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Wells Fargo Asset Securities Corp – ‘424B5’ on 6/16/05 re: Wells Fargo Asset Securities Corp Mortgage Pass-Through Certificates Series 2005-AR12

On:  Thursday, 6/16/05, at 8:16am ET   ·   Accession #:  1193125-5-126119   ·   File #s:  333-122307, -16

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

 6/16/05  Wells Fargo Asset Securities Corp 424B5                  1:2.6M Wells Fargo Asset Secs… 2005-AR12 RR Donnelley/FA

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

Document/Exhibit                   Description                      Pages   Size 

 1: 424B5       Wells Fargo 2005-Ar12 Prospectus Supplement         HTML   2.21M 


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  Wells Fargo 2005-AR12 Prospectus Supplement  

PROSPECTUS SUPPLEMENT

(To Prospectus Dated June 14, 2005)

LOGO

Wells Fargo Mortgage Backed Securities 2005-AR12 Trust

Issuer

 

 

LOGO

Seller

 

$1,795,754,100

(Approximate)

Mortgage Pass-Through Certificates, Series 2005-AR12

Principal and interest payable monthly, commencing in July 2005

 

 

You should carefully consider the risk factors beginning on page S-14 of this prospectus supplement.

 

Neither the offered certificates nor the underlying mortgage loans are insured or guaranteed by any governmental agency or instrumentality or any other entity.

 

The offered certificates will represent interests in the trust only and will not represent interests in or obligations of the seller or any affiliate of the seller.

 

This prospectus supplement may be used to offer and sell the offered certificates only if accompanied by the prospectus.

 

 

The Trust Will Issue—

 

Ÿ Two groups consisting of thirteen classes of senior Class A Certificates.

 

Ÿ Six classes of Class B Certificates, all of which are subordinated to, and provide credit enhancement for, the Class A Certificates. Each class of Class B Certificates is also subordinated to each class of Class B Certificates, if any, with a lower number.

 

The classes of offered certificates are listed under the heading “Offered Certificates” in the table beginning on page S-4.

 

The yield to maturity of the interest only certificates, which are entitled to distributions of interest only prior to the distribution date in July 2009, will be particularly sensitive to the rate of principal payments on the applicable mortgage loans. If you are purchasing interest only certificates, you should consider the risk that a faster than anticipated rate of principal prepayments on the applicable mortgage loans will have a negative effect on the yield to maturity of your certificates and could result in the loss of all or part of your initial investment.

 

The Assets of the Trust Will Include—

 

Ÿ  Two loan groups of fully amortizing, one- to four-family, adjustable interest rate, residential first mortgage loans, substantially all of which have original terms to stated maturity of approximately 30 years. All of the mortgage loans were made at a reduced rate of interest as a result of the mortgagors’ banking relationship with Wells Fargo Bank, N.A. Certain of the mortgage loans will require only payments of interest until the first due date following the related first interest rate adjustment date.

 

Neither the SEC nor any state securities commission has approved the certificates offered by this prospectus supplement or determined that this prospectus supplement or the prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

The underwriter will purchase the offered certificates from the seller and offer them to investors at varying prices to be determined at the time of sale. The offered certificates will be available for delivery to investors on or about June 16, 2005. Total proceeds to the seller for the offered certificates will be approximately $1,783,161,518 before deducting expenses estimated at $435,000 plus accrued interest from June 1, 2005 to June 16, 2005.

 

Lehman Brothers

 

The date of this prospectus supplement is June 14, 2005


TABLE OF CONTENTS

PROSPECTUS SUPPLEMENT

 

 

     Page

Summary Information    S-6
Risk Factors    S-14

Prepayments May Adversely Affect Yield

   S-14

Geographic Concentration May Increase Risk of Loss Because of Adverse Economic Conditions or Natural Disasters

   S-15

Subordination of Super Senior Support Certificates and Class B Certificates Increases Risk of Loss

   S-15

Class B Certificates Provide Subordination for Both Certificate Groups

   S-15

Rights of Beneficial Owners May Be Limited By Book-Entry System for Certain Classes of Certificates

   S-16

The Variable Rate of Interest on the Offered Certificates Will Affect Your Yield

   S-16

There Is a Risk that Interest Payments on the Mortgage Loans May Be Insufficient to Pay Interest on Your Certificates

   S-16

Certificates May Not Be Appropriate For Certain Individual Investors

   S-17

Interest Only Loans May Have Higher Risk of Default or Rates of Prepayment

   S-17

There Are Risks Relating to Second Lien Mortgage Loans

   S-18

Residual Certificates May Have Adverse Tax Consequences

   S-18

United States Military Operations May Increase Risk of Relief Act Shortfalls

   S-18
Forward Looking Statements    S-19
Description of the Certificates    S-19

General

   S-19

Distributions

   S-19

Interest

   S-21

Principal (Including Prepayments)

   S-24

Calculation of Amount to be Distributed on the Certificates

   S-24

Allocation of Amount to be Distributed on the Class A Certificates

   S-27

Cross-Collaterization

   S-28

Additional Rights of the Residual Certificateholders

   S-29

Restrictions on Transfer of the Residual Certificates

   S-29

Periodic Advances

   S-29

Subordination of Class B Certificates

   S-29

Allocation of Losses

   S-30
Description of the Mortgage Loans    S-32

General

   S-32

Mortgage Loan Data Appearing in

    Appendix A

   S-33
     Page

Mortgage Loan Underwriting

   S-35

Mandatory Repurchase or Substitution of Mortgage Loans

   S-36

Optional Purchase or Substitution of Mortgage Loans

   S-36
Prepayment and Yield Considerations    S-36

General

   S-36

Sensitivities of Certain Classes of Certificates

   S-42

Yield Considerations with Respect to the Class B-2 and Class B-3 Certificates

   S-43

Wells Fargo Bank

   S-44
Pooling and Servicing Agreement    S-44

General

   S-44

Distributions

   S-44

Voting

   S-44

Trustee

   S-45

Custodian

   S-45

Master Servicer

   S-45

Optional Termination

   S-45
Servicing of the Mortgage Loans    S-46

The Servicers

   S-46

Servicing Compensation and Payment of Expenses

   S-46
Delinquency and Foreclosure Experience    S-47
Federal Income Tax Considerations    S-47

Regular Certificates

   S-48

Residual Certificates

   S-48
ERISA Considerations    S-50
Legal Investment    S-50
Secondary Market    S-51
Underwriting    S-51
Legal Matters    S-51
Use of Proceeds    S-51
Ratings    S-52

Index of Significant Prospectus Supplement Definitions

   S-53
Appendix A—Mortgage Loan Data     
Appendix B—Decrement Tables     

Appendix C—Senior Sensitivity Tables

    

Appendix D—Subordinate Sensitivity Tables

    

 

S-2


IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS

PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS

 

Information is provided to you about the offered certificates in two separate documents that progressively provide more detail:

 

    the accompanying prospectus, which provides general information, some of which may not apply to your certificates; and

 

    this prospectus supplement, which describes the specific terms of your certificates.

 

If the description of the terms of your certificates varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.

 

Cross-references are included in this prospectus supplement and the accompanying prospectus to captions in these materials where you can find further related discussions. The foregoing Table of Contents and the Table of Contents included in the accompanying prospectus provide the pages on which these captions are located.

 

You can find a listing of the pages where capitalized terms used in this prospectus supplement and the accompanying prospectus are defined under the caption “Index of Significant Prospectus Supplement Definitions” beginning on page S-53 in this document and under the caption “Index of Significant Definitions” beginning on page 102 in the accompanying prospectus. Any capitalized terms used but not defined in this prospectus supplement have the meanings assigned in the prospectus.

 

S-3


THE SERIES 2005-AR12 CERTIFICATES

 

Class


  Initial
Principal
Balance(1)


  Pass-
Through
Rate


  Principal Types(2)

  Interest Types(2)

  Initial Rating
of Offered
Certificates(3)


  Original
Form(4)


  Minimum
Denomination(5)


  Incremental
Denomination(5)


          S&P

  Moody’s

     
Offered Certificates                                
Class I-A-1   $ 227,658,000   (6)   Super Senior, Pass-Through   Variable Rate   AAA   Aaa   BE   $ 25,000   $ 1,000
Class I-A-2   $ 25,296,000   (6)   Super Senior Support, Pass-Through   Variable Rate   AAA   Aaa   BE   $ 100,000   $ 1,000
Class I-A-R   $ 100   (6)   Senior, Sequential Pay   Variable Rate   AAA   None   D   $ 100     N/A
Class II-A-1   $ 344,306,000   (7)   Senior, Sequential Pay   Variable Rate   AAA   Aaa   BE   $ 25,000   $ 1,000
Class II-A-2   $ 127,000,000   4.080%(8)   Super Senior, Sequential Pay   Variable Rate   AAA   Aaa   BE   $ 25,000   $ 1,000
Class II-A-3   $ 3,850,000   (7)   Super Senior Support, Sequential Pay   Variable Rate   AAA   None   BE   $ 100,000   $ 1,000
Class II-A-4   $ 77,277,000   (7)   Senior, Sequential Pay   Variable Rate   AAA   Aaa   BE   $ 25,000   $ 1,000
Class II-A-5   $ 368,971,000   (7)   Senior, Sequential Pay   Variable Rate   AAA   Aaa   BE   $ 25,000   $ 1,000
Class II-A-6   $ 485,300,000   (7)   Super Senior, Pass-Through   Variable Rate   AAA   Aaa   BE   $ 25,000   $ 1,000
Class II-A-7   $ 14,700,000   (7)   Super Senior Support, Pass-Through   Variable Rate   AAA   None   BE   $ 100,000   $ 1,000
Class II-A-8     (9)   (10)   Senior, Notional Amount   Variable Rate,
Interest Only
  AAA   Aaa   BE   $ 18,143,000   $ 1,000
Class II-A-9   $ 70,000,000   (7)   Super Senior, Sequential Pay   Variable Rate   AAA   Aaa   BE   $ 25,000   $ 1,000
Class II-A-10   $ 5,328,000   (7)   Super Senior Support, Sequential Pay   Variable Rate   AAA   None   BE   $ 100,000   $ 1,000
Class B-1   $ 31,615,000   (11)   Subordinated   Variable Rate   AA   None   BE   $ 100,000   $ 1,000
Class B-2   $ 9,033,000   (11)   Subordinated   Variable Rate   A   None   BE   $ 100,000   $ 1,000
Class B-3   $ 5,420,000   (11)   Subordinated   Variable Rate   BBB   None   BE   $ 100,000   $ 1,000
Non-Offered Certificates                            
Class B-4   $ 5,419,000   (11)   Subordinated   Variable Rate   N/A   N/A   N/A     N/A     N/A
Class B-5   $ 2,710,000   (11)   Subordinated   Variable Rate   N/A   N/A   N/A     N/A     N/A
Class B-6   $ 2,710,761   (11)   Subordinated   Variable Rate   N/A   N/A   N/A     N/A     N/A

(1) Approximate. The initial principal balances are subject to adjustment as described in this prospectus supplement.
(2) See “Description of the Certificates — Categories of Classes of Certificates” in the prospectus for a description of the principal and interest categories listed.
(3)   A description of the ratings of the offered certificates is set forth under the heading “Rating of Certificates” in the Summary Information and under “Ratings” in the main text of this prospectus supplement.
(4)   See “Description of the Certificates — Definitive Form” and “— Book-Entry Form” in the prospectus for a description of the forms of certificates. Book-entry form is designated as “BE” and definitive form is designated as “D” in the table above.
(5)   Denominations for interest only certificates are expressed in notional amount. If necessary, in order to aggregate the initial principal balance or notional amount of a class, one certificate of the class will be issued in an incremental denomination of less than that shown.
(6)   The pass-through rate with respect to each distribution date will be a per annum rate equal to the net WAC (as defined in this prospectus supplement under “Description of the Certificates — Interest”) of the mortgage loans in the first loan group. For the initial distribution date in July 2005, this rate is expected to be approximately 4.357% per annum.
(7)   The pass-through rate with respect to each distribution date will be a per annum rate equal to the net WAC of the mortgage loans in the second loan group. For the initial distribution date in July 2005, this rate is expected to be approximately 4.322% per annum.
(8)   The pass-through rate with respect to each distribution date prior to the distribution date in July 2009 will be the lesser of (i) the per annum rate set forth in the table above and (ii) a per annum rate equal to the net WAC of the mortgage loans in the second loan group. On and after the distribution date in July 2009, the pass-through rate with respect to each distribution date will be a per annum rate equal to the net WAC of the mortgage loans in the second loan group.

 

S-4


(9)   The Class II-A-8 Certificates are interest only certificates, have no principal balance and will bear interest on their notional amount, initially approximately $127,000,000, as described in this prospectus supplement under “Description of the Certificates — Interest.” On and after the distribution date in July 2009, the notional amount of the interest only certificates will be zero.
(10)   The pass-through rate with respect to each distribution date prior to the distribution date in July 2009 will be a per annum rate equal to the excess, if any, of (i) the net WAC of the mortgage loans in the second loan group over (ii) the pass-through rate for the Class II-A-2 Certificates. On and after the distribution date in July 2009, the pass-through rate will be zero and the Class II-A-8 Certificates will be entitled to no further distributions of interest. For the initial distribution date in July 2005, this rate is expected to be approximately 0.242% per annum.
(11)   The pass-through rate with respect to each distribution date will be a per annum rate equal to the weighted average (based on the group subordinate amount for each loan group, as defined in this prospectus supplement under “Description of the Certificates — Interest”) of the net WACs of both loan groups. For the initial distribution date in July 2005, this rate is expected to be approximately 4.327% per annum.

 

S-5


 

SUMMARY INFORMATION

 

Ÿ   This summary highlights selected information from this document, but does not contain all of the information that you should consider in making your investment decision. Please read this entire prospectus supplement and the accompanying prospectus carefully for additional detailed information about the offered certificates.

 

 

RELEVANT PARTIES

 

Issuer

 

The Wells Fargo Mortgage Backed Securities 2005-AR12 Trust.

 

Seller

 

Wells Fargo Asset Securities Corporation.

 

Master Servicer

 

Wells Fargo Bank, N.A.

 

Servicers

 

Initially, Wells Fargo Bank, N.A. Any other servicer will be approved by the master servicer.

 

Trustee

 

Wachovia Bank, National Association.

 

Custodian

 

Wells Fargo Bank, N.A.

 

RATING OF CERTIFICATES

 

The trust will not issue the offered certificates unless they have received at least the ratings set forth in the table beginning on page S-4.

 

Ÿ   The ratings of the rating agencies are not recommendations to buy, sell or hold the certificates rated. A rating may be revised or withdrawn at any time by the assigning rating agency.

 

Ÿ   The ratings do not address the possibility that, as a result of principal prepayments, the yield on your certificate may be lower than anticipated.

 

Ÿ   The ratings do not address the possibility that, if you hold an interest only certificate, you may not recover your initial investment as a result of principal prepayments on the applicable mortgage loans.

 

See “— Effects of Prepayments on Your Investment Expectations” below and “Ratings” in this prospectus supplement.

 

DESCRIPTION OF CERTIFICATES

 

The certificates consist of:

 

Ÿ   the thirteen classes of senior Class A Certificates designated as “Senior,” “Super Senior” and “Super Senior Support” certificates in the table beginning on page S-4. The Class A Certificates will be divided into two certificate groups. The first certificate group will consist of three classes of Class A Certificates, each designated by the numeral “I” and the second certificate group will consist of ten classes of Class A Certificates, each designated by the numeral “II”; and

 

Ÿ   the six classes of junior Class B Certificates designated as “Subordinated” certificates in the table beginning on page S-4.

 

Only the Class A Certificates and the Class B-1, Class B-2 and Class B-3 Certificates are being offered by this prospectus supplement and the accompanying prospectus. The Class B-4, Class B-5 and Class B-6 Certificates are not being offered pursuant to this prospectus supplement and the accompanying prospectus, and the seller may retain or sell such classes. Information provided with respect to the Class B-4, Class B-5 and Class B-6 Certificates is included solely to aid your understanding of the offered certificates.

 

See the table beginning on page S-4 for more information with respect to each class of certificates.

 

Cut-Off Date

 

June 1, 2005.

 

Closing Date

 

On or about June 16, 2005.

 

Distribution Dates

 

The 25th day of each month, or the following business day if the 25th day is not a business day, commencing in July 2005.

 

S-6


 

Principal Balance of the Certificates

 

The certificates will have an approximate total initial principal balance of $1,806,593,861. Any difference between the total principal balance of the certificates as of the date of issuance of the certificates and the approximate total initial principal balance of the certificates as of the date of this prospectus supplement will not exceed 5% of the total initial principal balance of the certificates. Any such difference will be allocated among the various classes of certificates so as to materially retain the characteristics of the offered certificates described in this prospectus supplement.

 

Interests in Mortgage Loans

 

The Class A Certificates in each certificate group will represent interests in the mortgage loans in the related loan group.

 

The Class B Certificates will represent interests in the mortgage loans of both loan groups.

 

The relative interests in the mortgage loans in a loan group represented by the Class A Certificates of the related certificate group and the Class B Certificates are subject to change over time because:

 

Ÿ   certain unscheduled principal payments on the mortgage loans in a loan group will be disproportionately allocated to the Class A Certificates of the related certificate group for a specified period;

 

Ÿ   certain losses and certain shortfalls on the mortgage loans in a loan group will be allocated first to the classes of Class B Certificates in reverse numerical order prior to the allocation of such losses and shortfalls to the Class A Certificates of the related certificate group, as discussed in “Description of the Certificates — Distributions” and “— Subordination of Class B Certificates” in this prospectus supplement; and

 

Ÿ   under specific circumstances, certain scheduled and unscheduled principal payments on the mortgage loans of a loan group otherwise distributable to the Class B Certificates may be allocated to the unrelated certificate group of Class A Certificates, as discussed in “Description of the Certificates—Cross-Collateralization” in this prospectus supplement.

 

Forms of Certificates; Denominations

 

Your certificates will be issued either in book-entry form or in fully registered, certificated form and in the minimum denomination and the incremental denomination set forth in the table beginning on page S-4. The offered certificates are not intended to be directly or indirectly held or beneficially owned by anyone in amounts lower than such minimum denominations.

 

MORTGAGE POOL

 

The assets of the trust are expected to consist of mortgage loans divided into two loan groups of approximately 982 mortgage loans in the first loan group with an aggregate unpaid principal balance as of the cut-off date of approximately $261,181,350 and approximately 2,384 mortgage loans in the second loan group with an aggregate unpaid principal balance as of the cut-off date of approximately $1,545,412,512. The mortgage loans in both loan groups, which are the source of distributions to holders of the certificates, will consist of conventional, adjustable interest rate, monthly pay, fully amortizing, one- to four-family, residential first mortgage loans, substantially all of which have original terms to stated maturity of approximately 30 years. Some of the mortgage loans in each loan group were made in connection with the relocation of employees of various corporate employers. Some of these corporate employers participate in Wells Fargo Bank, N.A.’s relocation program.

 

The mortgage loans in a loan group will be, except to the extent of cross-collateralization payments described herein, the primary source of distributions to the holders of the Class A Certificates in the related certificate group and the source of a portion of the distributions to holders of the Class B Certificates.

 

As of the cut-off date, all of the mortgage loans in the first loan group have original principal balances that conform to Fannie Mae and Freddie Mac guidelines and all of the mortgage loans in the second loan group have original principal balances that conform to or exceed Fannie Mae and Freddie Mac guidelines.

 

The mortgage loans provide for a fixed interest rate during an initial period of approximately five years and thereafter provide for adjustments to that interest rate on an annual basis. The interest rate of each mortgage loan will adjust to equal the sum of the index and a gross margin. Interest rate adjustments will be subject to certain limitations stated in the related mortgage note on increases and decreases for any adjustment date. In addition, interest rate adjustments will be subject to a lifetime maximum mortgage interest rate and a minimum mortgage interest rate which will be the related gross margin. The index will be the weekly average yield on United States Treasury Securities adjusted to a constant maturity of one year

 

S-7


 

as described under “Description of the Mortgage Loans” in this prospectus supplement.

 

All of the mortgage loans are relationship ARMs which have interest rates during the fixed-rate period which are 0.125% to 0.500% per annum lower than the rates generally applicable to comparable loans made to mortgagors who do not have a banking relationship with Wells Fargo Bank, N.A.

 

Certain of the mortgage loans will require only payments of interest until the first due date following the related first adjustment date.

 

See “Appendix A” and “Description of the Mortgage Loans” in this prospectus supplement.

 

Changes to Mortgage Pool

 

The seller may remove mortgage loans from a loan group, or may make substitutions for certain mortgage loans, in advance of the closing date.

 

After the issuance of the certificates, the seller may remove certain mortgage loans from a loan group through repurchase or, under certain circumstances, may make substitutions for certain mortgage loans.

 

See “Description of the Mortgage Loans—Mandatory Repurchase or Substitution of Mortgage Loans” and “—Optional Purchase or Substitution of Mortgage Loans” in this prospectus supplement.

 

Optional Termination of the Trust

 

The seller may, subject to certain conditions including the then-remaining size of the pool, purchase all outstanding mortgage loans in the pool and thereby effect early retirement of the certificates. See “Pooling and Servicing Agreement — Optional Termination” in this prospectus supplement.

 

DISTRIBUTIONS OF PRINCIPAL AND INTEREST TO CERTIFICATEHOLDERS

 

On each distribution date the amount available for distribution on the certificates relating to each loan group, which consists of those payments, recoveries, advances and other receipts in respect of the mortgage loans in the loan group which are available for distribution on such date, will be distributed generally in the following order of priority:

 

Ÿ   first, pro rata, to the holders of the Class A Certificates of the related certificate group, in respect of interest which they are entitled to receive on such distribution date;

 

Ÿ   second, to the holders of the Class A Certificates of the related certificate group in respect of principal which they are entitled to receive on such distribution date; and

 

Ÿ   third, to the holders of the Class B Certificates in numerical order beginning with the Class B-1 Certificates in respect of interest and principal which they are entitled to receive on such distribution date.

 

Interest Distributions

 

A class will accrue interest for each interest accrual period in an amount equal to:

 

Ÿ    1/12th of the pass-through rate for the class multiplied by the outstanding principal balance or notional amount of such class on the related distribution date minus

 

Ÿ   the amount of certain interest shortfalls arising from the timing of prepayments on the mortgage loans and the application of the Servicemembers Civil Relief Act and comparable state legislation and interest losses allocated to the class, as described under “Description of the Certificates — Interest” in this prospectus supplement.

 

The interest only certificates will not be entitled to any distributions of interest on and after the distribution date in July 2009.

 

The allocation of interest distributions among the Class A Certificates of a certificate group will be made as described under “Description of the Certificates — Distributions” and “— Interest” in this prospectus supplement.

 

Principal Distributions

 

The calculation of the amount of principal which each class of offered certificates is entitled to receive on each distribution date and the priority of principal distributions among the Class A Certificates of each certificate group are described under “Description of the Certificates —  Distributions” and “— Principal (Including Prepayments)” in this prospectus supplement.

 

Credit Enhancement

 

The rights of the holders of each class of Class B Certificates to receive distributions will be subordinated to the rights of the holders of the Class A Certificates and the holders of the classes of Class B Certificates, if any, with lower numerical designations to receive distributions.

 

In general, the protection afforded the holders of more senior classes of certificates by means of this subordination will be effected in two ways:

 

Ÿ  

by the preferential right of the holders of such classes to receive, prior to any distribution being

 

S-8


 

  made on any distribution date to the holders of the more junior classes of certificates, the amounts of interest and principal due on the more senior classes of certificates and, if necessary, by the right of such more senior holders to receive future distributions on the mortgage loans that would otherwise have been allocated to the holders of the more junior classes of certificates; and

 

Ÿ   by the allocation of losses resulting from the liquidation of defaulted mortgage loans or the bankruptcy of mortgagors to the more junior classes of certificates in inverse order of seniority, until their respective principal balances have been reduced to zero, prior to the allocation of such losses to the more senior classes of certificates.

 

Credit support for the Class A Certificates in both certificate groups is provided by subordination of the Class B Certificates as follows:

 

LOGO

 

The approximate initial credit support percentages set forth in the preceding chart show the initial principal balance of the class or classes of Certificates subordinate to a class or classes as a percentage of the aggregate unpaid principal balance of the mortgage loans as of the cut-off date.

 

In addition, in order to increase the period during which the principal balances of the Class B Certificates remain available as credit enhancement to the Class A Certificates, a disproportionate amount of prepayments and unscheduled principal receipts with respect to the mortgage loans of each loan group will be allocated to the Class A Certificates of the related certificate group in the aggregate. This allocation will accelerate the amortization of the Class A Certificates of such certificate group while, in the absence of losses due to the liquidation of defaulted mortgage loans or losses resulting from the bankruptcy of mortgagors, increasing the percentage interest in the principal balance of the mortgage loans in the related loan group evidenced by the Class B Certificates. See “Description of the Certificates” and “Prepayment and Yield Considerations” in this prospectus supplement.

 

After the principal balances of the Class B Certificates have been reduced to zero, the principal portion of all losses attributable to a loan group will be allocated to the Class A Certificates of the related certificate group. The principal portion of any losses borne by the Class A Certificates of a certificate group will be shared pro rata by the classes of Class A Certificates of such certificate group based on their then-outstanding principal balances and the interest portion of such losses will be shared pro rata by the Class A Certificates of such certificate group based on interest accrued. However, the share of principal losses allocated to a class of super senior certificates will be borne by the related class of super senior support certificates, together with such class of super senior support certificates’ own share of losses. To this extent, a class of super senior support certificates is subordinate to its related class of super senior certificates. See “Description of the Certificates — Interest” and “— Subordination of Class B Certificates — Allocation of Losses” in this prospectus supplement.

 

If you are purchasing Class B Certificates, you should be aware that losses from both loan groups will be allocated to your certificates before being borne by the Class A Certificates of either certificate group. If you are purchasing Class A Certificates of a certificate group, you should be aware that if the mortgage loans in the unrelated loan group experience a disproportionate amount of losses, the principal balances of the Class B Certificates may be reduced to zero sooner than you anticipated, which increases the likelihood that your Class A Certificates may experience losses.

 

S-9


 

See “Description of the Certificates — Distributions” and “— Subordination of Class B Certificates” in this prospectus supplement.

 

EFFECTS OF PREPAYMENTS ON YOUR INVESTMENT EXPECTATIONS

 

The rate of prepayments on the mortgage loans will affect the investment performance of the offered certificates.

 

The offered certificates were structured assuming, among other things, that prepayments on the mortgage loans occur at a constant rate of 15% of the constant prepayment rate described in this prospectus supplement under “Prepayment and Yield Considerations.” However, no one can predict the actual rate of prepayment of principal on the mortgage loans.

 

In deciding whether to purchase any offered certificates, you should make an independent decision as to the appropriate prepayment assumptions to use. If prepayments on the applicable mortgage loans are higher or lower than you anticipate, the investment performance of the offered certificates may vary materially and adversely from your investment expectations.

 

Factors affecting the rate of prepayment on the mortgage loans and the manner in which prepayments are allocated among the classes of certificates of a certificate group are discussed in this prospectus supplement under “Description of the Certificates — Principal (Including Prepayments)” and “Prepayment and Yield Considerations.”

 

The actual yield on your certificates may not be equal to the yield you anticipated at the time of purchase. In addition, even if the actual yield is equal to the yield you anticipated at the time of purchase, the total return on investment you expected or the expected weighted average life of your certificates may not be realized. These effects are summarized below.

 

Yield

 

The actual yield on your certificates depends on the:

 

Ÿ   pass-through rate, if any;

 

Ÿ   price paid;

 

Ÿ absence or occurrence of interest shortfalls or losses;

 

Ÿ   absence or occurrence of principal losses; and

 

Ÿ   rate and timing of principal prepayments.

 

If you purchase offered certificates, your yield, absent shortfalls or losses, will primarily be a function of the price paid and the rate and timing of prepayments on the applicable mortgage loans.

 

Ÿ If you purchase your certificate at an amount equal to its unpaid principal balance — that is, at “par”— your effective yield will approximate the pass-through rate on that certificate.

 

Ÿ If you pay less or more than the unpaid principal balance of your certificate — that is, buy the certificate at a “discount” or “premium,” respectively — then your effective yield will be higher or lower, respectively, than the pass-through rate on the certificate, because such discount or premium will be amortized over the life of the certificate.

 

Ÿ Any deviation in the actual rate of prepayments on the applicable mortgage loans from the rate you assumed will affect the period of time over which, or the rate at which, any discount or premium will be amortized and, consequently, will cause your actual yield to differ from that which you anticipated.

 

In addition, the pass-through rate on each certificate may decrease, and may decrease significantly, after the mortgage interest rates on the applicable mortgage loans begin to adjust as a result of, among other factors, the dates of adjustment, the gross margins and changes in the index. Moreover, although each mortgage loan has a maximum mortgage interest rate, none of the mortgage loans has a specified floor. Accordingly, the minimum mortgage interest rates to which the mortgage loans may adjust will be the applicable gross margin. Also, if, despite increases in the index, the mortgage interest rate on any mortgage loan cannot increase due to a maximum mortgage interest rate limitation or a periodic cap, the yield on a certificate could be adversely affected. Because the pass-through rates on the certificates will be based on the net WAC of the mortgage loans in the related loan group, or both loan groups in the case of the Class B Certificates, disproportionate prepayments on the mortgage loans in the related loan group, or either loan group in the case of the Class B Certificates, having net mortgage interest rates higher or lower than the then-current pass-through rates on the

 

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related certificates may affect the pass-through rate for those certificates for future periods and the yield on those certificates. In addition, the interest only certificates will also be affected by disproportionate principal payments on the mortgage loans in the second loan group with higher net mortgage interest rates because the pass-through rate for the interest only certificates is equal to the difference between the net WAC of the mortgage loans in the second loan group and the pass-through rate on the Class II-A-2 Certificates. For any distribution date on which the pass-through rate on the Class II-A-2 Certificates is equal to the net WAC of the mortgage loans in the second loan group, the interest only certificates will receive no interest distribution for such distribution date.

 

If you purchase interest only certificates, your yield will be highly sensitive to the overall rate of prepayment on the applicable mortgage loans. In addition, the yield on the interest only certificates will be particularly affected by the timing of prepayments on the applicable mortgage loans because the interest only certificates will receive no distributions of interest on or after the distribution date in July 2009.

 

The particular sensitivity of the interest only certificates to prepayments is displayed in the table appearing in Appendix C.

 

The yield to maturity of classes subordinated to other classes will be more sensitive to losses due to liquidations of the mortgage loans and the timing thereof than the classes to which they are subordinated.

 

If you are purchasing super senior support certificates, which are subordinate to the related super senior certificates, after the Class B Certificates are no longer outstanding, you should consider this increased sensitivity to losses on your yield to maturity.

 

The sensitivities of the yields to maturity of the Class B-2 and Class B-3 Certificates to losses are illustrated in the tables appearing in Appendix D. These illustrations are based on default, loss and other assumptions which are unlikely to match actual experience on the mortgage loans; therefore, your results will vary.

 

If you are purchasing offered certificates at a discount, you should consider the risk that a slower than anticipated rate of principal payments on the mortgage loans in the related loan group, or either loan group in the case of the Class B Certificates, will have a negative effect on the yield to maturity of your certificates.

 

If you are purchasing offered certificates at a premium, or if you are purchasing interest only certificates, you should consider the risk that a faster than anticipated rate of principal payments on the mortgage loans in the related loan group will have a negative effect on the yield to maturity of your certificates and that a rapid rate of principal payments on the mortgage loans in the related loan group could result in the loss of all or part of your initial investment.

 

Reinvestment Risk

 

As stated above, if you purchase an offered certificate at par, fluctuations in the rate of distributions of principal will generally not affect your yield to maturity. However, the total return on your investment, even if you purchase your certificates at par, will be reduced if principal distributions received on your certificates cannot be reinvested at a rate as high as the stated pass-through rate.

 

You should consider the risk that rapid rates of prepayments on the mortgage loans may coincide with periods of low prevailing market interest rates. During periods of low prevailing market interest rates, mortgagors may be expected to prepay or refinance mortgage loans that carry interest rates higher than then-current interest rates for mortgage loans. Consequently, the amount of principal distributions available to you for reinvestment at such low prevailing interest rates may be relatively large.

 

Moreover, some mortgagors who prefer the certainty provided by fixed interest rate mortgage loans may nevertheless obtain adjustable interest rate mortgage loans (especially if they are able to obtain a relationship ARM, which has a below market interest rate during the fixed-rate period) at a time when they regard the mortgage interest rates (and, therefore, the payments) on fixed interest rate mortgage loans as unacceptably high. These mortgagors may be induced to refinance adjustable interest rate mortgage loans when the mortgage interest rates and monthly payments on comparable fixed interest rate mortgage loans decline to levels which these mortgagors regard as acceptable, even if such mortgage interest rates and

 

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monthly payments may be significantly higher than current mortgage interest rates and monthly payments on the mortgagors’ adjustable interest rate mortgage loans.

 

Conversely, slow rates of prepayments on the mortgage loans may coincide with periods of high prevailing market interest rates. During such periods, it is less likely that mortgagors will elect to prepay or refinance mortgage loans and, therefore, the amount of principal distributions available to you for reinvestment at such high prevailing interest rates may be relatively small.

 

Weighted Average Life Volatility

 

One indication of the impact of varying prepayment speeds on a security is the change in its weighted average life.

 

Ÿ   The “weighted average life” of an offered certificate, other than an interest only certificate, is the average amount of time that will elapse between the date of issuance of the certificate and the date on which each dollar in reduction of the principal balance of the certificate is distributed to the investor.

 

Ÿ   The “weighted average life” of an interest only certificate is the average amount of time that will elapse between the date of issuance of the certificate and the date on which each dollar reduction in the notional amount of such certificate occurs.

 

Low rates of prepayment on the mortgage loans in the related loan group, or either loan group in the case of the Class B Certificates, may result in the extension of the weighted average life of a certificate. High rates of prepayment may result in the shortening of the weighted average life of a certificate.

 

In general, if you purchase your certificates at par and the weighted average life of your certificates is extended beyond your anticipated time period, the market value of your certificates may be adversely affected even though the yield to maturity on your certificates is unaffected.

 

The sensitivities of the weighted average lives of the offered certificates to prepayments are illustrated in the tables appearing in Appendix B. These illustrations are based on prepayment and other assumptions which are unlikely to match the actual experience on the mortgage loans. Therefore, your results will vary.

 

See “Risk Factors — Prepayments May Adversely Affect Yield” and “—Interest Only Loans May Have Higher Risks of Default or Rates of Prepayment” and “Prepayment and Yield Considerations” in this prospectus supplement.

 

FEDERAL INCOME TAX STATUS

 

For federal income tax purposes, the trust estate will consist of three separate REMICs, an upper-tier REMIC, a middle-tier REMIC and a lower-tier REMIC.

 

Ÿ   The offered certificates (other than the Class I-A-R Certificates) and the Class B-4, Class B-5 and Class B-6 Certificates will constitute “regular interests” in the upper-tier REMIC and will be treated as newly-originated debt instruments for most federal income tax purposes.

 

Ÿ   The Class I-A-R Certificates are residual certificates. The Class I-A-R Certificates will be the sole “residual interest” in each of the upper-tier REMIC, middle-tier REMIC and lower-tier REMIC.

 

You must report income received on your certificates as it accrues from distribution date to distribution date, even if it is before such income is distributed in cash to you.

 

Certain classes of certificates may be issued with “original issue discount.” If your class of certificates is issued with original issue discount, you must report original issue discount income over the life of your certificate, often well before such income is distributed in cash to you. See “Federal Income Tax Considerations” in this prospectus supplement.

 

The residual certificates will not be treated as debt instruments for federal income tax purposes. Instead, if you are a holder of a residual certificate, you must include the taxable income or loss of each REMIC in determining your federal taxable income. You may have to use funds other than distributions on your certificate to meet the tax liabilities resulting from the ownership of a residual certificate.

 

In addition, certain transfers of the residual certificates may be disregarded for federal tax purposes, with the transferor continuing to have tax liabilities for the transferred certificates. See “Description of the Certificates — Restrictions on Transfer of the Residual Certificates” and “Federal Income Tax Considerations” in this prospectus supple

 

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ment and “Certain Federal Income Tax Consequences — Federal Income Tax Consequences for REMIC Certificates” in the prospectus.

 

ERISA CONSIDERATIONS

 

If you are a fiduciary of a retirement plan or other employee benefit plan or arrangement subject to ERISA, the Internal Revenue Code or any federal, state or local law which is, to a material extent, similar to ERISA or the Internal Revenue Code, you should carefully review with your legal advisors whether the purchase or holding of offered certificates could give rise to a transaction prohibited or not otherwise permissible under the rules or regulations referred to above.

 

The residual certificates may not be purchased by or transferred to a plan or a person acting on behalf of or investing the assets of a plan. See “Description of the Certificates — Restrictions on Transfer of the Residual Certificates” and “ERISA Considerations” in this prospectus supplement.

 

LEGAL INVESTMENT

 

Ÿ   The Class A and Class B-1 Certificates will constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984 as amended, so long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization.

 

Ÿ   The Class B-2 and Class B-3 Certificates will not constitute “mortgage related securities” under this act.

 

If your investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities, you may be subject to restrictions on investment in the offered certificates and should consult your own legal, tax and accounting advisors in determining the suitability of and consequences to you of the purchase, ownership and disposition of the offered certificates.

 

See “Legal Investment” in the prospectus.

 

MONTHLY REPORTS AND ADDITIONAL INFORMATION

 

The master servicer will prepare, and the trustee will make available to certificateholders via the internet, the monthly report described under “Reports to Certificateholders” and “The Pooling and Servicing Agreement — Reports to Certificateholders” in the prospectus. In addition, the seller intends to make the information contained in the monthly report, together with certain additional information, available to any interested investor via the internet and other electronic means described under “Where You Can Find More Information” in the prospectus.

 

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RISK FACTORS

 

Prepayments May Adversely Affect Yield

 

The rate of distributions of principal and the yield to maturity on your certificates will be directly related to the rate of payments of principal on the mortgage loans in the related loan group, or either loan group in the case of the Class B Certificates, and the amount and timing of mortgagor defaults resulting in realized losses. Mortgagors are permitted to prepay the mortgage loans, in whole or in part, at any time without penalty. The rate of principal payments on the mortgage loans will be affected by, among other things:

 

    the amortization schedules of the mortgage loans;

 

    the rate of principal prepayments (including partial prepayments and those resulting from refinancing) thereon by mortgagors;

 

    liquidations of defaulted mortgage loans;

 

    repurchases of mortgage loans by the seller as a result of defective documentation or breaches of representations and warranties;

 

    optional purchases by the seller of defaulted mortgage loans; and

 

    the optional purchase by the seller of all of the mortgage loans in connection with the termination of the trust estate.

 

See “Prepayment and Yield Considerations,” “Pooling and Servicing Agreement — Optional Termination” and “Description of the Mortgage Loans — Mandatory Repurchase or Substitution of Mortgage Loans” herein and “The Pooling and Servicing Agreement — Assignment of Mortgage Loans to the Trustee,” “— Optional Purchases” and “— Termination; Optional Purchase of Mortgage Loans” in the prospectus.

 

The rate of payments (including prepayments) on pools of mortgage loans is influenced by a variety of economic, geographic, social and other factors.

 

    If prevailing rates for similar mortgage loans fall below the mortgage interest rates on the mortgage loans, the rate of prepayment would generally be expected to increase.

 

    Conversely, if interest rates on similar mortgage loans rise above the mortgage interest rates on the mortgage loans, the rate of prepayment would generally be expected to decrease.

 

The rate of prepayment on the mortgage loans may also be influenced by programs offered by mortgage originators (including Wells Fargo Bank, N.A.), on a general or targeted basis, to encourage refinancing. See “Prepayment and Yield Considerations — Refinancings” in the prospectus.

 

If you are purchasing offered certificates at a discount, you should consider the risk that if principal payments on the mortgage loans in the related loan group, or either loan group in the case of the Class B Certificates, occur at a rate slower than you expected, there will be a negative effect on the yield to maturity of your certificates.

 

If you are purchasing offered certificates at a premium, or if you are purchasing interest only certificates, you should consider the risk that if principal payments on the mortgage loans in the related loan group occur at a rate faster than you expected, there will be a negative effect on the yield to maturity of your certificates. If you are purchasing interest only certificates, you should consider the risk that a rapid rate of prepayment on the mortgage loans in the related loan group could result in your failure to recover your initial investment.

 

In addition, the interest only certificates will not be entitled to any distributions of interest on and after the distribution date in July 2009.

 

The particular sensitivity of the interest only certificates is separately displayed in the table appearing in Appendix C.

 

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See “—Interest Only Loans May Have Higher Risk of Default or Rates of Prepayment” below and “Summary Information — Effects of Prepayments on Your Investment Expectations” and “Prepayment and Yield Considerations” herein.

 

Geographic Concentration May Increase Risk of Loss Because of Adverse Economic Conditions or Natural Disasters

 

The yield to maturity on your certificates may be affected by the geographic concentration of the mortgaged properties securing the mortgage loans. Certain regions of the United States from time to time will experience weaker regional economic conditions or might experience weaker housing markets or inflated housing prices. Any concentration of the mortgage loans in such a region may present risk considerations in addition to those generally present for similar mortgage-backed securities without such concentration. In addition, certain regions have experienced or may experience natural disasters, including earthquakes, fires, floods and hurricanes, which may adversely affect property values. Any deterioration in housing prices in the regions in which there is a significant concentration of mortgaged properties, as well as the other regions in which the mortgaged properties are located, and any deterioration of economic conditions in such regions which adversely affects the ability of borrowers to make payments on the mortgage loans may increase the likelihood of delinquencies and losses on the mortgage loans. Such losses, if they occur, may have an adverse effect on the yield to maturity of your certificates, especially if they are subordinated and particularly if they are Class B-3 Certificates. Also, any increase in the market value of properties located in the regions in which the mortgaged properties are located, would reduce the loan-to-value ratios and could, therefore, make alternative sources of financing available to the mortgagors at lower interest rates, which could result in an increased rate of prepayment of the mortgage loans. The concentrations of mortgaged properties by state and geographic areas are identified in Appendix A.

 

Subordination of Super Senior Support Certificates and Class B Certificates Increases Risk of Loss

 

If you purchase a class of super senior support certificates, you should consider the risk that on or after the date on which the aggregate principal balance of the Class B Certificates has been reduced to zero, the principal portion of realized losses allocated to the related class of super senior certificates will be borne by your class of super senior support certificates (in addition to the principal portion of realized losses allocated to such class of super senior support certificates) and not by the related class of super senior certificates so long as the principal balance of such class of super senior support certificates remains outstanding. See “Description of the Certificates — Subordination of Class B Certificates — Allocation of Losses” herein.

 

The rights of the holders of each class of Class B Certificates to receive distributions will be subordinated to such rights of the holders of the Class A Certificates and the holders of the lower-numbered classes of Class B Certificates, if any. In addition, realized losses will be allocated to the Class B Certificates in the reverse order in which they are entitled to distributions of principal before being allocated to the Class A Certificates. Accordingly, if you are purchasing Class B Certificates, you will be more likely to experience losses as a result of the occurrence of losses or interest shortfalls on the mortgage loans. See “Description of the Certificates — Subordination of Class B Certificates” herein.

 

Class B Certificates Provide Subordination for Both Certificate Groups

 

Because the Class B Certificates provide credit support for both certificate groups, the principal balances of the Class B Certificates could be reduced to zero as a result of a disproportionate amount of realized losses on the mortgage loans in one loan group. Therefore, realized losses on the mortgage loans in one loan group will reduce the subordination provided by the Class B Certificates to the unrelated certificate group of Class A Certificates and increase the likelihood that realized losses may be allocated to such unrelated certificate group of Class A Certificates.

 

See “Description of the Certificates — Subordination of Class B Certificates — Allocation of Losses” herein.

 

Under certain circumstances, principal otherwise payable to the Class B Certificates will be paid to the Class A Certificates as described under “Description of the Certificates — Cross-Collateralization” herein.

 

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Rights of Beneficial Owners May Be Limited By Book-Entry System for Certain Classes of Certificates

 

Transactions in the book-entry certificates generally can only be carried out through DTC, DTC participants and indirect DTC participants. If you are a beneficial owner of book-entry certificates, your ability to pledge your certificates, and the liquidity of your certificates in general, may be limited due to the fact that you will not have a physical certificate. In addition, you may experience delays in receiving payments on your certificates. See “Risk Factors — Book-Entry Certificates May Experience Decreased Liquidity and Payment Delay” and “Description of the Certificates — Book-Entry Form” in the prospectus.

 

The Variable Rate of Interest on the Offered Certificates Will Affect Your Yield

 

The mortgage interest rate on each mortgage loan will be fixed for an initial period of approximately five years from the date of origination of such mortgage loan. Thereafter, each mortgage loan provides for adjustments to the mortgage interest rate on an annual basis. The mortgage interest rate on each mortgage loan will adjust to equal the sum of the index and a gross margin. Mortgage interest rate adjustments will be subject to the limitations stated in the mortgage note with respect to increases and decreases for any adjustment (i.e., a “periodic cap”). In addition, the mortgage interest rate will be subject to a lifetime maximum mortgage interest rate. See “Description of the Mortgage Loans” herein.

 

The pass-through rate on each offered certificate may decrease, and may decrease significantly, after the mortgage interest rates on the mortgage loans in the related loan group, or either loan group in the case of the Class B Certificates, begin to adjust as a result of, among other factors, the dates of adjustment, the gross margins and changes in the index. The mortgage interest rates on the mortgage loans in a loan group will not all begin to adjust on the same date. Therefore, the mortgage interest rates of some of the mortgage loans in a loan group may still be in their fixed-rate period while the mortgage interest rates on other mortgage loans in such loan group may have begun to adjust. The number of months until the first adjustment dates of the mortgage loans in each loan group are set forth in the tables appearing in Appendix A. Moreover, although each mortgage loan has a maximum mortgage interest rate, none of the mortgage loans has a specified floor. Accordingly, the minimum mortgage interest rate to which the mortgage loans may adjust will be the applicable gross margin. In addition, if, despite increases in the index, the mortgage interest rate on any mortgage loan in the related loan group, or either loan group in the case of the Class B Certificates, cannot increase due to a maximum mortgage interest rate limitation or a periodic cap, the yield on such offered certificates could be adversely affected. In addition, because the pass-through rate on each offered certificate will be based on the net WAC of the mortgage loans in the related loan group, or both loan groups in the case of the Class B Certificates, disproportionate principal payments on the mortgage loans in the related loan group, or either loan group in the case of the Class B Certificates, having net mortgage interest rates higher or lower than the then-current pass-through rate on a class of offered certificates may affect the pass-through rate for such offered certificates for future periods and the yield on such offered certificates. The interest only certificates will also be affected by the disproportionate principal payments on the mortgage loans in the second loan group with higher net mortgage interest rates because the pass-through rate for the interest only certificates is equal to the difference between the net WAC of the mortgage loans in the second loan group and the pass-through rate on the Class II-A-2 Certificates. For any distribution date on which the pass-through rate on the Class II-A-2 Certificates is equal to the net WAC of the mortgage loans in the second loan group, the interest only certificates will receive no interest distribution for such distribution date. On and after the distribution date in July 2009, the pass-through rate on the interest only certificates will be zero. See “Description of the Mortgage Loans” and “Prepayment and Yield Considerations” herein.

 

There Is a Risk that Interest Payments on the Mortgage Loans May Be Insufficient to Pay Interest on Your Certificates

 

When a mortgage loan is prepaid in full, the mortgagor is charged interest only up to the date on which payment is made, rather than for an entire month. When a mortgagor makes a partial principal prepayment on a mortgage loan, the mortgagor is not charged interest on the amount prepaid for the month in which received. This may result in a shortfall in interest collections available for payment on the next distribution date. The master servicer is required to cover a portion of the shortfall in interest collections that are attributable to prepayments in full on the mortgage loans, but only up to the amount of compensating interest for such distribution date as de -

 

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scribed under “Description of the Certificates — Distributions to Certificateholders — Distributions of Interest” in the prospectus. To the extent these shortfalls from the mortgage loans are not covered by the amount of compensating interest, they will be allocated pro rata to the interest-bearing classes of certificates as described herein under “Description of the Certificates — Interest.”

 

The master servicer will not cover shortfalls in interest collections arising from partial prepayments. Any such shortfalls will be borne pro rata by the interest-bearing classes of certificates as described herein under “Description of the Certificates — Interest.”

 

Certificates May Not Be Appropriate For Certain Individual Investors

 

If you are an individual investor who does not have sufficient resources or expertise to evaluate the particular characteristics of the applicable class of offered certificates, the offered certificates may not be an appropriate investment for you. This may be the case because, among other things:

 

    if you purchase your certificates at a price other than par, your yield to maturity will be sensitive to the uncertain rate and timing of principal prepayments on the applicable mortgage loans;

 

    the rate of principal distributions on, and the weighted average life of, the offered certificates will be sensitive to the uncertain rate and timing of principal prepayments on the applicable mortgage loans and the priority of principal distributions among the classes of certificates, and, as such, the offered certificates may be inappropriate investments for you if you require a distribution of a particular amount of principal on a specific date or an otherwise predictable stream of distributions;

 

    you may not be able to reinvest amounts distributed in respect of principal on your certificates (which distributions in general, are expected to be greater during periods of relatively low interest rates) at a rate at least as high as the applicable pass-through rate or your expected yield;

 

    a secondary market for the offered certificates may not develop or provide you with liquidity of investment; and

 

    you must report interest as well as original issue discount, if any, on the accrual method of accounting, even if you are otherwise using the cash method of accounting.

 

If you are an individual investor considering the purchase of an offered certificate, you should also carefully consider the further risks and other special considerations discussed above and under the headings “Summary Information — Effects of Prepayments on Your Investment Expectations” and “Prepayment and Yield Considerations” herein and “Risk Factors — Rate of Prepayment on Mortgage Loans May Adversely Affect Average Lives and Yields on Certificates” in the prospectus.

 

Interest Only Loans May Have Higher Risk of Default or Rates of Prepayment

 

Certain of the mortgage loans are interest only loans which require only the payment of interest until the first due date following the related first adjustment date. At that time, the payments on each such loan will be recalculated to fully amortize its unpaid principal balance over the remaining life of such loan and the mortgagor will be required to make payments of both principal and interest. The required payment of principal will increase the burden on the mortgagor and may increase the risk of default under such mortgage loan. In underwriting an interest only loan, the ability of the mortgagor to make payments in respect of principal is not considered.

 

The increase in the mortgagor’s monthly payment attributable to principal will occur when the mortgagor’s monthly interest payment will no longer have the benefit of a reduced rate due to the fact that the mortgage loan is a relationship ARM and may also be increasing as a result of an increase in the mortgage interest rate on the related first adjustment date. The combination of these three factors may significantly increase the risk of default under such mortgage loan.

 

In addition, the increase in the monthly payment to be made by a mortgagor may induce the mortgagor to refinance such mortgage loan which would result in a prepayment of such loan.

 

The number of interest only loans and the percentage they represent of the trust estate and each loan group is specified in Appendix A.

 

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There Are Risks Relating to Second Lien Mortgage Loans

 

With respect to certain of the mortgage loans, at the time of origination of the first lien mortgage loan, the originator or another lender may have originated a second lien mortgage loan. With respect to mortgage loans that have second lien mortgage loans encumbering the same mortgaged property, foreclosure frequency may be increased relative to mortgage loans that do not have second lien mortgage loans behind them because mortgagors have less equity in the mortgaged property. Investors should also note that any mortgagor may obtain second lien mortgage loans at any time subsequent to the date of origination of their first lien mortgage loan from the originator or from any other lender. See the tables with the heading “Original Combined Loan-To-Value Ratios” in Appendix A.

 

Residual Certificates May Have Adverse Tax Consequences

 

The residual certificates will be the sole “residual interest” in each REMIC for federal income tax purposes. Holders of the residual certificates must report as ordinary income or loss the net income or the net loss of each REMIC whether or not any cash distributions are made to them. This allocation of income or loss may result in a zero or negative after-tax return. Under current law, a holder of a Class I-A-R Certificate must account separately for its interest in each REMIC and generally cannot offset income from one REMIC with losses from another REMIC. No cash distributions are expected to be made with respect to the residual certificates other than the distribution of their principal balance and interest on that balance. Due to their tax consequences, the residual certificates will be subject to restrictions on transfer that may affect their liquidity. In addition, the residual certificates may not be acquired by ERISA plans or similar governmental plans.

 

United States Military Operations May Increase Risk of Relief Act Shortfalls

 

As a result of military operations in Afghanistan and Iraq, the United States has placed a substantial number of armed forces reservists and members of the National Guard on active duty status. It is possible that the number of reservists and members of the National Guard placed on active duty status may remain at high levels for an extended time. To the extent that a member of the military, or a member of the armed forces reserves or National Guard who is called to active duty, is a mortgagor of a mortgage loan in the trust, the interest rate limitation of the Servicemembers Civil Relief Act and any comparable state law, will apply. This may result in interest shortfalls on the mortgage loans, which will be borne by all interest-bearing classes of certificates. The seller has not taken any action to determine whether any of the mortgage loans would be affected by such interest rate limitation. See “Description of the Certificates — Interest” herein and “Certain Legal Aspects of the Mortgage Loans — Servicemembers Civil Relief Act and Similar Laws” in the prospectus.

 

See “Risk Factors” in the prospectus for a description of certain other risks and special considerations applicable to the offered certificates.

 

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FORWARD LOOKING STATEMENTS

 

This prospectus supplement and the accompanying prospectus contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended. Such forward-looking statements, together with related qualifying language and assumptions, are found in the material, including each of the tables, set forth under “Risk Factors” and “Prepayment and Yield Considerations” and in the Appendices. Forward-looking statements are also found elsewhere in this prospectus supplement and the prospectus, and may be identified by, among other things, accompanying language including the words “expects,” “intends,” “anticipates,” “estimates” or analogous expressions, or by qualifying language or assumptions. Such statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results or performance to differ materially from such forward-looking statements. Such risks, uncertainties and other factors include, among others, general economic and business conditions, competition, changes in political, social and economic conditions, regulatory initiatives and compliance with government regulations, customer preference and various other matters, many of which are beyond the Seller’s control. These forward-looking statements speak only as of the date of this prospectus supplement. The Seller expressly disclaims any obligation or undertaking to disseminate any updates or revisions to such forward-looking statements to reflect any change in the Seller’s expectations with regard thereto or any change in events, conditions or circumstances on which any forward-looking statement is based.

 

DESCRIPTION OF THE CERTIFICATES

 

General

 

        The Wells Fargo Mortgage Backed Securities 2005-AR12 Trust (the “Trust”) will issue Mortgage Pass-Through Certificates, Series 2005-AR12 (the “Certificates”) on the Closing Date.

 

The Certificates will consist of thirteen classes of senior certificates (the “Class A Certificates”) divided into two certificate groups (each may be referred to as a “Group”). The first Group (“Group I”) will consist of the Class I-A-1, Class I-A-2 and Class I-A-R Certificates (the “Group I-A Certificates”). The second Group (“Group II”) will consist of the Class II-A-1, Class II-A-2, Class II-A-3, Class II-A-4, Class II-A-5, Class II-A-6, Class II-A-7, Class II-A-8, Class II-A-9 and Class II-A-10 Certificates (the “Group II-A Certificates”). The Certificates will also consist of six classes of junior certificates (the “Class B Certificates” or “Subordinated Certificates”). Only the Class A Certificates and the Class B-1, Class B-2 and Class B-3 Certificates are being offered by this prospectus supplement and the accompanying prospectus (the “Offered Certificates”). The Offered Certificates will be issued in the forms and denominations set forth in the table beginning on page S-4.

 

Distributions

 

On each Distribution Date, the Trustee or other paying agent will make monthly distributions of interest and in reduction of Principal Balance to holders of each Class of Certificates, to the extent of each Class’s entitlement thereto. Distributions will be made on each Distribution Date to holders of record (which, in the case of the Book-Entry Certificates, will be Cede, as nominee for DTC) at the close of business on the last business day of the preceding month (each, a “Record Date”).

 

The aggregate amount available for distribution to holders of the Group I-A Certificates on each Distribution Date (except to the extent of cross-collateralization payments) will be the Group I Pool Distribution Amount. The aggregate amount available for distribution to holders of the Group II-A Certificates on each Distribution Date (except to the extent of cross-collateralization payments) will be the Group II Pool Distribution Amount. The Class B Certificates will be entitled to distributions from the Group I Pool Distribution Amount and the Group II Pool Distribution Amount. The Group I Pool Distribution Amount will be determined by reference to amounts received and expenses incurred in connection with the Group I Mortgage Loans and the Group II Pool Distribution Amount will be determined by reference to amounts received and expenses incurred in

 

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connection with the Group II Mortgage Loans. The “Group I Pool Distribution Amount” and the “Group II Pool Distribution Amount” (each, a “Pool Distribution Amount”) for a Distribution Date will be the sum of:

 

(i) all previously undistributed payments or other receipts on account of principal (including principal prepayments and Liquidation Proceeds in respect of principal, if any), and interest on or in respect of the Group I Mortgage Loans and the Group II Mortgage Loans, as applicable, received by the Master Servicer, including without limitation any related insurance proceeds, any proceeds received as a result of a substitution of a Mortgage Loan and the proceeds of any purchase of a related Group I Mortgage Loan or Group II Mortgage Loan, as applicable, for breach of a representation or warranty or the sale of a Mortgaged Property by a Servicer in connection with the liquidation of the related Group I Mortgage Loan or Group II Mortgage Loan, as applicable, on or prior to the Remittance Date in the month in which such Distribution Date occurs;

 

(ii) all Periodic Advances made with respect to a Group I Mortgage Loan or Group II Mortgage Loan, as applicable; and

 

(iii) all other amounts with respect to a Group I Mortgage Loan or Group II Mortgage Loan, as applicable (including any insurance proceeds and Compensating Interest) placed in the Certificate Account by any Servicer on or before the Remittance Date or by the Master Servicer on or before the Distribution Date pursuant to the Pooling and Servicing Agreement, but excluding the following:

 

(a) amounts received as late payments of principal or interest with respect to a Group I Mortgage Loan or Group II Mortgage Loan, as applicable, as to which one or more unreimbursed Periodic Advances has been made;

 

(b) those portions of each payment of interest on a particular Group I Mortgage Loan or Group II Mortgage Loan, as applicable, which represent (i) the applicable Servicing Fee, (ii) the Master Servicing Fee and (iii) any Incremental Interest;

 

(c) all amounts with respect to a Group I Mortgage Loan or Group II Mortgage Loan, as applicable, representing scheduled payments of principal and interest due after the Due Date occurring in the month in which such Distribution Date occurs;

 

(d) all Unscheduled Principal Receipts of any Group I Mortgage Loans or Group II Mortgage Loans, as applicable, that were received by the Servicers after the Unscheduled Principal Receipt Period relating to the Distribution Date for the applicable type of Unscheduled Principal Receipt, and all related payments of interest on such amounts;

 

(e) all repurchase proceeds with respect to the Group I Mortgage Loans or Group II Mortgage Loans, as applicable, repurchased by the Seller on or following the Determination Date in the month in which such Distribution Date occurs and the excess of the unpaid principal balance of any Group I Mortgage Loan or Group II Mortgage Loan, as applicable, for which a Mortgage Loan was substituted over the unpaid principal balance of such substituted Mortgage Loan on or following the Determination Date in the month in which such Distribution Date occurs;

 

(f) to the extent permitted by the Pooling and Servicing Agreement, that portion of Liquidation Proceeds or insurance proceeds with respect to a Group I Mortgage Loan or Group II Mortgage Loan, as applicable, or proceeds of any Mortgaged Property that becomes owned by the Trust Estate which represents (i) any unpaid Servicing Fee or Master Servicing Fee to which such Servicer or Master Servicer, respectively, is entitled, (ii) any unreimbursed Periodic Advances or (iii) any Incremental Interest;

 

(g) all amounts representing certain expenses reimbursable to the Master Servicer or any Servicer and other amounts permitted to be retained by the Master Servicer or any Servicer or withdrawn by the Master Servicer from the Certificate Account pursuant to the Pooling and Servicing Agreement;

 

(h) reinvestment earnings on payments received in respect of the Group I Mortgage Loans or Group II Mortgage Loans, as applicable, or on other amounts on deposit in the Certificate Account;

 

(i) Liquidation Profits in respect of the Group I Mortgage Loans or Group II Mortgage Loans, as applicable;

 

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(j) Month End Interest in respect of the Group I Mortgage Loans or Group II Mortgage Loans, as applicable; and

 

(k) amounts reimbursable to a Servicer for PMI Advances in respect of the Group I Mortgage Loans or Group II Mortgage Loans, as applicable.

 

See “Description of the Certificates — Distributions to Certificateholders” in the prospectus.

 

Each Servicer is required to deposit in the Certificate Account by the Remittance Date certain amounts in respect of the Mortgage Loans as set forth in the prospectus under “Servicing of the Mortgage Loans — Payments on Mortgage Loans.” The Master Servicer is required to remit to the Trustee on or before the Distribution Date any payments constituting part of the Pool Distribution Amounts that are received by the Master Servicer or are required to be made with the Master Servicer’s own funds. Except as described below under “— Periodic Advances,” neither the Master Servicer nor the Trustee is obligated to remit any amounts which a Servicer was required but failed to deposit in the Certificate Account.

 

On each Distribution Date, the Pool Distribution Amount for each Loan Group will be allocated among the Classes of Certificates relating to such Loan Group and distributed to the holders thereof of record as of the related Record Date as follows (the “Pool Distribution Amount Allocation”):

 

(a) with respect to each Group of Class A Certificates from the Group I Pool Distribution Amount or Group II Pool Distribution Amount, as applicable, as follows:

 

first, to the Classes of Class A Certificates of a Group, pro rata, based on their respective Interest Accrual Amounts, in an aggregate amount up to the sum of their Interest Accrual Amounts with respect to such Distribution Date;

 

second, to the Classes of Class A Certificates of a Group, pro rata, based on their respective unpaid Interest Shortfall Amounts, in an aggregate amount up to the sum of their unpaid Interest Shortfall Amounts; and

 

third, to the Class A Certificates of a Group, in an aggregate amount up to the Class A Optimal Principal Amount for such Group; and

 

(b) to the Class B Certificates, from the Group I Pool Distribution Amount and Group II Pool Distribution Amount, subject to distributions to the Class A Certificates described in clause (a) above and payments described under “—Cross-Collateralization” below, sequentially, to the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates so that each such Class shall receive (A) first, an amount up to its Interest Accrual Amount with respect to such Distribution Date, (B) then, an amount up to its previously unpaid Interest Shortfall Amounts and (C) finally, an amount up to its Class B Optimal Principal Amount before any Classes of Class B Certificates with higher numerical designations receive any payments in respect of interest or principal.

 

The undivided percentage interest (the “Percentage Interest”) represented by any Offered Certificate of a Class will be equal to the percentage obtained by dividing the initial principal balance (or initial notional amount in the case of the Interest Only Certificates) of such Certificate by the initial Principal Balance (or initial Notional Amount) of such Class.

 

Interest

 

Interest will accrue on each Class of Certificates during each one-month period ending on the last day of the month preceding the month in which each Distribution Date occurs (each, an “Interest Accrual Period”). The initial Interest Accrual Period will be deemed to have commenced on the Cut-Off Date. Interest which accrues on such Classes of Certificates will be calculated on the assumption that distributions in reduction of the Principal Balances thereof on a Distribution Date are made on the first day of the month of each Distribution Date.

 

The amount of interest that will accrue on each Class of Certificates during each Interest Accrual Period, after taking into account any Non-Supported Interest Shortfalls, Relief Act Shortfalls and the interest portion of certain losses allocated to such Class, is referred to herein as the “Interest Accrual Amount” for such Class.

 

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The Interest Accrual Amount for each Class of Certificates equals (a) the product of (i)  1/12th of the Pass-Through Rate for such Class and (ii) the outstanding Principal Balance or Notional Amount of such Class minus (b) the sum of (i) any Non-Supported Interest Shortfall allocable to such Class, (ii) any Relief Act Shortfall allocable to such Class and (iii) in the case of the Class A Certificates, the interest portion of any Realized Losses allocable to such Class on or after the Subordination Depletion Date. The pass-through rate (the “Pass-Through Rate”) for each Class of Certificates is the percentage described in the table beginning on page S-4 of this prospectus supplement. Interest on each Class of Certificates will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

 

The Class II-A-8 Certificates are Interest Only Certificates and have no Principal Balance. The “Notional Amount” of the Class II-A-8 Certificates with respect to each Distribution Date (up to and including the Distribution Date in June 2009) will be equal to the Principal Balance of the Class II-A-2 Certificates. Accordingly, any distributions in respect of principal made to, or losses in respect of principal allocated in reduction of, the Principal Balance of the Class II-A-2 Certificates will result in a related reduction in the Notional Amount of the Class II-A-8 Certificates. See “— Principal (including Prepayments)” and “— Subordination of Class B Certificates — Allocation of Losses” herein. The Notional Amount of the Class II-A-8 Certificates with respect to the first Distribution Date will be approximately $127,000,000. On and after the Distribution Date in July 2009, the Notional Amount of the Class II-A-8 Certificates will be zero.

 

The “Group Subordinate Amount” of either Loan Group as of any date will equal the excess, if any, of the Pool Balance for such Loan Group over the Class A Principal Balance of the related Group of Class A Certificates.

 

Subject to the adjustment described below, the “Principal Balance” of a Class of Certificates as of any date will be the principal balance of such Class on the date of initial issuance of the Certificates, less all amounts previously distributed on such Class on prior Distribution Dates in reduction of the principal balance of such Class.

 

After distributions of principal have been made on a Distribution Date, the Principal Balances of the Certificates will be adjusted so that they equal the Adjusted Pool Amounts for the Loan Groups for such Distribution Date. Such adjustment could result in an increase or decrease in the Principal Balance of a Class. Prior to the Subordination Depletion Date, the most subordinate Class of Class B Certificates then outstanding will be subject to the adjustment. After the Subordination Depletion Date, the Principal Balances of the Class A Certificates of a Group will be adjusted to equal the Adjusted Pool Amount for the related Loan Group. Any adjustment to the Class A Certificates of a Group will be allocated among the Class A Certificates of such Group pro rata, based on their Principal Balances.

 

Notwithstanding the foregoing, the Principal Balance of a Class may not be increased such that it exceeds the initial Principal Balance of such Class less all amounts previously distributed on such Class in reduction of the Principal Balance thereof.

 

A Recovery with respect to a loss on a Mortgage Loan in a Loan Group will be treated as a principal prepayment and will result in a payment of principal to one or more Classes of then-outstanding Certificates. A Class will cease to be entitled to any distributions after its Principal Balance is reduced to zero for any reason. It is possible that such payment will not be made to the Class that originally bore the loss. Further, even though a Class may have previously had its Principal Balance reduced as a result of a loss for which there is later a Recovery, that Class will not be entitled to any interest on the amount of such reduction. Because a Recovery results in a payment of principal to certain Classes without a corresponding decrease in the related Adjusted Pool Amount, the Principal Balance of the most subordinate Class then outstanding (which may not be the Class that originally bore the loss if such Class is no longer outstanding) may be increased or such Principal Balance may be decreased by a lesser amount than would otherwise be the case based on any Realized Losses allocable to such Class.

 

The “Class A Principal Balance” of a Group as of any date will be equal to the sum of the Principal Balances of the Classes of Class A Certificates of such Group as of such date.

 

The “Class B Principal Balance” as of any date will be equal to the sum of the Principal Balances of the Classes of Class B Certificates as of such date.

 

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The “Aggregate Principal Balance” as of any date will be equal to the sum of the Class A Principal Balances and the Class B Principal Balance as of such date.

 

With respect to any Distribution Date and either Loan Group, the “Adjusted Pool Amount” will equal the aggregate unpaid principal balance of the Mortgage Loans in such Loan Group as of the Cut-Off Date minus the sum of (i) all amounts in respect of principal received in respect of the Mortgage Loans (including amounts received as Periodic Advances, principal prepayments and Liquidation Proceeds in respect of principal) and distributed to holders of the Certificates on such Distribution Date and all prior Distribution Dates, (ii) the principal portion of all Liquidated Loan Losses incurred on the Mortgage Loans for which the Liquidation Proceeds were received from the Cut-Off Date through the end of the applicable Unscheduled Principal Receipt Period for such Distribution Date and (iii) the principal portion of all Bankruptcy Losses (other than Debt Service Reductions) incurred on the Mortgage Loans from the Cut-Off Date through the end of the period which corresponds to the applicable Unscheduled Principal Receipt Period for principal prepayments in full for such Distribution Date.

 

The “Net Mortgage Interest Rate” on each Mortgage Loan will be equal to the Mortgage Interest Rate on such Mortgage Loan as provided for in the related mortgage note (without giving effect to any Incremental Rate) minus the sum of (i) the applicable Servicing Fee Rate and (ii) the Master Servicing Fee Rate for such Mortgage Loan. See “Servicing of the Mortgage Loans — Servicing Compensation and Payment of Expenses” herein.

 

The “Net WAC” of either Loan Group and any Distribution Date will equal the weighted average of the Net Mortgage Interest Rates of the Mortgage Loans in such Loan Group (based on the Scheduled Principal Balances of the Mortgage Loans in such Loan Group on the first day of the month preceding the month in which such Distribution Date occurs).

 

As to any Distribution Date, Prepayment Interest Shortfalls, to the extent that they exceed Compensating Interest, and Curtailment Interest Shortfalls are referred to herein as “Non-Supported Interest Shortfalls” and will be allocated to (i) the Class A Certificates according to the percentage obtained by dividing the sum of the Class A Principal Balances by the Aggregate Principal Balance and (ii) the Class B Certificates according to the percentage obtained by dividing the Class B Principal Balance by the Aggregate Principal Balance. Such allocation of Non-Supported Interest Shortfalls will reduce the amount of interest due to be distributed to holders of Certificates then entitled to distributions in respect of interest. Any such reduction in respect of interest allocated to the Class A Certificates will be allocated among the Classes of Class A Certificates, pro rata, on the basis of their respective Interest Accrual Amounts without regard to any reduction pursuant to this paragraph, for such Distribution Date. Any such reduction in respect of interest allocated to the Class B Certificates will be allocated among such Classes of Class B Certificates, pro rata, on the basis of their respective Interest Accrual Amounts, without regard to any reduction pursuant to this paragraph, for such Distribution Date.

 

Any interest shortfalls arising from Unscheduled Principal Receipts in full that are not Prepayments in Full and any other interest shortfalls arising from Unscheduled Principal Receipts, other than Curtailments, will be borne first by the Classes of Class B Certificates in reverse numerical order and then pro rata by the Class A Certificates, based on interest accrued. After the Subordination Depletion Date, all interest shortfalls arising from Unscheduled Principal Receipts, other than Prepayment Interest Shortfalls covered by Compensating Interest, will be treated as Non-Supported Interest Shortfalls and allocated in reduction of interest accrued on the Class A Certificates.

 

See “Description of the Certificates — Distributions to Certificateholders — Distributions of Interest” in the prospectus for a discussion of Prepayment Interest Shortfalls, Curtailment Interest Shortfalls and Compensating Interest.

 

Any interest shortfalls arising as a result of the reduction in the amount of monthly interest payments on any Mortgage Loans as a result of the application of the Servicemembers Civil Relief Act or comparable state legislation (“Relief Act Shortfalls”) will be allocated among the Class A Certificates and Class B Certificates in the same manner as Non-Supported Interest Shortfalls.

 

Allocations of the interest portion of Realized Losses first to the Classes of Class B Certificates in reverse numerical order will result from the priority of distributions first to the holders of the Class A Certificates and

 

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then to the holders of the Classes of Class B Certificates in numerical order of the Pool Distribution Amounts as described above under “— Distributions.”

 

On each Distribution Date on which the amount available to be distributed in respect of interest on a Class of Certificates pursuant to the Pool Distribution Amount Allocation is less than such Class’s Interest Accrual Amount, the amount of any such deficiency (as to each Class, an “Interest Shortfall Amount”) will be added to the amount of interest distributable to such Class on subsequent Distribution Dates, but only for so long as such Class’s Principal Balance or Notional Amount is greater than zero. No interest will accrue on any Interest Shortfall Amounts.

 

Under certain circumstances, the unpaid Interest Shortfall Amounts for a Group of Class A Certificates will be payable from amounts otherwise distributable as principal on the Class B Certificates in reverse order of priority. See “— Cross-Collateralization” below.

 

Principal (Including Prepayments)

 

The principal balance of a Certificate (other than an Interest Only Certificate) at any time is equal to the product of the related Class’s Principal Balance and such Certificate’s Percentage Interest, and represents the maximum specified dollar amount (exclusive of (i) any interest that may accrue on such Certificate and (ii) in the case of the Residual Certificates, any additional amounts to which the holders of such Certificates may be entitled as described below under “—Additional Rights of the Residual Certificateholders”) to which the holder thereof is entitled from the cash flow on the Mortgage Loans at such time and will decline to the extent of distributions in reduction of the principal balance of, and allocations of losses to, such Certificate. The approximate initial Principal Balance of each Class of Certificates is set forth in the table beginning on page S-4 of this prospectus supplement.

 

Calculation of Amount to be Distributed on the Certificates

 

Distributions in reduction of the Principal Balance of the Class A Certificates of each Group will be made on each Distribution Date pursuant to the Pool Distribution Amount Allocation, in an aggregate amount equal to the Class A Principal Distribution Amount for such Group. The “Class A Principal Distribution Amount” with respect to a Group and any Distribution Date will be equal to the amount distributed pursuant to clause (a) priority third of the Pool Distribution Amount Allocation in an aggregate amount up to the Class A Optimal Principal Amount for such Group.

 

Distributions in reduction of the Principal Balances of the Class B-1, Class B-2, Class B-3, Class B-4, Class B-5 and Class B-6 Certificates will be made on each Distribution Date first to the Class B-1 Certificates, second to the Class B-2 Certificates, third to the Class B-3 Certificates, fourth to the Class B-4 Certificates, fifth to the Class B-5 Certificates and then to the Class B-6 Certificates, pursuant to clause (b) (C) of the Pool Distribution Amount Allocation, in an aggregate amount with respect to each such Class (each, a “Class B Principal Distribution Amount”) up to the Class B Optimal Principal Amount for such Class.

 

The “Class A Optimal Principal Amount” for each Group and the “Class B Loan Group I Optimal Principal Amount” and the “Class B Loan Group II Optimal Principal Amount” (each a “Class B Loan Group Optimal Principal Amount”) for each Class of Class B Certificates with respect to each Distribution Date will be an amount equal to the sum of:

 

(I) for each outstanding Mortgage Loan in the related Loan Group (including each defaulted Mortgage Loan with respect to which the related Mortgaged Property has been acquired by the Trust Estate) the sum of:

 

(i)  the applicable Class Percentage of the scheduled payment of principal due on such Mortgage Loan on the first day of the month in which the Distribution Date occurs;

 

(ii)  the applicable Class Prepayment Percentage of all Unscheduled Principal Receipts (other than Recoveries) that were received by a Servicer with respect to such Mortgage Loan during the Unscheduled Principal Receipt Period relating to such Distribution Date for each applicable type of Unscheduled Principal Receipt;

 

(iii)  the applicable Class Prepayment Percentage of the Scheduled Principal Balance of such Mortgage Loan which, during the one month period ending on the day preceding the Determination

 

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Date for such Distribution Date, was repurchased by the Seller, as described under the heading “Description of the Mortgage Loans — Mandatory Repurchase or Substitution of Mortgage Loans” herein; and

 

(iv)  the applicable Class Percentage of the excess of the unpaid principal balance of any Mortgage Loan for which a Mortgage Loan was substituted during the one month period ending on the day preceding the Determination Date for such Distribution Date over the unpaid principal balance of such substituted Mortgage Loan, less the amount allocable to the principal portion of any unreimbursed advances in respect of such Mortgage Loan. See “The Pooling and Servicing Agreement — Assignment of Mortgage Loans to the Trustee” and “— Optional Substitutions” in the prospectus; and

 

(II) in the case of the Class A Certificates of a Group and each Class of Class B Certificates, the applicable Class Prepayment Percentage of any Recoveries.

 

The “Class Percentage” will equal (i) the applicable Class A Percentage, in the case of the calculation of the Class A Optimal Principal Amount for a Group and (ii) the applicable Class B Percentage, in the case of the calculation of the Class B Loan Group Optimal Principal Amounts for a Class of Class B Certificates.

 

The “Class Prepayment Percentage” will equal (i) the applicable Class A Prepayment Percentage, in the case of the calculation of the Class A Optimal Principal Amount for a Group and (ii) the applicable Class B Prepayment Percentage, in the case of the calculation of the Class B Loan Group Optimal Principal Amounts for a Class of Class B Certificates.

 

The “Class B Optimal Principal Amount” for a Class of Class B Certificates is equal to the sum of the Class B Loan Group I Optimal Principal Amount and the Class B Loan Group II Optimal Principal Amount for such Class.

 

The principal distribution to the holders of a Class of Class B Certificates will be reduced on any Distribution Date on which (i) the Principal Balance of such Class of Class B Certificates would be reduced to zero as a result of principal distributions or allocation of losses and (ii) the Principal Balance of any Class A Certificates or any Class of Class B Certificates with a lower numerical designation, would be subject to reduction as a result of the allocation of Realized Losses. The amount of any such reduction in the principal distributed to the holders of such Class of Class B Certificates will instead be distributed pro rata to the holders of any Class senior in priority to receive distributions in accordance with the Pool Distribution Amount Allocation.

 

The “Pool Balance” for a Loan Group and any Distribution Date is the sum for each outstanding Mortgage Loan in such Loan Group of the Scheduled Principal Balance of such Mortgage Loan as of such Distribution Date.

 

The “Class A Percentage” for a Group and any Distribution Date occurring on or prior to the Subordination Depletion Date is the percentage, which in no event will exceed 100%, obtained by dividing the Class A Principal Balance for such Group as of such date (before taking into account distributions in reduction of Principal Balance on such date) by the Pool Balance for the related Loan Group. The Class A Percentage for each Group of Class A Certificates for the first Distribution Date will be approximately 96.85%. The Class A Percentage for each Group and any Distribution Date occurring after the Subordination Depletion Date will be 100%.

 

The “Class A Prepayment Percentage” for each Group and any Distribution Date prior to the Distribution Date in July 2012 will be 100% and thereafter will be the applicable Class A Percentage for such Group for such Distribution Date plus the percentage of the applicable Subordinated Percentage for the applicable Loan Group indicated in the table below; provided, however, that if on any Distribution Date the percentage, the numerator of which is equal to the sum of the Class A Principal Balances for each Group and the denominator of which is equal to the sum of the Pool Balances for each Loan Group (the “Aggregate Class A Percentage”) exceeds the initial Aggregate Class A Percentage, the Class A Prepayment Percentage for both groups for such Distribution Date will equal 100%. See “Prepayment and Yield Considerations” herein and in

 

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the prospectus. Notwithstanding the foregoing, no reduction of the level of the Class A Prepayment Percentage for either Group will occur on any Distribution Date if the Delinquency and Loss Tests are not met.

 

The “Delinquency and Loss Tests” with respect to any Distribution Date are met if (i) as of such Distribution Date as to which any reduction in the Class A Prepayment Percentage for either Group applies, the average outstanding principal balance on such Distribution Date and for the preceding five Distribution Dates of the Mortgage Loans that were delinquent 60 days or more (including for this purpose any Mortgage Loans in foreclosure and Mortgage Loans with respect to which the related Mortgaged Property has been acquired by the Trust Estate) is less than 50% of the Class B Principal Balance and (ii) for any Distribution Date, cumulative Realized Losses with respect to the Mortgage Loans are less than or equal to the percentages of the principal balance of the Class B Certificates as of the Cut-Off Date (the “Original Class B Principal Balance”) indicated in the table below.

 

Distribution Date Occurring In


   Percentage of
Applicable
Subordinated
Percentage


    Percentage of
Original Class B
Principal Balance


 
July 2012 through June 2013    70 %   30 %
July 2013 through June 2014    60 %   35 %
July 2014 through June 2015    40 %   40 %
July 2015 through June 2016    20 %   45 %
July 2016 and thereafter    0 %   50 %

 

In addition, if on any Distribution Date, prior to giving effect to any distributions on such Distribution Date:

 

(i)    the Aggregate Subordinated Percentage is greater than twice the Aggregate Subordinated Percentage as of the Cut-Off Date;

 

(ii)    the average outstanding principal balance on such Distribution Date and for the preceding five Distribution Dates of the Mortgage Loans in both Loan Groups that were delinquent 60 days or more (including for this purpose any Mortgage Loans in foreclosure and Mortgage Loans with respect to which the related Mortgaged Property has been acquired by the Trust Estate) does not exceed 50% of the Class B Principal Balance; and

 

(iii)    either (A)  prior to the Distribution Date in July 2008, cumulative Realized Losses on the Mortgage Loans in both Loan Groups do not exceed 20% of the Original Class B Principal Balance; or

 

         (B)  on or after the Distribution Date in July 2008, cumulative Realized Losses on the Mortgage Loans in both Loan Groups do not exceed 30% of the Original Class B Principal Balance;

 

then, if (i), (ii) and (iii)(A) have occurred, the Class A Prepayment Percentage for each Group for such Distribution Date will equal the applicable Class A Percentage for such Distribution Date plus 50% of the related Subordinated Percentage for such Distribution Date, or if (i), (ii) and (iii)(B) have occurred, the Class A Prepayment Percentage for each Group for such Distribution Date will equal the applicable Class A Percentage for such Distribution Date.

 

The “Aggregate Subordinated Percentage” at any time will equal the difference between 100% and the Aggregate Class A Percentage.

 

If on any Distribution Date the allocation to the Class A Certificates of a Group of full and partial principal prepayments and other amounts in the percentage required as described above would reduce the outstanding Class A Principal Balance of such Group below zero, the Class A Prepayment Percentage with respect to such Group for such Distribution Date will be limited to the percentage necessary to reduce the Class A Principal Balance of such Group to zero.

 

This disproportionate allocation of unscheduled payments in respect of principal will have the effect of accelerating the amortization of the Class A Certificates of a Group while, in the absence of Realized Losses, increasing the interest in the principal balance of the Mortgage Loans in the related Loan Group evidenced by the Class B Certificates. Increasing the respective interest of the Class B Certificates in a Loan Group relative to that of the Class A Certificates of the related Group is intended to preserve the availability of the subordination provided by the Class B Certificates. See “— Subordination of Class B Certificates” below.

 

The “Subordinated Percentage” for either Loan Group and any Distribution Date will be calculated (i) for Loan Group I, as the difference between 100% and the Class A Percentage for the Group I-A Certificates for

 

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such date and (ii) for Loan Group II, as the difference between 100% and the Class A Percentage for the Group II-A Certificates for such date. The “Subordinated Prepayment Percentage” for either Loan Group and any Distribution Date will be calculated (i) for Loan Group I, as the difference between 100% and the Class A Prepayment Percentage for the Group I-A Certificates for such date and (ii) for Loan Group II, as the difference between 100% and the Class A Prepayment Percentage for the Group II-A Certificates for such date.

 

The “Class B Percentage” for a Class of Class B Certificates and for either Loan Group and any Distribution Date will equal the portion of the Subordinated Percentage for such Loan Group represented by the fraction the numerator of which is the Principal Balance for such Class of Class B Certificates and the denominator of which is the Class B Principal Balance.

 

The “Class B Prepayment Percentage” for a Class of Class B Certificates and for either Loan Group and any Distribution Date will equal the portion of the Subordinated Prepayment Percentage for such Loan Group represented by the fraction the numerator of which is the Principal Balance for such Class of Class B Certificates and the denominator of which is the Class B Principal Balance or, in the case of the unscheduled principal distributions described below, the sum of the Principal Balances of the Classes of Class B Certificates entitled to those unscheduled principal distributions for such Distribution Date described below. In the event that a Class of Class B Certificates is not entitled to the unscheduled principal distributions described below for such Distribution Date, the Class B Prepayment Percentage with respect to such unscheduled principal distributions for such Class will be 0% with respect to such Distribution Date.

 

In the event that on any Distribution Date the Current Fractional Interest of any Class of Class B Certificates is less than the Original Fractional Interest of such Class, then the Classes of Certificates that are subordinate to such Class will not be entitled to distributions in respect of unscheduled principal receipts including receipts from the repurchase of Mortgage Loans (other than Liquidation Proceeds on Liquidated Loans) and the Principal Balances of such subordinated Classes will not be used to determine the Class B Prepayment Percentages of the Classes of Class B Certificates that are senior to such subordinated Classes for such Distribution Date with respect to such unscheduled principal. The Class B-6 Certificates will not have original or current fractional interests which are required to be maintained as described above.

 

The “Original Fractional Interest” of a Class of Class B Certificates is the percentage obtained by dividing the sum of the initial Principal Balances of the Classes of Certificates that are subordinate to such Class by the initial Aggregate Principal Balance. The “Current Fractional Interest” of a Class of Class B Certificates for any Distribution Date is the percentage obtained by dividing the sum of the Principal Balances of the Classes of Certificates that are subordinate to such Class by the Aggregate Principal Balance.

 

The following table sets forth the expected approximate Original Fractional Interest for each Class of Class B Certificates on the date of issuance of the Certificates.

 

Class


  

Approximate

Original
Fractional
Interest


 
B-1    1.40 %
B-2    0.90 %
B-3    0.60 %
B-4    0.30 %
B-5    0.15 %
B-6    N/A  

 

Allocation of Amount to be Distributed on the Class A Certificates

 

Group I-A Certificates

 

On each Distribution Date occurring prior to the Subordination Depletion Date, the Class A Principal Distribution Amount for the Group I-A Certificates will be allocated among and distributed in reduction of the Principal Balances of the Group I-A Certificates, sequentially, as follows:

 

first, to the Class I-A-R Certificates; and

 

second, concurrently, to the Class I-A-1 and Class I-A-2 Certificates, pro rata.

 

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Group II-A Certificates

 

On each Distribution Date occurring prior to the Subordination Depletion Date, the Class A Principal Distribution Amount for the Group II-A Certificates will be allocated among and distributed in reduction of the Principal Balances of the Group II-A Certificates, concurrently, as follows:

 

(A)  approximately 66.5938858794%, sequentially, as follows:

 

(i)  concurrently, to the Class II-A-1, Class II-A-9 and Class II-A-10 Certificates, pro rata;

 

(ii)  concurrently, to the Class II-A-2, Class II-A-3 and Class II-A-4 Certificates, pro rata; and

 

(iii)  to the Class II-A-5 Certificates; and

 

(B)  approximately 33.4061141206%, concurrently, to the Class II-A-6 and Class II-A-7 Certificates, pro rata.

 

Notwithstanding the foregoing, on each Distribution Date occurring on or after the Subordination Depletion Date, the Class A Principal Distribution Amount for each Group will be distributed among the Classes of Class A Certificates of such Group, pro rata, in accordance with their respective outstanding Principal Balances, without regard to either the proportions or the priorities set forth above.

 

Any amounts distributed on a Distribution Date to the holders of any Class in reduction of Principal Balance will be allocated among the holders of such Class pro rata in accordance with their respective Percentage Interests.

 

Cross-Collateralization

 

On each Distribution Date prior to the Subordination Depletion Date but on or after the date on which the Principal Balances of the Class A Certificates of a Group have been reduced to zero, amounts otherwise distributable pursuant to clauses (I) (ii) and (I) (iii) of the Class B Loan Group Optimal Principal Amounts with respect to the related Loan Group (other than Liquidation Proceeds on Liquidated Loans) on the Class B Certificates, in reverse order of priority, from their applicable Apportioned Class B Principal Distribution Amount will be paid as principal to the remaining Class A Certificates in accordance with the priorities set forth for the applicable Group under “— Principal (Including Prepayments) — Allocation of Amount to be Distributed on the Class A Certificates,” provided that on such Distribution Date (a) the Aggregate Subordinated Percentage for such Distribution Date is less than 3.50% or (b) the average outstanding principal balance of the Mortgage Loans delinquent 60 days or more over the last six months as a percentage of the Class B Principal Balance is greater than or equal to 100%.

 

With respect to each Class of Class B Certificates and any Distribution Date, the “Apportioned Class B Principal Distribution Amount” will equal the product of (i) the applicable Class B Principal Distribution Amount and (ii) the applicable Apportionment Fraction.

 

In the event the Principal Balances of the Class A Certificates of a Group have been reduced to zero, the applicable “Apportionment Fraction” will equal for a Class of Class B Certificates, a fraction the numerator of which is equal to the applicable portion of the Class B Loan Group Optimal Principal Amount relating to the Loan Group for which the Class A Certificates are no longer outstanding and the denominator of which is equal to the applicable Class B Optimal Principal Amount.

 

In addition, if on any Distribution Date the Class A Principal Balance of a Group of Class A Certificates (after giving effect to distributions to be made on such Distribution Date) is greater than the Adjusted Pool Amount of the related Loan Group (either such Group, the “Undercollateralized Group” and any such excess, the “Undercollateralized Amount”), all amounts otherwise distributable as principal on the Class B Certificates, in reverse order of priority pursuant to clause (b)(C) of the Pool Distribution Amount Allocation will be paid as principal to the Class A Certificates of the Undercollateralized Group in accordance with the priorities set forth under “— Principal (Including Prepayment) — Allocation of Amount to be Distributed on the Class A Certificates,” until the aggregate Principal Balance of such Class A Certificates of the Undercollateralized Group equals the Adjusted Pool Amount of the related Loan Group. In addition, the amount of any unpaid Interest Shortfall Amounts with respect to the Undercollateralized Group (including any Interest Shortfall Amount for such Distribution Date) will be paid to the Undercollateralized Group prior to the payment of any Undercollateralized Amount from

 

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amounts otherwise distributable as principal on the Class B Certificates, in reverse order of priority pursuant to clause (b)(C) of the Pool Distribution Amount Allocation; such amount will be paid to the Undercollateralized Group in accordance with clause (a) priority second of the Pool Distribution Amount Allocation.

 

Additional Rights of the Residual Certificateholders

 

The Residual Certificates will remain outstanding for as long as the Trust Estate shall exist, whether or not such Class is receiving current distributions of principal or interest. The holders of the Residual Certificates will be entitled to receive the proceeds of the remaining assets of each REMIC, if any, on the final Distribution Date for the Certificates, after distributions in respect of any accrued but unpaid interest on the Certificates and after distributions in reduction of Principal Balance have reduced the Principal Balances of the Certificates to zero. It is not anticipated that there will be any material assets remaining in the Trust Estate on the final Distribution Date following the distributions of interest and in reduction of Principal Balance made on the Certificates on such date.

 

In addition, the Class I-A-R Certificateholders will be entitled on each Distribution Date to receive any Pool Distribution Amounts remaining after all distributions pursuant to the Pool Distribution Amount Allocation have been made. It is not anticipated that there will be any material undistributed portion of the Pool Distribution Amounts.

 

Restrictions on Transfer of the Residual Certificates

 

The Residual Certificates will be subject to restrictions on transfer, and the Residual Certificates will contain a legend describing such restrictions.

 

Tax-related restrictions on transfer are discussed under “Certain Federal Income Tax Consequences — Federal Income Tax Consequences for REMIC Certificates — Taxation of Residual Certificates — Tax-Related Restrictions on Transfer of Residual Certificates” in the prospectus.

 

In addition, the Residual Certificates may not be purchased by or transferred to any person that is an employee benefit plan or other retirement plan or arrangement subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”) (any such plan or arrangement, an “ERISA Plan”) or that is a governmental plan, as defined in Section 3(32) of ERISA, subject to any federal, state or local law (“Similar Law”) which is, to a material extent, similar to the foregoing provisions of ERISA or the Code (collectively, with an ERISA Plan, a “Plan”), or any person acting on behalf of or investing the assets of such Plan. See “ERISA Considerations” herein and in the prospectus.

 

Periodic Advances

 

Generally, each Servicer is required to advance delinquent payments of principal and interest on any Mortgage Loan in the Trust Estate to the extent that such Servicer believes that such amounts will be recoverable by it from liquidation proceeds or other recoveries in respect of the related Mortgage Loan (each, a “Periodic Advance”). Upon a Servicer’s failure to make a Periodic Advance required by the Underlying Servicing Agreement, the Trustee, if such Servicer is Wells Fargo Bank, or the Master Servicer, if such Servicer is not Wells Fargo Bank, will be required to make such Periodic Advance.

 

Amounts advanced are reimbursable to the Servicer, the Master Servicer or the Trustee, as applicable, from amounts received on the related Mortgage Loan or from other funds in the Trust Estate if it is determined that the amounts advanced will not be recoverable from amounts received on such Mortgage Loan. See “Servicing of the Mortgage Loans — Periodic Advances and Limitations Thereon” in the prospectus.

 

Subordination of Class B Certificates

 

The rights of the holders of the Class B Certificates to receive distributions with respect to the Mortgage Loans in the Trust Estate will be subordinated to such rights of the holders of the Class A Certificates and the rights of the holders of the Classes of Class B Certificates with higher numerical designations to receive

 

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distributions with respect to the Mortgage Loans in the Trust Estate will be subordinated to such rights of the holders of Classes of Class B Certificates with lower numerical designations, all to the extent described below. This subordination is intended to enhance the likelihood of timely receipt by the holders of the more senior Certificates of the full amount of their scheduled monthly payments of interest and principal and to afford the holders of the more senior Certificates protection against Realized Losses, as more fully described below. If Realized Losses exceed the credit support provided through subordination to a given Class of Certificates, all or a portion of such losses will be borne by such Class of Certificates.

 

The protection afforded to the holders of more senior Classes of Certificates by means of the subordination feature will be accomplished by the preferential right of such holders to receive, prior to any distribution being made on a Distribution Date in respect of the more junior Classes of Certificates, the amounts of principal and interest due such holders on each Distribution Date out of the applicable Pool Distribution Amount with respect to such date and, if necessary, by the right of such holders to receive future distributions on the Mortgage Loans that would otherwise have been payable to the holders of the more junior Classes of Certificates. Because of the priorities in distributing principal to the Class A Certificates, some Classes of Class A Certificates of a Group may be outstanding longer than other Classes of Class A Certificates of such Group. The aggregate Principal Balance of the Class B Certificates will be reduced on each Distribution Date either through principal distributions or the allocation of Realized Losses. The longer a Class of Class A Certificates of a Group is outstanding, the smaller the Principal Balances will be of the Class B Certificates providing subordination for such Class A Certificates.

 

Amounts distributed to holders of Subordinated Certificates will not be available to cover delinquencies or Realized Losses in respect of subsequent Distribution Dates.

 

Allocation of Losses

 

Realized Losses on the Mortgage Loans in a Loan Group will not be allocated to the holders of the Class A Certificates of the related Group until the date on which the aggregate Principal Balance of the Subordinated Certificates has been reduced to zero (the “Subordination Depletion Date”). Prior to such time, such Realized Losses will be allocated to the Classes of Class B Certificates sequentially in reverse numerical order, until the Principal Balance of each such Class has been reduced to zero.

 

The allocation of the principal portion of a Realized Loss (other than a Debt Service Reduction) on a Mortgage Loan in a Loan Group will be effected through the adjustment of the Principal Balance of the most subordinate Class then outstanding in such amount as is necessary to cause the Aggregate Principal Balance to equal the sum of the Adjusted Pool Amounts.

 

Allocations to the Classes of Class B Certificates of (i) the principal portion of Debt Service Reductions, (ii) the interest portion of Realized Losses, (iii) any shortfalls resulting from delinquencies for which the Servicer, the Master Servicer or the Trustee does not advance and (iv) any interest shortfalls resulting from the timing of the receipt of Unscheduled Principal Receipts (other than Prepayments in Full and Curtailments) with respect to Mortgage Loans will result from the priority of distributions of the Pool Distribution Amounts first to the Class A Certificates and then to the Classes of Class B Certificates in numerical order as described above under “—Distributions.”

 

After distributions of principal have been made on a Distribution Date, the allocation of the principal portion of Realized Losses in respect of the Mortgage Loans in a Loan Group allocated on or after the Subordination Depletion Date will be effected through the adjustment of the applicable Class A Principal Balance such that such Class A Principal Balance equals the Adjusted Pool Amount for the related Loan Group. The principal portion of such Realized Losses allocated to the Class A Certificates of a Group will be allocated to such outstanding Classes of Class A Certificates, pro rata, in accordance with their Principal Balances. The interest portion of any Realized Loss allocated to a Group on or after the Subordination Depletion Date will be allocated among the outstanding Classes of Class A Certificates of such Group, pro rata in accordance with their respective Interest Accrual Amounts, without regard to any reduction pursuant to this sentence. Any such losses will be allocated among the outstanding Class A Certificates within each such Class pro rata in accordance with their respective Percentage Interests.

 

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On or after the Subordination Depletion Date, the Principal Balance of a Class of Super Senior Support Certificates will be reduced not only by the principal portion of Realized Losses allocated to such Class as provided in the preceding paragraph, but also by the portion allocated to the related Class of Super Senior Certificates indicated in the following table.

 

The related Classes of Super Senior and Super Senior Support Certificates are as follows:

 

Super Senior Classes


   Super Senior Support Classes

Class I-A-1

   Class I-A-2

Class II-A-2

   Class II-A-3

Class II-A-6

   Class II-A-7

Class II-A-9

   Class II-A-10

 

If due to losses on the Mortgage Loans in a Loan Group, the applicable Pool Distribution Amount is not sufficient to cover the Class A Optimal Principal Amount of the related Loan Group on a particular Distribution Date, then the applicable Class A Percentage for such Group on and after the next Distribution Date will be proportionately increased, thereby reducing, as a relative matter, the respective interest of the Class B Certificates in future payments of principal on the Mortgage Loans in such Loan Group.

 

Notwithstanding the foregoing, the provisions relating to subordination will not be applicable in connection with a Bankruptcy Loss so long as the applicable Servicer has notified the Trustee and the Master Servicer in writing that such Servicer is diligently pursuing any remedies that may exist in connection with the representations and warranties made regarding the related Mortgage Loan and when (A) the related Mortgage Loan is not in default with regard to the payments due thereunder or (B) delinquent payments of principal and interest under the related Mortgage Loan and any premiums on any applicable Standard Hazard Insurance Policy and any related escrow payments in respect of such Mortgage Loan are being advanced on a current basis by such Servicer, in either case without giving effect to any Debt Service Reduction.

 

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DESCRIPTION OF THE MORTGAGE LOANS(1)

 

General

 

The mortgage loans to be included in the Trust Estate will be adjustable interest rate, conventional, monthly pay, fully amortizing, one- to four-family, residential first mortgage loans substantially all of which have original terms to stated maturity of approximately 30 years (the “Mortgage Loans”). The Mortgage Loans will be divided into two loan groups (“Loan Group I” and “Loan Group II”). The Mortgage Loans in Loan Group I are sometimes referred to as the “Group I Mortgage Loans” and the Mortgage Loans in Loan Group II are sometimes referred to as the “Group II Mortgage Loans.” As of the Cut-Off Date, all of the Mortgage Loans in Loan Group I have original principal balances that conform to Fannie Mae and Freddie Mac guidelines and all of the Mortgage Loans in Loan Group II have original principal balances that conform to or exceed Fannie Mae and Freddie Mac guidelines. Some of the Mortgage Loans in each Loan Group were made in connection with the relocation of employees of various corporate employers. Some of these corporate employers participate in Wells Fargo Bank’s relocation program. The Mortgage Loans are expected to be secured by first liens (the “Mortgages”) on one- to four-family residential properties (the “Mortgaged Properties”) and to have the additional characteristics described herein and in the prospectus. Wells Fargo Asset Securities Corporation (the “Seller”) will transfer the Mortgage Loans to the Trust.

 

All of the Mortgage Loans are Relationship ARMs. A “Relationship ARM” provides a reduced Mortgage Interest Rate during the fixed-rate period described below to a mortgagor who has or establishes at the time of the origination of the Mortgage Loan certain banking relationships with Wells Fargo Bank. The amount of the reduction is based on the mortgagor maintaining certain accounts and balances. In the event a mortgagor fails to maintain the required relationship, Wells Fargo Bank may, upon notice, increase the Mortgage Interest Rate for the fixed-rate period by a specified number of percentage points ranging from 0.125% to 0.500% (the amount of any such rate increase when in effect, the “Incremental Rate” and the amount of interest accrued at the Incremental Rate, the “Incremental Interest”).

 

Each Mortgage Loan has a fixed Mortgage Interest Rate for approximately the first five years after the origination of such Mortgage Loan. Each Mortgage Note provides for adjustments to the Mortgage Interest Rate thereon at the end of the initial fixed-rate period and annually thereafter (each, an “Adjustment Date”).

 

The Mortgage Interest Rate on each Mortgage Loan will adjust annually commencing on or about the fifth anniversary of the first Due Date. On each Adjustment Date, the Mortgage Interest Rate of such Mortgage Loan will adjust to the sum of the Index and the number of basis points specified in the applicable Mortgage Note (the “Gross Margin”), rounded to the nearest one-eighth of one percent, subject to the limitation that with respect to each Adjustment Date, the interest rate after such adjustment may not vary from the Mortgage Interest

 


(1) The descriptions in this prospectus supplement of the Loan Groups and the properties securing the Mortgage Loans to be included in the Loan Groups are based upon the expected characteristics of the Mortgage Loans at the close of business on the Cut-Off Date, as adjusted for the scheduled principal payments due on or before such date. Notwithstanding the foregoing, any of such Mortgage Loans may be excluded from the related Loan Group (i) as a result of principal prepayment thereof in full or (ii) if, as a result of delinquencies or otherwise, the Seller otherwise deems such exclusion necessary or desirable. In either event, other Mortgage Loans may be included in such Loan Group. The Seller believes that the information set forth herein with respect to the expected characteristics of the Mortgage Loans on the Cut-Off Date is representative of the characteristics as of the Cut-Off Date of the Mortgage Loans to be included in the related Loan Group as it will be constituted at the time the Certificates are issued, although the aggregate principal balance of the Mortgage Loans included in each Loan Group as of the Cut-Off Date, the range of Mortgage Interest Rates and maturities, and certain other characteristics of the Mortgage Loans in a Loan Group may vary. In the event that any of the characteristics as of the Cut-Off Date of the Mortgage Loans that constitute a Loan Group on the date of initial issuance of the Certificates vary materially from those described herein, revised information regarding such Mortgage Loans will be made available to purchasers of the Offered Certificates, on or before such issuance date, and a Current Report on Form 8-K containing such information will be filed with the Securities and Exchange Commission within 15 days following such date.

 

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Rate in effect prior to such adjustment by more than the amount specified in the Mortgage Note (the “Periodic Cap”). The Periodic Cap on the Mortgage Loans is generally 5.00% for the first Adjustment Date and 2.00% for every Adjustment Date thereafter. In addition, adjustments to the interest rate for each Mortgage Loan are subject to a lifetime maximum Mortgage Interest Rate (a “Rate Ceiling”). Generally, the Rate Ceiling for each Mortgage Loan will equal the Mortgage Interest Rate at origination of such Mortgage Loan plus 5.00%. None of the Mortgage Loans is subject to a lifetime minimum Mortgage Interest Rate. Therefore, the minimum Mortgage Interest Rate will be the Gross Margin. Some of the Mortgage Loans will require only payments of interest until the first due date following the related first Adjustment Date (the “Interest Only Loans”). On the first Due Date following each Adjustment Date for each Mortgage Loan, the monthly payment for the Mortgage Loan will be adjusted, if necessary, to an amount that will fully amortize such Mortgage Loan at the adjusted Mortgage Interest Rate over its remaining scheduled term to maturity.

 

If a mortgagor of an Interest Only Loan makes a partial principal prepayment prior to the related first Adjustment Date, the monthly payment of such Interest Only Loan is reduced to equal the amount of interest owed on the reduced principal balance.

 

The index for the Mortgage Loans will be the One-Year CMT (the “Index”). “One-Year CMT” is defined to be the weekly average yield on United States Treasury Securities adjusted to a constant maturity of one year, as made available by the Federal Reserve Board, published in Federal Reserve Statistical Release H.15 (519) and most recently available as of the date 45 days before the applicable Adjustment Date. In the event the Index is no longer available, the applicable Servicer will select a substitute index in accordance with the terms of the related mortgage note in compliance with federal and state law.

 

Listed below are historical average values of the Index for the months and years shown. The monthly averages shown are intended only to provide an historical summary of the movement in yields on the Index and may not be indicative of future rates. The source of the daily values of the Index used in determining the monthly averages shown below is Bloomberg Professional Services®.

 

    

Year


 

Month


   2005

    2004

    2003

    2002

    2001

    2000

    1999

    1998

 

January

   2.86 %   1.24 %   1.36 %   2.16 %   4.81 %   6.12 %   4.51 %   5.24 %

February

   3.03     1.24     1.30     2.23     4.68     6.22     4.70     5.31  

March

   3.30     1.19     1.24     2.57     4.30     6.22     4.78     5.39  

April

   3.32     1.43     1.27     2.48     3.98     6.15     4.69     5.38  

May

   3.33     1.78     1.18     2.35     3.78     6.33     4.85     5.44  

June

         2.12     1.01     2.20     3.58     6.17     5.10     5.41  

July

         2.10     1.12     1.96     3.62     6.08     5.03     5.36  

August

         2.02     1.31     1.76     3.47     6.18     5.20     5.21  

September

         2.12     1.24     1.72     2.82     6.13     5.25     4.71  

October

         2.23     1.25     1.65     2.33     6.01     5.43     4.12  

November

         2.50     1.34     1.49     2.18     6.09     5.55     4.53  

December

         2.67     1.31     1.45     2.22     5.60     5.84     4.52  

 

Each of the Mortgage Loans is subject to a due-on-sale clause. See “Certain Legal Aspects of the Mortgage Loans — ‘Due-on-Sale’ Clauses” and “Servicing of the Mortgage Loans — Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans” in the prospectus.

 

Mortgage Loan Data Appearing in Appendix A

 

The Mortgage Loans of each Loan Group were originated by Wells Fargo Bank or affiliates or by other originators. No single other originator is expected to have accounted for more than 5.00% of the aggregate unpaid principal balance of the Mortgage Loans in a Loan Group as of the Cut-Off Date.

 

In originating Mortgage Loans, the documentation levels vary depending upon several factors, including loan amount, Loan-to-Value Ratio and the type and purpose of the Mortgage Loan. Asset, income and mortgage verifications were obtained for Mortgage Loans processed with “full documentation.” In the case of “no

 

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documentation,” neither asset nor income verifications were obtained. For purposes of Appendix A, Mortgage Loans originated under Wells Fargo Bank’s retention program are included in the category of “no documentation.” Eligibility for loans included in the “asset verification” category is determined via a credit scoring model assessment, or this feature may be selected by the borrower with an associated pricing adjustment. See “The Mortgage Loan Programs—Mortgage Loan Underwriting—Wells Fargo Bank Underwriting—Retention Program Standards” in the prospectus. In most instances, a verification of the borrower’s employment was obtained.

 

The Mortgage Loans were originated for various purposes. In general, in the case of a Mortgage Loan made for “rate/term” refinance purpose, 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 a Mortgaged Property and to pay origination and closing costs associated with such refinancing. However, in the case of a Mortgage Loan made for “equity take out” refinance purpose, all or a portion of the proceeds are generally required by the mortgagor for uses unrelated to the Mortgaged Property. The amount of such proceeds retained by the mortgagor may be substantial.

 

For purposes of Appendix A, the term “single-family dwellings” includes single family attached planned unit developments (“PUDs”), single family detached PUDs, single family townhouses and single family detached dwellings.

 

In addition, for purposes of Appendix A, the Loan-to-Value Ratio of a Mortgage Loan is calculated using the lesser of (i) the appraised value of the related Mortgaged Property, as established by an appraisal obtained by the originator from an appraiser at the time of origination and (ii) the sale price for such property. For the purpose of calculating the Loan-to-Value Ratio of any Mortgage Loan that is the result of the refinancing (including a refinancing for “equity take out” purposes) of an existing mortgage loan, the appraised value of the related Mortgaged Property is generally determined by reference to an appraisal. Although for purposes of applying the Underwriting Standards, the Loan-to-Value Ratio of an LOC Pledged Asset Mortgage Loan, if any, is calculated taking into account the value of the LOC, for purposes of this prospectus supplement, such Loan-to-Value Ratio is calculated without regard to the value of such LOC. See “The Trust Estates — Mortgage Loans  — Pledged Asset Mortgage Loans” in the prospectus. There can be no assurance that such appraisal, which is based on the independent judgment of an appraiser and not an arms-length sales transaction, is an accurate representation of the market value of a Mortgaged Property. See “The Trust Estates — Mortgage Loans” in the prospectus. No assurance can be given that the values of the Mortgaged Properties securing the Mortgage Loans have remained or will remain at the levels used in calculating the Loan-to-Value Ratios shown in Appendix A. The Seller has taken no action to establish the current value of any Mortgaged Property. See “Risk Factors — Real Estate Market Conditions Affect Mortgage Loan Performance” and “— Geographic Concentration May Increase Rates of Loss and Delinquency” in the prospectus.

 

For purposes of Appendix A, the “Combined Loan-to-Value Ratio” or “CLTV” is the ratio, expressed as a percentage, of (i) the principal amount of the Mortgage Loan at origination plus (a) any junior mortgage encumbering the related Mortgaged Property originated by Wells Fargo Bank or of which Wells Fargo Bank has knowledge at the time of the origination of the Mortgage Loan or (b) the total available amount of any home equity line of credit originated by Wells Fargo Bank or of which Wells Fargo Bank has knowledge at the time of the origination of the Mortgage Loan, over (ii) the lesser of (a) the appraised value of the related Mortgaged Property at origination or (b) the sales price for such property. There can be no assurance that all data regarding junior mortgage loans or home equity lines of credit originated by parties other than Wells Fargo Bank is known by Wells Fargo Bank and therefore accurately reflected in the tables appearing in Appendix A.

 

Mortgage Loans with Loan-to-Value Ratios at origination greater than 80% may or may not be covered by a primary mortgage insurance policy. Certain Mortgage Loans may be covered by lender-paid primary mortgage insurance policies (each, an “LPMI Policy”). These LPMI Policies, if any, together with all borrower-paid primary mortgage insurance policies, will be assigned to the Trust on the Closing Date. Wells Fargo Bank will be responsible for paying the premiums under the LPMI Policies and may assign such obligation only with the consent of each Rating Agency and the respective primary mortgage insurance policy provider. Information with respect to the Mortgage Loans covered by LPMI Policies is set forth in Appendix A.

 

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Appendix A also contains tables of the FICO Scores for the Mortgage Loans in the aggregate and in each Loan Group. “FICO Scores” are statistical credit scores obtained by many mortgage lenders in connection with the loan application to help assess a borrower’s credit-worthiness. FICO Scores are generated by models developed by a third party and are made available to lenders through three national credit bureaus. The models were derived by analyzing data on consumers in order to establish patterns which are believed to be indicative of the borrower’s probability of default. The FICO Score is based on a borrower’s historical credit data, including, among other things, payment history, delinquencies on accounts, levels of outstanding indebtedness, length of credit history, types of credit, and bankruptcy experience. FICO Scores range from approximately 300 to approximately 850, with higher scores indicating an individual with a more favorable credit history compared to an individual with a lower score. However, a FICO Score purports only to be a measurement of the relative degree of risk a borrower represents to a lender, i.e., that a borrower with a higher score is statistically expected to be less likely to default in payment than a borrower with a lower score. In addition, it should be noted that FICO Scores were developed to indicate a level of default probability over a two-year period which does not correspond to the life of a mortgage loan. Furthermore, FICO Scores were not developed specifically for use in connection with mortgage loans, but for consumer loans in general. Therefore, a FICO Score does not take into consideration the effect of mortgage loan characteristics on the probability of repayment by the borrower. The FICO Scores set forth in the tables appearing in Appendix A entitled Original FICO Scores (the “Original FICO Scores”) were obtained at the time of origination of the Mortgage Loans. The FICO Scores set forth in the tables appearing in Appendix A entitled Recent FICO Scores are either (i) the Original FICO Scores for Mortgage Loans originated less than or equal to six months prior to the Cut-Off Date or for which Updated FICO Scores are not available or (ii) when available, the FICO Scores of the borrowers obtained at the end of February 2005 (the “Updated FICO Scores”) for Mortgage Loans originated more than six months prior to the Cut-Off Date. For a Mortgage Loan originated by Wells Fargo Bank or its affiliates the Updated FICO Score used in the tables is the FICO Score for the borrower whose FICO Score was used in connection with the origination of the Mortgage Loan. For a Mortgage Loan originated by an originator other than Wells Fargo Bank or its affiliates, (i) where there is only one borrower, the Updated FICO Score used in the tables is the Updated FICO Score of that borrower or (ii) where there is more than one borrower, the Updated FICO Score used in the tables is the lowest Updated FICO Score of any borrower for that Mortgage Loan. Consequently, for a Mortgage Loan originated by an originator other than Wells Fargo Bank or its affiliates, the Updated FICO Score may be for a borrower other than the borrower whose FICO Score was used at the time of origination of the Mortgage Loan. In addition, the Updated FICO Score for a Mortgage Loan may not have been provided by the same credit bureau as the Original FICO Score for such Mortgage Loan. Neither the Seller nor Wells Fargo Bank makes any representations or warranties as to the actual performance of any Mortgage Loan or that a particular FICO Score should be relied upon as a basis for an expectation that the borrower will repay the Mortgage Loan according to its terms.

 

In addition, Appendix A contains tables of the months to the first Adjustment Date for the Mortgage Loans in the aggregate and in each Loan Group. With respect to each Mortgage Loan, “Months to First Adjustment Date” equals the number of months from the Cut-Off Date to the month in which the interest rate applicable to such Mortgage Loan is initially adjusted.

 

The data appearing in Appendix A may not be exact due to rounding.

 

See “The Mortgage Loan Programs — Mortgage Loan Underwriting” in the prospectus.

 

Mortgage Loan Underwriting

 

All of the Mortgage Loans were generally originated in conformity with the underwriting standards described in the prospectus under the heading “The Mortgage Loan Programs — Mortgage Loan Underwriting — Wells Fargo Bank Underwriting” (the “Underwriting Standards”). In certain instances, exceptions to the Underwriting Standards may have been granted by Wells Fargo Bank. See “The Mortgage Loan Programs — Mortgage Loan Underwriting” in the prospectus.

 

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Mandatory Repurchase or Substitution of Mortgage Loans

 

The Seller is required, with respect to Mortgage Loans that are found by the Trustee or Custodian to have defective documentation, or in respect of which the Seller has breached a representation or warranty, either to repurchase such Mortgage Loans or, at the Seller’s option, if within two years of the date of initial issuance of the Certificates, to substitute new Mortgage Loans therefor. See “Prepayment and Yield Considerations” herein and “The Pooling and Servicing Agreement — Assignment of Mortgage Loans to the Trustee” in the prospectus.

 

Optional Purchase or Substitution of Mortgage Loans

 

Under certain circumstances as described in the prospectus under “The Pooling and Servicing Agreement — Optional Purchases” the Seller may, at its sole discretion purchase certain Mortgage Loans from the Trust Estate. The Seller may also, for three months following the Closing Date, substitute, for any reason, a new Mortgage Loan for any Mortgage Loan in the Trust Estate. See “Prepayment and Yield Considerations” herein.

 

PREPAYMENT AND YIELD CONSIDERATIONS

 

General

 

The rate of distributions in reduction of the Principal Balance of any Class of the Offered Certificates, the aggregate amount of distributions on any Class of the Offered Certificates and the Weighted Average Life and yield to maturity of any Class of the Offered Certificates purchased at a discount or premium will be directly related to the rate of payments of principal on the Mortgage Loans in the related Loan Group, or either Loan Group in the case of the Class B Certificates, and the amount and timing of mortgagor defaults resulting in Realized Losses on the Mortgage Loans in the related Loan Group, or either Loan Group in the case of the Class B Certificates. Prepayments (which, as used herein, include all unscheduled payments of principal, including payments as the result of liquidations, purchases and repurchases) of the Mortgage Loans in a Loan Group will result in distributions to Certificateholders then entitled to distributions in respect of principal in respect of such Mortgage Loans of amounts which would otherwise be distributed over the remaining terms of such Mortgage Loans. Since the rate of prepayment on the Mortgage Loans will depend on future events and a variety of factors (as described more fully below and in the prospectus under “Prepayment and Yield Considerations”), no assurance can be given as to such rate or the rate of principal payments or yield on, or Weighted Average Life of, any Class of the Offered Certificates or the aggregate amount of distributions on any Class of the Offered Certificates.

 

The rate of principal payments on the Mortgage Loans will be affected by the amortization schedules of the Mortgage Loans, the rate of principal prepayments (including partial prepayments and those resulting from refinancing) thereon by mortgagors, liquidations of defaulted Mortgage Loans, repurchases by the Seller of Mortgage Loans as a result of defective documentation or breaches of representations and warranties and optional purchases by the Seller of all of the Mortgage Loans in connection with the termination of the Trust Estate. See “Description of the Mortgage Loans — Mandatory Repurchase or Substitution of Mortgage Loans” and “Pooling and Servicing Agreement — Optional Termination” herein and “The Pooling and Servicing Agreement — Assignment of Mortgage Loans to the Trustee,” “— Optional Purchases” and “— Termination; Optional Purchase of Mortgage Loans” in the prospectus. Mortgagors are permitted to prepay the Mortgage Loans, in whole or in part, at any time without penalty. If prevailing rates for similar mortgage loans fall below the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would generally be expected to increase. Conversely, if interest rates on similar mortgage loans rise above the Mortgage Interest Rates on the Mortgage Loans, the rate of prepayment would generally be expected to decrease.

 

The Interest Only Loans require only the payment of interest until the first Due Date following the related first Adjustment Date. At that time, the payments on each Interest Only Loan will be recalculated to fully amortize its unpaid principal balance over the remaining life of such loan and the mortgagor will be required to make payments of both principal and interest, which may increase the burden of the mortgagor and may increase the risk of default under such Mortgage Loan.

 

The Mortgage Interest Rates on the Mortgage Loans will be fixed for approximately the first five years after origination and thereafter will adjust annually and may vary significantly over time. When a Mortgage Loan begins its adjustable period, increases and decreases in the Mortgage Interest Rate on that Mortgage Loan will be

 

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based on the Index in effect 45 days prior to the related Adjustment Date plus the applicable Gross Margin and will be limited by the applicable Periodic Cap and Rate Ceiling. The Index may not rise and fall consistently with mortgage interest rates. As a result, the Mortgage Interest Rates on the Mortgage Loans at any time may not equal the prevailing mortgage interest rates for similar adjustable interest rate mortgage loans, and accordingly the prepayment rate may be lower or higher than would otherwise be anticipated. Moreover, some mortgagors who prefer the certainty provided by fixed interest rate mortgage loans may nevertheless obtain adjustable interest rate mortgage loans (especially if they are able to obtain a Relationship ARM, which has a below market interest rate during the fixed-rate period) at a time when they regard the mortgage interest rates (and, therefore, the payments) on fixed interest rate mortgage loans as unacceptably high. These mortgagors may be induced to refinance adjustable interest rate mortgage loans when the mortgage interest rates and monthly payments on comparable fixed interest rate mortgage loans decline to levels which these mortgagors regard as acceptable, even though such mortgage interest rates and monthly payments may be significantly higher than the current Mortgage Interest Rates and monthly payments on the mortgagors’ adjustable interest rate mortgage loans. The ability to refinance a mortgage loan will depend on a number of factors prevailing at the time refinancing is desired, including, without limitation, real estate values, the mortgagor’s financial situation, prevailing mortgage interest rates, the mortgagor’s equity in the related mortgaged property, tax laws and prevailing general economic conditions.

 

The Pass-Through Rates on each Offered Certificate may decrease, and may decrease significantly, after the Mortgage Interest Rates on the Mortgage Loans in the related Loan Group, or either Loan Group in the case of the Class B Certificates, begin to adjust as a result of, among other factors, the dates of adjustment, the gross margins and changes in the Index. The Mortgage Interest Rates on the Mortgage Loans in a Loan Group will not all begin to adjust on the same date. Therefore, the Mortgage Interest Rates of some of the Mortgage Loans in a Loan Group may still be in their fixed-rate period while the Mortgage Interest Rates on other Mortgage Loans in such Loan Group may have begun to adjust. Moreover, although each Mortgage Loan has a maximum Mortgage Interest Rate, none of the Mortgage Loans has a specified floor. Accordingly, the minimum Mortgage Interest Rate to which the Mortgage Loans may adjust will be the applicable Gross Margin. In addition, if despite increases in the Index, the Mortgage Interest Rate on any Mortgage Loan cannot increase due to a maximum mortgage interest rate limitation or a Periodic Cap, the yield on such Offered Certificates could be adversely affected. In addition, because the Pass-Through Rate on each Offered Certificate will be based on the Net WAC of the Mortgage Loans in the related Loan Group, or both Loan Groups in the case of the Class B Certificates, disproportionate principal payments on the Mortgage Loans in the related Loan Group, or either Loan Group in the case of the Class B Certificates, having Net Mortgage Interest Rates higher or lower than the then-current Pass-Through Rates on a Class of Offered Certificates may affect the Pass-Through Rates for such Offered Certificates for future periods and the yield on such Offered Certificates. The Interest Only Certificates will also be affected by disproportionate principal payments on the Group II Mortgage Loans with higher Net Mortgage Interest Rates because the Pass-Through Rate for the Interest Only Certificates is equal to the difference between the Net WAC of the Group II Mortgage Loans and the Pass-Through Rate on the Class II-A-2 Certificates. For any Distribution Date on which the Pass-Through Rate on the Class II-A-2 Certificates is equal to the Net WAC of the Group II Mortgage Loans, the Interest Only Certificates will receive no interest distribution for such Distribution Date. On and after the Distribution Date in July 2009, the Pass-Through Rate on the Interest Only Certificates will be zero.

 

In addition, because the characteristics of the Group I Mortgage Loans and Group II Mortgage Loans differ, the Group I Mortgage Loans and Group II Mortgage Loans as a whole may be expected to prepay at different rates. The rate of prepayment on the Mortgage Loans may also be influenced by programs offered by mortgage loan originators (including Wells Fargo Bank), servicers (including Wells Fargo Bank) and mortgage loan brokers to encourage refinancing through such originators, servicers and brokers, including, but not limited to, general or targeted solicitations (which may be based on characteristics including, but not limited to, the mortgage loan interest rate or payment history and the geographic location of the Mortgaged Property), reduced origination fees or closing costs, pre-approved applications, waiver of pre-closing interest accrued with respect to a refinanced loan prior to the pay-off of such loan, or other financial incentives. In particular, the application of Wells Fargo Bank’s “retention program,” which enables qualifying mortgagors to refinance at greatly reduced cost, to its servicing portfolio may substantially affect the rate of prepayment on the Mortgage Loans. See

 

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“Prepayment and Yield Considerations — Refinancings” in the prospectus. In addition, Wells Fargo Bank or third parties may enter into agreements with borrowers providing for the bi-weekly payment of principal and interest on the related mortgage loan, thereby accelerating payment of the mortgage loan resulting in partial prepayments.

 

Other factors affecting prepayment of mortgage loans include changes in mortgagors’ housing needs, job transfers, unemployment or substantial fluctuations in income, significant fluctuations in real estate values and adverse economic conditions either generally or in particular geographic areas, mortgagors’ equity in the Mortgaged Properties, including the use of the properties as second or vacation homes, and servicing decisions, such as, without limitation, the decision as to whether to foreclose on a Mortgage Loan or to modify the terms of the related Mortgage Note and decisions as to the timing of any foreclosure. Furthermore, certain characteristics of mortgage loans are thought by some in the mortgage industry to be more likely to affect prepayments. These characteristics include, but are not limited to, principal balance, loan-to-value ratio, credit quality of borrower and current interest rate higher than prevailing interest rates. No representation is made as to the rate of prepayment on the Mortgage Loans included in the Trust having any particular characteristic. In addition, all of the Mortgage Loans contain due-on-sale clauses which will be exercised upon the sale of the related Mortgaged Properties and enforced to the extent described in the prospectus under “Servicing of the Mortgage Loans — Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans.”  Consequently, acceleration of mortgage payments as a result of any such sale will affect the level of prepayments on the Mortgage Loans. The extent to which defaulted Mortgage Loans are assumed by transferees of the related Mortgaged Properties or are refinanced will also affect the rate of principal payments. The rate of prepayment and, therefore, the yield to maturity of the Offered Certificates will be affected by, among other things, the extent to which (i) the Seller elects to repurchase, rather than substitute for, Mortgage Loans which are found by the Trustee or Custodian to have defective documentation or with respect to which the Seller has breached a representation or warranty, (ii) a substitute Mortgage Loan has an unpaid principal balance less than the Mortgage Loan for which it is substituted or (iii) a Servicer may take certain actions to mitigate losses on a defaulted Mortgage Loan which may include, but are not limited to, selling the Mortgaged Property of such Mortgage Loan for less than its unpaid principal balance or modifying the payment terms of such Mortgage Loan. See “Servicing of the Mortgage Loans — Enforcement of Due-on-Sale Clauses; Realization Upon Defaulted Mortgage Loans” in the prospectus.

 

All of the Mortgage Loans are Relationship ARMs. A Relationship ARM is subject to a Mortgage Interest Rate increase during the initial fixed-rate period in the event the mortgagor fails to maintain a required banking relationship with Wells Fargo Bank. In the event of such an increase, the Mortgage Loan will be re-amortized over its remaining term, and the monthly payments to be made by the mortgagor will increase. In the event Wells Fargo Bank exercises its right to increase the Mortgage Interest Rate by the Incremental Rate, a mortgagor may be more likely to prepay the Mortgage Loan through refinancing or otherwise. See “Description of the Mortgage Loans — General” in this prospectus supplement. An increase in the Mortgage Interest Rate on a Relationship ARM will not be accompanied by an increase in the Periodic Cap or the Rate Ceiling on such Mortgage Loan. Therefore, the interest rate adjustments on Relationship ARMs may be more likely to be subject to limitation by operation of such caps and ceiling than a comparable loan which was originated with an initial Mortgage Interest Rate equal to the Mortgage Interest Rate of the Relationship ARM plus the Incremental Rate.

 

As described under “Description of the Certificates — Principal (Including Prepayments)” herein, all or a disproportionate percentage of principal prepayments on the Mortgage Loans in a Loan Group (including liquidations and repurchases of Mortgage Loans in such Loan Group) are expected to be distributed to the holders of the Class A Certificates of the related Group then entitled to distributions in respect of principal during the eleven years beginning on the first Distribution Date.

 

The yield to maturity of the Offered Certificates will be sensitive in varying degrees to the rate and timing of principal payments (including prepayments, which may be made at any time without penalty) on the Mortgage Loans. Investors in the Offered Certificates should consider the associated risks, including, in the case of Offered Certificates purchased at a discount, the risk that a slower than anticipated rate of payments in respect of principal (including prepayments) on the Mortgage Loans in the related Loan Group, or either Loan Group in the case of the Class B Certificates, will have a negative effect on the yield to maturity of such Certificates and, in the case of Offered Certificates purchased at a premium, or the Interest

 

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Only Certificates, the risk that a faster than anticipated rate of payments in respect of principal (including prepayments) on the Mortgage Loans in the related Loan Group will have a negative effect on the yield to maturity of such Certificates. Investors purchasing Offered Certificates at a premium, or the Interest Only Certificates, should also consider the risk that a rapid rate of payments in respect of principal (including prepayments) on the Mortgage Loans in the related Loan Group could result in the failure of such investors to fully recover their initial investments. An investor is urged to make an investment decision with respect to any Class of Offered Certificates based on the anticipated yield to maturity of such Class resulting from its purchase price and such investor’s own determination as to anticipated Mortgage Loan prepayment rates under a variety of scenarios.

 

The timing of changes in the rate of prepayment on the Mortgage Loans in a Loan Group may significantly affect the actual yield to maturity experienced by an investor who purchases a Class A Certificate of the related Group or a Class B Certificate at a price other than par, even if the average rate of principal payments experienced over time is consistent with such investor’s expectation. In general, the earlier a prepayment of principal on the underlying Mortgage Loans in the related Loan Group, the greater the effect on such investor’s yield to maturity. As a result, the effect on such investor’s yield of principal payments occurring at a rate higher (or lower) than the rate anticipated by the investor during the period immediately following the issuance of the Offered Certificates would not be fully offset by a subsequent like reduction (or increase) in the rate of principal payments.

 

The yield to maturity on the Classes of Class B Certificates with higher numerical designations will generally be more sensitive to losses than the Classes with lower numerical designations because the entire amount of such losses will be allocable to the Classes of Class B Certificates in reverse numerical order, except as provided herein. To the extent not covered by Periodic Advances, delinquencies on Mortgage Loans in a Loan Group will also have a relatively greater effect on the yield to maturity on the Classes of Class B Certificates with higher numerical designations because amounts otherwise distributable to holders of the Class B Certificates will be made available to protect the holders of the Class A Certificates of the related Group against interruptions in distributions due to such unadvanced mortgagor delinquencies. Such unadvanced delinquencies, even if subsequently cured, may affect the timing of the receipt of distributions by the holders of the Class B Certificates.

 

On and after the Subordination Depletion Date, the yield to maturity of a Class of Super Senior Support Certificates will be more sensitive to losses on the Mortgage Loans in the related Loan Group than those Classes of Class A Certificates of the same Group that are not Super Senior Support Certificates, because while outstanding, each Class of Super Senior Support Certificates will bear not only its own share of losses, but also the share allocated to the related Class of Super Senior Certificates.

 

The actual yield to maturity experienced by an investor may also be affected by the occurrence of interest shortfalls resulting from Unscheduled Principal Receipts to the extent, if any, to which such interest shortfalls are not covered by Compensating Interest or subordination. See “Description of the Certificates — Interest” herein and “Servicing of the Mortgage Loans — Changes in Servicing” in the prospectus.

 

The yield to maturity on the Offered Certificates and more particularly on the Class B-1, Class B-2 and Class B-3 Certificates, may be affected by the geographic concentration of the Mortgaged Properties securing the Mortgage Loans in the related Loan Group, or either Loan Group in the case of the Class B Certificates. Certain regions in the United States have experienced or may experience significant fluctuations in housing prices. In addition, certain regions have experienced or may experience natural disasters, including earthquakes, fires, floods and hurricanes, which may adversely affect property values. See “Description of the Mortgage Loans” herein. Any deterioration in housing prices in the regions in which there is a significant concentration of Mortgaged Properties, as well as other regions in which the Mortgaged Properties are located, and any deterioration of economic conditions in such regions which adversely affects the ability of borrowers to make payments on the Mortgage Loans, may increase the likelihood of losses on the Mortgage Loans. Such losses, if they occur, may have an adverse effect on the yield to maturity of the Offered Certificates and more particularly on the Class B-1, Class B-2 and Class B-3 Certificates.

 

As to Mortgaged Properties in regions that have recently experienced natural disasters, neither the Seller nor Wells Fargo Bank has undertaken the physical inspection of such Mortgaged Properties. As a result, there can

 

S-39


be no assurance that material damage to any Mortgaged Property in an affected region has not occurred. In the Pooling and Servicing Agreement, the Seller will represent and warrant that, as of the date of issuance of the Certificates, each Mortgaged Property is undamaged by flood, water, fire, earthquake or earth movement, wind- storm, tornado or similar casualty (excluding casualty from the presence of hazardous wastes or hazardous substances, as to which the Seller makes no representation) so as to affect adversely the value of such Mortgaged Property as security for such Mortgage Loan or the use for which such premises was intended. In the event of a breach of such representation with respect to a Mortgaged Property which materially and adversely affects the interests of Certificateholders in the related Mortgage Loan, the Seller will be obligated to repurchase or substitute for such Mortgage Loan, as described under “The Mortgage Loan Programs — Representations and Warranties” and “The Pooling and Servicing Agreement — Assignment of Mortgage Loans to the Trustee” in the prospectus. Repurchase of any such Mortgage Loan will affect in varying degrees the yields and Weighted Average Lives of the related Classes of Offered Certificates and could adversely affect the yield of any related Offered Certificates purchased at a premium.

 

No representation is made as to the rate of principal payments on the Mortgage Loans or as to the yield to maturity of any Class of Offered Certificates.

 

An investor should consider the risk that rapid rates of prepayments on the Mortgage Loans in a Loan Group, or either Loan Group in the case of the Class B Certificates, and therefore of amounts distributable in reduction of principal balance of the related Offered Certificates, may coincide with periods of low prevailing interest rates. During such periods, the effective interest rates on securities in which an investor may choose to reinvest amounts distributed in reduction of the principal balance of such investor’s Offered Certificate may be lower than the applicable Pass-Through Rate or expected yield. Conversely, slower rates of prepayments on the Mortgage Loans in a Loan Group, or either Loan Group in the case of the Class B Certificates, and therefore of amounts distributable in reduction of principal balance of the related Offered Certificates, may coincide with periods of high prevailing interest rates. During such periods, the amount of principal distributions available to an investor for reinvestment at such high prevailing interest rates may be relatively small.

 

Due to the special tax treatment of residual interests, the after-tax return of the Residual Certificates may be significantly lower than would be the case if the Residual Certificates were taxed as debt instruments, or may be negative. See “Federal Income Tax Considerations” herein.

 

As referred to herein, the “Weighted Average Life” of a Class of Offered Certificates, other than a Class of Interest Only Certificates, refers to the average amount of time that will elapse from the date of issuance of such Class until each dollar in reduction of the Principal Balance of such Class is distributed to the investor. The Weighted Average Life of a Class of Interest Only Certificates is equal to the average amount of time that will elapse between the date of issuance of such Class and the date on which each dollar reduction in the Notional Amount of such Class occurs.

 

Prepayments on mortgage loans are commonly measured relative to a prepayment standard or model. The model used in this prospectus supplement, the Constant Prepayment Rate (“CPR”), represents an assumed rate of prepayment each month relative to the outstanding principal balance of a pool of mortgage loans for the life of such mortgage loans. A prepayment assumption of 10% CPR assumes constant prepayment rates of 10% per annum of the then-outstanding principal balance of such mortgage loans. As used in the tables appearing in the appendices, “0% CPR” assumes prepayment rates equal to 0% of CPR, i.e., no prepayments. Correspondingly, “15% CPR” assumes prepayment rates equal to 15% of CPR, and so forth. CPR does not purport to be a historical description of prepayment experience or a prediction of the anticipated rate of prepayment of any pool of mortgage loans, including the Mortgage Loans.

 

Appendix B sets forth the decrement tables for the Offered Certificates. The tables appearing in Appendix B have been prepared assuming, among other things, the following (the “Structuring Assumptions”):

 

(i)  the Trust Estate consists of the “Assumed Mortgage Loans” with the characteristics set forth below;

 

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(ii)  the scheduled payment in each month for each Assumed Mortgage Loan has been based on its outstanding balance as of the first day of the month preceding the month of such payment, its Mortgage Interest Rate and its remaining term to stated maturity, so that such scheduled payments (beginning with the scheduled payment after the interest-only period in the case of the Assumed Mortgage Loan (Interest Only) in each Loan Group) would amortize the remaining balance over its remaining term to maturity;

 

(iii)  scheduled monthly payments of principal and interest on the Assumed Mortgage Loans will be timely received on the first day of each month (with no defaults), commencing in July 2005;

 

(iv)  the Seller does not repurchase any of the Assumed Mortgage Loans and the Seller does not exercise its option to purchase the Assumed Mortgage Loans and thereby cause a termination of the Trust Estate;

 

(v)  principal payments on the Assumed Mortgage Loans representing principal prepayments in full of individual mortgage loans will be received on the last day of each month commencing in June 2005 at the respective constant percentages of CPR set forth in the tables and there are no Curtailments, Prepayment Interest Shortfalls or Relief Act Shortfalls;

 

(vi)  the Certificates will be issued on the Closing Date;

 

(vii)  distributions to Certificateholders will be made on the 25th day of each month, commencing in July 2005;

 

(viii) the Index remains constant at 3.31%;

 

(ix) the Periodic Cap is 5.00% for the first Adjustment Date for the Assumed Mortgage Loans and the Periodic Cap for each Adjustment Date thereafter is 2.00%;

 

(x) the Assumed Mortgage Loans adjust on the first Adjustment Date and annually on each anniversary thereof;

 

(xi)  the Master Servicing Fee Rate will be 0.010% per annum for each Assumed Mortgage Loan;

 

(xii)  there is no Incremental Interest with respect to any Assumed Mortgage Loan; and

 

(xiii)  the initial Principal Balance (or Notional Amount) of each Class of Certificates will be as set forth in the table beginning on page S-4 of this prospectus supplement.

 

Assumed Mortgage Loan Characteristics

 

   

Principal Balance

as of the

Cut-Off Date


 

Current
Mortgage

Interest Rate


   

Servicing

Fee Rate


   

Remaining

Term to
Maturity

(in Months)


 

Original

Term to
Maturity
(in Months)


 

Months to

First
Adjustment

Date


  Original
Interest
Only
Months


  Rate
Ceiling


    Gross
Margin


 

Loan Group I


                                             

Assumed Mortgage Loan

(Interest Only)

  $ 176,181,111.12   4.6136343085 %   0.250 %   349   360   49   60   9.61363 %   2.750 %

Assumed Mortgage Loan

  $ 85,000,238.81   4.6229368566 %   0.250 %   345   360   46   0   9.64094 %   2.750 %

Loan Group II


                                             

Assumed Mortgage Loan

(Interest Only)

  $ 1,148,219,205.63   4.5833519305 %   0.250 %   349   360   49   60   9.58874 %   2.750 %

Assumed Mortgage Loan

  $ 397,193,306.18   4.5798496212 %   0.250 %   344   360   44   0   9.60891 %   2.750 %

 

It is highly unlikely that the Mortgage Loans in a Loan Group will prepay at any constant rate, that all of the Mortgage Loans in a Loan Group will prepay at the same rate or that the Mortgage Loans in a Loan Group will not experience any losses. In addition, there will be differences between the characteristics of the Mortgage Loans ultimately included in each Loan Group and the characteristics which are assumed in preparing the tables, as described above. Any difference may have an effect upon the actual percentages of initial Principal Balances (or, initial Notional Amount, in the case of the Interest Only Certificates) of the Classes of Certificates outstanding, the actual Weighted Average Lives of the Classes of Certificates and the date on which the Principal Balance (or, initial Notional Amount, in the case of the Interest Only Certificates) of any Class of Certificates is reduced to zero.

 

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Based upon the foregoing assumptions, the tables appearing in Appendix B indicate the Weighted Average Life of each Class of Offered Certificates, and set forth the percentages of the initial Principal Balance (or, initial Notional Amount, in the case of the Interest Only Certificates) of each such Class of Offered Certificates that would be outstanding after each of the dates shown at constant percentages of CPR presented.

 

Interest accrued on the Offered Certificates will be reduced by the amount of any interest portions of Realized Losses allocated to such Certificates as described under “Description of the Certificates — Interest” herein. The yield on the Offered Certificates will be less than the yield otherwise produced by their respective Pass-Through Rates, if any, and the prices at which such Certificates are purchased because the interest which accrues on the Mortgage Loans during each month will not be passed through to Certificateholders until the 25th day of the month following the end of such month (or if such 25th day is not a business day, the following business day).

 

The Seller intends to file certain additional yield tables and other computational materials with respect to one or more Classes of Offered Certificates with the Securities and Exchange Commission in a Report on Form 8-K. See “Incorporation of Certain Information by Reference” in the prospectus. Such tables and materials will have been prepared by the Underwriter at the request of certain prospective investors, based on assumptions provided by, and satisfying the special requirements of, such investors. Such tables and assumptions may be based on assumptions that differ from the Structuring Assumptions. Accordingly, such tables and other materials may not be relevant to or appropriate for investors other than those specifically requesting them.

 

Sensitivities of Certain Classes of Certificates

 

Interest Only Certificates will be highly sensitive to the rate and timing of principal payments (including prepayments) on the Mortgage Loans in the related Loan Group, which rate may fluctuate significantly from time to time. An investor in the Interest Only Certificates should fully consider the associated risks, including the risk that a rapid rate of principal payments (including prepayments) could result in the failure of such investor to fully recover its initial investment.

 

The Interest Only Certificates will receive no distributions of interest on and after the Distribution Date in July 2009 and prior to the Distribution Date in July 2009 may receive no distributions of interest under the circumstances described herein under “Risk Factors — The Variable Rate of Interest on the Offered Certificates Will Affect Your Yield.”

 

The table appearing in Appendix C indicates the sensitivity to various rates of prepayment on the Mortgage Loans in the related Loan Group of the pre-tax yields to maturity on a semi-annual corporate bond equivalent (“CBE”) basis of the Interest Only Certificates.

 

The table has been prepared on the basis of the Structuring Assumptions, and the additional assumption that the Class II-A-8 Certificates will be purchased on the Closing Date at a purchase price equal to 0.609375% of their initial Notional Amount plus accrued interest from the first day of the initial Interest Accrual Period for such Class to (but not including) the Closing Date.

 

The pre-tax yields to maturity set forth in the table appearing in Appendix C were calculated by (i) determining the monthly discount rates which, when applied to the assumed streams of cash flows to be paid on the Interest Only Certificates, would cause the discounted present value of such assumed streams of cash flows to equal the assumed purchase price for the Interest Only Certificates set forth above and (ii) converting such monthly rates to CBE rates. Such calculations do not take into account the interest rates at which investors may be able to reinvest funds received by them as distributions on the Certificates and consequently do not purport to reflect the return on any investment in the Certificates when such reinvestment rates are considered.

 

Notwithstanding the assumed prepayment rates reflected in the table in Appendix C, it is highly unlikely that the applicable Mortgage Loans will prepay at a constant rate until maturity, that all of the applicable Mortgage Loans will prepay at the same rate or that the applicable Mortgage Loans will not experience any losses. In addition, there will be differences between the characteristics of the Mortgage Loans ultimately included in Loan

 

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Group II and the Assumed Mortgage Loans for Loan Group II. As a result of these factors, the pre-tax yields to maturity on the Interest Only Certificates are likely to differ from those shown in the table, even if all of the applicable Mortgage Loans prepay at the indicated percentages of CPR.

 

Yield Considerations with Respect to the Class B-2 and Class B-3 Certificates

 

Defaults on mortgage loans may be measured relative to a default standard or model. The model used in this prospectus supplement, the constant default rate (“CDR”), represents an assumed rate of default each month, expressed as an annual rate, relative to the then-outstanding performing principal balance of the Mortgage Loans. Such defaults are assumed to occur with respect to individual mortgage loans comprising, and which have characteristics identical to, the Assumed Mortgage Loans. CDR does not purport to be a historical description of default experience or a prediction of the anticipated rate of default of any pool of mortgage loans, including the Mortgage Loans.

 

The tables appearing in Appendix D indicate the sensitivity of the pre-tax yield to maturity on a CBE basis of the Class B-2 and Class B-3 Certificates to various rates of prepayment and varying levels of aggregate Realized Losses. The tables appearing in Appendix D are based upon, among other things, the Structuring Assumptions (other than the assumption that no defaults shall have occurred with respect to the Assumed Mortgage Loans) and the additional assumptions that (i) liquidations (other than those scenarios indicated as 0% of CDR (no defaults)) occur monthly on the last day of the preceding month at the percentages of CDR set forth in the tables and (ii) all delinquency tests are met.

 

In addition, it was assumed that (i) Realized Losses on liquidations of 15% or 25% of the outstanding principal balance of such liquidated Mortgage Loans, as indicated in the tables (referred to as a “Loss Severity Percentage”) will occur at the time of liquidation, (ii) there is no delay between the default and the liquidation of the mortgage loans and (iii) the Class B-2 and Class B-3 Certificates are purchased on the Closing Date at purchase prices equal to 97.421875% and 96.109375%, respectively, of the initial Principal Balances thereof, plus accrued interest from the first day of the initial Interest Accrual Period to (but not including) the Closing Date.

 

The actual Mortgage Loans ultimately included in each Loan Group will have characteristics differing from those assumed in preparing the tables and it is unlikely that they will prepay or liquidate at any of the rates specified. In addition, it is unlikely that Realized Losses will be incurred according to any one particular pattern. The assumed percentages of CDR and CPR and the loss severities shown in the tables are for illustrative purposes only and the Seller makes no representations with respect to the reasonableness of such assumptions or that the actual rates of prepayment and liquidation and loss severity experience of the Mortgage Loans will in any way correspond to any of the assumptions made herein. For these reasons, and because the timing of cash flows is critical to determining yield, the actual pre-tax yields to maturity of the Class B-2 and Class B-3 Certificates are likely to differ from the pre-tax yields to maturity shown in the tables.

 

The pre-tax yields to maturity in the tables appearing in Appendix D were calculated by (i) determining the monthly discount rates which, when applied to the assumed streams of cash flows to be paid on the Class B-2 and Class B-3 Certificates, would cause the discounted present value of such assumed streams of cash flows to equal the assumed purchase prices of the Class B-2 and Class B-3 Certificates set forth above and (ii) converting such monthly rates to CBE rates. Such calculations do not take into account the interest rates at which investors may be able to reinvest funds received by them as distributions on the Class B-2 and Class B-3 Certificates and consequently do not purport to reflect the return on any investment in the Class B-2 and Class B-3 Certificates when such reinvestment rates are considered.

 

Investors are urged to make their investment decisions based on their determinations as to anticipated rates of prepayment and Realized Losses under a variety of scenarios. Investors in Class B-2 and Class B-3 Certificates should fully consider the risk that Realized Losses on the Mortgage Loans in either Loan Group could result in the failure of such investors to fully recover their initial investments.

 

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WELLS FARGO BANK

 

Wells Fargo Bank, N.A. (“Wells Fargo Bank”) will act as the Custodian, the Master Servicer and a Servicer with respect to the Mortgage Loans. Even though Wells Fargo Bank will be acting in these multiple capacities, it is expected that with respect to the functions of Master Servicer and Custodian, on the one hand, and Servicer, on the other, different divisions within Wells Fargo Bank, acting through different personnel, will be performing these functions. See “Wells Fargo Bank” in the prospectus.

 

POOLING AND SERVICING AGREEMENT

 

General

 

The Certificates will be issued pursuant to a Pooling and Servicing Agreement to be dated as of the Closing Date (the “Pooling and Servicing Agreement”) among the Seller, the Master Servicer and the Trustee. Reference is made to the prospectus for important additional information regarding the terms and conditions of the Pooling and Servicing Agreement and the Certificates. See “Description of the Certificates,” “Servicing of the Mortgage Loans” and “The Pooling and Servicing Agreement” in the prospectus.

 

The Trust Estate created pursuant to the Pooling and Servicing Agreement will consist of (i) the Mortgage Loans, (ii) such assets as from time to time are identified as deposited in any account held for the benefit of the Certificateholders, (iii) any Mortgaged Properties acquired on behalf of the Certificateholders by foreclosure or by deed in lieu of foreclosure after the Closing Date and (iv) the rights of the Trustee to receive the proceeds of all insurance policies and performance bonds, if any, required to be maintained pursuant to the Pooling and Servicing Agreement.

 

Distributions

 

Distributions (other than the final distribution in retirement of the Offered Certificates of each Class) will be made by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. However, with respect to any holder of an Offered Certificate evidencing at least a $100,000 initial Principal Balance or, in the case of the Class II-A-8 Certificates, the holder of 14% Percentage Interest, distributions will be made on the Distribution Date by wire transfer in immediately available funds. The final distribution in respect of each Class of Offered Certificates will be made only upon presentation and surrender of the related Certificate at the office or agency appointed by the Trustee specified in the notice of final distribution with respect to the related Class. See “Description of the Certificates — General” in the prospectus.

 

DTC will receive distributions on the Book-Entry Certificates from the Trustee and transmit them to DTC Participants for distribution to Beneficial Owners or their nominees.

 

Voting

 

With respect to any provisions of the Pooling and Servicing Agreement providing for the action, consent or approval of the holders of all Certificates evidencing specified Voting Interests in the Trust Estate, the Interest Only Certificates will be entitled to 1% of the aggregate Voting Interest represented by all Certificates and each remaining Class of Certificates will be entitled to a pro rata portion of the remaining Voting Interest based on the outstanding Principal Balance of such Class. Each Certificateholder of a Class will have a Voting Interest equal to the product of the Voting Interest to which such Class is collectively entitled and the Percentage Interest in such Class represented by such holder’s Certificates. With respect to any provisions of the Pooling and Servicing Agreement providing for action, consent or approval of each Class of Certificates or specified Classes of Certificates, each Certificateholder of a Class will have a Voting Interest in such Class equal to such holder’s Percentage Interest in such Class. Unless Definitive Certificates are issued as described under “Description of the Certificates — Book-Entry Form” in the prospectus, Beneficial Owners of Book-Entry Certificates may exercise their voting rights only through DTC Participants.

 

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Trustee

 

The “Trustee” for the Certificates will be Wachovia Bank, National Association, a national banking association. The corporate trust office of the Trustee is located at 401 South Tryon Street, Charlotte, North Carolina 28288. The Trustee will be required to make Periodic Advances to the limited extent described herein with respect to the Mortgage Loans serviced by Wells Fargo Bank if Wells Fargo Bank, as Servicer, fails to make a Periodic Advance required by the related Underlying Servicing Agreement. See “Description of the Certificates — Periodic Advances” herein and “The Pooling and Servicing Agreement — The Trustee” in the prospectus.

 

Custodian

 

The “Custodian” for the Mortgage Loans will be the Corporate Trust Services division of Wells Fargo Bank. See “The Pooling and Servicing Agreement — Assignment of Mortgage Loans to the Trustee” in the prospectus.

 

Master Servicer

 

The Corporate Trust Services division of Wells Fargo Bank will act as “Master Servicer” of the Mortgage Loans and, in that capacity, will supervise the servicing of the Mortgage Loans, cause the Mortgage Loans to be serviced in the event an Other Servicer is terminated and a successor servicer is not appointed, provide certain reports to the Trustee regarding the Mortgage Loans and the Certificates and make Periodic Advances to the limited extent described herein. See “Description of the Certificates — Periodic Advances” herein. Under the Pooling and Servicing Agreement, any good faith interpretation of the Master Servicer of any provisions of the Pooling and Servicing Agreement relating to the distributions to be made on or the allocation of any losses to the Certificates which the Master Servicer concludes are ambiguous or unclear will be binding on Certificateholders. The Master Servicer will be entitled to a “Master Servicing Fee” payable monthly equal to the product of (i)  1/12th of 0.010% (the “Master Servicing Fee Rate”) and (ii) the aggregate Scheduled Principal Balance of the Mortgage Loans as of the first day of each month. The Master Servicer will pay certain administrative expenses to the Trust Estate subject to reimbursement as described under “Servicing of the Mortgage Loans — The Master Servicer” in the prospectus.

 

Optional Termination

 

The Seller may purchase from the Trust Estate all of the Mortgage Loans and any REO Properties, and thereby effect early retirement of the Certificates, on any Distribution Date when the aggregate Scheduled Principal Balance of the Mortgage Loans is less than 10% of the aggregate unpaid principal balance of the Mortgage Loans as of the Cut-Off Date. In the event the Seller purchases the Mortgage Loans and any REO Properties as described above, holders of the Certificates, to the extent the purchase price as described in the prospectus under “The Pooling and Servicing Agreement — Termination; Optional Purchase of Mortgage Loans” is sufficient, will receive the unpaid principal balance of their Certificates and any accrued and unpaid interest thereon. For so long as the Seller is subject to regulation by the OCC, the FDIC, the Federal Reserve or the OTS, the Seller may purchase the Mortgage Loans and REO Properties only if the aggregate fair market value of such Mortgage Loans and REO Properties is greater than or equal to the purchase price. The amount, if any, remaining in the Certificate Account after the payment of all principal and interest on the Certificates and expenses of the Upper-Tier REMIC, Middle-Tier REMIC and Lower-Tier REMIC will be distributed to the holders of the Class I-A-R Certificates. See “Description of the Certificates —  Additional Rights of the Residual Certificateholders” herein and “The Pooling and Servicing Agreement — Termination; Optional Purchase of Mortgage Loans” in the prospectus. The exercise of the foregoing option will be in the Seller’s sole discretion. Without limitation, the Seller may enter into agreements with third parties to (i) exercise such option at the direction of such third party or (ii) forbear from the exercise of such option.

 

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SERVICING OF THE MORTGAGE LOANS

 

Wells Fargo Bank will, and other servicers (the “Other Servicers,” and collectively with Wells Fargo Bank, the “Servicers”) may, service the Mortgage Loans, each pursuant to a separate servicing agreement (each, an “Underlying Servicing Agreement”). Initially, it is anticipated that there will be no Other Servicers servicing the Mortgage Loans. The rights to enforce the related Servicer’s obligations under each Underlying Servicing Agreement with respect to the related Mortgage Loans will be assigned to the Trustee for the benefit of Certificateholders. Among other things, the Servicers are obligated under certain circumstances to advance delinquent payments of principal and interest with respect to the Mortgage Loans. See “Servicing of the Mortgage Loans” and “Wells Fargo Bank” in the prospectus.

 

The Servicers

 

The Group I Mortgage Loans initially will be serviced by the following entities:

 

Name of Servicer


  Approximate Percentage
of Group I Unpaid
Principal Balance as of
the Cut-Off Date


 

Wells Fargo Bank

     

Type 1 Loans

  100.00 %

Type 2 Loans

  0.00 %
   

Wells Fargo Bank Total

  100.00 %
   

 

The Group II Mortgage Loans initially will be serviced by the following entities:

 

Name of Servicer


  Approximate Percentage
of Group II Unpaid
Principal Balance as of
the Cut-Off Date


 

Wells Fargo Bank

     

Type 1 Loans

  99.83 %

Type 2 Loans

  0.17 %
   

Wells Fargo Bank Total

  100.00 %
   

 

See “Description of the Certificates — Distributions to Certificateholders — Unscheduled Principal Receipts” and “Servicing of the Mortgage Loans — Changes in Servicing” in the prospectus.

 

Servicing Compensation and Payment of Expenses

 

The primary compensation payable to each of the Servicers is the aggregate of the Servicing Fees applicable to the related Mortgage Loans. The Servicing Fee applicable to each Mortgage Loan is expressed as a fixed percentage (the “Servicing Fee Rate”) of the scheduled principal balance (as defined in the Underlying Servicing Agreements) of such Mortgage Loan as of the first day of each month. The Servicing Fee Rate for each Mortgage Loan is 0.250% per annum. The Servicers also are entitled to additional servicing compensation, as described in the prospectus under “Servicing of the Mortgage Loans — Fixed Retained Yield, Servicing Compensation and Payment of Expenses.” Any Incremental Interest will be treated as additional servicing compensation and will not be made available to make payments to Certificateholders. No Fixed Retained Yield (as defined in the prospectus) will be retained with respect to any of the Mortgage Loans.

 

The Master Servicer will pay certain expenses, including fees of the Trustee incurred in connection with its responsibilities under the Pooling and Servicing Agreement, subject to certain rights of reimbursement as described in the prospectus. The servicing fees and other expenses of the Upper-Tier REMIC, Middle-Tier REMIC and Lower-Tier REMIC will be allocated to the holders of the Class I-A-R Certificates. See “Federal Income Tax Considerations” herein and “Certain Federal Income Tax Consequences — Federal Income Tax Consequences for REMIC Certificates — Limitations on Deduction of Certain Expenses” in the prospectus.

 

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DELINQUENCY AND FORECLOSURE EXPERIENCE

 

Certain information concerning recent delinquency and foreclosure experience as reported to the Master Servicer by the applicable servicers on adjustable-rate mortgage loans included in various mortgage pools underlying all series of the Seller’s mortgage pass-through certificates is set forth in the applicable table under “Delinquency and Foreclosure Experience” in the prospectus. There can be no assurance that the delinquency and foreclosure experience set forth in such table will be representative of the results that may be experienced with respect to the Mortgage Loans included in the Trust Estate.

 

See “Delinquency and Foreclosure Experience” in the prospectus for a discussion of various factors affecting delinquencies and foreclosures generally.

 

FEDERAL INCOME TAX CONSIDERATIONS

 

The following discussion represents the opinion of Cadwalader, Wickersham & Taft LLP as to the anticipated material federal income tax consequences of the purchase, ownership and disposition of the Offered Certificates.

 

The Trust will consist of three segregated asset groupings, each of which will qualify as a REMIC for federal income tax purposes. One REMIC (the “Lower-Tier REMIC”) will issue certain uncertificated interests (each, a “Lower-Tier REMIC Regular Interest”), each of which will be designated as a regular interest in the Lower-Tier REMIC, and the Class I-A-LR Interest, which will be designated as the residual interest in the Lower-Tier REMIC. The assets of the Lower-Tier REMIC will include the Mortgage Loans, together with the amounts held by the Master Servicer in a separate account in which collections on the Mortgage Loans will be deposited (the “Certificate Account”), the hazard insurance policies and primary mortgage insurance policies, if any, relating to the Mortgage Loans and any property that secured a Mortgage Loan that is acquired by foreclosure or deed in lieu of foreclosure.

 

The second REMIC (the “Middle-Tier REMIC”) will issue certain uncertificated interests (each, a “Middle-Tier REMIC Regular Interest”), each of which will be designated as a regular interest in the Middle-Tier REMIC, and the Class I-A-MR Interest, which will be designated as the residual interest in the Middle-Tier REMIC. The assets of the Middle-Tier REMIC will include the uncertificated Lower-Tier REMIC Regular Interests and a separate account in which distributions on the uncertificated Lower-Tier REMIC Regular Interests will be deposited. The aggregate amount distributable with respect to the Middle-Tier REMIC Regular Interests and the Class I-A-MR Interest, payable from such separate account, will be equal to the aggregate distributions in respect of the Mortgage Loans on the uncertificated Lower-Tier REMIC Regular Interests.

 

The third REMIC (the “Upper-Tier REMIC”) will issue all Classes of the Class A Certificates (other than the portion of the Class I-A-R Certificates representing the Class I-A-LR Interest and Class I-A-MR Interest) and all Class B Certificates. Each Class of Offered Certificates (other than the Class I-A-R Certificates), together with each Class of Certificates not offered hereby (collectively, the “Regular Certificates”) will be designated as regular interests in the Upper-Tier REMIC, and the Class I-A-R Certificates will be designated as the residual interest in the Upper-Tier REMIC. For tax purposes, the Class I-A-R Certificates represent the beneficial ownership of three residual interests (the “Class I-A-R Interest,” the “Class I-A-MR Interest” and the “Class I-A-LR Interest”). The Class I-A-R Certificates are “Residual Certificates” for purposes of the prospectus. The assets of the Upper-Tier REMIC will include the uncertificated Middle-Tier REMIC Regular Interests and a separate account in which distributions on the uncertificated Middle-Tier REMIC Regular Interests will be deposited. The aggregate amount distributed to the Regular Certificates and the Class I-A-R Interest, payable from such separate account, will be equal to the aggregate distributions on the uncertificated Middle-Tier REMIC Regular Interests.

 

The Offered Certificates will be treated as “loans . . . secured by an interest in real property which is . . . residential real property” for a domestic building and loan association, “real estate assets” for a real estate

 

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investment trust and, other than the Residual Certificates, “qualified mortgages” for a REMIC, to the extent described in the prospectus.

 

Regular Certificates

 

The Regular Certificates generally will be treated as newly originated debt instruments for federal income tax purposes. Beneficial Owners (or in the case of Definitive Certificates, holders) of the Regular Certificates will be required to report income on such Certificates in accordance with the accrual method of accounting.

 

It is anticipated that:

 

    The Class II-A-8 Certificates will be issued with original issue discount equal to the excess of all distributions of interest expected to be received on these Certificates over their issue price (including accrued interest from the first day of the initial Interest Accrual Period);

 

    The Class II-A-2, Class II-A-4, Class II-A-10, Class B-2 and Class B-3 Certificates will be issued with original issue discount equal to the excess of their initial Principal Balances over their respective issue prices (including accrued interest from the first day of the initial Interest Accrual Period);

 

    The Class I-A-1 Certificates will be issued at a premium; and

 

    The Class I-A-2, Class II-A-1, Class II-A-3, Class II-A-5, Class II-A-6, Class II-A-7, Class II-A-9 and Class B-1 Certificates will be issued with de minimis original issue discount.

 

It is also anticipated that the Class B-4, Class B-5 and Class B-6 Certificates, which are not offered hereby, will be issued with original issue discount.

 

See “Certain Federal Income Tax Consequences — Federal Income Tax Consequences for REMIC Certificates — Taxation of Regular Certificates” in the prospectus.

 

The Prepayment Assumption (as defined in the prospectus) that the Master Servicer intends to use in determining the rate of accrual of original issue discount and whether the original issue discount is considered de minimis, and that may be used by Beneficial Owners (or holders) to amortize premium, will be calculated assuming that the Mortgage Loans will prepay at 15% CPR. No representation is made as to the actual rate at which the Mortgage Loans will prepay.

 

If the method for computing original issue discount results in a negative amount for any period with respect to any holder of Offered Certificates, the amount of original issue discount allocable to that period would be zero. This is a possibility of particular relevance to a holder of an Interest Only Certificate. Although the matter is not free from doubt, a holder of an Interest Only Certificate may be permitted to deduct a loss to the extent that its remaining basis in the Certificate exceeds the maximum amount of future payments to which the holder is entitled, assuming no further prepayments on the Mortgage Loans. Any loss might be treated as a capital loss.

 

Residual Certificates

 

The holders of the Class I-A-R Certificates must include the taxable income or loss of the Upper-Tier REMIC, the Middle-Tier REMIC and the Lower-Tier REMIC in determining their federal taxable income. In making such determination, the holders of the Class I-A-R Certificates must account separately for their interest in each REMIC and generally cannot offset income from one REMIC with losses from another REMIC. The Residual Certificates will remain outstanding for federal income tax purposes until there are no Certificates of any other Class outstanding. Prospective investors are cautioned that the Residual Certificateholders’ REMIC taxable income and the tax liability thereon may exceed, and may substantially exceed, cash distributions to such holders during certain periods, in which event, the holders thereof must have sufficient alternative sources of funds to pay such tax liability. Furthermore, it is anticipated that all or a substantial portion of the taxable income of the Upper-Tier REMIC, Middle-Tier REMIC and Lower-Tier REMIC includible by the holders of the Class I-A-R Certificates will be treated as “excess inclusion” income, resulting in (i) the inability of such holders to use

 

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net operating losses to offset such income from the respective REMIC, (ii) the treatment of such income as “unrelated business taxable income” to certain holders who are otherwise tax-exempt, and (iii) the treatment of such income as subject to 30% withholding tax to certain non-U.S. investors, with no exemption or treaty reduction.

 

The Residual Certificates will be considered “noneconomic residual interests,” with the result that transfers thereof would be disregarded for federal income tax purposes if any significant purpose of the transferor was to impede the assessment or collection of tax. Accordingly, the Residual Certificates are subject to certain restrictions on transfer and any prospective transferee thereof will be required to furnish to the Trustee an affidavit as described under “Certain Federal Income Tax Consequences — Federal Income Tax Consequences for REMIC Certificates — Taxation of Residual Certificates — Tax-Related Restrictions on Transfer of Residual Certificates — Noneconomic Residual Interests” in the prospectus. See also “Certain Federal Income Tax Consequences — Federal Income Tax Consequences for REMIC Certificates — Taxation of Residual Certificates — Limitations on Offset or Exemption of REMIC Income” in the prospectus.

 

An individual, trust or estate that holds a Residual Certificate (whether such Certificate is held directly or indirectly through certain pass-through entities) also may have additional gross income with respect to, but may be subject to limitations on the deductibility of, Servicing Fees on the Mortgage Loans and other administrative expenses of the REMICs in computing such holder’s regular tax liability, and may not be able to deduct such fees or expenses to any extent in computing such holder’s alternative minimum tax liability. In addition, some portion of a purchaser’s basis, if any, in a Residual Certificate may not be recovered until termination of the Trust Estate.

 

Due to the special tax treatment of residual interests, the effective after-tax return of the Residual Certificates may be significantly lower than would be the case if the Residual Certificates were taxed as debt instruments, or may be negative.

 

See “Certain Federal Income Tax Consequences” in the prospectus.

 

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ERISA CONSIDERATIONS

 

The Residual Certificates may not be purchased by or transferred to a Plan or a person acting on behalf of or investing the assets of a Plan. See “Description of the Certificates — Restrictions on Transfer of the Residual Certificates” herein.

 

Accordingly, the following discussion applies to the Offered Certificates (other than the Residual Certificates) and does not purport to discuss the considerations under ERISA, Code Section 4975 or Similar Law with respect to the purchase, acquisition or resale of a Residual Certificate.

 

As described in the prospectus under “ERISA Considerations,” ERISA and the Code impose certain duties and restrictions on ERISA Plans and certain persons who perform services for ERISA Plans. Comparable duties and restrictions may exist under Similar Law on governmental plans and certain persons who perform services for governmental plans. For example, unless exempted, investment by a Plan in the Offered Certificates may constitute a prohibited transaction under ERISA, the Code or Similar Law. There are certain exemptions issued by the United States Department of Labor (the “DOL”) that may be applicable to an investment by an ERISA Plan in the Offered Certificates, including the individual administrative exemption described below. For a further discussion of the individual administrative exemption, including the necessary conditions to its applicability, and other important factors to be considered by an ERISA Plan contemplating investing in the Offered Certificates, see “ERISA Considerations” in the prospectus.

 

The DOL issued an Underwriter Exemption to Lehman Brothers Inc. (“Lehman Brothers”). This Underwriter Exemption might apply to the acquisition, holding and resale of the Offered Certificates by an ERISA Plan, provided that specified conditions are met.

 

Among the conditions which would have to be satisfied for the Underwriter Exemption to apply to the acquisition by an ERISA Plan of the Offered Certificates is the condition that the ERISA Plan investing in the Offered Certificates be an “accredited investor” as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Securities Act”).

 

Before purchasing an Offered Certificate, a fiduciary of an ERISA Plan should make its own determination as to the availability of the exemptive relief provided in the Underwriter Exemption or the availability of any other prohibited transaction exemptions, and whether the conditions of any such exemption will be applicable to the Offered Certificates, and a fiduciary of a governmental plan should make its own determination as to the need for and availability of any exemptive relief under Similar Law. Any fiduciary of an ERISA Plan considering whether to purchase an Offered Certificate should also carefully review with its own legal advisors the applicability of the fiduciary duty and prohibited transaction provisions of ERISA and the Code to such investment. See “ERISA Considerations” in the prospectus.

 

LEGAL INVESTMENT

 

The Class A and Class B-1 Certificates constitute “mortgage related securities” for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as amended (“SMMEA”) so long as they are rated in one of the two highest rating categories by at least one nationally recognized statistical rating organization. The Class B-2 and Class B-3 Certificates will not constitute “mortgage related securities” under SMMEA.

 

Prospective purchasers whose investment activities are subject to legal investment laws and regulations, regulatory capital requirements or review by regulatory authorities may be subject to restrictions on investment in the Offered Certificates and should consult their own legal, tax and accounting advisors in determining the suitability of and consequences to them of the purchase, ownership and disposition of the Offered Certificates. See “Legal Investment” in the prospectus.

 

 

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SECONDARY MARKET

 

There will not be any market for the Offered Certificates prior to the issuance thereof. The Underwriter intends to act as a market maker in the Offered Certificates, subject to applicable provisions of federal and state securities laws and other regulatory requirements, but is under no obligation to do so. There can be no assurance that a secondary market in the Offered Certificates will develop or, if such a market does develop, that it will provide holders of Offered Certificates with liquidity of investment at any particular time or for the life of the Offered Certificates. As a source of information concerning the Certificates and the Mortgage Loans, prospective investors in Certificates may obtain copies of the Monthly Reports to Certificateholders described under “The Pooling and Servicing Agreement — Reports to Certificateholders” in the prospectus upon written request to the Trustee at the Corporate Trust Office.

 

UNDERWRITING

 

Subject to the terms and conditions of the underwriting agreement dated May 10, 2004 and the terms agreement dated April 28, 2005 (together, the “Underwriting Agreement”) among Wells Fargo Bank, the Seller and Lehman Brothers, as underwriter (the “Underwriter”), the Offered Certificates are being purchased from the Seller by the Underwriter upon issuance thereof. The Underwriter, which is not an affiliate of the Seller, is committed to purchase all of the Offered Certificates if any such Certificates are purchased. The Underwriter has advised the Seller that it proposes to offer the Offered Certificates, from time to time, for sale in negotiated transactions or otherwise at prices determined at the time of sale. Proceeds to the Seller from the sale of the Offered Certificates are expected to be approximately $1,783,161,518, plus accrued interest thereon from the Cut-Off Date to (but not including) the Closing Date before deducting expenses payable by the Seller estimated to be $435,000. The Underwriter has advised the Seller that it has not allocated the purchase price paid to the Seller for the Class A Certificates among such Classes. The Underwriter and any dealers that participate with the Underwriter in the distribution of the Offered Certificates may be deemed to be underwriters, and any discounts or commissions received by them and any profit on the resale of Offered Certificates by them may be deemed to be underwriting discounts or commissions, under the Securities Act.

 

The Underwriting Agreement provides that the Seller or Wells Fargo Bank will indemnify the Underwriter against certain civil liabilities under the Securities Act or contribute to payments which the Underwriter may be required to make in respect thereof.

 

This prospectus supplement and the prospectus may be used by Wells Fargo Brokerage Services, LLC, an affiliate of the Seller and Wells Fargo Bank, to the extent required, in connection with market making transactions in the Offered Certificates. Wells Fargo Brokerage Services, LLC may act as principal or agent in such transactions.

 

LEGAL MATTERS

 

The validity of the Offered Certificates and certain tax matters with respect thereto will be passed upon for the Seller by Cadwalader, Wickersham & Taft LLP, New York, New York. Certain legal matters will be passed upon for the Underwriter by Stroock & Stroock & Lavan LLP, New York, New York.

 

USE OF PROCEEDS

 

The net proceeds to be received from the sale of the Offered Certificates will be applied by the Seller to the purchase from Wells Fargo Bank of the Mortgage Loans underlying the Certificates.

 

 

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RATINGS

 

It is a condition to the issuance of the Offered Certificates that each such Class will have received at least the rating set forth in the table beginning on page S-4 from Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P,” and together with Moody’s, the “Rating Agencies”). 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. Each security rating should be evaluated independently of any other security rating.

 

The ratings of Moody’s on mortgage pass-through certificates address the likelihood of the receipt by certificateholders of all distributions of principal and interest to which such certificateholders are entitled. Moody’s rating opinions address the structural, legal and issuer aspects associated with the certificates, including the nature of the underlying mortgage loans and the credit quality of the credit support provider, if any. Moody’s ratings on mortgage pass-through certificates do not represent any assessment of the likelihood or rate of principal prepayments and consequently any adverse effect the timing of such prepayments could have on an investor’s anticipated yield.

 

The ratings of S&P on mortgage pass-through certificates address the likelihood of the receipt by certificateholders of timely payments of interest and the ultimate return of principal. S&P’s ratings take into consideration the credit quality of the mortgage pool, including any credit support providers, structural and legal aspects associated with the certificates, and the extent to which the payment stream on the mortgage pool is adequate to make payments required under the certificates. S&P’s ratings on such certificates do not, however, constitute a statement regarding frequency of prepayments on the mortgage loans. S&P’s ratings do not address the possibility that investors may suffer a lower than anticipated yield as a result of prepayments of the underlying mortgages. In addition, it should be noted that in some structures a default on a mortgage is treated as a prepayment and may have the same effect on yield as a prepayment.

 

The ratings of Moody’s and S&P also do not address the possibility that, as a result of principal prepayments, a holder of an Interest Only Certificate may not fully recover its initial investment.

 

The Seller has not requested a rating on the Offered Certificates of any Class by any rating agency other than Moody’s and S&P, although data with respect to the Mortgage Loans may have been provided to other rating agencies solely for their informational purposes. While Moody’s has not rated the Class II-A-3, Class II-A-7 and Class II-A-10 Certificates, the Seller has been advised that if ratings were given to such Classes by Moody’s, they would be lower than the ratings assigned to such Classes by S&P. There can also be no assurance that any rating assigned by any other rating agency to the Offered Certificates will be as high as those assigned by Moody’s and S&P.

 

S-52


INDEX OF SIGNIFICANT

PROSPECTUS SUPPLEMENT DEFINITIONS

Term


   Page

Adjusted Pool Amount    S-23
Adjustment Date    S-32

Aggregate Class A Percentage

   S-25
Aggregate Principal Balance    S-23

Aggregate Subordinated Percentage

   S-26

Apportioned Class B Principal Distribution Amount

   S-28

Apportionment Fraction

   S-28
Assumed Mortgage Loans    S-40
CBE    S-42
CDR    S-43
Certificate Account    S-47
Certificates    S-19
Class I-A-LR Interest    S-47
Class I-A-MR Interest    S-47
Class I-A-R Interest    S-47
Class A Certificates    S-19
Class A Optimal Principal Amount    S-24
Class A Percentage    S-25
Class A Prepayment Percentage    S-25
Class A Principal Balance    S-22
Class A Principal Distribution Amount    S-24
Class B Certificates    S-19

Class B Loan Group Optimal Principal Amount

   S-24

Class B Loan Group I Optimal Principal Amount

   S-24

Class B Loan Group II Optimal Principal Amount

   S-24
Class B Optimal Principal Amount    S-25
Class B Percentage    S-27
Class B Prepayment Percentage    S-27
Class B Principal Balance    S-22
Class B Principal Distribution Amount    S-24
Class Percentage    S-25
Class Prepayment Percentage    S-25
CLTV    S-34
Code    S-29
Combined Loan-to Value Ratio    S-34
CPR    S-40
Current Fractional Interest    S-27
Custodian    S-45
Delinquency and Loss Tests    S-26
DOL    S-50
ERISA    S-29
ERISA Plan    S-29
FICO Scores    S-35
Gross Margin    S-32
Group    S-19

Group I

   S-19

Group I Mortgage Loans

   S-32

Group I Pool Distribution Amount

   S-20

Group I-A Certificates

   S-19

Term


   Page

Group II

   S-19

Group II Mortgage Loans

   S-32

Group II Pool Distribution Amount

   S-20

Group II-A Certificates

   S-19

Group Subordinate Amount

   S-22

Incremental Interest

   S-32

Incremental Rate

   S-32

Index

   S-33
Interest Accrual Amount    S-21
Interest Accrual Period    S-21

Interest Only Loans

   S-33
Interest Shortfall Amount    S-24
Lehman Brothers    S-50
Loan Group I    S-32
Loan Group II    S-32
Loss Severity Percentage    S-43
Lower-Tier REMIC    S-47
Lower-Tier REMIC Regular Interest    S-47
LPMI Policy    S-34
Master Servicer    S-45
Master Servicing Fee    S-45
Master Servicing Fee Rate    S-45
Middle-Tier REMIC    S-47
Middle-Tier REMIC Regular Interest    S-47
Moody’s    S-52
Mortgage Loans    S-32
Mortgaged Properties    S-32
Mortgages    S-32
Net Mortgage Interest Rate    S-23

Net WAC

   S-23
Non-Supported Interest Shortfalls    S-23
Notional Amount    S-22
Offered Certificates    S-19
One-Year CMT    S-33
Original Class B Principal Balance    S-26
Original FICO Scores    S-35
Original Fractional Interest    S-27
Other Servicers    S-46
Pass-Through Rate    S-22
Percentage Interest    S-21
Periodic Advance    S-29
Periodic Cap    S-33
Plan    S-28
Pool Balance    S-25
Pool Distribution Amount    S-20
Pool Distribution Amount Allocation    S-21
Pooling and Servicing Agreement    S-44
Principal Balance    S-22
PUDs    S-34
Rate Ceiling    S-33
Rating Agencies    S-52
Record Date    S-19
Regular Certificates    S-47

 

S-53


Term


   Page

Relationship ARM    S-32
Relief Act Shortfalls    S-23
Residual Certificates    S-47
S&P    S-52
Securities Act    S-50
Seller    S-32
Servicers    S-46
Servicing Fee Rate    S-46
Similar Law    S-29
SMMEA    S-50
Structuring Assumptions    S-40
Subordinated Certificates    S-19
Subordinated Percentage    S-26
Subordinated Prepayment Percentage    S-27

Term


   Page

Subordination Depletion Date    S-30
Trust    S-19
Trustee    S-45
Undercollateralized Amount    S-28
Undercollateralized Group    S-28
Underlying Servicing Agreement    S-46
Underwriter    S-51
Underwriting Agreement    S-51
Underwriting Standards    S-35
Updated FICO Scores    S-35
Upper-Tier REMIC    S-47
Weighted Average Life    S-40
Wells Fargo Bank    S-44

 

S-54


APPENDIX A

 

SELECTED MORTGAGE LOAN DATA

(as of the Cut-Off Date)

 

    

Aggregate

Mortgage Loans


  

Group I

Mortgage Loans


  

Group II

Mortgage Loans


Number of Mortgage Loans

   3,366    982    2,384

Aggregate Unpaid Principal Balance

   $1,806,593,862    $261,181,350    $1,545,412,512

Range of Unpaid Principal Balances

   $50,000 to $4,200,000    $71,755 to $359,364    $50,000 to $4,200,000

Average Unpaid Principal Balance

   $536,718    $265,969    $648,244

Range of Current Mortgage Interest Rates

   3.375% to 4.875%    4.000% to 4.875%    3.375% to 4.625%

Weighted Average Current Mortgage Interest Rate

   4.587%    4.617%    4.582%

Weighted Average Current Net Mortgage Interest Rate

   4.327%    4.357%    4.322%

Range of Remaining Terms to Stated Maturity

   220 to 359 Months    220 to 358 Months    227 to 359 Months

Weighted Average Remaining Term to Stated Maturity

   348 Months    348 Months    348 Months

Range of Original Loan-to-Value Ratios

   5.22% to 95.00%    5.22% to 95.00%    8.54% to 90.00%

Weighted Average Original Loan-to-Value Ratio

   64.95%    67.77%    64.47%

Range of Original Combined Loan-to-Value Ratios

   5.22% to 100.00%    5.22% to 100.00%    8.54% to 100.00%

Weighted Average Original Combined Loan-to-Value Ratio

   71.26%    74.61%    70.69%

Number of Mortgage Loans with Original Loan-to-Value Ratios greater than 80% not covered by Primary Mortgage Insurance

   2    1    1

Mortgage Loans with Original Loan-to-Value Ratios greater than 80% not covered by Primary Mortgage Insurance as a Percentage of Aggregate Unpaid Principal Balance

   0.04%    0.11%    0.02%

Number of Mortgage Loans covered by an LPMI Policy

   6    5    1

Mortgage Loans covered by an LPMI Policy as a Percentage of Aggregate Unpaid Principal Balance

   0.09%    0.48%    0.03%

Number of Interest Only Loans

   2,364    646    1,718

Interest Only Loans as a Percentage of Aggregate Unpaid Principal Balance

   73.31%    67.46%    74.30%

Weighted Average Original Loan-to-Value Ratio of Mortgage Loans with Original Principal Balances greater than $600,000

   61.13%    N/A    61.13%

Maximum Original Loan-to-Value Ratio of Mortgage Loans with Original Principal Balances greater than $600,000

   85.00%    N/A    85.00%

 

A-1


APPENDIX A (Continued)

 

SELECTED MORTGAGE LOAN DATA (Continued)

(as of the Cut-Off Date)

 

    

Aggregate

Mortgage Loans


  

Group I

Mortgage Loans


  

Group II

Mortgage Loans


Geographic Concentration of Mortgaged Properties Securing Mortgage Loans in Excess of 5% of the Aggregate Unpaid Principal Balance

              

California

   83.51%    81.17%    83.91%

Maximum Five-Digit Zip Code Concentration

   1.10%    1.50%    1.25%

Earliest Origination Month

   September 2002    October 2002    September 2002

Latest Origination Month

   April 2005    March 2005    April 2005

Latest Stated Maturity Date

   May 1, 2035    April 1, 2035    May 1, 2035

Number of Buy-Down Loans

   0    0    0

Buy-Down Loans as a Percentage of Aggregate Unpaid Principal Balance

   0.00%    0.00%    0.00%

Range of Gross Margins

   2.750% to 2.750%    2.750% to 2.750%    2.750% to 2.750%

Weighted Average Gross Margin

   2.750%    2.750%    2.750%

Range of Rate Ceilings

   8.375% to 10.625%    9.000% to 10.625%    8.375% to 10.625%

Weighted Average Rate Ceiling

   9.598%    9.623%    9.594%

Range of Months to First Adjustment Date

   27 to 59 Months    29 to 58 Months    27 to 59 Months

Weighted Average Months to First Adjustment Date

   48 Months    48 Months    48 Months

Number of Relocation Mortgage Loans

   18    3    15

Relocation Mortgage Loans as a Percentage of Aggregate Unpaid Principal Balance

   0.63%    0.27%    0.69%

Number of Subsidy Loans

   1    0    1

Subsidy Loans as a Percentage of Aggregate Unpaid Principal Balance

   0.05%    0.00%    0.06%

Number of Home Asset Management SM Account Loans

   111    52    59

Home Asset ManagementSM Account Loans as a Percentage of Aggregate Unpaid Principal Balance

   2.30%    5.24%    1.80%

Number of LOC Pledged Asset Mortgage Loans

   0    0    0

LOC Pledged Asset Mortgage Loans as a Percentage of Aggregate Unpaid Principal Balance

   0.00%    0.00%    0.00%

Weighted Average Original FICO Score(1)

   737    743    736

Weighted Average Recent FICO Score(1)

   744    750    743

(1)   Does not include the Mortgage Loans for which FICO Scores are not available.
 *   Less than 5% of the aggregate unpaid principal balance as of the Cut-Off Date.

 

A-2


APPENDIX A (Continued)

 

AGGREGATE MORTGAGE LOAN DATA

 

CURRENT MORTGAGE INTEREST RATES

 

Range of Current
Mortgage Interest Rates


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

3.250% to 3.499%

  1   $ 542,400.00   0.03 %

3.500% to 3.749%

  5     4,893,414.57   0.27  

3.750% to 3.999%

  11     8,823,214.21   0.49  

4.000% to 4.249%

  99     71,712,267.18   3.97  

4.250% to 4.499%

  37     33,544,814.14   1.86  

4.500% to 4.749%

  3,210     1,686,483,986.05   93.35  

4.750% to 4.875%

  3     593,765.59   0.03  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

DOCUMENTATION LEVELS

 

Documentation Level


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Full Documentation

  1,378   $ 831,449,694.35   46.02 %

Income Verification

  23     10,407,985.90   0.58  

Asset Verification

  1,491     715,464,699.82   39.60  

No Documentation

  474     249,271,481.67   13.80  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

REMAINING TERMS TO STATED MATURITY

 

Remaining Stated

Term (Months)


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

220

  1   $ 312,986.73   0.02 %

227

  1     495,469.29   0.03  

277

  1     737,188.86   0.04  

287

  1     483,307.70   0.03  

293

  1     975,081.26   0.05  

327

  2     1,483,339.88   0.08  

328

  2     1,017,237.33   0.06  

329

  6     2,256,664.29   0.12  

330

  14     9,395,260.34   0.52  

331

  9     5,006,608.47   0.28  

333

  1     562,652.73   0.03  

334

  23     13,486,929.19   0.75  

335

  69     36,703,296.65   2.03  

336

  67     37,169,084.34   2.06  

337

  86     49,381,518.19   2.73  

338

  80     41,404,364.74   2.29  

339

  97     50,226,286.80   2.78  

340

  114     68,786,403.00   3.81  

341

  83     41,287,922.15   2.29  

342

  84     42,911,543.71   2.38  

343

  136     74,621,881.52   4.13  

344

  124     64,033,214.20   3.54  

345

  181     92,927,201.47   5.14  

346

  127     62,861,652.65   3.48  

347

  69     31,462,843.16   1.74  

348

  204     89,457,115.11   4.95  

349

  170     88,740,151.73   4.91  

350

  47     34,921,607.72   1.93  

351

  78     52,737,728.74   2.92  

352

  244     130,019,817.83   7.20  

353

  424     217,643,190.67   12.05  

354

  420     217,247,794.19   12.03  

355

  245     145,617,389.11   8.06  

356

  86     56,073,369.31   3.10  

357

  37     19,851,307.29   1.10  

358

  31     23,646,451.39   1.31  

359

  1     648,000.00   0.04  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

YEARS OF ORIGINATION

 

Year of Origination


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

2002

  33   $ 19,159,110.31   1.06 %

2003

  829     449,227,397.18   24.87  

2004

  2,326     1,223,508,476.10   67.72  

2005

  178     114,698,878.15   6.35  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

A-3


APPENDIX A (Continued)

 

AGGREGATE MORTGAGE LOAN DATA

 

PROPERTY TYPES

 

Property Type


  Number

 

Aggregate

Unpaid
Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Single-family dwellings

  2,648   $ 1,498,072,065.80   82.92 %

Two- to four-family units

  45     26,547,183.01   1.47  

Condominiums

               

High-rise (greater than four stories)

  137     63,828,834.39   3.53  

Low-rise (four stories
or less)

  531     215,817,345.06   11.95  

Cooperative Units

  5     2,328,433.48   0.13  

Manufactured Homes

  0     0.00   0.00  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

GEOGRAPHIC AREAS

 

Geographic Area


  Number

  Aggregate
Unpaid
Principal
Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 
Arizona   80   $ 37,732,265.40   2.09 %
California   2,805     1,508,685,425.37   83.51  
Colorado   57     33,785,254.14   1.87  
Connecticut   21     18,600,812.24   1.03  
Delaware   2     987,287.10   0.05  
District of Columbia   4     2,718,859.23   0.15  
Florida   25     14,308,621.06   0.79  
Georgia   6     3,283,775.92   0.18  
Hawaii   28     20,688,403.70   1.15  
Idaho   16     7,943,267.25   0.44  
Illinois   8     5,152,285.50   0.29  
Iowa   6     2,751,037.27   0.15  
Maryland   7     2,764,326.61   0.15  
Massachusetts   12     6,663,021.82   0.37  
Michigan   3     1,056,568.35   0.06  
Minnesota   16     7,748,889.96   0.43  
Montana   5     1,988,180.57   0.11  
Nebraska   4     1,827,998.06   0.10  
Nevada   64     29,734,059.71   1.65  
New Hampshire   2     1,045,089.26   0.06  
New Jersey   8     5,835,132.88   0.32  
New Mexico   2     591,210.21   0.03  
New York   21     13,759,632.96   0.76  
North Carolina   6     3,351,262.40   0.19  
North Dakota   3     658,871.29   0.04  
Ohio   4     2,093,692.54   0.12  
Oregon   27     9,480,624.28   0.52  
South Carolina   5     2,001,469.84   0.11  
Tennessee   1     149,027.10   0.01  
Texas   31     17,596,566.69   0.97  
Utah   8     4,204,652.98   0.23  
Virginia   9     3,718,383.87   0.21  
Washington   61     29,860,621.89   1.65  
Wisconsin   8     3,656,431.07   0.20  
Wyoming   1     170,853.22   0.01  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

ORIGINAL LOAN-TO-VALUE RATIOS

 

Range of
Original
Loan-to-Value
Ratios


  Number

  Aggregate
Unpaid
Principal
Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 
50% or less   545   $ 322,356,981.25   17.84 %
50.01% to 55.00%   172     113,615,533.21   6.29  
55.01% to 60.00%   239     156,744,039.07   8.68  
60.01% to 65.00%   258     181,973,269.78   10.07  
65.01% to 70.00%   366     206,500,239.67   11.43  
70.01% to 75.00%   390     209,016,132.99   11.57  
75.01% to 80.00%   1,375     610,321,022.57   33.78  
80.01% to 85.00%   6     2,307,924.01   0.13  
85.01% to 90.00%   8     2,218,049.04   0.12  
90.01% to 95.00%   7     1,540,670.15   0.09  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

ORIGINAL COMBINED

LOAN-TO-VALUE RATIOS

 

Range of

Original Combined

Loan-to-Value

Ratios


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 
50% or less   360     $198,763,883.74   11.00 %
50.01% to 55.00%   128     82,742,196.42   4.58  
55.01% to 60.00%   205     134,833,683.45   7.46  
60.01% to 65.00%   224     153,576,305.28   8.50  
65.01% to 70.00%   359     215,868,356.15   11.95  
70.01% to 75.00%   361     205,222,835.89   11.36  
75.01% to 80.00%   783     391,216,708.44   21.65  
80.01% to 85.00%   98     54,738,099.98   3.03  
85.01% to 90.00%   471     234,247,139.77   12.97  
90.01% to 95.00%   278     103,877,222.08   5.75  
95.01% to 100.00%   99     31,507,430.54   1.74  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

ORIGINAL FICO SCORES

 

Range of Original

FICO Scores


  Number

 

Aggregate

Unpaid
Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


   

Weighted
Average

Original

Loan-to-

Value
Ratio


 
300 to 350   0   $ 0.00   0.00 %   0.00 %
351 to 400   0     0.00   0.00     0.00  
401 to 450   0     0.00   0.00     0.00  
451 to 500   0     0.00   0.00     0.00  
501 to 550   1     400,348.17   0.02     69.17  
551 to 600   6     4,098,552.60   0.23     68.62  
601 to 650   64     37,731,942.29   2.09     64.86  
651 to 700   552     310,952,933.08   17.21     65.68  
701 to 750   1,202     660,189,034.32   36.54     65.26  
751 to 800   1,424     739,358,835.24   40.93     64.44  
801 to 850   115     53,263,103.33   2.95     63.55  
Not Available   2     599,112.71   0.03     61.10  
   
 

 

 

Total/Weighted Average

  3,366   $ 1,806,593,861.74   100.00 %   64.95 %
   
 

 

 

 

A-4


APPENDIX A (Continued)

 

AGGREGATE MORTGAGE LOAN DATA

 

RECENT FICO SCORES

 

Range of Recent
FICO Scores


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


    Weighted
Average
Original
Loan-to-
Value
Ratio


 
300 to 350   0   $ 0.00   0.00 %   0.00 %
351 to 400   0     0.00   0.00     0.00  
401 to 450   0     0.00   0.00     0.00  
451 to 500   0     0.00   0.00     0.00  
501 to 550   0     0.00   0.00     0.00  
551 to 600   1     869,134.87   0.05     65.00  
601 to 650   82     45,498,058.36   2.52     67.59  
651 to 700   476     263,136,211.86   14.57     66.32  
701 to 750   1,003     563,626,951.15   31.20     65.04  
751 to 800   1,522     804,439,192.38   44.53     64.68  
801 to 850   281     128,875,286.02   7.13     62.42  
Not Available   1     149,027.10   0.01     85.96  
   
 

 

 

Total/Weighted
Average

  3,366   $ 1,806,593,861.74   100.00 %   64.95 %
   
 

 

 

 

ORIGINAL PRINCIPAL BALANCES

 

Range of Original
Principal Balances


  Number

 

Aggregate

Unpaid
Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Less than or equal to $50,000

  0   $ 0.00   0.00 %
$50,001 to $100,000   1     95,518.13   0.01  
$100,001 to $150,000   30     4,273,600.58   0.24  
$150,001 to $200,000   146     25,641,625.45   1.42  
$200,001 to $250,000   188     42,597,975.95   2.36  
$250,001 to $300,000   248     67,814,772.73   3.75  
$300,001 to $350,000   318     102,772,322.25   5.69  
$350,001 to $400,000   380     141,970,508.39   7.86  
$400,001 to $450,000   300     126,121,787.26   6.98  
$450,001 to $500,000   336     159,177,066.09   8.81  
$500,001 to $550,000   211     109,516,819.58   6.06  
$550,001 to $600,000   184     105,796,705.26   5.86  
$600,001 to $650,000   221     138,603,725.17   7.67  
$650,001 to $700,000   100     66,626,487.35   3.69  
$700,001 to $750,000   94     67,962,751.70   3.76  
$750,001 to $800,000   73     56,017,240.14   3.10  
$800,001 to $850,000   50     40,885,564.35   2.26  
$850,001 to $900,000   67     58,052,842.36   3.21  
$900,001 to $950,000   56     51,556,952.49   2.85  
$950,001 to $1,000,000   234     228,648,012.94   12.66  

$1,000,001 to $1,500,000

  74     95,757,140.35   5.30  

$1,500,001 to $2,000,000

  31     55,139,118.31   3.05  

$2,000,001 to $2,500,000

  14     30,614,410.07   1.69  

$2,500,001 to $3,000,000

  7     19,445,335.58   1.08  

$3,000,001 to $3,500,000

  1     3,373,254.89   0.19  

Over $3,500,000

  2     8,132,324.37   0.45  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

ORIGINATORS

 

Originator


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Wells Fargo Bank or Affiliate

  3,366   $ 1,806,593,861.74   100.00 %

Other Originators

  0     0.00   0.00  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

PURPOSES

 

Purpose


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Purchase

  1,500   $ 759,575,323.40   42.04 %

Equity Take Out Refinance

  647     337,788,193.07   18.70  

Rate/Term Refinance

  1,219     709,230,345.27   39.26  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

MONTHS TO FIRST ADJUSTMENT DATE

 

Months to First

Adjustment Date


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 
27   2   $ 1,483,339.88   0.08 %
28   2     1,017,237.33   0.06  
29   6     2,256,664.29   0.12  
30   14     9,395,260.34   0.52  
31   9     5,006,608.47   0.28  
33   1     562,652.73   0.03  
34   23     13,486,929.19   0.75  
35   69     36,703,296.65   2.03  
36   67     37,169,084.34   2.06  
37   87     50,118,707.05   2.77  
38   80     41,404,364.74   2.29  
39   97     50,226,286.80   2.78  
40   115     69,099,389.73   3.82  
41   83     41,287,922.15   2.29  
42   84     42,911,543.71   2.38  
43   136     74,621,881.52   4.13  
44   124     64,033,214.20   3.54  
45   181     92,927,201.47   5.14  
46   127     62,861,652.65   3.48  
47   71     32,441,620.15   1.80  
48   204     89,457,115.11   4.95  
49   170     88,740,151.73   4.91  
50   47     34,921,607.72   1.93  
51   78     52,737,728.74   2.92  
52   244     130,019,817.83   7.20  
53   425     218,618,271.93   12.10  
54   420     217,247,794.19   12.03  
55   245     145,617,389.11   8.06  
56   86     56,073,369.31   3.10  
57   37     19,851,307.29   1.10  
58   31     23,646,451.39   1.31  
59   1     648,000.00   0.04  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

A-5


APPENDIX A (Continued)

 

AGGREGATE MORTGAGE LOAN DATA

 

OCCUPANCY TYPES

 

Occupancy Type


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Investment Property

  1   $ 356,112.85   0.02 %

Primary Residence

  2,978     1,614,801,839.57   89.38  

Second Home

  387     191,435,909.32   10.60  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

RATE CEILINGS

 

Range of

Rate Ceilings


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 
8.250% to 8.499%   1   $ 542,400.00   0.03 %
8.500% to 8.749%   5     4,893,414.57   0.27  
8.750% to 8.999%   11     8,823,214.21   0.49  
9.000% to 9.249%   99     71,712,267.18   3.97  
9.250% to 9.499%   37     33,544,814.14   1.86  
9.500% to 9.749%   3,176     1,667,229,357.61   92.29  
9.750% to 9.999%   3     593,765.59   0.03  
10.000% to 10.249%   0     0.00   0.00  
10.250% to 10.499%   0     0.00   0.00  
10.500% to 10.625%   34     19,254,628.44   1.07  
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

GROSS MARGINS

 

Range of

Gross Margins


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

2.750% to 2.750%

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

Total

  3,366   $ 1,806,593,861.74   100.00 %
   
 

 

 

A-6


APPENDIX A (Continued)

 

GROUP I MORTGAGE LOAN DATA

 

CURRENT MORTGAGE INTEREST RATES

 

Range of Current
Mortgage Interest Rates


  Number

 

Aggregate
Unpaid

Principal

Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

4.000% to 4.249%

  14   $ 3,530,812.14    1.35 %

4.250% to 4.499%

  3     765,406.30    0.29  

4.500% to 4.749%

  962     256,291,365.90    98.13  

4.750% to 4.875%

  3     593,765.59    0.23  
   
 

  

Total

  982   $ 261,181,349.93    100.00 %
   
 

  

 

DOCUMENTATION LEVELS

 

Documentation Level


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Full Documentation

  350   $ 94,666,734.31   36.25 %

Income Verification

  9     2,476,915.45   0.95  

Asset Verification

  517     134,179,140.65   51.37  

No Documentation

  106     29,858,559.52   11.43  
   
 

 

Total

  982   $ 261,181,349.93   100.00 %
   
 

 

 

REMAINING TERMS TO STATED

MATURITY

 

Remaining Stated

Term (Months)


   Number

  

Aggregate
Unpaid

Principal

Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

220

   1    $ 312,986.73    0.12 %

329

   2      561,120.29    0.21  

330

   2      286,615.96    0.11  

331

   3      587,341.05    0.22  

334

   3      904,632.06    0.35  

335

   12      2,839,036.38    1.09  

336

   13      3,176,900.57    1.22  

337

   16      4,521,747.65    1.73  

338

   18      4,982,386.67    1.91  

339

   25      6,839,147.47    2.62  

340

   30      7,637,123.70    2.92  

341

   25      6,711,972.55    2.57  

342

   27      7,013,592.49    2.69  

343

   39      10,574,580.97    4.05  

344

   49      12,944,146.08    4.96  

345

   57      16,166,778.90    6.19  

346

   50      12,825,609.62    4.91  

347

   30      7,965,266.65    3.05  

348

   76      20,439,124.69    7.83  

349

   60      14,846,536.09    5.68  

350

   9      2,308,082.18    0.88  

351

   12      2,934,203.98    1.12  

352

   73      20,481,518.96    7.84  

353

   136      35,201,162.71    13.48  

354

   127      35,233,241.42    13.49  

355

   58      15,558,653.34    5.96  

356

   15      4,000,636.97    1.53  

357

   11      2,648,683.80    1.01  

358

   3      678,520.00    0.26  
    
  

  

Total

   982    $ 261,181,349.93    100.00 %
    
  

  

 

YEARS OF ORIGINATION

 

Year of Origination


   Number

  

Aggregate
Unpaid

Principal

Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

2002

   7    $ 1,435,077.30    0.55 %

2003

   207      54,955,239.58    21.04  

2004

   735      196,299,796.38    75.16  

2005

   33      8,491,236.67    3.25  
    
  

  

Total

   982    $ 261,181,349.93    100.00 %
    
  

  

 

PROPERTY TYPES

 

Property Type


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Single-family dwellings

  683   $ 180,313,236.19   69.04 %

Two- to four-family units

  4     1,161,410.78   0.44  

Condominiums

               

High-rise (greater than
four stories)

  45     12,988,836.21   4.97  

Low-rise (four stories
or less)

  249     66,422,683.27   25.43  

Cooperative Units

  1     295,183.48   0.11  

Manufactured Homes

  0     0.00   0.00  
   
 

 

Total

  982   $ 261,181,349.93   100.00 %
   
 

 

 

GEOGRAPHIC AREAS

 

Geographic Area


  Number

 

Aggregate
Unpaid

Principal
Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Arizona

  31   $ 7,215,692.86   2.76 %

California

  781     211,996,773.87   81.17  

Colorado

  15     3,819,661.43   1.46  

Connecticut

  3     740,719.83   0.28  

Florida

  11     2,517,901.86   0.96  

Georgia

  4     875,021.05   0.34  

Hawaii

  7     1,922,387.24   0.74  

Idaho

  4     998,709.81   0.38  

Illinois

  4     910,862.46   0.35  

Iowa

  3     882,603.76   0.34  

Maryland

  2     384,463.94   0.15  

Massachusetts

  4     1,109,576.61   0.42  

Michigan

  1     240,000.00   0.09  

Minnesota

  4     975,700.00   0.37  

Montana

  3     576,322.83   0.22  

Nebraska

  2     471,964.43   0.18  

Nevada

  29     6,973,968.60   2.67  

New Mexico

  2     591,210.21   0.23  

New York

  2     545,183.48   0.21  

North Carolina

  2     597,250.00   0.23  

North Dakota

  3     658,871.29   0.25  

Oregon

  16     3,744,281.98   1.43  

South Carolina

  1     178,978.48   0.07  

Tennessee

  1     149,027.10   0.06  

Texas

  10     2,867,659.81   1.10  

Utah

  4     1,162,617.11   0.45  

Virginia

  4     1,017,627.87   0.39  

Washington

  24     5,968,014.01   2.29  

Wisconsin

  4     917,444.79   0.35  

Wyoming

  1     170,853.22   0.07  
   
 

 

Total

  982   $ 261,181,349.93   100.00 %
   
 

 

 

A-7


APPENDIX A (Continued)

 

GROUP I MORTGAGE LOAN DATA

 

 

ORIGINAL LOAN-TO-VALUE RATIOS

 

Range of
Original
Loan-to-Value
Ratios


   Number

  

Aggregate
Unpaid

Principal
Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

50% or less

   187    $ 44,356,180.58    16.98 %

50.01% to 55.00%

   35      9,520,121.66    3.65  

55.01% to 60.00%

   54      14,456,495.82    5.54  

60.01% to 65.00%

   48      12,732,385.30    4.87  

65.01% to 70.00%

   77      20,212,668.48    7.74  

70.01% to 75.00%

   85      23,459,246.05    8.98  

75.01% to 80.00%

   480      132,696,221.39    50.81  

80.01% to 85.00%

   3      827,571.46    0.32  

85.01% to 90.00%

   6      1,379,789.04    0.53  

90.01% to 95.00%

   7      1,540,670.15    0.59  
    
  

  

Total

   982    $ 261,181,349.93    100.00 %
    
  

  

 

ORIGINAL COMBINED

LOAN-TO-VALUE RATIOS

 

Range of

Original Combined

Loan-to-Value

Ratios


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 
50% or less   138   $ 32,414,502.50   12.41 %
50.01% to 55.00%   32     8,693,886.76   3.33  
55.01% to 60.00%   52     13,885,034.99   5.32  
60.01% to 65.00%   52     13,286,574.53   5.09  
65.01% to 70.00%   76     19,918,502.52   7.63  
70.01% to 75.00%   84     22,931,260.71   8.78  
75.01% to 80.00%   217     59,232,701.22   22.68  
80.01% to 85.00%   20     5,739,875.61   2.20  
85.01% to 90.00%   117     32,485,284.95   12.44  
90.01% to 95.00%   130     35,520,586.64   13.60  
95.01% to 100.00%   64     17,073,139.50   6.54  
   
 

 

Total

  982   $ 261,181,349.93   100.00 %
   
 

 

 

ORIGINAL FICO SCORES

 

Range of Original

FICO Scores


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


   

Weighted
Average

Original

Loan-to-

Value
Ratio


 

300 to 350

  0   $ 0.00   0.00 %   0.00 %

351 to 400

  0     0.00   0.00     0.00  

401 to 450

  0     0.00   0.00     0.00  

451 to 500

  0     0.00   0.00     0.00  

501 to 550

  0     0.00   0.00     0.00  

551 to 600

  0     0.00   0.00     0.00  

601 to 650

  15     4,076,992.30   1.56     73.54  

651 to 700

  146     39,154,131.56   14.99     71.12  

701 to 750

  341     92,217,063.68   35.31     69.07  

751 to 800

  425     111,801,885.12   42.81     65.24  

801 to 850

  54     13,782,250.17   5.28     68.20  

Not Available

  1     149,027.10   0.06     85.96  
   
 

 

 

Total/Weighted Average

  982   $ 261,181,349.93   100.00 %   67.77 %
   
 

 

 

 

RECENT FICO SCORES

 

Range of

Recent FICO
Scores


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


    Weighted
Average
Original
Loan-to-
Value
Ratio


 

300 to 350

  0   $ 0.00   0.00 %   0.00 %

351 to 400

  0     0.00   0.00     0.00  

401 to 450

  0     0.00   0.00     0.00  

451 to 500

  0     0.00   0.00     0.00  

501 to 550

  0     0.00   0.00     0.00  

551 to 600

  0     0.00   0.00     0.00  

601 to 650

  18     4,650,129.07   1.78     69.72  

651 to 700

  129     34,534,432.81   13.22     71.07  

701 to 750

  273     74,385,396.72   28.48     70.06  

751 to 800

  444     117,612,467.97   45.03     66.03  

801 to 850

  117     29,849,896.26   11.43     64.67  

Not Available

  1     149,027.10   0.06     85.96  
   
 

 

 

Total/Weighted Average

  982   $ 261,181,349.93   100.00 %   67.77 %
   
 

 

 

 

ORIGINAL PRINCIPAL BALANCES

 

Range of Original
Principal Balances


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Less than or equal to $50,000

  0   $ 0.00   0.00 %

$50,001 to $100,000

  1     95,518.13   0.04  

$100,001 to $150,000

  30     4,273,600.58   1.64  

$150,001 to $200,000

  146     25,641,625.45   9.82  

$200,001 to $250,000

  188     42,597,975.95   16.31  

$250,001 to $300,000

  248     67,814,772.73   25.96  

$300,001 to $350,000

  317     102,454,928.79   39.23  

$350,001 to $400,000

  52     18,302,928.30   7.01  

$400,001 to $450,000

  0     0.00   0.00  

$450,001 to $500,000

  0     0.00   0.00  

$500,001 to $550,000

  0     0.00   0.00  

$550,001 to $600,000

  0     0.00   0.00  

$600,001 to $650,000

  0     0.00   0.00  

$650,001 to $700,000

  0     0.00   0.00  

$700,001 to $750,000

  0     0.00   0.00  

$750,001 to $800,000

  0     0.00   0.00  

$800,001 to $850,000

  0     0.00   0.00  

$850,001 to $900,000

  0     0.00   0.00  

$900,001 to $950,000

  0     0.00   0.00  

$950,001 to $1,000,000

  0     0.00   0.00  

Over $1,000,000

  0     0.00   0.00  
   
 

 

Total

  982   $ 261,181,349.93   100.00 %
   
 

 

 

ORIGINATORS

 

Originator


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Wells Fargo Bank or Affiliate

  982   $261,181,349.93   100.00 %

Other Originators

  0   0.00   0.00  
   
 
 

Total

  982   $261,181,349.93   100.00 %
   
 
 

 

A-8


APPENDIX A (Continued)

 

GROUP I MORTGAGE LOAN DATA

 

PURPOSES

 

Purpose


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Purchase

  488   $130,791,608.55   50.08 %

Equity Take Out Refinance

  219   56,011,245.44   21.45  

Rate/Term Refinance

  275   74,378,495.94   28.48  
   
 
 

Total

  982   $261,181,349.93   100.00 %
   
 
 

 

OCCUPANCY TYPES

 

Occupancy Type


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Investment Property

  0   $ 0.00   0.00 %

Primary Residence

  820     222,035,636.52   85.01  

Second Home

  162     39,145,713.41   14.99  
   
 

 

Total

  982   $ 261,181,349.93   100.00 %
   
 

 

 

MONTHS TO FIRST ADJUSTMENT DATE

 

Months to First
Adjustment Date


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

29

  2   $ 561,120.29   0.21 %
30   2     286,615.96   0.11  
31   3     587,341.05   0.22  
34   3     904,632.06   0.35  
35   12     2,839,036.38   1.09  
36   13     3,176,900.57   1.22  
37   16     4,521,747.65   1.73  
38   18     4,982,386.67   1.91  
39   25     6,839,147.47   2.62  
40   31     7,950,110.43   3.04  
41   25     6,711,972.55   2.57  
42   27     7,013,592.49   2.69  
43   39     10,574,580.97   4.05  
44   49     12,944,146.08   4.96  
45   57     16,166,778.90   6.19  
46   50     12,825,609.62   4.91  
47   30     7,965,266.65   3.05  
48   76     20,439,124.69   7.83  
49   60     14,846,536.09   5.68  
50   9     2,308,082.18   0.88  
51   12     2,934,203.98   1.12  
52   73     20,481,518.96   7.84  
53   136     35,201,162.71   13.48  
54   127     35,233,241.42   13.49  
55   58     15,558,653.34   5.96  
56   15     4,000,636.97   1.53  
57   11     2,648,683.80   1.01  
58   3     678,520.00   0.26  
   
 

 

Total

  982   $ 261,181,349.93   100.00 %
   
 

 

 

RATE CEILINGS

 

Range of

Rate Ceilings


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

9.000% to 9.249%

  14   $ 3,530,812.14   1.35 %

9.250% to 9.499%

  3     765,406.30   0.29  

9.500% to 9.749%

  954     254,760,770.47   97.54  

9.750% to 9.999%

  3     593,765.59   0.23  

10.000% to 10.249%

  0     0.00   0.00  

10.250% to 10.499%

  0     0.00   0.00  

10.500% to 10.625%

  8     1,530,595.43   0.59  
   
 

 

Total

  982   $ 261,181,349.93   100.00 %
   
 

 

 

GROSS MARGINS

 

Range of

Gross Margins


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

2.750% to 2.750%

  982   $ 261,181,349.93   100.00 %
   
 

 

Total

  982   $ 261,181,349.93   100.00 %
   
 

 

 

A-9


APPENDIX A (Continued)

 

GROUP II MORTGAGE LOAN DATA

 

CURRENT MORTGAGE INTEREST RATES

 

Range of Current
Mortgage Interest Rates


   Number

  

Aggregate
Unpaid

Principal

Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

3.250% to 3.499%

   1    $ 542,400.00    0.04 %

3.500% to 3.749%

   5      4,893,414.57    0.32  

3.750% to 3.999%

   11      8,823,214.21    0.57  

4.000% to 4.249%

   85      68,181,455.04    4.41  

4.250% to 4.499%

   34      32,779,407.84    2.12  

4.500% to 4.625%

   2,248      1,430,192,620.15    92.54  
    
  

  

Total

   2,384    $ 1,545,412,511.81    100.00 %
    
  

  

 

DOCUMENTATION LEVELS

 

Documentation Level


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Full Documentation

  1,028   $ 736,782,960.04   47.68 %

Income Verification

  14     7,931,070.45   0.51  

Asset Verification

  974     581,285,559.17   37.61  

No Documentation

  368     219,412,922.15   14.20  
   
 

 

Total

  2,384   $ 1,545,412,511.81   100.00 %
   
 

 

 

REMAINING TERMS TO STATED

MATURITY

 

Remaining Stated

Term (Months)


   Number

  

Aggregate

Unpaid

Principal

Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

227

   1    $ 495,469.29    0.03 %

277

   1      737,188.86    0.05  

287

   1      483,307.70    0.03  

293

   1      975,081.26    0.06  

327

   2      1,483,339.88    0.10  

328

   2      1,017,237.33    0.07  

329

   4      1,695,544.00    0.11  

330

   12      9,108,644.38    0.59  

331

   6      4,419,267.42    0.29  

333

   1      562,652.73    0.04  

334

   20      12,582,297.13    0.81  

335

   57      33,864,260.27    2.19  

336

   54      33,992,183.77    2.20  

337

   70      44,859,770.54    2.90  

338

   62      36,421,978.07    2.36  

339

   72      43,387,139.33    2.81  

340

   84      61,149,279.30    3.96  

341

   58      34,575,949.60    2.24  

342

   57      35,897,951.22    2.32  

343

   97      64,047,300.55    4.14  

344

   75      51,089,068.12    3.31  

345

   124      76,760,422.57    4.97  

346

   77      50,036,043.03    3.24  

347

   39      23,497,576.51    1.52  

348

   128      69,017,990.42    4.47  

349

   110      73,893,615.64    4.78  

350

   38      32,613,525.54    2.11  

351

   66      49,803,524.76    3.22  

352

   171      109,538,298.87    7.09  

353

   288      182,442,027.96    11.81  

354

   293      182,014,552.77    11.78  

355

   187      130,058,735.77    8.42  

356

   71      52,072,732.34    3.37  

357

   26      17,202,623.49    1.11  

358

   28      22,967,931.39    1.49  

359

   1      648,000.00    0.04  
    
  

  

Total

   2,384    $ 1,545,412,511.81    100.00 %
    
  

  

 

YEARS OF ORIGINATION

 

Year of Origination


   Number

  

Aggregate

Unpaid

Principal

Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

2002

   26    $ 17,724,033.01    1.15 %

2003

   622      394,272,157.60    25.51  

2004

   1,591      1,027,208,679.72    66.47  

2005

   145      106,207,641.48    6.87  
    
  

  

Total

   2,384    $ 1,545,412,511.81    100.00 %
    
  

  

 

PROPERTY TYPES

 

Property Type


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Single-family dwellings

  1,965   $ 1,317,758,829.61   85.27 %

Two- to four-family units

  41     25,385,772.23   1.64  

Condominiums

               

High-rise (greater than four stories)

  92     50,839,998.18   3.29  

Low-rise (four stories or less)

  282     149,394,661.79   9.67  

Cooperative Units

  4     2,033,250.00   0.13  

Manufactured Homes

  0     0.00   0.00  
   
 

 

Total

  2,384   $ 1,545,412,511.81   100.00 %
   
 

 

 

GEOGRAPHIC AREAS

 

Geographic Area


  Number

 

Aggregate
Unpaid

Principal
Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Arizona

  49   $ 30,516,572.54   1.97 %

California

  2,024     1,296,688,651.50   83.91  

Colorado

  42     29,965,592.71   1.94  

Connecticut

  18     17,860,092.41   1.16  

Delaware

  2     987,287.10   0.06  

District of Columbia

  4     2,718,859.23   0.18  

Florida

  14     11,790,719.20   0.76  

Georgia

  2     2,408,754.87   0.16  

Hawaii

  21     18,766,016.46   1.21  

Idaho

  12     6,944,557.44   0.45  

Illinois

  4     4,241,423.04   0.27  

Iowa

  3     1,868,433.51   0.12  

Maryland

  5     2,379,862.67   0.15  

Massachusetts

  8     5,553,445.21   0.36  

Michigan

  2     816,568.35   0.05  

Minnesota

  12     6,773,189.96   0.44  

Montana

  2     1,411,857.74   0.09  

Nebraska

  2     1,356,033.63   0.09  

Nevada

  35     22,760,091.11   1.47  

New Hampshire

  2     1,045,089.26   0.07  

New Jersey

  8     5,835,132.88   0.38  

New York

  19     13,214,449.48   0.86  

North Carolina

  4     2,754,012.40   0.18  

Ohio

  4     2,093,692.54   0.14  

Oregon

  11     5,736,342.30   0.37  

South Carolina

  4     1,822,491.36   0.12  

Texas

  21     14,728,906.88   0.95  

Utah

  4     3,042,035.87   0.20  

Virginia

  5     2,700,756.00   0.17  

Washington

  37     23,892,607.88   1.55  

Wisconsin

  4     2,738,986.28   0.18  
   
 

 

Total

  2,384   $ 1,545,412,511.81   100.00 %
   
 

 

 

A-10


APPENDIX A (Continued)

 

GROUP II MORTGAGE LOAN DATA

 

 

ORIGINAL LOAN-TO-VALUE RATIOS

 

Range of
Original
Loan-to-Value
Ratios


  Number

  

Aggregate
Unpaid

Principal
Balance


   Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 
50% or less   358    $ 278,000,800.67    17.99 %
50.01% to 55.00%   137      104,095,411.55    6.74  
55.01% to 60.00%   185      142,287,543.25    9.21  
60.01% to 65.00%   210      169,240,884.48    10.95  
65.01% to 70.00%   289      186,287,571.19    12.05  
70.01% to 75.00%   305      185,556,886.94    12.01  
75.01% to 80.00%   895      477,624,801.18    30.91  
80.01% to 85.00%   3      1,480,352.55    0.10  
85.01% to 90.00%   2      838,260.00    0.05  
   
  

  

Total

  2,384    $ 1,545,412,511.81    100.00 %
   
  

  

 

ORIGINAL COMBINED

LOAN-TO-VALUE RATIOS

 

Range of Original
Combined
Loan-to-Value Ratios


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

50% or less

  222   $ 166,349,381.24   10.76 %

50.01% to 55.00%

  96     74,048,309.66   4.79  

55.01% to 60.00%

  153     120,948,648.46   7.83  

60.01% to 65.00%

  172     140,289,730.75   9.08  

65.01% to 70.00%

  283     195,949,853.63   12.68  

70.01% to 75.00%

  277     182,291,575.18   11.80  

75.01% to 80.00%

  566     331,984,007.22   21.48  

80.01% to 85.00%

  78     48,998,224.37   3.17  

85.01% to 90.00%

  354     201,761,854.82   13.06  

90.01% to 95.00%

  148     68,356,635.44   4.42  

95.01% to 100.00%

  35     14,434,291.04   0.93  
   
 

 

Total

  2,384   $ 1,545,412,511.81   100.00 %
   
 

 

 

ORIGINAL FICO SCORES

 

Range of Original

FICO Scores


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


   

Weighted
Average

Original

Loan-to-

Value
Ratio


 

300 to 350

  0   $ 0.00   0.00 %   0.00 %

351 to 400

  0     0.00   0.00     0.00  

401 to 450

  0     0.00   0.00     0.00  

451 to 500

  0     0.00   0.00     0.00  

501 to 550

  1     400,348.17   0.03     69.17  

551 to 600

  6     4,098,552.60   0.27     68.62  

601 to 650

  49     33,654,949.99   2.18     63.81  

651 to 700

  406     271,798,801.52   17.59     64.90  

701 to 750

  861     567,971,970.64   36.75     64.64  

751 to 800

  999     627,556,950.12   40.61     64.30  

801 to 850

  61     39,480,853.16   2.55     61.93  

Not Available

  1     450,085.61   0.03     52.87  
   
 

 

 

Total/Weighted Average

  2,384   $ 1,545,412,511.81   100.00 %   64.47 %
   
 

 

 

 

RECENT FICO SCORES

 

Range of

Recent

FICO Scores


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


    Weighted
Average
Original
Loan-to-
Value
Ratio


 

300 to 350

  0   $ 0.00   0.00 %   0.00 %

351 to 400

  0     0.00   0.00     0.00  

401 to 450

  0     0.00   0.00     0.00  

451 to 500

  0     0.00   0.00     0.00  

501 to 550

  0     0.00   0.00     0.00  

551 to 600

  1     869,134.87   0.06     65.00  

601 to 650

  64     40,847,929.29   2.64     67.34  

651 to 700

  347     228,601,779.05   14.79     65.60  

701 to 750

  730     489,241,554.43   31.66     64.28  

751 to 800

  1,078     686,826,724.41   44.44     64.45  

801 to 850

  164     99,025,389.76   6.41     61.74  

Not Available

  0     0.00   0.00     0.00  
   
 

 

 

Total/Weighted Average

  2,384   $ 1,545,412,511.81   100.00 %   64.47 %
   
 

 

 

 

ORIGINAL PRINCIPAL BALANCES

 

Range of Original
Principal Balances


  Number

 

Aggregate
Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Less than or equal to $50,000

  0   $ 0.00   0.00 %

$50,001 to $100,000

  0     0.00   0.00  

$100,001 to $150,000

  0     0.00   0.00  

$150,001 to $200,000

  0     0.00   0.00  

$200,001 to $250,000

  0     0.00   0.00  

$250,001 to $300,000

  0     0.00   0.00  

$300,001 to $350,000

  1     317,393.46   0.02  

$350,001 to $400,000

  328     123,667,580.09   8.00  

$400,001 to $450,000

  300     126,121,787.26   8.16  

$450,001 to $500,000

  336     159,177,066.09   10.30  

$500,001 to $550,000

  211     109,516,819.58   7.09  

$550,001 to $600,000

  184     105,796,705.26   6.85  

$600,001 to $650,000

  221     138,603,725.17   8.97  

$650,001 to $700,000

  100     66,626,487.35   4.31  

$700,001 to $750,000

  94     67,962,751.70   4.40  

$750,001 to $800,000

  73     56,017,240.14   3.62  

$800,001 to $850,000

  50     40,885,564.35   2.65  

$850,001 to $900,000

  67     58,052,842.36   3.76  

$900,001 to $950,000

  56     51,556,952.49   3.34  

$950,001 to $1,000,000

  234     228,648,012.94   14.80  

$1,000,001 to $1,500,000

  74     95,757,140.35   6.20  

$1,500,001 to $2,000,000

  31     55,139,118.31   3.57  

$2,000,001 to $2,500,000

  14     30,614,410.07   1.98  

$2,500,001 to $3,000,000

  7     19,445,335.58   1.26  

$3,000,001 to $3,500,000

  1     3,373,254.89   0.22  

Over $3,500,000

  2     8,132,324.37   0.53  
   
 

 

Total

  2,384   $ 1,545,412,511.81   100.00 %
   
 

 

 

A-11


APPENDIX A (Continued)

 

GROUP II MORTGAGE LOAN DATA

 

ORIGINATORS

 

Originator


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Wells Fargo Bank or Affiliate

  2,384   $ 1,545,412,511.81   100.00 %

Other Originators

  0     0.00   0.00  
   
 

 

Total

  2,384   $ 1,545,412,511.81   100.00 %
   
 

 

 

PURPOSES

 

Purpose


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Purchase

  1,012   $ 628,783,714.85   40.69 %

Equity Take Out Refinance

  428     281,776,947.63   18.23  

Rate/Term Refinance

  944     634,851,849.33   41.08  
   
 

 

Total

  2,384   $ 1,545,412,511.81   100.00 %
   
 

 

 

OCCUPANCY TYPES

 

Occupancy Type


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

Investment Property

  1   $ 356,112.85   0.02 %

Primary Residence

  2,158     1,392,766,203.05   90.12  

Second Home

  225     152,290,195.91   9.85  
   
 

 

Total

  2,384   $ 1,545,412,511.81   100.00 %
   
 

 

 

MONTHS TO FIRST ADJUSTMENT DATE

 

Months to First

Adjustment Date


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

27

  2   $ 1,483,339.88   0.10 %

28

  2     1,017,237.33   0.07  

29

  4     1,695,544.00   0.11  

30

  12     9,108,644.38   0.59  

31

  6     4,419,267.42   0.29  

33

  1     562,652.73   0.04  

34

  20     12,582,297.13   0.81  

35

  57     33,864,260.27   2.19  

36

  54     33,992,183.77   2.20  

37

  71     45,596,959.40   2.95  

38

  62     36,421,978.07   2.36  

39

  72     43,387,139.33   2.81  

40

  84     61,149,279.30   3.96  

41

  58     34,575,949.60   2.24  

42

  57     35,897,951.22   2.32  

43

  97     64,047,300.55   4.14  

44

  75     51,089,068.12   3.31  

45

  124     76,760,422.57   4.97  

46

  77     50,036,043.03   3.24  

47

  41     24,476,353.50   1.58  

48

  128     69,017,990.42   4.47  

49

  110     73,893,615.64   4.78  

50

  38     32,613,525.54   2.11  

51

  66     49,803,524.76   3.22  

52

  171     109,538,298.87   7.09  

53

  289     183,417,109.22   11.87  

54

  293     182,014,552.77   11.78  

55

  187     130,058,735.77   8.42  

56

  71     52,072,732.34   3.37  

57

  26     17,202,623.49   1.11  

58

  28     22,967,931.39   1.49  

59

  1     648,000.00   0.04  
   
 

 

Total

  2,384   $ 1,545,412,511.81   100.00 %
   
 

 

 

RATE CEILINGS

 

Range of

Rate Ceilings


  Number

 

Aggregate

Unpaid

Principal

Balance


  Percentage
of Total
Aggregate
Unpaid
Principal
Balance


 

8.250% to 8.499%

  1   $ 542,400.00   0.04 %

8.500% to 8.749%

  5     4,893,414.57   0.32  

8.750% to 8.999%

  11     8,823,214.21   0.57  

9.000% to 9.249%

  85     68,181,455.04   4.41  

9.250% to 9.499%

  34     32,779,407.84   2.12  

9.500% to 9.749%

  2,222     1,412,468,587.14   91.40  

9.750% to 9.999%

  0     0.00   0.00  

10.000% to 10.249%

  0     0.00   0.00  

10.250% to 10.499%

  0