.140%

Class A-2B Certificates

   LIBOR plus 0.240%

Class A-2C Certificates

   LIBOR plus 0.340%

Class A-2D Certificates

   LIBOR plus 0.480%

Class M-1 Certificates

   LIBOR plus 0.360%

Class M-2 Certificates

   LIBOR plus 0.435%

Class M-3 Certificates

   LIBOR plus 0.540%

Class M-4 Certificates

   LIBOR plus 0.570%

Class M-5 Certificates

   LIBOR plus 0.600%

Class M-6 Certificates

   LIBOR plus 0.675%

Class M-7 Certificates

   LIBOR plus 1.200%

Class M-8 Certificates

   LIBOR plus 1.575%

Class M-9 Certificates

   LIBOR plus 2.925%

Class M-10 Certificates

   LIBOR plus 3.375%

Class M-11 Certificates

   LIBOR plus 3.375%

Class M-12 Certificates

   LIBOR plus 3.375%

Principal

On each distribution date, the certificateholders are scheduled to receive their share of an amount of principal generally equal to the sum of:

 

  the scheduled principal on the mortgage loans collected or advanced during the related due period;

 

  unscheduled principal on the mortgage loans collected during the prior prepayment period; and

 

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  excess interest to the extent necessary to maintain or restore the overcollateralization amount to the required overcollateralization amount.

The Mezzanine Certificates are unlikely to receive any principal payments until, at the earliest, the distribution date occurring in October 2009 (unless the aggregate principal balance of the Class A Certificates has been reduced to zero).

After the crossover date, principal will be distributed to the certificateholders of each class in accordance with a distribution priority which is designed to maintain a specified level of support below each class. This support consists of the certificates that are more subordinated to that class, overcollateralization, which is subordinated to all classes of Class A and Mezzanine Certificates, and excess interest from the mortgage loans.

Credit Enhancement

The credit enhancement provided to the holders of the Class A and Mezzanine Certificates will consist of subordination, overcollateralization, excess cashflow, mortgage insurance and limited cross-collateralization.

Subordination

The rights of the holders of the Class A Certificates to receive distributions are subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Class I Certificates.

The rights of the holders of the Mezzanine Certificates to receive distributions will be subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Class I Certificates and the Class A Certificates.

The rights of the holders of the Mezzanine Certificates with higher numerical class designations to receive distributions will be subordinated, to the extent described in this prospectus supplement, to the rights of the holders of the Mezzanine Certificates with lower numerical class designations.

Subordination is intended to enhance the likelihood of regular distributions on the more senior certificates and to afford those certificates protection against losses.

Overcollateralization

The issuing entity will have an initial level of overcollateralization of approximately 0.55% of the sum of (i) the aggregate principal balance of the initial mortgage loans as of the cut-off date and (ii) the original pre-funding amount. On any distribution date after the closing date, the issuing entity is required to maintain or restore overcollateralization to the required level as described herein.

The overcollateralization is available for the benefit of all classes of Class A, Mezzanine and Class I Certificates.

Excess Cashflow

Excess cashflow (which includes excess interest from the mortgage loans) will be paid as follows:

(i) to the holders of the class or classes of Class A and Mezzanine Certificates then entitled to receive distributions in respect of principal, in an amount equal to any Extra Principal Distribution Amount, distributable to such holders in the same order of priority as the Group I Principal Distribution Amount and the Group II Principal Distribution Amount as described under “Description of the Certificates—Principal Allocations” herein;

(ii) to the supplemental interest trust to be distributed as described under “Description of the Certificates — Supplemental Interest Trust” herein; and

(iii) any remaining amounts to the holders of the residual certificates, as provided in the pooling and servicing agreement.

 

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Mortgage Insurance

Approximately 55.47% of the initial mortgage loans by cut-off date principal balance are covered by a mortgage insurance policy issued by Mortgage Guaranty Insurance Corporation (“MGIC”) and approximately 0.10% of the initial mortgage loans by cut-off date principal balance are covered by a mortgage insurance policy issued by PMI Mortgage Insurance Co. (“PMI”). The sponsor expects that certain of the subsequent mortgage loans may also be covered by a mortgage insurance policy issued by Radian Guaranty Inc. (“Radian”). Approximately 39.68% of the initial mortgage loans by cut-off date principal balance have a combined original loan-to-value ratio in excess of 60% and are not insured. Additionally, approximately 4.75% of the initial mortgage loans by cut-off date principal balance have a combined original loan-to-value ratio less than or equal to 60% and are not insured.

The mortgage insurance policies provided by MGIC, PMI and Radian insure a portion of the loss on the related mortgage loan to a level where the uninsured exposure of the mortgage loan is reduced to an amount equal to 55%, 51% and 50%, respectively, of the original loan-to-value ratio of such mortgage loan, as more fully described in the related mortgage insurance policy.

Limited Cross-Collateralization

The mortgage loans have been divided into two subpools, designated as the “Group I mortgage loans” and the “Group II mortgage loans.” The Group I mortgage loans primarily support the Group I Certificates. The Group II mortgage loans primarily support the Group II Certificates. Distributions of collections from both groups of mortgage loans will be used to pay interest and principal to the Mezzanine Certificates, the Class I Certificates and the Class C Certificates. To the extent that available funds representing interest from one group of mortgage loans are insufficient to make a required payment of interest to its related Class A Certificates, then any remaining available funds representing interest from the other group, after payment of interest to its related Class A Certificates, may be used to make such required payment as described in this prospectus supplement. Likewise, remaining funds representing principal from a group after making the required distribution of principal to its related Class A Certificates may be used to make required principal distributions on the other classes of Class A Certificates as described in this prospectus supplement.

Interest Rate Hedge Agreements

By the end of the pre-funding period, the supplemental interest trust will enter into twelve interest rate cap agreements with the Hedge Providers. Under each interest rate cap agreement, on each distribution date after the supplemental interest trust has entered into that interest rate cap agreement until that interest rate cap agreement is retired, the supplemental interest trust will make a payment equal to a fixed rate on a notional amount to the hedge provider, and the supplemental interest trust will receive a payment from the hedge provider equal to the product of (a) the excess, if any, of one-month LIBOR over the related strike price, (b) the actual number of days elapsed in the related accrual period divided by 360 and (c) the applicable notional amount.

On each distribution date amounts received by the supplemental interest trust in respect of the interest rate hedge agreements will be available to restore the overcollateralization to the required level and to pay any available funds cap shortfall.

See “Description of the Certificates – Summary of Interest Rate Hedge Agreements” in this prospectus supplement.

Allocation of Losses

All realized losses on the mortgage loans will be allocated on each distribution date, sequentially as follows: first to the excess cash flow, second in reduction of the overcollateralization amount and third to the reduction of the principal balance of the classes of Mezzanine Certificates, in inverse order of priority.

 

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See “Risk Factors—Potential inadequacy of credit enhancement” and “Description of the Certificates” in this prospectus supplement.

Removal and Substitution of Mortgage Loans

Upon the earlier of discovery or receipt of notice by the depositor of a breach of any of the representations and warranties contained in the mortgage loan purchase agreement which materially and adversely affects the value of the related mortgage loan or the interests of the certificateholders, the sponsor will have a period of sixty days to effect a cure. If the breach is not cured within the sixty-day period, the sponsor will, either (a) substitute for such mortgage loan a Qualified Substitute Mortgage Loan or (b) purchase such mortgage loan from the issuing entity. See “Description of the Certificates— Assignment of Mortgage Loans” in this prospectus supplement.

The custodian on behalf of the trustee shall review each mortgage loan file and if during the process of reviewing the mortgage files, finds any document constituting a part of a mortgage file which is not executed, has not been received, is unrelated to the mortgage loan, or does not conform to the requirements in the pooling and servicing agreement, the custodian will promptly so notify the sponsor and the trustee in writing with details thereof. If, within 45 days after the custodian’s notice of such defect, the sponsor has not caused the defect to be remedied and the defect materially and adversely affects the value of the related mortgage loan or the interest of the certificateholders in the related mortgage loan, the sponsor will either (a) substitute such mortgage loan with a qualified substitute mortgage loan or (b) purchase such mortgage loan from the issuing entity. See “Description of the Certificates—Assignment of Mortgage Loans” in this prospectus supplement.

Advancing

The servicer will be required to advance amounts representing delinquent payments of scheduled principal and interest, other than balloon payments, as well as expenses to preserve and to protect the value of collateral, in each case to the extent considered recoverable. Reimbursement of these advances is senior to payments to the certificateholders.

Servicing Fee

The servicer will receive a servicing fee on each distribution date in an amount equal to interest at the servicing fee rate for a mortgage loan on the outstanding principal balance of that mortgage loan. The servicing fee rate with respect to each mortgage loan will be 0.50% per annum. The servicing fee will be paid out of available funds on each distribution date prior to any payments on the certificates.

Clean-up Call

The servicer or its designee has a clean-up call option which, if exercised, would result in early retirement of the certificates on any distribution date on or after the date on which the aggregate principal balance of the mortgage loans has declined to 10% or less of the sum of (i) the aggregate principal balance of the initial mortgage loans as of the cut-off date and (ii) the original pre-funding amount. See “Description of the Certificates—Optional Purchase Pledge” in this prospectus supplement.

Federal Income Tax Consequences

Elections will be made to treat certain portions of the issuing entity as one or more REMICs for federal income tax purposes. The Class A and Mezzanine Certificates represent ownership of “regular interests” in a REMIC, along with certain contractual rights and obligations as described herein. Certificateholders will be required to include interest on the certificates in income in accordance with an accrual method of accounting.

 

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Calculation of LIBOR

The London interbank offered rate (“LIBOR”) with respect to any distribution date will be determined by the trustee (provided that, in the case of each interest rate hedge agreement, it will be determined by the applicable Hedge Provider) and will equal the posted rate for United States dollar deposits for one month that appeared on Telerate Page 3750 as of 11:00 a.m., London time, on the second LIBOR Business Day prior to the immediately preceding distribution date (or, in the case of the first distribution date, the second LIBOR business day preceding the closing date). If no such posted rate appears, LIBOR will be determined on the basis of the offered quotation of the reference banks (which shall be four major banks that are engaged in transactions in the London interbank market) identified in the pooling and servicing agreement for United States dollar deposits for one month to prime banks in the London interbank market as of 11:00 a.m., London time, on such date. See “Description of the Certificates–Calculation of One-Month LIBOR” in this prospectus supplement.

ERISA Considerations

After the end of the pre-funding period, the underwritten certificates may be purchased by ERISA plans provided that certain conditions are satisfied. A fiduciary of any ERISA plan that is considering a purchase of underwritten certificates should, among other things, consult with experienced legal counsel in determining whether all required conditions for purchase have been satisfied.

Legal Investment

The Class A and Mezzanine Certificates will not constitute “mortgage related securities” for purposes of SMMEA. Institutions 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.

Ratings

The offered certificates must receive at least the following ratings from Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. and Moody’s Investors Service, Inc. in order to be issued:

 

Class

 

Ratings

   

S&P

 

Moody’s

A-1A   AAA   Aaa
A-2A   AAA   Aaa
A-2B   AAA   Aaa
A-2C   AAA   Aaa
A-2D   AAA   Aaa
M-1   AA+   Aa1
M-2   AA   Aa2
M-3   AA   Aa3
M-4   AA-   A1
M-5   A+   A2
M-6   A   A3
M-7   A-     Baa1
M-8   BBB+   Baa2
M-9   BBB   Baa3
M-10   BBB-   NR
M-11   BB+   NR
M-12   BB   NR

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 agency. A security rating does not address the frequency of principal prepayments or the collection thereof, the corresponding effect on yield to investors or the payment of any shortfall resulting from the application of the available funds cap rate.

 

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Risk Factors

Prospective investors should consider, among other things, the items discussed under “Risk Factors” in the prospectus and the following factors in connection with the purchase of the offered certificates:

Most of the loans in the mortgage pool were underwritten to non-conforming standards and may experience higher delinquency and loss rates

The underwriting standards for the mortgage loans are described under Description of the Mortgage Pool—Underwriting Standards for the Mortgage Loans,” and are primarily intended to provide single family mortgage loans for non-conforming credits which do not satisfy the requirements of typical “A” credit borrowers. A “non-conforming credit” means a borrower whose mortgage loan would be ineligible for direct purchase by Fannie Mae due to credit characteristics that do not meet the Fannie Mae underwriting guidelines, for reasons such as creditworthiness and repayment ability. These mortgagors may have a record of credit write-offs, outstanding judgments, prior bankruptcies and other negative credit items. Accordingly, mortgage loans underwritten to non-conforming credit underwriting standards or to standards that do not meet the requirements for typical “A” credit borrowers 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 underwriting guidelines or to typical “A” credit borrowers.

The mortgage pool contains high original loan-to-value loans which could cause losses to holders of the Class A and Mezzanine Certificates

Approximately 57.54% of the Group I initial mortgage loans and approximately 52.54% of the Group II initial mortgage loans (in each case, by aggregate principal balance of the related loan group as of the cut-off date), respectively, with an original loan-to-value ratio in excess of 60% will be covered by a lender-paid mortgage insurance policy (references to loan-to-value ratios in this prospectus supplement are references to combined loan-to-value ratios with respect to second-lien mortgage loans).

Approximately 50.49% and 49.41% of the Group I initial mortgage loans and Group II initial mortgage loans (in each case, by aggregate principal balance of the related loan group as of the cut-off date), respectively, have original loan-to-value ratios in excess of 80%. Mortgage loans with a loan-to-value ratio in excess of 80% will be affected to a greater extent than mortgage loans with a loan-to-value ratio equal to or less than 80% by any decline in the value of the related property securing such mortgage loans. We can give no assurance 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 such that the outstanding balances of the mortgage loans, and any secondary financing on the mortgaged properties, 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.

Potential inadequacy of credit enhancement

The overcollateralization, subordination, limited cross-collateralization, loss allocation, excess cashflow and primary mortgage insurance features described in this prospectus supplement are intended to enhance the likelihood that the certificateholders will receive regular payments of interest and principal, but such credit enhancements are limited in nature and may be insufficient to cover all losses on the mortgage loans. The credit enhancement includes the subordination of excess interest to payments of interest and principal on the Class I Certificates, Class A Certificates and Mezzanine Certificates.

 

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Further, while excess interest, if any, will be available to maintain or restore overcollateralization, there may not be sufficient funds available to make the required distribution of interest on the certificates. Such a shortfall would reduce the interest distributed to the Class M-12, Class M-11, Class M-10, Class M-9, Class M-8, Class M-7, Class M-6, Class M-5, Class M-4, Class M-3, Class M-2, Class M-1, Class A Certificates, concurrently, and the Class I Certificates, in that order.

Although primary mortgage insurance policies have been acquired on behalf of the issuing entity from the mortgage insurance providers, such coverage will provide only limited protection against losses on defaulted covered mortgage loans. Unlike a financial guaranty policy, coverage under the mortgage insurance policies is subject to certain limitations and exclusions including, for example, losses resulting from fraud and physical damage to the mortgaged property and to certain conditions precedent to payment, such as notices and reports. As a result, coverage may be denied or limited on covered mortgage loans. In addition, since the amount of coverage depends on the loan-to-value ratio at the time of origination of the covered mortgage loan, a decline in the value of a mortgaged property will not result in increased coverage, and the issuing entity may still suffer a loss on a covered mortgage loan. The mortgage insurance providers also may affect the timing and conduct of foreclosure proceedings and other servicing decisions regarding defaulted mortgage loans covered by the policy.

Pledge of servicing rights

The servicing rights with respect to the mortgage loans may be pledged by the servicer to a third-party unrelated to the servicer. The pledgee of the servicing rights has the right, at its discretion, to transfer servicing responsibilities to another entity upon the occurrence of a servicer event of default under the pooling and servicing agreement, or upon a default of the servicer or its affiliates under the lending facility between the servicer and the pledgee of the servicing rights, if the pledgee of the servicing rights certifies to the trustee that such entity is a qualified servicer pursuant to the requirements of the pooling and servicing agreement, and such transfer does not cause any of the rating agencies to withdraw, downgrade or qualify the ratings they have assigned to any of the certificates. It is possible that the servicing responsibilities with respect to some or all of the mortgage loans may be transferred from the servicer to a third party in the future, which may or may not occur within a short time following the closing date. At any time that servicing responsibilities are transferred as described above, the mortgage loans may experience an increase in delinquencies and default during the transitions of servicing responsibilities. In addition, in the event of a servicer default under the pooling and servicing agreement, the pledgee of the servicing rights will have the right to require the replacement of the servicer, even if the certificateholders have waived the related default.

The mortgage pool includes balloon loans, which can create increased risk of losses

Approximately 4.45% and 8.65% of the Group I initial and the Group II initial mortgage loans (in each case, by aggregate principal balance of the related loan group as of the cut-off date), respectively, are fixed-rate “balloon loans”; that is, they require monthly payments of principal based on 30-year amortization schedules and have scheduled maturity dates of 15 years from the due date of the first monthly payment or they require monthly payments of principal based on 40-year amortization schedules and have scheduled maturity dates of 30 years from the due date of the first monthly payment, in each case leaving a substantial portion of the original principal amount due and payable on the respective scheduled maturity date; or they are adjustable rate “balloon loans”; that is, they have interest rates that are fixed for two, three or five years and then the interest rates float for twenty-eight, twenty-seven or twenty-five years, respectively, and they require monthly payments of principal based on 40-year amortization schedules and have scheduled maturity dates of 30 years from the due date of the first monthly payment. The balloon loans entail a greater degree of risk for prospective investors because the ability of a mortgagor to make a balloon payment typically will depend upon the mortgagor’s ability

 

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either to refinance the related balloon loan or to sell the related mortgaged property. The mortgagor’s ability to sell or refinance will be affected by a number of factors, including the level of prevailing mortgage rates at the time of sale or refinancing, the mortgagor’s equity in the related mortgaged property, the financial condition and credit profile of the mortgagor, applicable tax laws and general economic conditions. No person is obligated to refinance any balloon loan.

The mortgage pool includes mortgage loans secured by second-liens on the related mortgaged property

Approximately 1.88% of the Group I initial mortgage loans and approximately 8.98% of the Group II initial mortgage loans (by aggregate principal balance as of the cut-off date) are secured by second-liens on the related mortgaged properties. The proceeds from any liquidation, insurance or condemnation proceedings will be available to satisfy the outstanding balance of such mortgage loans only to the extent that the claims of the related senior mortgages have been satisfied in full, including any related foreclosure costs. In circumstances when it has been determined to be uneconomical to foreclose on the mortgaged property, the servicer may write off the entire balance of such second-lien mortgage loan as a bad debt. The foregoing considerations will be particularly applicable to mortgage loans secured by second-liens that have high loan-to-value ratios because it is comparatively more likely that the servicer would determine foreclosure to be uneconomical in the case of such mortgage loans. The rate of default of second-lien mortgage loans may be greater than that of mortgage loans secured by first-liens on comparable properties.

An overall decline in the residential real estate markets could adversely affect the values of the mortgaged properties and cause the outstanding principal balances of the second-lien mortgage loans, together with the senior mortgage loans secured by the same mortgaged properties, to equal or exceed the value of the mortgaged properties. This type of a decline would adversely affect the position of a second mortgagee before having the same effect on the related first mortgagee. A rise in interest rates over a period of time and the general condition of a mortgaged property as well as other factors may have the effect of reducing the value of the mortgaged property from the appraised value at the time the mortgage loan was originated. If there is a reduction in value of the mortgaged property, the ratio of the amount of the mortgage loan to the value of the mortgaged property may increase over what it was at the time the mortgage loan was originated. This type of increase may reduce the likelihood of liquidation or other proceeds being sufficient to satisfy the second-lien mortgage loan after satisfaction of any senior liens.

The prepayment experience of the second lien loans may differ from that of the first lien loans. Second lien mortgage loans often are not viewed as permanent financing and may be more likely to be prepaid. However, the smaller monthly payment relative to that of a first lien mortgage loan may reduce the perceived benefits of refinancing. Changes in the tax laws governing deductibility of mortgage interest are likely to have a greater effect on second lien loans than on first lien loans.

The mortgage pool includes interest-only mortgage loans, which may have an increased risk of loss

Approximately 8.63% and 17.44% of the Group I initial and Group II initial mortgage loans (by aggregate principal balance of the related loan group as of the cut-off date), respectively, do not provide for any required payments of principal during the first five or ten years of their term. These loans are sometimes referred to as interest only loans. Interest only loans may have risks and payment characteristics that are not present with fully amortizing mortgage loans, including the following:

 

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    no principal distributions will be made to certificateholders from interest only loans during their interest only period except in the case of a prepayment, which may extend the weighted average lives of the notes;

 

    during the interest only period interest only loans may be less likely to prepaid since the perceived benefits of refinancing may be less than with a fully amortizing mortgage loan;

 

    as the end of the interest only period approaches, an interest only loan may be more likely to be refinanced in order to avoid the increase in the monthly payment required to amortize the loan over its remaining term;

 

    interest only loans may be more likely to default than fully amortizing loans a the end of the interest only period due to the increased monthly payment required to amortize the loan over its remaining term; and

 

    if an interest only loan defaults, the severity of loss may be greater due to the larger unpaid principal balance.

Seasoned Mortgage Loans

Up to 5% by aggregate principal balance of the Mortgage Loans may be seasoned more than 12 months. These mortgage loans were included in prior securitization trusts of the sponsor, which recently have had their “clean-up calls.” Such mortgage loans were originated in accordance with the originator’s underwriting guidelines in place at the time of their origination. Certain of the borrowers on these mortgage loans may be in or may have emerged recently from bankruptcy proceedings, although any borrowers in bankruptcy are current under their respective bankruptcy plans. The prepayment and default experience on these well seasoned mortgage loans may differ from that on the other mortgage loans, either as a result of differing underwriting guidelines, or simply the passage of time, during which the borrower’s situation and/or needs may have changed

The mortgage loans have geographic concentrations which could cause losses to the holders if certain events occur in such regions

Approximately 21.93%, 7.11% and 6.14% of the Group I initial mortgage loans (by aggregate principal balance of the Group I initial mortgage loans as of the cut-off date) are secured by properties located in Florida, California and Maryland, respectively. Approximately 25.54%, 16.00% and 6.91% of the Group II initial mortgage loans (by aggregate principal balance of the Group II initial mortgage loans as of the cut-off date) are secured by properties located in Florida, California and Maryland, respectively. In the event any of these states experiences a decline in real estate values, losses on the mortgage loans may be greater than otherwise would be the case. Such mortgage loans may be subject to prepayment or loss, both of which could affect the yield on the Class A and Mezzanine Certificates.

The final pool of mortgage loans will include mortgage loans which will differ from the pool of initial mortgage loans described in this prospectus supplement

Subsequent mortgage loans acquired by the issuing entity as a result of the pre-funding feature may have characteristics different from those of the initial mortgage loans. However, each subsequent mortgage loan must satisfy the eligibility criteria referred to under the “Description of the Mortgage Pool—Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account” at the time of its conveyance to the issuing entity and must be underwritten in accordance with the criteria described

 

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under “Description of the Mortgage Pool—Underwriting Standards for the Mortgage Loans” herein. The statistical information presented in this prospectus supplement under “Description of the Mortgage Pool” describes a pool of mortgage loans consisting in the aggregate of the initial mortgage loans to be transferred to the trust on the closing date.

The pre-funding feature could result in a significant prepayment on the Class A and Mezzanine Certificates at the end of the pre-funding period

If funds in the pre-funding account allocable to a Group of mortgage loans are not fully applied to the purchase of subsequent mortgage loans by the end of the pre-funding period, the related remaining funds will be used to make a principal prepayment on the Group I Certificates (to the extent the unapplied funds relate to the Group I mortgage loans), the Group II Certificates (to the extent the unapplied funds relate to the Group II mortgage loans) and the remaining funds for both Groups, to the Mezzanine Certificates. No assurances can be given that there will not be such a payment.

The rate and timing of principal prepayments on the mortgage loans could adversely affect the yield on the Class A and Mezzanine Certificates

The rate and timing of principal payments on the certificates will depend on the rate and timing of principal payments (including prepayments, defaults, liquidations, purchases of the mortgage loans due to a breach of a representation or warranty and the servicer’s limited right to purchase delinquent mortgage loans) on the mortgage loans. Accordingly, the certificates are subject to inherent cash-flow uncertainties because the mortgage loans may be prepaid at any time. The Group I Certificates will primarily bear the prepayment risk of the Group I mortgage loans, the Group II Certificates will primarily bear the prepayment risk of the Group II mortgage loans and the Mezzanine Certificates will bear the prepayment risk of both Groups of mortgage loans. Generally, when prevailing interest rates increase, prepayment rates on mortgage loans tend to decrease, resulting in a slower return of principal to investors at a time when reinvestment at such higher prevailing rates would be desirable. Conversely, when prevailing interest rates decline, prepayment rates on mortgage loans tend to increase, resulting in a faster return of principal to investors at a time when reinvestment at comparable yields may not be possible.

Approximately 64.33% and 59.51% of the Group I initial mortgage loans and Group II initial mortgage loans (in each case, by aggregate principal balance of the related loan group as of the cut-off date), respectively, are subject to prepayment penalties as of the cut-off date. Of the Group I initial mortgage loans that are subject to prepayment penalties, approximately 50.13% are ARM loans and 14.19% are fixed-rate mortgage loans. Of the Group II initial mortgage loans that are subject to prepayment penalties, approximately 52.04% are ARM loans and 7.47% are fixed-rate mortgage loans. Typically, the mortgage loans with a prepayment penalty provision provide for a prepayment penalty for partial prepayments and full prepayments. Prepayment penalties may be payable for a period of time ranging from one to five years from the related origination date. Such prepayment penalties may reduce the rate of prepayment on the mortgage loans. Under certain circumstances, as described in the pooling and servicing agreement, the servicer may waive the payment of any otherwise applicable prepayment penalty. Investors should conduct their own analysis of the effect, if any, that the prepayment penalties, and decisions by the servicer with respect to the waiver thereof, may have on the prepayment performance of the mortgage loans. The depositor makes no representations as to the effect that the prepayment penalties, and decisions by the servicer with respect to the waiver thereof, may have on the prepayment performance of the mortgage loans.

The yields to maturity on the certificates will depend on, among other things, the rate and timing of principal payments (including prepayments, defaults, liquidations, purchases of the mortgage

 

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loans due to a breach of a representation or warranty and purchases of delinquent loans by the servicer) on the mortgage loans. The yield to maturity on the certificates will also depend on the related certificate interest rate and the purchase price for such certificates.

If the certificates are purchased at a premium and principal payments thereon 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 certificates are purchased at a discount and principal payments thereon occur at a rate slower than that assumed at the time of purchase, the investor’s actual yield to maturity will be lower than that assumed at the time of purchase. The certificates were structured assuming, among other things, a prepayment rate and corresponding weighted average lives as described herein. The prepayment, yield and other assumptions to be used for pricing purposes for the certificates may vary as determined at the time of sale.

See “Certain Yield and Prepayment Considerations” herein and “Description of the Securities—Weighted Average Life of the Securities” in the prospectus.

Effect of mortgage rates on the pass-through rates

The Class A and Mezzanine Certificates accrue interest at pass-through rates based on a one-month LIBOR index plus a specified margin, but such pass-through rates are subject to an Available Funds Cap Rate. Each pass-through rate, other than that on the Class A-2A Certificates, also is subject to a maximum rate. As a result of the effect of the Available Funds Cap Rate on the pass-through rates on the Class A and Mezzanine Certificates, such certificates may accrue less interest than they would otherwise accrue if their pass-through rates were based solely on the one month LIBOR index plus the specified margin.

Substantially all of the adjustable-rate mortgage loans have mortgage rates that adjust based on a six-month LIBOR index. The adjustable-rate mortgage loans have periodic and maximum limitations on adjustments to their mortgage rates, and will have the first adjustment to their mortgage rates generally two years, three years or five years after the origination thereof. The fixed-rate mortgage loans have mortgage rates that will not adjust.

A variety of factors could limit the pass-through rates and adversely affect the yields to maturity on the Class A and Mezzanine Certificates. Some of these factors are described below.

 

    The pass-through rates for the Class A and Mezzanine Certificates may adjust monthly while the mortgage rates on the adjustable-rate mortgage loans adjust less frequently and the mortgage rates on the fixed-rate mortgage loans do not adjust. Furthermore, the adjustable-rate mortgage loans will have the first adjustment to their mortgage rates generally two years, three years or five years following their origination. Consequently, the Available Funds Cap Rate on the pass-through rates on the Class A and Mezzanine Certificates may prevent any increases in the pass-through rates on such certificates for extended periods.

 

    If prepayments, defaults and liquidations occur more rapidly on the mortgage loans with relatively higher mortgage rates than on the mortgage loans with relatively lower mortgage rates, the pass-through rates on the Class A and Mezzanine Certificates are more likely to be limited.

 

   

The index used to determine the mortgage rates on the adjustable-rate mortgage loans may respond to different economic and market factors than does one-month LIBOR. It is possible that the mortgage rates on certain of the adjustable-rate mortgage loans may decline while the pass-through rates on the Class A and Mezzanine Certificates are stable or rising. It is also possible that the

 

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mortgage rates on the adjustable-rate mortgage loans and the pass-through rates on the Class A and Mezzanine Certificates may both decline or increase during the same period, but that the pass-through rates on the Class A and Mezzanine Certificates may decline more slowly or increase more rapidly.

If the pass-through rate on any class of Class A and Mezzanine Certificates is limited by the Available Funds Cap Rate on any distribution date, the resulting Available Funds Cap Shortfalls may be recovered by the holders of such class of certificates on such distribution date or future distribution dates, to the extent that on such distribution dates there are Available Funds remaining after certain other payments on the Class A and Mezzanine Certificates and the payment of certain fees and expenses of the trust (including the fixed rate cap payment, or any hedge termination payment owed to a Hedge Provider other than a Defaulted Hedge Termination Payment).

Amounts used to pay such shortfalls on the Class A and Mezzanine Certificates may be supplemented by the Hedge Agreements to the extent described in this prospectus supplement. However, the amount received from the Hedge Provider under the Hedge Agreements may be insufficient to pay the holders of the applicable certificates the full amount of interest which they would have received absent the Available Funds Cap Rate.

Prepayment interest shortfalls and Servicemembers Civil Relief Act (“Relief Act”) shortfalls

When a mortgage loan is prepaid, the mortgagor is charged interest on the amount prepaid only up to the date on which the prepayment is made, rather than for an entire month. This may result in a shortfall in interest collections available for payment on the next distribution date. The servicer is required to cover a portion of such prepayment interest shortfall in interest collections that are attributable to prepayments, but only up to the amount of the servicer’s servicing fee for the related period. The servicer is not required to off-set prepayment interest shortfalls from any interest income or ancillary income otherwise payable to the servicer. In addition, certain shortfalls in interest collections arising from the application of the Relief Act or any state law providing for similar relief will not be covered by the servicer.

On any distribution date, any shortfalls resulting from the application of the Relief Act or any state law providing for similar relief and any prepayment interest shortfalls to the extent not covered by compensating interest paid by the servicer will be allocated, first, to the excess cashflow, and second to the monthly interest distributable amounts with respect to the Class A and Mezzanine Certificates on a pro rata basis based on the respective amounts of interest accrued on such certificates for such distribution date. The holders of the Class A and Mezzanine Certificates will not be entitled to reimbursement for any such interest shortfalls. If these are allocated to the Class A and Mezzanine Certificates, the amount of interest paid to those certificates will be reduced, adversely affecting the yield on your investment.

The assignment of certain of the mortgages in the name of MERS may result in delays and additional costs in commencing, prosecuting and completing foreclosure proceedings

The assignment of certain of the mortgages in the name of Mortgage Electronic Registration Systems, Inc. (“MERS”) is a new practice in the mortgage lending industry. The depositor expects that the servicer or successor servicer will be able to commence foreclosure proceedings on the mortgaged properties, when necessary and appropriate; however, public recording officers and others may have limited, if any, experience with lenders seeking to foreclose mortgages, assignments of which are registered with MERS. Accordingly, delays and additional costs in commencing, prosecuting and completing foreclosure proceedings, defending litigation commenced by third parties and conducting foreclosure sales of the mortgaged properties could result. Those delays and additional costs could in turn delay the distribution of liquidation proceeds to the certificateholders and increase the amount of realized losses on the mortgage loans.

 

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The Mezzanine Certificates are particularly sensitive to the timing and amount of losses and prepayments on the mortgage loans

The weighted average lives of, and the yields to maturity on, the Mezzanine Certificates, in the increasing order of their numerical class designations, will be progressively more sensitive, in reverse order of such certificates’ distribution priority, to the rate and timing of mortgagor defaults and the severity of ensuing losses on the mortgage loans. If the actual rate and severity of losses on the mortgage loans is higher than those assumed by an investor in those 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 pool 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 mortgage loans, to the extent they exceed the amount of excess interest and overcollateralization following distributions of principal on the related distribution date, will reduce the Certificate Balances of the classes of Mezzanine Certificates then outstanding in reverse order of their numerical class designation. As a result of such reductions, less interest will accrue on each such class of Mezzanine Certificates than would otherwise be the case. Once a realized loss is allocated to a Mezzanine Certificate, such amounts may be distributable as a result of Subsequent Recoveries on the Mortgage Loans with respect to such written down amount.

Unless the Certificate Balances of the Class A Certificates have been reduced to zero, the Mezzanine Certificates will not be entitled to any principal distributions until, at the earliest, the distribution date in October 2009. Even after the date on which the Mezzanine Certificates are scheduled to begin to amortize they may become locked out of receiving principal distributions during periods in which delinquencies or losses on the mortgage loans exceed certain levels. As a result, the weighted average lives of such certificates will be longer than would otherwise be the case if distributions of principal were allocated among all of the certificates at the same time. As a result of the longer weighted average lives of such certificates, the holders of such certificates have a greater risk of suffering a loss on their investments. Further, because such certificates might not receive any principal if certain delinquency levels occur, it is possible for such certificates, for so long as the Class A Certificates are outstanding, to receive no principal distributions even if no losses have occurred on the mortgage pool.

The structure of the Mezzanine Certificates causes the yield of such classes to be particularly sensitive to changes in the rates of prepayment of the mortgage loans. Because distributions of principal will be made to the holders of such certificates according to the priorities described in this prospectus supplement, 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.

Ratings on the offered certificates are dependent upon the creditworthiness of the Mortgage Insurance Providers

The ratings assigned to the Class A and Mezzanine Certificates by the rating agencies will be based in part on the credit characteristics of the mortgage loans and on ratings assigned to the mortgage insurance providers. Mortgage Guaranty Insurance Corporation insures approximately 57.54% of the Group I initial mortgage loans having lender-paid mortgage insurance policies and approximately 52.29% of the Group II initial mortgage loans (by aggregate principal balance of the related loan group as of the cut-off date) having lender-paid mortgage insurance policies. PMI Mortgage Insurance Co. insures

 

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approximately 0.25% of the Group II initial mortgage loans (by aggregate principal balance of the related loan group as of the cut-off date) having lender-paid mortgage insurance policies. The Sponsor expects that certain of the subsequent mortgage loans may also have mortgage insurance from PMI Mortgage Insurance Co., Radian Guaranty Inc. or Mortgage Guaranty Insurance Company. Any reduction in the ratings assigned to a mortgage insurance provider by the rating agencies could result in the reduction of the ratings assigned to the offered certificates. This reduction in ratings could adversely affect the liquidity and market value of the offered certificates.

The call of soldiers into active duty could limit the servicer’s ability to collect on the loans

As described in the prospectus, the Relief Act, as amended, and similar state laws limit the rate of interest and the ability of the servicer to foreclose on mortgages if the mortgagor is called into military service after the origination of the loan. A number of reservists and other soldiers have been recently called into active duty and additional soldiers could be called into service in the future. If any of the borrowers enter into active military duty, shortfalls and losses to the issuing entity and the certificates could result, particularly since any interest otherwise due to the certificateholders may be reduced by application of the Relief Act, as described herein.

NovaStar Financial, Inc. is subject to certain class action litigation

Since April 2004, a number of substantially similar class action lawsuits have been filed and consolidated into a single action in the United States District Court for the Western District of Missouri. The consolidated complaint generally alleges that NovaStar Financial, Inc. (the “Company”) made public statements that were misleading for failing to disclose certain regulatory and licensing matters. The plaintiffs purport to have brought this consolidated action on behalf of all persons who purchased the Company’s common stock (and sellers of put options on the Company’s stock) during the period from October 29, 2003 through April 8, 2004. On January 14, 2005 , the Company filed a motion to dismiss this action, and on May 12, 2005, the court denied such motion. The Company believes that these claims are without merit and intends to vigorously defend against them.

Violation of various federal and state laws may result in losses on the mortgage loans

Numerous federal and state consumer protection laws impose requirements applicable to the origination of the contracts, including the Truth in Lending Act, the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act and the Uniform Consumer Credit Code. In the case of some of these laws, the failure to comply with their provisions may affect the enforceability of the related contract.

In addition to the Home Ownership and Equity Protection Act of 1994 (the “Homeownership Act”), a number of legislative proposals have been introduced at the federal, state and municipal 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 mortgage rates or origination costs in excess of prescribed levels, and require that borrowers be given certain disclosures prior to the consummation of such mortgage loans. In some cases, state law may impose requirements and restrictions greater than those in the Homeownership Act. The sponsor’s failure to comply with these laws could subject the issuing entity and other assignees of the mortgage loans, to monetary penalties and could result in the borrowers rescinding such mortgage loans whether held by the issuing entity 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. Named defendants in these cases include numerous participants within the secondary mortgage market, including some securitization trusts.

 

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Violations of certain provisions of these laws may limit the ability of the servicer to collect all or part of the principal of or interest on the mortgage loans, could subject the issuing entity to damages and administrative enforcement and could result in the borrowers rescinding such mortgage loans against either the issuing entity or subsequent holders of the mortgage loans.

The sponsor will represent that as of the Closing Date or the Subsequent Transfer Date, as applicable, each mortgage loan is in compliance with applicable federal and state laws and regulations. In the event of a breach of such representation, the sponsor will be obligated to cure such breach or repurchase or replace the affected mortgage loan in the manner described under “Description of the Certificates—Assignment of Mortgage Loans” herein.

Use of Proceeds

After deducting the estimated expenses of this offering, as identified on the cover page, the net proceeds to the depositor from the sale of the underwritten certificates are estimated to be $1,264,868,806. The depositor will use the entire net proceeds to pay the sponsor for the initial mortgage loans and to make the initial deposit to the pre-funding account and to any required interest coverage account. The sponsor anticipates that it will use a majority of the proceeds to repay indebtedness and accrued interest under its warehouse lines of credit, including those provided by one or more affiliates of the underwriters. The depositor and the sponsor believe that funds provided by the net proceeds of this offering will be sufficient to accomplish the purposes set forth above.

Description of the Mortgage Pool

The statistical information presented in this prospectus supplement describes the Group I initial mortgage loans and the Group II initial mortgage loans (collectively, the “initial mortgage loans”) that are expected to be included in the trust estate on the closing date. The statistical information does not describe the subsequent mortgage loans which may be acquired through the pre-funding feature using the funds on deposit in the pre-funding account.

The “cut-off date” for the initial mortgage loans is the later of September 1, 2006, and the date of origination of such initial mortgage loan. The cut-off date for any subsequent mortgage loan is the later of (i) the first day of the month in which such subsequent mortgage loan is acquired by the trust and (ii) the date of origination of such subsequent mortgage loan.

It is possible that some of the mortgage loans may be repaid or prepaid in full or in part, or otherwise removed from the mortgage pool prior to the closing date. In this event, other mortgage loans may be transferred to the issuing entity. The depositor believes that the information set forth herein with respect to the mortgage pool and each initial loan group as presently constituted is representative of the characteristics of the mortgage pool and each initial loan group as they will be constituted on the closing date, although some characteristics in the mortgage pool may vary.

All statistical information related to the mortgage loans and contained herein is stated as of September 1, 2006, and all percentages, unless otherwise stated, are by aggregate principal balance.

This prospectus supplement contains information regarding the initial mortgage loans to be included in the pool as of the closing date. These initial mortgage loans consist of mortgage loans originated through September 1, 2006.

Additional subsequent mortgage loans are intended to be purchased by the issuing entity from the sponsor from time to time before the end of the pre-funding period, from remaining funds on

 

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deposit in the pre-funding account as described below under —Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account.” The additional subsequent mortgage loans must conform to certain specified characteristics described below under —Conveyance of Subsequent Mortgage Loans and the Pre-Funding Account.” Although these additional subsequent mortgage loans will have characteristics that differ somewhat from the initial mortgage loans we describe in this prospectus supplement, the depositor does not expect that their characteristics will vary materially from the initial mortgage loans. In addition, all subsequent mortgage loans must conform to the representations and warranties in the pooling and servicing agreement.

The mortgage pool will consist of conventional, monthly payment, first- and second-lien subprime mortgage loans with terms to maturity of not more than 30 years from the date of origination or modification. The mortgage pool will consist of both adjustable-rate mortgage (“ARM”) loans and fixed-rate mortgage loans.

NovaStar Mortgage, Inc., in its capacity as sponsor, will convey the mortgage loans to NovaStar Mortgage Funding Corporation pursuant to a mortgage loan purchase agreement. NovaStar Mortgage Funding Corporation will then convey the mortgage loans to the trust. All of the mortgage loans will be serviced by NovaStar Mortgage, Inc., as the servicer. The sponsor will make various representations and warranties regarding the mortgage loans under the purchase agreement and will have repurchase or substitution obligations if those representations or warranties are breached and such breach has a material adverse impact on the value of the mortgage loan or the certificateholders’ interest therein. The obligations of NovaStar Mortgage, Inc. under the mortgage loan purchase agreement will be guaranteed by an affiliate, NovaStar Financial, Inc. See “Description of the Certificates—Assignment of Mortgage Loans” herein.

The mortgages for certain mortgage loans were or may be, at the sole discretion of the servicer, originally recorded in the name of Mortgage Electronic Registration Systems, Inc. (“MERS”), solely as nominee for the sponsor, and its successors and assigns; furthermore, subsequent assignments of such mortgages were or may be, at the sole discretion of the servicer, registered electronically through the MERS System. For certain other mortgage loans, (i) the mortgage was originally recorded in the name of the sponsor, (ii) record ownership was later assigned to MERS, solely as nominee for the sponsor, and (iii) subsequent assignments of the mortgage were or may be, at the sole discretion of the servicer, registered electronically through the MERS System. For each of such mortgage loans, MERS serves as mortgagee of record on the mortgage solely as a nominee in an administrative capacity on behalf of the trustee, and does not have any beneficial interest in the mortgage loan.

Approximately 50.06% by principal balance of the initial mortgage loans have original loan-to-value ratios in excess of 80%. Approximately 55.56% of the initial mortgage loans have an original loan-to-value ratio in excess of 60% and are covered by a lender-paid primary mortgage insurance policy insuring first losses on the principal balance of each mortgage loan. See “The Originator—Private Mortgage Insurance Policies” herein. The remainder of the initial mortgage loans will either be covered by a borrower-paid mortgage insurance policy or will not be covered by a mortgage insurance policy.

As of the cut-off date, the minimum loan-to-value ratio at origination for the initial mortgage loans was approximately 10.53%, the maximum loan-to-value ratio at origination was approximately 100.00%, and the weighted average loan-to-value ratio at origination was approximately 83.01% (references to loan-to-value ratios in this prospectus supplement are references to combined loan-to-value ratios with respect to second-lien mortgage loans).

 

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All of the initial mortgage loans will contain a customary “due-on-sale” clause, although the mortgage loans may be assumable if permitted by the servicer under certain circumstances. See “Certain Yield and Prepayment Considerations” herein. Pursuant to the terms of the pooling and servicing agreement, the servicer will be entitled to all late payment charges received on the mortgage loans as additional servicing compensation and such amounts will not be available for distribution on the certificates.

The initial mortgage loans have original terms to stated maturity of not more than 360 months.

Approximately 0.95% of the initial mortgage loans are 30 to 59 days delinquent as of the cut-off date.

Approximately 0.09% of the initial mortgage loans are 60 or more days delinquent as of the cut-off date.

Approximately 95.32% of the initial mortgage loans are secured by a first-lien on the related mortgaged property, and approximately 4.68% of the initial mortgage loans are secured by a second-lien on the related mortgaged property.

Approximately 21.03% of the initial mortgage loans are secured by a first-lien on the related mortgaged property for which a second-lien was originated at the same time as the first-lien.

None of the initial mortgage loans are subject to temporary buydown plans, pursuant to which the monthly payments made by the mortgage during the early years of the loan are less than the scheduled monthly payments thereon.

The due date for substantially all of the initial mortgage loans is the first day of the month.

Of the initial mortgage loans, approximately 81.02% by principal balance are ARM loans and approximately 18.98% are fixed-rate mortgage loans. The mortgage rates on substantially all of the ARM loans adjust semi-annually.

Prepayment Penalties

Of the initial mortgage loans, approximately 62.43% by principal balance are subject to prepayment penalties as of the cut-off date. Of the mortgage loans subject to prepayment penalties, approximately 50.89% are ARM loans, and approximately 11.54% are fixed-rate mortgage loans. The prepayment penalty provisions typically provide for payment of a prepayment penalty for partial prepayments and full prepayments. Prepayments may be payable for a period of time ranging from one to five years from the related origination date. Prepayment penalties received on the mortgage loans will be available for distribution on the Class C Certificates only.

The initial mortgage loans are expected to have the following characteristics as of the cut-off date (the sum in any column may not equal the total indicated due to rounding):

 

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Geographic Distribution of the Mortgaged Properties of the Initial Mortgage Loans

 

Geographical Distribution

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Alabama

   84    $ 11,134,779.96    1.49 %   10.535 %   354    89.52 %   591

Arizona

   111      21,352,379.50    2.85     9.063     348    81.08     635

Arkansas

   35      3,285,274.58    0.44     9.910     348    87.89     597

California

   277      79,481,671.00    10.62     8.855     349    79.84     629

Colorado

   41      6,339,965.58    0.85     9.605     346    86.03     604

Connecticut

   76      13,834,948.56    1.85     9.426     351    83.03     622

Delaware

   10      1,829,985.01    0.24     9.355     345    81.58     633

District of Columbia

   16      4,682,974.81    0.63     9.592     352    78.48     656

Florida

   958      174,830,445.36    23.35     9.175     350    81.92     622

Georgia

   165      22,160,214.26    2.96     9.736     349    84.06     620

Idaho

   21      2,907,856.60    0.39     8.655     353    84.17     627

Illinois

   87      12,553,538.71    1.68     9.286     355    83.21     600

Indiana

   52      5,549,437.75    0.74     9.960     351    88.87     586

Iowa

   14      1,457,355.99    0.19     10.201     356    89.88     577

Kansas

   26      2,928,469.21    0.39     9.908     350    89.10     598

Kentucky

   42      4,280,806.21    0.57     9.527     350    85.07     586

Louisiana

   91      11,184,444.02    1.49     9.437     354    84.37     607

Maine

   24      2,807,711.50    0.38     9.257     347    76.35     608

Maryland

   219      48,274,332.93    6.45     8.965     348    81.21     618

Massachusetts

   62      13,145,234.35    1.76     9.552     355    80.35     594

Michigan

   236      27,956,883.36    3.73     9.832     354    85.91     608

Minnesota

   54      10,997,124.24    1.47     9.407     340    84.25     632

Mississippi

   42      4,197,472.85    0.56     9.726     346    83.35     591

Missouri

   96      11,593,923.76    1.55     9.857     354    83.00     602

Montana

   5      1,503,145.11    0.20     9.135     359    92.83     631

Nebraska

   13      985,830.63    0.13     10.215     340    87.60     566

Nevada

   52      9,844,232.49    1.32     8.961     341    82.05     633

New Hampshire

   26      5,038,996.58    0.67     9.476     352    83.85     597

New Jersey

   126      28,342,497.72    3.79     9.377     355    82.59     606

New Mexico

   9      1,179,690.08    0.16     9.939     359    82.64     567

New York

   120      30,697,473.61    4.10     9.416     354    80.86     616

North Carolina

   185      22,427,930.79    3.00     9.973     349    85.28     606

North Dakota

   2      245,410.00    0.03     10.245     360    82.26     586

Ohio

   150      16,043,291.79    2.14     9.688     352    87.22     607

Oklahoma

   17      1,474,367.32    0.20     9.891     325    91.77     618

Oregon

   13      2,261,459.95    0.30     9.385     351    82.04     587

Pennsylvania

   156      18,776,541.25    2.51     9.786     358    86.79     604

Rhode Island

   11      2,306,053.37    0.31     9.515     348    84.35     605

South Carolina

   145      17,720,986.47    2.37     9.509     347    84.58     600

South Dakota

   1      148,000.00    0.02     8.650     360    80.00     543

Tennessee

   119      12,449,550.62    1.66     9.692     347    86.33     594

Texas

   256      28,985,658.82    3.87     9.685     343    85.00     599

Utah

   55      10,107,405.86    1.35     9.248     343    85.66     660

Vermont

   4      606,900.92    0.08     9.402     359    85.11     593

Virginia

   123      23,018,636.14    3.07     9.385     348    84.20     631

Washington

   45      8,519,319.29    1.14     9.076     350    82.89     624

West Virginia

   15      1,886,427.34    0.25     9.817     360    79.56     600

Wisconsin

   30      3,950,289.68    0.53     10.027     356    87.68     600

Wyoming

   9      1,319,298.08    0.18     9.744     351    80.42     578
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

No more than approximately 0.39% (the highest concentration in a single zip code) of the initial mortgage loans will be secured by mortgaged properties located in Florida in zip code 33411.

 

S-24


Types of Mortgaged Properties of the Initial Mortgage Loans

 

Property Types

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Condo

   297    $ 48,482,023.82    6.48 %   9.355 %   344    84.92 %   640

Manufactured Housing

   2      138,141.36    0.02     10.382     169    83.34     556

Multi-Unit

   142      31,531,723.28    4.21     9.643     354    83.49     647

PUD

   607      119,690,778.87    15.99     9.284     347    84.39     629

Single Family Residence

   3,478      548,763,956.68    73.30     9.365     351    82.51     609
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

 

S-25


Loan Purpose of the Initial Mortgage Loans

 

Loan Purpose (1)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Cash Out Refinance

   2,218    $ 408,515,209.71    54.57 %   9.188 %   356    79.57 %   598

Purchase

   2,129      312,717,075.46    41.77     9.599     342    87.53     640

Rate/Term Refinance

   179      27,374,338.84    3.66     9.287     353    82.71     603
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

(1) In general, in the case of a mortgage loan made for “rate/term” refinance purposes, substantially all of the proceeds are used to pay in full the principal balance of a previous mortgage loan of the mortgagor with respect to the related mortgaged property and to pay associated origination and closing costs. Mortgage loans made for “cash-out” refinance purposes may involve the use of the proceeds to pay in full the principal balance of a previous mortgage loan and related costs except that a portion of the proceeds are generally retained by the mortgagor for uses unrelated to the mortgaged property. The amount of these proceeds retained by the mortgagor may be substantial.

Occupancy Status of the Mortgaged Properties of the Initial Mortgage Loans

 

Occupancy Status

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Investment (Non-Owner Occupied)

   192    $ 32,227,356.82    4.30 %   9.593 %   355    80.66 %   656

Primary

   4,223      690,663,293.90    92.26     9.353     350    83.08     612

Secondary Home

   111      25,715,973.29    3.44     9.361     352    84.10     672
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

Documentation Type of the Initial Mortgage Loans

 

Loan Documentation Types

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Full Documentation

   2,471    $ 340,911,989.15    45.54 %   9.263 %   351    83.22 %   586

Limited Documentation

   24      4,313,764.29    0.58     9.251     358    82.63     611

No Documentation

   277      54,350,537.43    7.26     9.239     349    84.48     706

Stated Income

   1,754      349,030,333.14    46.62     9.482     349    82.58     631
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

 

S-26


Risk Classification of the Initial Mortgage Loans

 

Risk Classification

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

M1

   2,619    $ 406,980,803.72    54.37 %   9.285 %   349    84.15 %   613

M2

   816      149,285,061.03    19.94     9.751     358    81.81     577

M3

   150      25,216,043.59    3.37     9.847     357    73.30     543

M4

   118      20,593,560.72    2.75     9.873     359    67.62     557

Alt A

   810      145,192,224.40    19.39     9.024     341    84.86     685

AA

   4      313,173.76    0.04     9.888     236    82.67     563

A+

   1      207,828.97    0.03     7.900     316    80.00     676

A

   2      253,461.08    0.03     9.769     285    87.36     534

A-  

   2      158,844.93    0.02     11.209     303    89.15     619

B

   2      281,066.62    0.04     10.012     303    88.10     607

Fico Enhanced

   1      41,694.67    0.01     11.500     285    90.00     545

NSFICO

   1      82,860.52    0.01     9.700     324    90.00     636
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

 

S-27


Original Loan-to-Value Ratios of the Initial Mortgage Loans

 

Range of LTV Ratios*(%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

  0.01 – 49.99

   85    $ 12,270,682.35    1.64 %   8.719 %   353    42.45 %   594

50.00 – 54.99

   50      8,211,087.59    1.10     8.447     357    52.66     579

55.00 – 59.99

   79      12,716,693.93    1.70     8.652     360    57.19     587

60.00 – 64.99

   118      22,457,700.36    3.00     8.604     358    62.54     585

65.00 – 69.99

   161      30,606,031.52    4.09     8.828     358    67.06     578

70.00 – 74.99

   208      39,953,181.61    5.34     8.933     355    71.93     585

75.00 – 79.99

   305      57,770,684.60    7.72     9.022     358    76.64     594

80.00

   987      189,873,812.45    25.36     8.844     359    80.00     639

80.01 – 84.99

   113      22,969,466.76    3.07     8.860     357    83.27     612

85.00 – 89.99

   357      68,860,252.34    9.20     9.333     358    86.22     596

90.00 – 94.99

   739      129,733,500.89    17.33     9.696     358    90.24     604

95.00 – 99.99

   392      75,133,720.31    10.04     9.965     356    95.16     626

100.00

   932      78,049,809.30    10.43     10.883     283    100.00     658
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

* LTV Ratios calculated as of origination

Weighted Average: 83.01% (approximate)

 

S-28


Cut-Off Date Principal Balances of the Initial Mortgage Loans

 

Range of Cut-Off Date

Principal Balances ($)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

           0.01 – 50,000.00

   495    $ 16,383,710.77    2.19 %   11.364 %   192    97.33 %   633

  50,000.01 – 100,000.00

   1,031      78,405,047.23    10.47     10.053     322    84.45     608

100,000.01 – 150,000.00

   1,104      137,095,822.17    18.31     9.506     354    82.92     596

150,000.01 – 200,000.00

   711      123,192,192.58    16.46     9.292     358    81.92     606

200,000.01 – 250,000.00

   437      98,073,528.57    13.10     9.056     357    81.09     621

250,000.01 – 300,000.00

   244      66,397,146.01    8.87     9.081     358    81.45     626

300,000.01 – 350,000.00

   160      51,968,693.31    6.94     8.848     359    81.64     617

350,000.01 – 400,000.00

   120      44,882,560.18    6.00     9.235     359    84.61     612

400,000.01 – 450,000.00

   67      28,453,982.01    3.80     9.147     359    83.87     639

450,000.01 – 500,000.00

   43      20,300,451.23    2.71     9.361     359    84.57     630

500,000.01 – 550,000.00

   28      14,660,156.58    1.96     9.130     359    83.58     642

550,000.01 – 600,000.00

   21      12,090,961.90    1.62     9.441     351    85.40     625

600,000.01 – 650,000.00

   6      3,702,545.25    0.49     9.161     359    89.06     632

650,000.01 – 700,000.00

   9      6,022,629.01    0.80     9.264     359    86.93     627

700,000.01 – 750,000.00

   5      3,601,778.17    0.48     9.115     360    79.87     660

750,000.01 – 800,000.00

   7      5,391,708.74    0.72     9.774     359    86.45     635

800,000.01 – 850,000.00

   7      5,749,289.15    0.77     9.257     359    80.64     631

850,000.01 – 900,000.00

   8      7,019,084.63    0.94     9.380     359    83.67     634

900,000.01 – 950,000.00

   3      2,809,597.72    0.38     10.336     359    98.31     700

950,000.01 – 1,000,000.00

   3      2,997,114.52    0.40     8.477     359    75.14     698

1,000,000.01 and Above

   17      19,408,624.28    2.59     9.007     360    79.44     657
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

Average: $165,401 (approximate)

 

S-29


Remaining Terms to Maturity of the Initial Mortgage Loans

 

Range of Remaining Terms

to Maturity (in months)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

  61-120

   1    $ 91,579.67    0.01 %   9.750 %   107    85.04 %   554

121-180

   749      38,037,815.11    5.08     11.339     179    97.42     650

181-240

   12      1,531,128.09    0.20     9.188     240    79.77     591

241-300

   9      716,311.12    0.10     9.882     289    83.45     575

301-360

   3,755      708,229,790.02    94.61     9.257     359    82.24     614
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

Weighted Average: 350 months (approximate)

 

S-30


Original Terms to Maturity of the Initial Mortgage Loans

 

Original Terms to

Maturity (in months)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

180

   750    $ 38,129,394.78    5.09 %   11.335 %   179    97.39 %   650

240

   12      1,531,128.09    0.20     9.188     240    79.77     591

300

   1      81,907.28    0.01     7.550     299    71.55     676

360

   3,763      708,864,193.86    94.69     9.258     359    82.24     614
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

Weighted Average: 351 months (approximate)

Lien Position of the Initial Mortgage Loans

 

Lien Position

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

First Lien

   3,797    $ 713,557,012.17    95.32 %   9.258 %   358    82.19 %   614

Second Lien

   729      35,049,611.84    4.68     11.504     181    99.66     655
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

Credit Scores of the Initial Mortgage Loans

 

Range of Credit Scores

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

None

   1    $ 77,894.32    0.01 %   11.990 %   174    100.00 %   N/A

400 - 499

   84      12,722,681.40    1.70     9.584     356    78.04     488

500 - 524

   281      43,524,913.73    5.81     9.948     355    77.50     515

525 - 549

   519      79,745,757.36    10.65     9.846     356    79.17     537

550 - 574

   574      87,341,436.53    11.67     9.588     353    80.91     563

575 - 599

   652      100,379,957.31    13.41     9.527     352    82.46     587

600 - 624

   586      101,935,842.31    13.62     9.195     353    83.29     613

625 - 649

   589      99,166,445.66    13.25     9.163     349    85.33     637

650 - 674

   441      81,511,636.01    10.89     9.129     344    84.83     661

675 - 699

   309      50,518,888.38    6.75     8.909     344    85.42     686

700 and Above

   491      91,759,065.32    12.26     9.104     342    86.47     734
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

Weighted Average: 616 (approximate)

 

S-31


Current Mortgage Rates of the Initial Mortgage Loans

 

Range of Gross Interest Rates (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

  5.500 -   5.999

   1    $ 124,943.66    0.02 %   5.990 %   348    52.27 %   491

  6.000 -   6.499

   5      1,020,487.98    0.14     6.308     357    70.54     603

  6.500 -   6.999

   28      5,973,858.84    0.80     6.846     359    73.59     620

  7.000 -   7.499

   64      15,560,327.99    2.08     7.289     359    75.55     643

  7.500 -   7.999

   378      77,735,596.34    10.38     7.814     358    75.59     639

  8.000 -   8.499

   466      95,356,331.99    12.74     8.273     359    77.91     636

  8.500 -   8.999

   752      151,590,017.16    20.25     8.764     358    80.79     629

  9.000 -   9.499

   439      74,940,043.57    10.01     9.259     358    82.48     606

  9.500 -   9.999

   736      126,440,082.90    16.89     9.760     354    84.94     601

10.000 - 10.499

   344      57,186,227.78    7.64     10.251     351    88.07     605

10.500 - 10.999

   465      66,072,575.23    8.83     10.728     347    88.68     594

11.000 - 11.499

   230      27,148,267.15    3.63     11.246     329    90.10     589

11.500 - 11.999

   313      29,271,594.68    3.91     11.738     302    92.71     595

12.000 - 12.499

   168      11,935,578.46    1.59     12.231     259    94.99     613

12.500 - 12.999

   127      7,316,990.56    0.98     12.697     249    94.73     618

13.000 - 13.499

   9      883,709.47    0.12     13.223     294    96.27     600

13.500 - 13.999

   1      49,990.25    0.01     13.700     359    94.34     531
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

Weighted Average: 9.363% (approximate)

 

S-32


Fixed Rate Loan Types of the Initial Mortgage Loans

 

Fixed Rate Loan Types

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Fixed Rate

   715    $ 93,533,810.39    65.82 %   9.162 %   344    79.55 %   610

Fixed Rate Balloon 30/15

   638      31,344,772.23    22.06     11.483     179    99.62     655

Fixed Rate Balloon 40/30

   79      14,391,392.36    10.13     8.874     360    78.60     612

Fixed Rate Interest Only*

   16      2,845,314.95    2.00     8.601     360    76.37     679
                                       

Total

   1,448    $ 142,115,289.93    100.00 %   9.634 %   310    83.82 %   622
                                       

* (10 Year IO Term)

Initial Periodic Rate Cap of the Initial ARM Loans

 

Initial Periodic Rate Cap (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

1.500

   1    $ 391,083.26    0.06 %   8.725 %   356    80.00 %   518

3.000

   3,077      606,100,250.82    99.94     9.300     359    82.82     615
                                       

Total

   3,078    $ 606,491,334.08    100.00 %   9.300 %   359    82.82 %   615
                                       

Periodic Rate Cap of the Initial ARM Loans

 

Periodic Rate Cap (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

1.000

   3,077    $ 606,100,250.82    99.94 %   9.300 %   359    82.82 %   615

1.500

   1      391,083.26    0.06     8.725     356    80.00     518
                                       

Total

   3,078    $ 606,491,334.08    100.00 %   9.300 %   359    82.82 %   615
                                       

 

S-33


Maximum Loan Rates of the Initial ARM Loans

 

Range of Maximum

Interest Rates (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

12.500 – 12.999

   1    $ 361,183.79    0.06 %   6.850 %   348    82.95 %   448

13.000 – 13.499

   3      876,800.00    0.14     6.358     360    69.48     613

13.500 – 13.999

   26      5,495,774.13    0.91     6.845     359    72.90     632

14.000 – 14.499

   55      13,806,989.05    2.28     7.286     359    75.45     640

14.500 – 14.999

   272      58,775,770.22    9.69     7.816     359    76.85     640

15.000 – 15.499

   349      76,965,897.92    12.69     8.274     360    78.49     638

15.500 – 15.999

   582      128,173,690.67    21.13     8.764     359    80.88     632

16.000 – 16.499

   357      64,453,120.14    10.63     9.260     359    82.91     607

16.500 – 16.999

   544      106,624,601.78    17.58     9.757     360    85.42     601

17.000 – 17.499

   259      49,792,964.22    8.21     10.250     359    87.84     603

17.500 – 17.999

   320      54,101,218.89    8.92     10.721     359    88.16     590

18.000 – 18.499

   126      21,002,404.32    3.46     11.243     359    88.07     576

18.500 – 18.999

   128      18,225,081.25    3.01     11.705     359    89.76     567

19.000 – 19.499

   31      4,497,803.95    0.74     12.231     359    88.05     569

19.500 – 19.999

   22      2,723,794.03    0.45     12.612     360    86.31     561

20.000 – 20.499

   2      564,249.47    0.09     13.350     359    94.16     580

20.500 – 20.999

   1      49,990.25    0.01     13.700     359    94.34     531
                                       

Total

   3,078    $ 606,491,334.08    100.00 %   9.300 %   359    82.82 %   615
                                       

Weighted Average: 16.300% (approximate)

 

S-34


Minimum Loan Rates of the Initial ARM Loans

 

Range of Minimum Interest Rates (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

  5.500 –   5.999

   1    $ 56,900.86    0.01 %   6.000 %   341    72.50 %   673

  6.000 –   6.499

   3      876,800.00    0.14     6.358     360    69.48     613

  6.500 –   6.999

   27      5,856,957.92    0.97     6.845     359    73.52     621

  7.000 –   7.499

   55      13,806,989.05    2.28     7.286     359    75.45     640

  7.500 –   7.999

   272      58,775,770.22    9.69     7.816     359    76.85     640

  8.000 –   8.499

   349      76,965,897.92    12.69     8.274     360    78.49     638

  8.500 –   8.999

   582      128,191,976.93    21.14     8.765     359    80.89     632

  9.000 –   9.499

   357      64,453,120.14    10.63     9.260     359    82.91     607

  9.500 –   9.999

   544      106,624,601.78    17.58     9.757     360    85.42     601

10.000 – 10.499

   259      49,792,964.22    8.21     10.250     359    87.84     603

10.500 – 10.999

   320      54,101,218.89    8.92     10.721     359    88.16     590

11.000 – 11.499

   125      20,927,217.20    3.45     11.253     360    88.08     577

11.500 – 11.999

   128      18,225,081.25    3.01     11.705     359    89.76     567

12.000 – 12.499

   31      4,497,803.95    0.74     12.231     359    88.05     569

12.500 – 12.999

   22      2,723,794.03    0.45     12.612     360    86.31     561

13.000 – 13.499

   2      564,249.47    0.09     13.350     359    94.16     580

13.500 – 13.999

   1      49,990.25    0.01     13.700     359    94.34     531
                                       

Total

   3,078    $ 606,491,334.08    100.00 %   9.300 %   359    82.82 %   615
                                       

Weighted Average: 9.300% (approximate)

 

S-35


Next Interest Adjustment Date of the Initial ARM Loans

 

Date of Next Rate Change Date

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

October 2006

   1    $ 64,166.49    0.01 %   11.000 %   289    87.89 %   651

November 2006

   2      219,420.99    0.04     11.067     290    85.45     565

December 2006

   3      189,416.58    0.03     10.051     311    87.18     530

January 2007

   2      121,748.81    0.02     9.695     288    83.09     516

February 2007

   1      56,900.86    0.01     6.000     341    72.50     673

August 2007

   4      783,207.89    0.13     7.477     347    88.47     536

September 2007

   4      645,720.90    0.11     7.815     348    83.13     496

December 2007

   3      298,372.02    0.05     8.710     351    83.80     493

January 2008

   2      303,362.09    0.05     7.996     352    80.00     607

February 2008

   6      1,410,938.95    0.23     8.478     353    83.93     626

March 2008

   9      1,832,468.16    0.30     8.927     354    85.53     635

April 2008

   27      4,139,812.54    0.68     9.601     355    83.68     573

May 2008

   41      6,296,898.01    1.04     9.427     356    86.82     579

June 2008

   108      18,097,587.92    2.98     9.658     357    86.42     590

July 2008

   75      14,855,499.54    2.45     9.363     358    83.06     603

August 2008

   632      133,133,727.89    21.95     9.278     359    82.29     612

September 2008

   2,096      410,414,269.05    67.67     9.314     360    87.99     618

July 2009

   2      466,554.32    0.08     9.663     358    58.31     560

August 2009

   15      3,317,366.24    0.55     8.399     359    79.53     617

September 2009

   29      5,905,156.00    0.97     8.762     360    80.78     621

August 2011

   3      479,578.83    0.08     7.792     359    68.82     616

September 2011

   13      3,459,160.00    0.57     8.924     360    75.93     625
                                       

Total

   3,078    $ 606,491,334.08    100.00 %   9.300 %   359    82.82 %   615
                                       

The weighted average remaining months to the next interest adjustment date of the ARM initial mortgage loans as of the cut-off date will be approximately 24 months.

 

S-36


Gross Margins of the Initial ARM Loans

 

Range of Gross Margins (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

3.000 - 3.499

   1    $ 120,000.00    0.02 %   7.650 %   360    79.47 %   718

3.500 - 3.999

   2      283,465.19    0.05     7.784     358    51.65     593

4.000 - 4.499

   41      9,261,675.79    1.53     7.882     360    73.86     694

4.500 - 4.999

   328      79,653,543.34    13.13     8.224     360    78.23     671

5.000 - 5.499

   532      109,852,693.73    18.11     8.509     360    78.76     639

5.500 - 5.999

   762      156,411,529.41    25.79     9.152     359    83.99     620

6.000 - 6.499

   733      137,487,134.60    22.67     9.853     359    86.11     591

6.500 - 6.999

   437      75,220,162.71    12.40     10.521     359    86.55     567

7.000 - 7.499

   232      35,981,337.46    5.93     10.444     359    82.53     561

7.500 - 7.999

   9      2,119,833.78    0.35     9.490     357    81.83     595

8.000 - 8.499

   1      99,958.07    0.02     10.250     359    69.44     510
                                       

Total

   3,078    $ 606,491,334.08    100.00 %   9.300 %   359    82.82 %   615
                                       

Weighted Average: 5.811% (approximate)

 

S-37


ARM Loan Types of the Initial ARM Loans

 

Adjustable Rate Loan Types

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

2/28 6 Month LIBOR Interest Only*

   279    $ 84,005,155.58    13.85 %   8.580 %   359    81.85 %   656

2/28 6 Month LIBOR ARM

   2,159      378,205,275.78    62.36     9.549     359    83.37     604

2/28 6 Month LIBOR ARM 40/30 Balloon

   577      130,533,511.62    21.52     9.101     360    82.34     619

3/27 6 Month LIBOR Interest Only*

   9      2,559,100.00    0.42     8.362     360    85.83     643

3/27 6 Month LIBOR ARM

   31      5,586,797.22    0.92     9.042     358    77.16     598

3/27 6 Month LIBOR ARM 40/30 Balloon

   7      1,662,755.05    0.27     8.181     360    77.06     631

5/25 6 Month LIBOR

   9      1,561,548.83    0.26     8.717     360    79.19     615

5/25 6 Month LIBOR Interest Only**

   6      1,228,000.00    0.20     9.188     360    74.89     651

5/25 6 Month LIBOR ARM 40/30 Balloon

   1      1,149,190.00    0.19     8.450     360    69.65     606
                                       

Total

   3,078    $ 606,491,334.08    100.00 %   9.300 %   359    82.82 %   615
                                       

* (5 Year IO Term)
** (10 Year IO Term)

 

S-38


Distribution by Amortization Type of the Initial Mortgage Loans

 

Amortization Types

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Interest Only

   310    $ 90,637,570.53    12.11 %   8.583 %   359    81.69 %   657

Not Interest Only

   4,216      657,969,053.48    87.89     9.471     349    83.19     610
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

Distribution of Seasoning of the Initial Mortgage Loans

 

Seasoning (months)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

0

   3,237    $ 530,475,755.05    70.86 %   9.357 %   350    82.91 %   619

1

   870      159,845,321.36    21.35     9.328     352    82.38     613

2

   102      17,010,166.12    2.27     9.496     347    83.40     606

3

   138      20,195,055.60    2.70     9.764     347    86.48     591

4

   45      6,679,525.36    0.89     9.359     355    87.00     584

5

   59      5,416,721.45    0.72     10.052     316    87.35     584

6

   21      2,518,475.24    0.34     9.518     313    88.42     634

7 or More

   54      6,465,603.83    0.86     8.544     323    84.41     573
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

 

S-39


Original Prepayment Penalty Term of the Initial Mortgage Loans

 

Original Prepayment

Penalty Term (in months)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

No prepayment penalty

   1,697    $ 281,284,684.84    37.57 %   9.536 %   346    83.51 %   624

12

   11      2,732,593.05    0.37     9.249     352    78.00     597

24

   1,422      235,953,145.59    31.52     9.401     352    82.58     612

36

   1,390      227,998,465.40    30.46     9.116     353    82.89     610

60

   6      637,735.13    0.09     8.510     276    82.57     593
                                       

Total

   4,526    $ 748,606,624.01    100.00 %   9.363 %   350    83.01 %   616
                                       

 

S-40


Adjustable Rate Feature of the ARM Loans

Effective with the first payment due on an ARM loan after each related adjustment date, the monthly payment will be adjusted to an amount that will fully amortize the outstanding principal balance of the mortgage loan over its remaining term. The weighted average number of months from the cut-off date to the next adjustment date for the ARM loans is approximately 24 months.

Adjustments to the mortgage rates on substantially all of the ARM loans commence after an initial period after origination of two years, three years or five years in each case on each applicable adjustment date to a rate equal to the sum, generally rounded up to the nearest one-eighth of one percentage point (12.5 basis points), of (i) the related index plus (ii) a fixed gross margin. Substantially all of the ARM loans are subject to an initial fixed rate period. In addition, the mortgage rate on each ARM loan is subject, on its first adjustment date following its origination, to a cap and on each adjustment date thereafter to a periodic rate cap. All of the ARM loans are also subject to specified maximum and minimum lifetime mortgage rates. The ARM loans were generally originated with an mortgage rate below the sum of the current index and the gross margin. Due to the application of the periodic rate caps, maximum mortgage rates and minimum mortgage rates, the mortgage rate on any ARM loan, as adjusted on any related adjustment date, may not equal the sum of the related index and the gross margin.

Substantially all of the ARM loans will not have reached their first adjustment date as of the closing date. The mortgage rate is generally lower than the rate that would have been produced if the applicable gross margin had been added to the related index in effect at origination. ARM loans that have not reached their first adjustment date are, therefore, subject to the initial periodic rate cap on their first adjustment date.

The index applicable to the determination of the mortgage rate on substantially all of the ARM loans will be the average of the interbank offered rates for six-month United States dollar deposits in the London market based on quotations of major banks, as published in the Western Edition of The Wall Street Journal, and most recently available as of the first business day generally 30 days prior to the adjustment date (“Six-Month LIBOR”).

Mortgage Loan Groups

The mortgage loans have been divided into two subpools, designated as the “Group I mortgage loans,” and the “Group II mortgage loans.” The Group I mortgage loans will consist exclusively of mortgage loans that conform to certain agency guidelines described herein. The Group II mortgage loans will consist of a combination of mortgage loans which may conform to certain agency guidelines described herein and mortgage loans that may not conform to such agency guidelines. The Group I Certificates primarily represent interests in the Group I mortgage loans. The Group II Certificates primarily represent interests in the Group II mortgage loans. The Mezzanine Certificates, the Class I Certificates and the Class C Certificates represent interests in both Groups of mortgage loans. Information about the characteristics of the mortgage loans in each Group is described under The Group I Mortgage Loans,” and “The Group II Mortgage Loans” below.

The Group I Initial Mortgage Loans

The Group I initial mortgage loans consist of 3,066 mortgage loans that have an aggregate principal balance of approximately $453,094,304 as of the cut-off date.

 

S-41


All of the Group I initial mortgage loans conform to certain agency guidelines with respect to the principal balance of such mortgage loans and certain representations made in respect of those mortgage loans, including the following: (i) none of the Group I mortgage loans will be subject to the Home Ownership and Equity Protection Act of 1994, or HOEPA, or any comparable state law, (ii) none of the proceeds from any of the Group I mortgage loans will be used to finance single premium credit life insurance policies, (iii) the servicer will accurately and fully report its borrower credit files to the three largest credit repositories in a timely manner, (iv) none of the Group I mortgage loans impose a prepayment penalty more than three years after origination of the mortgage loan, (v) each of the Group I mortgage loans complies in all material respects with applicable local, state and federal laws including, but not limited to, all applicable predatory and abusive lending laws, (vi) none of the Group I mortgage loans are “high cost,” “covered” (excluding home loans defined as “covered homes” pursuant to the New Jersey Home Ownership Security Act of 2002), “high risk home,” or “predatory” loan under any applicable federal, state or local law (or are similarly classified and/or defined using different terminology under a law imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees) mortgage loans, (vii) none of the Group I mortgage loans originated on or after October 1, 2002 and before March 7, 2003 are secured by property located in the State of Georgia, and none of the Group I mortgage loans originated on or after March 7, 2003 is a “high cost home loan” as defined under the Georgia Fair Lending Act, (viii) the servicer for each of the Group I mortgage loans has fully furnished (and, on a going forward basis, will fully furnish), in accordance with the Fair Credit Reporting Act and its implementing regulations, accurate and complete information (i.e., favorable and unfavorable) on its borrower credit files to Equifax, Experian, and Trans Union Credit Information Company (three of the credit repositories), on a monthly basis (during the period in which the servicer serviced the Group I mortgage loans), (ix) the principal balance at origination for each Group I mortgage loan originated in most states may not exceed $417,000 for single-family residences, $533,850 for two-family residences, $645,300 for three-family residences and $801,950 for four-family residences and (x) with respect to the Group I initial mortgage loans originated on or after August 1, 2004 none of the related mortgages nor the related mortgage notes require the borrower to submit to arbitration to resolve any dispute arising out of or relating in any way to the mortgage loan transaction.

Approximately 22.27% of the Group I initial mortgage loans are fixed-rate mortgage loans, and approximately 77.73% of the Group I initial mortgage loans are ARM loans.

Approximately 64.33% of the Group I initial mortgage loans provide for payment by the mortgagor of a prepayment penalty in limited circumstances on certain prepayments.

Approximately 50.49% of the Group I initial mortgage loans had loan-to-value ratios at origination in excess of 80%.

Approximately 98.12% of the Group I initial mortgage loans are secured by first-liens on the related mortgaged property and approximately 1.88% of the Group I initial mortgage loans are secured by second-liens on the related mortgaged property.

The weighted average remaining term to maturity of the Group I initial mortgage loans is approximately 355 months as of the cut-off date.

The average principal balance of the Group I initial mortgage loans as of the cut-off date was approximately $147,780. No Group I initial mortgage loan had a principal balance, as of the cut-off date, of greater than approximately $519,701 or less than approximately $14,980.

The Group I initial mortgage loans had mortgage rates of not less than approximately 6.300% per annum and not more than approximately 13.100% per annum as of the cut-off date, and the weighted average mortgage rate of the Group I initial mortgage loans was approximately 9.328% per annum as of the cut-off date.

The Group I initial mortgage loans are expected to have the following characteristics as of the cut-off date (the sum in any column may not equal the total indicated due to rounding):

 

S-42


Geographic Distribution of the Mortgaged Properties of the Group I Initial Mortgage Loans

 

Geographical Distribution

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Alabama

   67    $ 7,240,833.79    1.60 %   10.352 %   354    87.92 %   579

Arizona

   69      12,175,237.62    2.69     8.957     355    79.72     613

Arkansas

   21      1,941,297.82    0.43     9.996     357    87.45     604

California

   127      32,205,484.30    7.11     8.611     358    73.16     606

Colorado

   31      4,334,610.74    0.96     9.754     346    85.76     602

Connecticut

   63      11,119,670.34    2.45     9.284     354    81.34     618

Delaware

   7      1,044,120.85    0.23     9.237     360    77.49     577

District of Columbia

   10      2,425,974.81    0.54     9.252     360    66.67     588

Florida

   575      99,352,685.94    21.93     9.016     356    79.19     606

Georgia

   122      15,001,814.11    3.31     9.804     355    84.04     594

Idaho

   16      2,425,556.60    0.54     8.489     356    83.88     636

Illinois

   77      10,917,516.28    2.41     9.230     356    82.07     596

Indiana

   35      3,732,364.93    0.82     10.066     357    89.72     582

Iowa

   12      1,244,855.99    0.27     10.208     355    88.15     584

Kansas

   17      1,722,556.37    0.38     9.752     352    85.61     572

Kentucky

   38      3,850,506.21    0.85     9.542     350    84.27     582

Louisiana

   71      8,902,945.57    1.96     9.339     357    83.58     609

Maine

   22      2,707,365.68    0.60     9.185     353    75.47     605

Maryland

   136      27,840,700.68    6.14     9.003     354    79.74     596

Massachusetts

   53      10,983,223.01    2.42     9.373     356    79.81     590

Michigan

   197      20,650,769.56    4.56     9.801     354    84.90     598

Minnesota

   36      5,851,315.03    1.29     9.604     356    84.37     605

Mississippi

   35      3,493,951.11    0.77     9.803     347    82.81     581

Missouri

   76      7,693,615.62    1.70     10.163     354    84.71     581

Montana

   3      432,244.27    0.10     8.526     359    87.46     614

Nebraska

   13      985,830.63    0.22     10.215     340    87.60     566

Nevada

   27      4,568,579.16    1.01     8.855     352    80.36     618

New Hampshire

   22      3,870,662.75    0.85     9.565     352    81.50     579

New Jersey

   98      20,973,701.14    4.63     9.277     358    80.13     595

New Mexico

   9      1,179,690.08    0.26     9.939     359    82.64     567

New York

   79      15,821,597.46    3.49     9.369     355    77.05     593

North Carolina

   126      14,346,278.49    3.17     9.994     352    84.80     601

North Dakota

   1      115,000.00    0.03     9.900     360    73.48     636

Ohio

   115      11,586,054.40    2.56     9.661     356    88.50     609

Oklahoma

   15      1,260,367.32    0.28     9.617     319    90.79     621

Oregon

   12      1,816,260.65    0.40     9.516     350    80.09     591

Pennsylvania

   117      13,975,825.40    3.08     9.723     358    85.75     598

Rhode Island

   7      1,625,053.37    0.36     9.067     359    80.67     559

South Carolina

   95      10,089,790.03    2.23     9.593     347    84.44     595

Tennessee

   81      8,521,412.72    1.88     9.637     354    85.96     590

Texas

   147      14,170,698.82    3.13     9.643     343    83.62     593

Utah

   30      4,554,093.13    1.01     9.002     351    82.98     627

Vermont

   3      424,900.92    0.09     8.975     358    78.73     597

Virginia

   76      12,213,626.39    2.70     9.349     354    82.73     611

Washington

   31      5,679,429.29    1.25     9.013     355    79.31     614

West Virginia

   13      1,757,446.89    0.39     9.664     360    78.06     599

Wisconsin

   26      3,122,489.68    0.69     10.038     357    85.59     597

Wyoming

   7      1,144,298.08    0.25     9.913     355    79.87     581
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

No more than approximately 0.37% (the highest concentration in a single zip code) of the Group I mortgage loans will be secured by mortgaged properties located in Florida in zip code 33411.

 

S-43


Types of Mortgaged Properties of the Group I Initial Mortgage Loans

 

Property Types

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Condo

   158    $ 21,772,687.92    4.81 %   9.275 %   353    81.88 %   621

Multi – Unit

   102      19,671,307.51    4.34     9.590     356    78.42     625

PUD

   292      55,535,366.88    12.26     9.136     355    82.43     613

Single Family Residence

   2,514      356,114,941.72    78.60     9.347     355    81.17     596
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

 

S-44


Loan Purpose of the Group I Initial Mortgage Loans

 

Loan Purpose (1)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Refinance – Cash Out

   2,087    $ 341,003,390.06    75.26 %   9.200 %   356    79.36 %   594

Purchase

   806      86,992,263.84    19.20     9.816     349    88.11     627

Refinance – Rate Term

   173      25,098,650.13    5.54     9.389     354    82.99     597
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

(1) In general, in the case of a mortgage loan made for “rate/term” refinance purposes, substantially all of the proceeds are used to pay in full the principal balance of a previous mortgage loan of the mortgagor with respect to the related mortgaged property and to pay associated origination and closing costs. Mortgage loans made for “cash-out” refinance purposes may involve the use of the proceeds to pay in full the principal balance of a previous mortgage loan and related costs except that a portion of the proceeds are generally retained by the mortgagor for uses unrelated to the mortgaged property. The amount of these proceeds retained by the mortgagor may be substantial.

Occupancy Status of the Mortgaged Properties of the Group I Initial Mortgage Loans

 

Occupancy Status

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Primary

   2,793    $ 405,353,810.70    89.46 %   9.314 %   354    81.23 %   594

Secondary Home

   88      18,280,426.44    4.03     9.202     359    83.17     664

Investment (Non - Owner Occupied)

   185      29,460,066.89    6.50     9.600     358    80.27     656
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

Documentation Type of the Group I Initial Mortgage Loans

 

Loan Documentation Types

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Full Documentation

   1,842    $ 242,413,832.57    53.50 %   9.193 %   354    81.85 %   581

Stated Income

   1,067      183,982,689.16    40.61     9.560     355    80.69     615

No Documentation

   134      22,861,818.01    5.05     8.945     357    79.33     682

Limited Documentation

   23      3,835,964.29    0.85     9.076     358    81.09     611
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

 

S-45


Risk Classification of the Group I Initial Mortgage Loans

 

Risk Classification

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

M1

   1,764    $ 248,173,648.36    54.77 %   9.187 %   354    83.10 %   607

M2

   696      108,151,510.35    23.87     9.704     358    80.56     570

M3

   142      23,864,616.42    5.27     9.850     358    73.30     542

M4

   115      19,188,222.02    4.23     9.856     359    67.85     557

Alt A

   349      53,716,306.88    11.86     8.806     351    82.35     673
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

Original Loan-to-Value Ratios of the Group I Initial Mortgage Loans

 

Range of LTV Ratios* (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

    0.01 – 49.99

   80    $ 10,337,246.88    2.28 %   8.603 %   352    41.59 %   592

  50.00 – 54.99

   47      6,798,372.49    1.50     8.488     357    52.54     591

  55.00 – 59.99

   75      11,744,593.93    2.59     8.644     360    57.23     583

  60.00 – 64.99

   113      18,552,652.71    4.09     8.592     357    62.30     583

  65.00 – 69.99

   150      25,545,261.62    5.64     8.746     358    67.11     576

  70.00 – 74.99

   187      30,526,397.77    6.74     8.962     357    71.71     580

  75.00 – 79.99

   279      44,937,845.56    9.92     9.104     358    76.46     581

  80.00

   494      75,904,528.55    16.75     9.067     358    80.00     617

  80.01 – 84.99

   103      17,660,005.53    3.90     8.917     357    83.21     608

  85.00 – 89.99

   310      51,926,494.47    11.46     9.412     359    86.17     592

  90.00 – 94.99

   579      89,867,607.96    19.83     9.670     358    90.25     601

  95.00 – 99.99

   266      41,555,312.37    9.17     9.953     357    95.19     616

100.00

   383      27,737,984.19    6.12     10.668     307    100.00     642
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

* LTV Ratios calculated as of origination

Weighted Average: 81.24% (approximate)

 

S-46


Cut-off Date Principal Balances of the Group I Initial Mortgage Loans

 

Range of Cut-Off Date

Principal Balances ($)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

           0.01 –   50,000.00

   240    $ 7,400,163.04    1.63 %   11.185 %   199    94.83 %   625

  50,000.01 – 100,000.00

   755      58,764,640.61    12.97     9.789     348    81.29     597

100,000.01 – 150,000.00

   854      105,825,171.15    23.36     9.419     358    81.57     591

150,000.01 – 200,000.00

   534      92,159,625.20    20.34     9.277     359    80.53     596

200,000.01 – 250,000.00

   289      64,718,298.89    14.28     9.082     359    79.82     609

250,000.01 – 300,000.00

   182      49,361,535.85    10.89     9.110     357    80.48     612

300,000.01 – 350,000.00

   113      36,618,950.27    8.08     8.841     360    80.52     604

350,000.01 – 400,000.00

   80      30,013,485.47    6.62     9.341     360    84.44     603

400,000.01 – 450,000.00

   14      5,785,583.87    1.28     9.106     359    80.85     606

450,000.01 – 500,000.00

   3      1,414,748.85    0.31     9.552     359    83.33     641

500,000.01 – 550,000.00

   2      1,032,100.83    0.23     8.899     359    68.76     632
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

Average: $147,780 (approximate)

 

S-47


Remaining Terms to Maturity of the Group I Initial Mortgage Loans

 

Range of Remaining Terms

to Maturity (in months)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

121 – 180

   279    $ 11,069,459.70    2.44 %   10.893 %   179    93.51 %   628

181 – 240

   12      1,531,128.09    0.34     9.188     240    79.77     591

241 – 300

   1      81,907.28    0.02     7.550     299    71.55     676

301 – 360

   2,774      440,411,808.96    97.20     9.290     360    80.94     600
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

Weighted Average: 355 months (approximate)

Original Terms to Maturity of the Group I Initial Mortgage Loans

 

Original Terms to Maturity (months)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

180

   279    $ 11,069,459.70    2.44 %   10.893 %   179    93.51 %   628

240

   12      1,531,128.09    0.34     9.188     240    79.77     591

300

   1      81,907.28    0.02     7.550     299    71.55     676

360

   2,774      440,411,808.96    97.20     9.290     360    80.94     600
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

Weighted Average: 355 months (approximate)

Lien Position of the Group I Initial Mortgage Loans

 

Lien Position

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

First Lien

   2,812    $ 444,579,157.93    98.12 %   9.291 %   358    80.90 %   600

Second Lien

   254      8,515,146.10    1.88     11.300     182    99.38     638
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

 

S-48


Credit Scores of the Group I Initial Mortgage Loans

 

Range of Credit Scores

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

400 – 499

   62    $ 8,882,772.62    1.96 %   9.754 %   358    77.21 %   490

500 – 524

   230      34,723,930.41    7.66     9.938     357    76.37     515

525 – 549

   435      64,296,262.33    14.19     9.844     357    78.86     537

550 – 574

   434      62,642,613.46    13.83     9.469     356    79.48     562

575 – 599

   494      69,600,221.62    15.36     9.408     356    81.25     587

600 – 624

   431      67,260,927.83    14.84     9.038     355    81.99     613

625 – 649

   350      51,566,112.64    11.38     8.997     354    83.62     637

650 – 674

   244      33,817,672.14    7.46     9.133     349    83.90     661

675 – 699

   177      27,085,329.27    5.98     8.818     351    84.34     686

700 and Above

   209      33,218,461.71    7.33     8.865     353    84.89     728
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

Weighted Average: 600 (approximate)

 

S-49


Current Mortgage Rates of the Group I Initial Mortgage Loans

 

Range of Gross Interest Rates (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

  6.000 – 6.499

   3    $ 876,800.00    0.19 %   6.358 %   360    69.48 %   613

  6.500 – 6.999

   21      4,017,491.50    0.89     6.848     359    70.21     612

  7.000 – 7.499

   47      10,298,337.46    2.27     7.284     359    72.28     630

  7.500 – 7.999

   279      50,072,832.54    11.05     7.797     358    73.30     629

  8.000 – 8.499

   318      54,913,481.41    12.12     8.277     359    76.69     618

  8.500 – 8.999

   513      83,334,461.46    18.39     8.766     357    80.14     611

  9.000 – 9.499

   345      53,603,221.32    11.83     9.266     359    81.73     596

  9.500 – 9.999

   540      79,758,729.58    17.60     9.766     356    83.23     588

10.000 – 10.499

   246      33,786,118.90    7.46     10.255     354    86.22     592

10.500 – 10.999

   331      42,962,409.37    9.48     10.730     351    86.41     576

11.000 – 11.499

   141      16,196,493.72    3.57     11.248     344    87.82     571

11.500 – 11.999

   154      15,531,966.54    3.43     11.716     340    89.67     568

12.000 – 12.499

   77      4,947,135.88    1.09     12.232     306    90.89     580

12.500 – 12.999

   49      2,678,524.35    0.59     12.616     296    90.47     580

13.000 – 13.499

   2      116,300.00    0.03     13.081     326    91.87     567
                                       

Total

   3,066    $ 453,094,304.03    100.00 %   9.328 %   355    81.24 %   600
                                       

Weighted Average: 9.328% (approximate)

 

S-50


Fixed Rate Loan Types of the Group I Initial Mortgage Loans

 

Fixed Rate Loan Types

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

Fixed Rate

   601    $ 78,730,268.65    78.04 %   9.056 %   350    78.30 %   607

Fixed Rate Balloon 30/15

   229      7,765,364.97    7.70     11.311     179    99.42     639

Fixed Rate Balloon 40/30

   76      12,400,357.45    12.29     8.852     360    80.00     613

Fixed Rate Interest Only*

   14      1,991,714.95    1.97     8.577     360    75.13     648
                                       

Total

   920    $ 100,887,706.02    100.00 %   9.195 %   338    80.07 %   611
                                       

* (10 Year IO Term)

Initial Periodic Rate Cap of the Group I Initial ARM Loans

 

Initial Periodic Rate Cap (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

1.500

   1    $ 391,083.26    0.11 %   8.725 %   356    80.00 %   518

3.000

   2,145      351,815,514.75    99.89     9.367     359    81.58     597
                                       

Total

   2,146    $ 352,206,598.01    100.00 %   9.367 %   359    81.58 %   597
                                       

 

S-51


Periodic Rate Cap of the Group I Initial ARM Loans

 

Periodic Rate Cap (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

1.000

   2,145    $ 351,815,514.75    99.89 %   9.367 %   359    81.58 %   597

1.500

   1      391,083.26    0.11     8.725     356    80.00     518
                                       

Total

   2,146    $ 352,206,598.01    100.00 %   9.367 %   359    81.58 %   597
                                       

Maximum Loan Rates of the Group I Initial ARM Loans

 

Range of Maximum Interest Rates (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

13.000 – 13.499

   3    $ 876,800.00    0.25 %   6.358 %   360    69.48 %   613

13.500 – 13.999

   20      3,900,590.58    1.11     6.847     359    69.99     612

14.000 – 14.499

   38      8,544,998.52    2.43     7.279     360    71.45     623

14.500 – 14.999

   179      33,743,313.92    9.58     7.793     360    74.67     628

15.000 – 15.499

   211      38,608,398.90    10.96     8.279     360    77.47     617

15.500 – 15.999

   356      62,280,654.14    17.68     8.766     359    80.18     611

16.000 – 16.499

   273      44,718,113.26    12.70     9.266     360    82.15     593

16.500 – 16.999

   402      65,481,632.45    18.59     9.766     359    83.58     588

17.000 – 17.499

   188      27,896,067.56    7.92     10.250     359    86.07     588

17.500 – 17.999

   247      35,979,457.07    10.22     10.727     359    86.28     574

18.000 – 18.499

   94      13,385,486.60    3.80     11.251     360    86.39     566

18.500 – 18.999

   92      12,270,411.07    3.48     11.711     360    88.74     561

19.000 – 19.499

   26      2,705,724.95    0.77     12.238     360    85.48     550

19.500 – 19.999

   16      1,720,448.99    0.49     12.559     360    85.23     562

20.000 – 20.499

   1      94,500.00    0.03     13.100     360    90.00     547
                                       

Total

   2,146    $ 352,206,598.01    100.00 %   9.367 %   359    81.58 %   597
                                       

Weighted Average: 16.367% (approximate)

 

S-52


Minimum Loan Rates of the Group I Initial ARM Loans

 

Range of Minimum Interest Rates (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

  6.000 –   6.499

   3    $ 876,800.00    0.25 %   6.358 %   360    69.48 %   613

  6.500 –   6.999

   20      3,900,590.58    1.11     6.847     359    69.99     612

  7.000 –   7.499

   38      8,544,998.52    2.43     7.279     360    71.45     623

  7.500 –   7.999

   179      33,743,313.92    9.58     7.793     360    74.67     628

  8.000 –   8.499

   211      38,608,398.90    10.96     8.279     360    77.47     617

  8.500 –   8.999

   356      62,280,654.14    17.68     8.766     359    80.18     611

  9.000 –   9.499

   273      44,718,113.26    12.70     9.266     360    82.15     593

  9.500 –   9.999

   402      65,481,632.45    18.59     9.766     359    83.58     588

10.000 – 10.499

   188      27,896,067.56    7.92     10.250     359    86.07     588

10.500 – 10.999

   247      35,979,457.07    10.22     10.727     359    86.28     574

11.000 – 11.499

   94      13,385,486.60    3.80     11.251     360    86.39     566

11.500 – 11.999

   92      12,270,411.07    3.48     11.711     360    88.74     561

12.000 – 12.499

   26      2,705,724.95    0.77     12.238     360    85.48     550

12.500 – 12.999

   16      1,720,448.99    0.49     12.559     360    85.23     562

13.000 – 13.499

   1      94,500.00    0.03     13.100     360    90.00     547
                                       

Total

   2,146    $ 352,206,598.01    100.00 %   9.367 %   359    81.58 %   597
                                       

Weighted Average: 9.367% (approximate)

 

S-53


Next Interest Adjustment Date of the Group I Initial ARM Loans

 

Date of Next Rate Change Date

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

December 2007

   2    $ 127,366.86    0.04 %   9.126 %   351    88.90 %   451

February 2008

   5      931,238.95    0.26     8.750     353    77.74     614

March 2008

   7      1,214,799.13    0.34     9.101     354    88.35     599

April 2008

   20      2,544,090.50    0.72     9.944     355    84.54     546

May 2008

   38      5,232,609.02    1.49     9.490     356    86.13     560

June 2008

   89      10,823,635.70    3.07     9.848     357    85.99     571

July 2008

   55      7,753,680.75    2.20     9.574     358    82.78     573

August 2008

   464      78,520,247.04    22.29     9.289     359    81.15     598

September 2008

   1,415      234,963,617.25    66.71     9.381     360    83.66     600

July 2009

   2      466,554.32    0.13     9.663     358    58.31     560

August 2009

   14      2,993,537.66    0.85     8.464     359    79.48     611

September 2009

   22      4,073,592.00    1.16     8.960     360    83.34     616

August 2011

   3      479,578.83    0.14     7.792     359    68.82     616

September 2011

   10      2,082,050.00    0.59     9.172     360    78.95     634
                                       

Total

   2,146    $ 352,206,598.01    100.00 %   9.367 %   359    81.58 %   597
                                       

The weighted average remaining months to the next interest adjustment date of the Group I Initial ARM loans as of the cut-off date will be approximately 24 months.

Gross Margins of the Group I Initial ARM Loans

 

Range of Gross Margins (%)

   Number
of
Mortgage
Loans
   Aggregate Cut-off
Date Principal
Balance
   Percentage
of
Aggregate
Cut-off
Date
Principal
Balance
    Weighted
Average
Gross
Coupon
    Weighted
Average
Stated
Remaining
Term
(Months)
   Weighted
Average
Original
LTV
    Weighted
Average
FICO

3.000 – 3.499

   1    $ 120,000.00    0.03 %   7.650 %   360    79.47 %   718

3.500 – 3.999

   2      283,465.19    0.08     7.784     358    51.65     593

4.000 – 4.499

   22      3,924,085.89    1.11     7.876     360    70.01     650

4.500 – 4.999

   168      31,640,474.98    8.98     8.131     360    77.01     657

5.000 – 5.499

   352      61,250,491.24    17.39     8.460     360    77.40     623

5.500 – 5.999

   506      86,170,724.13    24.47     9.162     360    82.48     610

6.000 – 6.499

   531      84,601,930.65    24.02     9.745     359    83.89     580

6.500 – 6.999

   362      54,308,040.07    15.42     10.473     359    85.11     559

7.000 – 7.499

   197      29,281,248.64    8.31     10.258     359    81.31     559

7.500 – 7.999

   4      526,179.15    0.15     10.365     359    78.47     575

8.000 – 8.499

   1      99,958.07